Anti-Trust? European Competition Law and Mutual Environmental Insurance

Paul Bennett

Economic Geography, 2000, vol. 76, issue 1, 50-67

Abstract: In this paper I argue that competition law risks undermining institutional incentives toward higher corporate environmental performance. Firms are increasingly expected to influence the environmental standards of companies they invest in, lend to, or insure. This may be jeopardized if they are competing for those businesses, particularly in markets with information asymmetries. I examine the environmental implications of market competition, competition between regulators, and the particular case of insurance markets in which insurers fulfill both a market and a quasi-regulatory role. The core of the paper concerns an ongoing dispute between the European Commission and a group of mutual, non-profit-making marine insurers known as Protection and Indemnity (P–I) Clubs, into which shipowners pool their environmental and other third-party liabilities. The Clubs try to allocate costs fairly so that the “polluter pays,” providing an incentive to minimize risk. Fourteen of these Clubs, containing about 90 percent of the world’s merchant fleet, enter into a further scale of mutuality by collectively reinsuring one another. Mutuality at both scales, they claim, is dependent upon them not competing for members by setting unfairly low rates. The European Commission argues, in turn, that this agreement contravenes European competition law. Through an analysis of this case I demonstrate a potential conflict between competition law and “private” environmental regulation. I conclude by discussing the consequences of drawing disciplinary boundaries between policy areas and questioning the conceptualization of the economy which underpins competition law.

Date: 2000
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DOI: 10.1111/j.1944-8287.2000.tb00133.x

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