In cartel proceedings against industrial insurers the Bundeskartellamt in Bonn has imposed fines totalling approx. 130 million Euro against 10 industrial insurers and the directors involved. It is to be expected that further fines will be imposed against other insurers this summer. The cartel law violation had a nation-wide and cross-industry effect on, in particular, the industrial property insurance sector (fire, consequential loss, EC and all-risk insurances, and technical insurances) as well as the transport insurance and the buildings/monopoly insurance sector. According to the Bundeskartellamt’s findings, in the middle of 1999 the relevant insurers agreed to put an end to the intense competition at that time in premiums and conditions and thus cause a turnaround in the market. The following ten insurers have received administrative orders imposing fines:

- Allianz Versicherungs-Aktiengesellschaft
- AXA Versicherung AG
- Gerling-Konzern Allgemeine Versicherungs-Aktiengesellschaft
- HDI Haftpflichtverband der Deutschen Industrie Versicherungsverein auf Gegenseitigkeit
- Aachener und Münchener Versicherung
- Gothaer Allgemeine Versicherung AG
- Mannheimer Versicherung Aktiengesellschaft
- R + V Allgemeine Versicherung AG
- Victoria Versicherung AG
- Württembergische Versicherung AG

The cartel, which in part continued even after the search operation conducted by the Bundeskartellamt in July 2002, was mainly based on agreements between the directors of the companies represented in the Special Committee for Industrial Property Insurance (FIS) of the German Insurance Association (GDV). Within the framework of so-called “FIS principles” the parties concerned agreed inter alia not to reduce insurance contributions during terms of contract, not to make any backdated premium adjustments, to conclude new contracts only with opt-out and adjustment clauses and to consult each other more in “competitive cases”. These principles were supplemented by further agreements on premium and /or retention increases as well as on the adjustment of contract conditions.

In addition, the industrial insurers participating in the cartel agreed “not to disrupt restructuring measures” of their rivals and “not to undercut the improved premium” demanded and to inform each other at regular intervals on restructuring measures. By means of previous insurance enquiries and not submitting competing offers they aimed to avoid entering into new contracts with existing risks.

Important platforms and operation units to implement the cartel agreement were formed at director/ head of department level by the regionally active working and discussion groups or regular meetings of representatives of the various rival companies. The objective of these meetings was to exchange in-depth information on company-specific restructuring criteria and revenue improvement measures, to further confidence building and to constantly manifest mutual reliability as regards market behaviour and non-competition. Insurers offering a more advantageous offer to insurance holders in individual cases were taken to task as “obstructors of improvement” to achieve market conformity. Another means of exerting pressure to enforce “market-conform behaviour” was to cancel co-insurance contracts. Here, in individual cases, the mandates of insurance brokers encouraging customers to change their insurer were revoked.

Fines were calculated on the basis of the additional proceeds obtained from the cartel agreement in the relevant period, i.e. the profits which could only have been gained by the companies concerned from their infringement of competition. The Bundeskartellamt multiplied the additional proceeds of the individual companies by the factor 2 or 1.5 depending on the respective role the companies played in the agreements. Actuarial factors were taken into account when calculating the additional proceeds.

The President of the Bundeskartellamt, Dr Böge, stated: “According to the Bundeskartellamt’s investigations the directors of the companies fined knowingly violated the ban on cartels to end the intense competition between the industrial insurers. It was not a matter of the usual agreements on prices or areas. In view of the complexity of the contracts and the individual risks of the industrial customers uniform prices would not have been enforceable anyway. Instead, competition was directly eliminated by the cartel members’ agreement to refrain from submitting competing offers in order to achieve an “improvement” – i.e. to raise premiums and adjust conditions. So-called previous insurance enquiries to identify “improvable” contracts and their premiums were an important tool in this context. As a result every insurance company was able to enforce increased premiums or adjusted conditions on its customers without having to fear other competitors’ reactions. The agreements thus resulted in an almost total elimination of competition in the industrial property insurance sector or, as the industrial insurers described it themselves, a “hard restructuring front” or a “hard market”. Those directly affected by the cartel agreement were the industrial customers of the insurers, however, each consumer receiving the increased insurance prices was also indirectly affected.”

Background: Following the complaints of policy holders in July 2002 the Bundeskartellamt searched the premises of 13 companies and seized substantial evidence. Due to its obligation to give the parties the right to be heard, the Bundeskartellamt was forced upon appeal to grant the insurance companies concerned an extension, in some cases of several months, of the deadline to comment on the written charges sent out in July 2003, May 2004 and autumn 2004. The conclusion of the proceedings was delayed as a result.

The parties concerned have the possibility of appealing against the administrative orders imposing the fines within two weeks of receipt. The Düsseldorf Higher Regional Court will then have to decide on the appeals.