2005 Idaho Code - 41-3805B — ACQUISITIONS INVOLVING INSURERS NOT OTHERWISE COVERED

                                  TITLE  41
                                  INSURANCE
                                  CHAPTER 38
                    ACQUISITIONS OF CONTROL AND INSURANCE
                           HOLDING COMPANY SYSTEMS
    41-3805B.  ACQUISITIONS INVOLVING INSURERS NOT OTHERWISE COVERED. (1) The
following definitions shall apply for the purposes of this section only:
    (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, 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 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 subsection (b) of this subsection, 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 shall not apply to the following:
         (i)  An acquisition subject to approval or disapproval by the
         director pursuant to sections 41-3802 and 41-3805, Idaho Code;
         (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 state. If a purchase of securities results
         in a presumption of control under the provisions of section
         41-3801(2), Idaho Code, 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 director of this
         state;
         (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 director in accordance with subsection (3) (a) of this section
         thirty (30) days prior to the proposed effective date of the
         acquisition. However, such preacquisition notification is not
         required for exclusion from the provisions of this section if the
         acquisition would otherwise be excluded from the provisions of this
         section by any other subsection of this subsection;
         (iv)  The acquisition of already affiliated persons;
         (v)  An acquisition if, as an immediate result of the acquisition,
              1.  In no market would the combined market share of the involved
              insurers exceed five percent (5%) of the total market,
              2.  There would be no increase in any market share, or
              3.  In no market would the combined market share of the involved
              insurers exceed twelve percent (12%) of the total market, and
              the market share increase by more than two percent (2%) of the
              total market.
              For the purpose of subsection (b) (v) of this section, 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;
         (vi)  An acquisition for which a preacquisition notification would be
         required pursuant to the provisions of this section due solely to the
         resulting effect on the ocean marine insurance line of business;
         (vii) An acquisition of an insurer whose domiciliary commissioner
         affirmatively finds that such insurer is in failing condition; there
         is a lack of a 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 commissioner to the director of this state.
    (3)  An acquisition covered under the provisions of subsection (2) of this
section may be subject to an order pursuant to subsection (5) of this section,
unless the acquiring person files a preacquisition notification and the
waiting period has expired. The acquired person may file a preacquisition
notification.
    (a)  The preacquisition notification shall be in such form and contain
    such information as prescribed by the national association of insurance
    commissioners relating to those markets which, under subsection (2) (b)
    (v) of this section, cause the acquisition not to be exempted from the
    provisions of this section. The director may require such additional
    material and information as he deems necessary to determine whether the
    proposed acquisition, if consummated, would violate the competitive
    standard of subsection (4) 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.
    (b)  The waiting period required shall begin on the date of receipt of the
    director of a preacquisition notification and shall end on the earlier of
    the 30th day after the date of such receipt, or termination of the waiting
    period by the director. Prior to the end of the waiting period, the
    director, 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 receipt
    of such additional information by the director or termination of the
    waiting period by the director.
    (4) (a)  The director may enter an order under the provisions of
    subsection (5) (a) of this section 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 the provisions of subsection (3)
    of this section.
    (b)  In determining whether a proposed acquisition would violate the
    competitive standard of subsection (a) of this section, the director shall
    consider the following:
         (i)  Any acquisition covered under the provisions of subsection (2)
         of this section involving two (2) or more insurers competing in the
         same market is prima facie evidence of violation of the competitive
         standards:
              1.  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
              2.  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 (4) largest insurers is seventy-five percent (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 (2) insurers are involved, exceeding the total
              of the two (2) columns in the table is prima facie evidence of
              violation of the competitive standard in subsection (4) (a) of
              this section. For the purpose of this subsection, the insurer
              with the greatest 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 (2) largest to the eight (8)
         largest, has increased by seven percent (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 or merger covered under subsection (2)
         of this section, involving two (2) or more insurers competing in the
         same market is prima facie evidence of violation of the competitive
         standards in subsection (a) of this section if:
              1.  There is a significant trend toward increased concentration
              in the market;
              2.  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
              3.  Another involved insurer's market is two percent (2%) or
              more.
         (iii) For the purposes of subsection (4) (b) of this section:
              1.  The term "insurer" includes any company or group of
              companies under common management, ownership or control;
              2.  The term "market" means the relevant product and
              geographical markets. In determining the relevant product and
              geographical markets, the director 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;
              3.  The burden of showing prima facie evidence of violation of
              the competitive standard rests upon the director.
         (iv)  Even though an acquisition is not prima facie violative of the
         competitive standard under subsections (4) (b) (i) and (ii) of this
         section, the director may establish the requisite anticompetitive
         effect based upon other substantial evidence. Even though an
         acquisition is prima facie violative of the competitive standards
         under subsections (4) (b) (i) and (ii) of this section, a party may
         establish the absence of the requisite anticompetitive effect based
         upon other substantial evidence. Relevant factors in making a
         determination under the the provisions of this subsection include,
         but are not limited to, the following: market share, 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 the provisions of subsection (5)
    (a) of this section, 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.
         (5) (a) (i)  If an acquisition violates the standards of the
         provisions of this section, the director 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.
         (ii)  Such an order shall not be entered unless:
              1.  There is a hearing;
              2.  Notice of such hearing is issued prior to the end of the
              waiting period and not less than fifteen (15) days prior to the
              hearing; and
              3.  The hearing is concluded and the order is issued no later
              than sixty (60) days after the end of the waiting period.
         Every order shall be accompanied by a written decision of the
         director setting forth his findings of fact and conclusions of law.
         (iii) An order entered under the provisions [of] this subsection
         shall not become final earlier than thirty (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 such plan or other information, the
         director 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.
         (iv)  An order pursuant to the provisions of this subsection shall
         not apply if the acquisition is not consummated.
    (b)  Any person who violates a cease and desist order of the director
    under subsection (5) (a) (i) of this section, and while such order is in
    effect may, after notice and hearing and upon order of the director, be
    subject to the discretion of the director to any one (1) or more of the
    following:
         (i)  A monetary penalty of not more than ten thousand dollars
         ($10,000) for every day of violation; and/or
         (ii)  Suspension or revocation of such person's license.
    (c)  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 fine of not
    more than fifty thousand dollars ($50,000).
    (6)  Sections 41-3815 (2) and (3) and 41-3817, Idaho Code, do not apply to
acquisitions covered under subsection (2) of this section.