The acquisition of TM Insurance by Landsbankinn hf.

The Competition Authority has approved the merger of Landsbankinn hf. and TM tryggingar hf. The proceedings concluded with a settlement between Landsbankinn and the Competition Authority, which both parties had finalised on 21 February 2025.

Landsbankinn is the country's largest commercial bank and offers a comprehensive range of financial services to individuals, businesses and investors. TM is the third largest general insurance company in the country and also operates a life insurance business through its subsidiary, TM Life Insurance Ltd. The merger is therefore, for the most part, a so-called conglomerate merger.

The restrictions on competition that would otherwise have resulted from the merger of Landsbankinn and TM relate to a considerable extent to the marketing and sale of TM's insurance through Landsbankinn's distribution network. Following settlement negotiations, Landsbankinn agreed to settle with the Competition Authority to counteract the harmful effects that would otherwise have resulted from the merger. Under the settlement, the bank undertakes to ensure that special terms on TM's insurance are not made conditional on a customer's salary being paid into their account with the bank.

The deal takes into account that payroll accounts can be considered an important gateway for broader banking business. Thus, smaller competitors in the commercial banking market could find it difficult to withstand the impact of banks with a strong position, such as Landsbankinn, tying special insurance terms to the condition that customers hold a salary account with that bank. Such conduct could therefore restrict the growth and viability of smaller competitors, and they could even be excluded from competing for a large share of customers in the market for general current account services.

The settlement also provides that Landsbankinn will endeavour to operate in accordance with the objectives set out in the bank's previous settlement with the Competition Authority, as described in Decision No. 22/2017, Measures to Strengthen Competition in the Commercial Banking Market. The said settlement was primarily aimed at the following:

a) Reduce the costs incurred by customers when switching banks.

b) To promote more effective competition from individuals and small businesses with those providing commercial banking services in Iceland.

c) Work against situations that could give rise to tacit coordination in the market/markets for retail banking services.

The condition set out in Article 2 of the new settlement with Landsbankinn is primarily in line with points b and c of the aforementioned objectives. As set out above, the condition of the new settlement is specifically aimed at preventing the position of smaller competitors in the commercial banking market from being weakened as a result of the acquisition of TM. This could, amongst other things, facilitate tacit coordination between the three major commercial banks.

The investigation into the matter revealed that TM's market share in the damage insurance market had been declining for many years in the run-up to the merger, and there are indications that this was due to the company's weaker competition for customers than before. The Competition Authority believes that the new ownership could create the scope and incentives for increased competition in the casualty insurance market.

English summary:

The acquisition of TM hf. by Landsbankinn hf.

The Icelandic Competition Authority (ICA) has approved the merger of Landsbankinn hf. and TM tryggingar hf. The competition assessment of the merger concluded with a settlement between Landsbankinn and the ICA, which both parties finalised signing on 21 February 2025.

Landsbankinn is the country's largest commercial bank, offering comprehensive financial services to individuals, companies and investors. TM is the country's third-largest non-life insurance company and also operates life insurance activities through its subsidiary, TM líftryggingar hf. The merger is therefore primarily a so-called „conglomerate merger.“

The restrictions on competition that would otherwise have resulted from the merger relate largely to the marketing and sale of TM insurance through Landsbankinn's distribution network. Following settlement talks, Landsbankinn agreed to enter into a settlement with the ICA to counteract the harmful effects that would otherwise have arisen. Under the settlement, the bank commits to ensuring that special terms on TM's insurance products will not be conditional upon the customer's salary being deposited into an account with the bank.

The settlement takes into account the finding that salary accounts can be considered a significant customer acquisition channel for broader banking business. Thus, smaller competitors in the retail banking market could find it difficult to compete with a bank in a strong position—such as Landsbankinn—that is offering rebates or other special insurance terms conditional on customers holding a salary account with them. Such conduct could impair smaller competitors’ ability to grow their income and thrive, potentially leading to their exclusion from a large part of the retail banking market.

The settlement also states that Landsbankinn will strive to operate in accordance with the goals set out in the bank's older settlement with the ICA (Decision No. 22/2017), which aimed to strengthen competition in the retail banking market. That settlement focused specifically on:

1. Reducing switching costs, i.e. the costs customers incur when switching banks.
2. Promoting more effective competitive constraint being exerted by individuals and small businesses upon providers of retail banking services in Iceland.
3. Counteracting conditions that could lend support to and enable tacit collusion in the retail banking market(s).

The condition set forth in Article 2 of the new settlement aligns particularly with goals b and c above. As previously stated, the new condition aims to prevent the competitive position of smaller competitors from weakening as a result of Landsbankinn's acquisition of TM. A weakened position of smaller players could, among other things, facilitate tacit collusion between the three large commercial banks.

The investigation revealed that TM's market share in the non-life insurance market had contracted for several years leading up to the merger, with indications that this was due to the company's weaker competition for customers. The ICA considers that under the new ownership, TM should have greater room and incentive to compete more vigorously in the non-life insurance market than before.