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 two (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 subparagraph 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.
SECTION 6. Ins 40.03 is repealed and recreated to read:
Ins 40.03 Registration. (1) REGISTRATION. (a) 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.
(b) 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: (a) The capital structure, general financial condition, ownership and management of the insurer and any person having control of the insurer;
(b) 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;
(c) 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:
1. 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;
2. Purchases, sales or exchange of assets;
3. Transactions not in the ordinary course of business;
4. 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;
5. All management agreements, exclusive agent agreements, service contracts and all cost−sharing arrangements;
6. Reinsurance agreements;
7. Dividends and other distributions to shareholders; and
8. Consolidated tax allocation agreements.
(d) Any pledge of the insurer’s stock, including stock of any subsidiary or affiliate having control of the insurer, for a loan made to any member of the insurance holding company system;
(e) If requested by the commissioner, the insurer shall include financial statements, as prepared in the ordinary course of its business, of or within an insurance holding company system, including all affiliates. Financial statements may include, but are not limited to, annual audited financial statements filed with the U.S. Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended. An insurer required to file financial statements pursuant to this paragraph may satisfy the request by providing the commissioner with the most recently filed parent corporation financial statements that have been filed with the Securities and Exchange Commission;
(f) 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 commissioner;
(g) 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;
(h) Any other information required by the commissioner by rule or regulation.
(4) SUMMARY OF CHANGES TO REGISTRATION STATEMENT. All registration statements shall contain a summary on form C contained in the appendix to this chapter outlining all items in the current registration statement representing changes from the prior registration statement.
(5) MATERIALITY. No information need be disclosed on the registration statement required under this section if the information is not material for the purposes of this section. Any transaction related to a management, exclusive agency or similar agreement or which is a service contract or cost−sharing arrangement is a material transaction. Any other transaction subject to sub. (3) is a material transaction if it involves or exposes to risk in a single transaction or group or series of related transactions an amount which is more than .5% of the insurer’s admitted assets as of the 31st day of December of the immediately preceding calendar year, unless the commissioner by order provides otherwise.
(6) AFFILIATE TO PROVIDE INFORMATION. A person within an insurance holding company system which includes an insurer subject to registration shall provide to the insurer any information which is reasonably necessary to enable the insurer to comply with this chapter and ch. 617, Stats. The person shall provide complete and accurate information. (7) CONSOLIDATED FILING. The commissioner may require or allow 2 or more insurers which are affiliates subject to registration to file a consolidated registration statement.
(8) DISCLAIMER. Any person may file with the commissioner a disclaimer of affiliation with any authorized insurer or a 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 the person and the insurer as well as the basis for disclaiming affiliation. A disclaimer of affiliation shall be deemed to have been granted unless the commissioner, within 30 days following receipt of a complete disclaimer, notifies the filing party 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 commissioner, or if the disclaimer is deemed to have been approved.
(9) ENTERPRISE RISK FILING. (a) Except as provided in par. (c), the ultimate controlling person of every insurer subject to registration shall file an annual enterprise risk report on form F in the appendix of this chapter. The report shall, to the best of the ultimate controlling person’s knowledge and belief, identify the material risks within the insurance holding company system that could pose enterprise risk to the insurer. The report shall be filed with the lead state commissioner of the insurance holding company system as determined by the procedures within the Financial Analysis Handbook adopted by the National Association of Insurance Commissioners. The time for filing the first enterprise risk report shall be June 1, 2015, or 30 days after the effective date of this rule, whichever date is later. Thereafter, the enterprise risk report shall be filed annually by June 1 for the immediately preceding calendar year. An applicant for an acquisition of control of an insurer under s. Ins 40.02 shall file an enterprise risk report within fifteen (15) days after the end of the month in which the acquisition of control occurs. (b) Sections 19.31 to 19.37, Stats., do not apply to an insurer’s annual enterprise risk report or to any information submitted to the commissioner in connection with an insurer’s annual enterprise risk report and the report shall not be subject to subpoena, discovery or be admissible in evidence in any private civil action. The commissioner shall only share an insurer’s annual enterprise risk report, and any information requested by the commissioner in connection with an insurer’s annual enterprise risk report, with commissioners of states having statutes or regulations substantially similar to this subsection and who have agreed in writing not to disclose such information. (c) The commissioner may grant a waiver from the requirements in par. (a) if the ultimate controlling person demonstrates that compliance with par. (a) would impose an undue financial or organizational hardship on the ultimate controlling person. The commissioner may order an ultimate controlling person otherwise exempted under this paragraph to file an enterprise risk report if an insurer subject to registration is not in compliance with applicable risk-based capital or compulsory and security surplus requirements or is otherwise in hazardous condition as determined by the commissioner.
SECTION 7. Ins 40.04 is repealed and recreated to read:
Ins 40.04 Standards for transactions within an insurance holding company system. (1) TRANSACTIONS WITHIN AN INSURANCE HOLDING COMPANY SYSTEM. An insurer, or affiliate of an insurer, which is required to register under s. Ins 40.03 may not enter directly or indirectly into a transaction between the insurer and the affiliate unless the insurer and affiliate: (a) Comply with s. 617.21 (1), Stats., and sub. (6); (b) Expenses incurred and payment received for the transaction are allocated to the insurer in conformity with customary insurance accounting practices consistently applied; and
(c) The books, accounts and records of each party to the transaction clearly and accurately disclose the nature and details of the transaction including the accounting information which is necessary to support the reasonableness of the charges or fees to the respective parties.
