The Vermont Statutes Online
Subchapter 013 : Holding Companies and Subsidiaries(Cite as: 8 V.S.A. § 3683)
§ 3683. Acquisition of control of or merger with domestic insurer
(a) Filing requirements.
(1) 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 thereof, such person would, directly or indirectly (or by conversion or by exercise of any right to acquire) be in control of such insurer, and no person shall enter into an agreement to merge with or otherwise to acquire control of a domestic insurer unless, at the time any such offer, request, or invitation is made or any such agreement is entered into, or prior to the acquisition of such securities if no offer or agreement is involved, such person has filed with the Commissioner and has sent to such insurer, and such insurer has sent to its shareholders, a statement containing the information required by this section and such offer, request, invitation, agreement, or acquisition has been approved by the Commissioner in the manner hereinafter prescribed.
(2) For purposes of this subsection, 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 and not subject to public inspection and copying under the Public Records Act 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 subdivision (1) of this subsection is otherwise filed, this subdivision shall not apply.
(3) With respect to a transaction subject to this section, the acquiring person must also file a preacquisition notification with the Commissioner, which shall contain the information set forth in subdivision 3683a(c)(1). A failure to file the notification may be subject to penalties specified in subsection 3683a(e) of this chapter.
(4) For purposes of this section, a domestic insurer shall include 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. For the purposes of this section, "person" shall not include any securities broker holding, in the usual and customary broker's function, less than 20 percent of the voting securities of an insurance company or of any person which controls an insurance company.
(b) Content of statement. The statement to be filed with the Commissioner hereunder shall be made under oath or affirmation and shall contain the following information:
(1) The name and address of each person by whom or on whose behalf the merger or other acquisition of control referred to in subsection (a) of this section is to be effected (hereinafter called "acquiring party"), and:
(A) If such person is an individual, his or her principal occupation and all offices and positions held during the past five years, and any conviction of crimes other than minor traffic violations during the past 10 years.
(B) If such person is not an individual, a report of the nature of its business operations during the past five years or for such lesser period as such person and any predecessors thereof shall have been in existence; an informative description of the business intended to be done by such person and such person's subsidiaries; and a list of all individuals who are or who have been selected to become directors or executive officers of such person, or who perform or will perform functions appropriate to such positions. Such list shall include for each such individual the information required by subdivision (A) of this subdivision (1).
(C) Whether such person is a depository institution or an affiliate of a depository institution.
(2) 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 wherein funds were or are to be obtained for any such purpose, and the identity of persons furnishing such consideration; provided, however, that where a source of such consideration is a loan made in the lender's ordinary course of business, the identity of the lender shall remain confidential, if the person filing such statement so requests.
(3) Fully audited financial information as to the earnings and financial condition of each acquiring party for the preceding five fiscal years of each such acquiring party (or for such lesser period as such acquiring party and any predecessors thereof shall have been in existence), and similar unaudited information as of a date not earlier than 90 days prior to the filing of the statement.
(4) Any plans or proposals which each acquiring party may have to liquidate such 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.
(5) The number of shares of any security referred to in subsection (a) of this section which each acquiring party proposes to acquire, and the terms of the offer, request, invitation, agreement, or acquisition referred to in subsection (a) of this section, and a statement as to the method by which the fairness of the proposal was arrived at.
(6) The amount of each class of any security referred to in subsection (a) of this section which is beneficially owned or concerning which there is a right to acquire beneficial ownership by each acquiring party.
(7) A full description of any contracts, arrangements, or understandings with respect to any security referred to in subsection (a) of this section in which any acquiring party is involved, including 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. Such description shall identify the persons with whom such contracts, arrangements or understandings have been entered into.
(8) A description of the purchase of any security referred to in subsection (a) of this section during the 12 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 therefor.
(9) A description of any recommendations to purchase any security referred to in subsection (a) of this section made during the 12 calendar months preceding the filing of the statement, by any acquiring party, or by anyone based upon interviews or at the suggestion of such acquiring party.
(10) 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 (a) of this section, and (if distributed) of additional soliciting material relating thereto.
(11) The terms of any agreement, contract or understanding made with any broker-dealer as to solicitation of securities referred to in subsection (a) of this section for tender, and the amount of any fees, commissions, or other compensation to be paid to broker-dealers with regard thereto.
(12) An agreement by the person required to file the statement referred to in subsection (a) of this section that it will provide the annual report specified in subsection 3684(m) of this chapter, for so long as control exists.
(13) An acknowledgment by the person required to file the statement referred to in subsection (a) 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.
(14) Such additional information as the Commissioner may by rule prescribe as necessary or appropriate for the protection of policyholders and security holders of the insurer or in the public interest.
(c) Filing by certain entities. If the person required to file the statement referred to in subsection (a) of this section is a partnership, limited partnership, syndicate, or other group, the Commissioner may require that the information called for by subdivisions (b)(1) through (12) of this section shall be given with respect to each partner of such partnership or limited partnership, each member of such syndicate or group, and each person who controls such partner or member. If any such partner, member or person is a corporation or the person required to file the statement referred to in subsection (a) of this section is a corporation, the Commissioner may require that the information called for by subdivisions (b)(1) through (14) of this section shall be given with respect to such corporation, each officer and director of such corporation, and each person who is directly or indirectly the beneficial owner of more than 10 percent of the outstanding voting securities of such corporation.
(d) Material change to filing. If any material change occurs in the facts set forth in the statement filed with the Commissioner and sent to such insurer pursuant to this section, an amendment setting forth such change, together with copies of all documents and other material relevant to such change, shall be filed with the Commissioner and sent to such insurer within two business days after the person learns of such change. Such insurer shall send such amendment to its shareholders.
(e) Alternative filing materials. If any offer, request, invitation, agreement, or acquisition referred to in subsection (a) of this section is proposed to be made by means of a registration statement under the Securities Act of 1933 or in circumstances requiring the disclosure of similar information under the Securities Exchange Act of 1934, or under a state law requiring similar registration or disclosure, the person required to file the statement referred to in subsection (a) may utilize such documents in furnishing the information called for by that statement.
(f) Approval by Commissioner; hearings.
(1) The Commissioner shall hold a public hearing on any merger or other acquisition of control referred to in subsection (a) of this section if the Commissioner determines that the statement filed as required by this section does not demonstrate compliance with the standards referred to in subsection (b) of this section or if the Commissioner determines that such acquisition of control is likely to be hazardous or prejudicial to the insurance buying public, or at the request of the acquiring party. Holding a public hearing is otherwise optional at the discretion of the Commissioner. In the event the Commissioner determines that a public hearing is not required, the Commissioner shall require that notice of the transaction be published on the website maintained by the Department of Financial Regulation and in two daily newspapers of general jurisdiction in Vermont, as determined by the Commissioner. The notice shall describe the proposed transaction and state that members of the public and interested parties may file written comments on the proposed transaction with the Commissioner. The Commissioner shall consider all written comments received within 14 days after initial publication of the notice and may subsequently hold a public hearing in response to any comments received. The Commissioner shall approve any merger or other acquisition of control referred to in subsection (a) of this section unless he or she finds that:
(A) after the change of control the domestic insurer referred to in subsection (a) 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 subdivision:
(i) the informational requirements of subdivision 3683a(c)(1) and the standards of subdivision 3683a(d)(2) of this chapter shall apply;
(ii) the merger or other acquisition shall not be disapproved if the Commissioner finds that any of the situations meeting the criteria provided by subdivision 3683a(d)(3) of this chapter 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 terms of the offer, request, invitation, agreement, or acquisition referred to in subsection (a) of this section are unfair and unreasonable to the security holders of the insurer;
(E) 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 to 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;
(F) 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
(G) the acquisition is likely to be hazardous or prejudicial to the insurance-buying public.
(2) The public hearing referred to in subdivision (1) of this subsection (f), if required, shall be held within 60 days after the statement required by subsection (a) of this section is filed, and at least 20 days' notice thereof shall be given by the Commissioner to the person filing the statement. Not less than seven days' notice of such public hearing shall be given by the person filing the statement to the insurer and to such other persons as may be designated by the Commissioner. The insurer shall give such notice to its security holders. The Commissioner shall make a determination within 30 days after the conclusion of such hearing or, if a public hearing is not required, within 30 days after the comment period deadline; provided, however, that, if the insurer is or will be an affiliate of a depository institution or any affiliate thereof, the Commissioner shall issue a determination within the 60-day period preceding the effective date of the acquisition or change or continuation of control of an insurer. At such 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 thereby shall have the right to present evidence, examine, and cross-examine witnesses and offer oral and written arguments and in connection therewith shall be entitled to conduct discovery proceedings in the same manner as is presently allowed in the Superior Court of this State. All discovery proceedings shall be concluded not later than three days prior to the commencement of the public hearing.
(3) If the proposed acquisition of control will require the approval of more than one commissioner, the public hearing may be held on a consolidated basis upon request of the person filing the statement referred to in subsection (a) of this section. Such person shall file the statement referred to in subsection (a) of this section with the NAIC within five days of 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 10 days of the receipt of the statement referred to in subsection (a) of this section. A hearing conducted on a consolidated basis shall be public and shall be held within the United States before the commissioners of the states in which the insurers are domiciled. Such commissioners shall hear and receive evidence. A commissioner may attend such hearing in person or by telecommunication.
(4) In connection with a change of control of a domestic insurer, any determination by the Commissioner that the person acquiring control of the insurer shall be required to maintain or restore the capital of the insurer to the level required by the laws and rules of this State shall be made not later than 60 days after the date of notification of the change in control submitted pursuant to subdivision (a)(1) of this section.
(5) 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.
(g) Mailings to shareholders; payment of expenses. All statements, amendments, or other material filed pursuant to subsection (a) or (b) of this section, and all notices of public hearings held pursuant to subsection (d) of this section, shall be mailed by the insurer to its shareholders within five business days after the insurer has received such statements, amendments, other material, or notices. The expenses of mailing shall be borne by the person making the filing. As security for the payment of such expenses, such person shall file with the Commissioner an acceptable bond or other deposit in an amount to be determined by the Commissioner.
(h) Exemptions. The provisions of this section shall not apply to:
(2) Any transaction which is subject to the provisions of subchapter 3 of this chapter dealing with the merger or consolidation of two or more insurers.
(3) Any offer, request, invitation, agreement, or acquisition which the Commissioner by order shall exempt therefrom as:
(A) 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
(B) as otherwise not comprehended within the purposes of this section.
(4) The formation of a mutual holding company and reorganization of a mutual insurance company pursuant to section 3441 of this title or a merger pursuant to section 3442 of this title.
(i) Violations. The following shall be violations of this section:
(1) The failure to file any statement, amendment, or other material required to be filed pursuant to subsection (a) or (b) of this section; or
(2) The effectuation 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 thereto.
(j) Jurisdiction; consent to service of process. The courts of this State are hereby vested with 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 such person arising out of violations of this section, and each such person shall be deemed to have performed acts equivalent to and constituting an appointment of the Commissioner by such a person 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 violations of this section. Copies of all such lawful process shall be served on the Commissioner and transmitted by registered or certified mail by the Commissioner to such person at his or her last known address.
(k) Additional capital requirements. As a condition for approval under this section, the Commissioner may require the person that is acquiring control of an insurer domiciled in this State to maintain or restore capital in compliance with and under the time frame established under the provisions of 15 U.S.C. § 6701(c)(2)(B). (Added 1971, No. 72, § 2; amended 1973, No. 193 (Adj. Sess.), § 3 eff. April 9, 1974; 1991, No. 101, § 12; 1991, No. 249 (Adj. Sess.), § 15; 1993, No. 12, § 9, eff. April 26, 1993; 1995, No. 167 (Adj. Sess.), § 29b; 2001, No. 71, §§ 8-10, eff. June 16, 2001; 2013, No. 29, § 28, eff. May 13, 2013; 2019, No. 103 (Adj. Sess.), § 19.)