Bill Text: IA SF2316 | 2017-2018 | 87th General Assembly | Enrolled

Iowa Senate Bill 2316 (Prior Session Legislation)

Bill Title: A bill for an act relating to transactions by domestic stock insurers, small employer group health insurers, and universal life insurance. (Formerly SSB 3160.) Vetoed 6-1-18.

Spectrum: Committee Bill

Status: (Vetoed) 2018-06-01 - Vetoed by Governor. S.J. 1088. [SF2316 Detail]

Download: Iowa-2017-SF2316-Enrolled.html

Senate File 2316 - Enrolled

SENATE FILE
BY COMMITTEE ON COMMERCE

(SUCCESSOR TO SSB
3160)

(COMPANION TO LSB
5520HV by Committee on
commerce)
\5
A BILL FOR
\1
Senate File 2316

AN ACT
RELATING TO TRANSACTIONS BY DOMESTIC STOCK INSURERS,
SMALL EMPLOYER GROUP HEALTH INSURERS, AND UNIVERSAL LIFE
INSURANCE.

BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
Section 1. NEW SECTION. 521I.1 Definitions.
As used in this chapter, unless the context otherwise
requires:
1. "Assets" means property whether real, personal, mixed,
tangible, or intangible and any right or interest therein,
including all rights under a contract or other agreement.
2. "Capital" means the capital stock component of a
statutory surplus as defined in the latest edition of the
national association of insurance commissioners' accounting
practices and procedures manual.
3. "Commissioner" means the commissioner of insurance.
4. "Divide" or "division" means a transaction in which
a domestic stock insurer splits into two or more resulting
domestic stock insurers.
5. "Dividing insurer" means a domestic stock insurer that
approves a plan of division.
6. "Domestic stock insurer" means a stock insurer domiciled
and organized under the law of this state other than a company
qualified and authorized by the commissioner to transact the
business of insurance in this state by certificate issued
pursuant to chapter 508, 512B, 514, 514B, 515, 5l5E, or 520.
7. "Liability" means a secured or contingent debt or
obligation arising in any manner.
8. "Resulting insurer" means a dividing domestic stock
insurer that survives a division or a new domestic stock
insurer that is created by a division.
9. "Shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial
owner of shares to the extent of the rights granted by a
nominee certificate on file with a corporation.
10. "Surplus" means total statutory surplus less capital
stock calculated in accordance with the current national
association of insurance commissioners' accounting practices
and procedures manual.
11. "Transfer" includes an assignment, assumption,
conveyance, sale, lease, encumbrance, security interest, gift,
or transfer by operation of law.
Sec. 2. NEW SECTION. 521I.2 Plan of division ==== general
requirements.
A domestic stock insurer's plan of division shall include
all of the following:
1. The name of the domestic stock insurer seeking to divide.
2. The name of each resulting insurer created by the
proposed division and for each resulting insurer a copy of all
of the following:
a. Proposed articles of incorporation.
b. Proposed bylaws.
3. The manner of allocating assets and liabilities,
including policy liabilities, between or among all resulting
insurers.
4. The manner of distributing shares in the resulting
insurers to the dividing insurer or the dividing insurer's
shareholders.
5. A reasonable description of all liabilities and all
assets that the dividing insurer proposes to allocate to each
resulting insurer, including the manner by which the dividing
insurer proposes to allocate all reinsurance contracts.
6. All terms and conditions required by the laws of this
state and the articles and bylaws of the dividing insurer.
7. All other terms and conditions of the division. Terms of
a plan of division may be made dependent on facts objectively
ascertainable outside of the plan of division.
Sec. 3. NEW SECTION. 521I.3 Plan of division ==== dividing
insurer to survive division.
If a dividing insurer will survive a division, the plan
of division shall include, in addition to the requirements
pursuant to section 521I.2, all of the following:
1. All proposed amendments to the dividing insurer's
articles of incorporation and bylaws.
2. If the dividing insurer intends to cancel some but not
all shares in the dividing insurer, the manner in which the
dividing insurer intends to cancel such shares.
3. If the dividing insurer intends to convert some but
not all shares in the dividing insurer into securities,
obligations, money, other property, rights to acquire shares or
securities, or any combination thereof, a statement disclosing
the manner in which the dividing insurer intends to convert
such shares.
Sec. 4. NEW SECTION. 521I.4 Plan of division ==== dividing
insurer not to survive division.
If a dividing insurer will not survive a division, the plan
of division shall include, in addition to the requirements
pursuant to section 521I.2, the manner in which the dividing
insurer will cancel or convert shares in the dividing insurer's
shares into shares, securities, obligations, money, other
property, rights to acquire shares or securities, or any
combination thereof.
Sec. 5. NEW SECTION. 521I.5 Amending plan of division.
1. A dividing insurer may amend the dividing insurer's
plan of division in accordance with any procedures set forth
in the plan of division, or if no such procedures are set
forth in the plan of division, in a manner determined by the
board of directors of the dividing insurer. A shareholder
that is entitled to vote on or consent to approval of the plan
of division shall be entitled to vote on or consent to an
amendment of the plan of division that will affect any of the
following:
a. The amount or kind of shares, securities, obligations,
money, other property, rights to acquire shares or securities,
or any combination thereof to be received by any of the
shareholders of the dividing insurer under the plan of
division.
b. The articles of incorporation or bylaws of any resulting
insurer that become effective when the division becomes
effective except for changes that do not require approval of
the shareholders of the resulting insurer under such articles
of incorporation or bylaws.
c. Any other terms or conditions of the plan of division
if the change may adversely affect the shareholders in any
material respect.
2. A dividing insurer shall not amend the dividing insurer's
plan of division after the plan of division becomes effective.
Sec. 6. NEW SECTION. 521I.6 Abandoning plan of division.
1. A dividing insurer may abandon the dividing insurer's
plan of division in any of the following circumstances:
a. After the dividing insurer has approved the plan
of division without any action by the shareholders and in
accordance with any procedures set forth in the plan of
division, or if no such procedures are set forth in the plan of
division, in a manner determined by the board of directors of
the dividing insurer.
b. After the dividing insurer has filed a certificate
of division with the secretary of state pursuant to section
521I.10, the dividing insurer may file a signed certificate of
abandonment with the secretary of state and file a copy with
the commissioner. The certificate of abandonment shall be
effective on the date the certificate of abandonment is filed
with the secretary of state.
2. A dividing insurer shall not abandon the dividing
insurer's plan of division after the plan of division becomes
effective.
Sec. 7. NEW SECTION. 521I.7 Approval of plan of division ====
articles of incorporation and bylaws.
1. A dividing insurer shall not file a plan of division with
the commissioner until such plan of division has been approved
in accordance with all provisions of the dividing insurer's
articles of incorporation and bylaws. If the dividing
insurer's articles of incorporation and bylaws do not provide
for approval of a plan of division, the dividing insurer shall
not file the plan of division with the commissioner unless
such plan of division has been approved in accordance with all
provisions of the dividing insurer's articles of incorporation
and bylaws that provide for approval of a merger.
2. If a provision of a dividing insurer's articles of
incorporation or bylaws adopted before the effective date of
this Act requires that a specific number of or a percentage
of the board of directors or shareholders propose or adopt a
plan of merger or impose other procedures for the proposal or
adoption of a plan of merger, the dividing insurer shall adhere
to such provision in proposing or adopting a plan of division.
If any such provision of the articles of incorporation or
bylaws is amended on or after the effective date of this Act,
such provision shall apply to a division thereafter only in
accordance with its express terms.
Sec. 8. NEW SECTION. 521I.8 Commissioner approval of plan
of division.
1. After a dividing insurer approves a plan of division
pursuant to section 521I.7, the dividing insurer shall file the
plan of division with the commissioner. Within ten business
days of filing the plan of division with the commissioner, the
dividing insurer shall provide notice of the filing to each
reinsurer that is a party to a reinsurance contract allocated
in the plan of division.
2. A division shall not become effective until approved by
the commissioner after reasonable notice and a public hearing.
Notice and public hearing required under this section shall be
conducted as a contested case pursuant to chapter 17A.
3. The commissioner may approve a plan of division if the
commissioner finds that all of the following apply:
a. The interest of the policyholders, creditors, or
shareholders of the dividing insurer will be adequately
protected and the plan of division is not unfair or
unreasonable to the policyholders of the dividing insurer and
is not contrary to the public interest.
b. The financial condition of the resulting insurers will
not jeopardize the financial stability of a dividing insurer
or the resulting insurers or prejudice the interests of the
policyholders of such insurers.
c. All resulting insurers created by the proposed division
will be qualified and eligible to receive a certificate of
authority to transact the business of insurance in this state.
d. The proposed division does not violate a provision of
chapter 684. In a division in which the dividing insurer
will survive, the commissioner shall apply chapter 684 to the
dividing insurer in its capacity as a resulting insurer. In
applying the provisions of chapter 684 to a resulting insurer,
the commissioner shall do all of the following:
(1) Treat the resulting insurer as a debtor.
(2) Treat a liability allocated to the resulting insurer as
a liability incurred by a debtor.
(3) Treat the resulting insurer as receiving unequal value
in exchange for incurring allocated obligations.
(4) Treat assets allocated to the resulting insurer as
remaining assets.
e. The proposed division is not being made for the purpose
of hindering, delaying, or defrauding any policyholders or
other creditors of the dividing insurer.
f. All resulting insurers will be solvent when the division
becomes effective.
g. The remaining assets of a resulting insurer will not be
unreasonably small in relation to the business and transactions
such resulting insurer has been engaged in or will engage in
after completion of the division.
4. In determining if the standards set forth in subsection
3, paragraphs "c" through "g" are satisfied, the commissioner
may consider all proposed assets of the resulting insurer
including without limitation reinsurance agreements, parental
guarantees, support agreements, keepwell agreements, and
capital maintenance of contingent capital agreements regardless
of whether such qualify as an admitted asset under state law.
5. All expenses incurred by the commissioner in connection
with proceedings under this section including expenses
for attorneys, actuaries, accountants, and other experts
not otherwise a part of the commissioner's staff as may be
reasonably necessary to assist the commissioner in reviewing
a proposed plan of division shall be paid by the dividing
insurer filing such plan. A dividing insurer may allocate such
expense in a plan of division in the same manner as any other
liability.
6. If the commissioner approves a plan of division the
commissioner shall issue an order which shall be accompanied
by findings of fact and conclusions of law. The commissioner
shall also issue a certificate of authority authorizing the
resulting insurers to transact the business of insurance in
this state.
7. The conditions in this section for freeing one or more
of the resulting insurers from the liabilities of the dividing
insurer and for allocating some or all of the liabilities of
the dividing insurer shall be deemed to have been satisfied if
the plan of division is approved by the commissioner in a final
order.
Sec. 9. NEW SECTION. 521I.9 Confidentiality.
All information and documents submitted to, obtained by, or
disclosed to the commissioner in connection with a dividing
insurer's plan of division shall be confidential and shall not
be available for public inspection until notice of a public
hearing is provided pursuant to section 521I.8, subsection
1. After issuance of a notice of such hearing, the dividing
insurer may submit a written request to the commissioner
requesting that confidentiality be maintained regarding
all business, financial, and actuarial information. If the
commissioner grants the dividing insurer's request, such
confidential information shall not be available for public
inspection and shall not be subject to chapter 22. The plan
of division and any materials incorporated by reference into
or otherwise made a part of such plan of division shall not be
confidential and shall be available for public inspection.
Sec. 10. NEW SECTION. 521I.10 Certificate of division.
1. If the commissioner approves a dividing insurer's plan
of division pursuant to section 521I.8, an officer or duly
authorized representative of the dividing insurer shall sign a
certificate of division that sets forth all of the following:
a. The name of the dividing insurer.
b. A statement disclosing whether the dividing insurer
survived the division. If the dividing insurer survived
the division, the certificate of division shall include any
amendments to the dividing insurer's articles of incorporation
or bylaws as approved as part of the plan of division.
c. The name of each resulting insurer that is created by
the division.
d. The date on which the division is effective.
e. A statement that the division was approved by the
commissioner under section 521I.8.
f. A statement that the dividing insurer provided reasonable
notice to each reinsurer that is a party to a reinsurance
contract allocated in the plan of division.
g. The resulting insurer's articles of incorporation and
bylaws for each resulting insurer created by the division. The
articles of incorporation and bylaws of each resulting insurer
must comply with the applicable requirements of the laws of
this state. The articles of incorporation and bylaws may state
the name or address of an incorporator, may be signed, and may
include any provision that is not required in a restatement of
the articles of incorporation or bylaws.
h. A reasonable description of the capital, surplus, other
assets and liabilities, including policy liabilities, of the
dividing insurer that are to be allocated to each resulting
insurer.
2. A dividing insurer's certificate of division is
effective on the date the dividing insurer files the
certificate with the secretary of state and provides a
concurrent copy to the commissioner, or on another date
as specified in the plan of division, whichever is later.
However, the certificate of division shall become effective
not later than ninety calendar days after it is filed with the
secretary of state. A division shall be effective when the
relevant certificate of division is effective.
Sec. 11. NEW SECTION. 521I.11 Division effective.
1. On the effective date of a division pursuant to section
521I.10, the following apply:
a. If the dividing insurer survives, all of the following
apply:
(1) The dividing insurer shall continue to exist.
(2) The articles of incorporation of the dividing insurer
shall be amended, if at all, if provided for in the plan of
division.
(3) The bylaws of the dividing insurer shall be amended, if
at all, if provided for in the plan of division.
b. If the dividing insurer does not survive, the dividing
insurer's separate existence shall cease to exist and any
resulting insurer created by the plan of division shall come
into existence.
c. Each resulting insurer shall hold any capital, surplus,
and other assets allocated to such resulting insurer by the
plan of division as a successor to the dividing insurer by
operation of law, and not by transfer, whether directly or
indirectly. The articles of incorporation and bylaws, if any,
of each resulting insurer shall be effective when the resulting
insurer comes into existence.
d. (1) All capital, surplus, and other assets of the
dividing insurer that are allocated by the plan of division
shall vest in the applicable resulting insurer as provided in
the plan of division or shall remain vested in the dividing
insurer as provided in the plan of division.
(2) All capital, surplus, and other assets of the dividing
insurer that are not allocated by the plan of division shall
remain vested in the dividing insurer if the dividing insurer
survives the division and shall be allocated to and vest pro
rata in the resulting insurers individually if the dividing
insurer does not survive the division.
(3) All capital, surplus, and other assets of the dividing
insurer otherwise vest as provided in this section without
transfer, reversion, or impairment.
e. A resulting insurer to which a cause of action is
allocated may be substituted or added in any pending action or
proceeding to which the dividing insurer is a party when the
division becomes effective.
f. All liabilities of a dividing insurer are allocated
between or among any resulting insurers as provided in section
521I.10 and each resulting insurer to which liabilities are
allocated is liable only for those liabilities, including
policy liabilities, allocated as a successor to the dividing
insurer by operation of law.
g. Any shares in the dividing insurer that are to be
converted or canceled in the division are converted or canceled
and the shareholders of those shares are entitled only to
the rights provided to such shareholders under the plan of
division and any appraisal rights that such shareholders may
have pursuant to section 521I.13.
2. Except as provided in the dividing insurer's articles
of incorporation or bylaws, the division does not give rise
to any rights that a shareholder, director of a domestic
stock insurer, or third party would have upon a dissolution,
liquidation, or winding up of the dividing insurer.
3. The allocation to a resulting insurer of capital,
surplus, or other asset that is collateral covered by an
effective financing statement shall not be effective until a
new effective financing statement naming the resulting insurer
as a debtor is effective under the uniform commercial code.
4. Unless otherwise provided in the plan of division,
the shares in and any securities of each resulting insurer
shall be distributed to the dividing insurer if it survives
the division, or pro rata to the shareholders of the dividing
insurer that do not assert any appraisal rights pursuant to
section 521I.13.
Sec. 12. NEW SECTION. 521I.12 Resulting insurers liability
for allocated assets, debts, and liabilities.
1. Except as expressly provided in this section, when a
division becomes effective, by operation of law all of the
following apply:
a. A resulting insurer is individually liable for the
liabilities, including policy liabilities, that the resulting
insurer issues, undertakes, or incurs in its own name after the
division.
b. A resulting insurer is individually liable for the
liabilities, including policy liabilities, of the dividing
insurer that are allocated to or remain the liability of the
resulting insurer to the extent specified in the plan of
division.
c. The dividing insurer remains responsible for the
liabilities, including policy liabilities, of the dividing
insurer that are not allocated by the plan of division if the
dividing insurer survives the division.
d. A resulting insurer is liable pro rata individually for
the liabilities, including policy liabilities, of the dividing
insurer that are not allocated by the plan of division if the
dividing insurer does not survive the division.
2. Except as otherwise expressly provided in this section,
when a division becomes effective a resulting insurer is not
responsible for and shall not have liability for any of the
following:
a. Any liabilities, including policy liabilities, that
another resulting insurer issues, undertakes, or incurs in such
resulting insurer's own name after the division.
b. Any liabilities, including policy liabilities, of the
dividing insurer that are allocated to or remain the liability
of another resulting insurer under the plan of division.
3. If a provision of any evidence of indebtedness, whether
secured or unsecured, or a provision of any contract other than
an insurance policy, annuity, or reinsurance agreement that was
issued, incurred, or executed by the dividing insurer before
the effective date of this Act, requires the consent of the
obligee to a merger of the dividing insurer, or treats such a
merger as a default, such provision shall apply to a division
of the dividing insurer as if such division were a merger.
4. If a division breaches a contractual obligation of
the dividing insurer, all resulting insurers are jointly
and severally liable for the breach. The validity and
effectiveness of the division shall not be affected by the
breach.
5. A direct or indirect allocation of capital, surplus,
assets, or liabilities, including policy liabilities, shall
occur automatically, by operation of law, and shall not be
treated as a distribution or transfer for any purpose with
respect to either the dividing insurer or any resulting
insurer.
6. Liens, security interests, and other charges on the
capital, surplus, or other assets of the dividing insurer
shall not be impaired by the division, notwithstanding any
otherwise enforceable allocation of liabilities, including
policy liabilities, of the dividing insurer.
7. If the dividing insurer is bound by a security agreement
governed by chapter 554 or article 9 of the uniform commercial
code as enacted in any other jurisdiction, and the security
agreement provides that the security interest attaches to
after=acquired collateral, a resulting insurer shall be bound
by the security agreement.
8. Unless provided in the plan of division and specifically
approved by the commissioner, an allocation of a policy or
other liability is prohibited from doing any of the following:
a. Affecting the rights that a policyholder or creditor
has under any other law with respect to such policy or other
liability, except that such rights shall be available only
against a resulting insurer responsible for the policy or
liability under this section.
b. Releasing or reducing the obligation of a reinsurer,
surety, or guarantor of the policy or liability.
9. A resulting insurer shall only be liable for the
liabilities allocated to the resulting insurer in accordance
with the plan of division and this section and shall not be
liable for any other liabilities under the common law doctrine
of successor liability or any other theory of liability
applicable to transferees or assignees of assets.
Sec. 13. NEW SECTION. 521I.13 Shareholder appraisal rights.
If a dividing insurer does not survive a division, an
objecting shareholder of the dividing insurer is entitled to
appraisal rights and to obtain payment of the fair value of
such shareholder's shares in the same manner and to the extent
provided for a corporation as a party to a merger pursuant to
section 490.1302.
Sec. 14. NEW SECTION. 521I.14 Rules.
The commissioner shall adopt rules pursuant to chapter 17A
to administer this chapter.
Sec. 15. NEW SECTION. 521I.15 Enforcement.
The commissioner may take any action under the
commissioner's authority to enforce compliance with this
chapter.
Sec. 16. Section 490.120, subsection 12, paragraph c,
subparagraph (2), Code 2018, is amended to read as follows:
(2) "Plan" means a plan of merger or, a plan of share
exchange, or a plan of division pursuant to chapter 521I.
Sec. 17. Section 490.1302, subsection 1, Code 2018, is
amended by adding the following new paragraph:
NEW PARAGRAPH. g. Consummation of a division pursuant
to chapter 521I to which the corporation is a party if the
corporation does not survive such division.
Sec. 18. Section 513B.2, subsections 10 and 18, Code 2018,
are amended to read as follows:
10. "Eligible employee" means an employee who works on a
full=time basis and has a normal workweek of thirty or more
hours. The term includes a sole proprietor, a partner of
a partnership, and an independent contractor, if the sole
proprietor, partner, or independent contractor is included
as an employee under health insurance coverage of a small
employer, but does not include an employee who works on a
part=time, temporary, or substitute basis. An internal revenue
service form W=2 wage and tax statement shall not be required
to qualify as an eligible employee under this subsection.
18. "Small employer" means a person, other than a
limited liability company, a partner of a partnership, an S
corporation, a C corporation, or an independent contractor,
actively engaged in business who, on at least fifty percent
of the employer's working days during the preceding year,
employed at least one and not more than fifty full=time
equivalent eligible employees. A limited liability company, a
partner of a partnership, an S corporation, a C corporation,
or an independent contractor shall not be required to employ
an eligible employee to qualify as a small employer under
this subsection. "Small employer" includes a self=employed
individual. In determining the number of eligible employees,
companies which are affiliated companies or which are eligible
to file a combined tax return for purposes of state taxation
are considered one employer.
Sec. 19. NEW SECTION. 508.25A Rules ==== termination of
universal life insurance policy.
The commissioner of insurance shall adopt rules pursuant
to chapter 17A that require a written notice be sent to a
policyholder at least thirty calendar days prior to termination
of coverage of a universal life insurance policy in an envelope
that includes language on the outside of the envelope, or that
is viewable through the envelope window, indicating that the
envelope contains important information.
Sec. 20. Section 521.1, Code 2018, is amended by adding the
following new subsections:
NEW SUBSECTION. 5. "Dividing insurer" means the same as
defined in section 521I.1.
NEW SUBSECTION. 6. "Resulting insurer" means the same as
defined in section 521I.1.
Sec. 21. NEW SECTION. 521.19 Merger or consolidation
effective with division.
A dividing insurer and the dividing insurer's officers,
directors, and shareholders shall have the authority to adopt
and execute a plan of merger or consolidation on behalf of a
resulting insurer, to execute and deliver documents, plans,
certificates, and resolutions, and to make any filings on
behalf of such resulting insurer. If provided in a plan of
merger or consolidation, the merger or consolidation shall be
effective simultaneously with the effectiveness of a division
pursuant to 521I.10.

CHARLES SCHNEIDE

LINDA UPMEYER

W. CHARLES SMITH

KIM REYNOLDS

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