Marsh & McLennan Companies and Jardine Lloyd Thompson plc are global insurance brokers specialised in assisting clients in securing suitable cover for large and complex insurance risks in specialty sectors, such as aviation and large energy projects. The two companies are also active in the broking of reinsurance, and in the provision of retirement and employee benefits-related services. MMC and JLT are two of the most significant players in both of these markets in the European Economic Area (EEA) and globally.
The Commission's investigation
The Commission examined in particular the effects of the proposed transaction on competition in the markets where the activities of the companies overlap leading to affected markets:
(i) the supply of insurance broking services for specialty sectors, such as energy, aircraft operators, aerospace manufacturers and space, and
(ii) the provision of employee benefits-related services such as pensions administration and the fiduciary management of pension funds.
As regards (i) insurance broking services for specialty sectors, the Commission was concerned that the transaction, as originally notified, would have significantly reduced competition in the insurance brokerage. markets for the specialties of Aircraft Operators and Aerospace Manufacturing.
- Aircraft Operators insurance predominantly consists of the coverage against damage to the aircraft (“hull coverage”) and general liability to passengers and third parties, for example in case of accident. In this area, the merger would result in a significantly concentrated market, reducing the number of main competitors from three to two at EEA level and from four to three at global level.
- Aerospace Manufacturing insurance refers to the distribution of commercial insurance to cover risks associated with the manufacturing of aerospace products. Manufacturers of aerospace components purchase cover to insure against damage caused by, or liability arising out of, defects in their products. In this area, the merger would reinforce MMC's strong market position and would reduce the number of main competitors from four to three at both EEA and global levels.
The Commission found that barriers to entry are high on both markets, as customers require suppliers to have a proven track record, access to scarce expertise, and global reach in order to compete effectively. As a result, the Commission was concerned that the transaction as notified would have negatively affected competition and could have led to higher prices, less choice and lower quality of services in these markets.
The Commission also looked into insurance broking for other specialty markets but did not identify any competition concerns.
As regards the (ii) provision of employee benefits-related services, the Commission found that the proposed merger would raise no competition concerns because a sufficient number of alternative suppliers is present, and the companies are not close competitors.
The proposed remedies
To address the Commission's competition concerns, the companies offered to divest JLT's global Aerospace practice to a suitable buyer. This practice includes all of JLT's activities in Aircraft Operators, Aerospace Manufacturing and Space, as well as a separate, standalone Aviation division (Hayward Aviation).
These commitments fully address the Commission's concerns as they remove the entire overlap between the companies' activities in the supply of insurance broking services in the specialties of Aircraft Operators and Aerospace Manufacturing.
Therefore, the Commission concluded that the proposed transaction, as modified by the commitments, would no longer raise competition concerns in the EEA. The decision is conditional upon full compliance with the commitments.
Companies and products
Marsh & McLennan Companies, based in the US, is a global professional services firm offering clients advice and solutions in the areas of risk, strategy and people. MMC consists of four key lines of business operated by the following entities (i) Marsh, active in insurance broking and risk management solutions; (ii) Guy Carpenter, active in reinsurance and capital strategies; (iii) Mercer, active in health, wealth and career consulting; and (iv) Oliver Wyman, a strategy, economic and brand consultancy.
Jardine Lloyd Thompson plc, based in the UK, is a publicly listed company with two principal business areas: (i) Risk & Insurance, encompassing insurance and reinsurance broking; and (ii) Employee Benefits, comprising advice and services to companies, pension trustees and individuals, including retirement solutions; benefits consulting; wealth and investment management; and technology solutions.
Merger control rules
The transaction was notified to the Commission on 1 February 2019.
The Commission has the duty to assess mergers and acquisitions involving companies with a turnover above certain thresholds (see Article 1 of the Merger Regulation) and to prevent concentrations that would significantly impede effective competition in the EEA or any substantial part of it.
The vast majority of notified mergers do not pose competition problems and are cleared after a routine review. From the moment a transaction is notified, the Commission generally has a total of 25 working days to decide whether to grant approval (Phase I) or to start an in-depth investigation (Phase II).