As Amended by Senate Committee
Session of 1999
By Committee on Federal and State Affairs

10             AN  ACT concerning insurance; establishing a procedure for the conver-
11             sion of a stock or mutual insurance company into an insurance
12             reciprocal.
14       Be it enacted by the Legislature of the State of Kansas:
15             Section  1. (a) Any insurance company may convert to a Kansas in-
16       surance reciprocal in accordance with a plan for the conversion of the
17       insurance company into an insurance reciprocal filed with and approved
18       by the commissioner.
19             (b) The commissioner may establish reasonable requirements and
20       procedures for the submission and approval of a conversion plan author-
21       ized by subsection (a).
22             (c) No conversion plan shall be approved under this section unless
23       such conversion plan includes:
24             (1) A provision for the conversion of existing stockholder or policy-
25       holder interests in the insurance company into reciprocal or exchange
26       subscriber interests in the insurance reciprocal so that each subscriber's
27       interest in the resulting Kansas insurance reciprocal shall be fairly pro-
28       portionate to such subscriber's interest in the insurance company;
29             (2) a provision for the amendment of the insurance company's exist-
30       ing articles of incorporation or other chartering document to a sub-
31       scriber's agreement which complies with the provisions of K.S.A. 40-1602
32       and 40-1603 and amendments thereto;
33             (3) a copy of the proposed subscriber's agreement;
34             (4) proof of the approval or adoption of the conversion plan by not
35       less than 75% of the shares or policyholders entitled to vote, represented
36       either in person or by proxy, at a duly called regular or special meeting
37       of the stockholders or policyholders of the insurance company at which
38       a quorum, as determined by the bylaws or other chartering documents
39       of the insurance company, is present:
40             (5) a transition plan for the change of governance of the insurance
41       company from the board of directors and officer structure of the insur-
42       ance company to the insurance reciprocal which shall be governed by
43       article 16 of chapter 40 of the Kansas Statutes Annotated and amend-

SB 356--Am.


  1       ments thereto; and
  2             (6) any other information required by the commissioner.
  3             (d) The commissioner shall approve the conversion plan if the com-
  4       missioner finds that the proposed conversion will:
  5             (1) Not be detrimental to the interests of the stockholders or poli-
  6       cyholders of the insurance company;
  7             (2) not be detrimental to the interests of the state of Kansas; and
  8             (3) not render the insurer incapable of fulfilling the insurer's con-
  9       tractual obligations.
10             (e) Upon approval of a conversion plan under this section, the com-
11       missioner shall issue a new or amended certificate of authority, which
12       shall be deemed to be the final act of conversion at which time the in-
13       surance company shall concurrently become an insurance reciprocal. The
14       insurance reciprocal shall be deemed to be a continuation of the insurance
15       company and deemed to have been organized at the time the converted
16       insurance company was organized.
17             (f) Each insurance reciprocal created pursuant to this section shall
18       comply with all provisions of K.S.A. 40-1612, and amendments thereto.
19             (g) Any conversion of an insurance company to a reciprocal shall not
20       be subject to the provisions of K.S.A. 40-3304, and amendments thereto.
21             (h) For the purposes of this section:
22             (1) "Commissioner" means the commissioner of insurance.
23             (2) "Insurance company" means a stock or mutual insurance
24       company.
25             (3) "Insurance reciprocal" means a reciprocal or interinsurance
26       exchange established to exchange reciprocal or interinsurance contracts
27       with subscribers to provide indemnity among themselves.
28             Sec.  2. Within 15 days of the date of the commissioner's approval or
29       denial of the conversion plan submitted in accordance with section 1, the
30       insurance company shall have the right to request a hearing by filing a
31       written request with the commissioner. The commissioner shall conduct
32       the hearing in accordance with the provisions of the Kansas administrative
33       procedure act within 30 days after such request is filed. Any action of the
34       commissioner pursuant to this section is subject to review in accordance
35       with the provisions of the act for judicial review and civil enforcement of
36       agency actions.
37             Sec.  3. The provisions of this act shall be supplemental to article 16
38       of chapter 40 of the Kansas Statutes Annotated and amendments thereto.
39        Sec.  4. This act shall take effect and be in force from and after its
40       publication in the statute book Kansas register.