§691.5. 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 any of the following events:

(a) 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 pursuant to R.S. 22:691.2, 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.

(b) 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 C of this Section thirty 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 Subsection B of this Section.

(c) The acquisition of already affiliated persons.

(d)(i) An acquisition if, as an immediate result of the acquisition, any of the following circumstances would exist:

(aa) There is no market where the combined market share of the involved insurers would exceed five percent of the total market.

(bb) There would be no increase in any market share.

(cc) There is no market wherein the combined market share of the involved insurers would exceed twelve percent of the total market, and the market share would increase by more than two percent of the total market.

(ii) For the purpose of this Subparagraph, a market means direct written insurance premiums 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.

(e) 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.

(f) 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 B of this Section may be subject to an order pursuant to Subsection E of this Section 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 R.S. 22:691.10.

(1) The pre-acquisition notification shall be in such form and contain such information as prescribed by the commissioner relating to those markets, in accordance with Subparagraph (B)(2)(d) of this Section, which 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 set forth in Subsection D of this Section. The required information may include an opinion of an economist as to the competitive impact of the acquisition in this state accompanied by a summary of the education and experience of such person indicating his or her ability to render an informed opinion.

(2) The waiting period required shall begin on the date 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 pursuant to Subsection E of this Section with respect to an acquisition if there is substantial evidence that the effect of the acquisition may be to substantially 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 the provisions of Subsection C of this Section.

(2) In determining whether a proposed acquisition would violate the competitive standard set forth in Paragraph (1) of this Subsection, the commissioner shall consider the following:

(a) Any acquisition covered under Subsection B of this Section that involves two or more insurers competing in the same market shall be prima facie evidence of violation of the competitive standards if either of the following circumstances are present:

(i) 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) 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

(aa) A highly concentrated market is one in which the share of the four largest insurers is seventy-five percent or more of the market.

(bb) Percentages not shown in the tables are interpolated proportionately to the percentages that are shown. If more than two insurers are involved, exceeding the total of the two columns in the table shall be prima facie evidence of violation of the competitive standard set forth in Paragraph (1) of this Subsection.

(cc) For the purpose of Items (i) and (ii) of this Subparagraph, the insurer with the largest share of the market shall be deemed to be Insurer A.

(b) Whether there is a significant trend toward increased concentration when the aggregate market share of any grouping of the largest insurers in the market, from the two largest to the eight largest, has increased by seven percent or more of the market over a period of time extending from any base year of five to ten years prior to the acquisition up to the time of the acquisition. Any acquisition or merger covered under Subsection B of this Section involving two or more insurers competing in the same market is prima facie evidence of violation of the competitive standard set forth in Paragraph (1) of this Subsection if each of the following circumstances exist:

(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.

(iii) Another involved insurer's market is two percent or more.

(c) For the purposes of this Subsection:

(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 any applicable definitions or guidelines promulgated by the NAIC and to any relevant information submitted by parties to the acquisition, as well as any other factors the commissioner deems relevant. 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 the same one that is used in the annual statement required to be filed by insurers doing business in this state. The relevant geographical market shall be assumed to be this state.

(d) The burden of showing prima facie evidence of violation of the competitive standard rests upon the commissioner.

(e) Even if an acquisition is not a prima facie violation of the competitive standard pursuant to Subparagraphs (a) and (b) of this Paragraph, the commissioner may establish the requisite anticompetitive effect based upon other substantial evidence. Even when an acquisition is a prima facie violation of the competitive standard pursuant to Subparagraphs (a) and (b) of this Paragraph, 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 shall not be limited to 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 pursuant to Subsection E of this Section if either of the following circumstances exists:

(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.

(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 which:

(i) Requires 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.

(ii) Denies 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 each of the following requirements have been satisfied:

(i) Interested parties have opportunity for a hearing.

(ii) Notice of the hearing is issued prior to the end of the waiting period and not less than fifteen days prior to the hearing.

(iii) The hearing is concluded and the order is issued no later than sixty days after the date of the filing of the pre-acquisition notification with the commissioner.

(c) Every order shall be accompanied by a written decision of the commissioner setting forth findings of fact and conclusions of law.

(d) An order issued 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 issued in accordance with Paragraph (1) of this Subsection while the order is in effect may be subject to one or more of the following penalties:

(a) A monetary penalty of not more than ten thousand dollars for every day of violation.

(b) Suspension or revocation of the person's license.

(3) Any insurer or other person who fails to make any filing required by this Section, and who fails to demonstrate a good faith effort to comply with any filing requirement, shall be subject to a fine of not more than fifty thousand dollars.

F. The provisions of R.S. 22:691.12(B) and (C) and 691.14 do not apply to acquisitions covered under Subsection B of this Section.

Acts 2012, No. 294, §1.