§ 27-1-40.1 - Mutual insurance holding companies.
SECTION 27-1-40.1
§ 27-1-40.1 Mutual insurance holdingcompanies. – (a) Any mutual insurance company created under the laws of this state (whetherpursuant to § 7-1-5 or by special act of the general assembly) and anyforeign mutual insurance company which has been domesticated or redomesticatedpursuant to Chapter 2.2 of this title which meets or exceeds all capital andsurplus funds required by law for the transaction of business in Rhode Islandmay, in any manner permitted by subsection (b) of this section, reorganize intoa mutual insurance holding company structure upon adoption of a plan ofreorganization by two-thirds (2/3) vote of the board of directors or othergoverning body, approval of a plan of reorganization by the director of thedepartment of business regulation, and the affirmative vote of one half (1/2)of those members or policyholders, constituting a quorum, present in person orby 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 ofreorganization, each member or policyholder shall have one vote, and in thecase of any policy or contract of group life or other group insurance, theemployer or other person to whom or in whose name the master policy or contracthas been issued shall be deemed to be the member or policyholder and shall beentitled to one vote for each policy or contract of group insuranceirrespective of the number of individuals insured.
(b) A plan of reorganization of a mutual insurance companyinto a mutual insurance holding company structure may provide for thereorganization to be effected in one of the following manners:
(1) A domestic mutual insurance company may form a mutualinsurance holding company in accordance with the provisions of § 7-1-5except that the approval of the plan of reorganization by the director of thedepartment of business regulation shall be deemed to constitute the approval ofthe director of the department of business regulation required under §7-1-5. Upon this formation, the domestic mutual insurance company shall beconverted to a stock insurance company and shall issue to the mutual insuranceholding company all of the authorized shares of the voting stock of the stockinsurance company. The articles of incorporation and bylaws of the mutualinsurance holding company formed in this manner shall provide for all thencurrent policyholders of the converted mutual insurance company to becomemembers of the mutual insurance holding company and to retain this membershipinterest so long as the policyholder has a policy in force with the convertedmutual insurance company. The articles of incorporation and bylaws of themutual insurance holding company also shall set forth the terms and conditionsunder which future policyholders of the stock insurance company shall becomemembers of the mutual insurance holding company. The mutual insurance holdingcompany at all times shall retain a majority of the issued and outstandingshares of each class of voting stock of the stock insurance company.
(2) A domestic mutual insurance company may merge itspolicyholders' membership interests into a mutual insurance holding companypreviously formed under the provisions of this section. Upon the merger, thedomestic mutual insurance company shall be converted to a stock insurancecompany and shall issue to the mutual insurance holding company all of theauthorized shares of voting stock of the stock insurance company. In connectionwith the merger and in accordance with the articles of incorporation and bylawsof the mutual insurance holding company, the then current policyholders of theconverted mutual insurance company shall become members of the mutual insuranceholding company and shall retain membership interest so long as thepolicyholder has a policy in force with the converted mutual insurance company.The mutual insurance holding company at all times shall retain a majority ofthe issued and outstanding shares of each class of voting stock of the stockinsurance company.
(3) A domestic mutual insurance company may establish asubsidiary stock insurance company in accordance with the provisions of §7-1-5 (approval of the plan of reorganization by the director of the departmentof business regulation constituting any approval required under § 7-1-5)and then transfer to the subsidiary stock insurance company substantially allof its assets and liabilities. Upon this transfer, all persons who prior to thetransfer held policy rights with respect to or other rights as creditors of themutual insurance company shall have those rights solely with respect to thesubsidiary stock insurance company created and the corresponding liability orobligation of the mutual insurance company to those persons shall be assumed bythe subsidiary stock insurance company. All policyholders of the mutualinsurance company at the time of the transfer of assets and liabilities shallcontinue to have a membership interest in the mutual insurance company and thearticles of incorporation and bylaws of the mutual insurance company shall beamended to provide this. The articles of incorporation and bylaws of the mutualinsurance company shall also be amended to set forth the terms and conditionsunder which future policyholders of the subsidiary stock insurance companyshall become members of the mutual insurance company. The mutual insurancecompany after this shall be considered a mutual insurance holding company forthe purposes of this section and at all times shall retain a majority of theissued and outstanding shares of each class of voting stock of the subsidiarystock insurance company.
(c) The plan of reorganization shall specify in any detail asmay be required by the director of the department of business regulation themanner under subsection (b) in which the mutual holding company structure shallbe created, the capital structure of the stock insurance company and the mutualinsurance holding company, the management of the stock insurance company andthe mutual insurance holding company, the purposes for the reorganization, thearticles of incorporation and bylaws of both the mutual insurance holdingcompany and the stock insurance company, and the terms of and use of proceedsfrom any proposed sale of capital stock by the stock insurance company.
(d) The corporate existence of any mutual insurance companyreorganizing into a mutual insurance holding company structure under thissection shall not terminate, but the reorganized institution shall be deemed tobe a continuation of entity of this reorganized mutual insurance company.
(e) The director of the department of business regulation mayemploy staff personnel as well as professional consultants and other persons toassist in the review of the plan of reorganization and may hold public hearingsas, in the director's discretion, are desirable prior to granting approval ofthe plan of reorganization. All reasonable costs related to the review of theplan of reorganization, including the costs attributable to staff personnel andprofessional consultants, shall be borne by the mutual insurance company filinga plan of reorganization for approval.
(f) The department of business regulation shall issue rulesand regulations implementing this section, which shall be administered by thedirector of the department of business regulation.
(g) Subject to applicable provisions of this title, a mutualinsurance holding company formed pursuant to this section may: (1) invest inthe stock of one or more domestic or foreign insurance companies; (2) acquire adomestic or foreign insurance company through consolidation or merger of theinstitution with its subsidiary insurance company; (3) merge with anothermutual insurance holding company; (4) invest in a corporation, the purchase ofthe capital stock of which is permitted for a mutual insurance company underthe laws of this state; (5) exercise any other power or engage in any activitypermitted to a mutual insurance company organized under the laws of this state;and (6) exercise the powers and engage directly or indirectly in thoseactivities as are now or may after this be permitted for business corporationsunder Chapter 1.1 of this title.
(h) A mutual insurance holding company formed pursuant tothis section, subsequent to its formation, shall be subject to the provisionsof Chapter 35 of this title.