Bill Text: IA HF2455 | 2017-2018 | 87th General Assembly | Introduced
Bill Title: A bill for an act relating to the division of domestic stock insurers into two or more domestic stock insurers. (Formerly HSB 600.)
Spectrum: Committee Bill
Status: (Introduced - Dead) 2018-05-02 - Withdrawn. [HF2455 Detail]
Download: Iowa-2017-HF2455-Introduced.html
House File 2455 - Introduced HOUSE FILE BY COMMITTEE ON COMMERCE (SUCCESSOR TO HSB 600) (COMPANION TO LSB 5520SV by Committee on commerce) A BILL FOR 1 An Act relating to the division of domestic stock insurers into 2 two or more domestic stock insurers. 3 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: TLSB 5520HV (3) 87 ko/rj PAG LIN 1 1 Section 1. NEW SECTION. 521I.1 Definitions. 1 2 As used in this chapter, unless the context otherwise 1 3 requires: 1 4 1. "Assets" means property whether real, personal, mixed, 1 5 tangible, or intangible and any right or interest therein, 1 6 including all rights under a contract or other agreement. 1 7 2. "Capital" means the capital stock component of a 1 8 statutory surplus as defined in the latest edition of the 1 9 national association of insurance commissioners' accounting 1 10 practices and procedures manual. 1 11 3. "Commissioner" means the commissioner of insurance. 1 12 4. "Divide" or "division" means a transaction in which 1 13 a domestic stock insurer splits into two or more resulting 1 14 domestic stock insurers. 1 15 5. "Dividing insurer" means a domestic stock insurer that 1 16 approves a plan of division. 1 17 6. "Domestic stock insurer" means a stock insurer domiciled 1 18 and organized under the law of this state other than a company 1 19 qualified and authorized by the commissioner to transact the 1 20 business of insurance in this state by certificate issued 1 21 pursuant to chapter 508, 512B, 514, 514B, 515, 5l5E, or 520. 1 22 7. "Liability" means a secured or contingent debt or 1 23 obligation arising in any manner. 1 24 8. "Resulting insurer" means a dividing domestic stock 1 25 insurer that survives a division or a new domestic stock 1 26 insurer that is created by a division. 1 27 9. "Shareholder" means the person in whose name shares are 1 28 registered in the records of a corporation or the beneficial 1 29 owner of shares to the extent of the rights granted by a 1 30 nominee certificate on file with a corporation. 1 31 10. "Surplus" means total statutory surplus less capital 1 32 stock calculated in accordance with the latest edition of the 1 33 national association of insurance commissioners' accounting 1 34 practices and procedures manual. 1 35 11. "Transfer" includes an assignment, assumption, 2 1 conveyance, sale, lease, encumbrance, security interest, gift, 2 2 or transfer by operation of law. 2 3 Sec. 2. NEW SECTION. 521I.2 Plan of division == general 2 4 requirements. 2 5 A domestic stock insurer's plan of division shall include 2 6 all of the following: 2 7 1. The name of the domestic stock insurer seeking to divide. 2 8 2. The name of each resulting insurer created by the 2 9 proposed division and for each resulting insurer a copy of all 2 10 of the following: 2 11 a. Proposed articles of incorporation. 2 12 b. Proposed bylaws. 2 13 3. The manner of allocating assets and liabilities, 2 14 including policy liabilities, between or among all resulting 2 15 insurers. 2 16 4. The manner of distributing shares in the resulting 2 17 insurers to the dividing insurer or the dividing insurer's 2 18 shareholders. 2 19 5. A reasonable description of all liabilities and all 2 20 assets that the dividing insurer proposes to allocate to each 2 21 resulting insurer, including the manner by which the dividing 2 22 insurer proposes to allocate all reinsurance contracts. 2 23 6. All terms and conditions required by the laws of this 2 24 state and the articles and bylaws of the dividing insurer. 2 25 7. All other terms and conditions of the division. Terms of 2 26 a plan of division may be made dependent on facts objectively 2 27 ascertainable outside of the plan of division. 2 28 Sec. 3. NEW SECTION. 521I.3 Plan of division == dividing 2 29 insurer to survive division. 2 30 If a dividing insurer will survive a division, the plan 2 31 of division shall include, in addition to the requirements 2 32 pursuant to section 521I.2, all of the following: 2 33 1. All proposed amendments to the dividing insurer's 2 34 articles of incorporation and bylaws. 2 35 2. If the dividing insurer intends to cancel some but not 3 1 all shares in the dividing insurer, the manner in which the 3 2 dividing insurer intends to cancel such shares. 3 3 3. If the dividing insurer intends to convert some but 3 4 not all shares in the dividing insurer into securities, 3 5 obligations, money, other property, rights to acquire shares or 3 6 securities, or any combination thereof, a statement disclosing 3 7 the manner in which the dividing insurer intends to convert 3 8 such shares. 3 9 Sec. 4. NEW SECTION. 521I.4 Plan of division == dividing 3 10 insurer not to survive division. 3 11 If a dividing insurer will not survive a division, the plan 3 12 of division shall include, in addition to the requirements 3 13 pursuant to section 521I.2, the manner in which the dividing 3 14 insurer will cancel or convert shares in the dividing insurer's 3 15 shares into shares, securities, obligations, money, other 3 16 property, rights to acquire shares or securities, or any 3 17 combination thereof. 3 18 Sec. 5. NEW SECTION. 521I.5 Amending plan of division. 3 19 1. A dividing insurer may amend the dividing insurer's 3 20 plan of division in accordance with any procedures set forth 3 21 in the plan of division, or if no such procedures are set 3 22 forth in the plan of division, in a manner determined by the 3 23 board of directors of the dividing insurer. A shareholder 3 24 that is entitled to vote on or consent to approval of the plan 3 25 of division shall be entitled to vote on or consent to an 3 26 amendment of the plan of division that will affect any of the 3 27 following: 3 28 a. The amount or kind of shares, securities, obligations, 3 29 money, other property, rights to acquire shares or securities, 3 30 or any combination thereof to be received by any of the 3 31 shareholders of the dividing insurer under the plan of 3 32 division. 3 33 b. The articles of incorporation or bylaws of any resulting 3 34 insurer that become effective when the division becomes 3 35 effective except for changes that do not require approval of 4 1 the shareholders of the resulting insurer under such articles 4 2 of incorporation or bylaws. 4 3 c. Any other terms or conditions of the plan of division 4 4 if the change may adversely affect the shareholders in any 4 5 material respect. 4 6 2. A dividing insurer shall not amend the dividing insurer's 4 7 plan of division after the plan of division becomes effective. 4 8 Sec. 6. NEW SECTION. 521I.6 Abandoning plan of division. 4 9 1. A dividing insurer may abandon the dividing insurer's 4 10 plan of division in any of the following circumstances: 4 11 a. After the dividing insurer has approved the plan 4 12 of division without any action by the shareholders and in 4 13 accordance with any procedures set forth in the plan of 4 14 division, or if no such procedures are set forth in the plan of 4 15 division, in a manner determined by the board of directors of 4 16 the dividing insurer. 4 17 b. After the dividing insurer has filed a certificate 4 18 of division with the secretary of state pursuant to section 4 19 521I.10, the dividing insurer may file a signed certificate of 4 20 abandonment with the secretary of state and file a copy with 4 21 the commissioner. The certificate of abandonment shall be 4 22 effective on the date the certificate of abandonment is filed 4 23 with the secretary of state. 4 24 2. A dividing insurer shall not abandon the dividing 4 25 insurer's plan of division after the plan of division becomes 4 26 effective. 4 27 Sec. 7. NEW SECTION. 521I.7 Approval of plan of division == 4 28 articles of incorporation and bylaws. 4 29 1. A dividing insurer shall not file a plan of division with 4 30 the commissioner until such plan of division has been approved 4 31 in accordance with all provisions of the dividing insurer's 4 32 articles of incorporation and bylaws. If the dividing 4 33 insurer's articles of incorporation and bylaws do not provide 4 34 for approval of a plan of division, the dividing insurer shall 4 35 not file the plan of division with the commissioner unless 5 1 such plan of division has been approved in accordance with all 5 2 provisions of the dividing insurer's articles of incorporation 5 3 and bylaws that provide for approval of a merger. 5 4 2. If a provision of a dividing insurer's articles of 5 5 incorporation or bylaws adopted before the effective date of 5 6 this Act requires that a specific number of or a percentage 5 7 of the board of directors or shareholders propose or adopt a 5 8 plan of merger or impose other procedures for the proposal or 5 9 adoption of a plan of merger, the dividing insurer shall adhere 5 10 to such provision in proposing or adopting a plan of division. 5 11 If any such provision of the articles of incorporation or 5 12 bylaws is amended on or after the effective date of this Act, 5 13 such provision shall apply to a division thereafter only in 5 14 accordance with its express terms. 5 15 Sec. 8. NEW SECTION. 521I.8 Commissioner approval of plan 5 16 of division. 5 17 1. After a dividing insurer approves a plan of division 5 18 pursuant to section 521I.7, the dividing insurer shall file the 5 19 plan of division with the commissioner. Within ten business 5 20 days of filing the plan of division with the commissioner, the 5 21 dividing insurer shall provide notice of the filing to each 5 22 reinsurer that is a party to a reinsurance contract allocated 5 23 in the plan of division. 5 24 2. A division shall not become effective until approved by 5 25 the commissioner after reasonable notice and a public hearing. 5 26 Notice and public hearing required under this section shall be 5 27 conducted as a contested case pursuant to chapter 17A. 5 28 3. The commissioner may approve a plan of division if the 5 29 commissioner finds that all of the following apply: 5 30 a. The interest of the policyholders, creditors, or 5 31 shareholders of the dividing insurer will be adequately 5 32 protected and the plan of division is not unfair or 5 33 unreasonable to the policyholders of the dividing insurer and 5 34 is not contrary to the public interest. 5 35 b. The financial condition of the resulting insurers will 6 1 not jeopardize the financial stability of a dividing insurer 6 2 or the resulting insurers or prejudice the interests of the 6 3 policyholders of such insurers. 6 4 c. All resulting insurers created by the proposed division 6 5 will be qualified and eligible to receive a certificate of 6 6 authority to transact the business of insurance in this state. 6 7 d. The proposed division does not violate a provision of 6 8 chapter 684. In a division in which the dividing insurer 6 9 will survive, the commissioner shall apply chapter 684 to the 6 10 dividing insurer in its capacity as a resulting insurer. In 6 11 applying the provisions of chapter 684 to a resulting insurer, 6 12 the commissioner shall do all of the following: 6 13 (1) Treat the resulting insurer as a debtor. 6 14 (2) Treat a liability allocated to the resulting insurer as 6 15 a liability incurred by a debtor. 6 16 (3) Treat the resulting insurer as receiving unequal value 6 17 in exchange for incurring allocated obligations. 6 18 (4) Treat assets allocated to the resulting insurer as 6 19 remaining assets. 6 20 e. The proposed division is not being made for the purpose 6 21 of hindering, delaying, or defrauding any policyholders or 6 22 other creditors of the dividing insurer. 6 23 f. All resulting insurers will be solvent when the division 6 24 becomes effective. 6 25 g. The remaining assets of a resulting insurer will not be 6 26 unreasonably small in relation to the business and transactions 6 27 such resulting insurer has been engaged in or will engage in 6 28 after completion of the division. 6 29 4. In determining if the standards set forth in subsection 6 30 3, paragraphs "c" through "g" are satisfied, the commissioner 6 31 may consider all proposed assets of the resulting insurer 6 32 including without limitation reinsurance agreements, parental 6 33 guarantees, support agreements, keepwell agreements, and 6 34 capital maintenance of contingent capital agreements regardless 6 35 of whether such qualify as an admitted asset under state law. 7 1 5. All expenses incurred by the commissioner in connection 7 2 with proceedings under this section including expenses 7 3 for attorneys, actuaries, accountants, and other experts 7 4 not otherwise a part of the commissioner's staff as may be 7 5 reasonably necessary to assist the commissioner in reviewing 7 6 a proposed plan of division shall be paid by the dividing 7 7 insurer filing such plan. A dividing insurer may allocate such 7 8 expense in a plan of division in the same manner as any other 7 9 liability. 7 10 6. If the commissioner approves a plan of division the 7 11 commissioner shall issue an order which shall be accompanied 7 12 by findings of fact and conclusions of law. The commissioner 7 13 shall also issue a certificate of authority authorizing the 7 14 resulting insurers to transact the business of insurance in 7 15 this state. 7 16 7. The conditions in this section for freeing one or more 7 17 of the resulting insurers from the liabilities of the dividing 7 18 insurer and for allocating some or all of the liabilities of 7 19 the dividing insurer shall be deemed to have been satisfied if 7 20 the plan of division is approved by the commissioner in a final 7 21 order. 7 22 Sec. 9. NEW SECTION. 521I.9 Confidentiality. 7 23 All information and documents submitted to, obtained by, or 7 24 disclosed to the commissioner in connection with a dividing 7 25 insurer's plan of division shall be confidential and shall not 7 26 be available for public inspection until notice of a public 7 27 hearing is provided pursuant to section 521I.8, subsection 7 28 1. After issuance of a notice of such hearing, the dividing 7 29 insurer may submit a written request to the commissioner 7 30 requesting that confidentiality be maintained regarding 7 31 all business, financial, and actuarial information. If the 7 32 commissioner grants the dividing insurer's request, such 7 33 confidential information shall not be available for public 7 34 inspection and shall not be subject to chapter 22. The plan 7 35 of division and any materials incorporated by reference into 8 1 or otherwise made a part of such plan of division shall not be 8 2 confidential and shall be available for public inspection. 8 3 Sec. 10. NEW SECTION. 521I.10 Certificate of division. 8 4 1. If the commissioner approves a dividing insurer's plan 8 5 of division pursuant to section 521I.8, an officer or duly 8 6 authorized representative of the dividing insurer shall sign a 8 7 certificate of division that sets forth all of the following: 8 8 a. The name of the dividing insurer. 8 9 b. A statement disclosing whether the dividing insurer 8 10 survived the division. If the dividing insurer survived 8 11 the division, the certificate of division shall include any 8 12 amendments to the dividing insurer's articles of incorporation 8 13 or bylaws as approved as part of the plan of division. 8 14 c. The name of each resulting insurer that is created by 8 15 the division. 8 16 d. The date on which the division is effective. 8 17 e. A statement that the division was approved by the 8 18 commissioner under section 521I.8. 8 19 f. A statement that the dividing insurer provided reasonable 8 20 notice to each reinsurer that is a party to a reinsurance 8 21 contract allocated in the plan of division. 8 22 g. The resulting insurer's articles of incorporation and 8 23 bylaws for each resulting insurer created by the division. The 8 24 articles of incorporation and bylaws of each resulting insurer 8 25 must comply with the applicable requirements of the laws of 8 26 this state. The articles of incorporation and bylaws may state 8 27 the name or address of an incorporator, may be signed, and may 8 28 include any provision that is not required in a restatement of 8 29 the articles of incorporation or bylaws. 8 30 h. A reasonable description of the capital, surplus, other 8 31 assets and liabilities, including policy liabilities, of the 8 32 dividing insurer that are to be allocated to each resulting 8 33 insurer. 8 34 2. A dividing insurer's certificate of division is 8 35 effective on the date the dividing insurer files the 9 1 certificate with the secretary of state and provides a 9 2 concurrent copy to the commissioner, or on another date 9 3 as specified in the plan of division, whichever is later. 9 4 However, the certificate of division shall become effective 9 5 not later than ninety calendar days after it is filed with the 9 6 secretary of state. A division shall be effective when the 9 7 relevant certificate of division is effective. 9 8 Sec. 11. NEW SECTION. 521I.11 Division effective. 9 9 1. On the effective date of a division pursuant to section 9 10 521I.10, the following apply: 9 11 a. If the dividing insurer survives, all of the following 9 12 apply: 9 13 (1) The dividing insurer shall continue to exist. 9 14 (2) The articles of incorporation of the dividing insurer 9 15 shall be amended, if at all, if provided for in the plan of 9 16 division. 9 17 (3) The bylaws of the dividing insurer shall be amended, if 9 18 at all, if provided for in the plan of division. 9 19 b. If the dividing insurer does not survive, the dividing 9 20 insurer's separate existence shall cease to exist and any 9 21 resulting insurer created by the plan of division shall come 9 22 into existence. 9 23 c. Each resulting insurer shall hold any capital, surplus, 9 24 and other assets allocated to such resulting insurer by the 9 25 plan of division as a successor to the dividing insurer by 9 26 operation of law, and not by transfer, whether directly or 9 27 indirectly. The articles of incorporation and bylaws, if any, 9 28 of each resulting insurer shall be effective when the resulting 9 29 insurer comes into existence. 9 30 d. (1) All capital, surplus, and other assets of the 9 31 dividing insurer that are allocated by the plan of division 9 32 shall vest in the applicable resulting insurer as provided in 9 33 the plan of division or shall remain vested in the dividing 9 34 insurer as provided in the plan of division. 9 35 (2) All capital, surplus, and other assets of the dividing 10 1 insurer that are not allocated by the plan of division shall 10 2 remain vested in the dividing insurer if the dividing insurer 10 3 survives the division and shall be allocated to and vest pro 10 4 rata in the resulting insurers individually if the dividing 10 5 insurer does not survive the division. 10 6 (3) All capital, surplus, and other assets of the dividing 10 7 insurer otherwise vest as provided in this section without 10 8 transfer, reversion, or impairment. 10 9 e. A resulting insurer to which a cause of action is 10 10 allocated may be substituted or added in any pending action or 10 11 proceeding to which the dividing insurer is a party when the 10 12 division becomes effective. 10 13 f. All liabilities of a dividing insurer are allocated 10 14 between or among any resulting insurers as provided in section 10 15 521I.10 and each resulting insurer to which liabilities are 10 16 allocated is liable only for those liabilities, including 10 17 policy liabilities, allocated as a successor to the dividing 10 18 insurer by operation of law. 10 19 g. Any shares in the dividing insurer that are to be 10 20 converted or canceled in the division are converted or canceled 10 21 and the shareholders of those shares are entitled only to 10 22 the rights provided to such shareholders under the plan of 10 23 division and any appraisal rights that such shareholders may 10 24 have pursuant to section 521I.13. 10 25 2. Except as provided in the dividing insurer's articles 10 26 of incorporation or bylaws, the division does not give rise 10 27 to any rights that a shareholder, director of a domestic 10 28 stock insurer, or third party would have upon a dissolution, 10 29 liquidation, or winding up of the dividing insurer. 10 30 3. The allocation to a resulting insurer of capital, 10 31 surplus, or other asset that is collateral covered by an 10 32 effective financing statement shall not be effective until a 10 33 new effective financing statement naming the resulting insurer 10 34 as a debtor is effective under the uniform commercial code. 10 35 4. Unless otherwise provided in the plan of division, 11 1 the shares in and any securities of each resulting insurer 11 2 shall be distributed to the dividing insurer if it survives 11 3 the division, or pro rata to the shareholders of the dividing 11 4 insurer that do not assert any appraisal rights pursuant to 11 5 section 521I.13. 11 6 Sec. 12. NEW SECTION. 521I.12 Resulting insurers liability 11 7 for allocated assets, debts, and liabilities. 11 8 1. Except as expressly provided in this section, when a 11 9 division becomes effective, by operation of law all of the 11 10 following apply: 11 11 a. A resulting insurer is individually liable for the 11 12 liabilities, including policy liabilities, that the resulting 11 13 insurer issues, undertakes, or incurs in its own name after the 11 14 division. 11 15 b. A resulting insurer is individually liable for the 11 16 liabilities, including policy liabilities, of the dividing 11 17 insurer that are allocated to or remain the liability of the 11 18 resulting insurer to the extent specified in the plan of 11 19 division. 11 20 c. The dividing insurer remains responsible for the 11 21 liabilities, including policy liabilities, of the dividing 11 22 insurer that are not allocated by the plan of division if the 11 23 dividing insurer survives the division. 11 24 d. A resulting insurer is liable pro rata individually for 11 25 the liabilities, including policy liabilities, of the dividing 11 26 insurer that are not allocated by the plan of division if the 11 27 dividing insurer does not survive the division. 11 28 2. Except as otherwise expressly provided in this section, 11 29 when a division becomes effective a resulting insurer is not 11 30 responsible for and shall not have liability for any of the 11 31 following: 11 32 a. Any liabilities, including policy liabilities, that 11 33 another resulting insurer issues, undertakes, or incurs in such 11 34 resulting insurer's own name after the division. 11 35 b. Any liabilities, including policy liabilities, of the 12 1 dividing insurer that are allocated to or remain the liability 12 2 of another resulting insurer under the plan of division. 12 3 3. If a provision of any evidence of indebtedness, whether 12 4 secured or unsecured, or a provision of any contract other than 12 5 an insurance policy, annuity, or reinsurance agreement that was 12 6 issued, incurred, or executed by the dividing insurer before 12 7 the effective date of this Act, requires the consent of the 12 8 obligee to a merger of the dividing insurer, or treats such a 12 9 merger as a default, such provision shall apply to a division 12 10 of the dividing insurer as if such division were a merger. 12 11 4. If a division breaches a contractual obligation of 12 12 the dividing insurer, all resulting insurers are jointly 12 13 and severally liable for the breach. The validity and 12 14 effectiveness of the division shall not be affected by the 12 15 breach. 12 16 5. A direct or indirect allocation of capital, surplus, 12 17 assets, or liabilities, including policy liabilities, shall 12 18 occur automatically, by operation of law, and shall not be 12 19 treated as a distribution or transfer for any purpose with 12 20 respect to either the dividing insurer or any resulting 12 21 insurer. 12 22 6. Liens, security interests, and other charges on the 12 23 capital, surplus, or other assets of the dividing insurer 12 24 shall not be impaired by the division, notwithstanding any 12 25 otherwise enforceable allocation of liabilities, including 12 26 policy liabilities, of the dividing insurer. 12 27 7. If the dividing insurer is bound by a security agreement 12 28 governed by chapter 554 or article 9 of the uniform commercial 12 29 code as enacted in any other jurisdiction, and the security 12 30 agreement provides that the security interest attaches to 12 31 after=acquired collateral, a resulting insurer shall be bound 12 32 by the security agreement. 12 33 8. Unless provided in the plan of division and specifically 12 34 approved by the commissioner, an allocation of a policy or 12 35 other liability is prohibited from doing any of the following: 13 1 a. Affecting the rights that a policyholder or creditor 13 2 has under any other law with respect to such policy or other 13 3 liability, except that such rights shall be available only 13 4 against a resulting insurer responsible for the policy or 13 5 liability under this section. 13 6 b. Releasing or reducing the obligation of a reinsurer, 13 7 surety, or guarantor of the policy or liability. 13 8 9. A resulting insurer shall only be liable for the 13 9 liabilities allocated to the resulting insurer in accordance 13 10 with the plan of division and this section and shall not be 13 11 liable for any other liabilities under the common law doctrine 13 12 of successor liability or any other theory of liability 13 13 applicable to transferees or assignees of assets. 13 14 Sec. 13. NEW SECTION. 521I.13 Shareholder appraisal rights. 13 15 If a dividing insurer does not survive a division, an 13 16 objecting shareholder of the dividing insurer is entitled to 13 17 appraisal rights and to obtain payment of the fair value of 13 18 such shareholder's shares in the same manner and to the extent 13 19 provided for a corporation as a party to a merger pursuant to 13 20 section 490.1302. 13 21 Sec. 14. NEW SECTION. 521I.14 Rules. 13 22 The commissioner shall adopt rules pursuant to chapter 17A 13 23 to administer this chapter. 13 24 Sec. 15. NEW SECTION. 521I.15 Enforcement. 13 25 The commissioner may take any action under the 13 26 commissioner's authority to enforce compliance with this 13 27 chapter. 13 28 Sec. 16. Section 490.120, subsection 12, paragraph c, 13 29 subparagraph (2), Code 2018, is amended to read as follows: 13 30 (2) "Plan" means a plan of mergeror, a plan of share 13 31 exchange, or a plan of division pursuant to chapter 521I. 13 32 Sec. 17. Section 490.1302, subsection 1, Code 2018, is 13 33 amended by adding the following new paragraph: 13 34 NEW PARAGRAPH. g. Consummation of a division pursuant 13 35 to chapter 521I to which the corporation is a party if the 14 1 corporation does not survive such division. 14 2 Sec. 18. Section 521.1, Code 2018, is amended by adding the 14 3 following new subsections: 14 4 NEW SUBSECTION. 5. "Dividing insurer" means the same as 14 5 defined in section 521I.1. 14 6 NEW SUBSECTION. 6. "Resulting insurer" means the same as 14 7 defined in section 521I.1. 14 8 Sec. 19. NEW SECTION. 521.19 Merger or consolidation 14 9 effective with division. 14 10 A dividing insurer and the dividing insurer's officers, 14 11 directors, and shareholders shall have the authority to adopt 14 12 and execute a plan of merger or consolidation on behalf of a 14 13 resulting insurer, to execute and deliver documents, plans, 14 14 certificates, and resolutions, and to make any filings on 14 15 behalf of such resulting insurer. If provided in a plan of 14 16 merger or consolidation, the merger or consolidation shall be 14 17 effective simultaneously with the effectiveness of a division 14 18 pursuant to 521I.10. 14 19 EXPLANATION 14 20 The inclusion of this explanation does not constitute agreement with 14 21 the explanation's substance by the members of the general assembly. 14 22 This bill relates to the division of a domestic stock insurer 14 23 into two or more domestic stock insurers. 14 24 The bill defines a dividing insurer as a domestic stock 14 25 insurer that approves a plan of division. A resulting insurer 14 26 is defined as a dividing insurer that survives a division, or a 14 27 new domestic stock insurer that is created by a division. 14 28 The bill requires a dividing insurer to develop a plan 14 29 of division that identifies the dividing insurer's name, the 14 30 proposed resulting insurers and their articles of incorporation 14 31 and bylaws, the allocation of the dividing insurer's assets, 14 32 liabilities, and reinsurance contracts to the resulting 14 33 insurers, and the manner in which the shares in the resulting 14 34 insurers will be distributed to the dividing insurer or its 14 35 shareholders. The plan of division must also comply with all 15 1 terms of the dividing insurer's articles of incorporation and 15 2 bylaws. 15 3 If the dividing insurer will survive the division, the plan 15 4 of division must also include any proposed amendments to the 15 5 dividing insurer's articles of incorporation and bylaws and 15 6 the manner in which the dividing insurer proposes to cancel or 15 7 convert some of its shares. If the dividing insurer will not 15 8 survive the division, the plan of division must include details 15 9 on how the dividing insurer will cancel or convert its shares 15 10 into securities, obligations, other property, or rights to 15 11 acquire shares or securities. 15 12 The bill allows a dividing insurer to amend or cancel a plan 15 13 of division, and allows a shareholder to vote or consent to an 15 14 amendment, under certain conditions as detailed in the bill. 15 15 The bill requires that prior to filing a plan of division 15 16 with the commissioner, a dividing insurer must obtain approval 15 17 in accordance with all provisions of the dividing insurer's 15 18 articles of incorporation and bylaws. If the articles of 15 19 incorporation and bylaws do not provide for approval of a plan 15 20 of division, the dividing insurer must obtain approval in 15 21 accordance with all provisions of such that apply to approval 15 22 of a merger. 15 23 The bill provides that a division shall not become effective 15 24 until approved by the commissioner after reasonable notice 15 25 and a public hearing. The commissioner may approve a plan of 15 26 division if the commissioner determines that the interests of 15 27 the policyholders, creditors, or shareholders of the dividing 15 28 insurer are adequately protected and the proposed division is 15 29 not unfair or unreasonable to the policyholders of the dividing 15 30 insurer; that the division is not contrary to public policy; 15 31 that the financial condition of the resulting insurers will 15 32 not jeopardize the financial stability of a dividing insurer 15 33 or the resulting insurers or prejudice the interests of the 15 34 policyholders of such insurers; that all resulting insurers 15 35 created by the proposed division are qualified and eligible to 16 1 receive a certificate of authority to transact the business 16 2 of insurance in this state; that the proposed division does 16 3 not violate the state's voidable transactions statute; that 16 4 the proposed division is not for the purpose of hindering, 16 5 delaying, or defrauding any policyholders or other creditors 16 6 of the dividing insurer; that all resulting insurers will be 16 7 solvent; and that the remaining assets of a resulting insurer 16 8 will not be unreasonably small in relation to the business and 16 9 transactions in which such resulting insurer has been engaged 16 10 in or will engage in after completion of the division. 16 11 The bill requires the commissioner to issue an order, 16 12 including findings of fact and conclusions of law, to approve 16 13 a plan of division. The commissioner is required to issue a 16 14 certificate of authority to the resulting insurers. If the 16 15 plan of division has been approved by the commissioner in a 16 16 final order, any conditions required to remove liabilities of 16 17 the dividing insurer from the resulting insurer, or to allocate 16 18 some or all of the liabilities of the dividing insurer to the 16 19 resulting insurers, are deemed satisfied. 16 20 All information and documents submitted to, obtained by, or 16 21 disclosed to the commissioner in connection with a dividing 16 22 insurer's plan of division are confidential and not available 16 23 for public inspection until the commissioner has provided 16 24 notice of a public hearing. After issuance of such notice, 16 25 the dividing insurer may submit a written request to the 16 26 commissioner to continue treating all business, financial, 16 27 and actuarial information as confidential. The bill requires 16 28 that the plan of division and any materials incorporated by 16 29 reference into or otherwise made a part of such plan shall not 16 30 be confidential and shall be available for public inspection. 16 31 If the commissioner approves a dividing insurer's plan 16 32 of division, an officer of the dividing insurer shall sign 16 33 a certificate of division that sets forth information, as 16 34 detailed in the bill, related to the dividing insurer's 16 35 post=division status and any resulting insurer's post=division 17 1 status. A dividing insurer's certificate of division 17 2 is effective on the date the dividing insurer files the 17 3 certificate with the secretary of state or on another date 17 4 as specified in the plan of division, whichever is later. 17 5 However, the certificate of division shall become effective 17 6 not later than 90 days after it is filed with the secretary of 17 7 state. 17 8 When a division becomes effective and the dividing insurer 17 9 survives, the bill provides that the dividing insurer continues 17 10 to exist and that the articles of incorporation and the bylaws 17 11 of the dividing insurer must be amended as provided in the 17 12 plan of division. If the dividing insurer does not survive, 17 13 the dividing insurer's separate existence ceases to exist and 17 14 any resulting insurers created by the plan of division come 17 15 into existence. The bill provides that all resulting insurers 17 16 shall hold any capital, surplus, and other assets allocated 17 17 to each as a successor to the dividing insurer by operation 17 18 of law, and not by transfer. All capital, surplus, and other 17 19 assets of the dividing insurer that are allocated by the plan 17 20 of division either vest in the applicable resulting insurer 17 21 or remain vested in the dividing insurer as provided in the 17 22 plan of division. All capital, surplus, and other assets that 17 23 are not allocated by the plan of division remain vested in the 17 24 dividing insurer if the dividing insurer survives the division, 17 25 are allocated to the resulting insurers individually if the 17 26 dividing insurer does not survive the division, or vest as 17 27 otherwise provided in the bill. 17 28 A resulting insurer to which a cause of action is allocated 17 29 may be substituted or added in any pending action to which 17 30 the dividing insurer is a party when the division becomes 17 31 effective. All liabilities of a dividing insurer are allocated 17 32 between or among any resulting insurers and each resulting 17 33 insurer to which liabilities are allocated is liable only for 17 34 those liabilities, including policy liabilities, allocated as a 17 35 successor to the dividing insurer. 18 1 The bill also provides that when a division becomes 18 2 effective any shares in the dividing insurer that are to 18 3 be converted or canceled in the division are converted or 18 4 canceled, and the shareholders of those shares are entitled 18 5 only to the rights provided to such shareholders under the 18 6 plan of division and per any appraisal rights they may have 18 7 as detailed in the bill. Except as provided in the dividing 18 8 insurer's articles of incorporation or bylaws, the division 18 9 does not give any rights to a shareholder, director, or third 18 10 party that such would have upon a dissolution, liquidation, or 18 11 winding up of the domestic stock insurer. 18 12 Unless otherwise provided in the plan of division, the 18 13 shares and securities of each resulting insurer are distributed 18 14 to the dividing insurer if it survives the division, or pro 18 15 rata to any shareholders of the dividing insurer that do not 18 16 assert appraisal rights. 18 17 The bill provides that when a division becomes effective, 18 18 each resulting insurer is individually liable for all 18 19 liabilities that such resulting insurer issues, undertakes, 18 20 or incurs in its own name after the division; each resulting 18 21 insurer is individually liable for the liabilities of 18 22 the dividing insurer that are allocated to or remain the 18 23 liability of such resulting insurer as specified in the plan 18 24 of division; and the dividing insurer remains responsible for 18 25 all liabilities of the dividing insurer that are not allocated 18 26 by the plan of division if the dividing insurer survives 18 27 the division. If the dividing insurer does not survive the 18 28 division, each resulting insurer is pro rata individually 18 29 liable for all liabilities of the dividing insurer that are not 18 30 allocated by the plan of division. 18 31 The bill also provides that when a division becomes 18 32 effective, no resulting insurer is liable for any liabilities 18 33 that another resulting insurer issues, undertakes, or incurs in 18 34 its own name after the division, or for any liabilities of the 18 35 dividing insurer that are allocated to or remain the liability 19 1 of another resulting insurer per the plan of division. If 19 2 any provision of any evidence of indebtedness or a provision 19 3 of any contract other than an insurance policy, annuity, or 19 4 reinsurance agreement that was issued, incurred, or executed 19 5 by the dividing insurer before the effective date of the bill 19 6 requires the consent of the obligee to a merger of the dividing 19 7 insurer, or treats such a merger as a default, such provision 19 8 applies to a division of the dividing insurer as if such 19 9 division were a merger. 19 10 If a division breaches a contractual obligation of the 19 11 dividing insurer, all resulting insurers are liable, jointly 19 12 and severally, for the breach. The validity and effectiveness 19 13 of the division are not affected by the breach. 19 14 In a division, a direct or indirect allocation of capital, 19 15 surplus, assets, or liabilities, including policy liabilities, 19 16 occurs automatically by operation of law and shall not be 19 17 treated as a distribution or transfer for any purpose with 19 18 respect to either the dividing insurer or any of the resulting 19 19 insurers. Liens, security interests, and other charges on the 19 20 capital, surplus, or other assets of the dividing insurer are 19 21 not impaired by the division. 19 22 Except as provided in the plan of division and as 19 23 specifically approved by the commissioner, an allocation of a 19 24 policy or other liability does not affect the rights that a 19 25 policyholder or creditor has under any other law with respect 19 26 to such policy or other liability, except that such rights are 19 27 available only against a resulting insurer responsible for the 19 28 policy or liability. A reinsurer, surety, or guarantor of the 19 29 policy or liability is not released from their obligations 19 30 under the policy or other liability. 19 31 If a dividing insurer does not survive a division, an 19 32 objecting shareholder of the dividing insurer is entitled to 19 33 appraisal rights and to obtain payment of the fair value of 19 34 such shareholder's shares. 19 35 The bill requires the commissioner to adopt rules pursuant 20 1 to Code chapter 17A to administer the requirements of the 20 2 bill and allows the commissioner to take any action under the 20 3 commissioner's authority to enforce compliance with the bill. 20 4 The bill amends Code section 490.120 to add a plan of 20 5 division to the definition of plan. The bill amends Code 20 6 section 490.1302 to provide for shareholder appraisal rights 20 7 for a division to which a corporation is a party, if the 20 8 corporation does not survive such division. The bill amends 20 9 Code chapter 521 to allow a dividing insurer to adopt and 20 10 execute a plan of merger or consolidation on behalf of a 20 11 resulting insurer and if provided for in the plan of merger or 20 12 consolidation, the merger or consolidation shall be effective 20 13 simultaneously with the effectiveness of a division under the 20 14 bill. LSB 5520HV (3) 87 ko/rj
