CHAPTER 23. REGULATION OF INSURANCE HOLDING COMPANY SYSTEMS
IC 27-1-23
Chapter 23. Regulation of Insurance Holding Company Systems
IC 27-1-23-1
Definitions
Sec. 1. As used in this chapter, the following terms shall have therespective meanings set forth in this section, unless the context shallotherwise require:
(a) An "acquiring party" is the specific person by whom anacquisition of control of a domestic insurer or of any corporationcontrolling a domestic insurer is to be effected, and each person whodirectly, or indirectly through one (1) or more intermediaries,controls the person specified.
(b) An "affiliate" of, or person "affiliated" with, a specific person,is a person that directly, or indirectly through one (1) or moreintermediaries, controls, or is controlled by, or is under commoncontrol with, the person specified.
(c) A "beneficial owner" of a voting security includes any personwho, directly or indirectly, through any contract, arrangement,understanding, relationship, revocable or irrevocable proxy, orotherwise has or shares:
(1) voting power including the power to vote, or to direct thevoting of, the security; or
(2) investment power which includes the power to dispose, orto direct the disposition, of the security.
(d) "Commissioner" means the insurance commissioner of thisstate.
(e) "Control" (including the terms "controlling", "controlled by",and "under common control with") means the possession, direct orindirect, of the power to direct or cause the direction of themanagement and policies of a person, whether through the beneficialownership of voting securities, by contract other than a commercialcontract for goods or nonmanagement services, or otherwise, unlessthe power is the result of an official position or corporate office.Control shall be presumed to exist if any person beneficially ownsten percent (10%) or more of the voting securities of any otherperson. The commissioner may determine this presumption has beenrebutted only by a showing made in the manner provided by section3(k) of this chapter that control does not exist in fact, after giving allinterested persons notice and an opportunity to be heard. Controlshall be presumed again to exist upon the acquisition of beneficialownership of each additional five percent (5%) or more of the votingsecurities of the other person. The commissioner may determine,after furnishing all persons in interest notice and opportunity to beheard, that control exists in fact, notwithstanding the absence of apresumption to that effect.
(f) "Department" means the department of insurance created byIC 27-1-1-1.
(g) A "domestic insurer" is an insurer organized under the laws ofthis state. (h) "Earned surplus" means an amount equal to the unassignedfunds of an insurer as set forth in the most recent annual statementof an insurer that is submitted to the commissioner, excluding surplusarising from unrealized capital gains or revaluation of assets.
(i) An "insurance holding company system" consists of two (2) ormore affiliated persons, one (1) or more of which is an insurer.
(j) "Insurer" has the same meaning as set forth in IC 27-1-2-3,except that it does not include:
(1) agencies, authorities, or instrumentalities of the UnitedStates, its possessions and territories, the Commonwealth ofPuerto Rico, the District of Columbia, or a state or politicalsubdivision of a state;
(2) fraternal benefit societies; or
(3) nonprofit medical and hospital service associations.
The term includes a health maintenance organization (as defined inIC 27-13-1-19) and a limited service health maintenance organization(as defined in IC 27-13-1-27).
(k) A "person" is an individual, a corporation, a limited liabilitycompany, a partnership, an association, a joint stock company, atrust, an unincorporated organization, any similar entity or anycombination of the foregoing acting in concert, but shall not includeany securities broker performing no more than the usual andcustomary broker's function.
(l) A "policyholder" of a domestic insurer includes any personwho owns an insurance policy or annuity contract issued by thedomestic insurer, any person reinsured by the domestic insurer undera reinsurance contract or treaty between the person and the domesticinsurer, and any health maintenance organization with which thedomestic insurer has contracted to provide services or protectionagainst the cost of care.
(m) A "subsidiary" of a specified person is an affiliate controlledby that person directly or indirectly through one or moreintermediaries.
(n) "Surplus" means the total of gross paid in and contributedsurplus, special surplus funds, and unassigned surplus, less treasurystock at cost.
(o) "Voting security" includes any security convertible into orevidencing a right to acquire a voting security.
(Formerly: Acts 1971, P.L.387, SEC.1.) As amended by Acts 1981,P.L.244, SEC.1; P.L.26-1991, SEC.8; P.L.8-1993, SEC.416;P.L.130-1994, SEC.28; P.L.116-1994, SEC.38; P.L.26-1994, SEC.9;P.L.2-1995, SEC.100; P.L.203-2001, SEC.5.
IC 27-1-23-1.5
Dividend payments; notice; content
Sec. 1.5. (a) A domestic insurer that is a member of an insuranceholding company system may not pay a dividend unless the insurernotifies the department of the dividend and the department receivesthe notice from the insurer:
(1) not more than five (5) business days after the declaration of
the dividend or distribution; and
(2) at least ten (10) days before the payment of the dividend ordistribution.
(b) A notice provided by an insurer under subsection (a) mustcontain information indicating that the surplus of the insurer asregards policyholders will be:
(1) reasonable in relation to the outstanding liabilities of theinsurer; and
(2) adequate to the financial needs of the insurer;
following the payment of the dividend.
(c) After receiving a notice from an insurer under this section, thedepartment shall promptly consider the information set forth in thenotice under subsection (b). In the department's consideration of theinformation, the department shall apply the factors set forth insection 4(f) of this chapter.
As added by P.L.130-1994, SEC.29 and P.L.116-1994, SEC.39.
IC 27-1-23-2
Acquisition of domestic insurance company; statement tocommissioner; hearings; notice; approval; exceptions; process
Sec. 2. (a) No person other than the issuer shall commence atender offer for or a request or invitation for tenders of, or enter intoany agreement to purchase or exchange securities for, or otherwiseseek to acquire, or acquire, in the open market or otherwise, or solicitproxies relating to, any voting security of a domestic insurer or ofany corporation controlling a domestic insurer if, after theconsummation thereof, such person would, directly or indirectly (orby conversion or by exercise of any right to acquire), be in control ofsuch insurer, and no person shall enter into an agreement to acquirecontrol of a domestic insurer or of any corporation controlling adomestic insurer unless, at the time any such offer, request, orinvitation is commenced or any such agreement is entered into, orany such solicitation is begun, or prior to the acquisition of suchsecurities if no offer or agreement is involved:
(1) each acquiring party has filed with the commissioner andhas sent to such insurer and any such controlling corporation astatement containing the information required by this section;
(2) the offer, request, invitation, agreement, solicitation, oracquisition has been approved by the commissioner; and
(3) two (2) business days have elapsed following thecommissioner's determination approving the offer, request,invitation, agreement, solicitation, or acquisition;
all in the manner prescribed in this section.
(b) A statement to be filed with the commissioner under thissection shall be made under oath or affirmation and shall contain thefollowing information:
(1) The name and address of the acquiring party.
(2) If the acquiring party is an individual, his principaloccupation and all offices and positions held during the pastfive (5) years, and any conviction of crimes other than minor
traffic violations during the past ten (10) years.
(3) If the acquiring party is not an individual, a report of thenature of its business operations during the past five (5) yearsor for such lesser period as the acquiring party and anypredecessors thereof shall have been in existence, including, butnot limited to:
(A) information relating to the acquisition or disposition ofcontrol by the acquiring party of any other person and anysubsequent material change in the financial condition,management, organization, or operations of such otherperson;
(B) an informative description of the business intended to bedone by the acquiring party and its affiliates;
(C) any plans or proposals for the conduct of the business oremployment of the assets and surplus of the domestic insurerand any corporation controlling such insurer;
(D) an informative description of any transaction in whichthe acquiring party received, employed, or used anyaffiliate's assets;
(E) an informative description of any transaction orpresently proposed transaction between the acquiring partyand any of its affiliates in which either such acquiring partyor such affiliate has a direct or indirect material interest;however, no information need be given as to any suchtransaction where the amount involved in the transaction orseries of similar transactions, including all periodicpayments or installments in the case of any lease oragreement providing for periodic payments or installments,does not or would not exceed one hundred thousand dollars($100,000); and
(F) a list of all individuals who are or who have beenselected to become directors or officers of the acquiringparty, or who perform or will perform functions appropriateto such positions, such list to include for each suchindividual the information required by clause (2) of thissubsection.
(4) The source, nature, and amount of the consideration to beused in effecting the acquisition of control, a description of anytransaction wherein funds were or are to be obtained for anysuch purpose (including any pledge of the insurer's stock, or thestock of any of the insurer's subsidiaries or controllingaffiliates), all documents evidencing, supporting, referring to,or relating to any such transaction and the identity of personswho are furnishing or who will furnish such consideration.
(5) Fully audited financial information as to the earnings andfinancial condition of the acquiring party for its preceding five(5) fiscal years (or for such lesser period as such acquiring partyand any predecessors thereof shall have been in existence), andsimilar unaudited information as of a date not earlier thanninety (90) days prior to the filing of the statement. (6) Any plans or proposals which the acquiring party may haveto liquidate such domestic insurer or such controllingcorporation, to sell its assets or merge or consolidate it with anyperson, or to make any other material change in its investmentpolicy, business, corporate structure, or management.
(7) The number of shares of any security referred to insubsection (a) which the acquiring party proposes to acquire,the terms of the proposed offer, request, invitation, agreement,or acquisition referred to in subsection (a), and a statement asto the method by which the terms of the proposal were arrivedat.
(8) The amount of each class of any security referred to insubsection (a) which is beneficially owned or concerning whichthere is a right to acquire beneficial ownership by the acquiringparty.
(9) A full description of any contracts, arrangements, orunderstandings with respect to any security referred to insubsection (a) in which the acquiring party proposes to be or isinvolved, including but not limited to transfer of any of thesecurities, joint ventures, loan or option arrangements, puts orcalls, guarantees of loans, guarantees against loss or guaranteesof profits, division of losses or profits, or the giving orwithholding of proxies. Such description shall identify thepersons with whom such contracts, arrangements, orunderstandings have been or will be entered into.
(10) A description of the purchase of any security referred to insubsection (a) during the twelve (12) calendar months precedingthe filing of the statement by the acquiring party, including thedates of purchase, names of the purchasers, and considerationpaid or agreed to be paid therefor.
(11) A description of any recommendations to purchase anysecurity referred to in subsection (a) made during the twelve(12) calendar months preceding the filing of the statement bythe acquiring party, or by anyone, based upon interviews or atthe suggestion of such acquiring party.
(12) Copies of the proposed forms of all tender offers for,requests or invitations for tenders of, exchange offers for, andagreements to acquire or exchange any securities referred to insubsection (a), and of the proposed form of additional solicitingmaterial relating thereto.
(13) The terms of any agreement, contract, or understandingmade or proposed to be made with any broker-dealer as tosolicitation of securities referred to in subsection (a) for tender,and the amount of any fees, commissions, or othercompensation paid or to be paid to broker-dealers with regardthereto.
(14) A full description of any existing or proposed contracts,arrangements, or understandings between the acquiring partyand any present or former director, officer, or employee of thedomestic insurer or of any corporation controlling such insurer.
Such description shall identify the persons with whom suchcontracts, arrangements, or understandings have been or will beentered into.
(15) Copies of all studies, analyses, and reports which wereprepared by or for the acquiring party or any affiliate of theacquiring party for the purpose of evaluating or analyzing theproposed acquisition of control with respect to market shares,competition, competitors, markets, and potential for growth orexpansion into product or geographic markets.
(16) If the acquiring party or any affiliate of the acquiring partyis an insurer:
(A) the amount of any premiums, deposits, or annuityconsiderations received by the insurer during each of the lastfive (5) fiscal years (calculated on an accrual basis) for eachline of insurance business conducted in any section of thisstate, and copies of annual statements for each of the lastfive (5) fiscal years filed by any such insurer with theinsurance regulatory authority of its domiciliary jurisdiction;
(B) a full and complete description of any direct or indirectreinsurance relationship between the acquiring party or anyaffiliate of the acquiring party and the domestic insurer orany affiliate of the domestic insurer, together with copies ofany treaties or contracts relating to that relationship; and
(C) such additional information as the commissioner may byrule or order prescribe as necessary or appropriate to enablehim to make the determination required by subsection (e)(2).
(17) Such additional information as the commissioner may byrule or order prescribe as necessary or appropriate for theprotection of policyholders or in the public interest.
If any material change occurs in the facts set forth in a statementfiled with the commissioner and sent to the insurer and anycontrolling corporation under this section, an amendment made underoath or affirmation setting forth the change, together with copies ofall documents and other material relevant to the change, shall be filedwith the commissioner and sent to the insurer and any controllingcorporation within two (2) business days after any acquiring partylearns of this change.
(c) If any acquiring party is a partnership, limited partnership,syndicate, or other group, the commissioner may require that theinformation called for by subdivisions (1) through (17) of subsection(b) shall be given with respect to each partner of such partnership orlimited partnership, each member of such syndicate or group, andeach person who controls such partner or member. If any suchpartner, member, person, or acquiring party is a corporation, thecommissioner may require that the information called for bysubdivisions (1) through (17) shall be given with respect to allindividuals who are or have been selected to become directors orofficers of any such corporation or who perform or will performfunctions appropriate to these positions.
(d) If the proposed acquisition of control referred to in subsection
(a) requires the filing of a registration statement under the federalSecurities Act of 1933 (15 U.S.C. 77a-15 U.S.C. 77aa) or requiresthe disclosure of similar information under the federal SecuritiesExchange Act of 1934 (15 U.S.C. 78a-15 U.S.C. 78kk) or under astate law requiring similar registration or disclosure, an acquiringparty may utilize such documents in furnishing the informationcalled for by the statement.
(e) The commissioner shall hold a public hearing on the proposedacquisition of control referred to in subsection (a) and shall thereafterapprove such acquisition of control only if he finds, by apreponderance of the evidence, that:
(1) the acquisition of control would not tend to affect adverselythe contractual obligations of the domestic insurer or its abilityand tendency to render service in the future to its policyholdersand the public;
(2) the effect of the acquisition of control would not besubstantially to lessen competition in any line of insurancebusiness in any section of this state or tend to create amonopoly therein;
(3) the financial condition of any acquiring party is not such asmight jeopardize the financial stability of the domestic insureror of any corporation controlling such insurer, or prejudice theinterest of its policyholders;
(4) the plans or proposals which any acquiring party has toliquidate the domestic insurer or any such controllingcorporation, sell its assets or consolidate or merge it with anyperson, or to make any other material change in its investmentpolicy, business, corporate structure, or management are fairand reasonable to policyholders of the domestic insurer and inthe public interest; and
(5) the competence, experience, and integrity of those personswho would control the operation of the domestic insurer aresuch that the acquisition of control would not tend to affectadversely the general capacity or intention of the domesticinsurer to transact the business of insurance in a safe andprudent manner.
(f) For the purposes of the commissioner's application of thecompetitive standard set forth in subsection (e)(2) to a proposedacquisition:
(1) the acquiring person must file a pre-acquisition notificationthat meets the requirements set forth in section 2.5(e) of thischapter;
(2) the commissioner shall apply the provisions of section2.5(h) of this chapter; and
(3) the commissioner may not disapprove the acquisition basedupon the application of subsection (e)(2) if the commissionerfinds that either of the conditions set forth in section 2.5(i) ofthis chapter applies to the proposed acquisition.
(g) The public hearing referred to in subsection (e) shall be heldwithin sixty (60) days after all statements required by subsection (a)
are filed, or within such longer period after the statements are filedas the commissioner determines upon a showing of good causetherefor, in the city of Indianapolis at such place, date, and time asthe commissioner shall specify. At least thirty (30) days writtennotice of the hearing shall be given by the commissioner to eachacquiring party, the domestic insurer, any corporation controllingsuch insurer, and to other persons as the commissioner maydesignate. In the event that an amendment to any such statement isfiled, the hearing shall be postponed for a further period not toexceed sixty (60) days after the filing of such amendment, or for suchlonger period after the amendment is filed as the commissionerdetermines upon a showing of good cause therefor.
(h) The commissioner shall give notice of the hearing bypublication in a newspaper of general circulation in the city ofIndianapolis, and in the city wherein is located the principal office ofthe domestic insurer, and in such other city or cities as he may deemappropriate. Any policyholder of the domestic insurer who makes awritten request to the commissioner is entitled to a copy of allstatements, amendments, or other material filed with thecommissioner by any acquiring party.
(i) The commissioner may retain at the acquiring party's expenseany attorneys, actuaries, accountants, and other experts not otherwisea part of the commissioner's staff as may be reasonably necessary toassist the commissioner in reviewing the proposed acquisition ofcontrol. All hearing expenses, including transcript costs, expenses ofpublication and of preparing and mailing material to policyholders,shall be borne equally by each acquiring party. As security for thepayment of such expenses, each acquiring party shall file with thecommissioner an acceptable bond or other deposit in an amount to bedetermined by the commissioner.
(j) At such hearing, each acquiring party, the domestic insurer,any corporation controlling such insurer, policyholders of thedomestic insurer, and any other person whose interests may beaffected by the proposed acquisition of control shall have the rightto appear and become party to the proceeding. Each such personshall have the right to present evidence, examine and cross-examinewitnesses, and offer oral and written arguments and in connectiontherewith shall be entitled to conduct discovery proceedings in thesame manner as provided in the Indiana Rules of Trial Procedure.The commissioner may employ any sanction or power granted courtsin the Indiana Rules of Trial Procedure, excluding the power ofcontempt, to enforce his discovery rulings or orders. Thecommissioner shall make a determination within thirty (30) daysafter the conclusion of such hearing and shall immediately uponmaking that determination notify all persons who appeared andbecame parties to the proceeding of that determination. To permit anaggrieved party to perfect an appeal under IC 27-1-23-12, no offer,request, invitation, agreement, or acquisition referred to in subsection(a) may be commenced, entered into, or consummated until two (2)business days have elapsed following the commissioner's
determination approving an acquisition of control.
(k) Except as otherwise provided in this section, the hearing andthe determination made therein shall be subject to IC 4-21.5-3.
(l) The provisions of this section shall not apply to the following:
(1) Any merger, consolidation, or plan of exchange to beconsummated with the approval of the commissioner under thelaws of this state.
(2) Any transaction to be undertaken under a statutoryprocedure for the purchase of dissenting shareholder's stock.
(3) Any transaction to be undertaken under a judiciallyapproved reorganization.
(4) Any offer, request, invitation, agreement, solicitation, oracquisition respecting any security of a domestic insurer or ofany corporation controlling such insurer if any acquiring party,immediately prior to such offer, request, invitation, agreement,solicitation, or acquisition being commenced, entered into,begun, or consummated, beneficially owns more than fiftypercent (50%) of all the outstanding voting securities of suchdomestic insurer or corporation controlling such insurer.
(5) Any solicitation of proxies respecting any security of adomestic insurer or of any corporation controlling a domesticinsurer that is undertaken by the management or the board ofdirectors of the issuer of the security for purposes other thaneffecting, directly or indirectly, a transaction that wouldotherwise be subject to the requirements of this section.
(6) Any offer, request, invitation, agreement, solicitation, oracquisition respecting a security of a non-insurance corporationcontrolling one (1) or more domestic insurers if all of thefollowing conditions are met:
(A) the offer, request, invitation, agreement, solicitation, oracquisition has been approved by the insurance regulatoryauthority of any state or territory of the United States ofAmerica other than Indiana, and the insurance regulatoryauthority of the state or territory has been accredited by theNational Association of Insurance Commissioners;
(B) the domestic insurer or insurers meet all of the followingconditions, determined in accordance with generallyaccepted accounting principles:
(i) the investments in and advances to the domestic insureror insurers by the controlling non-insurance corporationand its other subsidiaries equal less than ten percent (10%)of the total assets of the controlling non-insurancecorporation and all of its subsidiaries consolidated as ofthe end of the most recently completed fiscal year;
(ii) the proportionate share of the controllingnon-insurance corporation and its other subsidiaries in thetotal assets (after intercompany eliminations) of thedomestic insurer or insurers equals less than ten percent(10%) of the total assets of the controlling non-insurancecorporation and all of its subsidiaries consolidated as of
the end of the most recently completed fiscal year; and
(iii) the equity of the controlling non-insurancecorporation and its other subsidiaries in the income fromcontinuing operations before income taxes, extraordinaryitems, and the cumulative effect of a change in accountingprinciple of the domestic insurer or insurers is less thanten percent (10%) of the income of that corporation and allof its subsidiaries consolidated for the end of the mostrecently completed fiscal year; and
(C) the commissioner has not determined that the applicationof this section to the offer, request, invitation, agreement,solicitation, or acquisition is necessary or appropriate for theprotection of policyholders of the domestic insurer orinsurers.
(7) Any acquisition of stock of a former mutual by a parentcompany, as those terms are defined in IC 27-15-1, that occursin connection with the conversion of a mutual insurancecompany to a stock insurance company under IC 27-15,provided that no person acquires control of the parent company.
(m) The courts of this state are hereby vested with jurisdictionover every acquiring party not resident, domiciled, or authorized todo business in this state, and over all actions involving each suchacquiring party arising out of violations of this section, and each suchacquiring party shall be deemed to have performed acts equivalent toand constituting an appointment by the acquiring party of thecommissioner to be his true and lawful attorney upon whom may beserved all lawful process in any action, suit, or proceeding arising outof violations of this section. Copies of all such lawful process shallbe served on the commissioner and transmitted by registered orcertified mail by the commissioner to such acquiring party at his lastknown address.
(Formerly: Acts 1971, P.L.387, SEC.1.) As amended by Acts 1979,P.L.252, SEC.1; Acts 1981, P.L.244, SEC.2; P.L.2-1987, SEC.38;P.L.26-1991, SEC.9; P.L.130-1994, SEC.30; P.L.116-1994, SEC.40;P.L.94-1999, SEC.2.
IC 27-1-23-2.5
Acquisitions in which there is a change in control of an insurer;preacquisition notification; waiting period; competitive standards;violations; order; penalties
Sec. 2.5. (a) The following definitions apply throughout thissection:
(1) "Acquisition" means any agreement, arrangement, oractivity the consummation of which results in a personacquiring directly or indirectly the control of another person.The term includes the acquisition of voting securities, and theacquisition of assets, assumption reinsurance, and mergers.
(2) "Involved insurer" includes an insurer that:
(A) acquires;
(B) is acquired; (C) is affiliated with an acquirer;
(D) is affiliated with an acquired; or
(E) is the result of a merger.
(b) Except as provided in subsection (c), this section applies toany acquisition in which there is a change in control of an insurerauthorized to do business in Indiana.
(c) This section does not apply to the following:
(1) An acquisition subject to approval or disapproval by thecommissioner under section 2 of this chapter.
(2) A purchase of securities solely for investment purposes, solong as those securities are not used by voting or otherwise tocause or attempt to cause the substantial lessening ofcompetition in any insurance market in this state. If a purchaseof securities results in a presumption of control under section1(e) of this chapter, it is not solely for investment purposesunless the commissioner of the insurer's state of domicileaccepts a disclaimer of control or affirmatively finds thatcontrol does not exist and this disclaimer action or affirmativefinding is communicated by the domiciliary commissioner tothe commissioner of Indiana.
(3) The acquisition of a person by another person when bothpersons are neither directly nor through affiliates primarilyengaged in the business of insurance, if a pre-acquisitionnotification is filed with the commissioner in accordance withsubsection (d) at least thirty (30) days before the proposedeffective date of the acquisition. However, a pre-acquisitionnotification is not required for an exclusion from this section ifthe acquisition would otherwise be excluded from this sectionby any other subdivision of this subsection.
(4) The acquisition of persons already affiliated with theacquirer.
(5) An acquisition if, as an immediate result of the acquisition:
(A) in no market would the combined market share of theinvolved insurers exceed five percent (5%) of the totalmarket;
(B) there would be no increase in any market share; or
(C) in no market would the combined market share of theinvolved insurers:
(i) exceed twelve percent (12%) of the total market; or
(ii) increase by more than two percent (2%) of the totalmarket.
(6) An acquisition for which a pre-acquisition notificationwould be required under this section due solely to the resultingeffect on the ocean marine insurance line of business.
(7) An acquisition of an insurer, if:
(A) the domiciliary commissioner of the insureraffirmatively finds that:
(i) the insurer is in failing condition;
(ii) there is a lack of feasible alternatives to improving thatcondition; and (iii) the public benefits of improving the insurer'scondition through the acquisition exceed the publicbenefits that would arise from not lessening competition;and
(B) those findings are communicated by the domiciliarycommissioner to the commissioner of Indiana.
For the purposes of this subsection, a "market" means the total directwritten insurance premium of all insurers providing insurance inIndiana for a particular line of business, as reported in the annualstatements required to be filed by insurers licensed to do business inIndiana.
(d) An order pursuant to subsection (j) may be entered withrespect to an acquisition to which this section applies unless theacquiring person files a pre-acquisition notification with respect tothe acquisition and the waiting period referred to in subsection (f)has expired. An acquired person may also file a pre-acquisitionnotification with respect to an acquisition. Information inpre-acquisition notifications filed under this section is confidentialand protected from disclosure under section 6 of this chapter.
(e) A pre-acquisition notification filed under this section must bein the form and must contain the information prescribed by theNational Association of Insurance Commissioners with respect tomarkets that meet the description set forth in subsection (c)(5),causing an acquisition not to be exempted from the provisions of thissection. The commissioner may require additional material andinformation that the commissioner considers necessary to determinewhether the proposed acquisition, if consummated, would violate thecompetitive standard set forth in subsection (g). The requiredinformation may include an opinion of an economist as to thecompetitive impact of the acquisition in Indiana, accompanied by asummary of the education and experience of the economist,indicating the economist's ability to render an informed opinion.
(f) The waiting period required with respect to a proposedacquisition begins on the day when the commissioner receives apre-acquisition notification and ends:
(1) on the thirtieth day after the day the commissioner receivesthe notification; or
(2) upon the commissioner's termination of the waiting period,if earlier.
Before the end of the waiting period, the commissioner, on aone-time basis, may require the submission of additional neededinformation relevant to the proposed acquisition. If the commissionerrequests additional information under this subsection, the waitingperiod ends on the earlier of the thirtieth day after receipt of theadditional information by the commissioner or the termination of thewaiting period by the commissioner.
(g) The commissioner may enter an order under subsection (j)with respect to an acquisition if:
(1) there is substantial evidence that the effect of the acquisitionmay be substantially to lessen competition in any line of
insurance in Indiana or to tend to create a monopoly in any lineof insurance in Indiana; or
(2) the insurer fails to file adequate information in compliancewith subsections (d) and (e).
(h) In determining whether a proposed acquisition to which thissection applies would violate the competitive standard set forth insubsection (g), the commissioner shall consider the following:
(1) An acquisition to which this section applies that involvestwo (2) or more insurers competing in the same market is primafacie evidence of a violation of the competitive standard:
(A) If the market is highly concentrated and the involvedinsurers possess the following shares of the market:
(i) Insurer A a share of four percent (4%) and insurer B ashare of 4% or more.
(ii) Insurer A a share of ten percent (10%) and insurer B ashare of two percent (2%) or more.
(iii) Insurer A a share of fifteen percent (15%) and insurerB a share of one percent (1%) or more.
(B) If the market is not highly concentrated and the involvedinsurers possess the following shares of the market:
(i) Insurer A a share of five percent (5%) and insurer B ashare of five percent (5%) or more.
(ii) Insurer A a share of ten percent (10%) and insurer B ashare of four percent (4%) or more.
(iii) Insurer A a share of fifteen percent (15%) and insurerB a share of three percent (3%) or more.
(iv) Insurer A a share of nineteen percent (19%) andinsurer B a share of one percent (1%) or more.
For the purposes of this subdivision, a highly concentratedmarket is a market in which the share of the four (4) largestinsurers is seventy-five percent (75%) or more of the market.Percentages not referred to in this subdivision must beinterpolated proportionately to the percentages that are referredto in this subdivision. If more than two (2) insurers are involvedin a proposed acquisition, exceeding the total of the two (2)figures set forth for insurer A and insurer B in an item set forthin this subdivision is prima facie evidence of violation of thecompetitive standard set forth in subsection (g). For the purposeof this subdivision, the insurer with the largest share of themarket shall be considered to be insurer A.
(2) There is a significant trend toward increased concentrationwhen the aggregate market share of any grouping of the largestinsurers in the market, from the two (2) largest to the eight (8)largest, has increased by seven percent (7%) or more of themarket over a period of time extending from any base year five(5) to ten (10) years before the acquisition up to the time of theacquisition. Any acquisition or merger to which this sectionapplies involving two (2) or more insurers competing in thesame market is prima facie evidence of violation of thecompetitive standard set forth in subsection (g) if: (A) there is a significant trend toward increasedconcentration in the market;
(B) one (1) of the insurers involved is one (1) of the insurersin a grouping of those large insurers showing the requisiteincrease in the market share; and
(C) the market share of another involved insurer is twopercent (2%) or more.
(3) For the purposes of this subsection:
(A) The term "insurer" includes any company or group ofcompanies under common management, ownership, orcontrol.
(B) The term "market" means the relevant product andgeographical markets. In determining the relevant productand geographical markets with respect to an acquisition, thecommissioner shall give due consideration to, among otherthings, the definitions or guidelines, if any, promulgated bythe National Association of Insurance Commissioners, andto information, if any, submitted by parties to theacquisition. In the absence of sufficient information to thecontrary, the relevant product market is assumed to be thedirect written insurance premium for a line of business thatis used in the annual statement required to be filed byinsurers doing business in Indiana, and the relevantgeographical market is assumed to be Indiana.
(C) The burden of showing prima facie evidence of aviolation of the competitive standard rests upon thecommissioner.
(4) Even though an acquisition is not prima facie violative ofthe competitive standard under subdivisions (1) and (2), thecommissioner may establish the requisite anticompetitive effectbased upon other substantial evidence. Even though anacquisition is prima facie violative of the competitive standardunder subdivisions (1) and (2), a party may establish theabsence of the requisite anticompetitive effect based upon othersubstantial evidence. Relevant factors in making adetermination under this subdivision include, but are not limitedto, the following:
(A) Market shares.
(B) Volatility of ranking of market leaders.
(C) Number of competitors.
(D) Concentration and trend of concentration in the industry.
(E) Ease of entry into and exit from the market.
(i) An order may not be entered under subsection (j) if:
(1) the acquisition will yield substantial economies of scale oreconomies in resource utilization that cannot be feasiblyachieved in any other way, and the public benefits that wouldarise from those economies exceed the public benefits thatwould arise from not lessening competition; or
(2) the acquisition will substantially increase the availability ofinsurance, and the public benefits of that increase exceed the
public benefits that would arise from not lessening competition.
(j) If an acquisition violates the standards set forth in this section,the commissioner may enter an order:
(1) requiring an involved insurer to cease and desist from doingbusiness in Indiana with respect to the line or lines of insuranceinvolved in the violation; or
(2) denying the application of an acquired or acquiring insurerfor a license to do business in Indiana.
(k) An order may not be entered under subsection (j) unless:
(1) there is a hearing;
(2) notice of the hearing is issued before the end of the waitingperiod and not less than fifteen (15) days before the hearing;and
(3) the hearing is concluded and the order is issued not morethan sixty (60) days after the end of the waiting period.
Every order shall be accompanied by a written decision of thecommissioner setting forth the commissioner's findings of fact andconclusions of law.
(l) An order entered under subsection (j) shall not become finalless than thirty (30) days after it is issued, during which time theinvolved insurer may submit a plan to remedy the anticompetitiveimpact of the acquisition within a reasonable time. Based upon thatplan or other information, the commissioner shall specify theconditions, if any, under which the aspects of the acquisition causinga violation of the standards of this section would be remedied and theorder vacated or modified, and the time period within which thoseaspects would have to remedied.
(m) An order entered under subsection (j) does not apply if theacquisition to which the order applies is not consummated.
(n) A person who violates a cease and desist order issued by thecommissioner under subsection (j) while that order is in effect may,after notice and hearing under IC 4-21.5 and upon order of thecommissioner, be subject at the discretion of the commissioner toany one (1) or more of the following:
(1) A civil penalty of not more than ten thousand dollars($10,000) for each day of violation.
(2) The suspension or revocation of the person's license.
(3) Both a monetary penalty under subdivision (1) and thesuspension or revocation or the person's license undersubdivision (2).
(o) An insurer or other person who fails to make any filingrequired by this section and also fails to demonstrate a good faitheffort to comply with that filing requirement is subject to a civilpenalty of not more than fifty thousand dollars ($50,000).
(p) Sections 8(b), 8(c), and 10 of this chapter do not apply to anacquisition to which this section applies.
As added by P.L.26-1991, SEC.10.
IC 27-1-23-2.6
Primary and subsidiary companies Sec. 2.6. (a) As used in this section, "entity" means:
(1) a sole proprietorship;
(2) a corporation;
(3) a limited liability company;
(4) a partnership;
(5) an association;
(6) a joint stock company;
(7) a mutual fund;
(8) a joint venture;
(9) a trust;
(10) a joint tenancy;
(11) an unincorporated organization; or
(12) a similar entity.
(b) As used in this section, "primary company" means a domesticinsurance company that beneficially owns more than fifty percent(50%) of one (1) or more subsidiary companies.
(c) As used in this section, "subsidiary company" means an entityof which more than fifty percent (50%) is beneficially owned by aninsurance company.
(d) As used in this section, "total investment of the primarycompany" means the total of:
(1) a direct investment by a primary company in an asset; plus
(2) the primary company's proportionate share of an investmentmade by a subsidiary company of the primary company.
The primary company's proportionate share must be determined bymultiplying the amount of the subsidiary company's investment bythe percentage of the primary company's ownership interest in thesubsidiary company.
(e) A primary company may, independently or in cooperation withanother person, organize or acquire one (1) or more subsidiarycompanies.
(f) A subsidiary company of a primary company may conductbusiness of any kind, and the authority to conduct the business is notlimited because of the status of the subsidiary company as asubsidiary company of the primary company.
(g) In addition to investments in common stock, preferred stock,debt obligations, and other securities as permitted under IC 27-1-12-2or IC 27-1-13-3, a primary company to which this section appliesmay, directly or through one (1) or more subsidiary companies, alsodo the following:
(1) Invest in common stock, preferred stock, debt obligations,and other securities of one (1) or more subsidiary companies,amounts that in total do not exceed the lesser of ten percent(10%) of the primary company's admitted assets or fifty percent(50%) of the primary company's surplus as regardspolicyholders, if, after the investments, the primary company'ssurplus as regards policyholders is reasonable in relation to theprimary company's outstanding liabilities and adequate to theprimary company's financial needs. In calculating the amount ofinvestments permitted under this subdivision: (A) investments, whether made directly or through one (1)or more subsidiary companies, in domestic or foreigninsurance subsidiary companies and health maintenanceorganizations must be excluded; and
(B) to the extent that expenditures relate to an investmentother than an investment described in clause (A), thefollowing must be included:
(i) Total net money or other consideration expended andobligations assumed in the acquisition or formation of asubsidiary company, including all organizational expensesand contributions to capital and surplus of the subsidiarycompany, whether or not represented by the purchase ofcapital stock or issuance of other securities.
(ii) All amounts expended in acquiring additional commonstock, preferred stock, debt obligations, and othersecurities and all contributions to the capital or surplus ofa subsidiary company subsequent to the subsidiarycompany's acquisition or formation.
(2) Notwithstanding subdivision (1), invest an amount incommon stock, preferred stock, debt obligations, and othersecurities of one (1) or more subsidiary companies engaged ororganized to engage exclusively in the ownership andmanagement of assets authorized as investments for the primarycompany, if the subsidiary company agrees to limit thesubsidiary company's investment in an asset so that, whencombined with the investments of the primary company, thetotal investment of the primary company will not exceed theinvestment limitations described in subdivision (1) or in anyapplicable provision of IC 27-1-12-2 or IC 27-1-13-3.
(3) Notwithstanding subdivision (1), with the prior approval ofthe commissioner, invest a greater amount in common stock,preferred stock, debt obligations, or other securities of one (1)or more subsidiary companies, if, after the investment, theprimary company's surplus as regards policyholders isreasonable in relation to the primary company's outstandingliabilities and adequate to the primary company's financialneeds.
(h) Investments that are made under this section in common stock,preferred stock, debt obligations, or other securities of a subsidiarycompany are not subject to restrictions or prohibitions underIC 27-1-12-2 or IC 27-1-13-3 that otherwise apply to investments ofprimary companies.
(i) Before a primary company to which this section applies makesan investment described in subsection (g), a primary company shallmake a determination regarding whether the proposed investmentmeets the applicable requirements by determining the applicableinvestment limitations as though the investment has been made,considering:
(1) the currently outstanding principal balance on previousinvestments in debt obligations; and (2) the value of previous investments in equity securities as ofthe day that the investments in equity securities were made;
net of any return of capital invested.
(j) If a primary company ceases to control a subsidiary company,the primary company shall dispose of any investment in thesubsidiary company made under this section not more than:
(1) three (3) years from the time of the cessation of control; or
(2) the period determined appropriate by the commissioner;
unless the investment meets the requirements for investment underany applicable provision of IC 27-1-12-2 or IC 27-1-13-3 and theprimary company has notified the commissioner that the investmentmeets the requirements.
(k) A primary company, at the time of establishing a subsidiarycompany, must possess:
(1) assets of not less than twenty-five million dollars($25,000,000); or
(2) not less than three million five hundred thousand dollars($3,500,000) of:
(A) combined capital and surplus in the case of a stockcompany; and
(B) surplus in the case of a mutual company.
(l) The department has the power to:
(1) conduct periodic examinations of a subsidiary company;
(2) require reports that reflect the effect of the condition andoperation of a subsidiary company on the financial condition ofa primary company; and
(3) make additional examinations or require other reports withrespect to a subsidiary company that are necessary to carry outthe purposes of this section.
A noninsurance subsidiary company shall annually furnish thedepartment financial statements that are prepared under generallyaccepted accounting principles and certified by an independentcertified public accountant and the department may rely on thestatements. If a subsidiary company conducts the business of thesubsidiary company in a manner that clearly tends to impair thecapital or surplus fund of the primary company, or otherwise makesthe operation of the primary company financially unsafe, thedepartment may act under IC 27-1-3-19 with respect to the primarycompany.
(m) A primary company and a subsidiary company shall, in allrespects, stand before the law as separate and distinct companies andneither company is liable to the creditors, policyholders, orstockholders of the other company, acts or omissions of an officer,director, stockholder, or member of either company notwithstanding.
(n) The board of directors and officers of a primary company anda subsidiary company may be identical. However, the affairs of eachcompany shall be carried on separate and distinct from the othercompany.
(o) A foreign subsidiary company shall be treated in the samemanner as other foreign companies, except that the treatment may be
withheld or suspended with respect to a subsidiary company that isdomiciled in a state that does not treat a:
(1) primary company; or
(2) subsidiary company;
that is domiciled in Indiana in a manner equal to a foreign ordomestic company doing business in the other state.
(p) Interests in a subsidiary company that are owned by a primarycompany must be registered in the name of the primary companyexcept for shares that are required under Indiana law to be registeredin the name of another person.
As added by P.L.126-2001, SEC.3.
IC 27-1-23-3
Registration statement; amendments; termination; disclaimer ofaffiliation
Sec. 3. (a) Every insurer which is authorized to do business in thisstate and which is a member of an insurance holding companysystem shall register with the commissioner, except a foreign insurersubject to disclosure requirements and standards adopted by statuteor regulation in the jurisdiction of its domicile which aresubstantially similar to those contained in:
(1) this section;
(2) section 4(a) and 4(c) of this chapter; and
(3) section 4(b) of this chapter or a provision such as thefollowing:
Each registered insurer shall keep current the informationrequired to be disclosed in its registration statement byreporting all material changes or additions within fifteendays after the end of the month in which it learns of eachsuch change or addition.
Any insurer which is subject to registration under this section shallregister within fifteen (15) days after it becomes subject toregistration, and annually thereafter by March 15 of each year for theprevious calendar year, unless the commissioner for good causeshown extends the time for registration, and then within suchextended time. The commissioner may require any authorized insurerwhich is a member of an insurance holding company system but notsubject to registration under this section to furnish a copy of theregistration statement or other information filed by such insurer withthe insurance regulatory authority of its domiciliary jurisdiction.
(b) Every insurer subject to registration shall file a registrationstatement on a form prescribed by the commissioner, which shallcontain current information about:
(1) the capital structure, general financial condition, ownershipand management of the insurer and any person controlling theinsurer;
(2) the identity of every member of the insurance holdingcompany system;
(3) the following agreements in force, relationships subsisting,and transactions that are currently outstanding or that have
occurred during the last calendar year between such insurer andits affiliates:
(i) loans, other investments, or purchases, sales or exchangesof securities of the affiliates by the insurer or of the insurerby its affiliates;
(ii) purchases, sales, or exchanges of assets;
&n