Competition issues within the business insurance sector have been much discussed recently. The European Commission published its final report on its inquiry into the business insurance sector on 25 September 2007. The report highlighted some questions regarding premium alignment between lead insurers and followers in the co-insurance market. Following the publication of the final report, the European Federation of Insurance Intermediaries (BIPAR) developed High Level Principles (published 28 April 2008) which are intended to be used by brokers as a general guide in relation to placement of risk with multiple insurers. Lloyd’s considers that co-insurance arrangements at Lloyd’s currently operate in a highly competitive and efficient manner delivering real benefit to policyholders. On 29 April 2008, Lloyd’s issued a market bulletin emphasising managing agents’ and their underwriters’ duty to conduct insurance business at Lloyd’s in full compliance with European and UK competition law.
The bulletin highlights the following points:
- brokers must seek to place business as they find appropriate, having regard to the interests of their client. That may involve brokers inviting the following market to subscribe to a risk on identical contractual terms and conditions (other than the premium) as the lead underwriter;
- in any co-insurance placement, underwriters may, but are not obliged to, follow the premium charged by the lead underwriter;
- underwriters should not use “best terms and conditions clauses” or engage in market practice which has the same effect unless they have first obtained legal advice that the use of such a clause or practice would be lawful in the circumstances of a particular case.
BIPAR’s High Level Principles are also attached to the bulletin (please click here to view the bulletin).
