Section 26.1-10-03 - Acquisition of control of or merger with domestic insurer - Penalties1.a. A person other than the issuer may not make a tender offer for or a request or invitation for tenders of, or enter into any agreement to exchange securities for, seek to acquire, or acquire, in the open market or otherwise, any voting security of a domestic insurer if, after consummation, the person would, directly or indirectly, or by conversion or by exercise of any right to acquire, be in control of the insurer, and a person may not enter an agreement to merge with or otherwise to acquire control of a domestic insurer or any person controlling a domestic insurer unless, at the time the offer, request, or invitation is made or the agreement is entered into, or prior to the acquisition of the securities if no offer or agreement is involved, the person has filed with the commissioner and has sent to the insurer, a statement containing the information required by this section and the offer, request, invitation, agreement, or acquisition has been approved by the commissioner in the manner prescribed in this chapter. b. For purposes of this section, any controlling person of a domestic insurer seeking to divest the person's controlling interest in the domestic insurer, in any manner, shall file with the commissioner, with a copy to the insurer, confidential notice of the person's proposed divestiture at least thirty days before the cessation of control. The commissioner shall determine those instances in which a party seeking to divest or to acquire a controlling interest in an insurer, will be required to file for and obtain approval of the transaction. The information remains confidential until the conclusion of the transaction unless the commissioner determines confidential treatment will interfere with enforcement of this section. If the statement referred to in subdivision a is otherwise filed, this subdivision does not apply.c. With respect to a transaction subject to this section, the acquiring person shall file a preacquisition notification with the commissioner which must contain the information set forth in subdivision a of subsection 3 of section 26.1-10-03.1. Failure to file the notification may result in penalties specified in subdivision e of subsection 5 of section 26.1-10-03.1.d. For purposes of this section, a domestic insurer includes any other person in control of a domestic insurer unless the other person, as determined by the commissioner, is either directly or through its affiliates primarily engaged in business other than the business of insurance. For purposes of this section, the term "person" does not include a securities broker holding, in the usual and customary broker's function, less than twenty percent of the voting securities of an insurer or of any person that controls an insurer.2. The statement to be filed with the commissioner must be made under oath or affirmation and must contain the following:a. The name and address of each person by whom or on whose behalf the merger or other acquisition of control referred to in subsection 1 is to be effected, hereinafter called the "acquiring party":(1) If the person is an individual, the individual's principal occupation and all offices and positions held during the past five years, and any conviction of crimes other than minor traffic violations during the past ten years.(2) If the person is not an individual, a report of the nature of its business operations during the past five years or for any lesser period as the person and any predecessors thereof have been in existence; an informative description of the business intended to be done by the person and the person's subsidiaries; and a list of all individuals who are or who have been selected to become directors or executive officers of the person, or who perform or will perform functions appropriate to these positions. The list must include for each individual the information required by this subsection.b. The source, nature, and amount of the consideration used or to be used in effecting the merger or other acquisition of control, a description of any transaction that funds were or are to be obtained for any such purpose, including any pledge of the insurer's stock, or the stock of any of the insurer's subsidiaries or controlling affiliates, and the identity of persons furnishing the consideration; provided, however, that if a source of the consideration is a loan made in the lender's ordinary course of business, the identity of the lender must remain confidential, if the person filing the statement so requests.c. Fully audited financial information as to the earnings and financial condition of each acquiring party for the preceding five fiscal years of each acquiring party, or for any lesser period as the acquiring party and any predecessors thereof have been in existence, and similar unaudited information as of a date not earlier than ninety days prior to the filing of the statement.d. Any plans or proposals which each acquiring party may have to liquidate the insurer, to sell its assets or merge or consolidate it with any person, or to make any other material change in its business or corporate structure or management.e. The number of shares of any security referred to in subsection 1 which each acquiring party proposes to acquire, and the terms of the offer, request, invitation, agreement, or acquisition referred to in subsection 1, and a statement as to the method used to arrive at the fairness of the proposal.f. The amount of each class of any security referred to in subsection 1 which is beneficially owned or concerning which there is a right to acquire beneficial ownership by each acquiring party.g. A full description of any contracts, arrangements, or understandings with respect to any security referred to in subsection 1 in which any acquiring party is involved, including transfer of any of the securities, joint ventures, loan or option arrangements, puts or calls, guarantees of loans, guarantees against loss or guarantees of profits, division of losses or profits, or the giving or withholding of proxies. The description must identify the persons who have entered into the contracts, arrangements, or understandings.h. A description of the purchase of any security referred to in subsection 1 during the twelve calendar months preceding the filing of the statement, by any acquiring party, including the dates of purchase, names of the purchasers, and consideration paid or agreed to be paid.i. A description of any recommendations to purchase any security referred to in subsection 1 made during the twelve calendar months preceding the filing of the statement, by any acquiring party, or by anyone based upon interviews or at the suggestion of the acquiring party.j. Copies of all tender offers for, requests or invitations for tenders of, exchange offers for, and agreements to acquire or exchange any securities referred to in subsection 1, and, if distributed, of additional soliciting material relating thereto.k. The term of any agreement, contract, or understanding made with or proposed to be made with any broker-dealer as to solicitation of securities referred to in subsection 1 for tender, and the amount of any fees, commissions, or other compensation to be paid to broker-dealers with regard thereto.l. An agreement by the person required to file the statement referred to in subsection 1 to provide the annual report, specified in subsection 12 of section 26.1-10-04, for so long as control exists.m. An acknowledgment by the person required to file the statement referred to in subsection 1, that the person and all subsidiaries within the person's control in the insurance holding company system will provide information to the commissioner upon request as necessary to evaluate enterprise risk to the insurer.n. Any additional information the commissioner by rule prescribes as necessary or appropriate for the protection of policyholders of the insurer or in the public interest. If the person required to file the statement referred to in subsection 1 is a partnership, limited partnership, syndicate, or other group, the commissioner may require that the information called for by subdivisions a through n must be given with respect to each partner of the partnership or limited partnership, each member of the syndicate or group, and each person who controls the partner or member. If any partner, member, or person is a corporation or the person required to file the statement referred to in subsection 1 is a corporation, the commissioner may require that the information called for by subdivisions a through n must be given with respect to the corporation, each officer and director of the corporation, and each person who is directly or indirectly the beneficial owner of more than ten percent of the outstanding voting securities of the corporation.
If any material change occurs in the facts set forth in the statement filed with the commissioner and sent to the insurer pursuant to this section, an amendment setting forth the change, together with copies of all documents and other material relevant to the change, must be filed with the commissioner and sent to the insurer within two business days after the person learns of the change.
3. If any offer, request, invitation, agreement, or acquisition referred to in subsection 1 is proposed to be made by means of a registration statement under the Securities Act of 1933 or in circumstances requiring the disclosure of similar information under the Securities Exchange Act of 1934, or under a state law requiring similar registration or disclosure, the person required to file the statement referred to in subsection 1 may utilize those documents in furnishing the information called for by that statement.4.a. The commissioner shall approve any merger or other acquisition of control referred to in subsection 1 unless, after a public hearing, the commissioner finds that: (1) After the change of control, the domestic insurer referred to in subsection 1 would not be able to satisfy the requirements for the issuance of a certificate of authority to write the lines of insurance for which it is presently licensed.(2) The effect of the merger or other acquisition of control would be substantially to lessen competition in insurance in this state or tend to create a monopoly. In applying the competitive standard in this subdivision:(a) The information requirements of subdivision a of subsection 3 of section 26.1-10-03.1 and the standards of subdivision b of subsection 4 of section 26.1-10-03.1;(b) The merger or other acquisition may not be disapproved if the commissioner finds that any of the situations meeting the criteria provided by subdivision c of subsection 4 of section 26.1-10-03.1 exist; and(c) The commissioner may condition the approval of the merger or other acquisition on the removal of the basis of disapproval within a specified period of time.(3) The financial condition of any acquiring party might jeopardize the financial stability of the insurer or prejudice the interest of its policyholders.(4) The plans or proposals which the acquiring party has to liquidate the insurer, sell its assets or consolidate or merge it with any person, or to make any other material change in its business or corporate structure or management, are unfair and unreasonable to policyholders of the insurer and not in the public interest.(5) The competence, experience, and integrity of those persons who would control the operation of the insurer are such that it would not be in the interest of policyholders of the insurer and of the public to permit the merger or other acquisition of control.(6) The acquisition is likely to be hazardous or prejudicial to the insurance buying public.b. The public hearing referred to in subdivision a must be held within thirty days after the statement required by subsection 1 is filed and at least twenty days' notice must be given by the commissioner to the person filing the statement. Not less than seven days' notice of the hearing must be given by the person filing the statement to the insurer and to other persons designated by the commissioner. The commissioner shall make a determination within the sixty-day period preceding the effective date of the proposed transaction. At the hearing, the person filing the statement, the insurer, any person to whom notice of hearing was sent, and any other person whose interests may be affected have the right to present evidence, examine and cross-examine witnesses, and offer oral and written arguments and in connection therewith are entitled to conduct discovery proceedings in the same manner allowed in district court of this state. All discovery proceedings must be concluded not later than three days prior to the hearing.c. If the proposed acquisition of control will require the approval of more than one commissioner, the public hearing referred to in subdivision b may be held on a consolidated basis upon request of the person filing the statement referred to in subsection 1. Within five days of making the request for a public hearing, the person shall file the statement referred to in subsection 1 with the national association of insurance commissioners. A commissioner may opt out of a consolidated hearing and shall provide notice to the applicant of the opt out within ten days of the receipt of the statement referred to in subsection 1. A hearing conducted on a consolidated basis is public and must be held within the United States before the commissioners of the states in which the insurers are domiciled. The commissioners shall hear and receive evidence. A commissioner may attend the hearing in person or by telecommunication.d. In connection with a change of control of a domestic insurer, any determination by the commissioner that the person acquiring control of the insurer must be required to maintain or restore the capital of the insurer to the level required by the laws and rules of this state must be made not later than sixty days after the date of notification of the change in control submitted pursuant to subdivision a of subsection 1.e. The commissioner may retain at the acquiring person's expense any attorneys, actuaries, accountants, and other experts not otherwise a part of the commissioner's staff as may be reasonably necessary to assist the commissioner in reviewing the proposed acquisition of control.5. This section does not apply to: a. Any transaction which is subject to the provisions of chapter 26.1-07, dealing with the merger or consolidation of two or more insurers.b. Any offer, request, invitation, agreement, or acquisition which the commissioner by order exempts as not having been made or entered for the purpose and not having the effect of changing or influencing the control of a domestic insurer or as otherwise not comprehended within the purposes of this section.6. The following is a violation of this section:a. The failure to file any statement, amendment, or other material required to be filed pursuant to subsection 1 or 2.b. The effectuation or any attempt to effectuate an acquisition of control of, divestiture of, or merger with, a domestic insurer without the approval of the commissioner.7. The courts of this state have jurisdiction over every person not resident, domiciled, or authorized to do business in this state who files a statement with the commissioner under this section, and over all actions involving the person arising out of violations of this section, and each person is deemed to have performed acts equivalent to and constituting appointment of the commissioner as the person's attorney upon whom may be served all lawful process in any action, suit, or proceeding arising out of violations of this section. Copies of all lawful process must be served on the commissioner and transmitted by registered mail by the commissioner to the person at the person's last-known address.Amended by S.L. 2015, ch. 207 (HB 1132),§ 3, eff. 8/1/2015.