§ 59A-37-29 — Acquisitions that would lessen competition

New Mexico § 59A-37-29

• Jurisdiction: New Mexico
• Ch. 59A: Insurance Code
• Art. 37: Insurance Holding Companies

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A. As used in this section: (1) "acquisition" means an agreement, arrangement or activity whose consummation results in a person directly or indirectly acquiring the control of another person and includes the acquisition of voting securities, the acquisition of assets, bulk reinsurance and mergers; and (2) "involved insurer" includes an insurer that acquires or is acquired, is affiliated with an acquirer or acquired or is the result of a merger. B. Except as provided in this subsection, this section applies to an acquisition in which there is a change of control of an insurer authorized to do business in New Mexico. This section does not apply to: (1) a purchase of securities made solely for investment purposes if the securities are not used by voting or otherwise to cause or attempt to cause the substantial lessening of competition in an insurance market in New Mexico. If a purchase of securities results in a presumption of control as provided in Subsection C of Section 59A-37-2 NMSA 1978, this section applies to the purchase unless the insurance supervisory official of the insurer's state of domicile accepts a disclaimer of control or affirmatively finds that control does not exist and the domiciliary insurance supervisory official communicates that disclaimer action or affirmative finding to the superintendent; (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 the acquisition would otherwise not be excluded from this section by the provisions of another paragraph of this subsection and if the acquiring party to the acquisition files with the superintendent a notification in accordance with Paragraph (1) of Subsection C of this section at least thirty days prior to the proposed effective date of the acquisition; (3) the acquisition of an already affiliated person; (4) where "market" means the direct written insurance premium in New Mexico for a line of business contained in the annual statement required to be filed by an insurer licensed to do business in New Mexico, an acquisition if, as an immediate result of the acquisition: (a) the combined market share of the involved insurers would not exceed five percent of the total market in any market; (b) no market share would increase; or (c) the combined market share of the involved insurers would not exceed twelve percent, and the market share would not increase by more than two percent, of the total market in any market; (5) an acquisition for which a pre-acquisition notification would be required by the provisions of this section solely because of its effect on the ocean marine insurance line of business; and (6) an acquisition of an insurer whose domiciliary insurance supervisory official finds that the insurer is in failing condition, that there is no feasible way to improve the condition and that the benefit to the public of improving the insurer's condition through the acquisition exceeds the benefit to the public that would arise from not lessening competition; provided that the findings are communicated to the superintendent by the domiciliary insurance supervisory official. C. An acquisition identified 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 pre- acquisition notification and the waiting period has expired. The acquired person may file a pre-acquisition notification. The superintendent shall treat as confidential information submitted pursuant to this subsection in the same manner as provided in Section 59A- 37-24 NMSA 1978. (1) Pre-acquisition notification shall contain the information and be in the form prescribed by the national association of insurance commissioners relating to the markets that, pursuant to Paragraph (4) of Subsection B of this section, subject the acquisition to the provisions of this section. The superintendent may require the submission of additional materials and information that the superintendent deems necessary to determine whether the proposed acquisition, if consummated, would violate the competitive standard identified in Subsection D of this section. Among other materials, the superintendent may require the submission of an economist's opinion relating to the competitive impact of the acquisition in New Mexico along with an addendum addressing the economist's educational background, experience and ability to render an informed opinion. (2) A waiting period shall begin on the date that the superintendent receives a pre-acquisition notification and shall end on the thirtieth day after the date of receipt or upon the superintendent's termination of the waiting period, whichever is earlier. Prior to the end of the waiting period, the superintendent, through one request, may require the submission of additional information relevant to the proposed acquisition. A request for the submission of additional information shall trigger a new waiting period that begins on the date of receipt of the additional information and ends on the thirtieth day after that receipt or upon the superintendent's termination of the waiting period, whichever is earlier. D. The superintendent may enter an order pursuant to Subsection E of this section if there is substantial evidence that the acquisition may substantially lessen competition in a line of insurance in New Mexico or that the acquisition would tend to create a monopoly or if the insurer fails to file adequate information in compliance with Subsection C of this section. (1) In determining whether a proposed acquisition would violate the competitive standard identified in this subsection, the superintendent shall consider that: (a) an acquisition identified in Subsection B of this section that involves two or more insurers competing in the same market is prima facie evidence of a violation of the competitive standard: 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; (b) for the purposes of Subparagraph (a) of this paragraph, a highly concentrated market is one in which the share of the four largest insurers is seventy-five percent or more of the market; the insurer with the largest share of the market shall be deemed to be Insurer A; a percentage not shown in a table is interpolated in proportion to the percentages shown; and if more than two insurers are involved in the acquisition, exceeding the total of the two columns in the table is prima facie evidence of a violation of the competitive standard of this subsection; (c) there is a significant trend toward increased concentration when the aggregate market share of a grouping of the largest insurers in the market, from the two largest to the eight largest, has increased by seven or more percent 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. An acquisition or a merger identified in Subsection B of this section that involves two or more insurers competing in the same market is prima facie evidence of a violation of the competitive standard of this subsection if: 1) there is a significant trend toward increased concentration in the market; 2) an involved insurer is in a grouping of large insurers showing the requisite increase in the market share; and 3) another involved insurer's market is two percent or more; (d) for the purposes of this subsection: 1) "insurer" includes a company and a group of companies under common management, ownership or control; 2) "market" means the relevant product and geographical markets. In determining the relevant product and geographical markets, the superintendent shall give due consideration to, among other things, existing definitions or guidelines promulgated by the national association of insurance commissioners and information submitted by the 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 New Mexico, and the relevant geographical market is assumed to be New Mexico; and 3) the superintendent bears the burden of showing prima facie evidence of a violation of the competitive standard; and (e) an acquisition that is not prima facie evidence of a violation of the competitive standard pursuant to Subparagraphs (a) and (b) of this paragraph may establish the requisite anti-competitive effect based on other substantial evidence. Using other substantial evidence, a party may establish the absence of the requisite anti-competitive effect for an acquisition that violates the competitive standard pursuant to Subparagraphs (a) and (b) of Paragraph (2) of this subsection. In making a determination pursuant to this subparagraph, the superintendent shall consider relevant factors, including: 1) market shares; 2) volatility of the ranking of market leaders; 3) the number of competitors; 4) concentration; 5) the trend of concentration in the industry; and 6) the ease of entry and exit into the market. (2) An order shall not be entered pursuant to Subsection E of this section if: (a) the acquisition would yield substantial economies of scale or economies in resource utilization that cannot be feasibly achieved in another way and the benefit to the public that would arise from those economies would exceed the benefits to the public that would arise from not lessening competition; or (b) the acquisition would substantially increase the availability of insurance and the benefits to the public of the increase would exceed the benefits to the public that would arise from not lessening competition. E. If an acquisition violates the standards of this section, the superintendent may enter an order requiring an involved insurer to cease and desist from doing business in New Mexico with respect to the line or lines of insurance involved in the violation or an order denying the application of an acquired or acquiring insurer for a license to do business in New Mexico. The superintendent shall only enter an order if notice of a hearing was issued before the end of the waiting period, but not less than fifteen days prior to the hearing, and the hearing has concluded. The superintendent shall not enter an order more than sixty days after the insurer filed with the superintendent pre- acquisition notification. A written decision by the superintendent that sets forth findings of fact and conclusions of law shall accompany an order. An order is void if the acquisition is not consummated. After notice and a hearing, the superintendent may fine a person that violates a valid cease-and-desist order no more than ten thousand dollars ($10,000) per day of the violation or suspend or revoke the person's license, or both. The superintendent may fine an insurer or other person that fails to make a filing required by this section and fails to demonstrate a good faith effort to comply with a filing requirement no more than fifty thousand dollars ($50,000). F. Subsections B and C of Section 59A-37-25 NMSA 1978 and Subsection A of Section 59A-37-27 NMSA 1978 do not apply to an acquisition identified in Subsection B of this section.

Legislative History

1978 Comp., § 59A-37-29, enacted by Laws 2014, ch. 59, § 43.