Renewal, changes likely on block exemption

BRUSSELS, Belgium—Europe's Block Exemption Regulation as it applies to insurance pooling arrangements likely will be renewed, but it appears the section allowing cooperation on standard policy conditions will be allowed to expire, insurance market representatives said after a European Commission hearing recently.

If that happens, insurance buyers likely would see coinsurance and reinsurance pooling arrangements thrive, though policy-holders that need coverage written by multiple insurers that collaborate on policy clauses could face difficulties, participants said after the meeting.

The E.C. met June 2 in Brussels, Belgium, to discuss a March commission report, which said parts of the block exemption that allow insurers to cooperate in pooling arrangements, joint calculations and joint studies without needing to verify each time whether such cooperation falls afoul of European Union competition law should be retained when the exemption expires in March 2010.

The report further indicated the E.C. is leaning toward removing the exemption as it applies to developing and distributing standard policy conditions for direct insurance. The E.C. also said it would like to remove the exemption covering insurer collaboration on standards for security devices.

The commission is expected to publish a draft regulation this fall.

Insurers in pooling arrangements, which are critical sources of capacity in some lines of coverage, should be able to interact without fear of running afoul of competition laws, said Marie-Gemma Dequae, president of the Brussels-based Federation of European Risk Management Assns.

“I think that the (Block Exemption Regulation) will be renewed for pools, but the conditions will be redrafted,” said Ms. Dequae, who participated in the June 2 hearing.

The E.C. indicated in its March report that it is considering several amendments.

The Brussels-based CEA, the European insurance and reinsurance federation, said in comments submitted during the June 2 hearing that it welcomed the commission's statement that “pools can give rise to such positive effects” as allowing small and medium-size insurers to enter markets and gain experience with unfamiliar risks.

“This leads to an increase in the availability of insurance products on the market,” the CEA said, “while cross-border pools help to create a more integrated insurance industry throughout the E.U.”

The CEA said while it was pleased with the commission's intent to renew the exemption for pools, it could not say the same about allowing the sections related to standard conditions and security devices lapse. In both cases, the commission has proposed issuing guidance rather than renewing the exemption.

Rob Gillies, head of market processes at Lloyd's Market Assn., which provides services to Lloyd's of London underwriters, agreed that failing to renew the exemption with regard to standard policy conditions could cause problems for insurance buyers.

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