Marvin Mandel, Governor                        1005

270. Converting Mutual Insurer TO STOCK INSURER.

(a)    A domestic mutual insurer may become a stock insurer
under such plan and procedure as may be approved by the Commis-
sioner after a hearing thereon.

(b)    The Commissioner shall not approve any such plan or pro-
cedure unless:

(1)    It is equitable to the insurer's members;

(2)    It is subject to approval by vote of not less than three-
fourths of the insurer's current members voting thereon in person,
by proxy, or by mail at a meeting of members called for the purpose
pursuant to such reasonable notice and procedure as may be approved
by the Commissioner; if a life insurer, right to vote may be limited
to members who hold policies other than term or group policies, and
whse WHOSE policies have been in force for not less than one year;

(3)    The equity of each policyholder in the insurer is determinable
under a fair formula approved by the Commissioner, which such
equity shall be based upon not less than the insurer's entire surplus
(after deducting contributed or borrowed surplus funds) plus a rea-
sonable present equity in its reserves and in all non-admitted assets;

(4)    The policy holders entitled to participate in the purchase of
stock or distribution of assets shall include all current policyholders
and all existing persons who had been a policyholder of the insurer
within three years prior to the date such plan was submitted to the
Commissioner;

(5)    The plan gives to each policyholder of the insurer as specified
in subdivision (4) above, a preemptive right to acquire his propor-
tionate part of all of the proposed capital stock of the insurer,
within a designated reasonable period, and to apply upon the pur-
chase thereof the amount of his equity in the insurer as determined
under subdivision (3) above;

(6)    Shares are so offered to policyholders at a price not greater
than to be thereafter offered to others, but at not more than double
the par value of such shares;

(7)    The plan provides for payment to each policyholder not elect-
ing to apply his equity in the insurer for or upon the purchase price
of stock to which preemptively entitled, of cash in the amount of not
less than fifty per cent (50%) of the amount of his equity not so used
for the purchase of stock, and which cash payment together with
stock so purchased, if any, shall constitute full payment and dis-
charge of the policyholder's equity as an owner of such mutual
insurer; and

(8)    The plan, when completed, would provide for the converted
insurer paid-in capital stock in an amount not less than the minimum
paid-in capital required of a domestic stock insurer transacting like
kinds of insurance, together with surplus funds in amount not less
than[one-half] fifty per cent of such required capital [.], for com-
panies commencing- business in this State prior to July 1, 1966, and
not less than one hundred per cent of such required capital for com-
panies commencing business in this State on or after July 1, 1966.
ONE-HUNDRED (100) PER-CENT OF SUCH REQUIRED
CAPITAL.