The Block Exemption Regulation (the Exemption) which exempts certain agreements between insurers and reinsurers from the ban on cartels expires on 31 March 2017. The European Commission recently started a market consultation to investigate whether the insurance market still needs a sector-specific exemption from the ban on cartels. Based on the consultation, the European Commission will decide whether it is necessary to extend the Exemption (in its current form or after amendment). Responses to the consultation are being accepted until 4 November 2014.
The ban on cartels only prohibits agreements between businesses that have the aim or effect of noticeably restricting competition. Exempted from the ban on cartels and therefore permitted are (to put it briefly) anticompetitive agreements whose advantages outweigh the disadvantages. This is only the case if the anticompetitive cooperation (cumulatively) (i) produces advantages of efficiency that (ii) benefit the users and (iii) the restrictions on competition are indispensable for achieving the advantages and (iv) there is still adequate other competition remaining. It is up to the parties involved in the agreement to demonstrate that these conditions have been satisfied. Since it is an exception, the test is restrictive, so that the businesses involved in an anticompetitive agreement face a heavy burden of proof. On the other hand, if a (prospective) collaboration between insurers satisfies the conditions from the Exemption, it is assumed that the advantages always outweigh the disadvantages and it is no longer a requirement for the insurers involved to test the object and effects of the agreement in concrete terms. The Exemption therefore provides legal certainty.
On grounds of the current Exemption, two types of agreements that insurers and reinsurers conclude with each other are excluded from the ban on cartels (under the conditions described in the regulation):
- the joint calculation of risks and joint studies into future risks; and
- the establishment and management of co-insurance pools and co-reinsurance pools for certain risks.
It could be worth the effort for interested parties such as insurers to answer the European Commission’s call. They have the opportunity to stress the importance of the Exemption and submit new proposals for agreements to be exempted. On the other hand, the revision of an earlier (expired) version of the Exemption resulted in agreements between insurers on (i) joint determination of non-binding standard policy terms and conditions and (ii) inspection and approval of technical specifications for security provisions no longer being exempted from the ban on cartels. Agreements relating to these topics were required to have since been assessed on a case-by-case basis by the particular businesses and their advisers to determine whether they are permitted, for instance with reference to the European Commission’s guidelines on horizontal agreements.