COMMISSION OF THE EUROPEAN COMMUNITIES 
Brussels, 
COM(1999) 192 final 
REPORT FROM THE COMMISSION TO THE COUNCIL 
AND THE EUROPEAN PARLIAMENT 
ON THE OPERATION OF COMMISSION REGULATION No 3932/92 
CONCERNING THE APPLICATION OF ARTICLE 
81 (EX-ARTICLE 85), PARAGRAPH 3, OF THE TREATY TO CERTAIN 
CATEGORIES OF AGREEMENTS, DECISIONS AND CONCERTED 
PRACTICES IN THE FIELD OF INSURANCE. 
REPORT FROM THE COMMISSION TO THE COUNCIL 
AND THE EUROPEAN PARLIAMENT 
ON THE OPERATION OF COMMISSION REGULATION N° 3932/92 
CONCERNING THE APPLICATION OF ARTICLE 
81 (EX-ARTICLE 85), PARAGRAPH 3, OF THE TREATY TO CERTAIN 
CATEGORIES OF AGREEMENTS, DECISIONS AND CONCERTED 
PRACTICES IN THE FIELD OF INSURANCE. 
(1 ·ext with EEA relevance) 
Notice: this report uses the new numbering of the EC Treaty articles, following 
the entry into force of the Amsterdam Treaty on May 1, 1999. The old 
numbering is nevertheless still shown in brackets. 
INTRODUCTION 
1. By Regulation N° 15 34/91 of 31 May 199 Jl, the Council empowered the 
Commission to adopt a Regulation on the application of Article 81-3 (ex-Article 
85-3) of the EC treaty. to certain types of agreements between undertakings, 
decisions of associations of undertakings and concerted practices (hereafter 
agreements) in the field of insurance. This empowerment concerns in particular 
agreements concerning a) the joint establishment of tariffs of risk premiums 
based on collective statistics or on the number of claims, b) the establishment of 
standard insurance conditions, c) the joint coverage of certain types of risks, d) 
settlement of claims, c) verification and approval of safety equipment and f) 
registers and information systems concerning aggravated risks. 
It is worth recalling that agreements having the aim or effect of restricting 
competition within the meaning of Article 81-1 (ex-Article 85-1) of the treaty can 
be authorised under Article 81-3 (ex-Article 85-3) if they contribute to promoting 
technical or economic progress or to improving production or the distribution of 
insurance products and if insured persons derive benefit from them, provided that 
the restrictions are limited to what is strictly necessary (principle of 
proportionality) and that they do not entirely eliminate competition on the market 
in question. 
OJ N° L.l43 of07.06.1991, p. 1. 
2. Basing itself on the empowering Regulation of the Council, the Commission 
adopted on 21 December 1992 its Regulation N° 3932/92 aiming to exempt four 
of the six types of above-mentioned2 agreements. This Regulation covers the 
agreements on calculation of premiums. on the establishment of policy 
conditions, on the joint coverage of certain types of risk and on security 
"equipment. The Commission considered it did not have sufficient experience as 
regards treatment of agreements on the settlement of claims and registers of 
aggravated risks to include these agreements in the field of its Exemption 
Regulation (hereafter the Regulation). 
Under Article 8 of the Council empowering Regulation, the Commission has to 
submit to the European Parliament and to the Council a report on the functioning 
of its Regulation and formulate, if necessary, draft amendments. The Commission 
has to submit this report no later than six years after the entry into force o(the 
Regulation (1 April 1993). 
This report complies with that request. It includes a first part on the application of 
Article 81 (ex-Article 85) to the four types of agr~ements covered by the 
Regulation and a second part (significantly shorter) on the application of Article 
81 (ex-Article 85) to the two types of agreements not covered by the Regulation. 
For each type of agreement, the Commission presents a number of considerations 
of a general nature, describes its practical experience and mentions possible 
future developments. The report does not contain adopted proposals for 
modifications. It does however contain a number of forward-looking ideas on 
which the Commission wishes to receive comments from regulatory and 
competition authorities of the Member States and from interested parties. 
3. Be tore going into details, it is worth making some general comments. 
2 First of all, the Regulation aims, like any other exemption Regulation, to free the 
Commission from examining a large number of similar agreements and to allow 
it to devote its resources to the examination of cases which deserve a $pecitic 
analysis. Before the entry into force of the Regulation, the Commission's services 
(DG IV) were apprised of several hundred notified agreements. As from the entry 
into force of the Regulation, the notifying parties were invited to specify if they 
wished to maintain their notification(s) or if, on the other hand, they insisted on a 
formal position from the Commission on the compatibility of the agreements 
notified with Article 81 (ex-Article 85). The Commission moreover indicated that 
in the event of silence six months after receipt of this invitation, they would 
proceed to close the cases without further action. This approach allowed the 
reduction of the number of current notifications to a few dozen. The majority of 
these in fact concerned agreements aiming to create eo-insurance or co­
reinsurance groupings (hereafter pools). It should be stressed immediately that the 
evaluation of these agreements in the light of the provisions of the Regulation 
(Title IV) is by far the most complex one and will continue to be a priority for the 
Commission in the years to come. 
OJ N° L.398 of 3 1.12.1992, p. 7. 
2 
4. 
5. 
3 Like any other exemption Regulation. the Regulation contributes to decentralised 
application of Community competition law. Indeed, both national jurisdictions 
and national competition authorities are themselves competent to check if an 
agreement meets the conditions for application of the Regulation and benefits. 
consequently, from an exemption. Since the entry into force of the Regulation, 
the Commission, in addition, has laid down the methods of co-operation between 
itself and these jurisdictions and national authorities3. In the field of insurance, 
however, the Commission does not have a full list of the cases in which national 
jurisdictions or authorities have implemented the Regulation. It considers that it 
would be useful to have such a list before formulating precise proposals for 
amendments to the Regulation. Consequently it invites the national competition 
authorities to provide it with such lists. These might constitute a base for a 
discussion, within the Consultative· Committee on agreements and dominant 
positions, on the application of the Regulation. 
Since the entry into force of the Regulation, the Commission's services have 
twice had the opportunity of providing explanations on the implementation of this 
Regulation to the monitoring authorities of the Member States, within the 
framework of the Committee on Insurance which meets under the chairmanship 
ofDGXV. 
FIRST PART 
THE CATEGORIES OF AGREEMENTS COVERED 
BY THE REGULATION 
I. Calculation of premiums (Title 11) 
A. General information 
The commercial (or gross) premium is the price that the person insured pays for 
the covering of a given risk. This price comprises an element which reflects the 
net cost of this cover. This is the risk premium. It is fixed according to the size 
(the intensity) of the insured risk as well as to the frequency with which this risk 
occurs. Insurers fix the risk premium by first determining the pure (or net) 
premium, which is based on the statistical data concerning the frequency and the 
average intensity of the risk in the past, and by then applying to it a coefficient 
which takes account of forecasts of the future occurrence of the risk. The 
commercial (or gross) premium corresponds to the risk premium plus the 
administrative costs and the profjt margin of the individual insurers. 
The Regulation permits insurers to co-operate with a view to calculating a 
uniform pure premium corresponding to the average cost of covering the risks. 
See its communications of 1993 (OJ N° C.39 of 13.02.1993, p. I 0) and of 1997 (OJ N° C.313 of 
15.10.1997, p 9). 
3 
Article 2.a specifics that co-operation has to be limited to what is necessary to 
create reliable statistical data on the intensity and the frequency of claims in the 
past. Insurers can also jointly carry out studies with a view to making forecasts on 
the frequency or the extent of claims in future (Article 2.b) without however 
calculating jointly the security charge which _aims to take account of these 
forecasts (Article 3.b). Co-operation between insurers cannot lead to joint 
calculation either of administrative expenses or of insurers' profit margins 
(ibidem). 
6. The ratio legis of Title 11 is as follows. Each individual risk is specific. It varies 
according to a series of parameters. For example, the intensity and the frequency 
of the automobile third-party liability risk incurred by an individual person 
insured will depend on a combination of factors, such as the type of car (model, 
engine power), the place of registration, the driver's personal profile (age, 
profession), etc. An insurer will seek to avoid (or at least to reduce as much as 
possible) the "dispersal", i.e. the divergence between, on the one hand, the real 
value of a claim for which the person insured has to be compensated and, on the 
other hand, the premium which the person insured has paid. To this end, the 
insurer will group similar risks and will calculate their average cost. The dispersal 
will decrease as a) the grouped risks are more homogeneous and b) the number of 
such risks is higher. Article 2.a) permits insurers to carry out precisely this 
grouping of risks. It is the job of actuaries and statisticians to determine the 
sufficient number for each type of risk. Article 2.b) enables insurers to complete 
their statistical data by jointly undertaking studies on the future development of 
the risk in question. Such co-operation makes it possible to improve knowledge 
of the risks and facilitates their evaluation by individual companies (see recital 6). 
7. 
4 In this respect, it is worth adding a nuance. The question of to what extent an 
insurer needs really to co-operate with its competitors as regards calculation of 
premiums, will depend on its size. Thus, one cannot rule out that a large insurer 
might on its own have a sufficient size to cover sufficient similar risks to obtain 
reliable statistical data. In such cases, any co-operation within the meaning of 
Title 11 would have the purpose -from its point of view -not of improving its 
own knowledge of the risks, but rather that of its competitors whose size is not 
sufficient to cover enough similar risks. At that moment, the virtue of such a co­
operation changes. It establishes a certain solidarity between insurers of different 
sizes and thus creates a level playing field to the benefit of smaller insurers 4. 
B. Practical experience 
The Commission has not had to examine in detail agreements providing for joint 
premium calculation in the field of life insurance. On the other hand, it has 
considered a number of agreements of this type in the field of non-life insurance. 
Title H thus goes beyond the decisions Nuovo Cegam (OJ N° L 99 of 11.04.1984, p. 29) and 
Concordato lncendio (OJ N° L 15 of 19.01.1990, p. 25) by which the Commission exempted 
agreements on premium calculation. In those two cases, the parties to the agreement represented 
only a part of the market (respectively 26% and 50%) and the Commission had justified the 
exemption while referring to the difficulties that members would have ,encountered in entering the 
market without such an agreement. 
4 
All these cases involved recommendations emanating from insurers' national 
associations. In other words, co-operation as regards calculation of. premiums 
extended to (almost) all the active operators on the national market concerned. 
In two cases (one involving the German association VdS, the other the Belgian 
association UPEA), the examination took place without any formal procedure. A 
third case concerned a notification carried out by UPEA. The last two cases 
(pertaining to recommendations from the Italian association ANIA) were the 
subject of a ex officio procedure. 
X. The German case concerned the compilation of statistics concerning third party 
liability risks for cars. The association Verhand der Sachversicherer (VdS) had 
set itself the goal of determining the average cost of covering the risks (average 
pure premium) according to the engine output as well as claims rates in the 
various regions. In Germany, there are 400 regions for car registrations. The V dS 
had claimed that it was necessary to have at least approximately thirty thousand 
risks to calculate in a reliable way the regional claim rate. This is why the V dS 
had included neighbouring regions and had used 320 regions covering each one at 
least thirty thousand risks. It had informally asked the Commission's services 
whether it could further group the 320 pure premiums resulting from this first 
classification into ten overall regional classes. At the end of 1995, the 
Commission's services answered in the negative, commenting that this second 
grouping exceeded the limits laid down by Article 2a) of the Regulation. Indeed, 
the number sufficient to constitute "the population which can be handled 
statistically" within the meaning of this provision had been reached with the 
reduction to 320 regions. It was therefore for the individual insurers to reduce this 
number still further and to make their own wider classes. 
9. The case involving the Belgian professional association of insurance companies 
(UPEA) had been communicated to the Commission's services by the Belgian 
consumers' association Test A chats. It had complained, inter alia, about a 
recommendation from UPEA aiming to establish a minimum pure premium for 
the coverage of hospital expenses in the case of group contracts. There was a 
uniform premium for contracts with groups containing up to 10 members and 
reductions for contracts with larger groups. There was nothing to indicate that this 
recommendation was based on statistical data. The Commission's services, 
consequently, concluded that the recommendation was not in conformity with 
Title li and they informed Test Achats and UPEA. The matter was then pursued 
before national jurisdictions. The Commercial Court and then the Brussels Court 
of Appeal both followed the informal standpoint of the Commission's services5. 
Currently, the case is being dealt with by the Supreme Court ( Cour de Cassation). 
1 0. The other case involving UPEA involved a recommendation concerning the 
calculation of premiums for so-called special risks, concerning fire coverage for 
movable and immovable properties with a value above a certain amount, and thus 
in particular numerous industrial properties. UPEA had already notitied this 
recommendation in 1988, well before the entry into force of the Regulation. 
5 Judgement of the President of the Tribunal de Commerce of Sept. 1, 1995, upheld by the Brussels 
Court of Appeals on May'24, 1996. 
5 
Instead of recommending an average pure premium, UPEA encouraged its 
members to increase or decrease the "basic commercial premium". that is, the 
basic pure premium plus the administration and distribution expenses or each 
individual insurer. Th~ choice of this base already placed the recommendation 
outside the scope of the Regulation. Moreover, each aggravating or mitigating 
factor was expressed as a percentage increase or reduction (typically 1 0%) which 
did not appear to be founded on any statistical exercise - a further reason to 
conclude that the recommendation was not covered by the Regulation. This 
conclusion was finally corroborated by a declaration of UPEA itself according to 
which the premiums actually charged by the insurers were generally appreciably 
lower than those which would result from the application of the recommended 
tariff. Having regard to the considerable divergences between the premiums 
charged by insurers, the Commission's services restricted themselves to informing 
UPEA of the incompatibility of its recommendation with Title 11 and finally 
closed the case without further action. 
11. Finally the Commission's services launched two "ex officio" (own initiative) cases 
to examine recommendations from ANIA. 
The first recommendation concerned the application by insurers of surcharges to 
marine cargo insurance premiums. Since these surcharges were added to the 
(gross) commercial premiums, the recommendation of ANIA resembled the one 
by the V dS that the Commission had formally condemned in 1987 and the 
Regulation seemed obviously inapplicable to it. Following the sending of a 
formal statement of objections, ANIA explained at the oral hearing (and then 
confirmed in writing) that the surcharges were expressed in percentage terms of 
the value of the assets ensured (and not of the commercial premium) and that all 
these percentages had a statistical base. Under these conditions, the Commission's 
services decided to close the case without further action as soon as ANIA has 
furthermore clarified that its recommendation is purely indicative and does not 
commit its members at all (See Article 3a). 
In 1997, the Commission's services initiated an "own initiative" procedure with 
the aim of checking if some other recommendations of ANIA really meet all the 
conditions for application of Title 11 of Regulation 3932/92. This involves inter 
alia recommendations or databases as regards motor insurance (including general 
risks, theft, fire, and third party liability )6 . This procedure again confronts the 
Commission's services with the difficult task of checking the compatibility of an 
agreement with Title 11. The examination currently in hand aims to check, on the 
one hand, if the data that each insurer has to provide to ANIA is limited to what is 
necessary to determine the average frequency of the claims and the average cost 
of cover and, on the other hand, what effect the recommendation produces on the 
commercial premiums that insurers charge in practice. 
6 At the beginning of 1993, ANIA had certified that the recommendation on various car insurance 
risks (theft, fire) would be modified in the light of the provisions of Title 11 of the Regulation. The 
Italian competition authority (the Autorita) then challenged the validity under Italian competition 
law of this recommendation as well as of other recommendations, for the reason that it led the 
insurers to apply uniform commercial premiums. The Autorita adopted a prohibition decision and 
imposed a fine on ANIA, but the latter obtained the annulment of the fine first by the Latium court 
and then by a decision of the Council of State. 
6 
C. Future prospects 
12. The legality test stated in Title 11 is clear: co-operation as regards premium 
calculation has to remain within the limits of what is necessary to form groups of 
comparable risks in sufficient number to constitute a population capable of being 
handled statisti-cally (Article 2.a). Each insurer must have free choice as to the 
setting-up of other groups. It will make its choice on the basis of criteria related 
to statistical technique but also of other criteria related to its commercial policy. 
If the legality test is clear, its implementation is not easy. The risk grouping 
permitted by the Regulation is a technical exercise that insurers entrust to 
actuaries and that the Commission's services are not in a position to analyse and 
to evaluate in detail. In addition, if they started such an effort, the Regulation 
would lose its raison d'etre, namely to make it possible to insurers to have their 
agreements benefit from an exemption without having to notify them to the 
Commission. · 
The Commission's services will therefore restrict themselves to examtnmg 
whether the body instructed to calculate the average pure premium only a) 
collects from insurers the data necessary from a statistical point of view to 
calculate thispremium and b) then passes on to them only this aggregated data 
(namely the total number of claims during the period of observation and the total 
of the payments made or due in respect of the claims which have occurred during 
this period). 
If they experience difficulties- in checking whether the conditions of application 
of Title II of the Regulation are met, the Commission's services will examine 
what concrete effect the co-operation as regards calculation of the premiums 
produces on the market in question. If insurers depart from the joint calculations 
of the average pure premium and/or apply different commercial premiums, the 
Commission's services will have to evaluate the extent of the departure and/or the 
. differences with a view to judging if the agreement in question restricts 
competition in an appreciable way. If that is not the case, it will not be necessary 
to intervene. 
11. Standard policy conditions (Titre Ill) 
A. General 
13. Title Ill exempts agreements which have as their object the establishment and 
distribution of standard policy conditions for direct insurance (Article 5-l) as well 
as common models illustrating the profits to be realised from an insurance policy 
involving an element of capitalisation (Article 5-2). 
These agreements restrict competition insofar as they tend to lead to uniform 
conditions being offered by insurers, and therefore to limit customer choice. 
However, they "have the advantage of improving the comparability of cover for 
7 
the consumer and of allowing risks to be classified more uniformly" (recital 7). 
As full standardisation would not leave customers much to choose from, the 
exemption only applies to standard conditions or common models which indicate 
explicitly that they are purely illustrative, i.e. that they are established for 
guidance only (Article 6-1 and 6-2). Furthermore, insurers are not allowed to 
agree among themselves that the standardised policy conditions are the only ones 
to be applied by them (Article 7-2). 
14. Since the entry into force of the Regulation, the Commission's services have not 
had to handle any cases related to common models. The present Report will 
therefore focus on the scope of Articles 7 and 8 regarding policy conditions. 
15. Article 7 contains a list of conditions which insurers cannot agree to impose on 
their customers. These (under the Regulation) unexemptable standard conditions 
arc known as « black clauses». By and large, they fall into three categories. 
The first category comprises the clauses featuring in Article 7-1 sub a to d. These 
all concern the extent of the cover. Those excluding from the cover certain risks 
belonging to the class of insurance concerned (sub a), making the cover of certain 
risks subject to specific conditions (sub b) or imposing comprehensive cover for 
risks to which a significant number of policyholders ~s not simultaneously exposed 
(sub c) are unexemptable unless they indicate that insurers remain free to derogate . 
from them. The clause sub d indicating the amount of the cover or the « excess » 
(i.e. the amount not covered) is «black» under all circumstances (i.e. even if 
insurers can derogate from it). 
/ 
A second set of clauses (sub e to i) deals with the duration of the policy and aims at 
avoiding insurers creating too captive a customer base. Two of these clauses arc 
nevertheless exemptable under the Regulation if their application is made subject to 
the express consent of the policyholder (sub e and f). The others are unexemptable 
without further qualification. 
The third series of clauses (sub j and k) concerns forms of tying . One requires the 
policyholder to obtain cover from the same insurer for different risks whereas the 
other one requires the person acquiring a risk from the policyholder to take over the 
latter's insurance policy. 
16. Moreover, according to Article 8, the block exemption does not apply to 
agreements whereby insurers undertake to exclude cover for certain risk 
categories because of the characteristics associated with the policyholder. Article 
8 does, however, allow them to establish specific insurance conditions for 
particular social or occupational categories of the population. 
B. Practical experience 
1 7. Many notifications made prior to the entry into force of the Regulation, were 
subsequently withdrawn by the parties because they considered the notified 
agreements to be in line with the Regulation. Some other notifications were 
maintained because the parties saw room for interpreting the provisions of the 
Regulation, especially those listing the « black» clauses and sought the 
8 
Commission's services' assurance that the notified clauses were indeed 
t.:xemptable. Occasionally. the Commission's services have also been called upon 
to clarify the scope of Article 7 outside the framework of a formal notification. In 
one such instance, it was an informal complaint that prompted them to do so (sec 
below). 
18. In some cases, the raison d'etre itself of Article 7-1 sub a has been called into 
question for certain allegedly « uninsurable» risks . Insurers submitted that they 
should be allowed to exclude by common agreement such risks from any cover. 
For instance, flood risks in the Netherlands, in particular from salty water (a 
substantial part of the country lies below sea level), are said to be uninsurable. 
The national organisation of insurers (VvV) had decided to prevent insurers from 
offering cover for flood risks (from salty as well as from fresh water). The 
Commission's services queried why there was any need for such a decision if 
insurers considered the risks to be uninsurable anyway. The VvV defended the 
decision by emphasising the unique situation in the Netherlands. In some other 
countries, a number of different catastrophic risks (flood, fire, etc.) are incurred 
by different regions. This enables the government to impose solidarity on the 
entire population and insurers to offer a global insurance for all these risks. This 
was impossible in the Netherlands. In this respect, the VvV referred to the plan to 
have an insurance pool for fresh water flood risks in which the insurers as well as . 
the government would take part. The Dutch State Council, however, had blocked 
the project on the ground that it was unreasonable to have six million fire 
insurance policies subsidise the 200,000 policies of households really incurring 
that risk. Eventually, the VvV brought its binding decision in line with Article 7.1 
sub a by simply converting it into a non-binding recommendation, leaving each 
insurer free to extend cover to flood risks. 
In another case, a common agreement to exclude war risks from marine hull 
insurance was at stake. This was not considered by the Commission's services as 
contrary to Article 7~ 1 (a) in so far as this provision only aims at the exclusion 
from cover of losses « normally » relating to the class of insurance concerned. 
The term «normally», however, does not appear in all language versions. This 
issue will have.to addressed when the Regulation expires. 
19. The exact meaning of Article 7-1 (d) has also been discussed several times. As a 
matter of fact, the only complaint which the Commission's services have received 
in connection with Title Ill concerned this provision. The (informal) complaint 
was lodged by Test Achats, a Belgian consumers' organisation, and was directed 
against inter alia the recommendation issued by UPEA concerning a standard cover 
and the above-mentioned standard excess for hospitalisation costs (for the aspects 
regarding Title 11 see above paragraph 9). UPEA proposed to limit the cover to 
twice the amount of the costs which the insured could recover as an affiliate of a 
basic social security institution, and to set the excess at 10% of that cover (with a 
ceiling of 20,000 BF). The Commission's services took the view that this 
recommendation violated Article7-1 sub d.7 
7 As indicated above (paragraph 9), the matter was pursued further in the national courts. 
9 
The formally notified German Gliedertaxe also raised an issue of interpretation with 
regard to Article 7-1 sub d. As in the war risk case above, the interpretation problem 
is due to a lack of concordance between the various language versions of this 
provision. According to the German text, the block exemption is inapplicable not 
only if insurers agree on the amount of cover but also if they agree on any other 
indication ( « Angabe « ) related to cover. A recommendation issued by the German 
association of insurers (GDV) regarding general accident insurance spells out 
invalidity degrees for people who have lost a body part (e.g. limbs) or a sense organ. 
These indications have an impact on the level of cover offered by the insurers. 
While declaring Article 7-1 sub d applicable, the Commission's services 
nevertheless saw enough reason for issuing a comfort letter to the GDV in 
September 1998. They were indeed unable to rebut the argument that the absence of 
unitonn invalidity degrees would lead to such a lack of market transparency that the 
insured would not be in a position to profit from competition between· insurers. 
Moreover, the Commission's services took into account the fact that the invalidity 
degrees were based on medical experience and that insurers in any event were 
allowed to derogate from the G/iedertaxe. 
In 1996, the standard « 3/4ths collision liability » clause in marine hull insurance 
(which is essentially a property insurance) was also looked at under Article 7-1 sub 
d. The question was whether the remaining Y.. liability had to be considered as a 
uniform excess in violation of Article 7-1 sub d. However, there appeared to be 
separate cover for that remaining Y.. liability (offered either by the hull insurer or by 
P. & I. Clubs). In other words, there was no genuine excess. In any event, the 
Commission's services obtained from the Institute of London Underwriters (ILU) 
and the Lloyd's Underwriters' Association (LUA) that they clarified that the 3/4 
liability clause was not a binding one. 
20. Finally, Article 7-1 sub e has been discussed a few times. The Co.nu:nission's 
services had to comment on GDV standard policy conditions allowing insurers to 
maintain the policy in the event that they increase the premium without changing the 
cover (in casu car insurance) or cancel part of the cover (in casu piracy risk in 
marine insurance). Such policy conditions are unexemptable under the Regulation 
unless they provide for the express consent of the policy holder that the policy be 
maintained. In both cases, the Commission's services nevertheless accepted the 
standard policy conditions in so far as they provided for an adequate notice period 
(requiring the policy holder to express his dissent) 
21. Pursuant to Article 8, the Regulation is inapplicable to agreements which exclude 
the coverage of certain risk categories because of characteristics pertaining to the 
policyholder. A standard policy clause excluding from general accident insurance 
people who permanently require extensive care or who are' mentally ill was declared 
contrary to Article 8. The fact that the exclusion would occur only some time after 
the conclusion of the insurance contract was considered irrelevant. 
C. Future prospects 
22. As some of the examples commented above illustrate, discordance between the 
different language versions of the Regulation has occasionally proved to be a source 
of interpretation problems. This Report provides the Commission with an 
10 
opportunity to invite all interested parties to signal other discordances which have 
led to a lack of clarity and to suggest ways to amend the current texts. 
23. 1\s previously mentioned, three standard clauses enumerated in Article 7-1 arc 
considered to be unexcmptable under the Regulation unless they indicate that each 
individual insurer remains free to derogate from them. This is the case for the 
clauses set forth in Article 7-1 sub (a) to (c). The rationale for this qualification 
needs to be revisited. 
First of all, Article 6-1 already provides that the Regulation only applies to « white » 
clauses, if« they are established and distributed with an explicit statement that they 
arc purely illustrative», i.e. only if they leave each insurer the freedom to derogate 
from them. The qualification added in Article 7-1 sub a to c therefore in effect blurs 
the distinction between "white" and "black" clauses. Secondly, whether or not 
particular standard policy conditions contain an explicit statement that insurers are 
not bound by them, what matters is whether these conditions constitute the « faithful 
reflection» of the insurance association's resolve to co-ordinate the conduct of its 
members on the market8• This would be the case if in practice insurers all 
implement the association's recommendation. Thirdly, Article 7-1 sub d and Art .8 
refer simply to '« black » policy conditions (i.e. even if insurers remain free to 
deviate from them). And yet, these conditions are generally not more harmful to the 
insured than those mentioned in Article 7-1 sub a to c. 
24. As we have seen, the Regulation is not applicable to agreements whereby insurers 
commit themselves individually not to offer cover for certain risks (see Article 7-1 
sub (a) and Article 8). The question is whether this should still be the case if these 
insurers have decided to offer such cover in common by setting up a pool within the 
meaning of Title IV and if that pool is in accordance with the requirements 
contained therein (see below). 
Ill Common coverage of certain risks (Titre IV) 
A. General 
25. Title IV concerns agreements whereby insurers set up eo-insurance and co­
reinsurance pools for the purpose of covering « an unspecified number of risks » 
(recital 1 0). In other words, it only concerns institutionalised pools for the 
common coverage of a specific category of risks (or « groups » in the parlance of 
the Regulation), not pools which insurers create ad hoc in order to cover a 
specified risk. The latter do not create any competition concerns at all. 
26. 
8 On the other hand, the current Regulation is based on the premise that any 
institutionalised grouping is in itself restrictive of competition. However, a pool 
can benefit from the block exemption if the market share of its members (or that 
of the grouping itself where catastrophic or aggravated risks are concerned) does 
not exceed a certain threshold. 
See ECJ judgement in Verband der Sachversicherer, # 32-Case 45/85, ECR 1987, p. 405. 
11 
In fact, pursuant to Article 11-1, a pool is exemptable under the Regulation when 
the market share of its participating members does not exceed I 0°/o (in the case of 
eo-insurance) or 15% (in the case of co-reinsurance). The market share comprises 
the members' global turnover in the relevant insurance market, irrespective or 
whether they do their business through the pool or independently. In this context, 
it must be noted that the requirement that all risks be brought into the pool (the 
so-called obligation d'apport) is considered as an excessive, unexemptable 
restriction of competition (recital 13). 
Article 11-2 specifies that the market share to be taken into account in the case of 
coverage of catastrophic or aggravated risks only relates to « the insurance 
products brought into the group», i.e. the members' turnover made through the 
pool (subject to two conditions which are not repeated here). 
The correct application of Article 11 hinges on a proper definition of the relevant 
product and geographic market. In a recent Notice, the Commission defines the 
relevant market as comprising all products which exercise competitive constraints 
on the product under consideration9. It identifies the three main constraints : 
demand substitutability, supply substitutability and potential market entry . Since 
each insurance policy is unique, and therefore demand substitutability is 
theoretically zero, supply substitutability is particularly important in insurance 
market definition. As for potential competition, this is not taken into account for 
the market definition but is taken into account at a later stage, to evaluate the 
position of the undertakings on this market (see Article 24 of the Notice) 
27. The other provisions of the Regulation, in particular Articles 10-3 and 10-4 as 
well as Article 12 and Article 13 indicate which restrictions of their freedom of 
action the participants in the pool may subscribe to without the pool losing the 
benefit of the exemption under the Regulation. Some of these restrictions 
appreciably restrict competition between the participants : e.g. the obligation to 
use identical policy conditions and premiums (risk premium in the case of co­
reinsurance, commercial premium in the case of eo-insurance) or the obligation to 
submit claim settlements to the pool for approval. Nevertheless, these restrictions 
are considered to be inherent to a pooling agreement. Hence, they do not raise 
competition concerns on condition that the market share thresholds laid down in 
Article 11 are not exceeded. 
28. 
9 B. Practical experience 
Since the entry into force of the Regulation, the Commission's services have 
developed their approach with regard to pools. Conceptually speaking, they apply 
a three-tier legality test to find out whether a pool falls within the scope of Article 
81-I (ex-Article 85. I). The second step of this test is new, in the sense that the 
Regulation does not explicitly provide for it. 
O.J. no C.372 of09.12.1997. p. 5. 
12 
a) The first question is whether the pool (or its membership) meets the market 
share test set forth in Article 11. One of the main difficulties encountered thus far 
is the adequate definition of one or more relevant product and geographic markets 
and. subsequently, the accurate measurement of market shares. This is due to the 
fact that the insurance sector organises its business along the lines of insurance 
risk branches (annex to the Commission's first non-life directive'0) and that these 
branches do not necessarily correspond to the notion of a relevant product market. 
Another difficulty is that a pool often covers catastrophic or aggravated risks at 
the same time as normal risks. This requires an examination of the pool under 
Article 11-1 as well as under Article 11-2. 
b) The second question only arises if the pool does not (or not entirely) meet the 
criteria of Article 11, in particular if it exceeds the thresholds. This question is 
whether such a pool is necessary to allow its members to operate in a specific 
market. In all areas of insurance, an insurer must, in order to be present on a 
market without incurring excessive risk, insure a sufficient number of risks so 
that the risk profile of its portfolio corresponds to the average for the totality of 
risks in the category. There therefore needs to be a strong probability that the real 
level of claims incurred by the insurer will be the same as the average level of 
claims of all insurers. This strong probability can only be obtained above a 
certain number of risks covered by the insurer. This is called the minimum 
dimension. Certain catastrophic risks may be such that no individual insurer is 
capable of insuring it alone. In such a case, the pooling of capacity does not 
restrict competition. If anything, the pool strengthens competition since it allows 
several insurers who are unable alone to provide cover for the risk at hand to put 
their resources in common and create a new competitor for the benefit of 
customers in need of such cover. It could be added that even for non-catastrophic 
risks, small insurers may need to group together in pools in order to attain the 
necessary minimum dimension. In any event, the Commission will consider that 
pools, no matter how high their market share is, are not covered by Article 81-1 
(ex-Article 85-1) when they are necessary to allow their members to provide a 
type of insurance they could not provide alone. 
c) If the pool is not necessary for coverage of the risks, a third question arises, 
namely whether or not pool members are under a contractual obligation to bring 
all or part of their insurance products into the pool. If there is such an obligation 
d'apport, Article 81-1 (ex-Article 85-1) definitely applies. If there is no such 
obligation, Article 81-1 (ex-Article 85-1) is likely to apply if the participating 
members do not have an commercial interest in offering their products outside the 
pool (see §33 infine). 
29. This new approach towards insurance pools (especially the second step regarding 
a pool's contribution to reaching a certain minimum dimension) in fact gives to 
Article 11 of the Regulation the effect in practice of a de minimis rule. It has 
already been applied to a claim-sharing arrangement between insurance mutuals 
(the equivalent of a pool in the non-profit insurance sector). In the P&l Clubs 
case (Protection and Indemnity insurance) the Commission concluded that a 
10 Council Directive no 73/239of 24 July 1973, concerning access to the activity of direct insurance 
other than non-life insurance, and to its exercise. OJ n° L 228/3 of 16 August 1973. 
13 
claim-sharing agreement between mutuals covering 89o/o of the world market for 
maritime contractual and third party liability insurance is not caught by Article 
X 1-1 (ex-Article 85-1) when it is necessary to allow its members to offer the level 
of cover they now offer ($US 4.25 billion). An in-depth market enquiry involving 
the main brokers and re-insurers operating in the P&l insurance market as well as 
the P&l Clubs themselves had indeed revealed that no entity or group with less 
than 50% of the market was currently able to offer such a level of cover. The 
Commission also exempted the quotation procedures which prevented Clubs from 
undercutting each other's prices (expressed in so-called rates per ton). It did so by 
analogy with Article 13 of the Regulation which allows the setting of uniform risk 
premiums in co-reinsurance pools, but not that of commercial premiums. Indeed 
the amended quotation procedures will only apply to the Clubs' costs which are 
related to the insured risks (including -for case-specific practical reasons -the 
retention costs). These procedures no longer apply to the Clubs' administrative 
costs. For further details, this Report refers to the recently adopted Commission 
decision. 
30. Moreover, in September 1997. the Commission's services also undertook an 
enquiry into the market for aviation risk insurance in order to find out whether the 
(notified and other) pools operating in the Community tell within the scope of 
Article 81-1 (ex-Article 85-1 ). This enquiry showed that for most risks the 
relevant geographic market is international because the customers (e.g. airline 
companies owning a large fleet of aircraft) are large companies who are able to 
look for the best available conditions of insurance around the world. In this 
market, none of the pools holds a share that even comes close to the ceilings set 
forth in Article 11 of the Regulation. Therefore, none of these pools appreciably 
restricts competition within the meaning of Article 81-1 (ex-Article 85-1) in this 
market (see first step of the approach). In contrast, for small, non-catastrophic 
risks (which represent low insured values in relation to the other aviation risks of 
the same branch), a national market appears to exist. Customers include smaller 
aircraft owners, flying clubs or parachutist clubs who have limited opportunities 
of looking for better insurance conditions abroad. In these national markets, the 
pools hold a market ~hare which exceeds by far the Article 11 thresholds (first 
step). Moreover. they do not seem to be necessary for the coverage of the risks 
(second step). However, the Commission's services decided not examine this 
question further. Their market enquiry had indeed shown that the coverage of 
these small risks accounted for a very minor share of world-wide turnover. Under 
those circumstances, the Commission's services concluded early in 1999 that there 
was no sufficient Community interest to find possible infringements of the EC 
Treaty's competition rules and terminated the investigation by , sending 
administrative comfort letters to the insurers who had notified their aviation 
pools. These letters included a caveat in relation to the national markets, pointing 
out that national authorities could intervene against ·the pool's anti-competitive 
structure or anti-competitive behaviour by its members if they considered it 
appropriate. In two cases, there appeared to be no need any more for a comfort 
letter because, since the notification, the parties had decided to either dissolve the 
pool (Italy) or transform it into a company which would offer aviation risk cover 
in its own name (Netherlands). For reasons of proper administration, the 
Commission's services also informed in writing the insurers who had not notified 
14 
their pools but had also been subject to the market enquiry of the outcome of the 
enquiry. 
31. Some further points concerning the Commission's practical experience with pools 
need to be made. 
Firstly, it might happen that insurers consider a grouping as necessary at one 
time, but not thereafter. This might be because after some time the insurers gain 
the minimal capacity or expertise to insure these risks alone. It is also possible 
that the size or nature of the risks covered by the pool changes in such a way that 
the pool members can insure them alone. The Dutch Jnvaliditeitscentra/e (IVC) 
co-reinsurance· pool for disability risks, which was set up in 1955, provides a 
telling example. Initially, insurers operated all their business through the pool and 
were unwilling to provide cover alone because they had insufficient experience 
with such risks. The IVC pool was the major market player in the Netherlands. 
But as time passed by, insurers acquired more experience and began to compete 
among each other. In 1983, the pool's share had already come down to 25%. In 
1993, it had dropped to even less than 5o/o and in 1994 insurers decided to bring 
no new insurance policies into the pool. The pool only remained in existence for 
the settling of existing policies. The pool will fade away as insured parties reach 
retirement age or die. In this case, the block exemption Regulation could not 
apply, given that the participants in the grouping together held a market share 
which was distinctly over the threshold of 15o/o laid down in Article 11-1. The 
Commission's services nevertheless sent an administrative comfort letter under 
Article 81-3 (ex-Article 85-3). They observed in particular that the risk that the 
participants would co-ordinate their competitive behaviour outside the grouping 
(the risk of "spillover") could clearly be ruled out without further market analysis, 
given the completely negligible market share of the grouping itself. Obviously, in 
other cases where the pool proves to be no longer necessary but still holds a 
substantial market share, the outcome will be different. For instance, in the P&l 
Clubs case (see above), the Commission has reserved the right to withdraw the 
exemption which it has granted to the quotation procedure (see above §29). 
should the claims-sharing arrangement at some point in time no longer be 
necessary for its members to offer the level of cover they then offer. 
Secondly, in some pools cases, the Commission's services have issued comfort 
letters on the ground that the global turnover generated by the pool was so small 
that a further examination was not warranted. The turnover figures in question 
were clearly well below those allowed for SMEs in the Commission's de minimis 
notice11. Some Dutch pools covering professional risks (notaries, real estate 
agents, etc.) have benefited from this pragmatic approach. In some other cases, 
the insignificant level of the turnover led the Commission's services to clear the 
case for lack of effect on interstate trade (see e.g. Dutch pool for caravan fire 
insurance) or to close the case without formalising the finding of an infringement 
within the meaning of Article 81-1 (ex-Article 85-1) (see German car insurance 
11 However, although this notice could not be relied on as such because the insurance companies 
participating in the pool cannot be considered as small or medium sized undertakings within the 
meaning of that notice. 
15 
pool for third country owners of cars who do not show adequate liability 
insurance at the border). 
Thirdly, in some cases, the Commission's services have applied straightforwardly 
the "de minimis" rule contained in Article 11, thereby defining the relevant 
product or geographic market in a broad way (e.g. an Austrian pool for 
international transport risks which appeared to obtain around a third of its 
turnover from customers abroad was considered to operate on a geographic 
market which was wider than Austria, the market share of another Austrian pool 
dealing with the insurance of Volkswagen-type cars was determined with 
reference to the wider product market for car insurance, an Italian pool providing 
entrepreneurs or contractors with insurance against late delivery of their work 
was considered to operate in competition with financial institutions providing 
such companies a bank guarantee against the same event). 
C. Perspectives for the future 
32. The Commission's services have just launched their investigation into eo­
insurance or co-reinsurance pools dealing with environmental risks and nuclear 
risks. Several of those pools have been notified (the French environmental pool 
Assurpol was actually granted an exemption in 1991. This exemption expired last 
year12). All these pools will be assessed in light of the three tier legality test 
spelled out above (§28). 
33. A number of further points concerning the future application of the Block 
Exemption to pools can be made. 
Firstly, the Commission recognises that for certain highly atypical risks(satellites 
and spacecraft, for example), it may not be possible to determine with any 
certainty the minimum portfolio necessary for entry to the market, and as a 
consequence, the necessity or otherwise of the pool for its members cannot 
accurately be evaluated. In such cases the Commission intends to give the benefit 
of the doubt to the pool and clear it, unless any other specific factors preclude a 
clearance. 
Secondly, it is possible that a pool whose members differ greatly in size may be 
necessary for some members but not for others, who could be present on the 
market without recourse to the pool. In such cases, the Commission does not 
intend to break up a pool if that deprives the former totally of the chance to be 
present on the market. However, if the size of the pool is so large that it could be 
replaced by two or more pools in competition with each other, the Commission 
will insist that it reorganise itself in such a way. 
Thirdly, the Commission is aware of the fact that insurers may set up eo­
insurance or co-reinsurance pools for reasons other than to create for themselves 
the possibility to operate in a specific market. The pool may be created as· a 
vehicle to permit cross-subsidisation between different types of risks, to jointly 
purchase reinsurance, to increase the technical capacity of its members or to 
12 0.1. n° L 37 of 14.02.1992, p. 16. 
16 
~;impli(y the administration of the insurance of different risks. At this stage or 
their analysis, the ( ~ommission's services take the view however that insurers can 
achieve these objectives without having to pool their business, in other words by 
devising alternative methods which are less restrictive of competition (see §28 in 
fine). 
IV. Safety equipment (Title V) 
A. General information 
34. Title V allows insurers to fix by mutual agreement a) technical specifications 
relating to safety equipment and procedures to check if this equipment 
corresponds to these specifications (Article 14 first indent) and b) conditions of 
approval for fitters or repairers and procedures making it possible to assess 
whether they meet these conditions (Article 14 second indent). This co-operation 
enables insurers to evaluate better the risks that they cover and to calculate more 
precisely the premiums that they receive. It also encourages the manufacturers of 
safety systems to improve them and theref(lre to minimise the insured risks. In 
theory, the person insured benefits from this because if he buys powerful safety 
equipment, his risk decreases and his insurance premium falls. 
35. As regards the technical specifications relating to safety equipment, the 
Regulation is in line with the Commission's new approach on technical 
harmonisation and standardisation and as regards the approach on certification 
and tests.I3 This policy advocates a harmonisation process based on the one hand 
on legislation laying down essential requirements, and on the other on work by 
recognised European standardisation organisations, involving all market 
operators. Accordingly, Article 14 refers " in particular " to technical 
specifications "which are intended to become European standards" (See also 
recital 16). The words "in particular" show however that technical specifications 
established by insurers (or their associations) on a national scale (and therefore 
lacking a European vocation) are also exemptable under the Regulation on 
condition (inter alia) that they "are technically justified " (Article 15 sub a). 
Specifications must in particular include classification according to the 
performance level obtained (Article 15 sub e). Article 15 thus subjects the 
exemptability of these specifications to "Cassis de Dijon" conditions of 
legality applicable to State measures resulting in restriction of free movement of 
goods within the meaning of Article 28 (ex-Article 30) of the treaty. 
36. Regarding the rules of approval of fitters and repairers, Article 14 includes no 
reference to a European vocation. It is enough that these rules be "objective~', be 
applied in a non-discriminatory fashion to the undertakings involved, and concern 
" the professional qualifications of these companies " (Article 15 sub b). 
B. Practical experience 
13 See Council Resolution of 7 May 1985 (OJ C.l36/l of 4 June 1985), Communication of the 
Corn mission of 15 June 1989 (OJ C.267 /3 of 19 October 1989) and Directive 98/34 of Parliament 
and ofthe Council of22 June 1998 (OJ C.204/37 of21 July 1998). 
17 
J7. The Commission's services have only had to examine a few cases involving Title 
V. Apart from a number of informal complaints relating to alarm systems in 
motor vehicles, they received some notifications from national associations of 
insurers r~lating to safety equipment to combat burglary. In addition, the 
European Insurance Committee (EIC) informed the Commission's services of 
some isolated initiatives for the sector aiming-to set up systems "with a 
European vocation" (fire-fighting systems, common minimum rules for approval 
of fitters). It pointed out that on the other hand, in the field of anti-theft or anti­
intrusion alarms, few European standards have so far been established. 
38. In their assessment of the systems in question, the Commissionts services make a 
distinction between two situations. Either the Community legislator has adopted 
harmonisation directives in the field concerned. That is the case for motor 
vehicles, for which an EC approval procedure exists, and for the warning systems 
installed in these vehicles, for which optional harmonisation rules are also in 
force 14• Or no harmonisation has taken place. This is the case for other safety 
equipment. The "low tension" and "electromagnetic compatibility" Directives 
only in fact cover some aspects of this kind of equipment. In the absence of 
harmonisation, member States are nevertheless obliged to notify their draft 
national technical rules to the Commission and to other member States t s. It 
cannot but be admitted that the voluntary harmonisation work by recognised 
European standardisation bodies (in particular the technical committee TC 79 of 
Cenelec) has hardly progressed, owing to specific national regulations and 
specifications. 
3 9. In the first situation (e.g. vehicle alarm systems), the Directives in question aim at 
an optional harmonisation: while permitting the Member States to enact stricter 
rules for equipment manufactured on the national territory, they forbid them to 
oppose the marketing of imported equipment if it respects the provisions of the 
directives. It follows mutatis mutandis that Article 81 (ex-Article 85) forbids the 
insurers' national as·sociations to issue recommendations obstructing freedom of 
movement of equipment which conforms to the harmonisation directives. Indeed, 
what the official authorities of a Member State are not permitted to do, private 
companies cannot do eithcrt6. 
14 See for the warning systems Council Directive n°74/61, OJ N° L42 of 23 February 1970, as 
codified by Commission Directive n°95/56, OJ L286 of29 November 1995. 
15 See Parliament and Council Directive 98/34, OJ n° L 204 of 21 July 1998, which codifies Council 
Directive 83/189, OJ L109 of26 April 1983, which provides for an information procedure in the 
field oftechriical standards and regulation. 
16 See Reply to the parliamentary question N° E-0021/98 of Mr von Wogau :« ... Council directive 
74/61, as last amended by Commission directive 95/56 ( ... ) provides for harmonised technical 
requirements concerning vehicles fitted with alarm systems and the alarm systems intended for 
such vehicles. Therefore, since 1 January 1997, Member States may not refuse to grant 
Community-type approval to vehicles thus equipped, or those alarm systems. The insurance 
companies are also required to comply». 
18 
For example, if the directive lays down a determined colour for cabling wires or 
warning systems, insurers could not oppose the marketing of equipment of which 
the wires have the colour laid down by the directive. More generally, nor could 
they submit equipment accompanied by an certificate of conformity within the 
meaning of the directive, to a (additional) national evaluation procedure to check 
if this equipment respects the national technical specifications. The infringement 
of the competition rules would be all the more patent if the insurers' association 
applied a different treatment to alarm systems installed as standard in different 
makes of vehicles. 
40. In the second situation (e.g. anti-theft or anti-burglary security systems), it is 
worth noting as a preliminary that one cannot rule out a priori that 
recommendations emanating from national associations of insurers establishing 
technical specifications are subject to the provisions of the directive envisaging 
an information procedure in the field of technical standards and regulations 17. 
Regarding the conditions for application of Article 81 (ex-Article 85), it follows 
from Article 15 of the Regulation that these have to be linked to those relating to 
the application of Article 28 (ex-Article 30) (free movement of goods) and 
Articles 43 (ex-Article 52) and 49 (ex-Article 59) (free movement of persons and 
of services). Unless there is objective justification, insurers established in a 
Member State have to respect the principle of mutual recognition. They could not 
therefore place obstacles in the way of the marketing of safety equipment legally 
manufactured and marketed in another Member State, or the activities of fitters or 
repairers whose professional qualifications were recognised in another Member 
State. That means that, when this equipment or fitters/repairers have already been 
the subject of evaluation procedures in the Member State of origin, they could not 
be subject to such additional procedures in the host Member State. 
In the context of its notification of a recommendation concerning anti-burglary 
safety equipment for buildings, SKAFOR (the Danish insurers' association) 
subscribed to this principle of mutual recognition. It nevertheless asked the 
Commission's services to permit it to apply an " intelligent " method making it 
possible to test the performance of the safety equipment in question 
(manufactured in Denmark or coming from another Member State.). This method 
would apply both to mechanical equipment (e.g. a metal grid behind the front 
door of a building) and to electronic warning systems. Instead of testing the 
degree of resistance of this equipment against various forms of violence, the 
"intelligent" method aims to check to what extent this equipment can be 
overcome by the burglar. The Commission's services considered that this method 
is acceptable. Article 15( e) enables the insurers to establish technical 
specifications which include "classification according to the performance level 
obtained". But the "intelligent" method has the aim of measuring in a more 
appropriate way the level of performance of the various safety · equipment. 
Moreover, SKAFOR committed itself to entrusting a new independent body with 
the task of testing, according to this method, how well the equipment resists 
disactivation. Under these conditions, the Commission's services have just closed 
the case by administrative letter. 
17 Cit. Note 15. 
19 
C. Future prospects 
41. As the reference of Article 14, first indent, to " European standards" indicates, 
Title V not only permits insurers to agree on specifications, provided that these 
do not obstruct the integration of national markets, but also encourages them to 
provide a Community basis for genuine European standards which contribute 
actively to this integration. In this respect, the experiment was disappointing. In 
fact, to the knowledge of the Commission's services, up till now no document 
originating from associations of insurers has formed a basis for European 
standardisation work. Any revision of Title V of the Regulation should go 
together with reflection on the application of the Community approach in the 
field of technical harmonisation based on European standards. In order to create a 
real common market, the Commission is thinking of asking European bodies, in a 
well defined framework, to work out European standards in collaboration with all 
interested parties. 
SECOND PART 
CATEGORIES OF AGREEMENTS NOT CONCERNED 
BY THE REGULATION 
I. Settlement of claims 
A. General information 
42. As regards claims settlement, agreements between insurers typically cover two 
aspects. These two aspects can be presented separately or together. The first 
aspect concerns direct compensation for the person insured. Such an agreement 
will enable the persons insured to address themselves directly to their own insurer 
with a view to being compensated without having to await the outcome of any 
legal proceedings to establish responsibility. The advantage of such an agreement 
consists in the speed with which the claim is settled. The second aspect concerns 
the allocation between insurers of compensation costs; this allocation can be 
determined on a flat-rate basis or according to a scale of the responsibilities of the 
persons insured. An· agreement of this type enables the insurers to reduce their 
overheads, which should in theory be reflected in the level of the premiums. 
B. Practical experience 
43. At the time of the adoption of the Regulation, the Commission had not gained 
sufficient experience to include claim settlements agreements in the Regulation. 
Six years later, the experience has hardly become richer. The Commission's 
services have had to examine some notified agreements concerning the direct 
compensation of persons insured, or the allocation between insurers of the costs 
of this compensation, or a combination of these two aspects. In all these cases, 
they were able to send an administrative letter t9 the notifying parts confirming 
that the agreements did not raise any problem from the point of view of Article 81 
(ex-Article 85). 
20 
44. lt should be stressed that the scope of these agreements was always limited. They 
concerned claims giving rise to relatively limited compensation. Thus, an 
agreement by which insurers had agreed each to pay 50°/o of the payments 
resulting from a collision between ships flying ditTerent flags on inland 
waterways in the Netherlands (without determining responsibility), was limited to 
compensation claims not exceeding ten thousand Swiss francs. The scope of a 
Spanish agreement covering at the same time the principle of flat-rate distribution 
of compensation costs between insurers and that of direct compensation of the 
persons insured in the field of car third party liability insurance was for its part, 
limited to maximum claims of one million pesetas. The Commission's services 
considered that the advantages resulting from these settlement agreements, which 
cover claims for which the financial stake is limited (speed of settlement, savings 
on overheads) made up for the possible disadvantages (a certain degree of cross­
subsidisation between the premiums paid by the persons insured not assuming 
any responsibility and those due by the persons insured who incurred 
responsibility). 
45. More recently, the Commission's services -for the first time -received a 
complaint concerning a claim settlement agreement. The complainants advance 
that the agreement leads to an unjust increase in their premium and to a 
phenomenon of unjust cross subsidy between persons insured. The examination 
of this complaint is in hand. 
C. Future prospects 
46. In view of the relatively new character of the complaint of negative effects on 
persons insured of agreements on the settlement of claims, the Commission will 
have to examine fully the above-mentioned complaint and, if necessary, of other 
cases which might be brought to its attention, before being able to envisage 
extending the scope of the Regulation to this category of agreements. 
21 ; 
j 
f 
\ 
i l 
\ l 
I 
I I. Registers of and information systems on aggravated risks 
A. General information 
4 7. Agreements on keeping registers or exchanging information on aggravated risks 
have the aim of making it possible for insurers to know better the nature of the 
risks to be insured. They are in particular used for motor insurance, where such 
registers or specific information mechanisms allow~ for example, to know the 
history of -"bad" drivers or "bad" payers or to account for stolen cars. 
These agreements do not fall normally within Article 81-1 (ex-Article 85-1) if 
they restrict themselves to giving information on aggravated risks. This 
evaluation is without prejudice to measures applicable for the protection of 
personal data. In any case, a simple exchange of information on the nature of a 
risk does not appear to have the aim of restricting competition between insurers. 
lt is different if the exchange of information is accompanied by an agreement 
aiming to adopt a common attitude with regard to the risks in question. For 
example, recommendations to refuse to cover the aggravated risks in question or 
to raise the risk premiums for these risks (whether it is the simple principle of 
such an increase or of a percentage or fixed amount of increase) fall clearly 
within the scope of Article 81-1 (ex-Article 85-1) and do not appear exemptable 
under the terms of Article 81-3 (ex-Article 85-3) (See. already Title Il and Ill of 
the Regulation). 
B. Practical experience 
48. Since the entry into force of the Regulation, the Commission has only been 
. notified of three agreements on keeping registers or exchanging information on 
aggravated risks. In only one case (in Spain), the Commission's services had to 
insist on the abolition of a clause going beyond the legitimate object of these 
agreements. This clause compelled insurers to impose a minimum supplement on 
the premiums of "bad" drivers. In the three cases, the Commission's services 
declared Article 81-1 (ex-Article 85-1) inapplicable, by administrative comfort 
letter. They specified that this conclusion was without prejudice to measures 
applicable for the protection of personal data. 
More complex is the question if it would be appropriate to intervene with regard 
to agreements aiming to establish registers of bad risks if these would 
systematically lead insurers to refuse to cover those risks. In the absence of a 
formal commitment of the insurers to do this or of a recommendation from their 
association aiming to encourage them no longer to insure these risks, Article 
7.1(a) of Title Ill (prohibiting any clause which excludes damage involving the 
risk branch concerned from the cover) would not apply. In any event, the 
Commission's services do not have for the moment evidence suggesting that 
insurers carry o~t such parallel behaviour 
C. Future prospects 
22 
49. Agreements limited to keeping registers and to exchanging information on 
aggravated risks not appearing likely, apart from exceptional cases, to fall under 
the scope of Article 81 (ex-Article 85). Agreements going further will in theory 
have to be assessed with respect to Titles II and Ill of the Regulation. The 
Commission does not think, at this stage of its experience, that it is timely to 
adopt in this connection a block exemption mechanism. 
C<>NCLUSION 
50. The Regulation applies to two types of agreements concerning compet1t10n 
parameters which, at the time of the adoption of the Regulation, had just been the 
su~jcct of deregulation at the Community level, namely premiums and policy 
conditions. The obje.ctive of the Regulation was to accompany this process of 
deregulation and to ensure that the newly-created competition would not be 
restricted by self-regulation initiatives exceeding the limits of what was justified 
by the characteristics of the insurance sector. 
The question is whether the Regulation has achieved this objective. Experience 
shows that the implementation of Title II concerning the calculation of premiums 
is not easy. Owing to the technicality of the matter, the Commission's services 
have difficulties in checking whether or not co-operation as regards risk 
premiums is compatible with the Regulation. However, in the few cases where 
they collected data concerning the (gross) commercial premiums charged by the 
insurers, the Commission's services were reassured by the range of these 
premiums. With regard to policy conditions (Title Ill), the experience emphasises 
a different type of application problem. Among the so-called "black" clauses, the 
most harmful for competition, there are several which become, under the very 
terms of Article 7, cxcmptablc since their authors declare that they do not commit 
Insurers. 
51. The examination of joint eo-insurance or co-reinsurance groupings ("pools") 
under Title IV of the Regulation will remain a priority. The economic approach to 
be followed has been determined (see paragraph 28) and already applied to pools 
covering aviation risks. It will be necessary to modify the provisions of Title IV 
in the light of this approach and its application to the families of pools currently 
notified to the Commission. 
Each stage of the economic approach in question raises a question for which the 
answer depends on the actual facts. The question if the pool benefits from the de 
minimis rule of Article 11 of the Regulation depends on the definition of the 
market concerned (first stage). The question of checking if the pool is necessary 
for the coverage of the risk depends on the minimum size (second stage). And the 
question concerning the restrictive character of a pool for which there is not a 
ohliKalion d'apporl requires that one examines up to what point insurers have an 
economic interest in providing cover outside the pool (third stage). 
52. The agreements involving Title V (safety equipment) as well as those mentioned 
in the Council's empowering Regulation (claims settlement and registers of bad 
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risks) have not so J~tr occupied a leading place in the administrative practice of 
the Commission. lt will act only in the event of complaints and then solely insolltr 
as the jurisdictions or national competition authorities arc not ocllcr placed to 
examine them. 
53. This Report gives the Commission an opportunity not only to inform interested 
authorities and undertakings of the way in which its services have implemented 
the Regulation, but also to collect facts, comments and suggestions for 
improvements from these authorities and undertakings. In this respect, if 
necessary, a hearing could be envisaged. 
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