Introduction

This chapter reports an econometric analysis conducted for a real case, but the identities of the firms have been suppressed for confidentiality reasons. The merger was eventually approved by the relevant national authority. The study is aimed at providing a measure of unilateral effects of the proposed acquisition of A by B on an insurance market in a national market in Europe by means of an econometric model. In other words, it provides a measure of the impact of this notified merger on the insurance price and the consumer surplus. It is expected that the preservation of competition on insurance markets makes insurance premia closer to the actuarial values of the risk transfers, therefore improving the insurability of individual risks and their diversification through mutualisation. This yields a direct welfare gain due to the risk aversion of consumers. But insurability is also favourable to economic growth by disentangling investment decisions from risk aversion. The aim of this study is to determine whether the planned merger could jeopardise those collective benefits. This requires us to examine the recent evidence on prices, costs and market shares in order to estimate how much competition would be taken out by the merger and how competition would remain from continuing rivals.

The econometric model describing the functioning of the non-life insurance markets is based on several facts which are drawn from a descriptive analysis.