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Market Scene : Europe's Insurance Barriers May Soon Be Tumbling Down : But most American firms seem reluctant to look to the Continent where the European Community is pressing ahead with a sweeping deregulation of the lucrative market.


BRUSSELS — Metropolitan Life did not become America's biggest life insurance company by passing up chances to sell its products.

So when it found a modern, industrialized country in which the average citizen carries barely one-fourth as much life insurance as the average American, it acted. The country was Spain, where the Met in 1987 established a joint insurance venture with Banco Santander. And already, enough Spaniards have decided that it pays to get Met that the U.S. company has burst into the top 10 life insurers in the country.

Many more such chances are waiting elsewhere in Western Europe. "We're bullish on Europe," said Metropolitan Life Executive Vice President William Poortvliet.

What is remarkable is that so few other American insurance companies can say the same thing.

The 12 nations of the European Community have embarked on a sweeping deregulation of their insurance markets, which are now encrusted with national laws and traditions that protect home-grown insurance companies from foreign competition--often at the expense of consumers.

Gone, for example, will be the German government's monopoly in fire insurance. Belgium will no longer be able to set the rates that insurance companies may charge and to insist that their income be invested in government bonds.

Currently, it is practically impossible for, say, French companies to sell insurance in Germany. But in two or three years, if all goes according to plan, there will be fewer legal hurdles between France and Germany than between California and Arizona.

And foreign insurers will have the same rights as Europeans. Insurers from the United States and other foreign countries will be able to sell throughout the gigantic EC market--the community's population is about one-third larger than America's--merely by qualifying for a license in any one of the 12 member countries.

Yet remarkably few U.S. insurers are angling for a piece of the European action. So dependent is the U.S. industry on the giant American insurance market that only 2% of its income comes from abroad.

"Most U.S. insurers have been seemingly oblivious to the opportunities presented by the enlarged market," said a recent report by the New York law firm of LeBoeuf, Lamb, Leiby & MacRae.

Henry G. Parker III, senior vice president of Chubb & Son Inc. and chairman of the International Insurance Council, shares the concern. "The current disinterest on the part of U.S. property-casualty insurers to study their opportunities in a $4-trillion economy will prove a strategic mistake," he said.

The significance reaches far beyond the insurance business. If this view is correct, it adds evidence to the argument that the persistent U.S. trade deficit is rooted as much in American business practices as in restrictive trade barriers imposed by foreign countries to keep Americans and others out of their markets.

Service industries such as insurance have long been the hope of those who see U.S. manufacturers losing their global competitive edge.

Consequently, in the current round of international trade talks, U.S. negotiators are pressing hard to open foreign markets to U.S. insurance, banking and other financial services. Surely, in this view, the American insurance giants, if given half a chance to operate in foreign markets, could help offset the trade deficit in manufacturing.

Maybe not. EC companies are forming cross-border mergers to position themselves better for the deregulated market. Traditionally strong insurance companies from Switzerland, which is not a member of the European Community, are beefing up their operations in the EC countries.

And the Japanese are coming too, although for now they are mostly content to insure the Japanese manufacturers whose plants are springing up all over Europe.

"But I think the day might be coming," said Guy Soussan, a lawyer in the Brussels office of LeBoeuf, Lamb, "when the Japanese insurers will extend their reach."

Peter Smith of Ernst & Whinney Management Consultants in London found that the Japanese "are set on a path of gradual and cautious expansion in Europe."

Regardless of who fills it, the European insurance market offers a huge opportunity. Europeans are insured to the extent of only $550 per person, according to LeBoeuf, Lamb, in contrast to $1,500 in the United States. When fire devastated a large section of the Portuguese capital of Lisbon in 1988, fewer than 10% of the houses were insured.

"There is an enormous unfilled market here," said Ulick Bourke, a partner in the Brussels office of the British law firm Clifford Chance. "Especially the Greek, Spanish and Portuguese markets are wide open."

Some American companies have been active in Europe for years. Unat, a subsidiary of the U.S. giant American International Group, sells property-casualty insurance to corporate customers in 17 European countries. Cigna Insurance Co. of Europe has 51 offices in 16 European countries.

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