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| [ Introduced ] | [ Engrossed ] | [ House Amendment 001 ] |
90_SB1901enr
215 ILCS 5/4 from Ch. 73, par. 616
Amends the Illinois Insurance Code. Provides that a
policy that allows payment of a percentage of the face amount
of benefits in advance upon a diagnosis that the insured has
incurred a medical condition listed in the policy may pay up
to 75%, rather than 25%, of the benefits in advance.
Provides that total and permanent disability or any condition
approved by the Department of Insurance may qualify for
advance payments. Effective immediately.
LRB9011659JSgc
SB1901 Enrolled LRB9011659JSgc
1 AN ACT to amend the Illinois Insurance Code by changing
2 Sections 4 and 57 and adding Section 59.2.
3 Be it enacted by the People of the State of Illinois,
4 represented in the General Assembly:
5 Section 5. The Illinois Insurance Code is amended by
6 changing Sections 4 and 57 and adding Section 59.2 as
7 follows:
8 (215 ILCS 5/4) (from Ch. 73, par. 616)
9 Sec. 4. Classes of insurance. Insurance and insurance
10 business shall be classified as follows:
11 Class 1. Life, Accident and Health.
12 (a) Life. Insurance on the lives of persons and every
13 insurance appertaining thereto or connected therewith and
14 granting, purchasing or disposing of annuities. Policies of
15 life or endowment insurance or annuity contracts or contracts
16 supplemental thereto which contain provisions for additional
17 benefits in case of death by accidental means and provisions
18 operating to safeguard such policies or contracts against
19 lapse, to give a special surrender value, or special benefit,
20 or an annuity, in the event, that the insured or annuitant
21 shall become totally and permanently disabled as defined by
22 the policy or contract, or which contain benefits providing
23 acceleration of life or endowment or annuity benefits in
24 advance of the time they would otherwise be payable, as an
25 indemnity for long term care which is certified or ordered by
26 a physician, including but not limited to, professional
27 nursing care, medical care expenses, custodial nursing care,
28 non-nursing custodial care provided in a nursing home or at a
29 residence of the insured, or which contain benefits providing
30 acceleration of life or endowment or annuity benefits in
31 advance of the time they would otherwise be payable, at any
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1 time during the insured's lifetime, as an indemnity for a
2 terminal illness shall be deemed to be policies of life or
3 endowment insurance or annuity contracts within the intent of
4 this clause.
5 Also to be deemed as policies of life or endowment
6 insurance or annuity contracts within the intent of this
7 clause shall be those policies or riders that provide for the
8 payment of up to 75% 25% of the face amount of benefits in
9 advance of the time they would otherwise be payable upon a
10 diagnosis by a physician licensed to practice medicine in all
11 of its branches that the insured has incurred a one of the
12 covered condition conditions listed in the policy or rider.
13 Every such policy or rider shall contain a majority of
14 the following "Covered condition", as used in this clause,
15 means conditions: heart attack,; stroke,; coronary artery
16 surgery,; life threatening cancer,; renal failure,;
17 alzheimer's disease,; paraplegia,; major organ
18 transplantation, total and permanent disability, and any
19 other medical condition that the Department may approve for
20 any particular filing.
21 The Director may issue rules that specify prohibited
22 policy provisions, not otherwise specifically prohibited by
23 law, which in the opinion of the Director are unjust, unfair,
24 or unfairly discriminatory to the policyholder, any person
25 insured under the policy, or beneficiary.
26 (b) Accident and health. Insurance against bodily
27 injury, disablement or death by accident and against
28 disablement resulting from sickness or old age and every
29 insurance appertaining thereto, including stop-loss
30 insurance. Stop-loss insurance is insurance against the risk
31 of economic loss issued to a single employer self-funded
32 employee disability benefit plan or an employee welfare
33 benefit plan as described in 29 U.S.C. 100 et seq.
34 (c) Legal Expense Insurance. Insurance which involves
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1 the assumption of a contractual obligation to reimburse the
2 beneficiary against or pay on behalf of the beneficiary, all
3 or a portion of his fees, costs, or expenses related to or
4 arising out of services performed by or under the supervision
5 of an attorney licensed to practice in the jurisdiction
6 wherein the services are performed, regardless of whether the
7 payment is made by the beneficiaries individually or by a
8 third person for them, but does not include the provision of
9 or reimbursement for legal services incidental to other
10 insurance coverages. The insurance laws of this State,
11 including this Act do not apply to:
12 (i) Retainer contracts made by attorneys at law
13 with individual clients with fees based on estimates of
14 the nature and amount of services to be provided to the
15 specific client, and similar contracts made with a group
16 of clients involved in the same or closely related legal
17 matters;
18 (ii) Plans owned or operated by attorneys who are
19 the providers of legal services to the plan;
20 (iii) Plans providing legal service benefits to
21 groups where such plans are owned or operated by
22 authority of a state, county, local or other bar
23 association;
24 (iv) Any lawyer referral service authorized or
25 operated by a state, county, local or other bar
26 association;
27 (v) The furnishing of legal assistance by labor
28 unions and other employee organizations to their members
29 in matters relating to employment or occupation;
30 (vi) The furnishing of legal assistance to members
31 or dependents, by churches, consumer organizations,
32 cooperatives, educational institutions, credit unions, or
33 organizations of employees, where such organizations
34 contract directly with lawyers or law firms for the
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1 provision of legal services, and the administration and
2 marketing of such legal services is wholly conducted by
3 the organization or its subsidiary;
4 (vii) Legal services provided by an employee
5 welfare benefit plan defined by the Employee Retirement
6 Income Security Act of 1974;
7 (viii) Any collectively bargained plan for legal
8 services between a labor union and an employer negotiated
9 pursuant to Section 302 of the Labor Management Relations
10 Act as now or hereafter amended, under which plan legal
11 services will be provided for employees of the employer
12 whether or not payments for such services are funded to
13 or through an insurance company.
14 Class 2. Casualty, Fidelity and Surety.
15 (a) Accident and health. Insurance against bodily
16 injury, disablement or death by accident and against
17 disablement resulting from sickness or old age and every
18 insurance appertaining thereto, including stop-loss
19 insurance. Stop-loss insurance is insurance against the risk
20 of economic loss issued to a single employer self-funded
21 employee disability benefit plan or an employee welfare
22 benefit plan as described in 29 U.S.C. 1001 et seq.
23 (b) Vehicle. Insurance against any loss or liability
24 resulting from or incident to the ownership, maintenance or
25 use of any vehicle (motor or otherwise), draft animal or
26 aircraft. Any policy insuring against any loss or liability
27 on account of the bodily injury or death of any person may
28 contain a provision for payment of disability benefits to
29 injured persons and death benefits to dependents,
30 beneficiaries or personal representatives of persons who are
31 killed, including the named insured, irrespective of legal
32 liability of the insured, if the injury or death for which
33 benefits are provided is caused by accident and sustained
34 while in or upon or while entering into or alighting from or
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1 through being struck by a vehicle (motor or otherwise), draft
2 animal or aircraft, and such provision shall not be deemed to
3 be accident insurance.
4 (c) Liability. Insurance against the liability of the
5 insured for the death, injury or disability of an employee or
6 other person, and insurance against the liability of the
7 insured for damage to or destruction of another person's
8 property.
9 (d) Workers' compensation. Insurance of the obligations
10 accepted by or imposed upon employers under laws for workers'
11 compensation.
12 (e) Burglary and forgery. Insurance against loss or
13 damage by burglary, theft, larceny, robbery, forgery, fraud
14 or otherwise; including all householders' personal property
15 floater risks.
16 (f) Glass. Insurance against loss or damage to glass
17 including lettering, ornamentation and fittings from any
18 cause.
19 (g) Fidelity and surety. Become surety or guarantor for
20 any person, copartnership or corporation in any position or
21 place of trust or as custodian of money or property, public
22 or private; or, becoming a surety or guarantor for the
23 performance of any person, copartnership or corporation of
24 any lawful obligation, undertaking, agreement or contract of
25 any kind, except contracts or policies of insurance; and
26 underwriting blanket bonds. Such obligations shall be known
27 and treated as suretyship obligations and such business shall
28 be known as surety business.
29 (h) Miscellaneous. Insurance against loss or damage to
30 property and any liability of the insured caused by accidents
31 to boilers, pipes, pressure containers, machinery and
32 apparatus of any kind and any apparatus connected thereto, or
33 used for creating, transmitting or applying power, light,
34 heat, steam or refrigeration, making inspection of and
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1 issuing certificates of inspection upon elevators, boilers,
2 machinery and apparatus of any kind and all mechanical
3 apparatus and appliances appertaining thereto; insurance
4 against loss or damage by water entering through leaks or
5 openings in buildings, or from the breakage or leakage of a
6 sprinkler, pumps, water pipes, plumbing and all tanks,
7 apparatus, conduits and containers designed to bring water
8 into buildings or for its storage or utilization therein, or
9 caused by the falling of a tank, tank platform or supports,
10 or against loss or damage from any cause (other than causes
11 specifically enumerated under Class 3 of this Section) to
12 such sprinkler, pumps, water pipes, plumbing, tanks,
13 apparatus, conduits or containers; insurance against loss or
14 damage which may result from the failure of debtors to pay
15 their obligations to the insured; and insurance of the
16 payment of money for personal services under contracts of
17 hiring.
18 (i) Other casualty risks. Insurance against any other
19 casualty risk not otherwise specified under Classes 1 or 3,
20 which may lawfully be the subject of insurance and may
21 properly be classified under Class 2.
22 (j) Contingent losses. Contingent, consequential and
23 indirect coverages wherein the proximate cause of the loss is
24 attributable to any one of the causes enumerated under Class
25 2. Such coverages shall, for the purpose of classification,
26 be included in the specific grouping of the kinds of
27 insurance wherein such cause is specified.
28 (k) Livestock and domestic animals. Insurance against
29 mortality, accident and health of livestock and domestic
30 animals.
31 (l) Legal expense insurance. Insurance against risk
32 resulting from the cost of legal services as defined under
33 Class 1(c).
34 Class 3. Fire and Marine, etc.
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1 (a) Fire. Insurance against loss or damage by fire,
2 smoke and smudge, lightning or other electrical disturbances.
3 (b) Elements. Insurance against loss or damage by
4 earthquake, windstorms, cyclone, tornado, tempests, hail,
5 frost, snow, ice, sleet, flood, rain, drought or other
6 weather or climatic conditions including excess or deficiency
7 of moisture, rising of the waters of the ocean or its
8 tributaries.
9 (c) War, riot and explosion. Insurance against loss or
10 damage by bombardment, invasion, insurrection, riot, strikes,
11 civil war or commotion, military or usurped power, or
12 explosion (other than explosion of steam boilers and the
13 breaking of fly wheels on premises owned, controlled,
14 managed, or maintained by the insured.)
15 (d) Marine and transportation. Insurance against loss or
16 damage to vessels, craft, aircraft, vehicles of every kind,
17 (excluding vehicles operating under their own power or while
18 in storage not incidental to transportation) as well as all
19 goods, freights, cargoes, merchandise, effects,
20 disbursements, profits, moneys, bullion, precious stones,
21 securities, chooses in action, evidences of debt, valuable
22 papers, bottomry and respondentia interests and all other
23 kinds of property and interests therein, in respect to,
24 appertaining to or in connection with any or all risks or
25 perils of navigation, transit, or transportation, including
26 war risks, on or under any seas or other waters, on land or
27 in the air, or while being assembled, packed, crated, baled,
28 compressed or similarly prepared for shipment or while
29 awaiting the same or during any delays, storage,
30 transshipment, or reshipment incident thereto, including
31 marine builder's risks and all personal property floater
32 risks; and for loss or damage to persons or property in
33 connection with or appertaining to marine, inland marine,
34 transit or transportation insurance, including liability for
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1 loss of or damage to either arising out of or in connection
2 with the construction, repair, operation, maintenance, or use
3 of the subject matter of such insurance, (but not including
4 life insurance or surety bonds); but, except as herein
5 specified, shall not mean insurances against loss by reason
6 of bodily injury to the person; and insurance against loss or
7 damage to precious stones, jewels, jewelry, gold, silver and
8 other precious metals whether used in business or trade or
9 otherwise and whether the same be in course of transportation
10 or otherwise, which shall include jewelers' block insurance;
11 and insurance against loss or damage to bridges, tunnels and
12 other instrumentalities of transportation and communication
13 (excluding buildings, their furniture and furnishings, fixed
14 contents and supplies held in storage) unless fire, tornado,
15 sprinkler leakage, hail, explosion, earthquake, riot and
16 civil commotion are the only hazards to be covered; and to
17 piers, wharves, docks and slips, excluding the risks of fire,
18 tornado, sprinkler leakage, hail, explosion, earthquake, riot
19 and civil commotion; and to other aids to navigation and
20 transportation, including dry docks and marine railways,
21 against all risk.
22 (e) Vehicle. Insurance against loss or liability
23 resulting from or incident to the ownership, maintenance or
24 use of any vehicle (motor or otherwise), draft animal or
25 aircraft, excluding the liability of the insured for the
26 death, injury or disability of another person.
27 (f) Property damage, sprinkler leakage and crop.
28 Insurance against the liability of the insured for loss or
29 damage to another person's property or property interests
30 from any cause enumerated in this class; insurance against
31 loss or damage by water entering through leaks or openings in
32 buildings, or from the breakage or leakage of a sprinkler,
33 pumps, water pipes, plumbing and all tanks, apparatus,
34 conduits and containers designed to bring water into
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1 buildings or for its storage or utilization therein, or
2 caused by the falling of a tank, tank platform or supports or
3 against loss or damage from any cause to such sprinklers,
4 pumps, water pipes, plumbing, tanks, apparatus, conduits or
5 containers; insurance against loss or damage from insects,
6 diseases or other causes to trees, crops or other products of
7 the soil.
8 (g) Other fire and marine risks. Insurance against any
9 other property risk not otherwise specified under Classes 1
10 or 2, which may lawfully be the subject of insurance and may
11 properly be classified under Class 3.
12 (h) Contingent losses. Contingent, consequential and
13 indirect coverages wherein the proximate cause of the loss is
14 attributable to any of the causes enumerated under Class 3.
15 Such coverages shall, for the purpose of classification, be
16 included in the specific grouping of the kinds of insurance
17 wherein such cause is specified.
18 (i) Legal expense insurance. Insurance against risk
19 resulting from the cost of legal services as defined under
20 Class 1(c).
21 (Source: P.A. 88-364.)
22 (215 ILCS 5/57) (from Ch. 73, par. 669)
23 Sec. 57. Amendment of articles of incorporation.
24 (1) A company subject to the provisions of this Article
25 may amend its articles of incorporation in any respect not in
26 violation of law, but may not amend such articles to insert
27 any provision prohibited, or to delete any provision
28 required, in original articles of incorporation for a similar
29 domestic company organized under this Code except as
30 otherwise provided in Section 59.1 or 59.2 of this Code.
31 (2) Amendments to the articles of incorporation for the
32 various classes of companies shall be made in the following
33 manner:
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1 (a) Class 1. The board of directors or trustees
2 shall adopt a resolution setting forth the proposed
3 amendment and directing that it be submitted to a vote of
4 the policyholders at either an annual or special meeting.
5 Written or printed notice shall be given to policyholders
6 in the same manner as is required in the case of notices
7 to shareholders of stock companies by Section 29. The
8 proposed amendment shall be adopted upon receiving the
9 affirmative vote of 2/3 of the policyholders present in
10 person or by proxy at such meeting. Restated articles of
11 incorporation setting forth the articles of incorporation
12 as amended shall thereupon be executed in duplicate by
13 the company or its president or vice president, and its
14 secretary or assistant secretary, and duplicate originals
15 of such restated articles of incorporation and an
16 affidavit of the secretary of the company setting forth
17 the facts to show that this section has been fully
18 complied with shall be delivered to the Director.
19 (b) Classes 2 and 3. The board of directors or
20 trustees shall adopt the amendment and deliver to the
21 Director duplicate original restated articles of
22 incorporation setting forth the articles of incorporation
23 as amended and a copy of the resolution of the board of
24 directors or trustees adopting such an amendment
25 certified to by the secretary of the company.
26 (3) The restated articles of incorporation of any
27 company subject to the provisions of this article so
28 delivered to the Director may be approved or disapproved by
29 the Director in the same manner as the original articles of
30 incorporation. If approved, the Director shall place on file
31 in his office all of the documents so delivered to him except
32 one of the duplicate originals of the restated articles of
33 incorporation, and shall endorse upon such duplicate original
34 his approval thereof and the month, day and year of such
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1 approval, and deliver it to the company. The amendment shall
2 be effective as of the date of the approval thereof by the
3 Director. Such duplicate original shall be filed for record,
4 within 15 days after it has been delivered to the company, in
5 the office of the recorder of the county where the principal
6 office of the company is located.
7 (Source: P.A. 88-662, eff. 9-16-94.)
8 (215 ILCS 5/59.2 new)
9 Sec. 59.2. Formation of mutual insurance holding company
10 and conversion of mutual company to stock company.
11 (1) Definitions. For the purposes of this Section, the
12 following terms shall have the meanings indicated:
13 (a) "Converted company" means an Illinois domiciled
14 stock insurance company subject to the provisions of
15 Article II, except as otherwise provided in this Section,
16 that continues in existence after a reorganization under
17 this Section in connection with the formation of a mutual
18 holding company.
19 (b) "Converted mutual holding company" means the
20 stock corporation into which a mutual holding company has
21 been converted in accordance with Section 59.1 and
22 subsection (13) of this Section.
23 (c) "Eligible member" means a member as of the date
24 the board of directors adopts a plan of MHC conversion
25 under this Section. For the conversion of a mutual
26 holding company, "eligible member" means a member of the
27 mutual holding company who is of record as of the date
28 the mutual holding company board of directors adopts a
29 plan of conversion under Section 59.1.
30 (d) "Intermediate holding company" means a
31 corporation authorized to issue one or more classes of
32 capital stock, the corporate purposes of which include
33 holding directly or indirectly the voting stock of a
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1 converted company.
2 (e) "Member" means a person who, on the records of
3 the mutual company and pursuant to its articles of
4 incorporation or bylaws, is deemed to be a holder of a
5 membership interest in the mutual company and shall also
6 include a person or persons insured under a group policy,
7 subject to the following conditions:
8 (i) the person is insured or covered under a
9 group life policy or group annuity contract under
10 which funds are accumulated and allocated to the
11 respective covered persons;
12 (ii) the person has the right to direct the
13 application of the funds so allocated;
14 (iii) the group policyholder makes no
15 contribution to the premiums or deposits for the
16 policy or contract; and
17 (iv) the mutual company has the names and
18 addresses of the persons covered under the group
19 life policy or group annuity contract.
20 On and after the effective date of a plan of MHC
21 conversion under this Section, the term "member" shall mean a
22 member of the mutual holding company created thereby.
23 (f) "Mutual holding company" or "MHC" means a
24 corporation resulting from a reorganization of a mutual
25 company under this Section. A mutual holding company
26 shall be subject to the provisions of this Article and to
27 any other provisions of this Code applicable to mutual
28 companies, except as otherwise provided in this Section.
29 The articles of incorporation of a mutual holding company
30 shall include provisions setting forth the following:
31 (i) that it is a mutual holding company
32 organized under this Article;
33 (ii) that the mutual holding company may hold
34 not less than a majority of the shares of voting
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1 stock of a converted company or an intermediate
2 holding company, which in turn holds directly or
3 indirectly all of the voting stock of a converted
4 company;
5 (iii) that it is not authorized to issue any
6 capital stock except pursuant to a conversion in
7 accordance with the provisions of Section 59.1 and
8 subsection (13) of this Section;
9 (iv) that its members shall have the rights
10 specified in this Section and in its articles of
11 incorporation and bylaws; and
12 (v) that its assets shall be subject to
13 inclusion in the estate of the converted company in
14 any proceedings initiated by the Director against
15 the converted company under Article XIII.
16 (g) "Mutual company" means for purposes of this
17 Section a mutual life insurer or mutual property-casualty
18 insurer that may convert pursuant to a plan of MHC
19 conversion under this Section.
20 (h) "Plan of MHC conversion," or "plan" when used
21 in this Section means a plan adopted pursuant to this
22 Section by the board of directors of an Illinois domestic
23 mutual company for the conversion of the mutual company
24 into a direct or indirect stock subsidiary of a mutual
25 holding company.
26 (i) "Policy" includes any group or individual
27 insurance policy or contract issued by a mutual company,
28 including an annuity contract. The term policy does not
29 include a certificate of insurance issued in connection
30 with a group policy or contract.
31 (j) "Policyholder" means the holder of a policy
32 other than a reinsurance contract.
33 (2) Formation of mutual holding company and conversion
34 of mutual company. A mutual company, upon approval of the
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1 Director, may reorganize by forming a mutual holding company
2 and continue the corporate existence of the reorganizing
3 mutual company as a stock insurance company in accordance
4 with this Section. Upon effectiveness of a plan of MHC
5 conversion, and without any further action:
6 (a) The mutual company shall become a stock
7 corporation, the membership interests of the
8 policyholders in the mutual company shall be deemed
9 extinguished and all eligible members of the mutual
10 company shall be and become members of the mutual holding
11 company, in accordance with the articles of incorporation
12 and bylaws of the mutual holding company and the
13 applicable provisions of this Section and Article III;
14 and
15 (b) all of the shares of the capital stock of the
16 converted company shall be issued to the mutual holding
17 company, which at all times shall own a majority of the
18 shares of the voting stock of the converted company,
19 except that either at the time of conversion, or at a
20 later time with the approval of the Director, an
21 intermediate holding company or companies may be created,
22 so long as the mutual holding company at all times owns
23 directly or indirectly a majority of the shares of the
24 voting stock of the converted company.
25 (3) MHC membership interests.
26 (a) No member of a mutual holding company may
27 transfer membership in the mutual holding company or any
28 right arising from the membership.
29 (b) A member of a mutual holding company shall not,
30 as a member, be personally liable for the acts, debts,
31 liabilities, or obligations of the company.
32 (c) No assessments of any kind may be imposed upon
33 the members of a mutual holding company by the directors
34 or members, or because of any liability of any company
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1 owned or controlled by the mutual holding company or
2 because of any act, debt, liability, or obligation of the
3 mutual holding company itself.
4 (d) A membership interest in a domestic mutual
5 holding company shall not constitute a security under any
6 law of this State.
7 (4) Adoption of the plan of MHC conversion by the board
8 of directors.
9 (a) A mutual company seeking to convert to a mutual
10 holding company structure shall, by the affirmative vote
11 of two-thirds of its board of directors, adopt a plan of
12 MHC conversion consistent with the requirements of
13 subsection (8) of this Section.
14 (b) At any time before approval of a plan by
15 eligible members, the mutual company, by the affirmative
16 vote of two-thirds of its board of directors, may amend
17 or withdraw the plan of MHC conversion.
18 (5) Approval of the plan of MHC conversion by the
19 Director.
20 (a) Required findings. After adoption or amendment
21 of the plan by the mutual company's board of directors,
22 the plan of MHC conversion shall be submitted to the
23 Director for review and approval. The Director shall
24 hold a public hearing on the plan. The Director shall
25 approve the plan upon finding that:
26 (i) the provisions of this Section have been
27 complied with; and
28 (ii) the plan is fair and equitable as it
29 relates to the interests of the members.
30 (b) Documents to be filed.
31 (i) Prior to the members' approval of the plan
32 of MHC conversion, a mutual company seeking the
33 Director's approval of a plan shall file the
34 following documents with the Director for review and
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1 approval:
2 (A) the plan of MHC conversion;
3 (B) the form of notice required by item
4 (b) of subsection (6) of this Section for
5 eligible members to vote on the plan;
6 (C) any proxies to be solicited from
7 eligible members and any other soliciting
8 materials;
9 (D) the proposed articles of
10 incorporation and bylaws of the mutual holding
11 company, each intermediate holding company, if
12 any, and the revised articles of incorporation
13 and bylaws of the converted company.
14 Once filed, these documents shall be approved
15 or disapproved by the Director within a reasonable
16 time.
17 (ii) After the members have approved the plan,
18 the converted company shall file the following
19 documents with the Director:
20 (A) the minutes of the meeting of the
21 members at which the plan of MHC conversion was
22 voted upon; and
23 (B) the articles and bylaws of the mutual
24 holding company and each intermediate holding
25 company, if any, and the revised articles of
26 incorporation and bylaws of the converted
27 company.
28 (c) The Director's approval of a plan pursuant to
29 this subsection (5) may be made conditional at the sole
30 discretion of the Director whenever he determines that
31 such conditions are reasonably necessary to protect
32 policyholder interests. Such conditions may include, but
33 shall not be limited to, limitations, requirements, or
34 prohibitions as follows:
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1 (i) prior approval of any acquisition or
2 formation of affiliate entities of the MHC;
3 (ii) prior approval of the capital structure
4 of any intermediate holding company or any changes
5 thereto;
6 (iii) prior approval of any initial public
7 offering or other issuance of equity or debt
8 securities of an intermediate holding company or the
9 converted company in a private sale or public
10 offering;
11 (iv) prior approval of the expansion of the
12 mutual holding company system into lines of
13 business, industries, or operations not presented at
14 the time of the conversion;
15 (v) limitations on dividends and distributions
16 if the effect would be to reduce capital and surplus
17 of the converted company, in addition to any
18 limitations which may otherwise be authorized by
19 law; and
20 (vi) limitations on the pledge, incumbrance,
21 or transfer of the stock of the converted company.
22 (d) Consultant. The Director may retain, at the
23 mutual company's expense, any qualified expert not
24 otherwise a part of the Director's staff to assist in
25 reviewing the plan of MHC conversion.
26 (6) Approval of the plan by the members.
27 (a) Members entitled to notice of and to vote on
28 the plan. All eligible members shall be given notice of
29 and an opportunity to vote upon the plan of MHC
30 conversion.
31 (b) Notice required. All eligible members shall be
32 given notice of the members' meeting to vote upon the
33 plan of MHC conversion. The notice shall identify in
34 reasonable detail the benefits and risks of the MHC
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1 conversion. A copy of the plan of MHC conversion or a
2 summary of the plan, if so authorized by the Director,
3 shall accompany the notice. If a summary of the plan
4 accompanies the notice, a copy of the plan shall be made
5 available without charge to any eligible member upon
6 request. The notice shall state that approval by the
7 Director does not constitute a recommendation that
8 eligible members approve the plan. The notice shall be
9 mailed to each member's last known address, as shown on
10 the mutual company's records, within 45 days of the
11 Director's approval of the plan. The meeting to vote upon
12 the plan shall not be set for a date less than 60 days
13 after the date when the notice of the meeting is mailed
14 by the mutual company. If the meeting to vote upon the
15 plan is held coincident with the mutual company's annual
16 meeting of policyholders, only one combined notice of
17 meeting is required.
18 (c) Vote required for approval.
19 (i) After approval by the Director, the plan
20 of MHC conversion shall be adopted, at an annual or
21 special meeting of policyholders at which a quorum
22 is present, upon receiving the affirmative vote of
23 at least two-thirds of the votes cast by eligible
24 members.
25 (ii) Members entitled to vote upon the
26 proposed plan may vote in person or by proxy. Any
27 proxies to be solicited from eligible members,
28 together with the related proxy statement and any
29 other soliciting materials, shall be filed with and
30 approved by the Director.
31 (iii) The number of votes each eligible member
32 may cast shall be determined by the mutual company's
33 bylaws. If the bylaws are silent, each eligible
34 member may cast one vote.
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1 (7) Adoption of articles of incorporation. Adoption of
2 articles of incorporation for the mutual holding company,
3 each intermediate holding company, if any, and revised
4 articles of incorporation for the converted company is
5 necessary to implement the plan of MHC conversion.
6 Procedures for adoption or revision of such articles shall be
7 governed by the applicable provisions of this Code or, in the
8 case of an intermediate holding company, the business
9 corporation law of the state in which the intermediate
10 holding company is incorporated. For a Class I mutual
11 company, the members may adopt revised articles of
12 incorporation at the same meeting at which the members
13 approve the plan. For a Class 2 or 3 mutual company, the
14 articles of incorporation may be adopted solely by the board
15 of directors or trustees, as provided in Section 57 of this
16 Code.
17 (8) Required provisions in a plan of MHC conversion.
18 The following provisions shall be included in the plan of MHC
19 conversion:
20 (a) The plan shall set forth the reasons for the
21 proposed conversion.
22 (b) Effect of MHC conversion on existing policies.
23 (i) The plan shall provide that all policies
24 of the converted company in force on the effective
25 date of conversion shall continue to remain in force
26 under the terms of those policies, except that any
27 voting or other membership rights of the
28 policyholders provided for under the policies or
29 under this Code and any contingent liability policy
30 provisions of the type described in Section 55 of
31 this Code shall be extinguished on the effective
32 date of the conversion.
33 (ii) The plan shall further provide that
34 holders of participating policies in effect on the
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1 date of conversion shall continue to have the right
2 to receive dividends as provided in the
3 participating policies, if any.
4 (iii) Except for a mutual company's life
5 policies, guaranteed renewable accident and health
6 policies, and non-cancelable accident and health
7 policies, the converted stock company may issue the
8 insured a nonparticipating policy as a substitute
9 for the participating policy upon the renewal date
10 of a participating policy.
11 (iv) The plan shall provide that a Class I
12 mutual company's participating life policies in
13 force on the effective date of the conversion shall
14 be operated by the converted company for dividend
15 purposes as a closed block of participating business
16 except that any or all classes of group
17 participating policies may be excluded from the
18 closed block. The plan shall establish one or more
19 segregated accounts for the benefit of the closed
20 block of business and shall allocate to those
21 segregated accounts enough assets of the mutual
22 company so that the assets together with the revenue
23 from the closed block of business are sufficient to
24 support the closed block including, but not limited
25 to, the payment of claims, expenses, taxes, and any
26 dividends that are provided for under the terms of
27 the participating policies with appropriate
28 adjustments in the dividends for experience changes.
29 The plan shall be accompanied by an opinion of a
30 qualified actuary or an appointed actuary who meets
31 the standards set forth in the insurance laws or
32 regulations for the submission of actuarial opinions
33 as to the adequacy of reserves or assets. The
34 opinion shall relate to the adequacy of the assets
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1 allocated to the segregated accounts in support of
2 the closed block of business. The actuarial opinion
3 shall be based on methods of analysis deemed
4 appropriate for those purposes by the Actuarial
5 Standards Board. The amount of assets allocated to
6 the segregated accounts of the closed block shall be
7 based upon the mutual company's last annual
8 statement that is updated to the effective date of
9 the conversion. The converted stock company shall
10 keep a separate accounting for the closed block and
11 shall make and include in the annual statement to be
12 filed with the Director each year a separate
13 statement showing the gains, losses, and expenses
14 properly attributable to the closed block.
15 Periodically, upon the Director's approval, those
16 assets allocated to the closed block as provided
17 herein that are in excess of the amount of assets
18 necessary to support the remaining policies in the
19 closed block shall revert to the benefit of the
20 converted company. The Director may waive the
21 requirement for the establishment of a closed block
22 of business if the Director deems it to be in the
23 best interests of the participating policyholders of
24 the mutual company to do so.
25 (c) The plan shall set forth the requirements for
26 granting membership interests to future policyholders of
27 the converted company.
28 (d) The plan shall include information sufficient
29 to demonstrate that the financial condition of the
30 converted company will not be diminished by the plan of
31 MHC conversion.
32 (e) The plan shall include a description of any
33 current proposal to issue shares of an intermediate
34 holding company or the converted company to the public or
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1 to other persons who are not direct or indirect
2 subsidiaries of the mutual holding company.
3 (f) The plan shall include the identity of the
4 proposed officers and directors of the mutual holding
5 company and each intermediate holding company, if any,
6 together with such other biographical information as the
7 Director may request.
8 (g) The plan shall include such other information
9 as the Director may request or may prescribe by rule.
10 (9) Effective date of the plan of MHC conversion. A
11 plan shall become effective when the Director has approved
12 the plan, the members have approved the plan and the articles
13 of incorporation of the mutual holding company, each
14 intermediate holding company, if any, and the revised
15 articles of incorporation of the converted company have been
16 adopted and filed with the Director.
17 (10) Corporate existence.
18 (a) Upon the conversion of a mutual company to a
19 converted company according to the provisions of this
20 Section, the corporate existence of the mutual company
21 shall be continued in the converted company with the
22 original date of incorporation of the mutual company.
23 All the rights, franchises, and interests of the mutual
24 company in and to every type of property, real, personal,
25 and mixed, and things in action thereunto belonging, is
26 deemed transferred to and vested in the converted company
27 without any deed or transfer. Simultaneously, the
28 converted company is deemed to have assumed all the
29 obligations and liabilities of the mutual company.
30 (b) The directors and officers of the mutual
31 company, unless otherwise specified in the plan of
32 conversion shall serve as directors and officers of the
33 converted company until new directors and officers of the
34 converted company are duly elected pursuant to the
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1 articles of incorporation and bylaws of the converted
2 company.
3 (11) Regulation and authority of mutual holding company.
4 (a) A mutual holding company shall have the same
5 powers granted to domestic mutual companies and be
6 subject to the same requirements and provisions of
7 Article III and any other provisions of this Code
8 applicable to mutual companies that are not inconsistent
9 with the provisions of this Section, provided however
10 that a mutual holding company shall not have the
11 authority to transact insurance pursuant to Section
12 39(l).
13 (b) Neither the mutual holding company nor any
14 intermediate holding company shall issue or reinsure
15 policies of insurance.
16 (c) A mutual holding company may enter into an
17 affiliation agreement or a merger agreement either at the
18 time of conversion, or at some later time with the
19 approval of the Director, with any mutual insurance
20 company authorized to do business in this State or
21 another mutual holding company. Any such merger
22 agreement may authorize members of the mutual insurance
23 company or other mutual holding company to become members
24 of the mutual holding company. Any such affiliation
25 agreement or merger agreement shall be subject to the
26 insurance laws of this State relating to such
27 transactions entered into by a domestic mutual company.
28 (d) The assets of the MHC shall be held in trust,
29 under such arrangements and on such terms as the Director
30 may approve, for the benefit of the policyholders of the
31 converted company. Any residual rights of the MHC in
32 such assets or any assets of the MHC determined not to be
33 held in trust shall be subject to a lien in favor of the
34 policyholders of the converted company under such terms
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1 as the Director may approve. Upon conversion of the
2 mutual holding company as provided for in subsection (13)
3 of this Section, such assets shall be released from trust
4 in accordance with the plan of conversion approved by the
5 Director.
6 (12) Diversion of business to affiliates. Without prior
7 approval of the Director, neither the converted company nor
8 any other person affiliated with or controlling the converted
9 company shall divert business from the converted company to
10 any insurance company affiliate if the purpose or effect
11 would be to significantly reduce the number of members of the
12 mutual holding company.
13 (13) Conversion of mutual holding company. A mutual
14 holding company created pursuant to this Section may
15 reorganize by complying with the applicable provisions of
16 Section 59. For purposes of effecting a conversion under
17 that Section, the mutual holding company shall be deemed a
18 "mutual company" and the converted mutual holding company
19 shall be deemed a "converted stock company," as such terms
20 are defined in Section 59.1.
21 (14) Conflict of interest. No director, officer, agent,
22 or employee of the mutual company or any other person shall
23 receive any fee, commission, or other valuable consideration,
24 other than his or her usual regular salary and compensation,
25 for in any manner aiding, promoting, or assisting in the
26 conversion except as set forth in the plan of MHC conversion
27 approved by the Director. This provision does not prohibit
28 the payment of reasonable fees and compensation to attorneys,
29 accountants, and actuaries for services performed in the
30 independent practice of their professions, even if the
31 attorney, accountant, or actuary is also a director of the
32 mutual company.
33 (15) Costs and expenses. All the costs and expenses
34 connected with a plan of MHC conversion shall be paid for or
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1 reimbursed by the mutual company or the converted company.
2 (16) Failure to give notice. If the mutual company
3 complies substantially and in good faith with the notice
4 requirements of this Section, the mutual company's failure to
5 give any member or members any required notice does not
6 impair the validity of any action taken under this Section.
7 (17) Limitation of actions. Any action challenging the
8 validity of or arising out of acts taken or proposed to be
9 taken under this Section shall be commenced within 30 days
10 after the effective date of the plan of MHC conversion.
11 Section 99. Effective date. This Act takes effect upon
12 becoming law.