on the application of Article 101(3) of the Treaty on the Functioning of the European Union to certain categories of agreements, decisions and concerted practices in the insurance sector {C(2010) 1746 final}
Date: 2010-03-24
Institutions: European Commission
Subjects: insurance, insurance company, insurance contract, insured risk, inter-company agreement, restrictive trade practice

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EUROPEAN COMMISSION 

Brussels, 24.3.2010 
COM(2010) 100 final 

COMMUNICATION FROM THE COMMISSION 

on the application of Article 101(3) of the Treaty on the Functioning of the European 
Union to certain categories of agreements, decisions and concerted practices in the 
insurance sector 

{C(2010) 1746 final} 

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COMMUNICATION FROM THE COMMISSION 

on the application of Article 101(3) of the Treaty on the Functioning of the European 
Union to certain categories of agreements, decisions and concerted practices in the 
insurance sector 

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INTRODUCTION AND BACKGROUND 

Commission  Regulation  (EC)  No  358/20031,  the  previous  Insurance  Block 
Exemption  Regulation  (BER)  which  expired  on  31  March  2010,  applied 
Article 101(3) of the Treaty on the Functioning of the European Union∗ (the Treaty) 
to  certain  categories  of  agreements,  decisions  and  concerted  practices  in  the 
insurance sector.  

Following  a  lengthy  review  (the  Review)  of  the  functioning  of  Regulation (EC) 
No 358/2003, the Commission published its Report to the European Parliament and 
the  Council  on  the  functioning  of  that  Regulation2  (the  Report)  as  well  as  an 
accompanying Working Document3 (the Working Document) on 24 March 2009. 

As a result of its findings following the Review, the Commission has now adopted a 
new insurance BER which renews the exemptions for two of the four categories of 
agreements exempted in the previous BER; namely: (i) joint compilations, tables and 
studies; and (ii) common coverage of certain types of risks (pools). 

FIRST PRINCIPLES ANALYSIS 

The Commission's original objective when it adopted Regulation (EC) No 358/2003 
of reducing the number of notifications it received is no longer relevant since under 
Regulation (EC) No 1/2003 undertakings can no longer notify their agreements to the 
Commission,  but  now  must  conduct  their  own  self-assessment.  In  this  context,  a 
specific legal instrument such as a BER should only be adopted if cooperation in the 
insurance sector is "special" and different to other sectors which do not benefit from 
a BER (i.e. most sectors currently). The Commission's analysis as to whether or not 
to  renew  the  BER  addressed  three  key  questions  in  relation  to  each  of  the  four 
categories of agreements exempted by the BER, namely: 

(a)  whether  the  business  risks  or  other  issues  in  the  insurance  sector  make  it 
"special" and different to other sectors such that this leads to an enhanced need 
for cooperation amongst insurers; 

OJ L 53, 28.2.2003, p. 8. 
With effect from 1 December 2009, Article 81 of the EC Treaty has become Article 101 of the Treaty 
on  the  Functioning  of  the  European  Union.  The  two  Articles  are,  in  substance,  identical.  For  the 
purposes  of  this  Communication,  references  to  Article  101  of  the  Treaty  on  the  Functioning  of  the 
European Union should be understood as references to Article 81 of the EC Treaty where appropriate. 
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:52009DC0138:EN:NOT 
http://ec.europa.eu/competition/sectors/financial_services/insurance_ber_working_document.pdf 

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(b) 

(c) 

if  so,  whether  this  enhanced  need  for  cooperation  requires  a  legal  instrument 
such as the BER to protect or facilitate it; and 

if so, what is the most appropriate legal instrument (i.e. whether it is the current 
BER or whether partial renewal, amended renewal, or guidance would be more 
appropriate). 

RENEWED EXEMPTIONS 

a 

year 

period, 

On  the  basis  of  its  Review  and  consultation  of  stakeholders  which  was  conducted 
new  BER 
over 
the  Commission 
2 
(with 
[Commission Regulation 
amendments)  the  exemptions  for  two  forms  of  cooperation,  namely  (i)  joint 
compilations, tables and studies; and (ii) common coverage of certain types of risks 
(pools). 

(EU)  No xx/xx  of  xx/xx/xxxx] 

the 
renewing 

adopted 

When  agreements  falling  within  these  categories of agreements do not  meet all the 
conditions  to  benefit  from  the  block  exemption,  an  individual  analysis  under 
Article 101  of  the  Treaty  is  required.  The  analytical  framework  set  out  in  the 
Commission's  Guidelines  on  the  applicability  of  Article  81  of  the  EC  Treaty  to 
horizontal cooperation agreements4 (the Horizontal Guidelines) will assist businesses 
in assessing the compatibility of agreements with Article 101 of the Treaty.5  

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Joint Compilations, Tables and Studies 

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Subject to certain conditions, the previous BER exempted agreements which relate to 
the  joint  establishment  and  distribution  of  (i)  calculations  of  the  average  cost  of 
covering a specified risk in the past and (ii) mortality tables and tables showing the 
frequency of illness, accident and invalidity, in connection with insurance involving 
an element of capitalisation. It also exempted (subject to certain conditions) the joint 
carrying out of studies on the probable impact of general circumstances external to 
the  interested  undertakings,  either  on  the  frequency  or  scale  of  future  claims  for  a 
given risk or risk category or on the profitability of different types of investment and 
the distribution of the results of such studies.  

As  summarised  in  the  Report,  the  costs  of  insurance  products  are  unknown  at  the 
time  the  price  is  agreed  and  the  risk  covered.  Calculation  of  risk  is  a  key  issue  in 
pricing all insurance products which appears to be a differentiating factor from other 
sectors  including  the  banking  sector.  This  makes  access  to  past  statistical  data  in 
order  to  technically  price  risks  crucial.  Therefore,  the  Commission  considers  that 
cooperation  in  this  area  is  both  specific  to  the  insurance  industry  and  necessary  in 
order to price risks. 

9. 

The Commission also considers that there are good reasons to protect and facilitate 
cooperation  in  this  area  with  a  BER  and  that  it  is  appropriate  that  the  BER  be 

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See paragraph 7 of Commission Notice of 6 January 2001: Guidelines on the applicability of Article 81 
of the EC Treaty to horizontal cooperation agreements, O J C 3, 6.1.2001, p. 2. 
The current Horizontal Guidelines are under review. 

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renewed for this category of agreements in order to avoid any reduction in such pro-
competitive cooperation. 

However,  in  renewing  the  exemption  the  Commission  made  the  following  key 
changes: (i) the term "joint calculations" was changed to "joint compilations" (which 
may also include some calculations); (ii) clarification that exchange of information is 
only  allowed  where  it  is  necessary;  and  (iii)  access  to  data  shared  is  now  also 
allowed  for  consumer  organisations  and  customer  organisations  (as  distinguished 
from individuals), with a public security exception. 

Common coverage of certain types of risks (pools) 

The previous BER exempted6 the setting up and operation of co-(re)insurance pools 
for  the  common  coverage  of  new  risks  as  well  as  co-(re)insurance  pools  covering 
risks which are not new, subject to certain conditions, in particular to market share 
thresholds.  

As  a  result  of  its  Review,  the  Commission  considers  that  risk  sharing  for  certain 
types  of  risks  (such  as  nuclear,  terrorism  and  environmental  risks),  for  which 
individual insurance companies are reluctant or unable to insure the entire risk alone, 
is  crucial  in  order  to  ensure  that  all  such  risks  can  be  covered.  This  makes  the 
insurance  sector  different  to  other  sectors  and  triggers  an  enhanced  need  for 
cooperation7. Therefore, the new BER also exempts pools under certain conditions.  

In renewing the exemption, the Commission made the following key changes: (i) a 
change to the approach to market share calculation in order to bring it into line with 
other  general  and  sector-specific  competition  rules  so  that  not  only  gross  premium 
income earned within the pool by the participating undertakings, but also outside the 
pool  will  be  taken  into  account;  and  (ii)  an  amendment  and  expansion  to  the 
definition of "new risks".  

In  terms  of  self-assessment  it  is  important  to  consider  that  there  are  three  types  of 
pools  and  determine  into  which  category  a  particular  pool  falls.  (i)  pools  which  do 
not require a BER as a safe harbour because they do not give rise to a restriction of 
competition as long as the pooling is necessary to allow their members to provide a 
type  of  insurance  that  they  could  not  provide  alone;  (ii)  pools  which  fall  under 
Article 101(1) of the Treaty and which do not comply with the conditions of the new 
BER  but  may  benefit  from  an  individual  exception  under  Article  101(3)  of  the 
Treaty;  (iii)  pools  which  fall  under  Article  101(1)  of  the  Treaty  but  which  comply 
with the conditions of the BER.  

15. 

For both types (ii) and (iii) it is necessary to carefully define the relevant product and 
geographic  market,  as  market  definition  is  a  prerequisite  in  order  to  assess 
compliance  with  the  market  share  thresholds8.  The  Commission's  Notice  on  the 

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For three years from the date of first establishment of the group, regardless of the market share of the 
group. 
An alternative method of covering risks through co-(re)insurance is ad-hoc co-(re)insurance agreements 
on the subscription market, which may be a less restrictive option depending on the analysis on a case-
by-case basis. 
Concerns were also raised about the definition of "new risks". 

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definition  of  the  relevant  market  for  the  purposes  of  Community  competition  law9, 
together  with  relevant  Commission  decisions  and  comfort  letters  in  the  insurance 
sector can be used as guidance in order for pools to determine the relevant market on 
which they operate.  

However  the  Review  showed  that  many  insurers  were  incorrectly  using  the  pool 
exemption  in  the  BER  as  a  "blanket"  exemption,  without  carrying  out  the  required 
careful legal assessment of a pool's compliance with the conditions of the BER.10  

Also,  it  should  be  remembered  that  ad-hoc  co-(re)insurance  agreements  on  the 
subscription market11 have never been covered by the BER and they remain outside 
the  scope  of  the  new  BER.  As  mentioned in the Commission's Final Report on the 
Business  Insurance  Sector  Inquiry  of  25  September  200712,  practices  involving  an 
alignment  of  premium  (between  co-(re)insurers  through  ad-hoc  co-(re)insurance 
agreements)  may  fall  within  the  scope  of  Article  101(1)  of  the  Treaty,  but  may 
benefit from the exemption afforded by Article 101(3) of the Treaty. 

The  Commission  intends  to  closely  monitor,  in  cooperation  with  national 
competition authorities within the framework of the European Competition Network, 
the  operation  of  pools  to  ensure  that  blanket  applications  of  the  BER  or 
Article 101(3)  of  the  Treaty  are  not  occurring.  This  closer  monitoring  will  be 
undertaken  in  line  with  enforcement  cases  where  pools  are  found  to  fall  foul  of 
Article 101(1) of the Treaty and/or the BER.  

NON-RENEWED EXEMPTIONS  

in 

On  the  basis  of  the  Commission's  analysis  set  out  in  the  Report  and  Working 
Document,  as  well  as  in  its  Impact  Assessment  of  the  new  BER,  two  of  the  four 
exemptions 
the  previous  BER,  namely  agreements  on  standard  policy 
conditions (SPCs) and security devices have not been renewed by the new BER. This 
is primarily because they are not specific to the insurance sector and therefore their 
inclusion  in  such  an  exceptional  legal  instrument  may  result  in  unjustified 
discrimination  against  other  sectors  which  do  not  benefit  from  a  BER.  In  addition, 
although  these  two  forms  of  cooperation  may  give  rise  to  some  benefits  to 
consumers,  the  Review  showed  that  they  can  also  give  rise  to  certain  competition 
concerns. Therefore, it is more appropriate that they be subject to self-assessment. 

20. 

Although non-renewal of the BER in relation to these two types of cooperation will 
inevitably  result  in  slightly  less  legal  certainty,  it  should  be  emphasised  that  the 
insurance sector will benefit in this regard from the same level of legal certainty as 

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OJ C 372, 9.12.1997, p. 5. 
In  particular  in  relation  to  market  share  thresholds.  Furthermore,  it  is  crucial  that  any  pools  covering 
new  risks  and  purporting  to  fall  within  the  BER  ensure  that  they  are  in  fact  covered  by  the  precise 
definition  of  new  risks  in  Article  1  of  the  new  BER,  as  mentioned  in  the  Report  and  Working 
Document. 
Whereby a certain part of a given risk is covered by a lead insurer and the remaining part of the risk is 
covered by follow insurers who are invited to cover the remainder. 
COM(2007) 556 final: Communication from the Commission to the European Parliament, the Council, 
the  European  Economic  and  Social  Committee  and  the  Committee  of  the  Regions  -  Sector  Inquiry 
under Article 17 of Regulation (EC) No 1/2003 on business insurance (Final Report). 

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the other sectors which do not benefit from a BER. Furthermore, as outlined below 
the  Commission  plans  to  address  both  these  forms  of  cooperation  in  its  Horizontal 
Guidelines. 

Standard Policy Conditions 

The previous BER exempted the joint establishment and distribution of non-binding 
standard policy conditions (SPCs) for direct insurance13.  

On  the  basis  of  the  evidence  found  during  its  Review,  the  Commission  no  longer 
considers  that  a  sector  specific  BER  is  necessary  since  cooperation  on  SPCs  is  not 
specific  to  the  insurance  sector,  but  common  to  many  others,  such  as  the  banking 
sector, which do not benefit from a BER. As SPCs are not specific to the insurance 
sector it is appropriate that any guidance on SPCs is afforded to industry as a whole 
and in the form of a horizontal instrument. 

The Commission considers that in many cases SPCs can give rise to positive effects 
for  competition  and  consumers.  For  example,  SPCs  allow  the  comparison  of 
insurance  policies  offered  by  different  insurers,  allowing  customers  to  verify  the 
content  of  guarantees  more  easily  and  facilitating  switching  between  insurers  and 
insurance  products.  However,  whilst  there  is  a  need  for  comparability  between 
insurance  products  for  consumers,  too  much  standardisation  can  be  harmful  for 
consumers  and  can  lead  to  a  lack  of  non-price  competition.  In  addition,  given  that 
certain  SPCs  can  be  imbalanced,  it  is  more  appropriate  that  undertakings  conduct 
their  own  assessment  on  the  basis  of  Article  101(3)  of  the  Treaty  in  the  event  that 
Article 101(1) of the Treaty is applicable in order to demonstrate that the cooperation 
they  are  part  of  gives  rise  to  efficiency  gains,  a  fair  share  of  which  benefit 
consumers14. 

Accordingly, the Commission is planning to expand its Horizontal Guidelines to also 
address  SPCs  for  all  sectors.  These  are  currently  under  review  and  it  is  planned  to 
publish  a  draft  of  the  revised  Horizontal  Guidelines  for  stakeholder  consultation  in 
the first half of 2010. 

Security devices 

The  previous  BER  exempted  (i)  technical  specifications,  rules  or  codes  of  practice 
regarding  security  devices  and  procedures  for  assessing  and  approving  their 
compliance with these standards as well as (ii) technical specifications, rules or codes 
of  practice  for  the  installation  and  maintenance  of  security  devices  and  procedures 
for assessing and approving the compliance of undertakings which install or maintain 
security devices with such standards.  

Article 6(1)(a) to (k) of Regulation (EC) No 358/2003. 
Certain of the clauses listed in Article 6(1) of the previous BER, Regulation (EC) No 358/2003, would 
remain relevant for self-assessment of agreements under Article 101 of the Treaty, in particular those 
which  have  an  impact  on  prices  and  product  innovation.  Of  particular  relevance  are,  for  example, 
clauses which (i) contain any indication of the level of commercial premiums; (ii) indicate the amount 
of  cover  or  the  part  which  the  policyholder  must  pay  himself;  or  (iii)  impose  comprehensive  cover 
including  risks  to  which  a  significant  number  of  policyholders  are  not  simultaneously  exposed; 
(iv) require the policyholder to obtain cover from the same insurer for different risks. 

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However, the Commission considers that the setting of technical standards falls into 
the general domain of standard setting, which is not unique to the insurance sector. 
As these kinds of agreements are not specific to the insurance sector, it is appropriate 
that  any  guidance  is  afforded  to  the  industry  as  a  whole  and  in  the  form  of  a 
horizontal  instrument.  This  is  already  the  case,  as  Point  6  of  the  Horizontal 
Guidelines  provides  guidance  on  the  compliance  of  technical  standards  with 
Article 101  of  the  Treaty.  Moreover,  the  Horizontal  Guidelines  are  currently  under 
review  and  it  is  planned  to  publish  a  draft  of  the  revised  Horizontal  Guidelines  for 
stakeholder consultation during the first half of 2010.  

In addition, these agreements were covered by the BER in so far as no harmonisation 
exists at Union level. The Commission's Review showed that there is reduced scope 
for the BER, since such harmonisation is now extensive. As regards the limited area 
where  there  is  not  yet  Union  harmonisation,  detailed  national  rules  result  in 
fragmentation of the internal market, reduction of competition between producers of 
security  devices  across  the  Member  States  and  less  choice  for  consumers  as 
consumers  do  not  obtain  insurance  in  the  event  that  their  security  devices  do  not 
comply with standards commonly established by insurers. 

The  Commission  has  therefore  not  renewed  the  BER  for  these  categories  of 
agreements.  

CONCLUSIONS  

It  will  be  necessary  for  undertakings  to  carefully  assess  their  cooperation  on  joint 
compilations,  tables  and  studies  and  pools  under  the  conditions  established  by  the 
BER, in order to avoid blanket application of the BER.  

As  regards  self-assessment  under  Article  101(3)  of  the  Treaty  for  cooperation  on 
SPCs and security devices, undertakings benefit from two legal instruments, namely 
the  Horizontal  Guidelines  (currently  being  revised)  and  the  Guidelines  on  the 
application of Article 81(3) of the Treaty15. 

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OJ C 101, 27.4.2004, p. 97. 

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