Reinsurance News

EC confirms “in-depth investigation” of Aon / WTW merger

21st December 2020 - Author: Luke Gallin

The European Commission (EC) has now confirmed that it has opened what it calls an “in-depth investigation” of insurance and reinsurance broker Aon’s proposed acquisition of rival Willis Towers Watson (WTW).

aon-and-willis-towers-watson-logosThe European Commission (EC) said it will carefully investigate the proposed acquisition and merger to establish whether the combination of Aon and Willis Towers Watson (WTW) could have any negative effects for competition, pricing and reduce choice in the commercial risk insurance and reinsurance broking marketplace.

Aon also confirmed that the European Commission (EC) has now initiated the Phase II review in connection with its combination with Willis Towers Watson (WTW).

Reports emerged last week that regulators in the European Union (EU) were set to undergo an in-depth review of the $30 billion deal in light of its complexity and potential ramifications for the market.

Confirming the Phase II review, Aon noted that this is a common next step in the review process for a deal of this size and complexity under EU Merger Regulation.

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The re/insurance broker has reiterated that the businesses of Aon and WTW are complimentary, operating across broad, very competitive areas of the economy. At the same time, Aon has said that it remains confident of a positive outcome without any divestitures.

The EC’s Executive Vice-President Margrethe Vestager, responsible for competition policy, commented, “Aon and Willis Towers Watson are two leading companies in the market for insurance and re-insurance brokerage. 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.”

The EC said that its initial investigation of the proposed Aon acquisition of WTW, “Identified a number of concerns in relation to the supply of commercial brokerage services especially to large multi-national customers, who depend on brokers with a high level of expertise and a global presence.”

The EC said it has particular concerns that the deal could reduce market competition in these specific areas:

  • Brokerage services to large multi-national customers in the risk classes Property & Casualty, Financial and Professional services, Credit and Political risk, Cyber and Marine;
  • Brokerage services to customers of all sizes for Space and Aerospace manufacturing risks as well as in a few additional risk classes in specific national markets.

“The Commission considers that Aon and Willis Towers Watson are two of the very few brokers that are able to provide these services on a multi-national scale,” it explained.

In addition, the EC is going to examine other markets where both companies are active, including reinsurance broking as the deal could “reduce choice for insurance companies placing their risks with reinsurance companies.”

The aim of the investigation is to establish whether the Aon and Willis Towers Watson deal could “significantly reduce effective competition.”

The EC has 90 working days to conclude its investigation, until May 10th 2021.

Analysts at KBW warned last week that any resulting divestitures could reduce the benefits of the combination.

Aon noted that it expected a thorough review of this combination and still expects the transaction to close in the first half of 2021.

Adding that it will continue to work closely with all the relevant regulators, including the EC, throughout the Phase II review process.

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