Insurance Block Exemption – partial renewal

There were two important announcements yesterday. One saw the release of the draft Bill for the US Reinsurance Regulatory Framework (as predicted), the other was the European Commission’s decision on the Insurance Block Exemption (earlier than expected). The good news is that the Block Exemption will be partially renewed in respect of arrangements relating to joint calculations, tables and studies and the operation of coinsurance pools. This decision is welcome as the Commission has heeded market concerns that statistical studies would not be as complete or effective without some form of exemption. Pooling arrangements are also a specific feature of the EU insurance sector and rely on cooperation for them to be successful therefore the continued exemption is appropriate. The disappointing news is that the exemption looks likely not to be renewed for the development and distribution of non binding model policy conditions for direct insurance. IUA has always had concerns that losing the exemption might hamper the efficient mechanisms that exist in preparing model wordings which are cost effective for market participants and supported by risk managers within client organisations who argue that their function is pro competitive. Unfortunately the Commission is not persuaded that the exemption is required noting for example model wordings are prepared in the reinsurance market without any form of exemption. The next step is for yesterday’s report to be the subject of a public hearing on 2nd June where IUA, along with many other interested parties, will testify. A final decision will then be reached by the Commission, however, it will be a tough battle to obtain a full renewal of the Block Exemption.