H.F. _____ 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 the latest edition of the 8 national association of insurance commissioners’ accounting 9 practices and procedures manual. 10 3. “Commissioner” means the commissioner of insurance. 11 4. “Divide” or “division” means a transaction in which 12 a domestic stock insurer splits into two or more resulting 13 domestic stock insurers. 14 5. “Dividing insurer” means a domestic stock insurer that 15 approves a plan of division. 16 6. “Domestic stock insurer” means a stock insurer domiciled 17 and organized under the laws of this state pursuant to chapter 18 508, 514B, or 515, including domestic stock insurers affiliated 19 with a mutual insurance holding company organized pursuant to 20 section 521A.14, and including those insurers which confer 21 membership rights in the mutual insurance holding company. 22 7. “Liability” means a secured or contingent debt or 23 obligation arising in any manner. 24 8. “Resulting insurer” means a dividing domestic stock 25 insurer that survives a division or a new domestic stock 26 insurer that is created by a division. 27 9. “Shareholder” means the person in whose name shares are 28 registered in the records of a corporation or the beneficial 29 owner of shares to the extent of the rights granted by a 30 nominee certificate on file with a corporation. 31 10. “Surplus” means total statutory surplus less capital 32 stock calculated in accordance with the current national 33 association of insurance commissioners’ accounting practices 34 and procedures manual. 35 -1- LSB 1677YC (3) 88 ko/rn 1/ 19

H.F. _____ 11. “Transfer” includes an assignment, assumption, 1 conveyance, sale, lease, encumbrance, security interest, gift, 2 or transfer by operation of law. 3 Sec. 2. NEW SECTION . 521I.2 Plan of division —— general 4 requirements. 5 A domestic stock insurer’s plan of division shall include 6 all of the following: 7 1. The name of the domestic stock insurer seeking to divide. 8 2. The name of each resulting insurer created by the 9 proposed division and for each resulting insurer a copy of all 10 of the following: 11 a. Proposed articles of incorporation. 12 b. Proposed bylaws. 13 3. The manner of allocating assets and liabilities, 14 including policy liabilities, between or among all resulting 15 insurers. 16 4. The manner of distributing shares in the resulting 17 insurers to the dividing insurer or the dividing insurer’s 18 shareholders. 19 5. A description of all liabilities and all assets that 20 the dividing insurer proposes to allocate to each resulting 21 insurer, including the manner by which the dividing insurer 22 proposes to allocate all reinsurance contracts. 23 6. All terms and conditions required by the laws of this 24 state and the articles and bylaws of the dividing insurer. 25 7. All other terms and conditions of the division. Terms of 26 a plan of division may be made dependent on facts objectively 27 ascertainable outside of the plan of division. 28 Sec. 3. NEW SECTION . 521I.3 Plan of division —— dividing 29 insurer to survive division. 30 If a dividing insurer will survive a division, the plan 31 of division shall include, in addition to the requirements 32 pursuant to section 521I.2, all of the following: 33 1. All proposed amendments to the dividing insurer’s 34 articles of incorporation and bylaws. 35 -2- LSB 1677YC (3) 88 ko/rn 2/ 19

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

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

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

H.F. _____ b. The financial condition of the resulting insurers will 1 not jeopardize the financial stability of a dividing insurer 2 or the resulting insurers or prejudice the interests of the 3 policyholders of such insurers. 4 c. All resulting insurers created by the proposed division 5 will be qualified and eligible to receive a certificate of 6 authority to transact the business of insurance in this state. 7 d. The proposed division does not violate a provision of 8 chapter 684. In a division in which the dividing insurer 9 will survive, the commissioner shall apply chapter 684 to the 10 dividing insurer in its capacity as a resulting insurer. In 11 applying the provisions of chapter 684 to a resulting insurer, 12 the commissioner shall do all of the following: 13 (1) Treat the resulting insurer as a debtor. 14 (2) Treat a liability allocated to the resulting insurer as 15 a liability incurred by a debtor. 16 (3) Treat the resulting insurer as receiving unequal value 17 in exchange for incurring allocated obligations. 18 (4) Treat assets allocated to the resulting insurer as 19 remaining assets. 20 e. The proposed division is not being made for the purpose 21 of hindering, delaying, or defrauding any policyholders or 22 other creditors of the dividing insurer. 23 f. All resulting insurers will be solvent when the division 24 becomes effective. 25 g. The remaining assets of a resulting insurer will not be 26 unreasonably small in relation to the business and transactions 27 such resulting insurer has been engaged in or will engage in 28 after completion of the division. 29 4. In determining if the standards set forth in subsection 30 3, paragraphs “c” through “g” are satisfied, the commissioner 31 may consider all proposed assets of the resulting insurer 32 including without limitation reinsurance agreements, parental 33 guarantees, support agreements, keepwell agreements, and 34 capital maintenance of contingent capital agreements regardless 35 -6- LSB 1677YC (3) 88 ko/rn 6/ 19

H.F. _____ of whether such qualify as an admitted asset under state law. 1 5. All expenses incurred by the commissioner in connection 2 with proceedings under this section including expenses 3 for attorneys, actuaries, accountants, and other experts 4 not otherwise a part of the commissioner’s staff as may be 5 reasonably necessary to assist the commissioner in reviewing 6 a proposed plan of division shall be paid by the dividing 7 insurer filing such plan. A dividing insurer may allocate such 8 expense in a plan of division in the same manner as any other 9 liability. 10 6. If the commissioner approves a plan of division the 11 commissioner shall issue an order which shall be accompanied 12 by findings of fact and conclusions of law. The commissioner 13 shall also issue a certificate of authority authorizing the 14 resulting insurers to transact the business of insurance in 15 this state. 16 7. The conditions in this section for freeing one or more 17 of the resulting insurers from the liabilities of the dividing 18 insurer and for allocating some or all of the liabilities of 19 the dividing insurer shall be deemed to have been satisfied if 20 the plan of division is approved by the commissioner in a final 21 order. 22 Sec. 9. NEW SECTION . 521I.9 Confidentiality. 23 A dividing insurer may submit a written request to the 24 commissioner that confidentiality be maintained regarding 25 all business, financial, actuarial, and other proprietary 26 information submitted to, obtained by, or disclosed to the 27 commissioner in connection with the dividing insurer’s plan 28 of division. The commissioner shall make a determination 29 regarding the dividing insurer’s request prior to issuing 30 a notice of a public hearing pursuant to section 521I.8, 31 subsection 2. If the commissioner grants the dividing 32 insurer’s request in whole or in part, such information as the 33 commissioner determines shall remain confidential, shall not be 34 available for public inspection, and shall not be subject to 35 -7- LSB 1677YC (3) 88 ko/rn 7/ 19

H.F. _____ chapter 22. The plan of division shall not be confidential and 1 shall be available for public inspection. 2 Sec. 10. NEW SECTION . 521I.10 Certificate of division. 3 1. If the commissioner approves a dividing insurer’s plan 4 of division pursuant to section 521I.8, an officer or duly 5 authorized representative of the dividing insurer shall sign a 6 certificate of division that sets forth all of the following: 7 a. The name of the dividing insurer. 8 b. A statement disclosing whether the dividing insurer 9 survived the division. If the dividing insurer survived 10 the division, the certificate of division shall include any 11 amendments to the dividing insurer’s articles of incorporation 12 or bylaws as approved as part of the plan of division. 13 c. The name of each resulting insurer that is created by 14 the division. 15 d. The date on which the division is effective. 16 e. A statement that the division was approved by the 17 commissioner under section 521I.8. 18 f. A statement that the dividing insurer provided reasonable 19 notice to each reinsurer that is a party to a reinsurance 20 contract allocated in the plan of division. 21 g. The resulting insurer’s articles of incorporation and 22 bylaws for each resulting insurer created by the division. The 23 articles of incorporation and bylaws of each resulting insurer 24 must comply with the applicable requirements of the laws of 25 this state. The articles of incorporation and bylaws may state 26 the name or address of an incorporator, may be signed, and may 27 include any provision that is not required in a restatement of 28 the articles of incorporation or bylaws. 29 h. A reasonable description of the capital, surplus, other 30 assets and liabilities, including policy liabilities, of the 31 dividing insurer that are to be allocated to each resulting 32 insurer. 33 2. A dividing insurer’s certificate of division is 34 effective on the date the dividing insurer files the 35 -8- LSB 1677YC (3) 88 ko/rn 8/ 19

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

H.F. _____ insurer that are not allocated by the plan of division shall 1 remain vested in the dividing insurer if the dividing insurer 2 survives the division and shall be allocated to and vest pro 3 rata in the resulting insurers individually if the dividing 4 insurer does not survive the division. 5 (3) All capital, surplus, and other assets of the dividing 6 insurer otherwise vest as provided in this section without 7 transfer, reversion, or impairment. 8 e. A resulting insurer to which a cause of action is 9 allocated may be substituted or added in any pending action or 10 proceeding to which the dividing insurer is a party when the 11 division becomes effective. 12 f. All liabilities of a dividing insurer are allocated 13 between or among any resulting insurers as provided in section 14 521I.10 and each resulting insurer to which liabilities are 15 allocated is liable only for those liabilities, including 16 policy liabilities, allocated as a successor to the dividing 17 insurer by operation of law. 18 g. Any shares in the dividing insurer that are to be 19 converted or canceled in the division are converted or canceled 20 and the shareholders of those shares are entitled only to 21 the rights provided to such shareholders under the plan of 22 division and any appraisal rights that such shareholders may 23 have pursuant to section 521I.13. 24 2. Except as provided in the dividing insurer’s articles 25 of incorporation or bylaws, the division does not give rise 26 to any rights that a shareholder, director of a domestic 27 stock insurer, or third party would have upon a dissolution, 28 liquidation, or winding up of the dividing insurer. 29 3. The allocation to a resulting insurer of capital, 30 surplus, or other asset that is collateral covered by an 31 effective financing statement shall not be effective until a 32 new effective financing statement naming the resulting insurer 33 as a debtor is effective under the uniform commercial code. 34 4. Unless otherwise provided in the plan of division, 35 -10- LSB 1677YC (3) 88 ko/rn 10/ 19

H.F. _____ the shares in and any securities of each resulting insurer 1 shall be distributed to the dividing insurer if it survives 2 the division, or pro rata to the shareholders of the dividing 3 insurer that do not assert any appraisal rights pursuant to 4 section 521I.13. 5 Sec. 12. NEW SECTION . 521I.12 Resulting insurers liability 6 for allocated assets, debts, and liabilities. 7 1. Except as expressly provided in this section, when a 8 division becomes effective, by operation of law all of the 9 following apply: 10 a. A resulting insurer is individually liable for the 11 liabilities, including policy liabilities, that the resulting 12 insurer issues, undertakes, or incurs in its own name after the 13 division. 14 b. A resulting insurer is individually liable for the 15 liabilities, including policy liabilities, of the dividing 16 insurer that are allocated to or remain the liability of the 17 resulting insurer to the extent specified in the plan of 18 division. 19 c. The dividing insurer remains responsible for the 20 liabilities, including policy liabilities, of the dividing 21 insurer that are not allocated by the plan of division if the 22 dividing insurer survives the division. 23 d. A resulting insurer is liable pro rata individually for 24 the liabilities, including policy liabilities, of the dividing 25 insurer that are not allocated by the plan of division if the 26 dividing insurer does not survive the division. 27 2. Except as otherwise expressly provided in this section, 28 when a division becomes effective a resulting insurer is not 29 responsible for and shall not have liability for any of the 30 following: 31 a. Any liabilities, including policy liabilities, that 32 another resulting insurer issues, undertakes, or incurs in such 33 resulting insurer’s own name after the division. 34 b. Any liabilities, including policy liabilities, of the 35 -11- LSB 1677YC (3) 88 ko/rn 11/ 19

H.F. _____ dividing insurer that are allocated to or remain the liability 1 of another resulting insurer under the plan of division. 2 3. If a provision of any evidence of indebtedness, whether 3 secured or unsecured, or a provision of any contract other than 4 an insurance policy, annuity, or reinsurance agreement that was 5 issued, incurred, or executed by the dividing insurer before 6 the effective date of this Act, requires the consent of the 7 obligee to a merger of the dividing insurer, or treats such a 8 merger as a default, such provision shall apply to a division 9 of the dividing insurer as if such division were a merger. 10 4. If a division breaches a contractual obligation of 11 the dividing insurer, all resulting insurers are jointly 12 and severally liable for the breach. The validity and 13 effectiveness of the division shall not be affected by the 14 breach. 15 5. A direct or indirect allocation of capital, surplus, 16 assets, or liabilities, including policy liabilities, shall 17 occur automatically, by operation of law, and shall not be 18 treated as a distribution or transfer for any purpose with 19 respect to either the dividing insurer or any resulting 20 insurer. 21 6. Liens, security interests, and other charges on the 22 capital, surplus, or other assets of the dividing insurer 23 shall not be impaired by the division, notwithstanding any 24 otherwise enforceable allocation of liabilities, including 25 policy liabilities, of the dividing insurer. 26 7. If the dividing insurer is bound by a security agreement 27 governed by chapter 554 or article 9 of the uniform commercial 28 code as enacted in any other jurisdiction, and the security 29 agreement provides that the security interest attaches to 30 after-acquired collateral, a resulting insurer shall be bound 31 by the security agreement. 32 8. Unless provided in the plan of division and specifically 33 approved by the commissioner, an allocation of a policy or 34 other liability is prohibited from doing any of the following: 35 -12- LSB 1677YC (3) 88 ko/rn 12/ 19

H.F. _____ a. Affecting the rights that a policyholder or creditor 1 has under any other law with respect to such policy or other 2 liability, except that such rights shall be available only 3 against a resulting insurer responsible for the policy or 4 liability under this section. 5 b. Releasing or reducing the obligation of a reinsurer, 6 surety, or guarantor of the policy or liability. 7 9. A resulting insurer shall only be liable for the 8 liabilities allocated to the resulting insurer in accordance 9 with the plan of division and this section and shall not be 10 liable for any other liabilities under the common law doctrine 11 of successor liability or any other theory of liability 12 applicable to transferees or assignees of assets. 13 Sec. 13. NEW SECTION . 521I.13 Shareholder appraisal rights. 14 If a dividing insurer does not survive a division, an 15 objecting shareholder of the dividing insurer is entitled to 16 appraisal rights and to obtain payment of the fair value of 17 such shareholder’s shares in the same manner and to the extent 18 provided for a corporation as a party to a merger pursuant to 19 section 490.1302. 20 Sec. 14. NEW SECTION . 521I.14 Rules. 21 The commissioner shall adopt rules pursuant to chapter 17A 22 to administer this chapter. 23 Sec. 15. NEW SECTION . 521I.15 Enforcement. 24 The commissioner may take any action under the 25 commissioner’s authority to enforce compliance with this 26 chapter. 27 Sec. 16. Section 490.120, subsection 12, paragraph c, 28 subparagraph (2), Code 2019, is amended to read as follows: 29 (2) “Plan” means a plan of merger or , a plan of share 30 exchange , or a plan of division pursuant to chapter 521I . 31 Sec. 17. Section 490.1302, subsection 1, Code 2019, is 32 amended by adding the following new paragraph: 33 NEW PARAGRAPH . g. Consummation of a division pursuant 34 to chapter 521I to which the corporation is a party if the 35 -13- LSB 1677YC (3) 88 ko/rn 13/ 19

H.F. _____ corporation does not survive such division. 1 Sec. 18. Section 521.1, Code 2019, is amended by adding the 2 following new subsections: 3 NEW SUBSECTION . 5. “Dividing insurer” means the same as 4 defined in section 521I.1. 5 NEW SUBSECTION . 6. “Resulting insurer” means the same as 6 defined in section 521I.1. 7 Sec. 19. NEW SECTION . 521.19 Merger or consolidation 8 effective with division. 9 A dividing insurer and the dividing insurer’s officers, 10 directors, and shareholders shall have the authority to adopt 11 and execute a plan of merger or consolidation on behalf of a 12 resulting insurer, to execute and deliver documents, plans, 13 certificates, and resolutions, and to make any filings on 14 behalf of such resulting insurer. If provided in a plan of 15 merger or consolidation, the merger or consolidation shall be 16 effective simultaneously with the effectiveness of a division 17 pursuant to 521I.10. 18 EXPLANATION 19 The inclusion of this explanation does not constitute agreement with 20 the explanation’s substance by the members of the general assembly. 21 This bill relates to the division of domestic stock 22 insurers. 23 The bill defines a domestic stock insurer as a stock insurer 24 domiciled and organized under the laws of this state pursuant 25 to Code chapter 508, 514B, or 515, including domestic stock 26 insurers affiliated with a mutual insurance holding company 27 organized pursuant to Code section 521A.14, and including those 28 insurers which confer membership rights in the mutual insurance 29 company. A dividing insurer is defined as a domestic stock 30 insurer that approves a plan of division (plan). A resulting 31 insurer is defined as a dividing insurer that survives a 32 division, or a new domestic stock insurer that is created by 33 a division. 34 The bill requires a dividing insurer to develop a plan that 35 -14- LSB 1677YC (3) 88 ko/rn 14/ 19

H.F. _____ identifies the dividing insurer’s name, the proposed resulting 1 insurers and their articles of incorporation and bylaws, the 2 allocation of the dividing insurer’s assets, liabilities, 3 and reinsurance contracts to the resulting insurers, and the 4 manner in which the shares in the resulting insurers will be 5 distributed to the dividing insurer or its shareholders. 6 If the dividing insurer will survive the division, the plan 7 must also include any proposed amendments to the dividing 8 insurer’s articles of incorporation and bylaws and the manner 9 in which the dividing insurer proposes to cancel or convert 10 some of its shares. If the dividing insurer will not survive 11 the division, the plan of division must include details on how 12 the dividing insurer will cancel or convert its shares. 13 The bill allows a dividing insurer to amend or cancel a plan 14 under certain conditions as detailed in the bill. 15 The bill requires that prior to filing a plan with the 16 commissioner, a dividing insurer must obtain approval in 17 accordance with its articles of incorporation and bylaws. If 18 the articles of incorporation and bylaws do not provide for 19 such approval, the dividing insurer must obtain approval in 20 accordance with all provisions of such that apply to approval 21 of a merger. 22 The bill provides that a division is not effective until 23 approved by the commissioner after reasonable notice and 24 a public hearing. The commissioner may approve a plan 25 if the commissioner determines that the interests of the 26 policyholders, creditors, or shareholders of the dividing 27 insurer are adequately protected and the proposed division is 28 not unfair or unreasonable to the policyholders of the dividing 29 insurer; that the division is not contrary to public policy; 30 that the financial condition of the resulting insurers will 31 not jeopardize the financial stability of a dividing insurer 32 or the resulting insurers or prejudice the interests of the 33 policyholders of such insurers; that all resulting insurers 34 created by the proposed division are qualified and eligible to 35 -15- LSB 1677YC (3) 88 ko/rn 15/ 19

H.F. _____ receive a certificate of authority to transact the business 1 of insurance in this state; that the proposed division does 2 not violate the state’s voidable transactions statute; that 3 the proposed division is not for the purpose of hindering, 4 delaying, or defrauding any policyholders or other creditors 5 of the dividing insurer; that all resulting insurers will be 6 solvent; and that the remaining assets of a resulting insurer 7 will not be unreasonably small in relation to the business and 8 transactions in which such resulting insurer has been engaged 9 in or will engage in after completion of the division. 10 The bill requires the commissioner to issue an order, 11 including findings of fact and conclusions of law, to approve a 12 plan of division and to issue a certificate of authority to the 13 resulting insurers. 14 A dividing insurer may submit a written request to the 15 commissioner that confidentiality be maintained regarding all 16 business and other proprietary information submitted to the 17 commissioner in connection with the dividing insurer’s plan of 18 division. The commissioner must make a determination regarding 19 the dividing insurer’s request prior to issuing a notice of 20 a public hearing. If the commissioner grants the request, 21 any information the commissioner determines shall remain 22 confidential is not available for public inspection and shall 23 not be subject to Code chapter 22. The plan of division is not 24 confidential and shall be available for public inspection. 25 If the commissioner approves a dividing insurer’s plan, an 26 officer of the dividing insurer must sign a certificate of 27 division that sets forth information, as detailed in the bill, 28 related to the dividing insurer’s post-division status and any 29 resulting insurer’s post-division status. A certificate of 30 division is effective on the date the dividing insurer files 31 the certificate with the secretary of state as specified in 32 the plan of division. The certificate of division becomes 33 effective not later than 90 days after it is filed. 34 When a division becomes effective and the dividing insurer 35 -16- LSB 1677YC (3) 88 ko/rn 16/ 19

H.F. _____ survives, the bill provides that the dividing insurer continues 1 to exist and that the articles of incorporation and the bylaws 2 of the dividing insurer must be amended as provided in the 3 plan. If the dividing insurer does not survive, the dividing 4 insurer’s separate existence ceases to exist and any resulting 5 insurers created by the plan come into existence. The bill 6 provides that all resulting insurers hold any capital, surplus, 7 and other assets allocated to each as a successor to the 8 dividing insurer by operation of law, and not by transfer. All 9 capital, surplus, and other assets of the dividing insurer 10 that are allocated by the plan of division either vest in the 11 applicable resulting insurer or remain vested in the dividing 12 insurer as provided in the plan. All capital, surplus, and 13 other assets that are not allocated by the plan remain vested 14 in the dividing insurer if the dividing insurer survives the 15 division, are allocated to the resulting insurers individually 16 if the dividing insurer does not survive the division, or vest 17 as otherwise provided in the bill. 18 A resulting insurer to which a cause of action is allocated 19 may be substituted or added in any pending action to which 20 the dividing insurer is a party when the division becomes 21 effective. All liabilities of a dividing insurer are allocated 22 between or among any resulting insurers and each resulting 23 insurer to which liabilities are allocated is liable only for 24 those liabilities, including policy liabilities, allocated as a 25 successor to the dividing insurer. 26 The bill also provides that when a division becomes 27 effective any shares in the dividing insurer that are converted 28 or canceled entitle the shareholders of those shares to 29 the rights provided under the plan of division and per any 30 appraisal rights they may have as detailed in the bill. 31 Unless otherwise provided in the plan, the shares and 32 securities of each resulting insurer are distributed to the 33 dividing insurer if it survives the division, or pro rata to 34 any shareholders of the dividing insurer that do not assert 35 -17- LSB 1677YC (3) 88 ko/rn 17/ 19

H.F. _____ appraisal rights. 1 The bill provides that after a division becomes effective, 2 each resulting insurer is individually liable for all 3 liabilities that such resulting insurer issues, undertakes, or 4 incurs in its own name; each resulting insurer is individually 5 liable for the liabilities of the dividing insurer that are 6 allocated to or remain the liability of such resulting insurer 7 as specified in the plan; and the dividing insurer remains 8 responsible for all liabilities of the dividing insurer that 9 are not allocated by the plan if the dividing insurer survives 10 the division. If the dividing insurer does not survive the 11 division, each resulting insurer is pro rata individually 12 liable for all liabilities of the dividing insurer that are not 13 allocated by the plan. 14 If a division breaches a contractual obligation of the 15 dividing insurer, all resulting insurers are liable, jointly 16 and severally, for the breach. The validity and effectiveness 17 of the division are not affected by the breach. 18 In a division, a direct or indirect allocation of capital, 19 surplus, assets, or liabilities, including policy liabilities, 20 occurs automatically by operation of law and is not treated 21 as a distribution or transfer for any purpose with respect to 22 either the dividing insurer or any of the resulting insurers. 23 Except as provided in the plan and as approved by the 24 commissioner, an allocation of a policy or other liability does 25 not affect the rights that a policyholder or creditor has under 26 any other law with respect to such policy or other liability, 27 except that such rights are available only against a resulting 28 insurer responsible for the policy or liability. A reinsurer, 29 surety, or guarantor of the policy or liability is not released 30 from their obligations under the policy or other liability. 31 The bill requires the commissioner to adopt rules pursuant 32 to Code chapter 17A to administer the requirements of the 33 bill and allows the commissioner to take any action under the 34 commissioner’s authority to enforce compliance with the bill. 35 -18- LSB 1677YC (3) 88 ko/rn 18/ 19

H.F. _____ The bill amends Code section 490.120 to add a plan of 1 division to the definition of plan. The bill amends Code 2 section 490.1302 to provide for shareholder appraisal rights 3 for a division to which a corporation is a party, if the 4 corporation does not survive such division. The bill amends 5 Code chapter 521 to allow a dividing insurer to adopt and 6 execute a plan of merger or consolidation on behalf of a 7 resulting insurer and if provided for in the plan of merger or 8 consolidation, the merger or consolidation shall be effective 9 simultaneously with the effectiveness of a division under the 10 bill. 11 -19- LSB 1677YC (3) 88 ko/rn 19/ 19