European Commission urged to roll insurance review into wider financial services and banking reform
6 November 2008
The European Commission should roll insurance into wider reforms of cross-border banking and financial services regulation rather than proceed with a potentially inconsistent review of special provisions for the sector, a member of the EC Competition Directorate has been told.
A private meeting of insurers in London, hosted by the business law firm LG, heard that the Commission is still considering its response to the market crisis. Eithne McCarthy, project leader for the Commission, said it was not clear how this will impact a separate review of the insurance industry's "block exemption" from competition law, adding that insurers have so far failed to make a case for the exemption to continue beyond March 2010 when it will lapse.
"It is clearly inconsistent that the EC is pursuing a review of the insurance market which could reduce information-sharing about risk when this is precisely what politicians and regulators have argued is needed in other areas of banking and financial services," said William Sturge, partner at LG.
Whilst accepting that insurers must do more to make their case to the Commission, Mr Sturge added that if the block exemption for the industry were to lapse, it would also cost firms much more to clarify the legality of their business and policyholders would almost certainly pay in higher premiums.
"The big question is whether it's in policyholders' interests for the block exemption to go," Mr Sturge continued. "The impact of the credit squeeze will be to tighten access to insurance and even without additional legal costs, it will become harder to get and more expensive for many."
Notes to editors:
- The European Commission is currently considering how to reform financial and banking regulation in the wake of the recent market collapse and later this month the G20 meet in Washington to consider a global response to the crisis.
- Quite separately, the EC is shortly due to publish a draft report on whether the block exemption from competition law should continue for insurance companies beyond 2010. The insurance industry believes this greatly simplifies the process of assessing risk and complying with competition law but, unless the EC is convinced there is a need to extend this special provision it will automatically lapse. The EC is due to publish its final report early next year.
- LG is a business law firm based in London with a substantial insurance and reinsurance practice. The firm also specialises in banking, financial services and all aspects of European competition law.