1.1                                        A bill for an act&#10;1.2     relating to mutual insurance companies; changing certain conversion and &#10;1.3     reorganization provisions; modifying the exception to the restriction on insuring &#10;1.4     property in certain cities;amending Minnesota Statutes 2004, sections 60A.075, &#10;1.5     subdivision 1; 60A.077, subdivisions 1, 3, by adding a subdivision; 60A.207; &#10;1.6     60D.19, subdivision 1; 60K.56, subdivisions 5, 6; 64B.13; 67A.14, subdivision &#10;1.7     5; Minnesota Statutes 2005 Supplement, sections 66A.02, subdivisions 2, 3; &#10;1.8     66A.07, subdivision 2.&#10;1.9     BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:&#10;&#10;<a id="go.0.1.0"></a>1.10        Section 1. Minnesota Statutes 2004, section 60A.075, subdivision 1, is amended to &#10;1.11    read:&#10;1.12        Subdivision 1. <b>Definitions.</b> (a) For the purposes of this section, the terms in this &#10;1.13    subdivision have the meanings given them.&#10;1.14    (b) "Converting mutual insurer" means a Minnesota domestic mutual insurance &#10;1.15    company seeking to reorganize according to this section.&#10;1.16    (c) "Converting mutual holding company" means a Minnesota domestic mutual &#10;1.17    insurance holding company seeking to reorganize according to this section.&#10;1.18    (d) "Converting mutual company" means a converting mutual insurer or a converting &#10;1.19    mutual holding company seeking to convert according to this section.&#10;1.20    (e) "Reorganized company" means a converting mutual insurer or a converting &#10;1.21    mutual holding company, as the case may be, that has reorganized according to this section.&#10;1.22    (f) "Eligible member" means:&#10;1.23    (1) for converting mutual insurers, a policyholder whose policy is in force as of the &#10;1.24    record date. Unless otherwise provided in the plan, a person <del>insured</del><ins> covered</ins> under a &#10;1.25    group policy is not an eligible member, <del>unless</del><ins> except that a person insured under a group </ins>&#10;1.26    <ins>life insurance policy is an eligible member if,</ins> on the record date:&#10;2.1     (i) the person is insured <del>or covered</del> under a group life policy <del>or group annuity </del>&#10;2.2     <del>contract</del> under which <del>funds are</del><ins> cash value has</ins> accumulated and <ins>been </ins>allocated to the &#10;2.3     <del>respective covered</del><ins> insured</ins> persons;<ins> and</ins>&#10;2.4     <del>(ii) the person has the right to direct the application of the funds so allocated;</del>&#10;2.5     <del>(iii)</del><ins> (ii)</ins> the group policyholder makes no contribution to the premiums <del>or deposits</del> &#10;2.6     for the <ins>group </ins>policy <del>or contract</del>; and&#10;2.7     <del>(iv) the converting mutual company has the names and addresses of the persons </del>&#10;2.8     <del>covered under the group life policy or group annuity contract;</del>&#10;2.9     (2) for converting mutual holding companies, a person who is a member of the &#10;2.10    converting mutual holding company, as defined by the converting mutual holding &#10;2.11    company's articles of incorporation and bylaws, determined as of the record date.&#10;2.12    (g) "Plan of conversion" or "plan" means a plan adopted by a converting mutual &#10;2.13    company's board of directors under this section.&#10;2.14    (h) "Policy" means a policy or contract of insurance, including an annuity contract, &#10;2.15    issued by a converting mutual insurer or issued by a <del>stock</del><ins> reorganized</ins> insurance company &#10;2.16    subsidiary of a mutual holding company<ins>, but excluding individual noncontributory </ins>&#10;2.17    <ins>insurance policies for which the premiums are paid by a financial institution, association, </ins>&#10;2.18    <ins>employer, or other institutional entity</ins>.&#10;2.19    (i) "Active participating policy" means an individual policy of a converting mutual &#10;2.20    company or its subsidiary that: (1) is a participating policy; (2) is among a class of similar &#10;2.21    policies that have been credited with policy dividends at any time within the 12 months &#10;2.22    preceding the effective date of the conversion or that will, under the then current dividend &#10;2.23    scale, be credited with policy dividends if in force on a future policy anniversary; (3) gives &#10;2.24    rise to membership interests in the converting mutual company; and (4) is in force on the &#10;2.25    effective date or some other reasonable date identified in the plan.&#10;2.26    (j) "Commissioner" means the commissioner of commerce.&#10;2.27    (k) "Effective date of a conversion" means the date determined according to &#10;2.28    subdivision 6.&#10;2.29    (l) "Record date" means the date that the converting mutual company's board &#10;2.30    of directors adopts a plan of conversion, unless another date is specified in the plan of &#10;2.31    conversion and approved by the commissioner.&#10;2.32    (m) "Membership interests" means all rights as members of the converting &#10;2.33    mutual company, including, but not limited to, the rights to vote and to participate in &#10;2.34    any distributions of distributable net worth, whether or not incident to the company's &#10;2.35    liquidation.&#10;3.1     (n) "Distributable net worth" means the value of the converting mutual company &#10;3.2     as of the record date of the conversion, or other date approved by the commissioner, &#10;3.3     determined as set forth in the plan and approved by the commissioner. The commissioner &#10;3.4     may approve a valuation method based on any of the following: (1) the surplus as regards &#10;3.5     policyholders of a converting mutual insurer determined according to statutory accounting &#10;3.6     principles, which may be adjusted to reflect the current market values of assets and &#10;3.7     liabilities, together with any other adjustments that are appropriate in the circumstances; &#10;3.8     (2) the net equity of a converting mutual holding company or a converting mutual insurer &#10;3.9     determined according to generally accepted accounting principles, which may be adjusted &#10;3.10    to reflect the current market values of assets and liabilities, together with any other &#10;3.11    adjustments that are appropriate in the circumstances; (3) the fair market value of the &#10;3.12    converting mutual company determined by an independent, qualified person; or (4) any &#10;3.13    other reasonable valuation method.&#10;3.14    (o) "Permitted issuer" means: (1) a corporation organized and owned by the &#10;3.15    converting mutual company or by any other insurance company or insurance holding &#10;3.16    company for the purpose of purchasing and holding securities representing a majority of &#10;3.17    voting control of the reorganized company; (2) a stock insurance company owned by the &#10;3.18    converting mutual company or by any other insurance company or insurance holding &#10;3.19    company into which the converting mutual company will be merged; or (3) any other &#10;3.20    corporation approved by the commissioner.&#10;3.21    <ins><b>EFFECTIVE DATE.</b></ins><ins>This section is effective the day following final enactment.</ins>&#10;&#10;<a id="go.0.2.0"></a>3.22        Sec. 2. Minnesota Statutes 2004, section 60A.077, subdivision 1, is amended to read:&#10;3.23        Subdivision 1. <b>Formation.</b> (a) A domestic mutual insurance company, upon &#10;3.24    approval of the commissioner, may reorganize by forming an insurance holding company &#10;3.25    based upon a mutual plan and continuing the corporate existence of the reorganizing &#10;3.26    insurance company as a stock insurance company. The commissioner, if satisfied that the &#10;3.27    interests of the policyholders are properly protected and that the plan of reorganization is &#10;3.28    fair and equitable to the policyholders, may approve the proposed plan of reorganization &#10;3.29    and may require as a condition of approval the modifications of the proposed plan of &#10;3.30    reorganization as the commissioner finds necessary for the protection of the policyholders' &#10;3.31    interests. The commissioner shall retain jurisdiction over the mutual insurance holding &#10;3.32    company according to this section and chapter 60D to assure that policyholder and &#10;3.33    member interests are protected.&#10;3.34    (b) All of the initial voting shares of the capital stock of the reorganized insurance &#10;3.35    company must be issued to the mutual insurance holding company or to an intermediate &#10;4.1     stock holding company. The membership interests of the policyholders of the reorganized &#10;4.2     insurance company become membership interests in the mutual insurance holding &#10;4.3     company. "Membership interests" means those interests described in section  60A.075, &#10;4.4     subdivision 1, paragraph <del>(h)</del><ins> (m)</ins>. Policyholders of the reorganized insurance company &#10;4.5     shall be members of the mutual insurance holding company and their voting rights must &#10;4.6     be determined in accordance with the articles of incorporation and bylaws of the mutual &#10;4.7     insurance holding company. <ins>Policyholders of any other insurance company subsidiary </ins>&#10;4.8     <ins>of a mutual insurance holding company shall not be members of the mutual insurance </ins>&#10;4.9     <ins>holding company unless otherwise specified in the articles of incorporation or bylaws of </ins>&#10;4.10    <ins>the mutual insurance holding company. For purposes of this paragraph, "other insurance </ins>&#10;4.11    <ins>company subsidiary" means an insurance company subsidiary of a mutual insurance </ins>&#10;4.12    <ins>holding company that has not reorganized under this chapter or a comparable statute in </ins>&#10;4.13    <ins>another jurisdiction. </ins>The mutual insurance holding company shall, at all times, directly &#10;4.14    or through one or more intermediate stock holding companies, control a majority of the &#10;4.15    voting shares of the capital stock of the reorganized insurance company, taking into &#10;4.16    account any potential dilution resulting from convertible securities. &#10;4.17    (c) A majority of the board of directors of a mutual insurance holding company &#10;4.18    must be disinterested directors. For purposes of this section, a director is disinterested if &#10;4.19    (i) the director is not or has not within the past two years been an officer or employee of &#10;4.20    the mutual insurance holding company or any subsidiary or predecessor corporation, and &#10;4.21    (ii) the director does not hold, directly or indirectly, a material ownership interest in any &#10;4.22    subsidiary of the mutual insurance holding company. An ownership interest is material &#10;4.23    if it represents more than one-half of one percent of the voting securities of the issuer, &#10;4.24    or a larger percentage as the commissioner may approve.&#10;4.25    <ins><b>EFFECTIVE DATE.</b></ins><ins>This section is effective the day following final enactment.</ins>&#10;&#10;<a id="go.0.3.0"></a>4.26        Sec. 3. Minnesota Statutes 2004, section 60A.077, subdivision 3, is amended to read:&#10;4.27        Subd. 3. <b>Plan of reorganization; approval by commissioner.</b> (a) A reorganizing or &#10;4.28    merging insurer or a merging mutual insurance holding company shall, by the affirmative &#10;4.29    vote of a majority of its board of directors, adopt a plan of reorganization or merger &#10;4.30    consistent with the requirements of this section and file the plan with the commissioner. &#10;4.31    At any time before the approval of a plan by the commissioner, the company, by the &#10;4.32    affirmative vote of a majority of its directors, may amend or withdraw the plan. The plan &#10;4.33    must provide for the following:&#10;4.34    (1) in the case of a reorganization under subdivision 1, establishing a mutual &#10;4.35    insurance holding company with at least one stock insurance company subsidiary, or in &#10;5.1     the case of a reorganization under subdivision 2, a description of the terms and conditions &#10;5.2     of the proposed merger;&#10;5.3     (2) analyzing the benefits and risks attendant to the proposed reorganization, &#10;5.4     including the rationale for the reorganization and analysis of the comparative benefits and &#10;5.5     risks of a demutualization under section  60A.075; &#10;5.6     (3) protecting the immediate and long-term interests of existing policyholders;&#10;5.7     (4) ensuring immediate membership in the mutual insurance holding company of all &#10;5.8     existing policyholders of the reorganizing domestic insurance company;&#10;5.9     (5) describing a plan providing for membership interests of future policyholders;&#10;5.10    (6) describing the number of members of the board of directors of the mutual &#10;5.11    insurance holding company required to be policyholders;&#10;5.12    (7) describing the mutual insurance holding company's plan for distributions to &#10;5.13    members or other uses of accumulated mutual holding company earnings;&#10;5.14    (8) describing the nature and content of the annual report and financial statement &#10;5.15    to be sent <ins>or otherwise made available </ins>to each member;&#10;5.16    (9) <ins>describing a plan to send or otherwise make available to members the annual </ins>&#10;5.17    <ins>report and financial statement;</ins>&#10;5.18    <ins>(10) </ins>a copy of the proposed mutual insurance holding company's articles of &#10;5.19    incorporation and bylaws specifying all membership rights;&#10;5.20    <del>(10)</del><ins> (11)</ins> the names, addresses, and occupational information of all corporate officers &#10;5.21    and members of the proposed mutual insurance holding company board of directors;&#10;5.22    <del>(11)</del><ins> (12)</ins> information sufficient to demonstrate that the financial condition of the &#10;5.23    reorganizing or merging company will not be materially diminished upon reorganization, &#10;5.24    including information concerning any subsidiaries of the reorganizing or merging insurers &#10;5.25    that will become subsidiaries of the mutual insurance holding company or an intermediate &#10;5.26    holding company as part of the reorganization;&#10;5.27    <del>(12)</del><ins> (13)</ins> a copy of the articles of incorporation and bylaws for any proposed &#10;5.28    insurance company subsidiary or intermediate holding company subsidiary;&#10;5.29    <del>(13)</del><ins> (14)</ins> describing any plans for an initial sale or subscription of stock or other &#10;5.30    securities of the reorganized insurance company or any intermediate holding company; and&#10;5.31    <del>(14)</del><ins> (15)</ins> any other information requested by the commissioner or required by rule.&#10;5.32    (b) The commissioner may approve the plan upon finding that the requirements of &#10;5.33    this section have been fully met and the plan will protect the immediate and long-term &#10;5.34    interests of policyholders.&#10;6.1     (c) The commissioner may retain, at the reorganizing or merging mutual company's &#10;6.2     expense, any qualified experts not otherwise a part of the commissioner's staff to assist in &#10;6.3     reviewing the plan.&#10;6.4     (d) The commissioner may, but need not, conduct a public hearing regarding the &#10;6.5     proposed plan. The hearing must be held within 30 days after submission of a completed &#10;6.6     plan of reorganization to the commissioner. The commissioner shall give the reorganizing &#10;6.7     mutual company at least 20 days' notice of the hearing. At the hearing, the reorganizing &#10;6.8     mutual company, its policyholders, and any other person whose interest may be affected &#10;6.9     by the proposed reorganization, may present evidence, examine and cross-examine &#10;6.10    witnesses, and offer oral and written arguments or comments according to the procedure &#10;6.11    for contested cases under chapter 14. The persons participating may conduct discovery &#10;6.12    proceedings in the same manner as prescribed for the district courts of this state. All &#10;6.13    discovery proceedings must be concluded no later than three days before the scheduled &#10;6.14    commencement of the public hearing.&#10;6.15    <ins><b>EFFECTIVE DATE.</b></ins><ins>This section is effective the day following final enactment.</ins>&#10;&#10;<a id="go.0.4.0"></a>6.16        Sec. 4. Minnesota Statutes 2004, section 60A.077, is amended by adding a subdivision &#10;6.17    to read:&#10;6.18        <ins>Subd. 13.</ins> <ins><b>Conversion.</b></ins> <ins>(a) With the approval of the commissioner, a domestic </ins>&#10;6.19    <ins>insurance company that previously reorganized under this section into a stock subsidiary </ins>&#10;6.20    <ins>of a mutual insurance holding company may convert back into a mutual insurance </ins>&#10;6.21    <ins>company. It shall effect the conversion by merging with its parent mutual insurance </ins>&#10;6.22    <ins>holding company (a "parent mutual"), but only if the parent mutual owns or controls, </ins>&#10;6.23    <ins>directly or indirectly, all of the voting shares of capital stock of the reorganized insurance </ins>&#10;6.24    <ins>company. The reorganized subsidiary, as the surviving company, shall continue its </ins>&#10;6.25    <ins>corporate existence as a domestic mutual insurance company (a "remutualized company"). </ins>&#10;6.26    <ins>A conversion under this subdivision may, but need not, occur in connection with the </ins>&#10;6.27    <ins>simultaneous or subsequent merger of the remutualized company with a domestic or </ins>&#10;6.28    <ins>foreign mutual insurance company. Section 61A.37 is not applicable to a conversion </ins>&#10;6.29    <ins>under this subdivision.</ins>&#10;6.30    <ins>(b) The conversion can be effected by the parent mutual pursuant to a plan of </ins>&#10;6.31    <ins>conversion adopted as follows:</ins>&#10;6.32    <ins>(1) The parent mutual shall, by the affirmative vote of a majority of its board of </ins>&#10;6.33    <ins>directors, adopt a plan of conversion consistent with the requirements of this subdivision.</ins>&#10;7.1     <ins>(2) The parent mutual, by the affirmative vote of a majority of its board of directors, </ins>&#10;7.2     <ins>may amend the plan at any time before approval of the plan by the commissioner and may </ins>&#10;7.3     <ins>withdraw the plan at any time before the effective date of the plan.</ins>&#10;7.4     <ins>(3) The duties of the board of directors of the parent mutual, in considering or acting </ins>&#10;7.5     <ins>upon a proposed plan of conversion or related transaction, shall be as set forth in section </ins>&#10;7.6     <ins>302A.251 and, to the extent not inconsistent with that section, the parent mutual's articles </ins>&#10;7.7     <ins>of incorporation and bylaws.</ins>&#10;7.8     <ins>(c) The parent mutual shall file with the commissioner an application for approval </ins>&#10;7.9     <ins>of, and permission to carry out the reorganization according to, the plan of conversion. </ins>&#10;7.10    <ins>The application must include the following:</ins>&#10;7.11    <ins>(1) the plan of conversion;</ins>&#10;7.12    <ins>(2) the form of notice of meeting for eligible members to vote on the plan;</ins>&#10;7.13    <ins>(3) the form of any proxies to be solicited from eligible members;</ins>&#10;7.14    <ins>(4) the proposed articles of incorporation and bylaws of the remutualized company;</ins>&#10;7.15    <ins>(5) information required under chapter 60D if the plan results in a change of control </ins>&#10;7.16    <ins>of the remutualizing company;</ins>&#10;7.17    <ins>(6) if required by the commissioner, an independent actuarial opinion on matters </ins>&#10;7.18    <ins>affecting the structure or fairness of the plan; and</ins>&#10;7.19    <ins>(7) other information or documentation required by the commissioner or required by </ins>&#10;7.20    <ins>rule.</ins>&#10;7.21    <ins>(d) The commissioner shall determine, within 30 days of submission of the </ins>&#10;7.22    <ins>application, whether the application is complete.</ins>&#10;7.23    <ins>(e) If the plan of conversion proposes a simultaneous merger of the remutualized </ins>&#10;7.24    <ins>company with a foreign or domestic mutual insurance company, the commissioner may </ins>&#10;7.25    <ins>conduct concurrent proceedings under this subdivision and section 60A.16.</ins>&#10;7.26    <ins>(f) The commissioner may retain, at the parent mutual's expense, qualified experts </ins>&#10;7.27    <ins>not otherwise a part of the commissioner's staff, including without limitation, actuaries, </ins>&#10;7.28    <ins>accountants, investment bankers, and attorneys, to assist in reviewing the plan and </ins>&#10;7.29    <ins>supplemental materials and valuations.</ins>&#10;7.30    <ins>(g) The commissioner may, but need not, conduct a public hearing regarding the </ins>&#10;7.31    <ins>proposed plan of conversion. If a hearing is to be held, the commissioner shall designate a </ins>&#10;7.32    <ins>date for the public hearing promptly upon determining that the application is complete </ins>&#10;7.33    <ins>and that the forms of notice are adequate. The public hearing must be held on one or </ins>&#10;7.34    <ins>more days, the first beginning within 90 days after the date on which the commissioner </ins>&#10;7.35    <ins>determines the application is complete, unless the parent mutual requests, and the </ins>&#10;7.36    <ins>commissioner agrees to, a longer period for the purpose of preparing and distributing the </ins>&#10;8.1     <ins>notices required by this paragraph and by paragraph (i), clause (1). The hearing shall be in </ins>&#10;8.2     <ins>the nature of a legislative hearing and shall not constitute or be considered a contested </ins>&#10;8.3     <ins>case under chapter 14. The hearing may be conducted by the commissioner or by a </ins>&#10;8.4     <ins>person designated by the commissioner, which designee may be an administrative law </ins>&#10;8.5     <ins>judge. The parent mutual shall provide its eligible members with at least 45 days' notice </ins>&#10;8.6     <ins>of the hearing, the notice to be in the form, and provided in a manner, approved by the </ins>&#10;8.7     <ins>commissioner. The purpose of the hearing is to receive comments and information for </ins>&#10;8.8     <ins>the purpose of aiding the commissioner in making a decision on the plan of conversion. </ins>&#10;8.9     <ins>Persons wishing to make comments and submit information may submit written </ins>&#10;8.10    <ins>statements before the public hearing and may appear and be heard at the hearing. The </ins>&#10;8.11    <ins>commissioner's order or determination must be issued within 45 days after the closing of </ins>&#10;8.12    <ins>the record of the hearing by the commissioner or the hearing officer, as applicable, which </ins>&#10;8.13    <ins>record must not be closed until the record includes certification of the vote on the plan </ins>&#10;8.14    <ins>of conversion by the eligible members of the parent mutual. The commissioner shall </ins>&#10;8.15    <ins>issue a written decision detailing the reasons why the parent mutual company's plan </ins>&#10;8.16    <ins>of conversion is approved or disapproved.</ins>&#10;8.17    <ins>(h) The commissioner shall approve the application and permit the conversion </ins>&#10;8.18    <ins>according to the plan if the commissioner finds that: </ins>&#10;8.19    <ins>(1) the provisions of this subdivision have been fully met; and</ins>&#10;8.20    <ins>(2) the plan is not unfair or inequitable to the members of the parent mutual. </ins>&#10;8.21    <ins>The commissioner's order approving or disapproving a plan of conversion is a final agency </ins>&#10;8.22    <ins>decision subject to appeal according to sections 14.63 to 14.68.</ins>&#10;8.23    <ins>(i)(1) No later than 90 days following the date of the public hearing, if any, or the </ins>&#10;8.24    <ins>date the commissioner determines the application is complete if no hearing is held, the </ins>&#10;8.25    <ins>parent mutual shall give all eligible members notice of a regular or special meeting of the </ins>&#10;8.26    <ins>members called for the purpose of considering the plan and any corporate actions that </ins>&#10;8.27    <ins>are a part of, or are reasonably attendant to, the accomplishment of the plan, including </ins>&#10;8.28    <ins>without limitation, any proposed merger of the remutualizing company with a domestic or </ins>&#10;8.29    <ins>foreign mutual insurance company.</ins>&#10;8.30    <ins>(2) A copy of the plan or a summary of the plan must accompany the notice. The </ins>&#10;8.31    <ins>notice must be mailed to each eligible member's last known address, as shown on the </ins>&#10;8.32    <ins>parent mutual's records, not less than 45 days before the date of the meeting, unless the </ins>&#10;8.33    <ins>commissioner directs a later date for mailing. If the meeting to vote upon the plan is held </ins>&#10;8.34    <ins>coincident with the parent mutual's annual meeting of members, only one combined notice </ins>&#10;8.35    <ins>of meeting is required. The notice of the meeting of eligible members may be combined </ins>&#10;8.36    <ins>with the notice of hearing described in paragraph (g).</ins>&#10;9.1     <ins>(3) If the parent mutual complies substantially and in good faith with the notice </ins>&#10;9.2     <ins>requirements of this section, the parent mutual's failure to give any member or members </ins>&#10;9.3     <ins>required notice does not impair the validity of an action taken under this section.</ins>&#10;9.4     <ins>(j)(1) The plan must be adopted upon receiving the affirmative vote of a majority of </ins>&#10;9.5     <ins>the votes cast by eligible members.</ins>&#10;9.6     <ins>(2) Eligible members may vote in person or by proxy. The form of any proxy must </ins>&#10;9.7     <ins>be filed with and approved by the commissioner.</ins>&#10;9.8     <ins>(k)(1) Following approval by the eligible members, the parent mutual shall file a </ins>&#10;9.9     <ins>copy of the converting subsidiary's amended or restated articles of incorporation with the </ins>&#10;9.10    <ins>commissioner, together with a certified copy of the minutes of the meeting of the members </ins>&#10;9.11    <ins>of the parent mutual at which the plan was adopted and a certified copy of the plan. The </ins>&#10;9.12    <ins>commissioner shall review and, if appropriate, approve the amended or restated articles. </ins>&#10;9.13    <ins>After approval by the commissioner, the parent mutual shall file the articles with the </ins>&#10;9.14    <ins>secretary of state as provided by section 60A.07, subdivision 1d, and chapter 302A.</ins>&#10;9.15    <ins>(2) The conversion is effective on the date of filing an amendment or restatement of </ins>&#10;9.16    <ins>the articles of incorporation with the secretary of state, or on a later date if the plan so </ins>&#10;9.17    <ins>specifies.</ins>&#10;9.18    <ins>(l) Upon the effective date of the conversion in accordance with this subdivision:</ins>&#10;9.19    <ins>(1) The corporate existence of the parent mutual is continued in the converted </ins>&#10;9.20    <ins>subsidiary. All the rights, privileges, powers, franchises, and interests of the parent </ins>&#10;9.21    <ins>mutual in and to all property and things in action belonging to the parent company are </ins>&#10;9.22    <ins>considered transferred to and vested in the converted subsidiary without any deed or </ins>&#10;9.23    <ins>transfer. Simultaneously, the converted subsidiary is considered to have assumed all the </ins>&#10;9.24    <ins>obligations and liabilities of the parent mutual.</ins>&#10;9.25    <ins>(2) The directors and officers of the parent mutual, unless otherwise specified in the </ins>&#10;9.26    <ins>plan of conversion, shall serve as directors and officers of the converted subsidiary until </ins>&#10;9.27    <ins>new directors and officers of the converted subsidiary are duly elected according to the </ins>&#10;9.28    <ins>articles of incorporation and bylaws of the converted subsidiary.</ins>&#10;9.29    <ins>(3) All policies issued by the converted subsidiary in force on the effective date </ins>&#10;9.30    <ins>of the conversion remain in force subject to the terms of those policies, except that the </ins>&#10;9.31    <ins>membership interests in the parent mutual shall become membership interests in the </ins>&#10;9.32    <ins>converted subsidiary, and member voting rights in the converted subsidiary shall be </ins>&#10;9.33    <ins>exclusively governed by the converted subsidiary's articles and bylaws.</ins>&#10;9.34    <ins>(4) Except as otherwise provided in the plan of conversion, the converted subsidiary </ins>&#10;9.35    <ins>is no longer subject to the requirements of subdivisions 1 to 12 of this section or to the </ins>&#10;9.36    <ins>terms of the original plan of reorganization.</ins>&#10;10.1    <ins>(5) At the effective time of the merger, all of the voting shares of capital stock of the </ins>&#10;10.2    <ins>converted subsidiary shall be deemed to be redeemed and canceled.</ins>&#10;10.3    <ins>(6) Any provisions of the original plan of reorganization pertaining to the protection </ins>&#10;10.4    <ins>of reasonable policyholder dividend expectations may be continued, modified, or </ins>&#10;10.5    <ins>extinguished as provided under the plan of conversion and approved by the commissioner.</ins>&#10;10.6    <ins>(m) No director, officer, agent, employee of the parent mutual or the converting </ins>&#10;10.7    <ins>subsidiary, or any other person shall receive a fee, commission, or other valuable </ins>&#10;10.8    <ins>consideration, other than the person's usual regular salary and compensation, for in any </ins>&#10;10.9    <ins>manner aiding, promoting, or assisting in the conversion except as set forth in the plan </ins>&#10;10.10   <ins>approved by the commissioner. This provision does not prohibit the payment of reasonable </ins>&#10;10.11   <ins>fees and compensation to attorneys, accountants, investment bankers, and actuaries for </ins>&#10;10.12   <ins>services performed in the independent practice of their professions.</ins>&#10;10.13   <ins>(n) All the costs and expenses connected with a plan of conversion must be paid </ins>&#10;10.14   <ins>for or reimbursed by the parent mutual or converted subsidiary except where the plan </ins>&#10;10.15   <ins>provides otherwise.</ins>&#10;10.16   <ins>(o)(1) An action challenging the validity of or arising out of acts taken or proposed </ins>&#10;10.17   <ins>to be taken according to this section must be commenced within 180 days after the </ins>&#10;10.18   <ins>effective date of the conversion.</ins>&#10;10.19   <ins>(2) The parent mutual, the converted subsidiary, or any defendant in an action </ins>&#10;10.20   <ins>described in clause (1) may petition the court in the action to order a party to give security </ins>&#10;10.21   <ins>for the reasonable attorney fees that may be incurred by a party to the action. The amount </ins>&#10;10.22   <ins>of security may be increased or decreased in the discretion of the court having jurisdiction </ins>&#10;10.23   <ins>if a showing is made that the security provided is or may become inadequate or excessive.</ins>&#10;10.24   <ins>(p) For purposes of this subdivision, the following terms have the meanings given.</ins>&#10;10.25   <ins>(1) "Eligible member" means a person who is a member of the parent mutual, as </ins>&#10;10.26   <ins>defined by the parent mutual's articles of incorporation and bylaws, determined as of </ins>&#10;10.27   <ins>the record date.</ins>&#10;10.28   <ins>(2) "Membership interests" means all rights as members of  the parent mutual, </ins>&#10;10.29   <ins>including, but not limited to, the rights to vote.</ins>&#10;10.30   <ins>(3) "Plan of conversion" or "plan" means a plan adopted by a parent mutual's board </ins>&#10;10.31   <ins>of directors under this section.</ins>&#10;10.32   <ins>(4) "Record date" means the date that the parent mutual's board of directors adopts a </ins>&#10;10.33   <ins>plan of conversion, unless another date is specified in the plan of conversion and approved </ins>&#10;10.34   <ins>by the commissioner.</ins>&#10;10.35   <ins>(5) "Converted subsidiary" means a converting subsidiary that has converted into a </ins>&#10;10.36   <ins>mutual insurance company under this subdivision.</ins>&#10;11.1    <ins>(6) "Converting subsidiary" means a Minnesota domestic insurance company that </ins>&#10;11.2    <ins>previously reorganized under this section that is seeking to convert back into a mutual </ins>&#10;11.3    <ins>insurance company in accordance with this subdivision.</ins>&#10;11.4    <ins><b>EFFECTIVE DATE.</b></ins><ins>This section is effective the day following final enactment.</ins>&#10;&#10;<a id="go.0.5.0"></a>11.5        Sec. 5. Minnesota Statutes 2004, section 60A.207, is amended to read:&#10;11.6    <b>60A.207 POLICIES TO INCLUDE NOTICE.</b>&#10;11.7    Each policy, cover note, or instrument evidencing surplus lines insurance from an &#10;11.8    eligible surplus lines insurer which is delivered to an insured or a representative of an &#10;11.9    insured shall have printed, typed, or stamped <del>in red ink</del> upon its face in not less than 10 &#10;11.10   point type, the following notice: "THIS INSURANCE IS ISSUED PURSUANT TO THE &#10;11.11   MINNESOTA SURPLUS LINES INSURANCE ACT. THE INSURER IS AN ELIGIBLE &#10;11.12   SURPLUS LINES INSURER BUT IS NOT OTHERWISE LICENSED BY THE STATE &#10;11.13   OF MINNESOTA. IN CASE OF INSOLVENCY, PAYMENT OF CLAIMS IS NOT &#10;11.14   GUARANTEED." This notice shall not be covered or concealed in any manner.&#10;&#10;<a id="go.0.6.0"></a>11.15       Sec. 6. Minnesota Statutes 2004, section 60D.19, subdivision 1, is amended to read:&#10;11.16       Subdivision 1. <b>Registration.</b> Every insurer that is authorized to do business in this &#10;11.17   state and that is a member of an insurance holding company system shall register with the &#10;11.18   commissioner, except a foreign insurer subject to registration requirements and standards &#10;11.19   adopted by statute or regulation in the jurisdiction of its domicile that are substantially &#10;11.20   similar to those contained in:&#10;11.21   (1) this section;&#10;11.22   (2) section  60D.20, subdivisions 1, paragraph (a); 2; and 4; and &#10;11.23   (3) either section  60D.20, subdivision 1, paragraph (b), or a provision such as the &#10;11.24   following: Each registered insurer shall keep current the information required to be &#10;11.25   disclosed in its registration statement by reporting all material changes or additions within &#10;11.26   15 days after the end of the month in which it learns of each such change or addition. &#10;11.27   Any insurer that is subject to registration under this section shall register within 15 &#10;11.28   days after it becomes subject to registration, and annually thereafter by <del>March</del><ins> June</ins> 1 of &#10;11.29   each year for the previous calendar year, unless the commissioner for good cause shown &#10;11.30   extends the time for registration, and then within such extended time. The commissioner &#10;11.31   may require any insurer authorized to do business in the state that is a member of a &#10;11.32   holding company system, and that is not subject to registration under this section, to &#10;11.33   furnish a copy of the registration statement, the summary specified in subdivision 3 or &#10;12.1    other information filed by the insurance company with the insurance regulatory authority &#10;12.2    of domiciliary jurisdiction.&#10;&#10;<a id="go.0.7.0"></a>12.3        Sec. 7. Minnesota Statutes 2004, section 60K.56, subdivision 5, is amended to read:&#10;12.4        Subd. 5. <b>Criteria for course accreditation.</b> (a) The commissioner may accredit a &#10;12.5    course only to the extent it is designed to impart substantive and procedural knowledge of &#10;12.6    the insurance field. The burden of demonstrating that the course satisfies this requirement &#10;12.7    is on the individual or organization seeking accreditation. The commissioner shall approve &#10;12.8    any educational program approved by Minnesota Continuing Legal Education relating to &#10;12.9    the insurance field. The commissioner is authorized to establish a procedure for renewal &#10;12.10   of course accreditation.&#10;12.11   (b) The commissioner shall approve or disapprove professional designation &#10;12.12   examinations that are recommended for approval by the advisory task force. In order &#10;12.13   for an insurance producer to receive full continuing education credit for a professional &#10;12.14   designation examination, the producer must pass the examination. A producer may &#10;12.15   not receive credit for classroom instruction preparing for the professional designation &#10;12.16   examination and also receive continuing education credit for passing the professional &#10;12.17   designation examination.&#10;12.18   (c) The commissioner may not accredit a course:&#10;12.19   (1) that is designed to prepare students for a license examination;&#10;12.20   <del>(2) in mechanical office or business skills, including typing, speedreading, use of </del>&#10;12.21   <del>calculators, or other machines or equipment;</del>&#10;12.22   <del>(3)</del><ins> (2)</ins> in sales promotion<del>, including meetings held in conjunction with the general </del>&#10;12.23   <del>business of the licensed agent</del>; or&#10;12.24   <del>(4)</del><ins> (3)</ins> in motivation, the art of selling, <ins>or </ins>psychology<del>, or time management</del>.&#10;&#10;<a id="go.0.8.0"></a>12.25       Sec. 8. Minnesota Statutes 2004, section 60K.56, subdivision 6, is amended to read:&#10;12.26       Subd. 6. <b>Minimum education requirement.</b> Each person subject to this section &#10;12.27   shall complete a minimum of 30 credit hours of courses accredited by the commissioner &#10;12.28   during each 24-month licensing period. Any person whose initial licensing period extends &#10;12.29   more than six months shall complete 15 hours of courses accredited by the commissioner &#10;12.30   during the initial license period. Any person teaching or lecturing at an accredited &#10;12.31   course qualifies for three times the number of credit hours that would be granted to a &#10;12.32   person completing the accredited course. No more than one-half of the credit hours per &#10;12.33   licensing period required under this section may be credited to a person for attending any &#10;12.34   combination of courses either sponsored by, offered by, or affiliated with an insurance &#10;13.1    company or its agents; or offered using new delivery technology, including computer, &#10;13.2    interactive technology, and the Internet. <ins>A licensee may obtain up to five hours of the credit </ins>&#10;13.3    <ins>hours per licensing period from classes in the area of professional development including, </ins>&#10;13.4    <ins>but not limited to, best practices, ethics, privacy protection, customer/client, personal and </ins>&#10;13.5    <ins>safety awareness, software applications, agency management, claims settlement, business </ins>&#10;13.6    <ins>perpetuation, and disaster planning. </ins>Courses sponsored by, offered by, or affiliated with an &#10;13.7    insurance company or agent may restrict its students to agents of the company or agency.&#10;&#10;<a id="go.0.9.0"></a>13.8        Sec. 9. Minnesota Statutes 2004, section 64B.13, is amended to read:&#10;13.9    <b>64B.13 REINSURANCE.</b>&#10;13.10   (a) A domestic society may, by a reinsurance agreement, cede any individual risk &#10;13.11   or risks in whole or in part to an insurer, other than another fraternal benefit society, &#10;13.12   having the power to make such reinsurance and authorized to do business in this state, &#10;13.13   or if not so authorized, one which is approved by the commissioner, but no such society &#10;13.14   may reinsure substantially all of its insurance in force without the written permission of &#10;13.15   the commissioner. It may take credit for the reserves on the ceded risks to the extent &#10;13.16   reinsured, but no credit shall be allowed as an admitted asset or as a deduction from &#10;13.17   liability to a ceding society for reinsurance made, ceded, renewed, or otherwise becoming &#10;13.18   effective after August 1, 1985, unless the reinsurance is payable by the assuming insurer &#10;13.19   on the basis of the liability of the ceding society under the contract or contracts reinsured &#10;13.20   without diminution because of the insolvency of the ceding society.&#10;13.21   (b) Notwithstanding the limitation in paragraph (a), a society may reinsure the risks &#10;13.22   of another society in a consolidation or merger approved by the commissioner under &#10;13.23   section  64B.14<ins>, or under such other circumstances as approved by the commissioner </ins>&#10;13.24   <ins>including reinsurance of an affiliated insurance company</ins>. &#10;&#10;<a id="go.0.10.0"></a>13.25       Sec. 10. Minnesota Statutes 2005 Supplement, section 66A.02, subdivision 2, is &#10;13.26   amended to read:&#10;13.27       Subd. 2. <b>Mutual holding companies.</b> For purposes of sections 66A.01 to 66A.07 &#10;13.28   and 66A.21, <del>the term</del> <ins>unless the context clearly suggests otherwise, </ins>"domestic mutual &#10;13.29   insurance company" is deemed to include domestic mutual insurance holding companies &#10;13.30   organized under section 60A.077 and <del>the term</del> "member" is deemed to include members of &#10;13.31   a domestic mutual insurance holding company as specified in section 60A.077, subdivision &#10;13.32   1, paragraph (b). For purposes of section 60A.07, subdivisions 1, 1a, <del>1b,</del> 1c, 1d, and 1e, a &#10;13.33   domestic mutual insurance holding company is deemed to be an insurance corporation.&#10;14.1    <ins><b>EFFECTIVE DATE.</b></ins><ins>This section is effective the day following final enactment.</ins>&#10;&#10;<a id="go.0.11.0"></a>14.2        Sec. 11. Minnesota Statutes 2005 Supplement, section 66A.02, subdivision 3, is &#10;14.3    amended to read:&#10;14.4        Subd. 3. <b>Terms.</b> For purposes of applying chapter 302A to domestic mutual &#10;14.5    insurance companies, members of a domestic mutual insurance company must be treated &#10;14.6    in the same manner as shareholders of a stock corporation, except as otherwise provided &#10;14.7    in this chapter. Every member of the mutual insurance company shall be deemed to hold &#10;14.8    one share of the company for purposes of applying provisions of chapter 302A relating &#10;14.9    to voting. Mutual insurance companies are not included in the definitions of "closely &#10;14.10   held corporation," "publicly held corporation," or "issuing public corporation." The term &#10;14.11   "distribution" does not include dividends paid on participating policies issued by the &#10;14.12   mutual insurance company or any <ins>reorganized </ins>insurance company subsidiary in the case &#10;14.13   of a mutual insurance holding company.&#10;14.14   <ins><b>EFFECTIVE DATE.</b></ins><ins>This section is effective the day following final enactment.</ins>&#10;&#10;<a id="go.0.12.0"></a>14.15       Sec. 12. Minnesota Statutes 2005 Supplement, section 66A.07, subdivision 2, is &#10;14.16   amended to read:&#10;14.17       Subd. 2. <b>Life insurance companies.</b> (a) Unless otherwise approved by the &#10;14.18   commissioner of commerce, a domestic mutual life insurance company member is any &#10;14.19   person who is listed on the records of the company as the owner of an in-force policy, and &#10;14.20   each member is entitled to one vote regardless of the number of policies owned by the &#10;14.21   member or the amounts of coverage provided to the member. <ins>For purposes of this section, </ins>&#10;14.22   "policy" means a policy or contract of insurance, including an annuity contract issued by &#10;14.23   the company<ins>, but excluding individual noncontributory insurance policies for which the </ins>&#10;14.24   <ins>premiums are paid by a financial institution, association, employer, or other institutional </ins>&#10;14.25   <ins>entity</ins>. Except as otherwise provided in the company's certificate or bylaws, a person &#10;14.26   <del>insured</del><ins> covered</ins> under a group policy is not a member by virtue of such coverage, <del>unless</del><ins> </ins>&#10;14.27   <ins>except that a person insured under a group life insurance policy is a member if:</ins> (1) the &#10;14.28   person is insured <del>or covered</del> under a group life policy <del>or group annuity contract</del> under &#10;14.29   which <del>funds are</del><ins> cash value has</ins> accumulated and <ins>been </ins>allocated to the <del>respective covered</del><ins> </ins>&#10;14.30   <ins>insured</ins> persons; <ins>and </ins>(2)<del> the person has the right to direct the application of the funds so </del>&#10;14.31   <del>allocated; (3)</del> the group policyholder makes no contribution to the premiums or deposits &#10;14.32   for the policy <del>or contract; and (4) the company has the names and addresses of the persons </del>&#10;14.33   <del>covered under the group life policy or group annuity contract</del>.&#10;15.1    (b) Every member <ins>of a mutual life insurance company </ins>must be notified of its annual &#10;15.2    meetings by a written notice mailed to the member's address, or by an imprint on the front &#10;15.3    or back of the policy, premium notice, receipt, or certificate of renewal, substantially &#10;15.4    as follows:&#10;15.5    "The policyowner is hereby notified that by virtue of his or her ownership of this &#10;15.6    policy, the policyowner is a member of the .......... Insurance Company, and that the annual &#10;15.7    meetings of said company are held at its home office on the .... day of .... in each year, &#10;15.8    at .... o'clock."&#10;15.9    For mutual <ins>life </ins>insurance holding companies, the notice of the annual meeting &#10;15.10   may be modified to reflect that the policyowner, by virtue of his or her ownership of a &#10;15.11   policy issued by a subsidiary insurance company reorganized under section 60A.077, is a &#10;15.12   member of the mutual insurance holding company. Notice given in this manner is deemed &#10;15.13   to comply with the requirements of section 302A.435.&#10;15.14   <ins><b>EFFECTIVE DATE.</b></ins><ins>This section is effective the day following final enactment.</ins>&#10;&#10;<a id="go.0.13.0"></a>15.15       Sec. 13. Minnesota Statutes 2004, section 67A.14, subdivision 5, is amended to read:&#10;15.16       Subd. 5. <b>What may not be insured; property outside designated territory; </b>&#10;15.17   <b>exceptions.</b> (a) No township mutual insurance company shall insure any property in &#10;15.18   cities of the first or second class.&#10;15.19   (b) If by annexation or other growth in population a city, town, township or &#10;15.20   unorganized territory or any portion thereof is reclassified into a city of the second class, a &#10;15.21   township mutual insurance company may <del>continue to</del> do business in that portion of the &#10;15.22   city in which it was authorized to do business prior to the reclassification.&#10;15.23   (c) A township mutual insurance company may insure any real or personal property, &#10;15.24   including qualified or secondary property, subject to the limitations in subdivision 1, &#10;15.25   paragraph (b), located outside of the limits of the territory in which the company is &#10;15.26   authorized by its certificate or articles of incorporation to transact business, if the company &#10;15.27   is already covering qualified property belonging to the insured, inside the limits of the &#10;15.28   company's territory.&#10;15.29   (d) A township mutual fire insurance company may insure property temporarily &#10;15.30   outside of the authorized territory of the township mutual insurance company.&#10;15.31   <ins>(e) Except as otherwise provided in paragraph (b) or elsewhere in this chapter, a </ins>&#10;15.32   <ins>company may operate in adjoining cities of the second class if approval has been granted </ins>&#10;15.33   <ins>by the commissioner.</ins>&#10;