AB773: Bill Text

AB773, s. 1 Section 1. 20.145 (1) (h) of the statutes is created to read:

AB773,3,5 20.145 (1) (h) Holding company restructuring expenses. All moneys received from converting mutual insurance companies under s. 644.07 (11) for expenses, including prorated salaries, incurred by the commissioner and office staff related to restructurings under ch. 644.

AB773, s. 2 Section 2. 610.01 (intro.) of the statutes is amended to read:

AB773,3,8 610.01 Definitions. (intro.) In chs. 610 to 620 and 644, unless the context requires otherwise:

AB773, s. 3 Section 3. 613.03 (3) of the statutes, as affected by 1997 Wisconsin Act 27, is amended to read:

AB773,3,15 613.03 (3) Applicability of insurance laws. Except as otherwise specifically provided, service insurance corporations organized or operating under this chapter are subject to ss. 610.01, 610.11, 610.21, 610.23 and 610.24 and chs. 600, 601, 609, 617, 620, 623, 625, 627, 628, 631, 632, 635, 644 and 645 and to no other insurance laws.

AB773, s. 4 Section 4. Chapter 644 of the statutes is created to read:

AB773,3,19 CHAPTER 644 Domestic Mutual iNSURANCE HOLDING COMPANIES

AB773,4,2 SUBCHAPTER I GENERAL PROVISIONS

AB773,4,3 644.02 Definitions. (1) In this chapter, unless the context otherwise requires:

AB773,4,5 (a) "Board" means the board of directors or board of trustees, as the case may be, of the converting insurance company.

AB773,4,9 (b) "Converted insurance company" means an insurance company that converted under this chapter from a mutual insurance company to a stock insurance company, or from a service insurance corporation to a mutual insurance company and then to a stock insurance company, and formed a mutual holding company.

AB773,4,12 (c) "Converted life insurance company" means a life insurance company that converted under this chapter from a mutual life insurance company to a stock insurance company and formed a mutual holding company.

AB773,4,15 (d) "Converting insurance company" means a domestic mutual insurance company or a domestic service insurance corporation undergoing restructuring under this chapter.

AB773,4,20 (e) "Dividend plan" means a plan to provide reasonable assurances as to the policyholder dividend scales of the participating individual policies and contracts of a converted insurance company in the life insurance business in force on the date specified in the dividend plan for which the insurer had an experience-based dividend scale payable in the year of the plan by creating any of the following:

AB773,4,22 1. Covenants of the converted insurance company or the mutual holding company, or both.

AB773,5,7 2. One or more closed blocks. Assets of the converted insurance company shall be allocated to the closed block in an amount that produces cash flows, together with anticipated revenues from the closed block business, expected to be sufficient to support the closed block business, including provision for payment of claims and those expenses and taxes specified in the dividend plan, and provision for continuation of the dividend scales in effect on the effective date of the restructuring under this chapter if the experience underlying such dividend scales continues. Any plan under this subdivision may provide for conditions under which the converted insurance company may cease to maintain any closed block and for the allocation of assets to that closed block.

AB773,5,9 3. A combination of subds. 1. and 2. or any other means of providing reasonable assurances that the commissioner approves.

AB773,5,11 (f) "Dividend scales" means the equitable apportionment of divisible surplus by the board.

AB773,5,13 (g) "Divisible surplus" means the annual distribution described in s. 632.62 (4) (b) as a payment made to policyholders as determined by the board.

AB773,5,15 (h) "Intermediate stock holding company" means a corporation that satisfies all of the following:

AB773,5,16 1. The corporation was incorporated under ch. 180.

AB773,5,18 2. At least 51% of the corporation's voting stock is held directly or indirectly by a mutual holding company.

AB773,5,20 3. The corporation holds directly or indirectly at least 51% of the voting stock of a converted insurance company.

AB773,5,21 (i) "Member" means any of the following:

AB773,5,24 1. For a converting mutual insurance company, a policyholder who, by the records of the converting insurance company and by its articles of incorporation and bylaws, is a holder of a membership interest in the converting insurance company.

AB773,6,3 2. For a converting service insurance corporation, a policyholder shown on the books and records of the converting insurance company on the effective date of the restructuring.

AB773,6,13 (j) "Membership interests" means the voting rights of a member arising under the statutes and the articles of incorporation and bylaws of the converting insurance company, including the right to vote for the board and the right to vote on any plan of conversion, voluntary dissolution or amendment of the articles of incorporation. On and after the effective date of the restructuring, "membership interests" means the voting rights of a member arising under the statutes and the articles of incorporation and bylaws of the mutual holding company, including the right to vote for the board and the right to vote on any plan of conversion, voluntary dissolution or amendment of the articles of incorporation. "Membership interests" does not include members' rights in surplus, if any.

AB773,6,14 (k) "Mutual holding company" means a mutual insurance holding company.

AB773,6,16 (L) "Policyholder" means the person identified in the records of the converting insurance company or the converted insurance company under s. 611.51 (9) (c).

AB773,7,5 (m) "Rights in surplus" means any rights of a member arising under the converting insurance company's articles of incorporation or ch. 611 to a return of the surplus in respect of policies or contracts of the converting insurance company that may exist with regard to the surplus not apportioned or declared by its board as divisible surplus, including rights of members to a distribution of such surplus in dissolution or conversion proceedings under ch. 611. On and after the effective date of the restructuring, "rights in surplus" means any rights of a member of the mutual holding company arising under its articles of incorporation or this chapter to the net worth of the mutual holding company, including rights of members of the mutual holding company to a distribution of any portion of the net worth of the mutual holding company in conversion proceedings under s. 644.25 or dissolution proceedings under s. 644.28 or 644.29. "Rights in surplus" shall not include any right to divisible surplus expressly conferred solely by the terms of an insurance policy or annuity contract.

AB773,7,10 (n) "Voting stock" means stock of any class or any ownership interest having voting power for the election of directors, trustees or management. All references to a specified percentage of voting stock shall mean stock having the specified percentage of the voting power for the election of directors, trustees or management, including stock having such power only by reason of the happening of a contingency.

AB773,7,14 (2) Except when inconsistent with the definitions given in this chapter, the definitions of ss. 600.03 and 610.01 apply to this chapter. In the provisions of chs. 181 and 611 that are made applicable to this chapter or incorporated into this chapter by reference, all of the following apply:

AB773,7,16 (a) "Corporation" includes a mutual holding company formed under this chapter.

AB773,7,17 (b) "Department" means the commissioner.

AB773,7,18 (c) "Mutual" includes a mutual holding company.

AB773,7,19 (d) "Nonassessable mutual" includes a mutual holding company.

AB773,7,20 (e) "Policyholder" includes a member.

AB773,7,21 (f) "This chapter" includes this chapter.

AB773,7,23 644.03 Scope and purposes. (1) Scope. This chapter applies to all mutual insurance holding companies organized under the laws of this state.

AB773,8,5 (2) Purposes. The purposes of this chapter are to provide complete, self-contained procedures for the formation of mutual insurance holding companies. A corporation organized as a mutual insurance holding company under this chapter may be organized for any lawful purpose and shall hold directly or indirectly as a subsidiary at least one stock insurance company converted from a mutual insurance company or from a service insurance corporation that converted to a mutual insurance company. A mutual holding company is not an insurer.

AB773,8,7 644.04 Restructuring. (1) On the effective date of a restructuring under this chapter, all of the following shall occur:

AB773,8,9 (a) The converting insurance company shall become a domestic stock insurance company.

AB773,8,14 (b) All membership interests and rights in surplus of the converting insurance company shall be extinguished and the members of the converting insurance company shall become members of the mutual holding company in accordance with this chapter and the articles of incorporation and bylaws of the mutual holding company.

AB773,8,17 (c) All shares of the voting stock of the converting insurance company shall be acquired and retained by the mutual holding company or, if created, an intermediate stock holding company.

AB773,8,19 (d) All of the shares of voting stock of any intermediate stock holding company shall be acquired and retained by the mutual holding company.

AB773,8,23 (2) Any intermediate stock holding company created at the time of the restructuring to hold the stock of the converting insurance company shall be incorporated under ch. 180 and may engage in any business or activity permitted by ch. 180.

AB773,9,2 (3) Subject to s. 611.33, the converted insurance company and any intermediate stock holding company may thereafter issue to 3rd parties debt securities, stock other than voting stock and, subject to s. 644.15, voting stock, so long as all of the following are true:

AB773,9,5 (a) No shares of stock representing more than 49% of the voting power of all issued and outstanding voting stock of either the converted insurance company or the intermediate stock holding company, if any, are issued to 3rd parties.

AB773,9,20 (b) At least 51% of the voting stock of the converted insurance company is at all times owned by the mutual holding company or by the intermediate stock holding company, at least 51% of whose voting stock is held by the mutual holding company, and such 51% interests in the converted insurance company and any intermediate stock holding company are not conveyed, transferred, assigned, pledged, subjected to a security interest or lien, placed in a voting trust, encumbered or otherwise hypothecated or alienated by the mutual holding company or by the intermediate stock holding company. Any conveyance, transfer, assignment, pledge, security interest, lien, placement in a voting trust, encumbrance, or hypothecation or alienation of, in or on the 51% of the voting shares of the converted insurance company or the intermediate stock holding company in violation of this paragraph shall be void in inverse chronological order of the date of such conveyance, transfer, assignment, pledge, security interest, lien, placement in a voting trust, encumbrance, hypothecation or alienation as to the shares necessary to constitute 51% of such voting stock.

AB773,9,24 (4) For purposes of the calculations under this section and under s. 644.13, any issued and outstanding securities of the converted insurance company or any intermediate stock holding company that are convertible into voting stock are considered to be issued and outstanding voting stock.

AB773,10,2 644.05 General corporate powers and procedures. (1) Powers. Section 181.04 applies to mutual holding companies.

AB773,10,4 (2) Effect of unauthorized corporate acts. Section 181.057 (1) and (2) applies to mutual holding companies.

AB773,10,5 (3) Omission of seal. Section 181.665 applies to mutual holding companies.

AB773,10,7 (4) Waiver of notice and informal action by members or directors. Sections 181.70 and 181.72 apply to mutual holding companies.

AB773,10,12 644.06 Registered agent for service of process. Sections 601.715, 601.72 (1) (a), (2) and (3) to (5) and 601.73 apply to mutual holding companies, except that, for purposes of this chapter, "authorized insurer" used in s. 601.715 means mutual holding company and "insurer" used in s. 601.72 (1) (a) and (2) means mutual holding company.

AB773,10,15 SUBCHAPTER II MUTUAL INSURANCE HOLDING COMPANIES

AB773,10,18 644.07 Restructuring procedures. (1) Formation of mutual holding company. (a) 1. A domestic mutual insurance company organized under ch. 611 may restructure by forming a mutual holding company in accordance with this section.

AB773,10,22 2. A domestic service insurance corporation organized under ch. 613 may restructure by simultaneously converting to a mutual insurance company that is subject to ch. 611 and forming a mutual holding company in accordance with this section.

AB773,11,4 (b) The mutual holding company may use the word "mutual" in its name. The restructuring shall continue the corporate existence of the converting insurance company as a stock insurance company subsidiary of the mutual holding company or as a stock insurance company subsidiary of an intermediate stock holding company that is a subsidiary of the mutual holding company. The converted insurance company may continue to use the word "mutual" in its name if the name includes the abbreviation "SI" for stock insurer, or the words "stock insurer".

AB773,11,8 (2) Resolution of the board. The board shall pass a resolution to the effect that restructuring is fair and equitable to policyholders. The resolution shall specify the reasons for and the purposes of the proposed restructuring, and explain the manner in which the restructuring is expected to benefit policyholders.

AB773,11,14 (3) Adoption of plan. The board shall adopt a mutual holding company plan. The mutual holding company plan shall set forth the reasons for and the purposes of the proposed restructuring, explain how the restructuring is expected to benefit policyholders and provide for amending the converting insurance company's articles of incorporation to give effect to the restructuring from a mutual, nonstock corporation into a stock corporation.

AB773,11,16 (4) Submission of plan. The board shall submit the mutual holding company plan to the commissioner for approval, together with all of the following:

AB773,11,19 (a) The proposed articles and bylaws of the mutual holding company, which shall comply with s. 644.09, of the converted insurance company, which shall comply with s. 611.12, and of any intermediate stock holding company.

AB773,11,21 (b) So much of the following information pertaining to the mutual holding company as the commissioner reasonably requires:

AB773,11,23 1. The names and, for the preceding 10 years, all addresses and all occupations of all proposed directors and officers.

AB773,11,25 2. All agreements relating to the mutual holding company to which any proposed director or officer is a party.

AB773,12,2 3. The amount and sources of the funds available for organization expenses and initial operating expenses.

AB773,12,3 4. The proposed compensation of directors and officers.

AB773,12,4 5. The proposed capital.

AB773,12,6 6. A business plan of the mutual holding company for the first 5 years of operation.

AB773,12,8 (c) Such other relevant documents or information as the commissioner reasonably requires.

AB773,12,9 (5) Plan contents. (a) The plan shall include all of the following:

AB773,12,13 1. A description of any plans for the initial sale of voting stock to 3rd parties by the converted insurance company or any intermediate stock holding company, or a statement that the converted insurance company or intermediate stock holding company has no current plans for the sale of voting stock.

AB773,12,17 2. A description of any plans for the transfer of assets and assumption of obligations, including any one or more subsidiaries of the converting insurance company, to the mutual holding company or to the intermediate stock holding company.

AB773,12,19 (b) 1. A plan for the initial sale of voting stock shall be adequately described under par. (a) 1. if it contains all of the following:

AB773,12,22 a. A statement of intent to conduct an initial sale of voting stock of the converted insurance company or of any intermediate stock holding company within a specified time after the effective date of the restructuring.

AB773,12,23 b. A description of the maximum percentage of the stock to be sold.

AB773,12,25 c. A description of the process to be used in offering the stock and setting the initial sale price for the stock.

AB773,13,3 d. A description of the rights of members to subscribe to the stock offering if the initial sale of voting stock by the converted insurance company or any intermediate stock holding company involves an initial public offering.

AB773,13,4 e. Such other information as may be prescribed by the commissioner.

AB773,13,10 2. No plan for the initial sale of voting stock that is approved by policyholders as part of the approval of a mutual holding company conversion plan under sub. (8) or by members as part of an approval under s. 644.15 shall be effective for more than the specified time under subd. 1. a. after the effective date of the restructuring or the date on which the plan is approved by members under. s. 644.15 (1), whichever is applicable.

AB773,13,13 (5m) Additional plan contents for service insurance corporations. If the converting insurance company is a service insurance corporation, in addition to satisfying the requirements under sub. (5), the plan shall state all of the following:

AB773,13,17 (a) That those persons who are policyholders of the converting service insurance corporation on the date of the resolution under sub. (2) and who remain policyholders on the record date established by the board for the vote under sub. (8) shall have the right to vote on the plan under sub. (8).

AB773,13,21 (b) That the members of the mutual holding company shall be those persons who are policyholders of the converting service insurance corporation on the effective date of the restructuring, and that thereafter membership shall be as provided in sub. (10) (d).

AB773,13,24 (c) Any other conditions that the commissioner may require relating to the company's conversion from a service insurance corporation to a mutual holding company.

AB773,14,2 (6) Hearing. (a) The commissioner or a hearing examiner designated by the commissioner shall hold a hearing after receipt of a mutual holding company plan.

AB773,14,13 (b) 1. Notice of the hearing shall be mailed by the converting insurance company not more than 60 days and not less than 10 days before the scheduled date of the hearing to the last-known address of each person who was a policyholder of the converting insurance company on the date of the resolution under sub. (2), together with a copy of the mutual holding company plan, or a copy of a summary of the plan if the commissioner approves the summary, and any comment that the commissioner considers necessary for the adequate information of policyholders. Failure to mail notice to a policyholder does not invalidate a proceeding under this subsection if the commissioner determines that the converting insurance company has substantially complied with this subdivision and has attempted in good faith to mail notice to all policyholders entitled to notice.

AB773,14,18 2. The notice, the plan or a summary of the plan and any comments under subd. 1. shall also be mailed by the converting insurance company not more than 60 days and not less than 10 days before the scheduled date of the hearing to the commissioner of every jurisdiction in which the converting insurance company is authorized to do any business.