Year 2016 - EVOLUTION OF INSURANCE INDUSTRY UNDER THE COMPETITION ORDINANCE 公平競爭法下保險業新進化

Catastrophe risk and serious loss that could impact the solvency of the insurance company if no appropriate “Spread of risk” arrangement is being applied such as “Reinsurance” or “Co-Insurance”. Ideally, an insurer desires to diversify risks and spread of risks. However, some spread of risk related insurance arrangement may contravene the First Conduct Rule. • “Reinsurance” Reinsurance is insurance that purchased by an insurance company (the “ceding company” or “cedent” or “cedant” under the arrangement) from one or more other insurance companies (the “reinsurer”) directly or through a broker as a means of risk management. However , some insurance products may involve few competitors , homogeneous in nature and limited market. Making it easy for the public to consider it is a conduct of collude. • “Co-Insurance” Coinsurance is the splitting or spreading of risk among multiple parties. Similar to reinsurance , some insurance products may involve few competitors , homogeneous in nature and limited market. Making it easy for the public to consider it is a conduct of cartel. • “Exclusive” Exclusive quotation or product is a very common product development strategy in insurance industry but it may fall into the conduct of exclusive distribution that may contravene the First Conduct Rule. In fact , exclusive quotation arrangement proposed by the insurance intermediary is to protect both seller and buyer interest. Exclusive product arrangement is to offer tailor-made benefits for a selective distribution channel or target segment that fulfill the specific insurance product pricing model calculated by actuary based on different risk nature. Conclusion The Competition Commission (Commission) can make a block exemption order where it is satisfied that a particular category of agreement falls within the scope of the exclusion for agreements enhancing overall economic efficiency. Therefore , the captioned spread of risk arrangement that we mentioned in insurance industry may consider to apply Block Exemption Order or to seek clarification with The Competition Commission. The concept of spread of risk is very important and necessary for establishing a healthy and stable insurance industry. Different insurance funding arrangement between insurers , reinsurers or intermediaries which related to insurance risk management is necessary for protecting both insurance industry and customers in the long run. Therefore , a continue education to the public for the concept of risk management and spread of risk are highly recommended. Dr. Tony Lee Director of ANZIIF Board Australian and New Zealand Institute of Insurance and Finance (ANZIIF) 31