§ 3421. Mutualization of stock insurer

(a) A domestic stock insurer may become a mutual insurer under such plan and procedure as may be approved by the Commissioner after a hearing held substantially in accordance with the provisions of section 3305 of this title.

(b) The Commissioner shall not approve any such plan or mutualization unless:

(1) It is equitable to its stockholders and policyholders.

(2) It is subject to approval by the holders of not less than a majority of the insurer's outstanding capital stock having voting rights present at a duly called regular or special meeting thereof, and by not less than a majority of the insurer's policyholders who vote on such plan in person, by proxy or by mail pursuant to such notice and procedure as may be approved by the Commissioner.

(3) If a life insurer, the right to vote thereon is limited to holders of policies other than term or group policies, and whose policies have been in force for more than one year.

(4) Mutualization will result in retirement of shares of the insurer's capital stock at a price not in excess of the fair market value thereof as determined by competent disinterested appraisers.

(5) The plan provides for the purchase of the shares of any nonconsenting stockholder in substantially the same manner and subject to the same rights and conditions as are accorded a dissenting shareholder under section 3428 of this title.

(6) The plan provides for definite conditions to be fulfilled by a designated early date upon which such mutualization will be deemed effective and for notices substantially in accordance with section 3424 of this title.

(7) The mutualization leaves the insurer with surplus funds reasonably adequate for the security of its policyholders and to enable it to continue successfully in business in states in which it is then authorized to transact business, and for the kinds of insurance included in its certificates of authority in such states.

(c) No director, officer, agent, or employee of the insurer, nor any other person, shall receive any fee, commission, or other valuable consideration whatsoever for in any manner aiding, promoting, or assisting therein except as set forth in the plan of mutualization as approved by the Commissioner.

(d) This section shall not apply to mutualization under order of court pursuant to rehabilitation or reorganization of an insurer. (Added 1967, No. 344 (Adj. Sess.), § 1 (ch. 1, subch. 4, § 1).)