CELEX: 31994M0433
Language: en
Date: 1994-05-27 00:00:00
Title: COMMISSION DECISION of 27.05.1994 declaring a concentration to be compatible with the common market (Case No IV/M.433 - ERC / NRG VICTORY) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)

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31994M0433

COMMISSION DECISION of 27.05.1994 declaring a concentration to be compatible with the common market (Case No IV/M.433 - ERC / NRG VICTORY) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)  

Official Journal C 165 , 17/06/1994 P. 0000

 COMMISSION DECISION of 27.05.1994 declaring a concentration to be compatible with the common market  (Case No IV/M.433 - ERC / NRG VICTORY) according to Council Regulation (EEC) No 4064/89  (Only the English text is authentic)  The paper version of the decision is available through the sales offices of the Office of Official Publications of  the European Communities. PUBLIC VERSION MERGER PROCEDURE ARTICLE 6(1)(b) DECISION Registered with advice of delivery To the notifying party Dear Sirs, Subject : <ind> Case No IV/M.433 - ERC/NRG VICTORY  <ind>  <ind> Notification of  20.04.1994 pursuant to Article 4 of Council Regulation No 4064/89   <ind> I. THE OPERATION  1. <ind> The above operation concerns the acquisition by  Employers Reassurance Limited (ERAL) of part of   NRG Victory Reinsurance Limited (Victory). ERAL will acquire Victory's UK based  life, health and disability  reinsurance business. ERAL will also  acquire certain assets and  employees of  NRG Victory Management  Service Limited  (Victory Services), which provides management and administrative services to Victory.  Besides, ERAL will acquire from Victory Service   NRG Victory Life & Health Services Limited (Victory Life &  Health) which conducts a life and health disability consultancy service in association with Victory's UK long- term reinsurance business. Under the sale and purchase agreement, the life reinsurance business of Victory's  Singapore branch is to be acquired  by Nordisk Reinsurance Company (Nordisk).  2. <ind> After examination of the notification the Commission has concluded that the proposed operation falls  within the scope of Council regulation No 4064/89 and does not rise serious doubts as to the compatibility with  the common market and the EEA agreement.   <ind> II. THE PARTIES  3. <ind> ERAL's principal activity is the transaction of long term-term reinsurance business including  reinsurance of life, annuity and permanent health business. ERAL is a wholly owned subsidiary of Employers Re  Corporation (UK) Limited, a company ultimately owned  by General Electric Company (GE). GE is a large and  diversified US-based company.   <ind> Nordisk - also ultimately owned by GE - is a Danish company active in the field of reinsurance.  4. <ind> Victory is active in all branches of reinsurance business; Both Victory and Victory Services are  subsidiaries of NRG Victory Holdings Limited, a holding company incorporated in England which is a wholly- owned subsidiary of NRG Holding. The ultimate parent company of NRG Holding is the Duch banking and  insurance conglomerate, Internationale-Nederlanden Groep NV.   <ind> III.  COMMUNITY / EEA DIMENSION  5. <ind> The concentration has a Community dimension. The GE group on its own has worldwide turnover in  excess of ECU 5,000 million; a community-wide turnover in excess of ECU 250 million; and GE does not  achieve more than two-thirds of its community-wide turnover in any Member State. The community-wide  turnover of the acquired business calculated in accordance with Art. 5.3(b) of the Merger Regulation also  exceeds ECU 250 million.   6. <ind> The operation is not an EEA "cooperation" case. The combined turnover of the undertakings concerned  in the territory of the EFTA States does not equal 25% or more of their total turnover in the EEA territory. Only  GE has turnover exceeding ECU 250 million in the territory of the EFTA States.     <ind> IV. COMPATIBILITY WITH THE COMMON MARKET AND WITH THE FUNCTIONING OF THE  EEA AGREEMENT  7. <ind> The business of reinsurance represents a specialist form of insurance. The purpose of reinsurance is to  spread the risks between insurers. The reinsurer accepts either the whole or part of the risk insured by another  insurer and thereby provides the primary insurer with the ability to increase the amount of insurance  underwritten, and to diversify risk over time and geographic area. Thus, the reinsurance product is traded  between industry specialists; it is written only with other insurance companies, no premium income is derived  from reinsurance sales to the public, and no channels for retail distribution are therefore required. Accordingly,  the reinsurance business must be considered distinct from direct insurance.  8. <ind> The sector involved is the life (including health and disability) reinsurance business. The acquisition  also includes Victory's business of reinsurance of  UK single premium guaranteed bonds (SPGB). SPGB's are of  three types, namely guaranteed income bonds, guaranteed growth bonds and guaranteed equity bonds. All three  types are investments of one to five year duration but differ regarding the way of repayment. Each type of bond  includes a small life insurance element (usually the repayment of 101% of the premium upon death during the  term of the bond.)   9. <ind> According to the notifying party, reinsurance in general (or more narrowly life including health and  disability) should be regarded as the relevant product market. As to the SPGB business, it is argued that  reinsurance of these products should be regarded as part of the overall reinsurance or life reinsurance market.   10. <ind> However, the question of product market definition can be left open here since even a very narrow  product market definition will not give rise to competition problems.   11. <ind> According to ERAL reinsurance is a worldwide market, and figures provided by the company makes it  probable that reinsurance is an international business. In this context the parties emphasize, that since no  products are sold to the public but traded between industry specialists, the controls by national authorities over  the conduct of pure reinsurance tend to be much less extensive  than in direct insurance.  12. <ind> As to the SPGB's the market for these products are UK based because they are driven by the UK tax  régime.  However the market for reinsurance of these products appears to be a wider one, according to the  parties; many non-UK based reinsurers as well as UK-licensed pure reinsurers are currently active in this area,  including for example Cologne Re, Frankona and Gerling (each of Germany) and Woolwich Life (a UK-based  direct writer of life insurance).  13. <ind> In view of the above mentioned factors, the geographic scope of reinsurance must be considered as  international or even worldwide in scope.  14. <ind> According to the figures provided by the notifying party, the GE group's  share of  the worldwide  reinsurance business (both life and non-life) after the  acquisition will not exceed [less than 5%]. Considering  life reinsurance (life, health and disability) only, the share of the GE Group after the acquisition will not exceed  [less than 5%] on a worldwide basis. It is not likely that a further distinction of this reinsurance business into  separate markets for life, health and disability would give rise to any competition problems considering that the  markets are international or worldwide in scope.   15. <ind> The SPGB premiums  written by GE and the acquired business are included in the above mentioned  figures. Considering the SPGB business separately GE's and Victory's combined shares in 1993 do not exceed  [less than 15%]. The parties shares have fluctuated over the past three years and have declined because  guaranteed income and growth bonds have become less attractive in the last years as UK interest rates have  declined.  Moreover, according to the parties, there is a significant likelihood that the SPGB-business will cease  because of changes to the UK tax system.   16. <ind> There are a large number of financially strong competitors (both pure reinsures and direct insurers) in  the global reinsurance market, of which both Munich Re and Swiss Re write significantly larger volumes of  reinsurance than the GE group. Furthermore, the customers of reinsurance are generally specialists from large  insurance companies who are able to take care of their own interests.   17. <ind> In conclusion, in view of the above, the proposed concentration does not raise serious doubts as to its  compatibility with the common market.    <ind> V.  ANCILLARY RESTRAINT  18. <ind> NRG agrees on its behalf and on behalf of its present or future subsidiaries not to compete with the  acquired business or to solicit former customers of the vendor in connection with the acquired business for a  period of three years from completion.  As this provision is aimed to guarantee the transfer to the acquirer of the  full value of the assets transferred it shall be considered as directly related and necessary to the concentration.   <ind> For the above reasons, the Commission has decided not to oppose the notified operation and to declare it  compatible with the common market and with the functioning of the EEA agreement. This decision is adopted in  application of Article 6(1)(b) of Council Regulation No 4064/89.  For the Commission,