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Assembly Actions -
Lowercase Senate Actions - UPPERCASE |
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| May 04, 2022 |
referred to insurance |
Senate Bill S9021
2021-2022 Legislative Session
Relates to the formation of mutual holding companies by certain domestic mutual property/casualty insurers and the reorganization in connection therewith of a domestic mutual property/casualty insurer
download bill text pdfSponsored By
(D, WF) 46th Senate District
Archive: Last Bill Status - In Senate Committee Insurance Committee
- Introduced
-
- In Committee Assembly
- In Committee Senate
-
- On Floor Calendar Assembly
- On Floor Calendar Senate
-
- Passed Assembly
- Passed Senate
- Delivered to Governor
- Signed By Governor
Actions
2021-S9021 (ACTIVE) - Details
- Current Committee:
- Senate Insurance
- Law Section:
- Insurance Law
- Laws Affected:
- Add Art 81 §§8101 - 8120, Ins L
- Versions Introduced in 2023-2024 Legislative Session:
-
S3538
2021-S9021 (ACTIVE) - Sponsor Memo
BILL NUMBER: S9021
SPONSOR: BRESLIN
TITLE OF BILL:
An act to amend the insurance law, in relation to the formation of mutu-
al holding companies by certain domestic mutual property/casualty insur-
ers and the reorganization in connection therewith of a domestic mutual
property/casualty insurer into a domestic stock property/casualty insur-
er
PURPOSE OF BILL:
This bill would authorize a domestic mutual property/casualty insurer to
reorganize into a domestic stock property/casualty insurer through the
formation of a new mutual holding company which owns, directly or
through one or more stock holding companies, at least 51% of the reor-
ganized mutual property/casualty insurer.
SUMMARY OF SPECIFIC PROVISIONS:
Adds a new Article 81 to the Insurance Law providing for the reorganiza-
tion of a domestic mutual property/casualty insurer into a domestic stock property/casualty insurer through the formation of a new mutual holding company which owns, directly or through one or more stock hold- ing companies, at least 51% of the reorganized mutual property/casualty insurer. The new Article 81 specifies in great detail: 1) The process for reorganization and required contents of the plan of reorganization; 2) obligations to policyholders; 3) application and review by the super- intendent of financial services including the holding of a public hear- ing; 4) the process for policyholder review and voting on a reorganiza- tion plan; 5) restrictions on compensation received by officers, directors and employees of the reorganized company; 6) requirements on board members of the mutual holding company and any stock holding compa- ny, including a requirement for outside directors of each, and annual filings to be made by the mutual holding company with the superintendent if required by the superintendent; 7) limitations on stock options and stock awards to officers and directors of the mutual holding company, stock holding company and the reorganized insurer; 8) limitations on ownership of voting stock of the reorganized insurer by officers and directors of the mutual holding company, stock holding company and the reorganized insurer; and 9) many other matters related to the regu- lation, powers and duties of a reorganized mutual holding company. Section two sets out the effective date. JUSTIFICATION: Similar statutes allowing for insurance mutual holding companies have been enacted into law in 34 states and the District of Columbia. Numer- ous property/casualty insurance companies in the United States have converted to a mutual holding company structure in recent years. New York domestic mutual property/casualty insurers are at a competitive disadvantage because they do not have the authority to reorganize in the same manner. In New York State, there are a number of companies, that could enhance the interests of policyholders by availing themselves of this proposed law and, as a result, being able to raise capital or merge with other mutual holding companies, thereby contributing to the growth of New York's economy. As a major part of the financial services indus- try, property/casualty insurers today face the same competitive pres- sures and capital needs that are linked to any mergers, consolidations and capital-raising activities occurring throughout the financial services arena. Within the property/casualty insurance industry itself, insurers must enhance and strengthen capital, liquidity and profitabil- ity in order to hold their own against intense competition. The insu- rance-buying public looks carefully at financial ratings and capital base. As a consequence, more than ever before, access to capital is critical. However, one segment of the property/casualty insurance industry - mutual property/casualty insurers - has a decided disadvan- tage compared to stock property/casualty insurers in accessing capital markets. Since mutual insurers cannot issue stock, they do not have the array of methods for accessing capital markets that their stock insurer counterparts do. Additionally, mutual insurers are limited in their ability to consolidate and grow through acquisitions because other companies can only be acquired as subsidiaries of the mutual property/casualty insurer, and this structure limits the size of acqui- sitions because subsidiaries are subject to a%- risk-based-capital factor, statutory accounting requires write - off of the good will element of the purchase price, and legal investment laws may limit the amount an insurer may invest in subsidiaries. Therefore, this.law would enhance the ability of property/casualty insurers to consolidate and grow through acquisitions. One of the few alternatives for a mutual property/casualty insurer is to convert to a stock form of ownership in a process called demutualiza- tion. Demutualization (or conversion) of New York domestic mutual property/casualty insurers is currently authorized pursuant to Insurance Law Section 7307. However, proceeding directly with demutualization is a major undertaking involving complexity and uncertainty. The feasibility of raising capital through demutualization can be hampered by stock market conditions, which can be volatile and uncertain, and by strains on the profitability of the insurance business. Conversion to the stock form opens a mutual property/casualty insurer to the possibility of hostile acquisition by a foreign management - presenting uncertainty and instability which may make property/casualty policyholders uncomforta- ble. There are therefore a number of mutual property/casualty insurers for which demutualization may not be an attractive alternative, but which still have a need to raise capital to support their business. This bill would authorize a domestic mutual property/casualty insurer to reorganize into a domestic stock property/casualty insurer through the formation of a new mutual holding company which owns, directly or through one or more stock holding companies, at least 51% of the reor- ganized mutual property/casualty insurer. The new organization could permit capital raising by selling voting stock of the reorganized insur- er or one or more stock holding companies to persons other than the mutual holding company, and the issuer of such voting stock contributing all or a portion of the proceeds down to its stock property/casualty insurer subsidiary. Such a reorganization would not affect the obli- gations of the reorganizing insurer. All insurance obligations of the reorganizing insurer stay intact. Policyholders/members would retain membership, voting rights and rights to participate in any distribution of surplus, but such rights in the insurer become instead rights in the mutual holding company. Policyholders/members would continue to control the reorganized insurer through their new membership interests in the mutual holding company, the directors of which are elected by the members. Policyholders then have the ability to protect and strengthen their financial position by raising new capital through a controlled subsidiary. Such a structure has been successfully employed by mutual savings banks in New York under Article VI-C of the Banking Law (enacted in 1989) and by thrifts since the late 1980s in many other states. The bill contains a number of provisions that protect the interests of policyholders of the reorganiz- ing insurer. Dividend Practices. To further protect the dividend expectations of participating policyholders, the bill requires that the reorganized insurer, on or before the date on which less than 75% of the votes eligible to be cast by the mutual holding company's members are held by owners of the reorganized insurer's participating policies or contracts, provide as to its participating individual policies in a manner approved by the superintendent. Reorganization Procedural Safeguards. The reorganization of a domestic mutual property/casualty insurer through the formation of a mutual hold- ing company would be subject to the procedural safeguards applicable to property/casualty insurer demutalization under current law, including board approval, a public hearing, the superintendent's approval and approval by eligible policyholders. Required Outside Directors of Mutual Holding Company and Stock Holding Company and Limitations on their Ownership Interests in the Reorganized Insurer. The bill provides that (a) at least two-thirds of the directors of the mutual holding company and of any stock holding company, all of the members of the compensation committee of the board of directors of the mutual holding company and of any stock holding company, at least two-thirds of the members of any committee responsible for making deci- sions affecting the capital structure or mergers and acquisitions, and a majority of the directors on each other committee of the board of direc- tors of the mutual holding company and any stock holding company must be outside directors; and (b) the aggregate percentage of voting securities of the reorganized insurer directly or indirectly owned, controlled or held with the power to vote, either personally or by persons (other than the mutual holding company and any stock holding company) of which they are directors, officers or employees, by outside directors, may not exceed three percent or such lesser percentage as may be determined by the superintendent in his approval of the mutual holding company's plan of reorganization. Supermajority of Directors of Mutual Holding Company and Stock Holding Company required in Certain Instances. The bill requires that the by-laws of the mutual holding company and any stock holding company provide that the affirmative vote of at least two-thirds of the board of directors of such company be required for any action by such company to (a) adopt a plan of conversion of the mutual holding company, (b) enter into a merger with the mutual holding company, or (c) conduct a public offering or authorize the issuance of any voting stock or security convertible into voting stock of the reorganized insurer or the stock holding company to any person other than the mutual holding company or the stock holding company. Limitations of Management Stock Options and Stock Awards. The bill provides that, subject to a limited exception, until six months after the completion of either an initial public offer- ing or the first issuance of voting stock or securities convertible into voting stock of the reorganized insurer or the stock holding company to any person other than the mutual holding company or the stock holding company, neither the stock holding company nor the reorganized insurer may award any stock options or stock grants to persons who are officers or directors of the mutual holding company, the stock holding company or the reorganized insurer. Aggregate Limitations on Management Ownership of Voting Stock. The bill provides that, until two years after the six month period after the completion of either an initial public offering or the first issuance of voting stock or securities convertible into voting stock of the reorgan- ized insurer or the stock holding company to any person other than the mutual holding company or the stock holding company, the officers and directors of the mutual holding company, a stock holding company and of the reorganized insurer may not own beneficially, in the aggregate, more than five percent of the voting stock of the reorganized insurer. Superintendent to Approve Valuation of Stock Offering Prior to Initial Public Offering. The bill provides that any issuance of voting stock or securities convertible into voting stock of the reorganized insurer or the stock holding company prior to an initial public offering, private equity placement, or the issuance of public or private voting stock or securities convertible into voting stock of the reorganized insurer or stock holding company or any other type of capital raised must be approved by the superintendent as to the proposed valuation of such stock or securities. Superintendent Approval Required of Mutual Holding Company Merger, Consolidation and Other Reorganization. Recognizing that the reorganization of a domestic mutual property/casualty insurer through the formation of a mutual holding company and its stock property/casualty insurer subsidiary is, in effect, the continuance of the existence of the mutual property/casualty insurer in another form. The bill would allow a mutual holding company to engage in mergers, consolidations and other reorganizations subject to the superintendent's approval. LEGISLATIVE HISTORY: New bill. FISCAL IMPLICATIONS: None. EFFECTIVE DATE: Immediately.
2021-S9021 (ACTIVE) - Bill Text download pdf
S T A T E O F N E W Y O R K
________________________________________________________________________
9021
I N S E N A T E
May 4, 2022
___________
Introduced by Sen. BRESLIN -- read twice and ordered printed, and when
printed to be committed to the Committee on Insurance
AN ACT to amend the insurance law, in relation to the formation of mutu-
al holding companies by certain domestic mutual property/casualty
insurers and the reorganization in connection therewith of a domestic
mutual property/casualty insurer into a domestic stock
property/casualty insurer
THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
BLY, DO ENACT AS FOLLOWS:
Section 1. The insurance law is amended by adding a new article 81 to
read as follows:
ARTICLE 81
MUTUAL HOLDING COMPANY; PROPERTY/CASUALTY INSURER
SECTION 8101. DEFINITIONS.
8102. REORGANIZATION OF MUTUAL PROPERTY/CASUALTY INSURER THROUGH
FORMATION OF A MUTUAL HOLDING COMPANY; CONTENTS OF PLAN.
8103. DIVIDEND PRACTICES.
8104. ADOPTION OF PLAN; SUBMISSION OF PLAN TO THE SUPERINTEN-
DENT.
8105. AMENDMENT OR WITHDRAWAL OF PLAN.
8106. CONSULTANTS.
8107. APPROVAL OF PLAN BY SUPERINTENDENT; HEARING.
8108. APPROVAL OF PLAN BY ELIGIBLE MEMBERS.
8109. FILING OF PLAN; EFFECTIVE DATE OF REORGANIZATION.
8110. EFFECT OF REORGANIZATION.
8111. CORPORATE EXISTENCE.
8112. DIRECTORS AND OFFICERS.
8113. NOTICE OF PROPOSED REORGANIZATION.
8114. FAILURE TO GIVE NOTICE.
8115. LIMITATIONS OF ACTIONS; SECURITY.
8116. PROHIBITED TRANSACTIONS BY OFFICERS, DIRECTORS AND EMPLOY-
EES.
8117. REQUIREMENTS APPLICABLE TO A MUTUAL HOLDING COMPANY.
EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD15521-01-2
S. 9021 2
8118. OTHER REQUIREMENTS APPLICABLE TO AN INTERMEDIATE STOCK
HOLDING COMPANY AND A MUTUAL HOLDING COMPANY.
8119. CONVERSION OF MUTUAL HOLDING COMPANY.
8120. TRANSFERS OF SUBSIDIARIES.
§ 8101. DEFINITIONS. AS USED IN THIS ARTICLE, THE FOLLOWING TERMS
SHALL HAVE THE FOLLOWING MEANINGS:
(A) "ADOPTION DATE" MEANS THE DATE THE BOARD OF DIRECTORS OF THE MUTU-
AL PROPERTY/CASUALTY INSURER ADOPTS THE PLAN OF REORGANIZATION.
(B) "BENEFICIAL OWNERSHIP" WITH RESPECT TO ANY SECURITY, MEANS THE
SOLE OR SHARED POWER TO VOTE OR DIRECT THE VOTING OF, SUCH SECURITY
AND/OR THE SOLE OR SHARED POWER TO DISPOSE OR DIRECT THE DISPOSITION OF
SUCH SECURITY.
(C) "EFFECTIVE DATE" MEANS, IN THE CASE OF THE REORGANIZATION OF A
MUTUAL PROPERTY/CASUALTY INSURER, THE DATE UPON WHICH THE REORGANIZATION
OF THE MUTUAL PROPERTY/CASUALTY INSURER SHALL BE EFFECTIVE IN ACCORDANCE
WITH SECTION EIGHT THOUSAND ONE HUNDRED NINE OF THIS ARTICLE AS A RESULT
OF REORGANIZATION PROCEEDINGS PURSUANT TO THIS ARTICLE.
(D) "ELIGIBLE MEMBER" WITH REFERENCE TO A MUTUAL PROPERTY/CASUALTY
INSURER, MEANS A PERSON WHO, BY THE RECORDS OF THE MUTUAL
PROPERTY/CASUALTY INSURER, IS DEEMED TO BE THE "POLICYHOLDER" OF A POLI-
CY OR CONTRACT WHICH IS OF A TYPE OF ANY ONE OR MORE OF THE BASIC KINDS
OF INSURANCE SPECIFIED IN SUBSECTION (A) OF SECTION FOUR THOUSAND
HUNDRED ONE OF THIS CHAPTER FOR PURPOSES OF SECTION FOUR THOUSAND ONE
HUNDRED SIXTEEN OF THIS CHAPTER AS OF THE ADOPTION DATE. A PERSON
INSURED UNDER A GROUP POLICY IS NOT AN ELIGIBLE MEMBER. A PERSON WHOSE
POLICY BECOMES EFFECTIVE ONE CALENDAR DAY AFTER THE BOARD OF DIRECTORS
ADOPTS THE PLAN OF CONVERSION BUT BEFORE THE EFFECTIVE DATE OF THE PLAN
OF CONVERSION IS NOT AN ELIGIBLE MEMBER.
(E) "MEMBER" MEANS A MEMBER OF SUCH MUTUAL HOLDING COMPANY AS PROVIDED
IN SUBSECTION (C) OF SECTION EIGHT THOUSAND ONE HUNDRED SEVENTEEN OF
THIS ARTICLE.
(F) "MEMBERSHIP INTERESTS" MEANS, WITH REFERENCE TO AN INSTITUTION
THAT IS A MUTUAL PROPERTY/CASUALTY INSURER OR A MUTUAL HOLDING COMPANY,
THE RIGHTS AS MEMBERS ARISING UNDER THE CHARTER OF SUCH INSTITUTION OR
THIS CHAPTER OR OTHERWISE BY LAW INCLUDING THE RIGHTS TO VOTE AND TO
PARTICIPATE IN ANY DISTRIBUTION OF THE SURPLUS OF SUCH INSTITUTION,
WHETHER OR NOT INCIDENT TO A LIQUIDATION THEREOF. THE TERM "MEMBERSHIP
INTERESTS" DOES NOT INCLUDE RIGHTS EXPRESSLY CONFERRED UPON THE POLICY-
HOLDERS BY THEIR POLICIES OR CONTRACTS (INCLUDING THE RIGHT TO PARTIC-
IPATE IN THE DISTRIBUTION OF SURPLUS) OTHER THAN THE RIGHT TO VOTE.
(G) "MUTUAL HOLDING COMPANY" MEANS A CORPORATION ORGANIZED UNDER
SECTION EIGHT THOUSAND ONE HUNDRED SEVENTEEN OF THIS ARTICLE.
(H) "MUTUAL PROPERTY/CASUALTY INSURER" FOR THE PURPOSES OF THIS ARTI-
CLE MEANS A DOMESTIC MUTUAL PROPERTY/CASUALTY INSURANCE COMPANY ORGAN-
IZED UNDER ARTICLE TWELVE OF THIS CHAPTER AND LICENSED UNDER ARTICLE
FORTY-ONE OF THIS CHAPTER, OR A DOMESTIC ADVANCE PREMIUM CORPORATION
ORGANIZED AND LICENSED UNDER ARTICLE SIXTY-SIX OF THIS CHAPTER, OR AN
ASSESSMENT CORPORATION ORGANIZED AND LICENSED UNDER ARTICLE SIXTY-SIX OF
THIS CHAPTER.
(I) "OFFER" INCLUDES EVERY OFFER TO BUY OR ACQUIRE, SOLICITATION OF AN
OFFER TO SELL, TENDER OFFER FOR, OR REQUEST OR INVITATION FOR TENDERS OF
A SECURITY OR INTEREST IN A SECURITY FOR VALUE.
(J) "OUTSIDE DIRECTOR" MEANS A DIRECTOR:
(1) WHO IS NOT AN OFFICER, EMPLOYEE OR CONSULTANT OF THE MUTUAL HOLD-
ING COMPANY, ANY STOCK HOLDING COMPANY, THE REORGANIZED INSURER OR ANY
S. 9021 3
OTHER SUBSIDIARY OF THE MUTUAL HOLDING COMPANY OR ANY STOCK HOLDING
COMPANY;
(2) WHO DOES NOT DIRECTLY OR INDIRECTLY OWN, CONTROL OR HOLD ONE
PERCENT OR GREATER OF THE VOTING SECURITIES OF ANY STOCK HOLDING COMPA-
NY, THE REORGANIZED INSURER OR ANY OTHER SUBSIDIARY OF THE MUTUAL HOLD-
ING COMPANY OR ANY STOCK HOLDING COMPANY; AND
(3) WHO IS NOT A DIRECTOR, OFFICER OR EMPLOYEE OF ANY PERSON EXCEPT
THE MUTUAL HOLDING COMPANY OR ANY STOCK HOLDING COMPANY THAT DIRECTLY OR
INDIRECTLY OWNS, CONTROLS OR HOLDS SUCH PERCENTAGE OF SUCH VOTING SECU-
RITY. LESSER AMOUNTS OF OWNERSHIP OF VOTING SECURITIES OTHER THAN THOSE
PROVIDED FOR IN THIS SUBSECTION MAY BE APPROVED BY THE SUPERINTENDENT AS
A COMPONENT OF THE MUTUAL HOLDING COMPANY'S PLAN OF REORGANIZATION
PURSUANT TO THIS ARTICLE.
(K) "PERSON" MEANS AN INDIVIDUAL, PARTNERSHIP, FIRM, ASSOCIATION,
CORPORATION, JOINT-STOCK COMPANY, LIMITED LIABILITY COMPANY, LIMITED
LIABILITY PARTNERSHIP, TRUST, GOVERNMENT OR GOVERNMENTAL AGENCY, STATE
OR POLITICAL SUBDIVISION THEREOF, PUBLIC OR PRIVATE CORPORATION, BOARD,
ASSOCIATION, ESTATE, TRUSTEE OR FIDUCIARY, ANY SIMILAR ENTITY OR ANY
COMBINATION OF THE FOREGOING ACTING IN CONCERT.
(L) "PLAN OF REORGANIZATION" OR "PLAN" MEANS A PLAN ADOPTED BY A MUTU-
AL PROPERTY/CASUALTY INSURER IN COMPLIANCE WITH THIS ARTICLE.
(M) "POLICYHOLDER" MEANS A PERSON WHO, BY THE RECORDS OF THE MUTUAL
PROPERTY/CASUALTY INSURER, IS DEEMED TO BE THE POLICYHOLDER OF A POLICY
OR CONTRACT WHICH IS OF A TYPE OF ANY ONE OR MORE OF THE BASIC KINDS OF
INSURANCE SPECIFIED IN SUBSECTION (A) OF SECTION FOUR THOUSAND ONE
HUNDRED ONE OF THIS CHAPTER FOR PURPOSES OF SECTION FOUR THOUSAND ONE
HUNDRED SIXTEEN OF THIS CHAPTER.
(N) "PUBLIC OFFERING" MEANS A STOCK OFFERING REQUIRED TO BE REGISTERED
PURSUANT TO THE SECURITIES ACT OF 1933, UNITED STATES CODE, TITLE 15,
SECTION 77E.
(O) "REORGANIZED STOCK INSURER" MEANS THE STOCK PROPERTY/CASUALTY
INSURER INTO WHICH A MUTUAL PROPERTY/CASUALTY INSURER HAS BEEN REORGAN-
IZED IN ACCORDANCE WITH THE PROVISIONS OF THIS ARTICLE.
(P) "REORGANIZING INSURER" MEANS, IN THE CASE OF A PLAN OF REORGANIZA-
TION OF A MUTUAL PROPERTY/CASUALTY INSURER UNDER THIS ARTICLE, THE MUTU-
AL PROPERTY/CASUALTY INSURER THAT IS REORGANIZING PURSUANT TO SUCH PLAN.
(Q) "INTERMEDIATE STOCK HOLDING COMPANY" MEANS A CORPORATION INCORPO-
RATED UNDER THE LAWS OF ANY JURISDICTION IN THE UNITED STATES, AT LEAST
FIFTY-ONE PERCENT OF THE VOTING STOCK OF WHICH IS OWNED, DIRECTLY OR
THROUGH ANOTHER INTERMEDIATE STOCK HOLDING COMPANY, BY A MUTUAL HOLDING
COMPANY AND WHICH HOLDS, DIRECTLY OR INDIRECTLY, VOTING STOCK IN AT
LEAST ONE REORGANIZED INSURER.
(R) "VOTING SECURITY" INCLUDES VOTING SECURITIES AS DEFINED IN PARA-
GRAPH FORTY-FIVE OF SUBSECTION (A) OF SECTION ONE HUNDRED SEVEN OF THIS
CHAPTER, ANY REORGANIZATION CERTIFICATE OR SUBSCRIPTION (INCLUDING
SUBSCRIPTION RIGHTS ISSUED PURSUANT TO A PLAN OF REORGANIZATION), OR ANY
SECURITY CONVERTIBLE (WITH OR WITHOUT CONSIDERATION) INTO ANY SUCH SECU-
RITY, OR CARRYING ANY WARRANT OR RIGHT TO SUBSCRIBE FOR OR PURCHASE ANY
SUCH SECURITY, OR ANY SUCH WARRANT OR RIGHT.
(S) "VOTING STOCK" MEANS CAPITAL STOCK THAT CONSTITUTES VOTING SECURI-
TIES AS DEFINED IN PARAGRAPH FORTY-FIVE OF SUBSECTION (A) OF SECTION ONE
HUNDRED SEVEN OF THIS CHAPTER. ALL REFERENCES IN THIS ARTICLE TO A SPEC-
IFIED PERCENTAGE OF THE VOTING STOCK OF ANY PERSON SHALL MEAN SECURITIES
HAVING THE SPECIFIED PERCENTAGE OF THE VOTING POWER IN SUCH PERSON FOR
THE ELECTION OF DIRECTORS, TRUSTEES OR MANAGEMENT OF SUCH PERSON OTHER
S. 9021 4
THAN SECURITIES HAVING SUCH POWER ONLY BY REASON OF THE HAPPENING OF A
CONTINGENCY.
§ 8102. REORGANIZATION OF MUTUAL PROPERTY/CASUALTY INSURER THROUGH
FORMATION OF A MUTUAL HOLDING COMPANY; CONTENTS OF PLAN. (A) A MUTUAL
PROPERTY/CASUALTY INSURER MAY BE REORGANIZED AS A DOMESTIC STOCK
PROPERTY/CASUALTY INSURER WITH A MUTUAL HOLDING COMPANY BY COMPLYING
WITH THE REQUIREMENTS OF THIS ARTICLE.
(B) THE PLAN OF REORGANIZATION SHALL CONTAIN PROVISIONS FOR:
(1) THE REORGANIZING INSURER BECOMING A DOMESTIC STOCK
PROPERTY/CASUALTY INSURER;
(2) THE FORMATION OF A MUTUAL HOLDING COMPANY;
(3) THE ELIGIBLE MEMBERS OF THE REORGANIZING INSURER BECOMING MEMBERS
OF THE MUTUAL HOLDING COMPANY WITH MEMBERSHIP INTERESTS THEREIN, AND THE
MEMBERSHIP INTERESTS IN THE REORGANIZING INSURER BEING EXTINGUISHED;
(4) AT LEAST FIFTY-ONE PERCENT OF THE VOTING STOCK ISSUED BY THE REOR-
GANIZED INSURER BEING ACQUIRED AND HELD, DIRECTLY OR THROUGH ONE OR MORE
INTERMEDIATE STOCK HOLDING COMPANIES, BY THE MUTUAL HOLDING COMPANY;
(5) IF APPLICABLE, THE GENERAL TERMS FOR THE ESTABLISHMENT OF AN
ALTERNATIVE PROVISION UNDER THE PROPOSED DIVIDEND POLICY UNDER
SUBSECTION (A) OF SECTION EIGHT THOUSAND ONE HUNDRED THREE OF THIS ARTI-
CLE; AND
(6) A PLAN OF OPERATION FOR THE REORGANIZED INSURER INCLUDING FINAN-
CIAL PROJECTIONS FOR A THREE-YEAR PERIOD AND A STATEMENT INDICATING ITS
INTENTIONS WITH REGARD TO ISSUING ANY NONPARTICIPATING BUSINESS.
(C) THE PLAN OF REORGANIZATION SHALL PROVIDE THAT THE REORGANIZATION
PROCESS ITSELF WILL NOT CHANGE PREMIUMS OR REDUCE POLICY BENEFITS OR
OTHER POLICY OBLIGATIONS OF THE MUTUAL PROPERTY/CASUALTY INSURER,
PROVIDED THAT THE PLAN OF REORGANIZATION MAY PROVIDE THAT THE REORGAN-
IZED STOCK INSURER WILL BE ABLE TO MAKE SUCH CHANGES AND REDUCTIONS AS
WOULD BE PERMITTED UNDER THIS CHAPTER IF THE MUTUAL PROPERTY/CASUALTY
INSURER WERE NOT A REORGANIZING INSURER UNDER THIS ARTICLE.
(D) THE PLAN MAY PROVIDE FOR THE FORMATION OF ONE OR MORE INTERMEDIATE
STOCK HOLDING COMPANIES.
(E) THE PLAN SHALL INCLUDE THE FOLLOWING AS EXHIBITS:
(1) THE PROPOSED CHARTERS OR CERTIFICATES OF INCORPORATION OF THE
REORGANIZED INSURER, THE MUTUAL HOLDING COMPANY AND ANY INTERMEDIATE
STOCK HOLDING COMPANY OR COMPANIES; AND
(2) THE PROPOSED BY-LAWS OF THE REORGANIZED INSURER, THE MUTUAL HOLD-
ING COMPANY AND ANY STOCK HOLDING COMPANY OR COMPANIES.
§ 8103. DIVIDEND PRACTICES. (A) FOLLOWING THE EFFECTIVE DATE OF THE
PLAN, THE REORGANIZED INSURER MAY, WITH RESPECT TO ITS INDIVIDUAL POLI-
CIES AND CONTRACTS:
(1) CONTINUE THE DIVIDEND PRACTICES OF THE REORGANIZING INSURER;
(2) CONTINUE THE DIVIDEND PRACTICES OF THE REORGANIZING INSURER AND
ADOPT SUCH OTHER DIVIDEND PRACTICES AS, AT THE TIME OF THE EFFECTIVE
DATE OR AT ANY TIME THEREAFTER, MAY BE PERMITTED UNDER APPLICABLE LAW OR
REGULATION OR APPROVED BY THE SUPERINTENDENT;
(3) ADOPT SUCH OTHER ALTERNATIVE WITH RESPECT TO DIVIDEND PRACTICES AS
THE SUPERINTENDENT MAY APPROVE; OR
(4) DISCONTINUE THE DIVIDEND PRACTICES OF THE REORGANIZING INSURER.
§ 8104. ADOPTION OF PLAN; SUBMISSION OF PLAN TO THE SUPERINTENDENT.
(A) A MUTUAL PROPERTY/CASUALTY INSURER SEEKING TO REORGANIZE UNDER THIS
ARTICLE SHALL, BY APPROVAL OF A RESOLUTION ADOPTED BY AT LEAST TWO-
THIRDS OF ITS ENTIRE BOARD OF DIRECTORS, ADOPT A PLAN CONSISTENT WITH
THE PROVISIONS OF SECTIONS EIGHT THOUSAND ONE HUNDRED TWO AND EIGHT
THOUSAND ONE HUNDRED THREE OF THIS ARTICLE WHICH IS FAIR AND EQUITABLE
S. 9021 5
TO THE POLICYHOLDERS. THE RESOLUTION VOTED UPON BY THE BOARD OF DIREC-
TORS SHALL SPECIFY THE REASONS FOR AND THE PURPOSES OF THE PROPOSED
REORGANIZATION.
(B) THE PLAN SHALL BE SUBMITTED TO THE SUPERINTENDENT, TOGETHER WITH
THE RESOLUTION OF THE BOARD OF DIRECTORS OF THE REORGANIZING INSURER,
CERTIFIED BY THE SECRETARY THEREOF, ADOPTING THE PLAN PURSUANT TO THIS
ARTICLE.
§ 8105. AMENDMENT OR WITHDRAWAL OF PLAN. AT ANY TIME BEFORE THE PLAN
OF REORGANIZATION BECOMES EFFECTIVE AS PROVIDED IN SECTION EIGHT THOU-
SAND ONE HUNDRED NINE OF THIS ARTICLE, THE REORGANIZING INSURER MAY, BY
RESOLUTION OF A THREE-FOURTHS MAJORITY OF ITS ENTIRE BOARD OF DIRECTORS,
AMEND THE PLAN OF REORGANIZATION OR WITHDRAW THE PLAN OF REORGANIZATION.
IN THE CASE OF A PLAN AMENDMENT, ALL REFERENCES IN THIS ARTICLE TO THE
PLAN OF REORGANIZATION SHALL BE DEEMED TO REFER TO THE PLAN AS AMENDED,
BUT NO AMENDMENT SHALL BE DEEMED TO CHANGE THE ADOPTION DATE OF THE PLAN
OF REORGANIZATION. A FURTHER PUBLIC HEARING IS NOT NECESSARY UNLESS THE
SUPERINTENDENT DETERMINES THAT AMENDMENTS SUBMITTED AFTER THE ORIGINAL
HEARING REQUIRED UNDER SECTION EIGHT THOUSAND ONE HUNDRED SEVEN OF THIS
ARTICLE WILL SUBSTANTIALLY ALTER THE PLAN. IN THE EVENT THAT THE SUPER-
INTENDENT DETERMINES THAT THE AMENDMENT SUBSTANTIALLY ALTERS THE PLAN,
THE PLAN AS AMENDED MUST BE SUBMITTED FOR RECONSIDERATION BY THE ELIGI-
BLE MEMBERS AS PROVIDED IN SECTION EIGHT THOUSAND ONE HUNDRED EIGHT OF
THIS ARTICLE.
§ 8106. CONSULTANTS. THE SUPERINTENDENT MAY APPOINT ONE OR MORE
CONSULTANTS AS THE SUPERINTENDENT SHALL REASONABLY DEEM NECESSARY TO
ADVISE THE SUPERINTENDENT IN MAKING THE DETERMINATION OF WHETHER THE
PROPOSED PLAN OF REORGANIZATION MEETS THE APPLICABLE REQUIREMENTS OF
THIS ARTICLE. THE REORGANIZING INSURER SHALL BE RESPONSIBLE FOR THE
REASONABLE FEES AND EXPENSES OF ANY SUCH CONSULTANTS. THIS EXPENDITURE
SHALL NOT CONSTITUTE AN EXPENDITURE OF PUBLIC FUNDS PURSUANT TO THE
STATE FINANCE LAW, BUT THE SUPERINTENDENT, WITH THE APPROVAL OF THE
COMPTROLLER, MAY IN THE SUPERINTENDENT'S DISCRETION FOR GOOD CAUSE SHOWN
REMIT SUCH CHARGES.
§ 8107. APPROVAL OF PLAN BY SUPERINTENDENT; HEARING. THE SUPERINTEN-
DENT MAY ORDER A PUBLIC HEARING ON THE PLAN TO BE HELD PRIOR TO THE PLAN
BEING SUBMITTED TO THE ELIGIBLE MEMBERS FOR THEIR APPROVAL. THE REORGAN-
IZING INSURER SHALL GIVE WRITTEN NOTICE OF THE HEARING TO ELIGIBLE
MEMBERS SENT BY MAIL OR ELECTRONIC TRANSMISSION TO THE LAST KNOWN MAIL-
ING OR ELECTRONIC ADDRESSES OF SUCH ELIGIBLE MEMBERS AS SHOWN ON THE
RECORDS OF THE REORGANIZING INSURER. SUCH SUMMARY NOTICE SHALL BE
SUBJECT TO THE APPROVAL OF THE SUPERINTENDENT, SHALL INCLUDE THE DATE,
TIME AND PLACE OF THE HEARING, AND SHALL INCLUDE BOTH A WEBSITE ADDRESS
AND A TOLL-FREE TELEPHONE NUMBER THROUGH WHICH ELIGIBLE MEMBERS MAY
OBTAIN, IF NOT INCLUDED IN THE SUMMARY NOTICE, A FULL NOTICE OF THE
HEARING AND EITHER A TRUE AND CORRECT COPY OF THE PLAN, OR A SUMMARY
THEREOF APPROVED BY THE SUPERINTENDENT, AND SUCH OTHER EXPLANATORY
INFORMATION AS THE SUPERINTENDENT SHALL APPROVE OR REQUIRE. THE REOR-
GANIZING INSURER SHALL ALSO POST A COPY OF SUCH NOTICE ON ITS WEBSITE.
SUCH NOTICE SHALL BE SENT TO ELIGIBLE MEMBERS AT LEAST THIRTY DAYS
BEFORE THE DATE SPECIFIED FOR THE HEARING AND MAY BE SENT ELECTRONICALLY
IF THE ELIGIBLE MEMBER HAS CONSENTED TO RECEIVE ELECTRONIC COMMUNI-
CATIONS FROM THE REORGANIZING INSURER UNDER SECTION THREE THOUSAND FOUR
HUNDRED FIFTY-EIGHT OF THIS CHAPTER. THE HEARING SHALL BE HELD AT A TIME
AND LOCATION IN THIS STATE DEEMED BY THE SUPERINTENDENT TO BE MOST
CONVENIENT TO THE GREATEST NUMBER OF ELIGIBLE MEMBERS. AT SUCH HEARING
ANY PERSON MAY BE HEARD IN FAVOR OF, OR AGAINST, THE TERMS OF THE PLAN.
S. 9021 6
THE PLAN OF REORGANIZATION SHALL BE MADE AVAILABLE FOR PUBLIC INSPECTION
AT ONE OFFICE OF THE DEPARTMENT IN EACH CITY IN THIS STATE WHERE THE
DEPARTMENT MAINTAINS AN OFFICE AND AT THE PRINCIPAL OFFICE OF THE REOR-
GANIZING INSURER. THE SUPERINTENDENT SHALL APPROVE THE PLAN IF THE
SUPERINTENDENT FINDS THAT:
(A) THE PLAN IS FAIR AND EQUITABLE TO POLICYHOLDERS;
(B) THE PLAN DOES NOT VIOLATE THIS ARTICLE; AND
(C) AFTER GIVING EFFECT TO THE REORGANIZATION, THE REORGANIZED INSURER
WILL HAVE AN AMOUNT OF CAPITAL AND SURPLUS THE SUPERINTENDENT DEEMS TO
BE REASONABLY NECESSARY FOR ITS FUTURE SOLVENCY.
§ 8108. APPROVAL OF PLAN BY ELIGIBLE MEMBERS. (A) A PROPOSAL TO
APPROVE THE PLAN OF REORGANIZATION SHALL BE SUBMITTED TO ELIGIBLE
MEMBERS FOR APPROVAL. THE REORGANIZING INSURER SHALL GIVE WRITTEN
NOTICE STATING THE DATE, TIME AND PLACE FOR VOTING ON SUCH PROPOSAL TO
ELIGIBLE MEMBERS AND TO VOTE ON THE PROPOSAL IN ACCORDANCE WITH THIS
SECTION, SENT BY MAIL OR ELECTRONIC TRANSMISSION TO THE LAST KNOWN MAIL-
ING OR ELECTRONIC ADDRESSES OF SUCH POLICYHOLDERS AS SHOWN ON THE
RECORDS OF THE REORGANIZING INSURER. SUCH NOTICE SHALL BE SENT AT LEAST
FORTY-FIVE DAYS BEFORE THE DATE OF THE PROPOSED VOTE TO APPROVE THE PLAN
OF REORGANIZATION. SUCH NOTICE MAY BE COMBINED WITH THE SUMMARY NOTICE
OF THE HEARING REQUIRED BY SECTION EIGHT THOUSAND ONE HUNDRED SEVEN OF
THIS ARTICLE. SUCH NOTICE SHALL BE SUBJECT TO THE APPROVAL OF THE SUPER-
INTENDENT AND SHALL INCLUDE BOTH A WEBSITE ADDRESS AND A TOLL-FREE TELE-
PHONE NUMBER THROUGH WHICH MEMBERS MAY OBTAIN EITHER A TRUE AND CORRECT
COPY OF THE PLAN, OR A SUMMARY THEREOF APPROVED BY THE SUPERINTENDENT,
AND SUCH OTHER EXPLANATORY INFORMATION AS THE SUPERINTENDENT SHALL
APPROVE OR REQUIRE.
(B) EACH ELIGIBLE MEMBER SHALL BE ENTITLED TO CAST ONE VOTE, UNLESS
OTHERWISE PROVIDED IN THE CHARTER OR BY-LAWS OF THE REORGANIZING INSUR-
ER, ON THE PROPOSAL, EITHER IN PERSON, BY MAIL OR BY PROXY, IRRESPECTIVE
OF THE NUMBER OR AMOUNT OF THE POLICIES OR CONTRACTS HELD. EACH PROXY
SHALL BE REVOCABLE AT ANY TIME, EXCEPT TO THE EXTENT THAT, AT THE TIME
OF ATTEMPTED REVOCATION, THE POWER CONFERRED THEREBY HAS ALREADY BEEN
PROPERLY EXERCISED. ALL VOTES SHALL BE BY WRITTEN BALLOT CAST IN PERSON,
BY MAIL OR BY ELECTRONIC MEANS BY ELIGIBLE MEMBERS OR BY PROXY AGENTS
DULY APPOINTED BY ELIGIBLE MEMBERS. THE IN-PERSON VOTING ON THE PLAN
SHALL BE HELD AT A LOCATION AND TIME APPROVED BY THE SUPERINTENDENT.
(C) THE PROPOSAL TO APPROVE THE PLAN OF REORGANIZATION SHALL BE
ADOPTED BY THE AFFIRMATIVE VOTE OF AT LEAST TWO-THIRDS OF ALL VOTES CAST
BY ELIGIBLE MEMBERS.
(D) THE SUPERINTENDENT SHALL HAVE POWER TO PRESCRIBE RULES GOVERNING
THE PROCEDURES FOR CONDUCT OF THE VOTING ON THE PROPOSAL.
(E) THE PROVISIONS OF SECTION FOUR THOUSAND ONE HUNDRED SIXTEEN OF
THIS CHAPTER SHALL NOT APPLY TO THE ACTION BY ELIGIBLE MEMBERS PURSUANT
TO THIS SECTION.
(F) THE PROVISIONS OF SUBSECTION (A) OF SECTION FOUR THOUSAND ONE
HUNDRED TEN OF THIS CHAPTER AND SUBSECTION (A) OF SECTION SIX THOUSAND
SIX HUNDRED THIRTEEN OF THIS CHAPTER SHALL NOT APPLY TO A CORPORATION
ORGANIZED UNDER SECTION EIGHT THOUSAND ONE HUNDRED SEVENTEEN OF THIS
ARTICLE.
(G) UPON THE CONCLUSION OF THE VOTE, THE REORGANIZING INSURER SHALL
SUBMIT TO THE SUPERINTENDENT:
(1) A CERTIFIED COPY OF THE PLAN OF REORGANIZATION, SUBSCRIBED BY THE
CHAIRMAN OF THE BOARD, THE PRESIDENT OR ANY VICE PRESIDENT AND ATTESTED
BY THE SECRETARY OR AN ASSISTANT SECRETARY OF THE REORGANIZING INSURER;
S. 9021 7
(2) A CERTIFICATE, SUBSCRIBED BY THE CHAIRMAN OF THE BOARD, THE PRESI-
DENT OR ANY VICE PRESIDENT AND ATTESTED BY THE SECRETARY OR ASSISTANT
SECRETARY OF THE REORGANIZING INSURER, OR SUBSCRIBED BY THE PERSON OR
PERSONS, IF ANY, DESIGNATED BY THE SUPERINTENDENT TO SUPERVISE THE
GIVING OF NOTICE OF THE DATE FOR ACTION ON THE PROPOSAL, TO THE EFFECT
THAT SUCH NOTICE WAS GIVEN IN ACCORDANCE WITH THIS SECTION TO ALL POLI-
CYHOLDERS ENTITLED TO SUCH NOTICE; AND
(3) A CERTIFICATE SUBSCRIBED BY AN OFFICER OF THE REORGANIZING INSURER
OF THE RESULTS OF THE VOTE, AS EVIDENCED BY VALID BALLOTS RECEIVED
BEFORE THE POLLS WERE CLOSED.
(H) EACH SUCH CERTIFICATE SHALL BE AFFIRMED AS TRUE UNDER THE PENAL-
TIES OF PERJURY BY THE PERSON OR PERSONS SUBSCRIBING THE SAME AND, IN
THE CASE OF A CERTIFICATE SIGNED BY OFFICERS OF THE REORGANIZING INSUR-
ER, SHALL BE AFFIRMED UNDER THE CORPORATE SEAL OF THE REORGANIZING
INSURER.
§ 8109. FILING OF PLAN; EFFECTIVE DATE OF REORGANIZATION. (A) WHEN THE
SUPERINTENDENT HAS APPROVED THE PLAN OF REORGANIZATION AS PROVIDED IN
SECTION EIGHT THOUSAND ONE HUNDRED SEVEN OF THIS ARTICLE, AND CERTIF-
ICATION OF APPROVAL OF THE PLAN BY ELIGIBLE MEMBERS HAS BEEN MADE TO THE
SUPERINTENDENT AS PROVIDED IN SECTION EIGHT THOUSAND ONE HUNDRED EIGHT
OF THIS ARTICLE, A COPY OF THE PLAN OF REORGANIZATION, WITH THE SUPER-
INTENDENT'S APPROVAL ENDORSED THEREON, SHALL BE FILED IN THE OFFICE OF
THE SUPERINTENDENT. A COPY OF SUCH PLAN CERTIFIED BY THE SUPERINTENDENT
SHALL ALSO BE FILED BY THE REORGANIZING INSURER IN THE OFFICE OF THE
CLERK OF THE COUNTY WHERE THE PRINCIPAL OFFICE OF THE REORGANIZING
INSURER IS LOCATED WITHIN THIRTY DAYS AFTER THE SUPERINTENDENT'S
APPROVAL.
(B) THE PLAN OF REORGANIZATION SHALL TAKE EFFECT IN ACCORDANCE WITH
ITS TERMS ON THE DATE AND AT THE TIME WHEN THE FILING IN THE OFFICE OF
THE SUPERINTENDENT REQUIRED BY THIS SECTION HAS BEEN MADE OR ON SUCH
LATER DATE OR AT SUCH LATER TIME, IF ANY, AS MAY HAVE BEEN SPECIFIED IN
OR DETERMINED IN ACCORDANCE WITH THE PLAN OR PURSUANT THERETO.
(C) AS OF THE EFFECTIVE DATE, THE SUPERINTENDENT SHALL ISSUE AN
AMENDED CERTIFICATE OF AUTHORITY TO THE REORGANIZED INSURER, AND, IF THE
PLAN OF REORGANIZATION SPECIFIES THAT THE REORGANIZED INSURER PROPOSES
TO CONTINUE TO ISSUE FOR DELIVERY IN THIS STATE PARTICIPATING POLICIES
OR CONTRACTS, THE SUPERINTENDENT SHALL, ISSUE A PERMIT AUTHORIZING IT TO
DO SO.
§ 8110. EFFECT OF REORGANIZATION. UPON THE EFFECTIVE DATE OF A PLAN OF
REORGANIZATION IN ACCORDANCE WITH SECTION EIGHT THOUSAND ONE HUNDRED
NINE OF THIS ARTICLE:
(A) THE REORGANIZING INSURER SHALL IMMEDIATELY BECOME A DOMESTIC STOCK
PROPERTY/CASUALTY INSURER;
(B) THE POLICYHOLDERS OF THE REORGANIZING INSURER ON THE EFFECTIVE
DATE SHALL IMMEDIATELY BECOME MEMBERS OF THE MUTUAL HOLDING COMPANY WITH
MEMBERSHIP INTERESTS THEREIN, AND ALL MEMBERSHIP INTERESTS IN THE REOR-
GANIZING INSURER SHALL BE EXTINGUISHED;
(C) PERSONS BECOMING POLICYHOLDERS OF THE REORGANIZED INSURER AFTER
THE EFFECTIVE DATE OF THE PLAN SHALL BECOME MEMBERS OF THE MUTUAL HOLD-
ING COMPANY IMMEDIATELY UPON ISSUANCE OF THE POLICY OR CONTRACT;
(D) ONE HUNDRED PERCENT OF THE VOTING STOCK ISSUED BY THE REORGANIZED
INSURER SHALL BE OWNED, DIRECTLY OR THROUGH ONE OR MORE INTERMEDIATE
STOCK HOLDING COMPANIES, BY THE MUTUAL HOLDING COMPANY, AND AT NO TIME
SUBSEQUENT SHALL SUCH MUTUAL HOLDING COMPANY OWN LESS THAN FIFTY-ONE
PERCENT OF SUCH VOTING STOCK; AND
S. 9021 8
(E) ANY OTHER REORGANIZATION OF THE REORGANIZING INSURER AND ITS
SUBSIDIARIES SPECIFIED IN THE PLAN SHALL BECOME EFFECTIVE IN ACCORDANCE
WITH THE TERMS OF THE PLAN. EXCEPT FOR THE RIGHT TO VOTE, THE RIGHTS OF
ALL POLICYHOLDERS WITH RESPECT TO THE REORGANIZED INSURER THEREAFTER
SHALL BE AS SPECIFIED IN THEIR POLICIES OR CONTRACTS, IN THE CHARTER OF
THE REORGANIZED INSURER AND IN THE PLAN OF REORGANIZATION.
§ 8111. CORPORATE EXISTENCE. (A) THE REORGANIZED INSURER SHALL BE A
CONTINUATION OF THE REORGANIZING INSURER, AND THE REORGANIZATION SHALL
IN NO WAY ANNUL, MODIFY, OR CHANGE ANY OF SUCH INSURER'S EXISTING SUITS,
RIGHTS, CONTRACTS, OR LIABILITIES EXCEPT AS PROVIDED IN THE APPROVED
PLAN OF REORGANIZATION. ALL RIGHTS, FRANCHISES AND INTERESTS OF THE
REORGANIZING INSURER IN AND TO EVERY SPECIES OF PROPERTY, REAL, PERSONAL
AND MIXED, AND THINGS IN ACTION THEREUNTO BELONGING, SHALL BE VESTED IN
THE CONTINUING COMPANY, WITHOUT ANY DEED OR TRANSFER, AND SIMULTANEOUSLY
THEREWITH SUCH CONTINUING COMPANY SHALL BE SUBJECT TO ALL OF THE OBLI-
GATIONS AND LIABILITIES OF THE REORGANIZING INSURER, OTHER THAN OBLI-
GATIONS AND LIABILITIES WITH RESPECT TO THE POLICYHOLDERS' MEMBERSHIP
INTERESTS EXTINGUISHED BY THE PLAN OF REORGANIZATION.
(B) NO ACTION OR PROCEEDING PENDING AT THE TIME OF THE REORGANIZATION
TO WHICH THE REORGANIZING INSURER MAY BE A PARTY SHALL BE ABATED OR
DISCONTINUED BY REASON OF SUCH REORGANIZATION, BUT THE SAME MAY BE PROS-
ECUTED TO FINAL JUDGMENT IN THE SAME MANNER AS IF THE REORGANIZATION HAD
NOT TAKEN PLACE, OR THE REORGANIZED INSURER MAY BE SUBSTITUTED IN PLACE
OF SUCH REORGANIZING INSURER BY ORDER OF THE COURT IN WHICH THE ACTION
OR PROCEEDING MAY BE PENDING.
§ 8112. DIRECTORS AND OFFICERS. EXCEPT AS OTHERWISE PROVIDED IN THE
PLAN OF REORGANIZATION AND SUBJECT TO SUBSECTION (D) OF SECTION EIGHT
THOUSAND ONE HUNDRED SEVENTEEN OF THIS ARTICLE, THE DIRECTORS AND OFFI-
CERS OF THE REORGANIZING INSURER SHALL SERVE AS DIRECTORS AND OFFICERS
OF THE REORGANIZED INSURER, ANY INTERMEDIATE STOCK HOLDING COMPANY AND
THE MUTUAL HOLDING COMPANY UNTIL NEW DIRECTORS AND OFFICERS HAVE BEEN
DULY ELECTED AND QUALIFIED PURSUANT TO THE CHARTER OR CERTIFICATE OF
INCORPORATION AND THE BY-LAWS OF THE RESPECTIVE COMPANIES.
§ 8113. NOTICE OF PROPOSED REORGANIZATION. (A) IN ADDITION TO THE
NOTICES GIVEN PURSUANT TO SECTION EIGHT THOUSAND ONE HUNDRED EIGHT OF
THIS ARTICLE, THE REORGANIZING INSURER SHALL GIVE WRITTEN NOTICE OF THE
PENDENCY OF THE PROPOSED REORGANIZATION AND OF THE EFFECT THEREOF TO ALL
PERSONS WHO ARE NOT ELIGIBLE MEMBERS TO WHOM THE REORGANIZING INSURER
DELIVERS POLICIES OR CONTRACTS THAT ARE ISSUED AFTER THE ADOPTION DATE
AND BEFORE THE PLAN TAKES EFFECT OR IS WITHDRAWN, SENT BY MAIL OR ELEC-
TRONIC TRANSMISSION TO THE LAST KNOWN MAILING OR ELECTRONIC ADDRESSES OF
SUCH PERSONS AS SHOWN ON THE RECORDS OF THE REORGANIZING INSURER.
(B) NEITHER THE RECEIPT OF SUCH POLICY OR CONTRACT NOR THE RIGHT TO
RECEIVE SUCH NOTICE SHALL ENTITLE SUCH PERSONS TO VOTE ON THE PROPOSED
PLAN OF REORGANIZATION PURSUANT TO SECTION EIGHT THOUSAND ONE HUNDRED
EIGHT OF THIS ARTICLE OR VEST SUCH PERSONS WITH ANY OTHER RIGHTS OR
ENTITLEMENTS EXCEPT AS PROVIDED FOR IN THIS ARTICLE.
(C) WHERE, PRIOR TO THE ISSUANCE OF A POLICY OR CONTRACT, THE REORGAN-
IZING INSURER PROVIDES THE PROSPECTIVE POLICYHOLDERS WITH NOTICE OF THE
PENDENCY OF THE PROPOSED REORGANIZATION AND OF THE EFFECT THEREOF, WHICH
NOTICE HAS BEEN APPROVED FOR SUCH PURPOSE BY THE SUPERINTENDENT, THEN,
UNLESS THE LAWS OF THE POLICYHOLDER'S DOMICILIARY STATE OTHERWISE
REQUIRE, SUCH POLICYHOLDERS SHALL NOT HAVE THE FOREGOING RIGHTS OF
RESCISSION AND REFUND.
§ 8114. FAILURE TO GIVE NOTICE. IF THE REORGANIZING INSURER COMPLIES
SUBSTANTIALLY AND IN GOOD FAITH WITH THE REQUIREMENTS OF THIS ARTICLE
S. 9021 9
WITH RESPECT TO THE GIVING OF ANY REQUIRED NOTICE, ITS FAILURE IN ANY
CASE TO GIVE SUCH NOTICE TO ANY PERSON OR PERSONS ENTITLED THERETO SHALL
NOT IMPAIR THE VALIDITY OF THE ACTIONS AND PROCEEDINGS TAKEN UNDER THIS
ARTICLE OR ENTITLE SUCH PERSON TO ANY INJUNCTIVE OR OTHER EQUITABLE
RELIEF WITH RESPECT THERETO, NOR SHALL SUCH PERSON HAVE ANY CLAIM FOR
DAMAGES DUE TO SUCH FAILURE.
§ 8115. LIMITATIONS OF ACTIONS; SECURITY. (A) NOTWITHSTANDING ANY
OTHER PROVISION OF LAW TO THE CONTRARY AND EXCEPT AS OTHERWISE PROVIDED
IN SUBSECTION (C) OR (D) OF THIS SECTION, ACTIONS CONCERNING OR ARISING
OUT OF ANY PLAN OF REORGANIZATION, PROPOSED PLAN OF REORGANIZATION, PLAN
AMENDMENT OR PROPOSED PLAN AMENDMENT UNDER THIS ARTICLE OR ANY ACTS
TAKEN OR PROPOSED TO BE TAKEN UNDER THIS ARTICLE SHALL BE COMMENCED
WITHIN EIGHTEEN MONTHS AFTER THE PLAN OF REORGANIZATION OR PLAN AMEND-
MENT IS FILED PURSUANT TO SUBSECTION (A) OF SECTION EIGHT THOUSAND ONE
HUNDRED NINE OF THIS ARTICLE OR THE CHARTER IS FILED PURSUANT TO
SUBSECTION (C) OF SECTION EIGHT THOUSAND ONE HUNDRED SEVENTEEN OF THIS
ARTICLE, AS THE CASE MAY BE, IN THE OFFICE OF THE SUPERINTENDENT OR ONE
YEAR FROM THE EFFECTIVE DATE OF THE PLAN OF REORGANIZATION, WHICHEVER IS
LATER, OR IF THE PLAN OF REORGANIZATION OR PLAN AMENDMENT IS WITHDRAWN,
WITHIN ONE YEAR FROM THE DATE THE BOARD OF DIRECTORS APPROVES A RESOL-
UTION TO WITHDRAW THE PLAN. WHERE AN ACTION CONCERNS OR ARISES OUT OF A
PLAN AMENDMENT OR PROPOSED PLAN AMENDMENT MADE UNDER SECTION EIGHT THOU-
SAND ONE HUNDRED FIVE OF THIS ARTICLE, THE APPLICABLE TIME PERIOD IS
MEASURED FROM THE FILING, EFFECTIVE DATE OR APPROVAL OF WITHDRAWAL OF
THE PLAN AMENDMENT, AS THE CASE MAY BE. WHERE THE ACTION ARISES OUT OF
EITHER A TRANSFER OF SUBSIDIARIES PURSUANT TO SECTION EIGHT THOUSAND ONE
HUNDRED TWENTY OF THIS ARTICLE OR A SALE OF SECURITIES OF THE REORGAN-
IZED INSURER OR ANY STOCK HOLDING COMPANY PURSUANT TO SECTION EIGHT
THOUSAND ONE HUNDRED EIGHTEEN OF THIS ARTICLE, WHICH TRANSFER OR SALE IS
NOT CONTEMPLATED BY THE PLAN, THEN THE APPLICABLE TIME PERIOD SHALL BE
MEASURED FROM THE EFFECTIVE DATE OF SUCH TRANSFER OR SALE, AS THE CASE
MAY BE. WHERE THE ACTION CONCERNS OR ARISES OUT OF A PLAN OF REORGANIZA-
TION ADOPTED PURSUANT TO SECTION EIGHT THOUSAND ONE HUNDRED NINETEEN OF
THIS ARTICLE, THEN THE APPLICABLE TIME PERIOD SHALL BE MEASURED FROM THE
EFFECTIVE DATE OF THE PLAN OF REORGANIZATION.
(B) IN ANY ACTION REFERRED TO IN SUBSECTION (A) OF THIS SECTION, THE
PLAINTIFF OR PLAINTIFFS SHALL BE REQUIRED, UPON A MOTION OF THE MUTUAL
HOLDING COMPANY, REORGANIZING INSURER OR REORGANIZED INSURER OR ANY
INTERMEDIATE STOCK HOLDING COMPANY WHICH ESTABLISHES TO THE SATISFACTION
OF THE COURT, THAT A SUBSTANTIAL LIKELIHOOD EXISTS THAT SUCH ACTION IS
BROUGHT WITHOUT MERIT AND WITH AN INTENTION TO DELAY OR HARASS, TO GIVE
ADEQUATE SECURITY FOR THE DAMAGES AND REASONABLE EXPENSES, INCLUDING
ATTORNEYS' FEES, WHICH MAY BE INCURRED AS A RESULT OF, OR IN CONNECTION
WITH, SUCH ACTION BY SUCH COMPANY AND BY ANY OTHER DEFENDANTS IN SUCH
ACTION OR FOR WHICH SUCH COMPANY MAY BECOME LIABLE, TO WHICH SECURITY
THE MUTUAL HOLDING COMPANY, REORGANIZING INSURER OR REORGANIZED INSURER
OR ANY STOCK HOLDING COMPANY SHALL HAVE RECOURSE IN SUCH AMOUNT AS THE
COURT DETERMINES UPON THE TERMINATION OF SUCH ACTION. THE AMOUNT OF
SECURITY MAY FROM TIME TO TIME BE INCREASED OR DECREASED IN THE
DISCRETION OF THE COURT UPON A SHOWING THAT THE SECURITY PROVIDED HAS OR
MAY BECOME INADEQUATE OR EXCESSIVE.
(C) NOTWITHSTANDING ANY OTHER PROVISION OF LAW TO THE CONTRARY, ANY
ACTION SEEKING A STAY, RESTRAINING ORDER, INJUNCTION OR SIMILAR REMEDY
TO PREVENT OR DELAY THE CLOSING OF ANY TRANSACTION PURSUANT TO THIS
ARTICLE OR OF ANY TRANSACTION DESCRIBED IN THE PLAN OF REORGANIZATION
S. 9021 10
MUST BE COMMENCED WITHIN THE EARLIER OF ONE HUNDRED TWENTY DAYS AFTER,
AS APPLICABLE:
(1) THE APPROVAL OF A PLAN OF REORGANIZATION BY THE SUPERINTENDENT
PURSUANT TO SECTION EIGHT THOUSAND ONE HUNDRED SEVEN OR EIGHT THOUSAND
ONE HUNDRED NINETEEN OF THIS ARTICLE, AS THE CASE MAY BE; OR
(2) THE APPROVAL OF THE SUPERINTENDENT PURSUANT TO SECTION EIGHT THOU-
SAND ONE HUNDRED TWENTY OF THIS ARTICLE.
(D) ANY ACTION OR PROCEEDING AGAINST THE SUPERINTENDENT OR ANY OTHER
GOVERNMENTAL BODY OR OFFICER IN CONNECTION WITH ANY ACT TAKEN OR ORDER,
REGULATION OR RULE ISSUED PURSUANT TO THIS ARTICLE SHALL BE COMMENCED
WITHIN ONE HUNDRED TWENTY DAYS FROM THE DATE OF SUCH ACT OR SIGNING OF
SUCH ORDER, REGULATION OR RULE.
(E) ANY PERSON AGGRIEVED BY ANY ACT TAKEN OR ORDER, REGULATION OR RULE
ISSUED PURSUANT TO THIS ARTICLE MAY PETITION FOR JUDICIAL REVIEW IN THE
MANNER PROVIDED BY ARTICLE SEVENTY-EIGHT OF THE CIVIL PRACTICE LAW AND
RULES, PURSUANT TO THE LIMITATIONS PERIOD PRESCRIBED IN SUBSECTION (D)
OF THIS SECTION. THE PETITION SHALL BE BROUGHT IN THE JUDICIAL DEPART-
MENT EMBRACING THE COUNTY WHEREIN THE ACT WAS TAKEN, OR THE ORDER, REGU-
LATION OR RULE WAS ISSUED. ALL SUCH PROCEEDINGS SHALL BE HEARD AND
DETERMINED AS EXPEDITIOUSLY AS POSSIBLE AND WITH LAWFUL PRECEDENCE OVER
OTHER MATTERS. ACTS TAKEN OR ORDERS, REGULATIONS OR RULES ISSUED PURSU-
ANT TO THIS ARTICLE SHALL NOT BE STAYED OR ENJOINED EXCEPT UPON APPLICA-
TION AFTER NOTICE TO THE SUPERINTENDENT AND TO THE ATTORNEY GENERAL AND
UPON A SHOWING THAT THE PETITIONER HAS A SUBSTANTIAL LIKELIHOOD OF
SUCCESS AND WILL SUFFER IRREPARABLE HARM IF THE STAY OR INJUNCTION IS
NOT GRANTED.
§ 8116. PROHIBITED TRANSACTIONS BY OFFICERS, DIRECTORS AND EMPLOYEES.
NO DIRECTOR, OFFICER, AGENT OR EMPLOYEE OF THE REORGANIZING INSURER
SHALL RECEIVE ANY FEE, COMMISSION OR OTHER VALUABLE CONSIDERATION WHAT-
SOEVER, OTHER THAN REGULAR SALARY AND COMPENSATION, FOR IN ANY MANNER
AIDING, PROMOTING OR ASSISTING IN THE REORGANIZATION EXCEPT AS SET FORTH
IN THE PLAN APPROVED BY THE SUPERINTENDENT.
§ 8117. REQUIREMENTS APPLICABLE TO A MUTUAL HOLDING COMPANY. (A) THE
FOLLOWING PROVISIONS OF THIS ARTICLE ARE APPLICABLE TO A MUTUAL HOLDING
COMPANY:
(1) THE FOLLOWING PROVISIONS OF ARTICLE TWELVE OF THIS CHAPTER SHALL
APPLY TO A MUTUAL HOLDING COMPANY AS THOUGH IT WERE A DOMESTIC MUTUAL
INSURER: SECTION ONE THOUSAND TWO HUNDRED ONE OF THIS CHAPTER TO THE
EXTENT PROVIDED IN SUBSECTION (C) OF THIS SECTION AND SECTIONS ONE THOU-
SAND TWO HUNDRED TWO, ONE THOUSAND TWO HUNDRED SIX, ONE THOUSAND TWO
HUNDRED EIGHT, ONE THOUSAND TWO HUNDRED NINE, ONE THOUSAND TWO HUNDRED
TWELVE, AND ONE THOUSAND TWO HUNDRED FIFTEEN THROUGH ONE THOUSAND TWO
HUNDRED NINETEEN OF THIS CHAPTER;
(2) THE PROVISIONS OF THE BUSINESS CORPORATION LAW THAT ARE APPLICABLE
TO A DOMESTIC MUTUAL PROPERTY/CASUALTY INSURER SHALL APPLY TO A MUTUAL
HOLDING COMPANY AS THOUGH IT WERE A DOMESTIC MUTUAL INSURER; AND
(3) THE PROVISIONS OF SECTION FOUR THOUSAND ONE HUNDRED SIXTEEN OF
THIS CHAPTER APPLICABLE TO A DOMESTIC MUTUAL PROPERTY/CASUALTY INSURER
SHALL BE APPLIED TO A MUTUAL HOLDING COMPANY AS THOUGH ITS MEMBERS WERE
VOTING POLICYHOLDERS OF A MUTUAL PROPERTY/CASUALTY INSURER.
(B) A MUTUAL HOLDING COMPANY SHALL NOT DISSOLVE, LIQUIDATE OR WIND UP
AND DISSOLVE EXCEPT THROUGH PROCEEDINGS UNDER SECTION EIGHT THOUSAND ONE
HUNDRED NINETEEN OF THIS ARTICLE, ARTICLE SEVEN THOUSAND FOUR OF THIS
CHAPTER FOR THE LIQUIDATION OR DISSOLUTION OF THE REORGANIZED INSURER OR
AS THE SUPERINTENDENT MAY OTHERWISE APPROVE. IN THE EVENT ANY
PROCEEDINGS ARE INSTITUTED UNDER ARTICLE SEVEN THOUSAND FOUR OF THIS
S. 9021 11
CHAPTER FOR THE COMPLETE LIQUIDATION OF REORGANIZED INSURER PURSUANT TO
THIS ARTICLE:
(1) THE MUTUAL HOLDING COMPANY FORMED AS PART OF SUCH REORGANIZATION
SHALL AUTOMATICALLY BECOME A PARTY TO SUCH PROCEEDINGS;
(2) ALL OF THE MUTUAL HOLDING COMPANY'S ASSETS, INCLUDING ITS HOLDINGS
OF SHARES IN THE REORGANIZED INSURER OR ANY INTERMEDIATE STOCK HOLDING
COMPANY, SHALL BE DEEMED ASSETS OF THE ESTATE OF THE DOMESTIC STOCK
PROPERTY/CASUALTY INSURER TO THE EXTENT NECESSARY TO SATISFY CLAIMS OF
PERSONS WHO HAVE CLASS ONE, CLASS TWO, CLASS THREE OR CLASS FOUR CLAIMS
UNDER SUBSECTION (A) OF SECTION SEVEN THOUSAND FOUR HUNDRED THIRTY-FIVE
OF THIS CHAPTER WITH RESPECT TO SUCH DOMESTIC STOCK PROPERTY/CASUALTY
INSURER; AND
(3) MEMBERS OF THE MUTUAL HOLDING COMPANY SHALL BE DEEMED TO HOLD
CLASS SEVEN CLAIMS WITH RESPECT TO THE MUTUAL HOLDING COMPANY UNDER
SUBSECTION (A) OF SECTION SEVEN THOUSAND FOUR HUNDRED THIRTY-FOUR OF
THIS CHAPTER.
(C) THE CHARTER OF THE MUTUAL HOLDING COMPANY SHALL BE FILED WITH THE
SUPERINTENDENT AND SHALL CONTAIN THE MATTERS REQUIRED TO BE CONTAINED IN
THE CHARTER OF A DOMESTIC MUTUAL PROPERTY/CASUALTY INSURER BY SECTION
ONE THOUSAND TWO HUNDRED ONE OF THIS CHAPTER, EXCEPT THAT THE NAME OF
THE MUTUAL HOLDING COMPANY SHALL CONTAIN THE WORD "MUTUAL" AND SHALL NOT
CONTAIN THE WORD "INSURANCE", "ASSURANCE" AND THE COMPANY'S POWERS SHALL
NOT INCLUDE DOING AN INSURANCE BUSINESS. THE CHARTER SHALL CONTAIN
PROVISIONS STATING THAT:
(1) IT IS A MUTUAL HOLDING COMPANY ORGANIZED UNDER THIS ARTICLE;
(2) ITS PURPOSE SHALL BE TO HOLD, DIRECTLY OR THROUGH ONE OR MORE
INTERMEDIATE STOCK HOLDING COMPANIES, GREATER THAN FIFTY PERCENT OF THE
VOTING STOCK OF A REORGANIZED INSURER;
(3) IT SHALL NOT BE AUTHORIZED TO ISSUE VOTING STOCK;
(4) IT SHALL NOT BE AUTHORIZED TO CONDUCT ANY BUSINESS OTHER THAN THAT
OF A MUTUAL HOLDING COMPANY, EXCEPT FOR THE ACQUISITION, OWNERSHIP,
MANAGEMENT AND DISPOSITION OF ITS ASSETS AND ALL ACTIONS REASONABLY
INCIDENT THERETO; AND
(5) IT SHALL HAVE MEMBERS HAVING THE RIGHTS SPECIFIED IN THIS SECTION
AND SECTION EIGHT THOUSAND ONE HUNDRED TEN OF THIS ARTICLE AND IN ITS
CHARTER AND BY-LAWS. THE CHARTER SHALL ALSO CONTAIN PROVISIONS SETTING
FORTH ANY RIGHTS OF MEMBERS OF THE MUTUAL HOLDING COMPANY IN THE SURPLUS
OF THE MUTUAL HOLDING COMPANY.
(D) AT LEAST TWO-THIRDS OF THE DIRECTORS OF THE MUTUAL HOLDING COMPANY
AND OF ANY INTERMEDIATE STOCK HOLDING COMPANY, ALL OF THE MEMBERS OF THE
COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS OF THE MUTUAL HOLDING
COMPANY AND OF ANY INTERMEDIATE STOCK HOLDING COMPANY, AT LEAST TWO-
THIRDS OF THE MEMBERS OF ANY COMMITTEE RESPONSIBLE FOR MAKING DECISIONS
AFFECTING THE CAPITAL STRUCTURE OR MERGERS AND ACQUISITIONS, AND A
MAJORITY OF THE DIRECTORS ON EACH OTHER COMMITTEE OF THE BOARD OF DIREC-
TORS OF THE MUTUAL HOLDING COMPANY AND ANY STOCK HOLDING COMPANY SHALL
BE OUTSIDE DIRECTORS. THE AGGREGATE PERCENTAGE OF VOTING SECURITIES OF
THE REORGANIZED INSURER DIRECTLY OR INDIRECTLY OWNED, CONTROLLED OR HELD
WITH THE POWER TO VOTE, EITHER PERSONALLY OR BY PERSONS (OTHER THAN THE
MUTUAL HOLDING COMPANY AND ANY INTERMEDIATE STOCK HOLDING COMPANY) OF
WHICH THEY ARE DIRECTORS, OFFICERS OR EMPLOYEES, BY OUTSIDE DIRECTORS,
SHALL NOT EXCEED THREE PERCENT OR SUCH LESSER PERCENTAGE AS MAY BE
DETERMINED BY THE SUPERINTENDENT IN HIS OR HER APPROVAL OF THE MUTUAL
HOLDING COMPANY'S PLAN OF REORGANIZATION PURSUANT TO THIS ARTICLE. THE
BY-LAWS OF THE MUTUAL HOLDING COMPANY AND ANY INTERMEDIATE STOCK HOLDING
COMPANY SHALL PROVIDE THAT THE AFFIRMATIVE VOTE OF AT LEAST TWO-THIRDS
S. 9021 12
OF THE BOARD OF DIRECTORS OF SUCH COMPANY SHALL BE REQUIRED FOR ANY
ACTION BY SUCH COMPANY TO ADOPT A PLAN OF CONVERSION PURSUANT TO SECTION
EIGHT THOUSAND ONE HUNDRED NINETEEN OF THIS ARTICLE, ENTER INTO A MERG-
ER, CONDUCT A PUBLIC OFFERING OR AUTHORIZE THE ISSUANCE OF ANY VOTING
STOCK OR SECURITY CONVERTIBLE INTO VOTING STOCK OF THE REORGANIZED
INSURER OR THE STOCK HOLDING COMPANY TO ANY PERSON OTHER THAN THE MUTUAL
HOLDING COMPANY OR THE STOCK HOLDING COMPANY.
(E) THE SUPERINTENDENT MAY, BY REGULATION, REQUIRE A MUTUAL HOLDING
COMPANY TO FILE ANNUAL STATEMENTS WITH THE SUPERINTENDENT IN SUCH FORM
AS THE SUPERINTENDENT SHALL PRESCRIBE.
(F) WITH THE WRITTEN APPROVAL OF THE SUPERINTENDENT, AND SUBJECT TO
THE CONDITIONS THAT THE SUPERINTENDENT MAY IMPOSE, A MUTUAL HOLDING
COMPANY OR STOCK COMPANY MAY:
(1) MERGE OR CONSOLIDATE WITH, OR ACQUIRE THE ASSETS OF, A MUTUAL
HOLDING COMPANY ORGANIZED PURSUANT TO THIS ARTICLE OR PURSUANT TO THE
LAWS OF ANOTHER STATE;
(2) EITHER ALONE OR TOGETHER WITH ONE OR MORE OF THE REORGANIZED
INSURER, ANY INTERMEDIATE STOCK HOLDING COMPANIES OR ANY SUBSIDIARIES OF
ANY OF THEM, MERGE OR CONSOLIDATE WITH OR ACQUIRE THE ASSETS OF A MUTUAL
PROPERTY/CASUALTY INSURER;
(3) MERGE OR CONSOLIDATE WITH ANY OTHER PERSON.
(G) A MUTUAL HOLDING COMPANY OR ANY INTERMEDIATE STOCK HOLDING COMPANY
MAY ALSO ACQUIRE THE CAPITAL STOCK OR ASSETS OF OTHER PERSONS.
(H) A MEMBER OF A MUTUAL HOLDING COMPANY IS NOT, AS A MEMBER,
PERSONALLY LIABLE FOR THE ACTS, DEBTS, LIABILITIES OR OBLIGATIONS OF THE
COMPANY. NO ASSESSMENT OF ANY KIND MAY BE IMPOSED UPON THE MEMBERS OF A
MUTUAL HOLDING COMPANY BY THE BOARD OF DIRECTORS, MEMBERS OR CREDITORS
OF THE MUTUAL HOLDING COMPANY OR BECAUSE OF ANY LIABILITY OF ANY COMPANY
OWNED OR CONTROLLED, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, BY THE
MUTUAL HOLDING COMPANY OR BECAUSE OF ANY ACT, DEBT OR LIABILITY OF THE
MUTUAL HOLDING COMPANY.
(I) A MEMBERSHIP INTEREST IN A MUTUAL HOLDING COMPANY SHALL NOT
CONSTITUTE A SECURITY UNDER THE LAWS OF THIS STATE.
(J) THE SUPERINTENDENT SHALL RETAIN JURISDICTION OVER ANY MUTUAL HOLD-
ING COMPANY ORGANIZED PURSUANT TO THIS ARTICLE.
(K) DIRECTORS OF THE MUTUAL HOLDING COMPANY SHALL BE ELECTED BY A
MAJORITY VOTE OF ALL MEMBERS WHO VOTE IN SUCH ELECTION IN PERSON OR BY
PROXY OR AS SET FORTH IN THE BY-LAWS OF THE MUTUAL HOLDING COMPANY. IF
THE REORGANIZED INSURER TAKES ANY ACTION OTHER THAN ELECTION OF ITS
DIRECTORS THAT WOULD REQUIRE A VOTE OF POLICYHOLDERS IF THE REORGANIZED
INSURER WERE A MUTUAL PROPERTY/CASUALTY INSURER, THEN SUCH ACTION SHALL
REQUIRE A VOTE OF MEMBERS OF THE MUTUAL HOLDING COMPANY.
§ 8118. OTHER REQUIREMENTS APPLICABLE TO AN INTERMEDIATE STOCK HOLDING
COMPANY AND A MUTUAL HOLDING COMPANY. (A) FROM AND AFTER THE EFFECTIVE
DATE, THE MUTUAL HOLDING COMPANY SHALL HOLD, DIRECTLY OR THROUGH ONE OR
MORE STOCK HOLDING COMPANIES, MORE THAN FIFTY PERCENT OF THE ISSUED AND
OUTSTANDING VOTING STOCK OF THE REORGANIZED INSURER. FOR PURPOSES OF THE
VOTING STOCK OWNERSHIP REQUIREMENT UNDER THIS SUBSECTION, ANY ISSUED AND
OUTSTANDING SECURITIES OF THE REORGANIZED INSURER OR ANY STOCK HOLDING
COMPANY THAT ARE CONVERTIBLE INTO VOTING STOCK SHALL BE CONSIDERED
ISSUED AND OUTSTANDING VOTING STOCK.
(B) A MUTUAL HOLDING COMPANY AND ANY INTERMEDIATE STOCK HOLDING COMPA-
NY SHALL EACH BE DEEMED TO BE A "HOLDING COMPANY" OF THE REORGANIZED
INSURER WITHIN THE MEANING OF ARTICLE FIFTEEN OF THIS CHAPTER, AND ALL
PROVISIONS OF ARTICLE FIFTEEN OF THIS CHAPTER SHALL APPLY TO TRANS-
ACTIONS OCCURRING BETWEEN THE MUTUAL HOLDING COMPANY, THE STOCK HOLDING
S. 9021 13
COMPANY AND THE REORGANIZED INSURER. APPROVAL OF THE PLAN OF REORGANIZA-
TION BY THE SUPERINTENDENT PURSUANT TO THIS ARTICLE SHALL CONSTITUTE
APPROVAL OF THE ACQUISITION OF CONTROL BY A MUTUAL HOLDING COMPANY AND
ANY STOCK HOLDING COMPANY UNDER SECTION ONE THOUSAND FIVE HUNDRED SIX OF
THIS CHAPTER, THE REGISTRATION BY THE REORGANIZED INSURER AS A
CONTROLLED INSURER UNDER SECTION ONE THOUSAND FIVE HUNDRED THREE OF THIS
CHAPTER AND NOTICE OF THE ACQUISITION OF SHARES OF THE REORGANIZED
INSURER UNDER SECTION FOUR THOUSAND TWO HUNDRED THREE OF THIS CHAPTER.
(C) OUTSIDE DIRECTORS OF THE MUTUAL HOLDING COMPANY, AN INTERMEDIATE
STOCK HOLDING COMPANY OR THE REORGANIZED INSURER SHALL NOT OWN BENEFI-
CIALLY, IN THE AGGREGATE, MORE THAN THREE PERCENT OF THE VOTING STOCK OF
THE STOCK HOLDING COMPANY OR THE REORGANIZED INSURER.
(D) ANY ISSUANCE OF VOTING STOCK OR SECURITIES CONVERTIBLE INTO VOTING
STOCK OR OPTIONS FOR THE PURCHASE OF VOTING STOCK OF THE REORGANIZED
INSURER OR THE STOCK HOLDING COMPANY PRIOR TO AN INITIAL PUBLIC OFFER-
ING, PRIVATE EQUITY PLACEMENT, OR THE ISSUANCE OF PUBLIC OR PRIVATE
VOTING STOCK OR SECURITIES CONVERTIBLE INTO VOTING STOCK OF THE REORGAN-
IZED INSURER OR STOCK HOLDING COMPANY OR ANY OTHER TYPE OF CAPITAL
RAISED SHALL BE SUBJECT TO THE APPROVAL OF THE SUPERINTENDENT AS TO THE
PROPOSED VALUATION OF SUCH STOCK OR SECURITIES, THE SUPERINTENDENT MAY
IMPOSE CONDITIONS UPON SUCH APPROVAL, AND ALL EXPENSES OF THE SUPER-
INTENDENT'S REVIEW, INCLUDING WITHOUT LIMITATION THOSE OF OUTSIDE
CONSULTANTS IN REVIEWING SUCH PROPOSED VALUATION, SHALL BE BORNE BY THE
ISSUING COMPANY.
(E) IN THE EVENT OF AN INITIAL PUBLIC OFFERING, AN INTERMEDIATE STOCK
HOLDING COMPANY OR REORGANIZED INSURER MAY NOT REPURCHASE CAPITAL STOCK
WITHIN ONE YEAR FOLLOWING THE DATE OF SUCH INITIAL PUBLIC OFFERING,
EXCEPT THAT REPURCHASES OF NO GREATER THAN FIVE PERCENT OF THE OUTSTAND-
ING STOCK MAY BE REPURCHASED DURING THIS ONE-YEAR PERIOD WITHOUT THE
APPROVAL OF THE SUPERINTENDENT.
(F) IN THE EVENT OF ANY VIOLATION OF THIS SECTION, OR OF ANY ACTION
WHICH, IF CONSUMMATED, MIGHT CONSTITUTE SUCH A VIOLATION:
(1) ALL VOTING STOCK OF THE REORGANIZED INSURER, ANY STOCK HOLDING
COMPANY, OR THE REORGANIZED MUTUAL HOLDING COMPANY, ACQUIRED BY ANY
PERSON IN EXCESS OF THE MAXIMUM AMOUNT PERMITTED TO BE ACQUIRED BY SUCH
PERSON PURSUANT TO THIS SUBSECTION SHALL BE DEEMED TO BE NON-VOTING
STOCK; AND
(2) IN ADDITION TO ANY OTHER ENFORCEMENT POWERS OF THE SUPERINTENDENT
UNDER THIS CHAPTER, SUCH VIOLATION OR ACTION MAY BE ENFORCED OR
ENJOINED, AS THE CASE MAY BE, BY APPROPRIATE PROCEEDING COMMENCED ON
BEHALF OF THE REORGANIZED INSURER, ANY STOCK HOLDING COMPANY OR, IF
APPLICABLE, A REORGANIZED MUTUAL HOLDING COMPANY, BY THE REORGANIZED
INSURER, THE STOCK HOLDING COMPANY, THE MUTUAL HOLDING COMPANY OR THE
SUPERINTENDENT, THE ATTORNEY GENERAL, ANY MEMBER OF THE MUTUAL HOLDING
COMPANY OR, IF APPLICABLE, A REORGANIZED MUTUAL HOLDING COMPANY, OR ANY
STOCKHOLDER OF THE REORGANIZED INSURER, ANY STOCK HOLDING COMPANY OR THE
REORGANIZED MUTUAL HOLDING COMPANY IN THE SUPREME COURT IN THE JUDICIAL
DISTRICT IN WHICH THE REORGANIZED INSURER HAS ITS HOME OFFICE OR IN ANY
OTHER COURT HAVING JURISDICTION, AND SUCH COURT MAY ISSUE ANY ORDER,
INJUNCTIVE OR OTHERWISE, IT FINDS NECESSARY TO CURE SUCH VIOLATION OR TO
PREVENT SUCH ACTION.
§ 8119. CONVERSION OF MUTUAL HOLDING COMPANY. (A) A MUTUAL HOLDING
COMPANY MAY REORGANIZE IN ACCORDANCE WITH A PLAN OF REORGANIZATION WHICH
IS FAIR AND EQUITABLE TO THE COMPANY'S MEMBERS AND IS:
(1) ADOPTED BY ACTION OF TWO-THIRDS OF ITS ENTIRE BOARD OF DIRECTORS;
S. 9021 14
(2) APPROVED BY THE SUPERINTENDENT IF FOUND BY THE SUPERINTENDENT TO
BE FAIR AND EQUITABLE TO THE COMPANY'S MEMBERS AFTER A HEARING HELD UPON
NOTICE TO THE COMPANY'S MEMBERS; AND, THEREAFTER,
(3) ADOPTED BY THE AFFIRMATIVE VOTE OF TWO-THIRDS OF ALL VOTES CAST BY
MEMBERS OF THE COMPANY ENTITLED TO VOTE, AFTER NOTICE BEING GIVEN TO ALL
MEMBERS ENTITLED TO VOTE. THE MUTUAL HOLDING COMPANY SHALL GIVE WRITTEN
NOTICE STATING THE DATE, TIME AND PLACE FOR VOTING ON SUCH PROPOSAL TO
MEMBERS ENTITLED TO NOTICE OF AND TO VOTE ON THE PROPOSAL IN ACCORDANCE
WITH THIS SECTION, SENT BY MAIL OR ELECTRONIC TRANSMISSION TO THE LAST
KNOWN MAILING OR ELECTRONIC ADDRESSES OF SUCH POLICYHOLDERS AS SHOWN ON
THE RECORDS OF THE MUTUAL HOLDING COMPANY. SUCH NOTICE SHALL BE SENT AT
LEAST FORTY-FIVE DAYS BEFORE THE DATE OF THE PROPOSED VOTE TO APPROVE
THE PLAN OF REORGANIZATION. SUCH NOTICE MAY BE COMBINED WITH NOTICE OF
THE HEARING REQUIRED BY PARAGRAPH TWO OF THIS SUBSECTION. SUCH NOTICE
SHALL BE PRECEDED OR ACCOMPANIED BY A TRUE AND CORRECT COPY OF THE PLAN,
OR BY A SUMMARY THEREOF APPROVED BY THE SUPERINTENDENT, AND SUCH OTHER
EXPLANATORY INFORMATION AS THE SUPERINTENDENT SHALL APPROVE OR REQUIRE.
(B) A PLAN OF REORGANIZATION PURSUANT TO SUBSECTION (A) OF THIS
SECTION SHALL PROVIDE FOR THE MEMBERSHIP INTERESTS IN THE MUTUAL HOLDING
COMPANY BEING EXTINGUISHED AND MAY PROVIDE EITHER FOR:
(1) THE CONVERSION OF THE MUTUAL HOLDING COMPANY INTO A STOCK CORPO-
RATION, IN WHICH EVENT CONSIDERATION DISTRIBUTED SHALL BE EQUAL TO THAT
REQUIRED UNDER SECTION SEVEN THOUSAND THREE HUNDRED SEVEN OF THIS CHAP-
TER OR SUCH OTHER LAW GOVERNING THE DEMUTUALIZATION OF MUTUAL
PROPERTY/CASUALTY INSURERS AS MAY THEN BE IN EFFECT; OR
(2) THE DISTRIBUTION TO ELIGIBLE MEMBERS OF THE MUTUAL HOLDING COMPANY
OF CONSIDERATION CONSISTING OF ALL ASSETS OF THE MUTUAL HOLDING COMPANY
INCLUDING ALL STOCK OF THE REORGANIZED INSURER OR ANY STOCK HOLDING
COMPANY OWNED BY THE MUTUAL HOLDING COMPANY, OR OTHER CONSIDERATION
HAVING EQUIVALENT AGGREGATE VALUE, WHICH MAY BE IN THE FORM OF CASH,
SECURITIES OF ANY INSTITUTION, ADDITIONAL INSURANCE OR ANNUITY BENEFITS
OR POLICY CREDITS, DIVIDENDS OR OTHER CONSIDERATION, ALL SUCH CONSIDER-
ATION BEING ALLOCATED AMONG ELIGIBLE MEMBERS OF THE MUTUAL HOLDING
COMPANY IN A MANNER THAT IS FAIR AND EQUITABLE TO THE COMPANY'S MEMBERS.
§ 8120. TRANSFERS OF SUBSIDIARIES. A REORGANIZING OR REORGANIZED
INSURER MAY TRANSFER ANY ONE OR MORE OF ITS SUBSIDIARIES TO THE MUTUAL
HOLDING COMPANY OR TO ONE OR MORE PERSONS OWNED OR CONTROLLED BY THE
MUTUAL HOLDING COMPANY, PROVIDED THE REORGANIZING OR REORGANIZED INSURER
OBTAINS THE PRIOR APPROVAL OF THE SUPERINTENDENT. ANY SUCH TRANSFER MAY
BE MADE WITHOUT CONSIDERATION AS A DIVIDEND OR FOR CONSIDERATION THAT
MAY INCLUDE OBLIGATIONS OF THE MUTUAL HOLDING COMPANY OR OBLIGATIONS OR
PREFERRED SHARES OF A PERSON OWNED OR CONTROLLED BY THE MUTUAL HOLDING
COMPANY. THE SUPERINTENDENT SHALL APPROVE EACH SUCH PROPOSED TRANSFER IF
THE SUPERINTENDENT FINDS IT IS FAIR AND EQUITABLE. FOR A REORGANIZING
INSURER, THE PLAN MAY PROVIDE FOR SUCH TRANSFER, IN WHICH CASE APPROVAL
OF THE PLAN SHALL CONSTITUTE APPROVAL BY THE SUPERINTENDENT PURSUANT TO
THIS SECTION. THE PROVISIONS OF SECTION ONE THOUSAND FIVE HUNDRED FIVE
OF THIS CHAPTER SHALL NOT APPLY TO ANY TRANSFER OF SUBSIDIARIES AFFECTED
PURSUANT TO THIS SECTION BUT SHALL OTHERWISE APPLY TO THE REORGANIZED
INSURER AND ITS AFFILIATES IN ACCORDANCE WITH THEIR TERMS. FOR A REOR-
GANIZED INSURER, THE OTHER PROVISIONS OF THIS ARTICLE, INCLUDING, WITH-
OUT LIMITATION, THE REQUIREMENT OF FILING A PLAN OF REORGANIZATION,
SHALL NOT APPLY TO THE TRANSFER OF SUBSIDIARIES PURSUANT TO THIS
SECTION.
§ 2. This act shall take effect immediately.
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