KRS 304.49-180: Conversion or merger of consortium captive insurer or industrial

insurer group into reciprocal insurer -- Plan of conversion or merger -- Other

conditions.

(1) A consortium captive insurer or industrial insured group formed as a stock or

mutual corporation or other legal or statutory entity may be converted to or merged

with and into a reciprocal insurer in accordance with a plan therefor and the

provisions of this section.

(2) Any plan for such conversion or merger shall be fair and equitable to th e

shareholders, in the case of a stock insurer, or the policyholders, in the case of a

mutual insurer.

(3) In the case of a conversion authorized under subsection (1) of this section:

(a) The conversion shall be accomplished under any reasonable plan and

procedure approved by the commissioner, but the commissioner shall not

approve any plan of conversion unless the plan:

1. Satisfies the provisions of subsection (2) of this section;

2. Provides for a hearing, of which notice has been given to the insurer, i ts

directors, officers, and stockholders, in the case of a stock insurer, or

policyholders, in the case of a mutual insurer, all of whom shall have the

right to appear at the hearing, except that the commissioner may waive

or modify the requirements for th e hearing, provided that if a notice of

hearing is required, but no hearing is requested, the commissioner may

cancel the hearing;

3. Provides for the conversion of existing stockholder or policyholder

interests into subscriber interests in the resulting r eciprocal insurer,

proportionate to stockholder or policyholder interests in the stock or

mutual insurer; and

4. Is approved:

a. In the case of a stock insurer, by a majority of the shares entitled to

vote represented in person or by proxy at a duly called regular or

special meeting at which a quorum is present;

b. In the case of a mutual insurer, by a majority of the voting interests

of policyholders represented in person or by proxy at a duly called

regular or special meeting at which a quorum is present;

(b) The commissioner shall approve the plan of conversion if the commissioner

finds that the conversion will promote the general good of the state in

conformity with those standards set forth in KRS 304.49-060(7);

(c) If the commissioner approves the plan , the commissioner shall amend the

converting insurer's certificate of authority to reflect conversion to a reciprocal

insurer and issue an amended certificate of authority to the company's

attorney-in-fact;

(d) Upon the issuance of an amended certificate of authority of a reciprocal

insurer by the commissioner, the conversion shall be effective; and

(e) Upon the effectiveness of the conversion, the corporate existence of the

converting insurer shall cease and the resulting reciprocal insurer shall notify

the Secretary of State of the conversion.

(4) A merger authorized under subsection (1) of this section shall be accomplished

substantially in accordance with the procedures set forth in KRS 304.24-390, except

that, solely for purposes of the merger:

(a) The plan of merger shall satisfy the provisions of subsection (2) of this

section;

(b) The subscribers' advisory committee of a reciprocal insurer shall be equivalent

to the board of directors of a stock or mutual insurer;

(c) The subscribers of a reciprocal insurer shall be the equivalent of the

policyholders of a mutual insurer;

(d) If a subscribers' advisory committee does not have a president or secretary, the

officers of the committee having substantially equiva lent duties shall be

deemed the president or secretary of the committee;

(e) The commissioner may, upon request of an insurer party to a merger

authorized under subsection (1) of this section, waive the requirement of KRS

304.24-390(4);

(f) The commissione r shall approve the articles of merger if the commissioner

finds that the merger will promote the general good of the state in conformity

with those standards set forth in KRS 304.49 -060(7). If the commissioner

approves the articles of merger, the commissi oner shall indorse his or her

approval thereon and the surviving insurer shall present and file them with the

Secretary of State;

(g) Notwithstanding KRS 304.49 -040, the commissioner may permit the

formation, without surplus, of a captive insurer organized as a reciprocal

insurer, into which an existing captive insurer may be merged for the purpose

of facilitating a transaction under this section; however, there shall be no more

than one (1) authorized insurer surviving the merger; and

(h) An alien insurer may be a party to a merger authorized under subsection (1) of

this section, provided that the requirements for a merger between a domestic

and a foreign insurer under KRS 304.24-390 shall apply to a merger between a

domestic and an alien insurer under this subsection. The alien insurer shall be

treated as a foreign insurer under KRS 304.24 -390 and the other jurisdictions

shall be the equivalent of a state for purposes of KRS 304.24-390.