The first meeting of the European Commission’s Expert Group on European Insurance Contract Law took place in April. The group consists of eight representatives from the insurance sector, four from business and consumer organisations and four from the legal professions and academics.

This initiative is a consequence of the proposal for a regulation on a Common European Sales Law (CESL), which would consist of an optional regime for cross-border trade transactions. The proposed text is now at the European Parliament, awaiting first reading. The Legal Affairs and Consumer Protection Committees are co-responsible. The draft report was released early March. (availablehere).

To fully understand the rationale behind this new expert group, it’s important to note that the proposal for a regulation on a Common European Sales Law explicitly excludes financial services, insurance being one of them. In January, the Commission decided to consider whether there should be an insurance edition of the law, and appointed the specific expert group to work on the differences across the European Union in insurance contract laws.

Cross-border obstacles

The mission of the experts is to explore whether there are obstacles to cross-border insurance provision arising from contract law and, if so, in what classes of insurance. They are holding monthly meetings and are expected to release their report with conclusions by the end of 2013.

The experts will analyse if differences in contract laws throughout Europe are affecting the cross-border trade in insurance products. From a risk manager’s perspective, the most important class of insurance likely to be considered is liability insurance, including professional, product and construction. Term life insurance and 3rd pillar pensions, travel and motor insurance are also expected to come under scrutiny.

This review is expected to cover pre-contractual obligations, contract formation, claims settlement, coverage triggers (i.e. claims-made versus occurrence based) and the impact of mandatory insurances.

Then depending on the experts’ conclusions, the Commission will judge if further action is necessary. At this early stage, it is impossible to predict if the views of the expert group will lead to a CESL equivalent for insurance law in Europe.

Viviane Reding Vice-President of the European Commission and EU’s Justice Commissioner stated: “Differences in contract law may hinder cross-border trade for both small- and medium-sized companies and consumers buying across borders as well as for some insurance companies.”

From the opposite perspective, Insurance Europe, the European federation for the insurance industry and a member of the expert group, argued that contract law only has a minor impact on cross-border trade in insurance. It pointed out that there are
other obstacles with a greater impact, such as cultural sensitivities and expectations, language or tax laws.

The second meeting scheduled on 15-16 May was expected to discuss the differences in national insurance contract laws arising from, for example, differences in the information
requirements placed on the insurer, duties of disclosure for the policyholder and contract formation/termination.

FERMA will closely monitor the evolution of the discussions within the expert group until the final report.

More details here.

In a nutshell
Common European Sales Law
Expert Group on European Insurance Contract Law
Due to report: end of 2013