European Commission DG Competition Review of Insurance BER Antitrust Registry Jozef II Street, 70 / Jozef II Straat 70 B-1049 Bruxelles/Brussel

Transcription

1 European Commission DG Competition Review of Insurance BER Antitrust Registry Jozef II Street, 70 / Jozef II Straat 70 B-1049 Bruxelles/Brussel Bratislava, 17th July 2008 Dear Madam/ Sir, Slovak Insurance Association appreciates very much a possibility to respond to the DG Competition Consultation Paper concernig the review of the functioning of Commission Regulation (EC) No 358/2003 on the application of Article 81(3) of the Treaty to certain categories of agreements, decisions and concerted practices in the insurance sector. (further referred to as Block Exemption Regulation - BER ) As a representant of more than 95 % of insurance companies operating in the Slovak Insurance market and voluntary associated within the Slovak Insurance Association we would like to express view of our members which are in favour of BER renewal. Whereas the only two types of exemptions currently used in the Slovak insurance market are joint calculations and pools hereinafter we present our position only to the questions and issues of specific interest for the part No. III - Joint Calculations, tables and studies and V of the Consultation Paper Common coverage of certain types of risks (pools). Nevertheless, Slovak Insurance Association would like to remark on this mater that although only joint, calculations, tables and studies and common coverage of certain types of risks are being used at present in the Slovak market due to relatively short history, other forms of cooperation falling under the scope of BER cannot be excluded for the future. We are of the opinion that cooperation allows smaller insurers to offer insurance coverage because of lower costs for obtaining risk data and potential noncooperation could lead to crowd out effect and leaving the market by those insurers whose individual portfolio would be too small and at the same time who would not be

2 able to obtain risk data for reasonable costs. For this reason renewal of BER is of the relevance even for such a small and concentrated market as Slovak market definitely is. Slovak Insurance Association is open to any further discussion. Kind regards, Jozefina Žáková General Director

3 I. Joint Calculations, tables and studies pricing of insurance policies? (iii) To what extent is the performance (profitability, solvency) of the insurance industry affected? Please explain your answers. (i) Slovak Insurers Bureau (SIB), association of insurers providing MTPL insurance, in which membership is mandatory by law, carries out studies on the probable impact of external factors on the frequency or scale of future claims. SIB has been making calculations and studies since the tariff deregulation in 2004 and results are to the disposal of of its members and potential market newcomers. (ii); (iii) Since tariff deregulation in 2004, three new companies entered the market. One company did not use the joint calculations and studies, set too low prices what had subsequently led to price war, deformed the MTPL market, and it all had very negative impact on solvency of this particular company. We do not have any exact information regarding the positive effect on pricing but in our opinion indirectly not using of the calculations and studies can potentially endanger stability of the insurance company and can have influence on stability of the whole market. 2. Are there any changes that you believe may be useful in the current BER in order to improve its functioning e.g. differentiating between insurance classes / specific risks (e.g. should the frequency and diversifiability of specific risks play a role in block exempting cooperation among insurers)? Please explain the reasons for your answer. In our view no changes to this particular form of cooperation are needed. 3. Considering the greenfield market entries in the insurance sector over the last five years to your knowledge (i) did such entrants make use of the joint calculations, tables, and studies envisaged in the BER? (ii) Is there evidence that this exemption has affected entry and if so, how? (iii) Please describe any entry barriers affected by this exemption and provide estimates of the costs involved in overcoming these barriers. Please provide any analysis, report, study or survey to substantiate your views. (i); (ii) Please see reply to question I. (iii) 4. (i) What do you consider would be the impact if any of the non-renewal of the BER on the scope and level of cooperation in this particular area? Please explain why you would expect this impact. (ii) What do you consider would be the economic effects (e.g. in terms of market structure, entry barriers, competitiveness of smaller insurers, level of customer mobility, etc.) of these changes in cooperation? Please provide any analysis, report, study or surveys to substantiate your claims. We share and fully support the position of CEA (Comité Européen des Assurances) at this point. 5. Do you consider there to be alternative (pro-competitive) solutions to overcome the information asymmetry problems faced by the industry other than through renewal of the BER as it is currently drafted? Please explain your answer.

4 II. Standard Policy Conditions and models pricing of insurance policies? To what extent is the performance (profitability, solvency) of the insurance industry affected? Please explain your answers. This form of cooperation is not used in Slovakia. 2. Are there any changes that you believe may be useful in the current BER to improve its functioning (e.g. differentiating between insurance classes)? Please be specific and give reasons for your answer. 3. Considering the greenfield market entries over the last five years in the insurance sector, to your knowledge: (i) did such entrants make use of standard policy conditions, clauses, models envisaged in the BER? (ii) Is there evidence that this exemption has affected entry and if so how? (iii) Please describe any entry barriers affected by this exemption and provide estimates of the costs involved in overcoming these barriers. Please provide any analysis, report, study or survey to substantiate your claims. 4. (i) What do you consider would be the impact if any of the non-renewal of the BER on the scope and level of cooperation in this particular area? Please explain why you would expect this impact. (ii) What do you consider would be the economic effects (e.g. in terms of market structure, entry barriers, competitiveness of smaller insurers, level of customer mobility, etc.) of these changes in cooperation? Please provide any analysis, report, study or surveys to substantiate your views. 5. (i) In your experience, how does cooperation on standard policy conditions affect the variety of available insurance policies? (ii) Can cooperation lead to a decreased supply of insurance products? 6. In your experience, how does cooperation on standard policy conditions affect the use of restrictive or exclusionary terms? Please explain your answer. III. Common coverage of certain types of risks (pools) pricing of insurance policies? (iii) To what extent is the performance (profitability, solvency) of the insurance industry affected? Please explain your answers.

5 (i.) In our opinion the BER functions very well. Any anti-trust effects have not been proved. The situation is exactly the opposite. Existence of pools resulting from BER enabled to insure those risks that otherwise would not be insurable. BER permits functioning of nuclear pool in Slovakia, which is definitely a class of insurance for which sufficient national and international capacity would otherwise not be available. (ii.) In most countries and markets the obligatory (compulsory) financial security required for nuclear third party liability is provided by nuclear pools by way of insurance for a price which is, in our opinion, less expensive and financially more effective than any other form of financial security. (iii.) The insurance industry performance (solvency) is very well protected through nuclear insurance pools as there is in place a strict control of possible cumulation of risks. Each insurer actually bears on each risk only a sum reasonable to its own retention. In a case of a serious nuclear accident the nuclear insurance pool becomes a professional quarantor of efficient handling and settlement of all claims (practically worldwide). 2. Are there any changes that you believe may be useful in the BER to improve its functioning? Please be specific and give reasons for your answer. We believe that a better and more realistic definition of "the relevant market" would help to improve the functioning of the BER. 3. (i) What do you consider would be the impact if any of the non-renewal of the BER on the scope and level of cooperation in this particular area? Please explain why you would expect this impact. (ii) What do you consider would be the economic effects (e.g. in terms of market structure, entry barriers, competitiveness of smaller insurers, level of customer mobility, etc.) of these changes in cooperation? Please provide any analysis, report, study or surveys to substantiate your claims. (i.) In our opinion non-renewal of the BER would in fact be danger if not make impossible sufficient insurance capacity (cover) in respect of nuclear related risks. An absolute majority of insurers would not agree to offer coverage of nuclear risks due to the fact that such cover would be financially inattractive (only a few risks available) with a danger of a catastrophic type loss of a long tail character. (ii.) Negative economic effects would have to be expected (see above our comment 3i). 4. (i) Do you consider that the current BER provisions define pro-competitive pools sufficiently? (ii) Are there any exceptions (e.g. pro-competitive pools not exempted, anticompetitive pools exempted)? Please give examples and explain. (i.) Yes, in our opinion they are sufficient. (ii) Not available.

6 5. Do you consider that the BER hinders setting-up pools with innovative policies (e.g. against natural disasters) on the basis that the risks are not new? Please give examples and explain. In our opinion no. 6. In what sense, if any would non-renewal / absence of the BER affect the setting-up of cross-border pools? Please explain your answer. Non-renewal of the BER would negatively effect national nuclear insurance pools and therefore the operation of cross-border pools would be impossible. IV. Security devices/ safety equipment pricing of insurance policies? (iii) To what extent is the performance (profitability, solvency) of the insurance industry affected? This form of cooperation is not used in Slovakia. 2. Are there any changes that you believe may be useful in BER to improve its functioning? Please be specific and give reasons for your answer. 3. (i) Considering the greenfield market entries over the last five years in the insurance sector, to your knowledge, did such entrants make use of the cooperation in the field of security devices envisaged in the BER? (ii) Is there evidence that the BER has affected entry in a positive way in the past? 4. (i) What do you consider would be the impact if any of the non-renewal of the BER on the scope and level of cooperation in this particular area? Please explain why you expect this outcome. (ii) What do you consider would be the economic effects (e.g. in terms of market structure, entry barriers, competitiveness of smaller insurers, level of customer mobility, etc.) of these changes in cooperation? Please provide any analysis, report, study or surveys to substantiate your claims. 5. Did you experience any competition problems in relation to the BER in the following sectors: (i) production of security devices; (ii) evaluation of security devices; (iii) installation and maintenance of security devices? In each case, if so, please explain your answer.

7 Any further inquiries regarding the above-mentioned replies can be addressed to: Eva Jacková Slovak Insurance Association Drieňová Bratislava 29 Slovakia