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Aon / WTW: Reports suggest US DOJ may have reinsurance concerns

17th March 2021 - Author: Steve Evans

The pending acquisition of rival Willis Towers Watson (WTW) by its larger rival Aon continues to generate headlines, with recent reports in specialist antitrust publications suggesting concerns from the US government may have a reinsurance focus, as well as in other areas like benefits and large corporate clients.

aon-willis-towers-watson-merger-antitrustWhile concerns raised by competition authorities and regulators in other regions of the world including Europe have been well-documented, the US has been less so.

Typically, the US Antitrust Division of the Department of Justice looks for clear evidence of pricing power being uneven due to a merger or acquisition, before it will highlight any concerns.

But specialist antitrust and M&A publisher CTFN has said that it believes the Antitrust Division remains in a holding pattern, waiting on direction from those under the new Biden leadership.

That suggests the antitrust decision in the US on the Aon and Willis Towers Watson (WTW) merger has yet to be made and CTFN highlights a number of potential avenues of concern, one of which is reinsurance.

As we explained in our last article on the merger, our sources are growing increasingly confident a sale of reinsurance broker Willis Re will be part of any package of divestment remedies that are needed in order to get the merger through.

The Antitrust Division is still awaiting an appointee as assistant attorney general for antitrust from President Biden and once that happens it seems the focus on this merger deal has the potential to intensify.

CFTN reports that staff at the Antitrust Division are likely to continue pursuing a number of avenues, of which reinsurance is said to be one, alongside health benefit related business and also large corporate risk insurance.

An initial recommendation related to the Aon and Willis Towers Watson (WTW) merger had reportedly been made, which while having a focus on reinsurance and health benefits, also raised a number of other areas, CFTN’s Diane Alter had reported.

Alter also reported that Aon has not yet entered any negotiations with the US Department of Justice, although this may need to wait until the new Antitrust Division leadership is installed.

The lack of leadership at the AD presents a challenge to Aon’s target of getting the WLTW acquisition completed by the middle of this year, as it seems it has held up the delivery of any formal statement of concerns.

It’s not unusual for this Division of the DOJ to wait until well into April for its leadership to be approved under a new Presidential administration.

The fact reinsurance is raised again as an area of focus for an antitrust authority will perhaps heighten the focus on potential sale of Willis Re.

Alongside that, the divestiture rumour-mill continues to revolve around facultative operations, large corporate brokerage, the health and benefits unit and also regional verticals, we understand.

Pension related consultancy has also been raised to us by sources in the last week, as some competition authorities are said to also have an issue with the level of concentration seen across the world’s largest pensions and the service offerings of Aon, WLTW and Mercer, so another case of three dropping to just two.

It seems that right now, rather than the focus concentrating on one or two options for remedies and divestments, it continues to be quite broad.

However, reinsurance remains an area of specific contention and as a result should stay in focus until we hear something more concrete, in terms of specific concerns regarding the merger, from authorities.

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