Section 10-3-803.5 - Acquisitions involving insurers not otherwise covered - definitions(1) As used in this section, unless the context otherwise requires: (a) "Acquisition" means an 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) For the purposes of subparagraph (IV) of paragraph (b) of subsection (2) of this section, "insurer" includes any company or group of companies under common management, ownership, or control.(c) "Involved insurer" includes an insurer that either acquires or is acquired through an acquisition, is affiliated with an insurer that acquires or is acquired through an acquisition, or is the result of a merger.(d) "Market" means:(I) For the purposes of subparagraph (IV) of paragraph (b) of subsection (2) of this section, 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;(II) For the purposes of paragraph (b) of subsection (4) of this section, 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.(2)Scope.(a) Except as exempted in paragraph (b) of this subsection (2), 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 the following:(I) A purchase of securities 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 any insurance market in this state. If a purchase of securities results in a presumption of control under section 10-3-801 (3), the purchase is not solely for investment purposes unless the insurance 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 preacquisition notification is filed with the commissioner in accordance with paragraph (b) of subsection (3) of this section thirty days before the proposed effective date of the acquisition; except that preacquisition notification is not required for exclusion from this section if the acquisition would otherwise be excluded from this section by any other subparagraph of this paragraph (b);(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 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 the combined market share increase by more than two percent of the total market;(V) 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; or(VI) An acquisition of an insurer whose domiciliary insurance commissioner affirmatively finds that the insurer is in failing condition; there is a lack of feasible alternatives to improving its 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)(a) An acquisition covered by subsection (2) of this section may be subject to an order pursuant to subsection (5) of this section 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 (3) in the same manner as otherwise provided in this part 8; except that the notice required by subsection (3)(d)(I) of this section must include the information specified in subsection (3)(d)(I) of this section if the preacquisition notification presents prima facie evidence of a violation of the competitive standard specified in subsection (4)(b) of this section.(b) The preacquisition notification must be in the form and contain the information as prescribed by the NAIC relating to those markets which, under subparagraph (IV) of paragraph (b) of subsection (2) of this section, cause the acquisition not to be exempted from this section. The commissioner may require additional material and information as deemed necessary to determine whether the proposed acquisition, if consummated, would violate the competitive standard of subsection (4) 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 the economist indicating his or her ability to render an informed opinion.(c) Except as otherwise provided in subsection (3)(d) of this section:(I) The waiting period begins on the date of receipt by the commissioner of a preacquisition notification and ends on the earlier of the thirtieth day after the date of receipt or termination of the waiting period by the commissioner; and(II) 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, in which 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.(d) If the proposed acquisition involves one or more health insurers:(I) The commissioner shall provide public notice of the filing of an application for an acquisition of control referred to in subsection (2)(a) of this section no later than five business days after the receipt of the preacquisition notification required by subsection (3)(a) of this section. If the preacquisition notification presents prima facie evidence of a violation of the competitive standard specified in subsection (4)(b) of this section, the notice must include: (A) The relevant product for which prima facie evidence of the violation of the competitive standard was presented in the preacquisition notice;(B) The relevant geographic market for which prima facie evidence of the violation of the competitive standard was presented in the preacquisition notice; and(C) As specified in subsection (4)(b)(I)(A) or (4)(b)(I)(B) of this section, the shares of the market in which prima facie evidence of the violation of the competitive standard was presented in the preacquisition notice.(II) The commissioner shall review the impact of a proposed acquisition on competition when the proposed acquisition involves a transaction that the commissioner determines would present prima facie evidence of a violation of the competitive standard specified in subsection (4) of this section. The review must include a public hearing or an opportunity for the public to submit written comments to the commissioner.(III) The waiting period begins on the date of receipt by the commissioner of a preacquisition notification and, except as specified in subsection (3)(d)(IV) of this section, ends on the earlier of the thirtieth day after the date of receipt of the preacquisition notification or termination of the waiting period by the commissioner.(IV) If the commissioner allows for public comment as part of the review of a merger, the waiting period ends on the earlier of the thirtieth day after the date of receipt of the preacquisition notification or termination of the waiting period by the commissioner. If the commissioner holds a hearing as part of the review of a merger, the waiting period ends on the date of the hearing.(V) 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.(VI) Nothing in this section prevents an applicant from making the preacquisition notification available for confidential stakeholder inspection.(4)Competitive standard.(a) The commissioner may enter an order under paragraph (a) of subsection (5) of this section with respect to an acquisition if:(I) 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(II) The insurer fails to file adequate information in compliance with subsection (3) of this section.(b) In determining whether a proposed acquisition would violate the competitive standard of paragraph (a) of this subsection (4), the commissioner shall consider the following: (I) An acquisition covered under section 10-3-803 (2) involving two or more insurers competing in the same market is prima facie evidence of violation of the competitive standards if one of the following occurs:(A) 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) 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 |
(II) 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 of sub-subparagraphs (A) and (B) of subparagraph (I) of this paragraph (b) are interpolated proportionately to the percentages that are shown. For the purpose of subparagraph (I) of this paragraph (b), the insurer with the largest share of the market is deemed to be insurer A.(III) Whether there is a significant trend toward increased concentration in the market. There is a significant trend toward increased concentration in the market 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. An acquisition covered under subsection (2) of this section involving two or more insurers competing in the same market is prima facie evidence of violation of the competitive standard in paragraph (a) of this subsection (4) 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 or more; and(IV) Even though an acquisition is not prima facie violative of the competitive standard under subparagraph (I) or (III) of this paragraph (b), 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 subparagraph (I) or (III) of this paragraph (b), a party may establish the absence of the requisite anticompetitive effect based upon other substantial evidence. Relevant factors in making a determination under this subparagraph (IV) 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 and exit into the market.(c) The burden of showing prima facie evidence of violation of the competitive standard rests upon the commissioner.(d) The commissioner shall not enter an order under paragraph (a) of subsection (5) of this section if the acquisition will:(I) 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 such economies exceed the public benefits that would arise from not lessening competition; or(II) Substantially increase the availability of insurance and the public benefits of the increase exceed the public benefits that would arise from not lessening competition.(5)Orders and penalties.(a)(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) The commissioner shall not enter an order under this paragraph (a) unless: (A) There is a hearing on the proposed order;(B) Except for a hearing held pursuant to subsection (3)(d) of this section, notice of the hearing is issued before the end of the waiting period and not less than fifteen days before the hearing;(C) For a hearing held pursuant to subsection (3)(d) of this section, notice of the hearing is issued by the later of the thirtieth day after receipt by the commissioner of a preacquisition notification or by the date the commissioner sets for the receipt of public comments;(D) Except for a hearing held pursuant to subsection (3)(d) of this section, 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; and(E) For a hearing held pursuant to subsection (3)(d) of this section, the hearing is concluded and the order is issued no later than sixty days after the end of the waiting period.(III) Every order must be accompanied by a written decision of the commissioner setting forth findings of fact and conclusions of law.(IV) An order entered pursuant to this paragraph (a) does not apply if the acquisition is not consummated.(b) A person who violates a cease-and-desist order of the commissioner under paragraph (a) of this subsection (5) and while the order is in effect is, after notice and hearing and upon order of the commissioner, subject at the discretion of the commissioner to one or more of the following: (I) A monetary penalty of not more than ten thousand dollars for every day of violation; or(II) Suspension or revocation of the person's license.(c) An 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, is subject to a fine of not more than fifty thousand dollars.(6) Sections 10-3-810 (2) and (3) and 10-3-812 do not apply to acquisitions covered under subsection (2) of this section.Amended by 2017 Ch. 300, § 1, eff. 6/2/2017.Part 8 repealed and reenacted by 2014 Ch. 312, § 2, eff. 7/1/2014.This section is similar to former § 10-3-803.5 as it existed prior to 2014.