Oligopoly of P&I Insurance Market via Collective Dominance Sample Clauses

Oligopoly of P&I Insurance Market via Collective Dominance. Although the aforementioned comparative statistics relate to 2010, it maps out the whole picture of the P&I insurance market in the past three decades. No remarkable fluctuation in the market share has been recorded from the birth of the IG in 1981. This illustrates the fact that the IG Clubs cover the overwhelming majority of the world‟s P&I insurance market leaving very limited room for other fringe players outside of the IG to compete in terms of pricing and service. The latest example is that of the South of England Protection and Indemnity Association. An independent mutual club which mainly insured larger tonnage which the IG would not accept normally for reasons of age or class, it went into provisional liquidation and ceased trading in October 2011.22 The ECJ confirmed in the AKZO23 case that a market share of 50 per cent or more is normally a fair indication of dominance. More accurately, being a preliminary parameter, high market share is usually applied by the EU competition authority as the starting point for assessing market power and thereby identifying market type in respect to the competitive process. Here, the proxy of strong market power, the over-50 percent market share of the IG, just causes the possibility of anti-trust investigation, rather than initiating the proceedings directly. The following test is to scrutinize other competitive factors in the relevant market including the extent of comparative advantage to nearest rival24, market entry barrier, etc. In the case of the Pooling Agreement and the IGA, the fact that a huge gap exists between the IG and its contenders satisfies the test of Xxxxxxxx-La Roche25 very clearly. Much light should be shed on market entry barriers inseparable from the essence of P&I insurance. Barriers inherent in the nature of the market will include “economies of scale or 22 Xxxxx‟s List (2011) 23 Case C-62/86 [1991] ECR I-3359 24 Fist held in the judgment of Xxxxxxxx-Xx Xxxxx (para 42) Case 85/76 [1979] ECR 461 25 Ibid. 24 scope, and the risk of having to make large capital investments to enter the market that may turn out to be irrecoverable (referred as to as „sunk costs‟)”.26 The P&I insurance market is where prominent entry barriers exist in form of economies of scale. Extremely high level of P&I insurance covering catastrophic risks means that the law of large numbers could only work on a large number of risk units. Otherwise, an insufficient spread of risk underwritten below the minimum scale could...