CHAPTER 50. Insurance Holding Company System Registration

§ 5001 Definitions. For purposes of this chapter: (1) “Affiliate.” — An “affiliate” of, or person “affiliated” with, a specific person, is a person that directly, or indirectly through 1 or more intermediaries, controls, or is controlled by, or is under common control with, the person specified. (2) “Commissioner.” — The term “Commissioner” shall mean the Insurance Commissioner, the Commissioner’s deputies, or the Insurance Department, as appropriate. (3) “Control.” — The term “control” (including the terms “controlling,” “controlled by” and “under common control with”) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract other than a commercial contract for goods or nonmanagement services, or otherwise, unless the power is the result of an official position with or corporate office held by the person. Control shall be presumed to exist if any person, directly or indirectly, owns, controls, holds with the power to vote, or holds proxies representing, 10 percent or more of the voting securities of any other person. This presumption may be rebutted by a showing made in the manner provided by § 5004(k) of this title that control does not exist in fact. The Commissioner may determine, after furnishing all persons in interest notice and opportunity to be heard and making specific findings of fact to support such determination, that control exists in fact, notwithstanding the absence of a presumption to that effect. (4) “Enterprise risk.” — The term “enterprise risk” shall mean any activity, circumstance, event or series of events, involving 1 or more affiliates of an insurer that, if not remedied promptly, is likely to have a material adverse effect upon the financial condition or liquidity of the insurer or its insurance holding company system as a whole, including, but not limited to, anything that would cause the insurer’s risk-based capital to fall into company action level as set forth in § 5803 of this title or would cause the insurer to be in hazardous financial condition as set forth in Section 3 of Department of Insurance Regulation 304 — Standards and Commissioner’s Authority for Companies Deemed to be in Hazardous Financial Condition [18 DE Admin. Code 304-3.0]. (5) “Group capital calculation instructions” means the group capital calculation instructions adopted by the NAIC and as amended, from time to time, by the NAIC. (6) “Group-wide supervisor.” — The “group-wide supervisor” is the regulatory official authorized to engage in conducting and coordinating group-wide supervision activities who is determined or acknowledged by the Commissioner under § 5015 of this title to have sufficient significant contacts with the internationally active insurance group. (7) “Insurance holding company system.” — An “insurance holding company system” consists of 2 or more affiliated persons, 1 or more of which is an insurer. (8) “Insurer.” — The term “insurer” shall have the same meaning as set forth in § 102 of this title, except that it shall not include agencies, authorities or instrumentalities of the United States, its possessions and territories, the Commonwealth of Puerto Rico, the District of Columbia, or a state or political subdivision of a state. (9) “Person.” — A “person” is an individual, a corporation, a partnership, an association, a joint stock company, a trust, an unincorporated organization, any similar entity or any combination of the foregoing acting in concert, but shall not include any joint venture partnership exclusively engaged in owning, managing, leasing or developing real or tangible personal property. (10) “NAIC” means National Association of Insurance Commissioners. (11) “NAIC liquidity stress test framework” means the NAIC publication which includes a history of the NAIC’s development of regulatory liquidity stress testing, the scope criteria applicable for a specific data year, and the liquidity stress test instructions and reporting templates for a specific data year, as adopted by the NAIC, and as amended from time to time by the NAIC, in accordance with the procedures adopted by the NAIC. (12) “Internationally active insurance group.” — An “internationally active insurance group” is an insurance holding company system that meets all of the following criteria: a. Includes an insurer registered under § 5004 of this title. b. Has premiums written in at least 3 countries. c. Has gross premiums written outside the United States that are at least 10% of total gross written premiums. d. Based on a 3-year rolling average, has total assets of at least $50 billion or total gross written premiums of at least $10 billion. (13) “Scope criteria” means the designated exposure bases, along with minimum magnitudes thereof for the specified data year, used to establish a preliminary list of insurers considered scoped into the NAIC liquidity stress test framework for that data year. (14) “Securityholder.” — A “securityholder” of a specified person is one who owns any security of such person, including common stock, preferred stock, debt obligations and any other security convertible into or evidencing the right to acquire any of the foregoing. (15) “Subsidiary.” — A “subsidiary” of a specified person is an affiliate controlled by such person directly or indirectly through 1 or more intermediaries. (16) “Voting security.” — The term “voting security” shall include any security convertible into or evidencing a right to acquire a voting security. 18 Del. C. 1953, §  5002; 56 Del. Laws, c. 380, §  1 ; 59 Del. Laws, c. 197, §  1 ; 60 Del. Laws, c. 616, §  3 ; 68 Del. Laws, c. 325, §  1 ; 70 Del. Laws, c. 186, §  1 ; 79 Del. Laws, c. 388, §  1 ; 80 Del. Laws, c. 118, §  1 ; 83 Del. Laws, c. 272, § 1 ; § 5002 Subsidiaries of insurers. Any domestic insurer, either by itself or in cooperation with 1 or more persons, may organize or acquire 1 or more subsidiaries as otherwise permitted under this title. Such subsidiaries may conduct any kind of business or businesses and their authority to do so shall not be limited by reason of the fact that they are subsidiaries of a domestic insurer. 68 Del. Laws, c. 325, §  1 ; 79 Del. Laws, c. 388, §  1 ; § 5003 Acquisition of control of or merger with domestic insurer. (a) Filing requirements. — 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, or 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 or any person controlling 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, 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. For purposes of this section, 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 the Commissioner’s discretion, determines that confidential treatment will interfere with enforcement of this section. If the statement referred to in the above paragraph of this subsection (a) is otherwise filed, this paragraph shall not apply. With respect to a transaction subject to this section, the acquiring person must also file a pre-acquisition notification with the Commissioner, which shall contain the information set forth in § 5003A of this title 30 days prior to the proposed effective date of the acquisition. A failure to file the notification may result in penalties specified in § 5003A of this title. For purposes of this section, a domestic insurer shall include any person controlling a domestic insurer unless such 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 brokers 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, the acquiring party’s principal occupation and all offices and positions held during the past 5 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 5 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 paragraph (b)(1)a. of this section. (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 (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 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 5 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, 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. 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 therefore. (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 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 (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 § 5004( l )(1) of this title, for so long as control exists. (13) An acknowledgement 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 or regulation prescribe as necessary or appropriate for the protection of policyholders of the insurer or in the public interest. 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 paragraphs (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 paragraphs (b)(1) through (12) 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. 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 2 business days after the person learns of such change. (c) 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 [15 U.S.C. § 77a et seq.] or in circumstances requiring the disclosure of similar information under the Securities Exchange Act of 1934 [15 U.S.C. § 78a et seq.], or under a state law requiring similar registration or disclosure, the person required to file the statement referred to in subsection (a) of this section may utilize such documents in furnishing the information called for by that statement. (d) Approval by Commissioner: Hearings. — (1) The Commissioner shall approve any merger or other acquisition of control referred to in subsection (a) of this section unless, after a public hearing thereon, the Commissioner 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 therein. In applying the competitive standard in this paragraph: 1. The informational requirements of § 5003A(c)(1) of this title and the standards of § 5003A(d)(2) of this title shall apply; 2. The merger or other acquisition shall not be disapproved if the Commissioner finds that any of the situations meeting the criteria provided by § 5003A(d)(3) of this title exist; and 3. 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 which 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; 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. (2) The public hearing referred to in paragraph (d)(1) of this section shall be held within 45 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 7 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 Commissioner shall make a determination within 30 days after the conclusion of such hearing. At such hearing, the person filing the statement, the insurer, any person to whom notice of hearing was sent, and any other person whose interest 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 3 days prior to the commencement of the public hearing. If the proposed acquisition of control will require the approval of more than 1 Commissioner, the public hearing referred to in paragraph (d)(1) of this section 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 National Association of Insurance Commissioners (NAIC) within 5 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. (3) 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. (e) Exemptions. — The provisions of this section shall not apply to: (1) Any transaction which is subject to the provisions of Chapter 49 of this title dealing with the merger or consolidation of 2 or more insurers. (2) 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. Otherwise not comprehended within the purposes of this section. (f) 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 approval thereto. (g) 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 by such a person of the Commissioner to be the person’s 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 the person’s last known address. 68 Del. Laws, c. 325, §  1 ; 70 Del. Laws, c. 186, §  1 ; 79 Del. Laws, c. 388, §  1 ; 80 Del. Laws, c. 118, §  1 ; 83 Del. Laws, c. 272, § 2 ; 84 Del. Laws, c. 42, § 1 ; § 5003A Acquisitions involving insurers not otherwise covered. (a) Definitions. — The following definitions shall apply for the purposes of this section only: (1) “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 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 either acquires or is acquired, is affiliated with an acquirer or acquired or is the result of a merger. (b) Scope. — (1) Except as exempted in paragraph (b)(2) of this section, this section applies to any acquisition in which there is a change in control of an insurer authorized to do business in this State. (2) This section shall not apply to the following: a. A purchase of securities solely for investment purposes so long as such 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 § 5001(3) of this title, 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 such disclaimer action or affirmative finding is communicated by the domiciliary commissioner to the Commissioner of this State; 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 pre-acquisition notification is filed with the Commissioner in accordance with paragraph (c)(1) of this section 30 days prior to the proposed effective date of the acquisition. However, such pre-acquisition notification is not required for exclusion from this section if the acquisition would otherwise be excluded from this section by any other subparagraph of this paragraph; c. The acquisition of already affiliated persons; d. An acquisition if, as an immediate result of the acquisition: 1. In no market would the combined market share of the involved insurers exceed 5 percent of the total market; 2. There would be no increase in any market share; or 3. In no market would: A. The combined market share of the involved insurers exceed 12 percent of the total market, and B. The market share increases by more than 2 percent of the total market. For the purpose of this paragraph (b)(2)d.3., 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 pre-acquisition 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 such insurer is in failing condition; there is a lack of feasible alternative to improving such condition; the public benefits of improving such insurer’s condition through the acquisition exceed the public benefits that would arise from not lessening competition; and such findings are communicated by the domiciliary commissioner to the Commissioner of this State. (c) Pre-acquisition notification, waiting period. — An acquisition covered by subsection (b) of this section may be subject to an order pursuant to subsection (e) of this section unless the acquiring person files a pre-acquisition notification and the waiting period has expired. The acquired person may file a pre-acquisition notification. The Commissioner shall give confidential treatment to information submitted under this subsection in the same manner as provided in § 5007 of this title. (1) The pre-acquisition notification shall be in such form and contain such information as prescribed by the National Association of Insurance Commissioners relating to those markets which, under paragraph (b)(2)d. of this section, cause the acquisition not to be exempted from the provisions of this section. The Commissioner may require such additional material and information as the Commissioner deems necessary to determine whether the proposed acquisition, if consummated, would violate the competitive standard of subsection (d) of this section. 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 the person’s ability to render an informed opinion. (2) The waiting period required shall begin on the date of receipt by the Commissioner of a pre-acquisition notification and shall end on the earlier of the thirtieth day after the date of such 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 such additional information by the Commissioner or termination of the waiting period by the Commissioner. (d) Competitive standard. — (1) The Commissioner may enter an order under paragraph (e)(1) of this section with respect to an acquisition if there is substantial evidence that the effect of the acquisition may be substantially to lessen competition in any line of insurance in this State or tend to create a monopoly therein or if the insurer fails to file adequate information in compliance with subsection (c) of this section. (2) In determining whether a proposed acquisition would violate the competitive standard of paragraph (d)(1) of this section, the Commissioner shall consider the following: a. Any acquisition covered under subsection (b) of this section involving 2 or more insurers competing in the same market is prima facie evidence of violation of the competitive standards: 1. 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 2. Or, 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 in which the share of the 4 largest insurers is 75 percent or more of the market. Percentages not shown in the tables are interpolated proportionately to the percentages that are shown. If more than 2 insurers are involved, exceeding the total of the 2 columns in the table is prima facie evidence of violation of the competitive standard in paragraph (d)(1) of this section. For the purpose of this paragraph (d)(2)a., the insurer with the largest share of the market shall be deemed to be Insurer A. b. 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 percent 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 subsection (b) of this section involving 2 or more insurers competing in the same market is prima facie evidence of violation of the competitive standard in paragraph (d)(1) of this section if: 1. There is a significant trend toward increased concentration in the market; 2. One of the insurers involved is 1 of the insurers in a grouping of such large insurers showing the requisite increase in the market share; and 3. Another involved insurer’s market is 2 percent or more. c. For the purposes of subsection (d)(2) of this section: 1. The term “insurer” includes any company or group of companies under common management, ownership or control; 2. 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; 3. The burden of showing prima facie evidence of violation of the competitive standard rests upon the Commissioner. d. Even though an acquisition is not prima facie violative of the competitive standard under paragraphs (d)(2)a. and b. of this section, the Commissioner may establish the requisite anticompetitive effect based upon other substantial evidence. Even though an acquisition is prima facie violative of the competitive standard under paragraphs (d)(2)a. and b. of this section, a party may establish the absence of the requisite anticompetitive effect based upon other substantial evidence. Relevant factors in making a determination under this paragraph 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. (3) An order may not be entered under paragraph (e)(1) of this section if: a. The acquisition will yield substantial economies of scale or economies in resource utilization that cannot be feasibly achieved in any other way, and the public benefits which would arise from such economies exceed the public benefits which would arise from not lessening competition; or b. The acquisition will substantially increase the availability of insurance, and the public benefits of such increase exceed the public benefits which would arise from not lessening competition. (e) Orders and penalties. — (1) a. If an acquisition violates the standards of this section, the Commissioner may enter an order: 1. Requiring an involved insurer to cease and desist from doing business in this State with respect to the line or lines of insurance involved in the violation; or 2. Denying the application of an acquired or acquiring insurer for a license to do business in this State. b. Such an order shall not be entered unless: 1. There is a hearing; 2. Notice of such hearing is issued prior to the end of the waiting period and not less than 15 days prior to the hearing; and 3. The hearing is concluded and the order is issued no later than 60 days after the end of the waiting period. Every order shall be accompanied by a written decision of the Commissioner setting forth the Commissioner’s findings of fact and conclusions of law. c. An order entered under this paragraph shall not become final earlier than 30 days after it is issued, during which time the involved insurer may submit a plan to remedy the anticompetitive impact of the acquisition within a reasonable time. Based upon such plan or other information, the Commissioner 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 pursuant to this paragraph shall not apply if the acquisition is not consummated. (2) Any person who violates a cease and desist order of the Commissioner under paragraph (e)(1) of this section and while such order is in effect may, after notice and hearing and upon order of the Commissioner, be subject at the discretion of the Commissioner to any 1 or more of the following: a. A monetary penalty of not more than $10,000 for every day of violation; and/or b. Suspension or revocation of such person’s license. (3) Any insurer or other person who fails to make any filing required by this section, and who also fails to demonstrate a good faith effort to comply with any such filing requirement, shall be subject to a fine of not more than $50,000. (f) Inapplicable provisions. — Sections 5009(b), (c) and 5011 of this title do not apply to acquisitions covered under subsection (b) of this section. 68 Del. Laws, c. 325, §  1 ; 70 Del. Laws, c. 186, §  1 ; 79 Del. Laws, c. 388, §  1 ; § 5004 Registration of insurers. (a) Registration. — Every insurer which is authorized to do business in this State and which is a member of an insurance holding company system shall register with the Commissioner, except a foreign insurer subject to registration requirements and standards adopted by statute or regulation in the jurisdiction of its domicile which are substantially similar to those contained in: (1) This section; (2) Section 5005(a)(1) and (b) of this title; and (3) Either § 5005(a)(2) of this title; or a provision such as the following: Each registered insurer shall keep current the information required to be disclosed in its registration statement by reporting all material changes or additions within 15 days after the end of the month in which it learns of each such change or addition. Any insurer which is subject to registration under this section shall register within 15 days after it becomes subject to registration, and annually thereafter by June 1 of each year for the previous calendar year, unless the Commissioner for good cause shown extends the time for registration, and then within such extended time. The Commissioner may require any insurer authorized to do business in the State which is a member of a holding company system, and which is not subject to registration under this section, to furnish a copy of the registration statement, the summary specified in subsection (c) of this section or other information filed by such insurance company with the insurance regulatory authority of domiciliary jurisdiction. (b) Information and form required. — Every insurer subject to registration shall file the registration statement with the Commissioner on a form and in a format prescribed by the National Association of Insurance Commissioners, which shall contain the following current information: (1) The capital structure, general financial condition, ownership and management of the insurer and any person controlling the insurer; (2) The identity and relationship of every member of the insurance holding company system; (3) The following agreements in force, and transactions currently outstanding or which have occurred during the last calendar year between such insurer and its affiliates: a. Loans, other investments, or purchases, sales or exchanges of securities of the affiliates by the insurer or of the insurer by its affiliates; b. Purchases, sales or exchange of assets; c. Transactions not in the ordinary course of business; d. 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; e. All management agreements, service contracts and all cost-sharing arrangements; f. Reinsurance agreements; g. Dividends and other distributions to shareholders; and h. Consolidated tax allocation agreements; (4) Any pledge of the insurer’s stock, including stock of any subsidiary or controlling affiliate, for a loan made to any member of the insurance holding company system; (5) If requested by the Commissioner, the insurer shall include financial statements 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 (SEC) pursuant to the Securities Act of 1933 [15 U.S.C. § 77a et seq.], as amended, or the Securities Exchange Act of 1934 [15 U.S.C. § 78a et seq.], 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 SEC; (6) 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; (7) 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; and (8) Any other information required by the Commissioner by rule or regulation. (c) Summary of changes to registration statement. — All registration statements shall contain a summary outlining all items in the current registration statement representing changes from the prior registration statement. (d) Materiality. — No information need be disclosed on the registration statement filed pursuant to subsection (b) of this section if such information is not material for the purposes of this section. Unless the Commissioner by rule, regulation or order provides otherwise, sales, purchases, exchanges, loans or extensions of credit, investments, or guarantees involving 1 / 2 of 1 percent or less of an insurer’s admitted assets as of December 31 next preceding shall not be deemed material for purposes of this section. (e) Reporting of dividends to shareholders. — (1) Subject to § 5005(b) of this title, each registered insurer shall provide notice to the Commissioner of all dividends and other distributions to shareholders within 5 business days following the declaration thereof and at least 10 days prior to the payment thereof. (2) The Commissioner shall promptly consider the information set forth in the notice under paragraph (e)(1) of this section. In the Commissioner’s consideration of the information, the Commissioner shall apply the factors set forth in § 5005(c) of this title. (f) Information of insurers. — Any person within an insurance holding company system subject to registration shall be required to provide complete and accurate information to an insurer, where such information is reasonably necessary to enable the insurer to comply with the provisions of this chapter. (g) Termination of registration. — The Commissioner shall terminate the registration of any insurer which demonstrates that it no longer is a member of an insurance holding company system. (h) Consolidated filing. — The Commissioner may require or allow 2 or more affiliated insurers subject to registration hereunder to file a consolidated registration statement. (i) Alternative registration. — The Commissioner may allow an insurer which is authorized to do business in this State and which is part of an insurance holding company system to register on behalf of any affiliated insurer which is required to register under subsection (a) of this section and to file all information and material required to be filed under this section. (j) Exemptions. — The provisions of this section shall not apply to any insurer, information or transaction if and to the extent that the Commissioner by rule, regulation or order shall exempt the same from the provisions of this section. (k) Disclaimer. — Any person may file with the Commissioner a disclaimer of affiliation with any authorized insurer or such a disclaimer may be filed by such insurer or any member of an insurance holding company system. The disclaimer shall fully disclose all material relationships and bases for affiliation between such person and such insurer as well as the basis for disclaiming such 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. ( l ) Enterprise risk filings. — (1) The ultimate controlling person of every insurer subject to registration shall also file an annual enterprise risk report. 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 first enterprise risk report is not required until October 3, 2014, unless the Commissioner for good cause shown extends the time for filing, and then within such extended time. 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 NAIC, with a copy to the Commissioner upon request. (2) Group capital calculation. Except as provided below, the ultimate controlling person of every insurer subject to registration shall concurrently file with the registration an annual group capital calculation as directed by the lead state commissioner. The report shall be completed in accordance with the NAIC group capital calculation instructions, which may permit the lead state commissioner to allow a controlling person that is not the ultimate controlling person to file the group capital calculation. The report shall be filed with the lead state commissioner of the insurance holding company system as determined by the Commissioner in accordance with the procedures within the Financial Analysis Handbook adopted by the NAIC. All of the insurance holding company systems described below are exempt from filing the group capital calculation: a. An insurance holding company system that has only 1 insurer within its holding company structure, that only writes business and is only licensed in its domestic state, and assumes no business from any other insurer. b. An insurance holding company system that is required to perform a group capital calculation specified by the United States Federal Reserve Board. The lead state commissioner shall request the calculation from the Federal Reserve Board under the terms of information sharing agreements in effect. If the Federal Reserve Board cannot share the calculation with the lead state commissioner, the insurance company holding system is not exempt from the group capital calculation filing. c. An insurance holding company system whose non-U.S. group-wide supervisor is located within a reciprocal jurisdiction as described in § 911(6) of this title that recognizes the U.S. state regulatory approach to group supervision and group capital. d. An insurance holding company system that meets both of the following: 1. That provides information to the lead state that meets the requirements for accreditation under the NAIC financial standards and accreditation program, either directly or indirectly through the group-wide supervisor, who has determined such information is satisfactory to allow the lead state to comply with the NAIC group supervision approach, as detailed by the NAIC Financial Analysis Handbook. 2. Whose non-U.S. group-wide supervisor that is not in a reciprocal jurisdiction recognizes and accepts, as specified by the commissioner in regulation, the group capital calculation as the world-wide group capital assessment for U.S. insurance groups who operate in that jurisdiction. e. Notwithstanding the provisions of paragraphs ( l )(2)c. and d. of this section, a lead state commissioner shall require the group capital calculation for U.S. operations of any non-U.S. based insurance holding company system where, after any necessary consultation with other supervisors or officials, it is deemed appropriate by the lead state commissioner for prudential oversight and solvency monitoring purposes or for ensuring the competitiveness of the insurance marketplace. f. Notwithstanding the exemptions from filing the group capital calculation stated in paragraphs ( l )(2)a. through d. of this section, the lead state commissioner has the discretion to exempt the ultimate controlling person from filing the annual group capital calculation or to accept a limited group capital filing or report in accordance with criteria as specified by the commissioner in regulation. g. If the lead state commissioner determines that an insurance holding company system no longer meets 1 or more of the requirements for an exemption from filing the group capital calculation under this section, the insurance holding company system shall file the group calculation at the next annual filing date unless given an extension by the lead state commissioner based on reasonable grounds shown. (3) Liquidity stress test. — The ultimate controlling person of every insurer subject to registration and also scoped into the NAIC liquidity stress test framework shall file the results of a specific year’s liquidity stress test. The filing shall be made to the lead state insurance commissioner of the insurance holding company system as determined by the procedures within the Financial Analysis Handbook adopted by the NAIC. a. The NAIC liquidity stress test framework includes scope criteria applicable to a specific data year. These scope criteria are reviewed at least annually by the Financial Stability Task Force or its successor. Any change to the NAIC liquidity stress test framework or to the data year for which the scope criteria are to be measured shall be effective on January 1 of the year following the calendar year when such changes are adopted. Insurers meeting at least 1 threshold of the scope criteria are considered scoped into the NAIC liquidity stress test framework for the specified data year unless the lead state insurance commissioner, in consultation with the NAIC Financial Stability Task Force or its successor, determines the insurer should not be scoped into the NAIC liquidity stress test framework for that data year. Similarly, insurers that do not trigger at least 1 threshold of the scope criteria are considered scoped out of the NAIC liquidity stress test framework for the specified data year, unless the lead state insurance commissioner, in consultation with the NAIC Financial Stability Task Force, or its successor, determines the insurer should be scoped into the NAIC liquidity stress test framework for that data year. Regulators wish to avoid having insurers scoped in and out of the NAIC liquidity stress test framework on a frequent basis. The lead state insurance commissioner, in consultation with the Financial Stability Task Force or its successor, will assess this concern as part of the determination for an insurer. b. The performance of, and filing of the results from, a specific year’s liquidity stress test shall comply with the NAIC liquidity stress test framework’s instructions and reporting templates for that year and any lead state insurance commissioner determinations, in consultation with the Financial Stability Task Force or its successor, provided within the NAIC liquidity stress test framework. (m) Violations. — The failure to file a registration statement or any summary of the registration statement or enterprise risk filing thereto required by this section within the time specified for such filing shall be a violation of this section. 18 Del. C. 1953, §  5003; 56 Del. Laws, c. 380, §  1 ; 59 Del. Laws, c. 197, §  1 ; 60 Del. Laws, c. 616, §  4a ; 67 Del. Laws, c. 223, §  35 ; 68 Del. Laws, c. 325, §  1 ; 69 Del. Laws, c. 132, §  1 ; 79 Del. Laws, c. 388, §  1 ; 83 Del. Laws, c. 272, § 3 ; § 5005 Standards and management of an insurer within an insurance holding company system. (a) Transactions within an insurance holding company system. — (1) Transactions within an insurance holding company system to which an insurer subject to registration is a party shall be subject to the following standards: a. The terms shall be fair and reasonable. b. Agreements for cost-sharing services and management shall include such provisions as required by regulation issued by the Commissioner. c. Charges or fees for services performed shall be reasonable. d. Expenses incurred and payment received shall be allocated to the insurer in conformity with customary insurance accounting practices consistently applied. e. The books, accounts and records of each party to all such transactions shall be so maintained as to clearly and accurately disclose the nature and details of the transactions, including such accounting information as is necessary to support the reasonableness of the charges or fees to the respective parties. f. The insurer’s surplus as regards policyholders following any dividends or distributions to shareholder affiliates shall be reasonable in relation to the insurer’s outstanding liabilities and adequate to its financial needs. g. If an insurer subject to this chapter is deemed by the Commissioner to be in a hazardous financial condition, as set forth in § 3 of Department of Insurance Regulation 304 (18 DE Admin. Code 304-3.0), or a condition that would be grounds for supervision, conservation, or a delinquency proceeding, then the Commissioner may require the insurer to secure and maintain either a deposit, held by the Commissioner, or a bond, as determined by the insurer at the insurer’s discretion, for the protection of the insurer for the duration of the contracts or agreements, or the existence of the condition for which the Commissioner required the deposit or bond. In determining whether a deposit or a bond is required, the Commissioner should consider whether concerns exist with respect to the affiliated person’s ability to fulfill the contracts or agreements if the insurer were to be put into liquidation. Once the insurer is deemed to be in a hazardous financial condition or a condition that would be grounds for supervision, conservation, or a delinquency proceeding, and a deposit or bond is necessary, the Commissioner has discretion to determine the amount of the deposit or bond, not to exceed the value of the contracts or agreements in any 1 year, and whether such deposit or bond should be required for a single contract, multiple contracts or a contract only with a specific person(s). h. All records and data of the insurer held by an affiliate are and remain the property of the insurer, are subject to control of the insurer, are identifiable, and are segregated or readily capable of segregation, at no additional cost to the insurer, from all other persons’ records and data. This includes all records and data that are otherwise the property of the insurer, in whatever form maintained, including, but not limited to, claims and claim files, policyholder lists, application files, litigation files, premium records, rate books, underwriting manuals, personnel records, financial records, or similar records within the possession, custody, or control of the affiliate. At the request of the insurer, the affiliate shall provide that the receiver can obtain a complete set of all records of any type that pertain to the insurer’s business; obtain access to the operating systems on which the data is maintained; obtain the software that runs those systems either through assumption of licensing agreements or otherwise; and restrict the use of the data by the affiliate if it is not operating the insurer’s business. The affiliate shall provide a waiver of any landlord lien or other encumbrance to give the insurer access to all records and data in the event of the affiliate’s default under a lease or other agreement; and i. Premiums or other funds belonging to the insurer that are collected by or held by an affiliate are the exclusive property of the insurer and are subject to the control of the insurer. Any right of offset in the event an insurer is placed into receivership shall be subject to Chapter 59 of this title. (2) The following transactions involving a domestic insurer and any person in its insurance holding company system, including amendments or modifications of affiliate agreements previously filed pursuant to this section, which are subject to any materiality standards contained in paragraphs (a)(2)a. through e. of this section, may not be entered into unless the insurer has notified the Commissioner in writing of its intention to enter into such transaction at least 30 days prior thereto, or such shorter period as the Commissioner may permit, and the Commissioner has not disapproved it within such period. The notice for amendments or modifications shall include the reasons for the change and the financial impact on the domestic insurer. Informal notice shall be reported, within 30 days after a termination of a previously filed agreement, to the Commissioner for determination of the type of filing required, if any. a. Sales, purchases, exchanges, loans or extensions of credit, guarantees, or investments, provided such transactions are equal to or exceed: 1. With respect to nonlife insurers, the lesser of 3 percent of the insurer’s admitted assets or 25 percent of surplus as regards policyholders; 2. With respect to life insurers, 3 percent of the insurer’s admitted assets, Each as of December 31 next preceding; b. Loans or extensions of credit to any person who is not an affiliate, where the insurer makes such loans or extensions of credit with the agreement or understanding that the proceeds of such transactions, in whole or in substantial part, are to be used to make loans or extensions of credit to, to purchase assets of, or to make investments in, any affiliate of the insurer making such loans or extensions of credit provided such transactions are equal to or exceed: 1. With respect to nonlife insurers, the lesser of 3 percent of the insurer’s admitted assets or 25 percent of surplus as regards policyholders; 2. With respect to life insurers, 3 percent of the insurer’s admitted assets, as of December 31 next preceding; c. Reinsurance agreements or modifications thereto, including: 1. All reinsurance pooling agreements; 2. Agreements in which the reinsurance premium or a change in the insurer’s liabilities, or the projected reinsurance premium or a change in the insurer’s liabilities in any of the next 3 years, equals or exceeds 5 percent of the insurer’s surplus as regards policyholders, as of December 31 next preceding, including those agreements which may require as consideration the transfer of assets from an insurer to a nonaffiliate, if an agreement or understanding exists between the insurer and nonaffiliate that any portion of such assets will be transferred to 1 or more affiliates of the insurer; d. All management agreements, service contracts, tax allocation agreements, and all cost-sharing arrangements; and e. Any material transactions, specified by regulation, which the Commissioner determines may adversely affect the interests of the insurer’s policyholders. Nothing herein contained shall be deemed to authorize or permit any transactions which, in the case of an insurer not a member of the same insurance holding company system, would be otherwise contrary to law. (3) A domestic insurer may not enter into transactions which are part of a plan or series of like transactions with persons within the insurance holding company system if the purpose of those separate transactions is to avoid the statutory threshold amount and thus avoid the review that would occur otherwise. If the Commissioner determines that such separate t