TITLE 27
Insurance
CHAPTER 27-1
Domestic Insurance Companies
SECTION 27-1-40.1
§ 27-1-40.1 Mutual insurance holding
companies.
(a)(1) Any domestic mutual insurance company, upon approval of the
commissioner, may reorganize by forming or merging into a mutual insurance
holding company based upon a plan of reorganization and continuing the
corporate existence of the reorganizing insurance company as a stock insurance
company. The commissioner, after a public hearing as provided in Rhode Island
general laws subsection 27-35-2(d), if satisfied that the interests of the
policyholders are properly protected and that the plan of reorganization is
fair and equitable to the policyholders, may approve the proposed plan of
reorganization or may require as a condition of approval such modifications of
the proposed plan of reorganization as the commissioner finds necessary for the
protection of the policyholders' interests. The commissioner may retain
consultants as provided in Rhode Island general laws subdivision 27-35-2(d)(5).
A reorganization pursuant to this section is subject to Rhode Island general
laws §§ 27-35-1, 27-35-1.5, 27-35-2 and 27-35-2.5. The commissioner
shall retain jurisdiction over a mutual insurance holding company organized
pursuant to this section to assure that policyholder interests are protected.
(2) A plan of reorganization must be approved by two-thirds
(2/3) vote of the board of directors or other governing body, the director of
the department of business regulation, and the affirmative vote of a majority
of those members or policyholders, (subscribers in the case of a health service
corporation) constituting a quorum, present in person or by proxy at a meeting
called by the board of directors or other governing body.
(3) All of the initial shares of the capital stock of the
reorganized insurance company shall be issued to the mutual insurance holding
company. The membership interests of the policyholders of the reorganized
insurance company shall become membership interests in the mutual insurance
holding company. Policyholders of the reorganized insurance company shall be
members of the mutual insurance holding company in accordance with the articles
of incorporation and bylaws of the mutual insurance holding company. The mutual
insurance holding company shall at all times own a majority of the voting
shares of the capital stock of the reorganized insurance company.
(4) A merger of policyholders' membership interests in a
mutual insurance company into a mutual insurance holding company shall be
deemed to be a merger of insurance companies pursuant to Rhode Island general
laws § 27-35-2 and that chapter is also applicable.
(b) A foreign mutual insurance company or a foreign health
service corporation, which if a domestic corporation would be organized under
chapters 19, 20, 20.1, 20.2 or 20.3 of title 27, may reorganize upon the
approval of the commissioner and in compliance with the requirements of any law
or regulation which is applicable to the foreign mutual insurance company or
foreign health service corporation by merging its policyholders' or
subscribers' membership interests into a domestic mutual insurance holding
company in the same manner as under subsection (a) above.
(c) A mutual insurance holding company resulting from the
reorganization of a domestic mutual insurance company organized under chapter 1
of title 27 shall be incorporated pursuant to chapter 1 of title 27. The
articles of incorporation and any amendments to such articles of the mutual
insurance holding company shall be subject to approval of the commissioner in
the same manner as those of an insurance company.
(d) A mutual insurance holding company is deemed to be an
insurer subject to chapters 14.1, 14.2, 14.3 and 14.4 of title 27 and shall
automatically be a party to any proceeding under chapters 14.3 or 14.4 of title
27 involving an insurance company which as a result of a reorganization
pursuant to subsection (a) or (b) is a subsidiary of the mutual insurance
holding company. In any proceeding under chapters 14.3 or 14.4 of title 27
involving the reorganized insurance company, the assets of the mutual insurance
holding company are deemed to be assets of the estate of the reorganized
insurance company for purposes of satisfying the claims of the reorganized
insurance company's policyholders. A mutual insurance holding company shall not
dissolve or liquidate without the approval of the commissioner or as ordered by
the superior court pursuant to chapters 14.3 or 14.4 of title 27.
(e) Section 27-1-40 of the general laws is not applicable to
a reorganization or merger pursuant to this section.
(f) A membership interest in a domestic mutual insurance
holding company shall not constitute a security as defined in chapter 7-11.
(g) The majority of the voting shares of the capital stock of
the reorganized insurance company, which is required by this section to be at
all times owned by a mutual insurance holding company, shall not be conveyed,
transferred, assigned, pledged, subjected to a security interest or lien,
encumbered, or otherwise hypothecated or alienated by the mutual insurance
holding company or intermediate holding company. Any conveyance, transfer,
assignment, pledge, security interest, lien, encumbrance, or hypothecation or
alienation of, in or on the majority of the voting shares of the reorganized
insurance company which is required by this section to be at all times owned by
a mutual insurance holding company, is in violation of this section and shall
be void in inverse chronological order of the date of such conveyance,
transfer, assignment, pledge, security interest, lien, encumbrance, or
hypothecation or alienation, as to the shares necessary to constitute a
majority of such voting shares. The majority of the voting shares of the
capital stock of the reorganized insurance company which is required by this
section to be at all times owned by a mutual insurance holding company shall
not be subject to execution and levy. The shares of the capital stock of the
surviving or new company resulting from a merger or consolidation of two (2) or
more reorganized insurance companies or two (2) or more intermediate holding
companies which were subsidiaries of the same mutual insurance holding company
are subject to the same requirements, restrictions, and limitations as provided
in this section to which the shares of the merging or consolidating reorganized
insurance companies or intermediate holding companies were subject by this
section prior to the merger or consolidation.
As used in this section, "majority of the voting shares of
the capital stock of the reorganized insurance company" means shares of the
capital stock of the reorganized insurance company which carry the right to
cast a majority of the votes entitled to be cast by all of the outstanding
shares of the capital stock of the reorganized insurance company for the
election of directors and on all other matters submitted to a vote of the
shareholders of the reorganized insurance company. The ownership of a majority
of the voting shares of the capital stock of the reorganized insurance company
which are required by this section to be at all times owned by a parent mutual
insurance holding company includes indirect ownership through one or more
intermediate holding companies in a corporate structure approved by the
commissioner. However, indirect ownership through one or more intermediate
holding companies shall not result in the mutual insurance holding company
owning less than the equivalent of a majority of the voting shares of the
capital stock of the reorganized insurance company. The commissioner shall have
jurisdiction over an intermediate holding company as if it were a mutual
insurance holding company. As used in this section, "intermediate holding
company" means a holding company which is a subsidiary of a mutual insurance
holding company, and which either directly or through a subsidiary intermediate
holding company has one or more subsidiary reorganized insurance companies of
which a majority of the voting shares of the capital stock would otherwise have
been required by this section to be at all times owned by the mutual insurance
holding company.
History of Section.
(P.L. 1996, ch. 231, § 1; P.L. 2012, ch. 66, § 2; P.L. 2012, ch. 84,
§ 2; P.L. 2012, ch. 308, § 1; P.L. 2012, ch. 335, § 1.)
