Mutual insurance holding companies. Establishes a
mechanism under which a mutual insurance company (MIC) may
reorganize as a mutual insurance holding company (MIHC). Requires
the MIC to submit a plan of reorganization for approval by the
commissioner of the department of insurance. Requires a public
hearing and notice to members of the MIC regarding the
reorganization. Requires a two-thirds vote in favor of the reorganization
by those members voting. Specifies rules for the operation of the
MIHC, including limits on the issuance and ownership of stock
associated with the MIHC.
November 16, 1999, read first time and referred to Committee on Rules and Legislative
November 16, 1999, reported favorably _ Do Pass.
A BILL FOR AN ACT to amend the Indiana Code concerning
IS AMENDED TO READ AS FOLLOWS
[EFFECTIVE UPON PASSAGE]: Sec. 1. Proceedings under this
article apply to the following:
(1) All insurers who are doing, or who have done, insurance business in Indiana, and against whom claims arising from that business may exist.
(2) All insurers who purport to do insurance business in Indiana.
(3) All insurers who have insureds resident in Indiana.
(4) All other persons organized or in the process of organizing with the intent to do an insurance business in Indiana.
(5) All nonprofit service plans, fraternal benefit societies, and beneficial societies.
(6) All title insurance companies.
(7) All health maintenance organizations under IC 27-13.
(8) All multiple employer welfare arrangements under IC 27-1-34.
(9) All limited service health maintenance organizations under
(10) All mutual insurance holding companies under IC 27-14.
SECTION 2. IC 27-9-2-1 IS AMENDED TO READ AS FOLLOWS [EFFECTIVE UPON PASSAGE]: Sec. 1. (a) Whenever the commissioner has reasonable cause to believe, and determines, after a hearing held under IC 4-21.5-3 , that any domestic insurer has committed or engaged in, or is about to commit or engage in, any act, practice, or transaction that would subject it to a delinquency proceeding under IC 27-9-3-1 or IC 27-9-3-6 , the commissioner may make and serve upon the insurer and any other persons involved, any orders reasonably necessary to correct, eliminate, or remedy that conduct, condition, or ground.
(b) If the commissioner has reasonable cause to believe that any domestic insurer is in such condition as to render the continuance of its business hazardous to the public or to holders of its policies or certificates of insurance, or if that domestic insurer gives its consent, the commissioner shall upon his determination issue an order:
(1) notifying the insurer of his determination; and
(2) providing the insurer with a written list of the commissioner's requirements to correct its business practices.
(c) If the commissioner makes a determination to supervise an insurer subject to an order under subsection (a) or (b), the commissioner shall notify the insurer that it is under the supervision of the commissioner. If the insurer is a reorganized insurer under IC 27-14, the commissioner may also determine to supervise the mutual insurance holding company that is affiliated with the reorganized insurer, regardless of whether another basis exists for supervising the mutual insurance holding company. If the commissioner makes a determination to supervise a mutual insurance holding company, the commissioner shall notify the mutual insurance holding company that it is under the supervision of the commissioner.
(d) During the period of supervision, the commissioner may appoint a supervisor to supervise the insurer. The order appointing a supervisor must direct the supervisor to enforce orders issued under subsection (a) or (b). The order may also provide that the insurer may not do any of the following things, during the period of supervision, without the prior approval of the commissioner or his supervisor:
(1) Dispose of, convey, or encumber any of its assets or its business in force.
(2) Withdraw funds from any of its bank accounts.
(3) Lend any of its funds.
embezzlement from the insurer, wrongful sequestration or
diversion of the insurer's assets, forgery or fraud affecting the
insurer, or other illegal conduct in, by, or with respect to the
insurer that if established would endanger assets in an amount
threatening the solvency of the insurer.
(3) The insurer has failed to remove any person who in fact has executive authority in the insurer, whether an officer, manager, general agent, employee, or other person, if the person has been found after notice and hearing by the commissioner under IC 4-21.5-3 to be dishonest or untrustworthy in a way affecting the insurer's business.
(4) Control of the insurer, whether by stock ownership or otherwise, and whether direct or indirect, is in a person found after notice and hearing under IC 4-21.5-3 to be untrustworthy.
(5) Any person who in fact has executive authority in the insurer, whether an officer, manager, general agent, director or trustee, employee, or other person, has refused to be examined under oath by the commissioner concerning its affairs, whether in Indiana or elsewhere, and after reasonable notice of the fact the insurer has failed promptly and effectively to terminate the employment and status of the person and all his influence on management.
(6) After demand by the commissioner under this article or IC 27-1-3 , the insurer has failed to promptly make available for examination any of its own property, books, accounts, documents, or other records, or those of any subsidiary or related company within the control of the insurer, or those of any person having executive authority in the insurer so far as they concern the insurer.
(7) Without first obtaining the written consent of the commissioner, the insurer has transferred, or attempted to transfer, in a manner contrary to IC 27-1-23 or IC 27-6, substantially all of its entire property or business, or has entered into any transaction the effect of which is to merge, consolidate, or reinsure substantially its entire property or business in or with the property or business of any other person.
(8) The insurer or its property has been or is the subject of an application for the appointment of a receiver, trustee, custodian, conservator, or sequestrator or similar fiduciary of the insurer or its property otherwise than as authorized under this title, and the appointment has been made or is imminent, and the appointment might:
(A) remove the insurer from the jurisdiction of the Indiana
(B) prejudice orderly delinquency proceedings under this article.
(9) Within the previous four (4) years the insurer has willfully violated its charter or articles of incorporation, its bylaws, this title, or any valid order of the commissioner under IC 27-9-2-1.
(10) The insurer has failed to pay within sixty (60) days after the due date any obligation to any state or any political subdivision of any state or any judgment entered in any state, if the court in which the judgment was entered had jurisdiction over the subject matter. However, nonpayment shall not be a ground until sixty (60) days after any good faith effort by the insurer to contest the obligation has been terminated, whether it is before the commissioner or in the courts, or the insurer has systematically attempted to compromise or renegotiate previously agreed settlements with its creditors on the ground that it is financially unable to pay its obligations in full.
(11) The insurer has failed to file its annual report or other financial report required by law and, after written demand by the commissioner, has failed to immediately give an adequate explanation.
(12) The board of directors or the holders of a majority of the shares entitled to vote, or a majority of those individuals entitled to the control of those entities, request or consent to rehabilitation under this article.
(13) The insurer is a mutual insurance holding company under IC 27-14 and a reorganized insurance company that is affiliated with the mutual insurance holding company and is or has been the subject of a petition for an order authorizing the commissioner to rehabilitate the reorganized insurance company under this section or to liquidate the reorganized insurance company under section 6 of this chapter , regardless of whether another basis exists for petitioning for rehabilitation of the mutual insurance holding company.
SECTION 4. IC 27-14 IS ADDED TO THE INDIANA CODE AS A NEW ARTICLE TO READ AS FOLLOWS [EFFECTIVE UPON PASSAGE]:
ARTICLE 14. MUTUAL INSURANCE HOLDING COMPANY LAW
Chapter 1. General Provisions and Definitions
Sec. 1. This article may be referred to as the Indiana mutual insurance holding company law.
Sec. 2. (a) The requirements of this section constitute the "members' protection principle" for purposes of this article.
(b) The MIHC must at all times have the voting power and economic interests required by IC 27-14-5-1.
(c) The aggregate value of the members' interests in an MIHC shall be protected from dilution as a result of sales of stock of a reorganized insurer or stock holding company to persons other than the MIHC through compliance with the requirements of IC 27-14-5-6 , IC 27-14-5-7 , IC 27-14-5-8 , and IC 27-14-6-5.
(d) Dividends paid on participating policies shall be protected as provided by IC 27-14-3-11.
(e) An MIHC, stock holding company, and reorganized insurer must have outside directors as required by IC 27-14-3-5.
(f) The officers and directors of the MIHC and any subsidiary of the MIHC are subject to the restrictions on stock ownership set forth in IC 27-14-5-2 , IC 27-14-5-3 , and IC 27-14-5-9.
Sec. 3. The definitions set forth in this chapter apply throughout this article.
Sec. 4. (a) Subject to subsection (b), "acting in concert" means:
(1) a knowing participation in a joint activity whether or not under an express agreement;
(2) interdependent conscious parallel action toward a common goal under an express agreement or otherwise; or
(3) a combination or pooling of voting interests or other interests in the securities of any person for a common purpose under any contract, understanding, relationship, agreement, or other arrangement, written or otherwise.
(b) An employee benefit plan is acting in concert with:
(1) its trustee; or
(2) a person who serves in a capacity similar to a trustee;
solely for the purpose of determining whether capital stock held by the trustee or the person in a similar capacity and capital stock held by the plan will be aggregated.
Sec. 5. "Adoption date" means, with respect to a plan, the date on which the board of directors approves a plan of reorganization or a plan to issue stock.
Sec. 6. "Affiliate" means a person who, directly or indirectly:
(2) is controlled by; or
(3) is under common control with;
Sec. 7. "Applicant" means, with respect to a plan, a person that has submitted a plan to the commissioner under this article.
Sec. 8. (a) Subject to subsection (b), "associate" means any of the following:
(1) With respect to a particular person, corporation, business entity, or other organization (other than the applicant or an affiliate of the applicant) for which the person is:
(A) an officer;
(B) a partner; or
(C) directly or indirectly the beneficial owner of at least ten percent (10%) of any class of equity securities.
(2) With respect to an individual who is a director or an officer of the applicant or of any of the applicant's affiliates, a:
(A) spouse; or
(B) member of the immediate family sharing the same household.
(3) With respect to a particular person, a trust or other estate in which the person has a substantial beneficial interest or for which the person serves as trustee or in a similar fiduciary capacity.
(b) The term does not apply to a person that:
(1) has a beneficial interest in; or
(2) serves as a trustee or in a similar fiduciary capacity for;
an employee benefit plan.
Sec. 9. "Board" means:
(1) the board of directors of an MIHC, an MIC, a stock holding company, or a reorganized insurer; or
(2) another board or committee that is responsible under the articles or bylaws of the company for decisions involving the structure or management of an MIHC, MIC, stock holding company, or reorganized insurer.
Sec. 10. "Commissioner" refers to the insurance commissioner appointed under IC 27-1-1-2.
Sec. 11. "Company" means any of the following:
(1) An MIC.
(2) An MIHC.
(3) A stock holding company.
(4) A reorganized insurer.
Sec. 12. "Effective date" means, with respect to a plan, the date on which the plan becomes effective under this article.
Sec. 13. "Eligible member" means, with respect to a plan, a person who is a member of an MIC or MIHC, as applicable, on the adoption date of a plan and:
(1) solely for purposes of receipt of notice of and voting at a
meeting of members on a plan of reorganization, continues to
be a member of the MIC on the record date for the meeting of
(2) solely for purposes of eligibility to receive stock subscription rights under a plan to issue stock, continues to be a member of the MIC or MIHC, as applicable, on the date the commissioner approves the plan to issue stock.
Sec. 14. "Employee benefit plan" means an employee benefit plan established by an MIHC or by one (1) or more of the subsidiaries of an MIHC for the sole benefit of its:
(1) employees; or
(2) sales agents.
Sec. 15. "Immediate family" means any child, stepchild, grandchild, parent, stepparent, grandparent, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law, and includes adoptive relationships.
Sec. 16. "Internal Revenue Code" refers to the Internal Revenue Code of 1986, as amended.
Sec. 17. "Member" means a person that, according to the:
(1) records; and
(2) articles of incorporation and bylaws;
of an MIC or MIHC, as applicable, is a member of the MIC or MIHC, as applicable.
Sec. 18. "Member's interest" means
(1) the voting rights of a member provided by law and by the MIC's or MIHC's articles of incorporation and bylaws; and
(2) the right to receive cash, stock, or other consideration in the event of a conversion to a stock company under IC 27-1 through IC 27-13 or a dissolution under IC 27-1-10 , as provided by those laws and by the MIC's or MIHC's articles of incorporation or bylaws.
Sec. 19. "MIC" refers to a mutual insurance company.
Sec. 20. "MIHC" refers to a mutual insurance holding company.
Sec. 21. "Mutual insurance company" or "MIC" means a mutual insurer that is:
(1) submitting; or
(2) subject to;
a plan of reorganization or plan to issue stock under this article.
Sec. 22. "Mutual insurance holding company" or "MIHC" means a mutual insurance holding company established under IC 27-14-2.
Sec. 23. (a) "Outside director" means an individual who:
the kinds of insurance described in
Sec. 30. "Reorganized insurer" means an entity:
(1) that is a domestic stock insurance company that is owned entirely or in part by an MIHC or a stock holding company; and
(2) the policyholders of which may be or are entitled to become members of the MIHC.
Sec. 31. "Stock holding company" means an entity other than a reorganized insurer and its subsidiaries that:
(1) is owned entirely or in part, directly or indirectly, by an MIHC; and
(2) directly or indirectly owns all or part of the capital stock of a reorganized insurer.
Sec. 32. "Subsidiary" means, with respect to a particular person, an affiliate of the person that is controlled by the person, either:
(1) directly; or
(2) indirectly through one (1) or more intermediaries.
Sec. 33. "Voting capital stock" means capital stock whose holder has the right to vote in the election of directors.
Chapter 2. Mutual Insurance Company Reorganization
Sec. 1. (a) A mutual insurance company (MIC) may reorganize under this chapter as a mutual insurance holding company (MIHC) with one (1) or more subsidiaries after the following have occurred:
(1) The favorable vote of its board of directors to reorganize.
(2) The filing of an application with the commissioner.
(3) A notice of a public hearing made to its members and the public.
(4) At least one (1) public hearing conducted by the commissioner.
(5) The approval of the plan by the commissioner.
(6) A favorable vote of the eligible members of the MIC.
(7) The issuance of an order of completion by the commissioner.
(b) The subsidiaries of an MIHC:
(1) must include at least one (1) reorganized insurer;
(2) may include one (1) or more stock holding companies; and
(3) may include one (1) or more stock insurance companies, the policyholders of which are not and do not become members of the MIHC.
Sec. 2. The reorganization of an MIC or two (2) or more MICs into an MIHC structure under this chapter may be accomplished
by any means approved by the commissioner, including the
(1) The establishment of at least one (1) company.
(2) The amendment or restatement of the articles and bylaws of any company.
(3) The transfer or acquisition of any or all of the assets and liabilities or of the stock of any company.
(4) The merger or consolidation of two (2) or more MICs.
(5) The merger or consolidation of two (2) or more stock holding companies as part of the merger of two (2) or more MIHCs.
(6) The merger or consolidation of two (2) or more stock insurance companies.
(7) The merger of an MIC's membership interests into any existing MIHC, with the continued corporate existence of the reorganized MIC as a reorganized insurer.
Sec. 3. (a) A plan of reorganization must be adopted by the board of directors of the MIC.
(b) For a plan of reorganization to be adopted by the board of directors of an MIC, at least seventy-five percent (75%) of the members of the board of directors must vote in favor of the adoption.
Sec. 4. Within ninety (90) days after the adoption of a plan of reorganization and before a vote on the plan by the members, the company adopting the plan must file with the commissioner an application containing the following:
(1) A plan of reorganization.
(2) The form of the notices to be sent to members under sections 8 and 12(b) of this chapter.
(3) A copy of the:
(A) proposed articles of incorporation; and
of each company to be formed under the plan, including the reorganized insurer in compliance with the requirements of IC 27-1-6.
(4) If it is necessary to amend the current articles of incorporation or bylaws of any company that is affected by the plan, a copy of:
(A) the proposed articles of amendment or amended and restated articles of incorporation; and
(B) amended or restated bylaws;
of the company, which in the case of each domestic insurance company must comply with the requirements of IC 27-1-8.
subject of the meeting, including specific notice to the member
that the member's interest in the MIC will be affected by the
(5) include or be accompanied by a copy of the plan or a summary of the plan; and
(6) describe the member's right to attend and participate in the meeting.
(c) The notice sent under this section must achieve a minimum score of forty (40) on the Flesch reading ease test or an equivalent score on a comparable test approved by the commissioner.
Sec. 13. Notwithstanding IC 27-1-7-9 , with respect to a vote under section 12 of this chapter, an eligible member:
(1) may vote in person or by proxy if the proxy soliciting material:
(A) includes reference to the applicable statutory provisions;
(B) states the date, time, and location of the meeting;
(C) contains a brief statement of the subject of the meeting, including specific notice that the member's interest in the MIC will be affected by the reorganization;
(D) was solicited and obtained from the member after the commissioner has approved the plan of reorganization under this article; and
(E) was found to be sufficient in the reasonable determination of the commissioner for the eligible members to make an informed decision about the plan of reorganization; and
(2) is entitled to cast only one (1) vote on the proposed plan of reorganization, regardless of the number of policies or the amount of insurance that the member has with the MIC or any affiliate of the MIC.
Sec. 14. For a plan of reorganization to be approved by the members of an MIC:
(1) the plan of reorganization must be approved at a meeting at which at least ten percent (10%) of the eligible members are represented in person or by proxy; and
(2) at least two-thirds (2/3) of the eligible members voting in person or by proxy must vote in favor of the plan.
Sec. 15. Not later than thirty (30) days after members have approved a plan of reorganization at a special or annual meeting of members under this chapter, an applicant must file with the commissioner the minutes of the meeting at which the plan of reorganization was approved.
the following, or provisions at least substantially equivalent to the
(1) The name of the MIHC, which must include the term "mutual" or the abbreviation "MIHC".
(2) A provision specifying that the MIHC does not have the power to engage in the business of issuing insurance policies or contracts.
(3) A provision specifying that the MIHC is not authorized to issue voting or any other capital stock.
(4) A provision setting forth the rights of members of the MIHC in the equity of the MIHC in the event of a conversion to a stock company under Indiana law or a dissolution under IC 27-1-10 , including the rights of the members to the assets of the MIHC.
(5) A provision specifying that:
(A) a member of the MIHC is not, as a member, personally liable for the acts, debts, liabilities, or obligations of the MIHC; and
(B) no assessment may be imposed upon the members of the MIHC by any person, including:
(i) the board of directors, members, or creditors of the MIHC; and
(ii) any governmental office or official, including the commissioner;
because of any liability of any company or because of any act, debt, or liability of the MIHC.
Sec. 3. Members of an MIHC have rights and obligations specified in:
(1) this article; and
(2) the articles of incorporation and bylaws of the MIHC.
Sec. 4. The MIHC may not make any direct payment of income, dividends, or other distribution of profits to a member of an MIHC with respect to any membership interest in the MIHC, other than as directed or approved by the commissioner.
Sec. 5. (a) At least a majority of the following must be made up of outside directors:
(1) The board of directors of an MIHC.
(2) The board of directors of a stock holding company that is not a wholly-owned subsidiary of an MIHC.
(3) The board of directors of a reorganized insurer that is not a wholly-owned subsidiary of an MIHC.
(4) Any audit committee or executive committee of the board of directors of:
(A) an MIHC;
(B) a stock holding company that is not a wholly-owned subsidiary of an MIHC; or
(C) a reorganized insurer that is not a wholly-owned subsidiary of an MIHC.
(b) All of the directors who are members of any management compensation committee of the following entities must be outside directors:
(1) An MIHC.
(2) A stock holding company that is not a wholly-owned subsidiary of an MIHC.
(3) A reorganized insurer that is not a wholly-owned subsidiary of an MIHC.
(c) All of the directors who are members of any pricing committee of the following entities with responsibility for approving the price of stock sold in any offering under this article must be outside directors:
(1) A stock holding company.
(2) A reorganized insurer.
(d) The commissioner may determine, after furnishing the affected company and director with notice and opportunity to be heard, that an individual does not qualify as an outside director or otherwise should not be considered an outside director. Such an individual may continue to serve as a director, but from the date the commissioner notifies the affected company in writing of the determination and the basis for the determination, the individual may not be considered an outside director.
(e) A director's failure to qualify as or be considered an outside director does not affect the validity of any action taken by the company, the board of directors, or any committee of the board of directors.
Sec. 6. (a) Except as provided in subsection (b), an MIHC:
(1) has and may exercise all the rights and privileges of insurance companies formed under this title; and
(2) is subject to all the requirements and regulations imposed upon insurance companies formed under this title.
(b) The exceptions referred to in subsection (a) are as follows:
(1) An MIHC does not have the right or privilege to write insurance (except through an insurance company subsidiary) and is not subject to any requirement or rule adopted under IC 4-22-2 relating to the writing of insurance.
(2) An MIHC is not subject to the deposit requirement in IC 27-1-6-15 (d).
(3) An MIHC is not subject to any statute or rule adopted under IC 4-22-2 that is imposed upon insurance companies formed under this title to the extent that the statute or rule is in conflict with this article.
(4) An MIHC is not subject to the investment requirements under IC 27-1-12 or IC 27-1-13 that limit or restrict investments in subsidiaries.
(5) An MIHC is not subject to risk-based capital requirements under IC 27-1-36.
(6) An MIHC is not subject to a requirement under IC 27 if the commissioner determines by order or rule adopted by the commissioner under IC 4-22-2 that the requirement does not apply to the MIHC.
Sec. 7. (a) Not later than July 1 of each year, an MIHC shall file with the commissioner an annual statement containing the following information:
(1) Audited financial statements, including:
(A) an income statement;
(B) a balance sheet;
(C) a statement of cash flows; and
(2) Complete information on the status of any condition imposed in connection with the approval of a plan of reorganization.
(3) An investment plan covering all assets of the MIHC.
(4) A statement that the MIHC and its affiliates have complied with section 8 of this chapter.
(5) A statement that describes any changes in the members' interests and the reason for any change in the members' interests.
(b) Not later than July 1 of the first, second, and third years after completion of a reorganization under IC 27-14-2 , a reorganized insurer shall file with the commissioner:
(1) a certificate of an actuary stating that the methodology used by the reorganized insurer for any payment of policyholder dividends in the previous year complied with the methodology stated in the plan submitted under IC 27-14-2-4 (5) or other methodology approved by the commissioner; and
(2) a certificate of an independent auditor of the reorganized insurer that the calculation of any participating policy dividends paid during the previous year complied with the methodology stated in the plan submitted under
(5) and was accurate.
(c) If the certification of the actuary or auditor required in subsection (b) has not been filed or if the commissioner has other reasonable cause, the commissioner may employ at the expense of the reorganized insurer an independent actuary or auditor, or both, to issue the certifications required in subsection (b).
(d) The requirement to submit the certifications under subsection (b) may be extended by the commissioner beyond the third year after completion of a reorganization under IC 27-14-2 :
(1) by order applicable to a particular recognized insurer if the commissioner determines that further certifications are necessary for the protection of the interests of the policyholders of the reorganized insurer; and
(2) by rule adopted under IC 4-22-2 if the commissioner determines that further certifications are necessary for the protection of the interests of the policyholders of all reorganized insurers or a particular class of reorganized insurers.
Sec. 8. (a) For the purposes of IC 27-1-23 :
(1) an MIHC and its affiliates constitute an insurance holding company system; and
(2) an MIHC is considered to be an "insurer".
However, a separate filing or approval is not required under IC 27-1-23 for an acquisition or a reorganization that is included in a plan approved under this article.
(b) For the purpose of this section, a "material transaction" means:
(1) a transaction described in IC 27-1-23-4 (b):
(A) between an MIHC and any affiliate; or
(B) between any affiliates of an MIHC if the transaction equals or exceeds the percentages of admitted assets or surplus set forth in IC 27-1-23-4 (b) of any reorganized insurer of the MIHC; or
(2) a transaction described in IC 27-1-23-4 (b) between an MIHC and any person as specified in a rule adopted by the commissioner under IC 4-22-2 or an order issued by the commissioner.
(c) An MIHC may not enter into a material transaction unless the MIHC has notified the commissioner in writing of its intention to enter into a material transaction at least thirty (30) days before the transaction, or a shorter period as the commissioner may permit, and the commissioner has not disapproved the transaction within that period.
to be offered by the applicant;
(C) the total number of shares authorized to be issued;
(D) the estimated number of shares the applicant intends to offer; and
(E) the intended date or range of dates for the offering.
(6) A list of:
(A) the name of any underwriter, syndicate member, or placement agent involved;
(B) if known by the applicant, the name of each person or group of persons who will control five percent (5%) or more of the total outstanding shares of the class of stock to be offered; and
(C) if any of the persons listed under clause (A) or (B) is a corporation or other business organization, the name of each member of its board of directors or equivalent management body.
(7) A description of all expenses expected to be incurred in connection with the offering.
(8) Any other information requested by the commissioner.
Sec. 5. A plan to issue stock in a public offering (other than an offering solely in connection with a consolidation, merger, share exchange, or other business combination or an offering of stock under a stock option or other employee benefit plan) must do the following:
(1) Provide for each eligible member to receive, without payment, nontransferable subscription rights to purchase a portion of the stock of the applicant.
(2) Specify how subscription rights are to be allocated in whole shares of stock among the eligible members.
(3) Provide a fair and equitable means for allocating shares of stock in the event of an over-subscription to the shares by eligible members exercising subscription rights received under this chapter.
(4) Provide that any shares of stock not subscribed to by eligible members exercising subscription rights received under this chapter, or not subscribed to by an employee benefit plan or by directors, officers, and employees exercising subscription rights, will be sold:
(A) in a public offering through an underwriter;
(B) through private placement; or
(C) by any other method approved by the commissioner that is fair and equitable to members.
(5) Provide that the MIHC will adopt articles of incorporation
or articles of amendment that include a provision prohibiting
the MIHC from waiving any dividends from its subsidiaries
except after approval of the waiver by the board of directors
of the MIHC and by the commissioner.
(6) Establish a pricing committee within the board of directors of the entity making the offering of stock, consisting exclusively of outside directors.
(7) Require that the shares not be issued without the favorable written opinion of the independent financial advisor as required by IC 27-14-6-4.
Sec. 6. Subject to the limitations of IC 27-14-5 , a plan to issue stock may do the following:
(1) Provide an allocation without payment of nontransferable subscription rights to purchase not more than ten percent (10%) of the total amount of outstanding stock to one (1) or more employee benefit plans that satisfy the requirements of Section 401(a), 403(b), 404(c), 408, 423, or 501(c)(9) of the Internal Revenue Code, limited to the extent that unsubscribed shares of stock remain after the members have exercised their subscription rights.
(2) Provide for:
(A) the establishment of; and
(B) the allocation of not more than four percent (4%) of the total amount of outstanding stock to;
an employee benefit plan that provides benefits that are subject to taxation under Section 83 of the Internal Revenue Code or that complies with the requirements of Section 422 of the Internal Revenue Code, for the purpose of granting stock or stock options.
(3) Provide that the articles of incorporation of a subsidiary of the MIHC may, subject to specified exceptions, prohibit a:
(A) person; or
(B) group of persons acting in concert;
acting directly or through associates, from acquiring more than a specified percentage of any class of the issued and outstanding shares of capital stock of the issuing subsidiary.
(4) Provide that the aggregate number of shares of outstanding stock purchased by an eligible member that exercises subscription rights may not exceed:
(A) a specified number of shares equal to at least one percent (1%) of the total number of outstanding shares; or
(B) a specified percentage of not less than one percent (1%) of the total number of outstanding shares.
(4) Thirty percent (30%) of the total number of outstanding shares of equity securities of each reorganized insurer and all of its reorganized insurers is less than or equal to two hundred fifty million dollars ($250,000,000), as adjusted annually by the CPI.
Sec. 3. The aggregate number of shares of equity securities owned by:
(1) a single director or officer of the MIHC or any subsidiary of the MIHC;
(2) associates of the person referred to in subdivision (1); and
(3) persons acting in concert with the person referred to in subdivision (1) or (2);
may not exceed five percent (5%) of the total number of outstanding shares of equity securities of each reorganized insurer and any stock holding company excluding any equity securities acquired by or held for the benefit of the officers and directors and their associates through employee benefit plans as permitted by IC 27-14-4-6 (1) and section 5 of this chapter, but including any equity securities beneficially owned by officers and directors and their associates under employee benefit plans as provided in IC 27-14-4-6 (2).
Sec. 4. A director, officer, agent, or employee of the MIHC or its subsidiaries, or an associate of a director, an officer, an agent, or employee, may not receive a fee, commission, or other valuable consideration for aiding, promoting, or assisting in the issuance of stock under this section, except for:
(1) compensation as provided for in the plan and approved by the commissioner;
(2) the person's usual, regular salary or compensation; or
(3) reasonable fees and compensation paid to an individual who is an attorney, accountant, actuary, or financial adviser for services performed in the individual's independent practice, even if the individual is also a director, an officer, an agent, or an employee of the MIHC or its subsidiaries.
Sec. 5. The aggregate number of shares of stock that may be purchased or held by an employee benefit plan may not exceed ten percent (10%) of the total number of outstanding shares of a reorganized insurer or any stock holding company.
Sec. 6. A reorganized insurer or stock holding company may not issue stock to directors or officers, or both, except stock of a class that is publicly traded.
Sec. 7. A reorganized insurer or stock holding company may
(1) grant stock purchase options or warrants, or otherwise use securities to provide compensation to directors or officers, or both, at a price less than the fair market value of the security on the date of the grant; or
(2) sell securities to directors or officers, or both, at a price less than the fair market value of the security (except under the exercise of authorized stock options consistent with subdivision (1) and section 8 of this chapter).
Sec. 8. A reorganized insurer or stock holding company may not grant stock purchase options to directors or officers, or both, until at least six (6) months after public trading for the stock has begun.
Sec. 9. (a) For purposes of determining compliance with ownership restrictions in this chapter, a person to whom a stock purchase option or warrant has been granted under this chapter is not considered to own the underlying securities until the stock purchase option or warrant is exercised and the securities have been issued.
(b) An increase in a person's percentage ownership of securities does not constitute a violation of the securities ownership restrictions in this chapter if the increase in percentage ownership results solely from a decrease in the aggregate number of securities outstanding.
(c) An inadvertent ownership of securities that exceeds the securities ownership limitations in this chapter does not violate this chapter if:
(1) a sufficient number of securities are divested within thirty (30) days after the limitation was first known to be exceeded so that the limitation is no longer exceeded; and
(2) during the period when the limitation is known to have been exceeded, the owner of the securities:
(A) does not vote any securities in excess of the limitation; and
(B) does not accept a dividend in respect of any securities that exceed the limitations.
Chapter 6. Public Hearing, Commissioner Approval, and Effective Date of Plan to Issue Stock
Sec. 1. Not more than:
(1) sixty (60) days after the acceptance of an application filed with respect to a plan to issue stock under IC 27-14-4 ; or
(2) a longer period after the application is filed, as determined by the commissioner upon a showing of good cause;
the commissioner may conduct a public hearing under
to afford interested persons an opportunity to present
information, views, arguments, or comments about the plan.
Sec. 2. (a) At least thirty (30) days before a hearing held under this chapter, the commissioner shall publish notice of the hearing in a newspaper of general circulation in:
(1) the city of Indianapolis;
(2) the city in which the principal office of the applicant is located; and
(3) another city or cities that the commissioner considers appropriate;
and may provide written notice of the hearing by other means and to other persons that the commissioner considers appropriate.
(b) The notice provided under this section must:
(1) refer to the applicable statutory provisions;
(2) state the date, time, and location of the hearing; and
(3) include a brief statement of the subject of the hearing.
Sec. 3. (a) On or before the later of:
(1) sixty (60) days after a public hearing held under this chapter; or
(2) one hundred twenty (120) days after the commissioner accepts the application relating to the plan;
or a longer period if extended by the commissioner for good cause, the commissioner shall issue an order to approve or disapprove the plan under IC 27-14-4 to issue stock.
(b) The commissioner shall fully consider any comments received at a public hearing under IC 4-22-2-27 before issuing an order under subsection (a).
Sec. 4. (a) The commissioner shall retain an independent financial adviser who shall, on behalf of members, review the offering price and issue a written opinion as to whether the offering price is fair from a financial point of view to the members as a group.
(b) The commissioner's approval of a plan under section 6 of this chapter is subject to the condition that a favorable opinion of the financial advisor is delivered to the commissioner before the stock is issued.
(c) The fees and expenses of the financial adviser shall be paid by the issuer of the stock.
Sec. 5. The commissioner shall approve a plan to issue stock submitted under IC 27-14-4 unless the commissioner makes at least one (1) of the following findings with respect to the plan:
(1) Disapproval of the plan is necessary to prevent practices that will cause financial impairment to the applicant or its
(2) The financial or management resources of the applicant or its subsidiaries or affiliates warrant disapproval.
(3) The plan does not comply with this article.
(4) The proposed plan is unfair, unreasonable or inequitable to members or policyholders.
(5) The plan does not comply with the members' protection principle.
Sec. 6. (a) The commissioner shall transmit to the applicant a copy of any order approving or disapproving a plan.
(b) If the commissioner disapproves a plan, the commissioner shall provide the applicant with a written statement detailing the reasons for the disapproval.
Sec. 7. The approval by the commissioner of a plan to issue stock expires one hundred eighty (180) days after the date of approval, except as otherwise provided by an order of the commissioner.
Sec. 8. The amendment of the articles of incorporation of a domestic insurance company under a plan under this article must be conducted in compliance with IC 27-1-8 , except as provided in this chapter.
Chapter 7. Miscellaneous Provisions
Sec. 1. (a) This article, while independent of any other law, is supplemental to IC 27-1-2 through IC 27-1-20.
(b) Except as provided in this article, all provisions of IC 27-1-2 through IC 27-1-20 are fully and completely applicable to this article in the same manner as if the provisions of this article had been an original part of IC 27-1-2 through IC 27-1-20. If any conflict exists between this article and IC 27-1-2 through IC 27-1-20 , this article is controlling.
Sec. 2. A civil action:
(1) challenging the validity of; or
(2) arising out of;
action that is taken or proposed to be taken under this article must commence not later than sixty (60) days after the approval by the commissioner of the plan under which or in respect of which the action is taken or proposed to be taken.
Sec. 3. The provisions of this article are severable in the manner provided in IC 1-1-1-8 (b).
Sec. 4. (a) A person who is aggrieved by an action of the commissioner under this article may petition for judicial review of the action under IC 4-21.5-5.
(b) A person who is aggrieved by a failure of the commissioner
to act or make a determination required by this article may bring
an action for mandate in the circuit court of Marion County to
compel the commissioner to act or make the determination.
Sec. 5. (a) Except as provided in this section, IC 5-14 applies to all filings made under this article.
(b) Filings made under this article may include information that might be damaging to an applicant or its affiliate if made available to competitors. Subject to subsection (c), all information, documents, and copies of the filings containing trade secrets of an applicant or its affiliate are declared:
(1) confidential for the purposes of IC 5-14-3-4 ; and
(2) not subject to inspection and copying by the public under person, except to insurance departments of other states which agree to such confidential treatment;
without the written consent of the person to which they pertain.
(c) If the commissioner, after giving notice to the person seeking such confidential treatment and any other person requesting disclosure, after giving them an opportunity to respond at a departmental hearing in camera, and after giving due consideration to any legitimate interest in preserving trade secrets, determines that the members or policyholders have a compelling interest that would be served by disclosure, then the commissioner, after five (5) business days have elapsed from notification to the applicant, may disclose all or any part thereof in a manner and subject to the limitations as the commissioner determines appropriate.
(d) If within the five (5) business days period referred to in subsection (c), the applicant notifies the commissioner that the applicant or other interested party has filed an action seeking a protective order from a circuit or superior court to prevent or to limit disclosure, the commissioner shall not disclose the information, documents, or copies thereof during the pendency of the action and any appeal or after any final court decision prohibiting disclosure.
Sec. 6. An MIHC and its subsidiaries and affiliates may not do any of the following:
(1) Lend funds to a person to finance the purchase of stock in a stock offering by an MIHC or any of its subsidiaries other than policyholder loans granted under the terms of an insurance policy of a subsidiary.
(2) Pay commissions, special fees, or other special or extraordinary compensation to officers, directors, interested persons, or affiliates for arranging, promoting, aiding,
assisting, or participating in the structure or placement of a
stock offering by the MIHC or any of its subsidiaries, except
to the extent permitted under
(3) Enter into an understanding or agreement transferring legal or beneficial ownership of stock to another person in avoidance of this article.
Sec. 7. (a) Except as provided in subsection (b), a reorganized insurer to which insurance policies, contracts, and other assets and obligations are transferred in connection with a plan of reorganization under this article has, with respect to the insurance policies, contracts, and other assets and obligations, all rights, liabilities, and authority of the MIC that is the subject of the plan of reorganization.
(b) An MIHC resulting from a plan of reorganization of a MIC under this article, has all obligations and liabilities of the MIC for any claim, asserted or otherwise, that existed at the effective date of the reorganization and that:
(1) seeks the imposition of a constructive or charitable trust on assets of the MIC for the benefit of policyholders, members, or other persons;
(2) seeks distribution or return of assets, or other form of compensation, from the MIC to policy holders or members; or
(3) otherwise arises out of, or relates to, the ownership interest of policyholders or members of the MIC, or to the value of their ownership interests, including any claim that challenges a statutory transaction engaged in by the MIC before the effective date of the reorganization.
Sec. 8. If a proceeding is pending against an MIC that is the subject of a plan of reorganization under this article:
(1) the proceeding may be continued after the effective date as if the reorganization had not occurred; or
(2) the reorganized insurer that is the successor to the MIC's business may be substituted in the proceeding for the MIC;
except that the MIHC resulting from the plan of reorganization shall be substituted for the MIC and any subsidiaries of the MIC in all proceedings involving any claim described in section 7(b) of this chapter.
Sec. 9. An MIHC may convert to a stock company under IC 27-1-8-13 as though the MIHC were an MIC.
Sec. 10. The commissioner shall, at the applicant's expense, hire attorneys, actuaries, accountants, investment bankers, and other experts as may be necessary to assist the commissioner in
reviewing all matters under this article that are associated with a
plan of reorganization or a plan to issue stock. The commissioner
may at any time require an applicant to deposit an amount of
money with the department of insurance in anticipation of
expenses to be incurred by the commissioner under this article.
Sec. 11. The commissioner may adopt rules under IC 4-22-2 to carry out the purposes of this article.
Sec. 12. (a) A domestic MIC may reorganize with a foreign mutual holding company by complying with IC 27-14-2. The commissioner may waive any provision of IC 27-14-2 if the commissioner determines the provision to be unnecessary for the protection of policyholders and members.
(b) A plan of reorganization under subsection (a) is effective when the reorganized domestic stock insurance company subsidiary has filed its articles of amendment and amended certificate of authority in the office of the county recorder of the county in which the principal office of the company is located or at a later date specified in the plan of reorganization.
(c) A domestic MIC seeking to reorganize under subsection (a) may at the same time redomesticate to another state by complying with IC 27-1-6.5 and the applicable requirements of the state to which it seeks to transfer domicile.
Sec. 13. (a) An existing MIHC may, with the prior approval of the commissioner:
(1) acquire direct or indirect ownership of a converting foreign MIC that becomes a stock insurer in compliance with the laws of its state of domicile; and
(2) grant membership interests and equity rights to the members or policyholders of a foreign mutual insurer that merges with a direct or indirect domestic or foreign subsidiary of the MIHC or is otherwise acquired by the MIHC.
(b) The commissioner shall consider the fairness of the terms and conditions of the transaction, whether the interests of the members of each MIHC that is a party to the transaction are protected, and whether the proposed transaction is in the public interest when determining whether to approve a transaction under subsection (a).
Sec. 14. The concurrent reorganization of two (2) or more MICs into a single MIHC structure under IC 27-14-2 may be accomplished by a joint application and a joint plan of reorganization and may be approved by the commissioner following a combined hearing. The commissioner may allow such
other procedures as may be necessary or desirable to avoid
unnecessary or duplicative costs and efforts in satisfying the
requirements of this article and in effectuating the reorganization.
SECTION 5. [EFFECTIVE UPON PASSAGE] (a) IC 27-14, as added by this act, is intended to enable mutual insurance companies to seek additional capital more effectively to:
(1) enhance their financial strength and flexibility;
(2) support long term growth internally and through mergers and acquisitions; and
(3) expand and enhance the domestic insurance companies of this state.
(b) IC 27-14, as added by this act, provides an alternative organizational structure to help strengthen the Indiana mutual insurance industry by permitting mutual insurance companies to:
(1) reorganize into a mutual insurance holding company structure; and
(2) raise capital through the sale of capital stock.
SECTION 6. An emergency is declared for this act.