Relating to the division of domestic stock insurers

If the dividing insurer will survive the division, the plan must also include any proposed amendments to the dividing insurer’s articles of incorporation and bylaws and the manner in which the dividing insurer proposes to cancel or convert some of its shares. If the dividing insurer will not survive the division, the plan of division must include details on how the dividing insurer will cancel or convert its shares. The bill allows a dividing insurer to amend or abandon a plan under certain conditions as detailed in the bill. If a dividing insurer elects to abandon the dividing insurer’s plan of division, the dividing insurer is required to notify the commissioner. The bill requires that prior to filing a plan with the commissioner, a dividing insurer must obtain approval in accordance with its articles of incorporation and bylaws. If the articles of incorporation and bylaws do not provide for such approval, the dividing insurer must obtain approval in accordance with all provisions of such that apply to approval of a merger. The bill provides that a division is not effective until approved by the commissioner after reasonable notice and a public hearing. The commissioner shall require the dividing insurer to mail written notice of the public hearing to the dividing insurer’s policyholders advising the policyholders that a plan of division has been filed and providing the date, time, and location of the public hearing. The commissioner must retain an independent expert to review the dividing insurer’s plan of division and issue a report to the commissioner. The commissioner may approve a plan if the commissioner determines that the interests of the policyholders, creditors, or shareholders of the dividing insurer are adequately protected and the proposed division is not unfair or unreasonable to the policyholders of the dividing insurer; that the division is not contrary to public policy; that 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; that all resulting insurers created by the proposed division are qualified and eligible to receive a certificate of authority to transact the business of insurance in this state; that the proposed division does not violate the state’s voidable transactions statute; that the proposed division is not for the purpose of hindering, delaying, or defrauding any policyholders or other creditors of the dividing insurer; that all resulting insurers will be solvent; and that the remaining assets of a resulting insurer will not be unreasonably small in relation to the business and transactions in which such resulting insurer has been engaged in or will engage in after completion of the division. The bill requires the commissioner to issue an order, including findings of fact and conclusions of law, to approve a plan of division and to issue a certificate of authority to the resulting insurers. A dividing insurer may submit a written request to the commissioner that confidentiality be maintained regarding all business and other proprietary information submitted to the commissioner in connection with the dividing insurer’s plan of division. The commissioner must make a determination regarding the dividing insurer’s request prior to issuing a notice of a public hearing. If the commissioner grants the request, any information the commissioner determines shall remain confidential is not available for public inspection and shall not be subject to Code chapter 22. The plan of division is not confidential and shall be available for public inspection. If the commissioner approves a dividing insurer’s plan, an officer of the dividing insurer must sign a certificate of division that sets forth information, as detailed in the bill, related to the dividing insurer’s post-division status and any resulting insurer’s post-division status. A certificate of division is effective on the date the dividing insurer files the certificate with the secretary of state as specified in the plan of division. The certificate of division becomes effective not later than days after it is filed. When a division becomes effective and the dividing insurer survives, the bill provides that the dividing insurer continues to exist and that the articles of incorporation and the bylaws of the dividing insurer must be amended as provided in the plan. If the dividing insurer does not survive, the dividing insurer’s separate existence ceases to exist and any resulting insurers created by the plan come into existence. The bill provides that all resulting insurers hold any capital, surplus, and other assets allocated to each as a successor to the dividing insurer by operation of law, and not by transfer. All capital, surplus, and other assets of the dividing insurer that are allocated by the plan of division either vest in the applicable resulting insurer or remain vested in the dividing insurer as provided in the plan. All capital, surplus, and other assets that are not allocated by the plan remain vested in the dividing insurer if the dividing insurer survives the division, are allocated to the resulting insurers individually if the dividing insurer does not survive the division, or vest as otherwise provided in the bill. A resulting insurer to which a cause of action is allocated may be substituted or added in any pending action to which the dividing insurer is a party when the division becomes effective. All liabilities of a dividing insurer are allocated between or among any resulting insurers 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. The bill also provides that when a division becomes effective any shares in the dividing insurer that are converted or canceled entitle the shareholders of those shares to the rights provided under the plan of division and per any appraisal rights they may have as detailed in the bill. Unless otherwise provided in the plan, the shares and securities of each resulting insurer are distributed to the dividing insurer if it survives the division, or pro rata to any shareholders of the dividing insurer that do not assert appraisal rights. The bill provides that after a division becomes effective, each resulting insurer is individually liable for all liabilities that such resulting insurer issues, undertakes, or incurs in its own name; each resulting insurer is individually liable for the liabilities of the dividing insurer that are allocated to or remain the liability of such resulting insurer as specified in the plan; and the dividing insurer remains responsible for all liabilities of the dividing insurer that are not allocated by the plan if the dividing insurer survives the division. If the dividing insurer does not survive the division, each resulting insurer is pro rata individually liable for all liabilities of the dividing insurer that are not allocated by the plan. If a division breaches a contractual obligation of the dividing insurer, all resulting insurers are liable, jointly and severally, for the breach. The validity and effectiveness of the division are not affected by the breach. In a division, a direct or indirect allocation of capital, surplus, assets, or liabilities, including policy liabilities, occurs automatically by operation of law and is not treated as a distribution or transfer for any purpose with respect to either the dividing insurer or any of the resulting insurers. Except as provided in the plan and as approved by the commissioner, an allocation of a policy or other liability does not affect the rights that a policyholder or creditor has under any other law with respect to such policy or other liability, except that such rights are available only against a resulting insurer responsible for the policy or liability. A reinsurer, surety, or guarantor of the policy or liability is not released from their obligations under the policy or other liability. The bill allows the commissioner to adopt rules pursuant to Code chapter 17A to administer the requirements of the bill and allows the commissioner to take any action under the commissioner’s authority to enforce compliance with the bill.120 to add a plan of division to the definition of plan.1302 to provide for shareholder appraisal rights for a division to which a corporation is a party, if the corporation does not survive such division. The bill amends Code chapter 521 to allow a dividing insurer to adopt and execute a plan of merger or consolidation on behalf of a resulting insurer and if provided for in the plan of merger or consolidation, the merger or consolidation shall be effective simultaneously with the effectiveness of a division under the bill.