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PR(07)32: The EFTA Surveillance Authority publishes its interim report on business insurance in Norway and Iceland


The EFTA Surveillance Authority has today published an interim report on the preliminary findings of its sector inquiry into the business insurance markets of Norway and Iceland. The interim report sets out the Authority’s initial conclusions as to the competitiveness of the business insurance markets of Norway and Iceland. It also opens a consultation period during which comments are invited.

The Authority launched the sector inquiry into competition in the financial services markets of the EFTA States on 22 June 2005 (see PR(05)20). The sector inquiry corresponds to a similar inquiry of the European Commission, which published an interim report on business insurance in January 2007. Together, the conclusions of the Authority and the Commission will provide an overview of the competitiveness of the business insurance markets in the whole of the EEA. The Authority’s inquiry has investigated a number of key points which have also been considered by the Commission.

As far as cooperation between insurers is concerned, no significant issues regarding joint setting of standard policy conditions were found. The provision for such horizontal cooperation under the Insurance Block Exemption Regulation[1] ("Block Exemption") does not seem to be relied upon to any great extent by insurers. The Commission has raised questions as to whether the Insurance Block Exemption should be prolonged after 2010, when it is set to expire.

As to market structure and financial aspects of the industry, the inquiry finds high concentration in most insurance lines, both for insurers and brokers. There also appears to be considerable variation in profitability between insurance lines. In addition, profitability levels in Norway and Iceland for some insurance lines appear to differ significantly. High profitability levels might be indicative of a lack of competition. However, the cyclical nature of the industry along with the time lag from premium payments to final settlement of related claims makes it difficult at this stage to assess profitability based on the Authority’s survey data. This will be examined further during the consultation period.

In Norway, specific issues were examined in relation to distribution arrangements, where by insurance companies have introduced a “new branch norm” on remuneration of brokers. The new branch norm calls for net quoting to brokers (i.e., no commission from insurers to brokers). There are currently policy discussions in Norway regarding a domestic legislative proposal which might make net quoting the law.

In Iceland, there are indications of a collective refusal by insurance companies to supply liability insurance to brokers. This may give rise to competition concerns and will be examined further during the consultation period.

Of the EFTA States, only Iceland and Norway were included in the investigation. This is because there are no providers of business insurance in Liechtenstein. Customers of business insurance in Liechtenstein obtain insurance products from providers in other countries.

The publication of the interim report opens a consultation period, during which the Authority invites comments from public authorities, the industry, customers and third parties. Comments are requested by 28 September 2007.

Following analysis of the comments received, the Authority envisages publication of a concluding report towards the end of year 2007. On the basis of that report, the Authority will evaluate whether there are grounds for further action in order to address any competition problems identified.

[1] Commission Regulation (EC) No. 358/2003 of 27 February 2003 on the application of Article 81(3) of the Treaty to certain categories of agreements, decisions and concerted practices in the insurance sector.

For further information, please contact:

Mr. Justin Menezes
Officer, Competition & State Aid Directorate
tel. (+32)(0)2 286 18 84; or

Mr. Kjell-Arild Rein
Temporary Officer, Competition & State Aid Directorate
tel. (+32)(0)2 286 18 86

11 July 2007

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