Chapter 335
2012 -- S 2598 SUBSTITUTE A
Enacted 06/20/12
A N A C T
RELATING TO
INSURANCE --DOMESTIC INSURANCE COMPANIES
Introduced By: Senators Lombardo, and Miller
Date Introduced: March 01, 2012
It is enacted by the General
Assembly as follows:
SECTION 1. Section 27-1-40.1 of the General Laws in Chapter
27-1 entitled "Domestic
Insurance Companies"
is hereby amended to read as follows:
27-1-40.1.
Mutual insurance holding companies. -- (a)(1) Any domestic mutual
insurance company, upon approval of the commissioner, created
under the laws of this state
(whether pursuant to § 7-1-5
or by special act of the general assembly) and any foreign mutual
insurance company which has been domesticated or redomesticated pursuant to Chapter 2.2 of
this title which meets or exceeds all capital and surplus
funds required by law for the transaction
of business in may
reorganize by forming or merging into a mutual insurance holding
company based upon a plan of
reorganization and continuing the corporate existence of the
reorganizing insurance company as a
stock insurance company. The commissioner, after a public
hearing as provided in
general laws subsection 27-35-2(d), if satisfied that the
interests of the policyholders are properly
protected and that the plan of reorganization is fair and
equitable to the policyholders, may
approve the proposed plan of reorganization or may require as
a condition of approval such
modifications of the proposed plan of reorganization as the
commissioner finds necessary for the
protection of the policyholders’ interests. The commissioner may
retain consultants as provided
in
is subject to
commissioner shall retain jurisdiction over a mutual insurance
holding company organized
pursuant to this section to assure that policyholder interests
are protected. reorganize
into a
mutual insurance holding company structure upon adoption of
a
(2) A plan of
reorganization must be approved by two-thirds (2/3) vote of the board of
directors or other governing body, approval of a plan of
reorganization by the director of the
department of business regulation, and the affirmative vote of one
half (1/2) a majority of those
members or policyholders, (subscribers in the case of a
health service corporation) constituting a
quorum, present in person or by proxy at a meeting called by
the board of directors or other
governing body. Unless otherwise provided in its charter,
bylaws or in the plan of reorganization,
each member or policyholder shall have one vote, and in
the case of any policy or contract of
group life or other group insurance, the employer or other
person to whom or in whose name the
master policy or contract has been issued shall be deemed to
be the member or policyholder and
shall be entitled to one vote for each policy or contract
of group insurance irrespective of the
number of individuals insured.
(3) All of the
initial shares of the capital stock of the reorganized insurance company
shall be issued to the mutual insurance holding company.
The membership interests of the
policyholders of the reorganized insurance company shall become
membership interests in the
mutual insurance holding company. Policyholders of the
reorganized insurance company shall be
members of the mutual insurance holding company in accordance
with the articles of
incorporation and bylaws of the mutual insurance holding company.
The mutual insurance
holding company shall at all times own a majority of the
voting shares of the capital stock of the
reorganized insurance company.
(b) A plan of
reorganization of a mutual insurance company into a mutual insurance
holding company structure may provide for the reorganization
to be effected in one of the
following manners:
(1) A domestic mutual
insurance company may form a mutual insurance holding
company in accordance with the provisions of § 7-1-5 except
that the approval of the plan of
reorganization by the director of the department of business regulation
shall be deemed to
constitute the approval of the director of the department of
business regulation required under §
7-1-5. Upon this formation,
the domestic mutual insurance company shall be converted to a stock
insurance company and shall issue to the mutual insurance
holding company all of the authorized
shares of the voting stock of the stock insurance company.
The articles of incorporation and
bylaws of the mutual insurance holding company formed in
this manner shall provide for all then
current policyholders of the converted mutual insurance
company to become members of the
mutual insurance holding company and to retain this
membership interest so long as the
policyholder has a policy in force with the converted mutual
insurance company. The articles of
incorporation and bylaws of the mutual insurance holding company
also shall set forth the terms
and conditions under which future policyholders of the
stock insurance company shall become
members of the mutual insurance holding company. The mutual
insurance holding company at all
times shall retain a majority of the issued and outstanding
shares of each class of voting stock of
the stock insurance company.
(2) A domestic mutual
insurance company may merge its policyholders' membership
interests into a mutual insurance holding company previously
formed under the provisions of this
section. Upon the merger, the domestic mutual insurance
company shall be converted to a stock
insurance company and shall issue to the mutual insurance
holding company all of the authorized
shares of voting stock of the stock insurance company. In
connection with the merger and in
accordance with the articles of incorporation and bylaws of the
mutual insurance holding
company, the then current policyholders of the converted
mutual insurance company shall
become members of the mutual insurance holding company and
shall retain membership interest
so long as the policyholder has a policy in force with
the converted mutual insurance company.
The mutual insurance holding company at all times
shall retain a majority of the issued and
outstanding shares of each class of voting stock of the stock
insurance company.
(4) A merger of
policyholders’ membership interests in a mutual insurance company into
a mutual insurance holding company shall be deemed to
be a merger of insurance companies
pursuant to
(3) A domestic mutual
insurance company may establish a subsidiary stock insurance
company in accordance with the provisions of § 7-1-5
(approval of the plan of reorganization by
the director of the department of business regulation
constituting any approval required under § 7-
1-5) and then transfer to the subsidiary stock
insurance company substantially all of its assets and
liabilities. Upon this transfer, all persons who prior to the
transfer held policy rights with respect
to or other rights as creditors of the mutual insurance
company shall have those rights solely with
respect to the subsidiary stock insurance company created and
the corresponding liability or
obligation of the mutual insurance company to those persons
shall be assumed by the subsidiary
stock insurance company. All policyholders of the mutual
insurance company at the time of the
transfer of assets and liabilities shall continue to have a
membership interest in the mutual
insurance company and the articles of incorporation and bylaws
of the mutual insurance company
shall be amended to provide this. The articles of
incorporation and bylaws of the mutual
insurance company shall also be amended to set forth the terms
and conditions under which
future policyholders of the subsidiary stock insurance
company shall become members of the
mutual insurance company. The mutual insurance company after
this shall be considered a mutual
insurance holding company for the purposes of this section and
at all times shall retain a majority
of the issued and outstanding shares of each class of
voting stock of the subsidiary stock
insurance company.
(b) A foreign mutual
insurance company or a foreign health service corporation, which if
a domestic corporation would be organized under
chapters 19, 20, 20.1, 20.2 or 20.3 of title 27,
may reorganize upon the approval of the commissioner and
in compliance with the requirements
of any law or regulation which is applicable to the
foreign mutual insurance company or foreign
health service corporation by merging its policyholders’ or
subscribers’ membership interests into
a domestic mutual insurance holding company in the same
manner as under subsection (a) above.
(c) The plan of
reorganization shall specify in any detail as may be required by the
director of the department of business regulation the manner
under subsection (b) in which the
mutual holding company structure shall be created, the
capital structure of the stock insurance
company and the mutual insurance holding company, the
management of the stock insurance
company and the mutual insurance holding company, the
purposes for the reorganization, the
articles of incorporation and bylaws of both the mutual
insurance holding company and the stock
insurance company, and the terms of and use of proceeds from
any proposed sale of capital stock
by the stock insurance company. A mutual insurance holding company resulting from
the
reorganization of a domestic mutual insurance company organized
under chapter 1 of title 27
shall be incorporated pursuant to chapter 1 of title 27.
The articles of incorporation and any
amendments to such articles of the mutual insurance holding
company shall be subject to
approval of the commissioner in the same manner as those of an
insurance company.
(d) The corporate
existence of any mutual insurance company reorganizing into a mutual
insurance holding company structure under this section shall
not terminate, but the reorganized
institution shall be deemed to be a continuation of entity of
this reorganized mutual insurance
company. A
mutual insurance holding company is deemed to be an insurer subject to chapters
14.1, 14.2, 14.3 and 14.4 of title 27 and shall
automatically be a party to any proceeding under
chapters 14.3 or 14.4 of title 27 involving an insurance
company which as a result of a
reorganization pursuant to subsection (a) or (b) is a subsidiary of
the mutual insurance holding
company. In any proceeding under chapters 14.3 or 14.4 of
title 27 involving the reorganized
insurance company, the assets of the mutual insurance holding
company are deemed to be assets
of the estate of the reorganized insurance company for
purposes of satisfying the claims of the
reorganized insurance company’s policyholders. A mutual insurance
holding company shall not
dissolve or liquidate without the approval of the commissioner
or as ordered by the superior court
pursuant to chapters 14.3 or 14.4 of title 27.
(e) The director of
the department of business regulation may employ staff personnel as
well as professional consultants and other persons to
assist in the review of the plan of
reorganization and may hold public hearings as, in the director's
discretion, are desirable prior to
granting approval of the plan of reorganization. All
reasonable costs related to the review of the
plan of reorganization, including the costs attributable
to staff personnel and professional
consultants, shall be borne by the mutual insurance company
filing a plan of reorganization for
approval. Section
27-1-40 of the general laws is not applicable to a reorganization or merger
pursuant to this section.
(f) The department of
business regulation shall issue rules and regulations implementing
this section, which shall be administered by the director
of the department of business regulation.
A membership interest in a domestic mutual insurance
holding company shall not constitute a
security as defined in chapter 7-11.
(g)
Subject to applicable provisions of this title, a mutual insurance holding
company
formed pursuant to this section may: (1) invest in the stock
of one or more domestic or foreign
insurance companies; (2) acquire a domestic or foreign
insurance company through consolidation
or merger of the institution with its subsidiary
insurance company; (3) merge with another mutual
insurance holding company; (4) invest in a corporation, the
purchase of the capital stock of which
is permitted for a mutual insurance company under the
laws of this state; (5) exercise any other
power or engage in any activity permitted to a mutual
insurance company organized under the
laws of this state; and (6) exercise the powers and engage
directly or indirectly in those activities
as are now or may after this be permitted for business
corporations under Chapter 1.1 of this title.
The majority of the voting shares of the capital stock
of the reorganized insurance company,
which is required by this section to be at all times owned
by a mutual insurance holding company,
shall not be conveyed, transferred, assigned, pledged,
subjected to a security interest or lien,
encumbered, or otherwise hypothecated or alienated by the mutual
insurance holding company or
intermediate holding company. Any conveyance, transfer,
assignment, pledge, security interest,
lien, encumbrance, or hypothecation or alienation of, in
or on the majority of the voting shares of
the reorganized insurance company which is required by
this section to be at all times owned by a
mutual insurance holding company, is in violation of this
section and shall be void in inverse
chronological order of the date of such conveyance, transfer,
assignment, pledge, security
interest, lien, encumbrance, or hypothecation or alienation,
as to the shares necessary to constitute
a majority of such voting shares. The majority of the
voting shares of the capital stock of the
reorganized insurance company which is required by this section
to be at all times owned by a
mutual insurance holding company shall not be subject to
execution and levy. The shares of the
capital stock of the surviving or new company resulting from
a merger or consolidation of two (2)
or more reorganized insurance companies or two (2) or
more intermediate holding companies
which were subsidiaries of the same mutual insurance
holding company are subject to the same
requirements, restrictions, and limitations as provided in this
section to which the shares of the
merging or consolidating reorganized insurance companies or intermediate
holding companies
were subject by this section prior to the merger or
consolidation.
As used in this
section, “majority of the voting shares of the capital stock of the
reorganized insurance company” means shares of the capital stock
of the reorganized insurance
company which carry the right to cast a majority of the votes
entitled to be cast by all of the
outstanding shares of the capital stock of the reorganized
insurance company for the election of
directors and on all other matters submitted to a vote of the
shareholders of the reorganized
insurance company. The ownership of a majority of the voting
shares of the capital stock of the
reorganized insurance company which are required by this section
to be at all times owned by a
parent mutual insurance holding company includes indirect
ownership through one or more
intermediate holding companies in a corporate structure approved
by the commissioner.
However, indirect ownership through one or more intermediate
holding companies shall not
result in the mutual insurance holding company owning less
than the equivalent of a majority of
the voting shares of the capital stock of the reorganized
insurance company. The commissioner
shall have jurisdiction over an intermediate holding
company as if it were a mutual insurance
holding company. As used in this section, “intermediate
holding company” means a holding
company which is a subsidiary of a mutual insurance holding
company, and which either directly
or through a subsidiary intermediate holding company has
one or more subsidiary reorganized
insurance companies of which a majority of the voting shares of
the capital stock would
otherwise have been required by this section to be at all times
owned by the mutual insurance
holding company.
(h) A mutual
insurance holding company formed pursuant to this section, subsequent to
its formation, shall be subject to the provisions of
Chapter 35 of this title.
SECTION 2. Chapter 27-14.3 of the General Laws entitled
"Insurers' Rehabilitation and
Liquidation Act" is
hereby amended by adding thereto the following section:
27-14.3-22.1.
Grounds for rehabilitation or liquidation of a domestic company that
is a covered financial company under
protection act. – (a)
The provisions of this section apply in accordance
with title II of the federal
Dodd-Frank Wall Street reform and consumer protection
act, P.L. 111--203 with respect to an
insurance company that is a covered financial company, as that
term is defined under 12 U.S.C.
5381.
(b) The commissioner
may file a complaint for an order of rehabilitation or liquidation
pursuant to subdivision (4) of this chapter on any of the
following grounds:
(1) Upon a
determination and notification given by the secretary of the treasury of the
is a financial company satisfying the requirements of 12
U.S.C. 5383(b), and the board of
directors (or body performing similar functions) of the
insurance company acquiesces or consents
to the appointment of a receiver pursuant to 12 U.S.C.
5382 (a) (1) (A) (i) with such consent to be
considered as consent to an order of rehabilitation or
liquidation;
(2) Upon an order of
the United States district court for the
U.S.C. 5382 (a) (1) (A) (iv)
(I) granting the petition of the secretary of the treasury of the United
States concerning the insurance company under 12
U.S.C. 5382(a) (1) (A) (i); or
(3) A petition by the
secretary of the treasury of the
insurance company is granted by operation of law under 12
U.S.C. 5382(a) (1) (A) (v).
(c) Notwithstanding
any other provision of law, after notice to the insurance company,
the receivership court may grant an order on the
complaint for rehabilitation or liquidation within
twenty (24) hours after the filing of a complaint pursuant
to this section.
(d) If the
receivership court does not make a determination on a complaint for
rehabilitation or liquidation filed by the commissioner pursuant to
this section within twenty-four
(24) hours after its filing,
then it shall be deemed granted by operation of law upon the expiration
of the twenty-four (24) hour period. At the time that an
order is deemed granted under this
section, the provisions of chapter 14.3 of title 27 of this
title shall be deemed to be in effect, and
the director shall be deemed to be affirmed as receiver
and have all of the applicable powers
provided by this code, regardless of whether an order has been
entered. The receivership court
shall expeditiously enter an order of rehabilitation or
liquidation that:
(1) Is effective as
of the date that it is deemed granted by operation of law; and
(2) Conforms to the
provisions for rehabilitation or liquidation contained in this chapter,
as applicable.
(e) Any order of rehabilitation
or liquidation made pursuant to this section shall not be
subject to any stay or injunction pending appeal.
(f) Nothing in this
section shall be construed to supersede or impair any other power or
authority of the commissioner or the court under this chapter
or title 27.
SECTION
3. This act shall take effect upon
passage.
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LC01518/SUB A
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