Aon-WTW merger faces scrutiny from EU Commission
Regulators in the U.S., could harbor similar competition concerns and will be watching the European Commission's rulings carefully.
An in-depth investigation has been opened to look at Aon’s proposed acquisition of Willis Tower Watson, the European Commission reported.
The commission stated its concerns are that the transaction would significantly reduce competition in markets for commercial risk brokerage services, reinsurance and provision of retirement as well as health and welfare services to commercial customers. Of particular concern is the impact on brokerage services to large multinational customers in property & casualty, financial and professional services, credit and political risks, cyber and marine.
The commission, which noted Aon and Willis are two of the few brokers able to provide these services on a multinational scale, also reported competition concerns for broker services to customers of all sizes in space and aerospace manufacturing risk and additional markets that are region-specific.
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“Aon and Willis Towers Watson are two leading companies in the market for insurance and reinsurance brokerage,” Margrethe Vestager, an executive vice president with the European Commission, said in a release. “They help companies with their risk management and with finding the right insurers for their needs. We have opened an in-depth investigation to assess carefully whether the transaction could lead to negative effects for competition, less choice and higher prices for European customers in the commercial risk brokerage market.”
As part of the in-depth review, the commission is further examining markets where both companies are active, reporting the main focus will be on “the provision of reinsurance brokerage services, which comprises the mediation of risks between insurance and reinsurance companies. The transaction would combine two of the three leading reinsurance brokers and thereby may reduce choice for insurance companies placing their risks with reinsurance companies; and the provision of consulting and administration services to companies regarding the retirement, health and welfare schemes offered to their employees.”
The final decision must be made in 90 days, according to the commission, which noted: “The opening of an in-depth inquiry does not prejudge the final result of the investigation.”
EU taking lead, others to follow
When it comes to regulatory agencies, the EU’s is likely the most intensive, according to Joseph Marinucci, senior director at S&P Global Rating. He noted regulators in the U.S., Canada and Australia could also harbor similar competition concerns, and would be watching the European Commission’s rulings carefully.
“Clearly, the EU has expressed interested in looking at this and examining the pressure points,” Marinucci said, adding: “They are likely to probe this in a more detailed way.”
He said if the deal closes, it would open up new markets for Aon while strengthening Willis’ operations.
“This is one way for Aon to meaningful scale-up in the middle-market segment, where it hasn’t had the type of presence that its main competitor has been able to develop through the years,” he previously told PropertyCasualty360.com.
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