As private equity and venture capital investors add insurance company and health care investments to their portfolios, the investment process may be more than they bargained for. Such investments can trigger a change in control under state insurance laws modeled after the NAIC Insurance Holding Company System Regulatory Act (NAIC Model #440) (the Holding Company Act), which requires that any person acquiring 10% or greater of the voting securities of a domestic insurer (if consummation of the proposed transaction would place that person, directly or indirectly, or by conversion or by exercise of any right to acquire) in control of the insurer or any person controlling the domestic insurer, to first file a so-called Form A Statement of Change in Control of Domestic Insurer with that insurer’s domestic state insurance regulator and secure approval for such proposed transaction prior to consummation. See also the NAIC Insurance Holding Company System Regulatory Model Act (Model #440) and the NAIC Insurance Holding Company Systems Model Regulation (Model #450).

NAIC Model 440 defines the term, “control” which triggers regulatory review: