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Australia’s competition regulator said it has concerns over Aon PLC’s planned acquisition of Willis Towers Watson PLC because it could drive higher prices and reduce service for large commercial buyers.
The Australian Competition & Consumer Commission said bringing the two brokerages together could “significantly lessen competition” in commercial risk, reinsurance and employee benefits broking globally, as well as in Australia.
The announcement comes just weeks after the European Commission paused its antitrust investigation into the $30 billion deal until it receives further information. New Zealand’s competition regulator recently closed submissions on its statement of concerns about the deal and could reach its decision by the end of this month.
The Australian regulator said reducing the number of large commercial brokers to just Aon/Willis Towers Watson and Marsh & McLennan Cos. Inc. risks removing “significant competitive constraints” and opens the door to higher prices and falling service for commercial clients.
“We are concerned that the combination of Aon and WTW will remove a significant competitive constraint from the markets for commercial risk broking to large customers or those with more complex and/or high-value insurance premiums, reinsurance broking, and employee benefits broking in Australia,” said Stephen Ridgeway, the ACCC commissioner. “Reducing the number of brokers in these already concentrated markets increases the potential for the remaining brokers to align their pricing and strategies,” he said.
The commission said it will take a closer look at whether some classes of business could be more affected by rate increases following any deal. It is focusing on financial and professional, cyber, marine and construction insurance.
The commission said is also concerned about the supply of reinsurance broking and advisory services should Aon’s acquisition of WTW go ahead.
“Reinsurance is vital for the Australian economy as it enables insurers to continue to write new insurance policies. The ACCC is concerned that the proposed merger will reduce insurers’ choice of reinsurance brokers in an already concentrated market. This could lead to price increases or reduced service levels for customers, including the ability to access sufficient reinsurance capacity,” Mr. Ridgeway said.
The ACCC has invited submissions to its statement of issues until 12 March. It does not expect to make a final decision on the proposed merger before 27 May.
Earlier this month, top executives at Aon and Willis Towers Watson said they expect the acquisition to be completed in the first half of 2021. During a results call, Willis Towers Watson CEO John Haley said regulatory approval was always going to be difficult for such a complex deal involving filings all over the world.
Commercial Risk Europe is a sister publication of Business Insurance. More stories from CRE here.