GENERAL GROUNDS1 FOR THE BLOCK EXEMPTION COMMUNIQUÉ IN RELATION TO THE INSURANCE SECTOR
The insurance sector differs from the other sectors due to reasons stemming
from both the nature of service offered and the structuralization of the sector. Such
difference and special circumstances arising out of it should be taken into
consideration in applying article 4 of the Act No. 4054 to the insurance sector.
The leading one among the characteristics that differ the insurance sector
from the other sectors is the efficiency-enhancing effect of resorting to cooperation in
the calculation of average costs which are also called as net premium or risk
premium. As a matter of fact, joint calculation of an average cost incurred due to
having placed in the past certain risks under the coverage of guarantee (or the
preparation of tables such as life insurance death rate, sickness, accident, disability
frequency etc.) facilitates the identification and assessment of risk, encouraging the
realistic formation of prices and facilitating market entry. Likewise, researches that
would put forward the effect of general external conditions such as global warming,
earthquake, flood and erosion on future injury realization frequency and profitability
also are of a nature to contribute to understanding risk.
On the other hand, while making the regulations cited above, insurance
companies should not be precluded from carrying out their commercial activities
freely, and sufficient area should be left for competition. For this reason, it is required
that the calculations, tables and researches in question do not bear the nature of
determining and fixing commercial premiums.
Another issue to be taken into consideration within this framework is that
failure to open calculations, tables and researches to the access of undertakings to
newly enter the market may constitute a barrier to market entry. In order to rule out
this probability, results of calculations, tables and researches should also be made
available for the use of undertakings to newly enter the market under reasonable
conditions and without making discrimination. That insurance undertakings
1 This Section as to the general grounds has not been published in the Official Gazette.
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(especially large undertakings) avoid from providing data to be employed in the
preparation of calculations and tables, but that however they are able to reach results
would create an unfair advantage in favor of such undertakings. In order to prevent
this situation, it would be relevant to deem reasonable that despite being granted the
opportunity to participate in work under fair terms, undertakings which avoid from it
be denied the results of work.
Coinsurance and coreinsurance groups also known as insurance pool are
institutional structures set up with a view to placing under guarantee those risk
groups to which insurance companies and reinsurance companies are unable to offer
sufficient guarantee with their own institutional resources. These structures jointly
insure risk groups about which insurance companies do not have sufficient
information, also enabling them to identify the risks in question. On the other hand,
when it is taken into consideration that in the Turkish insurance sector, the average
size of an undertaking is quite below international averages and that therefore, the
financial power of the sector is low, it is seen that a similar benefit should also be
valid in terms of risks that have not been previously placed under guarantee in
Turkey. The facilitation of jointly placing such risks under guarantee would encourage
the development of new products in the sector.
On the other hand, cooperations that have a temporary nature and that are not
institutionalized, which are created for purposes of placing individual risks under
guarantee are not considered as coinsurance or coreinsurance within the meaning of
this Communiqué. As long as they emerge due to the fact that the parties do not
have financial resources or technical and managerial information to assume the risk
on their own, such kind of cooperations do not cause a competition-restricting effect.
On the contrary, it is considered that cooperations having the qualities listed above
have in general effects of promoting competition and enhancing product supply. As a
matter of fact, by means of placing under guarantee in cooperation those risks that
they are unable to place under guarantee on their own, undertakings either increase
supply by offering a service which cannot be offered otherwise or create a
competitive pressure upon large undertakings.
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Even though the reinsurance sector presents a globally integrated
appearance, the fact that there exists a single reinsurance undertaking operating in
the Turkish insurance sector should also not be disregarded while making an
evaluation in respect of coreinsurance. For this reason, it would be relevant that
pools where reinsurance undertakings are also involved continue to be subject to the
provisions of individual exemption. In other words, this Communiqué only covers
coinsurance and coreinsurance structures where insurance undertakings are
involved.
Coinsurance and coreinsurance agreements should be subjected to certain
limits of market power, securing the leaving of an area for competition in the relevant
markets. Within this framework, when the fact that the practical effects of coinsurance
and coreinsurance agreements considerably overlap is also taken into consideration
in addition to the Communiqué’s merely covering contracts concluded between
insurance undertakings, it is seen that it would be relevant to determine a joint market
share threshold for both types of agreements.
The final area of cooperation included within the scope of the Communiqué is
aimed at security instruments and security-building measures, and agreements and
assents intending to determine standards as to security equipment and measures
benefit from block exemption under the conditions determined.
Taking into account the foregoing statements, the Competition Board decided
on the issue of this Communiqué.
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BLOCK EXEMPTION COMMUNIQUÉ IN RELATION TO THE INSURANCE SECTOR
(COMMUNIQUÉ NO: 2008/3)
Purpose
ARTICLE 1 - (1) The purpose of this Communiqué is to determine the conditions for exempting as a block certain categories of agreements in the insurance
sector from the application of the provisions of the Act on the Protection of
Competition dated 7/12/1994 and numbered 4054.
Scope
ARTICLE 2 - (1) Under article 5 of the Act No. 4054 and the provisions included in this Communiqué;
a) Jointly doing so by undertakings in the insurance sector;
1) The calculation of an average cost of having covered a particular
risk in the past (calculations),
2) In connection with insurance operations, the preparation of
capitalization and death lists, and tables indicating the frequencies
of sickness, accident, disability (tables),
3) The distribution of the results of these calculations, and tables to
undertakings,
b) In a particular risk or risk category, jointly searching the likely effects of
general external conditions not associated with undertakings on the
frequency and scale of future compensation claims or the profitability of
investments of a different type (researches), and the distribution of the
results of these researches,
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c) Aimed at particular risk categories, setting up and operating coinsurance
and coreinsurance groups with a view to ensuring joint guarantee,
d) Jointly doing so by undertakings in the insurance sector in respect of
security devices, provided that the applicability of regulations as to
standards determined by authorized public agencies and organizations to
be valid in Turkey is not restricted;
Agreements having the nature of limiting competition, concluded between
undertakings operating in the insurance sector for purposes of determining,
introducing and distributing
1) technical specifications and rules of application,
2) procedures as to assessing and approving the conformity of devices
to such rules,
3) technical specifications and rules of application in respect of the
assembly and maintenance of devices,
4) procedures as to assessing and approving the conformity of
undertakings performing the assembly and/or maintenance of
devices to the rules in question
have been exempted as a block from the prohibition in article 4 of the Act No.
4054, based on article 5 paragraph three of the Act No. 4054, provided that they
conform to the conditions provided in this Communiqué.
Basis
ARTICLE 3 - (1) This Communiqué has been prepared based on articles 1 and 5 and article 27 sub-paragraph (f) of the Act No. 4054.
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Definitions
ARTICLE 4 - (1) In implementation of this Communiqué,
a) Act: Expresses the Act on the Protection of Competition No. 4054.
b) Agreement: Expresses an agreement, a decision of an association of undertakings or a concerted practice.
c) Participating undertakings: Express undertakings which are party to an agreement, and undertakings which are deemed “affiliated” with them
pursuant to the provisions of the Communiqué on Mergers and
Acquisitions Calling for the Authorization of the Competition Board No.
1997/1, which entered into force by having been published in the Official
Gazette dated 12/08/1997 and numbered 23078.
d) Coinsurance groups: Express groups which are set up by insurance undertakings and accept to insure a particular risk category on behalf and
on own account of all participating undertakings, or which empower, for this
task, an insurance undertaking, a joint agent or a structure set up to this
end.
e) Coreinsurance groups: Groups which are set up by insurance undertakings to make mutual reinsurance of risks in a particular risk
category partially or wholly or to accept reinsurance of risks in the same
category on behalf and on own account of all participants, or which
empower, for this task, an insurance undertaking, a joint agent or a
structure set up to this end.
f) New risks: Express risks which did not exist before and which, in order to enable that they are insured, necessitate the formation of an entirely new
insurance product rather than expanding, developing or changing an
existing insurance product.
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g) Security devices: Express parts, equipment or systems comprised of such elements designed for the prevention or decrease of injuries.
h) Commercial premium: Expresses the total paid to an insurance undertaking in return for ensuring insurance protection.
Joint calculations, tables and researches
ARTICLE 5 - (1) In order to enable that the exemption granted by article 2 paragraph one sub-paragraph (a) is valid, calculations and tables are required to
provide the following conditions:
a) Calculations and tables should be based on the collection of data that are
of adequate number to constitute a base which can be processed by
statistical methods and that relate to the same or a comparable risk during
a particular number of risk years selected as an observation period. Among
data to be obtained as a result of such activity;
1) The number of damage / compensation claims realized within the
period determined
2) The number of individual risks insured in each risk year of the
observation period selected
3) The amount of compensation paid or likely to be paid in connection
with damages realized within the period determined
4) The sum of insurance cost in each risk year of the observation
period selected may be found.
b) Statistical data included in calculations and tables should just be detailed
insofar as it is required by actuary operations.
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c) Calculations and tables should by no means contain information in respect
of reserves allocated for extraordinary circumstances, revenues arising
from reserves, costs or gains of administrative or commercial activities,
revenues arising or profits expected from investments.
ARTICLE 6 - (1) In order to enable that the exemption granted by article 2 paragraph one sub-paragraphs (a) and (b) is valid, it is required that the results of
calculations, tables and researches
a) do not contain identity information of the relevant insurance undertaking or
any insured party,
b) also contain an expression that they are not binding when their distribution
is made.
c) It is required that a copy of these calculations, tables and work be provided
to all demanding insurance undertakings under reasonable and non-
discriminating terms, also including undertakings not operating in the
relevant product market and the relevant geographical market.
ARTICLE 7 - (1) In the event that participating undertakings engage in a commitment among themselves for not deviating from the results of calculations,
tables and researches bearing the conditions for exemption determined by this
Communiqué or force the other undertakings in this matter, the exemption granted
shall not be valid.
Ensuring joint guarantee for particular kinds of risks
ARTICLE 8 - (1) The exemption granted by article 2 paragraph one sub- paragraph (c) is subject to the below-mentioned principles of application and market
share thresholds:
a) Coinsurance and coreinsurance groups set up for placing under guarantee
new risks or those risks which have not been previously covered in Turkey,
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b) Coinsurance or coreinsurance groups which are not included in sub-
paragraph (a) or whose period has exceeded three years despite being
included in this sub-paragraph shall benefit from exemption as long as this
Communiqué remains in force on condition that insurance products offered
by their participating undertakings within the scope of group arrangements
do not form more than 20 % of the relevant market.
(2) In the calculation of market share thresholds determined by paragraph one
sub-paragraph (b), the following rules shall be applied:
a) Market shares shall be calculated over commercial premium revenues. If
data of commercial premium revenues do not exist, in the calculation of
market share of the relevant undertaking, the other reliable market
information can be used, also including insurance guarantee provided and
risk value insured.
b) Market share shall be calculated over the data of the preceding calendar
year.
(3) In the event that while the market share mentioned in paragraph one sub-
paragraph (b) does not exceed 20 % market share threshold initially, this threshold is
exceeded later up to 22 %, exemption shall continue to be applied during two years
following the year the 20 % threshold has been exceeded the first time.
(4) In the event that while the market share mentioned in paragraph one sub-
paragraph (b) does not exceed 20 % market share threshold initially, this threshold is
exceeded later such that it is at a level above 22 %, exemption shall continue to be
applied during one year following the year the 22 % threshold has been exceeded
the first time.
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(5) It is not possible to use the exceptions granted by paragraphs three and
four by combining them such that it exceeds two years in total.
ARTICLE 9 - (1) Exemption granted to coinsurance and coreinsurance groups by article 2 paragraph one sub-paragraph (c) shall be valid in the event that the
following conditions are provided:
a) Every participating undertaking should have the right to leave the group
without being subject to any sanctions, subject to a notification period not
longer than one year.
b) None of the members of a group should be obliged to make insurance or
reinsurance over the group partially or wholly related to the risk category
concerned.
c) One should not lead to product or sales limitation, or market or customer
sharing by group arrangements.
d) No member of a group or no undertaking having a decisive influence on
the commercial policy of a group should also be a member of another
group operating in the same relevant market or should have a decisive
influence on the commercial policy of such a group.
e) Members of a coreinsurance group may not make an agreement aimed at
determining a commercial premium in respect of a direct insurance activity.
Security devices
ARTICLE 10 - (1) The exemption granted by article 2 paragraph one sub- paragraph (d) shall be valid in the event that the following conditions are provided:
a) Technical specifications and conformity assessment procedures should be
explicit and clear, technically reasonable, and proportionate to the
performance obtained by the security device concerned.
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b) Rules in respect of the assessment of assembly and maintenance
undertakings should be related to the technical capabilities of undertakings
and objective; they should be applied without making discrimination.
c) In insuring operations, insurance undertakings should be free to accept,
under the terms and conditions they wish, the other security devices or
installation and maintenance undertakings which do not conform to the
specifications and rules granted an exemption by this Communiqué. Those
specifications and rules granted an exemption by this Communiqué should
be prepared and distributed such that they contain an explicit expression
as regards this issue.
d) Specifications and rules should be available for the access of everyone
interested.
e) Each list related to security devices and assembly and maintenance
undertakings in harmony with specifications should also contain a
classification made by taking the level of performance as the basis.
f) It should be possible that conformity assessment is requested any time by
any applying candidate.
g) For conformity assessment, any cost not proportionate to the cost of
approval procedure should not be requested from the applicant.
h) Devices and assembly and maintenance undertakings meeting the
assessment criteria should be approved within six months from the date of
application without subjecting to any discriminative treatment, apart from
those situations where technical assessments justify a reasonable
additional period.
i) Conformity or approval should be documented by a letter.
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j) Grounds for the rejection of the provision of conformity certificate should be
provided in writing; a copy apiece of proceedings in respect of the results
of tests and controls performed should be enclosed with the letter.
k) Grounds for the rejection of a request for conformity assessment should be
provided in writing.
Revocation of exemption
ARTICLE 11 - (1) In case it is established that an agreement granted exemption by this Communiqué has effects incompatible with the conditions provided
in article 5 of the Act No. 4054, the Competition Bard may, based on article 13 of the
Act No. 4054, revoke the exemption granted to the agreement by this Communiqué.
In this situation, the Competition Board shall ask for the written and/or oral opinions
of the parties prior to taking its final decision.
Application of the Communiqué to concerted practices and decisions of associations of undertakings
ARTICLE 12 - (1) This Communiqué shall also be applicable to concerted practices between undertakings and decisions of associations of undertakings caught
by article 2 of the Act No. 4054.
Application of Article 6 of the Act
ARTICLE 13 - (1) Exemption granted pursuant to the provisions of this Communiqué shall not hinder the application of article 6 of the Act No. 4054.
TEMPORARY ARTICLE 1 - Agreements which have been concluded before the date of entry into force of this Communiqué and are still in force, and which bear
the conditions provided in this Communiqué shall also fall under this Communiqué.
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Entry Into Force
ARTICLE 14 - This Communiqué shall enter into force on the date it is published.
Execution
ARTICLE 15 - The provisions of this Communiqué shall be executed by the President of the Competition Authority.