Vermont Statutes
Chapter 101 - Insurance Companies Generally
§ 3683a. Acquisitions involving insurers not otherwise covered

§ 3683a. Acquisitions involving insurers not otherwise covered
(a) Definitions. For the purposes of this section:
(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 the acquisition of voting securities and assets, bulk reinsurance, and mergers.
(2) “Highly concentrated market” is a market in which the share of the four largest insurers is 75 percent or more of the market.
(3) “Insurer” means a company licensed to do business in this State and includes any company or group of companies under common management, ownership, or control.
(4) “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.
(5) “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, adopted 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.
(6) “Significant trend toward increased concentration” means 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 five to 10 years prior to the acquisition up to the time of the acquisition.
(b) Covered acquisitions. Except as provided in this subsection, this section applies to any acquisition in which there is a change in control of an insurer licensed to do business in this State, but not domiciled in this State. This section shall not apply to the following:
(1) 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 subdivision 3681(3) of this chapter, 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.
(2) The acquisition of a person by another person when both persons are neither directly nor through affiliates primarily engaged in the business of insurance, if preacquisition notification is filed with the Commissioner in accordance with subdivision (c)(1) of this section 30 days prior to the proposed effective date of the acquisition or if the acquisition would otherwise be excluded from this section by any other provision of this subsection.
(3) The acquisition of already affiliated persons.
(4) An acquisition if, as an immediate result of the acquisition:
(A) in no market would the combined market share of the involved insurers exceed five percent of the total market;
(B) there would be no increase in any market share; or
(C) in no market would the combined market share of the involved insurers exceed 12 percent of the total market and the market share increase by more than two percent of the total market. For purposes of this subdivision, “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.
(5) An acquisition for which a preacquisition notification would be required under this section due solely to the resulting effect on the ocean marine insurance line of business.
(6) An acquisition of an insurer whose domiciliary commissioner affirmatively finds that the insurer is in failing condition; there is a lack of feasible alternatives 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) Preacquisition notification; waiting period. An insurer involved in an acquisition covered by subsection (b) of this section shall file a preacquisition notification with the Commissioner so that the Commissioner may determine whether the proposed acquisition, if consummated, would violate the competitive standard established under subsection (d) of this section. The Commissioner shall give confidential treatment to information submitted under this subsection in the same manner as provided in section 3687 of this chapter.
(1) The preacquisition notification shall be in such form and contain such information as prescribed by the NAIC relating to those markets which cause the acquisition to be covered under provisions of this section. The Commissioner may require such additional material and information as deemed necessary to carry out the purposes 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 the Commissioner receives a preacquisition notification and shall end on the earlier of the 30th 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 30th day after the Commissioner receives the additional information or termination of the waiting period by the Commissioner.
(d) Competitive standard.
(1) The Commissioner may enter an order under subdivision (e)(1) of this section with respect to an acquisition if there is substantial evidence that the effect of the acquisition may be to lessen substantially competition in any line of insurance in this State or may tend to create a monopoly.
(2) In determining whether a proposed acquisition would violate the competitive standard of subdivision (1) of this subsection, the Commissioner shall consider the following:
(A) Any acquisition covered under subsection (b) of this section involving two insurers competing in the same market is prima facie evidence of violation of the competitive standard if:
(i) The market is highly concentrated and the involved insurers possess the following shares of the market:
(I) insurer A a share of four percent and insurer B a share of four percent or more;
(II) insurer A a share of 10 percent and insurer B a share of two percent or more; or
(III) insurer A a share of 15 percent and insurer B a share of one percent or more.
(ii) The market is not highly concentrated and the involved insurers possess the following shares of the market:
(I) insurer A a share of five percent and insurer B a share of five percent or more;
(II) insurer A a share of 10 percent and insurer B a share of four percent or more;
(III) insurer A a share of 15 percent and insurer B a share of three percent or more; or
(IV) insurer A a share of 19 percent and insurer B a share of one percent or more.
(B) If more than two insurers competing in the same market are involved in any acquisition covered under subsection (b) of this section, then exceeding the total of the two figures set forth for insurer A and insurer B established under subdivision (A)(i) or (ii) of this subdivision (2) is prima facie evidence of violation of the competitive standard. For purposes of this subdivision (2), the insurer with the largest share of the market shall be considered to be insurer A.
(C) Any acquisition 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 in subdivision (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 or more.
(3) If an acquisition is not prima facie violative of the competitive standard under subdivisions (A) through (C) of subdivision (2) of this subsection, the Commissioner may establish the requisite anticompetitive effect based upon other substantial evidence. If an acquisition is prima facie violative of the competitive standard under subdivisions (A) through (C) of subdivision (2), a party may establish the absence of the requisite anticompetitive effect based upon other substantial evidence. Relevant factors in making a determination under this subdivision include 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.
(4) The burden of showing prima facie evidence of violation of the competitive standard rests upon the Commissioner.
(5) Percentages not provided in subdivisions (A) and (B) of subdivision (2) of this subsection are interpolated proportionately to the percentages that are provided.
(6) An order may not be entered under subdivision (e)(1) of this section 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) If an acquisition violates the competitive standard of subsection (d) of this section or if an involved insurer fails to file adequate information in compliance with subsection (c) of this section, the Commissioner may enter an order:
(A) 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
(B) denying the application of an acquired or acquiring insurer for a license to do business in this State.
(2) Such an order shall not be entered unless there is a hearing, notice of the hearing is issued prior to the end of the waiting period and not less than 15 days prior to the hearing, and the hearing is concluded and the order is issued no later than 60 days after the date of the filing of the preacquisition notification with the Commissioner.
(3) Every order shall be accompanied by a written decision of the Commissioner setting forth findings of fact and conclusions of law. An order under this subdivision shall not apply if the acquisition is not consummated.
(4) Any person who violates a cease and desist order of the Commissioner under subdivision (1) of this subsection and while the order is in effect may, after notice and hearing and upon order of the Commissioner, be subject to a monetary penalty of not more than $10,000.00 for every day of violation or suspension or revocation of the person’s license, in the discretion of the Commissioner.
(5) Any insurer or other person who fails to make any filing required by this section and who also fails to demonstrate a good faith effort to comply with any filing requirement shall be subject to a fine of not more than $50,000.00.
(f) Subsections 3689(b) and (c) of this title (regarding voting securities) and section 3691 of this title (regarding receivership) do not apply to acquisitions covered under subsection (b) of this section. (Added 2013, No. 29, § 29, eff. May 13, 2013.)

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