European Insurance Contract law

Under the Europe 2020 Strategy, the European Commission is tackling bottlenecks in the Internal Market to create sustainable growth. It believes that opportunities for growth in the insurance sector can arise through cross-border trade where the potential has not yet been fully exploited.

In March 2013, the European Commission set up an Expert Group of which BIPAR was a member, tasked with analysing whether differences in the insurance contract laws of the Member States created an obstacle to European cross-border trade in insurance products and which (if any) insurance areas (non-life and life) were likely to be affected by such obstacles. On 27 February 2014 the Expert Group delivered its report.

Main findings of the report on European Insurance Contract Law

  • For many life, motor or liability insurance products sold to consumers, insurance companies have to adapt their contracts to the national rules where the policyholder is based.
  • Contract law differences may impact on the supply of insurance products across borders. They increase costs for the cross-border provision of insurance, create legal uncertainty and can make it difficult for consumers and businesses to take out insurance in other Member States.
  • Contract law obstacles are found primarily in the sector of life insurance, as well as areas such as liability and motor insurance. The report finds that problems are less likely to occur in insurance for large risk markets if linked to a trade or certain insurances for bigger companies - such as in the area of transport insurance.
  • Other differences – than the ones between national contract laws - influence cross-border insurance business. Some of them are of a factual, economic and social nature, others relate to areas of the law different from contract law, in particular, to prudential regulation and taxation.

BIPAR welcomed two conclusions, in particular, of the Expert Group that contract law is only one obstacle to cross-border insurance within the EU, among many more important ones and that insurance products for large risks are already widely distributed on a cross-border basis.

Further to the publication of the report, at the end of August 2014, the European Commission issued an open call for tender for an economic study on the impact of differences in insurance contract law on cross-border trade in the insurance sector. The purpose of the study was to collect data and, from an economic perspective, analyse the existence and extent of possible problems for concluding cross-border contracts. In July 2015, the Commission announced that none of the received offers to its open call for tenders could be considered as acceptable.

Next steps

It is unlikely that the European Commission will propose a Regulation on a possible optional European Insurance contract law regime in 2016/2017. Should this regime be developed one day, BIPAR believes that it is crucial that it is truly designed to be “distribution channels’ neutral”.

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