C.R.S.
Section 10-3-803
Acquisition of control of or merger with domestic insurer
- definitions
(1)
Intentionally left blank —Ed.(a)
No person other than the issuer shall make a tender offer for or a request or invitation for tenders of, or enter into any agreement to exchange securities for, seek to acquire, or acquire, in the open market or otherwise, any voting security of a domestic insurer if, after the consummation of the exchange or acquisition, the person would, directly, indirectly, by conversion, or by exercise of any right to acquire, be in control of the insurer, and no person shall enter into an agreement to merge with or otherwise to acquire control of a domestic insurer or any person controlling a domestic insurer unless, at the time the offer, request, or invitation is made or the agreement is entered into, or before the acquisition of the securities if no offer or agreement is involved, the person has filed with the commissioner and has sent to the insurer a statement containing the information required by this section and the commissioner has approved the offer, request, invitation, agreement, or acquisition in the manner prescribed in this part 8.(b)
In addition, if the person acting pursuant to this subsection (1) is:(I)
An individual, the person shall submit a set of fingerprints to the commissioner pursuant to subsection (3) of this section;(II)
A corporation, each executive officer and director of the corporation shall submit a set of fingerprints to the commissioner pursuant to subsection (3) of this section.(c)
For purposes of this section:(I)
“Domestic insurer” includes any person controlling a domestic insurer unless the person, as determined by the commissioner, is either directly or through its affiliates primarily engaged in business other than the business of insurance.(II)
“Person” does not include any securities broker holding, in the usual and customary broker’s function, less than twenty percent of the voting securities of an insurance company or of any person that controls an insurance company.(d)
A 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 thirty days before the cessation of control. The commissioner shall determine those instances in which the party 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 must 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 paragraph (a) of this subsection (1) has been filed, this paragraph (d) does not apply.(e)
With respect to a transaction subject to this section, the acquiring person shall also file a preacquisition notification with the commissioner, which must contain the information set forth in section 10-3-803.5 (3)(a). A failure to file the notification subjects the person to penalties specified in section 10-3-803.5 (5)(c).(2)
The statement filed pursuant to paragraph (a) of subsection (1) of this section shall be made under oath or affirmation and must contain the following:(a)
Intentionally left blank —Ed.(I)
The name and address of each person by whom or on whose behalf the merger or other acquisition of control referred to in subsection (1) of this section is to be effected, referred to in this section as the acquiring party;(II)
If the person is an individual, his or her principal occupation, all offices and positions held during the past five years, and any conviction of crimes other than minor traffic violations during the past ten years;(III)
If the person is not an individual, a report of the nature of its business operations during the past five years or for the lesser period as the person and any predecessors have been in existence; an informative description of the business intended to be done by the person and the person’s subsidiaries; and a list of all individuals who are or who have been selected to become directors or executive officers of the person or who perform or will perform functions appropriate to such positions. The list must include for each individual the information required by subparagraph (II) of this paragraph (a).(b)
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 where funds were or are to be obtained for any such purpose, including any pledge of the insurer’s stock or the stock of any of its subsidiaries or controlling affiliates, and the identity of persons furnishing consideration; except that, where a source of consideration is a loan made in the lender’s ordinary course of business, the identity of the lender must remain confidential if the person filing such statement so requests;(c)
Fully audited financial information as to the earnings and financial condition of each acquiring party for the preceding five fiscal years of each acquiring party, or for the lesser period as the acquiring party and any predecessors have been in existence, and similar unaudited information as of a date not earlier than ninety days before the filing of the statement;(d)
Any plans or proposals that each acquiring party may have to liquidate the insurer, to sell its assets or merge or consolidate it with any person, or to make any other material change in its business or corporate structure or management;(e)
The number of shares of any security referred to in subsection (1) of this section that each acquiring party proposes to acquire; the terms of the offer, request, invitation, agreement, or acquisition referred to in subsection (1) of this section; and a statement as to the method by which the fairness of the proposal was arrived at;(f)
The amount of each class of any security referred to in subsection (1) of this section that is beneficially owned or concerning which there is a right to acquire beneficial ownership by each acquiring party;(g)
A full description of any contracts, arrangements, or understandings with respect to any security referred to in subsection (1) of this section in which any acquiring party is involved, including the 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 must identify the persons with whom the contracts, arrangements, or understandings have been entered into.(h)
A description of the purchase of any security referred to in subsection (1) of this section during the twelve calendar months preceding the filing of the statement by any acquiring party, including the dates of purchase, names of the purchasers, and consideration paid or agreed to be paid;(i)
A description of any recommendations to purchase any security referred to in subsection (1) of this section made during the twelve calendar months preceding the filing of the statement by any acquiring party, or by anyone based upon interviews or at the suggestion of the acquiring party;(j)
Copies of all tender offers for, requests, or invitations for tenders of, exchange offers for, and agreements to acquire or exchange any securities referred to in subsection (1) of this section, and, if distributed, of additional soliciting material relating to them;(k)
The term of any agreement, contract, or understanding made with or proposed to be made with any broker-dealer as to solicitation of securities referred to in subsection (1) of this section for tender, and the amount of any fees, commissions, or other compensation to be paid to broker-dealers with regard to the solicitation;(l)
An agreement by the person required to file the statement referred to in subsection (1) of this section that the person will provide the annual report, specified in section 10-3-804 (12), for so long as control exists;(m)
An acknowledgment by the person required to file the statement referred to in subsection (1) of this section 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; and(n)
Such additional information as the commissioner may by rule prescribe as necessary or appropriate for the protection of policyholders of the insurer or in the public interest.(3)
Intentionally left blank —Ed.(a)
Each person described in subsection (1)(b) of this section shall submit a set of fingerprints to the commissioner at the time of filing the statement described in subsection (1)(a) of this section. The commissioner shall forward the fingerprints to the Colorado bureau of investigation for the purpose of conducting a state and national fingerprint-based criminal history record check utilizing records of the Colorado bureau of investigation and the federal bureau of investigation. The employer bears only the actual costs of the record check.(b)
When the results of a fingerprint-based criminal history record check of a person performed pursuant to this subsection (3) reveal a record of arrest without a disposition, the commissioner shall require that person to submit to a name-based judicial record check, as defined in section 22-2-119.3 (6)(d).(4)
If the person required to file the statement referred to in subsection (1) of this section is a partnership, limited partnership, syndicate, or other group, the commissioner may require the person to give the information called for by paragraphs (a) to (n) of subsection (2) of this section 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 the statement referred to in subsection (1) of this section is a corporation, the commissioner may require the corporation to give the information called for by paragraphs (a) to (n) of subsection (2) of this section with respect to the corporation, each officer and director of the corporation, and each person who is directly or indirectly the beneficial owner of more than ten percent of the outstanding voting securities of the corporation. If any material change occurs in the facts set forth in the statement filed with the commissioner and sent to the insurer pursuant to this section, an amendment setting forth the change, together with copies of all documents and other material relevant to the change, shall be filed with the commissioner and sent to the insurer within two business days after the person learns of the change.(5)
If any offer, request, invitation, agreement, or acquisition referred to in subsection (1) of this section is proposed to be made by means of a registration statement under the federal “Securities Act of 1933”, 15 U.S.C. sec. 77a et seq., as amended, or in circumstances requiring the disclosure of similar information under the federal “Securities Exchange Act of 1934”, 15 U.S.C. sec. 78a et seq., as amended, or under a state law requiring similar registration or disclosure, the person required to file the statement referred to in subsection (1) of this section may utilize such documents in furnishing the information called for by that statement.(6)
Intentionally left blank —Ed.(a)
The commissioner shall conduct an independent investigation to determine the impact of a proposed merger on competition:(I)
When the proposed merger involves a transaction that the commissioner determines, under section 10-3-803.5 (4)(b), would present prima facie evidence of a violation of the competitive standard; and(II)
If the merger or acquisition involves a domestic entity authorized under article 16 of this title or referenced in section 6-18-302 (1)(b)(IV), C.R.S., or a domestic insurer authorized under section 10-3-102 that writes more than fifty percent of its business as health insurance coverage.(b)
The investigation must include an analysis of the probable effects of the merger on consumers and on suppliers of services. The commissioner shall not rely solely on representations of insurers to determine whether the merger will produce economies of scale or economies in resource utilization that cannot be achieved feasibly in any other way. The investigation must also include reviewing the market conduct examination and financial examination reports for this state or any other state, consumer complaint information from records maintained by the division or any other state regulatory agency, and any information from any state or federal agency related to the applicant. The investigation must commence no later than fifteen days after the applicant files the notification referred to in paragraph (e) of subsection (1) of this section.(c)
The commissioner shall make public the report of the independent investigation conducted pursuant to this subsection (6) no later than five business days after the submission of the report to the commissioner, subject to the “Colorado Open Records Act”, part 2 of article 72 of title 24, C.R.S.(d)
The commissioner shall issue an executive summary, subject to the “Colorado Open Records Act”, part 2 of article 72 of title 24, C.R.S., of the competitive impact analysis filed by the applicant to the transaction no later than fifteen business days after the analysis is filed with the division. The applicant shall file the competitive impact analysis at the same time the applicant files the notification referred to in paragraph (e) of subsection (1) of this section with the division.(e)
The commissioner shall make all data and reports pertaining to the proposed merger and collected or used by the commissioner in his or her investigation and analysis available to the public; except that, in the commissioner’s discretion, the commissioner may redact specific items of proprietary information. If the insurer claims that information provided is proprietary, the insurer has the burden of proof on that issue.(f)
The commissioner shall complete the independent investigation pursuant to this subsection (6) no later than the day on which the application is deemed complete by the division. The commissioner shall coordinate the completion of the independent investigation with the experts retained pursuant to paragraph (g) of subsection (8) of this section. The applicant shall bear any expenses associated with the independent investigation pursuant to subsection (8) of this section.(7)
The commissioner shall approve any merger or other acquisition of control referred to in subsection (1) of this section unless, after an independent investigation pursuant to subsection (6) of this section, and a public hearing on the acquisition, the commissioner finds that:(a)
After the change of control, the domestic insurer referred to in subsection (1) of this section would not be able to satisfy the requirements for the issuance of a license to write the line or lines of insurance for which it is presently licensed;(b)
The effect of the merger or other acquisition of control would be substantially to lessen competition in insurance in this state or tend to create a monopoly. In applying the competitive standard in this paragraph (b):(I)
The informational requirements of section 10-3-803.5 (3)(a) and the standards of section 10-3-803.5 (4)(b) apply;(II)
The commissioner shall not disapprove the merger or other acquisition if the commissioner finds that any of the situations meeting the criteria provided by section 10-3-803.5 (4)(c) exist; and(III)
The commissioner may condition the approval of the merger or other acquisition on the removal of the basis of disapproval within a specified period of time.(c)
The financial condition of any acquiring party is such as might jeopardize the financial stability of the insurer or prejudice the interest of its policyholders;(d)
The plans or proposals that the acquiring party has to liquidate the insurer, sell its assets or consolidate or merge it with any person, or make any other material change in its business or corporate structure or management are unfair and unreasonable to policyholders of the insurer and not in the public interest;(e)
The competence, experience, and integrity of those persons who would control the operation of the insurer are such that it would not be in the interest of policyholders of the insurer and of the public to permit the merger or other acquisition of control; or(f)
The acquisition is likely to be hazardous or prejudicial to the insurance-buying public.(8)
Intentionally left blank —Ed.(a)
The commissioner shall provide public notice of the filing of an application for a merger or acquisition no later than five business days after the receipt of the initial application. The commissioner shall also provide a general statement to the public of the process and procedures concerning a merger or acquisition of a domestic insurer. The statement must be a clear and concise statement of how the public may participate in the review of a merger or acquisition transaction, including a public hearing or providing written comments to the commissioner.(b)
No later than fifteen business days after the initial application for a merger pursuant to this section, the commissioner and the applicant shall establish the elements of a public notice of the transaction. The commissioner shall publish the notice no later than seven days after the division deems the application to be complete.(c)
The commissioner shall hold the public hearing referred to in subsection (7) of this section within thirty days after the statement required by subsection (1) of this section is filed, and the commissioner shall give at least twenty days’ notice of the hearing to the person filing the statement. The commissioner shall give not less than seven days’ notice of the public hearing pursuant to paragraph (b) of this subsection (8) to the insurer and to the public. The insurer shall give the notice to its security holders. The commissioner shall make a determination within thirty days after the conclusion of the hearing. At the hearing, the person filing the statement, the insurer, any person to whom notice of hearing was sent, and any other person whose interests may be affected have the right to present evidence, examine and cross-examine witnesses, and offer oral and written arguments and, in connection therewith, are entitled to conduct discovery proceedings in the same manner as is presently allowed in the district courts of this state. All discovery proceedings must be concluded no later than three days before the commencement of the public hearing.(d)
The deadline for submission of written public comment to respond to testimony from the applicant is ten business days after the hearing. The commissioner shall review all responses and provide a report summarizing all public testimony.(e)
If the proposed acquisition of control will require the approval of a state other than Colorado in addition to the approval of the commissioner, the public hearing referred to in subsection (7) of this section may be held on a consolidated basis upon request of the person filing the statement referred to in subsection (1) of this section. The person shall file the statement referred to in subsection (1) of this section with the NAIC within five days after making the request for a public hearing. A commissioner may opt out of a consolidated hearing and shall provide notice to the applicant of the opt-out within ten days after the receipt of the statement referred to in subsection (1) of this section. A hearing conducted on a consolidated basis must be public and shall be held within the United States before the commissioners of the states in which the insurers are domiciled. The commissioners shall hear and receive evidence. A commissioner may attend the hearing in person or by telecommunication.(f)
In connection with a change of control of a domestic insurer, the commissioner shall make any determination that the person acquiring control of the insurer is required to maintain or restore the capital of the insurer to the level required by the laws and rules of this state not later than sixty days after the date of notification of the change in control submitted pursuant to paragraph (a) of subsection (1) of this section.(g)
The commissioner may retain, at the acquiring person’s expense, any attorneys, actuaries, accountants, and other experts not otherwise a part of the commissioner’s staff as may be reasonably necessary to assist the commissioner in reviewing the proposed acquisition of control.(9)
The insurer shall mail a synopsis of the statement referred to in subsection (1) of this section, and all notices of public hearings held pursuant to subsection (7) of this section, to its shareholders within five business days after the insurer has received such statements, amendments, other material, or notices filed pursuant to this section. The person making the filing shall bear the expenses of the mailing. As security for the payment of such expenses, the person shall file with the commissioner an acceptable bond or other deposit in an amount to be determined by the commissioner.(10)
This section does not apply to:(a)
An exchange of stock of a domestic insurer actually accomplished in accordance with sections 10-3-604 to 10-3-606, or any preliminary agreement between a domestic insurer and any other corporation entered into in contemplation of the adoption of a plan of exchange under part 6 of this article; or(b)
An offer, request, invitation, agreement, or acquisition that the commissioner, by order, exempts from this section as not having been made or entered into for the purpose and not having the effect of changing or influencing the control of a domestic insurer, or as otherwise not comprehended within the purposes of this section.(11)
The following are violations of this section:(a)
The failure to file any statement, amendment, or other material required to be filed pursuant to subsection (1) or (2) of this section; or(b)
The effectuation of, or any attempt to effectuate, an acquisition of control of, or merger with, a domestic insurer unless the commissioner has given his or her approval to the acquisition or merger.(12)
The courts of this state have jurisdiction over every person not resident, domiciled, or authorized to do business in this state who files a statement with the commissioner under this section and over all actions involving the person arising out of violations of this section, and each such person is deemed to have performed acts equivalent to and constituting an appointment by the person of the commissioner to be his or her true and lawful attorney upon whom may be served all lawful process in any action, suit, or proceeding arising out of a violation of this section. Copies of all such lawful process shall be served on the commissioner and the commissioner shall transmit the process by registered or certified mail to the person at his or her last-known address.(13)
If the procedures set forth in this section are not followed before the issuance of the order of the commissioner that approves or disapproves the merger, the aggrieved party may seek remedies pursuant to section 10-3-814.(14)
Nothing in this section limits the commissioner’s ability to conduct a hearing for transactions that do not meet the requirements in subsection (6) of this section.
Source:
Section 10-3-803 — Acquisition of control of or merger with domestic insurer - definitions, https://leg.colorado.gov/sites/default/files/images/olls/crs2023-title-10.pdf (accessed Oct. 20, 2023).
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