FERMA Seeks to Exempt Insurance from EU Public Procurement Directives

The Federation of European Risk Management Associations (FERMA) has called for excluding insurance policies from the scope of the European Union (EU) Public Procurement Directives (PDD).

FERMA argues that the current EU public procurement framework is poorly suited to the needs of public sector organizations purchasing insurance. According to FERMA, the directives create market inefficiencies, inequalities, and negative impacts for public buyers of insurance coverage.

EU public sector risk and insurance managers are required to comply with the PPD when they purchase insurance policies. FERMA said, however, that the federation believes that the existing rules are overly cumbersome and inflexible, and don't reflect the volatile and cyclical nature of the insurance market.

In a position paper, FERMA suggested that the complex administrative burden associated with the PPD also discourages insurers from participating in public sector business. That can reduce competition and leave public sector entities facing limited insurance capacity, weaker coverage terms, and potentially higher premiums than those available to private sector organizations, FERMA said.

As a result, FERMA asked the European Commission to exclude insurance policies from the scope of the PPD. Such an exclusion would be in line with the existing exemptions for loans and other financial products, FERMA said, while remaining consistent with the overall objectives of the directives.

"Access to sufficient and affordable insurance coverage is vital to the resilience of public sector entities and is in the best interests of citizens, who ultimately bear the losses sustained by the public sector when risks are not transferred to the insurance market," Laurent Nihoul, CEO of FERMA, said in a statement. "Rigid public procurement procedures are not well suited to insurance and discourage insurer participation, reducing capacity, weakening coverage, and potentially increasing premiums for public sector entities."

Excluding insurance from the directives would help ensure public-sector access to sufficient and affordable insurance, serving the interests of both resilience and citizens, Mr. Nihoul said.