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European Law Monitor newsCompetition: Commission issues final report on Business Insurance Sector Inquiry

The European Commission has adopted the final report of the competition inquiry on the business insurance sector. Building on the interim report of January 2007, a wide public consultation and extensive further fact-finding, the final report raises concerns about the operation of two areas of business insurance. First, long-standing and widespread industry practices in the reinsurance and coinsurance markets involving the alignment of premiums, which may lead to higher prices for large risk commercial insurance. The report leaves open the question of whether these constitute infringements of the prohibition on restrictive business practices (Article 81), but invites the industry either to justify the business practices concerned under the competition rules, or to reform them. Second, the Commission also confirms its concerns as to transparency of remuneration and conflicts of interest in insurance brokerage which may inflate prices and reduce choice, in particular for SMEs. The Commission will further explore this issue during the review of the Insurance Mediation Directive (2002/92/EC).

Competition Commissioner Neelie Kroes said "Today's report shows that the Commission is serious about making markets work better, even where that means we need to question some established market practices when these may be harmful to consumers and competition. I invite the industry to respond positively to the findings of the report and, where necessary, to reform the relevant business practices."

Insurance is of vital importance for big and small businesses throughout the EU. Many industries, from aviation and shipping to major real estate developments, could not function without insurance. EU insurers collect €375 billion in non-life premiums every year. European insurers and reinsurers are also very active in international markets, and they are major investors in capital markets.

Co- and reinsurance

The report looks inter alia at the coverage of large risks through co- and reinsurance. The Commission is concerned that the prevailing practice in the marketplace which excludes participants in the so-called "follow market" from offering lower premiums than that offered by the lead insurer, may not comply with competition law. The Report does not conclude that the law is actually being infringed, as this would only be possible in the context of a specific enforcement decision. Nonetheless, premium alignment is not, in the Commission's view, intrinsic to the operation of the subscription markets, and the Commission invites the industry either to justify the business practices concerned from a competition law standpoint, or to reform them.

The Commission does not intend to apply its findings retroactively and will give industry every opportunity to make the representations on this matter which it considers appropriate.

Insurance intermediaries

The Report also highlights conflicts of interest and lack of transparency in the way that insurance intermediaries are typically remunerated. This raises a number of issues for the functioning of the market and may in some cases lead to less competition and higher prices, especially for SMEs. There is a growing awareness in the market that such conflicts of interest may need to be better supervised or regulated. The Commission is committed to follow up these findings in the framework of the review of the Insurance Mediation Directive which has already started. National authorities are also expected to take an interest in the Commission's findings.

Block Exemption

In respect of the block exemption Regulation for insurance (358/2003 ), which lapses in 2010, the Commission has yet to be persuaded that the Regulation• which treats the insurance industry differently to other industry sectors • is still necessary. However, it will review the matter definitively in a report in March 2009.

Long-term Contracts

Finally, the Commission expresses concerns in the Report with the situation as regards networks of long-term contracts in Austria which may restrict competition. This is not a definite conclusion but it needs to be examined more closely. In the other cases examined • The Netherlands, Slovenia and Italy • the concerns raised in the interim report have been resolved.


The Commission decided on 13 June 2005 to initiate a sector inquiry into business insurance. Business insurance includes coverage for property risks and business interruption; shipping; motor vehicles; general, professional and environmental liability; personal accidents and credit risks.

The interim report received extensive attention from industry stakeholders during public consultations, and was the subject of a public hearing on 9 February 2007.
The final report is accompanied by a working document which sets out the detailed findings of the inquiry. The final report and working document, plus all non-confidential submissions made during the public consultation, have been published on the Commission's website at:

See also MEMO/07/382
Reproduced with the permission of the European Commission REF IP/07/1390