§36-1634. Acquisitions leading to change in control of an insurer -
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Exceptions - Examination by Commissioner.
A. The following definitions shall apply for the purposes of this section only:
1. "Acquisition" means any agreement, arrangement or activity the consummation of which results in a person acquiring directly or indirectly the control of another person, and includes but is not limited to the acquisition of voting securities, the acquisition of assets, bulk reinsurance and mergers; and
2. "Involved insurer" includes an insurer which acquires or is acquired, is affiliated with an acquirer or acquired, or is the result of a merger.
B. 1. Except as exempted in paragraph 2 of this subsection, this section applies to any acquisition in which there is a change in control of an insurer authorized to do business in this state.
2. This section shall not apply to the following:
a. a purchase of securities solely for investment
purposes so long as the securities are not used by
voting or otherwise to cause or attempt to cause the
substantial lessening of competition in any insurance
market in this state. If a purchase of securities
results in a presumption of control under paragraph 3
of Section 1 of this act, it is not solely for
investment purposes unless the Commissioner of the
insurer's state of domicile accepts a disclaimer of
control or affirmatively finds that control does not
exist and the disclaimer action or affirmative finding
is communicated by the domiciliary Commissioner to the
Commissioner of this state,
b. the acquisition of a person by another person when
both persons are neither directly nor through
affiliates primarily engaged in the business of
insurance, if preacquisition notification is filed
with the Commissioner in accordance with paragraph 1
of subsection C of this section thirty
(30)days prior
to the proposed effective date of the acquisition.
However, such preacquisition notification is not
required for exclusion from this section if the
acquisition would otherwise be excluded from the
requirements of this section by any other subparagraph
of this paragraph,
c. the acquisition of already affiliated persons,
d. an acquisition if, as an immediate result of the
acquisition,
(1)in no market would the combined market share of
the involved insurers exceed five percent (5%) of
the total market,
(2)there would be no increase in any market share,
or
(3)in no market would:
(a)the combined market share of the involved
insurers exceed twelve percent (12%) of the
total market, and
(b)the market share increase by more than two
percent (2%) of the total market.
For the purpose of this subparagraph, a "market" means
direct written insurance premium in this state for a
line of business as contained in the annual statement
required to be filed by insurers licensed to do
business in this state,
e. an acquisition for which a preacquisition notification
would be required pursuant to this section due solely
to the resulting effect on the ocean marine insurance
line of business, and
f.
an acquisition of an insurer whose domiciliary
Commissioner affirmatively finds that the insurer is
in failing condition; there is a lack of feasible
alternative to improving such condition; the public
benefits of improving the insurer's condition through
the acquisition exceed the public benefits that would
arise from not lessening competition; and the findings
are communicated by the domiciliary Commissioner to
the Commissioner of this state.
C. Any acquisition described in subsection B of this section may be subject to an order pursuant to subsection E of this section unless the acquiring person files a preacquisition notification and the waiting period has expired. The acquired person may file a preacquisition notification. The Commissioner shall give confidential treatment to information submitted under this subsection in the same manner as provided in Section 10 of this act.
1. The preacquisition notification shall be in such form and contain such information as prescribed by the National Association of Insurance Commissioners
(NAIC)relating to those markets which, under subparagraph d of paragraph 2 of subsection B of this section, cause the acquisition not to be exempted from the provisions of this section. The Commissioner may require such additional material and information as deemed necessary to determine whether the proposed acquisition, if consummated, would violate the competitive standard of subsection D of this section. The required information may include an opinion of an economist as to the competitive impact of the acquisition in this state accompanied by a summary of the education and experience of such person indicating his or her ability to render an informed opinion.
2. The waiting period required shall begin on the date of receipt of the Commissioner of a preacquisition notification and shall end on the earlier of the thirtieth day after the date of receipt, or termination of the waiting period by the Commissioner. Prior to the end of the waiting period, the Commissioner on a one- time basis may require the submission of additional needed information relevant to the proposed acquisition, in which event the waiting period shall end on the earlier of the thirtieth day after receipt of the additional information by the Commissioner or termination of the waiting period by the Commissioner.
D. 1. The Commissioner may enter an order under paragraph 1 of subsection E of this section with respect to an acquisition if there is substantial evidence that the effect of the acquisition may be substantially to lessen competition in any line of insurance in this state or tend to create a monopoly or if the insurer fails to file adequate information in compliance with subsection C of this section.
2. In determining whether a proposed acquisition would violate the competitive standard of paragraph 1 of this subsection, the Commissioner shall consider the following:
a. any acquisition covered under subsection B of this
section involving two or more insurers competing in
the same market is evidence of violation of the
competitive standards.
(1)if the market is highly concentrated and the
involved insurers possess the following shares of
the market:
Insurer A Insurer B
4% 4% or more
10% 2% or more
15% 1% or more, or
(2)if the market is not highly concentrated and the
involved insurers possess the following shares of
the market:
Insurer A Insurer B
5% 5% or more
10% 4% or more
15% 3% or more
19% 1% or more
A highly concentrated market, for purposes of this
subparagraph, is one in which the share of the four
largest insurers is seventy-five percent (75%) or more
of the market. Percentages not shown in the tables
are interpolated proportionately to the percentages
that are shown. If more than two insurers are
involved, exceeding the total of the two columns in
the table is prima facie evidence of violation of the
competitive standard in paragraph 1 of this
subsection. For the purpose of this subparagraph, the
insurer with the largest share of the market shall be
deemed to be Insurer A,
b. there is a significant trend toward increased
concentration when the aggregate market share of any
grouping of the largest insurers in the market, from
the two largest to the eight largest, has increased by
seven percent (7%) or more of the market over a period
of time extending from any base year five
(5)to ten
(10)years prior to the acquisition up to the time of
the acquisition. Any acquisition or merger covered
under subsection B of Section 5 of this act involving
two or more insurers competing in the same market is
evidence of violation of the competitive standard in
paragraph 1 of this subsection if:
there is a significant trend toward increased
concentration in the market,
(2)one of the insurers involved is one of the
insurers in a grouping of large insurers showing
the requisite increase in the market share, and
(3)another involved insurer's market is two percent
(2%) or more,
c. for the purposes of this paragraph:
(1)the term "insurer" includes any company or group
of companies under common management, ownership
or control,
(2)the term "market" means the relevant product and
geographical markets. In determining the
relevant product and geographical markets, the
Commissioner shall give due consideration to,
among other things, the definitions or
guidelines, if any, promulgated by the NAIC and
to information, if any, submitted by parties to
the acquisition. In the absence of sufficient
information to the contrary, the relevant product
market is assumed to be the direct written
insurance premium for a line of business, such
line being that used in the annual statement
required to be filed by insurers doing business
in this state, and the relevant geographical
market is assumed to be this state,
(3)the burden of showing prima facie evidence of
violation of the competitive standard rests upon
the Commissioner, and
d. even though an acquisition is not a prima facie
violation of the competitive standard under
subparagraphs a and b of this paragraph, the
Commissioner may establish the requisite
anticompetitive effect based upon other substantial
evidence. Even though an acquisition is a prima facie
violation of the competitive standard under
subparagraphs a and b of this paragraph, a party may
establish the absence of the requisite anticompetitive
effect based upon other substantial evidence.
Relevant factors in making a determination under this
subparagraph include, but are not limited to, market
shares, volatility of ranking of market leaders,
number of competitors, concentration, trend of
concentration in the industry, and ease of entry and
exit into the market.
3. An order may not be entered under subsection E of this section if:
a.
the acquisition will yield substantial economies of
scale or economies in resource utilization that cannot
be feasibly achieved in any other way, and the public
benefits which would arise from such economies exceed
the public benefits which would arise from not
lessening competition, or
b. the acquisition will substantially increase the
availability of insurance, and the public benefits of
the increase exceed the public benefits which would
arise from not lessening competition.
E. 1. a. If an acquisition violates the standards of this
section, the Commissioner may enter an order:
(1)requiring an involved insurer to cease and desist
from doing business in this state with respect to
the line or lines of insurance involved in the
violation, or
(2)denying the application of an acquired or
acquiring insurer for a license to do business in
this state.
b. The order shall not be entered unless:
(1)there is a hearing,
(2)notice of the hearing is issued prior to the end
of the waiting period and not less than fifteen
(15)days prior to the hearing, and
(3)the hearing is concluded and the order is issued
no later than sixty
(60)days after the date of
the filing of the preacquisition notification
with the Commissioner.
c. Every order shall be accompanied by a written decision
of the Commissioner setting forth findings of fact and
conclusions of law.
d. An order pursuant to this paragraph shall not apply if
the acquisition is not consummated.
2. Any person who violates a cease and desist order of the Commissioner under paragraph 1 of this subsection and while the order is in effect may, after notice and hearing and upon order of the Commissioner, be subject at the discretion of the Commissioner to one or more of the following:
a. a monetary penalty of not more than Ten Thousand
Dollars ($10,000.00) for every day of violation, or
b. suspension or revocation of the person's license.
3. Any insurer or other person who fails to make any filing required by this section, and who also fails to demonstrate a good- faith effort to comply with any filing requirement, shall be subject to a fine of not more than Fifty Thousand Dollars ($50,000.00).
F. Subsections B and C of Section 12 of this act and Section 14 of this act shall not apply to acquisitions covered under subsection B of this section. Added by Laws 2017, c. 350, § 4, emerg. eff. May 31, 2017.