2012 Delaware Code
Title 18 - Insurance Code
CHAPTER 49. ORGANIZATION AND CORPORATE POWERS; PROCEDURES OF DOMESTIC STOCK AND MUTUAL INSURERS
§ 4933. Converting mutual insurer.

(a) A mutual insurer may become a stock insurer under such reasonable plan and procedure as may be approved by the Commissioner after a hearing thereon of which notice was given to the insurer, its directors or trustees, its officers, employees and its members, all of whom shall have the right to appear at the hearing.

(b) The Commissioner shall not approve any such plan or procedure unless:

(1) Its terms and conditions are fair and equitable;

(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 shall be limited to members who hold policies other than group policies or term policies for terms of less than 20 years, and whose policies have been in force for not less than 1 year;

(3) The equity of each member in the insurer is determinable under a fair and reasonable formula approved by the Commissioner, which such equity shall be based upon the insurer's entire surplus including all voluntary reserves but excluding contingently repayable funds and without taking into account nonadmitted assets for insurance business in force;

(4) The plan gives to each member of the insurer, as specified in subdivision (5) below, a preemptive right to acquire such member's proportionate part of all of the proposed capital stock of the insurer within a designated reasonable period, as such part is determinable under the plan of conversion, and to apply upon the purchase thereof the amount of such member's equity in the insurer as determined under subdivision (3) above;

(5) The members entitled to participate in the purchase of stock or distribution of assets shall include not less than all current policyholders of the insurer and each existing person who had been a policyholder of the insurer within 3 years prior to the date such plan was submitted to the Commissioner;

(6) Shares are to be offered to members at a price not greater than to be thereafter offered under the plan to others;

(7) The plan provides for payment to each member not electing to apply equity in the insurer for or upon the purchase price of stock to which preemptively entitled of cash in an amount found to be reasonable by the Commissioner but not in excess of 50% of the amount of the member's 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 discharge of the member's equity or property interest as an owner of such mutual insurer;

(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 stock required of a domestic stock insurer upon initial authorization to transact like kinds of insurance, together with expendable surplus funds in amount not less than one half of such required capital stock; and

(9) The Commissioner finds that the insurer's management has not, through reduction in volume of new business written or cancellation or through any other means sought to reduce, limit or affect the number or identity of the insurer's members to be entitled to participate in such plan or to secure for the individuals comprising management any unfair advantage through such plan.

(c) Subsection (b) of this section shall not be deemed to prohibit the inclusion in the mutualization plan of provisions under which the individuals comprising the insurer's management and employee group shall be entitled to purchase for cash at the same price as offered to the insurer's members, shares of stock not taken by members on the preemptive offering to members, in accordance with such reasonable classifications of such individuals as may be included in the plan and approved by the Commissioner.

(d) No director, officer, agent or employee of the insurer or any other person shall receive any fee, commission or other valuable consideration whatsoever, other than their usual regular salaries and compensation, for in any manner aiding, promoting or assisting in such conversion except as set forth in the plan approved by the Commissioner. This provision shall not be deemed to prohibit the payment of reasonable fees and compensation to attorneys-at-law, accountants and actuaries for services performed in the independent practice of their professions, even though also directors of the insurer.

(e) In the event the equity of each member is determined under subsection (b)(3) of this section to be $0, the Commissioner may disregard the requirements of subsections (b)(4) and (b)(7) of this section in approving a plan of conversion, if the Commissioner finds that such approval would otherwise be in the best interests of policyholders.

18 Del. C. 1953, § 4933; 56 Del. Laws, c. 380, § 1; 70 Del. Laws, c. 186, § 1; 71 Del. Laws, c. 403, § 1.;