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 the
requirements 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 the
following, or provisions at least substantially equivalent to the
following:
(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 the
power to engage in the business of issuing insurance policies or
contracts.
(3) A provision specifying that the MIHC is not authorized to
issue voting or any other capital stock.
(4) A provision setting forth the rights of members of the MIHC
in the equity of the MIHC in the event of a conversion to a
stock company under Indiana law or a dissolution under
IC 27-1-10, including the rights of the members to the assets of
the MIHC.
(5) A provision specifying that:
(A) a member of the MIHC is not, as a member, personally
liable for the acts, debts, liabilities, or obligations of the
MIHC; and
(B) no assessment may be imposed upon the members of the
MIHC by any person, including:
(i) the board of directors, members, or creditors of the
MIHC; and
(ii) any governmental office or official, including the
commissioner;
because of any liability of any company or because of any
act, 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 obligations
specified 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 MIHC
with respect to any membership interest in the MIHC, other than as
directed 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 up
of outside directors:
(1) The board of directors of an MIHC.
(2) The board of directors of a stock holding company that is
not a wholly-owned subsidiary of an MIHC.
(3) The board of directors of a reorganized insurer that is not a
wholly-owned subsidiary of an MIHC.
(4) Any audit committee or executive committee of the board of
directors of:
(A) an MIHC;
(B) a stock holding company that is not a wholly-owned
subsidiary of an MIHC; or
(C) a reorganized insurer that is not a wholly-owned
subsidiary of an MIHC.
(b) All of the directors who are members of any management
compensation committee of the following entities must be outside
directors:
(1) An MIHC.
(2) A stock holding company that is not a wholly-owned
subsidiary of an MIHC.
(3) A reorganized insurer that is not a wholly-owned subsidiary
of an MIHC.
(c) All of the directors who are members of any pricing committee
of the following entities with responsibility for approving the price
of stock sold in any offering under this article must be outside
directors:
(1) A stock holding company.
(2) A reorganized insurer.
(d) The commissioner may determine, after furnishing the
affected company and director with notice and opportunity to be
heard, that an individual does not qualify as an outside director or
otherwise should not be considered an outside director. Such an
individual may continue to serve as a director, but from the date the
commissioner notifies the affected company in writing of the
determination and the basis for the determination, the individual may
not be considered an outside director.
(e) A director's failure to qualify as or be considered an outside
director does not affect the validity of any action taken by the
company, the board of directors, or any committee of the board of
directors.
(f) Concurrent with the initial public offering of any securities of
a stock holding company or a reorganized insurer, the majority of the
members of the board of directors of the MIHC must be disinterested
directors. 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 of
insurance companies formed under this title; and
(2) is subject to all the requirements and regulations imposed
upon 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 write
insurance (except through an insurance company subsidiary)
and is not subject to any requirement or rule adopted under
IC 4-22-2 relating to the writing of insurance.
(2) An MIHC is not subject to the deposit requirement in
IC 27-1-6-15(d).
(3) An MIHC is not subject to any statute or rule adopted under
IC 4-22-2 that is imposed upon insurance companies formed
under this title to the extent that the statute or rule is in conflict
with this article.
(4) An MIHC is not subject to the investment requirements
under IC 27-1-12 or IC 27-1-13 that limit or restrict investments
in subsidiaries.
(5) An MIHC is not subject to risk-based capital requirements
under IC 27-1-36.
(6) An MIHC is not subject to a requirement under IC 27 if the
commissioner determines by order or rule adopted by the
commissioner under IC 4-22-2 that the requirement does not
apply 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 file
with the commissioner an annual statement containing the following
information:
(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 condition
imposed in connection with the approval of a plan of
reorganization.
(3) An investment plan covering all assets of the MIHC.
(4) A statement that the MIHC and its affiliates have complied
with 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 after
completion of a reorganization under IC 27-14-2, a reorganized
insurer shall file with the commissioner:
(1) a certificate of an actuary stating that the methodology used
by the reorganized insurer for any payment of policyholder
dividends in the previous year complied with the methodology
stated in the plan submitted under IC 27-14-2-4(5) or other
methodology approved by the commissioner; and
(2) a certificate of an independent auditor of the reorganized
insurer that the calculation of any participating policy dividends
paid during the previous year complied with the methodology
stated in the plan submitted under IC 27-14-2-4(5) and was
accurate.
(c) If the certification of the actuary or auditor required in
subsection (b) has not been filed or if the commissioner has other
reasonable cause, the commissioner may employ at the expense of
the reorganized insurer an independent actuary or auditor, or both, to
issue 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 after
completion of a reorganization under IC 27-14-2:
(1) by order applicable to a particular recognized insurer if the
commissioner determines that further certifications are
necessary for the protection of the interests of the policyholders
of the reorganized insurer; and
(2) by rule adopted under IC 4-22-2 if the commissioner
determines that further certifications are necessary for the
protection of the interests of the policyholders of all
reorganized insurers or a particular class of reorganized
insurers. 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 holding
company system; and
(2) an MIHC is considered to be an "insurer".
However, a separate filing or approval is not required under
IC 27-1-23 for an acquisition or a reorganization that is included in
a 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 transaction
equals or exceeds the percentages of admitted assets or
surplus set forth in IC 27-1-23-4(b) of any reorganized
insurer of the MIHC; or
(2) a transaction described in IC 27-1-23-4(b) between an
MIHC and any person as specified in a rule adopted by the
commissioner under IC 4-22-2 or an order issued by the
commissioner.
(c) An MIHC may not enter into a material transaction unless the
MIHC has notified the commissioner in writing of its intention to
enter into a material transaction at least thirty (30) days before the
transaction, or a shorter period as the commissioner may permit, and
the commissioner has not disapproved the transaction within that
period.
(d) In addition to the requirements of IC 27-1-23-4(a) and
IC 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 that
are part of a plan or series of like transactions if the purpose of those
separate transactions is to circumvent any rules of the commissioner
prohibiting 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 constitute
a 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, the
officers and directors of the MIHC:
(1) owe the same fiduciary responsibilities to members of the
MIHC as the officers and directors of the former MIC owed to
members of the former MIC; and
(2) are subject to potential liability to members of the MIHC to
the same extent as the officers and directors of the former MIC
were to members of the former MIC before the effective date of
the plan of reorganization.
(b) An action may be brought to recover for the violation of
fiduciary responsibilities under this article under IC 34-11-2-4, or, in
the 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 commissioner
approval of the dividend practices with respect to participating
policies and contracts in force as of the effective date of the
reorganization to be followed by the reorganized insurer as set forth
in IC 27-14-2-4(5) if the dividend practices of the reorganized insurer
will be different from the dividend practices of the MIC.
(b) The commissioner may require the establishment of a closed
block or other mechanism that the commissioner finds to be fair for
the protection of MIC policyholder dividends.
(c) The dividend practices of the reorganized insurer, the
requirement to establish a closed block or other mechanism, or the
terms of the closed block, may be modified after approval under
subsection (a) or subsequent to a reorganization under IC 27-14-2
only with the prior approval of the commissioner on application of
the reorganized insurer.
(d) Neither a stock holding company nor a reorganized insurer
may pay dividends or make other distributions with respect to its
stock to its shareholders if the reorganized insurer has failed to pay
policyholder dividends in compliance with the dividend practices
approved by the commissioner in accordance with this section.
(e) A reorganized insurer or stock holding company of the MIHC
that has any shareholder other than the MIHC or a direct or indirect
wholly owned subsidiary of the MIHC may not declare or pay any
dividend or other distribution on its capital stock except to the extent
of:
(1) one (1) or more years of net income attributable to the year
of or years after the effective date of the plan of reorganization;
and
(2) proceeds from the issuance of capital stock (which as of any
date shall be that amount equal to the net proceeds received by
the issuer less amounts previously paid out of the net proceeds
to 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" has
the same meaning as the term is defined by the Securities and
Exchange 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 company
shall include only those amounts that satisfy any one (1) of the
following criteria:
(1) Amounts that are payable with respect to services rendered
before the effective date of the plan of reorganization.
(2) Amounts that would be deemed to be reasonable
compensation by the Internal Revenue Service and therefore
allowed as proper expense deductions for federal income tax
purposes.
(3) Amounts that are disclosed to the policyholders in proxy
solicitation materials or other written materials approved by the
commissioner as part of the notice of the meeting of the
members called to approve a plan of reorganization, are
approved by the commissioner in principle and concept as part
of the approval of the plan of reorganization, and are approved
by 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 preserve
the safety and soundness of the stock insurance company
subsidiary by enabling it to engage and retain capable
employees.
(5) Amounts payable solely out of net income of the company
after 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 in
businesses outside the ordinary course of the insurance business only
from funds separately raised and net income earned, after the
effective date of a plan of reorganization. As added by P.L.5-2000, SEC.4.
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 the
requirements 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 the
following, or provisions at least substantially equivalent to the
following:
(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 the
power to engage in the business of issuing insurance policies or
contracts.
(3) A provision specifying that the MIHC is not authorized to
issue voting or any other capital stock.
(4) A provision setting forth the rights of members of the MIHC
in the equity of the MIHC in the event of a conversion to a
stock company under Indiana law or a dissolution under
IC 27-1-10, including the rights of the members to the assets of
the MIHC.
(5) A provision specifying that:
(A) a member of the MIHC is not, as a member, personally
liable for the acts, debts, liabilities, or obligations of the
MIHC; and
(B) no assessment may be imposed upon the members of the
MIHC by any person, including:
(i) the board of directors, members, or creditors of the
MIHC; and
(ii) any governmental office or official, including the
commissioner;
because of any liability of any company or because of any
act, 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 obligations
specified 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 MIHC
with respect to any membership interest in the MIHC, other than as
directed 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 up
of outside directors:
(1) The board of directors of an MIHC.
(2) The board of directors of a stock holding company that is
not a wholly-owned subsidiary of an MIHC.
(3) The board of directors of a reorganized insurer that is not a
wholly-owned subsidiary of an MIHC.
(4) Any audit committee or executive committee of the board of
directors of:
(A) an MIHC;
(B) a stock holding company that is not a wholly-owned
subsidiary of an MIHC; or
(C) a reorganized insurer that is not a wholly-owned
subsidiary of an MIHC.
(b) All of the directors who are members of any management
compensation committee of the following entities must be outside
directors:
(1) An MIHC.
(2) A stock holding company that is not a wholly-owned
subsidiary of an MIHC.
(3) A reorganized insurer that is not a wholly-owned subsidiary
of an MIHC.
(c) All of the directors who are members of any pricing committee
of the following entities with responsibility for approving the price
of stock sold in any offering under this article must be outside
directors:
(1) A stock holding company.
(2) A reorganized insurer.
(d) The commissioner may determine, after furnishing the
affected company and director with notice and opportunity to be
heard, that an individual does not qualify as an outside director or
otherwise should not be considered an outside director. Such an
individual may continue to serve as a director, but from the date the
commissioner notifies the affected company in writing of the
determination and the basis for the determination, the individual may
not be considered an outside director.
(e) A director's failure to qualify as or be considered an outside
director does not affect the validity of any action taken by the
company, the board of directors, or any committee of the board of
directors.
(f) Concurrent with the initial public offering of any securities of
a stock holding company or a reorganized insurer, the majority of the
members of the board of directors of the MIHC must be disinterested
directors. 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 of
insurance companies formed under this title; and
(2) is subject to all the requirements and regulations imposed
upon 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 write
insurance (except through an insurance company subsidiary)
and is not subject to any requirement or rule adopted under
IC 4-22-2 relating to the writing of insurance.
(2) An MIHC is not subject to the deposit requirement in
IC 27-1-6-15(d).
(3) An MIHC is not subject to any statute or rule adopted under
IC 4-22-2 that is imposed upon insurance companies formed
under this title to the extent that the statute or rule is in conflict
with this article.
(4) An MIHC is not subject to the investment requirements
under IC 27-1-12 or IC 27-1-13 that limit or restrict investments
in subsidiaries.
(5) An MIHC is not subject to risk-based capital requirements
under IC 27-1-36.
(6) An MIHC is not subject to a requirement under IC 27 if the
commissioner determines by order or rule adopted by the
commissioner under IC 4-22-2 that the requirement does not
apply 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 file
with the commissioner an annual statement containing the following
information:
(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 condition
imposed in connection with the approval of a plan of
reorganization.
(3) An investment plan covering all assets of the MIHC.
(4) A statement that the MIHC and its affiliates have complied
with 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 after
completion of a reorganization under IC 27-14-2, a reorganized
insurer shall file with the commissioner:
(1) a certificate of an actuary stating that the methodology used
by the reorganized insurer for any payment of policyholder
dividends in the previous year complied with the methodology
stated in the plan submitted under IC 27-14-2-4(5) or other
methodology approved by the commissioner; and
(2) a certificate of an independent auditor of the reorganized
insurer that the calculation of any participating policy dividends
paid during the previous year complied with the methodology
stated in the plan submitted under IC 27-14-2-4(5) and was
accurate.
(c) If the certification of the actuary or auditor required in
subsection (b) has not been filed or if the commissioner has other
reasonable cause, the commissioner may employ at the expense of
the reorganized insurer an independent actuary or auditor, or both, to
issue 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 after
completion of a reorganization under IC 27-14-2:
(1) by order applicable to a particular recognized insurer if the
commissioner determines that further certifications are
necessary for the protection of the interests of the policyholders
of the reorganized insurer; and
(2) by rule adopted under IC 4-22-2 if the commissioner
determines that further certifications are necessary for the
protection of the interests of the policyholders of all
reorganized insurers or a particular class of reorganized
insurers. 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 holding
company system; and
(2) an MIHC is considered to be an "insurer".
However, a separate filing or approval is not required under
IC 27-1-23 for an acquisition or a reorganization that is included in
a 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 transaction
equals or exceeds the percentages of admitted assets or
surplus set forth in IC 27-1-23-4(b) of any reorganized
insurer of the MIHC; or
(2) a transaction described in IC 27-1-23-4(b) between an
MIHC and any person as specified in a rule adopted by the
commissioner under IC 4-22-2 or an order issued by the
commissioner.
(c) An MIHC may not enter into a material transaction unless the
MIHC has notified the commissioner in writing of its intention to
enter into a material transaction at least thirty (30) days before the
transaction, or a shorter period as the commissioner may permit, and
the commissioner has not disapproved the transaction within that
period.
(d) In addition to the requirements of IC 27-1-23-4(a) and
IC 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 that
are part of a plan or series of like transactions if the purpose of those
separate transactions is to circumvent any rules of the commissioner
prohibiting 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 constitute
a 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, the
officers and directors of the MIHC:
(1) owe the same fiduciary responsibilities to members of the
MIHC as the officers and directors of the former MIC owed to
members of the former MIC; and
(2) are subject to potential liability to members of the MIHC to
the same extent as the officers and directors of the former MIC
were to members of the former MIC before the effective date of
the plan of reorganization.
(b) An action may be brought to recover for the violation of
fiduciary responsibilities under this article under IC 34-11-2-4, or, in
the 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 commissioner
approval of the dividend practices with respect to participating
policies and contracts in force as of the effective date of the
reorganization to be followed by the reorganized insurer as set forth
in IC 27-14-2-4(5) if the dividend practices of the reorganized insurer
will be different from the dividend practices of the MIC.
(b) The commissioner may require the establishment of a closed
block or other mechanism that the commissioner finds to be fair for
the protection of MIC policyholder dividends.
(c) The dividend practices of the reorganized insurer, the
requirement to establish a closed block or other mechanism, or the
terms of the closed block, may be modified after approval under
subsection (a) or subsequent to a reorganization under IC 27-14-2
only with the prior approval of the commissioner on application of
the reorganized insurer.
(d) Neither a stock holding company nor a reorganized insurer
may pay dividends or make other distributions with respect to its
stock to its shareholders if the reorganized insurer has failed to pay
policyholder dividends in compliance with the dividend practices
approved by the commissioner in accordance with this section.
(e) A reorganized insurer or stock holding company of the MIHC
that has any shareholder other than the MIHC or a direct or indirect
wholly owned subsidiary of the MIHC may not declare or pay any
dividend or other distribution on its capital stock except to the extent
of:
(1) one (1) or more years of net income attributable to the year
of or years after the effective date of the plan of reorganization;
and
(2) proceeds from the issuance of capital stock (which as of any
date shall be that amount equal to the net proceeds received by
the issuer less amounts previously paid out of the net proceeds
to 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" has
the same meaning as the term is defined by the Securities and
Exchange 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 company
shall include only those amounts that satisfy any one (1) of the
following criteria:
(1) Amounts that are payable with respect to services rendered
before the effective date of the plan of reorganization.
(2) Amounts that would be deemed to be reasonable
compensation by the Internal Revenue Service and therefore
allowed as proper expense deductions for federal income tax
purposes.
(3) Amounts that are disclosed to the policyholders in proxy
solicitation materials or other written materials approved by the
commissioner as part of the notice of the meeting of the
members called to approve a plan of reorganization, are
approved by the commissioner in principle and concept as part
of the approval of the plan of reorganization, and are approved
by 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 preserve
the safety and soundness of the stock insurance company
subsidiary by enabling it to engage and retain capable
employees.
(5) Amounts payable solely out of net income of the company
after 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 in
businesses outside the ordinary course of the insurance business only
from funds separately raised and net income earned, after the
effective date of a plan of reorganization. As added by P.L.5-2000, SEC.4.
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 the
requirements 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 the
following, or provisions at least substantially equivalent to the
following:
(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 the
power to engage in the business of issuing insurance policies or
contracts.
(3) A provision specifying that the MIHC is not authorized to
issue voting or any other capital stock.
(4) A provision setting forth the rights of members of the MIHC
in the equity of the MIHC in the event of a conversion to a
stock company under Indiana law or a dissolution under
IC 27-1-10, including the rights of the members to the assets of
the MIHC.
(5) A provision specifying that:
(A) a member of the MIHC is not, as a member, personally
liable for the acts, debts, liabilities, or obligations of the
MIHC; and
(B) no assessment may be imposed upon the members of the
MIHC by any person, including:
(i) the board of directors, members, or creditors of the
MIHC; and
(ii) any governmental office or official, including the
commissioner;
because of any liability of any company or because of any
act, 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 obligations
specified 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 MIHC
with respect to any membership interest in the MIHC, other than as
directed 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 up
of outside directors:
(1) The board of directors of an MIHC.
(2) The board of directors of a stock holding company that is
not a wholly-owned subsidiary of an MIHC.
(3) The board of directors of a reorganized insurer that is not a
wholly-owned subsidiary of an MIHC.
(4) Any audit committee or executive committee of the board of
directors of:
(A) an MIHC;
(B) a stock holding company that is not a wholly-owned
subsidiary of an MIHC; or
(C) a reorganized insurer that is not a wholly-owned
subsidiary of an MIHC.
(b) All of the directors who are members of any management
compensation committee of the following entities must be outside
directors:
(1) An MIHC.
(2) A stock holding company that is not a wholly-owned
subsidiary of an MIHC.
(3) A reorganized insurer that is not a wholly-owned subsidiary
of an MIHC.
(c) All of the directors who are members of any pricing committee
of the following entities with responsibility for approving the price
of stock sold in any offering under this article must be outside
directors:
(1) A stock holding company.
(2) A reorganized insurer.
(d) The commissioner may determine, after furnishing the
affected company and director with notice and opportunity to be
heard, that an individual does not qualify as an outside director or
otherwise should not be considered an outside director. Such an
individual may continue to serve as a director, but from the date the
commissioner notifies the affected company in writing of the
determination and the basis for the determination, the individual may
not be considered an outside director.
(e) A director's failure to qualify as or be considered an outside
director does not affect the validity of any action taken by the
company, the board of directors, or any committee of the board of
directors.
(f) Concurrent with the initial public offering of any securities of
a stock holding company or a reorganized insurer, the majority of the
members of the board of directors of the MIHC must be disinterested
directors. 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 of
insurance companies formed under this title; and
(2) is subject to all the requirements and regulations imposed
upon 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 write
insurance (except through an insurance company subsidiary)
and is not subject to any requirement or rule adopted under
IC 4-22-2 relating to the writing of insurance.
(2) An MIHC is not subject to the deposit requirement in
IC 27-1-6-15(d).
(3) An MIHC is not subject to any statute or rule adopted under
IC 4-22-2 that is imposed upon insurance companies formed
under this title to the extent that the statute or rule is in conflict
with this article.
(4) An MIHC is not subject to the investment requirements
under IC 27-1-12 or IC 27-1-13 that limit or restrict investments
in subsidiaries.
(5) An MIHC is not subject to risk-based capital requirements
under IC 27-1-36.
(6) An MIHC is not subject to a requirement under IC 27 if the
commissioner determines by order or rule adopted by the
commissioner under IC 4-22-2 that the requirement does not
apply 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 file
with the commissioner an annual statement containing the following
information:
(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 condition
imposed in connection with the approval of a plan of
reorganization.
(3) An investment plan covering all assets of the MIHC.
(4) A statement that the MIHC and its affiliates have complied
with 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 after
completion of a reorganization under IC 27-14-2, a reorganized
insurer shall file with the commissioner:
(1) a certificate of an actuary stating that the methodology used
by the reorganized insurer for any payment of policyholder
dividends in the previous year complied with the methodology
stated in the plan submitted under IC 27-14-2-4(5) or other
methodology approved by the commissioner; and
(2) a certificate of an independent auditor of the reorganized
insurer that the calculation of any participating policy dividends
paid during the previous year complied with the methodology
stated in the plan submitted under IC 27-14-2-4(5) and was
accurate.
(c) If the certification of the actuary or auditor required in
subsection (b) has not been filed or if the commissioner has other
reasonable cause, the commissioner may employ at the expense of
the reorganized insurer an independent actuary or auditor, or both, to
issue 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 after
completion of a reorganization under IC 27-14-2:
(1) by order applicable to a particular recognized insurer if the
commissioner determines that further certifications are
necessary for the protection of the interests of the policyholders
of the reorganized insurer; and
(2) by rule adopted under IC 4-22-2 if the commissioner
determines that further certifications are necessary for the
protection of the interests of the policyholders of all
reorganized insurers or a particular class of reorganized
insurers. 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 holding
company system; and
(2) an MIHC is considered to be an "insurer".
However, a separate filing or approval is not required under
IC 27-1-23 for an acquisition or a reorganization that is included in
a 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 transaction
equals or exceeds the percentages of admitted assets or
surplus set forth in IC 27-1-23-4(b) of any reorganized
insurer of the MIHC; or
(2) a transaction described in IC 27-1-23-4(b) between an
MIHC and any person as specified in a rule adopted by the
commissioner under IC 4-22-2 or an order issued by the
commissioner.
(c) An MIHC may not enter into a material transaction unless the
MIHC has notified the commissioner in writing of its intention to
enter into a material transaction at least thirty (30) days before the
transaction, or a shorter period as the commissioner may permit, and
the commissioner has not disapproved the transaction within that
period.
(d) In addition to the requirements of IC 27-1-23-4(a) and
IC 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 that
are part of a plan or series of like transactions if the purpose of those
separate transactions is to circumvent any rules of the commissioner
prohibiting 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 constitute
a 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, the
officers and directors of the MIHC:
(1) owe the same fiduciary responsibilities to members of the
MIHC as the officers and directors of the former MIC owed to
members of the former MIC; and
(2) are subject to potential liability to members of the MIHC to
the same extent as the officers and directors of the former MIC
were to members of the former MIC before the effective date of
the plan of reorganization.
(b) An action may be brought to recover for the violation of
fiduciary responsibilities under this article under IC 34-11-2-4, or, in
the 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 commissioner
approval of the dividend practices with respect to participating
policies and contracts in force as of the effective date of the
reorganization to be followed by the reorganized insurer as set forth
in IC 27-14-2-4(5) if the dividend practices of the reorganized insurer
will be different from the dividend practices of the MIC.
(b) The commissioner may require the establishment of a closed
block or other mechanism that the commissioner finds to be fair for
the protection of MIC policyholder dividends.
(c) The dividend practices of the reorganized insurer, the
requirement to establish a closed block or other mechanism, or the
terms of the closed block, may be modified after approval under
subsection (a) or subsequent to a reorganization under IC 27-14-2
only with the prior approval of the commissioner on application of
the reorganized insurer.
(d) Neither a stock holding company nor a reorganized insurer
may pay dividends or make other distributions with respect to its
stock to its shareholders if the reorganized insurer has failed to pay
policyholder dividends in compliance with the dividend practices
approved by the commissioner in accordance with this section.
(e) A reorganized insurer or stock holding company of the MIHC
that has any shareholder other than the MIHC or a direct or indirect
wholly owned subsidiary of the MIHC may not declare or pay any
dividend or other distribution on its capital stock except to the extent
of:
(1) one (1) or more years of net income attributable to the year
of or years after the effective date of the plan of reorganization;
and
(2) proceeds from the issuance of capital stock (which as of any
date shall be that amount equal to the net proceeds received by
the issuer less amounts previously paid out of the net proceeds
to 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" has
the same meaning as the term is defined by the Securities and
Exchange 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 company
shall include only those amounts that satisfy any one (1) of the
following criteria:
(1) Amounts that are payable with respect to services rendered
before the effective date of the plan of reorganization.
(2) Amounts that would be deemed to be reasonable
compensation by the Internal Revenue Service and therefore
allowed as proper expense deductions for federal income tax
purposes.
(3) Amounts that are disclosed to the policyholders in proxy
solicitation materials or other written materials approved by the
commissioner as part of the notice of the meeting of the
members called to approve a plan of reorganization, are
approved by the commissioner in principle and concept as part
of the approval of the plan of reorganization, and are approved
by 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 preserve
the safety and soundness of the stock insurance company
subsidiary by enabling it to engage and retain capable
employees.
(5) Amounts payable solely out of net income of the company
after 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 in
businesses outside the ordinary course of the insurance business only
from funds separately raised and net income earned, after the
effective date of a plan of reorganization. As added by P.L.5-2000, SEC.4.
