The regulator has expressed issues over competition in the Australian market, as the two global insurance and advisory giants look to join forces.
Aon and Willis Towers Watson (WTW) indicated they would be consolidating in March last year, with an implied combined equity value of around $121 billion.
Shareholders voted in favour of the pairing in August, blessing the union of two of the three largest providers of commercial risk, reinsurance and employee benefits broking and advisory services globally including in Australia.
Aon currently employs 50,000 employees and conducts operations in more than 120 countries, with 40 branches across Australia. WTW in comparison has five local branches, with 45,000 employees globally, reaching across more than 140 countries.
But the ACCC has now raised concerns that the merger will significantly lessen competition across the supply of the companies’ services in Australia, in a new statement of issues.
Its worry is that the amalgamation may lead to price increases or reduced service levels for large, complex or high-value commercial insurance customers and that it may hit smaller brokers, limiting the insurance coverage and pricing they are able to obtain for their customers.
The ACCC is considering whether the effects of the merger are especially pronounced in certain commercial insurance risk classes or industry specialities such as financial and professional, cyber, marine insurance and insurance for construction projects.
The regulator has also flagged a potential impact on the supply of reinsurance broking and advisory services, particularly for the supply of reinsurance, which covers all current and future policies written by the primary insurer for particular risks.
“Reinsurance is vital for the Australian economy as it enable insurers to continue to write new insurance policies,” ACCC commissioner Stephen Ridgeway commented.
“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.”
Further, the watchdog is concerned the merger will reduce the three major providers of employee benefits, broking and consultancy services in Australia to two, especially for customers who require global coordination of the services.
“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.
The ACCC has sought further information from the companies.
The merger is also being reviewed by competition authorities in other jurisdictions, including the US, Europe, Canada and New Zealand.
Sarah Simpkins is a journalist at Momentum Media, reporting primarily on banking, financial services and wealth.
Prior to joining the team in 2018, Sarah worked in trade media and produced stories for a current affairs program on community radio.
You can contact her on [email protected].