Autorità Garante della Concorrenza e del Mercato

Decision n. 3632 of February 21, 1996




COMMENT By Roberto Bonsignore

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The 'Consorzio Italiano Assicurazioni Aeronautiche' (CIAA) is an organization set up by insurers operating in the Italian market for air risk insurance. Its activity is insurance and reinsurance against damages to airplanes, ai r accidents and tort liability connected with flights. Over 90 insurance companies participate to the organization. CIAA provides its member companies with tariff schedules for determining premiums and other contractual conditions. In the case premiums cannot be determined by such schedules, CIAA provides the company with a specific evaluation of the risk to be insured. When a client contacts more than one member company to compare offers, CIAA gives the same evaluation to each company. Furthermore, when concluding a contract with a CIAA company, clients are granted significant discounts only if they purchase the rest of their air insurance policies from other CIAA companies. Lastly, under the pooling and reinsurance scheme by CIAA, risks are redistributed among all member companies. Each company transfers almost 100% of its risks to CIAA and receives back a percentage of risks from each of the other companies. Redistribution is based partly on fixed quotas and partly on the extent of risks each company has.

CIAA's surplus is also distributed among member companies with a similar system. As to market definition, the Authority acknowledged that usually each risk category represents a separate product market, since policies covering different risks are not substitutable (see Italian Antitrust Authority, decision of October 26, 1994, Assicurazioni rischi agricoli). However, in the present case, it held that a number of different insurance products could be considered as parts of a single market, because of the supply and demand structure: insurance of airplanes, of transported goods and insurance against tort liability were included in the same market since they are offered by the same companies and are usually purchased in a single package. Casualty insurance was excluded from the market, since this product is offered by specialized companies which do not offer other flight-related policies. However, a distinction was made between major risks and minor risks. In the opinion of the Authority, because of the high fi nancial burden of insuring major risks (such as air carriers and satellite risks), companies need to reinsure such risks on the international market. Also, major risks are insured by important corporate clients (airlines or satellite owners), that can easily find insurers either in Italy or abroad. Consequently this market should be considered worldwide. On the other side, insurers of minor risks (i.e. those borne by amatuer flyers) do not require big international reinsurers. Coverage for this kind of risks is offered basically only by domestic companies, reinsured or coinsured by other domestic insurers. As a consequence, the minor risks insurance market should be considered nationwide. In the latter market, CIAA companies hold a 93% market share. Such assessment was confirmed by empirical data: out of a sample of 50% of small airplanes registered in Italy after 1993, 100% at the time of the decision were insured by CIAA companies.


The Authority decided it had jurisdiction over the case, notwithstand ing CIAA's objection that jurisdiction belonged to the UE Commission. In fact, the Commission, prompted by CIAA's application for a negative clearance, had requested information from CIAA. Art. 1, para. 3 of the Italian Antitrust Statute (Act n. 287/90) provides that when the Commission has already begun its procedure, the Authority shall stay its investigation on the same facts, except for the domestic aspects of the case. A procedure is deemed to be intiated only when the action taken by the Commission is to end in a definitive decision of either negative clearance, prohibition or exemption (see ECJ, decision of February 6, 1973, Brasserie de Haecht, case 49/72). In the present case, the Commission requested information from CIAA precisely to decide whether it is appropriate to begin a formal procedure. Consequently, jurisdiction belongs to the Italian Authority (see TAR Lazio, decision of November 2, 1993, n. 1549). Secondly, the Authority did not consider the exemption of EC Regulation n. 3932/92 applicab le to the case. In fact, such exemption operates only for entities which do not hold more than 10% or 15% of the relevant market, while CIAA's market share is over 90%. Furthermore, the Authority held that CIAA constitutes an agreement among competitors, as identified by art. 2 of the Italian Antitrust Statute. With its 93% market share, CIAA suppresses almost totally competition in the market for insurance of minor flight-connected risks. CIAA companies are not free to determine premiums and other contractual conditions. Tariff schedules represent an instrument of coordination, while CIAA's evaluation of risks not provided for in the tariff schedules ensures that member companies do not compete on premiums. As a consequence, CIAA companies were held in violation of art. 2, para. 2.A of the Antitrust Statute for fixing prices and agreeing on other contractual conditions. Lastly, in the opinion of the Autority, the mechanism for redistribution of risks and income through the pooling and reinsurance scheme, as to the part based on fixed quotas, results in a stabilization of market shares held by CIAA companies. Therefore, such mechanism constitutes a market sharing agreement prohibited by art. 2, para. 2.C of the Antitrust Statute. The Authority did not condemn the companies to payment of any fines, but ordered them to present a report within four months of the decision illustrating what measures have been taken to eliminate the violations.


By Roberto Bonsignore

The present decision represents another step in the difficult path towards full application of antitrust principles to the insurance market. Particularly, reinsurance agreements require that the Authority strike a delicate balance between needs of the insurance activity on one side and rules against cooperation among competitors on the other. CIAA was perhaps an "easy case" as it involved a clear example of price fixing and market sharing agreements. However, finding effective remedies might be more difficult, since the Authority itself acknolwedged that a pooling or r einsurance organization cannot avoid influencing first insurers to some extent. It should also be noted that the Authority based its market definition on existing market conditions: in assessing the dimension of the market for minor risks insurance, it considered only firms presently offering insurance in such market. However, insurance products being highly substitutable from the supply side, a few words might have been spent on the reason why, for instance, companies in the major risks insurance market were not considered as a competitive threat to CIAA nor included in the same market as potential competitors. As a result of this approach, the assessment of CIAA's market power would have been quite different. Furthermore, discounts granted by CIAA companies to clients who purchased the rest of their air insurance policies from other CIAA companies might have been a good opportunity to apply (and test) the controversial concept of collective dominant position, still debated in Community law.