“Voting security" includes, but is not limited to, any security convertible into or evidencing a right to acquire a voting security.
Ins 40.01 History
Cr. Register, July, 1993, No. 451
, eff. 8-1-93; correction in (12) made under s. 13.93 (2m) (b) 12., Stats., Register, June, 1997, No. 498
; CR 14-071
: cr. (4m), am. (7) Register August 2015 No. 716
, eff. 9-1-15; CR 19-013: cr. (5m), (7m) Register April 2020 No. 772, eff. 5-1-20; correction in (7m) (c) made under s. 35.17, Stats., Register April 2020 No. 772.
Acquisition of control of or merger with domestic insurer or divestiture of the shares of a domestic insurer. Ins 40.02(1)(a)(a)
Except as provided under par. (b)
, no person, other than the insurer, may:
Make a tender offer for, request or invitation for, tenders of, divestiture 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 of the offer, request, invitation, agreement or acquisition, the person would, directly or indirectly, or by conversion or by exercise of any right to acquire, be in control of the insurer; or
Enter into an agreement to merge with or otherwise to acquire or attempt to acquire control of a domestic insurer or any person having control of a domestic insurer.
The person first files the information required under sub. (2)
and, if applicable, the person files a pre-acquisition notification, which shall contain the information set forth in s. Ins 40.025
with the commissioner and sends a copy of the information to the domestic insurer; and
The offer, request, invitation, agreement or acquisition has been approved by the commissioner under ss. 611.72
, or 614.73
, and 617.21
Any controlling person of a domestic insurer seeking to divest its controlling interest in the domestic insurer, in any manner, shall file with the commissioner, with a copy to the insurer, confidential notice of its proposed divestiture at least 30 days prior to the cessation of control. The commissioner shall determine those instances in which the party or parties seeking to divest or to acquire a controlling interest in an insurer, will be required to file for and obtain approval of the transaction. The information shall remain confidential until the conclusion of the transaction unless the commissioner, in his or her discretion determines that confidential treatment will interfere with enforcement of this section. If the statement referred to in sub. (2)
is otherwise filed, this paragraph shall not apply.
For purposes of this section “domestic insurer" includes any person having control of a domestic insurer. This section does not apply to a person who is a securities broker holding, in the usual and customary securities broker's function, less than 20% of the voting securities of an insurer or of any person which controls an insurer.
(2) Content of statement.
Except as provided under sub. (5)
, a person required to file under sub. (1)
shall file the following information, using form A in the appendix to this chapter, in a sworn statement:
If the acquiring person is an individual, his or her principal occupation and all offices and positions held during the past 5 years, any conviction of crimes other than traffic violations not involving death or injury during the past 10 years and all relevant information regarding any occupational license or registration; and
If the acquiring person is not an individual, a report of the nature of its business operations during the past 5 years or for the lesser period that the acquiring person and any predecessors of the acquiring person have been in existence, if shorter, an informative description of the business intended to be done by the acquiring person and the acquiring person's subsidiaries, and a list of all individuals who are or who have been selected to become directors or executive officers of the acquiring person, or who perform or will perform functions similar to those positions. The list shall include for each individual the information required by subds. 1.
The source, nature, and amount of the consideration used or to be used in effecting the merger or other acquisition of control, a description of any transaction from which funds were or are to be obtained for that purpose, including any pledge of the insurer's stock, or the stock of any of its subsidiaries or affiliates which control the insurer, the criteria used in determining the nature and amount of consideration and the identity of persons furnishing the consideration.
Fully audited financial information as to the earnings and financial condition of each acquiring person for the preceding 5 fiscal years of each acquiring person or for the period the acquiring person and any predecessors of the acquiring person have been in existence, if shorter, and similar unaudited information as of a date not earlier than 90 days prior to the filing of the statement.
Any plans or proposals which any acquiring person is considering to liquidate, to sell assets of, or to merge or consolidate the insurer or to make any other material change in the insurer's business or corporate structure or management.
The number of shares of any security which each acquiring person proposes to acquire; the terms of the offer, request, invitation, agreement, or acquisition; and a statement as to the method by which the fairness of the proposal was determined.
The amount of each class of any security which is beneficially owned or concerning which there is a right to acquire beneficial ownership by any acquiring person.
A full description of any contracts, arrangements, or understandings with respect to any security in which any acquiring person is involved, including, but not limited to, transfer of any of the securities, joint ventures, loan or option arrangements, puts or calls, guarantees of loans, guarantees against loss or guarantees of profits, division of losses or profits, or the giving or withholding of proxies. The description shall identify the persons with whom the contracts, arrangements or understandings have been entered into.
A description of the purchase of any security of the entity to be acquired during the 12 calendar months preceding the filing of the statement by any acquiring person, including the dates of purchase, names of the purchasers, and consideration paid or agreed to be paid.
A description of any recommendations to purchase any security made during the 12 calendar months preceding the filing of the statement by any acquiring person, or by anyone at the suggestion of the acquiring person.
Copies of all tender offers for, requests or invitations for, tenders of, exchange offers for, or agreements to acquire or exchange any securities, and, if distributed, of additional soliciting material relating to those offers, requests, invitations, or agreements.
The term of any agreement, contract or understanding made with or proposed to be made with any broker-dealer as to solicitation of securities for tender, and the amount of any fees, commissions or other compensation to be paid to broker-dealers relating to the solicitation.
An agreement by the person required to file the statement referred to in sub. (1)
that it will provide the annual report specified in s. Ins 40.03 (9)
for so long as control exists.
An acknowledgement by the person required to file the statement referred to in sub. (1)
that the person and all subsidiaries within its control in the insurance holding company system will provide information to the commissioner upon request as necessary to evaluate enterprise risk to the insurer.
Whenever it appears to the commissioner that any person has committed a violation of this chapter which 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 summary orders in accordance with s. 645.21
(3) Partners and stockholders.
If the person required to file under sub. (1)
is a partnership, limited partnership, syndicate, or other group, the commissioner may require that the information required under sub. (2)
be given with respect to each partner of the partnership or limited partnership, each member of the syndicate or group, and each person who controls the partner or member. If any partner, member, or person is a corporation or the person required to file under sub. (1)
is a corporation, the commissioner may require that the information required under sub. (2)
be given with respect to the corporation, each officer and director of the corporation, and each person who is directly or indirectly the beneficial owner of more than 10% of the outstanding voting securities of the corporation.
(4) Material changes.
A person required to file under sub. (1)
shall file an amendment to the filing if any material change occurs in the facts set forth in a statement previously filed with the commissioner. The person shall include in the amendment a description of the change and copies of all documents and other material relevant to the change. The amendment shall be filed with the commissioner and sent to the insurer within 2 business days after the person learns of the change.
(5) Alternative filing materials.
If any offer, request, invitation, agreement, or acquisition is proposed to be made by means of a registration statement under the Securities Act of 1933 or in circumstances requiring the disclosure of information under the Securities Exchange Act of 1934, or under a state law requiring similar registration or disclosure, the person required to file information under sub. (1)
may utilize those documents to furnish the information required to be filed under sub. (2)
(6) Consolidated hearing.
If an applicant requests a hearing on a consolidated basis under s. 611.72
, Stats., and the commissioner approves a hearing on a consolidated basis, in addition to filing the form A with the commissioner, the applicant shall file a copy of form A with the National Association of Insurance Commissioners in electronic form.
Ins 40.02 History
Cr. Register, July, 1993, No. 451
, eff. 8-1-93; CR 14-071
: r. and recr. Register August 2015 No. 716
, eff. 9-1-15; s. 35.17
correction in (6) Register August 2015 No. 716
Acquisitions Involving Insurers Not Otherwise Covered. Ins 40.025(1)(1)
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.
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 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.
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)
An acquisition if, as an immediate result of the acquisition any of the following apply:
In no market would the combined market share of the involved insurers exceed 5% of the total market, or
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)
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.
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.
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.
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.
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.
In determining whether a proposed acquisition would violate the competitive standard of par. (a)
of this subsection, the commissioner shall consider the following:
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:
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
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
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:
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
The term “insurer" includes any company or group of companies under common management, ownership, or control;
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;
The burden of showing prima facie evidence of violation of the competitive standard rests upon the commissioner.
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.
The commissioner may approve the acquisition if the public benefits of the acquisition exceed the public benefits which would arise from not lessening competition.
Ins 40.025 History
History: CR 14-071
: cr. Register August 2015 No. 716
, eff. 9-1-15; s. 35.17
correction in (1), (4) (b) 2., 4. Register August 2015 No. 716
Except as provided under par. (b)
, every insurer which is authorized to do business in this state and which is a member of an insurance holding company system, and every person having or attempting to acquire control of such an insurer, shall register with the commissioner.
This subsection does not apply to a person, foreign insurer or alien insurer which is exempt from registration under s. 617.11 (2)
, Stats., unless otherwise ordered by the commissioner. An insurer may register on behalf of a person having or attempting to acquire control of the insurer or on behalf of an insurer which is an affiliate of the insurer. Lack of knowledge that an insurer has not registered on behalf of the person or affiliate or that the registration is incomplete or inaccurate is not a defense for the person or affiliate.
(2) Time for filing.
Any person which is subject to registration under this section shall register within 15 days after it becomes subject to registration, and annually by June 1 of each subsequent year for the immediately preceding calendar year, unless the commissioner for good cause shown extends the time for registration, and then within the extended time.
(3) Information and form required.
Every person subject to registration shall file the registration statement
with the commissioner on the forms and in a format prescribed under s. Ins 40.15
, and it shall contain the following information which is current on the date of filing:
The capital structure, general financial condition, ownership, and management of the insurer and any person having control of the insurer;
The identity and relationship of every member of the insurance holding company system except affiliates whose total assets are less than the lesser of .5% of the total assets of the ultimate controlling person or $10 million;
The following agreements in force, and transactions currently outstanding or which have occurred during the immediately preceding calendar year between the insurer and its affiliates:
Loans, extensions of credit, other investments, or purchases, sales or exchanges of securities of the affiliates by the insurer or of the insurer by its affiliates;
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;