Office of the Revisor of Statutes
Minnesota Session Laws - 2002, Regular Session
Key: (1) language to be deleted (2) new language
CHAPTER 336-S.F.No. 2592
An act relating to insurance; authorizing the
reorganization of a mutual insurance holding company
into a stock company; modifying accounting provisions
for certain ceding transactions; regulating filing
fees; modifying workers' compensation rating plan
threshold calculations; appropriating money; amending
Minnesota Statutes 2000, sections 60A.075; 60A.09,
subdivision 5; Minnesota Statutes 2001 Supplement,
sections 60A.14, subdivision 1; 79.56, subdivision 3.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
Section 1. Minnesota Statutes 2000, section 60A.075, is
amended to read:
60A.075 [MUTUAL COMPANY CONVERSION TO STOCK COMPANY.]
Subdivision 1. [DEFINITIONS.] (a) For the purposes of this
section, the terms in this subdivision have the meanings given
them.
(a) (b) "Converting mutual insurer" means a Minnesota
domestic mutual insurance company seeking to reorganize
according to this section.
(c) "Converting mutual holding company" means a Minnesota
domestic mutual insurance holding company seeking to reorganize
according to this section.
(d) "Converting mutual company" means a converting mutual
insurer or a converting mutual holding company seeking to
convert according to this section.
(e) "Reorganized company" means a converting mutual insurer
or a converting mutual holding company, as the case may be, that
has reorganized according to this section.
(f) "Eligible member" means:
(1) for converting mutual insurers, a policyholder whose
policy is in force as of the record date, which is the date that
the mutual company's board of directors adopts a plan of
conversion or some other date specified as the record date in
the plan of conversion and approved by the commissioner. Unless
otherwise provided in the plan, a person insured under a group
policy is not an eligible member, unless on the record date:
(1) (i) the person is insured or covered under a group life
policy or group annuity contract under which funds are
accumulated and allocated to the respective covered persons;
(2) (ii) the person has the right to direct the application
of the funds so allocated;
(3) (iii) the group policyholder makes no contribution to
the premiums or deposits for the policy or contract; and
(4) (iv) the converting mutual company has the names and
addresses of the persons covered under the group life policy or
group annuity contract.;
(b) "Reorganized company" means a Minnesota domestic stock
insurance company that has converted from a Minnesota domestic
mutual insurance company according to this section.
(2) for converting mutual holding companies, a person who
is a member of the converting mutual holding company, as defined
by the converting mutual holding company's articles of
incorporation and bylaws, determined as of the record date.
(c) (g) "Plan of conversion" or "plan" means a plan adopted
by a Minnesota domestic converting mutual insurance company's
board of directors under this section to convert the mutual
company into a Minnesota domestic stock insurance company.
(d) (h) "Policy" means a policy or contract of
insurance issued by a converting mutual company, including an
annuity contract, issued by a converting mutual insurer or
issued by a stock insurance company subsidiary of a mutual
holding company.
(i) "Active participating policy" means an individual
policy of a converting mutual company or its subsidiary that:
(1) is a participating policy; (2) is among a class of similar
policies that have been credited with policy dividends at any
time within the twelve months preceding the effective date of
the conversion or that will, under the then current dividend
scale, be credited with policy dividends if in force on a future
policy anniversary; (3) gives rise to membership interests in
the converting mutual company; and (4) is in force on the
effective date or some other reasonable date identified in the
plan.
(e) (j) "Commissioner" means the commissioner of commerce.
(f) "Converting mutual company" means a Minnesota domestic
mutual insurance company seeking to convert to a Minnesota
domestic stock insurance company according to this section.
(g) (k) "Effective date of a conversion" means the date
determined according to subdivision 6.
(l) "Record date" means the date that the converting mutual
company's board of directors adopts a plan of conversion, unless
another date is specified in the plan of conversion and approved
by the commissioner.
(h) (m) "Membership interests" means all policyholders'
rights as members of the converting mutual company, including,
but not limited to, the rights to vote and to participate in any
distributions of surplus distributable net worth, whether or not
incident to the company's liquidation.
(i) "Equitable surplus" means the converting mutual
company's surplus as regards policyholders as of the record date
of the conversion or other date approved by the commissioner
determined in a manner that is not unfair or inequitable to
policyholders.
(n) "Distributable net worth" means the value of the
converting mutual company as of the record date of the
conversion, or other date approved by the commissioner,
determined as set forth in the plan and approved by the
commissioner. The commissioner may approve a valuation method
based on any of the following: (1) the surplus as regards
policyholders of a converting mutual insurer determined
according to statutory accounting principles, which may be
adjusted to reflect the current market values of assets and
liabilities, together with any other adjustments that are
appropriate in the circumstances; (2) the net equity of a
converting mutual holding company or a converting mutual insurer
determined according to generally accepted accounting
principles, which may be adjusted to reflect the current market
values of assets and liabilities, together with any other
adjustments that are appropriate in the circumstances; (3) the
fair market value of the converting mutual company determined by
an independent, qualified person; or (4) any other reasonable
valuation method.
(j) (o) "Permitted issuer" means: (1) a corporation
organized and owned by the converting mutual company or by any
other insurance company or insurance holding company for the
purpose of purchasing and holding securities representing a
majority of voting control of the reorganized company; (2) a
stock insurance company owned by the converting mutual company
or by any other insurance company or insurance holding company
into which the converting mutual company will be merged; or (3)
any other corporation approved by the commissioner.
Subd. 2. [AUTHORIZATION.] In accordance with a plan of
conversion established and approved in the manner provided by
this section: (1) a mutual insurance company may become a stock
insurance company according to a plan of conversion established
and approved in the manner provided by this section.; and (2) a
mutual insurance holding company may: (i) become a corporation
organized under chapter 302A; (ii) reorganize according to a
plan in which a majority or all of the common stock of the
reorganized company is acquired by another institution, which
may include a subsidiary of the converting mutual holding
company; (iii) reorganize as a part of a liquidation or
dissolution of the converting mutual holding company; or (iv)
undertake any other reorganization or combination of the
foregoing approved by the commissioner.
Subd. 3. [ADOPTION OF A PLAN OF CONVERSION BY THE BOARD OF
DIRECTORS.] (a) A converting mutual company shall, by the
affirmative vote of a majority of its board of directors, adopt
a plan of conversion consistent with the requirements of this
section.
(b) At any time before approval of a plan by the
commissioner, The converting mutual company, by the affirmative
vote of a majority of its board of directors, may amend or
withdraw the plan at any time before approval of the plan by the
commissioner and may withdraw the plan at any time before the
effective date of the plan.
(c) The duties of the board of directors of a converting
mutual company, in considering or acting upon a proposed plan of
conversion or related transaction, shall be as set forth in
section 302A.251 and, to the extent not inconsistent with that
section, the converting mutual company's articles of
incorporation and bylaws.
Subd. 4. [APPROVAL FILING OF THE PLAN OF CONVERSION
BY WITH THE COMMISSIONER.] (a) [DOCUMENTS TO BE FILED.] After
adoption of the plan by the converting mutual company's board of
directors, but before the members' approval of the plan, The
converting mutual company shall file the following documents
with the commissioner for review and approval an application for
approval of, and permission to reorganize according to, the plan
of conversion. The application must include the following:
(1) the plan of conversion, including an independent
evaluation of the pro forma market value and of the equitable
surplus of the company and of the estimated value of any shares
to be issued and an independent actuarial opinion, if required;
(2) the form of notice of meeting for eligible members to
vote on the plan;
(3) the form of any proxies to be solicited from eligible
members;
(4) the proposed articles of incorporation and bylaws of
the converted stock company;
(5) information required under chapter 60D if the plan
results in a change of control of the converting mutual company;
and
(6) a basis for determining the converting mutual company's
distributable net worth for use in the plan of conversion;
(7) if required by the commissioner, an independent
evaluation of the estimated distributable net worth and of the
estimated value of any shares to be issued;
(8) if required by the commissioner, an independent
actuarial opinion on matters affecting the structure or fairness
of the plan; and
(9) other information or documentation requested by the
commissioner or required by rule.
(b) [REQUIRED FINDINGS DETERMINATION OF COMPLETENESS.] The
commissioner shall approve or conditionally approve the plan
upon finding that:
(1) the provisions of this section have been fully met; and
(2) the plan will not be unfair or inequitable to
policyholders.
(c) [TIME.] The plan of conversion shall, by order, be
approved, conditionally approved, or disapproved by the
commissioner within the later of 30 days from the commissioner's
receipt of all required information from the converting mutual
company or 30 days after the conclusion of a public hearing held
according to paragraph (e). An approval or conditional approval
of a plan expires if the reorganization is not completed within
180 days after the approval or conditional approval unless this
time period is extended by the commissioner for good cause shown
The commissioner shall determine, within 30 days of submission
of the application, whether the application is complete.
(d) (c) [CONSULTANTS.] The commissioner may retain, at the
converting mutual company's expense, qualified experts not
otherwise a part of the commissioner's staff to assist in
reviewing the plan and supplemental materials and valuations.
(e) (d) [HEARING.] The commissioner may, but need not,
conduct a public hearing regarding the proposed plan of
conversion. The hearing must begin no later than 30 days after
submission to the commissioner of a plan of conversion and all
required information. The commissioner shall give the
converting mutual company at least 20 days' notice of the
hearing. At the hearing, the converting mutual company, its
policyholders, and any other person whose interest may be
affected by the proposed conversion may present evidence,
examine and cross-examine witnesses, and offer oral and written
arguments or comments according to the procedure for contested
cases under chapter 14. The persons participating may conduct
discovery proceedings in the same manner as prescribed for the
district courts of this state. All discovery proceedings must
be concluded no later than three days before the scheduled
commencement date of the public hearing. If a hearing is to be
held, the commissioner shall designate a date for the public
hearing promptly upon determining that the application is
complete and that the forms of notice are adequate. The public
hearing must be held on one or more days, the first beginning
within 90 days after the date on which the commissioner
determines the application is complete, unless the converting
mutual company requests, and the commissioner agrees to, a
longer period for the purpose of preparing and distributing the
notices required by this paragraph and by subdivision 5,
paragraph (b). The hearing must be in the nature of a
legislative hearing and must not constitute or be considered a
contested case under chapter 14. The hearing may be conducted
by the commissioner or by a person designated by the
commissioner, which designee may be an administrative law
judge. The converting mutual company shall provide its eligible
members with at least 45 days' notice of the hearing, the notice
to be in the form, and provided in a manner, approved by the
commissioner. The purpose of the hearing is to receive comments
and information for the purpose of aiding the commissioner in
making a decision on the plan of conversion. Persons wishing to
make comments and submit information may submit written
statements before the public hearing and may appear and be heard
at the hearing. The commissioner's order or determination must
be issued within 45 days after the closing of the record of the
hearing by the commissioner or the hearing officer, as
applicable, which record must not be closed until the record
includes certification of the vote on the plan of reorganization
by the eligible members by the converting mutual company. The
commissioner shall issue a written decision detailing the
reasons why the converting mutual company's plan of conversion
is approved or disapproved.
(e) The commissioner shall approve the application and
permit the reorganization according to the plan of conversion if
the commissioner finds that: (1) the provisions of this section
have been fully met; and (2) the plan is not unfair or
inequitable to the members of the converting mutual company.
The commissioner's order approving or disapproving a plan of
conversion is a final agency decision subject to appeal
according to sections 14.63 to 14.68.
Subd. 5. [APPROVAL OF THE PLAN BY THE ELIGIBLE MEMBERS.]
(a) [NOTICE.] Following approval or conditional approval of the
plan by the commissioner, Within 90 days following the date of
the public hearing, if any, or the date the commissioner
determines the application is complete if no hearing is held,
the converting mutual company shall give all eligible members
shall be given notice of a regular or special meeting of the
policyholders members called for the purpose of considering the
plan and any corporate actions that are a part of, or are
reasonably attendant to, the accomplishment of the plan.
(b) [NOTICE REQUIRED REQUIREMENTS.] A copy of the plan or
a summary of the plan must accompany the notice. The notice
must be mailed to each eligible member's last known address, as
shown on the converting mutual company's records, within not
less than 45 days of before the commissioner's approval of the
plan date of the meeting, unless the commissioner directs an
earlier a later date for mailing. The meeting to vote upon the
plan must be set for a date no less than 45 days after the date
when the notice of the meeting is mailed by the converting
mutual company unless the commissioner directs an earlier date
for the meeting. If the meeting to vote upon the plan is held
coincident with the converting mutual company's annual meeting
of policyholders members, only one combined notice of meeting is
required. The notice of the meeting of eligible members may be
combined with the notice of hearing described in subdivision 4,
paragraph (d).
(c) [FAILURE TO GIVE NOTICE.] If the converting mutual
company complies substantially and in good faith with the notice
requirements of this section, the converting mutual company's
failure to give any member or members any required notice does
not impair the validity of any action taken under this section.
(d) [VOTING.] (1) The plan must be adopted upon receiving
the affirmative vote of a majority of the votes cast by eligible
members.
(2) Eligible members may vote in person or by proxy. The
form of any proxy must be filed with and approved by the
commissioner.
(3) The number of votes each eligible member may cast shall
be determined by the converting mutual company's bylaws. If the
bylaws are silent, or if the commissioner determines that the
voting requirements under the bylaws would be unfair or would
prejudice the rights of the eligible members, each eligible
member may cast one vote.
Subd. 6. [CONVERSION.] (a) [FILING.] Following approval
by the eligible members, the converting mutual company shall
file a copy of the company's amended or restated articles of
incorporation with the commissioner, together with a certified
copy of the minutes of the meeting at which the plan was adopted
and a certified copy of the plan. The commissioner shall review
and, if appropriate, approve the amended or restated articles.
After approval by the commissioner, the a converting mutual
company insurer shall file the articles with the secretary of
state as provided by chapter 300, or a converting mutual holding
company shall file the articles with the secretary of state as
provided by chapter 302A.
(b) [EFFECTIVE DATE.] Effective The reorganization of a
converting mutual company is effective on the date of filing an
amendment or restatement of the articles of incorporation with
the secretary of state as provided by chapter 300, or on a later
date if the plan so specifies, the converting mutual corporation
shall become a stock corporation and shall no longer be a mutual
corporation.
Subd. 7. [PLAN NOT UNFAIR OR INEQUITABLE.] A plan of
conversion shall not be unfair or inequitable to
policyholders members. A plan of conversion is not unfair or
inequitable if it satisfies the conditions of subdivision 8, or
9, or 10. The commissioner may determine that a plan proposed
under subdivision 10 or that any other plan proposed by a
converting mutual company under subdivision 12 is not unfair or
inequitable to policyholders members.
Subd. 8. [SHARE CONVERSION.] A plan of conversion under
this subdivision shall provide for exchange of policyholders'
membership interests in return for shares in the reorganized
company or a permitted issuer, according to paragraphs (a) to
(c), and shall provide for the reasonable dividend expectations
of policyholders of active participating policies as set forth
in subdivision 16a.
(a) The policyholders' membership interests of the eligible
members shall be exchanged, in a manner that takes into account
the estimated proportionate contribution of equitable surplus of
each class of participating policies and contracts, for all of
the common shares of the reorganized company or common shares of
its parent company or a permitted issuer, or for a combination
of the common shares of the reorganized company or a permitted
issuer, or for a combination of: (1) common shares of its
parent the reorganized company or a permitted issuer; and (2)
consideration equal to the proceeds of the public sale in the
market of the common shares by the issuer or by a trust
established according to subdivision 11. The consideration must
be allocated among the eligible members in a manner that takes
into account the estimated proportionate contribution of each
class of eligible members to the aggregate consideration being
given.
(b) Unless the anticipated issuance within a shorter period
is disclosed in the plan of conversion, the issuer of common
shares shall not, within two years after the effective date of
reorganization, issue either of the following:
(1) any of its common shares or any securities convertible
with or without consideration into the common shares or carrying
any warrant to subscribe to or purchase common shares; and
(2) any warrant, right, or option to subscribe to or
purchase the common shares or other securities described in
paragraph (a), except for the issue of common shares to or for
the benefit of policyholders eligible members according to the
plan of conversion and the issue of nontransferable subscription
rights for the purchase of common shares being granted to
officers, directors, or a tax qualified employee benefit plan of
the reorganized company or its parent company, if any, or a
permitted issuer, according to subdivision 11.
(c) Unless the common shares have a public market when
issued, the issuer shall use its best efforts to encourage and
assist in the establishment of a public market for the common
shares within two years of the effective date of the conversion
or a longer period as disclosed in the plan of conversion.
Within one year after any offering of stock other than the
initial distribution, but no later than six years after the
effective date of the conversion, the reorganized company shall
offer to make available to policyholders eligible members who
received and retained shares of common stock or securities
described in paragraph (b), clause (1), a procedure to dispose
of those shares of stock at market value without brokerage
commissions or similar fees.
Subd. 9. [SURPLUS DISTRIBUTION OF DISTRIBUTABLE NET
WORTH.] A plan of conversion under this subdivision shall
provide for the exchange of the policyholders' membership
interests of the eligible members in return for the operation a
distribution of the converting mutual company's participating
policies as a closed block of business and for the distribution
of the company's equitable surplus to
policyholders, distributable net worth and shall provide for the
issuance of new shares of the reorganized company or its parent
corporation, each according to paragraphs (a) to (i) or a
permitted issuer, and shall provide for the reasonable
expectations of policyholders of active participating policies
as set forth in subdivision 16a.
(a) The converting mutual company's participating business,
comprised of its participating policies and contracts in force
on the effective date of the conversion or other reasonable date
as provided in the plan, shall be operated by the reorganized
company as a closed block of participating business. However,
at the option of the converting mutual company, group policies
and group contracts may be omitted from the closed block.
(b) Assets of the converting mutual company must be
allocated to the closed block of participating business in an
amount equal to the reserves and liabilities for the converting
mutual life insurer's participating policies and contracts in
force on the effective date of the conversion. The plan must be
accompanied by an opinion of an independent qualified actuary
who meets the standards set forth in the insurance laws or
regulations for the submission of actuarial opinions as to the
adequacy of reserves or assets. The opinion must relate to the
adequacy of the assets allocated to support the closed block of
business. The actuarial opinion must be based on methods of
analysis considered appropriate for those purposes by the
Actuarial Standards Board.
(c) The reorganized company shall keep a separate
accounting for the closed block and shall make and include in
the annual statement to be filed with the commissioner each year
a separate statement showing the gains, losses, and expenses
properly attributable to the closed block.
(d) Notwithstanding the establishment of a closed block,
the entire assets of the reorganized company shall be available
for the payment of benefits to policyholders. Payment must
first be made from the assets supporting the closed block until
exhausted, and then from the general assets of the reorganized
company.
(e) (a) Distributions by the converting mutual company's
equitable surplus company under this subdivision shall be
distributed to eligible participating policyholders members in a
form or forms selected by the converting mutual company. The
form of distribution may consist of cash, securities of the
reorganized company, securities of another institution, a
certificate of contribution, additional life insurance, annuity
benefits, increased dividends, reduced premiums, or other
equitable consideration or any combination of forms of
consideration. The consideration, if any, given to a class or
category of policyholders eligible members may differ from the
consideration given to another class or category
of policyholders eligible members. A certificate of
contribution must be repayable in ten years, be equal to 100
percent of the value of the policyholders' eligible members'
membership interest, and bear interest at the highest rate
charged by the reorganized company or its insurance company
subsidiary for policy loans on the effective date of the
conversion.
(f) (b) The consideration must be allocated among the
policyholders eligible members in a manner that is fair and
equitable to the policyholders and that takes into account the
estimated proportionate contribution of each class of eligible
members to the aggregate consideration being given.
(g) (c) The reorganized company or its parent corporation
shall issue and sell shares of one or more classes having a
total price equal to the estimated value in the market of the
shares on the initial offering date. The estimated value must
take into account all of the following:
(1) the pro forma fair market value of the reorganized
company;
(2) the consideration to be given to policyholders
according to paragraph (e) (a);
(3) the proceeds of the sale of the shares; and
(4) any additional value attributable to the shares as a
result of a purchaser or a group of purchasers who acted in
concert to obtain shares in the initial offering, attaining,
through such purchase, control of the reorganized company or its
parent corporation.
(h) (d) If a purchaser or a group of purchasers acting in
concert is to attain control in the initial offering,
the converting mutual company shall not, directly or indirectly,
pay for any of the costs or expenses of conversion of
the converting mutual company, whether or not the conversion is
effected, except with permission of the commissioner.
(i) Periodically, with the commissioner's approval, the
reorganized company may share in the profits of the closed block
of participating business for the benefit of stockholders if the
assets allocated to the closed block are in excess of those
necessary to support the closed block.
Subd. 10. [SUBSCRIPTION RIGHTS.] A plan of conversion
under this subdivision shall provide for exchange of the
policyholders' eligible members' membership interests in return
for the operation of the converting mutual company's
participating policies as a closed block of business protection
of the reasonable dividend expectations of the policyholders of
active participating policies, for the creation of a liquidation
account to protect the interests of policyholders, and eligible
members, for the issuance of subscription rights to
eligible policyholders members, and shall provide for the
issuance of shares by the reorganized company, each according to
paragraphs (a) to (j).
(a) The converting mutual company's participating business,
comprised of its participating policies and contracts in force
on the effective date of the conversion, or such other
reasonable date specified in the plan, and excluding at the
converting mutual company's option any group policies or group
contracts, shall be operated by the reorganized company as a
closed block of participating business according to subdivision
9, paragraphs (a) to (d) plan of conversion shall provide for
the protection of the reasonable dividend expectations of
policyholders of active participating policies as provided in
subdivision 16a.
(b) The reorganized company or its parent corporation or a
permitted issuer shall issue and sell shares of one or more
classes having a total price equal to the estimated value of the
shares in the market on the initial offering date taking into
account the proceeds of the sale of shares and the consideration
given to policyholders eligible members.
(c) The policyholders eligible members shall receive
nontransferable preemptive subscription rights to purchase all
of the common shares of the issuer according to paragraph (b).
(d) The preemptive subscription rights to purchase the
common shares must be allocated among the participating
policyholders eligible members in whole shares in a fair and
equitable manner and as provided in the plan that takes, taking
into account the estimated proportionate contribution of each
class of participating policies and contracts eligible members
to the total amount of the policyholders' eligible members'
consideration. The plan must provide a fair and equitable means
for the allocation of shares in the event of an
oversubscription. The plan must further provide that any shares
of capital stock not subscribed by eligible members must may be
sold in a public offering through an underwriter, unless the
number of shares unsubscribed is so small in number so as not to
warrant the expense of a public offering, in which case the plan
may provide for the purchase of the unsubscribed shares by
private placement or through any fair and equitable alternative
means approved by the commissioner.
(e) The number of the common shares that a person, together
with any affiliates or group of persons acting in concert, may
subscribe or purchase in the reorganization, must be limited to
not more than five percent of the common shares. For this
purpose, neither the members of the board of directors of the
reorganized company nor its parent corporation, if any, is are
considered to be affiliates or a group of persons acting in
concert solely by reason of their board membership.
(f) Unless the common shares have a public market when
issued, officers and directors of the issuer and their
affiliates shall not, for at least three years after the date of
conversion, purchase common shares of the issuer, except with
the approval of the commissioner.
(g) Unless the common shares have a public market when
issued, the issuer shall use its best efforts to encourage and
assist in the establishment of a public market for the common
shares.
(h) The issuer shall not, for at least three years
following the conversion, repurchase any of its common shares
except according to a pro rata tender offer to all shareholders,
or with the approval of the commissioner.
(i) A liquidation account must be established for the
benefit of policyholders eligible members in the event of a
complete liquidation of the reorganized company. The
liquidation account must be equal to the equitable surplus
distributable net worth of the converting mutual company as of
the effective date of the conversion. The function of the
liquidation account is solely to establish a priority on
liquidation and its existence does not restrict the use or
application of the surplus distributable net worth of the
reorganized company except as specified in paragraph (j). The
liquidation account must be allocated equitably as of the
effective date of conversion among the then participating
policyholders eligible members. The amount allocated to a
policy or contract an eligible member must not increase and must
be reduced to zero when the policy or contract giving rise to
the membership interests of the owner terminates. In the event
of a complete liquidation of the reorganized company, the
policyholders eligible members among which the liquidation
account is allocated are entitled to receive a liquidation
distribution in the amount of the liquidation account before any
liquidation distribution is made with respect to shares.
(j) Until the liquidation account has been reduced to zero,
the issuer reorganized company shall not declare or pay a cash
dividend on, or repurchase any of, its common shares in (i) in
case of a converting mutual insurer, in an amount in excess of
its cumulative earned surplus generated after the conversion
determined according to statutory accounting principles, or (ii)
in the case of a converting mutual holding company, in an amount
in excess of its retained earnings, if the effect would be to
cause the amount of the statutory surplus distributable net
worth of the reorganized company to be reduced below the then
amount of the liquidation account.
Subd. 11. [OPTIONAL PROVISIONS.] A plan under subdivision
8, 9, or 10 may include, with the approval of the commissioner,
any of the provisions in paragraphs (a) and (b).
(a) A plan may provide that any shares of the stock of the
reorganized company or its parent corporation or a permitted
issuer included in the policyholders' eligible members'
consideration must be placed on the effective date of the
conversion in a trust or other entity existing for the exclusive
benefit of the participating policyholders eligible members and
established solely for the purposes of effecting the
reorganization. Under this option, the shares placed in trust
must be sold over a period of not more than ten 40 years and the
proceeds of the shares must be distributed using the
distribution priorities prescribed in the plan. Eligible
members shall have the option to sell their shares at any time
following the date specified in the plan, which date may not be
later than two years following the effective date of the plan.
(b) A plan may provide that the directors and officers of
the converting mutual company shall receive, without payment,
nontransferable subscription rights to purchase capital stock of
the reorganized company, its parent, or a permitted issuer.
Those subscription rights must be allocated among the directors
and officers by a fair and equitable formula.
(1) The total number of shares that may be purchased under
this clause, may not exceed 35 percent of the total number of
shares to be issued in the case of a converting mutual company
with total assets of less than $50,000,000 or 25 percent of the
total shares to be issued in the case of a converting mutual
company with total assets of more than $500,000,000. For
converting mutual companies with total assets between
$50,000,000 and $500,000,000, the total number of shares that
may be purchased may not exceed an interpolated percentage
between 25 and 35 percent.
(2) Stock purchased by a director or officer under clause
(1) may not be sold within one year following the effective date
of the conversion.
(3) The plan may also provide that a director or officer,
or person acting in concert with a director or officer of the
converting mutual company, may not acquire any capital stock of
the reorganized company for three years after the effective date
of the conversion, except through a licensed securities broker
or dealer, without the permission of the commissioner. That
provision may not apply to prohibit the directors and officers
from purchasing stock through subscription rights received in
the plan under clause (1).
(c) A plan may allocate to a tax-qualified employee benefit
plan nontransferable subscription rights to purchase up to ten
percent of the capital stock of the reorganized company, its
parent, or a permitted issuer. The employee benefit plan must
be entitled to exercise its subscription rights regardless of
the amount of shares purchased by other persons A plan may
provide that the directors and officers of the converting mutual
company may receive warrants, options, or nontransferable
subscription rights to purchase capital stock of the reorganized
company or its parent or a permitted issuer.
(c) A plan may provide that only eligible members whose
policies were in force as of a specified date are eligible to
receive compensation under the plan, which date must be no
earlier than one year before the effective date of the plan.
Subd. 12. [ALTERNATIVE PLAN OF CONVERSION.] In lieu of
selecting a plan of conversion provided for in this
section subdivision 8, 9, or 10, the converting mutual company
may convert according to a plan approved by the commissioner if
the commissioner finds that the plan does not prejudice the
interests of the eligible members, is fair and equitable, and is
based upon an independent appraisal of the market value of the
mutual company by a qualified person the fair market value of
the converting mutual company, and is a fair and equitable
allocation of any consideration to be given eligible members.
The commissioner may retain, at the converting mutual company's
expense, any qualified expert not otherwise a part of the
commissioner's staff to assist in reviewing the fair market
value of the company and in determining whether the alternative
plan may be approved and the valuation of the company.
Subd. 13. [EFFECT OF CONVERSION.] (a) Upon the conversion
of a converting mutual company to a reorganized company
according to this section, the corporate existence of the
converting mutual company must be is continued in the
reorganized company. All the rights, franchises, and interests
of the converting mutual company in and to all property and
things in action belonging to this property, is considered
transferred to and vested in the reorganized company without any
deed or transfer. Simultaneously, the reorganized company is
considered to have assumed all the obligations and liabilities
of the converting mutual company.
(b) The directors and officers of the converting mutual
company, unless otherwise specified in the plan of conversion,
shall serve as directors and officers of the reorganized company
until new directors and officers of the reorganized company are
duly elected according to the articles of incorporation and
bylaws of the reorganized company.
(c) All policies in force on the effective date of the
conversion continue to remain in force under the terms of those
policies, except that any voting rights of the policyholders
members provided for under the policies are extinguished on the
effective date of the conversion.
(d) All membership interests in the converting mutual
company are extinguished on the effective date of a conversion.
Subd. 14. [CONFLICT OF INTEREST.] No director, officer,
agent, employee of the converting mutual company, or any other
person shall receive a fee, commission, or other valuable
consideration, other than the person's usual regular salary and
compensation, for in any manner aiding, promoting, or assisting
in the conversion except as set forth in the plan approved by
the commissioner. This provision does not prohibit the payment
of reasonable fees and compensation to attorneys, accountants,
investment bankers, and actuaries for services performed in the
independent practice of their professions.
Subd. 15. [COSTS AND EXPENSES.] All the costs and expenses
connected with a plan of conversion must be paid for or
reimbursed by the converting mutual company or the reorganized
company except where the plan provides otherwise.
Subd. 16. [LIMITATION OF ACTIONS.] (a) An action
challenging the validity of or arising out of acts taken or
proposed to be taken according to this section must be commenced
within 180 days after the effective date of the conversion.
(b) The converting mutual company, the reorganized company,
or any defendant in an action described in paragraph (a), may
petition the court in the action to order a party to give
security for the reasonable attorney fees that may be incurred
by a party to the action. The amount of security may be
increased or decreased in the discretion of the court having
jurisdiction if a showing is made that the security provided is
or may become inadequate or excessive.
Subd. 16a. [CONTINUANCE OF PARTICIPATING POLICY
DIVIDENDS.] (a) To the extent required by this section, the plan
of reorganization of a converting mutual insurer that is a
mutual life insurance company or of a converting mutual holding
company that has a life insurance company subsidiary shall make
adequate provision for the protection of the reasonable dividend
expectations of the policyholders of active participating
policies, either through the establishment of a closed block or
other method acceptable by the commissioner.
(b) A closed block must be operated as follows:
(1) The converting mutual company's active participating
policies may be operated by the reorganized company as a closed
block of participating business.
(2) Assets must be allocated to the closed block of
participating business in an amount that ensures that the
assets, together with the anticipated revenue from the closed
block, are reasonably expected to be sufficient to permit the
closed block to pay all policy benefits, including dividends
according to the current dividend scale, and other items as
appropriate. The plan must be accompanied by an opinion of an
independent qualified actuary who meets the standards set forth
in the insurance laws or rules for the submission of actuarial
opinions as to the adequacy of reserves or assets. The opinion
must relate to the adequacy of the assets allocated to support
the closed block of business. The actuarial opinion must be
based on methods of analysis considered appropriate for those
purposes by the actuarial standards board.
(3) The reorganized company shall keep a separate
accounting for the closed block and shall make and include in
the annual statement to be filed with the commissioner each year
a separate statement showing the gains, losses, and expenses
properly attributable to the closed block.
(4) The closed block must be reviewed periodically by an
independent, qualified actuary for compliance with the
requirements of the plan and this subdivision and a copy of the
report must be provided to the commissioner and the reorganized
company.
(5) Notwithstanding the establishment of a closed block,
the entire assets of the company that issued the policies must
be available for the payment of benefits to policyholders.
Payment must first be made from the assets supporting the closed
block until exhausted, and then from the general assets of the
company which issued the policies.
Subd. 17. [SUPERVISORY CONVERSIONS.] The commissioner may
waive or alter any of the requirements of this section to
protect the interests of policyholders or members if the
converting mutual company is subject to the commissioner's
administrative supervision under chapter 60G or rehabilitation
under chapter 60B.
Subd. 18. [POSTCONVERSION ACQUISITION.] Prior to and for a
period of five three years following the date when the
distribution of consideration to the eligible members in
exchange for their membership interests is completed under a
plan of conversion according to this section, no person other
than the reorganized company shall directly or indirectly
acquire or offer to acquire in any manner ownership or
beneficial ownership of ten percent or more of any class of
voting security of the reorganized company, or of any affiliate
of the reorganized company which controls, directly or
indirectly, a majority of the voting power of the reorganized
company, without the prior approval of the commissioner. For
the purposes of this subdivision, the terms "affiliate" and
"person" have the meanings given in section 60D.15, and the term
"reorganized company" includes any successor of the reorganized
company.
Sec. 2. Minnesota Statutes 2000, section 60A.09,
subdivision 5, is amended to read:
Subd. 5. [REINSURANCE.] (1) [DEFINITIONS.] For the
purposes of this subdivision, the word "insurer" shall be deemed
to include the word "reinsurer," and the words "issue policies
of insurance" shall be deemed to include the words "make
contracts of reinsurance."
(2) [REINSURANCE OF MORE THAN 50 PERCENT OF INSURANCE
LIABILITIES.] Any contract of reinsurance whereby an insurer
cedes more than 50 percent of the total of its outstanding
insurance liabilities shall, if such insurer is incorporated by
or, if an insurer of a foreign country, has its principal office
in this state, be subject to the approval, in writing, by the
commissioner.
(3) [ACTUAL UNEARNED PREMIUM RESERVE TO BE CARRIED AS
LIABILITY.] Nothing in this subdivision shall be deemed to
permit the ceding insurer to receive, through the cession of the
whole of any risk or risks, any advantage in respect to its
unearned premium reserve that would reduce the same below the
actual amount thereof.
(4) [AIRCRAFT RISKS.] An insurer authorized to transact the
business specified in section 60A.06, subdivision 1, clauses (4)
and (5)(a), may through reinsurance assume any risk arising
from, related to, or incident to the manufacture, ownership, or
operation of aircraft and may retrocede any portion thereof;
provided, however, that no insurer may undertake any such
reinsurance business without the prior approval of the
commissioner and such reinsurance business shall be subject to
any regulations which may be promulgated by the commissioner.
Any such reinsurance business may be provided through pooling
arrangements with other insurers for purposes of spreading the
insurance risk.
Sec. 3. Minnesota Statutes 2001 Supplement, section
60A.14, subdivision 1, is amended to read:
Subdivision 1. [FEES OTHER THAN EXAMINATION FEES.] In
addition to the fees and charges provided for examinations, the
following fees must be paid to the commissioner for deposit in
the general fund:
(a) by township mutual fire insurance companies:
(1) for filing certificate of incorporation $25 and
amendments thereto, $10;
(2) for filing annual statements, $15;
(3) for each annual certificate of authority, $15;
(4) for filing bylaws $25 and amendments thereto, $10.
(b) by other domestic and foreign companies including
fraternals and reciprocal exchanges:
(1) for filing certified copy of certificate of articles of
incorporation, $100;
(2) for filing annual statement, $225;
(3) for filing certified copy of amendment to certificate
or articles of incorporation, $100;
(4) for filing bylaws, $75 or amendments thereto, $75;
(5) for each company's certificate of authority, $575,
annually.
(c) the following general fees apply:
(1) for each certificate, including certified copy of
certificate of authority, renewal, valuation of life policies,
corporate condition or qualification, $25;
(2) for each copy of paper on file in the commissioner's
office 50 cents per page, and $2.50 for certifying the same;
(3) for license to procure insurance in unadmitted foreign
companies, $575;
(4) for valuing the policies of life insurance companies,
one cent per $1,000 of insurance so valued, provided that the
fee shall not exceed $13,000 per year for any company. The
commissioner may, in lieu of a valuation of the policies of any
foreign life insurance company admitted, or applying for
admission, to do business in this state, accept a certificate of
valuation from the company's own actuary or from the
commissioner of insurance of the state or territory in which the
company is domiciled;
(5) for receiving and filing certificates of policies by
the company's actuary, or by the commissioner of insurance of
any other state or territory, $50;
(6) for each appointment of an agent filed with the
commissioner, $10;
(7) for filing forms and rates, $75 per filing, to be paid
on a quarterly basis in response to an invoice. Billing and
payment may be made electronically;
(8) for annual renewal of surplus lines insurer license,
$300;
(9) $250 filing fee for a large risk alternative rating
option plan that meets the $250,000 threshold requirement.
The commissioner shall adopt rules to define filings that
are subject to a fee.
Sec. 4. Minnesota Statutes 2001 Supplement, section 79.56,
subdivision 3, is amended to read:
Subd. 3. [PENALTIES.] (a) Any insurer using a rate or a
rating plan which has not been filed shall be subject to a fine
of up to $100 for each day the failure to file continues. The
commissioner may, after a hearing on the record, find that the
failure is willful. A willful failure to meet filing
requirements shall be punishable by a fine of up to $500 for
each day during which a willful failure continues. These
penalties shall be in addition to any other penalties provided
by law.
(b) Notwithstanding this subdivision, an employer that
generates $250,000 in annual written workers' compensation
premium under the rates and rating plan of an insurer before the
application of any large deductible rating plans, may be written
by that insurer using rates or rating plans that are not subject
to disapproval but which have been filed. For the purposes of
this paragraph, written workers' compensation premiums generated
from states other than Minnesota are included in calculating the
$250,000 threshold for large risk alternative rating option
plans.
Sec. 5. [APPROPRIATION.]
$70,000 is appropriated from the general fund to the
commissioner of commerce for the purpose of verifying premiums
in order to certify the $250,000 premium threshold under
Minnesota Statutes, section 79.56, subdivision 3.
Sec. 6. [EFFECTIVE DATE.]
Sections 3 to 5 are effective the day following final
enactment.
Presented to the governor April 12, 2002
Signed by the governor April 16, 2002, 11:57 a.m.
Official Publication of the State of Minnesota
Revisor of Statutes