EU: Final report on Business Insurance Sector Inquiry

Insurance is of vital importance for big and small businesses throughout the EU. Many industries, from aviation and shipping to major real estate developments, could not function without insurance. EU insurers collect €375 billion in non-life premiums every year. European insurers and reinsurers are also very active in international markets, and they are major investors in capital markets.

The European Commission adopted the final report of the competition inquiry on the business insurance sector, which raises concerns about the operation of two areas of business insurance.

First, long-standing and widespread industry practices in the reinsurance and coinsurance markets involving the alignment of premiums, which may lead to higher prices for large risk commercial insurance. The report leaves open the question of whether these constitute infringements of the prohibition on restrictive business practices (Article 81), but invites the industry either to justify the business practices concerned under the competition rules, or to reform them.

Second, the Commission also confirms its concerns as to transparency of remuneration and conflicts of interest in insurance brokerage, which may inflate prices and reduce choice, in particular for SMEs. The Commission will further explore this issue during the review of the Insurance Mediation Directive.

Competition Commissioner Neelie Kroes said that this report shows that the Commission is serious about making markets work better, even where that means to question some established market practices when these may be harmful to consumers and competition. Therefore, he invites the industry to respond positively to the findings of the report and, where necessary, to reform the relevant business practices.

For more information about the final report:
http://ec.europa.eu/comm/competition/antitrust/others/sector_inquiries/financial_services/business.html