Chapter 055
2010 -- S 2400 SUBSTITUTE A
Enacted 06/12/10
A N A C T
RELATING TO INSURANCE
Introduced By: Senators Miller, Bates, Jabour, Gallo, and Pichardo
Date Introduced: February 11, 2010
It is enacted by the General
Assembly as follows:
SECTION 1. Sections 27-35-1, 27-35-2, 27-35-3, 27-35-4,
27-35-5, 27-35-6, 27-35-8,
27-35-9 and 27-35-12 of the
General Laws in Chapter 27-35 entitled "Insurance Holding
Company Systems" are
hereby amended to read as follows:
27-35-1.
Definitions. -- (a) "Affiliate" An
"affiliate" of, or person "affiliated" with, a
specific person, is a person who that directly,
or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control
with, the person specified. An "affiliate"
does not include a protected cell of a protected cell
company organized under the Protected Cell
Companies Act, chapter 64 of this
title.
(b)
"Commissioner" The term "commissioner" means the insurance
commissioner
director of the department of business regulation and any assistant to the insurance commissioner
director designated and authorized by him or her while acting
under that designation.
(c) "Control",
The term "control" (including
the terms "controlling," "controlled by" and
"under common control
with"), means the possession, direct or indirect, of the power to
direct or
cause the direction of the management and policies of a
person, whether through the ownership of
voting securities, by contract other than a commercial
contract for goods or non-management
services, or
otherwise, unless the power is the result of an official position with or
corporate
office held by the person. Control shall be presumed to
exist if any person, directly or indirectly,
owns, controls, holds with the power to vote, or holds
proxies representing, ten percent (10%) or
more of the voting securities of any other person. This
presumption may be rebutted by a showing
made in the manner provided by section 27-35-3(i) that control does not exist in fact. The
commissioner may determine, after furnishing all persons in
interest notice and opportunity to be
heard and making specific findings of fact to support that
the determination, that control exists in
fact, notwithstanding the absence of a presumption to that
effect.
(d) "Insurance
holding company system" An "insurance holding company system"
consists of two (2) or more affiliated persons, one or more of
which is an insurer.
(e) "Insurer"
The term "insurer" means any person or persons or corporation,
partnership
or company authorized by the laws of this state to
transact the business of insurance in this state,
including entities organized or authorized to transact business
in this state pursuant to chapters
19, 20, 20.1, 20.2, 20.3, and 41 of this title, except
that it does shall not include: (1) agencies,
authorities, or instrumentalities of the
state.; or
(2) Fraternal benefit
societies.
(f) "NAIC"
means the National Association of Insurance Commissioners.
(f)(g)
"Person" A "person" is an individual, a
corporation, a limited liability company, a
partnership, an association, a joint stock company,
a trust, an unincorporated organization, or any
similar entity or any combination of the foregoing acting in
concert, but shall not include any
securities broker performing no more than the usual and
customary broker's function joint
venture
partnership exclusively engaged in owning, managing, leasing or
developing real or tangible
personal property.
(g)(h)
"Securityholder" A "securityholder" of a specified person is one who
owns any
security of the such person, including common
stock, preferred stock, debt obligations, and any
other security convertible into or evidencing the right to
acquire any of these the foregoing.
(h)(i) "Subsidiary" A "subsidiary"
of a specified person is an affiliate controlled by the
such person directly, or indirectly through one or more
intermediaries.
(i)(j) "Voting security" The
term "voting security" shall includes include any
security
convertible into or evidencing a right to acquire a voting
security.
27-35-2.
Acquisition of control of or merger with domestic insurer.
-- (a) Filing
Requirements. - (1) No person other than the issuer shall make a
tender offer for or a request or
invitation for tenders of, or enter into any agreement to
exchange securities for, seek to acquire,
or acquire, in the open market or otherwise, any voting
security of a domestic insurer if, after the
consummation of the agreement thereof, the such
person would, directly or indirectly, (or by
conversion or by exercise of any right to acquire),
be in control of the insurer, and no person shall
enter into an agreement to merge with or otherwise to
acquire control of a domestic insurer or any
person controlling a domestic insurer unless, at the time the offer, request,
or invitation is made or
the agreement is entered into, or prior to the
acquisition of the securities if no offer or agreement
is involved, the such person has filed
with the commissioner and has sent to the insurer, and, to
the extent permitted by applicable federal laws, rules,
and regulations, the insurer has sent to its
shareholders, a
statement containing the information required by this section and the offer,
request, invitation, agreement or acquisition has been
approved by the commissioner in the
manner prescribed in subsection (d) of this section prescribed
in this chapter;
(2) For the purposes of
this section, a domestic insurer shall includes include
any other
person controlling a domestic insurer unless the other
person, as determined by the commissioner,
is either directly or through its affiliates primarily
engaged in business other than the business of
insurance. However, the person shall file a pre-acquisition
notification with the commissioner
containing the information set forth in subdivision
27-35-2.5(c)(1) sixty (60) days prior to the
proposed effective date of the acquisition. Failure to file is
subject to subdivision 27-35-2.5(e)(3).
For the purposes of this section, "person"
shall not include any securities broker holding, in the
usual and customary broker's function, less than twenty
percent (20%) of the voting securities of
an insurance company or of any person which controls an
insurance company.
(b) Content of
Statement. - (1) The statement to be filed with the
commissioner under
this section shall be made under oath or affirmation and
shall contain the following information:
(i)
The name and address of each person by whom or on whose behalf the merger or
other acquisition of control referred to in subsection (a)
of this section is to be effected,
(hereinafter called the "acquiring party" in
this section), and:
(A) If that the
person is an individual, his or her principal occupation and all offices and
positions held during the past five (5) years, and any
conviction for crimes other than minor
traffic violations during the past ten (10) years; or
(B) If that the
person is not an individual, a report of the nature of its business operations
during the past five (5) years or for the lesser period as that
the person and any predecessors of
that person
shall have been in existence,; an informative description of the
business intended to be
done by the person and the person's subsidiaries,;
and a list of all individuals who are or who have
been selected to become directors or executive officers of
the person, or who perform or will
perform functions appropriate to those such
positions. The list shall include for each individual
the information required by this subdivision;
(ii) The source, nature,
and amount of the consideration used or to be used in affecting
effecting the merger or other acquisition of control, a
description of any transaction in which
where funds were or are to be obtained for the any
such purpose, (including any pledge of the
insurer's stock, or stock of any of its subsidiaries or
controlling affiliates), and the
identity of
persons furnishing the consideration; provided, however,
that where a source of the consideration
is a loan made in the lender's ordinary course of
business, the identity of the lender shall remain
confidential, if the person filing the statement so requests;
(iii) Fully audited
financial information as to the earnings and financial condition of each
acquiring party for the preceding five (5) fiscal years
of each acquiring party, (or for any such
lesser period as the acquiring party and any predecessors of
it shall have been in existence), and
similar unaudited information as of a date not earlier than
ninety (90) days prior to the filing of
the statement;
(iv)
Any plans or proposals which each acquiring party may have to liquidate
the insurer,
to sell its assets or merge or consolidate it with any
person, or to make any other material change
in its business or corporate structure or management;
(v) The number of
shares of any security referred to in subsection (a) of this section
which each acquiring party proposes to acquire, and the
terms of the offer, request, invitation,
agreement, or acquisition referred to in subsection (a) of this
section, and a statement as to the
method by which the fairness of the proposal was arrived at;
(vi)
The amount of each class of any security referred to in subsection (a)
of this section
that which is beneficially owned or concerning
which there is a right to acquire beneficial
ownership by each acquiring party;
(vii) A full
description of any contracts, arrangements, or understanding with respect to
any security referred to in subsection (a) of this
section in which any acquiring party is involved,
including, but not limited to the transfer of any of the
securities, joint ventures, loan or option
arrangements, puts or calls, guarantees of loans, guarantees
against loss or guarantees of profits,
division of losses or profits, or the giving or withholding of
proxies. The description shall identify
the persons with whom the contracts, arrangements, or
understandings have been entered into;
(viii) A description of
the purchase of any security referred to in subsection (a) of this
section during the twelve (12) calendar months preceding the
filing of the statement by any
acquiring party, including the dates of purchase, names of the
purchasers, and consideration paid
or agreed to be paid for the purchase;
(ix) A description of
any recommendations to purchase any security referred to in
subsection (a) of this section made during the twelve (12)
calendar months preceding the filing of
the statement by any acquiring party, or by anyone based
upon interviews or at the suggestion of
the acquiring party;
(x) Copies of all
tender offers for, requests or invitations for tenders of, exchange offers
for, and agreements to acquire or exchange any securities
referred to in subsection (a) of this
section, and, (if distributed,)
of additional soliciting material relating to the offer, request, or
agreement them;
(xi) The terms of any
agreement, contract, or understanding made with or proposed to be
made with any
broker-dealer as to solicitation of securities referred to in subsection (a) of
this
section for tender, and the amount of any fees, commissions,
or other compensation to be paid to
broker-dealers with regard to the agreement, contract, or
understanding; thereto; and
(xii) Any Such
additional information that the commissioner may by rule or regulation
prescribe as necessary or appropriate for the protection of
policyholders and securityholders of
the insurer or in the public interest;
(2) If the person
required to file the statement referred to in
subsection (a) of this section
is a partnership, limited partnership, syndicate, or
other group, the commissioner may require that
the information called for by paragraphs (1)(i) -- (1)(xii) of this subsection shall be given with
respect to each partner of the partnership or limited
partnership, each member of the syndicate or
group, each member of the syndicate or group, and
each person who controls the partner or
member. If any partner, member, or person is a
corporation, or the person required to file the
statement referred to in subsection (a) of this section is a
corporation, the commissioner may
require that the information called for by paragraphs (1)(i) -- (1)(xii) of this subsection shall be
given with respect to the corporation, each officer and
director of the corporation, and each
person who is directly or indirectly the beneficial owner of
more than ten percent (10%) of the
outstanding voting securities of the corporation;
(3) If any material
change occurs in the facts set forth in the statement filed with the
commissioner and sent to the insurer pursuant to this section, an
amendment setting forth the
change, together with copies of all documents and other
material relevant to the change, shall be
filed with the commissioner and sent to the insurer within
two (2) business days after the person
learns of the change. The insurer shall send the
amendment to its shareholders.
(c) Alternative filing
materials. - If any offer, request, invitation, agreement or
acquisition referred to in subsection (a) of this section is
proposed to be made by means of a
registration statement under the Securities Act of 1933 15
U.S.C. sections 77a et seq. or in
circumstances requiring the disclosure of similar information under
the Securities Exchange Act
of 1934 15
U.S.C. sections 78a et seq. or under a state law requiring similar
registration or
disclosure, the person required to file the statement referred
to in subsection (a) of this section
may utilize the documents in furnishing the information
called for by that statement.
(d) Approval by
commissioner;: hearings Hearings. - (1) The
commissioner shall
approve any merger or other acquisition of control referred
to in subsection (a) of this section
unless, after a public hearing held on the merger or
acquisition, at the discretion of the
commissioner or upon the request of the acquiring party, the
insurer or any other interested party,
he or she finds that any of the following conditions
exist:
(i)
After the change of control the domestic insurer referred to in subsection (a)
of this
section would not be able to satisfy the requirements for the
issuance of a license to write the line
or lines of insurance for which it is presently authorized
licensed;
(ii) The effect of the
merger or other acquisition of control would be substantially to
lessen competition in insurance in this state or tend to
create a monopoly in insurance;. In
applying the competitive standard in this subparagraph:
(A) The informational
requirements of subdivision 27-35-2.5(c)(1) and the
standards of
subdivision 27-35-2.5(d)(2) shall apply;
(B) The merger or
other acquisition shall not be disapproved if the commissioner finds
that any of the situations meeting the criteria provided
by subdivision 27-35-2.5(d)(3) exist; and
(C) The commissioner
may condition the approval of the merger or other acquisition on
the removal of the basis of disapproval within a
specified period of time;
(iii) The financial
condition of any acquiring party is such as might jeopardize the
financial stability of the insurer, or prejudice the interest
of its policyholders; or the interests of
any remaining securityholders
who are unaffiliated with the acquiring party;
(iv)
The terms of the offer, request, invitation, agreement or
acquisition referred to in
subsection (a) of this section are unfair and unreasonable to
the securityholders of the insurer;
(v)(iv) The plans or proposals which the acquiring party
has to liquidate the insurer, sell
its assets or consolidate or merge it with any person, or
to make any other material change in its
business or corporate structure or management, are unfair and
unreasonable to policyholders of
the insurer and not in the public interest; or
(vi)(v)
The competence, experience, and integrity of those persons who would control
the operation of the insurer are such that it would not
be in the interest of policyholders of the
insurer and of the public to permit the merger or other
acquisition of control; or
(vi)
The acquisition is likely to be hazardous or prejudicial to the
insurance-buying
public.
(2) The public hearing
referred to in subdivision (1) of this subsection, if required,
shall
be held within sixty (60) thirty (30) days
after the statement required by subsection (a) of this
section is filed, and at least twenty (20) days notice of the
public hearing shall be given by the
commissioner to the person filing the statement. Not less than
seven (7) days notice of the public
hearing shall be given by the person filing the statement to
the insurer and to any such other
persons that as may be designated by the
commissioner. The insurer shall give notice of the
public hearing to its securityholders. The commissioner shall make a determination within thirty
(30) sixty
(60) days day after the conclusion of the hearing period
preceding the effective date of
the proposed transaction. At the hearing, the person filing the statement, the
insurer, any person to
whom notice of hearing was sent, and any other person
whose interests interest may be affected
by it shall
have the right to present evidence, examine and cross examine witnesses, and
offer oral
and written arguments and in connection therewith with
the hearing shall be entitled to conduct
discovery proceedings in the same manner as is presently
allowed in the superior court of this
state. All discovery proceedings shall be concluded not
later than three (3) days prior to the
commencement of the public hearing;
(3) In connection
with a change of control of a domestic insurer, any determination by
the commissioner that the person acquiring control of the
insurer shall be required to maintain or
restore the capital of the insurer to the level required by
the laws and regulations of this state shall
be made not later than sixty (60) days after the date of
notification of the change in control
submitted pursuant to section 27-35-2(a).
(3)(4)
The commissioner may retain at the acquiring person's expense any attorneys,
actuaries, accountants and other experts not otherwise a part
of the commissioner's staff as may
be reasonably necessary to assist the commissioner in
reviewing the proposed acquisition of
control.
(e) Mailings to
shareholders; payment of expenses. - To the extent permitted by
applicable federal laws, rules and regulations, all statements,
amendments, or other material filed
pursuant to subsection (a) or (b) of this section, and all
notices of public hearings held pursuant to
subsection (d) of this section, shall be mailed by the insurer
to its shareholders within five (5)
business days after the insurer has received the statements,
amendments, other material, or
notices. The expenses of mailing shall be borne by the person
making the filing. As security for
the payment of the expenses, the person shall file with
the commissioner an acceptable bond or
other deposit in an amount to be determined by the
commissioner.
(f)(e)
Exemptions. - The provisions of this section shall not apply to any offer,
request,
invitation, agreement or acquisition which the commissioner by
order shall exempt from this
section as: (1) not having been made or entered into
for the purpose and not having the effect of
changing or influencing the control of a domestic insurer, or (2)
as otherwise not comprehended
within the purposes of this section.
(g)(f)
Violations. - The following shall be violations of this section:
(1) The failure to file
any statement, amendment, or other material required to be filed
pursuant to subsection (a) or (b) of this section; or
(2) The effectuation or
any attempt to effectuate an acquisition of control of, or merger
with, a domestic insurer unless the commissioner has given
his or her approval to the acquisition
or merger.
(h)(g)
Jurisdiction; consent to service of process. - The courts of this state are hereby
vested with jurisdiction over every person not resident,
domiciled, or authorized to do business in
this state who files a statement with the commissioner
under this section, and over all actions
involving the such person arising out of
violations of this section, and that each such person shall
be deemed to have performed acts equivalent to and
constituting an appointment by the person of
the commissioner to be his true and lawful attorney upon
whom may be served all lawful process
in any action, suit, or proceeding arising out of
violations of this section. Copies of all lawful
process shall be served on the commissioner and transmitted
by registered or certified mail by the
commissioner to the person at his or her last known address.
27-35-3.
Registration of insurers. -- (a)
Registration. - Every insurer that which is
authorized to do business in this state and that which
is a member of an insurance holding
company system shall annually register with the
commissioner, except a foreign insurer subject to
disclosure registration requirements and standards
adopted by statute or regulation in the
jurisdiction of its domicile which are substantially similar to
those contained in:
(1) this section; and
(2) section 27-35-4(a)(1), (b), (f) and (g)(d)
and.
(3) Either
subdivision 27-35-4(a)(2) or a provision such as the
following: Each registered
insurer shall keep current the information required to be
disclosed in its registration statement by
reporting all material changes or additions within fifteen (15)
days after the end of the month in
which it learns of each change or addition.
Any insurer that which
is subject to registration under this section shall register fifteen
(15) days after it becomes
subject to registration, and annually thereafter by March 1 of each year
for the previous calendar year, unless the commissioner for good cause shown extends
the time
for registration, and then within that the
extended time. The commissioner may require any
authorized insurer that authorized to do business in
the state which is a member of a holding
company system and which is not subject to
registration under this section to furnish a copy of
the registration statement, the summary specified in
subsection (c) of this section or other
information filed by the insurance company with the insurance
regulatory authority of domiciliary
jurisdiction.
(b) Information and
form required. - Every insurer subject to registration shall file a
registration statement on a form provided prescribed
by the commissioner NAIC, which shall
contain the following current information about:
(1) The capital
structure, general financial condition, ownership, and management of the
insurer and any person controlling the insurer;
(2) The identity and
relationship of every member of the insurance holding company
system;
(3) The following
agreements in force, relationships subsisting, and transactions
currently outstanding or which have occurred during the last
calendar year between the insurer
and its affiliates:
(i)
Loans, other investments or purchases, and sales and or
exchanges of securities of the
affiliates by the insurer or of the insurer by its affiliates;
(ii) Purchases, sales,
or exchanges of assets;
(iii) Transactions not
in the ordinary course of business;
(iv)
Guarantees or undertakings for the benefit of an affiliate which result
in an actual
contingent exposure of the insurer's assets to liability, other
than insurance contracts entered into
in the ordinary course of the insurer's business;
(v) All management
service contracts, service contracts and all cost sharing
arrangements; and
(vi)
Reinsurance agreements;
(vii) Dividends and
other distributions to shareholder shareholders; and
(viii) Consolidated tax
allocation agreements; and
(3.1)(4)
Any pledge of the insurer's stock, including stock of any subsidiary or
controlling affiliate, for a loan made to any member of the
insurance holding company system;
and
(4)(5)
Other matters concerning transactions between registered insurers and any
affiliates as may be included from time to time in any
registration forms adopted or approved by
the commissioner.
(c) Summary of
Registration Statement. All registration statement shall contain a
summary outlining all items in the current registration
statement representing changes from the
prior registration statement.
(c)(d)
Materiality. - No information need be disclosed on the registration statement
filed
pursuant to subsection (b) of this section if that information
is not material for the purposes of this
section. Unless the commissioner by rule, regulation, or
order provides otherwise, sales,
purchases, exchanges, loans, or extensions of credit, or
investments or guarantees involving one-
half of one percent (.5%) or less of an insurer's admitted
assets as of the thirty-first day of
December next preceding shall not be deemed material
for purposes of this section.
(d) Amendments to
registration statements. - Each registered insurer shall keep current
the information required to be disclosed in its
registration statement by reporting all material
changes or additions on amendment forms provided by the
commissioner within fifteen (15) days
after the end of the month in which it learns of each change
or addition; provided, that subject to
section 27-35-4(c), each registered insurer shall report all
dividends and other distributions to
shareholders within two (2) business days following the
declaration of the dividend or other
distribution.
(e) Reporting of
Dividends to Shareholders. Subject to subsection 27-35-4(b), each
registered insurer shall report to the commissioner all
dividends and other distributions to
shareholders within fifteen (15) business days following the
declaration thereof.
(f) Information of
Insurers. Any person within an insurance holding company system
subject to registration shall be required to provide complete
and accurate information to an
insurer, where the information is reasonably necessary to
enable the insurer to comply with the
provisions of this act.
(e)(g)
Termination of registration. - The commissioner shall terminate the
registration of
any insurer that demonstrates that it no longer is a
member of an insurance holding company
system.
(f)(h)
Consolidated filing. - The commissioner may require or allow two (2) or more
affiliated insurers subject to registration under this
chapter to file a consolidated registration
statement or consolidated reports amending their
consolidated registration statement or their
individual registration statements.
(g)(i) Alternative registration. - The commissioner may
allow an insurer that is
authorized to do business in this state and which is part of an
insurance holding company system
to register on behalf of any affiliated insurer that
which is required to register under subsection (a)
of this section
and to file all information and material required to be filed under this
section.
(h)(j)
Exemptions. - The provisions of this section shall not apply to any insurer,
information, or transaction if and to the extent that the
commissioner by rule, regulation, or order
shall exempt from the provisions of this section.
(i)(k) Disclaimer. - Any person may file
with commissioner a disclaimer of affiliation
with any authorized insurer or the a
disclaimer may be filed by the insurer or any member of an
insurance holding company system. The disclaimer shall fully
disclose all material relationships
and basis bases for affiliation between the
person and the insurer as well as the basis for
disclaiming the affiliation. After a disclaimer has been filed,
the insurer shall be relieved of any
duty to register or report under this section that which
may arise out of the insurer's relationship
with the person unless and until the commissioner
disallows the disclaimer. The commissioner
shall disallow the a disclaimer only after
furnishing all parties in interest with notice and
opportunity to be heard and after making specific findings of
fact to support the disallowance.
(j)(l)
Violations. - The failure to file a registration statement or any amendment
to it
summary of the registration statement required by this section within the time specified
for the
filing shall be a violation of this section.
(k) Summary of
registration statement. - All registration statements shall contain a
summary outlining all items in the current registration
statement representing changes from the
prior registration statement.
(l) Information of
insurers. - Any person within an insurance holding company system
subject to registration shall be required to provide complete
and accurate information to an
insurer, where the information is reasonably necessary to
enable the insurer to comply with the
provisions of this chapter.
27-35-4.
Standards -- Reasonableness of surplus -- Extraordinary distributions.
--
Standards – and Management of
an insurer within a holding company system. --(a)
Transaction with affiliates Transactions within a Holding Company System..
– (1) Transactions
within a holding company system to which an insurer subject
to registration is a party shall be
subject to the following standards:
(1)(i) The terms shall be fair and reasonable;
(ii) Charges or fees
for services performed shall be reasonable;
(iii) Expenses
incurred and payment received shall be allocated to the insurer in
conformity with customary insurance accounting practices
consistently applied;
(2)(iv) The books, accounts, and records of each party to
all such transactions shall be so
maintained as to clearly and accurately disclose the precise
nature and details of the transactions
including any such accounting information that
as is necessary to support the reasonableness of
the charges or fees to the respective parties; and
(3)(v)
The insurer's surplus as regards policyholders following any dividends or
distributions to shareholder affiliates shall be reasonable in relation
to the insurer's outstanding
liabilities and adequate to its financial needs;
(4)(vi) The charges or fees for services performed shall
be reasonable; and
(5) The expenses
incurred and payment received shall be allocated to the insurer in
conformity with consistently applied customary insurance
accounting practices.
(b)(2) Prior
notification to commissioner. - (1) The following
transactions involving a
domestic insurer and any person in its holding company system
may not be entered into unless
the insurer has notified the commissioner in writing of
its intention to enter into the transaction at
least thirty (30) days prior thereto to entering
into it, or any such shorter period that as the
commissioner may permit, and the commissioner has not disapproved
it within that period: .
(i)(A) Sales, purchases, exchanges, loans, or
extensions of credit, or investments,
provided the transactions are equal to or exceed:
(A)(i) with With respect to nonlife insurers, the lesser of
three percent (3%) of the
insurer's admitted assets or twenty-five percent (25%) of
surplus as regards policyholders as of
the 31st day of December next preceding; or
(B)(ii) with With respect to
life insurers, three percent (3%) of the insurer's admitted
assets; each as of the 31st day of December next
preceding;
(ii)(B)
Loans or extensions of credit to any person who is not an affiliate, where the
insurer makes the loans or extensions of credit with the
agreement or understanding that the
proceeds of the transactions, in whole or in substantial part,
are to be used to make loans or
extensions of credit to, to purchase assets of, or to make
investments in, any affiliate of the
insurer making the loans of extensions of credit, provided the
transactions are equal to or exceed:
(A)(i) with With respect to
nonlife insurers, the lesser of three percent (3%) of the
insurer's admitted assets or twenty-five percent (25%) of
surplus as regards policyholders as of
the 31st day of December next preceding; or
(B)(ii) with With respect to
life insurers, three percent (3%) of the insurer's admitted
assets; each as of the 31st day of December next
preceding;
(iii)(C)
Reinsurance agreements or modifications thereto to them in which
the
reinsurance premium or a change in the insurer's liabilities
equals or exceeds five percent (5%) of
the insurer's surplus as regards policyholders as of the
31st day of December next preceding,
including those agreements which may require as consideration the
transfer of assets from an
insurer to a nonaffiliate, if an
agreement or understanding exists between the insurer and
nonaffiliate that any portion of those assets will be transferred
to one or more affiliate affiliates of
the insurer;
(iv)(D)
All management agreements, service contracts, guarantees and all cost sharing
arrangements; and
(E) Direct or
indirect acquisitions or investments in a person that controls the insurer or
in an affiliate of the insurer in an amount which, together
with its present holdings in such
investments, exceeds two and one-half percent (2.5%) of the
insurer's surplus to policyholders.
Direct or indirect acquisitions or investments in
subsidiaries acquired pursuant to section 2 of this
act (or authorized under any other section of this
chapter), or in non-subsidiary insurance
affiliates that are subject to the provisions of this act, are
exempt from this requirements; and
(v)(G) Any
material transactions, specified by regulation, which the commissioner
determines may adversely affect the interests of the insurer's
policyholders;
(2) Nothing
contained in this chapter paragraph shall be deemed to authorize
or permit
any transactions which, in the case of an insurer not a
member of the same holding company
system, would be otherwise contrary to law.
(c)(3) Prohibited
transactions. - A domestic insurer may not enter into transactions that
which are part of a plan or series of like transactions
with persons within the holding company
system if the purpose of those separate transactions is to
avoid the statutory threshold amount and
thus avoid the review that would occur otherwise.
If the commissioner determines that the
separate transactions were entered into over any twelve (12) month
period for that purpose, he or
she may exercise his or her authority under section
27-35-9.
(d)(4) Standard.
- The commissioner, in reviewing transactions pursuant to subsection
(b) of this section shall
consider whether the transactions comply with the standards set forth in
subsection (a) of this section and whether they may adversely
affect the interests of policyholders.
(e)(5) Notice
to commissioner. - The commissioner shall be notified within thirty (30)
days of any investment of the domestic insurer in any one
corporation if the total investment in
the corporation by the insurance holding company system
exceeds ten percent (10%) of the
corporation's voting securities.
(f)(b)
Adequacy of surplus. - For the purposes of this chapter, in determining whether
an
insurer's surplus as regards policyholders is reasonable in
relation to the insurer's outstanding
liabilities and adequate to its financial needs, the following
factors, among others, shall be
considered:
(1) The size of the
insurer as measured by its assets, capital and surplus, reserves,
premium writings, insurance in force, and other appropriate
criteria;
(2) The extent to which
the insurer's business is diversified among the several lines of
insurance;
(3) The number and size
of risks insured in each line of business;
(4) The extent of the
geographical dispersion of the insurer's insured risks;
(5) The nature and
extent of the insurer's reinsurance program;
(6) The quality,
diversification, and liquidity of the insurer's investment portfolio;
(7) The recent past and
projected future trend in the size of the insurer's investment
portfolio;
(8) The surplus as
regards policyholders maintained by other comparable insurers;
(9) The adequacy of the
insurer's reserves; and
(10) The quality and
liquidity of investment in affiliates. The commissioner may treat
this investment as a disallowed asset for the purposes of
determining the adequacy of surplus as
regards policyholders whenever in his or her judgment the
investment warrants.
(g)(c)
Dividends and other distributions. - (1) No domestic insurer subject to
registration
under section 27-35-3 shall pay any extraordinary dividend or make any other extraordinary
distribution to its shareholders until: (i)
thirty (30) days after the commissioner has received
notice of it’s the declaration thereof
and has not within that period disapproved the payment, or
(ii) until the commissioner shall have has
approved the payment within the thirty (30) day period;
(2) For the
purposes of this section, an "extraordinary dividend or
distribution" includes
any dividend or distribution of cash or other property,
whose fair market value together with that
of other dividends or distributions made within the
preceding twelve (12) months exceeds the
lesser of:
(i)
ten percent (10%) of the insurer's surplus as regards policyholders as of the
thirty-first
day of December next preceding, or
(ii) the
net gain from operations of the insurer, if the insurer is a life insurer, or
the net
income, if the insurer is not a life insurer, not including
realized capital gains, for the twelve (12)
month period ending the 31st day of December next
preceding, but shall not include pro rata
distributions of any class of the insurer's own securities.
In determining whether a
dividend or distribution is extraordinary, an insurer other than a
life insurer may carry forward net income from the
previous two (2) calendar years that has not
already been paid out as dividends. This carry forward shall
be computed by taking the net
income from the second and third preceding calendar years,
not including realized capital gains,
less dividends paid in the second and immediate preceding
calendar years;
(3) Notwithstanding any
other provision of law, an insurer may declare an extraordinary
dividend or distribution which is conditional upon the
commissioner's approval of it, and the
declaration shall confer no rights upon shareholders until: (i) the commissioner has approved the
payment of the dividend or distribution or (ii) the
commissioner has not disapproved the payment
within the thirty (30) day period referred to in subdivision
(1) of this subsection.
(d) Management of
Domestic Insurers Subject to Registration. All domestic insurers shall
become in compliance and maintain compliance with the
provisions of this title addressing good
corporate governance standards section 27-1-2.1, unless
otherwise exempted in section 27-1-2.1.
27-35-5.
Examination. -- (a) Power of commissioner.
- Subject to the limitation
contained in this section and in addition to the powers which
the commissioner has under other
sections of this title relating to the examination of
insurers, the commissioner shall also have the
power to order any insurer registered under section 27-35-3
to produce such any records, books,
or other information papers in the possession of the
insurer or its affiliates that shall be as are
reasonably necessary to ascertain the financial condition of
the insurer or to determine
compliance with this chapter legality of conduct of the insurer. In the event the insurer
fails to
comply with the order, the commissioner shall have the power
to examine the affiliates to obtain
the information.
(b) Purpose and
limitation of examination. - The commissioner shall exercise his or her
power under subsection (a) of this section only if the
examination of the insurer under other
sections of this title is inadequate or the interests of the
policyholders of the insurer may be
adversely affected.
(c)(b)
Use of consultants. - The commissioner may retain at the registered insurer's
expense those such attorneys, actuaries,
accountants, and other experts not otherwise a part of the
commissioner's staff that as shall be reasonably necessary to
assist in the conduct of the
examination under subsection (a) of this section. Any persons so
retained shall be under the
direction and control of the commissioner and shall act in a
purely advisory capacity.
(d)(c)
Expenses. - Each registered insurer producing for examination records, books
and
papers pursuant to subsection (a) of this section shall be
liable for and shall pay the expense of the
examination in accordance with applicable laws of this state.
27-35-6. Confidential treatment. -- All information,
documents, and copies of them (a)
Documents, materials or other information in the
possession or control of the department of
business regulation that are obtained by or disclosed to the commissioner or any other person in
the course of an examination or investigation made
pursuant to section 27-35-5, and all
information reported pursuant to section sections
27-35-2(b), 27-35-3, and 27-35-5, shall be given
confidential treatment by law and privileged, shall not
be subject to the access of public records
act, and
shall not be subject to subpoena and shall not be subject to discovery or
admissible in
evidence in any private civil action. However, the
commissioner is authorized to use the
documents, materials or other information in the furtherance of
any regulatory or legal action
brought as part of the commissioner's official duties. and shall not be
made public by the The
commissioner shall not otherwise make the documents, materials
or other information public or
any other person, except to insurance departments of
other states, without the prior
written
consent of the insurer to which it pertains unless the
commissioner, after giving the insurer and its
affiliates who would be affected by thereby the
information, notice and opportunity to be heard,
determines that the interests of policyholders, shareholders, or
the public will be served by it’s the
publication thereof, in which event the commissioner may
publish all or any part of it in a manner
that he or she may deem appropriate.
(b) Neither the
commissioner nor any person who received documents, materials or other
information while acting under the authority of the commissioner
shall be permitted or required to
testify in any private civil action concerning any
confidential documents, materials, or
information subject to subsection (a) of this section.
(c) In order to assist
in the performance of the commissioner's duties, the commissioner:
(1) May share
documents, materials or other information, including the confidential and
privileged documents, materials or information subject to
section (a), with other state, federal and
international regulatory agencies, with the NAIC and its affiliates
and subsidiaries, and with state,
federal, and international law enforcement authorities,
provided that the recipient agrees to
maintain the confidentiality and privileged status of the
document, material or other information;
(2) May receive
documents, materials or information, including otherwise confidential
and privileged documents, materials or information from
the NAIC and its affiliates and
subsidiaries and from regulatory and law enforcement officials of
other foreign or domestic
jurisdictions, and shall maintain as confidential or privileged any
document, material or
information received with notice or the understanding that it is
confidential or privileged under
the laws of the jurisdiction that is the source of the
document, material or information; and
(3) May enter into
agreements governing sharing and use of information consistent with
this subsection.
(d) No waiver of any
applicable privilege or claim of confidentiality in the documents,
materials or information shall occur as a result of disclosure
to the commissioner under this
section or as a result of sharing as authorized in section
(c).
27-35-8.
Injunctions -- Prohibitions against voting securities -- Sequestration of
voting securities. -- (a)
Injunctions. -
Whenever it appears to the commissioner that any person
insurer or any director, officer, employee, or agent of
any director, officer, or employee thereof
has committed or is about to commit a violation of this
chapter or of any rule, regulation, or order
issued by the commissioner under this chapter, the
commissioner may apply to the superior court
of that person the
insurer or that director, officer,
employee, or agent of any director, officer, or employee
thereof from violating or continuing to
violate this chapter or any rule, regulation or order, and
for any such other equitable relief that as
the nature of the case and the interests of the insurer's
policyholders, creditors, and shareholders
or the public may require.
(b) Voting of
securities; when prohibited. - No security which is the subject of any
agreement or arrangement regarding acquisition, or which is
acquired or to be acquired, in
contravention of the provisions of this chapter or of any rule,
regulation, or order issued by the
commissioner under this chapter may be voted at any shareholders'
meeting, or may be counted
for quorum purposes, and any action of shareholders
requiring the affirmative vote of a
percentage of shares may be taken as though the securities were
not issued and outstanding; but
no action taken at the meeting shall be invalidated by
the voting of the securities, unless the
action would materially affect control of the insurer or
unless the courts of this state have so
ordered. If an insurer or the commissioner has reason to
believe that any security of the insurer
has been or is about to be acquired in contravention of
the provisions of this chapter or of any
rule, regulation, or order issued by the commissioner
under this chapter the insurer or the
commissioner may apply to the superior court for
invitation, agreement, or acquisition made in contravention of
section 27-35-4 or any rule,
regulation, or order issued by the commissioner under that
section to enjoin the voting of any
security so acquired, to void any vote of the security already
cast at any meeting of shareholders,
and for any such other equitable relief that
as the nature of the case and the interests of the
insurer's policyholders, creditors, and shareholders or the
public may require.
(c) Sequestration of
voting securities. - In any case where a person has acquired or is
proposing to acquire any voting securities in violation of this
chapter or any rule, regulation, or
order issued by the commissioner under this chapter, the
superior court for
may, on such any notice that the court
deems appropriate, upon the application of the insurer or
the commissioner seize or sequester any voting securities
of the insurer owned directly or
indirectly by the person, and issue such any orders
with respect to those securities that as may be
appropriate to effectuate the provisions of this chapter.
Notwithstanding any other provisions of
law, for the purposes of this chapter, the situs of the ownership of the securities of domestic
insurers shall be deemed to be in this state.
27-35-9.
Criminal proceedings and civil penalties. --
Sanctions. -- (a) Criminal
penalties. - Whenever it appears to the commissioner that any
person or any director, officer,
employee, or agent of the person has committed a willful violation
of this chapter, the
commissioner may cause criminal proceedings to be instituted
against the person or the
responsible director, officer, employee, or agent of the person.
Any insurer that willfully violates
this chapter may be fined not more than ten thousand
dollars ($10,000). Any individual who
willfully violates this chapter may be fined not more than ten
thousand dollars ($10,000) or, if the
willful violation involves the deliberate perpetration of a
fraud upon the commissioner, be
imprisoned not more than two (2) years, or both.
(b)(a) Civil
penalties. - (1) Any insurer failing, without just
cause, to file any registration
statement as required in this chapter shall be required, after
notice and hearing, to pay a penalty of
five hundred dollars ($500) for each day's delay, to be
recovered by the commissioner, and the
penalty to be so recovered shall be paid into
the general revenue fund of this state. The maximum
penalty under this section is ten thousand dollars
($10,000) that determined pursuant to section
42-14-16. The commissioner may reduce the penalty if the insurer
demonstrates to the
commissioner that the imposition of the penalty would constitute a
financial hardship to the
insurer;
(2)(b)
Every director or officer of an insurance holding company system who knowingly
violates, participates in, or assents to, or who knowingly
shall permit any of the officers or agents
of the insurer to engage in transactions or make
investments which have not been properly
reported or submitted as required by this chapter or which
violate this chapter shall pay, in their
individual capacity, a civil forfeiture determined pursuant
to section 42-14-16, of not more than
one thousand dollars ($1,000) per violation, after notice
and hearing before the commissioner. In
determining the amount of the civil forfeiture, the commission
commissioner shall take into
account the appropriateness of the forfeiture with respect to
the gravity of the violation, the
history of previous violations, and any such
other matters that as justice may require;
(3)(c)
Whenever it appears to the commissioner that any insurer subject to this act or
any
director, officer, employee, or agent of the insurer has
engaged in any transaction or entered into
a contract which is subject to section 27-35-4 of this
chapter and which would not have been
approved had approval been requested, the commissioner may
order the insurer to immediately
cease and desist any further activity under the transaction
or contract. After notice and hearing the
commissioner may also order the insurer to void any contracts and
restore the status quo if that
action is in the best interest of the policyholders,
creditors, or the public.
(d) Whenever it
appears to the commissioner that any insurer or any director, officer,
employee or agent thereof has committed a willful violation of
this chapter, that any insurer or
any director, officer, employee or agent shall be in
violation of chapter 54 of title 27.
27-35-12. Judicial review -- Mandamus. -- (a) Any person aggrieved by any act,
determination, rule, regulation, or order or any other action of
the commissioner pursuant to this
chapter may appeal the action to the superior court. The
court shall conduct its review without a
jury and by trial de novo, except that if all parties,
including the commissioner, so stipulate, the
review shall be confined to the record. Portions of the
record may be introduced by stipulation
into evidence in a trial de novo as to those parties so
stipulating.
(b) The filing of an
appeal pursuant to this section shall stay the application of any rule,
regulation, order or other action of the commissioner to the
appealing party unless the court, after
giving the party notice and an opportunity to be heard,
determines that a stay would be
detrimental to the interest of policyholders, shareholders,
creditors or the public.
(b)(c)
Any person aggrieved by any failure of the commissioner to act or make a
determination required by this chapter may petition the superior
court of Providence County for a
writ in the nature of a mandamus or a peremptory mandamus
directing the commissioner to act or
make the determination.
SECTION 2. Chapter 27-35 of the General Laws entitled
"Insurance Holding Company
Systems" are hereby
amended by adding thereto the following sections:
27-35-1.5.
Subsidiaries of insurer. -- (a) Authorization. A
domestic insurer, either by
itself or in cooperation with one or more persons, may
organize or acquire one or more
subsidiaries. The subsidiaries may conduct any kind of business or
businesses and their authority
to do so shall not be limited by reason of the fact they
are subsidiaries of a domestic insurer.
(b) Additional
Investment Authority. In addition to investments in common stock,
preferred stock, debt obligations and other securities
permitted under all other sections of this
chapter, a domestic insurer may also:
(1) Invest, in common
stock, preferred stock, debt obligations, and other securities of one
or more subsidiaries, amounts which do not exceed the
lesser of ten percent (10%) of the insurer's
assets or fifty percent (50%) of the insurer's surplus as
regards policyholders, provided that after
such investments, the insurer's surplus as regards
policyholders will be reasonable in relation to
the insurer's outstanding liabilities and adequate to
meet its financial needs. In calculating the
amount of such investments, investments in domestic or
foreign insurance subsidiaries and health
maintenance organizations shall be excluded, and there shall be
included:
(i)
Total net monies or other consideration expended and obligations assumed in the
acquisition or formation of a subsidiary, including all
organizational expenses and contributions
to capital and surplus of the subsidiary whether or not
represented by the purchase of capital stock
or issuance of other securities; and
(ii) All amounts
expended in acquiring additional common stock, preferred stock, debt
obligations, and other securities; and all contributions to the
capital or surplus of a subsidiary
subsequent to its acquisition or formation;
(2) Invest any amount
in common stock, preferred stock, debt obligations and other
securities of one or more subsidiaries engaged or organized to
engage exclusively in the
ownership and management of assets authorized as investments
for the insurer provided that each
subsidiary agrees to limit its investments in any asset so that
such investments will not cause the
amount of the total investment of the insurer to exceed any
of the investment limitations specified
in subsection (b)(1) of this section or in chapter 11.1
of title 27 of this chapter applicable to the
insurer. For the purpose of this paragraph, "the total
investment of the insurer" shall include:
(i)
Any direct investment by the insurer in an asset; and
(ii)
The insurer's proportionate share of any investment in an asset
by any subsidiary of
the insurer, which shall be calculated by multiplying the
amount of the subsidiary's investment by
the percentage of the ownership of the subsidiary;
(3) With the approval
of the commissioner, invest any greater amount in common stock,
preferred stock, debt obligations, or other securities of one
or more subsidiaries; provided that
after the investment the insurer's surplus as regards
policyholders will be reasonable in relation to
the insurer's outstanding liabilities and adequate to its
financial needs.
(c) Exemption from
Investment Restrictions. Investments in common stock, preferred
stock, debt obligations or other securities of subsidiaries
made pursuant to subsection (b) of this
section shall not be subject to any of the otherwise
applicable restrictions or prohibitions
contained in this chapter applicable to such investments of
insurers.
(d) Qualification of
Investment; When Determined. Whether any investment made
pursuant to subsection (b) of this section meets the
applicable requirements of that subsection is
to be determined before the investment is made, by
calculating the applicable investment
limitations as though the investment had already been made,
taking into account the then
outstanding principal balance on all previous investments in debt
obligations, and the value of all
previous investments in equity securities as of the day they
were made, net of any return of
capital invested, not including dividends.
(e) Cessation of
Control. If an insurer ceases to control a subsidiary, it shall dispose of
any investment therein made pursuant to this section
within three (3) years from the time of the
cessation of control or within such further time as the
commissioner may prescribe, unless at any
time after the investment shall have been made, the
investment shall have met the requirements
for investment under any other section of this chapter,
and the insurer has so notified the
commissioner.
27-35-2.5.
Acquisitions involving insurers not otherwise covered. -- (a) Definitions.
The following definitions shall apply for the purposes
of this section only:
(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 but is not limited to, the acquisition of voting
securities, the acquisition of assets, bulk
reinsurance and mergers.
(2) 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.
(b) Scope. (1) Except
as exempted in paragraph (2) 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.
(2) This section
shall not apply to the following:
(a) An acquisition
subject to approval or disapproval by the commissioner pursuant to
section 27-35-2;
(b) 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 27-35-1(c), 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;
(c) 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 pre-acquisition
notification is filed with the commissioner in accordance with
subsection 27-35-2.5(c) thirty (30)
days prior to the proposed effective date of the
acquisition. However, such pre-acquisition
notification is not required for exclusion from this section if
the acquisition would otherwise be
excluded from this section by any other subparagraph of
subdivision 27-35-2.5(b)(2);
(d) The acquisition of
already affiliated persons;
(e) 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 (5%) of the total market,
(ii) There would be
no increase in any market share, or
(iii) In no market
would
(I) The combined market share of the involved insurers exceed
twelve percent (12%) of
the total market, and
(II) The market share
increase by more than two percent (2%) of the total market.
For the purpose of
section (2)(e), 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;
(f) An acquisition
for which a pre-acquisition notification would be required pursuant to
this section due solely to the resulting effect on the
ocean marine insurance line of business;
(g) 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 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) Pre-acquisition
Notification; Waiting Period. An acquisition covered by subsection
27-35-2.5(b) may be subject to an order pursuant to
subsection 27-35-2.5(e) unless the acquiring
person files a pre-acquisition notification and the waiting
period has expired. The acquired person
may file a pre-acquisition notification. The commissioner
shall give confidential treatment to
information submitted under this subsection in the same manner as
provided in §27-35-6.
(1) The
pre-acquisition notification shall be in such form and contain such information
as
prescribed by the NAIC relating to those markets which, under
subdivision 27-35-2.5(b)(2)(e),
cause the acquisition not to be exempted from the
provisions of this section. The commissioner
may require such additional material and information as
deemed necessary to determine whether
the proposed acquisition, if consummated, would violate
the competitive standard of subsection
27-35-2.5(d). 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 of receipt of the commissioner of
a pre-acquisition 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 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 thirtieth day after receipt of the
additional information by the commissioner or
termination of the waiting period by the commissioner.
(d) Competitive
Standard
(1) The commissioner
may enter an order under subdivision 27-35-2.5(e)(1)
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 or if the insurer fails to file adequate information
in compliance with subsection 27-35-
2.5(c).
(2) In determining
whether a proposed acquisition would violate the competitive standard
of paragraph (1) of this subsection, the commissioner
shall consider the following:
(a) Any acquisition
covered under subsection 27-35-2.5(b) involving two (2) 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% 4% or more
10% 2% or more
15% 1% or more
(ii) 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 columns in the table
is prima facie evidence of violation
of the competitive standard in paragraph (1) of this
subsection. For the purpose of this item, the
insurer with the largest share of the market shall be deemed
to be Insurer A.
(b) 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 27-35-2.5(b) involving two
(2) or more insurers
competing in the same market is prima facie evidence of violation of the
competitive standard in paragraph (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 (2%) or more.
(c) For the purposes
of subdivision 27-35-2.5(d)(2):
(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
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;
(iii) The burden of
showing prima facie evidence of violation of the competitive standard
rests upon the commissioner.
(d)
Even though an acquisition is not prima facie violative
of the competitive standard
under paragraphs (2)(a) and (2)(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 sections (2)(a) and (2)(b) of this
subsection, a party may establish the absence of the requisite
anticompetitive effect based upon
other substantial evidence. Relevant factors in making a
determination under this subparagraph
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.
(3) An order may not
be entered under subdivision 27-35-2.5(e)(1) 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) (a) If an acquisition violates the standards of this section,
the commissioner may enter
an order:
(i)
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
(ii) Denying the
application of an acquired or acquiring insurer for a license to do
business in this state.
(b) Such an order
shall not be entered unless:
(i)
There is a hearing;
(ii) Notice of the
hearing is issued prior to the end of the waiting period and not less than
fifteen (15) days prior to the hearing; and
(iii) The hearing is
concluded and the order is issued no later than sixty (60) days after
the date of the filing of the pre-acquisition
notification with the commissioner.
Every order shall be
accompanied by a written decision of the commissioner setting forth
findings of fact and conclusions of law.
(c) An order pursuant
to this paragraph shall not apply if the acquisition is not
consummated.
(2) Any person who
violates a cease and desist order of the commissioner
under
paragraph (1) and while the order is in effect may, after
notice and hearing and upon order of the
commissioner, be subject to one or more of the penalties set forth
in section 42-14-16:
(f) Inapplicable
Provisions. Subsections 27-35-8(b), 27-35-8(c), and 27-35-10 do not
apply to acquisitions covered under subsection
27-35-2.5(b).
27-35-10.5.
Recovery. -- (a) If an
order for liquidation or rehabilitation of a domestic
insurer has been entered, the receiver appointed under the order
shall have a right to recover on
behalf of the insurer, (i) from
any parent corporation or holding company or person or affiliate
who otherwise controlled the insurer, the amount of
distributions (other than distributions of
shares of the same class of stock) paid by the insurer on
its capital stock, or (ii) any payment in
the form of a bonus, termination settlement or
extraordinary lump sum salary adjustment made by
the insurer or its subsidiary to a director, officer or
employee, where the distribution or payment
pursuant to (i) or (ii) is made at
any time during the one year preceding the petition for
liquidation, conservation or rehabilitation, as the case may be,
subject to the limitations of
subsections (b), (c), and (d) of this section.
(b) No distribution
shall be recoverable if the parent or affiliate shows that when paid the
distribution was lawful and reasonable, and that the insurer did
not know and could not
reasonably have known that the distribution might adversely
affect the ability of the insurer to
fulfill its contractual obligations.
(c) Any person who
was a parent corporation or holding company or a person who
otherwise controlled the insurer or affiliate at the time the
distributions were paid shall be liable
up to the amount of distributions or payments under
subsection (a) of this section which the
person received. Any person who otherwise controlled the
insurer at the time the distributions
were declared shall be liable up to the amount of
distributions that would have been received if
they had been paid immediately. If two (2) or more persons
are liable with respect to the same
distributions, they shall be jointly and severally liable.
(d) The maximum amount
recoverable under this section shall be the amount needed in
excess of all other available assets of the impaired or
insolvent insurer to pay the contractual
obligations of the impaired or insolvent insurer and to reimburse
any guaranty funds.
(e) To the extent
that any person liable under subsection (c) of this section is insolvent or
otherwise fails to pay claims due from it, its parent
corporation or holding company or person
who otherwise controlled it at the time the distribution
was paid, shall be jointly and severally
liable for any resulting deficiency in the amount recovered
from the parent corporation or holding
company or person who otherwise controlled it.
SECTION 3. This act shall take effect upon passage.
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LC01611/SUB A
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