Section 991.1403 - Acquisitions Involving Insurers not Otherwise Covered(a) As used in this section the following words and phrases shall have the meanings given to them in this subsection: "Acquisition." 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, mergers and consolidations.
"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 or consolidation.
(b)(1) Except as exempted in paragraph (2), this section applies to any acquisition in which there is a change in control of an insurer authorized to do business in this Commonwealth.(2) This section shall not apply to any of the following:(i) An acquisition subject to approval or disapproval by the department pursuant to section 1402. (ii) A purchase of securities solely for investment purposes so long as such 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 Commonwealth. If a purchase of securities results in a presumption of control as described in the definition of "control" in section 1401, it is not solely for investment purposes unless the chief insurance regulatory official in the jurisdiction of the insurer's domicile accepts a disclaimer of control or affirmatively finds that control does not exist and such disclaimer action or affirmative finding is communicated by the domiciliary insurance regulator to the department.(iii) 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 department in accordance with subsection (c)(2) thirty (30) days prior to the proposed effective date of the acquisition. However, such preacquisition notification is not required for exclusion from this section if the acquisition would otherwise be excluded from this section by this paragraph.(iv) The acquisition of already affiliated persons.(v) 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 per centum (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 exceeds twelve per centum (12%) of the total market; and(II) the market share increases by more than two per centum (2%) of the total market. For the purpose of this subparagraph, a market means direct written insurance premium in this Commonwealth for a line of business as contained in the annual statement required to be filed by insurers licensed to do business in this Commonwealth.
(vi) 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.(vii) An acquisition of an insurer whose domiciliary insurance regulator affirmatively finds that such insurer is in failing condition; there is a lack of feasible alternative to improving such condition; the public benefits of improving such insurer's condition through the acquisition exceed the public benefits that would arise from not lessening competition; and such findings are communicated by the domiciliary insurance regulator to the department.(3)Sections 1409(b) and (c) and 1411 shall not apply to acquisitions provided for in this subsection.(c)(1) An acquisition covered by subsection (b) may be subject to an order pursuant to subsection (e) unless the acquiring person files a preacquisition notification and the waiting period has expired. The acquired person may file a preacquisition notification. The department shall give confidential treatment to information submitted under this subsection in the same manner provided in section 1407. (2) The preacquisition notification shall be in such form and contain such information as prescribed by the NAIC relating to those markets which, under subsection (b)(2)(v), cause the acquisition not to be exempted from the provisions of this section. The department may require such additional material and information as it deems necessary to determine whether the proposed acquisition, if consummated, would violate the competitive standard of subsection (d). The required information may include an opinion of an economist as to the competitive impact of the acquisition in this Commonwealth accompanied by a summary of the education and experience of such person indicating his or her ability to render an informed opinion.(3) The waiting period required shall begin on the date of receipt by the department of a preacquisition notification and shall end on the earlier of the thirtieth day after the date of such receipt or termination of the waiting period by the department. Prior to the end of the waiting period, the department 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 such additional information by the department or termination of the waiting period by the department.(d)(1) The department may enter an order under subsection (e)(1) 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 Commonwealth or tend to create a monopoly therein or if the insurer fails to file adequate information in compliance with subsection (c).(2) In determining whether a proposed acquisition would violate the competitive standard of paragraph (1), the department shall consider the following:(i) Any acquisition covered under subsection (b) involving two or more insurers competing in the same market is prima facie evidence of violation of the competitive standards as follows:(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; or |
(B) 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 per centum (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 insurers are involved, exceeding the total of the two columns in the table is prima facie evidence of violation of the competitive standard in paragraph (1). For the purpose of this subparagraph, 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 largest to the eight largest, has increased by seven per centum (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, merger or consolidation covered under subsection (b) involving two or more insurers competing in the same market is prima facie evidence of violation of the competitive standard in paragraph (1) 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 such large insurers showing the requisite increase in the market share; and(C) another involved insurer's market is two per centum (2%) or more.(iii) For the purposes of this paragraph: (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 department 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 Commonwealth and the relevant geographical market is assumed to be this Commonwealth.(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 subparagraphs (i) and (ii), the department may establish the requisite anticompetitive effect based upon other substantial evidence. Even though an acquisition is prima facie violative of the competitive standard under subparagraphs (i) and (ii), 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, 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) 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 such increase exceed the public benefits which would arise from not lessening competition.(e)(1)(i) If an acquisition violates the standards of this section, the department may enter an order: (A) requiring an involved insurer to cease and desist from doing business in this Commonwealth 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 Commonwealth.(ii) Such an order shall be issued in compliance with 2 Pa.C.S. (relating to administrative law and procedure).(iii) An order pursuant to this paragraph shall not apply if the acquisition is not consummated.(2) Any person who violates a cease and desist order of the department under paragraph (1) and while such order is in effect, may, after notice and hearing and upon order of the department, be subject at the discretion of the department to either or both of the following:(i) A civil penalty of not more than ten thousand dollars ($10,000) for every day of violation.(ii) Suspension or revocation of such person's license.(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 such filing requirement shall be subject to a civil penalty not to exceed fifty thousand dollars ($50,000).Amended by P.L. 1111 2012 No. 136, § 3, eff. 9/3/2012.1921, May 17, P.L. 682, No. 284, art. XIV, § 1403, added 1992, Dec. 18, P.L. 1519, No. 178, § 19, effective in 120 days. Amended 2008, July 9, P.L. 885, No. 62, § 6, imd. effective.