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The Vermont Statutes Online
Title
08
:
Banking and Insurance
Chapter
101
:
INSURANCE COMPANIES GENERALLY
Subchapter
013
:
HOLDING COMPANIES AND SUBSIDIARIES
§
3683a. Acquisitions involving insurers not otherwise covered
(a) Definitions.
For the purposes of this section:
(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 the acquisition of voting securities and
assets, bulk reinsurance, and mergers.
(2) "Highly
concentrated market" is a market in which the share of the four largest
insurers is 75 percent or more of the market.
(3)
"Insurer" means a company licensed to do business in this State and
includes any company or group of companies under common management, ownership,
or control.
(4)
"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.
(5)
"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, adopted 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.
(6)
"Significant trend toward increased concentration" means 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.
(b) Covered
acquisitions. Except as provided in this subsection, this section applies to
any acquisition in which there is a change in control of an insurer licensed to
do business in this State, but not domiciled in this State. This section shall
not apply to the following:
(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 subdivision 3681(3) of
this chapter, 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 (c)(1) of this section 30 days prior to the proposed effective date
of the acquisition or if the acquisition would otherwise be excluded from this
section by any other provision of this subsection.
(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 12 percent of
the total market and the market share increase by more than two percent of the
total market. For purposes of this subdivision, "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 under
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
alternatives 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)
Preacquisition notification; waiting period. An insurer involved in an
acquisition covered by subsection (b) of this section shall file a
preacquisition notification with the Commissioner so that the Commissioner may
determine whether the proposed acquisition, if consummated, would violate the
competitive standard established under subsection (d) of this section. The
Commissioner shall give confidential treatment to information submitted under
this subsection in the same manner as provided in section 3687 of this chapter.
(1) The
preacquisition notification shall be in such form and contain such information
as prescribed by the NAIC relating to those markets which cause the acquisition
to be covered under provisions of this section. The Commissioner may require
such additional material and information as deemed necessary to carry out the
purposes 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 the Commissioner receives a
preacquisition notification and shall end on the earlier of the 30th 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 30th day after the Commissioner receives the additional
information or termination of the waiting period by the Commissioner.
(d) Competitive
standard.
(1) The
Commissioner may enter an order under subdivision (e)(1) of this section with
respect to an acquisition if there is substantial evidence that the effect of
the acquisition may be to lessen substantially competition in any line of
insurance in this State or may tend to create a monopoly.
(2) In
determining whether a proposed acquisition would violate the competitive
standard of subdivision (1) of this subsection, the Commissioner shall consider
the following:
(A) any
acquisition covered under subsection (b) of this section involving two insurers
competing in the same market is prima facie evidence of violation of the
competitive standard if:
(i) The market
is highly concentrated and the involved insurers possess the following shares
of the market;
(I) insurer A a
share of four percent and insurer B a share of four percent or more;
(II) insurer A a
share of 10 percent and insurer B a share of two percent or more; or
(III) insurer A
a share of 15 percent and insurer B a share of one percent or more.
(ii) The market
is not highly concentrated and the involved insurers possess the following
shares of the market:
(I) insurer A a
share of five percent and insurer B a share of five percent or more;
(II) insurer A a
share of 10 percent and insurer B a share of four percent or more;
(III) insurer A
a share of 15 percent and insurer B a share of three percent or more; or
(IV) insurer A a
share of 19 percent and insurer B a share of one percent or more.
(B) If more than
two insurers competing in the same market are involved in any acquisition
covered under subsection (b) of this section, then exceeding the total of the
two figures set forth for insurer A and insurer B established under subdivision
(A)(i) or (ii) of this subdivision (2) is prima facie evidence of violation of the
competitive standard. For purposes of this subdivision (2), the insurer with
the largest share of the market shall be considered to be insurer A.
(C) Any
acquisition covered under subsection (b) of this section involving two or more
insurers competing in the same market is prima facie evidence of violation of
the competitive standard in subdivision (1) of this subsection if:
(i) there is a
significant trend toward increased concentration in the market;
(ii) 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
(iii) another
involved insurer's market is two percent or more.
(3) If an
acquisition is not prima facie violative of the competitive standard under
subdivisions (A) through (C) of subdivision (2) of this subsection, the
Commissioner may establish the requisite anticompetitive effect based upon
other substantial evidence. If an acquisition is prima facie violative of the
competitive standard under subdivisions (A) through (C) of subdivision (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 subdivision 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.
(4) The burden
of showing prima facie evidence of violation of the competitive standard rests
upon the Commissioner.
(5) Percentages
not provided in subdivisions (A) and (B) of subdivision (2) of this subsection
are interpolated proportionately to the percentages that are provided.
(6) An order may
not be entered under subdivision (e)(1) of this section if:
(A) 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
(B) 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) If an
acquisition violates the competitive standard of subsection (d) of this section
or if an involved insurer fails to file adequate information in compliance with
subsection (c) 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.
(2) Such an
order shall not be entered unless there is a hearing, notice of the hearing is
issued prior to the end of the waiting period and not less than 15 days prior
to the hearing, and the hearing is concluded and the order is issued no later
than 60 days after the date of the filing of the preacquisition notification
with the Commissioner.
(3) Every order
shall be accompanied by a written decision of the Commissioner setting forth
findings of fact and conclusions of law. An order under this subdivision shall
not apply if the acquisition is not consummated.
(4) Any person
who violates a cease and desist order of the Commissioner under subdivision (1)
of this subsection and while the order is in effect may, after notice and
hearing and upon order of the Commissioner, be subject to a monetary penalty of
not more than $10,000.00 for every day of violation or suspension or revocation
of the person's license, in the discretion of the Commissioner.
(5) 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 a fine of not more than $50,000.00.
(f) Subsections
3689 (b) and (c) of this title (regarding voting securities) and section 3691
of this title (regarding receivership) do not apply to acquisitions covered
under subsection (b) of this section. (Added 2013, No. 29, § 29, eff. May 13,
2013.)
