The merger could significantly hurt competition in commercial risk, reinsurance and employee benefits broking and advisory services in Australia, the Australian Competition and Consumer Commission (ACCC) said.
The pandemic has triggered a sharp rise in claims for insurers and hit their investment portfolios, which along with falling valuations have sparked several deals in the insurance industry.
Aon bid for Willis in March last year in an all-stock deal, which was the insurance sector’s largest ever.
Representatives of Aon and Willis declined to comment on the matter.
The regulator said the deal may lead to price increases or reduced service levels for large or high-value commercial insurance customers and may also limit the insurance coverage and pricing smaller brokers could get for their customers.
It was particularly concerned about the effects of the merger on reinsurance broking services, which it deemed vital for the Australian economy.
Australian insurers have been hit by claims from natural disasters such as wildfires and hailstorms and have bumped up their reinsurance covers in recent times to help shield the impact of these unforeseen large-scale payouts.
The European Commission had raised similar concerns about the deal in December, but suspended its investigation in February as it waited for the U.S. insurance broker to provide data required for the case.
The ACCC said feedback on the issues it had raised was due by March 12.