26.1-10-03.1. Acquisitions involving insurers not otherwise covered

26.1-10-03.1. Acquisitions involving insurers not otherwise covered

1. For the purpose of this section:

a. "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 the acquisition of voting securities, the acquisition of assets,

bulk reinsurance, and mergers.

b. 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.

2. a. Except as exempted in subdivision b, 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:

(1) 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

subsection 2 of section 26.1-10-01, 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.

(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 preacquisition notification is filed with the commissioner in

accordance with subdivision a of subsection 3 thirty days prior to the

proposed effective date of the acquisition. However, the preacquisition

notification is not required for exclusion from this section if the acquisition

would otherwise be excluded from this section by any other paragraph of

this subdivision.

(3) The acquisition of already affiliated persons.

(4) 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 in no market

would the market share increase by more than two percent of the total

market.

For the purpose of this paragraph, 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.

(5) 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.

is paragraph, 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.

(5) 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.

(6) 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 the insurer's 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. An acquisition covered by subsection 2 may be subject to an order pursuant to

subsection 5 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 in the same manner as provided in section 26.1-10-07.

a. The preacquisition notification must be in the form and contain the information

prescribed by the national association of insurance commissioners relating to

those markets which, under paragraph 4 of subdivision b of subsection 2, cause

the acquisition not to be exempted from the provisions of this section. The

commissioner may require additional material and information as the

commissioner deems necessary to determine whether the proposed acquisition, if

consummated, would violate the competitive standard of subsection 4. 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 that person's ability to

render an informed opinion.

b. The waiting period required begins on the date of receipt of the commissioner of

a preacquisition notification and ends on the earlier of the thirtieth day after the

date of its 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 the 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.

4. a. The commissioner may enter an order under subdivision a of subsection 5 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 therein or if the insurer fails to file

adequate information in compliance with subsection 3.

b. In determining whether a proposed acquisition would violate the competitive

standard of subdivision a, the commissioner shall consider the following:

(1) Any acquisition covered under subsection 2 involving two 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

commissioner shall consider the following:

(1) Any acquisition covered under subsection 2 involving two 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

largest insurers is seventy-five percent 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 subdivision a.

For the purpose of this paragraph, the insurer with the largest share of

the market must be deemed to be insurer A.

(2) 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

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.

Any acquisition or merger covered under subsection 2 involving two or more

insurers competing in the same market is prima facie evidence of violation

of the competitive standard in subdivision a if:

(a) There is a significant trend toward increased concentration in the

market;

(b) One of the insurers involved is one of the insurance companies 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.

(3) For the purposes of this subdivision:

(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

national association of insurance commissioners 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.

n, 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.

(4) Even though an acquisition is not prima facie violative of the competitive

standard under paragraphs 1 and 2, 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 paragraphs 1 and 2, 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 the

following: market shares, volatility of ranking of market leaders, number of

competitors, concentration, trend of concentration in the industry, and ease

of entry into and exit from the market.

c. An order may not be entered under subdivision a of subsection 5 if:

(1) 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

(2) 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.

5. a. If an acquisition violates the standards of this section, the commissioner may

enter an order:

(1) 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

(2) Denying the application of an acquired or acquiring insurer for a license to

do business in this state.

b. The order may not be entered unless:

(1) There is a hearing;

(2) Notice of the hearing is issued prior to the end of the waiting period and not

less than fifteen days prior to the hearing; and

(3) 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. Every order must be accompanied by a written decision of

the commissioner setting forth findings of fact and conclusions of law.

c. An order pursuant to this subsection does not apply if the acquisition is not

consummated.

d. Any person who violates a cease and desist order of the commissioner under this

subsection and while the order is in effect, after notice and hearing and upon

order of the commissioner, may be subject at the discretion of the commissioner

to any one or both of the following:

(1) A monetary penalty of not more than ten thousand dollars for every day of

violation.

(2) Suspension or revocation of the person's license.

e. 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 is subject to a fine of not more than fifty thousand dollars.

f. Subsections 2 and 3 of section 26.1-10-10 and section 26.1-10-12 do not apply to

acquisitions covered under subsection 2.