KRS 304.24-621: Use of closed block to preserve dividend expectations.

(1) The provisions of this section apply if a closed block is used for the preservation of

the reasonable dividend expectations of eligible members and other policyholders.

(2) The converting mutual shall prepare a written plan of operation for the closed block,

consistent with the requirements of this section and the other applicable

requirements of KRS 304.24-600 to 304.24-625.

(3) The closed block shall be operated for the exclusive benefit of policies and

contracts included in it. No costs or expenses incur red in connection with the

conversion shall be charged to the closed block.

(4) The assets allocated to the closed block, together with the revenue from the closed

block, shall be calculated to be reasonably sufficient to support the business in the

closed block until the last policy in the closed block has terminated, including

payment of claims and those expenses and taxes as are specified in the plan of

conversion, and to provide for continuation of dividend scales in effect on the

adoption date of the p lan of conversion, if the experience underlying those scales

continues and for appropriate adjustments in the scales if the experience changes.

(5) The assets to a closed block shall be specified in the plan of operation and must

consist of:

(a) A list of designated assets of the converting mutual's general account or

specified segments, which list shall change periodically to reflect the

acquisition and disposition of assets;

(b) A designated portion of each asset of the converting mutual's general account

or specified segments thereof, which portion shall change periodically to

reflect the cash flows of the closed block; or

(c) Assets designated by a combination of the methods described in paragraphs

(a) and (b) of this subsection.

(6) The plan of operation shall specify which of those methods of assignment of closed

block assets is being used and shall set forth the methods by which the designations

referred to in subsection (5) of this section are changed during the course of closed

block operations.

(7) The former mutual shall submit to the commissioner annual reports, in a form

acceptable to the commissioner, that account for and describe the operations of the

closed block; and as specified in the plan of operation provide for annual reviews

of, and reports and opinions on, the closed block by an independent actuary.

(8) The plan of operation shall provide for the conditions under which the former

mutual may terminate the closed block.

(9) The former mutual shall not distribute any residual assets of the closed block until

the plan for distribution of the residual assets is approved by the commissioner.