P&I club arrangements “restrict competition”, says EC

The European Commission has launched an inquiry into whether marine reinsurance deals between International Group of P&I Clubs hurt ship owners and insurers that are not members.

The International Group of P&I Clubs provide P&I insurance to about 93 % of the world’s ocean-going tonnage. It operates the International Group Agreement and the Pooling Agreement that contain rules on the sharing of insurance claims and joint reinsurance as well as rules on the contractual relationships between the P&I Clubs and their members.

The agreements are not automatically covered by the new antitrust block exemption for the insurance sector that came into force in April because the market share is well above the 20-25% ceilings.

Reduced competition

The Commission’s aim is to examine whether “certain provisions of the agreements may lessen competition between P&I Clubs as well as restrict, to a certain extent, the access of commercial insurers and/or other mutual P&I insurers to the relevant markets”.

In June the Commission “invited” the International Group of P&I Clubs to increase competition between its members.

Then Karel van Miert, the Commissioner responsible for competition, said that the P&I club deals were in breach of EC competition rules.

“The Commission could only grant an exemption from these rules if the International Group allows more competition between its members,” it said then.

Preliminary conclusion

“The Commission has now reached the preliminary conclusion, embodied in a statement of objections, that the arrangements concluded within the International Group, while continuing to produce benefits for the maritime industry and its customers, unduly restrict competition between the P&I Clubs in two main aspects:

  • first, they oblige all the P&I Clubs to offer the same level of cover, even if a large number of shipowners wishes to obtain substantially lower levels than the ones offered at present (this is the object of the complaint from the Greek Shipping Cooperation Committee) and
  • second, they impose limits to price competition between the P&I Clubs. The Commission exempted some of these limits in 1985, after amendments to the original International Group Agreement had been introduced. These amendments have not proved sufficient to improve competition on prices between the P&I Clubs and, therefore, the price limits can not be exempted as they stand today.”