FERMA has responded to the European Commission’s public consultation on the revision of the EU Public Procurement Directives (PPD). In its response, FERMA calls for the exclusion of insurance policies from the scope of the PPD, in line with existing exclusions for other financial instruments.
In an increasingly volatile risk environment, the need for robust and comprehensive insurance solutions to bolster the resilience of public-sector entities is critical. However, the current PPD requirements relating to public tenders for insurance are too burdensome for both public companies and insurers and lack the flexibility to secure coverage in an efficient and cost-effective manner.
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Inefficiencies within the PPD
PPD create major inefficiencies in the insurance purchasing process of public sector companies, mainly because of lengthy and burdensome procurement processes.
The existing EU rules for public tenders are not adapted to the purchase of insurance by public sector companies: FERMA’s position is that the PPD are too cumbersome, inflexible, and not suited to the volatile and cyclical nature of the insurance market, and moreover to the very nature of insurance products.
Because of the complex administrative burden, PPD discourage insurers from participating in public tenders, diminishing competition and exposing public sector entities to reduced insurance capacity, weaker coverage terms, and potentially higher premiums compared to those available to private sector businesses.
The process also lacks flexibility for today’s complex, multi-insurer insurance programmes.
PPD assume a single-winner model, which does not reflect market realities. Consequently, public-sector entities face weaker negotiating positions and increased risk of insufficient coverage.
Adapting the Public Procurement Directive
To address these inefficiencies and the lack of flexibility, FERMA advocates for revisions to the PPD and has called upon the European Commission to consider the following policy options:
- Excluding insurance policies from the scope of the PPD. This would align with the existing exclusions of loans and other financial products and would be compatible with the overall objectives of the PPD.
- Adapting the PPD to introduce lighter requirements for insurance contracts. FERMA has identified several areas of possible regulatory improvement, although it believes this option does not solve the issues concerning the purchase of insurance.
- Allowing ex post reporting on the purchase of insurance policies. This would provide a greater degree of transparency while giving public-sector companies the flexibility they require. However, this option would nonetheless represent an additional administrative burden compared to an exclusion.
Commenting on the proposed revisions, Laurent Nihoul, CEO of FERMA, said: “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. Like other financial services already excluded from the Public Procurement Directives, insurance operates in fast-moving markets where prices and conditions change rapidly. Excluding insurance from the scope of the Directives would therefore be a logical and consistent step, helping ensure public sector access to sufficient and affordable insurance in the interest of resilience and citizens alike.”