§ 27-35-2.5. Acquisitions involving insurers not otherwise covered.
(a) Definitions. 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.
(2) 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.
(b) Scope.(1) Except as exempted in subsection (b)(2) of this section, 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:
(i) 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 § 27-35-1(3), 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;
(ii) 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 pre-acquisition
notification is filed with the commissioner in accordance with subsection (c)(1) of
this section thirty (30) days prior to the proposed effective date of the acquisition.
However, such pre-acquisition notification is not required for exclusion from this
section if the acquisition would otherwise be excluded from this section by any other
subparagraph of subsection (b)(2) of this section;
(iii) The acquisition of already affiliated persons;
(iv) 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
(I) The combined market share of the involved insurers exceed twelve percent (12%) of
the total market, and
(II) The market share increase by more than two percent (2%) of the total market.
For the purpose of this subsection (b)(2)(iv), 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;
(v) An acquisition for which a pre-acquisition notification would be required pursuant
to this section due solely to the resulting effect on the ocean marine insurance line
of business;
(vi) 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) Pre-acquisition notification; Waiting period. An acquisition covered by 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 commissioner shall give confidential treatment to information submitted
under this subsection in the same manner as provided in §â€‚27-35-6.
(1) The pre-acquisition notification shall be in such form and contain such information
as prescribed by the NAIC relating to those markets which, under subsection (b)(2)(iv)
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 pre-acquisition 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) Competitive standard.(1) The commissioner may enter an order under subsection (e)(1) 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 subsection (d)(1) of this section, the commissioner shall consider the following:
(i) Any acquisition covered under subsection (b) of this section involving two (2) 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 (4) 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 (2) insurers are involved, exceeding the total of the two columns in the
table is prima facie evidence of violation of the competitive standard in subsection
(d)(1) of this section. For the purpose of this item, the insurer with the largest
share of the market shall be deemed to be Insurer A.
(ii) 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 prior
to the acquisition up to the time of the acquisition. Any acquisition or merger covered
under subsection (b) of this section involving two (2) or more insurers competing
in the same market is prima facie evidence of violation of the competitive standard
in subsection (d)(1) of this section if:
(A) There is a significant trend toward increased concentration in the market;
(B) 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
(C) Another involved insurer's market is two percent (2%) or more.
(iii) For the purposes of subsection (d)(2) of this section:
(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
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;
(C) The burden of showing prima facie evidence of violation of the competitive standard
rests upon the commissioner.
(iv) Even though an acquisition is not prima facie violative of the competitive standard
under subsections (d)(2)(i) and (d)(2)(ii) of this section, 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 subsections
(d)(2)(i) and (d)(2)(ii) of this section, a party may establish the absence of the
requisite anticompetitive effect based upon other substantial evidence. Relevant factors
in making a determination under this subsection (d)(2)(iv) include, 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 ease of
entry and exit into the market.
(3) An order may not be entered under subsection (e)(1) of this section if:
(i) 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
(ii) 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) Orders and penalties.(1)(i) If an acquisition violates the standards of this section, the commissioner may enter
an order:
(A) 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
(B) Denying the application of an acquired or acquiring insurer for a license to do business
in this state.
(ii) Such an order shall not be entered unless:
(A) There is a hearing;
(B) 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
(C) The hearing is concluded and the order is issued no later than sixty (60) days after
the date of the filing of the pre-acquisition notification with the commissioner.
Every order shall be accompanied by a written decision of the commissioner setting
forth findings of fact and conclusions of law.
(iii) An order pursuant to this subsection (e)(1) shall not apply if the acquisition is
not consummated.
(2) Any person who violates a cease and desist order of the commissioner under subsection
(e)(1) of this section and while the order is in effect may, after notice and hearing
and upon order of the commissioner, be subject to one or more of the penalties set
forth in §â€‚42-14-16.
(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 one or more penalties set forth in §â€‚42-14-16.
(f) Inapplicable provisions. Sections 27-35-8(b), 27-35-8(c), and 27-35-10 do not apply to acquisitions covered under subsection (b) of this section.