Public Act 90-0810 of the 90th General Assembly
Public Act 90-0810
SB1901 Enrolled LRB9011659JSgc
AN ACT to amend the Illinois Insurance Code by changing
Sections 4 and 57 and adding Section 59.2.
Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
Section 5. The Illinois Insurance Code is amended by
changing Sections 4 and 57 and adding Section 59.2 as
follows:
(215 ILCS 5/4) (from Ch. 73, par. 616)
Sec. 4. Classes of insurance. Insurance and insurance
business shall be classified as follows:
Class 1. Life, Accident and Health.
(a) Life. Insurance on the lives of persons and every
insurance appertaining thereto or connected therewith and
granting, purchasing or disposing of annuities. Policies of
life or endowment insurance or annuity contracts or contracts
supplemental thereto which contain provisions for additional
benefits in case of death by accidental means and provisions
operating to safeguard such policies or contracts against
lapse, to give a special surrender value, or special benefit,
or an annuity, in the event, that the insured or annuitant
shall become totally and permanently disabled as defined by
the policy or contract, or which contain benefits providing
acceleration of life or endowment or annuity benefits in
advance of the time they would otherwise be payable, as an
indemnity for long term care which is certified or ordered by
a physician, including but not limited to, professional
nursing care, medical care expenses, custodial nursing care,
non-nursing custodial care provided in a nursing home or at a
residence of the insured, or which contain benefits providing
acceleration of life or endowment or annuity benefits in
advance of the time they would otherwise be payable, at any
time during the insured's lifetime, as an indemnity for a
terminal illness shall be deemed to be policies of life or
endowment insurance or annuity contracts within the intent of
this clause.
Also to be deemed as policies of life or endowment
insurance or annuity contracts within the intent of this
clause shall be those policies or riders that provide for the
payment of up to 75% 25% of the face amount of benefits in
advance of the time they would otherwise be payable upon a
diagnosis by a physician licensed to practice medicine in all
of its branches that the insured has incurred a one of the
covered condition conditions listed in the policy or rider.
Every such policy or rider shall contain a majority of
the following "Covered condition", as used in this clause,
means conditions: heart attack,; stroke,; coronary artery
surgery,; life threatening cancer,; renal failure,;
alzheimer's disease,; paraplegia,; major organ
transplantation, total and permanent disability, and any
other medical condition that the Department may approve for
any particular filing.
The Director may issue rules that specify prohibited
policy provisions, not otherwise specifically prohibited by
law, which in the opinion of the Director are unjust, unfair,
or unfairly discriminatory to the policyholder, any person
insured under the policy, or beneficiary.
(b) Accident and health. Insurance against bodily
injury, disablement or death by accident and against
disablement resulting from sickness or old age and every
insurance appertaining thereto, including stop-loss
insurance. Stop-loss insurance is insurance against the risk
of economic loss issued to a single employer self-funded
employee disability benefit plan or an employee welfare
benefit plan as described in 29 U.S.C. 100 et seq.
(c) Legal Expense Insurance. Insurance which involves
the assumption of a contractual obligation to reimburse the
beneficiary against or pay on behalf of the beneficiary, all
or a portion of his fees, costs, or expenses related to or
arising out of services performed by or under the supervision
of an attorney licensed to practice in the jurisdiction
wherein the services are performed, regardless of whether the
payment is made by the beneficiaries individually or by a
third person for them, but does not include the provision of
or reimbursement for legal services incidental to other
insurance coverages. The insurance laws of this State,
including this Act do not apply to:
(i) Retainer contracts made by attorneys at law
with individual clients with fees based on estimates of
the nature and amount of services to be provided to the
specific client, and similar contracts made with a group
of clients involved in the same or closely related legal
matters;
(ii) Plans owned or operated by attorneys who are
the providers of legal services to the plan;
(iii) Plans providing legal service benefits to
groups where such plans are owned or operated by
authority of a state, county, local or other bar
association;
(iv) Any lawyer referral service authorized or
operated by a state, county, local or other bar
association;
(v) The furnishing of legal assistance by labor
unions and other employee organizations to their members
in matters relating to employment or occupation;
(vi) The furnishing of legal assistance to members
or dependents, by churches, consumer organizations,
cooperatives, educational institutions, credit unions, or
organizations of employees, where such organizations
contract directly with lawyers or law firms for the
provision of legal services, and the administration and
marketing of such legal services is wholly conducted by
the organization or its subsidiary;
(vii) Legal services provided by an employee
welfare benefit plan defined by the Employee Retirement
Income Security Act of 1974;
(viii) Any collectively bargained plan for legal
services between a labor union and an employer negotiated
pursuant to Section 302 of the Labor Management Relations
Act as now or hereafter amended, under which plan legal
services will be provided for employees of the employer
whether or not payments for such services are funded to
or through an insurance company.
Class 2. Casualty, Fidelity and Surety.
(a) Accident and health. Insurance against bodily
injury, disablement or death by accident and against
disablement resulting from sickness or old age and every
insurance appertaining thereto, including stop-loss
insurance. Stop-loss insurance is insurance against the risk
of economic loss issued to a single employer self-funded
employee disability benefit plan or an employee welfare
benefit plan as described in 29 U.S.C. 1001 et seq.
(b) Vehicle. Insurance against any loss or liability
resulting from or incident to the ownership, maintenance or
use of any vehicle (motor or otherwise), draft animal or
aircraft. Any policy insuring against any loss or liability
on account of the bodily injury or death of any person may
contain a provision for payment of disability benefits to
injured persons and death benefits to dependents,
beneficiaries or personal representatives of persons who are
killed, including the named insured, irrespective of legal
liability of the insured, if the injury or death for which
benefits are provided is caused by accident and sustained
while in or upon or while entering into or alighting from or
through being struck by a vehicle (motor or otherwise), draft
animal or aircraft, and such provision shall not be deemed to
be accident insurance.
(c) Liability. Insurance against the liability of the
insured for the death, injury or disability of an employee or
other person, and insurance against the liability of the
insured for damage to or destruction of another person's
property.
(d) Workers' compensation. Insurance of the obligations
accepted by or imposed upon employers under laws for workers'
compensation.
(e) Burglary and forgery. Insurance against loss or
damage by burglary, theft, larceny, robbery, forgery, fraud
or otherwise; including all householders' personal property
floater risks.
(f) Glass. Insurance against loss or damage to glass
including lettering, ornamentation and fittings from any
cause.
(g) Fidelity and surety. Become surety or guarantor for
any person, copartnership or corporation in any position or
place of trust or as custodian of money or property, public
or private; or, becoming a surety or guarantor for the
performance of any person, copartnership or corporation of
any lawful obligation, undertaking, agreement or contract of
any kind, except contracts or policies of insurance; and
underwriting blanket bonds. Such obligations shall be known
and treated as suretyship obligations and such business shall
be known as surety business.
(h) Miscellaneous. Insurance against loss or damage to
property and any liability of the insured caused by accidents
to boilers, pipes, pressure containers, machinery and
apparatus of any kind and any apparatus connected thereto, or
used for creating, transmitting or applying power, light,
heat, steam or refrigeration, making inspection of and
issuing certificates of inspection upon elevators, boilers,
machinery and apparatus of any kind and all mechanical
apparatus and appliances appertaining thereto; insurance
against loss or damage by water entering through leaks or
openings in buildings, or from the breakage or leakage of a
sprinkler, pumps, water pipes, plumbing and all tanks,
apparatus, conduits and containers designed to bring water
into buildings or for its storage or utilization therein, or
caused by the falling of a tank, tank platform or supports,
or against loss or damage from any cause (other than causes
specifically enumerated under Class 3 of this Section) to
such sprinkler, pumps, water pipes, plumbing, tanks,
apparatus, conduits or containers; insurance against loss or
damage which may result from the failure of debtors to pay
their obligations to the insured; and insurance of the
payment of money for personal services under contracts of
hiring.
(i) Other casualty risks. Insurance against any other
casualty risk not otherwise specified under Classes 1 or 3,
which may lawfully be the subject of insurance and may
properly be classified under Class 2.
(j) Contingent losses. Contingent, consequential and
indirect coverages wherein the proximate cause of the loss is
attributable to any one of the causes enumerated under Class
2. Such coverages shall, for the purpose of classification,
be included in the specific grouping of the kinds of
insurance wherein such cause is specified.
(k) Livestock and domestic animals. Insurance against
mortality, accident and health of livestock and domestic
animals.
(l) Legal expense insurance. Insurance against risk
resulting from the cost of legal services as defined under
Class 1(c).
Class 3. Fire and Marine, etc.
(a) Fire. Insurance against loss or damage by fire,
smoke and smudge, lightning or other electrical disturbances.
(b) Elements. Insurance against loss or damage by
earthquake, windstorms, cyclone, tornado, tempests, hail,
frost, snow, ice, sleet, flood, rain, drought or other
weather or climatic conditions including excess or deficiency
of moisture, rising of the waters of the ocean or its
tributaries.
(c) War, riot and explosion. Insurance against loss or
damage by bombardment, invasion, insurrection, riot, strikes,
civil war or commotion, military or usurped power, or
explosion (other than explosion of steam boilers and the
breaking of fly wheels on premises owned, controlled,
managed, or maintained by the insured.)
(d) Marine and transportation. Insurance against loss or
damage to vessels, craft, aircraft, vehicles of every kind,
(excluding vehicles operating under their own power or while
in storage not incidental to transportation) as well as all
goods, freights, cargoes, merchandise, effects,
disbursements, profits, moneys, bullion, precious stones,
securities, chooses in action, evidences of debt, valuable
papers, bottomry and respondentia interests and all other
kinds of property and interests therein, in respect to,
appertaining to or in connection with any or all risks or
perils of navigation, transit, or transportation, including
war risks, on or under any seas or other waters, on land or
in the air, or while being assembled, packed, crated, baled,
compressed or similarly prepared for shipment or while
awaiting the same or during any delays, storage,
transshipment, or reshipment incident thereto, including
marine builder's risks and all personal property floater
risks; and for loss or damage to persons or property in
connection with or appertaining to marine, inland marine,
transit or transportation insurance, including liability for
loss of or damage to either arising out of or in connection
with the construction, repair, operation, maintenance, or use
of the subject matter of such insurance, (but not including
life insurance or surety bonds); but, except as herein
specified, shall not mean insurances against loss by reason
of bodily injury to the person; and insurance against loss or
damage to precious stones, jewels, jewelry, gold, silver and
other precious metals whether used in business or trade or
otherwise and whether the same be in course of transportation
or otherwise, which shall include jewelers' block insurance;
and insurance against loss or damage to bridges, tunnels and
other instrumentalities of transportation and communication
(excluding buildings, their furniture and furnishings, fixed
contents and supplies held in storage) unless fire, tornado,
sprinkler leakage, hail, explosion, earthquake, riot and
civil commotion are the only hazards to be covered; and to
piers, wharves, docks and slips, excluding the risks of fire,
tornado, sprinkler leakage, hail, explosion, earthquake, riot
and civil commotion; and to other aids to navigation and
transportation, including dry docks and marine railways,
against all risk.
(e) Vehicle. Insurance against loss or liability
resulting from or incident to the ownership, maintenance or
use of any vehicle (motor or otherwise), draft animal or
aircraft, excluding the liability of the insured for the
death, injury or disability of another person.
(f) Property damage, sprinkler leakage and crop.
Insurance against the liability of the insured for loss or
damage to another person's property or property interests
from any cause enumerated in this class; insurance against
loss or damage by water entering through leaks or openings in
buildings, or from the breakage or leakage of a sprinkler,
pumps, water pipes, plumbing and all tanks, apparatus,
conduits and containers designed to bring water into
buildings or for its storage or utilization therein, or
caused by the falling of a tank, tank platform or supports or
against loss or damage from any cause to such sprinklers,
pumps, water pipes, plumbing, tanks, apparatus, conduits or
containers; insurance against loss or damage from insects,
diseases or other causes to trees, crops or other products of
the soil.
(g) Other fire and marine risks. Insurance against any
other property risk not otherwise specified under Classes 1
or 2, which may lawfully be the subject of insurance and may
properly be classified under Class 3.
(h) Contingent losses. Contingent, consequential and
indirect coverages wherein the proximate cause of the loss is
attributable to any of the causes enumerated under Class 3.
Such coverages shall, for the purpose of classification, be
included in the specific grouping of the kinds of insurance
wherein such cause is specified.
(i) Legal expense insurance. Insurance against risk
resulting from the cost of legal services as defined under
Class 1(c).
(Source: P.A. 88-364.)
(215 ILCS 5/57) (from Ch. 73, par. 669)
Sec. 57. Amendment of articles of incorporation.
(1) A company subject to the provisions of this Article
may amend its articles of incorporation in any respect not in
violation of law, but may not amend such articles to insert
any provision prohibited, or to delete any provision
required, in original articles of incorporation for a similar
domestic company organized under this Code except as
otherwise provided in Section 59.1 or 59.2 of this Code.
(2) Amendments to the articles of incorporation for the
various classes of companies shall be made in the following
manner:
(a) Class 1. The board of directors or trustees
shall adopt a resolution setting forth the proposed
amendment and directing that it be submitted to a vote of
the policyholders at either an annual or special meeting.
Written or printed notice shall be given to policyholders
in the same manner as is required in the case of notices
to shareholders of stock companies by Section 29. The
proposed amendment shall be adopted upon receiving the
affirmative vote of 2/3 of the policyholders present in
person or by proxy at such meeting. Restated articles of
incorporation setting forth the articles of incorporation
as amended shall thereupon be executed in duplicate by
the company or its president or vice president, and its
secretary or assistant secretary, and duplicate originals
of such restated articles of incorporation and an
affidavit of the secretary of the company setting forth
the facts to show that this section has been fully
complied with shall be delivered to the Director.
(b) Classes 2 and 3. The board of directors or
trustees shall adopt the amendment and deliver to the
Director duplicate original restated articles of
incorporation setting forth the articles of incorporation
as amended and a copy of the resolution of the board of
directors or trustees adopting such an amendment
certified to by the secretary of the company.
(3) The restated articles of incorporation of any
company subject to the provisions of this article so
delivered to the Director may be approved or disapproved by
the Director in the same manner as the original articles of
incorporation. If approved, the Director shall place on file
in his office all of the documents so delivered to him except
one of the duplicate originals of the restated articles of
incorporation, and shall endorse upon such duplicate original
his approval thereof and the month, day and year of such
approval, and deliver it to the company. The amendment shall
be effective as of the date of the approval thereof by the
Director. Such duplicate original shall be filed for record,
within 15 days after it has been delivered to the company, in
the office of the recorder of the county where the principal
office of the company is located.
(Source: P.A. 88-662, eff. 9-16-94.)
(215 ILCS 5/59.2 new)
Sec. 59.2. Formation of mutual insurance holding company
and conversion of mutual company to stock company.
(1) Definitions. For the purposes of this Section, the
following terms shall have the meanings indicated:
(a) "Converted company" means an Illinois domiciled
stock insurance company subject to the provisions of
Article II, except as otherwise provided in this Section,
that continues in existence after a reorganization under
this Section in connection with the formation of a mutual
holding company.
(b) "Converted mutual holding company" means the
stock corporation into which a mutual holding company has
been converted in accordance with Section 59.1 and
subsection (13) of this Section.
(c) "Eligible member" means a member as of the date
the board of directors adopts a plan of MHC conversion
under this Section. For the conversion of a mutual
holding company, "eligible member" means a member of the
mutual holding company who is of record as of the date
the mutual holding company board of directors adopts a
plan of conversion under Section 59.1.
(d) "Intermediate holding company" means a
corporation authorized to issue one or more classes of
capital stock, the corporate purposes of which include
holding directly or indirectly the voting stock of a
converted company.
(e) "Member" means a person who, on the records of
the mutual company and pursuant to its articles of
incorporation or bylaws, is deemed to be a holder of a
membership interest in the mutual company and shall also
include a person or persons insured under a group policy,
subject to the following conditions:
(i) the person is insured or covered under a
group life policy or group annuity contract under
which funds are accumulated and allocated to the
respective covered persons;
(ii) the person has the right to direct the
application of the funds so allocated;
(iii) the group policyholder makes no
contribution to the premiums or deposits for the
policy or contract; and
(iv) the mutual company has the names and
addresses of the persons covered under the group
life policy or group annuity contract.
On and after the effective date of a plan of MHC
conversion under this Section, the term "member" shall mean a
member of the mutual holding company created thereby.
(f) "Mutual holding company" or "MHC" means a
corporation resulting from a reorganization of a mutual
company under this Section. A mutual holding company
shall be subject to the provisions of this Article and to
any other provisions of this Code applicable to mutual
companies, except as otherwise provided in this Section.
The articles of incorporation of a mutual holding company
shall include provisions setting forth the following:
(i) that it is a mutual holding company
organized under this Article;
(ii) that the mutual holding company may hold
not less than a majority of the shares of voting
stock of a converted company or an intermediate
holding company, which in turn holds directly or
indirectly all of the voting stock of a converted
company;
(iii) that it is not authorized to issue any
capital stock except pursuant to a conversion in
accordance with the provisions of Section 59.1 and
subsection (13) of this Section;
(iv) that its members shall have the rights
specified in this Section and in its articles of
incorporation and bylaws; and
(v) that its assets shall be subject to
inclusion in the estate of the converted company in
any proceedings initiated by the Director against
the converted company under Article XIII.
(g) "Mutual company" means for purposes of this
Section a mutual life insurer or mutual property-casualty
insurer that may convert pursuant to a plan of MHC
conversion under this Section.
(h) "Plan of MHC conversion," or "plan" when used
in this Section means a plan adopted pursuant to this
Section by the board of directors of an Illinois domestic
mutual company for the conversion of the mutual company
into a direct or indirect stock subsidiary of a mutual
holding company.
(i) "Policy" includes any group or individual
insurance policy or contract issued by a mutual company,
including an annuity contract. The term policy does not
include a certificate of insurance issued in connection
with a group policy or contract.
(j) "Policyholder" means the holder of a policy
other than a reinsurance contract.
(2) Formation of mutual holding company and conversion
of mutual company. A mutual company, upon approval of the
Director, may reorganize by forming a mutual holding company
and continue the corporate existence of the reorganizing
mutual company as a stock insurance company in accordance
with this Section. Upon effectiveness of a plan of MHC
conversion, and without any further action:
(a) The mutual company shall become a stock
corporation, the membership interests of the
policyholders in the mutual company shall be deemed
extinguished and all eligible members of the mutual
company shall be and become members of the mutual holding
company, in accordance with the articles of incorporation
and bylaws of the mutual holding company and the
applicable provisions of this Section and Article III;
and
(b) all of the shares of the capital stock of the
converted company shall be issued to the mutual holding
company, which at all times shall own a majority of the
shares of the voting stock of the converted company,
except that either at the time of conversion, or at a
later time with the approval of the Director, an
intermediate holding company or companies may be created,
so long as the mutual holding company at all times owns
directly or indirectly a majority of the shares of the
voting stock of the converted company.
(3) MHC membership interests.
(a) No member of a mutual holding company may
transfer membership in the mutual holding company or any
right arising from the membership.
(b) A member of a mutual holding company shall not,
as a member, be personally liable for the acts, debts,
liabilities, or obligations of the company.
(c) No assessments of any kind may be imposed upon
the members of a mutual holding company by the directors
or members, or because of any liability of any company
owned or controlled by the mutual holding company or
because of any act, debt, liability, or obligation of the
mutual holding company itself.
(d) A membership interest in a domestic mutual
holding company shall not constitute a security under any
law of this State.
(4) Adoption of the plan of MHC conversion by the board
of directors.
(a) A mutual company seeking to convert to a mutual
holding company structure shall, by the affirmative vote
of two-thirds of its board of directors, adopt a plan of
MHC conversion consistent with the requirements of
subsection (8) of this Section.
(b) At any time before approval of a plan by
eligible members, the mutual company, by the affirmative
vote of two-thirds of its board of directors, may amend
or withdraw the plan of MHC conversion.
(5) Approval of the plan of MHC conversion by the
Director.
(a) Required findings. After adoption or amendment
of the plan by the mutual company's board of directors,
the plan of MHC conversion shall be submitted to the
Director for review and approval. The Director shall
hold a public hearing on the plan. The Director shall
approve the plan upon finding that:
(i) the provisions of this Section have been
complied with; and
(ii) the plan is fair and equitable as it
relates to the interests of the members.
(b) Documents to be filed.
(i) Prior to the members' approval of the plan
of MHC conversion, a mutual company seeking the
Director's approval of a plan shall file the
following documents with the Director for review and
approval:
(A) the plan of MHC conversion;
(B) the form of notice required by item
(b) of subsection (6) of this Section for
eligible members to vote on the plan;
(C) any proxies to be solicited from
eligible members and any other soliciting
materials;
(D) the proposed articles of
incorporation and bylaws of the mutual holding
company, each intermediate holding company, if
any, and the revised articles of incorporation
and bylaws of the converted company.
Once filed, these documents shall be approved
or disapproved by the Director within a reasonable
time.
(ii) After the members have approved the plan,
the converted company shall file the following
documents with the Director:
(A) the minutes of the meeting of the
members at which the plan of MHC conversion was
voted upon; and
(B) the articles and bylaws of the mutual
holding company and each intermediate holding
company, if any, and the revised articles of
incorporation and bylaws of the converted
company.
(c) The Director's approval of a plan pursuant to
this subsection (5) may be made conditional at the sole
discretion of the Director whenever he determines that
such conditions are reasonably necessary to protect
policyholder interests. Such conditions may include, but
shall not be limited to, limitations, requirements, or
prohibitions as follows:
(i) prior approval of any acquisition or
formation of affiliate entities of the MHC;
(ii) prior approval of the capital structure
of any intermediate holding company or any changes
thereto;
(iii) prior approval of any initial public
offering or other issuance of equity or debt
securities of an intermediate holding company or the
converted company in a private sale or public
offering;
(iv) prior approval of the expansion of the
mutual holding company system into lines of
business, industries, or operations not presented at
the time of the conversion;
(v) limitations on dividends and distributions
if the effect would be to reduce capital and surplus
of the converted company, in addition to any
limitations which may otherwise be authorized by
law; and
(vi) limitations on the pledge, incumbrance,
or transfer of the stock of the converted company.
(d) Consultant. The Director may retain, at the
mutual company's expense, any qualified expert not
otherwise a part of the Director's staff to assist in
reviewing the plan of MHC conversion.
(6) Approval of the plan by the members.
(a) Members entitled to notice of and to vote on
the plan. All eligible members shall be given notice of
and an opportunity to vote upon the plan of MHC
conversion.
(b) Notice required. All eligible members shall be
given notice of the members' meeting to vote upon the
plan of MHC conversion. The notice shall identify in
reasonable detail the benefits and risks of the MHC
conversion. A copy of the plan of MHC conversion or a
summary of the plan, if so authorized by the Director,
shall accompany the notice. If a summary of the plan
accompanies the notice, a copy of the plan shall be made
available without charge to any eligible member upon
request. The notice shall state that approval by the
Director does not constitute a recommendation that
eligible members approve the plan. The notice shall be
mailed to each member's last known address, as shown on
the mutual company's records, within 45 days of the
Director's approval of the plan. The meeting to vote upon
the plan shall not be set for a date less than 60 days
after the date when the notice of the meeting is mailed
by the mutual company. If the meeting to vote upon the
plan is held coincident with the mutual company's annual
meeting of policyholders, only one combined notice of
meeting is required.
(c) Vote required for approval.
(i) After approval by the Director, the plan
of MHC conversion shall be adopted, at an annual or
special meeting of policyholders at which a quorum
is present, upon receiving the affirmative vote of
at least two-thirds of the votes cast by eligible
members.
(ii) Members entitled to vote upon the
proposed plan may vote in person or by proxy. Any
proxies to be solicited from eligible members,
together with the related proxy statement and any
other soliciting materials, shall be filed with and
approved by the Director.
(iii) The number of votes each eligible member
may cast shall be determined by the mutual company's
bylaws. If the bylaws are silent, each eligible
member may cast one vote.
(7) Adoption of articles of incorporation. Adoption of
articles of incorporation for the mutual holding company,
each intermediate holding company, if any, and revised
articles of incorporation for the converted company is
necessary to implement the plan of MHC conversion.
Procedures for adoption or revision of such articles shall be
governed by the applicable provisions of this Code or, in the
case of an intermediate holding company, the business
corporation law of the state in which the intermediate
holding company is incorporated. For a Class I mutual
company, the members may adopt revised articles of
incorporation at the same meeting at which the members
approve the plan. For a Class 2 or 3 mutual company, the
articles of incorporation may be adopted solely by the board
of directors or trustees, as provided in Section 57 of this
Code.
(8) Required provisions in a plan of MHC conversion.
The following provisions shall be included in the plan of MHC
conversion:
(a) The plan shall set forth the reasons for the
proposed conversion.
(b) Effect of MHC conversion on existing policies.
(i) The plan shall provide that all policies
of the converted company in force on the effective
date of conversion shall continue to remain in force
under the terms of those policies, except that any
voting or other membership rights of the
policyholders provided for under the policies or
under this Code and any contingent liability policy
provisions of the type described in Section 55 of
this Code shall be extinguished on the effective
date of the conversion.
(ii) The plan shall further provide that
holders of participating policies in effect on the
date of conversion shall continue to have the right
to receive dividends as provided in the
participating policies, if any.
(iii) Except for a mutual company's life
policies, guaranteed renewable accident and health
policies, and non-cancelable accident and health
policies, the converted stock company may issue the
insured a nonparticipating policy as a substitute
for the participating policy upon the renewal date
of a participating policy.
(iv) The plan shall provide that a Class I
mutual company's participating life policies in
force on the effective date of the conversion shall
be operated by the converted company for dividend
purposes as a closed block of participating business
except that any or all classes of group
participating policies may be excluded from the
closed block. The plan shall establish one or more
segregated accounts for the benefit of the closed
block of business and shall allocate to those
segregated accounts enough assets of the mutual
company so that the assets together with the revenue
from the closed block of business are sufficient to
support the closed block including, but not limited
to, the payment of claims, expenses, taxes, and any
dividends that are provided for under the terms of
the participating policies with appropriate
adjustments in the dividends for experience changes.
The plan shall be accompanied by an opinion of a
qualified actuary or an appointed actuary who meets
the standards set forth in the insurance laws or
regulations for the submission of actuarial opinions
as to the adequacy of reserves or assets. The
opinion shall relate to the adequacy of the assets
allocated to the segregated accounts in support of
the closed block of business. The actuarial opinion
shall be based on methods of analysis deemed
appropriate for those purposes by the Actuarial
Standards Board. The amount of assets allocated to
the segregated accounts of the closed block shall be
based upon the mutual company's last annual
statement that is updated to the effective date of
the conversion. The converted stock company shall
keep a separate accounting for the closed block and
shall make and include in the annual statement to be
filed with the Director each year a separate
statement showing the gains, losses, and expenses
properly attributable to the closed block.
Periodically, upon the Director's approval, those
assets allocated to the closed block as provided
herein that are in excess of the amount of assets
necessary to support the remaining policies in the
closed block shall revert to the benefit of the
converted company. The Director may waive the
requirement for the establishment of a closed block
of business if the Director deems it to be in the
best interests of the participating policyholders of
the mutual company to do so.
(c) The plan shall set forth the requirements for
granting membership interests to future policyholders of
the converted company.
(d) The plan shall include information sufficient
to demonstrate that the financial condition of the
converted company will not be diminished by the plan of
MHC conversion.
(e) The plan shall include a description of any
current proposal to issue shares of an intermediate
holding company or the converted company to the public or
to other persons who are not direct or indirect
subsidiaries of the mutual holding company.
(f) The plan shall include the identity of the
proposed officers and directors of the mutual holding
company and each intermediate holding company, if any,
together with such other biographical information as the
Director may request.
(g) The plan shall include such other information
as the Director may request or may prescribe by rule.
(9) Effective date of the plan of MHC conversion. A
plan shall become effective when the Director has approved
the plan, the members have approved the plan and the articles
of incorporation of the mutual holding company, each
intermediate holding company, if any, and the revised
articles of incorporation of the converted company have been
adopted and filed with the Director.
(10) Corporate existence.
(a) Upon the conversion of a mutual company to a
converted company according to the provisions of this
Section, the corporate existence of the mutual company
shall be continued in the converted company with the
original date of incorporation of the mutual company.
All the rights, franchises, and interests of the mutual
company in and to every type of property, real, personal,
and mixed, and things in action thereunto belonging, is
deemed transferred to and vested in the converted company
without any deed or transfer. Simultaneously, the
converted company is deemed to have assumed all the
obligations and liabilities of the mutual company.
(b) The directors and officers of the mutual
company, unless otherwise specified in the plan of
conversion shall serve as directors and officers of the
converted company until new directors and officers of the
converted company are duly elected pursuant to the
articles of incorporation and bylaws of the converted
company.
(11) Regulation and authority of mutual holding company.
(a) A mutual holding company shall have the same
powers granted to domestic mutual companies and be
subject to the same requirements and provisions of
Article III and any other provisions of this Code
applicable to mutual companies that are not inconsistent
with the provisions of this Section, provided however
that a mutual holding company shall not have the
authority to transact insurance pursuant to Section
39(l).
(b) Neither the mutual holding company nor any
intermediate holding company shall issue or reinsure
policies of insurance.
(c) A mutual holding company may enter into an
affiliation agreement or a merger agreement either at the
time of conversion, or at some later time with the
approval of the Director, with any mutual insurance
company authorized to do business in this State or
another mutual holding company. Any such merger
agreement may authorize members of the mutual insurance
company or other mutual holding company to become members
of the mutual holding company. Any such affiliation
agreement or merger agreement shall be subject to the
insurance laws of this State relating to such
transactions entered into by a domestic mutual company.
(d) The assets of the MHC shall be held in trust,
under such arrangements and on such terms as the Director
may approve, for the benefit of the policyholders of the
converted company. Any residual rights of the MHC in
such assets or any assets of the MHC determined not to be
held in trust shall be subject to a lien in favor of the
policyholders of the converted company under such terms
as the Director may approve. Upon conversion of the
mutual holding company as provided for in subsection (13)
of this Section, such assets shall be released from trust
in accordance with the plan of conversion approved by the
Director.
(12) Diversion of business to affiliates. Without prior
approval of the Director, neither the converted company nor
any other person affiliated with or controlling the converted
company shall divert business from the converted company to
any insurance company affiliate if the purpose or effect
would be to significantly reduce the number of members of the
mutual holding company.
(13) Conversion of mutual holding company. A mutual
holding company created pursuant to this Section may
reorganize by complying with the applicable provisions of
Section 59. For purposes of effecting a conversion under
that Section, the mutual holding company shall be deemed a
"mutual company" and the converted mutual holding company
shall be deemed a "converted stock company," as such terms
are defined in Section 59.1.
(14) Conflict of interest. No director, officer, agent,
or employee of the mutual company or any other person shall
receive any fee, commission, or other valuable consideration,
other than his or her usual regular salary and compensation,
for in any manner aiding, promoting, or assisting in the
conversion except as set forth in the plan of MHC conversion
approved by the Director. This provision does not prohibit
the payment of reasonable fees and compensation to attorneys,
accountants, and actuaries for services performed in the
independent practice of their professions, even if the
attorney, accountant, or actuary is also a director of the
mutual company.
(15) Costs and expenses. All the costs and expenses
connected with a plan of MHC conversion shall be paid for or
reimbursed by the mutual company or the converted company.
(16) Failure to give notice. If the mutual company
complies substantially and in good faith with the notice
requirements of this Section, the mutual company's failure to
give any member or members any required notice does not
impair the validity of any action taken under this Section.
(17) Limitation of actions. Any action challenging the
validity of or arising out of acts taken or proposed to be
taken under this Section shall be commenced within 30 days
after the effective date of the plan of MHC conversion.
Section 99. Effective date. This Act takes effect upon
becoming law.