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Office of the Revisor of Statutes

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.