Expiry of the Block Exemption Ruling means uncertainty

There’s a smell of cordite in the air, and its coming from Brussels. The first warning shots have been fired that elements of, if not all of the Block Exemption Ruling (BER), are going to expire.

And that’s bad news for the insurance industry. There has been a lot of confusion over the BER, so lets take a step back and explain its background.

It all begins with Article 81 of the EC Treaty, which restricts anti-competition practices. Section one (81/1) bans collusion and cartelism. One might think that is bad news for insurers who share information and act together.

However, section 3 (81/3) lifts the ban on certain practices giving some breathing space to insurers. The problem - like many legal documents - is that its meaning is down to interpretation.

So in came the BER in 2003. Brussels recognised that the insurance industry was different to other sectors of the economy and designed the BER specifically for insurers. The BER gave clarity to what is essentially a fuzzy and unclear section 3.

It was a Godsend to underwriters, and they slept easy for five years, knowing exactly what they could and could not get away with on the anti-competition front.

They could share calculations and tables, act fairly freely in insurance pools, have standard policy documents and share security devices.

But if the BER is scrapped – it is due toe expire in March 2010 with a decision imminent - many insurers fear that confusion will once again take hold.

Insurers already send self-assessments to Europe on anti-competition, but instead of basing it around the BER, they may have to frame it around the hazy wordings of section 3.

Will standard policy documents be safe? What information and statistics can we safely share? Those are the sorts of questions that will be asked.

Some have already expressed fears that they could easily fall foul and face the wrath of Brussels. Others grimace at the thought of hiring expensive lawyers, another costly addition to their balance sheets that have been battered by the financial crisis.

There is a lot of uncertainty in the air, and that’s one thing everyone hates.