The Australian Competition & Consumer Commission (ACCC) has taken aim at the merger of financial services giants Aon and Willis Towers Watson (WTW).
The deal was announced in March 2020, with Aon acquiring WTW for $30bn (£21.5bn, €24.7bn).
The probe started in October 2020, but now the Australian competition watchdog has expressed concerns on the impact the merger can have on the country’s supply of services.
The announcement from the ACCC comes weeks after the European Commission stopped the clock on its own review of the deal.
European stumbling block
On 21 Dec 2020, the Commission confirmed it had opened an in-depth investigation to assess the merger.
Executive vice president Magrethe Vestager, responsible for competition policy, said at the time: “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 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.”
Aon described the move as a “common next step in the review process for a transaction of this size and complexity under EU merger regulations”.
The company added that it “remains on track to close the combination in the first half of 2021”.
The investigation was expected to complete by 10 May, but the Commission suspended the deadline on 8 February.
Industry publication Insurance Journal quoted a Commission spokesperson as saying: “This procudure in merger investigations in activated if the parties fail to provide, in a timely fashion, an important piece of information that the Commission has requested from them.
“To comply with merger deadlines, parties must supply the necessary information for the investigation in a timely fashion. Failure to do so will lead the Commission to stop the clock.
“Once the missing information is supplied by the parties, the clock is re-started and the deadlind for the Commission’s decision is then adjusted accordingly.”
Competitive constraint
Aon and WTW are the second and third largest providers of commercial risk, reinsurance, brokerage, employee benefits and advisory services in the world, including in Australia.
“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,” ACCC commissioner Stephen Ridgeway said.
The regulator’s fears echo those of the European Commission, that the completion of the deal could lead to price increases and/or reduced service levels for large, complex or high-value commercial insurance clients.
Consequently, this may also result in a limitation of insurance coverage and pricing that smaller brokers are able to obtain from their customers.
Lack of choice
Another area of concern is reinsurance, as it enables insurance providers to keep writing policies.
Ridgeway added: “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.”
Additionally, the merger would bring the current number of large providers of employee benefits broking and consultancy services from three to two, which could impact those clients that require global coordination of such services.
Ridgeway continued: “Reducing the number of brokers in these already concentrated markets, increases the potential for the remaining brokers to align their pricing and strategies.”
International Adviser contacted Willis Towers Watson and Aon, but both firms declined to comment.
The competition regulator is seeking further information on the M&A plans and expects feedback by 12 March 2021, with a final decision scheduled to be made by the end of May 2021.
The Aon-WTW merger is the latest M&A to receive scrutiny, following an ongoing inquiry in the UK into the fusion of financial services platforms FNZ and GBST, which has been under review for nearly a year, following the announcement of the merger in July 2019.
