HOUSE BILL REPORT

HB 1963

BYRepresentatives P. King,  Ferguson, Meyers, Peery, Silver, Nutley, Holland and Sutherland

Revising requirements for acquiring control of a domestic insurer.

House Committe on Financial Institutions & Insurance

Majority Report:  The substitute bill be substituted therefor an the substitute bill do pass. (10)

      Signed by Representatives Lux, Chair; Anderson, Betrozoff, Chandler, Day, Dorn, Ferguson, Grimm, P. King and Nutley.

House Staff:John Conniff (786-7119)

AS REPORTED BY COMMITTEE ON FINANCIAL INSTITUTIONS & INSURANCE

FEBRUARY 3, 1988

BACKGROUND:

The Washington Insurance Code contains specific provisions governing the solicitation of proxies (voting rights of shares in a company) and acquisition of control of a domestic stock insurance company.  A domestic stock insurance company is an insurance company incorporated in the state of Washington.

Before any person can solicit a proxy, the person must provide the stockholder an extensive disclosure of the purpose of the solicitation and other matters related to voting of the shares.  In addition, the person must comply with regulations adopted by the Insurance Commissioner implementing the statutory disclosure requirements governing acquisition of control of a domestic insurance company.  The Commissioner has authority to disapprove any acquisition of control of a domestic insurer based upon statutorily enumerated grounds including whether the acquisition would harm insurance competition in Washington and whether the acquisition would threaten the financial health of the insurance company.

SUMMARY:

SUBSTITUTE BILL:  The statute governing acquisition of control of a domestic stock insurance company is amended to clarify the Insurance Commissioner's authority to approve or disapprove acquisition through proxy solicitation.

SUBSTITUTE BILL COMPARED TO ORIGINAL:  A different method is used to clarify the Commissioner's authority to approve or disapprove acquisition of domestic insurers by proxy solicitation.

Fiscal Note:      Not Requested.

House Committee ‑ Testified For:    Steve Wehrly, Farmers Insurance Group and Mike Kapphahn, Farmers Insurance Group.

House Committee - Testified Against:      Basil Badley, BATUS.

House Committee - Testimony For:    The Commissioner probably has the authority to approve acquisition of domestic insurers through proxy solicitation.  However, this authority should be explicitly granted.

House Committee - Testimony Against:      Farmers Insurance is the subject of a takeover.  The State of Washington should not change the rules for approving acquisitions currently being negotiated.  The proposed clarification should be reviewed carefully to determine its full impact and should not be rushed through the Legislature.