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H0672...........................................................by BUSINESS
MUTUAL/STOCK INSURERS - Amends existing law to prohibit acquisition of
voting security in a mutual insurer or stock insurer without the approval
of the director of the Department of Insurance for five years after a
conversion and to authorize purchase of capital stock.
02/12 House intro - 1st rdg - to printing
02/13 Rpt prt - to Bus
02/24 Rpt out - rec d/p - to 2nd rdg
02/25 2nd rdg - to 3rd rdg
02/26 3rd rdg - PASSED - 64-0-6
AYES -- Alltus, Barraclough, Barrett, Bieter, Bivens, Black(15),
Black(23), Boe, Bruneel, Callister, Campbell, Chase, Clark, Crow,
Cuddy, Deal, Denney, Ellsworth, Field(13), Field(20), Geddes, Gould,
Hadley, Hansen, Henbest, Hornbeck, Jaquet, Jones(9), Jones(22),
Jones(20), Judd, Kellogg, Kempton, Kendell, Kunz, Lake, Loertscher,
Mader, Marley, McKague, Meyer, Miller, Mortensen, Pischner, Pomeroy,
Reynolds, Richman, Ridinger, Robison, Sali, Schaefer, Stevenson,
Stoicheff, Stone, Stubbs, Taylor, Tilman, Tippets, Trail, Watson,
Wheeler, Wood, Zimmermann, Mr Speaker
NAYS -- None
Absent and Excused -- Bell, Crane, Gagner, Kjellander, Linford,
Newcomb
Floor Sponsor - Taylor
Title apvd - to Senate
02/27 Senate intro - 1st rdg - to Com/HuRes
03/11 Rpt out - rec d/p - to 2nd rdg
03/12 2nd rdg - to 3rd rdg
03/18 3rd rdg - PASSED - 34-0-1
AYES--Andreason, Boatright, Branch, Bunderson, Burtenshaw, Cameron,
Crow, Danielson, Darrington, Deide, Dunklin, Frasure, Geddes,
Hawkins, Ingram, Ipsen, Keough, King, Lee, McLaughlin, Noh, Parry,
Richardson, Riggs, Risch, Sandy, Schroeder, Sorensen, Stennett,
Sweeney, Thorne, Twiggs, Wheeler, Whitworth
NAYS--None
Absent and excused--Hansen
Floor Sponsor - Cameron
Title apvd - to House
03/19 To enrol - rpt enrol - Sp signed
Pres signed - to Governor
03/24 Governor signed
Session Law Chapter 304
Effective: 07/01/98
H0672|||| LEGISLATURE OF THE STATE OF IDAHO |||| Fifty-fourth Legislature Second Regular Session - 1998IN THE HOUSE OF REPRESENTATIVES HOUSE BILL NO. 672 BY BUSINESS COMMITTEE 1 AN ACT 2 RELATING TO CONVERSION OF MUTUAL INSURER TO STOCK INSURER; AMENDING SECTION 3 41-2855, IDAHO CODE, TO PROHIBIT ACQUISITION OF VOTING SECURITY UNDER CER- 4 TAIN CONDITIONS AND TO AUTHORIZE TRANSFERS OF CAPITAL STOCK. 5 Be It Enacted by the Legislature of the State of Idaho: 6 SECTION 1. That Section 41-2855, Idaho Code, be, and the same is hereby 7 amended to read as follows: 8 41-2855. CONVERSION OF MUTUAL INSURER TO STOCK INSURER. (1) A mutual 9 insurer may become a stock insurer under such plan and procedure as may be 10 approved by the director after a hearing thereon. 11 (2) The director shall not approve any conversion plan or procedure 12 unless: 13 (a) It is equitable to the insurer's members; 14 (b) It is subject to approval by vote of not less than a majority of the 15 insurer's current members voting thereon in person, by proxy, or by mail 16 at a meeting of members called for the purpose pursuant to such reasonable 17 notice and procedure as may be approved by the director. If a life 18 insurer, the right to vote may be limited to members who hold policies 19 other than term or group policies and whose policies have been in force 20 for not less than one (1) year; 21 (c) The equity of each policyholder in the insurer is determinable under 22 a fair formula approved by the director, which equity shall be based upon 23 not less than the insurer's entire surplus, after deducting contributed or 24 borrowed surplus funds, plus a reasonable present equity in its reserves 25 and in all nonadmitted assets; 26 (d) The policyholders entitled to participate in the purchase of stock or 27 distribution of assets shall include all current policyholders and all 28 existing persons who had been policyholders of the insurer within three 29 (3) years prior to the date such plan was submitted to the director; 30 (e) The plan gives to each policyholder of the insurer, as specified in 31 paragraph (d) of this subsection, a preemptive right to acquire his pro- 32 portionate part of all of the proposed capital stock of the insurer within 33 a designated reasonable period, and to apply upon the purchase thereof the 34 amount of his equity in the insurer as determined under paragraph (c) of 35 this subsection; 36 (f) Shares are so offered to policyholders at a price not greater than to 37 be thereafter offered to others but at not more than double the par value 38 of such shares; 39 (g) The plan provides for payment of cash in the amount of not less than 40 fifty percent (50%) of the amount of the policyholder's equity not so used 41 for the purchase of stock to each policyholder not electing to exercise 42 his preemptive right to apply his equity in the insurer toward the pur- 43 chase of capital stock as provided in paragraph (e) of this subsection. 2 1 The cash payment together with stock so purchased, if any, shall consti- 2 tute full payment and discharge of the policyholder's equity as an owner 3 of such mutual insurer; 4 (h) The plan, when completed, would provide for the converted insurer 5 paid-up capital stock and additional surplus in amounts not less than the 6 minimum paid-up capital and surplus required of a domestic stock insurer 7 transacting like kinds of insurance, as provided in section 41-313, Idaho 8 Code; and 9 (i) It contains additional provisions or standards as the director may 10 reasonably require. 11 (3) No director, officer, agent or employee of the insurer, nor any other 12 person, shall receive any fee, commission or other valuable consideration 13 whatsoever for aiding, promoting, or assisting therein except as set forth in 14 the plan as approved by the director. 15 (4) Except as otherwise specifically provided in subsection (5) of 16 this section, prior to and for a period of five (5) years following the direc- 17 tor's approval of a new stock insurer under subsection (2) of this section, no 18 person other than the new stock insurer shall, without the prior approval of 19 the director, directly or indirectly offer to acquire or acquire in any manner 20 the beneficial ownership of five percent (5%) or more of any class of a voting 21 security of the new stock insurer or of any institution which owns a majority 22 or all of the voting securities of the stock insurer. 23 (5) Nothing in this section shall prohibit the inclusion in the plan of 24 conversion of provisions under which individuals comprising the new stock 25 insurer's board of directors, officers, employees, agents, and persons acting 26 as trustees of employee stock ownership plans or other employee benefit plans 27 may be entitled to purchase for cash capital stock of the new stock insurer at 28 the same price initially issued by the new stock insurer under the plan of 29 conversion. Nothing in this section shall prohibit a management-incentive com- 30 pensation program which is contained in the plan of conversion and approved by 31 the director to be adopted upon conversion to the new stock insurer or pro- 32 hibit such a program to be later adopted by the new stock insurer.
STATEMENT OF PURPOSE
RS 08031
The purpose of this legislation is twofold. First, the
legislation is intended to prevent any party, without the
approval of the director of the Department of Insurance, from
acquiring five percent or more of a new stock insurer (which
has converted from a mutual insurer), for a period of five
years after the director's approval of the new stock insurer.
Second, the legislation is intended to allow a new stock
insurer to sell its stock to its directors, officers and
employees, whether under a management incentive program or
otherwise.
FISCAL NOTE
There would be no fiscal impact to the State of Idaho. While
conversion of a mutual insurer to a stock insurer does require
regulatory oversight by the Department of Insurance, it is not
anticipated that the Department would be required to add
additional personnel or incur additional expenses.
Contact: M. Allyn Dingel, Jr. (208) 343-5454
STATEMENT OF PURPOSE/FISCAL NOTE
H 672