H.F. 264 Section 1. NEW SECTION . 521I.1 Definitions. 1 As used in this chapter, unless the context otherwise 2 requires: 3 1. “Assets” means property whether real, personal, mixed, 4 tangible, or intangible and any right or interest therein, 5 including all rights under a contract or other agreement. 6 2. “Capital” means the capital stock component of a 7 statutory surplus as defined in Iowa law. 8 3. “Commissioner” means the commissioner of insurance. 9 4. “Divide” or “division” means a transaction in which 10 a domestic stock insurer splits into two or more resulting 11 domestic stock insurers. 12 5. “Dividing insurer” means a domestic stock insurer that 13 approves a plan of division. 14 6. “Domestic stock insurer” means a stock insurer domiciled 15 and organized under the laws of this state pursuant to chapter 16 508, 514B, or 515, including domestic stock insurers affiliated 17 with a mutual insurance holding company organized pursuant to 18 section 521A.14, and including those insurers which confer 19 membership rights in the mutual insurance holding company. 20 7. “Liability” means a secured or contingent debt or 21 obligation arising in any manner. 22 8. “Resulting insurer” means a dividing domestic stock 23 insurer that survives a division or a new domestic stock 24 insurer that is created by a division. 25 9. “Shareholder” means the person in whose name shares are 26 registered in the records of a corporation or the beneficial 27 owner of shares to the extent of the rights granted by a 28 nominee certificate on file with a corporation. 29 10. “Surplus” means total statutory surplus less capital 30 stock calculated in accordance with the current national 31 association of insurance commissioners’ accounting practices 32 and procedures manual. 33 11. “Transfer” includes an assignment, assumption, 34 conveyance, sale, lease, encumbrance, security interest, gift, 35 -1- LSB 1677HV (3) 88 ko/rn 1/ 19

H.F. 264 or transfer by operation of law. 1 Sec. 2. NEW SECTION . 521I.2 Plan of division —— general 2 requirements. 3 A domestic stock insurer’s plan of division shall include 4 all of the following: 5 1. The name of the domestic stock insurer seeking to divide. 6 2. The name of each resulting insurer created by the 7 proposed division and for each resulting insurer a copy of all 8 of the following: 9 a. Proposed articles of incorporation. 10 b. Proposed bylaws. 11 3. The manner of allocating assets and liabilities, 12 including policy liabilities, between or among all resulting 13 insurers. 14 4. The manner of distributing shares in the resulting 15 insurers to the dividing insurer or the dividing insurer’s 16 shareholders. 17 5. A description of all liabilities and all assets that 18 the dividing insurer proposes to allocate to each resulting 19 insurer, including the manner by which the dividing insurer 20 proposes to allocate all reinsurance contracts. 21 6. All terms and conditions required by the laws of this 22 state and the articles and bylaws of the dividing insurer. 23 7. All other terms and conditions of the division. 24 Sec. 3. NEW SECTION . 521I.3 Plan of division —— dividing 25 insurer to survive division. 26 If a dividing insurer will survive a division, the plan 27 of division shall include, in addition to the requirements 28 pursuant to section 521I.2, all of the following: 29 1. All proposed amendments to the dividing insurer’s 30 articles of incorporation and bylaws. 31 2. If the dividing insurer intends to cancel some but not 32 all shares in the dividing insurer, the manner in which the 33 dividing insurer intends to cancel such shares. 34 3. If the dividing insurer intends to convert some but 35 -2- LSB 1677HV (3) 88 ko/rn 2/ 19

H.F. 264 not all shares in the dividing insurer into securities, 1 obligations, money, other property, rights to acquire shares or 2 securities, or any combination thereof, a statement disclosing 3 the manner in which the dividing insurer intends to convert 4 such shares. 5 Sec. 4. NEW SECTION . 521I.4 Plan of division —— dividing 6 insurer not to survive division. 7 If a dividing insurer will not survive a division, the plan 8 of division shall include, in addition to the requirements 9 pursuant to section 521I.2, the manner in which the dividing 10 insurer will cancel or convert shares in the dividing insurer’s 11 shares into shares, securities, obligations, money, other 12 property, rights to acquire shares or securities, or any 13 combination thereof. 14 Sec. 5. NEW SECTION . 521I.5 Amending plan of division. 15 1. A dividing insurer may amend the dividing insurer’s 16 plan of division in accordance with any procedures set forth 17 in the plan of division, or if no such procedures are set 18 forth in the plan of division, in a manner determined by the 19 board of directors of the dividing insurer. A shareholder 20 that is entitled to vote on or consent to approval of the plan 21 of division shall be entitled to vote on or consent to an 22 amendment of the plan of division that will affect any of the 23 following: 24 a. The amount or kind of shares, securities, obligations, 25 money, other property, rights to acquire shares or securities, 26 or any combination thereof to be received by any of the 27 shareholders of the dividing insurer under the plan of 28 division. 29 b. The articles of incorporation or bylaws of any resulting 30 insurer that become effective when the division becomes 31 effective except for changes that do not require approval of 32 the shareholders of the resulting insurer under such articles 33 of incorporation or bylaws. 34 c. Any other terms or conditions of the plan of division 35 -3- LSB 1677HV (3) 88 ko/rn 3/ 19

H.F. 264 if the change may adversely affect the shareholders in any 1 material respect. 2 2. A dividing insurer shall not amend the dividing insurer’s 3 plan of division after the plan of division becomes effective. 4 3. A dividing insurer shall not amend the dividing insurer’s 5 plan of division after the plan of division is approved by the 6 commissioner. 7 Sec. 6. NEW SECTION . 521I.6 Abandoning plan of division. 8 1. A dividing insurer may abandon the dividing insurer’s 9 plan of division in any of the following circumstances: 10 a. After the dividing insurer has approved the plan 11 of division without any action by the shareholders and in 12 accordance with any procedures set forth in the plan of 13 division, or if no such procedures are set forth in the plan of 14 division, in a manner determined by the board of directors of 15 the dividing insurer. 16 b. After the dividing insurer has filed a certificate 17 of division with the secretary of state pursuant to section 18 521I.10, the dividing insurer may file a signed certificate of 19 abandonment with the secretary of state and file a copy with 20 the commissioner. The certificate of abandonment shall be 21 effective on the date the certificate of abandonment is filed 22 with the secretary of state. 23 2. A dividing insurer shall not abandon the dividing 24 insurer’s plan of division after the plan of division becomes 25 effective. 26 3. If a dividing insurer elects to abandon the dividing 27 insurer’s plan of division, the dividing insurer shall notify 28 the commissioner. 29 Sec. 7. NEW SECTION . 521I.7 Approval of plan of division —— 30 articles of incorporation and bylaws. 31 1. A dividing insurer shall not file a plan of division with 32 the commissioner until such plan of division has been approved 33 in accordance with all provisions of the dividing insurer’s 34 articles of incorporation and bylaws. If the dividing 35 -4- LSB 1677HV (3) 88 ko/rn 4/ 19

H.F. 264 insurer’s articles of incorporation and bylaws do not provide 1 for approval of a plan of division, the dividing insurer shall 2 not file the plan of division with the commissioner unless 3 such plan of division has been approved in accordance with all 4 provisions of the dividing insurer’s articles of incorporation 5 and bylaws that provide for approval of a merger. 6 2. If a provision of a dividing insurer’s articles of 7 incorporation or bylaws adopted before the effective date of 8 this Act requires that a specific number of or a percentage 9 of the board of directors or shareholders propose or adopt a 10 plan of merger or impose other procedures for the proposal or 11 adoption of a plan of merger, the dividing insurer shall adhere 12 to such provision in proposing or adopting a plan of division. 13 If any such provision of the articles of incorporation or 14 bylaws is amended on or after the effective date of this Act, 15 such provision shall apply to a division thereafter only in 16 accordance with its express terms. 17 Sec. 8. NEW SECTION . 521I.8 Commissioner approval of plan 18 of division. 19 1. After a dividing insurer approves a plan of division 20 pursuant to section 521I.7, the dividing insurer shall file the 21 plan of division with the commissioner. Within ten business 22 days of filing the plan of division with the commissioner, the 23 dividing insurer shall provide notice of the filing to each 24 reinsurer that is a party to a reinsurance contract allocated 25 in the plan of division. 26 2. a. A division shall not become effective until approved 27 by the commissioner after reasonable notice and a public 28 hearing. Notice and public hearing required under this section 29 shall be conducted as a contested case pursuant to chapter 17A. 30 b. The commissioner shall require the dividing insurer 31 to mail written notice of the public hearing to the dividing 32 insurer’s policyholders stating that a plan of division has 33 been filed with the commissioner and providing the date, time, 34 and location of the public hearing. 35 -5- LSB 1677HV (3) 88 ko/rn 5/ 19

H.F. 264 c. The commissioner shall select and retain an independent 1 expert who shall review the dividing insurer’s plan of division 2 and issue a report to the commissioner. 3 3. The commissioner may approve a plan of division if the 4 commissioner finds that all of the following apply: 5 a. The interest of the policyholders, creditors, or 6 shareholders of the dividing insurer will be adequately 7 protected and the plan of division is not unfair or 8 unreasonable to the policyholders of the dividing insurer and 9 is not contrary to the public interest. 10 b. The financial condition of the resulting insurers will 11 not jeopardize the financial stability of a dividing insurer 12 or the resulting insurers or prejudice the interests of the 13 policyholders of such insurers. 14 c. All resulting insurers created by the proposed division 15 will be qualified and eligible to receive a certificate of 16 authority to transact the business of insurance in this state. 17 d. The proposed division does not violate a provision of 18 chapter 684. In a division in which the dividing insurer 19 will survive, the commissioner shall apply chapter 684 to the 20 dividing insurer in its capacity as a resulting insurer. In 21 applying the provisions of chapter 684 to a resulting insurer, 22 the commissioner shall do all of the following: 23 (1) Treat the resulting insurer as a debtor. 24 (2) Treat a liability allocated to the resulting insurer as 25 a liability incurred by a debtor. 26 (3) Treat the resulting insurer as receiving unequal value 27 in exchange for incurring allocated obligations. 28 (4) Treat assets allocated to the resulting insurer as 29 remaining assets. 30 e. The proposed division is not being made for the purpose 31 of hindering, delaying, or defrauding any policyholders or 32 other creditors of the dividing insurer. 33 f. All resulting insurers will be solvent when the division 34 becomes effective. 35 -6- LSB 1677HV (3) 88 ko/rn 6/ 19

H.F. 264 g. The remaining assets of a resulting insurer will not be 1 unreasonably small in relation to the business and transactions 2 such resulting insurer has been engaged in or will engage in 3 after completion of the division. 4 4. In determining if the standards set forth in subsection 5 3, paragraphs “c” through “g” are satisfied, the commissioner 6 may consider all proposed assets of the resulting insurer 7 including without limitation reinsurance agreements, parental 8 guarantees, support agreements, keepwell agreements, and 9 capital maintenance of contingent capital agreements regardless 10 of whether such qualify as an admitted asset under state law. 11 5. All expenses incurred by the commissioner in connection 12 with proceedings under this section including expenses 13 for attorneys, actuaries, accountants, and other experts 14 not otherwise a part of the commissioner’s staff as may be 15 reasonably necessary to assist the commissioner in reviewing 16 a proposed plan of division shall be paid by the dividing 17 insurer filing such plan. A dividing insurer may allocate such 18 expense in a plan of division in the same manner as any other 19 liability. 20 6. If the commissioner approves a plan of division the 21 commissioner shall issue an order which shall be accompanied 22 by findings of fact and conclusions of law. The commissioner 23 shall also issue a certificate of authority authorizing the 24 resulting insurers to transact the business of insurance in 25 this state. 26 7. The conditions in this section for freeing one or more 27 of the resulting insurers from the liabilities of the dividing 28 insurer and for allocating some or all of the liabilities of 29 the dividing insurer shall be deemed to have been satisfied if 30 the plan of division is approved by the commissioner in a final 31 order. 32 Sec. 9. NEW SECTION . 521I.9 Confidentiality. 33 A dividing insurer may submit a written request to the 34 commissioner that confidentiality be maintained regarding 35 -7- LSB 1677HV (3) 88 ko/rn 7/ 19

H.F. 264 all business, financial, actuarial, and other proprietary 1 information submitted to, obtained by, or disclosed to the 2 commissioner in connection with the dividing insurer’s plan 3 of division. The commissioner shall make a determination 4 regarding the dividing insurer’s request prior to issuing 5 a notice of a public hearing pursuant to section 521I.8, 6 subsection 2. If the commissioner grants the dividing 7 insurer’s request in whole or in part, such information as the 8 commissioner determines shall remain confidential, shall not be 9 available for public inspection, and shall not be subject to 10 chapter 22. The plan of division shall not be confidential and 11 shall be available for public inspection. 12 Sec. 10. NEW SECTION . 521I.10 Certificate of division. 13 1. If the commissioner approves a dividing insurer’s plan 14 of division pursuant to section 521I.8, an officer or duly 15 authorized representative of the dividing insurer shall sign a 16 certificate of division that sets forth all of the following: 17 a. The name of the dividing insurer. 18 b. A statement disclosing whether the dividing insurer 19 survived the division. If the dividing insurer survived 20 the division, the certificate of division shall include any 21 amendments to the dividing insurer’s articles of incorporation 22 or bylaws as approved as part of the plan of division. 23 c. The name of each resulting insurer that is created by 24 the division. 25 d. The date on which the division is effective. 26 e. A statement that the division was approved by the 27 commissioner under section 521I.8. 28 f. A statement that the dividing insurer provided reasonable 29 notice to each reinsurer that is a party to a reinsurance 30 contract allocated in the plan of division. 31 g. The resulting insurer’s articles of incorporation and 32 bylaws for each resulting insurer created by the division. The 33 articles of incorporation and bylaws of each resulting insurer 34 must comply with the applicable requirements of the laws of 35 -8- LSB 1677HV (3) 88 ko/rn 8/ 19

H.F. 264 this state. The articles of incorporation and bylaws may state 1 the name or address of an incorporator, may be signed, and may 2 include any provision that is not required in a restatement of 3 the articles of incorporation or bylaws. 4 h. A reasonable description of the capital, surplus, other 5 assets and liabilities, including policy liabilities, of the 6 dividing insurer that are to be allocated to each resulting 7 insurer. 8 2. A dividing insurer’s certificate of division is 9 effective on the date the dividing insurer files the 10 certificate with the secretary of state and provides a 11 concurrent copy to the commissioner, or on another date 12 as specified in the plan of division, whichever is later. 13 However, the certificate of division shall become effective 14 not later than ninety calendar days after it is filed with the 15 secretary of state. A division shall be effective when the 16 relevant certificate of division is effective. 17 Sec. 11. NEW SECTION . 521I.11 Division effective. 18 1. On the effective date of a division pursuant to section 19 521I.10, the following apply: 20 a. If the dividing insurer survives, all of the following 21 apply: 22 (1) The dividing insurer shall continue to exist. 23 (2) The articles of incorporation of the dividing insurer 24 shall be amended, if at all, if provided for in the plan of 25 division. 26 (3) The bylaws of the dividing insurer shall be amended, if 27 at all, if provided for in the plan of division. 28 b. If the dividing insurer does not survive, the dividing 29 insurer’s separate existence shall cease to exist and any 30 resulting insurer created by the plan of division shall come 31 into existence. 32 c. Each resulting insurer shall hold any capital, surplus, 33 and other assets allocated to such resulting insurer by the 34 plan of division as a successor to the dividing insurer by 35 -9- LSB 1677HV (3) 88 ko/rn 9/ 19

H.F. 264 operation of law, and not by transfer, whether directly or 1 indirectly. The articles of incorporation and bylaws, if any, 2 of each resulting insurer shall be effective when the resulting 3 insurer comes into existence. 4 d. (1) All capital, surplus, and other assets of the 5 dividing insurer that are allocated by the plan of division 6 shall vest in the applicable resulting insurer as provided in 7 the plan of division or shall remain vested in the dividing 8 insurer as provided in the plan of division. 9 (2) All capital, surplus, and other assets of the dividing 10 insurer that are not allocated by the plan of division shall 11 remain vested in the dividing insurer if the dividing insurer 12 survives the division and shall be allocated to and vest pro 13 rata in the resulting insurers individually if the dividing 14 insurer does not survive the division. 15 (3) All capital, surplus, and other assets of the dividing 16 insurer otherwise vest as provided in this section without 17 transfer, reversion, or impairment. 18 e. A resulting insurer to which a cause of action is 19 allocated may be substituted or added in any pending action or 20 proceeding to which the dividing insurer is a party when the 21 division becomes effective. 22 f. All liabilities of a dividing insurer are allocated 23 between or among any resulting insurers as provided in section 24 521I.10 and each resulting insurer to which liabilities are 25 allocated is liable only for those liabilities, including 26 policy liabilities, allocated as a successor to the dividing 27 insurer by operation of law. 28 g. Any shares in the dividing insurer that are to be 29 converted or canceled in the division are converted or canceled 30 and the shareholders of those shares are entitled only to 31 the rights provided to such shareholders under the plan of 32 division and any appraisal rights that such shareholders may 33 have pursuant to section 521I.13. 34 2. Except as provided in the dividing insurer’s articles 35 -10- LSB 1677HV (3) 88 ko/rn 10/ 19

H.F. 264 of incorporation or bylaws, the division does not give rise 1 to any rights that a shareholder, director of a domestic 2 stock insurer, or third party would have upon a dissolution, 3 liquidation, or winding up of the dividing insurer. 4 3. The allocation to a resulting insurer of capital, 5 surplus, or other asset that is collateral covered by an 6 effective financing statement shall not be effective until a 7 new effective financing statement naming the resulting insurer 8 as a debtor is effective under the uniform commercial code. 9 4. Unless otherwise provided in the plan of division, 10 the shares in and any securities of each resulting insurer 11 shall be distributed to the dividing insurer if it survives 12 the division, or pro rata to the shareholders of the dividing 13 insurer that do not assert any appraisal rights pursuant to 14 section 521I.13. 15 Sec. 12. NEW SECTION . 521I.12 Resulting insurers liability 16 for allocated assets, debts, and liabilities. 17 1. Except as expressly provided in this section, when a 18 division becomes effective, by operation of law all of the 19 following apply: 20 a. A resulting insurer is individually liable for the 21 liabilities, including policy liabilities, that the resulting 22 insurer issues, undertakes, or incurs in its own name after the 23 division. 24 b. A resulting insurer is individually liable for the 25 liabilities, including policy liabilities, of the dividing 26 insurer that are allocated to or remain the liability of the 27 resulting insurer to the extent specified in the plan of 28 division. 29 c. The dividing insurer remains responsible for the 30 liabilities, including policy liabilities, of the dividing 31 insurer that are not allocated by the plan of division if the 32 dividing insurer survives the division. 33 d. A resulting insurer is liable pro rata individually for 34 the liabilities, including policy liabilities, of the dividing 35 -11- LSB 1677HV (3) 88 ko/rn 11/ 19

H.F. 264 insurer that are not allocated by the plan of division if the 1 dividing insurer does not survive the division. 2 2. Except as otherwise expressly provided in this section, 3 when a division becomes effective a resulting insurer is not 4 responsible for and shall not have liability for any of the 5 following: 6 a. Any liabilities, including policy liabilities, that 7 another resulting insurer issues, undertakes, or incurs in such 8 resulting insurer’s own name after the division. 9 b. Any liabilities, including policy liabilities, of the 10 dividing insurer that are allocated to or remain the liability 11 of another resulting insurer under the plan of division. 12 3. If a provision of any evidence of indebtedness, whether 13 secured or unsecured, or a provision of any contract other than 14 an insurance policy, annuity, or reinsurance agreement that was 15 issued, incurred, or executed by the dividing insurer before 16 the effective date of this Act, requires the consent of the 17 obligee to a merger of the dividing insurer, or treats such a 18 merger as a default, such provision shall apply to a division 19 of the dividing insurer as if such division were a merger. 20 4. If a division breaches a contractual obligation of 21 the dividing insurer, all resulting insurers are jointly 22 and severally liable for the breach. The validity and 23 effectiveness of the division shall not be affected by the 24 breach. 25 5. A direct or indirect allocation of capital, surplus, 26 assets, or liabilities, including policy liabilities, shall 27 occur automatically, by operation of law, and shall not be 28 treated as a distribution or transfer for any purpose with 29 respect to either the dividing insurer or any resulting 30 insurer. 31 6. Liens, security interests, and other charges on the 32 capital, surplus, or other assets of the dividing insurer 33 shall not be impaired by the division, notwithstanding any 34 otherwise enforceable allocation of liabilities, including 35 -12- LSB 1677HV (3) 88 ko/rn 12/ 19

H.F. 264 policy liabilities, of the dividing insurer. 1 7. If the dividing insurer is bound by a security agreement 2 governed by chapter 554 or article 9 of the uniform commercial 3 code as enacted in any other jurisdiction, and the security 4 agreement provides that the security interest attaches to 5 after-acquired collateral, a resulting insurer shall be bound 6 by the security agreement. 7 8. Unless provided in the plan of division and specifically 8 approved by the commissioner, an allocation of a policy or 9 other liability is prohibited from doing any of the following: 10 a. Affecting the rights that a policyholder or creditor 11 has under any other law with respect to such policy or other 12 liability, except that such rights shall be available only 13 against a resulting insurer responsible for the policy or 14 liability under this section. 15 b. Releasing or reducing the obligation of a reinsurer, 16 surety, or guarantor of the policy or liability. 17 9. A resulting insurer shall only be liable for the 18 liabilities allocated to the resulting insurer in accordance 19 with the plan of division and this section and shall not be 20 liable for any other liabilities under the common law doctrine 21 of successor liability or any other theory of liability 22 applicable to transferees or assignees of assets. 23 Sec. 13. NEW SECTION . 521I.13 Shareholder appraisal rights. 24 If a dividing insurer does not survive a division, an 25 objecting shareholder of the dividing insurer is entitled to 26 appraisal rights and to obtain payment of the fair value of 27 such shareholder’s shares in the same manner and to the extent 28 provided for a corporation as a party to a merger pursuant to 29 section 490.1302. 30 Sec. 14. NEW SECTION . 521I.14 Rules. 31 The commissioner may adopt rules pursuant to chapter 17A to 32 administer this chapter. 33 Sec. 15. NEW SECTION . 521I.15 Enforcement. 34 The commissioner may take any action under the 35 -13- LSB 1677HV (3) 88 ko/rn 13/ 19

H.F. 264 commissioner’s authority to enforce compliance with this 1 chapter. 2 Sec. 16. Section 490.120, subsection 12, paragraph c, 3 subparagraph (2), Code 2019, is amended to read as follows: 4 (2) “Plan” means a plan of merger or , a plan of share 5 exchange , or a plan of division pursuant to chapter 521I . 6 Sec. 17. Section 490.1302, subsection 1, Code 2019, is 7 amended by adding the following new paragraph: 8 NEW PARAGRAPH . g. Consummation of a division pursuant 9 to chapter 521I to which the corporation is a party if the 10 corporation does not survive such division. 11 Sec. 18. Section 521.1, Code 2019, is amended by adding the 12 following new subsections: 13 NEW SUBSECTION . 5. “Dividing insurer” means the same as 14 defined in section 521I.1. 15 NEW SUBSECTION . 6. “Resulting insurer” means the same as 16 defined in section 521I.1. 17 Sec. 19. NEW SECTION . 521.19 Merger or consolidation 18 effective with division. 19 A dividing insurer and the dividing insurer’s officers, 20 directors, and shareholders shall have the authority to adopt 21 and execute a plan of merger or consolidation on behalf of a 22 resulting insurer, to execute and deliver documents, plans, 23 certificates, and resolutions, and to make any filings on 24 behalf of such resulting insurer. If provided in a plan of 25 merger or consolidation, the merger or consolidation shall be 26 effective simultaneously with the effectiveness of a division 27 pursuant to 521I.10. 28 EXPLANATION 29 The inclusion of this explanation does not constitute agreement with 30 the explanation’s substance by the members of the general assembly. 31 This bill relates to the division of domestic stock 32 insurers. 33 The bill defines a domestic stock insurer as a stock insurer 34 domiciled and organized under the laws of this state pursuant 35 -14- LSB 1677HV (3) 88 ko/rn 14/ 19

H.F. 264 to Code chapter 508, 514B, or 515, including domestic stock 1 insurers affiliated with a mutual insurance holding company 2 organized pursuant to Code section 521A.14, and including those 3 insurers which confer membership rights in the mutual insurance 4 company. A dividing insurer is defined as a domestic stock 5 insurer that approves a plan of division (plan). A resulting 6 insurer is defined as a dividing insurer that survives a 7 division, or a new domestic stock insurer that is created by 8 a division. 9 The bill requires a dividing insurer to develop a plan that 10 identifies the dividing insurer’s name, the proposed resulting 11 insurers and their articles of incorporation and bylaws, the 12 allocation of the dividing insurer’s assets, liabilities, 13 and reinsurance contracts to the resulting insurers, and the 14 manner in which the shares in the resulting insurers will be 15 distributed to the dividing insurer or its shareholders. 16 If the dividing insurer will survive the division, the plan 17 must also include any proposed amendments to the dividing 18 insurer’s articles of incorporation and bylaws and the manner 19 in which the dividing insurer proposes to cancel or convert 20 some of its shares. If the dividing insurer will not survive 21 the division, the plan of division must include details on how 22 the dividing insurer will cancel or convert its shares. 23 The bill allows a dividing insurer to amend or cancel a plan 24 under certain conditions as detailed in the bill. 25 The bill requires that prior to filing a plan with the 26 commissioner, a dividing insurer must obtain approval in 27 accordance with its articles of incorporation and bylaws. If 28 the articles of incorporation and bylaws do not provide for 29 such approval, the dividing insurer must obtain approval in 30 accordance with all provisions of such that apply to approval 31 of a merger. 32 The bill provides that a division is not effective until 33 approved by the commissioner after reasonable notice and a 34 public hearing. The commissioner shall require the dividing 35 -15- LSB 1677HV (3) 88 ko/rn 15/ 19

H.F. 264 insurer to mail written notice of the public hearing to the 1 dividing insurer’s policyholders advising the policy holders 2 that a plan of division has been filed with the commissioner 3 and providing the date, time, and location of the public 4 hearing. The commissioner is required to select and retain an 5 independent expert to review the dividing insurer’s plan of 6 division and provide a report to the commissioner. 7 The commissioner may approve a plan if the commissioner 8 determines that the interests of the policyholders, creditors, 9 or shareholders of the dividing insurer are adequately 10 protected and the proposed division is not unfair or 11 unreasonable to the policyholders of the dividing insurer; 12 that the division is not contrary to public policy; that 13 the financial condition of the resulting insurers will not 14 jeopardize the financial stability of a dividing insurer or 15 the resulting insurers or prejudice the interests of the 16 policyholders of such insurers; that all resulting insurers 17 created by the proposed division are qualified and eligible to 18 receive a certificate of authority to transact the business 19 of insurance in this state; that the proposed division does 20 not violate the state’s voidable transactions statute; that 21 the proposed division is not for the purpose of hindering, 22 delaying, or defrauding any policyholders or other creditors 23 of the dividing insurer; that all resulting insurers will be 24 solvent; and that the remaining assets of a resulting insurer 25 will not be unreasonably small in relation to the business and 26 transactions in which such resulting insurer has been engaged 27 in or will engage in after completion of the division. 28 The bill requires the commissioner to issue an order, 29 including findings of fact and conclusions of law, to approve a 30 plan of division and to issue a certificate of authority to the 31 resulting insurers. 32 A dividing insurer may submit a written request to the 33 commissioner that confidentiality be maintained regarding all 34 business and other proprietary information submitted to the 35 -16- LSB 1677HV (3) 88 ko/rn 16/ 19

H.F. 264 commissioner in connection with the dividing insurer’s plan of 1 division. The commissioner must make a determination regarding 2 the dividing insurer’s request prior to issuing a notice of 3 a public hearing. If the commissioner grants the request, 4 any information the commissioner determines shall remain 5 confidential is not available for public inspection and shall 6 not be subject to Code chapter 22. The plan of division is not 7 confidential and shall be available for public inspection. 8 If the commissioner approves a dividing insurer’s plan, an 9 officer of the dividing insurer must sign a certificate of 10 division that sets forth information, as detailed in the bill, 11 related to the dividing insurer’s post-division status and any 12 resulting insurer’s post-division status. A certificate of 13 division is effective on the date the dividing insurer files 14 the certificate with the secretary of state as specified in 15 the plan of division. The certificate of division becomes 16 effective not later than 90 days after it is filed. 17 When a division becomes effective and the dividing insurer 18 survives, the bill provides that the dividing insurer continues 19 to exist and that the articles of incorporation and the bylaws 20 of the dividing insurer must be amended as provided in the 21 plan. If the dividing insurer does not survive, the dividing 22 insurer’s separate existence ceases to exist and any resulting 23 insurers created by the plan come into existence. The bill 24 provides that all resulting insurers hold any capital, surplus, 25 and other assets allocated to each as a successor to the 26 dividing insurer by operation of law, and not by transfer. All 27 capital, surplus, and other assets of the dividing insurer 28 that are allocated by the plan of division either vest in the 29 applicable resulting insurer or remain vested in the dividing 30 insurer as provided in the plan. All capital, surplus, and 31 other assets that are not allocated by the plan remain vested 32 in the dividing insurer if the dividing insurer survives the 33 division, are allocated to the resulting insurers individually 34 if the dividing insurer does not survive the division, or vest 35 -17- LSB 1677HV (3) 88 ko/rn 17/ 19

H.F. 264 as otherwise provided in the bill. 1 A resulting insurer to which a cause of action is allocated 2 may be substituted or added in any pending action to which 3 the dividing insurer is a party when the division becomes 4 effective. All liabilities of a dividing insurer are allocated 5 between or among any resulting insurers and each resulting 6 insurer to which liabilities are allocated is liable only for 7 those liabilities, including policy liabilities, allocated as a 8 successor to the dividing insurer. 9 The bill also provides that when a division becomes 10 effective any shares in the dividing insurer that are converted 11 or canceled entitle the shareholders of those shares to 12 the rights provided under the plan of division and per any 13 appraisal rights they may have as detailed in the bill. 14 Unless otherwise provided in the plan, the shares and 15 securities of each resulting insurer are distributed to the 16 dividing insurer if it survives the division, or pro rata to 17 any shareholders of the dividing insurer that do not assert 18 appraisal rights. 19 The bill provides that after a division becomes effective, 20 each resulting insurer is individually liable for all 21 liabilities that such resulting insurer issues, undertakes, or 22 incurs in its own name; each resulting insurer is individually 23 liable for the liabilities of the dividing insurer that are 24 allocated to or remain the liability of such resulting insurer 25 as specified in the plan; and the dividing insurer remains 26 responsible for all liabilities of the dividing insurer that 27 are not allocated by the plan if the dividing insurer survives 28 the division. If the dividing insurer does not survive the 29 division, each resulting insurer is pro rata individually 30 liable for all liabilities of the dividing insurer that are not 31 allocated by the plan. 32 If a division breaches a contractual obligation of the 33 dividing insurer, all resulting insurers are liable, jointly 34 and severally, for the breach. The validity and effectiveness 35 -18- LSB 1677HV (3) 88 ko/rn 18/ 19

H.F. 264 of the division are not affected by the breach. 1 In a division, a direct or indirect allocation of capital, 2 surplus, assets, or liabilities, including policy liabilities, 3 occurs automatically by operation of law and is not treated 4 as a distribution or transfer for any purpose with respect to 5 either the dividing insurer or any of the resulting insurers. 6 Except as provided in the plan and as approved by the 7 commissioner, an allocation of a policy or other liability does 8 not affect the rights that a policyholder or creditor has under 9 any other law with respect to such policy or other liability, 10 except that such rights are available only against a resulting 11 insurer responsible for the policy or liability. A reinsurer, 12 surety, or guarantor of the policy or liability is not released 13 from their obligations under the policy or other liability. 14 The bill allows the commissioner to adopt rules pursuant 15 to Code chapter 17A to administer the requirements of the 16 bill and allows the commissioner to take any action under the 17 commissioner’s authority to enforce compliance with the bill. 18 The bill amends Code section 490.120 to add a plan of 19 division to the definition of plan. The bill amends Code 20 section 490.1302 to provide for shareholder appraisal rights 21 for a division to which a corporation is a party, if the 22 corporation does not survive such division. The bill amends 23 Code chapter 521 to allow a dividing insurer to adopt and 24 execute a plan of merger or consolidation on behalf of a 25 resulting insurer and if provided for in the plan of merger or 26 consolidation, the merger or consolidation shall be effective 27 simultaneously with the effectiveness of a division under the 28 bill. 29 -19- LSB 1677HV (3) 88 ko/rn 19/ 19