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Risk managers responded cautiously to the news of the planned nearly $30 billion merger between Aon PLC and Willis Towers Watson PLC, pointing out it raises concerns about the reduced competition among brokers.
Aon on Monday announced the nearly all-stock deal, which overtakes market leader Marsh & McLennan Cos. Inc.
Gloria Brosius, director of risk management and insurance for Pinnacle Agriculture Distributions Inc. in Loveland, Colorado, and immediate past president of the Risk & Insurance Management Society Inc., said, “Certainly, the combined organizations are going to be a very powerful force in the brokerage world and in the insurance world,” but it is “going to reduce the choices that risk managers and their organizations have.
“I think that competition among brokers can help in creating innovations and better solutions for the stakeholders, so I’m hopeful these combined organizations continue to be innovative and have good solutions for both the risk managers and their organizations.”
She added, however, she would have been just as happy if the merger had not been announced. “This requires risk managers to do their own due diligence and make sure they’re still getting the best solutions for them and their organizations,” she said.
“It’s just one less broker in the marketplace and probably reduces competition a little in the brokerage community,” said Michael Liebowitz, senior director of New York University’s Department of Insurance Programs in New York.
He added, “We’re going to have to see how they get integrated. Aon is a very strong broker. I don’t know what Willis brings to the table. The only thing I can think of is maybe their depth in the Middle East and Europe.”
He said, “I think it’s too early to opine on that. We’re going to have to see.”
David E. Arick, Memphis-based treasurer, global risk management for International Paper Co., who is on the RIMS board of directors, said, “Any time these sorts of transactions are announced, I think the immediate knee-jerk reaction is to have concerns about what does it mean for choice for buyers. You’re taking away a major option in the marketplace for us.”
But at the same time, if the best of these firms merge, you could end up with a situation where they “provide superior advice to customers, and that can be a good thing,” Mr. Arick said.
“We do business currently with Marsh, Aon and Willis. They’re all fantastic firms, so I think the prudent thing is to wait and see how this thing turns out,” he said.
Mr. Arick added, his only other thought would be is, given the antitrust concerns that arose with the Marsh-Jardine Lloyd Thompson deal, that “something like that could occur here. We’ll see how that plays out,” he said.
“My initial reaction as a former risk manager and as a risk management consultant is, I’m concerned about any event that on its face might appear to lessen competition among brokers,” said Peter Viscardi, former director, risk management and environmental affairs for conglomerate American Brands Inc., which has since been dissolved, who is now a Springfield, Tennessee-based senior adviser with Hanover Stone Partners LLC.
“I think my clients are best serviced by a competitive environment," he said, and both Aon and Willis “were good organizations, fully capable of servicing their clients, so I’d like to see what benefits this potential transaction would have for my clients."
Aon will likely look to eliminate redundancies, Mr. Viscardi said.
“We know that brokers don’t have the depth that they used to have. They’ve lost a lot of experienced, seasoned professionals and my concern would be that this sort of transaction ... may further reduce the pool of seasoned experts that are able to serve my clients,” he said
Shari Natovitz, former senior vice president and director of risk management for New York-based Silverstein Properties Inc., who is now a Washington-based independent consultant, said while she is not surprised by the merger, she is disappointed.
“I think they were two quality brokerage firms with different personalities” and because of the overlap that will be created with the merger “they’re going to lose too much talent.”
She said Willis has been a “much flatter organization” and has had “greater ease working across brokerage discipline lines, which can be very beneficial.”
On the other hand, Aon has “a vast array of quality risk management tools that are available to their clients that are not available from Willis.”
Frederick J. Fisher, president of El Segundo, California-based Fisher Consulting Group Inc., said, “This is a relationship-driven business,” and if risk managers maintain their relationships, “I don’t see any change” unless fees increase.
(Reuters) — Aon PLC said on Monday it would buy Willis Towers Watson PLC for nearly $30 billion in an all-stock deal that creates the world's largest insurance broker and adds scale in a battle with falling margins.