Abstract
The Italian insurance market represents a peculiar and puzzling case within the European Single Market. Since the radical deregulation process in 1992, standard indicators have shown a low degree of market concentration. However, at the same time, Italian insurance costs still remain among the highest in Europe due to the existence of widespread collusive practices, which have been largely documented by both the Italian Antitrust Authority and empirical evidence. The main channel of anti-competitive behavior seems to be related to the exchange of information. To improve the understanding of its structure, our paper studies interlocking linkages among firms operating in the Italian insurance market. Interlock linkages are apparent when single directors sit on more than one company’s board. Thus, interlock linkages can be viewed as a systemic channel of information exchange and a potential source of collusive practices. We distinguish interlock linkages occurring within and between groups operating under a common ownership because companies operating in the insurance sector may be organized in multi-brand holdings. Therefore, we disentangle interlocking directorates as holding business strategies from systemic structures that might represent potential threats for the market competition.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
Notes
According to the Eurostat data, during the 1994–2004 decade, the price of insurance in Italy has increased at a rate that is four times greater than the European average.
Specifically, it is approximately double that of Germany, which shows a similar concentration ratio (see Europe Economics 2009: Section 6).
Turchetti and Daraio (2004) analyze entry-exit dynamics, concentration ratio, and the premiums to evaluate the impact of legislative events over the period 1982–2000. They conclude that deregulation has shaped market structure and industry performance. See also Porrini (2004), Coccorese (2010) and Falce (2013).
The overall amount of fines was 361.5 million euros.
It is worth noting that price policy is not the only possibility to operate in a cooperative manner; see Motta et al. 2006).
ISVAP data about holdings have been collected since 2014; therefore, we identify the insurance holdings integrating these data with information derived from additional sources (company webpages and balance sheets).
The network maps for disaggregated life and non-life sectors are available upon request. However, they are very similar to those illustrated by Fig. 1.
Transactions that increase the index by more than 200 points in highly concentrated markets are presumed likely to enhance market power under the Horizontal Merger Guidelines issued by the Department of Justice and the Federal Trade Commission.
References
Adams R, Hermalin BE, Weisbac MS (2010) The role of boards of directors in corporate governance: a conceptual framework and survey. J Econ Lit 48:58–107
AGCM (2008) La corporate governance di banche e compagnie di assicurazioni, Indagine conoscitiva, IC36, Autorità Garante della concorrenza e del mercato, Rome
AGCM (2010) Autorità garante della concorrenza e del mercato 2010. Relazione annual sull’attività svolta nel 2009. Autorità Garante della concorrenza e del mercato, Rome
Berle A, Means G (1932) The modern corporation and private property. Harcourt Brace & World, New York
Coccorese P (2010) Information exchange as a means of collusion: the case of the Italian car insurance market. JICT 10:55–70
Cummins JD, Weiss MA (2000) Analyzing firm performance in the insurance industry using frontier efficiency and productivity methods. In: Dionne G (ed) Handbook of insurance. Kluwer, Boston, pp 767–829
Dooley P (1969) The interlocking directorate. Am Econ Rev 59:314–323
Drago C, Millo F, Ricciuti R, Santella P (2011b) Corporate governance reforms, interlocking directorship networks and company value in Italy (1998–2007). CESIFO Working Paper No. 3322, CESIFO, Munich
Drago C, Manestra S, Santella P (2011b) Interlocking directorships and cross-sharfalceong Italian Blue Chips. Eur Bus Organ Law Rev 12:619–652
Europe Economics (2009) Retail insurance market study. MARKT/2008/18/H Final Report, Europe Economics, London
Fahlenbrach R, Low A, Stulz RM (2010) The dark side of outside directors: do they quit when they are most needed? NBER Working Papers No. 15917, NBER, Cambridge (MA)
Falce V (2013) Interlocking directorates: an Italian antitrust dilemma, forthcoming in Journal of Competition, Law & Economics
Hallock K (1997) Reciprocally interlocking boards of directors and executive compensation. J Financ Quant Anal 32:331–344
Haunschild PR, Beckman CM (1998) When do interlocks matter? Alternate sources of information and interlock influence. Adm Sci Q 43:815–844
Jacobs ME (2014) Combating anticompetitive interlocks: section 8 of the Clayton Act as a template for small and emerging economies. Fordham Int Law J 37:643–686
Jensen M, Meckling WH (1976) Theory of the firm: managerial behaviour, agency costs and ownership structure. J Financ Econ 3:305–360
Kramarz F, Thesmar D (2013) Networks in the boardroom. J Eur Econ Assoc 11:780–807
Larcker DF, Richardson SA, Seary A, Tuna I (2005) Director networks, executive compensation, and organizational performance. Stanford University, mimeo
Mizruchi M (1996) What do interlocks do? An analysis, critique, and assessment of research on interlocking directorates. Annu Rev Sociol 22:271–298
Motta M, Courty P, Fabra N, Fumagalli C (2006) Identical price categories in oligopolistic markets. Innocent behaviour or collusive practice?, Temi e Problemi vol. 11, Autorità Garante della Concorrenza e del Mercato, Romes
OECD (2009) Antitrust issues involving minority shareholding and interlocking directorates. Series Roundtables on Competition Policy, DAF/COMP(2008)30 , OECD, Paris
Porrini D (2004) Information exchange as collusive behaviour: evidence from an antitrust intervention in the Italian insurance market. Geneva Pap Risk Ins 29:219–233
Richardson RJ (1987) Directorship interlocks and corporate profitability. Adm Sci Q 32:367–386
Turchetti G, Daraio C (2004) How deregulation shapes market structure and industry efficiency: the case of the Italian motor insurance industry. Geneva Pap Risk Ins 29:202–218
Waller SW (2011) Corporate governance and competition policy. George Mason L Rev 18:833–858
Author information
Authors and Affiliations
Corresponding author
Additional information
We are grateful to the Journal Editor (Michael Pender), two anonymous referees, Nicola Acocella, Davide Carbonai, Domenico Delli Gatti, Patrick Legros, Gianluca Vagnani for their comments on previous versions.
Rights and permissions
About this article
Cite this article
Di Bartolomeo, G., Canofari, P. Interlocking Directorates and Concentration in the Italian Insurance Market. J Ind Compet Trade 15, 351–362 (2015). https://doi.org/10.1007/s10842-015-0199-3
Received:
Revised:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s10842-015-0199-3