ACE Limited got the greenlight this week to go forward with its planned $28 billion acquisition of rival
Chubb Corp.
The deal – one of the largest in insurance industry history – received approval from the Federal Trade Commission, which was evaluating the deal for potential antitrust violations under the Hart-Scott-Rodino Antitrust Improvement Act of 1976.
Under terms of the transaction, the combined company will use the Chubb name and is expected to control nearly $6 billion in annual written premiums on personal insurance. The acquisition is just the latest in a series of moves that have rapidly consolidated the market for high-net worth clients – at the beginning of 2015, five major insurers were active in the space. Now, there are three: ACE/Chubb, American International Group and Privilege Underwriters’ PURE Group of Insurance Cos.
The proposed takeover has worried some ACE/Chubb agents, many of whom are fielding calls from clients worried about potential interruptions in service and changes in pricing.
“It’s a shockwave through the property-and-casualty insurance industry,” Marc Eagan, a broker in Metairie, Louisiana told the
Wall Street Journal.
Still, some see reason to be optimistic.
“We have witnessed a tremendous amount of innovation and competition amongst the insurance carriers in terms of new coverages and services to attract the most desirable high-net-worth clientele,” said Miami-based broker Ray Celedinas. “This has generally been very good for consumers by broadening coverage and driving down prices.”
Added Spencer Houldin, another insurance broker, “These are very aggressive companies and they’re going to do everything they can do to retain the business.”
ACE said the acquisition of Chubb will further entrench the company in the high-net-worth market and “deliver the finest service with the most talented professionals.”
Now that the FTC has approved the deal, ACE and Chubb must win over shareholders and gain other regulatory approvals. The boards of directors of both companies, however, have already approved the deal and it is expected to close during the first quarter of 2016.
