CELEX: 31995M0600
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.600 - Employers Reinsurance Corporation / Frankona Rückversicherungs AG) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)

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31995M0600

COMMISSION DECISION of 30/06/1995 declaring a concentration to be compatible with the common market (Case No IV/M.600 - Employers Reinsurance Corporation / Frankona Rückversicherungs 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.600 -  Employers Reins. Corp. / Frankona 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.600  EMPLOYERS REINSURANCE  CORPORATION / FRANKONA RUECKVERSICHERUNGS AG  <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 Frankona Rueckversicherungs AG  (Frankona 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> Frankona Rueck, incorporated in Germany, is ultimately  controlled by GerlingKonzern VersicherungsBeteiligungs AG  (GerlingKonzern), the head of the Gerling insurance group.  Its principal activity is the transaction of reinsurance  business.  II<ind> THE OPERATION  5<ind> Employers Reinsurance will acquire the 76 per cent  shareholding in Frankona Rueck at present held by the Gerling  insurance group and other shareholders. It will thus acquire  sole control of Frankona Rueck. Employers Reinsurance intends  if possible to obtain further shares in Frankona 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.]. Frankona 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.  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 the nongroup reinsurance  business of Aachener RueckversicherungsGesellschaft AG  (Aachener Rueck). [IV/M.601 Employers Reinsurance  Corporation/Aachener RueckversicherungsGesellschaft 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 per  cent.]) and General Re ([Deleted; business secret: 05 per  cent.] [Including Koelnische Rueck, which General Re acquired  in 1994 (case IV/M.491  General Re/Koelnische Rueck).]).  General Electric occupied the fourth position ([Deleted;  business secret: 05 per cent.]), Frankona Rueck the seventh  position ([Deleted; business secret: 05 per cent.]) and the  business acquired by Employers Reinsurance from Aachener  Rueck the eighteenth position (([Deleted; business secret: 05  per cent.]). 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 ([Deleted; business secret: 05 per cent.]). The  remainder of the market is highly fragmented, only five  suppliers having a share above [Deleted; business secret: 05  per cent.]. 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 [Deleted; business  secret: 05 per cent.], Frankona Rueck [Deleted; business  secret: 05 per cent.] and the business acquired by Employers  Reinsurance from Aachener Rueck [Deleted; business secret: 05  per cent.]. Their shares for nonlife reinsurance were   General Electric [Deleted; business secret: 05 per cent.],  Frankona Rueck [Deleted; business secret: 05 per cent.] and  the business acquired by Employers Reinsurance from Aachener  Rueck [Deleted; business secret: 05 per cent.]. 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 Aachener Rueck, does not create or enhance a  dominant position.  VI<ind> CONCLUSION  16<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.  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.a  <tab> For the Commission,