§ 27-1-40.1. Mutual insurance holding companies. (a)(1) Any domestic mutual insurance company, upon approval of the commissioner, may reorganize by forming or merging into a mutual insurance holding company based upon a plan of reorganization and continuing the corporate existence of the reorganizing insurance company as a stock insurance company. The commissioner, after a public hearing as provided in Rhode Island general laws subsection 27-35-2(d), if satisfied that the interests of the policyholders are properly protected and that the plan of reorganization is fair and equitable to the policyholders, may approve the proposed plan of reorganization or may require as a condition of approval such modifications of the proposed plan of reorganization as the commissioner finds necessary for the protection of the policyholders' interests. The commissioner may retain consultants as provided in Rhode Island general laws subdivision 27-35-2(d)(5). A reorganization pursuant to this section is subject to Rhode Island general laws §§ 27-35-1, 27-35-1.5, 27-35-2 and 27-35-2.5. The commissioner shall retain jurisdiction over a mutual insurance holding company organized pursuant to this section to assure that policyholder interests are protected.

(2) A plan of reorganization must be approved by two-thirds (2/3) vote of the board of directors or other governing body, the director of the department of business regulation, and the affirmative vote of a majority of those members or policyholders, (subscribers in the case of a health service corporation) constituting a quorum, present in person or by proxy at a meeting called by the board of directors or other governing body.

(3) All of the initial shares of the capital stock of the reorganized insurance company shall be issued to the mutual insurance holding company. The membership interests of the policyholders of the reorganized insurance company shall become membership interests in the mutual insurance holding company. Policyholders of the reorganized insurance company shall be members of the mutual insurance holding company in accordance with the articles of incorporation and bylaws of the mutual insurance holding company. The mutual insurance holding company shall at all times own a majority of the voting shares of the capital stock of the reorganized insurance company.

(4) A merger of policyholders' membership interests in a mutual insurance company into a mutual insurance holding company shall be deemed to be a merger of insurance companies pursuant to Rhode Island general laws § 27-35-2 and that chapter is also applicable.

(b) A foreign mutual insurance company or a foreign health service corporation, which if a domestic corporation would be organized under chapters 19, 20, 20.1, 20.2 or 20.3 of title 27, may reorganize upon the approval of the commissioner and in compliance with the requirements of any law or regulation which is applicable to the foreign mutual insurance company or foreign health service corporation by merging its policyholders' or subscribers' membership interests into a domestic mutual insurance holding company in the same manner as under subsection (a) above.

(c) A mutual insurance holding company resulting from the reorganization of a domestic mutual insurance company organized under chapter 1 of title 27 shall be incorporated pursuant to chapter 1 of title 27. The articles of incorporation and any amendments to such articles of the mutual insurance holding company shall be subject to approval of the commissioner in the same manner as those of an insurance company.

(d) A mutual insurance holding company is deemed to be an insurer subject to chapters 14.1, 14.2, 14.3 and 14.4 of title 27 and shall automatically be a party to any proceeding under chapters 14.3 or 14.4 of title 27 involving an insurance company which as a result of a reorganization pursuant to subsection (a) or (b) is a subsidiary of the mutual insurance holding company. In any proceeding under chapters 14.3 or 14.4 of title 27 involving the reorganized insurance company, the assets of the mutual insurance holding company are deemed to be assets of the estate of the reorganized insurance company for purposes of satisfying the claims of the reorganized insurance company's policyholders. A mutual insurance holding company shall not dissolve or liquidate without the approval of the commissioner or as ordered by the superior court pursuant to chapters 14.3 or 14.4 of title 27.

(e) Section 27-1-40 of the general laws is not applicable to a reorganization or merger pursuant to this section.

(f) A membership interest in a domestic mutual insurance holding company shall not constitute a security as defined in chapter 7-11.

(g) The majority of the voting shares of the capital stock of the reorganized insurance company, which is required by this section to be at all times owned by a mutual insurance holding company, shall not be conveyed, transferred, assigned, pledged, subjected to a security interest or lien, encumbered, or otherwise hypothecated or alienated by the mutual insurance holding company or intermediate holding company. Any conveyance, transfer, assignment, pledge, security interest, lien, encumbrance, or hypothecation or alienation of, in or on the majority of the voting shares of the reorganized insurance company which is required by this section to be at all times owned by a mutual insurance holding company, is in violation of this section and shall be void in inverse chronological order of the date of such conveyance, transfer, assignment, pledge, security interest, lien, encumbrance, or hypothecation or alienation, as to the shares necessary to constitute a majority of such voting shares. The majority of the voting shares of the capital stock of the reorganized insurance company which is required by this section to be at all times owned by a mutual insurance holding company shall not be subject to execution and levy. The shares of the capital stock of the surviving or new company resulting from a merger or consolidation of two (2) or more reorganized insurance companies or two (2) or more intermediate holding companies which were subsidiaries of the same mutual insurance holding company are subject to the same requirements, restrictions, and limitations as provided in this section to which the shares of the merging or consolidating reorganized insurance companies or intermediate holding companies were subject by this section prior to the merger or consolidation.

As used in this section, "majority of the voting shares of the capital stock of the reorganized insurance company" means shares of the capital stock of the reorganized insurance company which carry the right to cast a majority of the votes entitled to be cast by all of the outstanding shares of the capital stock of the reorganized insurance company for the election of directors and on all other matters submitted to a vote of the shareholders of the reorganized insurance company. The ownership of a majority of the voting shares of the capital stock of the reorganized insurance company which are required by this section to be at all times owned by a parent mutual insurance holding company includes indirect ownership through one or more intermediate holding companies in a corporate structure approved by the commissioner. However, indirect ownership through one or more intermediate holding companies shall not result in the mutual insurance holding company owning less than the equivalent of a majority of the voting shares of the capital stock of the reorganized insurance company. The commissioner shall have jurisdiction over an intermediate holding company as if it were a mutual insurance holding company. As used in this section, "intermediate holding company" means a holding company which is a subsidiary of a mutual insurance holding company, and which either directly or through a subsidiary intermediate holding company has one or more subsidiary reorganized insurance companies of which a majority of the voting shares of the capital stock would otherwise have been required by this section to be at all times owned by the mutual insurance holding company.

History of Section. (P.L. 1996, ch. 231, § 1; P.L. 2012, ch. 66, § 2; P.L. 2012, ch. 84, § 2; P.L. 2012, ch. 308, § 1; P.L. 2012, ch. 335, § 1.)