CELEX: 31995M0601
Language: en
Date: 1995-06-30 00:00:00
Title: COMMISSION DECISION of 30/06/1995 declaring a concentration to be compatible with the common market (Case No IV/M.601 - Employers Reinsurance Corporation / Aachener Rückversicherungs Gesellschaft AG) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)

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31995M0601

COMMISSION DECISION of 30/06/1995 declaring a concentration to be compatible with the common market (Case No IV/M.601 - Employers Reinsurance Corporation / Aachener Rückversicherungs Gesellschaft AG) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)  

Official Journal C 272 , 18/10/1995 P. 0005

  COMMISSION DECISION of 30/06/1995 declaring a concentration  to be compatible with the common market (Case No IV/M.601 -  Employers Reins. Corp. / Aachener Rueck AG) 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  To the notifying parties  Dear Sirs,  Subject:<ind> Case No.IV/M.601EMPLOYERS REINSURANCE  CORPORATION / AACHENER RUECKVERSICHERUNGS  GESELLSCHAFT AG  <ind> <ind> Notification of 24 May 1995 pursuant to Council  Regulation (EC) No. 4064/89  1<ind> On 24 May 1995 Employers Reinsurance Corporation  (Employers Reinsurance) notified to the Commission its  intended acquisition of the nongroup reinsurance business of  Aachener RueckversicherungsGesellschaft AG (Aachener Rueck).  2<ind> After examination of the notification, the Commission  has concluded that the notified operation falls within the  scope of application of Council Regulation No 4064/89 and  does not raise serious doubts as to its compatibility with  the common market and with the functioning of the EEA  Agreement.  I<ind> THE PARTIES  3<ind> Employers Reinsurance is incorporated in the United  States of America. Its ultimate parent is the General  Electric Company, the head of a large and diversified  industrial group. Its principal activity is the transaction  of reinsurance business. Other companies in the General  Electric group also supply reinsurance.  4<ind> Aachener Rueck, incorporated in Germany, is ultimately  controlled by Aachener und Muenchener Beteiligungs AG. Its  principal activity is the transaction of reinsurance  business.  II<ind> THE OPERATION  5<ind> Aachener Rueck, which conducts both intragroup and  nongroup reinsurance activities, will transfer to  Laurensberg Beteiligungs AG (Laurensberg), one of its  subsidiaries, its nongroup reinsurance activities and the  shares in certain other subsidiary and associated companies  engaged in nongroup reinsurance business. The transfer will  result in the acquisition by Laurensberg of minimal  intragroup reinsurance as well. Laurensberg will sell to ERC  three of its subsidiaries  Aachen Reinsurance Intermediaries  Inc Atlanta (USA), Aachen Holdings Inc Atlanta (USA) and  Applewood plc (United Kingdom). None of these companies  supplies reinsurance. Aachener Rueck will sell Laurensberg to  ERC. Laurensberg will acquire the name Aachener Rueck.  6<ind> The operation accordingly constitutes a concentration  within the meaning of article 3(1)b of the Regulation.  III<ind> CONCENTRATION OF COMMUNITY DIMENSION  7<ind> General Electric Company has a Communitywide turnover  [Turnover in paragraph 7 is calculated according to Article  5(3)(b) of the Regulation.] in excess of [Deleted; business  secret.]. The business which it will acquire from Aachener  Rueck has a Communitywide turnover of [Deleted; business  secret.]. Accordingly their combined aggregate worldwide  turnover exceeds ECU 5000m and each of them has a  Communitywide turnover in excess of ECU 250m But they do not  achieve more than twothirds of their aggregate Communitywide  turnover within one and the same Member State.  8<ind> The operation therefore has a Community dimension  within the meaning of Article 1(2) of the Regulation.  IV<ind> COMPATIBILITY WITH THE COMMON MARKET  a)<tab> Introduction  9<ind> Simultaneously with its notification of this  operation Employers Reinsurance notified to the Commission  its proposed acquisition of Frankona Rueckversicherungs AG  (Frankona Rueck), another reinsurer, from the Gerling  insurance group [IV/M.600  Employers Reinsurance  Corporation/Frankona Rueckversicherungs AG]. The assessment  made in this decision takes into account the effect of that  proposed acquisition.  b)<tab> Relevant product market  10<ind> Reinsurance is a particular form of insurance. Its  purpose is to spread risks between insurers. The reinsurer  accepts either the whole or part of the direct risk insured  by another insurer and thereby provides the primary insurer  with the ability to increase the amount of insurance which  he underwrites and to diversify his risk over time and  geographic area. Reinsurance 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 required. For these reasons the Commission has concluded  in earlier decisions [IV/M.433  ERC/NRG Victory; IV/M.491  General Re/Koelnische Re] that it is necessary to distinguish  between reinsurance and direct insurance.  11<ind> Reinsurance can be divided into two sectors  life  and nonlife. The nonlife sector can be further subdivided  into the following principal categories  liability, motor,  accident/sickness, fire, marine, aviation and other.  Although some reinsurers specialise in particular types of  cover, there is no reason apart from expertise why a  reinsurer should not readily enter the market in any sector;  there is thus a high level of supplyside substitutability.  Since even on the narrowest market definition no competition  difficulties arise the question whether the reinsurance  market should be subdivided can be left open.  c)<tab> Relevant geographic market  12<ind> Since reinsurance products are traded between  industry specialists and not sold to the general public,  controls by national authorities over the conduct of pure  reinsurance tend to be much less extensive than those over  direct insurance. This, together with the fact that  reinsurance business can be conducted without the necessity  of maintaining a large distribution force, tends to indicate  that the market has a global character. The existence of a  world market is also evidenced by the presence of  international broking firms which mediate reinsurance on a  worldwide scale. Within the European Union freedom of  establishment to provide reinsurance services was enacted by  Directive EEC 225/64. The Commission has in earlier  decisions [IV/M.433  ERC/NRG Victory; IV/M.491 General  Re/Koelnische Re] considered the reinsurance market to be  international or global.  d)<tab> Competitive assessment  13<ind> In 1994 the three largest reinsurers in the world  were Munich Re ([Deleted; business secret: 510 per cent.] of  the market), Swiss Re ([Deleted; business secret: 510%.])  and General Re ([ 05%.] [Including Koelnische Rueck, which  General Re acquired in 1994 (case IV/M.491  General  Re/Koelnische Rueck).]). General Electric occupied the fourth  position ([05%]), Frankona Rueck the seventh position ([05%])  and the business acquired by Employers Reinsurance from  Aachener Rueck the eighteenth position (([05%]). The effect  of this operation and of the acquisition by Employers  Reinsurance of Aachener Rueck is that General Electric  displaces General Re from the third position ([05%]). The  remainder of the market is highly fragmented, only five  suppliers having a share above [05%]. As this indicates,  barriers to entry are low.  14<ind> In 1994 the world market shares of the parties to  the two operations for life (including heath and disability)  reinsurance were  General Electric [05%], Frankona Rueck  [05%] and the business acquired by Employers Reinsurance  from Aachener Rueck [05%]. Their shares for nonlife  reinsurance were  General Electric [05%], Frankona Rueck  [05%] and the business acquired by Employers Reinsurance  from Aachener Rueck [05%]. In none of the categories  liability, motor, accident/sickness, fire and other did  their combined market shares exceed [Deleted; business  secret: 1015 per cent.]. Frankona has established a strong  reputation as a supplier of aviation [insurance]  [Correction: read reinsurance]. However in both marine and  aviation a comparison of the premiums received by the  parties to the two operations in 1994 indicates that the  increase in market shares resulting from the operation is  not significant.  15<ind> Accordingly the operation, even when it is  considered together with the acquisition by Employers  Reinsurance of Frankona Rueck, does not create or enhance a  dominant position.  V<ind> ANCILLARY RESTRAINTS  16<ind> Employers Reinsurance has requested that certain  restrictions be considered as ancillary to the  concentration.  <ind> <ind> Aachener Rueck agrees that pending completion it  will conduct the business which it transfers to Employers  Reinsurance only in the normal and ordinary course of  business.  <ind> <ind> Aachener Rueck agrees not to use certain names  containing the word "Aachen" or "Aachener", similar names  and trade marks or designs currently used by the business  transferred.  <ind> <ind> Aachener Rueck agrees that it will not for 10  years disclose or use business secrets relating exclusively  to the business transferred.  <ind> <ind> Subject to standard exceptions as to investment  Aachener Rueck and Aachener und Muenchener Beteiligungs agree  for [Deleted; business secret: 05 years] not to compete with  the business transferred.  <ind> <ind> Laurensberg grants to Aachener Rueck intellectual  property licences necessary for Aachener Rueck to conduct the  intragroup reinsurance business which it retains.  <ind> <ind> Aachener Rueck agrees to offer exclusively to  Laurensberg at original conditions between 1996 and 2002  retrocession contracts in respect of intragroup business  with Aachener und Muenchener Beteiligungs. These contracts  form part of the reinsurance business which Employers  Reinsurance acquire under the operation.  17<ind> In so far as these provisions amount to restrictions  they are necessary to guarantee the transfer to Employers  Reinsurance of the full value of the assets which they  purchase or the preservation for Aachener Rueck of the full  value of the assets which it retains or are otherwise  directly related to and necessary for the successful  implementation of the concentration. They can therefore be  treated as ancillary to the concentration.  VI<ind> CONCLUSION  18<ind> For the foregoing reasons, the proposed  concentration does not raise serious doubts as to its  compatibility with the common market and with the  functioning of the EEA Agreement.  <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.  <tab> For the Commission,