The European Commission’s Directorate-General Competition (DGC) has issued further questionnaires to a number of co-insurance firms with European subsidiaries. The study, conducted by Ernst and Young, is set to further investigate competitiveness amongst European participants to the subscription market, with a particular focus on whether the automatic upward alignment in premiums is still prevalent in the subscription market.

This new study follows a sector inquiry into business insurance, the Final Report for which was published in September 2007. Whilst the Commission noted in the Final Report that it recognised the importance of co-insurance, through allowing greater capacity and diversification of risk, which in turn resulted in better terms and lower prices for clients, the Commission also identified a number of practices which it believed potentially breached competition law. One of the focuses of the Commission was the degree of cooperation between insurers, in particular the use of mechanisms which provided for the upward alignment of premiums and terms and conditions between participants, which occurred where a two-step procedure involving lead and following underwriters was used. The Commission’s view was that, where there were agreements between insurers to align premiums, this could give rise to a breach of competition law. Following publication of the Final Report, the European Federation of Insurance Intermediaries (Bipar) developed five high-level principles for placing risk with multiple insurers, one of which bars the upward alignment on premiums.

The new study also marks the beginning of an inquiry announced in December 2011 to assess the viability of the (still relatively new) Insurance Block Exemption, due to expire in 2017, as well as other industry-wide, prevalent practices of cooperation between insurers. The Block Exemption allows insurers to discuss joint calculations, tables and studies, and agreements setting up co-insurance and reinsurance pools. Given this timing, it is too early to say whether this latest study could result in the Block Exemption being narrowed or removed altogether, although the Commission may be hoping that it keeps alive at least the threat of new investigations into conduct between insurers.