The EC turns on Europe's insurance industry.

The European Commission launched an inquiry into anti-competitive practices in the financial services. The first phase of the investigation will examine cross-border payments, while later in the process the Commission will focus its investigation on business insurance.

The Commission argues that there are still important price differences in this sector that reveal some competition problems. To understand those price differences, it will look at all of the different chains of the market. The Commission's approach is not to focus on a specific area of the business insurance market, but to understand the complete supply chain. The investigation will impact both layers of the supply chain: upstream (reinsurance) and downstream (intermediaries).

The investigation comes just as the Commission is drafting Solvency II and other legislative initiatives aimed at breaking down internal market barriers and allowing market consolidation. Although, the Commission has been careful in stating that it is the initiative of Neelie Kroes, Competition Commissioner, it is clear that competition officials will be sharing information with those who are currently working on directives such as the Solvency II exercises.

Although it was Kroes who launched the project, Charlie McCreevy, Internal Market Commissioner, also supports the initiative. Although competition officials say that there are separate issues, it is clear that the findings of this investigation will influence the current legislative work under McCreevy.

The investigation will be based mainly on the feedback of national competition authorities. The Commission will then ask for information from specific companies or trade associations who will be required to help anti-trust officials in their inquiry. The report is expected to be published by the end of 2006.