(A) An association captive insurance company or industrial insured group formed as a stock or mutual corporation, or a limited liability company may be converted to or merged with and into a reciprocal insurer in accordance with a plan and the provisions of this section.
(B) A plan for this conversion or merger:
(1) must be fair and equitable to the:
(a) shareholders, in the case of a stock insurer;
(b) members, in the case of a limited liability company; or
(c) policyholders, in the case of a mutual insurer; and
(2) must provide for the purchase of the shares of any nonconsenting shareholder of a stock insurer, of the member interest of any nonconsenting member of a limited liability company, of the policyholder interest of any nonconsenting policyholder of a mutual insurer in substantially the same manner and subject to the same rights and conditions as are accorded a dissenting shareholder, dissenting member, or a dissenting policyholder pursuant to the provisions of Chapter 13 or Chapter 44, Title 33. Provided, however, that the merger of a limited liability company requires the consent of all members unless this requirement has been waived in an operating agreement signed by all of the members of the limited liability company.
(C) In the case of a conversion authorized pursuant to the provisions of subsection (A):
(1) the conversion must be accomplished under a reasonable plan and procedure as may be approved by the director; however, the director may not approve the plan of conversion unless the plan:
(a) satisfies the provisions of subsection (B);
(b) provides for a hearing, of which notice has been given to the insurer, its directors, officers, and stockholders, in the case of a stock insurer; members and managers, in the case of a limited liability company; or policyholders, in the case of a mutual insurer, all of whom have the right to appear at the hearing, except that the director may waive or modify the requirements for the hearing; however, if a notice of hearing is required, but no hearing is requested, the director may cancel the hearing;
(c) provides for the conversion of existing stockholder, member, or policyholder interests into subscriber interests in the resulting reciprocal insurer, proportionate to stockholder, member, or policyholder interests in the stock or mutual insurer or limited liability company; and
(d) is approved:
(i) in the case of a stock insurer or limited liability company, by a majority of the shares or interests entitled to vote represented in person or by proxy at a duly called regular or special meeting at which a quorum is present;
(ii) in the case of a mutual insurer, by a majority of the voting interests of policyholders represented in person or by proxy at a duly called regular or special meeting at which a quorum is present;
(2) the director shall approve the plan of conversion if the director finds that the conversion will promote the general good of the State in conformity with those standards provided in Section 38-90-60;
(3) if the director approves the plan, the director shall amend the converting insurer's certificate of authority to reflect conversion to a reciprocal insurer and issue the amended certificate of authority to the company's attorney-in-fact;
(4) upon issuance of an amended certificate of authority of a reciprocal insurer by the director, the conversion is effective; and
(5) upon the effectiveness of the conversion, the corporate existence of the converting insurer shall cease and the resulting reciprocal insurer shall notify the Secretary of State of the conversion.
(D) A merger authorized pursuant to the provisions of subsection (A) must be accomplished substantially in accordance with the procedures provided in this title except that, only for purposes of the merger:
(1) the plan or merger must satisfy subsection (B);
(2) the subscribers' advisory committee of a reciprocal insurer must be equivalent to the board of directors of a stock or mutual insurance company or the managers of a limited liability company;
(3) the subscribers of a reciprocal insurer must be the equivalent of the policyholders of a mutual insurance company;
(4) if a subscribers' advisory committee does not have a president or secretary, the officers of the committee having substantially equivalent duties are considered the president and secretary of the committee;
(5) the director shall approve the articles of merger if the director finds that the merger will promote the general good of the State in conformity with those standards provided in Section 38-90-60. If the director approves the articles of merger, the director shall endorse his or her approval on the articles and the surviving insurer shall present the name to the Secretary of State at the Secretary of State's office;
(6) notwithstanding Section 38-90-40, the director may permit the formation, without surplus, capitalization, or a combination thereof, of a captive insurance company organized as a reciprocal insurer, into which an existing captive insurance company may be merged for the purpose of facilitating a transaction provided for in this section; however, there may be no more than one authorized insurance company surviving the merger;
(7) an alien insurer may be a party to a merger authorized pursuant to the provisions of subsection (A) if the requirements for the merger between a domestic and a foreign insurer pursuant to the provisions of Chapter 21 apply to a merger between a domestic and an alien insurer provided by this subsection. The alien insurer must be treated as a foreign insurer pursuant to the provisions of Chapter 21 and other jurisdictions must be the equivalent of a state for purposes of Chapter 21.
(E) A conversion or merger pursuant to the provisions of this section has all the effects set forth in Chapter 21, to the extent these effects are not inconsistent with this chapter.
HISTORY: 2000 Act No. 331, Section 1; 2003 Act No. 73, Section 24.G, eff June 25, 2003; 2018 Act No. 251 (H.4675), Section 1, eff May 18, 2018.
Effect of Amendment
2018 Act No. 251, Section 1, in (C)(2), substituted "Section 38-90-60" for "Section 38-90-60(2)"; and in (D), in (5), "Section 38-90-60" for "Section 38-90-60(D)(2)", and in (6), inserted "capitalization, or a combination thereof," following "without surplus,".