SECOND REGULAR SESSION
HOUSE BILL NO. 1336
97TH GENERAL ASSEMBLY
INTRODUCED BY REPRESENTATIVES GOSEN (Sponsor) AND BLACK (Co-sponsor).
4862L.02I D. ADAM CRUMBLISS, Chief Clerk
To repeal sections 382.010, 382.020, 382.040, 382.050, 382.060, 382.080, 382.095, 382.110, 382.170, 382.180, 382.190, 382.195, 382.220, and 382.230, RSMo, and to enact in lieu thereof seventeen new sections relating to insurance holding companies, with a penalty provision.
Be it enacted by the General Assembly of the state of Missouri, as follows:
Section A. Sections 382.010, 382.020, 382.040, 382.050, 382.060, 382.080, 382.095, 382.110, 382.170, 382.180, 382.190, 382.195, 382.220, and 382.230, RSMo, are repealed and seventeen new sections enacted in lieu thereof, to be known as sections 382.010, 382.020, 382.040, 382.050, 382.060, 382.080, 382.095, 382.110, 382.170, 382.175, 382.180, 382.190, 382.195, 382.220, 382.225, 382.230, and 382.277, to read as follows:
382.010. As used in sections 382.010 to 382.300, the following words and terms have the meanings indicated unless the context clearly requires otherwise:
(1) An "affiliate" of, or person "affiliated" with, a specific person, is a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the person specified;
(2) [The term] "Control", [including the terms] "controlling", "controlled by" [and] , or "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 nonmanagement 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 power to vote, or holds proxies representing, ten percent 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 382.170 that control does not exist in fact. The director may determine, after furnishing all persons in interest notice and opportunity to be heard and making specific findings of fact to support such determination, that control exists in fact, notwithstanding the absence of a presumption to that effect;
(3) [The term] "Director" [means] , the director of the department of insurance, financial institutions and professional registration, his deputies, or the department of insurance, financial institutions and professional registration, as appropriate;
(4) "Enterprise risk", any activity, circumstance, event, or series of events involving one or more affiliates of an insurer that, if not remedied promptly, is likely to have a material adverse effect upon the financial condition or liquidity of the insurer or its insurance holding company system as a whole, including but not limited to anything that would cause the insurer's risk-based capital to fall into company action level as set forth in section 375.1255 or would cause the insurer to be in hazardous financial condition as set forth in section 375.359;
(5) [An] "Insurance holding company system" [consists of] , two or more affiliated persons, one or more of which is an insurer;
[(5) The term] (6) "Insurer" [means] , an insurance company as defined in section 375.012, including a reciprocal or interinsurance exchange, and which is qualified and licensed by the department of insurance, financial institutions and professional registration of Missouri to transact the business of insurance in this state; but it shall not include any company organized and doing business under [chapters] chapter 377, 378 or 380, agencies, authorities, or instrumentalities of the United States, its possessions and territories, the Commonwealth of Puerto Rico, the District of Columbia, or a state or political subdivision of a state;
[(6) A] (7) "Person" [is] , an individual, corporation, partnership, association, joint stock company, business trust, unincorporated organization, or any similar entity, or any combination of the foregoing acting in concert, but [is not any securities broker performing no more than the usual and customary broker's function] shall not include any joint venture partnership exclusively engaged in owning, managing, leasing, or developing real or tangible personal property;
[(7)] (8) A "securityholder" of a specified person is one who owns any security of that person, including common stock, preferred stock, debt obligations, and any other security convertible into or evidencing the right to acquire any of the foregoing;
[(8)] (9) A "subsidiary" of a specified person is an affiliate controlled by that person directly, or indirectly through one or more intermediaries;
[(9)] (10) The term "voting security" includes any security convertible into or evidencing a right to acquire a voting security.
382.020. 1. Any domestic insurer, either by itself or in cooperation with one or more persons, may invest in, otherwise acquire or operate one or more subsidiaries engaged or registered to engage in one or more of the following businesses:
(1) Any kind of insurance business authorized by the laws of the state of Missouri;
(2) Investing, reinvesting or trading in securities for its own account, that of its parent, any subsidiary of its parent, or any affiliate or subsidiary;
(3) Rendering other services including, but not limited to, actuarial, loss prevention, safety engineering, marketing, data processing, accounting, claims, appraisal and collection services, if such services relate to the operations of the insurance business of the insurer; provided, however, that such services shall not include services of salvage of motor vehicles, the mechanical, body or other repair of motor vehicles and the towing or retrieval of motor vehicles;
(4) Ownership and management of the kinds of assets which the parent corporation could itself own or manage;
(5) Acting as administrative agent for a governmental instrumentality which is performing an insurance function;
(6) Financing of insurance premiums;
(7) Any other business activity determined by the director to be reasonably ancillary to the insurance business of the insurer;
(8) Owning a corporation or corporations engaged in or organized to engage exclusively in one or more of the businesses specified in this section;
(9) Acting as an insurance broker or as an insurance agent for its parent or for any of its parent's insurer subsidiaries;
(10) Management of any investment company subject to or registered pursuant to the federal Investment Company Act of 1940, as amended, including related sales and services;
(11) Acting as a broker-dealer subject to or registered pursuant to the federal Securities Exchange Act of 1934, as amended; and
(12) Rendering investment advice to governments, government agencies, corporations or other organizations or groups.
2. In addition, a domestic insurance company may, if it maintains books and records which separately account for such business, engage directly in any business referred to in subdivisions (3), (4), (5), (6) and (7) of subsection 1 of this section, either to the extent necessarily or properly incidental to the insurance business the insurer is authorized to do in this state or to the extent approved by the director and subject to any limitations the director may prescribe for the protection of the interests of the policyholders of the insurer after taking into account the effect of such business on the insurer's existing insurance business and its surplus, the proposed allocation of the estimated costs of such business and the risks inherent in such business as well as the relative advantages to the insurer and its policyholders of conducting such business directly instead of through a subsidiary. Nothing in sections 382.010 to 382.300 shall be deemed to limit the powers of a domestic insurance company existing prior to September 28, 1971.
3. In addition to investments in common stock, preferred stock, debt obligations and other securities permitted domestic insurers, a domestic insurer may also do one or more of the following:
(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 [five] ten percent of such insurer's assets or fifty percent of such insurer's surplus as regards policyholders, if after such investments the insurer's surplus as regards policyholders will be reasonable in relation to the insurer's outstanding liabilities and adequate to its financial needs. In calculating the amount of such investment, investments in domestic or foreign insurance subsidiaries shall be excluded, and there shall be included:
(a) Total net moneys 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 such subsidiary whether or not represented by the purchase of capital stock or issuance of other securities; and
(b) 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) With the approval of the director, invest any greater amount in common stock, preferred stock, debt obligations, or other securities of one or more subsidiaries, if after such 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;
(3) 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 such 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 subdivision (1) of this subsection or in other insurance laws applicable to the insurer. For the purpose of this subdivision, the total investment of the insurer shall include:
(a) Any direct investment by the insurer in an asset; and
(b) 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 such subsidiary.
4. Investments in common stock, preferred stock, debt obligations or other securities made pursuant to subsection 3 of this section shall be made as provided by the statutes of this state.
5. Whether any investment pursuant to subsections 3 and 4 of this section meets the applicable requirements thereof is to be determined immediately after such investment is 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 date they are made.
382.040. 1. No person other than the issuer shall commence 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 thereof, he 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 unless, at the time the offer, request, or invitation is commenced or the agreement is entered into, or prior to the acquisition of the securities if no offer or agreement is involved, he has filed with the director and has sent to the insurer a statement containing the information required by section 382.050 and the offer, request, invitation, agreement or acquisition has been approved by the director in the manner prescribed by sections 382.010 to 382.300.
2. For purposes of sections 382.040 to 382.090, any controlling person of a domestic insurer seeking to divest its controlling interest in the domestic insurer, in any manner, shall file with the director, with a copy to the insurer, confidential notice of its proposed divestiture at least thirty days prior to the cessation of control. The director shall determine those instances in which the party or parties seeking to divest or to acquire a controlling interest in an insurer shall be required to file for and obtain approval of the transaction. The information shall remain confidential until the conclusion of the transaction. If the statement referred to in subsection 1 of this section is otherwise filed, the provisions of this subsection shall not apply.
3. With respect to a transaction subject to this section, the acquiring person shall also file a preacquisition notification with the director which shall contain the information set forth in subsection 3 of section 382.095. A failure to file the notification may be subject to the penalties specified in subsection 5 of section 382.095.
4. For purposes of this section, a domestic insurer shall include any person controlling a domestic insurer unless such person, as determined by the director, is either directly or through its affiliates primarily engaged in business other than the business of insurance; however, such person shall file a preacquisition notification with the director containing the information set forth in section 382.095 thirty days prior to the proposed effective date of the acquisition. Any person who fails to file the preacquisition notification required by this section shall be subject to the penalties provided in subsection 5 of section 382.095. For the purposes of sections 382.040, 382.050, 382.060, 382.070, 382.080 and 382.090, "person" shall not include any securities broker holding, in the usual and customary broker's function, less than twenty percent of the voting securities of an insurance company or of any person which controls an insurance company.
382.050. 1. The statement to be filed with the director shall be made under oath or affirmation and shall contain the following [information]:
(1) The name and address of each person hereinafter called "acquiring party" by whom or on whose behalf the merger or other acquisition of control referred to in section 382.040 is to be effected, and
(a) If that person is an individual, his principal occupation and all offices and positions held during the past five years, and any conviction of crimes other than minor traffic violations during the past ten years; and
(b) If that person is not an individual, a report of the nature of its business operations during the past five years or for such lesser period as that person and any predecessors thereof have been in existence;
(c) An informative description of the business intended to be done by that person and its subsidiaries; and
(d) A list of all individuals who are or who have been selected to become directors or executive officers of such person, or who perform or will perform functions appropriate to such positions. The list shall include for each such individual the information required by paragraph (a) of subdivision (1) of subsection 1 of this section;
(2) The source, nature and amount of the consideration 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 any such purpose, including any pledge of the insurer's stock or the stock of any subsidiaries or controlling affiliates, and the identity of persons furnishing such consideration, but, 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 five fiscal years of each such acquiring party, or for such lesser period as such acquiring party and any predecessors thereof shall have been in existence, and similar unaudited information as of a date not earlier than ninety 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, to 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 section 382.040 which each acquiring party proposes to acquire;
(6) The terms of the proposed offer, request, invitation, agreement, or acquisition referred to in section 382.040, and a statement as to the method by which the fairness of the proposal was arrived at;
(7) The amount of each class of any security referred to in section 382.040 which is beneficially owned or concerning which there is a right to acquire beneficial ownership by each acquiring party;
(8) A full description of any contracts, arrangements or understandings with respect to any security referred to in section 382.040 in which any acquiring party proposes to be or 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. Such description shall identify the persons with whom such contracts, arrangements or understandings have been or will be entered into;
(9) A description of the purchase of any security referred to in section 382.040 during the twelve 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 therefor;
(10) A description of any recommendations to purchase any security referred to in section 382.040 made during the twelve calendar months preceding the filing of the statement by any acquiring party, or by anyone based upon interviews or at the suggestion of such acquiring party;
(11) Copies of the form 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 section 382.040, and of the form of additional soliciting material, if distributed, relating thereto;
(12) 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 section 382.040 for tender, and the amount of any fees, commissions or other compensation to be paid to broker-dealers with regard thereto; [and]
(13) An agreement by the person required to file the statement referred to in section 382.040 that the annual report specified in section 382.175 will be provided for so long as control exists;
(14) An acknowledgment by the person required to file the statement referred to in section 382.040 that such person and all subsidiaries within its control in the insurance holding company system shall provide information to the director upon request as necessary to evaluate enterprise risk to the insurer; and
(15) Such additional information as the director may by rule or regulation prescribe as necessary or appropriate for the protection of policyholders of the insurer or in the public interest.
2. If the person required to file the statement referred to in section 382.040 is a partnership, limited partnership, syndicate or other group, the director may require that the information called for by subdivisions (1) to [(13)] (15) of subsection 1 of this section shall be given with respect to each partner of such partnership or limited partnership, each member of such syndicate or group, and each person who controls such partner or member. If any such partner, member or person is a corporation or the person required to file the statement referred to in section 382.040 is a corporation, the director may require that the information called for by subdivisions (1) to [(13)] (15) of subsection 1 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 ten percent 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 director 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 director and shall be sent to the insurer within two business days after the person learns of the change.
4. If any offer, request, invitation, agreement or acquisition referred to in section 382.040 is proposed to be made by means of a registration statement under the Securities Act of 1933 or in circumstances requiring the disclosure of similar information under the Securities Exchange Act of 1934, or under a state law requiring similar registration or disclosure, the person required to file the statement referred to in section 382.040 may utilize such documents in furnishing the information called for by that statement.
382.060. 1. The director shall [hold a public hearing on the proposed] approve any merger or other acquisition of control referred to in section 382.040 [and shall thereafter approve such merger or acquisition of control unless he finds by a preponderance of the evidence] unless, after a public hearing, the director finds that:
(1) After the change of control the domestic insurer referred to in section 382.040 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;
(2) 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 therein. In applying the competitive standard in this subdivision:
(a) The informational requirements of subsection 3 of section 382.095 and the standards of subsection 4 of section 382.095 shall apply;
(b) The merger or other acquisition of control shall not be disapproved if the director finds that any of the situations meeting the criteria provided by subsection 4 of section 382.095 exist; and
(c) The director may condition the approval of the merger or other acquisition on the removal of the basis of disapproval within a specified period of time;
(3) 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;
(4) The plans or proposals which the acquiring party has to liquidate the insurer, to sell its assets or to 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 contrary to the public interest;
(5) The competence, experience or integrity of those persons who would control the operation of the insurer are such that it would be contrary to the interest of policyholders of the insurer and of the public to permit the merger or other acquisition of control; or
(6) The acquisition is likely to be hazardous or prejudicial to the insurance buying public. 2. Any disapproval made by the director shall be in writing and shall contain specific findings of fact supporting it.
3. The public hearing referred to above in this section shall be held within thirty days after the statement required by section 382.040 is filed, and at least twenty days' notice thereof shall be given by the director to the person filing the statement. Not less than seven days' notice of the public hearing shall be given by the person filing the statement to the insurer and to such other persons and in such manner as may be designated by the director. The director shall make a determination within thirty days after the conclusion of the hearing. 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 may be affected thereby shall have the right to present evidence, examine and cross-examine witnesses, and offer oral and written arguments and in connection therewith may conduct discovery proceedings in the same manner as is presently allowed in the circuit courts of this state. All discovery proceedings shall be concluded not later than three days prior to the commencement of the public hearing.
4. If the proposed acquisition of control requires the approval of more than one state insurance commissioner, the public hearing referred to in subsection 3 of this section may be held on a consolidated basis upon request of the person filing the statement referred to in section 382.040. Such person shall file the statement referred to in section 382.050 with the National Association of Insurance Commissioners within five days of making the request for a public hearing. A state insurance commissioner may opt out of a consolidated hearing and shall provide notice to the applicant of the opt-out within ten days of the receipt of the statement referred to in section 382.040. A hearing conducted on a consolidated basis shall be public and shall be held within the United States before the insurance commissioners of the states in which the insurers are domiciled. Such commissioners shall hear and receive evidence. A state insurance commissioner may attend such hearing in person or by telecommunication.
5. In connection with a change of control of a domestic insurer, any determination by the director 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 days after the date of notification of the change in control submitted under subsection 1 of section 382.040.
6. The director may retain at the acquiring party's expense any attorneys, actuaries, accountants and other experts not otherwise a part of the director's staff as may be reasonably necessary to assist the director in reviewing the proposed acquisition of control.
382.080. The following shall be violations of sections [382.010 to 382.300] 382.040 to 382.090:
(1) The failure to file any statement, amendment, or other material required to be filed pursuant to section 382.040 or 382.050; or
(2) The effectuation or any attempt to effectuate an acquisition of control of, divestiture of, or merger with[,] a domestic insurer covered by sections [382.010 to 382.300, within the thirty-day period referred to in section 382.060, without approval by the director or after disapproval by the director] 382.040 to 382.090, unless the director has given approval.
382.095. 1. As used in this section, the following terms mean:
(1) "Acquisition", 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) "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.
2. Except as provided in 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. This section shall not apply to the following [as provided in section 382.060]:
(1) [An acquisition subject to approval or disapproval by the director;
(2)] A purchase of securities solely for investment purposes so long as such 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 (2) of section 382.010, it is not solely for investment purposes unless the commissioner of insurance or other appropriate person of the insurer's state of domicile accepts a disclaimer of control or affirmatively finds that control does not exist and such disclaimer action or affirmative finding is communicated by such person to the director;
[(3)] (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 director in accordance with subsection 3 of this section thirty days prior to the proposed effective date of the acquisition; however, such preacquisition notification is not required for exclusion from this section if the acquisition would otherwise be excluded from this section by any other subdivision of this subsection;
[(4)] (3) The acquisition of already affiliated persons;
[(5)] (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 twelve percent of the total market, and the market share of the involved insurer after the acquisition would increase by two percent of the total market or less. For the purpose of this subdivision, 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;
[(6)] (5) An acquisition for which a preacquisition notification would be required pursuant to this section due solely to the resulting effect on the ocean marine insurance line of business;
[(7)] (6) An acquisition of an insurer whose domiciliary commissioner or other appropriate person affirmatively finds that such insurer is in failing condition; there is a lack of feasible alternative to improving such condition; the public benefits of improving such insurer's condition through the acquisition exceed the public benefits that would arise from not lessening competition; and such findings are communicated by such person to the director.
3. An acquisition covered by [subdivisions (1) to (7) of] subsection 2 of this section may be subject to an order pursuant to subsection  6 of this section, unless the acquiring person files a preacquisition notification and the waiting period described in this subsection has expired. The acquired person or acquiring person may file a preacquisition notification. The director shall give confidential treatment to information submitted under this subsection. The preacquisition notification shall be in such form and contain such information as prescribed by the National Association of Insurance Commissioners relating to those markets which, under subdivision [(5)] (4) of subsection 2 of this section cause the acquisition not to be exempted from the provisions of this section. The director may require such additional material and information as he deems necessary to determine whether the proposed acquisition, if consummated, would violate the competitive standard of subsection 4 of this section. The required information may include an opinion of an economist as to the competitive impact of the acquisition in this state accompanied by a summary of the education and experience of such person indicating his ability to render an informed opinion. The waiting period required shall begin on the date of receipt by the director of a preacquisition notification and shall end on the earlier of the thirtieth day after the date of such receipt, or termination of the waiting period by the director. Prior to the end of the waiting period, the director 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 such additional information by the director or termination of the waiting period by the director.
4. (1) The director may enter an order under subsection 5 of this section 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 therein or if the insurer fails to file adequate information in compliance with subsection 3 of this section.
(2) In determining whether a proposed acquisition would violate the competitive standard of subdivision (1) of this subsection, the director shall consider the following:
(a) Any acquisition covered under subsection 2 of this section involving two or more insurers competing in the same market is prima facie evidence of violation of the competitive standards:
a. If the market is highly concentrated and the involved insurers possess the following share of the market:
Insurer A Insurer B
4% 4% or more
10% 2% or more
15% 1% or more; or
b. If the market is not highly concentrated and the involved insurers possess the following share 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 largest insurers is seventy-five percent or more of the market. Percentages not shown in the tables are to be 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 is prima facie evidence of violation of the competitive standard in subdivision (1) of this subsection. For the purpose of this subdivision, 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 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 ten years prior to the acquisition up to the time of the acquisition. Any acquisition or merger covered under subsection 2 of this section involving two 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:
a. There is a significant trend toward increased concentration in the market;
b. One of the insurers involved is one of the insurers in a grouping of such large insurers showing the requisite seven percent or more increase in the market share; and
c. Another involved insurer's market is two percent or more.
(3) For the purposes of subdivision (2) of this subsection:
(a) The term "insurer" includes any company or group of companies under common management, ownership or control;
(b) The term "market" means the relevant product and geographical markets. In determining the relevant product and geographical markets, the director shall give due consideration to, among other things, the definitions or guidelines, if any, promulgated by the National Association of Insurance Commissioners and to information, if any, submitted by parties to the acquisition. In the absence of sufficient information to the contrary, the relevant product market is assumed to be the direct written insurance premium for a line of business, 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;
(c) The burden of showing prima facie evidence of violation of the competitive standard rests upon the director.
(4) Even though an acquisition is not prima facie violative of the competitive standard under subdivision (2) of this subsection, the director may establish that the requisite anticompetitive effect exists based upon other substantial evidence. Even though an acquisition is prima facie violative of the competitive standard under subdivision (2) 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 subdivision 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.
(5) An order [may] shall not be entered under subsection 5 of this section if:
(a) The acquisition will yield substantial economies of scale or economies in resource use 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 such increase exceed the public benefits which would arise from not lessening competition.
5. If an acquisition violates the standards of this section, the director may enter an order:
(1) 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
(2) Denying the application of an acquired or acquiring insurer for a license to do business in this state. Such an order shall not be entered unless there is a hearing, notice of such hearing is issued prior to the end of the waiting period and not less than fifteen days prior to the hearing, and the hearing is concluded and the order is issued no later than sixty days after the end of the waiting period. Every order shall be accompanied by a written decision of the director setting forth his findings of fact and conclusions of law. An order entered under this subsection shall not become final earlier than thirty days after it is issued, during which time any involved insurer may submit a plan to remedy the anticompetitive impact of the acquisition within a reasonable time. Based upon such plan or other information, the director shall specify the conditions, if any, under the time period during which the aspects of the acquisition causing a violation of the standards of this section would be remedied and the order vacated or modified. An order issued pursuant to this subsection shall not apply if the acquisition is not consummated. 6. Any person who violates a cease and desist order of the director under subsection 5 of this section, and while such order is in effect, may, after notice and hearing and upon order of the director, be subject at the discretion of the director to any one or more of the following:
(1) A monetary penalty of not more than ten thousand dollars for every day of violation; or
(2) Suspension or revocation of such person's license.
7. 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 such filing requirement shall be subject to a fine of not more than fifty thousand dollars.
8. Sections 382.260 and 382.280 do not apply to acquisitions covered by subsection 2 of this section.
382.110. 1. Every insurer subject to registration shall file a registration statement on a form provided by the director containing 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 of every member of the insurance holding company system;
(3) The following agreements in force, relationships subsisting, and transactions currently outstanding between the insurer and its affiliates:
(a) Loans, other investments, or purchases, sales or exchanges of securities of the affiliates by the insurer or of the insurer by its affiliates;
(b) Purchases, sales, or exchanges of assets;
(c) Transactions not in the ordinary course of business;
(d) 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;
(e) All management and service contracts and all cost-sharing arrangements; and
(f) Reinsurance agreements;
(g) Dividends and other distributions to shareholders; and
(h) Consolidated tax allocation agreements;
(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
(5) Financial statements of or within an insurance holding company system, including all affiliates, if requested by the director. Financial statements may include but are not limited to annual audited financial statements filed with the United States Securities and Exchange Commission (SEC) under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended. An insurer required to file financial statements under this subdivision may satisfy such requirement by providing the director with the most recently filed parent corporation financial statements that have been filed with the SEC;
(6) Statements that the insurer's board of directors oversees corporate governance and internal controls and that the insurer's officers or senior management have approved, implemented, and continue to maintain and monitor corporate governance and internal control procedures;
(7) 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 director; and
(8) Any other information required by the director by rule.
2. All registration statements shall contain a summary outlining all items in the current registration statement representing changes from the prior registration statement.
3. No information need be disclosed on the registration statement filed pursuant to subsection 1 of this section if such information is not material for the purposes of that subsection. Unless the director by rule, regulation or order provides otherwise, sales, purchases, exchanges, loans or extensions of credit, or investments, involving one-half of one percent 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 subsection 1 of this section.
4. Any person within an insurance holding company system subject to registration shall be required to provide complete and accurate information to an insurer, where such information is reasonably necessary to enable the insurer to comply with the provisions of sections 382.010 to 382.300.
382.170. Any person may file with the director a disclaimer of affiliation with any authorized insurer or the 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 bases for affiliation between such person and such insurer as well as the basis for disclaiming such affiliation. [After a disclaimer has been filed, the insurer shall be relieved of any duty to register or report under section 382.110 which may arise out of the insurer's relationship with such person unless and until the director disallows the disclaimer. The director shall disallow the 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.] A disclaimer of affiliation shall be deemed to have been granted unless the director, within thirty days following receipt of a complete disclaimer, notifies the filing party that the disclaimer is disallowed. In the event of disallowance, the disclaiming party may request an administrative hearing, which shall be granted. The disclaiming party shall be relieved of its duty to register under this section if approval of the disclaimer has been granted by the director if the disclaimer is deemed to have been approved.
382.175. Upon request of the director, the ultimate controlling person of every insurer subject to registration shall file an annual enterprise risk report. The report shall be appropriate to the nature, scale, and complexity of the operations of the insurance holding company and shall, to the best of the ultimate controlling person's knowledge and belief, identify the material risks within the insurance holding company system, if any, that could pose enterprise risk to the insurer. The report shall be filed with the lead state insurance commissioner of the insurance holding company system as determined by procedures within the Financial Analysis Handbook adopted by the National Association of Insurance Commissioners. The first enterprise risk report shall be due and filed no later than May 1, 2015, and annually thereafter by the first day of May each year, unless the lead state insurance commissioner extends the time for filing for good cause shown.
382.180. The failure to file a registration statement or any [amendment thereto] summary of the registration statement or enterprise risk filing required under sections 382.100 to 382.180 within the time specified for the filing is a violation of sections [382.010 to 382.300] 382.100 to 382.180.
382.190. Material transactions by registered insurers with their affiliates are subject to the following standards:
(1) The terms shall be fair and reasonable;
(2) Charges or fees for services shall be reasonable;
(3) Expenses incurred and payment received shall be allocated to the insurer in conformity with customary insurance accounting practices consistently applied;
(4) The books, accounts and records of each party shall be maintained so as to clearly and accurately disclose the precise nature and details of the transactions, including such accounting information as is necessary to support the reasonableness of the charges or fees to the respective parties; [and]
(5) 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; and
(6) Agreements for cost-sharing services and management shall include such provisions as required by the director by rule.
382.195. 1. The following transactions involving a domestic insurer and any person in its holding company system [may] , including amendments or modifications of affiliate agreements previously filed under this section that are subject to any materiality standards contained in subdivisions (1) to (7) of this subsection, shall not be entered into unless the insurer has notified the director in writing of its intention to enter into such transaction at least thirty days prior thereto, or such shorter period as the director may permit, and the director has not disapproved it within such period:
(1) Sales, purchases, exchanges, loans or extensions of credit, guarantees, or investments if such transactions are equal to or exceed, with respect to nonlife insurers, the lesser of three percent of the insurer's admitted assets or twenty-five percent of surplus as regards policyholders, or with respect to life insurers, three percent of the insurer's admitted assets, each as of the thirty-first day of December of the preceding year;
(2) Loans or extensions of credit to any person who is not an affiliate, where the insurer makes such loans or extensions of credit with agreement or understanding that the proceeds of such 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 such loans or extensions of credit provided such transactions are equal to or exceed, with respect to nonlife insurers, the lesser of three percent of the insurer's admitted assets or twenty-five percent of surplus as regards policyholders, or with respect to life insurers, three percent of the insurer's admitted assets; each as of the thirty-first day of December of the preceding year;
(3) Reinsurance agreements or modifications thereto, including:
(a) All reinsurance pooling agreements;
(b) Agreements in which the reinsurance premium or a change in the insurer's liabilities equals or exceeds five percent of the insurer's surplus as regards policyholders, as of the thirty-first day of December of the preceding year, 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 such assets will be transferred to one or more affiliates of the insurer;
(4) All management agreements, tax allocation agreements, service contracts and all cost-sharing arrangements; [and]
(5) Guarantees when made by a domestic insurer; provided, however, that a guarantee which is quantifiable as to amount is not subject to the notice requirements of this subdivision unless it exceeds the lesser of one-half of one percent of the insurer's admitted assets or ten percent of surplus as regards policyholders as of the thirty-first day of December next preceding. Further, all guarantees which are not quantifiable as to amount are subject to the notice requirements of this subdivision;
(6) 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 holding in such investments, exceeds two and one-half percent of the insurer's surplus to policyholders. Direct or indirect acquisitions or investments in subsidiaries acquired under section 382.020 or authorized under any other provision of this chapter or in nonsubsidiary insurance affiliates that are subject to the provisions of this chapter are exempt from such requirement; and
(7) Any material transactions, specified by regulation, which the director determines may adversely affect the interests of the insurer's policyholders.
The notice for amendments or modifications shall include the reasons for the change and the financial impact on the domestic insurer.
2. The provisions of subsection 1 of this section shall not 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.
[2.] 3. A domestic insurer [may] shall not enter into transactions which are part of a plan or series of like transactions with persons within the insurance 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 director determines that such separate transactions were entered into over any twelve-month period for such purpose, [he] the director may exercise his or her authority under section 382.265.
4. In reviewing transactions under subsection 1 of this section, the director shall consider whether the transactions comply with the standards set forth in section 382.190 and whether they may adversely affect the interest of policyholders.
5. The director shall be notified within thirty 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 fifty percent of the corporation's voting securities.
382.220. 1. Subject to the limitation contained in this section and in addition to all the other powers with which the director is vested by law relating to the examination of insurers, the director may [order] examine any insurer registered under the provisions of sections [382.010 to 382.300] 382.100 to 382.180 and its affiliates to ascertain the financial condition of the insurer, including the enterprise risk to the insurer by the ultimate controlling party, or by any entity or combination of entities within the insurance holding company system, or by the insurance company system on a consolidated basis.
2. The director may order any insurer registered under sections 382.100 to 382.180 to produce such records, books, or other information papers in the possession of the insurer or its affiliates as [shall be] are reasonably necessary to [ascertain the financial condition or legality of conduct of the insurer. In the event the insurer fails to comply with the order, the director may examine such affiliates to obtain such information] determine compliance with this chapter.
3. To determine compliance with this chapter, the director may order any insurer registered under sections 382.100 to 382.180 to produce information not in the possession of the insurer if the insurer is able to obtain access to such information under contractual relationships, statutory obligations, or other methods. In the event the insurer is unable to obtain the information requested by the director, the insurer shall provide the director with a detailed explanation of the reason that the insurer is unable to obtain the information and the identity of the holder of such information.
[2.] 4. The director may retain at the registered insurer's expense such attorneys, actuaries, accountants and other experts not otherwise a part of the director's staff as shall be reasonably necessary to assist in the conduct of the examination under this section. Any persons so retained shall be under the direction and control of the director and shall act in a purely advisory capacity.
[3.] 5. Each registered insurer producing for examination records, books and papers pursuant to this section shall be liable for and shall pay the expense of such examination in accordance with the provisions of section 374.220.
382.225. 1. With respect to any insurer registered under sections 382.100 to 382.180 and in accordance with subsection 3 of this section, the director shall also have the power to participate in a supervisory college for any domestic insurer that is part of an insurance holding company system with international operations in order to determine compliance by the insurer with this chapter. The powers of the director with respect to supervisory colleges include but are not limited to the following:
(1) Initiating the establishment of a supervisory college;
(2) Clarifying the membership and participation of other supervisors in the supervisory college;
(3) Clarifying the functions of the supervisory college and the role of other regulators, including the establishment of a group-wide supervisor or host, who may be the director;
(4) Coordinating the ongoing activities of the supervisory college, including planning meetings, supervisory activities, and processes for information sharing; and
(5) Establishing a crisis management plan.
2. Each registered insurer subject to this section shall be liable for and shall pay the reasonable expenses of the director's participation in a supervisory college in accordance with subsection 3 of this section, including reasonable travel expenses. For purposes of this section, a supervisory college may be convened as either a temporary or permanent forum for communication and cooperation between the regulators charged with the supervision of the insurer or its affiliates, and the director may establish a regular assessment to the insurer for the payment of such expenses.
3. In order to assess the business strategy, financial position, legal and regulatory position, risk exposure, risk management and governance processes, and as part of the examination of individual insurers in accordance with section 382.220, the director may participate in a supervisory college with other regulators charged with supervision of the insurer or its affiliates, including other state, federal, and international regulatory agencies. The director may enter into agreements in accordance with subsection 3 of section 382.230 providing the basis for cooperation between the director and the other regulatory agencies and the activities of the supervisory college. Nothing in this section shall delegate to the supervisory college the authority of the director to regulate or supervise the insurer or its affiliates within the director's jurisdiction.
382.230. 1. All information, documents and copies thereof obtained by or disclosed to the director or any other person in the course of an examination or investigation made [pursuant to] under section 382.220 and all information reported [pursuant to section] under subdivisions (13) and (14) of subsection 1 of section 382.050 and sections 382.100 to 382.210 shall be given confidential treatment and privileges, shall not be subject to the provisions of chapter 610, shall not be subject to subpoena [and] , shall not be made public by the director, the National Association of Insurance Commissioners, or any other person, except to the chief insurance regulatory official of other states, and shall not be subject to discovery or admissible as evidence in ay private civil action. However, the director is authorized to use the documents, materials, or other information in furtherance of any regulatory or legal action brought as a part of the director's official duties. The director shall not otherwise make the documents, material, or other information public without the prior written consent of the insurer to which it pertains unless the director, after giving the insurer and its affiliates who would be affected thereby, notice and opportunity to be heard, determines that the interests of policyholders, shareholders or the public will be served by the publication thereof, in which event [he] the director may publish all or any part thereof in such manner as he may deem appropriate.
2. Neither the director nor any person who receives documents, materials, or other information while acting under the authority of the director or with whom such documents, materials, or other information are shared under sections 382.010 to 382.300 shall be permitted or required to testify in any private civil action concerning any confidential documents, materials, or other information subject to subsection 1 of this section.
3. In order to assist in the performance of the director's duties, the director:
(1) May share documents, materials, or other information, including the confidential and privileged documents, materials, or other information subject to subsection 1 of this section with other state, federal, and international financial regulatory agencies, with the National Association of Insurance Commissioners and its affiliates and subsidiaries, and with state, federal, and international law enforcement authorities, including members of any supervisory college described in section 382.225; provided that, prior to receiving any such documents, materials, or information, the recipient agrees in writing to maintain the confidentiality and privileged status of such documents, materials, or other information, and has verified in writing the legal authority to maintain confidentiality; and
(2) Notwithstanding the provisions of subsection 1 of this section and subdivision (1) of this subsection, may only share confidential and privileged documents, materials, or other information reported under section 382.175 with the directors of states having statutes or regulations substantially similar to subsection 1 of this section and who have agreed in writing not to disclose such information;
(3) May receive documents, materials, or other information, including otherwise confidential and privileged documents, materials, or information from the National Association of Insurance Commissioners 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 documents, materials, or other 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 other information; and
(4) Shall enter into a written agreement with the National Association of Insurance Commissioners governing sharing and use of information provided under sections 382.010 to 382.300 consistent with this subsection that shall:
(a) Specify procedures and protocols regarding the confidentiality and security of information shared with the National Association of Insurance Commissioners and its affiliates and subsidiaries under sections 382.010 to 382.300, including procedures and protocols for sharing by the National Association of Insurance Commissioners with other state, federal, and international regulators;
(b) Specify that ownership of information shared with the National Association of Insurance Commissioners and its affiliates and subsidiaries under sections 382.010 to 382.300 remains with the director and that the National Association of Insurance Commissioner's use of such information is subject to the direction of the director;
(c) Require prompt notice to be given to an insurer whose confidential information in the possession of the National Association of Insurance Commissioners under sections 382.010 to 382.300 is subject to a request or subpoena to the National Association of Insurance Commissioners for disclosure or production; and
(d) Require the National Association of Insurance Commissioners and its affiliates and subsidiaries to consent to intervention by an insurer in any judicial or administrative action in which the National Association of Insurance Commissioners and its affiliates and subsidiaries may be required to disclose confidential information about the insurer shared with the National Association of Insurance Commissioners and its affiliates and subsidiaries under sections 382.010 to 382.300.
4. The sharing of information by the director under sections 382.010 to 382.300 shall not constitute a delegation of regulatory or rulemaking authority, and the director is solely responsible for the administration, execution, and enforcement of the provisions of sections 382.010 to 382.300.
5. No waiver of any applicable privilege or claim of confidentiality in the documents, materials, or other information shall occur as a result of disclosure of such documents, materials, or other information to the director under this section or as a result of sharing as authorized in sections 382.010 to 382.300.
6. Documents, materials, or other information in the possession or control of the National Association of Insurance Commissioners under sections 382.010 to 382.300 shall be confidential by law and privileged, shall not be subject to disclosure under chapter 610, shall not be subject to subpoena, and shall not be subject to discovery or admissible in evidence in any private civil action.
7. In addition to the specific provisions of this section, any recipient of documents, materials, or other information described in this section shall be subject to the provision of section 374.071 as to the confidentiality of such documents, materials, or other information.
382.277. Whenever it appears to the director that any person has committed a violation of sections 382.040 to 382.090 and the violation prevents the full understanding of the enterprise risk to the insurer by affiliates or by the insurance holding company system, the violation may serve as an independent basis for disapproving dividends or distributions and for placing the insurer under an order of suspension in accordance with section 375.1160.