382.095. Acquisitions where change of control of insurer, subject to order, when--contents, requirements--violations, penalties.
Acquisitions where change of control of insurer, subject to order,when--contents, requirements--violations, penalties.
382.095. 1. As used in this section, the following termsmean:
(1) "Acquisition", any agreement, arrangement or activitythe consummation of which results in a person acquiring directlyor indirectly the control of another person, and includes but isnot limited to the acquisition of voting securities, theacquisition of assets, bulk reinsurance and mergers;
(2) "Involved insurer" includes an insurer which eitheracquires or is acquired, is affiliated with an acquirer oracquired or is the result of a merger.
2. Except as provided in this subsection, this sectionapplies to any acquisition in which there is a change in controlof an insurer authorized to do business in this state. Thissection shall not apply to the following as provided in section382.060:
(1) An acquisition subject to approval or disapproval bythe director;
(2) A purchase of securities solely for investment purposesso long as such securities are not used by voting or otherwise tocause or attempt to cause the substantial lessening ofcompetition in any insurance market in this state. If a purchaseof securities results in a presumption of control undersubdivision (2) of section 382.010, it is not solely forinvestment purposes unless the commissioner of insurance or otherappropriate person of the insurer's state of domicile accepts adisclaimer of control or affirmatively finds that control doesnot exist and such disclaimer action or affirmative finding iscommunicated by such person to the director;
(3) The acquisition of a person by another person when bothpersons are neither directly nor through affiliates primarilyengaged in the business of insurance, if preacquisitionnotification is filed with the director in accordance withsubsection 3 of this section thirty days prior to the proposedeffective date of the acquisition; however, such preacquisitionnotification is not required for exclusion from this section ifthe acquisition would otherwise be excluded from this section byany other subdivision of this subsection;
(4) The acquisition of already affiliated persons;
(5) An acquisition if, as an immediate result of theacquisition:
(a) In no market would the combined market share of theinvolved insurers exceed five percent of the total market;
(b) There would be no increase in any market share; or
(c) In no market would the combined market share of theinvolved insurers exceed twelve percent of the total market, andthe market share of the involved insurer after the acquisitionwould increase by two percent of the total market or less.
For the purpose of this subdivision, a "market" means directwritten insurance premium in this state for a line of business ascontained in the annual statement required to be filed byinsurers licensed to do business in this state;
(6) An acquisition for which a preacquisition notificationwould be required pursuant to this section due solely to theresulting effect on the ocean marine insurance line of business;
(7) An acquisition of an insurer whose domiciliarycommissioner or other appropriate person affirmatively finds thatsuch insurer is in failing condition; there is a lack of feasiblealternative to improving such condition; the public benefits ofimproving such insurer's condition through the acquisition exceedthe public benefits that would arise from not lesseningcompetition; and such findings are communicated by such person tothe director.
3. An acquisition covered by subdivisions (1) to (7) ofsubsection 2 of this section may be subject to an order pursuantto subsection 5 of this section, unless the acquiring personfiles a preacquisition notification and the waiting perioddescribed in this subsection has expired. The acquired person oracquiring person may file a preacquisition notification. Thedirector shall give confidential treatment to informationsubmitted under this subsection. The preacquisition notificationshall be in such form and contain such information as prescribedby the National Association of Insurance Commissioners relatingto those markets which, under subdivision (5) of subsection 2 ofthis section cause the acquisition not to be exempted from theprovisions of this section. The director may require suchadditional material and information as he deems necessary todetermine whether the proposed acquisition, if consummated, wouldviolate the competitive standard of subsection 4 of this section.The required information may include an opinion of an economistas to the competitive impact of the acquisition in this stateaccompanied by a summary of the education and experience of suchperson indicating his ability to render an informed opinion. Thewaiting period required shall begin on the date of receipt by* thedirector of a preacquisition notification and shall end on theearlier of the thirtieth day after the date of such receipt, ortermination of the waiting period by the director. Prior to theend of the waiting period, the director on a one-time basis mayrequire the submission of additional needed information relevantto the proposed acquisition, in which event the waiting periodshall end on the earlier of the thirtieth day after receipt ofsuch additional information by the director or termination of thewaiting period by the director.
4. (1) The director may enter an order under subsection 5of this section with respect to an acquisition if there issubstantial evidence that the effect of the acquisition may besubstantially to lessen competition in any line of insurance inthis state or tend to create a monopoly therein or if the insurerfails to file adequate information in compliance with subsection3 of this section.
(2) In determining whether a proposed acquisition wouldviolate the competitive standard of subdivision (1) of thissubsection, the director shall consider the following:
(a) Any acquisition covered under subsection 2 of thissection involving two or more insurers competing in the samemarket is prima facie evidence of violation of the competitivestandards:
a. If the market is highly concentrated and the involvedinsurers possess the following share of the market:
Insurer A Insurer B
4% 4% or more
10% 2% or more
15% 1% or more; or
b. If the market is not highly concentrated and theinvolved insurers possess the following share 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 is one in which the share of thefour largest insurers is seventy-five percent or more of themarket. Percentages not shown in the tables are to beinterpolated proportionately to the percentages that are shown.If more than two insurers are involved, exceeding the total ofthe two columns in the table is prima facie evidence of violationof the competitive standard in subdivision (1) of thissubsection. For the purpose of this subdivision, the insurerwith the largest share of the market shall be deemed to beinsurer A;
(b) There is a significant trend toward increasedconcentration when the aggregate market share of any grouping ofthe largest insurers in the market, from the two largest to theeight largest, has increased by seven percent or more of themarket over a period of time extending from any base year five toten years prior to the acquisition up to the time of theacquisition. Any acquisition or merger covered under subsection2 of this section involving two or more insurers competing in thesame market is prima facie evidence of violation of thecompetitive standard in subdivision (1) of this subsection if:
a. There is a significant trend toward increasedconcentration in the market;
b. One of the insurers involved is one of the insurers in agrouping of such large insurers showing the requisite sevenpercent or more increase in the market share; and
c. Another involved insurer's market is two percent ormore.
(3) For the purposes of subdivision (2) of this subsection:
(a) The term "insurer" includes any company or group ofcompanies under common management, ownership or control;
(b) The term "market" means the relevant product andgeographical markets. In determining the relevant product andgeographical markets, the director shall give due considerationto, among other things, the definitions or guidelines, if any,promulgated by the National Association of InsuranceCommissioners and to information, if any, submitted by parties tothe acquisition. In the absence of sufficient information to thecontrary, the relevant product market is assumed to be the directwritten insurance premium for a line of business, such line beingthat used in the annual statement required to be filed byinsurers doing business in this state, and the relevantgeographical market is assumed to be this state;
(c) The burden of showing prima facie evidence of violationof the competitive standard rests upon the director.
(4) Even though an acquisition is not prima facie violativeof the competitive standard under subdivision (2) of thissubsection, the director may establish that the requisiteanticompetitive effect exists based upon other substantialevidence. Even though an acquisition is prima facie violative ofthe competitive standard under subdivision (2) of thissubsection, a party may establish the absence of the requisiteanticompetitive effect, based upon other substantial evidence.Relevant factors in making a determination under this subdivisioninclude, but are not limited to, the following: market shares,volatility of ranking of market leaders, number of competitors,concentration, trend of concentration in the industry, and easeof entry and exit into the market.
(5) An order may not be entered under subsection 5 of thissection if:
(a) The acquisition will yield substantial economies ofscale or economies in resource use that cannot be feasiblyachieved in any other way, and the public benefits which wouldarise from such economies exceed the public benefits which wouldarise from not lessening competition; or
(b) The acquisition will substantially increase theavailability of insurance, and the public benefits of suchincrease exceed the public benefits which would arise from notlessening competition.
5. If an acquisition violates the standards of thissection, the director may enter an order:
(1) Requiring an involved insurer to cease and desist fromdoing business in this state with respect to the line or lines ofinsurance involved in the violation; or
(2) Denying the application of an acquired or acquiringinsurer for a license to do business in this state.
Such an order shall not be entered unless there is a hearing,notice of such hearing is issued prior to the end of the waitingperiod and not less than fifteen days prior to the hearing, andthe hearing is concluded and the order is issued no later thansixty days after the end of the waiting period. Every ordershall be accompanied by a written decision of the directorsetting forth his findings of fact and conclusions of law. Anorder entered under this subsection shall not become finalearlier than thirty days after it is issued, during which timeany involved insurer may submit a plan to remedy theanticompetitive impact of the acquisition within a reasonabletime. Based upon such plan or other information, the directorshall specify the conditions, if any, under the time periodduring which the aspects of the acquisition causing a violationof the standards of this section would be remedied and the ordervacated or modified. An order issued pursuant to this subsectionshall not apply if the acquisition is not consummated.
6. Any person who violates a cease and desist order of thedirector under subsection 5 of this section, and while such orderis in effect, may, after notice and hearing and upon order of thedirector, be subject at the discretion of the director to any oneor more of the following:
(1) A monetary penalty of not more than ten thousanddollars for every day of violation; or
(2) Suspension or revocation of such person's license.
7. Any insurer or other person who fails to make any filingrequired by this section and who also fails to demonstrate a goodfaith effort to comply with any such filing requirement shall besubject to a fine of not more than fifty thousand dollars.
8. Sections 382.260 and 382.280 do not apply toacquisitions covered by subsection 2 of this section.
(L. 1991 H.B. 385, et al., A.L. 1992 H.B. 1574)*Word "of" appears in original rolls.