AIRMIC backs block exemption

AIRMIC, the UK’s Association of Insurance and Risk Managers, has made a submission to the EU Commission supporting continuation of the block exemption.

The association has written to the Commission describing the current arrangements as ‘pro-competitive’.

The exemption allows insurers to share policy wordings and some administrative arrangements when co-writing large risks. The Directorate General for Competition is investigating whether to allow the practice to continue when it expires in 2010.

In its submission, AIRMIC argues that the exemption encourages competition by making it easier for new players to enter the market when they might otherwise lack the resources to participate in very large insurance programmes. It also guarantees the buyer consistency of policy terms, said AIRMIC.

Kip Berkeley-Herring, chair of AIRMIC’s Insurance Steering Group, commented: ‘We believe that the block exemption acts in the interests of commercial insurance buyers, who would otherwise have less choice. This is one of those situations where allowing suppliers to co-operate in a few well-defined areas actually increases the amount of competition out there.’

The association does, however, support proposals to allow the following market to compete on price, rather than automatically following the rate set by the lead underwriter.

The Federation of European Risk Management Associations has sent a detailed response to the EU, also backing continuation. In its submission, AIRMIC strongly supports the FERMA position.

AIRMIC members have a premium spend of more than £5bn per annum.