CGU International Insurance plc / Gresham Insurance Company Ltd

OFT closed case: Completed acquisition by CGU International Insurance plc of Gresham Insurance Company Limited.

Affected market: Household insurance

No. ME/1717/05

The OFT’s decision on reference under section 22(1) given on 6 July 2005. Full text of decision published 28 July 2005.


CGU International Insurance plc (CGU) is a wholly-owned indirect subsidiary of Aviva plc (Aviva). Aviva is the holding company of the Aviva group of companies, which carries out life assurance and long-term savings business, fund management and all classes of general insurance. In 2004, Aviva achieved worldwide turnover (consolidated gross premium income) of £35 billion.

Gresham Insurance Company Limited (Gresham) is a private limited company based in England. It is the principal insurance underwriting company for household insurance associated with Barclays and The Woolwich (both part of the Barclays Group (Barclays)) in the United Kingdom (UK). In 2004, Gresham achieved turnover of approximately £146.4 million (reported gross written premiums) all in the UK.


The transaction was completed on 31 March 2005.

Details of the transaction were obtained from the parties through direct enquiry by the OFT. A satisfactory submission was received on 13 May 2005 and therefore the administrative timetable expires on 11 July 2005. The statutory time limit expires on 29 July 2005.


As a result of this transaction CGU and Gresham have ceased to be distinct. The UK turnover of Gresham exceeds £70 million, so the turnover test in section 23(1) (b) of the Enterprise Act 2002 (the Act) is satisfied. The OFT therefore believes that it is or may be the case that a relevant merger situation has been created.


Product Scope

The parties overlap in the supply of household insurance. On the demand side, there is little or no substitutability between household insurance and other ‘general’ insurance or non-life services such as travel or motor insurance.

On the supply side, there may be an element of substitutability on the basis that insurance products require a common set of skills and resources in terms of risk assessment, administration and claims management. Most insurance companies provide a range of insurance services and can easily switch to the various different types of non-life insurance services. However, given that the OFT considers there to be no competition concerns arising from any definition (see below), it is not necessary to reach any firm conclusion on the relevant product frame of reference.

Geographic market

There are no regional variations with regard to pricing except to account for different risk factors (e.g. in high flood risk areas). Many insurance companies are active through out the UK and given the differences in regulatory requirements and national distribution systems across countries it is appropriate to limit the geographic scope to the UK.


The parties overlap in the supply of household insurance. To the extent that a wider relevant frame of reference is taken to include all non-life insurance the parties’ combined share of supply is significantly below 25 per cent with a minimal increment to share of supply (less than 1 per cent).

If a narrow product frame of reference is taken i.e. household insurance, the parties’ submit that the combined share of supply will be 10-20 per cent (see [note 1])  (increment less than 5 per cent (see [note 1]). Although the merger has added to the share of one of the largest household insurance suppliers in the UK, the household insurance sector remains large and fragmented with numerous suppliers.

Barriers to entry and expansion

Barriers to entry into general insurance appear high due to the need for regulatory authorisation and to capital adequacy requirements which form part of the regulatory regime. However, these barriers do not appear to be prohibitive and the parties point to the recent entry of HBOS in 2004. Barriers to expansion into household insurance services appear to be low as insurance companies with expertise in one or more product lines are normally able to reapply those skills to enter other product areas.

Buyer power

Given that there are no competition concerns about this transaction no conclusions are drawn on buyer power.


The OFT has found no evidence that this transaction raises any vertical competition concerns.


No third party expressed any concern about this transaction.


This transaction does not raise any significant concerns on any reasonable frame of reference. The parties’ combined share of supply in non-life insurance is significantly less than 25 per cent. If a narrow frame of reference is taken (i.e. household insurance) the combined post-merger share of supply is approximately 10-20 (see [note 1]) per cent  which includes a small increment (less than 5 per cent (see [note 1]) to Aviva's share of supply in this sector. Post-merger, the household insurance sector is fragmented with numerous credible suppliers. Barriers to entry from existing suppliers of non-life insurance are also low.

Consequently, the OFT does not believe that it is or may be the case that the merger has resulted or may be expected to result in a substantial lessening of competition within a market or markets in the UK.


This merger will therefore not be referred to the Competition Commission under section 22(1) of the Act.


  1. Exact figure replaced by a range at Aviva’s request
Published 5 July 2005