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August 27, 2010

EU launches antitrust investigation of P&I clubs

The European Commission has opened formal proceedings to investigate whether certain provisions accompanying claim-sharing and joint-reinsurance agreements in the marine insurance sector might infringe European Union antitrust rules.

The Commission says it fears that the provisions at stake in the agreements between the Protection & Indemnity Clubs (P&I Clubs) within the International Group of P&I Clubs (IG) may harm ship owners and the insurers that are not members of the International Group.

P&I Clubs are mutual non-profit making associations that provide Protection and Indemnity insurance - a type of direct marine insurance - to their members, the shipowners. The International Group of P&I Clubs (IG) is a worldwide association of thirteen P&I Clubs. The members of the International Group provide P&I insurance to about 93 percent of the world's ocean-going tonnage.

In the framework of the International Group, the P&I Clubs operate two separate agreements, the International Group Agreement (IGA)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 Commission granted individual exemptions to its antitrust rules for the IGA in 1985 and, again, in 1999. On both occasions the exemption applied for 10 years. Following a detailed investigation in the 1990s, the Commission found in its 1999 decision that the Group's claims-sharing arrangements set out in the Pooling Agreement did not restrict competition and thus did not require exemption.

The Commission says these agreements are not automatically covered by a new EU antitrust block exemption for the insurance sector that came into force in April. This is because the market share concerned is well above the 20-25 percent ceilings provided in the block exemption.

The International Group says the Commission has told it that this review is not prompted by a complaint about the Group's arrangements. It is normal practice for the European Commission to review the position on expiry of an individual exemption. In relation to the aspects of the International Group's arrangements which the European Commission is reviewing, there have been no relevant or material changes to the arrangements or in the market for P&I cover since those arrangements were approved in the Commission's 1999 decision, with which the Group has continued to comply. The International Group therefore takes the view that the Commission's careful analysis of the Group's arrangements as set out in the 1999 decision remains valid. Pending the outcome of the Commission's review, the Group's arrangements remain unaffected. The Group provides the Commission with reports on its arrangements and the market each year and is working closely with DG Competition in its review.


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