EU INSURERS ARE SLOW TO EMBRACE NEW RULES FOR A SINGLE MARKET OFFICIALS REMAIN OPTIMISTIC

EU INSURERS ARE SLOW TO EMBRACE NEW RULES FOR A SINGLE MARKET OFFICIALS REMAIN OPTIMISTIC

A single insurance market in the European Union remains a distant target as cultural, tax and legal differences in the 15-nation bloc thwart the spread of business across borders.

In theory, nothing stands in the way of a seamless insurance market for the EU's 370 million consumers as EU governments have approved all the necessary directives.The single market was completed, on paper at least, in July 1994 when member states implemented the so-called framework directives. These marked the final stage in a program to liberalize the EU's $500 billion-a-year life and general insurance market, that began with the deregulation of the commercial sector in 1990.

LONG WAY TO GO

But there is a long way to go before the EU has an insurance market resembling that of the United States. "We now face a challenge in moving from the theory of the directives to the practice in the market," says Mario Monti, the EU commissioner responsible for the single market.

EU officials insist the single market will take off. "It is happening," said Patrick Pearson, a senior official in the insurance division of the commission's single market directorate. "We can tell by the number of insurers who ring us up with problems that they are working under the new rules."

It will take time for insurers, regulators and supervisors to get used to the new regime, he adds.

But there are clear signs that insurers are breaking into new markets. Foreign insurers are selling new services in Belgium, and Luxembourg- based insurers are doing a roaring business selling life policies to Germans and Belgians.

Brokers too are increasingly trying to place risks across borders, Mr. Pearson says.

PRICE GAP NARROWING

There are also signs that the big gap in prices for the same product among member states is beginning to narrow as foreign insurers move into protected, underinsured markets, particularly in the southern member states.

The cautious spread of a single insurance market has been flanked by a sharp increase in cross-border mergers and alliances by companies seeking to expand into national markets. Among the biggest deals were the 20 billion francs ($4 billion) purchase of Colonia of Germany by Union des Assurances de Paris (UAP) and Winterthur of Switzerland's 900 million marks ($625 million) acquisition of DBV Group of Germany.

The most recent deal also involved UAP, which paid UK527 million ($822 million) for full control of Britain's Sun Life Corp.

For some companies, the United States remains a much more attractive market than neighboring countries. Aegon NV, the second largest Dutch insurer, generates about 42 percent of its 22 billion guilders ($13.2 billion) annual income in the Netherlands, 30 percent in the United States and followed by Britain, Spain and Hungary where it acquired a state-owned company in 1992.

European insurers are looking further afield with the booming Asian and Pacific Rim the favored locations for growth. AXA Group, France's fourth biggest insurer, which acquired Equitable Life of the United States in 1991, recently paid $812 million for a 51 percent stake in National Mutual Life Association of Australia, Australia's second largest life insurer.

Allianz AG of Germany, Europe's biggest insurer, is also aiming to ''break big in Asia. We seek partnerships with local insurers, and we know how to act as a link to Western companies in the capital goods industry which wants to invest in these markets," said Allianz Chairman Henning Schulte- Noelle.

PLAYS DETECTIVE ROLE

While the industry itself is coming to grips with the single market, the commission has been forced to put pressure on member states to implement the directives. It has taken on the role of an insurance detective, asking insurance companies to report practices by member states that are blocking cross-border trade.

The main worry is that some countries will be tempted to exploit loopholes, which permits them to claim that national restrictions are for the ''general good."