§ 26.1-10-03.1 — Acquisitions involving insurers not otherwise covered

North Dakota § 26.1-10-03.1

• Jurisdiction: North Dakota
• Title 26.1: Insurance
• Ch. 26.1-10: Insurance Holding Company Systems

Text

1. For the purpose of this section:
a. "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 the acquisition of voting securities, the acquisition of assets,
bulk reinsurance, and mergers.
b. An "involved insurer" includes an insurer which either acquires or is acquired, is
affiliated with an acquirer or acquired, or is the result of a merger.
2. a. Except as exempted in subdivision b, this section applies to any acquisition in
which there is a change in control of an insurer authorized to do business in this
state.
b. This section does not apply to:
(1) 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
subsection 2 of section 26.1-10-01, 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.
(2) 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 subdivision a of subsection 3 thirty days prior to the
proposed effective date of the acquisition. However, the preacquisition
notification is not required for exclusion from this section if the acquisition
would otherwise be excluded from this section by any other paragraph of
this subdivision.
(3) The acquisition of already affiliated persons.
(4) 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 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 exceed twelve percent of the total market, and in no market

would the market share increase by more than two percent of the total
market.
For the purpose of this paragraph, 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.
(5) 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.
(6) 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 the insurer's 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.
3. An acquisition covered by subsection 2 may be subject to an order pursuant to
subsection 5 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 26.1-10-07.
a. The preacquisition notification must be in the form and contain the information
prescribed by the national association of insurance commissioners relating to
those markets which, under paragraph 4 of subdivision b of subsection 2, cause
the acquisition not to be exempted from the provisions of this section. The
commissioner may require additional material and information as the
commissioner deems necessary to determine whether the proposed acquisition, if
consummated, would violate the competitive standard of subsection 4. 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 that person's ability to
render an informed opinion.
b. The waiting period required begins on the date of receipt of the commissioner of
a preacquisition notification and ends on the earlier of the thirtieth day after the
date of its 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 the event the waiting period ends 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.
4. a. The commissioner may enter an order under subdivision a of subsection 5 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 therein or if the insurer fails to file
adequate information in compliance with subsection 3.
b. In determining whether a proposed acquisition would violate the competitive
standard of subdivision a, the commissioner shall consider the following:
(1) Any acquisition covered under subsection 2 involving two or more insurers
competing in the same market is prima facie evidence of violation of the
competitive standards:
(a) 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

(b) Or, 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 is one in which the share of the four
largest insurers is seventy-five percent 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 subdivision a.
For the purpose of this paragraph, the insurer with the largest share of
the market must be deemed 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 largest to the eight largest, has increased by seven
percent or more of the market over a period of time extending from any base
year five to ten years prior to the acquisition up to the time of the acquisition.
Any acquisition or merger covered under subsection 2 involving two or more
insurers competing in the same market is prima facie evidence of violation
of the competitive standard in subdivision a if:
(a) There is a significant trend toward increased concentration in the
market;
(b) One of the insurers involved is one of the insurance companies in a
grouping of large insurers showing the requisite increase in the market
share; and
(c) Another involved insurer's market is two percent or more.
(3) For the purposes of this subdivision:
(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, the commissioner shall give due consideration to, among
other things, the definitions or guidelines, if any, promulgated by the
national association of insurance commissioners 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.
(c) The burden of showing prima facie evidence of violation of the
competitive standard rests upon the commissioner.
(4) Even though an acquisition is not prima facie violative of the competitive
standard under paragraphs 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 paragraphs 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 paragraph include the
following: market shares, volatility of ranking of market leaders, number of
competitors, concentration, trend of concentration in the industry, and ease
of entry into and exit from the market.
c. An order may not be entered under subdivision a of subsection 5 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 which would arise from such economies exceed the
public benefits which would arise from not lessening competition; or
(2) The acquisition will substantially increase the availability of insurance, and
the public benefits of such increase exceed the public benefits which would
arise from not lessening competition.
5. 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 may 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 days prior to the hearing; and
(3) The hearing is concluded and the order is issued no later than sixty days
after the date of the filing of the preacquisition notification with the
commissioner. Every order must be accompanied by a written decision of
the commissioner setting forth findings of fact and conclusions of law.
c. An order pursuant to this subsection does not apply if the acquisition is not
consummated.
d. Any person who violates a cease and desist order of the commissioner under this
subsection and while the order is in effect, after notice and hearing and upon
order of the commissioner, may be subject at the discretion of the commissioner
to any one or both of the following:
(1) A monetary penalty of not more than ten thousand dollars for every day of
violation.
(2) Suspension or revocation of the person's license.
e. 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 such
filing requirement is subject to a fine of not more than fifty thousand dollars.
f. Subsections 2 and 3 of section 26.1-10-10 and section 26.1-10-12 do not apply to
acquisitions covered under subsection 2.