1999/329/EC: Commission Decision of 12 April 1999 relating to a proceeding pursuant to Articles 85 and 86 of the EC Treaty and Articles 53 and 54 of the EEA Agreement (Cases No IV/D-1/30.373 - P & I Clubs, IGA and No IV/D- 1/37.143 - P & I Clubs, Pooling Agreement) (notified under document number C(1999) 221) (Text with EEA relevance)
Date: 1999-04-12
Institutions: European Commission
Subjects: European treaties, association, carrier, competition law, insurance, maritime transport

L 125/12

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Official Journal of the European Communities

19. 5. 1999

II

(Acts whose publication is not obligatory)

COMMISSION

COMMISSION DECISION

of 12 April 1999

relating to a proceeding pursuant to Articles 85 and 86 of the EC Treaty and
Articles 53 and 54 of the EEA Agreement

(Cases No IV/D-1/30.373 (cid:190) P & I Clubs, IGA and No IV/D-1/37.143 (cid:190) P & I
Clubs, Pooling Agreement)

(notified under document number C(1999) 221)

(Only the English text is authentic)

(Text with EEA relevance)

(1999/329/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European
Community,

Having regard to the Agreement on the European
Economic Area,

Having regard to Council Regulation No 17 of 6 February
1962, first Regulation implementing Articles 85 and 86 of
the Treaty (1), as last amended by the Act of Accession of
Austria, Finland and Sweden, and in particular Articles 2,
6 and 8 thereof,

Having regard to the formal notifications for negative
clearance and exemption submitted pursuant to Article 4
of Regulation No 17 of the International Group Agree-
ment on 18 June 1981 and 27 July 1984, the request of
20 February 1995 to renew the exemption granted on 16
December 1985 and the formal notifications for exemp-
tion of the International Group Pooling Agreement on 7
July 1998 and of the International Group Agreement on
21 October 1998,

Having regard to the publication pursuant to Article 19(3)
of Regulation No 17 of a notice concerning the Inter-
national Group Pooling Agreement on 14 August 1998 (2)
and a similar notice regarding the International Group
Agreement, published on 21 October 1998 (3),

(1) OJ 13, 21.2.1962, p. 204/62.
(2) OJ C 256, 14.8.1998, p. 2.
(3) OJ C 322, 21.10.1998, p. 31.

After having consulted the Advisory Committee for
Restrictive Practices and Dominant Positions,

Whereas:

(A) THE FACTS

1. INTRODUCTION

(1)

(2)

(3)

This case concerns the compatibility with the
competition rules of the EC Treaty and the EEA
Agreement of two arrangements concluded within
the International Group of P & I Clubs (hereinafter
referred to as ‘the IG'), namely the International
Group Pooling Agreement (hereinafter ‘the Pooling
Agreement') and the International Group Agree-
ment (hereinafter ‘the IGA').

The IGA had originally been notified to the
Commission in 1981. The Commission granted to
it a formal exemption for 10 years. This expired in
February 1995 and the IG requested a renewal of
the exemption.

In June 1997 the Commission addressed a State-
ment of Objections to the IG, considering that
both the Pooling Agreement and the IGA were in
breach of the competition rules of the EC Treaty.

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Official Journal of the European Communities

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This Statement of Objections had been preceded
by a complaint against
the Pooling Agreement
submitted by the Greek Shipping Cooperation
Committee (‘GSCC'), a shipping organisation estab-
lished in London, which deals with matters
affecting ships ultimately owned by Greek interests.

After the adoption of the Statement of Objections,
the IG decided to amend its arrangements in order
to comply with EC and EEA competition rules. It
notified an amended version of the Pooling Agree-
ment in July 1998 and of the IGA in October
1998. They will enter into force in February 1999.

2. THE PARTIES

The Protection & Indemnity Clubs (P & I Clubs)
are mutual non-profit-making associations
that
provide Protection & Indemnity (P & I) insurance
to their members,
the
P & I Clubs is governed by a Board that represents
the members, but the day-to-day management is in
the hands of professional managers appointed by
the Board.

the shipowners. Each of

The International Group (IG) of P & I Clubs is a
worldwide association of P & I Clubs. 19 P & I
Clubs are members of the IG (seven from UK, four
from Bermuda, three from Luxembourg, two from
Norway, and one each from the United States of
America, Japan and Sweden).

(9)

(10)

tion; cargo and other (such as expenses of wreck
removal). Most P & I insurers provide all these types
of cover under a single contract.

Around 89 % of worldwide tonnage, and almost
100 % of European (EU-EFTA) tonnage, is insured
by the P & I Clubs which are members of the IG.
At present, they offer cover up to around EUR 3,9
billion (USD 4,25 billion).

The worldwide market shares of the individual IG
P & I Clubs range from 16,3 % (UK Mutual) to less
than 1 % (American Club). A breakdown of these
figures into each of the P & I Clubs for the 1998/99
policy year may be seen below (1).

P&I Club

Tonnage
insured
(million GRT)

Market share
(%)

American

Britannia

Gard

Japan Club

Liverpool & London

London

North of England

Skuld

SMP

Standard

Steamship Mutual

Swedish Club

UK Mutual

West of England

5,3

58,6

52,9

41,7

6,5

25,9

21,8

42,5

6,9

29,5

52,8

11

88,8

39,5

Total IG

483,7

0,98

10,78

9,73

7,67

1,2

4,77

4,01

7,82

1,27

5,43

9,72

2,02

16,34

7,27

89

3. THE MARKET OF P & I INSURANCE

(11)

Direct marine insurance can be divided into two
broad areas: one covers the risks of damage to the
(hull, machinery and suchlike) and is
vessels
normally offered by commercial
insurers. The
other, called Protection & Indemnity (P & I) insur-
ance, covers contractual and third-party liability
and has been traditionally insured by shipowner
mutual associations, the P & I Clubs.

Protection & Indemnity is a general concept which
risks:
includes insurance for different
injury or death of crew, passengers and others;
collision damage to vessels; other damage to third-
party property (such as harbour equipment); pollu-

types of

is not

insurers, or it

The remaining tonnage is insured by small inde-
pendent P & I mutual associations or maritime
commercial
insured at all
against P & I liabilities. Independent P & I mutual
associations normally focus on specific types of
vessels, such as dry-cargo or coastal or fishing
vessels and offer low levels of P & I cover. The
largest of
these insurers are the Ocean Marine
mutual associations.

(12)

Some P & I Clubs which are members of the IG
independently offer insurance for specific types of
vessels. For
the Shipowners Mutual
Protection (SMP) removed all the fishing vessels
from the IG’s arrangements in 1996 and now
provides cover to them up to USD 500 million.

instance,

(1) The Chart provides aggregated data for the Standard (London,
Europe and Bermuda), the Steamship Mutual (London, Europe
and Bermuda), and Skuld (Norway and Bermuda).

(4)

(5)

(6)

(7)

(8)

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(13)

Some commercial insurers, such as Lloyd’s Syndi-
cates, Southern Seas (Chubb Insurance), Terra Nova
or HIH also provide direct P&I insurance. Their
market share, at present, is insignificant.

agreed collectively by the clubs with commer-
cial insurers. Only one or two claims per year
reach this layer.

4. THE AGREEMENTS

4.1. The Pooling Agreement

(17)

(14)

is in essence a claim-
The Pooling Agreement
sharing agreement between mutual associations. Its
purpose is to share proportionately among all the
P & I Clubs the claims made on one club in excess
of a certain amount. It was signed for the first time
in 1899 between six P & I Clubs incorporated in
the United Kingdom. Since then it has been modi-
fied several times and new clubs have adhered to it.

(15) Only 18 P & I Clubs are parties to the Pooling
Agreement. The remaining member of the IG, the
SMP (from Luxembourg) indirectly participates in
it by being reinsured by one of the other clubs.

(d) The excess of any claim over the amount of the
Excess Reinsurance and up to around EUR 3,9
billion (USD 4,25 billion) is again shared by the
clubs under the Pooling Agreement. This is
known as the ‘Overspill'. So far, no claim has
ever reached this layer.

The qualification ‘up to around' EUR 3,9 billion
(USD 4,25 billion) for the ceiling set to the over-
spill needs to be explained: this ceiling is not a
fixed figure. If an overspill claim arises, each
Member will have to contribute up to 2,5 % of the
it would have to face
maximum liability that
according to Article 6(1)(b) of
the International
Convention on Limitation of Liability for Maritime
Claims of 1976 (Clause 14.2 of the Pooling Agree-
ment). The Article sets a series of maximum
amounts to be faced by a ship owner for any single
catastrophe based on the tonnage of
the ship
concerned (1). The EUR 3,9 billion (USD 4,25
billion) figure is arrived at by adding the 2,5 % of
the maximum liability figures for each of the ships
insured by P & I Clubs participating in the Pooling
Agreement.

4.1.1. The claim-sharing arrangement

(16)

claim-sharing

The
different layers of insurance coverage:

arrangement provides

(18) At the retention layer, as has been said, the totality
of the claim is borne by the club whose Member
has incurred the liability. In each of the other
layers, the claims are shared between the clubs
according to different rules:

for

(a) The first EUR 4,57 million (USD 5 million) of
any claim is borne by the club whose Member
has incurred the liability. This is known as the
club’s ‘retention'. Most of the claims faced by
the clubs fall in this layer (99 % in number and
82 % in value, for the period 1985 to 1995).

(b) The excess of any claim over EUR 4,57 million
(USD 5 million) up to EUR 27,42 million (USD
30 million) is shared by the clubs under the
Pooling Agreement. Around 20 claims per year
have fallen in this layer between 1985 and
1995.

(c) The excess of any claim over EUR 27,42
million (USD 30 million) up to EUR 1,8 billion
(USD 2 billion)
is covered by the Group
General Excess Loss Reinsurance Contract,

(a) Between EUR 4,57 million (USD 5 million) up
to EUR 27,42 million (USD 30 million). The
claims are shared according to the percentage
of each club in claims, tonnage and total calls.
Each one of these three factors accounts for
one-third of the final percentage (this is why
this method is called the one-third formula).
There are, however, two qualifications to this
formula. First, there is a loss ratio adjustment
that takes into account whether in the past the
club in question has been receiving more or
less in contributions than it has effectively
contributed to
Secondly,
between EUR 18,3 million (USD 20 million) up
to EUR 27,42 million (USD 30 million), the
club incurring the claim receives a 20 %
penalty (Clause 10.1 and Appendix VI of the
Pooling Agreement).

other members.

(1) Article 6 (1)(b) establishes a table ranging from USD 50 000
for a ship of 500 gross tons up to USD 5,5 million for a ship
of 170 000 gross tons.

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Official Journal of the European Communities

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(b) The cost of the Group General Excess Loss
Reinsurance Contract is shared between clubs
according to the tonnage insured by each club.
However, the rate to be paid per tonne depends
on the type of vessel. Vessels that in the past
have produced claims reaching this level have
higher
tankers have
produced around 80 % of the claims that have
reached this level and, therefore, their rates per
ton are much higher.

ton. In fact,

rates per

(c) An overspill claim would be apportioned
among all the clubs in the proportion which
the club limit of each of the clubs bears to the
aggregate of all the club limits, which is calcu-
lated according to the method explained before
(see recital 17).

(19)

It should be noted that in any event in the case of
‘Overspill' claims, each club is entitled to deduct
from its contribution the amounts not ‘economic-
ally recoverable' from its members (Clause 14.3 of
the Pooling Agreement). A panel of experts will
determine the amounts not ‘economically recovera-
ble'
in case of disagreement between the Clubs
(Clause 15 of the Pooling Agreement). This clause
limits the exposure of the clubs to a claim, and
prevents clubs from paying sums that they could
never collect in full.

4.1.2. The minimum common level of cover

(20) As explained above (see point 16), all members of
the P & I Clubs who participate in the pooling
agreement are obliged to share claims up to mound
EUR 3,9 billion (USD 4,25 billion).

(21)

85 because

Before 20 February 1998, this figure was set at
around EUR 16,5 billion (USD 18 billion) (20 % of
the maximum liability according to the Inter-
national Convention on Limitation of Liability for
Maritime Claims of 1976). In the Statement of
Objections the Commission considered that this
high minimum level of cover was contrary to
Article
from
it
competing by offering levels of cover lower than
around EUR 16.5 billion (USD 18 billion),
for
which substantial demand existed. It also consid-
ered this agreement on a high common level of
cover as an abuse pursuant to Article 86 of the
collective dominant position held by the P & I
Clubs, consisting in limiting the range of insurance
cover available in the market to the prejudice of
consumers.

impeded clubs

(22)

(23)

(24)

(25)

(26)

In reaction to the Statement of Objections, the IG
Clubs agreed to lower the minimum common level
of cover from around EUR 16,5 billion (USD 18
billion) to EUR 3,9 billion (USD 4,25 billion).

The IG has also notified an amendment to the
Pooling Agreement which makes it clear that the
P & I Clubs are free outside the Pooling Agreement
to offer higher levels of cover than the minimum
common level and, therefore, to compete between
themselves in providing such levels (amendment to
Clause 5 of Appendix III of the Pooling Agree-
ment). They are also free outside the Pooling
Agreement to offer lower levels individually.

4.1.3. Club rules approval

The Pooling Agreement also includes some clauses
that do not concern the method of sharing claims
between P & I Clubs but are nevertheless directly
related to it. The insurance policy conditions
(‘rules') of each club are subject to the approval of
the Pooling Agreement
the other members of
(Clause 16 of the Pooling Agreement). At present,
three-quarters of the P & I Clubs can decide to
withhold the benefits of the Pool from any P & I
Club whose rules and accounting practices are not
approved by them.

4.1.4. Re-insurance provisions

The Pooling Agreement also includes the provi-
sions that should be followed by any club that
wants to provide re-insurance to a third insurer, be
it a mutual insurer or a commercial one.

It originally included only objective conditions to
be fulfilled by mutual insurers to which a P & I
Club would provide re-insurance. No conditions
were included for commercial insurers. This could
have allowed the IG to discriminate between
commercial insurers, by providing re-insurance to
only some of them. In addition, the Pooling Agree-
ment did not include any procedural rule to ensure
that P & I clubs would comply with the objective
conditions set forth for mutual insurers. Therefore,
in the Statement of Objections the Commission
had considered that there was a lack of objective
criteria and appropriate procedures within the
Pooling Agreement governing the possibility for a
Club to provide re-insurance to a third insurer.
This constituted an infringement of Article 86 of
the Treaty.

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19. 5. 1999

(27)

The IG has notified amendments to the relevant
provisions (amendments to Appendix X of
the
Pooling Agreement). The amendments provide that
any Club that wants to provide re-insurance to a
third insurer will need to submit an application to
the IG. The parties to the Pooling Agreement will
have to decide whether the third insurer satisfies
several conditions. Some of these conditions are
general and some apply particularly to mutual or
commercial insurers. As regards the general ones
the insurer should be financially sound, the P & I
cover offered by it should be similar to that offered
by the IG Clubs, and it should make an equitable
contribution to pool claims and to the Excess Loss
the
Contract premiums. In addition to this,
insurer is a mutual one (not favcured by laws in its
country restricting freedom of choice of insurer for
owners or vessels of that country), it should operate
on a genuinely mutual non-profit making basis, its
experience and policies with regard to claimshan-
dling should be compatible with those of the P & I
Clubs and it should abide by the terms of the IGA.
If it is a commercial insurer (favoured by laws in its
country restricting freedom of choice of insurer for
owners or vessels of that country), the re-insuring
Club will have to be responsible for claimshandling
and for the rating on a mutual basis of shipowners
on behalf of the insurer.

if

(28) As to the procedure, a subcommittee of the IG will
have to make a recommendation on the application
within 30 days of receipt of all the relevant infor-
mation (this period may be extended by a further
30 days during the renewal period). The clubs will
then vote on the basis of the recommendation. If
the decision is negative, the insurer who is refused
re-insurance should be given a written notice to
that effect within 10 days of the vote being taken,
such notice stating the reasons for the refusal. The
insurer will have the right to appeal against any
such refusal. The appeal will be considered by three
arbitrators, who will decide whether the clubs have
applied the conditions listed above in a reasonable
manner. The parties will designate one arbitrator
each within 14 days of the request for arbitration
being submitted, and the third, to be designated by
the two others within 10 days of their appointment,
must be a senior lawyer experienced in commercial
and insurance matters. The arbitrators will deter-
mine their own procedures and will act with due
expedition. They have to give their decision in
writing, stating their reasons. Their decision has a
binding character.

(30)

(31)

on the methods for offering P & I cover to a ship-
owner who was already a member of another club.
At the beginning of the 1980s it became a written
agreement between all the members of the Inter-
national Group. It establishes rules to be followed
by the parties to the Pooling Agreement. Its main
features are described in points 30 to 40.

4.2.1. The quotation procedures

The IGA limits the freedom of the P & I Clubs to
quote a rate to shipowners for vessels insured by
other clubs in order to attract them. The rate is the
contribution that a vessel makes to the different
elements of the costs of claims borne by the P & I
Club which insures it, namely cost of claims to be
faced by the club under the retention level, cost of
claims to be shared with other Clubs through the
Pooling Agreement; cost of re-insurance and, in
some cases, a specific charge for the club’s adminis-
trative costs. This contribution is estimated at the
beginning of the policy year and is normally paid
in instalments: at the beginning of a policy year a
shipowner pays for each vessel an initial share
(advance call). The shipowner will have to pay
further contributions (supplementary calls) at a later
stage (typically; three years later) when its club’s
total liabilities, administrative costs and investment
income for that year are known.

The IGA prescribes that when quoting to insure a
vessel from the following 20 February (the policy
year starts on 20 February and therefore all move-
ments from one club to another become effective
on that date) no club can quote a lower rate than
the one quoted by the club presently insuring the
vessels in question (the ‘holding club') unless an
expert committee convened by the new club
rate unreasonably
considers
high. The
three
members: one for each club directly concerned and
an independent expert appointed by the IG.

the holding club’s

composed of

committee

is

4.2. The

International Group Agreement

(IGA)

(29) Originally, the IGA was a Gentlemen’s Agreement
reached between the clubs to establish some rules

(32) A new procedure was introduced at the Commis-
sion’s request in 1985: a club (the ‘new club') can
quote a lower rate than the one offered by the
‘holding club' if it has reached a binding agreement
with the shipowner before 30 September and the
new club has notified the holding club within three
days. If the holding club considers that the new
club’s rate is unreasonably low, it can appeal to an
expert committee.

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L 125/17

(33)

The Statement of Objections issued on 2 June
1997 maintained that
these procedures were
contrary to Article 85 of the Treaty because they
prevented the P & I Clubs from competing in rela-
tion to the rates quoted and were not indispensable
for the proper functioning of the Pooling Agree-
ment. It appeared that the new procedure intro-
duced in 1985 had not increased competition satis-
factorily. Indeed, in the early years several requests
for quotations for vessels were made in September.
Nevertheless, in only one case was the procedure
effectively used to move from one club to another.
In most
recent years the procedure has been
completely abandoned (1).

(34)

The IG has now notified an amendment to the
quotation procedures which reduces their scope.
From 20 February 1999, the quotation procedures
for the following policy year will no longer apply to
all the elements of the cost borne by a P & I Club
as they do at present, but will be limited to the
costs of claims and re-insurance. This means that
the club’s internal administrative costs will be
outside the quotation procedures.

(35) Under the amended quotation procedures, clubs
will remain free either to charge specifically for
their administrative costs by including them as a
distinct cost element in the rate quoted at the
beginning of the year, or to finance them out of
their investment income. In the latter case, clubs’
administrative costs will be taken into account
when their supplementary calls are set. In either
case the IGA quotation procedures will apply to
the rate, exclusive of any element
for internal
administrative costs. In the first case, the amended
quotation procedures will enable a new club with
lower administrative costs to offer a lower rate, with
an immediate effect on the level of advance call
payable by the shipowner. In the second case,
where the new club does not include in its rate a
specific
the
administrative
costs,
still be of
amended auotation procedures will
benefit to shipowners because, by changing clubs,
they will be able to benefit from any decrease in
administrative costs that they expect the new club
to enjoy in respect of the policy year in which they
move. The IG expects that, in most cases, the latter
situation will be the practical effect of the change
in the quotation procedures, because most clubs

element

for

(1) Use of the 30 September procedure: 1986: eight requests, no
transfer. 1987: three requests, one transfer. 1988: no requests.
1989: no data available. 1990: 13 requests, no transfer. 1991:
34 requests, no transfer. 1992: 86 requests, no transfer. 1993:
one request, no transfer. 1994: no request.

(36)

(37)

(38)

will in future choose to quote a rate that does not
include a specific element for administrative costs.

The amended quotation procedures will be supple-
mented by provisions aimed at
increasing the
transparency of the level of administrative costs for
each P & I Club. Clubs will calculate yearly a five-
year Average Expense Ratio which expresses the
percentage that administrative costs represent of
premium income plus investment
income. This
ratio will be included in the published accounts of
each club and will be provided whenever a club
quotes a rate on a vessel insured by another club
both by the new club and the holding club.

accordance with

In calculating the average expense ratio, adminis-
trative costs and investment income will be defined
in
applicable Community
accounting Directives, in particular with Council
Directive 91/674/EEC of 19 December 1991 on
the annual accounts and consolidated accounts of
insurance undertakings (2). Administrative
costs
means all expenditure incurred in operating a club
(except expenditure incurred in dealing with claims
and potential claims) and includes commissions,
brokerage, other acquisition expenses and deprecia-
tion. Investment
income means all capital and
currency gains and losses, whether realised or not,
earned during the financial year, less the related
expenditure.

4.2.2. Quotations for tankers

The IGA includes special rules for quotations for
the IG recommends annually a
tankers. First,
reasonable minimum provision in respect of claims
from tankers to be shared under the Pooling Agree-
ment. Secondly, the IGA prescribes explicitly that
quotations for tankers shall make fair and adequate
provision for all relevant elements of cost (Clause
6(2)) and sets up a procedure which enables clubs
to refer to an expert committee the acceptance of
insurance of a tanker by any other club. In these
the committee will be entitled to decide
cases,
whether the club insuring the tanker has made fair
and adequate provision of all the elements of cost
(Clause 12(4)). This referral to the expert committee
has taken place only once since 1985.

(39)

The IG has now notified an amendment to ensure
the consistency of this rule with the amendments,
proposed earlier, to the quotation procedures. From

(2) OJ L 374, 31.12.1991, p. 7.

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Official Journal of the European Communities

19. 5. 1999

the beginning of the next business year, the IGA
will prescribe that quotations for tankers must
make fair and adequate provision for all relevant
elements of cost other than internal administrative
costs.

(44)

IGA was adopted, which came into force in
February 1985. This new agreement was notified
and an exemption for 10 years was granted by
Commission Decision 85/615/EEC (1).

The IG of P & I Clubs requested a renewal of that
exemption in February 1995. For the investigation
of this case a notice was published in the Official
Journal of the European Communities in July
1995 (2), inviting interested third parties to submit
their observations. Some concerns were raised by
the GSCC, which in December 1995 decided to
transform its comments into a formal complaint.
At a later date comments were also received from
the Union of Greek Shipowners (UGS) and Ocean
Marine, an independent P & I mutual.

(45) On 2 June 1997 the Commission addressed a
Statement of Objections to the IG, ruling that both
the Pooling Agreement and the IGA were contrary
to the Community competition rules. The IG
replied on 14 September 1997 and an oral hearing
was held on 27 April 1998. In addition to the IG,
the GSCC, the UGS and Ocean Marine intervened.

(46) On 7 July 1998 the IG formally notified the
Pooling Agreement, amended as a result of nego-
tiations with the Commission. On 14 August 1998
the Commission published a notice pursuant to
Article 19(3) of Regulation No 17, which indicated
that
intended to adopt a favourable position
towards the notified Pooling Agreement.

it

(47) On 24 September 1998 the IG formally advised the
Commission that it intended to notify a number of
amendments
to be introduced into the Inter-
national Group Agreement. In view of this, on 21
October 1998 the Commission published a notice
to Article 19(3) of Regulation No 17
pursuant
concerning the amended IGA. At that same date,
the IG notified the amendments to the IGA.

(48)

It should be noted that the European Parliament
has shown considerable interest in the present case.
On 22 January 1996 MEP Bryan Cassidy intro-
duced three written questions (3). MEP Karl von
Wogau asked an oral question (O-0053/96) in a
session on 15 March 1996 (4) and finally, even a
resolution was adopted on 27 March 1996 (5)
stating that a USD 20 billion catastrophe ‘would
put at risk the P & I Clubs themselves' and urging
the Commission ‘to study various solutions to this
problem which must fully respect the polluter-pays
principle' as well as ‘to consider the question of
Article 85 exemption in the light of the conclu-
sions of this study'. Finally, MEP Cassidy intro-
duced another written question in January 1998
(E-0213/98) (6) and an oral question (No 077) was
asked in the session of 11 May 1998 by MEP Florus
Wijsenbeek (H-0410/98).

(1) OJ L 376, 31.12.1985, p. 2.
(2) OJ C 181, 15.7.1995, p. 16.
(3) OJ C 122, 25.4.1990, p. 32.
(4) Annex, OJ 4-478/300, 15.3.1996.
(5) OJ C 117, 22.4.1996, p. 20.
(6) OJ C 304, 2.10.1998, p. 54.

4.2.3. Release calls

(40) When a shipowner leaves his club he is obliged to
cover a share of the liabilities incurred by this club
during the years in which he was a member, even
if, at the moment of leaving, these liabilities are
still undetermined. Since 1985,
the IGA has
to choose between two
allowed the shipowner
options: to provide a bank guarantee or to pay a
release call fixed by the club. If he considers this
call unreasonably high, he can appeal to an expert
committee, composed as explained above (see
recital 31).

5. THE PROCEDURE

(41)

The IG of P & I Clubs submitted a notification of
some of its arrangements to the Commission in
June 1981. Only the IGA and some agreements
ancillary to the Pooling Agreement, such as the
in
re-insurance
Appendix X of the Pooling Agreement, see recital
25) were covered by it. The Pooling Agreement
itself was not formally notified.

(now included

agreements

(42) After a preliminary examination, the Commission
concluded that the IGA contained a number of
clauses that could not be exempted pursuant to
Article 85(3). On February 1983 it therefore opened
proceedings and sent the applicants a Statement of
Objections prior to a decision pursuant to Article
15(6) of Regulation No 17 to withdraw the benefit
of the exemption from fines. In December 1983,
the Union of Greek Shipowners and the Greek
Shipping Cooperation Committee (GSCC) entered
the procedure, lodging a formal complaint against
the IGA.

(43)

In July 1984 the Commission issued a Statement
of Objections on the substance of the case, holding
that some of the provisions of the IGA infringed
Article 85(1) and did not satisfy the conditions for
exemption contained in Article 85(3). After
substantial modifications (for instance, the intro-
duction of the 30 September procedure), a new

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(B) LEGAL ASSESSMENT

(54)

1. ARTICLE 85

(49) Under Article 85(1) of the Treaty any agreement
between undertakings which has as its object or
effect
the restriction of competition within the
common market is prohibited in so far as it may
affect trade between Member States. These agree-
ments may, nevertheless, be exempted if
they
satisfy several conditions set out in Article 85(3).

1.1. Agreement between undertakings

(50)

(51)

The Pooling Agreement and the IGA are agree-
ments between the P & I Clubs. These must be
undertakings
considered
non-profit-making
performing an economic activity. In fact,
they
compete between themselves as well as with other
mutuals
in some
and profit-making insurers
segments of the P & I insurance business.

The Court of Justice has already held in its
FEDETAB judgment (1) of 29 October 1980 that
non-profit-making entities engaged in economic
activities may be considered as undertakings within
the meaning of Article 85(1) (Joined Cases 209 to
215 and 218/75 Van Landewyck v. Commission, at
paragraph 88).

1.2 Market definition

(52) Any restriction of competition within the meaning
of Article 85(1) of the Treaty should be assessed in
the context of a relevant market. The relevant
markets for the assessment of this case, from a
product as well as from a geographical point of
view, are defined below.

1.2.1. Product market

Demand side analysis

(53)

From the demand side, direct marine insurance can
be clearly divided into two different product
markets: hull and P & I insurance. They cover
different needs and have traditionally been consid-
ered separately by shipowners: the latter obtain hull
insurers but create
insurance from commercial
mutual associations in order to share their P & I
risks. Maritime hull
insurance has already been
considered a separate market by Commission
Decision 93/3/EEC (Lloyd’s Underwriters’ Associa-
tion and the Institute of London Underwriters) (2).

(1)
[1980] ECR, p. 3125.
(2) OJ L 4, 8.1.1993, p. 26.

P & I insurance, also seen from the demand side,
could be theoretically divided into very specific
segments, according to the type of vessels insured
(tankers, fishing-vessels, dry-cargoes, etc.), the type
of cover (property damage, pollution, crew injury,
etc.) or even the level of this cover (unlimited,
limited to a certain level, etc.). In fact, non-standar-
is a tailor-made
dised insurance,
like this one,
product adapted to the characteristics of
the
insured.

(55) Direct hull and P & I insurance must be distin-
guished from marine re-insurance. The demand for
each type of insurance is different: in the first two
cases the demand comes from shipowners while in
the third one comes from professional
insurers.
Marine re-insurance is normally provided by
specialist re-insurers. In some cases, however, it can
also be provided by P & I insurers. In fact, the P & I
Clubs offer
independent
re-insurance to small
P & I mutuals.

(56)

(57)

(58)

Supply-side analysis

From the supply side it should first be analysed
whether the conditions on which P & I insurance is
offered are similar to those for other types of insur-
ance and whether, therefore, other insurers could
start to provide P & I insurance at short notice. If
this were the case, the product market should be
widened to include those other types of insurer.
Regulatory barriers to entering the P & I market for
firms already providing non-life insurance are not
significant. However, two other types of barrier are
more relevant.

First, P & I insurance requires some features that
other insurance companies cannot develop in a
short period of time. These features basically are
technical knowledge on P & I
risks and large
networks of representatives in the most important
world harbours that may solve efficiently P & I
claims and a sophisticated claims handling unit.

Secondly, and much more importantly, there are
very large economies of scale in the provision of
high levels of P & I insurance. In general, insurance
is always a matter of scale. In order to be able to
provide insurance for a specific type of risk, an
insurer must cover a minimum number of units.
This minimum number of units will allow it to
have a spread of risks large enough to reduce the
volatility of claims (cid:190) that is, to ensure that claims
will follow a regular pattern (which can normally
be established from the observation of the past). In
other words, if it insures this minimum number of
units, there will be a high probability that it will
not face unforeseen claims, because the frequency
and intensity of the claims received will reproduce
past patterns.

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Official Journal of the European Communities

19. 5. 1999

Normally, the minimum dimension is relatively
higher for catastrophic risks (i.e. risks which have a
large intensity but a low frequency) than for normal
ones.

(62)

(59)

In the field of P & I insurance, the minimum scale
required to offer cover is high in relation to the
whole market dimension. In other words, econo-
mies of scale represent important barriers to entry.
Indeed, to reach the minimum scale any insurer
would have to face important costs that could not
be recovered if the entry were to fail (sunk costs).
Once it had entered the market, an insurer would
be obliged to satisfy all the claims derived from the
policies it had underwritten. The sunk costs would
equal
the difference between the premiums
received, which would be calculated according to
past patterns, and the claims
the
minimum scale is not reached (if entry fails), this
difference may be very significant because claims
would be very volatile (that is, estimated patterns
would not be reproduced). This general proposition
about economies of
insurance
remains valid even though obviously these econo-
mies decrease when the level of cover offered
diminishes.

scale in P & I

satisfied.

If

(60)

The combination of
these two barriers restrain
most non-life insurance companies as well as
specialist re-insurers from operating in the P & I
insurance markets. Marine hull insurers, however,
can probably develop their expertise and claims
facilities in order to cover P & I risks more easily
than other types of insurer. For lower levels of
P & I cover, where economies of scale are small,
they could operate in the market. In fact, as has
been explained, a minority of them provide P & I
insurance up to around EUR 459 million (USD 500
million).

1.2.2. Geographic market

The market for contractual and third party mari-
time damages insurance has a worldwide scope.
Shipowners generally ensure that their fleets are
placed on the best possible terms to be offered by
any P & I Club, no matter where this club is
located. At present,
the International Group of
P & I Clubs as well as most of the small P & I
independent
registered
around the world. The market for P & I re-insur-
ance has also a worldwide scope.

insurers

vessels

cover

1.2.3. Conclusion

(63)

It can be concluded that P & I insurance represents
a single worldwide product market. Its substitut-
ability by other marine insurance products, from
the demand as well as from the supply point of
view, is weak. There is only a limited degree of
supply side
substitutability with marine hull
insurers in relation to low levels of P & I insurance
(up to EUR 459 million (USD 500 million)), where
independent P & I mutuals or commercial insurers
are also able to operate.

(64) With regard to P & I re-insurance, a distinction
must be made according to the level of cover
offered. Up to around USD 2 billion, P & I re-
insurance can be considered as part of the wider
worldwide market of marine re-insurance. Never-
theless, for higher levels marine re-insurers do not
reach at present the minimum dimension neces-
sary to offer P & I re-insurance and,
in conse-
quence, P & I re-insurance for levels higher than
around EUR 1,8 billion (USD 2 billion) should be
considered a distinct market.

1.3. Restriction of competition

(61) With regard to the market of re-insurance to P & I
direct insurers, economies of scale are the main
barrier to entry. Regulatory or technical barriers do
not play a significant role. In consequence, not
only are the P & I Clubs able to provide re-insur-
ance to other P & I insurers, but also marine re-
insurers which are able to reach a mirimum dimen-
sion can provide it. In practice, marine re-insurers
provide re-insurance for low levels of cover to inde-
pendent P & I mutuals as well as re-insurance to
the P & I Clubs up to EUR 1,8 billion (USD 2
billion). Re-insurance for higher levels of cover can
only be provided at present by the P & I Clubs.

1.3.1. The Pooling Agreement

(65) A claim-sharing agreement such as the Pooling
Agreement entails an agreement between the
parties on a number of aspects of their insurance
activity. Indeed, it is inherent in any claim-sharing
agreement that its members decide in common at
least the policy conditions and the level of cover
offered. Such agreement prevents
them from
offering different insurance products through the
claim-sharing agreement.

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Official Journal of the European Communities

L 125/21

(66)

(67)

(68)

Such an agreement cannot be considered anti-
competitive, at
least when the claim sharing is
necessary to allow its members to provide a type of
insurance that
they could not provide alone.
Indeed, there cannot be a restriction of competition
when the members of the pool are not actual or
potential competitors, because they are unable to
insure alone the risks covered by the pool. If
anything, such claim sharing indeed strengthens
competition since it allows several insurers which
are not able to provide such cover to put their
resources in common and create a new player.

that

To the extent
the claim sharing does not
violate Article 85(1), the restrictions imposed on
the parties to the claim-sharing agreement which
are indispensable to the proper functioning of that
claim sharing are not covered by Article 85(1).
They must be considered ancillary to, or inherent
in, the claim sharing (see for instance the judgment
of the Court of 15 December 1994 in Case C-250/
92, Gøttrup-Klim v. Dansk Landbrugs Grovvaresel-
skab (1), where the restrictions necessary for the
proper functioning of a cooperative were consid-
ered not to be covered by Article 85(1)).

1.3.1.1. Indispensability of claim sharing within

the IG of P & I Clubs

It is analysed below whether claim sharing within
the IG of P & I Clubs, which covers around 89 %
of the worldwide vessel tonnage, is necessary to
allow the P & I Clubs to provide P & I insurance up
to EUR 3,9 billion (USD 4,25 billion), as they do at
present. The conclusion will be that the IG’s claim-
sharing arrangements are indeed necessary to offer
the present level of cover, because the minimum
dimension required to offer such a cover can only
be attained by insuring more than 50 % of world-
wide tonnage. Therefore, there is no room for a
second viable supplier of such cover.

(69) As explained above (see recitals 58 and 59), insur-
ance normally presents economies of scale. A
minimum number of units must be insured to offer
insurance for a specific type of risk. This minimum
number of units can be reached either by a single
insurer or by different insurers who agree to insure
some type of risks in common. This is the case of
co-insurance or
co-reinsurance pools between
commercial
insurers but also of claim-sharing
agreements between mutuals such as the one at
issue in this case.

(1)

[1994] ECR, p. I-5641.

(70) Normally, the minimum dimension necessary to
provide a specific type of insurance can be directly
estimated by analysing the market shares held by
the insurers effectively providing alone this type of
insurance. In the P & I insurance market, as has
already been explained (see recitals 11 to 13), there
are very few insurers not taking part in the IG.
Moreover,
insurers (of whom
Ocean Marine, with a market share of around 2 %
of the market is the largest) provide relatively low
levels of P & I cover, normally up to EUR 459
million (USD 500 million). Consequently, they do
not constitute a useful element of comparison in
determining the minimum dimension necessary to
provide P & I cover up to around EUR 3,9 billion
(USD 4,25 billion).

these independent

(71)

insurance independently,

In cases when the minimum dimension to provide
one specific level of insurance cannot be directly
estimated because there are no insurers offering
this
indirect methods
must be used. The minimum dimension could be
indirectly estimated by analysing the availability of
re-insurance to insurers holding different market
shares. Indeed, the maximum level of re-insurance
available to a P & I Club will normally determine
the maximum level of cover that this club is able to
offer independently.

(72) With regard to the maximum level of re-insurance
available to independent P & I insurers, informa-
tion was requested from leading London maritime
brokers as well as from the main IG re-insurers. All
their replies coincided in indicating that 30 % of
worldwide tonnage would be enough to obtain re-
insurance of up to EUR 1,38 billion (USD 1,5
billion), 45 % to EUR 1,8 billion (USD 2 billion)
but that more than 50 % is required for amounts
higher than EUR 2,75 billion (USD 3 billion) and
thus there is only room for one market player
offering such a cover. This
that, at
present, the claim sharing among P & I Clubs is, as
such, pro-competitive.

indicates

(73)

It could theoretically be argued that re-insurance
should be available for higher levels of cover in
relation to vessels bearing lower
risks. In this
connection, brokers and re-insurers were requested
to determine the maximum re-insurance available
to a hypothetical club not
insuring tankers or
passenger vessels, which are the two types of vessels
which have produced larger claims in the past.

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Official Journal of the European Communities

19. 5. 1999

(74)

(75)

According to the replies received, the limits of
re-insurance available to such a hypothetical club
are the same as those valid for clubs including all
types of vessels.

it must be concluded that

In view of the evidence described in recitals 72 and
73,
the IG’s claim-
sharing arrangement is the only available altern-
ative to provide cover up to around EUR 3,9 billion
(USD 4,25 billion). It is therefore beyond all doubt
that all the restrictions indispensable to the proper
agreement
functioning
(inherent restrictions) must be considered compat-
ible with Article 85(1) of the EC Treaty.

claim-sharing

the

of

1.3.1.2. Restrictions inherent in the Pooling Agree-

ment

1 . 3 . 1 . 2 . 1 . T h e m i n i m u m c o m m o n l e v e l o f

c o v e r

the clause of

Both the GSCC’s complaint and the Statement of
the
Objections considered that
previous version of the Pooling Agreement that
provided for a single level of cover to be offered by
all clubs (up to EUR 16,5 billion (USD 18 billion)
was not indispensable to the proper functioning of
of
the
competition.
from
offering to shipowners different levels of cover. In
other words,
it prevented individual shipowners
from negotiating the level of cover which they
actually wanted or needed, given the nature of the
risk which their fleet represented.

Pooling Agreement

it prevented Clubs

restrictive

Indeed,

and

(76) At present,

levels of

than the

the Pooling Agreement has been
amended to clarify that the P & I Clubs are free to
offer
level
cover higher
commonly agreed, around EUR 3,9 billion (USD
4,25 billion). The amended version of the Pooling
Agreement,
therefore, no longer provides for a
single level of cover but merely for a minimum
level of cover to be offered in common by all the
parties to the agreement. Accordingly, Clubs are
not impeded any longer from offering higher levels
of cover. Nor are they impeded from offering lower
levels of cover individually.

(77) Actually, a claim-sharing arrangement cannot func-
tion properly without at least one level of cover to
be offered being agreed by all its members. The
reason is that no member would be willing to share
claims brought to the pool by other clubs of a
higher amount than the ones it can bring to the
pool. This can happen in a commercial pool
because all members pay pure premiums to the
pool, and those vary on the level of cover provided.
In a claim-sharing agreement between mutuals
which do not charge premiums, however, there is
the
no workable method available
members which would bring larger claims
to
compensate the others.

to force

(78)

(79)

(80)

This does not mean that the IG member clubs have
deprived themselves of the possibility of offering
collectively, other levels of cover. All members, or
only those wishing to share claims at higher levels,
could conclude additional special agreements to
offer higher cover in addition to agreeing on the
lowest level of cover to be provided through the
claim-sharing arrangement. The Statement of
Objections referred to documentary evidence that
showed that the IG had discussed the feasibility of
several of these systems in the past. In addition to
this evidence, in their replies to requests for infor-
mation, several P & I Clubs acknowledged the tech-
nical feasibility of implementing such systems.

It must be concluded that the clause providing for
a common level of cover does not include a restric-
tion of competition within the meaning of Article
85(1). Indeed, Clubs have only agreed to offer a
minimum level of cover
through their claim-
sharing agreement, which is a necessary agreement
for the functioning of such a system. They remain
free to offer, either on their own or together with
other Clubs, any level of cover that they consider
appropriate.

1 . 3 . 1 . 2 . 2 . C o m m o n a p p r o v a l o f r u l e s a n d
a c c o u n t i n g p r a c t i c e s

a

includes

The Pooling Agreement
clause
providing that the rules applicable to insurance
policies of each Club, are subject to the approval of
the Pooling
three-quarters of
Agreement. This clause impedes P & I Clubs from
offering different policy conditions through the
claim-sharing agreement.

the members of

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Official Journal of the European Communities

L 125/23

(81) Nevertheless, like any coinsurance or co-reinsur-
ance pool, a claim-sharing agreement can only
function properly if all members agree on the
conditions that each of them includes in its poli-
cies. Indeed, no member should be forced to
insurance cover
contribute to the provision of
under policy conditions that
it has not agreed.
Therefore, the clause of the Pooling Agreement
stipulating that insurance policies (‘rules') of each
Club are subject to approval of the other members
of the pool can be regarded as necessary for the
functioning of
the IG’s claim-sharing arrange-
ments.

1 . 3 . 1 . 2 . 3 . T h e j o i n t p u r c h a s e o f r e - i n s u r -

a n c e

(82) As explained above (see point 16), the excess of any
claim over EUR 27,4 million (USD 30 million) up
to EUR 1,8 billion (USD 2 billion) is covered by
the Group General Excess Loss Reinsurance
Contract. This
is agreed
collectively by the clubs with commercial insurers
pursuant to Clause 12 of the Pooling Agreement.
This represents an agreement of joint purchasing of
re-insurance.

re-insurance contract

(83) Common purchase of supplies could be considered
contrary to Article 85(1). In Decision 80/917/EEC
(National Sulphuric Acid Association) (1),
the
Commission found that a joint buying pool for the
purchase of sulphur, set up by an association
grouping all manufacturers of sulphuric acid in the
United Kingdom, was restrictive of competition. In
that case the joint purchasing agreement was
exempted, inter alia, because it ensured a steady
supply of sulphur in times of shortages and because
the pool were not obliged to
the members of
purchase
sulphur
full
through the pool.

requirements of

their

(84)

The joint purchase of re-insurance is normally not
inherent
in the functioning of a claim-sharing
agreement because each member of such an agree-
ment could independently re-insure its own share
of the claims. Nevertheless, in this particular case it
has been proved (see recitals 72 to 74) that without
joint purchase most of the P & I Clubs would not
have been able to obtain re-insurance up to the
level obtained at present. Indeed, a minimum
dimension of more than 50 % of the worldwide
tonnage is required before such a cover can be
offered, and the largest P & I Club, at present, only
covers 16,34 % of it (see recital 10). It should be

(1) OJ L 260, 3.10.1980, p. 24.

concluded, then, that the joint purchase of re-insur-
ance is necessary for the IG to offer cover at the
present conditions. It does not fall, therefore, under
the prohibition of Article 85(1).

1.3.2. The International Group Agreement

1.3.2.1. Rules related to release calls

The methods of calculation of release calls, as was
stated in point 27 of Decision 85/615/EEC, ‘do not
in themselves give rise to clear-cut restrictions (...)
but could be used to reinforce restrictions on trans-
fers between clubs. These rules could indeed be
used to further restrict the ability of an operator to
avail himself of the opportunity of seeking better
rates offered by another club. The level of a release
call claimed by the holding club in the event of a
withdrawal could in fact constitute a deterrent to
transfers between one club and another'.

In any event, rules relating to release calls are
inherent in the proper functioning of the Pooling
Agreement. Indeed, they are needed to prevent a
shipowner who has left a club to avoid paying the
sums that he still owes to his former club to cover
the liabilities incurred during his membership but
not settled at the time of withdrawal. These rules
are not disproportionate to this objective: they only
require a bank guarantee (an actual payment is not
needed until
the liabilities are determined) and
there is always the right to challenge the amount of
the release call before an independent expert
committee.

1.3.2.2. Rules for making quotations for vessels

The procedures for making quotations for vessels
restrict the freedom of the P & I Clubs to compete
on the rates to be quoted to vessels joining them.
Before the IGA was amended they restricted Clubs
to determining the full extent of the rate. After the
amendments are introduced to the IGA, clubs will
be free to quote the part of the rate covering the
administrative costs, but they will still be restricted
to determining he remaining elements of the rate.
Indeed, the 20 February procedure impedes any
P & I Club from offering a lower quotation than
the holding club for the elements of the rate other
than the administrative costs, unless an expert
committee considers the holding club’s quotation
for such elements of the rate to be unreasonably
high.

(85)

(86)

(87)

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Official Journal of the European Communities

19. 5. 1999

(88)

The elements of the rate for which club’s quota-
tions are restricted are those that reflect the costs of
the claims that will have to be paid by the clubs.
Indeed, the quotation procedures apply both to the
costs of claims which are shared between Clubs
(namely claims between EUR 4,57 million (USD 5
million) and EUR 27,4 million (USD 30 million),
plus the re-insurance) and to costs which are
supported individually by each Club (claims up to
EUR 4,57 million (USD 5 million); the so-called
retention level).

1 . 3 . 2 . 2 . 1 . I n h e r e n c e o f

t h e r e s t r i c t i o n

(89) Any claim-sharing agreement requires some degree
of discipline between the participants in that agree-
ment on the rates corresponding to the costs that
they share. No club would be ready to share claims
with another club that would be offering a lower
rate for covering these same claims. No customer
would remain with the first club because it would
know that it could obtain from the second club
exactly the same cover, covered also by all the P & I
Clubs, but for a lower rate.

(90)

(91)

In this case, the P & I Clubs share claims from
EUR 4,57 million (USD 5 million) to EUR 27,4
million (USD 30 million), they purchase together
re-insurance to face higher claims, up to EUR 1,8
billion (USD 2 billion), and should an even higher
claim arise (overspill claim) they would share it up
to EUR 3,9 billion (USD 4,25 billion). It appears
necessary that they agree on a degree of discipline
for setting the rates that correspond to these costs.
This discipline is achieved through the quotation
procedures and,
tankers, also through the
recommendation on the costs of the claims to be
shared under the pool.

for

These rules are not disproportionate to the objec-
tives they try to achieve. Indeed,
the quotation
procedures leave to the holding club the task of
setting the appropriate rate, and merely aim at
ensuring that club’s quotation of the costs of claims
will not be undercut by another club sharing
claims with it. Only for tankers does the IG go one
step further by recommending annually a non-
binding rate for the costs of the claims to be shared

under the Pooling Agreement. This particular rule
can be explained by the specific characteristics of
tanker risks (they are normally of a catastrophic
nature, tending to occur rarely but involving very
large liabilities when they do occur).

(92)

The amended quotation procedures, however, also
apply to some costs which are not shared between
the clubs, the retention costs, (meaning the costs of
the claims up to EUR 4,57 million (USD 5
million)). For these costs the quotation procedures
go beyond what is strictly necessary for keeping the
claim-sharing arrangement
for
non-shared costs there is no need to ensure that
clubs do not undercut each other. Clubs which
could achieve a reduction of these costs below the
level of their competitor’s costs should be able to
charge lower rates. Price competition on the reten-
tion cost component of the rates is not liable to
endanger the claim-sharing arrangement.

in place. Indeed,

(93)

It can be concluded, therefore, that the quotation
procedures, in so far as they extend to the element
of the rate reflecting the claims falling under the
retention, are not inherent in the claim-sharing
arrangement.

1 . 3 . 2 . 2 . 2 . A p p r e c i a b i l i t y
t i o n

o f

t h e

r e s t r i c -

(94)

Taking into account the fact that the P & I Clubs
account for around 89 % of the worldwide market
for P & I insurance and that there is very limited
competition coming from outside the system, any
restriction on rate competition between clubs has
an appreciable impact in the world wide market for
P & I insurance.

(95) After

to

the

the

IGA,

amendment

price
competition will be possible in relation to that part
of
the rate corresponding to the administration
costs. This does not mean, however, that a restric-
tion on the elements of the rate reflecting the cost
of claims falling under the retention does not have
an appreciable impact on competition between the
clubs. Indeed, the retention claims represent 82 %
in value and 99 % in number of all claims
supported by the IG (see recital 16).

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Official Journal of the European Communities

L 125/25

(96)

It is true that the restriction only lasts for a year.
Indeed, the year after a shipowner has moved to
another club, the new club could offer lower rates
than the ones it was obliged to offer in the first
year. It cannot be inferred from this fact, however,
that the restriction is not appreciable. It is at the
moment that a shipowner contemplates moving to
another club that this club can gain a competitive
advantage by quoting a lower rate and has therefore
an incentive to do so, not a year later.

(97) Nor can it be argued that the 20 February proce-
dure has no appreciable effect on competition
because there is an alternative procedure, the 30
September one, which allows clubs to quote a lower
rate than the rate of the holding club. Although
this is what
the Commission believed in 1985
when the 30 September procedure was adopted,
experience has shown since then that this proce-
dure did not have the expected effects. It has
indeed only once been used successfully to change
from one club to another (see recital 33).

(98) As a matter of fact, it is not surprising that the 30
September procedure has revealed itself not to be
an appropriate remedy. There are two reasons for
this. First, it can be used only five months before
the insurance renewal date. This is simply too early
for a club to make an accurate quotation (it is too
early, for example, to take into account the level of
re-insurance premiums that will prevail at
that
date). Secondly, if the holding club requests the
independent
to investigate
whether the rate quoted is unreasonably low and
the committee considers that it is indeed too low,
the penalty for the club’s having quoted the rate is
extremely severe: it loses re-insurance from other
clubs for the vessel in question for two entire years.

committee

expert

1.3.2.3. Rules on minimum cost for tankers

(99)

The IG recommends annually the amount of the
provision that clubs should include in their quota-
tions to reflect the cost that claims from tankers
would represent for the pool (see recitals 38 and
39). Even if the recommendation is not binding,
the IGA enables clubs to refer to a committee any
quotation for tankers from another club that they
consider not to make adequate provision for all the

elements of the cost of claims. If the committee
considers that this is the case, the club loses the
benefit of the pool for two years. The serious sanc-
tion attached to the finding from the committee
that a quotation does not make an adequate provi-
sion for all the elements of the cost of claims
restrains clubs from actually diverging from the
recommendation.

(100) As far as the recommendation also covers the
retention costs,
the same reasons as those
explained above (see recitals 88 to 97) it should be
regarded
of
competition and not inherent in the proper func-
tioning of the Pooling Agreement.

appreciable

restriction

for

an

as

1.3.3. Effects on trade between Member States

(101) The IG’s arrangements have appreciable effects on
trade between Member States. First, P & I Clubs’
members cf the IG are established in more than
one Member State as well as in third countries.
Secondly, the members of the IG provide insurance
to vessels from any Member State as well as from
third countries. As
entire
Community fleet is insured by the IG.

almost

the

is,

it

(102)

(103)

1.3.4. Conclusion: restrictions of competition

in the P & I insurance market

restrictions

In conclusion, both the quotation procedures as
well as the recommendation on minimum costs for
tankers, as far as they apply to the retention costs,
represent
on competition. Those
restrictions have an appreciable negative impact in
competition in the world wide market of P & I
trade between
insurance and substantially affect
Member States. They fall
therefore within the
prohibition under pursuant to Article 85(l) of the
Treaty.

1.4. Exemption pursuant to Article 85(3)

1.4.1. Applicability of the insurance block-

exemption

It has been argued that the Pooling Agreement and
the IGA are covered by the definition of co-rein-
surance agreements within, the meaning of Article
10(2)(b) of Commission Regulation (EEC) No 3932/
92 of 21 December 1992 on the application of
Article 85(3) of the Treaty to certain categories of
agreements, decisions and concerted practices in
the insurance sector (1). The Article defines a co-
reinsurance group as a group set up by insurance
undertakings in order to reinsure mutually all or
part of their liabilities in respect of a specified risk
category.

(1) OJ L 398, 31.12.1992, p. 7.

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Official Journal of the European Communities

19. 5. 1999

(104)

In fact, it is not clear from Community case-law
whether the insurance block-exemption also covers
claim-sharing arrangements between insurance
mutuals, but there is no need to resolve this issue
in this case, because the IG’s arrangements do not
fulfil all of the conditions required for coverage by
the block exemption. In particular,
the market
share of its members is substantially higher than
the 15 % required.

able and, were claims of this amount to arise, it is
likely that some of these customers would not be
able to obtain compensation from the shipowner.
The same could apply to any other third person
that could suffer from extra-contractual damages
produced by a shipowner (such as marine pollu-
tion).

1.4.2. Individual exemption

(105) Even if the IG’s arrangements are not covered by
the definition of co-reinsurance group of Regula-
tion (EEC) No 3932/92, an individual exemption
can be granted to the provisions of these arrange-
ments which are contrary to Article 85(l), namely
the quotation procedures
rules on
minimum cost for tankers, as far as they apply to
the retention costs.

and the

1.4.2.1. Promotion of economic progress

(106) As was explained above (see recital 72), to provide
P & I insurance up to EUR 3,9 billion (USD 4,25
billion) at present costs, an insurer should cover a
market share of more than 50 % in order not to be
confronted with excessively volatile claims and to
obtain sufficient re-insurance. No insurer alone
covers such a large market share and, therefore,
pooling risks among several insurers representing
together a market share of more than 50 % is the
only method available to the industry at present to
provide such a cover. The IG’s arrangements, there-
fore, contribute to economic progress by ensuring
that P & I insurance cover of up to EUR 3,9 billion
(USD 4,25 billion) is available in the market.

(107) The availability of cover up to EUR 3,9 billion
(USD 4,25 billion) is of immediate benefit to the
shipowner. By providing such a cover, the IG satis-
fies most of the world wide demand for P & I insur-
ance and allows maritime transport and other mari-
time activities
to continue with an adequate
coverage of contract and third party liabilities.

(108) The final customers of

the shipowner, be they
passengers or goods carriers, also benefit from the
provision of such a level of insurance. Indeed, in
the absence of the pooling arrangement no insur-
ance for such high levels would be generally avail-

1.4.2.2. Indispensability of the restriction

(109) As was explained above (see recitals 88 to 99) in so
far as the quotation rules and the rules on a
minimum cost for tankers apply to some costs
which are not shared between the clubs, in partic-
ular to the retention costs, (the costs of the claims
up to EUR 4,57 million (USD 5 million)), they are
not inherent in the claim-sharing arrangement.

(110) However, in this case the Commission acknowl-
edges that it might be unworkable, or in any event
very complex and burdensome, to devise an appro-
priate method which would ensure that the quota-
tion rules and the rules on a minimum cost for
tankers effectively apply only to the costs shared
under the Pooling Agreement and not to the reten-
tion costs.

(111)

it

In other words,

assesses
the claims that

Indeed, when a club quotes a rate for a vessel, it
makes a global assessment of the risk that this
the
vessel bears.
frequency and intensity of
the
vessel in question could bring to the club. Should
the quotation procedures or
the rules on a
minimum costs for
tankers apply only to the
elements of the rate that reflect the shared costs,
the club would be obliged artificially to make a
separate and different assessment for the possibility
that
in question would cause claims
below EUR 4,57 million (USD 5 million). As risk
assessment is based on subjective parameters (such
as vessel safety measures and the training of the
crew), it would be easy for a club to manipulate this
assessment by decreasing the relative weight of the
retention costs and increasing the weight of the
shared costs. As the retention costs would remain
outside the quotation procedures, the club could,
by decreasing the weight of the retention costs,

the vessel

19. 5. 1999

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Official Journal of the European Communities

L 125/27

rate accordingly and use this as a
reduce its
competitive tool to attract customers. As to tankers,
as the weight of shared costs would have been
artificially increased, the club would be able to
adhere at the same time to the recommendation on
the minimum cost.

companies that do work for profit). Should clubs
decide not to charge a specific part of the rate for
administrative costs but
them against
investment costs (see recital 35), competition would
still play a part, because a reduction of the adminis-
trative costs would be reflected in lower supple-
mentary calls for shipowners.

to offset

(112) Any policing system designed to avoid these
manipulations would need to monitor carefully the
risk assessments made by the clubs and, in partic-
ular, whether giving more or less weight to the
possibility of claims arising below the retention
level amounts to an unreasonable quotation. This
exercise, in view of the subjectivity involved in risk
assessment, would be very complex and time
consuming. It would exceed the complexity of the
tasks presently entrusted to the independent expert
committee, which is only required to check that
the risk assessment made by the clubs as a whole is
reasonable, but not that each of its elements, inde-
pendently, is such. Moreover, should the retention
the
remain outside the quotation procedures,
number of controversial quotations and, therefore,
of cases brought to the attention of the committee
would increase dramatically. It does not appear to
be feasible to entrust
the existing independent
expert committee or any new body created for this
purpose with the task of monitoring a large
number of controversial and largely subjective
quotations in a coherent and expeditious manner.

1.4.2.3. Non-elimination of competition

(113) The quotation procedures and the recommendation
on a minimum cost for tankers do not eliminate
competition in the market of P & I insurance.
Despite the fact that the IG covers 89 %. of the
world wide market for P & I insurance, there is
competition between the P & I clubs.

to the quotation procedures)

(114) Competition among P & I clubs on the elements of
the rate reflecting the cost of claims (the elements
is a very
subject
important parameter of competition, but it is not
the only one. Clubs remain free to compete on
non-price parameters (such as the level of claims-
handling service) as well as on the part of the rate
which reflects the administrative costs. Indeed,
there is scope for reduction of administrative costs
and therefore for competition on that part of the
rate reflecting them. These reductions can be
achieved through economies of scale, efficiency in
the administration and pressure on managers to
reduce profit margins (it should be remembered
that club managers are in most cases independent

(115)

In addition, the incorporation of the transparency
rules (see recital 36)
in the amended IGA will
contribute to an increase in competition in relation
to administrative costs. By obliging all clubs to
publish a five-year average expense ratio which
expresses the percentage that administrative costs
represent of premium income plus investment
income, they enable shipowners to compare the
efficiency of different clubs in relation to the part
of the rate which clubs can freely set, and allow
them to choose accordingly.

1.4.3. Conclusion

(116) From what has been explained in the foregoing
paragraphs,
it can be concluded that both the
quotation procedures and the recommendation on
minimum costs for tankers, as far as they apply to
retention costs, are contrary to Article 85(l) of the
Treaty but fulfil all the conditions of Article 85(3)
and therefore can be the subject of an individual
exemption. Indeed, they can be considered neces-
sary to achieve the economic advantages and bene-
fits for consumers brought forward by the Pooling
Agreement, and they do not eliminate competition
in the P & I insurance market.

(117) However, the quotation procedures and the recom-
mendation on minimum costs for tankers, as far as
they apply to retention costs, should only benefit
from the exemption as long as the Pooling Agree-
ment remains necessary in order to allow the P & I
clubs to reach a minimum scale which enables
them to provide a level of cover that they could not
provide alone (see recital 72).

The Commission will
intervene to revoke the
exemption granted by this Decision, pursuant to
Article 8(3) of Regulation No 17 if the members of
the IG collectively hold a market share larger than
twice the minimum scale economically required to
provide the level of cover agreed at any moment
within the IG. Indeed, in such a case, two market
operators could be created and,
the
Pooling Agreement would no longer be considered
necessary to achieve the minimum scale. It must

therefore,

L 125/28

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Official Journal of the European Communities

19. 5. 1999

be made clear that the minimum scale corresponds
to the market share necessary to reasonably ensure
that cover can be provided at a cost of claims per
ton which is similar to the cost of claims per ton
incurred by the members of the IG.

2. ARTICLE 86

(118) Under Article 86, any abuse by one or more under-
takings of a dominant position within the common
market or in a substantial part thereof is prohibited
in so far as it may affect trade between Member
States.

2.1. Dominant position

(119) The Court of Justice, in its judgment in Case 85/
76, Hoffmann-La Roche v. Commission (1), (para-
graphs 38 and 39) described a dominant position
as:

and

customers

‘a position of economic strength enjoyed by an
undertaking which enables it
to hinder the
maintenance of effective competition on the
relevant market by allowing it to behave to an
appreciable extent independently of its compet-
itors
of
consumers. Such a position does not preclude
some competition but enables the undertaking
which profits by it, if not to determine, at least
to have an appreciable influence on the condi-
tions under which competition will develop,
and in any case to act largely in disregard of it
so long as such conduct does not act to its
detriment'.

ultimately

and

(120) This dominant position can be held by a single
company or by a group of them. The Court of First
Instance defined a collective dominant position as
‘two or more independent economic entities being,
on a specific market, united by such economic
links that, by virtue of that fact, together they hold
a dominant position vis-(cid:133)-vis the other operators
on the same market'
(judgment in Joined Cases
T-68/89, T-77/89 and T-78/89, Societ(cid:133) Italian
Vetro v. Commission) (2). This was
recently
repeated by that Court in its judgment of 8 October
1996 in Joined Cases T-24/93, T-25/93, T-26/93,

(1)
(2)

[1979] ECR, p. 461.
[1992] ECR, p. II-1403.

v.
and T-28/93 (Compagnie Maritime Belge
Commission (3), which
upheld Commission
Decision 93/82/EEC (Cewal) (4) finding the exis-
tence of collective dominant positions in the case
of shipping conferences: it had already found this
in Decision 92/262/EEC (French-West African
Shipowners’ Committees) (5).

(121) The P & I Clubs which are members of the IG are
independent entities united by strong economic
links and that, by virtue of that fact, hold together a
dominant position on the world market for P & I
direct insurance as well as in the world market for
P & I re-insurance for levels higher than around
EUR 1,8 billion (USD 2 billion) (see recitals 52 to
64 for a description of the relevant market).

(122) The P & I Clubs’ members of

the IG have
concluded a claim-sharing arrangement that creates
strong economic links between them: they share
the claims brought by their members up to a
certain level, follow specific common procedures to
offer insurance to members of other P & I Clubs,
purchase re-insurance in common, agree on insur-
ance conditions to be provided to their members,
and cooperate in many other aspects of P & I insur-
ance. Moreover, by agreeing to have common
insurance conditions, and particularly to offer a
single level of cover, they adopt a uniform line of
action in the market.

(123) This collective position held by the IG of P & I
Clubs is clearly dominant. According to the Court
of Justice (judgment
in Case C-62/86, AKZO
Chemie BV v. Commission (6), at paragraph 60 and
Hoffmann-La Roche, at paragraph 41 ):
‘although
the importance of the market shares may vary from
one market to another, the view may legitimately
be taken that very large market shares are in them-
selves, and save in exceptional circumstances,
evidence of the existence of a dominant position'.

(124)

(125)

In the AKZO case the Court added that: ‘This is so
where the market share amounts to 50 %'. There-
fore, on the strength of market-share figures alone
it can be said that the IG of P & I Clubs, which
insures around 89 % of the world fleet, holds a
dominant position in all the world wide markets
for P & I insurance where it is present.

In its judgment in Hoffmann-La Roche (at para-
graph 42), the Court of Justice further held that a
big disparity between a firm’s share and those of its
next-largest competitors is also a relevant factor in
measuring the degree of market power that the
former possesses. It is clear that in this case the
difference between IG’s market shares and those of
its competitors is very significant.

(3)
[1996] ECR, p. II-1201
(4) OJ L 34, 10.2.1993, p. 20.
(5) OJ L 134, 18.5.1992, p. 1.
[1991] ECR, p. I-3359.
(6)

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Official Journal of the European Communities

L 125/29

(126) Moreover, in this case, other factors already identi-
fied in the Hoffmann-La Roche judgment (para-
graph 42) give extra weight to the conclusion that
the IG holds a significant amount of market power.
First, it has the capacity to offer all levels of P&I
cover, which its competitors do not have. Secondly,
it has acquired a wide experience and reputation by
offering P & I insurance for around one hundred
years. And thirdly, it is present all over the world
through a wide network of correspondents. All
these strengths,
in addition to its large market
share, allow the IG of P & I clubs to hold a clear
dominant position and to behave to a large extent
independently of its competitors.

2.2 Abuse of dominant position

(127) The Statement of Objections maintained that the
IG arrangements led to two different abuses of a
dominant position, namely a limitation of the level
of cover offered and a provision of re-insurance on
discriminatory terms. It is explained in recitals 129
to 133 that, in view of the amendments to the
Pooling Agreement it can no longer be argued that
the IG arrangements give rise to an abuse of a
dominant position. This does not exclude the poss-
ibility that the IG or its members acting together
could indulge in abuses of its collective dominant
position through its commercial behaviour. This,
however, is not the object of this Decision, which is
limited to the assessment of the notified arrange-
ments.

2.2.1. Exploitative abuses:

limitation of

the

products offered in the market

(128) Through the agreement on a single level of cover,
the IG exploited its customers by offering a single
insurance product that left a very substantial share
the demand unsatisfied. This constituted an
of
abuse within the meaning of Article 86(2)(b) of the
Treaty. It should be recalled, however, that it is not
for the Commission to decide which is the level of
cover that should be provided by the IG. The
Commission may only intervene in the matter if
there is clear and uncontroversial evidence that a
very substantial share of
the demand is being
deprived of a service that it manifestly needs and
that, therefore, the IG is really exploiting its domi-
nant position in an abusive way.

(129) This is not the case any more. First, as it has
the Pooling
already been explained (recital 76),
Agreement has been clarified to indicate that P & I
Clubs are free to offer individually lower or higher
levels of cover as well as to conclude any cooper-

ative arrangement that they might find appropriate
to this purpose.

organisations

(130) Secondly, since the IG adopted the new minimum
common level of cover of around EUR 3,9 billion
(USD 4,25 billion), no substantial share of
the
demand remains unsatisfied. Indeed, most shipow-
ner’s
the world have
around
submitted their views on this issue to the Commis-
sion and have not complained on the new level of
cover. Only part of
the Greek-controlled fleet,
which as a whole accounts for around 15 % of
world wide tonnage, remains dissatisfied with the
new level of cover.

(131) This conclusion is reinforced by the fact that, from
an objective pint of view, the new level of cover
cannot be
considered incapable of meeting
customer needs. It was argued that, should an over-
the shipping
spill claim arise, a large share of
industry would become bankrupt by trying to meet
a call up to the previous level of cover of around
EUR 16,5 billion (USD 18 billion)
(it must be
explained that the rates charged by the P & I Clubs
do not take into account the cost of an overspill
claim; members of the P & I Clubs would only have
to share the cost of such a claim if it were to
materialise). This cannot be the case with the new,
lower limit of cover of around EUR 3,9 billion
(USD 4.25 billion).

(132)

Indeed,
there is enough evidence to reasonably
expect that the shipping industry would be able to
face a claim up to EUR 3,9 billion (USD 4,25
billion). First, from the experience of past large
claims, it can be inferred that the full claim will
not have to be paid in a single year, but over a
period of several years, depending on the pace of
settlement of the claims. Secondly, some clubs hold
important reserves that can be used to satisfy part
of the share of an overspill claim (reserves on 20
February 1997 amounted to around EUR 0,9
billion) and would therefore reduce the burden on
individual shipowners. Thirdly, in any case, on past
occasions (such as the oil crisis of the 1970s) the
industry has been able to cope with increases of
costs of a similar magnitude to that of an overspill
claim. And finally, such a claim would represent
for most vessels a relatively minor share of their
yearly operating costs (lower than 10 %), which is
unlikely to force them into bankruptcy.

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Official Journal of the European Communities

19. 5. 1999

(133)

In view of all this, it is considered that the rules on
the minimum common level of cover do not give
rise any more to an infringement of Article 86 of
the Treaty.

2.2.2. Exclusionary abuses: provision of re-
insurance on discriminatory terms

and

conditions

non-discriminatory

(134) The Pooling Agreement allows independent P & I
insurers to obtain re-insurance from one of the
the IG if certain conditions are
members of
fulfilled. The Statement of Objections considered
that the Pooling Agreement did not include objec-
tive
for
deciding which commercial P & I insurers could
obtain re-insurance from its members (rather, these
conditions were considered objective in relation to
independent mutual P & I insurers). In addition,
the Pooling Agreement did not include any proce-
dural rule to allow the independent P & I insurers
(both commercial and mutual) to check whether
the IG rules on re-insurance were properly applied,
such as the obligation to communicate the refusal
to re-insure in writing and with reasons, or an
appeal procedure.

(135) The absence of objective conditions and procedural
safeguards in the Pooling Agreement was consid-
ered an abuse of the dominant position within the
meaning of Article 86 of the Treaty. Indeed, as has
been explained, at present the IG is the only entity
in the market offering P & I cover up to around
EUR 3,9 billion (USD 4,25 billion), and no inde-
pendent
insurer can reach alone the minimum
dimension necessary to offer such a cover. More-
over, independent insurers are not able to obtain
re-insurance for large P & I cover, owing to their
limited market shares. In view of this, the IG could
easily have distorted competition by not deciding,
on the basis of objective conditions, to which inde-
pendent insurers it would provide re-insurance.

(136) As was explained above (see recitals 27 and 28), the
IG has now included objective conditions in rela-
tion to the provision of re-insurance to commercial
insurers and has established an adequate procedure
to allow any independent P & I insurer requesting
re-insurance from the IG to ensure in a timely
manner that the monitoring of compliance with
the conditions is properly performed. Indeed, the
IG will have to take up a position on the request
within 30 days of receipt of all the relevant infor-

mation (this period may be extended by a further
30 days during the renewal period). If the decision
is negative, the insurer infused re-insurance should
be given a written notice stating the reasons for the
refusal. The insurer will have the right to appeal
against any such refusal. In view of
is
considered that the rules on re-insurance of inde-
pendent P & I insurers could no longer give rise to
an infringement of Article 86 of the Treaty.

this,

it

3. ARTICLES 53 AND 54 OF THE AGREEMENT ON

THE EUROPEAN ECONOMIC AREA

(137) According to Article 53 of the EEA Agreement,
any agreement between undertakings which has as
its object or effect the restriction of competition
within the territory covered by this agreement is
prohibited in so far as it may affect trade between
the States parties to the Agreement.

(138) According to Article 56(l) of the EEA Agreement,
the Commission has to decide on any case under
Article 53 of that Agreement where the commer-
cial agreement in question affects trade between
Member States and the turnover of the undertak-
ings concerned in the territory of the EFTA States
is less than 33 % of the turnover in the EEA terri-
tory.

(139)

In this case, the turnover obtained by the P & I
Clubs in the EFTA territory is less than 33 % of
the turnover in the EEA territory. Therefore, it is
up to the Commission to assess whether the IG has
infringed Article 53 of the EEA Agreement. To this
end, all the arguments developed in this Decision
in relation to Article 85 shall apply in this case also
to Article 53 of the EEA Agreement.

(140) According to Article 54 of the EEA Agreement,
any abuse by one or more undertakings of a domi-
nant position within the territory covered by the
Agreement or in a substantial part of it is to be
prohibited.

(141) According to Article 56(2) of the EEA Agreement,
the Commission has to decide on a case under
Article 54 of that Agreement where dominance
exists within the territories of the Community as
well as of the EFTA States and where the turnover
of the dominant undertaking in the territory of the
EFTA States is less than 33 % of its turnover in the
EEA territory.

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Official Journal of the European Communities

L 125/31

(142)

In this case, the P & I Clubs hold a world wide
collective dominant position and their turnover in
the EFTA States is less than 33 % of their turnover
in the whole EEA area. Therefore, it is up to the
they have infringed
Commission to decide if
Article 54 of the EEA Agreement. To this end, all
the arguments set out in this Decision in relation
to Article 86 apply in this case to Article 54 of the
EEA Agreement as well,

HAS ADOPTED THIS DECISION:

Article 1

On the basis of the facts in its possession, the Commis-
sion has no grounds for action pursuant to Article 85(1) of
the Treaty or pursuant to Article 53(1) of the EEA Agree-
ment in respect of the amended Pooling Agreement or
(‘IGA'), with the
the International Group Agreement
exception of the rules concerning the quotation proced-
ures and the minimum costs for tankers, in so far as they
apply to the retention costs.

Article 2

On the basis of the facts in its possession, the Commis-
sion has no grounds for action under Article 86 of the EC
Treaty or pursuant to Article 54 of the EEA Agreement in
respect of the Pooling Agreement and the IGA, both as
amended.

Article 3

are declared inapplicable

Pursuant to Article 85(3) of the EC Treaty and Article
53(3) of the EEA Agreement, the provisions of Article
85(1) of the EC Treaty and Article 53(1) of the EEA
Agreement
rules
concerning the quotation procedures and the minimum
costs for tankers included in the IGA, as amended, in so
far as they apply to the retention costs. This exemption
shall be valid from 20 February 1999, being the date on
which the latest notified amendments to the Pooling
Agreement and the IGA will enter into force, until 20
February 2009.

to the

Article 4

The International Group of P & I Clubs shall inform the
Commission each year of any amendment and/or addi-
tion to the notified agreement as well as of the conclusion
of any other agreement within the Group.

explaining whether

The IG shall also send to the Commission annually a
report
the Pooling Agreement
remains necessary to allow the P & I Cclubs to provide
the level of cover that they have agreed at that moment.
This report shall include detailed explanations on the
evolution of the markets of Protection and Indemnity
(‘P & I') direct insurance and re-insurance. With regard to
P & I direct insurance, the report shall include market
shares and levels of cover provided both by the IG and
each of its members as well as estimates of market shares
and levels of cover provided by third party providers.
With regard to P & I re-insurance, the report shall explain
the structure of the Group General Excess Loss Reinsur-
ance Contract (layers of re-insurance; premiums paid; re-
insurers taking part in it, with corresponding shares) and
estimate levels of cover provided to other P & I operators.

The IG shall provide annually detailed statistical informa-
tion on the functioning of the quotation procedures and
the rules for providing quotations on tankers.

Article 5

The Decision is addressed to:

The International Group of P & I Clubs
78 Fenchurch Street
London EC3M 4BT
United Kingdom

Done at Brussels, 12 April 1999.

For the Commission

Karel VAN MIERT

Member of the Commission