IUA Circular 034/11

European Commission Study on Co and Reinsurance Pools and Ad Hoc Subscription Agreements

Date: 4 May 2012
Interest Groups: Chief Executives of Ordinary and Affiliate Members
Subject: Update on current European Competition Authority's Study into pooling and subscription agreements
IUA Contact: Dave Matcham, Chief Executive

This circular serves to update members on the European Commission Study into the use and operation of pooling and ad hoc subscription agreements for commercial insurance or reinsurance placements. Members may already be aware of this initiative to a limited extent.

On 11th February 2012 the EC announced that Ernst & Young had been awarded the contract to conduct the study with the duration of the contract being 7 months, implying that a final report will be prepared in August 2012. The report will cover all current 27 member States of the European Union.

According to the tender specifications the general objective of the Commission is to obtain an in-depth knowledge of the market through a high quality study providing a wide overview of both co(re)insurance pools and co(re)insurance agreements on the subscription market throughout the European Union. The specific EC objectives are:

(i) to receive a clear picture on co(re)insurance pools across the EU, in particular given the Review of the Insurance Block Exemption Regulation;
(ii) to get an overview on the main changes (if any) regarding the functioning of co(re)insurance agreements on the subscription market across Member States, since the Business Insurance Sector Inquiry in September 2007. This includes an analysis on whether the way the market functioning has substantially changed since the Business Insurance Sector Inquiry, including the analysis of the application of the BIPAR principles;
(iii) to know what are the similarities and differences between the two forms of cooperation, in order to be able to assess to what extent a coherent approach regarding the competition treatment of the two is necessary.

The first phase of the project was for trade Associations to be interviewed and respond to a series of general questions relating to the practices and composition within their market. IUA was part of this process and has submitted a response to Ernst & Young which will be amalgamated with responses received from LMA, LIIBA and ABI.

The second phase, which we believe is already underway will be for Ernst & Young to conduct more detailed interviews with selected insurers and brokers from EU member States. For the London market both LMA and IUA identified their top 10 carriers by premium written all of whom are expected to be approached by E&Y in the next few weeks. IUA has contacted each of its top 10 carriers to confirm that their name has been put forward in accordance with E&Y’s request. We do not have a copy of the questionnaire that will be used for these series of interviews.

Part of the IUA submission to E&Y included our recent circulars on the implementation of the BIPAR Principles which resulted from the 2007 Commission report as part of their Sector Inquiry into Business Insurance. No comment on these documents was requested or given. Looking at the objectives above, we expect therefore that the second series of interviews will refer to members’ usage of the BIPAR Principles when considering the placement of new or renewal risks to the market.

If members have any questions regarding the Commission’s activity in this area, please feel free to contact me and we will endeavour to respond accordingly. We are in close dialogue with Insurance Europe and their Single Market Committee to remain updated on this matter.