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UGF-Premafin – Is competition vanishing in Italian insurance market?

The horizontal merge between Unipol (UGF) and Fondiaria Sai (Fonsai) represents one of the most important mergers realized in the italian insurance market. It occurred in 2012 and involved two of the most relevant insurance companies operating in Italy. They communicated their intention to the Italian Authority, as the law requires, and the Authority carefully analyzed the situation, in order to find any possible anti-competition effect. The operation consisted in the acquisition of Fonsai by UGF, with important consequences involving the network of financial links between the two insurance companies and banks involved in the merge and the governance of the post-merger entity.

The resulting entity is playing an important role in insurance market, supplying more than 14 millions of customers. Mediobanca, an Italian banking institute, was involved in credit operations with both companies. UGF and Fonsai were instead shareholders of Mediobanca. Furthermore, Mediobanca owned part of Generali, another insurance company operating in Italy, and could exercise its right of vote in the decision process. Many other links between the two entities were also in place.

The analysis leaded by the Authority brought to relevant results, showing that the post-merger entity would have been the dominant company in the insurance market related to damage branch. An analysis based on HHI and CR3, two indices of concentration, displayed that the post-merger entity would have gained even more power after the concentration, as the table below shows. Moreover, the new company would have been able to manage a particularly dominant premiums’ strategy, offering prices above those of other competitors while keeping its market dominance. The analysis led by the Authority brought to the conclusion that the post-merger entity would have been a dominant company in the insurance market. The competition in the market would have been compromised, also considering the relationship with Generali, that would have represented the main competitor of the entity. UGF and Mediobanca proposed many commitments in order to decrease the anti-competitive effects, trying to divide the interconnections between the firms involved in the merge.

The Authority evaluated their proposal and provided different arrangements and, in the end, decided to allow the merge, even if it would have brought restrictions to the competition. Many modifications were required in order to avoid harm to consumer and competition, starting from forcing the parts involved to dismiss their shares of other companies included in the merge and to relax, and in more extreme cases remove, any possible linkage. [1]

This decision was, for some parts, surprising, because the analysis clearly outlined restrictions to the competition, both on the side of horizontal merge and also through cross-ownership with other insurance companies operating in the same market. Recent news have highlighted how companies involved have disobeyed some of the rules imposed by the Authority about the transfer of their shares. This represents an interesting case where many restrictions to competition apply and where competition is likely to be compromised. Commitments are useful solutions but some doubts arise in this case, since anti-competitive effects appear so remarkable that even Authority could face difficulties in making them followed rigorously.


In Italian:


Edoardo Sezzi, 1747


Author: studentnovasbe

Master student in Nova Sbe

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