SC Code § 38-21-125 (2021)
2021 South Carolina Code of Laws|Title 38 - Insurance|Chapter 21 - Insurance Holding Company Regulatory Act|Section 38-21-125. Acquisitions of insurers not covered by the Insurance Holding Company Regulatory Act.

 (A) For purposes of this section:  (1) "Acquisition" means an agreement, arrangement, or activity the consummation of which results in a person directly or indirectly acquiring the control of another person and includes, but is not limited to, the acquisition of voting securities, the acquisition of assets, bulk reinsurance, and mergers.  (2) An "involved insurer" includes an insurer which acquires or is acquired, is affiliated with an acquirer or acquired, or is the result of a merger.  (B)(1) Except as exempted in item (2), this section applies to an acquisition in which there is a change in control of an insurer authorized to do business in this State.  (2) This section does not apply to:  (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 an insurance market in this State. If a purchase of securities results in a presumption of control under Section 38-21-10(2), 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 director or his designee;  (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 preacquisition notification is filed with the department in accordance with subsection (C)(1) thirty days before the proposed effective date of the acquisition. However, preacquisition notification is not required for exclusion from this section if the acquisition would be excluded by other provisions of this subsection;  (c) the acquisition of already affiliated persons;  (d) an acquisition if, as an immediate result of the acquisition:  (i) in any market the combined market share of the involved insurers does not exceed five percent of total market;  (ii) there is not an increase in a market share, or in any market the combined market share of the involved insurers does not exceed twelve percent of the total market, and the market share does not increase by more than two percent of the total market. For the purpose of this subitem a market means direct written insurance premium in this State for a line of business as contained in the annual statement required to be filed by insurers licensed to do business in this State;  (e) an acquisition for which a preacquisition 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:  (i) the insurer is in failing condition;  (ii) there is a lack of feasible alternatives to improving the condition;  (iii) the public benefits of improving the insurer's condition through the acquisition exceed the public benefits that would arise from not lessening competition; and  (iv) the findings are communicated by the domiciliary commissioner to the director or his designee.  (C)(1) An acquisition covered by subsection (B) may be subject to an order pursuant to subsection (E) unless the acquiring person files a preacquisition notification and the waiting period has expired. The acquired person may file a preacquisition notification. The director or his designee shall give confidential treatment to information submitted under subsection (C) in the same manner provided in Section 38-21-290.  (2) The preacquisition notification must be in a form and contain information prescribed by the National Association of Insurance Commissioners relating to those markets which, under subsection B(2)(e), cause the acquisition not to be exempted from the provisions of this section. The director or his designee may require additional material and information necessary to determine whether the proposed acquisition, if consummated, violates the competitive standard of subsection (D). 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 the person indicating ability to render an informed opinion.  (3) The required waiting period begins on the date of receipt of the department of a preacquisition notification and ends on the earlier of the thirtieth day after the date of receipt or termination of the waiting period by the Director or his designee. Before the end of the waiting period, the director or his designee on a one-time basis may require the submission of additional needed information relevant to the proposed acquisition. If he does, the waiting period ends on the earlier of the thirtieth day after receipt of the additional information by the department or termination of the waiting period by the director or his designee.  (D)(1) The director or his designee may enter an order under subsection (E) (1) with respect to an acquisition if there is substantial evidence that the effect of the acquisition may be to lessen competition substantially in a line of insurance in this State or tend to create a monopoly or if the insurer fails to file adequate information in compliance with subsection (C).  (2) In determining whether a proposed acquisition violates the competitive standard of item (1), the director or his designee shall consider the following:  (a) An acquisition covered under subsection (B) involving two or more insurers competing in the same market is prima facie evidence of a violation of the competitive standards:  (i) 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% 1% or more   (ii) if 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% 1% or more   A highly concentrated market is one of which the share of the four largest insurers is seventy-five percent or more of the market. Percentages not shown in the tables are interpolated proportionately to the percentages that are shown. If more than two insurers are involved, exceeding the total of the two columns in the table is prima facie evidence of violation of the competitive standard in item (1). For the purpose of this item, the insurer with the largest share of the market is Insurer A.  (b) It must be determined whether there is a significant trend toward increased concentration in the market. The trend exists when the aggregate market share of a grouping of the largest insurers in the market, from the two largest to the eight largest, has increased by seven percent or more of the market over time extending from a base year five to ten years before the acquisition up to the time of the acquisition. An acquisition or merger covered under subsection (B) involving two or more insurers competing in the same market is prima facie evidence of a violation of the competitive standard in item (1) if all of the following exist:  (i) There is a significant trend toward increased concentration in the market.  (ii) One of the insurers involved is one of the insurers in a grouping of the large insurers showing the requisite increase in the market share.  (iii) Another involved insurer's market is two percent or more.  (c) Even though an acquisition is not prima facie violative of the competitive standard under this item, the director or his designee may establish the requisite anticompetitive effect based upon other substantial evidence. Even though an acquisition is prima facie violative of the competitive standard under this item, a party may establish the absence of the requisite anticompetitive effect based upon other substantial evidence. Relevant factors in making a determination include, but are not limited to: market shares, volatility of the ranking of market leaders, number of competitors, concentration, trend of concentration in the industry, and ease of entry and exit into the market.  (d) For the purpose of this item:  (i) "Insurer" includes a company or group of companies under common management, ownership, or control.  (ii) "Market" means the relevant product and geographical markets. In determining the relevant product and geographical markets the director or his designee shall give due consideration to 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. The line is 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.  (iii) The burden of showing prima facie evidence of a violation of the competitive standard rests upon the director or his designee.  (3) An order must not be entered under subsection (E)(1) if the acquisition will:  (a) yield substantial economies of scale or economies in resource utilization that cannot be achieved feasibly in another way, and the public benefits which would arise from the economies exceed the public benefits which would arise from not lessening competition; or  (b) substantially increase the availability of insurance, and the public benefits of the increase exceed the public benefits which would arise from not lessening competition.  (E)(1)(a) If an acquisition violates the standards of this section, the director or his designee may enter an order:  (i) requiring an involved insurer to stop doing business in this State with respect to the line or lines of insurance involved in the violation; or  (ii) denying the application of an acquired or acquiring insurer for a license to do business in this State.  (b) An order must not be entered unless all of the following exist:  (i) There is a hearing.  (ii) Notice of the hearing is issued before the end of the waiting period and not less than fifteen days before the hearing.  (iii) The hearing is concluded and the order is issued no later than sixty days after the end of the waiting period. An order must be accompanied by a written decision of the director or his designee setting forth his findings of fact and conclusions of law.  (c) An order does not become final earlier than thirty days after it is issued. Before it becomes final the involved insurer may submit a plan to remedy the anticompetitive impact of the acquisition within a reasonable time. Based upon the plan or other information, the director or his designee shall specify the conditions, if any, under the time period during which the aspects of the acquisition causing a violation of the standards of this section would be remedied and the order vacated or modified.  (d) An order does not apply if the acquisition is not consummated.  (2) A person who violates an order under item (1), while the order is in effect, after notice and hearing, and upon order of the director or his designee, is subject at his discretion to one or more of the following:  (a) monetary penalty of not more than ten thousand dollars for each day of violation;  (b) suspension or revocation of license.  (3) An insurer or other person who fails to make a filing required by this section and who fails to demonstrate a good faith effort to comply with a filing requirement is subject to a fine of not more than fifty thousand dollars.  (F) Sections 38-21-320, 38-21-330, and 38-21-350 do not apply to acquisitions under subsection (B).  HISTORY: 1991 Act No. 13, Section 2; 1993 Act No. 181, Section 571; 2015 Act No. 2 (S.342), Section 8, eff March 9, 2015.  Effect of Amendment  2015 Act No. 2, Section 8, in (B)(2), deleted former (a) relating to Section 38-21-60; redesignated the former paragraphs accordingly; and made nonsubstantive changes.