Wisconsin Administrative Code
Office of the Commissioner of Insurance
Chapter Ins 40 - Insurance Holding Company System Regulation
Subchapter I - Insurance Holding Company Standards
Section Ins 40.025 - Acquisitions Involving Insurers Not Otherwise Covered

Universal Citation: WI Admin Code ยง Ins 40.025

Current through August 26, 2024

(1) DEFINITION. In this section. "acquisition" means any agreement, arrangement, or activity the consummation of which results in a person acquiring directly or indirectly the control of another person, and includes the acquisition of voting securities and the acquisition of assets, bulk reinsurance, and mergers.

(2) SCOPE. This section shall apply to any acquisition in which there is a change in control of an insurer authorized to do business in this state, except for the following:

(a) A purchase of securities solely for investment purposes so long as the securities are not used by voting or otherwise to cause or attempt to cause the substantial lessening of competition in any insurance market in this state. If a purchase of securities results in a presumption of control under s. 600.03(13), Stats., it is not solely for investment purposes unless the commissioner of the insurer's state of domicile accepts a disclaimer of control or affirmatively finds that control does not exist and the disclaimer action or affirmative finding is communicated by the domiciliary commissioner to the commissioner of this state.

(b) The acquisition of a person by another person when both persons are neither directly nor through affiliates primarily engaged in the business of insurance, if pre-acquisition notification is filed with the commissioner in accordance with sub. (3) 30 days prior to the proposed effective date of the acquisition. However, such pre-acquisition notification is not required if the acquisition would be otherwise excluded under sub. (2).

(c) The acquisition of already affiliated persons.

(d) An acquisition if, as an immediate result of the acquisition any of the following apply:
1. In no market would the combined market share of the involved insurers exceed 5% of the total market, or

2. There would be no increase in any market share, or

3. In no market would the combined market share of the involved insurers exceed 12% of the total market and the market share would not increase by more than 2% of the total market. For the purpose of par. (d), a market means direct written insurance premium in this state for a line of business as contained in the annual statement required under s. Ins 50.20(1).

(e) An acquisition for which a pre-acquisition notification would be required pursuant to this section due solely to the resulting effect on the ocean marine insurance line of business.

(f) An acquisition of an insurer whose domiciliary commissioner affirmatively finds that the insurer is in failing condition; there is a lack of feasible alternative to improving such condition; the public benefits of improving the insurer's condition through the acquisition exceed the public benefits that would arise from not lessening competition; and the findings are communicated by the domiciliary commissioner to the commissioner of this state.

(3) PRE-ACQUISITION NOTIFICATION. Any person seeking a merger or acquisition, that is not otherwise exempted under sub. (2) that results in a change of control of an insurer authorized to do business in this state shall file a pre-acquisition notification in a sworn statement using form E in the appendix to this chapter. The person being acquired may file the pre-acquisition notification.

(a) The commissioner may require such additional material and information as deemed necessary to determine whether the proposed acquisition, if consummated, would violate the competitive standard of sub. (4). The required information may include an opinion of an economist as to the competitive impact of the acquisition in this state accompanied by a summary of the education and experience of such person indicating his or her ability to render an informed opinion.

(b) The waiting period required in this subsection shall begin on the date of receipt of the commissioner of a pre-acquisition notification and shall end on the earlier of the thirtieth day after the date of receipt, or termination of the waiting period by the commissioner. Prior to the end of the waiting period, the commissioner on a one-time basis may require the submission of additional needed information relevant to the proposed acquisition, in which event the waiting period shall end on the earlier of the thirtieth day after receipt of the additional information by the commissioner or termination of the waiting period by the commissioner.

(4) COMPETITIVE STANDARD.

(a) The commissioner may disapprove an acquisition if there is substantial evidence that the effect of the acquisition may be to substantially lessen competition in any line of insurance in this state or tend to create a monopoly or if the insurer fails to file adequate information in compliance with sub. (3). In this subsection, a highly concentrated market is one in which the share of the 4 largest insurers is 75% or more of the market. Percentages not shown in the tables in this subsection are interpolated proportionately to the percentages that are shown. If more than 2 insurers are involved, exceeding the total of the two columns in the table is prima facie evidence of violation of the competitive standard in this subsection. For the purpose of this item, the insurer with the largest share of the market shall be deemed to be Insurer A.

(b) In determining whether a proposed acquisition would violate the competitive standard of par. (a) of this subsection, the commissioner shall consider the following:
1. Any acquisition covered under sub. (2) involving 2 or more insurers competing in the same market is prima facie evidence of violation of the competitive standards if:
a. The market is highly concentrated and the involved insurers possess the following shares of the market:

Insurer A Insurer B

4% 4% or more

10% 2% or more

15% or more 1% or more

b. Or, the market is not highly concentrated and the involved insurers possess the following shares of the market:

Insurer A Insurer B

5% 5% or more

10% 4% or more

15% 3% or more

19% or more 1% or more

2. 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 2 largest to the 8 largest, has increased by 7% or more of the market over a period of time extending from any base year 5 to 10 years prior to the acquisition up to the time of the acquisition. Any acquisition or merger covered under sub. (2) involving 2 or more insurers competing in the same market is prima facie evidence of violation of the competitive standard in par. (a) 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 large insurers showing the requisite increase in the market share; and

c. Another involved insurer's market is 2% or more.

3. For the purposes 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 commissioner 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 commissioner.

4. Even if an acquisition is not prima facie violative of the competitive standard under par. (a), the commissioner may establish the requisite anticompetitive effect based upon other substantial evidence. Even if an acquisition is prima facie violative of the competitive standard under par. (a), 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.

(c) The commissioner may approve the acquisition if the public benefits of the acquisition exceed the public benefits which would arise from not lessening competition.

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