California Insurance Code 4097.04 – For the demutualization of a mutual insurer into a stock insurer or …
For the demutualization of a mutual insurer into a stock insurer or for the demutualization of a mutual holding company into a stock corporation, the plan for conversion shall include the following:
(a) A fair, just, and equitable formula, approved by the commissioner, for determining the rights in surplus of each eligible member in the mutual company. The formula shall take account of both the total premiums paid by each eligible member and the duration of his or her membership. The rights in surplus shall be based upon an appraisal of the fair value of the mutual company by one or more qualified disinterested persons appointed by the mutual company with the approval of the commissioner. Those persons shall consider the assets and liabilities of the mutual company and any factors bearing on the value of the mutual company.
Terms Used In California Insurance Code 4097.04
- Appraisal: A determination of property value.
- Assets: (1) The property comprising the estate of a deceased person, or (2) the property in a trust account.
- Commissioner: means the Insurance Commissioner of this State. See California Insurance Code 20
- Converting mutual company: means , for a plan of conversion under this article, the medical malpractice mutual insurer or mutual holding company that is converting under the plan. See California Insurance Code 4097.01
- Corporation: A legal entity owned by the holders of shares of stock that have been issued, and that can own, receive, and transfer property, and carry on business in its own name.
- Demutualization: means the conversion of a medical malpractice mutual insurer into a stock insurer without the establishment of a mutual holding company or the conversion of a mutual holding company into a stock corporation. See California Insurance Code 4097.01
- Eligible members: means , for the conversion of a mutual insurer, members of the mutual insurer who are of record, fully paid-up and otherwise in good standing on the mutual insurer's adoption date and on its effective date, but shall not include those persons covered solely under a reporting endorsement to a claims made policy on either date. See California Insurance Code 4097.01
- Equitable: Pertaining to civil suits in "equity" rather than in "law." In English legal history, the courts of "law" could order the payment of damages and could afford no other remedy. See damages. A separate court of "equity" could order someone to do something or to cease to do something. See, e.g., injunction. In American jurisprudence, the federal courts have both legal and equitable power, but the distinction is still an important one. For example, a trial by jury is normally available in "law" cases but not in "equity" cases. Source: U.S. Courts
- Liabilities: The aggregate of all debts and other legal obligations of a particular person or legal entity.
- Member: means a person who, by the records of the mutual company and by its articles of incorporation or bylaws, is deemed to be a holder of a membership interest in the mutual company. See California Insurance Code 4097.01
- Mutual company: means , in the case of a plan of conversion, the medical malpractice mutual insurer or mutual holding company that is converting pursuant to the plan. See California Insurance Code 4097.01
- Mutual holding company: means a corporation organized under the laws of this state subject to the general corporation law as set forth in the Corporations Code. See California Insurance Code 4097.01
- Mutual insurer: means , in the case of a plan of conversion under this article, the medical malpractice mutual insurer that is converting pursuant to the plan. See California Insurance Code 4097.01
- plan: means a plan adopted by a mutual company in compliance with this article. See California Insurance Code 4097.01
- Rights in surplus: includes rights of members of the insurer to a distribution of surplus in liquidation, conservation or demutualization of the insurer under this code, or in a dissolution or winding up. See California Insurance Code 4097.01
(b) Each eligible member of the mutual company shall be given a preemptive right to acquire his or her proportionate part of all of the proposed capital stock of the converting mutual company, within a designated reasonable period, by applying upon the purchase of that part the amount of his or her rights in surplus as determined under the formula described in subdivision (a).
(c) Each member not applying his or her rights in surplus upon the purchase price of stock shall elect to receive either a cash payment or a certificate of contribution. The cash payment shall not be greater than 50 percent of his or her rights in surplus as determined by the formula in subdivision (a). The certificate of contribution shall be in an amount equal to 100 percent of his or her rights in surplus, as determined by the formula in subdivision (a), shall bear interest at the rate established in Section 10489.4 for minimum standard valuation of all life insurance policies of more than 20 years’ duration issued in the year, and shall be repayable within 10 years or, if necessary under the terms of the plan, later, only on written approval of the commissioner and only out of surplus in excess of an amount established in the plan. Any member not electing to receive cash or purchase stock shall be deemed to have elected to receive a certificate of contribution. The stock purchased, cash payment, or certificate of contribution shall constitute full payment and discharge of the member’s rights in surplus or property interest in the mutual company, and, notwithstanding any other provision of law, the member shall have no other rights with respect thereto.
(d) The number of shares to be authorized for the new stock insurer, their par value, and the method for determining the price at which the shares will be offered to eligible members, to the end that the plan, when completed, would satisfy the financial requirements for issuance of a license to transact insurance.
(e) Provision for the offering to others of shares not purchased by eligible members within the designated period referred to in subdivision (b) at a price not less than the offering price to members.
(Added by Stats. 1998, Ch. 421, Sec. 4. Effective January 1, 1999.)