N.Y. Insurance Law § 7311: Conversion of domestic mutual property/casualty insurance companies or advance premium corporations into domestic stock property/casualty...

§ 7311. Conversion of domestic mutual property/casualty insurance

companies or advance premium corporations into domestic stock

property/casualty insurance companies; insurers in rehabilitation. (a) A

domestic mutual insurer organized under article twelve of this chapter

and licensed pursuant to article forty-one of this chapter and operating

pursuant to an order of rehabilitation, or a domestic advance premium

corporation organized and licensed under article sixty-six of this

chapter and operating pursuant to an order of rehabilitation, may, upon

application of the superintendent and pursuant to an order granted by

the court in which the rehabilitation is pending, be converted by the

superintendent into a domestic stock insurer in rehabilitation to be

organized under article twelve and licensed under article forty-one of

this chapter, in accordance with the provisions of subsection (b) of

this section.

(b) Before making such application to the court, the superintendent

shall hold a public hearing, notice of which shall be given by

publication in a newspaper of general circulation in the county in which

the insurer has its principal office and in the two largest cities in

each state in which the insurer has underwritten insurance within one

year preceding the date of the order of rehabilitation.

(c) If, after such hearing, the superintendent concludes that such

conversion is appropriate and is necessary for a successful

rehabilitation or is likely to materially enhance the probability of a

successful rehabilitation, he may apply to the court in which the

rehabilitation is pending for an order directing him to convert such

insurer into a domestic stock insurer in rehabilitation, pursuant to the

plan of conversion that the superintendent shall propose, subject to

court approval. The primary objective of the plan shall be the

successful rehabilitation of the insurer. In the development of such

plan the superintendent shall take into account the policyholders'

equity, if any, at the time of conversion and may in his discretion

provide for a distribution of such equity to each person who had a

policy in effect at any time during the three year period (or such

shorter period that the superintendent determines is practicable)

preceding the date of the filing of the application by the

superintendent. The plan shall provide for appropriate procedures

necessary for the implementation of the proposed conversion. Such stock

insurer in rehabilitation shall be subject to all of the applicable

provisions of this chapter, except those provisions relating to

licensing and financial requirements from which it is exempted by the

superintendent. Upon the termination of the order of rehabilitation, the

exemptions granted by the superintendent shall cease and the insurer

shall become subject to all applicable provisions of this chapter.

(d) The authorized capital stock of the new domestic stock insurer

shall be held for the benefit of the qualifying prospective shareholders

or purchasers by an escrow agent appointed by the superintendent. Such

stock shall be released to the owners of record after the court approves

the conversion and the order of rehabilitation is terminated.

(e) All expenses of the conversion, including the expenses incurred by

the department of financial services, shall be borne by the company

being converted.