07 November 2014

Commercial Risk Europe: Ferma urged renewal of IBER to maintain coverage of large risks

Ferma argues that failure to do so would decrease the availability of insurance for large and exceptional risks while simultaneously driving up costs.

The European insurance and reinsurance federation Insurance Europe has meanwhile called on the EC to renew the Insurance Block Exemption Regulation (IBER) in full. It believes the regulation is vital to fostering competition in the insurance market and ensuring the availability of a wide range of insurance products.

Both Ferma and Insurance Europe made their views clear to a consultation on the IBER that closed on Tuesday. The Commission will use the consultation to help decide whether to retain, amend or abandon the regulation when it expires in March 2017.

The IBER aims to facilitate co-insurance and allow insurers to share information in order to more accurately price risks. The IBER exempts insurers from EU competition rules for certain practices. It permits cooperation between insurers on data compilation to help them calculate the cost of covering risks more effectively.

But perhaps more importantly for insurance buyers the regulation allows pooling of subscription capacity via co-insurance or co-reinsurance pools, provided certain conditions are met. This facilitates the coverage of risks that would otherwise not be insurable.

In its response to the consultation, Ferma said that coverage of the largest and exceptional risks still needs an exemption from EU competition rules. Julia Graham, President of Ferma, told the EC: "We represent consumers and users of these (re)insurance pools. Non-renewal of the block exemption would change radically the coverage of certain type of risks, but not widen choice for commercial insurance buyers. We believe there is still ground for an exemption from EU competition rules for the IBER.”

"If these rules are being challenged and such pools could fall within the scope of EU competition laws, then it is our priority to ensure that policymakers are well aware of the unintended consequences of a non-renewal decision on the scope of coverage and the level of prices for our largest and most exceptional risks," she added.

Ferma explained that the current IBER provides legal certainty of exemption from EU competition rules for every (re)insurance pool in the European Union, and this benefits all stakeholders; both providers of insurance capacity and insurance buyers.

Without the exemption, such pools would come under the EU general guidelines on horizontal cooperation agreements that allow wide discretion to national competition authorities, pointed out Ferma.

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