Public tenders in the EU are governed by the EU Public Procurement Directives (PPD).

Comprised of three separate directives, the PPD aims to help businesses seeking access to public-sector contracts.

Applicable to contracts with starting values ranging from EUR143,000–443,000, depending on the type or function of the authority or service, most insurance contracts across public-sector entities fall within the scope of the PPD.

While a robust regulatory framework is essential to support the awarding of contracts, FERMA believes the PPD are ill-suited to the buying dynamics of the insurance market and act as a barrier to securing essential insurance coverage for public-sector entities.

In a complex risk landscape, the ability to purchase comprehensive, cost-effective coverage is crucial.

Insurance plays a key role in managing heightened exposure and bolstering resilience, especially given the critical functions public-sector entities perform. But the cumbersome and inflexible nature of the EU’s procurement process hinders the ability to secure the necessary capacity at an affordable price.

AT ODDS WITH THE INSURANCE MARKET

The insurance market is dynamic and cyclical, with complex products – particularly in the context of multilayered programmes – and frequent pricing adjustments. In contrast, the PPD lacks the flexibility to accommodate the complexities of these programmes and the insurance market itself, creating several challenges.

Under the directive, risk managers in the public sector must define a finalised product at the start of the process – a particularly challenging task.

“This burdensome process deters insurers from participating in public tenders, increasing the likelihood of higher premiums”

Given that insurer negotiations are critical to developing the most appropriate coverage, requiring a precise definition of needs in the public tender process is not practical. Additionally, the procurement process is lengthy, taking at least three months, and demands extensive documentation.

Insurers must provide numerous data points, and the requirement to award the contract to a single company is often at odds with the need for multiple insurers in large-scale programs. The challenges are further compounded when policy renewals trigger a new tender process.

Even the Time to change the withdrawal of a single insurer from a large programme can require the process to begin again. This burdensome process deters insurers from participating in public tenders, increasing the likelihood of higher premiums compared to the private sector, and leading to reduced capacity for public-sector companies.

A MORE FLEXIBLE APPROACH

In response to the recent European Commission public consultation, FERMA is therefore advocating for amendments to the PPD to allow for greater flexibility when public-sector entities purchase insurance.

FERMA urges the European Commission to consider the following policy options:

Adapting the PPD to introduce lighter requirements for insurance contracts.

This could include allowing public-sector entities to amend insurance policy specifications without initiating a new tender process; directly negotiate contract renewals with their current provider an unlimited number of times; or reducing the amount of information required from insurers in the European Single Procurement Document.

Excluding insurance policies from the scope of the PPD.

This would align insurance policies with existing exclusions for loans and other financial products and be consistent with the overall objectives of the PPD.

Allowing ex-post reporting on the purchase of insurance policies.

This would provide a greater degree of transparency while giving public-sector companies greater flexibility in negotiating with insurers. However, this option would nonetheless represent an additional administrative burden compared to a simple exclusion.

Access to adequate insurance coverage is essential for the resilience of public-sector entities and, by extension, the well-being of citizens.

FERMA believes it is crucial that the EU procurement process be adapted to ensure the e¡ icient transfer of risk to the private insurance market. The federation has responded to the European Commission consultation and will continue to engage with the EC moving forward