2006 Minnesota Statutes

60D.18 ACQUISITIONS INVOLVING INSURERS NOT OTHERWISE COVERED.
    Subdivision 1. Definitions. The following definitions apply for the purposes of this section
only:
(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, but
is not limited to, the acquisition of voting securities, the acquisition of assets, bulk reinsurance,
and mergers.
(b) An "involved insurer" includes an insurer that either acquires or is acquired, is affiliated
with an acquirer or acquired, or is the result of a merger.
    Subd. 2. Scope. (a) Except as exempted in paragraph (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 the following:
(1) an acquisition subject to approval or disapproval by the commissioner pursuant to
section 60D.17;
(2) 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 state. If a purchase of securities results in a presumption of
control under section 60D.15, subdivision 4, 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 such disclaimer action or affirmative finding is communicated
by the domiciliary commissioner to the commissioner of this state;
(3) 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 3, paragraph (a), 30 days before
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 clause of this paragraph;
(4) the acquisition of already affiliated persons;
(5) an acquisition if, as an immediate result of the acquisition;
(i) in no market would the combined market share of the involved insurers exceed five
percent of the total market;
(ii) there would be no increase in any market share; or
(iii) in no market would the combined market share of the involved insurers exceed 12 percent
of the total market; and the market share increases by more than two percent of the total market.
For the purpose of this clause, 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;
(6) 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; and
(7) 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 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.
    Subd. 3. Preacquisition notification; waiting period. (a) An acquisition covered by
subdivision 2 may be subject to an order pursuant to subdivision 4 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 section in the same manner as provided in section 60D.22.
(b) The preacquisition notification must be in the form and contain the information as
prescribed by the National Association of Insurance Commissioners relating to those markets
that, under subdivision 2, paragraph (b), clause (5), cause the acquisition not to be exempted
from the provisions of this section. The commissioner may require the additional material
and information as the commissioner deems necessary to determine whether the proposed
acquisition, if consummated, would violate the competitive standard of subdivision 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 the person
indicating that person's ability to render an informed opinion.
(c) The waiting period required begins on the date of receipt of the commissioner of a
preacquisition notification and ends on the earlier of the 30th day after the date of its receipt, or
termination of the waiting period by the commissioner. Before the end of the waiting period, the
commissioner on a onetime 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 receipt of the additional information by the commissioner or termination
of the waiting period by the commissioner.
    Subd. 4. Competitive standard. (a) The commissioner may enter an order under subdivision
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
subdivision 3.
(b) In determining whether a proposed acquisition would violate the competitive standard of
paragraph (a), the commissioner shall consider the following:
(1) Any acquisition covered under subdivision 2 involving two or more insurers competing
in the same market is prima facie evidence of violation of the competitive standards:
(i) if the market is highly concentrated and the involved insurers possess the following
shares of the market:

		INSURER A	INSURER B
		4 percent	4 percent or more
		10 percent	2 percent or more
		15 percent	1 percent or more, or

(ii) if the market is not highly concentrated and the involved insurers possess the following
shares of the market:

		INSURER A	INSURER B
		5 percent	5 percent or more
		10 percent	4 percent or more
		15 percent	3 percent or more
		19 percent	1 percent or more

A highly concentrated market is one in which the share of the four largest insurers is 75
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
paragraph (a). For the purpose of this clause, the insurer with the largest share of the market shall
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 subdivision 2 involving two or more insurers competing in
the same market is prima facie evidence of violation of the competitive standard in clause (1) 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 such large insurers
showing the requisite increase in the market share; and
(iii) another involved insurer's market is two percent or more.
(3) For the purposes of paragraph (b):
(i) The term "insurer" includes any company or group of companies under common
management, ownership, or control.
(ii) 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, the 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.
(iii) 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
paragraph (b), clauses (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 paragraph (b), clauses (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, 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.
(c) An order may not be entered under subdivision 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.
    Subd. 5. Orders and penalties. 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.
The order must not be entered unless there is a hearing, the notice of the hearing is issued
before the end of the waiting period and not less than 15 days before the hearing, and the hearing
is concluded and the order is issued no later than 60 days after the end of the waiting period.
Every order must be accompanied by a written decision of the commissioner setting forth findings
of fact and conclusions of law.
An order entered under this paragraph shall not become final earlier than 30 days after it is
issued, during which time the involved insurer may submit a plan to remedy the anticompetitive
impact of the acquisition within a reasonable time. Based upon the plan or other information,
the commissioner shall specify the conditions, if any, under the time period during which the
aspects of the acquisition causing a violation of the standards of this section would be remedied
and the order vacated or modified.
An order pursuant to this subdivision does not apply if the acquisition is not consummated.
Any person who violates a cease and desist order of the commissioner and while the order
is in effect, may after notice and hearing and upon order of the commissioner, be subject at the
discretion of the commissioner to any one or more of the following:
(1) a monetary penalty of not more than $10,000 for every day of violation;
(2) suspension or revocation of the person's license.
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 the filing requirement, is subject
to a fine of not more than $50,000.
    Subd. 6. Inapplicable provisions. Sections 60D.24, paragraphs (b) and (c); and 60D.26 do
not apply to acquisitions covered under subdivision 2.
History: 1991 c 325 art 14 s 5