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Senate File 330 - 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 Iowa law.
93. “Commissioner” means the commissioner of insurance.
104. “Divide” or “division” means a transaction in which
11a domestic stock insurer splits into two or more resulting
12domestic stock insurers.
135. “Dividing insurer” means a domestic stock insurer that
14approves a plan of division.
156. “Domestic stock insurer” means a stock insurer domiciled
16and organized under the laws of this state pursuant to chapter
17508, 514B, or 515, including domestic stock insurers affiliated
18with a mutual insurance holding company organized pursuant to
19section 521A.14, and including those insurers which confer
20membership rights in the mutual insurance holding company.
217. “Liability” means a secured or contingent debt or
22obligation arising in any manner.
238. “Resulting insurer” means a dividing domestic stock
24insurer that survives a division or a new domestic stock
25insurer that is created by a division.
269. “Shareholder” means the person in whose name shares are
27registered in the records of a corporation or the beneficial
28owner of shares to the extent of the rights granted by a
29nominee certificate on file with a corporation.
3010. “Surplus” means total statutory surplus less capital
31stock calculated in accordance with the current national
32association of insurance commissioners’ accounting practices
33and procedures manual.
3411. “Transfer” includes an assignment, assumption,
35conveyance, sale, lease, encumbrance, security interest, gift,
-1-1or transfer by operation of law.
2 Sec. 2. NEW SECTION. 521I.2 Plan of division — general
3requirements.
4A domestic stock insurer’s plan of division shall include
5all of the following:
61. The name of the domestic stock insurer seeking to divide.
72. The name of each resulting insurer created by the
8proposed division and for each resulting insurer a copy of all
9of the following:
10a. Proposed articles of incorporation.
11b. Proposed bylaws.
123. The manner of allocating assets and liabilities,
13including policy liabilities, between or among all resulting
14insurers.
154. The manner of distributing shares in the resulting
16insurers to the dividing insurer or the dividing insurer’s
17shareholders.
185. A description of all liabilities and all assets that
19the dividing insurer proposes to allocate to each resulting
20insurer, including the manner by which the dividing insurer
21proposes to allocate all reinsurance contracts.
226. All terms and conditions required by the laws of this
23state and the articles and bylaws of the dividing insurer.
247. All other terms and conditions of the division.
25 Sec. 3. NEW SECTION. 521I.3 Plan of division — dividing
26insurer to survive division.
27If a dividing insurer will survive a division, the plan
28of division shall include, in addition to the requirements
29pursuant to section 521I.2, all of the following:
301. All proposed amendments to the dividing insurer’s
31articles of incorporation and bylaws.
322. If the dividing insurer intends to cancel some but not
33all shares in the dividing insurer, the manner in which the
34dividing insurer intends to cancel such shares.
353. If the dividing insurer intends to convert some but
-2-1not all shares in the dividing insurer into securities,
2obligations, money, other property, rights to acquire shares or
3securities, or any combination thereof, a statement disclosing
4the manner in which the dividing insurer intends to convert
5such shares.
6 Sec. 4. NEW SECTION. 521I.4 Plan of division — dividing
7insurer not to survive division.
8If a dividing insurer will not survive a division, the plan
9of division shall include, in addition to the requirements
10pursuant to section 521I.2, the manner in which the dividing
11insurer will cancel or convert shares in the dividing insurer’s
12shares into shares, securities, obligations, money, other
13property, rights to acquire shares or securities, or any
14combination thereof.
15 Sec. 5. NEW SECTION. 521I.5 Amending plan of division.
161. A dividing insurer may amend the dividing insurer’s
17plan of division in accordance with any procedures set forth
18in the plan of division, or if no such procedures are set
19forth in the plan of division, in a manner determined by the
20board of directors of the dividing insurer. A shareholder
21that is entitled to vote on or consent to approval of the plan
22of division shall be entitled to vote on or consent to an
23amendment of the plan of division that will affect any of the
24following:
25a. The amount or kind of shares, securities, obligations,
26money, other property, rights to acquire shares or securities,
27or any combination thereof to be received by any of the
28shareholders of the dividing insurer under the plan of
29division.
30b. The articles of incorporation or bylaws of any resulting
31insurer that become effective when the division becomes
32effective except for changes that do not require approval of
33the shareholders of the resulting insurer under such articles
34of incorporation or bylaws.
35c. Any other terms or conditions of the plan of division
-3-1if the change may adversely affect the shareholders in any
2material respect.
32. A dividing insurer shall not amend the dividing insurer’s
4plan of division after the plan of division becomes effective.
53. A dividing insurer shall not amend the dividing insurer’s
6plan of division after the plan of division is approved by the
7commissioner.
8 Sec. 6. NEW SECTION. 521I.6 Abandoning plan of division.
91. A dividing insurer may abandon the dividing insurer’s
10plan of division in any of the following circumstances:
11a. After the dividing insurer has approved the plan
12of division without any action by the shareholders and in
13accordance with any procedures set forth in the plan of
14division, or if no such procedures are set forth in the plan of
15division, in a manner determined by the board of directors of
16the dividing insurer.
17b. After the dividing insurer has filed a certificate
18of division with the secretary of state pursuant to section
19521I.10, the dividing insurer may file a signed certificate of
20abandonment with the secretary of state and file a copy with
21the commissioner. The certificate of abandonment shall be
22effective on the date the certificate of abandonment is filed
23with the secretary of state.
242. A dividing insurer shall not abandon the dividing
25insurer’s plan of division after the plan of division becomes
26effective.
273. If a dividing insurer elects to abandon the dividing
28insurer’s plan of division, the dividing insurer shall notify
29the commissioner.
30 Sec. 7. NEW SECTION. 521I.7 Approval of plan of division —
31articles of incorporation and bylaws.
321. A dividing insurer shall not file a plan of division with
33the commissioner until such plan of division has been approved
34in accordance with all provisions of the dividing insurer’s
35articles of incorporation and bylaws. If the dividing
-4-1insurer’s articles of incorporation and bylaws do not provide
2for approval of a plan of division, the dividing insurer shall
3not file the plan of division with the commissioner unless
4such plan of division has been approved in accordance with all
5provisions of the dividing insurer’s articles of incorporation
6and bylaws that provide for approval of a merger.
72. If a provision of a dividing insurer’s articles of
8incorporation or bylaws adopted before the effective date of
9this Act requires that a specific number of or a percentage
10of the board of directors or shareholders propose or adopt a
11plan of merger or impose other procedures for the proposal or
12adoption of a plan of merger, the dividing insurer shall adhere
13to such provision in proposing or adopting a plan of division.
14If any such provision of the articles of incorporation or
15bylaws is amended on or after the effective date of this Act,
16such provision shall apply to a division thereafter only in
17accordance with its express terms.
18 Sec. 8. NEW SECTION. 521I.8 Commissioner approval of plan
19of division.
201. After a dividing insurer approves a plan of division
21pursuant to section 521I.7, the dividing insurer shall file the
22plan of division with the commissioner. Within ten business
23days of filing the plan of division with the commissioner, the
24dividing insurer shall provide notice of the filing to each
25reinsurer that is a party to a reinsurance contract allocated
26in the plan of division.
272. a. A division shall not become effective until approved
28by the commissioner after reasonable notice and a public
29hearing. Notice and public hearing required under this section
30shall be conducted as a contested case pursuant to chapter 17A.
31b. The commissioner shall require the dividing insurer
32to mail written notice of the public hearing to the dividing
33insurer’s policyholders stating that a plan of division has
34been filed with the commissioner and providing the date, time,
35and location of the public hearing.
-5- 1c. The commissioner shall select and retain an independent
2expert who shall review the dividing insurer’s plan of division
3and issue a report to the commissioner.
43. The commissioner may approve a plan of division if the
5commissioner finds that all of the following apply:
6a. The interest of the policyholders, creditors, or
7shareholders of the dividing insurer will be adequately
8protected and the plan of division is not unfair or
9unreasonable to the policyholders of the dividing insurer and
10is not contrary to the public interest.
11b. The financial condition of the resulting insurers will
12not jeopardize the financial stability of a dividing insurer
13or the resulting insurers or prejudice the interests of the
14policyholders of such insurers.
15c. All resulting insurers created by the proposed division
16will be qualified and eligible to receive a certificate of
17authority to transact the business of insurance in this state.
18d. The proposed division does not violate a provision of
19chapter 684. In a division in which the dividing insurer
20will survive, the commissioner shall apply chapter 684 to the
21dividing insurer in its capacity as a resulting insurer. In
22applying the provisions of chapter 684 to a resulting insurer,
23the commissioner shall do all of the following:
24(1) Treat the resulting insurer as a debtor.
25(2) Treat a liability allocated to the resulting insurer as
26a liability incurred by a debtor.
27(3) Treat the resulting insurer as receiving unequal value
28in exchange for incurring allocated obligations.
29(4) Treat assets allocated to the resulting insurer as
30remaining assets.
31e. The proposed division is not being made for the purpose
32of hindering, delaying, or defrauding any policyholders or
33other creditors of the dividing insurer.
34f. All resulting insurers will be solvent when the division
35becomes effective.
-6- 1g. The remaining assets of a resulting insurer will not be
2unreasonably small in relation to the business and transactions
3such resulting insurer has been engaged in or will engage in
4after completion of the division.
54. In determining if the standards set forth in subsection
63, paragraphs “c” through “g” are satisfied, the commissioner
7may consider all proposed assets of the resulting insurer
8including without limitation reinsurance agreements, parental
9guarantees, support agreements, keepwell agreements, and
10capital maintenance of contingent capital agreements regardless
11of whether such qualify as an admitted asset under state law.
125. All expenses incurred by the commissioner in connection
13with proceedings under this section including expenses
14for attorneys, actuaries, accountants, and other experts
15not otherwise a part of the commissioner’s staff as may be
16reasonably necessary to assist the commissioner in reviewing
17a proposed plan of division shall be paid by the dividing
18insurer filing such plan. A dividing insurer may allocate such
19expense in a plan of division in the same manner as any other
20liability.
216. If the commissioner approves a plan of division the
22commissioner shall issue an order which shall be accompanied
23by findings of fact and conclusions of law. The commissioner
24shall also issue a certificate of authority authorizing the
25resulting insurers to transact the business of insurance in
26this state.
277. The conditions in this section for freeing one or more
28of the resulting insurers from the liabilities of the dividing
29insurer and for allocating some or all of the liabilities of
30the dividing insurer shall be deemed to have been satisfied if
31the plan of division is approved by the commissioner in a final
32order.
33 Sec. 9. NEW SECTION. 521I.9 Confidentiality.
34A dividing insurer may submit a written request to the
35commissioner that confidentiality be maintained regarding
-7-1all business, financial, actuarial, and other proprietary
2information submitted to, obtained by, or disclosed to the
3commissioner in connection with the dividing insurer’s plan
4of division. The commissioner shall make a determination
5regarding the dividing insurer’s request prior to issuing
6a notice of a public hearing pursuant to section 521I.8,
7subsection 2. If the commissioner grants the dividing
8insurer’s request in whole or in part, such information as the
9commissioner determines shall remain confidential, shall not be
10available for public inspection, and shall not be subject to
11chapter 22. The plan of division shall not be confidential and
12shall be available for public inspection.
13 Sec. 10. NEW SECTION. 521I.10 Certificate of division.
141. If the commissioner approves a dividing insurer’s plan
15of division pursuant to section 521I.8, an officer or duly
16authorized representative of the dividing insurer shall sign a
17certificate of division that sets forth all of the following:
18a. The name of the dividing insurer.
19b. A statement disclosing whether the dividing insurer
20survived the division. If the dividing insurer survived
21the division, the certificate of division shall include any
22amendments to the dividing insurer’s articles of incorporation
23or bylaws as approved as part of the plan of division.
24c. The name of each resulting insurer that is created by
25the division.
26d. The date on which the division is effective.
27e. A statement that the division was approved by the
28commissioner under section 521I.8.
29f. A statement that the dividing insurer provided reasonable
30notice to each reinsurer that is a party to a reinsurance
31contract allocated in the plan of division.
32g. The resulting insurer’s articles of incorporation and
33bylaws for each resulting insurer created by the division. The
34articles of incorporation and bylaws of each resulting insurer
35must comply with the applicable requirements of the laws of
-8-1this state. The articles of incorporation and bylaws may state
2the name or address of an incorporator, may be signed, and may
3include any provision that is not required in a restatement of
4the articles of incorporation or bylaws.
5h. A reasonable description of the capital, surplus, other
6assets and liabilities, including policy liabilities, of the
7dividing insurer that are to be allocated to each resulting
8insurer.
92. A dividing insurer’s certificate of division is
10effective on the date the dividing insurer files the
11certificate with the secretary of state and provides a
12concurrent copy to the commissioner, or on another date
13as specified in the plan of division, whichever is later.
14However, the certificate of division shall become effective
15not later than ninety calendar days after it is filed with the
16secretary of state. A division shall be effective when the
17relevant certificate of division is effective.
18 Sec. 11. NEW SECTION. 521I.11 Division effective.
191. On the effective date of a division pursuant to section
20521I.10, the following apply:
21a. If the dividing insurer survives, all of the following
22apply:
23(1) The dividing insurer shall continue to exist.
24(2) The articles of incorporation of the dividing insurer
25shall be amended, if at all, if provided for in the plan of
26division.
27(3) The bylaws of the dividing insurer shall be amended, if
28at all, if provided for in the plan of division.
29b. If the dividing insurer does not survive, the dividing
30insurer’s separate existence shall cease to exist and any
31resulting insurer created by the plan of division shall come
32into existence.
33c. Each resulting insurer shall hold any capital, surplus,
34and other assets allocated to such resulting insurer by the
35plan of division as a successor to the dividing insurer by
-9-1operation of law, and not by transfer, whether directly or
2indirectly. The articles of incorporation and bylaws, if any,
3of each resulting insurer shall be effective when the resulting
4insurer comes into existence.
5d. (1) All capital, surplus, and other assets of the
6dividing insurer that are allocated by the plan of division
7shall vest in the applicable resulting insurer as provided in
8the plan of division or shall remain vested in the dividing
9insurer as provided in the plan of division.
10(2) All capital, surplus, and other assets of the dividing
11insurer that are not allocated by the plan of division shall
12remain vested in the dividing insurer if the dividing insurer
13survives the division and shall be allocated to and vest pro
14rata in the resulting insurers individually if the dividing
15insurer does not survive the division.
16(3) All capital, surplus, and other assets of the dividing
17insurer otherwise vest as provided in this section without
18transfer, reversion, or impairment.
19e. A resulting insurer to which a cause of action is
20allocated may be substituted or added in any pending action or
21proceeding to which the dividing insurer is a party when the
22division becomes effective.
23f. All liabilities of a dividing insurer are allocated
24between or among any resulting insurers as provided in section
25521I.10 and each resulting insurer to which liabilities are
26allocated is liable only for those liabilities, including
27policy liabilities, allocated as a successor to the dividing
28insurer by operation of law.
29g. Any shares in the dividing insurer that are to be
30converted or canceled in the division are converted or canceled
31and the shareholders of those shares are entitled only to
32the rights provided to such shareholders under the plan of
33division and any appraisal rights that such shareholders may
34have pursuant to section 521I.13.
352. Except as provided in the dividing insurer’s articles
-10-1of incorporation or bylaws, the division does not give rise
2to any rights that a shareholder, director of a domestic
3stock insurer, or third party would have upon a dissolution,
4liquidation, or winding up of the dividing insurer.
53. The allocation to a resulting insurer of capital,
6surplus, or other asset that is collateral covered by an
7effective financing statement shall not be effective until a
8new effective financing statement naming the resulting insurer
9as a debtor is effective under the uniform commercial code.
104. Unless otherwise provided in the plan of division,
11the shares in and any securities of each resulting insurer
12shall be distributed to the dividing insurer if it survives
13the division, or pro rata to the shareholders of the dividing
14insurer that do not assert any appraisal rights pursuant to
15section 521I.13.
16 Sec. 12. NEW SECTION. 521I.12 Resulting insurers liability
17for allocated assets, debts, and liabilities.
181. Except as expressly provided in this section, when a
19division becomes effective, by operation of law all of the
20following apply:
21a. A resulting insurer is individually liable for the
22liabilities, including policy liabilities, that the resulting
23insurer issues, undertakes, or incurs in its own name after the
24division.
25b. A resulting insurer is individually liable for the
26liabilities, including policy liabilities, of the dividing
27insurer that are allocated to or remain the liability of the
28resulting insurer to the extent specified in the plan of
29division.
30c. The dividing insurer remains responsible for the
31liabilities, including policy liabilities, of the dividing
32insurer that are not allocated by the plan of division if the
33dividing insurer survives the division.
34d. A resulting insurer is liable pro rata individually for
35the liabilities, including policy liabilities, of the dividing
-11-1insurer that are not allocated by the plan of division if the
2dividing insurer does not survive the division.
32. Except as otherwise expressly provided in this section,
4when a division becomes effective a resulting insurer is not
5responsible for and shall not have liability for any of the
6following:
7a. Any liabilities, including policy liabilities, that
8another resulting insurer issues, undertakes, or incurs in such
9resulting insurer’s own name after the division.
10b. Any liabilities, including policy liabilities, of the
11dividing insurer that are allocated to or remain the liability
12of another resulting insurer under the plan of division.
133. If a provision of any evidence of indebtedness, whether
14secured or unsecured, or a provision of any contract other than
15an insurance policy, annuity, or reinsurance agreement that was
16issued, incurred, or executed by the dividing insurer before
17the effective date of this Act, requires the consent of the
18obligee to a merger of the dividing insurer, or treats such a
19merger as a default, such provision shall apply to a division
20of the dividing insurer as if such division were a merger.
214. If a division breaches a contractual obligation of
22the dividing insurer, all resulting insurers are jointly
23and severally liable for the breach. The validity and
24effectiveness of the division shall not be affected by the
25breach.
265. A direct or indirect allocation of capital, surplus,
27assets, or liabilities, including policy liabilities, shall
28occur automatically, by operation of law, and shall not be
29treated as a distribution or transfer for any purpose with
30respect to either the dividing insurer or any resulting
31insurer.
326. Liens, security interests, and other charges on the
33capital, surplus, or other assets of the dividing insurer
34shall not be impaired by the division, notwithstanding any
35otherwise enforceable allocation of liabilities, including
-12-1policy liabilities, of the dividing insurer.
27. If the dividing insurer is bound by a security agreement
3governed by chapter 554 or article 9 of the uniform commercial
4code as enacted in any other jurisdiction, and the security
5agreement provides that the security interest attaches to
6after-acquired collateral, a resulting insurer shall be bound
7by the security agreement.
88. Unless provided in the plan of division and specifically
9approved by the commissioner, an allocation of a policy or
10other liability is prohibited from doing any of the following:
11a. Affecting the rights that a policyholder or creditor
12has under any other law with respect to such policy or other
13liability, except that such rights shall be available only
14against a resulting insurer responsible for the policy or
15liability under this section.
16b. Releasing or reducing the obligation of a reinsurer,
17surety, or guarantor of the policy or liability.
189. A resulting insurer shall only be liable for the
19liabilities allocated to the resulting insurer in accordance
20with the plan of division and this section and shall not be
21liable for any other liabilities under the common law doctrine
22of successor liability or any other theory of liability
23applicable to transferees or assignees of assets.
24 Sec. 13. NEW SECTION. 521I.13 Shareholder appraisal rights.
25If a dividing insurer does not survive a division, an
26objecting shareholder of the dividing insurer is entitled to
27appraisal rights and to obtain payment of the fair value of
28such shareholder’s shares in the same manner and to the extent
29provided for a corporation as a party to a merger pursuant to
30section 490.1302.
31 Sec. 14. NEW SECTION. 521I.14 Rules.
32The commissioner may adopt rules pursuant to chapter 17A to
33administer this chapter.
34 Sec. 15. NEW SECTION. 521I.15 Enforcement.
35The commissioner may take any action under the
-13-1commissioner’s authority to enforce compliance with this
2chapter.
3 Sec. 16. Section 490.120, subsection 12, paragraph c,
4subparagraph (2), Code 2019, is amended to read as follows:
5(2) “Plan” means a plan of merger or, a plan of share
6exchange, or a plan of division pursuant to chapter 521I.
7 Sec. 17. Section 490.1302, subsection 1, Code 2019, is
8amended by adding the following new paragraph:
9 NEW PARAGRAPH. g. Consummation of a division pursuant
10to chapter 521I to which the corporation is a party if the
11corporation does not survive such division.
12 Sec. 18. Section 521.1, Code 2019, is amended by adding the
13following new subsections:
14 NEW SUBSECTION. 5. “Dividing insurer” means the same as
15defined in section 521I.1.
16 NEW SUBSECTION. 6. “Resulting insurer” means the same as
17defined in section 521I.1.
18 Sec. 19. NEW SECTION. 521.19 Merger or consolidation
19effective with division.
20A dividing insurer and the dividing insurer’s officers,
21directors, and shareholders shall have the authority to adopt
22and execute a plan of merger or consolidation on behalf of a
23resulting insurer, to execute and deliver documents, plans,
24certificates, and resolutions, and to make any filings on
25behalf of such resulting insurer. If provided in a plan of
26merger or consolidation, the merger or consolidation shall be
27effective simultaneously with the effectiveness of a division
28pursuant to 521I.10.
29EXPLANATION
30The inclusion of this explanation does not constitute agreement with
31the explanation’s substance by the members of the general assembly.
32This bill relates to the division of domestic stock
33insurers.
34The bill defines a domestic stock insurer as a stock insurer
35domiciled and organized under the laws of this state pursuant
-14-1to Code chapter 508, 514B, or 515, including domestic stock
2insurers affiliated with a mutual insurance holding company
3organized pursuant to Code section 521A.14, and including those
4insurers which confer membership rights in the mutual insurance
5company. A dividing insurer is defined as a domestic stock
6insurer that approves a plan of division (plan). A resulting
7insurer is defined as a dividing insurer that survives a
8division, or a new domestic stock insurer that is created by
9a division.
10The bill requires a dividing insurer to develop a plan that
11identifies the dividing insurer’s name, the proposed resulting
12insurers and their articles of incorporation and bylaws, the
13allocation of the dividing insurer’s assets, liabilities,
14and reinsurance contracts to the resulting insurers, and the
15manner in which the shares in the resulting insurers will be
16distributed to the dividing insurer or its shareholders.
17If the dividing insurer will survive the division, the plan
18must also include any proposed amendments to the dividing
19insurer’s articles of incorporation and bylaws and the manner
20in which the dividing insurer proposes to cancel or convert
21some of its shares. If the dividing insurer will not survive
22the division, the plan of division must include details on how
23the dividing insurer will cancel or convert its shares.
24The bill allows a dividing insurer to amend or abandon a
25plan under certain conditions as detailed in the bill. If a
26dividing insurer elects to abandon the dividing insurer’s plan
27of division, the dividing insurer is required to notify the
28commissioner.
29The bill requires that prior to filing a plan with the
30commissioner, a dividing insurer must obtain approval in
31accordance with its articles of incorporation and bylaws. If
32the articles of incorporation and bylaws do not provide for
33such approval, the dividing insurer must obtain approval in
34accordance with all provisions of such that apply to approval
35of a merger.
-15- 1The bill provides that a division is not effective until
2approved by the commissioner after reasonable notice and a
3public hearing. The commissioner shall require the dividing
4insurer to mail written notice of the public hearing to the
5dividing insurer’s policyholders advising the policyholders
6that a plan of division has been filed and providing the date,
7time, and location of the public hearing.
8The commissioner must retain an independent expert to
9review the dividing insurer’s plan of division and issue a
10report to the commissioner. The commissioner may approve a
11plan if the commissioner determines that the interests of the
12policyholders, creditors, or shareholders of the dividing
13insurer are adequately protected and the proposed division is
14not unfair or unreasonable to the policyholders of the dividing
15insurer; that the division is not contrary to public policy;
16that the financial condition of the resulting insurers will
17not jeopardize the financial stability of a dividing insurer
18or the resulting insurers or prejudice the interests of the
19policyholders of such insurers; that all resulting insurers
20created by the proposed division are qualified and eligible to
21receive a certificate of authority to transact the business
22of insurance in this state; that the proposed division does
23not violate the state’s voidable transactions statute; that
24the proposed division is not for the purpose of hindering,
25delaying, or defrauding any policyholders or other creditors
26of the dividing insurer; that all resulting insurers will be
27solvent; and that the remaining assets of a resulting insurer
28will not be unreasonably small in relation to the business and
29transactions in which such resulting insurer has been engaged
30in or will engage in after completion of the division.
31The bill requires the commissioner to issue an order,
32including findings of fact and conclusions of law, to approve a
33plan of division and to issue a certificate of authority to the
34resulting insurers.
35A dividing insurer may submit a written request to the
-16-1commissioner that confidentiality be maintained regarding all
2business and other proprietary information submitted to the
3commissioner in connection with the dividing insurer’s plan of
4division. The commissioner must make a determination regarding
5the dividing insurer’s request prior to issuing a notice of
6a public hearing. If the commissioner grants the request,
7any information the commissioner determines shall remain
8confidential is not available for public inspection and shall
9not be subject to Code chapter 22. The plan of division is not
10confidential and shall be available for public inspection.
11If the commissioner approves a dividing insurer’s plan, an
12officer of the dividing insurer must sign a certificate of
13division that sets forth information, as detailed in the bill,
14related to the dividing insurer’s post-division status and any
15resulting insurer’s post-division status. A certificate of
16division is effective on the date the dividing insurer files
17the certificate with the secretary of state as specified in
18the plan of division. The certificate of division becomes
19effective not later than 90 days after it is filed.
20When a division becomes effective and the dividing insurer
21survives, the bill provides that the dividing insurer continues
22to exist and that the articles of incorporation and the bylaws
23of the dividing insurer must be amended as provided in the
24plan. If the dividing insurer does not survive, the dividing
25insurer’s separate existence ceases to exist and any resulting
26insurers created by the plan come into existence. The bill
27provides that all resulting insurers hold any capital, surplus,
28and other assets allocated to each as a successor to the
29dividing insurer by operation of law, and not by transfer. All
30capital, surplus, and other assets of the dividing insurer
31that are allocated by the plan of division either vest in the
32applicable resulting insurer or remain vested in the dividing
33insurer as provided in the plan. All capital, surplus, and
34other assets that are not allocated by the plan remain vested
35in the dividing insurer if the dividing insurer survives the
-17-1division, are allocated to the resulting insurers individually
2if the dividing insurer does not survive the division, or vest
3as otherwise provided in the bill.
4A resulting insurer to which a cause of action is allocated
5may be substituted or added in any pending action to which
6the dividing insurer is a party when the division becomes
7effective. All liabilities of a dividing insurer are allocated
8between or among any resulting insurers and each resulting
9insurer to which liabilities are allocated is liable only for
10those liabilities, including policy liabilities, allocated as a
11successor to the dividing insurer.
12The bill also provides that when a division becomes
13effective any shares in the dividing insurer that are converted
14or canceled entitle the shareholders of those shares to
15the rights provided under the plan of division and per any
16appraisal rights they may have as detailed in the bill.
17Unless otherwise provided in the plan, the shares and
18securities of each resulting insurer are distributed to the
19dividing insurer if it survives the division, or pro rata to
20any shareholders of the dividing insurer that do not assert
21appraisal rights.
22The bill provides that after a division becomes effective,
23each resulting insurer is individually liable for all
24liabilities that such resulting insurer issues, undertakes, or
25incurs in its own name; each resulting insurer is individually
26liable for the liabilities of the dividing insurer that are
27allocated to or remain the liability of such resulting insurer
28as specified in the plan; and the dividing insurer remains
29responsible for all liabilities of the dividing insurer that
30are not allocated by the plan if the dividing insurer survives
31the division. If the dividing insurer does not survive the
32division, each resulting insurer is pro rata individually
33liable for all liabilities of the dividing insurer that are not
34allocated by the plan.
35If a division breaches a contractual obligation of the
-18-1dividing insurer, all resulting insurers are liable, jointly
2and severally, for the breach. The validity and effectiveness
3of the division are not affected by the breach.
4In a division, a direct or indirect allocation of capital,
5surplus, assets, or liabilities, including policy liabilities,
6occurs automatically by operation of law and is not treated
7as a distribution or transfer for any purpose with respect to
8either the dividing insurer or any of the resulting insurers.
9Except as provided in the plan and as approved by the
10commissioner, an allocation of a policy or other liability does
11not affect the rights that a policyholder or creditor has under
12any other law with respect to such policy or other liability,
13except that such rights are available only against a resulting
14insurer responsible for the policy or liability. A reinsurer,
15surety, or guarantor of the policy or liability is not released
16from their obligations under the policy or other liability.
17The bill allows the commissioner to adopt rules pursuant
18to Code chapter 17A to administer the requirements of the
19bill and allows the commissioner to take any action under the
20commissioner’s authority to enforce compliance with the bill.
21The bill amends Code section 490.120 to add a plan of
22division to the definition of plan. The bill amends Code
23section 490.1302 to provide for shareholder appraisal rights
24for a division to which a corporation is a party, if the
25corporation does not survive such division. The bill amends
26Code chapter 521 to allow a dividing insurer to adopt and
27execute a plan of merger or consolidation on behalf of a
28resulting insurer and if provided for in the plan of merger or
29consolidation, the merger or consolidation shall be effective
30simultaneously with the effectiveness of a division under the
31bill.
-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 Iowa law.
93. “Commissioner” means the commissioner of insurance.
104. “Divide” or “division” means a transaction in which
11a domestic stock insurer splits into two or more resulting
12domestic stock insurers.
135. “Dividing insurer” means a domestic stock insurer that
14approves a plan of division.
156. “Domestic stock insurer” means a stock insurer domiciled
16and organized under the laws of this state pursuant to chapter
17508, 514B, or 515, including domestic stock insurers affiliated
18with a mutual insurance holding company organized pursuant to
19section 521A.14, and including those insurers which confer
20membership rights in the mutual insurance holding company.
217. “Liability” means a secured or contingent debt or
22obligation arising in any manner.
238. “Resulting insurer” means a dividing domestic stock
24insurer that survives a division or a new domestic stock
25insurer that is created by a division.
269. “Shareholder” means the person in whose name shares are
27registered in the records of a corporation or the beneficial
28owner of shares to the extent of the rights granted by a
29nominee certificate on file with a corporation.
3010. “Surplus” means total statutory surplus less capital
31stock calculated in accordance with the current national
32association of insurance commissioners’ accounting practices
33and procedures manual.
3411. “Transfer” includes an assignment, assumption,
35conveyance, sale, lease, encumbrance, security interest, gift,
-1-1or transfer by operation of law.
2 Sec. 2. NEW SECTION. 521I.2 Plan of division — general
3requirements.
4A domestic stock insurer’s plan of division shall include
5all of the following:
61. The name of the domestic stock insurer seeking to divide.
72. The name of each resulting insurer created by the
8proposed division and for each resulting insurer a copy of all
9of the following:
10a. Proposed articles of incorporation.
11b. Proposed bylaws.
123. The manner of allocating assets and liabilities,
13including policy liabilities, between or among all resulting
14insurers.
154. The manner of distributing shares in the resulting
16insurers to the dividing insurer or the dividing insurer’s
17shareholders.
185. A description of all liabilities and all assets that
19the dividing insurer proposes to allocate to each resulting
20insurer, including the manner by which the dividing insurer
21proposes to allocate all reinsurance contracts.
226. All terms and conditions required by the laws of this
23state and the articles and bylaws of the dividing insurer.
247. All other terms and conditions of the division.
25 Sec. 3. NEW SECTION. 521I.3 Plan of division — dividing
26insurer to survive division.
27If a dividing insurer will survive a division, the plan
28of division shall include, in addition to the requirements
29pursuant to section 521I.2, all of the following:
301. All proposed amendments to the dividing insurer’s
31articles of incorporation and bylaws.
322. If the dividing insurer intends to cancel some but not
33all shares in the dividing insurer, the manner in which the
34dividing insurer intends to cancel such shares.
353. If the dividing insurer intends to convert some but
-2-1not all shares in the dividing insurer into securities,
2obligations, money, other property, rights to acquire shares or
3securities, or any combination thereof, a statement disclosing
4the manner in which the dividing insurer intends to convert
5such shares.
6 Sec. 4. NEW SECTION. 521I.4 Plan of division — dividing
7insurer not to survive division.
8If a dividing insurer will not survive a division, the plan
9of division shall include, in addition to the requirements
10pursuant to section 521I.2, the manner in which the dividing
11insurer will cancel or convert shares in the dividing insurer’s
12shares into shares, securities, obligations, money, other
13property, rights to acquire shares or securities, or any
14combination thereof.
15 Sec. 5. NEW SECTION. 521I.5 Amending plan of division.
161. A dividing insurer may amend the dividing insurer’s
17plan of division in accordance with any procedures set forth
18in the plan of division, or if no such procedures are set
19forth in the plan of division, in a manner determined by the
20board of directors of the dividing insurer. A shareholder
21that is entitled to vote on or consent to approval of the plan
22of division shall be entitled to vote on or consent to an
23amendment of the plan of division that will affect any of the
24following:
25a. The amount or kind of shares, securities, obligations,
26money, other property, rights to acquire shares or securities,
27or any combination thereof to be received by any of the
28shareholders of the dividing insurer under the plan of
29division.
30b. The articles of incorporation or bylaws of any resulting
31insurer that become effective when the division becomes
32effective except for changes that do not require approval of
33the shareholders of the resulting insurer under such articles
34of incorporation or bylaws.
35c. Any other terms or conditions of the plan of division
-3-1if the change may adversely affect the shareholders in any
2material respect.
32. A dividing insurer shall not amend the dividing insurer’s
4plan of division after the plan of division becomes effective.
53. A dividing insurer shall not amend the dividing insurer’s
6plan of division after the plan of division is approved by the
7commissioner.
8 Sec. 6. NEW SECTION. 521I.6 Abandoning plan of division.
91. A dividing insurer may abandon the dividing insurer’s
10plan of division in any of the following circumstances:
11a. After the dividing insurer has approved the plan
12of division without any action by the shareholders and in
13accordance with any procedures set forth in the plan of
14division, or if no such procedures are set forth in the plan of
15division, in a manner determined by the board of directors of
16the dividing insurer.
17b. After the dividing insurer has filed a certificate
18of division with the secretary of state pursuant to section
19521I.10, the dividing insurer may file a signed certificate of
20abandonment with the secretary of state and file a copy with
21the commissioner. The certificate of abandonment shall be
22effective on the date the certificate of abandonment is filed
23with the secretary of state.
242. A dividing insurer shall not abandon the dividing
25insurer’s plan of division after the plan of division becomes
26effective.
273. If a dividing insurer elects to abandon the dividing
28insurer’s plan of division, the dividing insurer shall notify
29the commissioner.
30 Sec. 7. NEW SECTION. 521I.7 Approval of plan of division —
31articles of incorporation and bylaws.
321. A dividing insurer shall not file a plan of division with
33the commissioner until such plan of division has been approved
34in accordance with all provisions of the dividing insurer’s
35articles of incorporation and bylaws. If the dividing
-4-1insurer’s articles of incorporation and bylaws do not provide
2for approval of a plan of division, the dividing insurer shall
3not file the plan of division with the commissioner unless
4such plan of division has been approved in accordance with all
5provisions of the dividing insurer’s articles of incorporation
6and bylaws that provide for approval of a merger.
72. If a provision of a dividing insurer’s articles of
8incorporation or bylaws adopted before the effective date of
9this Act requires that a specific number of or a percentage
10of the board of directors or shareholders propose or adopt a
11plan of merger or impose other procedures for the proposal or
12adoption of a plan of merger, the dividing insurer shall adhere
13to such provision in proposing or adopting a plan of division.
14If any such provision of the articles of incorporation or
15bylaws is amended on or after the effective date of this Act,
16such provision shall apply to a division thereafter only in
17accordance with its express terms.
18 Sec. 8. NEW SECTION. 521I.8 Commissioner approval of plan
19of division.
201. After a dividing insurer approves a plan of division
21pursuant to section 521I.7, the dividing insurer shall file the
22plan of division with the commissioner. Within ten business
23days of filing the plan of division with the commissioner, the
24dividing insurer shall provide notice of the filing to each
25reinsurer that is a party to a reinsurance contract allocated
26in the plan of division.
272. a. A division shall not become effective until approved
28by the commissioner after reasonable notice and a public
29hearing. Notice and public hearing required under this section
30shall be conducted as a contested case pursuant to chapter 17A.
31b. The commissioner shall require the dividing insurer
32to mail written notice of the public hearing to the dividing
33insurer’s policyholders stating that a plan of division has
34been filed with the commissioner and providing the date, time,
35and location of the public hearing.
-5- 1c. The commissioner shall select and retain an independent
2expert who shall review the dividing insurer’s plan of division
3and issue a report to the commissioner.
43. The commissioner may approve a plan of division if the
5commissioner finds that all of the following apply:
6a. The interest of the policyholders, creditors, or
7shareholders of the dividing insurer will be adequately
8protected and the plan of division is not unfair or
9unreasonable to the policyholders of the dividing insurer and
10is not contrary to the public interest.
11b. The financial condition of the resulting insurers will
12not jeopardize the financial stability of a dividing insurer
13or the resulting insurers or prejudice the interests of the
14policyholders of such insurers.
15c. All resulting insurers created by the proposed division
16will be qualified and eligible to receive a certificate of
17authority to transact the business of insurance in this state.
18d. The proposed division does not violate a provision of
19chapter 684. In a division in which the dividing insurer
20will survive, the commissioner shall apply chapter 684 to the
21dividing insurer in its capacity as a resulting insurer. In
22applying the provisions of chapter 684 to a resulting insurer,
23the commissioner shall do all of the following:
24(1) Treat the resulting insurer as a debtor.
25(2) Treat a liability allocated to the resulting insurer as
26a liability incurred by a debtor.
27(3) Treat the resulting insurer as receiving unequal value
28in exchange for incurring allocated obligations.
29(4) Treat assets allocated to the resulting insurer as
30remaining assets.
31e. The proposed division is not being made for the purpose
32of hindering, delaying, or defrauding any policyholders or
33other creditors of the dividing insurer.
34f. All resulting insurers will be solvent when the division
35becomes effective.
-6- 1g. The remaining assets of a resulting insurer will not be
2unreasonably small in relation to the business and transactions
3such resulting insurer has been engaged in or will engage in
4after completion of the division.
54. In determining if the standards set forth in subsection
63, paragraphs “c” through “g” are satisfied, the commissioner
7may consider all proposed assets of the resulting insurer
8including without limitation reinsurance agreements, parental
9guarantees, support agreements, keepwell agreements, and
10capital maintenance of contingent capital agreements regardless
11of whether such qualify as an admitted asset under state law.
125. All expenses incurred by the commissioner in connection
13with proceedings under this section including expenses
14for attorneys, actuaries, accountants, and other experts
15not otherwise a part of the commissioner’s staff as may be
16reasonably necessary to assist the commissioner in reviewing
17a proposed plan of division shall be paid by the dividing
18insurer filing such plan. A dividing insurer may allocate such
19expense in a plan of division in the same manner as any other
20liability.
216. If the commissioner approves a plan of division the
22commissioner shall issue an order which shall be accompanied
23by findings of fact and conclusions of law. The commissioner
24shall also issue a certificate of authority authorizing the
25resulting insurers to transact the business of insurance in
26this state.
277. The conditions in this section for freeing one or more
28of the resulting insurers from the liabilities of the dividing
29insurer and for allocating some or all of the liabilities of
30the dividing insurer shall be deemed to have been satisfied if
31the plan of division is approved by the commissioner in a final
32order.
33 Sec. 9. NEW SECTION. 521I.9 Confidentiality.
34A dividing insurer may submit a written request to the
35commissioner that confidentiality be maintained regarding
-7-1all business, financial, actuarial, and other proprietary
2information submitted to, obtained by, or disclosed to the
3commissioner in connection with the dividing insurer’s plan
4of division. The commissioner shall make a determination
5regarding the dividing insurer’s request prior to issuing
6a notice of a public hearing pursuant to section 521I.8,
7subsection 2. If the commissioner grants the dividing
8insurer’s request in whole or in part, such information as the
9commissioner determines shall remain confidential, shall not be
10available for public inspection, and shall not be subject to
11chapter 22. The plan of division shall not be confidential and
12shall be available for public inspection.
13 Sec. 10. NEW SECTION. 521I.10 Certificate of division.
141. If the commissioner approves a dividing insurer’s plan
15of division pursuant to section 521I.8, an officer or duly
16authorized representative of the dividing insurer shall sign a
17certificate of division that sets forth all of the following:
18a. The name of the dividing insurer.
19b. A statement disclosing whether the dividing insurer
20survived the division. If the dividing insurer survived
21the division, the certificate of division shall include any
22amendments to the dividing insurer’s articles of incorporation
23or bylaws as approved as part of the plan of division.
24c. The name of each resulting insurer that is created by
25the division.
26d. The date on which the division is effective.
27e. A statement that the division was approved by the
28commissioner under section 521I.8.
29f. A statement that the dividing insurer provided reasonable
30notice to each reinsurer that is a party to a reinsurance
31contract allocated in the plan of division.
32g. The resulting insurer’s articles of incorporation and
33bylaws for each resulting insurer created by the division. The
34articles of incorporation and bylaws of each resulting insurer
35must comply with the applicable requirements of the laws of
-8-1this state. The articles of incorporation and bylaws may state
2the name or address of an incorporator, may be signed, and may
3include any provision that is not required in a restatement of
4the articles of incorporation or bylaws.
5h. A reasonable description of the capital, surplus, other
6assets and liabilities, including policy liabilities, of the
7dividing insurer that are to be allocated to each resulting
8insurer.
92. A dividing insurer’s certificate of division is
10effective on the date the dividing insurer files the
11certificate with the secretary of state and provides a
12concurrent copy to the commissioner, or on another date
13as specified in the plan of division, whichever is later.
14However, the certificate of division shall become effective
15not later than ninety calendar days after it is filed with the
16secretary of state. A division shall be effective when the
17relevant certificate of division is effective.
18 Sec. 11. NEW SECTION. 521I.11 Division effective.
191. On the effective date of a division pursuant to section
20521I.10, the following apply:
21a. If the dividing insurer survives, all of the following
22apply:
23(1) The dividing insurer shall continue to exist.
24(2) The articles of incorporation of the dividing insurer
25shall be amended, if at all, if provided for in the plan of
26division.
27(3) The bylaws of the dividing insurer shall be amended, if
28at all, if provided for in the plan of division.
29b. If the dividing insurer does not survive, the dividing
30insurer’s separate existence shall cease to exist and any
31resulting insurer created by the plan of division shall come
32into existence.
33c. Each resulting insurer shall hold any capital, surplus,
34and other assets allocated to such resulting insurer by the
35plan of division as a successor to the dividing insurer by
-9-1operation of law, and not by transfer, whether directly or
2indirectly. The articles of incorporation and bylaws, if any,
3of each resulting insurer shall be effective when the resulting
4insurer comes into existence.
5d. (1) All capital, surplus, and other assets of the
6dividing insurer that are allocated by the plan of division
7shall vest in the applicable resulting insurer as provided in
8the plan of division or shall remain vested in the dividing
9insurer as provided in the plan of division.
10(2) All capital, surplus, and other assets of the dividing
11insurer that are not allocated by the plan of division shall
12remain vested in the dividing insurer if the dividing insurer
13survives the division and shall be allocated to and vest pro
14rata in the resulting insurers individually if the dividing
15insurer does not survive the division.
16(3) All capital, surplus, and other assets of the dividing
17insurer otherwise vest as provided in this section without
18transfer, reversion, or impairment.
19e. A resulting insurer to which a cause of action is
20allocated may be substituted or added in any pending action or
21proceeding to which the dividing insurer is a party when the
22division becomes effective.
23f. All liabilities of a dividing insurer are allocated
24between or among any resulting insurers as provided in section
25521I.10 and each resulting insurer to which liabilities are
26allocated is liable only for those liabilities, including
27policy liabilities, allocated as a successor to the dividing
28insurer by operation of law.
29g. Any shares in the dividing insurer that are to be
30converted or canceled in the division are converted or canceled
31and the shareholders of those shares are entitled only to
32the rights provided to such shareholders under the plan of
33division and any appraisal rights that such shareholders may
34have pursuant to section 521I.13.
352. Except as provided in the dividing insurer’s articles
-10-1of incorporation or bylaws, the division does not give rise
2to any rights that a shareholder, director of a domestic
3stock insurer, or third party would have upon a dissolution,
4liquidation, or winding up of the dividing insurer.
53. The allocation to a resulting insurer of capital,
6surplus, or other asset that is collateral covered by an
7effective financing statement shall not be effective until a
8new effective financing statement naming the resulting insurer
9as a debtor is effective under the uniform commercial code.
104. Unless otherwise provided in the plan of division,
11the shares in and any securities of each resulting insurer
12shall be distributed to the dividing insurer if it survives
13the division, or pro rata to the shareholders of the dividing
14insurer that do not assert any appraisal rights pursuant to
15section 521I.13.
16 Sec. 12. NEW SECTION. 521I.12 Resulting insurers liability
17for allocated assets, debts, and liabilities.
181. Except as expressly provided in this section, when a
19division becomes effective, by operation of law all of the
20following apply:
21a. A resulting insurer is individually liable for the
22liabilities, including policy liabilities, that the resulting
23insurer issues, undertakes, or incurs in its own name after the
24division.
25b. A resulting insurer is individually liable for the
26liabilities, including policy liabilities, of the dividing
27insurer that are allocated to or remain the liability of the
28resulting insurer to the extent specified in the plan of
29division.
30c. The dividing insurer remains responsible for the
31liabilities, including policy liabilities, of the dividing
32insurer that are not allocated by the plan of division if the
33dividing insurer survives the division.
34d. A resulting insurer is liable pro rata individually for
35the liabilities, including policy liabilities, of the dividing
-11-1insurer that are not allocated by the plan of division if the
2dividing insurer does not survive the division.
32. Except as otherwise expressly provided in this section,
4when a division becomes effective a resulting insurer is not
5responsible for and shall not have liability for any of the
6following:
7a. Any liabilities, including policy liabilities, that
8another resulting insurer issues, undertakes, or incurs in such
9resulting insurer’s own name after the division.
10b. Any liabilities, including policy liabilities, of the
11dividing insurer that are allocated to or remain the liability
12of another resulting insurer under the plan of division.
133. If a provision of any evidence of indebtedness, whether
14secured or unsecured, or a provision of any contract other than
15an insurance policy, annuity, or reinsurance agreement that was
16issued, incurred, or executed by the dividing insurer before
17the effective date of this Act, requires the consent of the
18obligee to a merger of the dividing insurer, or treats such a
19merger as a default, such provision shall apply to a division
20of the dividing insurer as if such division were a merger.
214. If a division breaches a contractual obligation of
22the dividing insurer, all resulting insurers are jointly
23and severally liable for the breach. The validity and
24effectiveness of the division shall not be affected by the
25breach.
265. A direct or indirect allocation of capital, surplus,
27assets, or liabilities, including policy liabilities, shall
28occur automatically, by operation of law, and shall not be
29treated as a distribution or transfer for any purpose with
30respect to either the dividing insurer or any resulting
31insurer.
326. Liens, security interests, and other charges on the
33capital, surplus, or other assets of the dividing insurer
34shall not be impaired by the division, notwithstanding any
35otherwise enforceable allocation of liabilities, including
-12-1policy liabilities, of the dividing insurer.
27. If the dividing insurer is bound by a security agreement
3governed by chapter 554 or article 9 of the uniform commercial
4code as enacted in any other jurisdiction, and the security
5agreement provides that the security interest attaches to
6after-acquired collateral, a resulting insurer shall be bound
7by the security agreement.
88. Unless provided in the plan of division and specifically
9approved by the commissioner, an allocation of a policy or
10other liability is prohibited from doing any of the following:
11a. Affecting the rights that a policyholder or creditor
12has under any other law with respect to such policy or other
13liability, except that such rights shall be available only
14against a resulting insurer responsible for the policy or
15liability under this section.
16b. Releasing or reducing the obligation of a reinsurer,
17surety, or guarantor of the policy or liability.
189. A resulting insurer shall only be liable for the
19liabilities allocated to the resulting insurer in accordance
20with the plan of division and this section and shall not be
21liable for any other liabilities under the common law doctrine
22of successor liability or any other theory of liability
23applicable to transferees or assignees of assets.
24 Sec. 13. NEW SECTION. 521I.13 Shareholder appraisal rights.
25If a dividing insurer does not survive a division, an
26objecting shareholder of the dividing insurer is entitled to
27appraisal rights and to obtain payment of the fair value of
28such shareholder’s shares in the same manner and to the extent
29provided for a corporation as a party to a merger pursuant to
30section 490.1302.
31 Sec. 14. NEW SECTION. 521I.14 Rules.
32The commissioner may adopt rules pursuant to chapter 17A to
33administer this chapter.
34 Sec. 15. NEW SECTION. 521I.15 Enforcement.
35The commissioner may take any action under the
-13-1commissioner’s authority to enforce compliance with this
2chapter.
3 Sec. 16. Section 490.120, subsection 12, paragraph c,
4subparagraph (2), Code 2019, is amended to read as follows:
5(2) “Plan” means a plan of merger or, a plan of share
6exchange, or a plan of division pursuant to chapter 521I.
7 Sec. 17. Section 490.1302, subsection 1, Code 2019, is
8amended by adding the following new paragraph:
9 NEW PARAGRAPH. g. Consummation of a division pursuant
10to chapter 521I to which the corporation is a party if the
11corporation does not survive such division.
12 Sec. 18. Section 521.1, Code 2019, is amended by adding the
13following new subsections:
14 NEW SUBSECTION. 5. “Dividing insurer” means the same as
15defined in section 521I.1.
16 NEW SUBSECTION. 6. “Resulting insurer” means the same as
17defined in section 521I.1.
18 Sec. 19. NEW SECTION. 521.19 Merger or consolidation
19effective with division.
20A dividing insurer and the dividing insurer’s officers,
21directors, and shareholders shall have the authority to adopt
22and execute a plan of merger or consolidation on behalf of a
23resulting insurer, to execute and deliver documents, plans,
24certificates, and resolutions, and to make any filings on
25behalf of such resulting insurer. If provided in a plan of
26merger or consolidation, the merger or consolidation shall be
27effective simultaneously with the effectiveness of a division
28pursuant to 521I.10.
29EXPLANATION
30The inclusion of this explanation does not constitute agreement with
31the explanation’s substance by the members of the general assembly.
32This bill relates to the division of domestic stock
33insurers.
34The bill defines a domestic stock insurer as a stock insurer
35domiciled and organized under the laws of this state pursuant
-14-1to Code chapter 508, 514B, or 515, including domestic stock
2insurers affiliated with a mutual insurance holding company
3organized pursuant to Code section 521A.14, and including those
4insurers which confer membership rights in the mutual insurance
5company. A dividing insurer is defined as a domestic stock
6insurer that approves a plan of division (plan). A resulting
7insurer is defined as a dividing insurer that survives a
8division, or a new domestic stock insurer that is created by
9a division.
10The bill requires a dividing insurer to develop a plan that
11identifies the dividing insurer’s name, the proposed resulting
12insurers and their articles of incorporation and bylaws, the
13allocation of the dividing insurer’s assets, liabilities,
14and reinsurance contracts to the resulting insurers, and the
15manner in which the shares in the resulting insurers will be
16distributed to the dividing insurer or its shareholders.
17If the dividing insurer will survive the division, the plan
18must also include any proposed amendments to the dividing
19insurer’s articles of incorporation and bylaws and the manner
20in which the dividing insurer proposes to cancel or convert
21some of its shares. If the dividing insurer will not survive
22the division, the plan of division must include details on how
23the dividing insurer will cancel or convert its shares.
24The bill allows a dividing insurer to amend or abandon a
25plan under certain conditions as detailed in the bill. If a
26dividing insurer elects to abandon the dividing insurer’s plan
27of division, the dividing insurer is required to notify the
28commissioner.
29The bill requires that prior to filing a plan with the
30commissioner, a dividing insurer must obtain approval in
31accordance with its articles of incorporation and bylaws. If
32the articles of incorporation and bylaws do not provide for
33such approval, the dividing insurer must obtain approval in
34accordance with all provisions of such that apply to approval
35of a merger.
-15- 1The bill provides that a division is not effective until
2approved by the commissioner after reasonable notice and a
3public hearing. The commissioner shall require the dividing
4insurer to mail written notice of the public hearing to the
5dividing insurer’s policyholders advising the policyholders
6that a plan of division has been filed and providing the date,
7time, and location of the public hearing.
8The commissioner must retain an independent expert to
9review the dividing insurer’s plan of division and issue a
10report to the commissioner. The commissioner may approve a
11plan if the commissioner determines that the interests of the
12policyholders, creditors, or shareholders of the dividing
13insurer are adequately protected and the proposed division is
14not unfair or unreasonable to the policyholders of the dividing
15insurer; that the division is not contrary to public policy;
16that the financial condition of the resulting insurers will
17not jeopardize the financial stability of a dividing insurer
18or the resulting insurers or prejudice the interests of the
19policyholders of such insurers; that all resulting insurers
20created by the proposed division are qualified and eligible to
21receive a certificate of authority to transact the business
22of insurance in this state; that the proposed division does
23not violate the state’s voidable transactions statute; that
24the proposed division is not for the purpose of hindering,
25delaying, or defrauding any policyholders or other creditors
26of the dividing insurer; that all resulting insurers will be
27solvent; and that the remaining assets of a resulting insurer
28will not be unreasonably small in relation to the business and
29transactions in which such resulting insurer has been engaged
30in or will engage in after completion of the division.
31The bill requires the commissioner to issue an order,
32including findings of fact and conclusions of law, to approve a
33plan of division and to issue a certificate of authority to the
34resulting insurers.
35A dividing insurer may submit a written request to the
-16-1commissioner that confidentiality be maintained regarding all
2business and other proprietary information submitted to the
3commissioner in connection with the dividing insurer’s plan of
4division. The commissioner must make a determination regarding
5the dividing insurer’s request prior to issuing a notice of
6a public hearing. If the commissioner grants the request,
7any information the commissioner determines shall remain
8confidential is not available for public inspection and shall
9not be subject to Code chapter 22. The plan of division is not
10confidential and shall be available for public inspection.
11If the commissioner approves a dividing insurer’s plan, an
12officer of the dividing insurer must sign a certificate of
13division that sets forth information, as detailed in the bill,
14related to the dividing insurer’s post-division status and any
15resulting insurer’s post-division status. A certificate of
16division is effective on the date the dividing insurer files
17the certificate with the secretary of state as specified in
18the plan of division. The certificate of division becomes
19effective not later than 90 days after it is filed.
20When a division becomes effective and the dividing insurer
21survives, the bill provides that the dividing insurer continues
22to exist and that the articles of incorporation and the bylaws
23of the dividing insurer must be amended as provided in the
24plan. If the dividing insurer does not survive, the dividing
25insurer’s separate existence ceases to exist and any resulting
26insurers created by the plan come into existence. The bill
27provides that all resulting insurers hold any capital, surplus,
28and other assets allocated to each as a successor to the
29dividing insurer by operation of law, and not by transfer. All
30capital, surplus, and other assets of the dividing insurer
31that are allocated by the plan of division either vest in the
32applicable resulting insurer or remain vested in the dividing
33insurer as provided in the plan. All capital, surplus, and
34other assets that are not allocated by the plan remain vested
35in the dividing insurer if the dividing insurer survives the
-17-1division, are allocated to the resulting insurers individually
2if the dividing insurer does not survive the division, or vest
3as otherwise provided in the bill.
4A resulting insurer to which a cause of action is allocated
5may be substituted or added in any pending action to which
6the dividing insurer is a party when the division becomes
7effective. All liabilities of a dividing insurer are allocated
8between or among any resulting insurers and each resulting
9insurer to which liabilities are allocated is liable only for
10those liabilities, including policy liabilities, allocated as a
11successor to the dividing insurer.
12The bill also provides that when a division becomes
13effective any shares in the dividing insurer that are converted
14or canceled entitle the shareholders of those shares to
15the rights provided under the plan of division and per any
16appraisal rights they may have as detailed in the bill.
17Unless otherwise provided in the plan, the shares and
18securities of each resulting insurer are distributed to the
19dividing insurer if it survives the division, or pro rata to
20any shareholders of the dividing insurer that do not assert
21appraisal rights.
22The bill provides that after a division becomes effective,
23each resulting insurer is individually liable for all
24liabilities that such resulting insurer issues, undertakes, or
25incurs in its own name; each resulting insurer is individually
26liable for the liabilities of the dividing insurer that are
27allocated to or remain the liability of such resulting insurer
28as specified in the plan; and the dividing insurer remains
29responsible for all liabilities of the dividing insurer that
30are not allocated by the plan if the dividing insurer survives
31the division. If the dividing insurer does not survive the
32division, each resulting insurer is pro rata individually
33liable for all liabilities of the dividing insurer that are not
34allocated by the plan.
35If a division breaches a contractual obligation of the
-18-1dividing insurer, all resulting insurers are liable, jointly
2and severally, for the breach. The validity and effectiveness
3of the division are not affected by the breach.
4In a division, a direct or indirect allocation of capital,
5surplus, assets, or liabilities, including policy liabilities,
6occurs automatically by operation of law and is not treated
7as a distribution or transfer for any purpose with respect to
8either the dividing insurer or any of the resulting insurers.
9Except as provided in the plan and as approved by the
10commissioner, an allocation of a policy or other liability does
11not affect the rights that a policyholder or creditor has under
12any other law with respect to such policy or other liability,
13except that such rights are available only against a resulting
14insurer responsible for the policy or liability. A reinsurer,
15surety, or guarantor of the policy or liability is not released
16from their obligations under the policy or other liability.
17The bill allows the commissioner to adopt rules pursuant
18to Code chapter 17A to administer the requirements of the
19bill and allows the commissioner to take any action under the
20commissioner’s authority to enforce compliance with the bill.
21The bill amends Code section 490.120 to add a plan of
22division to the definition of plan. The bill amends Code
23section 490.1302 to provide for shareholder appraisal rights
24for a division to which a corporation is a party, if the
25corporation does not survive such division. The bill amends
26Code chapter 521 to allow a dividing insurer to adopt and
27execute a plan of merger or consolidation on behalf of a
28resulting insurer and if provided for in the plan of merger or
29consolidation, the merger or consolidation shall be effective
30simultaneously with the effectiveness of a division under the
31bill.
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