Lloyd's Maritime and Commercial Law Quarterly
THE E.E.C. AND INSURANCE
Dr. S. Mankabady
Licencié en Droit, Docteur en Droit, LL.M., Ph.D. (London).
Insurance is a service and not a product. It operates in a national market except for reinsurance and marine insurance which have established themselves at an international level. It is rather difficult for an insurance company to penetrate the market of another country but nevertheless this can be achieved. This may be done by the company establishing an agency or a branch in a foreign country, but in order to do so it must meet all the legal requirements of the national law of that country. Even so there will be many problems, such as the adaptation of the policy in order to suit the needs of that particular market and the necessity to make amendments to the terms of their policies so as to bring them into line with those offered by other competitors. Moreover, there may be a cartel agreement which makes the operation of any foreign firm more difficult in the national market.
To overcome these, and other difficulties, insurance companies, instead of establishing an agency or a branch, prefer either to buy an entire domestic company, or to acquire a majority of its interests or to have a special agreement with another company.
Under present circumstances, it is not possible for a businessman to leave his national insurer in order to seek an insurer in another country. Such a freedom of choice would be important for industrial companies and would have a decisive effect on the competitive capacity of the insurance industry. In order to make the insurance market competitive, the assured must be able to insure against the risks outside his national market at the most advantageous conditions and rates.
Article 3 of the Treaty of Rome states the various tasks which are to be carried out by the Community and lays down a time-table for their achievement. These tasks include, inter alia, the elimination of Customs duties, the establishment of a common Customs tariff, the abolition of obstacles to freedom of movement for persons, services and capital and the adoption of a system ensuring that competition within the common market is not distorted.
In pursuance of art. 3 the Community adopted the following principles in the field of insurance:
- (1) That the market of each member State should be opened up to other members by the granting of freedom of establishment and services; and
- (2) That the legal rules which affect the conditions of competition in the member States should be harmonised.
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