2014 Kentucky Revised Statutes CHAPTER 304 - INSURANCE CODE Subtitle 37 - Insurance Holding Company Systems 37.37-130 Acquisition of control or merger of domestic insurers.
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304.37-130 Acquisition of control or merger of domestic insurers.
(1)
(2)
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, such as the acquisition of voting securities,
the acquisition of assets, bulk reinsurance, and mergers; and
(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.
(a) This section applies to any acquisition in which there is a change of
control of an insurer authorized to do business in Kentucky, except as set
forth in paragraph (b) of this subsection.
(b) This section shall not apply to the following:
1.
An acquisition subject to approval or disapproval of the
commissioner pursuant to KRS 304.37-120;
2.
A purchase of securities solely for the 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 Kentucky. If a purchase of securities results in a
presumption of control under KRS 304.37-010(8), it is not solely for
investment purposes unless the insurance regulatory official 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
insurance regulatory official to the commissioners;
3.
If 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 subsection (3)(a) of this section
thirty (30) days prior to the proposed effective date of the
acquisition. However, the acquisition notification shall not be
required for exclusion from this section if the acquisition would
otherwise be excluded from this section by any other subparagraph
of this paragraph;
4.
The acquisition of already affiliated persons;
5.
An acquisition if, as an immediate result of the acquisition:
a.
The combined market share of the involved insurers would not
exceed five percent (5%) of the total market;
b.
There would be no increase in any market share; or
c.
The combined market share of the involved insurers would not
exceed twelve percent (12%) of the total market; and the
market share would not increase by more than two percent
(2%) of the total market.
For the purpose of this subparagraph (b)5., a market means direct
written insurance premium in Kentucky for a line of business as
(3)
(4)
contained in the annual statement required to be filed by insurers
authorized to do business in Kentucky;
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 insurance regulatory
official affirmatively finds that the insurer is in failing condition, there
is 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
insurance regulatory official to the commissioner.
An acquisition covered by subsection (2) of this section may be subject to an
order pursuant to subsection (5) of this section or KRS 304.37-010 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 KRS 304.37-050.
(a) The preacquisition notification shall be in the form and contain the
information prescribed by the National Association of Insurance
Commissioners relating to those markets which, under subsection (2)(b)5.
of this section, cause the acquisition not to be exempted from the
provisions of this section. The commissioner may require additional
material and information the commissioner 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 Kentucky accompanied by a
summary of the education and experience of the economist indicating his
or her ability to render an informed opinion.
(b) The waiting period required shall begin on the date of receipt by the
commissioner of a preacquisition notification and shall end on the earlier
of the thirtieth 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 may, on a one-time basis, require the submission of
additional needed information relevant to the proposed acquisition; if the
submission is required, the waiting period shall end 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.
(a) The commissioner may enter an order under subsection (5)(a) 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 Kentucky or tend to create a monopoly, or if the
insurer fails to file adequate information in compliance with subsection (3)
of this section.
(b) In determining whether a proposed acquisition would violate the
competitive standard of paragraph (a) of this subsection, the
commissioner shall consider the following:
1.
Any acquisition 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:
a.
If the market is highly concentrated and the involved insurers
possess the following shares of the market:
Insurer A
nsurer B
4%
% or more
10%
% or more
15%
% or more;
or
b.
If the market is not highly concentrated and the involved
insurers possess the following shares of the market:
Insurer A
nsurer B
5%
% or more
10%
% or more
15%
% or more
19%
% or more.
A highly concentrated market means 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 paragraph (a) of this subsection. For the purpose of this
subparagraph, 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 (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 standard in
paragraph (a) of this subsection if:
a.
There is a significant trend toward increased concentration in
(c)
(5)
(a)
the market;
b.
One of the insurers involved is one of the insurers in a
grouping of the large insurers showing the requisite increase in
the market share; and
c.
Another involved insurer's market is two percent (2%) or more;
3.
For the purposes of subsection (4)(b) of this section:
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 factors such as 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 Kentucky, and the relevant
geographical market is assumed to be Kentucky; and
c.
The burden of showing prima facie evidence of violation of the
competitive standard rests upon the commissioner; and
4.
Even though an acquisition is not prima facie violative of the
competitive standard under paragraph (b) of this subsection, 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) of this subsection, a party may establish the absence of the
requisite anticompetitive effect based upon other substantial
evidence. Relevant factors in making this determination shall be
such factors as 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.
An order shall not be entered under subsection (5)(a) of this section 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 the
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 the increase exceed the public
benefits which would arise from not lessening competition.
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
(b)
business in Kentucky 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
certificate of authority to do business in Kentucky.
The order referred to in paragraph (a) of this subsection shall be entered
pursuant to a hearing held under Subtitle 2 of this chapter.
Effective:July 15, 2010
History: Amended 2010 Ky. Acts ch. 24, sec. 1484, effective July 15, 2010. -Created 1992 Ky. Acts ch. 267, sec. 3, effective July 14, 1992.
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