Insurance buyers stand to benefit from greater choice as regulators lose appetite for monopolistic tie-ups - Brokerslink
The decision by Aon and WTW to terminate their $30 billion merger and end litigation with the US Department of Justice (DOJ) can be considered a triumph for insurance buyers.
The mega deal was called off following a period of significant consolidation within the intermediary space following an “impasse” with the US Department of Justice, according to Aon CEO Greg Case.
The defunct merger has plunged the future of Willis Re into uncertainty during the midst of its sale to rival AJ Gallagher.
But the result, which will see the top three global brokers - Aon, Marsh and WTW - continuing to compete as three separate entities, is “a victory for competition and for business” according to José Manuel Fonseca, chairman of Brokerslink.
Commenting on the news of the terminated merger, he said: “The change in the US administration has probably driven a major shift in the economic mindset and with it the actions of regulators. The move away from a monopolistic tolerant approach to the creating of greater market competition has inevitably had a role to play in the termination of the deal.”
“Creating value from M&A needs to look beyond pure shareholder benefits. It must be the trigger for innovation, liberating talent, new ideas and products offering alternative solutions to the traditional markets.”
“Risk managers had expressed concern about the value and potential impact that the merger would have created in terms of choice. Whether this changes now that the deal is not proceeding will be closely watched by the profession.”
Analysts at KBW commented that it now sees “more go-it-alone headwinds at WTW than at Aon” due to perceived CEO uncertainty.
It also noted that a significant amount of talent has been lost from both firms in the run up to the now abandoned merger, benefiting other broking houses in the process. These are all factors that may ultimately benefit buyers of commercial insurance, thinks Fonseca.
“We are in a dynamic global broking landscape that has evolved, in part, because of the proposed merger,” he continued. ”We have seen new players, brokers investing in expanding their geographic footprint and the movement of talent between competitors.”
”Greater competition and market disruption has no doubt created opportunities and Brokerslink has seen an expansion of its network and recognition of the importance of a truly independent global broking alternative.”