Insurance block exemption rule still needed in Europe: FERMA
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The Federation of European Risk Management Associations has warned the European Commission that any restrictions imposed on the subscription insurance market could hurt businesses by reducing insurance market capacity or making access to capacity more difficult.
In a position paper released Monday, Brussels, Belgium-based FERMA said the existing Insurance Block Exemption Regulation, which grants exemption from European Union competition rules to co(re)insurance pools, provides more benefits than problems for the market.
“Some pools on national levels are really needed where the traditional insurance market is not interested or can’t solve temporary market problem(s) on its own, especially with unusual risks (terrorism, natural catastrophes ... ) and specific areas of activities (shipping, nuclear, aviation sector),” according to the FERMA paper. “This practice is the only way to find huge financial capacities that the industry needs in the business insurance sector.”
The paper said, however, that insurance markets can change rapidly, and warned that pools must not restrain the commercial insurance market from growing into risks. Consequently, it’s necessary to review the necessity of pools periodically.
The FERMA paper said that in such subscription insurance arrangements where risk is shared among multiple insurers, selecting the lead insurer is a highly competitive process. Once the lead insurer is selected, the process is an efficient one, FERMA said. It also brings legal certainty to claims handling and dispute resolution.
That efficiency draws diverse insurers to the subscription market, FERMA said, and buyers benefit from that diversity.
The existing E.U. block exemption on such coinsurance arrangements is set to expire on March 31, 2017.
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