1998 Legislation
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HOUSE BILL NO. 672 – Insurer, mutual/stock, vote securty


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Daily Data Tracking History

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,
    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
      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

Bill Text


 ||||              LEGISLATURE OF THE STATE OF IDAHO             ||||
Fifty-fourth Legislature                 Second Regular Session - 1998

                             IN THE HOUSE OF REPRESENTATIVES

                                    HOUSE BILL NO. 672

                                  BY BUSINESS COMMITTEE

 1                                        AN ACT

 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.


 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 / Fiscal Impact


                            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 
                                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
    H 672