District of Columbia Code
Subchapter I - Holding Company System
§ 31–703. Acquisition of control of or merger with domestic insurer

(a)(1) No person other than the issuer shall make a tender offer for or a request or invitation for tenders of, enter into any agreement to exchange securities, or seek to acquire, or acquire, in the open market or otherwise, any voting security of a domestic insurer, if, after consummation, the person would, directly or indirectly (or by conversion or by exercise of any right to acquire) be in control of the insurer.
(2) 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 any agreement is entered into, or prior to the acquisition of the securities if no offer or agreement is involved, the person has filed with the Mayor and has sent to the insurer, a statement containing the information required by this section and the offer, request, invitation, agreement, or acquisition has been approved by the Mayor in the manner prescribed by this subchapter.
(3) For the purposes of this section, any controlling person of a domestic insurer seeking to divest its controlling interest in the domestic insurer, in any manner, shall file with the Mayor, with a copy to the insurer, confidential notice of its proposed divestiture at least 30 days before the cessation of control. The Mayor shall determine those instances in which the party or parties seeking to divest or to acquire a controlling interest in an insurer will be required to file for and obtain approval of the transaction. The information shall remain confidential until the conclusion of the transaction unless the Mayor, in the Mayor’s discretion, determines that confidential treatment will interfere with enforcement of this subchapter. If the statement referred to in paragraph (2) of this subsection is otherwise filed, this paragraph shall not apply.
(b)(1) For purposes of this section, the term “domestic insurer” shall include any person controlling a domestic insurer unless the person, as determined by the Mayor, is either directly or through its affiliates primarily engaged in business other than the business of insurance. However, such a person shall file a preacquisition notification with the Mayor containing the information set forth in § 31-704(c) 30 days prior to the proposed effective date of the acquisition. Failure to file is subject to § 31-704(e).
(2) For the purposes of this section, the term “person” shall not include any securities broker holding, in the usual and customary brokers function, less than 20% of the voting securities of an insurance company or of any person who controls an insurance company.
(c) The statement to be filed with the Mayor shall be made under oath or affirmation and shall contain the following information:
(1) The name and address of each person by whom or on whose behalf the merger or other acquisition of control referred to in subsections (a) and (b) of this section is to be effected (hereinafter called “acquiring party”):
(A) If the person is an individual, his or her principal occupation and all offices and positions held during the past 5 years, and any conviction of crimes, other than minor traffic violations, during the past 10 years; or
(B) If the person is not an individual, a report of the nature of its business operations during the past 5 years or for any lesser period the person and any predecessors 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 these positions. The list shall include for each individual the information required by subparagraph (A) of this paragraph;
(2) The source, nature, and amount of the consideration used, or to be used, in effecting the merger or other acquisition of control, a description of any transaction wherein funds were or are to be obtained for this purpose (including any pledge of the insurer’s stock, or the 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;
(3) Fully audited financial information as to the earnings and financial condition of each acquiring party for the preceding 5 fiscal years of each acquiring party (or for any lesser period as the acquiring party and any predecessors shall have been in existence), and similar unaudited information as of a date not earlier than 90 days prior to the filing of the statement;
(4) 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;
(5) The number of shares of any security referred to in subsections (a) and (b) of this section which each acquiring party proposes to acquire, the terms of the offer, request, invitation, agreement, or acquisition referred to in subsections (a) and (b) of this section, and a statement as to the method by which the fairness of the proposal was determined;
(6) The amount of each class of any security referred to in subsections (a) and (b) of this section which is beneficially owned or concerning which there is a right to acquire beneficial ownership by each acquiring party;
(7) A full description of any contracts, arrangements, or understandings with respect to any security referred to in subsections (a) and (b) of this section in which any acquiring party is involved, including, but not limited to, 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 any contracts, arrangements, or understandings have been entered into;
(8) A description of the purchase of any security referred to in subsections (a) and (b) of this section during the 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;
(9) A description of any recommendations to purchase any security referred to in subsections (a) and (b) of this section made during the 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;
(10) 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 subsections (a) and (b) of this section, and, if distributed, all additional related soliciting material;
(11) 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 subsections (a) and (b) of this section for tender, and the amount of any resulting fees, commissions, or other compensation to be paid to broker-dealers;
(11A) An agreement by the person required to file the statement referred to in subsection (a) of this section that it will provide the annual report, specified in § 31-705(k-1), for so long as control exists;
(11B) An acknowledgement by the person required to file the statement referred to in subsection (a) of this section that the person and all subsidiaries within its control in the insurance holding company system will provide information to the Mayor upon request as necessary to evaluate enterprise risk to the insurer; and
(12) Any additional information as the Mayor may by rule or regulation prescribe as necessary or appropriate for the protection of policyholders of the insurer or in the public interest.
(d) If the person required to file the statement referred to in subsections (a) and (b) of this section is a partnership, limited partnership, syndicate or other group, the Mayor may require that the information called for by subsection (c)(1) through (12) of this section shall be given with respect to each partner of the partnership or limited partnership, 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 subsections (a) and (b) of this section is a corporation, the Mayor may require that the information called for by subsection (c)(1) through (12) of this section 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 10% of the outstanding voting securities of the corporation.
(e) If any material change occurs in the facts set forth in the statement filed with the Mayor 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 Mayor and sent to the insurer within 2 business days after the person learns of the change.
(f) If any offer, request, invitation, agreement, or acquisition referred to in subsections (a) and (b) of this section is proposed to be made by means of a registration statement under the Securities Act of 1933 (15 U.S.C. § 77a et seq.), or in circumstances requiring the disclosure of similar information under the Securities Exchange Act of 1934 (15 U.S.C. § 78a et seq.), or under a state law requiring similar registration or disclosure, the person required to file the statement referred to in subsections (a) and (b) of this section may utilize the documents in furnishing the information called for by that statement.
(g)(1)(A) If the acquiring company proposes to acquire a domestic insurer which is not a nonprofit hospital service plan or medical service plan, the Mayor shall approve any merger or other acquisition of control referred to in subsections (a) and (b) of this section unless, after a public hearing, the Mayor finds that:
(i) After the change of control, the domestic insurer referred to in subsections (a) and (b) 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 licensed;
(ii) The effect of the merger or other acquisition of control would be substantially to lessen competition in insurance in the District or tend to create a monopoly. In applying the competitive standard in this sub-subparagraph:
(I) The informational requirements of § 31-704(c)(1) and the standards of § 31-704(d)(2) shall apply;
(II) The merger or other acquisition shall not be disapproved if the Mayor finds that any of the situations meeting the criteria provided by § 31-704(d)(3) exist; and
(III) The Mayor 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 company is such as might jeopardize the financial stability of the insurer, or prejudice the interest of its policyholders;
(iv) The plans or proposals which the acquiring company 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 or are not in the public interest;
(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.
(B)(i) If an acquiring company proposes to acquire a domestic insurer which is a nonprofit hospital plan or medical service plan, the same procedure shall apply as provided in subparagraph (A) of this paragraph; provided, that the acquiring company shall have the burden of establishing that the proposed merger or acquisition of control does not result in the existence of any of the conditions set forth in sub-subparagraphs (i) through (vi) of subparagraph (A).
(ii) The determination made by the Mayor as provided in subparagraph (A) of this paragraph shall not become effective until 90 days after the Mayor makes the determination.
(2) The public hearing referred to in paragraph (1) of this subsection shall be held within 120 days after the statement required by subsections (a) and (b) of this section is filed, and at least 20-days notice shall be given by the Mayor to the person filing the statement; provided, that the Mayor may extend the 120-day period if all parties consent to the extension. Not less than 7-days notice of the public hearing shall be given by the person filing the statement to the insurer and to any other persons designated by the Mayor. The Mayor shall make a determination within 120 days after the conclusion of the hearing; provided, that the Mayor may extend this period if all parties consent to the extension. At the hearing, the person filing the statement, the insurer, and any party shall have the right to present evidence, examine and cross-examine witnesses, and offer oral and written arguments, and shall be entitled to conduct discovery proceedings in the same manner as is presently allowed in the Superior Court of the District of Columbia. All discovery proceedings shall be concluded not later than 3 days prior to the commencement of the public hearing.
(3) The Mayor may retain, at the acquiring person’s expense, any attorneys, actuaries, accountants, and other experts not otherwise a part of the Mayor’s staff as may be reasonably necessary to assist the Mayor in reviewing the proposed acquisition of control. For this purpose, the Mayor shall be exempt from the provisions of Unit A of Chapter 3 of Title 2.
(4)(A) If the proposed acquisition of control will require the approval of more than one commissioner, the public hearing referred to in paragraph (1) of this subsection may be held on a consolidated basis upon request of the person filing the statement referred to in subsection (a) of this section. A person shall file the statement referred to in subsection (a) of this section with the National Association of Insurance Commissioners within 5 days of making the request for a public hearing.
(B) A commissioner may opt out of a consolidated hearing, and shall provide notice to the applicant of the opt-out within 10 days of the receipt of the statement referred to in subsection (a) of this section.
(C) A hearing conducted on a consolidated basis shall be public and shall be held within the United States before the commissioners of the states in which the insurers are domiciled.
(D) The commissioners shall hear and receive evidence. A commissioner may attend a hearing in person or by telecommunication.
(h) The provisions of this section shall not apply to:
(1) Any transaction which is subject to the laws of the District dealing with the merger or consolidation of 2 or more insurers; or
(2) Any offer, request, invitation, agreement, or acquisition which the Mayor by order shall exempt as:
(A) 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
(B) Otherwise not comprehended within the purposes of this section.
(i) 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), (b), or (c) of this section; and
(2) The effectuation, or any attempt to effectuate, an acquisition of control of, divestiture of, or merger with, a domestic insurer unless the Mayor has given approval.
(j) Every person not resident, domiciled, or authorized to do business in the District who files a statement with the Mayor under this section shall be deemed to have performed acts equivalent to and constituting an appointment by such a person of the Mayor to be his or her 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 Mayor and transmitted by registered or certified mail by the Mayor to the person at his or her last known address.
(Oct. 21, 1993, D.C. Law 10-44, § 4, 40 DCR 6027; Mar. 24, 1998, D.C. Law 12-81, § 40(b), 45 DCR 745; Mar. 25, 2003, D.C. Law 14-236, § 2, 49 DCR 10483; Dec. 9, 2003, D.C. Law 15-56, § 2(b), 50 DCR 9188; Mar. 11, 2015, D.C. Law 20-235, § 2(b), 62 DCR 461.)
1981 Ed., § 35-3703.
This section is referenced in § 31-704, § 31-709, § 31-731, § 31-732, § 31-752, § 31-753, and § 31-755.
D.C. Law 14-236, in subsec. (g)(3), added the last sentence.
D.C. Law 15-56, in subsec. (g), rewrote par. (1), and in par. (2), substituted “The public hearing referred to in paragraph (1) of this subsection shall be held within 120 days after the statement required by subsections (a) and (b) of this section is filed, and at least 20-days notice shall be given by the Mayor to the person filing the statement; provided, that the Mayor may extend the 120-day period if all parties consent to the extension.” for “The public hearing referred to in paragraph (1) of this subsection shall be held within 30 days after the statement required by subsections (a) and (b) of this section is filed, and at least 20-days notice shall be given by the Mayor to the person filing the statement.”, substituted “The Mayor shall make a determination within 120 days after the conclusion of the hearing; provided, that the Mayor may extend this period if all parties consent to the extension.” for “The Mayor shall make a determination within 30 days after the conclusion of the hearing.”, and substituted “and any party” for “any person to whom notice of hearing was sent, and any other person whose interest may be affected”.
The 2015 amendment by D.C. Law 20-235 added (a)(3); added (c)(11A) and (c)(11B) and made related changes; added (g)(4); and added “divestiture of” in (i)(2).
For temporary (90 day) amendment of section, see § 2 of Department of Insurance and Securities Regulation Procurement Emergency Act of 2002 (D.C. Act 14-314, March 26, 2002, 49 DCR 3451).
For temporary (90 day) amendment of section, see § 2(b) of Department of Insurance and Securities Regulation Merger Review Emergency Amendment Act of 2002 (D.C. Act 14-457, July 23, 2002, 48 DCR 8132).
For temporary (90 day) amendment of section, see § 2(b) of Department of Insurance and Securities Regulation Merger Review Congressional Review Emergency Amendment Act of 2002 (D.C. Act 14-513, October 23, 2002, 49 DCR 10475).
For temporary (90 day) amendment of section, see § 2(b) of Department of Insurance and Securities Regulation Merger Congressional Review Emergency Act of 2003 (D.C. Act 15-8, January 27, 2003, 50 DCR 1473).
For temporary (90 day) amendment of section, see § 2 of Department of Insurance and Securities Regulation Procurement Congressional Review Emergency Act of 2003 (D.C. Act 15-9, January 27, 2003, 50 DCR 1478).
For temporary (90 day) amendment of section, see § 2(b) of Department of Insurance and Securities Regulation Merger Review Emergency Amendment Act of 2003 (D.C. Act 15-205, October 24, 2003, 50 DCR 9845).
For temporary (90 day) amendment of section, see § 2(b) of Department of Insurance and Securities Regulation Merger Review Second Congressional Review Emergency Amendment Act of 2003 (D.C. Act 15-257, November 25, 2003, 50 DCR 11006).
For temporary (225 day) amendment of section, see § 2 of Department of Insurance and Securities Regulation Procurement Temporary Act of 2002 (D.C. Law 14-159, June 25, 2002, law notification 49 DCR 6495).
For temporary (225 day) amendment of section, see § 2(b) of Department of Insurance and Securities Regulation Merger Review Temporary Amendment Act of 2002 (D.C. Law 14-217, March 25, 2003, law notification 50 DCR 2730).
Because of the codification of D.C. Law 11-159 as subchapter II of Chapter 37 of Title 35 [subchapter II of Chapter 7 of Title 31, 2001 Ed.], and the designation of the preexisting text as subchapter I, “subchapter” has been substituted for “chapter” in (a)(2).