Australia’s competition watchdog has raised concerns about the proposed merger of insurance brokers Aon and Willis Towers Watson, which are two of the big three players in the market.
Australia’s competition watchdog has raised concerns about the proposed merger of insurance brokers Aon and Willis Towers Watson, which are two of the big three players in the market.
The Australian Competition and Consumer Commission said today the proposed merger could significantly lessen competition in the supply of commercial risk, reinsurance and employee benefits broking.
“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.
In an issues paper published today, the ACCC said its preliminary view was that Aon, WTW and Marsh were the only brokers able to meet the requirements of large commercial insurance customers.
The ACCC said smaller international brokers such as Arthur J. Gallagher and Lockton, and the domestic broker networks of AUB and Steadfast, were competitive in respect of small and medium sized enterprises (SME) but were not able to meet the requirements of large customers.
The ACCC made a similar assessment of the market for employee benefits broking and consultancy.
It also concluded that Aon, WTW and Marsh (via its Guy Carpenter division) were the only reinsurance brokers with the expertise, data, analytical, and modelling capabilities and global reach to meet the requirements of insurers in Australia.
“Other reinsurance brokers (either in Australia or overseas) were not viewed as adequate alternatives,” it said.
The proposed merger comes two years after Marsh boosted its global market share by acquiring Jardine Lloyd Thompson.
That merger made Marsh the largest player in the WA market, with 280 local staff and 160 brokers, according to Business News’ Data & Insights.
Gallagher is the number two player in WA, courtesy of its 2015 acquisition of local firm Strathearn.
Independent Perth firm EBM is number three in the WA market, followed by WTW and Aon.
The proposed merger of Aon and WTW follows the launch of several boutique practices in Perth over the past two years, led by people who had been with major firms.
These include Fenchurch, which was launched by directors Richard Scragg, John Carrigg and Stuart McLean.
All three recently left Willis Towers Watson, five years after Willis bought CKA Risk Solutions, which they also established.
Similarly, Unicorn Risk Solutions was launched last year by Eddy Pope, who also hailed from Willis and CKA.
These moves follow the 2019 launch of Penguin Risk Solutions, led by Jason Fuller, who previously held senior roles with Gallagher and Strathearn.
The proposed merger of Aon and WTW was announced in March last year.
It is being reviewed by competition authorities in other jurisdictions including the United States, Europe, Canada, and New Zealand.
Despite the regulatory scrutiny, the two companies announced a new leadership structure last month, to take effect upon completion of the transaction.
Globally, Aon has approximately 50,000 employees while WTW has more than 45,000 employees.
The ACCC is considering whether the effects of the proposed merger would be especially pronounced in certain commercial insurance risk classes or industry specialities such as financial and professional, cyber, marine insurance and insurance for construction projects.
It suggested the proposed merger may also increase the risk of coordinated effects in the markets where Aon and WTW compete.
“Reducing the number of brokers in these already concentrated markets, increases the potential for the remaining brokers to align their pricing and strategies,” Mr Ridgeway said.
