Commission clears NZI and State Insurance to merge
Published09 May 2000
The Commerce Commission today cleared two of New Zealand's largest general insurance companies, New Zealand Insurance Limited (NZI) and State Insurance Limited, to merge.
The clearance is part of a global merger between CGU Plc and Norwich Union Plc. State is owned by Norwich Union and NZI by CGU.
Commission Chair John Belgrave said that the Commission identified five relevant markets for consideration of the proposal. These are the markets for:
domestic house and contents insurance;
domestic motor vehicle insurance;
commercial property insurance;
commercial motor vehicle insurance; and
commercial liability insurance.
Mr Belgrave said that the Commission was satisfied that, should the proposal go ahead, no parties would acquire or strengthen a dominant position in any of these markets.
In the markets for domestic house and contents insurance, the Commission determined that a combined NZI/State would have a market share outside the "safe harbours" published in the Commission's Business Acquisitions Guidelines. The safe harbours are:
40 percent market share, and
60 percent market share if at least one competitor has 15 percent or more of the market.
Notwithstanding this market share, the Commission concluded that effective competition was currently provided by a number of other general insurers, and that this competition was likely to provide a competitive constraint if the acquisition were implemented. In addition, barriers to entry into domestic insurance are relatively low, particularly for established insurance companies looking to expand their product range to include domestic insurance products.
Further, the Commission concluded that trading banks, as large purchasers of domestic insurance products, would provide a countervailing power and a competitive constraint on the merged NZI/State entity.
In the remaining markets, the market share for the merged entity falls within the Commission's safe harbours.
Public copies of the decision are available from reception at the Commission's Wellington office, Level 7 Landcorp House, 101 Lambton Quay.
