§ 27-1-23-2.5 — Acquisitions in which there is a change in control of an insurer; pre-acquisition notification; waiting period; competitive standards; violations; order; penalties

Indiana § 27-1-23-2.5

• Jurisdiction: Indiana
• Title 27: INSURANCE
• Art. 1: DEPARTMENT OF INSURANCE
• Ch. 23: Regulation of Insurance Holding Company Systems

Text

5. (a) The following definitions apply
throughout this section:
(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. The term includes the
acquisition of voting securities, and the acquisition of assets,
assumption reinsurance, and mergers.
(2) "Involved insurer" includes an insurer that:
(A) acquires;
(B) is acquired;
(C) is affiliated with an acquirer;
(D) is affiliated with an acquired; or
(E) is the result of a merger.
(b) Except as provided in subsection (c), this section applies to any
acquisition in which there is a change in control of an insurer
authorized to do business in Indiana.
(c) This section does not apply to the following:
(1) An acquisition subject to approval or disapproval by the
commissioner under section 2 of this chapter.
(2) A purchase of securities solely for investment purposes, so
long as those 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 section 1(e) of this
chapter, 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 this disclaimer action or affirmative finding is
communicated by the domiciliary commissioner to the
commissioner of Indiana.
(3) 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 a pre-acquisition
notification is filed with the commissioner in accordance with
subsection (d) at least thirty (30) days before the proposed
effective date of the acquisition. However, a pre-acquisition
notification is not required for an exclusion from this section if
the acquisition would otherwise be excluded from this section by
any other subdivision of this subsection.
(4) The acquisition of persons already affiliated with the acquirer.
(5) An acquisition if, as an immediate result of the acquisition:
(A) in no market would the combined market share of the
involved insurers exceed five percent (5%) 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 the
involved insurers:
(i) exceed twelve percent (12%) of the total market; or
(ii) increase by more than two percent (2%) of the total
market.
(6) An acquisition for which a pre-acquisition notification would
be required under this section due solely to the resulting effect on
the ocean marine insurance line of business.
(7) An acquisition of an insurer, if:
(A) the domiciliary commissioner of the insurer affirmatively
finds that:
(i) the insurer is in failing condition;
(ii) there is a lack of feasible alternatives to improving that
condition; and
(iii) the public benefits of improving the insurer's condition
through the acquisition exceed the public benefits that would
arise from not lessening competition; and
(B) those findings are communicated by the domiciliary
commissioner to the commissioner of Indiana.
For the purposes of this subsection, a "market" means the total direct
written insurance premium of all insurers providing insurance in
Indiana for a particular line of business, as reported in the annual
statements required to be filed by insurers licensed to do business in
Indiana.
(d) An order pursuant to subsection (j) may be entered with respect
to an acquisition to which this section applies unless the acquiring
person files a pre-acquisition notification with respect to the acquisition
and the waiting period referred to in subsection (f) has expired. An
acquired person may also file a pre-acquisition notification with respect
to an acquisition. Information in pre-acquisition notifications filed
under this section is confidential and protected from disclosure under
section 6 of this chapter.
(e) A pre-acquisition notification filed under this section must be in
the form and must contain the information prescribed by the NAIC, as
adopted by the commissioner in rules under IC 4-22-2, with respect to
markets that meet the description set forth in subsection (c)(5), causing
an acquisition not to be exempted from the provisions of this section.
The commissioner may require additional material and information that
the commissioner considers necessary to determine whether the
proposed acquisition, if consummated, would violate the competitive
standard set forth in subsection (g). The required information may
include an opinion of an economist as to the competitive impact of the
acquisition in Indiana, accompanied by a summary of the education and
experience of the economist, indicating the economist's ability to
render an informed opinion.
(f) The waiting period required with respect to a proposed
acquisition begins on the day when the commissioner receives a
pre-acquisition notification and ends:
(1) on the thirtieth day after the day the commissioner receives the
notification; or
(2) upon the commissioner's termination of the waiting period, if
earlier.
Before 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. If the commissioner requests
additional information under this subsection, the waiting period ends
on the earlier of the thirtieth day after receipt of the additional
information by the commissioner or the termination of the waiting
period by the commissioner.
(g) The commissioner may enter an order under subsection (j) with
respect to an acquisition if:
(1) there is substantial evidence that the effect of the acquisition
may be substantially to lessen competition in any line of insurance
in Indiana or to tend to create a monopoly in any line of insurance
in Indiana; or
(2) the insurer fails to file adequate information in compliance
with subsections (d) and (e).
(h) In determining whether a proposed acquisition to which this
section applies would violate the competitive standard set forth in
subsection (g), the commissioner shall consider the following:
(1) An acquisition to which this section applies that involves two
(2) or more insurers competing in the same market is prima facie
evidence of a violation of the competitive standard:
(A) If the market is highly concentrated and the involved
insurers possess the following shares of the market:
(i) Insurer A a share of four percent (4%) and insurer B a
share of four percent (4%) or more.
(ii) Insurer A a share of ten percent (10%) and insurer B a
share of two percent (2%) or more.
(iii) Insurer A a share of fifteen percent (15%) and insurer B
a share of one percent (1%) or more.
(B) If the market is not highly concentrated and the involved
insurers possess the following shares of the market:
(i) Insurer A a share of five percent (5%) and insurer B a
share of five percent (5%) or more.
(ii) Insurer A a share of ten percent (10%) and insurer B a
share of four percent (4%) or more.
(iii) Insurer A a share of fifteen percent (15%) and insurer B
a share of three percent (3%) or more.
(iv) Insurer A a share of nineteen percent (19%) and insurer
B a share of one percent (1%) or more.
For the purposes of this subdivision, a highly concentrated market
is a market in which the share of the four (4) largest insurers is
seventy-five percent (75%) or more of the market. Percentages
not referred to in this subdivision must be interpolated
proportionately to the percentages that are referred to in this
subdivision. If more than two (2) insurers are involved in a
proposed acquisition, exceeding the total of the two (2) figures set
forth for insurer A and insurer B in an item set forth in this
subdivision is prima facie evidence of violation of the competitive
standard set forth in subsection (g). For the purpose of this
subdivision, the insurer with the largest share of the market shall
be considered to be insurer A.
(2) 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 (2) largest to the eight (8)
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 before the acquisition up to the time of the
acquisition. Any acquisition or merger to which this section
applies involving two (2) or more insurers competing in the same
market is prima facie evidence of violation of the competitive
standard set forth in subsection (g) if:
(A) there is a significant trend toward increased concentration
in the market;
(B) one (1) of the insurers involved is one (1) of the insurers in
a grouping of those large insurers showing the requisite
increase in the market share; and
(C) the market share of another involved insurer is two percent
(2%) or more.
(3) For the purposes of this subsection:
(A) The term "insurer" includes any company or group of
companies under common management, ownership, or control.
(B) The term "market" means the relevant product and
geographical markets. In determining the relevant product and
geographical markets with respect to an acquisition, 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 that is
used in the annual statement required to be filed by insurers
doing business in Indiana, and the relevant geographical market
is assumed to be Indiana.
(C) The burden of showing prima facie evidence of a violation
of the competitive standard rests upon the commissioner.
(4) Even though an acquisition is not prima facie violative of the
competitive standard under subdivisions (1) and (2), the
commissioner may establish the requisite anticompetitive effect
based upon other substantial evidence. Even though an
acquisition is prima facie violative of the competitive standard
under subdivisions (1) and (2), a party may establish the absence
of the requisite anticompetitive effect based upon other
substantial evidence. Relevant factors in making a determination
under this subdivision include, but are not limited to, the
following:
(A) Market shares.
(B) Volatility of ranking of market leaders.
(C) Number of competitors.
(D) Concentration and trend of concentration in the industry.
(E) Ease of entry into and exit from the market.
(i) An order may not be entered under subsection (j) if:
(1) 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 that would arise from
those economies exceed the public benefits that would arise from
not lessening competition; or
(2) the acquisition will substantially increase the availability of
insurance, and the public benefits of that increase exceed the
public benefits that would arise from not lessening competition.
(j) If an acquisition violates the standards set forth in this section,
the commissioner may enter an order:
(1) requiring an involved insurer to cease and desist from doing
business in Indiana 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 Indiana.
(k) An order may not be entered under subsection (j) unless:
(1) there is a hearing;
(2) notice of the hearing is issued before the end of the waiting
period and not less than fifteen (15) days before the hearing; and
(3) the hearing is concluded and the order is issued not more than
sixty (60) days after the end of the waiting period.
Every order shall be accompanied by a written decision of the
commissioner setting forth the commissioner's findings of fact and
conclusions of law.
(l) An order entered under subsection (j) shall not become final less
than thirty (30) days after it is issued, during which time the involved
insurer may submit a plan to remedy the anticompetitive impact of the
acquisition within a reasonable time. Based upon that plan or other
information, the commissioner shall specify the conditions, if any,
under which the aspects of the acquisition causing a violation of the
standards of this section would be remedied and the order vacated or
modified, and the time period within which those aspects would have
to remedied.
(m) An order entered under subsection (j) does not apply if the
acquisition to which the order applies is not consummated.
(n) A person who violates a cease and desist order issued by the
commissioner under subsection (j) while that order is in effect may,
after notice and hearing under IC 4-21.5 and upon order of the
commissioner, be subject at the discretion of the commissioner to any
one (1) or more of the following:
(1) A civil penalty of not more than ten thousand dollars
($10,000) for each day of violation.
(2) The suspension or revocation of the person's license.
(3) Both a monetary penalty under subdivision (1) and the
suspension or revocation or the person's license under subdivision
(2).
(o) An insurer or other person who fails to make any filing required
by this section and also fails to demonstrate a good faith effort to
comply with that filing requirement is subject to a civil penalty of not
more than fifty thousand dollars ($50,000).
(p) Sections 8(b), 8(c), and 10 of this chapter do not apply to an
acquisition to which this section applies.

Legislative History

As added by P.L.26-1991, SEC.10. Amended by P.L.124-2018, SEC.40.