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Senate Study Bill 1044 - IntroducedA Bill ForAn Act 1relating to the division of domestic stock insurers.
2BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
1 Section 1. NEW SECTION. 521I.1 Definitions.
2As used in this chapter, unless the context otherwise
3requires:
41. “Assets” means property whether real, personal, mixed,
5tangible, or intangible and any right or interest therein,
6including all rights under a contract or other agreement.
72. “Capital” means the capital stock component of a
8statutory surplus as defined in the latest edition of the
9national association of insurance commissioners’ accounting
10practices and procedures manual.
113. “Commissioner” means the commissioner of insurance.
124. “Divide” or “division” means a transaction in which
13a domestic stock insurer splits into two or more resulting
14domestic stock insurers.
155. “Dividing insurer” means a domestic stock insurer that
16approves a plan of division.
176. “Domestic stock insurer” means a stock insurer domiciled
18and organized under the laws of this state pursuant to chapter
19508, 514B, or 515, including domestic stock insurers affiliated
20with a mutual insurance holding company organized pursuant to
21section 521A.14, and including those insurers which confer
22membership rights in the mutual insurance holding company.
237. “Liability” means a secured or contingent debt or
24obligation arising in any manner.
258. “Resulting insurer” means a dividing domestic stock
26insurer that survives a division or a new domestic stock
27insurer that is created by a division.
289. “Shareholder” means the person in whose name shares are
29registered in the records of a corporation or the beneficial
30owner of shares to the extent of the rights granted by a
31nominee certificate on file with a corporation.
3210. “Surplus” means total statutory surplus less capital
33stock calculated in accordance with the current national
34association of insurance commissioners’ accounting practices
35and procedures manual.
-1- 111. “Transfer” includes an assignment, assumption,
2conveyance, sale, lease, encumbrance, security interest, gift,
3or transfer by operation of law.
4 Sec. 2. NEW SECTION. 521I.2 Plan of division — general
5requirements.
6A domestic stock insurer’s plan of division shall include
7all of the following:
81. The name of the domestic stock insurer seeking to divide.
92. The name of each resulting insurer created by the
10proposed division and for each resulting insurer a copy of all
11of the following:
12a. Proposed articles of incorporation.
13b. Proposed bylaws.
143. The manner of allocating assets and liabilities,
15including policy liabilities, between or among all resulting
16insurers.
174. The manner of distributing shares in the resulting
18insurers to the dividing insurer or the dividing insurer’s
19shareholders.
205. A description of all liabilities and all assets that
21the dividing insurer proposes to allocate to each resulting
22insurer, including the manner by which the dividing insurer
23proposes to allocate all reinsurance contracts.
246. All terms and conditions required by the laws of this
25state and the articles and bylaws of the dividing insurer.
267. All other terms and conditions of the division. Terms of
27a plan of division may be made dependent on facts objectively
28ascertainable outside of the plan of division.
29 Sec. 3. NEW SECTION. 521I.3 Plan of division — dividing
30insurer to survive division.
31If a dividing insurer will survive a division, the plan
32of division shall include, in addition to the requirements
33pursuant to section 521I.2, all of the following:
341. All proposed amendments to the dividing insurer’s
35articles of incorporation and bylaws.
-2- 12. If the dividing insurer intends to cancel some but not
2all shares in the dividing insurer, the manner in which the
3dividing insurer intends to cancel such shares.
43. If the dividing insurer intends to convert some but
5not all shares in the dividing insurer into securities,
6obligations, money, other property, rights to acquire shares or
7securities, or any combination thereof, a statement disclosing
8the manner in which the dividing insurer intends to convert
9such shares.
10 Sec. 4. NEW SECTION. 521I.4 Plan of division — dividing
11insurer not to survive division.
12If a dividing insurer will not survive a division, the plan
13of division shall include, in addition to the requirements
14pursuant to section 521I.2, the manner in which the dividing
15insurer will cancel or convert shares in the dividing insurer’s
16shares into shares, securities, obligations, money, other
17property, rights to acquire shares or securities, or any
18combination thereof.
19 Sec. 5. NEW SECTION. 521I.5 Amending plan of division.
201. A dividing insurer may amend the dividing insurer’s
21plan of division in accordance with any procedures set forth
22in the plan of division, or if no such procedures are set
23forth in the plan of division, in a manner determined by the
24board of directors of the dividing insurer. A shareholder
25that is entitled to vote on or consent to approval of the plan
26of division shall be entitled to vote on or consent to an
27amendment of the plan of division that will affect any of the
28following:
29a. The amount or kind of shares, securities, obligations,
30money, other property, rights to acquire shares or securities,
31or any combination thereof to be received by any of the
32shareholders of the dividing insurer under the plan of
33division.
34b. The articles of incorporation or bylaws of any resulting
35insurer that become effective when the division becomes
-3-1effective except for changes that do not require approval of
2the shareholders of the resulting insurer under such articles
3of incorporation or bylaws.
4c. Any other terms or conditions of the plan of division
5if the change may adversely affect the shareholders in any
6material respect.
72. A dividing insurer shall not amend the dividing insurer’s
8plan of division after the plan of division becomes effective.
9 Sec. 6. NEW SECTION. 521I.6 Abandoning plan of division.
101. A dividing insurer may abandon the dividing insurer’s
11plan of division in any of the following circumstances:
12a. After the dividing insurer has approved the plan
13of division without any action by the shareholders and in
14accordance with any procedures set forth in the plan of
15division, or if no such procedures are set forth in the plan of
16division, in a manner determined by the board of directors of
17the dividing insurer.
18b. After the dividing insurer has filed a certificate
19of division with the secretary of state pursuant to section
20521I.10, the dividing insurer may file a signed certificate of
21abandonment with the secretary of state and file a copy with
22the commissioner. The certificate of abandonment shall be
23effective on the date the certificate of abandonment is filed
24with the secretary of state.
252. A dividing insurer shall not abandon the dividing
26insurer’s plan of division after the plan of division becomes
27effective.
28 Sec. 7. NEW SECTION. 521I.7 Approval of plan of division —
29articles of incorporation and bylaws.
301. A dividing insurer shall not file a plan of division with
31the commissioner until such plan of division has been approved
32in accordance with all provisions of the dividing insurer’s
33articles of incorporation and bylaws. If the dividing
34insurer’s articles of incorporation and bylaws do not provide
35for approval of a plan of division, the dividing insurer shall
-4-1not file the plan of division with the commissioner unless
2such plan of division has been approved in accordance with all
3provisions of the dividing insurer’s articles of incorporation
4and bylaws that provide for approval of a merger.
52. If a provision of a dividing insurer’s articles of
6incorporation or bylaws adopted before the effective date of
7this Act requires that a specific number of or a percentage
8of the board of directors or shareholders propose or adopt a
9plan of merger or impose other procedures for the proposal or
10adoption of a plan of merger, the dividing insurer shall adhere
11to such provision in proposing or adopting a plan of division.
12If any such provision of the articles of incorporation or
13bylaws is amended on or after the effective date of this Act,
14such provision shall apply to a division thereafter only in
15accordance with its express terms.
16 Sec. 8. NEW SECTION. 521I.8 Commissioner approval of plan
17of division.
181. After a dividing insurer approves a plan of division
19pursuant to section 521I.7, the dividing insurer shall file the
20plan of division with the commissioner. Within ten business
21days of filing the plan of division with the commissioner, the
22dividing insurer shall provide notice of the filing to each
23reinsurer that is a party to a reinsurance contract allocated
24in the plan of division.
252. A division shall not become effective until approved by
26the commissioner after reasonable notice and a public hearing.
27Notice and public hearing required under this section shall be
28conducted as a contested case pursuant to chapter 17A.
293. The commissioner may approve a plan of division if the
30commissioner finds that all of the following apply:
31a. The interest of the policyholders, creditors, or
32shareholders of the dividing insurer will be adequately
33protected and the plan of division is not unfair or
34unreasonable to the policyholders of the dividing insurer and
35is not contrary to the public interest.
-5- 1b. The financial condition of the resulting insurers will
2not jeopardize the financial stability of a dividing insurer
3or the resulting insurers or prejudice the interests of the
4policyholders of such insurers.
5c. All resulting insurers created by the proposed division
6will be qualified and eligible to receive a certificate of
7authority to transact the business of insurance in this state.
8d. The proposed division does not violate a provision of
9chapter 684. In a division in which the dividing insurer
10will survive, the commissioner shall apply chapter 684 to the
11dividing insurer in its capacity as a resulting insurer. In
12applying the provisions of chapter 684 to a resulting insurer,
13the commissioner shall do all of the following:
14(1) Treat the resulting insurer as a debtor.
15(2) Treat a liability allocated to the resulting insurer as
16a liability incurred by a debtor.
17(3) Treat the resulting insurer as receiving unequal value
18in exchange for incurring allocated obligations.
19(4) Treat assets allocated to the resulting insurer as
20remaining assets.
21e. The proposed division is not being made for the purpose
22of hindering, delaying, or defrauding any policyholders or
23other creditors of the dividing insurer.
24f. All resulting insurers will be solvent when the division
25becomes effective.
26g. The remaining assets of a resulting insurer will not be
27unreasonably small in relation to the business and transactions
28such resulting insurer has been engaged in or will engage in
29after completion of the division.
304. In determining if the standards set forth in subsection
313, paragraphs “c” through “g” are satisfied, the commissioner
32may consider all proposed assets of the resulting insurer
33including without limitation reinsurance agreements, parental
34guarantees, support agreements, keepwell agreements, and
35capital maintenance of contingent capital agreements regardless
-6-1of whether such qualify as an admitted asset under state law.
25. All expenses incurred by the commissioner in connection
3with proceedings under this section including expenses
4for attorneys, actuaries, accountants, and other experts
5not otherwise a part of the commissioner’s staff as may be
6reasonably necessary to assist the commissioner in reviewing
7a proposed plan of division shall be paid by the dividing
8insurer filing such plan. A dividing insurer may allocate such
9expense in a plan of division in the same manner as any other
10liability.
116. If the commissioner approves a plan of division the
12commissioner shall issue an order which shall be accompanied
13by findings of fact and conclusions of law. The commissioner
14shall also issue a certificate of authority authorizing the
15resulting insurers to transact the business of insurance in
16this state.
177. The conditions in this section for freeing one or more
18of the resulting insurers from the liabilities of the dividing
19insurer and for allocating some or all of the liabilities of
20the dividing insurer shall be deemed to have been satisfied if
21the plan of division is approved by the commissioner in a final
22order.
23 Sec. 9. NEW SECTION. 521I.9 Confidentiality.
24A dividing insurer may submit a written request to the
25commissioner that confidentiality be maintained regarding
26all business, financial, actuarial, and other proprietary
27information submitted to, obtained by, or disclosed to the
28commissioner in connection with the dividing insurer’s plan
29of division. The commissioner shall make a determination
30regarding the dividing insurer’s request prior to issuing
31a notice of a public hearing pursuant to section 521I.8,
32subsection 2. If the commissioner grants the dividing
33insurer’s request in whole or in part, such information as the
34commissioner determines shall remain confidential, shall not be
35available for public inspection, and shall not be subject to
-7-1chapter 22. The plan of division shall not be confidential and
2shall be available for public inspection.
3 Sec. 10. NEW SECTION. 521I.10 Certificate of division.
41. If the commissioner approves a dividing insurer’s plan
5of division pursuant to section 521I.8, an officer or duly
6authorized representative of the dividing insurer shall sign a
7certificate of division that sets forth all of the following:
8a. The name of the dividing insurer.
9b. A statement disclosing whether the dividing insurer
10survived the division. If the dividing insurer survived
11the division, the certificate of division shall include any
12amendments to the dividing insurer’s articles of incorporation
13or bylaws as approved as part of the plan of division.
14c. The name of each resulting insurer that is created by
15the division.
16d. The date on which the division is effective.
17e. A statement that the division was approved by the
18commissioner under section 521I.8.
19f. A statement that the dividing insurer provided reasonable
20notice to each reinsurer that is a party to a reinsurance
21contract allocated in the plan of division.
22g. The resulting insurer’s articles of incorporation and
23bylaws for each resulting insurer created by the division. The
24articles of incorporation and bylaws of each resulting insurer
25must comply with the applicable requirements of the laws of
26this state. The articles of incorporation and bylaws may state
27the name or address of an incorporator, may be signed, and may
28include any provision that is not required in a restatement of
29the articles of incorporation or bylaws.
30h. A reasonable description of the capital, surplus, other
31assets and liabilities, including policy liabilities, of the
32dividing insurer that are to be allocated to each resulting
33insurer.
342. A dividing insurer’s certificate of division is
35effective on the date the dividing insurer files the
-8-1certificate with the secretary of state and provides a
2concurrent copy to the commissioner, or on another date
3as specified in the plan of division, whichever is later.
4However, the certificate of division shall become effective
5not later than ninety calendar days after it is filed with the
6secretary of state. A division shall be effective when the
7relevant certificate of division is effective.
8 Sec. 11. NEW SECTION. 521I.11 Division effective.
91. On the effective date of a division pursuant to section
10521I.10, the following apply:
11a. If the dividing insurer survives, all of the following
12apply:
13(1) The dividing insurer shall continue to exist.
14(2) The articles of incorporation of the dividing insurer
15shall be amended, if at all, if provided for in the plan of
16division.
17(3) The bylaws of the dividing insurer shall be amended, if
18at all, if provided for in the plan of division.
19b. If the dividing insurer does not survive, the dividing
20insurer’s separate existence shall cease to exist and any
21resulting insurer created by the plan of division shall come
22into existence.
23c. Each resulting insurer shall hold any capital, surplus,
24and other assets allocated to such resulting insurer by the
25plan of division as a successor to the dividing insurer by
26operation of law, and not by transfer, whether directly or
27indirectly. The articles of incorporation and bylaws, if any,
28of each resulting insurer shall be effective when the resulting
29insurer comes into existence.
30d. (1) All capital, surplus, and other assets of the
31dividing insurer that are allocated by the plan of division
32shall vest in the applicable resulting insurer as provided in
33the plan of division or shall remain vested in the dividing
34insurer as provided in the plan of division.
35(2) All capital, surplus, and other assets of the dividing
-9-1insurer that are not allocated by the plan of division shall
2remain vested in the dividing insurer if the dividing insurer
3survives the division and shall be allocated to and vest pro
4rata in the resulting insurers individually if the dividing
5insurer does not survive the division.
6(3) All capital, surplus, and other assets of the dividing
7insurer otherwise vest as provided in this section without
8transfer, reversion, or impairment.
9e. A resulting insurer to which a cause of action is
10allocated may be substituted or added in any pending action or
11proceeding to which the dividing insurer is a party when the
12division becomes effective.
13f. All liabilities of a dividing insurer are allocated
14between or among any resulting insurers as provided in section
15521I.10 and each resulting insurer to which liabilities are
16allocated is liable only for those liabilities, including
17policy liabilities, allocated as a successor to the dividing
18insurer by operation of law.
19g. Any shares in the dividing insurer that are to be
20converted or canceled in the division are converted or canceled
21and the shareholders of those shares are entitled only to
22the rights provided to such shareholders under the plan of
23division and any appraisal rights that such shareholders may
24have pursuant to section 521I.13.
252. Except as provided in the dividing insurer’s articles
26of incorporation or bylaws, the division does not give rise
27to any rights that a shareholder, director of a domestic
28stock insurer, or third party would have upon a dissolution,
29liquidation, or winding up of the dividing insurer.
303. The allocation to a resulting insurer of capital,
31surplus, or other asset that is collateral covered by an
32effective financing statement shall not be effective until a
33new effective financing statement naming the resulting insurer
34as a debtor is effective under the uniform commercial code.
354. Unless otherwise provided in the plan of division,
-10-1the shares in and any securities of each resulting insurer
2shall be distributed to the dividing insurer if it survives
3the division, or pro rata to the shareholders of the dividing
4insurer that do not assert any appraisal rights pursuant to
5section 521I.13.
6 Sec. 12. NEW SECTION. 521I.12 Resulting insurers liability
7for allocated assets, debts, and liabilities.
81. Except as expressly provided in this section, when a
9division becomes effective, by operation of law all of the
10following apply:
11a. A resulting insurer is individually liable for the
12liabilities, including policy liabilities, that the resulting
13insurer issues, undertakes, or incurs in its own name after the
14division.
15b. A resulting insurer is individually liable for the
16liabilities, including policy liabilities, of the dividing
17insurer that are allocated to or remain the liability of the
18resulting insurer to the extent specified in the plan of
19division.
20c. The dividing insurer remains responsible for the
21liabilities, including policy liabilities, of the dividing
22insurer that are not allocated by the plan of division if the
23dividing insurer survives the division.
24d. A resulting insurer is liable pro rata individually for
25the liabilities, including policy liabilities, of the dividing
26insurer that are not allocated by the plan of division if the
27dividing insurer does not survive the division.
282. Except as otherwise expressly provided in this section,
29when a division becomes effective a resulting insurer is not
30responsible for and shall not have liability for any of the
31following:
32a. Any liabilities, including policy liabilities, that
33another resulting insurer issues, undertakes, or incurs in such
34resulting insurer’s own name after the division.
35b. Any liabilities, including policy liabilities, of the
-11-1dividing insurer that are allocated to or remain the liability
2of another resulting insurer under the plan of division.
33. If a provision of any evidence of indebtedness, whether
4secured or unsecured, or a provision of any contract other than
5an insurance policy, annuity, or reinsurance agreement that was
6issued, incurred, or executed by the dividing insurer before
7the effective date of this Act, requires the consent of the
8obligee to a merger of the dividing insurer, or treats such a
9merger as a default, such provision shall apply to a division
10of the dividing insurer as if such division were a merger.
114. If a division breaches a contractual obligation of
12the dividing insurer, all resulting insurers are jointly
13and severally liable for the breach. The validity and
14effectiveness of the division shall not be affected by the
15breach.
165. A direct or indirect allocation of capital, surplus,
17assets, or liabilities, including policy liabilities, shall
18occur automatically, by operation of law, and shall not be
19treated as a distribution or transfer for any purpose with
20respect to either the dividing insurer or any resulting
21insurer.
226. Liens, security interests, and other charges on the
23capital, surplus, or other assets of the dividing insurer
24shall not be impaired by the division, notwithstanding any
25otherwise enforceable allocation of liabilities, including
26policy liabilities, of the dividing insurer.
277. If the dividing insurer is bound by a security agreement
28governed by chapter 554 or article 9 of the uniform commercial
29code as enacted in any other jurisdiction, and the security
30agreement provides that the security interest attaches to
31after-acquired collateral, a resulting insurer shall be bound
32by the security agreement.
338. Unless provided in the plan of division and specifically
34approved by the commissioner, an allocation of a policy or
35other liability is prohibited from doing any of the following:
-12- 1a. Affecting the rights that a policyholder or creditor
2has under any other law with respect to such policy or other
3liability, except that such rights shall be available only
4against a resulting insurer responsible for the policy or
5liability under this section.
6b. Releasing or reducing the obligation of a reinsurer,
7surety, or guarantor of the policy or liability.
89. A resulting insurer shall only be liable for the
9liabilities allocated to the resulting insurer in accordance
10with the plan of division and this section and shall not be
11liable for any other liabilities under the common law doctrine
12of successor liability or any other theory of liability
13applicable to transferees or assignees of assets.
14 Sec. 13. NEW SECTION. 521I.13 Shareholder appraisal rights.
15If a dividing insurer does not survive a division, an
16objecting shareholder of the dividing insurer is entitled to
17appraisal rights and to obtain payment of the fair value of
18such shareholder’s shares in the same manner and to the extent
19provided for a corporation as a party to a merger pursuant to
20section 490.1302.
21 Sec. 14. NEW SECTION. 521I.14 Rules.
22The commissioner shall adopt rules pursuant to chapter 17A
23to administer this chapter.
24 Sec. 15. NEW SECTION. 521I.15 Enforcement.
25The commissioner may take any action under the
26commissioner’s authority to enforce compliance with this
27chapter.
28 Sec. 16. Section 490.120, subsection 12, paragraph c,
29subparagraph (2), Code 2019, is amended to read as follows:
30(2) “Plan” means a plan of merger or, a plan of share
31exchange, or a plan of division pursuant to chapter 521I.
32 Sec. 17. Section 490.1302, subsection 1, Code 2019, is
33amended by adding the following new paragraph:
34 NEW PARAGRAPH. g. Consummation of a division pursuant
35to chapter 521I to which the corporation is a party if the
-13-1corporation does not survive such division.
2 Sec. 18. Section 521.1, Code 2019, is amended by adding the
3following new subsections:
4 NEW SUBSECTION. 5. “Dividing insurer” means the same as
5defined in section 521I.1.
6 NEW SUBSECTION. 6. “Resulting insurer” means the same as
7defined in section 521I.1.
8 Sec. 19. NEW SECTION. 521.19 Merger or consolidation
9effective with division.
10A dividing insurer and the dividing insurer’s officers,
11directors, and shareholders shall have the authority to adopt
12and execute a plan of merger or consolidation on behalf of a
13resulting insurer, to execute and deliver documents, plans,
14certificates, and resolutions, and to make any filings on
15behalf of such resulting insurer. If provided in a plan of
16merger or consolidation, the merger or consolidation shall be
17effective simultaneously with the effectiveness of a division
18pursuant to 521I.10.
19EXPLANATION
20The inclusion of this explanation does not constitute agreement with
21the explanation’s substance by the members of the general assembly.
22This bill relates to the division of domestic stock
23insurers.
24The bill defines a domestic stock insurer as a stock insurer
25domiciled and organized under the laws of this state pursuant
26to Code chapter 508, 514B, or 515, including domestic stock
27insurers affiliated with a mutual insurance holding company
28organized pursuant to Code section 521A.14, and including those
29insurers which confer membership rights in the mutual insurance
30company. A dividing insurer is defined as a domestic stock
31insurer that approves a plan of division (plan). A resulting
32insurer is defined as a dividing insurer that survives a
33division, or a new domestic stock insurer that is created by
34a division.
35The bill requires a dividing insurer to develop a plan that
-14-1identifies the dividing insurer’s name, the proposed resulting
2insurers and their articles of incorporation and bylaws, the
3allocation of the dividing insurer’s assets, liabilities,
4and reinsurance contracts to the resulting insurers, and the
5manner in which the shares in the resulting insurers will be
6distributed to the dividing insurer or its shareholders.
7If the dividing insurer will survive the division, the plan
8must also include any proposed amendments to the dividing
9insurer’s articles of incorporation and bylaws and the manner
10in which the dividing insurer proposes to cancel or convert
11some of its shares. If the dividing insurer will not survive
12the division, the plan of division must include details on how
13the dividing insurer will cancel or convert its shares.
14The bill allows a dividing insurer to amend or cancel a plan
15under certain conditions as detailed in the bill.
16The bill requires that prior to filing a plan with the
17commissioner, a dividing insurer must obtain approval in
18accordance with its articles of incorporation and bylaws. If
19the articles of incorporation and bylaws do not provide for
20such approval, the dividing insurer must obtain approval in
21accordance with all provisions of such that apply to approval
22of a merger.
23The bill provides that a division is not effective until
24approved by the commissioner after reasonable notice and
25a public hearing. The commissioner may approve a plan
26if the commissioner determines that the interests of the
27policyholders, creditors, or shareholders of the dividing
28insurer are adequately protected and the proposed division is
29not unfair or unreasonable to the policyholders of the dividing
30insurer; that the division is not contrary to public policy;
31that the financial condition of the resulting insurers will
32not jeopardize the financial stability of a dividing insurer
33or the resulting insurers or prejudice the interests of the
34policyholders of such insurers; that all resulting insurers
35created by the proposed division are qualified and eligible to
-15-1receive a certificate of authority to transact the business
2of insurance in this state; that the proposed division does
3not violate the state’s voidable transactions statute; that
4the proposed division is not for the purpose of hindering,
5delaying, or defrauding any policyholders or other creditors
6of the dividing insurer; that all resulting insurers will be
7solvent; and that the remaining assets of a resulting insurer
8will not be unreasonably small in relation to the business and
9transactions in which such resulting insurer has been engaged
10in or will engage in after completion of the division.
11The bill requires the commissioner to issue an order,
12including findings of fact and conclusions of law, to approve a
13plan of division and to issue a certificate of authority to the
14resulting insurers.
15A dividing insurer may submit a written request to the
16commissioner that confidentiality be maintained regarding all
17business and other proprietary information submitted to the
18commissioner in connection with the dividing insurer’s plan of
19division. The commissioner must make a determination regarding
20the dividing insurer’s request prior to issuing a notice of
21a public hearing. If the commissioner grants the request,
22any information the commissioner determines shall remain
23confidential is not available for public inspection and shall
24not be subject to Code chapter 22. The plan of division is not
25confidential and shall be available for public inspection.
26If the commissioner approves a dividing insurer’s plan, an
27officer of the dividing insurer must sign a certificate of
28division that sets forth information, as detailed in the bill,
29related to the dividing insurer’s post-division status and any
30resulting insurer’s post-division status. A certificate of
31division is effective on the date the dividing insurer files
32the certificate with the secretary of state as specified in
33the plan of division. The certificate of division becomes
34effective not later than 90 days after it is filed.
35When a division becomes effective and the dividing insurer
-16-1survives, the bill provides that the dividing insurer continues
2to exist and that the articles of incorporation and the bylaws
3of the dividing insurer must be amended as provided in the
4plan. If the dividing insurer does not survive, the dividing
5insurer’s separate existence ceases to exist and any resulting
6insurers created by the plan come into existence. The bill
7provides that all resulting insurers hold any capital, surplus,
8and other assets allocated to each as a successor to the
9dividing insurer by operation of law, and not by transfer. All
10capital, surplus, and other assets of the dividing insurer
11that are allocated by the plan of division either vest in the
12applicable resulting insurer or remain vested in the dividing
13insurer as provided in the plan. All capital, surplus, and
14other assets that are not allocated by the plan remain vested
15in the dividing insurer if the dividing insurer survives the
16division, are allocated to the resulting insurers individually
17if the dividing insurer does not survive the division, or vest
18as otherwise provided in the bill.
19A resulting insurer to which a cause of action is allocated
20may be substituted or added in any pending action to which
21the dividing insurer is a party when the division becomes
22effective. All liabilities of a dividing insurer are allocated
23between or among any resulting insurers and each resulting
24insurer to which liabilities are allocated is liable only for
25those liabilities, including policy liabilities, allocated as a
26successor to the dividing insurer.
27The bill also provides that when a division becomes
28effective any shares in the dividing insurer that are converted
29or canceled entitle the shareholders of those shares to
30the rights provided under the plan of division and per any
31appraisal rights they may have as detailed in the bill.
32Unless otherwise provided in the plan, the shares and
33securities of each resulting insurer are distributed to the
34dividing insurer if it survives the division, or pro rata to
35any shareholders of the dividing insurer that do not assert
-17-1appraisal rights.
2The bill provides that after a division becomes effective,
3each resulting insurer is individually liable for all
4liabilities that such resulting insurer issues, undertakes, or
5incurs in its own name; each resulting insurer is individually
6liable for the liabilities of the dividing insurer that are
7allocated to or remain the liability of such resulting insurer
8as specified in the plan; and the dividing insurer remains
9responsible for all liabilities of the dividing insurer that
10are not allocated by the plan if the dividing insurer survives
11the division. If the dividing insurer does not survive the
12division, each resulting insurer is pro rata individually
13liable for all liabilities of the dividing insurer that are not
14allocated by the plan.
15If a division breaches a contractual obligation of the
16dividing insurer, all resulting insurers are liable, jointly
17and severally, for the breach. The validity and effectiveness
18of the division are not affected by the breach.
19In a division, a direct or indirect allocation of capital,
20surplus, assets, or liabilities, including policy liabilities,
21occurs automatically by operation of law and is not treated
22as a distribution or transfer for any purpose with respect to
23either the dividing insurer or any of the resulting insurers.
24Except as provided in the plan and as approved by the
25commissioner, an allocation of a policy or other liability does
26not affect the rights that a policyholder or creditor has under
27any other law with respect to such policy or other liability,
28except that such rights are available only against a resulting
29insurer responsible for the policy or liability. A reinsurer,
30surety, or guarantor of the policy or liability is not released
31from their obligations under the policy or other liability.
32The bill requires the commissioner to adopt rules pursuant
33to Code chapter 17A to administer the requirements of the
34bill and allows the commissioner to take any action under the
35commissioner’s authority to enforce compliance with the bill.
-18- 1The bill amends Code section 490.120 to add a plan of
2division to the definition of plan. The bill amends Code
3section 490.1302 to provide for shareholder appraisal rights
4for a division to which a corporation is a party, if the
5corporation does not survive such division. The bill amends
6Code chapter 521 to allow a dividing insurer to adopt and
7execute a plan of merger or consolidation on behalf of a
8resulting insurer and if provided for in the plan of merger or
9consolidation, the merger or consolidation shall be effective
10simultaneously with the effectiveness of a division under the
11bill.
-19-ko/rn
2BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
1 Section 1. NEW SECTION. 521I.1 Definitions.
2As used in this chapter, unless the context otherwise
3requires:
41. “Assets” means property whether real, personal, mixed,
5tangible, or intangible and any right or interest therein,
6including all rights under a contract or other agreement.
72. “Capital” means the capital stock component of a
8statutory surplus as defined in the latest edition of the
9national association of insurance commissioners’ accounting
10practices and procedures manual.
113. “Commissioner” means the commissioner of insurance.
124. “Divide” or “division” means a transaction in which
13a domestic stock insurer splits into two or more resulting
14domestic stock insurers.
155. “Dividing insurer” means a domestic stock insurer that
16approves a plan of division.
176. “Domestic stock insurer” means a stock insurer domiciled
18and organized under the laws of this state pursuant to chapter
19508, 514B, or 515, including domestic stock insurers affiliated
20with a mutual insurance holding company organized pursuant to
21section 521A.14, and including those insurers which confer
22membership rights in the mutual insurance holding company.
237. “Liability” means a secured or contingent debt or
24obligation arising in any manner.
258. “Resulting insurer” means a dividing domestic stock
26insurer that survives a division or a new domestic stock
27insurer that is created by a division.
289. “Shareholder” means the person in whose name shares are
29registered in the records of a corporation or the beneficial
30owner of shares to the extent of the rights granted by a
31nominee certificate on file with a corporation.
3210. “Surplus” means total statutory surplus less capital
33stock calculated in accordance with the current national
34association of insurance commissioners’ accounting practices
35and procedures manual.
-1- 111. “Transfer” includes an assignment, assumption,
2conveyance, sale, lease, encumbrance, security interest, gift,
3or transfer by operation of law.
4 Sec. 2. NEW SECTION. 521I.2 Plan of division — general
5requirements.
6A domestic stock insurer’s plan of division shall include
7all of the following:
81. The name of the domestic stock insurer seeking to divide.
92. The name of each resulting insurer created by the
10proposed division and for each resulting insurer a copy of all
11of the following:
12a. Proposed articles of incorporation.
13b. Proposed bylaws.
143. The manner of allocating assets and liabilities,
15including policy liabilities, between or among all resulting
16insurers.
174. The manner of distributing shares in the resulting
18insurers to the dividing insurer or the dividing insurer’s
19shareholders.
205. A description of all liabilities and all assets that
21the dividing insurer proposes to allocate to each resulting
22insurer, including the manner by which the dividing insurer
23proposes to allocate all reinsurance contracts.
246. All terms and conditions required by the laws of this
25state and the articles and bylaws of the dividing insurer.
267. All other terms and conditions of the division. Terms of
27a plan of division may be made dependent on facts objectively
28ascertainable outside of the plan of division.
29 Sec. 3. NEW SECTION. 521I.3 Plan of division — dividing
30insurer to survive division.
31If a dividing insurer will survive a division, the plan
32of division shall include, in addition to the requirements
33pursuant to section 521I.2, all of the following:
341. All proposed amendments to the dividing insurer’s
35articles of incorporation and bylaws.
-2- 12. If the dividing insurer intends to cancel some but not
2all shares in the dividing insurer, the manner in which the
3dividing insurer intends to cancel such shares.
43. If the dividing insurer intends to convert some but
5not all shares in the dividing insurer into securities,
6obligations, money, other property, rights to acquire shares or
7securities, or any combination thereof, a statement disclosing
8the manner in which the dividing insurer intends to convert
9such shares.
10 Sec. 4. NEW SECTION. 521I.4 Plan of division — dividing
11insurer not to survive division.
12If a dividing insurer will not survive a division, the plan
13of division shall include, in addition to the requirements
14pursuant to section 521I.2, the manner in which the dividing
15insurer will cancel or convert shares in the dividing insurer’s
16shares into shares, securities, obligations, money, other
17property, rights to acquire shares or securities, or any
18combination thereof.
19 Sec. 5. NEW SECTION. 521I.5 Amending plan of division.
201. A dividing insurer may amend the dividing insurer’s
21plan of division in accordance with any procedures set forth
22in the plan of division, or if no such procedures are set
23forth in the plan of division, in a manner determined by the
24board of directors of the dividing insurer. A shareholder
25that is entitled to vote on or consent to approval of the plan
26of division shall be entitled to vote on or consent to an
27amendment of the plan of division that will affect any of the
28following:
29a. The amount or kind of shares, securities, obligations,
30money, other property, rights to acquire shares or securities,
31or any combination thereof to be received by any of the
32shareholders of the dividing insurer under the plan of
33division.
34b. The articles of incorporation or bylaws of any resulting
35insurer that become effective when the division becomes
-3-1effective except for changes that do not require approval of
2the shareholders of the resulting insurer under such articles
3of incorporation or bylaws.
4c. Any other terms or conditions of the plan of division
5if the change may adversely affect the shareholders in any
6material respect.
72. A dividing insurer shall not amend the dividing insurer’s
8plan of division after the plan of division becomes effective.
9 Sec. 6. NEW SECTION. 521I.6 Abandoning plan of division.
101. A dividing insurer may abandon the dividing insurer’s
11plan of division in any of the following circumstances:
12a. After the dividing insurer has approved the plan
13of division without any action by the shareholders and in
14accordance with any procedures set forth in the plan of
15division, or if no such procedures are set forth in the plan of
16division, in a manner determined by the board of directors of
17the dividing insurer.
18b. After the dividing insurer has filed a certificate
19of division with the secretary of state pursuant to section
20521I.10, the dividing insurer may file a signed certificate of
21abandonment with the secretary of state and file a copy with
22the commissioner. The certificate of abandonment shall be
23effective on the date the certificate of abandonment is filed
24with the secretary of state.
252. A dividing insurer shall not abandon the dividing
26insurer’s plan of division after the plan of division becomes
27effective.
28 Sec. 7. NEW SECTION. 521I.7 Approval of plan of division —
29articles of incorporation and bylaws.
301. A dividing insurer shall not file a plan of division with
31the commissioner until such plan of division has been approved
32in accordance with all provisions of the dividing insurer’s
33articles of incorporation and bylaws. If the dividing
34insurer’s articles of incorporation and bylaws do not provide
35for approval of a plan of division, the dividing insurer shall
-4-1not file the plan of division with the commissioner unless
2such plan of division has been approved in accordance with all
3provisions of the dividing insurer’s articles of incorporation
4and bylaws that provide for approval of a merger.
52. If a provision of a dividing insurer’s articles of
6incorporation or bylaws adopted before the effective date of
7this Act requires that a specific number of or a percentage
8of the board of directors or shareholders propose or adopt a
9plan of merger or impose other procedures for the proposal or
10adoption of a plan of merger, the dividing insurer shall adhere
11to such provision in proposing or adopting a plan of division.
12If any such provision of the articles of incorporation or
13bylaws is amended on or after the effective date of this Act,
14such provision shall apply to a division thereafter only in
15accordance with its express terms.
16 Sec. 8. NEW SECTION. 521I.8 Commissioner approval of plan
17of division.
181. After a dividing insurer approves a plan of division
19pursuant to section 521I.7, the dividing insurer shall file the
20plan of division with the commissioner. Within ten business
21days of filing the plan of division with the commissioner, the
22dividing insurer shall provide notice of the filing to each
23reinsurer that is a party to a reinsurance contract allocated
24in the plan of division.
252. A division shall not become effective until approved by
26the commissioner after reasonable notice and a public hearing.
27Notice and public hearing required under this section shall be
28conducted as a contested case pursuant to chapter 17A.
293. The commissioner may approve a plan of division if the
30commissioner finds that all of the following apply:
31a. The interest of the policyholders, creditors, or
32shareholders of the dividing insurer will be adequately
33protected and the plan of division is not unfair or
34unreasonable to the policyholders of the dividing insurer and
35is not contrary to the public interest.
-5- 1b. The financial condition of the resulting insurers will
2not jeopardize the financial stability of a dividing insurer
3or the resulting insurers or prejudice the interests of the
4policyholders of such insurers.
5c. All resulting insurers created by the proposed division
6will be qualified and eligible to receive a certificate of
7authority to transact the business of insurance in this state.
8d. The proposed division does not violate a provision of
9chapter 684. In a division in which the dividing insurer
10will survive, the commissioner shall apply chapter 684 to the
11dividing insurer in its capacity as a resulting insurer. In
12applying the provisions of chapter 684 to a resulting insurer,
13the commissioner shall do all of the following:
14(1) Treat the resulting insurer as a debtor.
15(2) Treat a liability allocated to the resulting insurer as
16a liability incurred by a debtor.
17(3) Treat the resulting insurer as receiving unequal value
18in exchange for incurring allocated obligations.
19(4) Treat assets allocated to the resulting insurer as
20remaining assets.
21e. The proposed division is not being made for the purpose
22of hindering, delaying, or defrauding any policyholders or
23other creditors of the dividing insurer.
24f. All resulting insurers will be solvent when the division
25becomes effective.
26g. The remaining assets of a resulting insurer will not be
27unreasonably small in relation to the business and transactions
28such resulting insurer has been engaged in or will engage in
29after completion of the division.
304. In determining if the standards set forth in subsection
313, paragraphs “c” through “g” are satisfied, the commissioner
32may consider all proposed assets of the resulting insurer
33including without limitation reinsurance agreements, parental
34guarantees, support agreements, keepwell agreements, and
35capital maintenance of contingent capital agreements regardless
-6-1of whether such qualify as an admitted asset under state law.
25. All expenses incurred by the commissioner in connection
3with proceedings under this section including expenses
4for attorneys, actuaries, accountants, and other experts
5not otherwise a part of the commissioner’s staff as may be
6reasonably necessary to assist the commissioner in reviewing
7a proposed plan of division shall be paid by the dividing
8insurer filing such plan. A dividing insurer may allocate such
9expense in a plan of division in the same manner as any other
10liability.
116. If the commissioner approves a plan of division the
12commissioner shall issue an order which shall be accompanied
13by findings of fact and conclusions of law. The commissioner
14shall also issue a certificate of authority authorizing the
15resulting insurers to transact the business of insurance in
16this state.
177. The conditions in this section for freeing one or more
18of the resulting insurers from the liabilities of the dividing
19insurer and for allocating some or all of the liabilities of
20the dividing insurer shall be deemed to have been satisfied if
21the plan of division is approved by the commissioner in a final
22order.
23 Sec. 9. NEW SECTION. 521I.9 Confidentiality.
24A dividing insurer may submit a written request to the
25commissioner that confidentiality be maintained regarding
26all business, financial, actuarial, and other proprietary
27information submitted to, obtained by, or disclosed to the
28commissioner in connection with the dividing insurer’s plan
29of division. The commissioner shall make a determination
30regarding the dividing insurer’s request prior to issuing
31a notice of a public hearing pursuant to section 521I.8,
32subsection 2. If the commissioner grants the dividing
33insurer’s request in whole or in part, such information as the
34commissioner determines shall remain confidential, shall not be
35available for public inspection, and shall not be subject to
-7-1chapter 22. The plan of division shall not be confidential and
2shall be available for public inspection.
3 Sec. 10. NEW SECTION. 521I.10 Certificate of division.
41. If the commissioner approves a dividing insurer’s plan
5of division pursuant to section 521I.8, an officer or duly
6authorized representative of the dividing insurer shall sign a
7certificate of division that sets forth all of the following:
8a. The name of the dividing insurer.
9b. A statement disclosing whether the dividing insurer
10survived the division. If the dividing insurer survived
11the division, the certificate of division shall include any
12amendments to the dividing insurer’s articles of incorporation
13or bylaws as approved as part of the plan of division.
14c. The name of each resulting insurer that is created by
15the division.
16d. The date on which the division is effective.
17e. A statement that the division was approved by the
18commissioner under section 521I.8.
19f. A statement that the dividing insurer provided reasonable
20notice to each reinsurer that is a party to a reinsurance
21contract allocated in the plan of division.
22g. The resulting insurer’s articles of incorporation and
23bylaws for each resulting insurer created by the division. The
24articles of incorporation and bylaws of each resulting insurer
25must comply with the applicable requirements of the laws of
26this state. The articles of incorporation and bylaws may state
27the name or address of an incorporator, may be signed, and may
28include any provision that is not required in a restatement of
29the articles of incorporation or bylaws.
30h. A reasonable description of the capital, surplus, other
31assets and liabilities, including policy liabilities, of the
32dividing insurer that are to be allocated to each resulting
33insurer.
342. A dividing insurer’s certificate of division is
35effective on the date the dividing insurer files the
-8-1certificate with the secretary of state and provides a
2concurrent copy to the commissioner, or on another date
3as specified in the plan of division, whichever is later.
4However, the certificate of division shall become effective
5not later than ninety calendar days after it is filed with the
6secretary of state. A division shall be effective when the
7relevant certificate of division is effective.
8 Sec. 11. NEW SECTION. 521I.11 Division effective.
91. On the effective date of a division pursuant to section
10521I.10, the following apply:
11a. If the dividing insurer survives, all of the following
12apply:
13(1) The dividing insurer shall continue to exist.
14(2) The articles of incorporation of the dividing insurer
15shall be amended, if at all, if provided for in the plan of
16division.
17(3) The bylaws of the dividing insurer shall be amended, if
18at all, if provided for in the plan of division.
19b. If the dividing insurer does not survive, the dividing
20insurer’s separate existence shall cease to exist and any
21resulting insurer created by the plan of division shall come
22into existence.
23c. Each resulting insurer shall hold any capital, surplus,
24and other assets allocated to such resulting insurer by the
25plan of division as a successor to the dividing insurer by
26operation of law, and not by transfer, whether directly or
27indirectly. The articles of incorporation and bylaws, if any,
28of each resulting insurer shall be effective when the resulting
29insurer comes into existence.
30d. (1) All capital, surplus, and other assets of the
31dividing insurer that are allocated by the plan of division
32shall vest in the applicable resulting insurer as provided in
33the plan of division or shall remain vested in the dividing
34insurer as provided in the plan of division.
35(2) All capital, surplus, and other assets of the dividing
-9-1insurer that are not allocated by the plan of division shall
2remain vested in the dividing insurer if the dividing insurer
3survives the division and shall be allocated to and vest pro
4rata in the resulting insurers individually if the dividing
5insurer does not survive the division.
6(3) All capital, surplus, and other assets of the dividing
7insurer otherwise vest as provided in this section without
8transfer, reversion, or impairment.
9e. A resulting insurer to which a cause of action is
10allocated may be substituted or added in any pending action or
11proceeding to which the dividing insurer is a party when the
12division becomes effective.
13f. All liabilities of a dividing insurer are allocated
14between or among any resulting insurers as provided in section
15521I.10 and each resulting insurer to which liabilities are
16allocated is liable only for those liabilities, including
17policy liabilities, allocated as a successor to the dividing
18insurer by operation of law.
19g. Any shares in the dividing insurer that are to be
20converted or canceled in the division are converted or canceled
21and the shareholders of those shares are entitled only to
22the rights provided to such shareholders under the plan of
23division and any appraisal rights that such shareholders may
24have pursuant to section 521I.13.
252. Except as provided in the dividing insurer’s articles
26of incorporation or bylaws, the division does not give rise
27to any rights that a shareholder, director of a domestic
28stock insurer, or third party would have upon a dissolution,
29liquidation, or winding up of the dividing insurer.
303. The allocation to a resulting insurer of capital,
31surplus, or other asset that is collateral covered by an
32effective financing statement shall not be effective until a
33new effective financing statement naming the resulting insurer
34as a debtor is effective under the uniform commercial code.
354. Unless otherwise provided in the plan of division,
-10-1the shares in and any securities of each resulting insurer
2shall be distributed to the dividing insurer if it survives
3the division, or pro rata to the shareholders of the dividing
4insurer that do not assert any appraisal rights pursuant to
5section 521I.13.
6 Sec. 12. NEW SECTION. 521I.12 Resulting insurers liability
7for allocated assets, debts, and liabilities.
81. Except as expressly provided in this section, when a
9division becomes effective, by operation of law all of the
10following apply:
11a. A resulting insurer is individually liable for the
12liabilities, including policy liabilities, that the resulting
13insurer issues, undertakes, or incurs in its own name after the
14division.
15b. A resulting insurer is individually liable for the
16liabilities, including policy liabilities, of the dividing
17insurer that are allocated to or remain the liability of the
18resulting insurer to the extent specified in the plan of
19division.
20c. The dividing insurer remains responsible for the
21liabilities, including policy liabilities, of the dividing
22insurer that are not allocated by the plan of division if the
23dividing insurer survives the division.
24d. A resulting insurer is liable pro rata individually for
25the liabilities, including policy liabilities, of the dividing
26insurer that are not allocated by the plan of division if the
27dividing insurer does not survive the division.
282. Except as otherwise expressly provided in this section,
29when a division becomes effective a resulting insurer is not
30responsible for and shall not have liability for any of the
31following:
32a. Any liabilities, including policy liabilities, that
33another resulting insurer issues, undertakes, or incurs in such
34resulting insurer’s own name after the division.
35b. Any liabilities, including policy liabilities, of the
-11-1dividing insurer that are allocated to or remain the liability
2of another resulting insurer under the plan of division.
33. If a provision of any evidence of indebtedness, whether
4secured or unsecured, or a provision of any contract other than
5an insurance policy, annuity, or reinsurance agreement that was
6issued, incurred, or executed by the dividing insurer before
7the effective date of this Act, requires the consent of the
8obligee to a merger of the dividing insurer, or treats such a
9merger as a default, such provision shall apply to a division
10of the dividing insurer as if such division were a merger.
114. If a division breaches a contractual obligation of
12the dividing insurer, all resulting insurers are jointly
13and severally liable for the breach. The validity and
14effectiveness of the division shall not be affected by the
15breach.
165. A direct or indirect allocation of capital, surplus,
17assets, or liabilities, including policy liabilities, shall
18occur automatically, by operation of law, and shall not be
19treated as a distribution or transfer for any purpose with
20respect to either the dividing insurer or any resulting
21insurer.
226. Liens, security interests, and other charges on the
23capital, surplus, or other assets of the dividing insurer
24shall not be impaired by the division, notwithstanding any
25otherwise enforceable allocation of liabilities, including
26policy liabilities, of the dividing insurer.
277. If the dividing insurer is bound by a security agreement
28governed by chapter 554 or article 9 of the uniform commercial
29code as enacted in any other jurisdiction, and the security
30agreement provides that the security interest attaches to
31after-acquired collateral, a resulting insurer shall be bound
32by the security agreement.
338. Unless provided in the plan of division and specifically
34approved by the commissioner, an allocation of a policy or
35other liability is prohibited from doing any of the following:
-12- 1a. Affecting the rights that a policyholder or creditor
2has under any other law with respect to such policy or other
3liability, except that such rights shall be available only
4against a resulting insurer responsible for the policy or
5liability under this section.
6b. Releasing or reducing the obligation of a reinsurer,
7surety, or guarantor of the policy or liability.
89. A resulting insurer shall only be liable for the
9liabilities allocated to the resulting insurer in accordance
10with the plan of division and this section and shall not be
11liable for any other liabilities under the common law doctrine
12of successor liability or any other theory of liability
13applicable to transferees or assignees of assets.
14 Sec. 13. NEW SECTION. 521I.13 Shareholder appraisal rights.
15If a dividing insurer does not survive a division, an
16objecting shareholder of the dividing insurer is entitled to
17appraisal rights and to obtain payment of the fair value of
18such shareholder’s shares in the same manner and to the extent
19provided for a corporation as a party to a merger pursuant to
20section 490.1302.
21 Sec. 14. NEW SECTION. 521I.14 Rules.
22The commissioner shall adopt rules pursuant to chapter 17A
23to administer this chapter.
24 Sec. 15. NEW SECTION. 521I.15 Enforcement.
25The commissioner may take any action under the
26commissioner’s authority to enforce compliance with this
27chapter.
28 Sec. 16. Section 490.120, subsection 12, paragraph c,
29subparagraph (2), Code 2019, is amended to read as follows:
30(2) “Plan” means a plan of merger or, a plan of share
31exchange, or a plan of division pursuant to chapter 521I.
32 Sec. 17. Section 490.1302, subsection 1, Code 2019, is
33amended by adding the following new paragraph:
34 NEW PARAGRAPH. g. Consummation of a division pursuant
35to chapter 521I to which the corporation is a party if the
-13-1corporation does not survive such division.
2 Sec. 18. Section 521.1, Code 2019, is amended by adding the
3following new subsections:
4 NEW SUBSECTION. 5. “Dividing insurer” means the same as
5defined in section 521I.1.
6 NEW SUBSECTION. 6. “Resulting insurer” means the same as
7defined in section 521I.1.
8 Sec. 19. NEW SECTION. 521.19 Merger or consolidation
9effective with division.
10A dividing insurer and the dividing insurer’s officers,
11directors, and shareholders shall have the authority to adopt
12and execute a plan of merger or consolidation on behalf of a
13resulting insurer, to execute and deliver documents, plans,
14certificates, and resolutions, and to make any filings on
15behalf of such resulting insurer. If provided in a plan of
16merger or consolidation, the merger or consolidation shall be
17effective simultaneously with the effectiveness of a division
18pursuant to 521I.10.
19EXPLANATION
20The inclusion of this explanation does not constitute agreement with
21the explanation’s substance by the members of the general assembly.
22This bill relates to the division of domestic stock
23insurers.
24The bill defines a domestic stock insurer as a stock insurer
25domiciled and organized under the laws of this state pursuant
26to Code chapter 508, 514B, or 515, including domestic stock
27insurers affiliated with a mutual insurance holding company
28organized pursuant to Code section 521A.14, and including those
29insurers which confer membership rights in the mutual insurance
30company. A dividing insurer is defined as a domestic stock
31insurer that approves a plan of division (plan). A resulting
32insurer is defined as a dividing insurer that survives a
33division, or a new domestic stock insurer that is created by
34a division.
35The bill requires a dividing insurer to develop a plan that
-14-1identifies the dividing insurer’s name, the proposed resulting
2insurers and their articles of incorporation and bylaws, the
3allocation of the dividing insurer’s assets, liabilities,
4and reinsurance contracts to the resulting insurers, and the
5manner in which the shares in the resulting insurers will be
6distributed to the dividing insurer or its shareholders.
7If the dividing insurer will survive the division, the plan
8must also include any proposed amendments to the dividing
9insurer’s articles of incorporation and bylaws and the manner
10in which the dividing insurer proposes to cancel or convert
11some of its shares. If the dividing insurer will not survive
12the division, the plan of division must include details on how
13the dividing insurer will cancel or convert its shares.
14The bill allows a dividing insurer to amend or cancel a plan
15under certain conditions as detailed in the bill.
16The bill requires that prior to filing a plan with the
17commissioner, a dividing insurer must obtain approval in
18accordance with its articles of incorporation and bylaws. If
19the articles of incorporation and bylaws do not provide for
20such approval, the dividing insurer must obtain approval in
21accordance with all provisions of such that apply to approval
22of a merger.
23The bill provides that a division is not effective until
24approved by the commissioner after reasonable notice and
25a public hearing. The commissioner may approve a plan
26if the commissioner determines that the interests of the
27policyholders, creditors, or shareholders of the dividing
28insurer are adequately protected and the proposed division is
29not unfair or unreasonable to the policyholders of the dividing
30insurer; that the division is not contrary to public policy;
31that the financial condition of the resulting insurers will
32not jeopardize the financial stability of a dividing insurer
33or the resulting insurers or prejudice the interests of the
34policyholders of such insurers; that all resulting insurers
35created by the proposed division are qualified and eligible to
-15-1receive a certificate of authority to transact the business
2of insurance in this state; that the proposed division does
3not violate the state’s voidable transactions statute; that
4the proposed division is not for the purpose of hindering,
5delaying, or defrauding any policyholders or other creditors
6of the dividing insurer; that all resulting insurers will be
7solvent; and that the remaining assets of a resulting insurer
8will not be unreasonably small in relation to the business and
9transactions in which such resulting insurer has been engaged
10in or will engage in after completion of the division.
11The bill requires the commissioner to issue an order,
12including findings of fact and conclusions of law, to approve a
13plan of division and to issue a certificate of authority to the
14resulting insurers.
15A dividing insurer may submit a written request to the
16commissioner that confidentiality be maintained regarding all
17business and other proprietary information submitted to the
18commissioner in connection with the dividing insurer’s plan of
19division. The commissioner must make a determination regarding
20the dividing insurer’s request prior to issuing a notice of
21a public hearing. If the commissioner grants the request,
22any information the commissioner determines shall remain
23confidential is not available for public inspection and shall
24not be subject to Code chapter 22. The plan of division is not
25confidential and shall be available for public inspection.
26If the commissioner approves a dividing insurer’s plan, an
27officer of the dividing insurer must sign a certificate of
28division that sets forth information, as detailed in the bill,
29related to the dividing insurer’s post-division status and any
30resulting insurer’s post-division status. A certificate of
31division is effective on the date the dividing insurer files
32the certificate with the secretary of state as specified in
33the plan of division. The certificate of division becomes
34effective not later than 90 days after it is filed.
35When a division becomes effective and the dividing insurer
-16-1survives, the bill provides that the dividing insurer continues
2to exist and that the articles of incorporation and the bylaws
3of the dividing insurer must be amended as provided in the
4plan. If the dividing insurer does not survive, the dividing
5insurer’s separate existence ceases to exist and any resulting
6insurers created by the plan come into existence. The bill
7provides that all resulting insurers hold any capital, surplus,
8and other assets allocated to each as a successor to the
9dividing insurer by operation of law, and not by transfer. All
10capital, surplus, and other assets of the dividing insurer
11that are allocated by the plan of division either vest in the
12applicable resulting insurer or remain vested in the dividing
13insurer as provided in the plan. All capital, surplus, and
14other assets that are not allocated by the plan remain vested
15in the dividing insurer if the dividing insurer survives the
16division, are allocated to the resulting insurers individually
17if the dividing insurer does not survive the division, or vest
18as otherwise provided in the bill.
19A resulting insurer to which a cause of action is allocated
20may be substituted or added in any pending action to which
21the dividing insurer is a party when the division becomes
22effective. All liabilities of a dividing insurer are allocated
23between or among any resulting insurers and each resulting
24insurer to which liabilities are allocated is liable only for
25those liabilities, including policy liabilities, allocated as a
26successor to the dividing insurer.
27The bill also provides that when a division becomes
28effective any shares in the dividing insurer that are converted
29or canceled entitle the shareholders of those shares to
30the rights provided under the plan of division and per any
31appraisal rights they may have as detailed in the bill.
32Unless otherwise provided in the plan, the shares and
33securities of each resulting insurer are distributed to the
34dividing insurer if it survives the division, or pro rata to
35any shareholders of the dividing insurer that do not assert
-17-1appraisal rights.
2The bill provides that after a division becomes effective,
3each resulting insurer is individually liable for all
4liabilities that such resulting insurer issues, undertakes, or
5incurs in its own name; each resulting insurer is individually
6liable for the liabilities of the dividing insurer that are
7allocated to or remain the liability of such resulting insurer
8as specified in the plan; and the dividing insurer remains
9responsible for all liabilities of the dividing insurer that
10are not allocated by the plan if the dividing insurer survives
11the division. If the dividing insurer does not survive the
12division, each resulting insurer is pro rata individually
13liable for all liabilities of the dividing insurer that are not
14allocated by the plan.
15If a division breaches a contractual obligation of the
16dividing insurer, all resulting insurers are liable, jointly
17and severally, for the breach. The validity and effectiveness
18of the division are not affected by the breach.
19In a division, a direct or indirect allocation of capital,
20surplus, assets, or liabilities, including policy liabilities,
21occurs automatically by operation of law and is not treated
22as a distribution or transfer for any purpose with respect to
23either the dividing insurer or any of the resulting insurers.
24Except as provided in the plan and as approved by the
25commissioner, an allocation of a policy or other liability does
26not affect the rights that a policyholder or creditor has under
27any other law with respect to such policy or other liability,
28except that such rights are available only against a resulting
29insurer responsible for the policy or liability. A reinsurer,
30surety, or guarantor of the policy or liability is not released
31from their obligations under the policy or other liability.
32The bill requires the commissioner to adopt rules pursuant
33to Code chapter 17A to administer the requirements of the
34bill and allows the commissioner to take any action under the
35commissioner’s authority to enforce compliance with the bill.
-18- 1The bill amends Code section 490.120 to add a plan of
2division to the definition of plan. The bill amends Code
3section 490.1302 to provide for shareholder appraisal rights
4for a division to which a corporation is a party, if the
5corporation does not survive such division. The bill amends
6Code chapter 521 to allow a dividing insurer to adopt and
7execute a plan of merger or consolidation on behalf of a
8resulting insurer and if provided for in the plan of merger or
9consolidation, the merger or consolidation shall be effective
10simultaneously with the effectiveness of a division under the
11bill.
-19-ko/rn