CHAPTER 3. MUTUAL INSURANCE HOLDING COMPANIES
IC 27-14-3
Chapter 3. Mutual Insurance Holding Companies
IC 27-14-3-1
Requirement to comply with IC 27-14-2
Sec. 1. An MIHC organized under this article must meet therequirements of IC 27-14-2.
As added by P.L.5-2000, SEC.4.
IC 27-14-3-2
Contents of articles of incorporation
Sec. 2. The articles of incorporation of an MIHC must contain thefollowing, or provisions at least substantially equivalent to thefollowing:
(1) The name of the MIHC, which must include the term"mutual" or the abbreviation "MIHC".
(2) A provision specifying that the MIHC does not have thepower to engage in the business of issuing insurance policies orcontracts.
(3) A provision specifying that the MIHC is not authorized toissue voting or any other capital stock.
(4) A provision setting forth the rights of members of the MIHCin the equity of the MIHC in the event of a conversion to astock company under Indiana law or a dissolution underIC 27-1-10, including the rights of the members to the assets ofthe MIHC.
(5) A provision specifying that:
(A) a member of the MIHC is not, as a member, personallyliable for the acts, debts, liabilities, or obligations of theMIHC; and
(B) no assessment may be imposed upon the members of theMIHC by any person, including:
(i) the board of directors, members, or creditors of theMIHC; and
(ii) any governmental office or official, including thecommissioner;
because of any liability of any company or because of anyact, debt, or liability of the MIHC.
As added by P.L.5-2000, SEC.4.
IC 27-14-3-3
Rights and obligations of members
Sec. 3. Members of an MIHC have rights and obligationsspecified in:
(1) this article; and
(2) the articles of incorporation and bylaws of the MIHC.
As added by P.L.5-2000, SEC.4.
IC 27-14-3-4
Direct payments to members Sec. 4. The MIHC may not make any direct payment of income,dividends, or other distribution of profits to a member of an MIHCwith respect to any membership interest in the MIHC, other than asdirected or approved by the commissioner.
As added by P.L.5-2000, SEC.4.
IC 27-14-3-5
Outside directors
Sec. 5. (a) At least a majority of the following must be made upof outside directors:
(1) The board of directors of an MIHC.
(2) The board of directors of a stock holding company that isnot a wholly-owned subsidiary of an MIHC.
(3) The board of directors of a reorganized insurer that is not awholly-owned subsidiary of an MIHC.
(4) Any audit committee or executive committee of the board ofdirectors of:
(A) an MIHC;
(B) a stock holding company that is not a wholly-ownedsubsidiary of an MIHC; or
(C) a reorganized insurer that is not a wholly-ownedsubsidiary of an MIHC.
(b) All of the directors who are members of any managementcompensation committee of the following entities must be outsidedirectors:
(1) An MIHC.
(2) A stock holding company that is not a wholly-ownedsubsidiary of an MIHC.
(3) A reorganized insurer that is not a wholly-owned subsidiaryof an MIHC.
(c) All of the directors who are members of any pricing committeeof the following entities with responsibility for approving the priceof stock sold in any offering under this article must be outsidedirectors:
(1) A stock holding company.
(2) A reorganized insurer.
(d) The commissioner may determine, after furnishing theaffected company and director with notice and opportunity to beheard, that an individual does not qualify as an outside director orotherwise should not be considered an outside director. Such anindividual may continue to serve as a director, but from the date thecommissioner notifies the affected company in writing of thedetermination and the basis for the determination, the individual maynot be considered an outside director.
(e) A director's failure to qualify as or be considered an outsidedirector does not affect the validity of any action taken by thecompany, the board of directors, or any committee of the board ofdirectors.
(f) Concurrent with the initial public offering of any securities ofa stock holding company or a reorganized insurer, the majority of the
members of the board of directors of the MIHC must be disinteresteddirectors.
As added by P.L.5-2000, SEC.4.
IC 27-14-3-6
Rights and obligations of an MIHC
Sec. 6. (a) Except as provided in subsection (b), an MIHC:
(1) has and may exercise all the rights and privileges ofinsurance companies formed under this title; and
(2) is subject to all the requirements and regulations imposedupon insurance companies formed under this title.
(b) The exceptions referred to in subsection (a) are as follows:
(1) An MIHC does not have the right or privilege to writeinsurance (except through an insurance company subsidiary)and is not subject to any requirement or rule adopted underIC 4-22-2 relating to the writing of insurance.
(2) An MIHC is not subject to the deposit requirement inIC 27-1-6-15(d).
(3) An MIHC is not subject to any statute or rule adopted underIC 4-22-2 that is imposed upon insurance companies formedunder this title to the extent that the statute or rule is in conflictwith this article.
(4) An MIHC is not subject to the investment requirementsunder IC 27-1-12 or IC 27-1-13 that limit or restrict investmentsin subsidiaries.
(5) An MIHC is not subject to risk-based capital requirementsunder IC 27-1-36.
(6) An MIHC is not subject to a requirement under IC 27 if thecommissioner determines by order or rule adopted by thecommissioner under IC 4-22-2 that the requirement does notapply to the MIHC.
As added by P.L.5-2000, SEC.4.
IC 27-14-3-7
Annual statement; certifications
Sec. 7. (a) Not later than July 1 of each year, an MIHC shall filewith the commissioner an annual statement containing the followinginformation:
(1) Audited financial statements, including:
(A) an income statement;
(B) a balance sheet;
(C) a statement of cash flows; and
(D) footnotes.
(2) Complete information on the status of any conditionimposed in connection with the approval of a plan ofreorganization.
(3) An investment plan covering all assets of the MIHC.
(4) A statement that the MIHC and its affiliates have compliedwith section 8 of this chapter.
(5) A statement that describes any changes in the members'
interests and the reason for any change in the members'interests.
(b) Not later than July 1 of the first, second, and third years aftercompletion of a reorganization under IC 27-14-2, a reorganizedinsurer shall file with the commissioner:
(1) a certificate of an actuary stating that the methodology usedby the reorganized insurer for any payment of policyholderdividends in the previous year complied with the methodologystated in the plan submitted under IC 27-14-2-4(5) or othermethodology approved by the commissioner; and
(2) a certificate of an independent auditor of the reorganizedinsurer that the calculation of any participating policy dividendspaid during the previous year complied with the methodologystated in the plan submitted under IC 27-14-2-4(5) and wasaccurate.
(c) If the certification of the actuary or auditor required insubsection (b) has not been filed or if the commissioner has otherreasonable cause, the commissioner may employ at the expense ofthe reorganized insurer an independent actuary or auditor, or both, toissue the certifications required in subsection (b).
(d) The requirement to submit the certifications under subsection(b) may be extended by the commissioner beyond the third year aftercompletion of a reorganization under IC 27-14-2:
(1) by order applicable to a particular recognized insurer if thecommissioner determines that further certifications arenecessary for the protection of the interests of the policyholdersof the reorganized insurer; and
(2) by rule adopted under IC 4-22-2 if the commissionerdetermines that further certifications are necessary for theprotection of the interests of the policyholders of allreorganized insurers or a particular class of reorganizedinsurers.
As added by P.L.5-2000, SEC.4.
IC 27-14-3-8
Material transactions
Sec. 8. (a) For the purposes of IC 27-1-23:
(1) an MIHC and its affiliates constitute an insurance holdingcompany system; and
(2) an MIHC is considered to be an "insurer".
However, a separate filing or approval is not required underIC 27-1-23 for an acquisition or a reorganization that is included ina plan approved under this article.
(b) For the purpose of this section, a "material transaction" means:
(1) a transaction described in IC 27-1-23-4(b):
(A) between an MIHC and any affiliate; or
(B) between any affiliates of an MIHC if the transactionequals or exceeds the percentages of admitted assets orsurplus set forth in IC 27-1-23-4(b) of any reorganizedinsurer of the MIHC; or (2) a transaction described in IC 27-1-23-4(b) between anMIHC and any person as specified in a rule adopted by thecommissioner under IC 4-22-2 or an order issued by thecommissioner.
(c) An MIHC may not enter into a material transaction unless theMIHC has notified the commissioner in writing of its intention toenter into a material transaction at least thirty (30) days before thetransaction, or a shorter period as the commissioner may permit, andthe commissioner has not disapproved the transaction within thatperiod.
(d) In addition to the requirements of IC 27-1-23-4(a) andIC 27-1-23-4(d), a material transaction must:
(1) be fair and reasonable to the members of the MIHC; and
(2) not violate the members' surplus protection principle.
(e) An MIHC and its affiliates may not enter into transactions thatare part of a plan or series of like transactions if the purpose of thoseseparate transactions is to circumvent any rules of the commissionerprohibiting a material transaction or this section.
As added by P.L.5-2000, SEC.4.
IC 27-14-3-9
Interest of member not considered a security
Sec. 9. The interest of a member in an MIHC does not constitutea security under Indiana law.
As added by P.L.5-2000, SEC.4.
IC 27-14-3-10
Fiduciary responsibilities and liability of officers and directors
Sec. 10. (a) After the effective date of a plan of reorganization, theofficers and directors of the MIHC:
(1) owe the same fiduciary responsibilities to members of theMIHC as the officers and directors of the former MIC owed tomembers of the former MIC; and
(2) are subject to potential liability to members of the MIHC tothe same extent as the officers and directors of the former MICwere to members of the former MIC before the effective date ofthe plan of reorganization.
(b) An action may be brought to recover for the violation offiduciary responsibilities under this article under IC 34-11-2-4, or, inthe case of fraud, under IC 34-11-2-7.
As added by P.L.5-2000, SEC.4.
IC 27-14-3-11
Dividends and distributions
Sec. 11. (a) The reorganized insurer must obtain commissionerapproval of the dividend practices with respect to participatingpolicies and contracts in force as of the effective date of thereorganization to be followed by the reorganized insurer as set forthin IC 27-14-2-4(5) if the dividend practices of the reorganized insurerwill be different from the dividend practices of the MIC. (b) The commissioner may require the establishment of a closedblock or other mechanism that the commissioner finds to be fair forthe protection of MIC policyholder dividends.
(c) The dividend practices of the reorganized insurer, therequirement to establish a closed block or other mechanism, or theterms of the closed block, may be modified after approval undersubsection (a) or subsequent to a reorganization under IC 27-14-2only with the prior approval of the commissioner on application ofthe reorganized insurer.
(d) Neither a stock holding company nor a reorganized insurermay pay dividends or make other distributions with respect to itsstock to its shareholders if the reorganized insurer has failed to paypolicyholder dividends in compliance with the dividend practicesapproved by the commissioner in accordance with this section.
(e) A reorganized insurer or stock holding company of the MIHCthat has any shareholder other than the MIHC or a direct or indirectwholly owned subsidiary of the MIHC may not declare or pay anydividend or other distribution on its capital stock except to the extentof:
(1) one (1) or more years of net income attributable to the yearof or years after the effective date of the plan of reorganization;and
(2) proceeds from the issuance of capital stock (which as of anydate shall be that amount equal to the net proceeds received bythe issuer less amounts previously paid out of the net proceedsto stockholders in the form of dividends or other distributions).
As added by P.L.5-2000, SEC.4.
IC 27-14-3-12
Compensation of directors and executive officers
Sec. 12. (a) For purposes of this section, "executive officer" hasthe same meaning as the term is defined by the Securities andExchange Commission in 17 CFR 240.3b-7.
(b) After the effective date of a reorganization under this article,the compensation of directors or executive officers of a companyshall include only those amounts that satisfy any one (1) of thefollowing criteria:
(1) Amounts that are payable with respect to services renderedbefore the effective date of the plan of reorganization.
(2) Amounts that would be deemed to be reasonablecompensation by the Internal Revenue Service and thereforeallowed as proper expense deductions for federal income taxpurposes.
(3) Amounts that are disclosed to the policyholders in proxysolicitation materials or other written materials approved by thecommissioner as part of the notice of the meeting of themembers called to approve a plan of reorganization, areapproved by the commissioner in principle and concept as partof the approval of the plan of reorganization, and are approvedby the commissioner as to specific amount prior to payments
after the effective date of the plan of reorganization.
(4) Amounts that the commissioner deems necessary to preservethe safety and soundness of the stock insurance companysubsidiary by enabling it to engage and retain capableemployees.
(5) Amounts payable solely out of net income of the companyafter the effective date of the plan of reorganization.
As added by P.L.5-2000, SEC.4.
IC 27-14-3-13
Investment and operations in businesses outside insurance business
Sec. 13. A company may invest and conduct operations inbusinesses outside the ordinary course of the insurance business onlyfrom funds separately raised and net income earned, after theeffective date of a plan of reorganization.
As added by P.L.5-2000, SEC.4.