June 23, 2021 by Greg Meckbach
In trying to block Aon plc’s proposed acquisition of Willis Towers Watson plc, the United States competition regulator is off the mark in how it describes the world’s three-biggest property and casualty commercial insurance brokerages, suggests a senior executive with one of Canada’s largest brokerages.
The U.S. Department of Justice (DoJ) announced June 16 it is asking an American court to block Aon’s proposed acquisition of Willis Towers Watson. Both companies are based in Ireland, and they are ranked second and third worldwide by revenue by A.M. Best Company Inc. New York City-based Marsh & McLennan Companies Inc. has been the largest global P&C brokerage since it acquired Jardine Lloyd Thompson in 2018.
“The DoJ is incorrect if they feel that only the publicly-traded firms can offer specialty services like loss prevention, alternative risk financing, analytics, captive management, etc.,” said Brian Parsons, Toronto-based president of BFL Canada’s risk management division and vice chair [person] of Consulting Services Inc. “I can assure you that is not the case,” Parsons told Canadian Underwriter this week.
Before he joined BFL in early 2021, Parsons was CEO of Willis Towers Watson (Canadian region).
Shareholders of Aon and Willis approved their proposed deal Aug. 26, 2020.
The DoJ is arguing that Aon’s acquisition of Willis Towers Watson would violate an American law prohibiting mergers and acquisitions where the effect “may be substantially to lessen competition, or to tend to create a monopoly.” That allegation has not been proven in court.
The DoJ alleges that brokerages other than the Big 3 (Aon, Marsh and Willis) lack “extensive global networks of offices, sophisticated data and analytics, a breadth of knowledge across multiple types of employee benefits and risk management strategies, strong reputations, and depth of personnel with specialized expertise.”
Parsons thinks differently.
“I hold in high regard many of the talented and dedicated colleagues at Marsh, Aon, and Willis Towers Watson, but these organizations hold nothing proprietary to servicing large global clients. There is a robust group of options available to this segment of clients outside of these three,” Parsons told Canadian Underwriter.
In its recent filing with the U.S. District Court for the District of Columbia, the U.S. justice department said Marsh, Aon, and Willis Towers Watson “dominate competition for insurance broking for the largest companies in the United States, almost all of which are customers of at least one of them.”
Among large U.S. customers, Aon and Willis have a combined market share of at least 40% for broking property damage risk, third-party liability risk, and financial risk. Together, these areas account for the majority of most large customers’ commercial risk insurance expenditures, the DoJ said.
But Parsons reports that large corporate clients have a “robust group of options available” from brokerages other than Aon, Marsh and Willis.
“There are many large corporate clients that are not with one of these three organizations [Aon, Marsh or Willis], and [these brokerages] certainly do not have any special ability to access the global market or provide local service over firms like BFL,” said Parsons. “In fact, from what I have seen, firms like BFL are excellent and more flexible when it comes to global co-ordination and finding the right risk-trading partner around the world for a particular client situation.”
Parsons cited BFL’s partnership with Lockton Global LLP, which gives BFL access to service and insurers in 140 countries through 7,500 associates.
For its part, Gallagher, the No. 4 global commercial P&C brokerage, told Canadian Underwriter through a spokesperson that Gallagher is aware of the DoJ lawsuit and that the brokerage is “committed” to closing on its purchase of some of the Willis Towers Watson assets once Aon and Willis Towers Watson have received all required approvals.
Gallagher announced May 12 it agreed to buy certain assets of Willis Towers Watson for US$3.57 billion. That deal would include the following parts of Willis Towers Watson’s P&C brokerage business, among other assets:
Feature image via iStock.com/Atstock Productions