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Form a Business

Insurance Holding Company Systems

KRS tit. XXV, ch. 304, subtit. 37
in effect

KRS 304.37-010 Definitions for Subtitle 37

304.37-010. Definitions for Subtitle 37 As used in this subtitle, unless the context requires otherwise: (1) "Affiliate" or person "affiliated" with a specific person means a person that directly, or indirectly through one (1) or more intermediaries, controls, or is controlled by, or is under common control with, the person specified; (2) "Commissioner" means: (a) The commissioner of insurance of this state; or (b) When the context requires, the commissioner of insurance, or an equivalent official, of another state; (3) (a) "Control," "controlling," "controlled by," and "under common control with" mean the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract other than a loan contract or commercial contract for goods or nonmanagement services, or otherwise, unless the power is the result of an official position with or corporate office held by the person. (b) Control shall be presumed to exist if any person, directly or indirectly, owns, controls, holds with the power to vote, or holds proxies representing ten percent (10%) or more of the voting securities of any other person. This presumption may be rebutted by a showing, made in the manner provided by KRS 304.37-020(13), that control does not exist in fact. The commissioner may determine, after forwarding all persons in interest notice and opportunity to be heard and making specific findings of fact to support the determination, that control exists in fact, notwithstanding the absence of a presumption to that effect; (4) "Enterprise risk" means any activity, circumstance, event, or series of events involving one (1) or more affiliates of an insurer that, if not remedied promptly: (a) Is likely to have a material adverse effect upon the financial condition or liquidity of the insurer or its insurance holding company system as a whole, including but not limited to anything that would cause the insurer's risk-based capital to fall into company action level as set forth in KRS 304.3-125 and administrative regulations promulgated thereunder; or (b) Would cause the insurer to be in hazardous financial condition in accordance with KRS 304.2-065; (5) "Groupwide supervisor" means the regulatory official authorized to engage in conducting and coordinating groupwide supervision activities in accordance with KRS 304.37-160; (6) "Insurance holding company system" means two (2) or more affiliated persons, one (1) or more of which is an insurer; (7) "Insurer" has the same meaning as in KRS 304.1-040, except it shall not include agencies, authorities, or instrumentalities of the United States, its possessions and territories, the Commonwealth of Puerto Rico, the District of Columbia, or a state or political subdivision of a state; (8) "Internationally active insurance group" means an insurance holding company system that: (a) Includes an insurer registered under KRS 304.37-020; and (b) Meets the following criteria: 1. Has premiums written in at least three (3) countries; 2. Has gross premiums written outside of the United States that are at least ten percent (10%) of the system's total gross written premiums; and 3. Based on a three (3) year rolling average: a. Has total assets that are at least fifty billion dollars ($50,000,000,000); or b. Has total gross written premiums that are at least ten billion dollars ($10,000,000,000); (9) "NAIC" means the National Association of Insurance Commissioners; (10) "Person": (a) Means an individual, a corporation, a partnership, an association, a joint stock company, an unincorporated organization, any similar entity, or any combination of the foregoing acting in concert; and (b) Shall not include any: 1. Bank in its fiduciary capacity; or 2. Securities broker performing no more than the usual and customary broker's function; (11) "Subsidiary" of a specified person means an affiliate controlled by the person directly or indirectly through one (1) or more intermediaries; (12) "Supervisory college" means a forum for cooperation and communication between the involved supervisors established for the fundamental purpose of facilitating the effectiveness of supervision of entities which belong to an insurance group and facilitating both the supervision of the group as a whole on a groupwide basis and improving the legal entity supervision of the entities within the insurance group; and (13) "Voting security" includes any security convertible into or evidencing a right to acquire a voting security. Effective: July 14, 2022 History: Amended 2022 Ky. Acts ch. 133, sec. 7, effective July 14, 2022. -- Amended 2019 Ky. Acts ch. 156, sec. 2, effective June 27, 2019. -- Amended 2012 Ky. Acts ch. 74, sec. 13, effective July 12, 2012. -- Amended 2010 Ky. Acts ch. 24, sec. 1472, effective July 15, 2010. -- Amended 1994 Ky. Acts ch. 92, sec. 4, effective July 15, 1994. – Amended 1992 Ky. Acts ch. 267, sec. 7, effective July 14, 1992. -- Created 1972 Ky. Acts ch. 52, sec. 1, effective June 16, 1972.

KRS 304.37-020 Registration of insurers

304.37-020. Registration of insurers (1) As used in this section: (a) "Group capital calculation instructions" means the group capital calculation instructions adopted or amended by the NAIC in accordance with procedures adopted by the NAIC; and (b) 1. "NAIC Liquidity Stress Test Framework" means a separate NAIC publication that includes: a. A history of the NAIC's development of regulatory liquidity stress testing; and b. The following, as adopted or amended by the NAIC in accordance with procedures adopted by the NAIC: i. The scope criteria applicable for a specific data year; and ii. The liquidity stress test instructions and reporting templates for a specific data year. 2. As used in this paragraph, "scope criteria" means the designated exposure bases, along with minimum magnitudes thereof for the specified data year, used to establish a preliminary list of insurers considered scoped into the NAIC Liquidity Stress Test Framework for that data year. (2) (a) Every insurer that is authorized to do business in this state and is a member of an insurance holding company system shall register with the commissioner, except a foreign or alien insurer subject to disclosure requirements and standards adopted by statute or regulation in the jurisdiction of its domicile that are substantially similar to those contained in this section. (b) For an alien insurer, the domiciliary state shall be deemed to be its state of entry. (c) Any insurer that is subject to registration under this section shall register fifteen (15) days after it becomes subject to registration and annually thereafter by April 1 of each year for the previous calendar year, unless the commissioner for good cause shown extends the time for registration and then, within the extended time. (d) The commissioner may require any authorized insurer that is a member of a holding company system but is not subject to registration under this section to furnish a copy of the registration statement or other information filed by the insurer with the insurance regulatory authority of its domiciliary jurisdiction. (3) Every insurer subject to registration shall file a registration statement on a form provided by the commissioner, which shall contain current information about: (a) The capital structure, general financial condition, ownership, and management of the insurer and any person controlling the insurer; (b) The identity of every member of the insurance holding company system; (c) The following agreements in force, relationships subsisting, and transactions currently outstanding between the insurer and its affiliates: 1. Loans to, other investments in, or purchases, sales, or exchanges of securities of the affiliates by the insurer or of the insurer by its affiliates; 2. Purchases, sales, or exchanges of assets; 3. Transactions not in the ordinary course of business; 4. Guarantees or undertakings for the benefit of an affiliate which result in an actual contingent exposure of the insurer's assets to liability, other than insurance contracts entered in the ordinary course of the insurer's business; 5. All management and service contracts and all cost-sharing arrangements; 6. All reinsurance agreements; 7. Dividend and other distributions to shareholders; and 8. Consolidated tax allocation agreements; (d) Any pledge of the insurer's stock, including stock of any subsidiary or controlling affiliate for a loan made to any member of the insurance holding company system; (e) 1. If requested by the commissioner, financial statements of, or within, an insurance holding company system, including all affiliates. 2. Financial statements may include but are not limited to annual audited financial statements filed with the United States Securities and Exchange Commission, pursuant to the Securities Act of 1933, as amended, or the Securities Exchange Act of 1932, as amended. 3. An insurer required to file financial statements pursuant to this paragraph may satisfy the request by providing the commissioner with the most recently filed parent corporation financial statements that have been filed with the United States Securities and Exchange Commission; (f) Other matters concerning transactions between registered insurers and any affiliates as may be included from time to tim e in any registration forms adopted or approved by the commissioner; (g) Statements that the insurer's: 1. Board of directors oversees corporate governance and internal controls; and 2. Officers or senior management have approved, implemented, and continue to maintain and monitor corporate governance and internal control procedures; and (h) Any other information required by the commissioner through administrative regulations. (4) (a) It shall not be necessary to disclose information on the registration statement filed pursuant to subsection (3) of this section if the information is not material for the purposes of this section. (b) Unless the commissioner by administrative regulation or or der provides otherwise, sales, purchases, exchanges, loans, or extensions of credit, or investments, involving one-half of one percent (0.5%) or less of an insurer's admitted assets as of the thirty-first day of December next preceding shall not be deemed material for purposes of this section. (c) The materiality guidelines provided in this subsection shall not apply for purposes of the information required under subsections (15) and (16) of this section. (5) Each registered insurer shall keep current the information required to be disclosed in its registration statement by reporting all material changes or additions on amendment forms provided by the commissioner within: (a) Except as provided in paragraph (b) of this subsection, thirty (30) days after the end of the month in which the insurer learns of each change or addition; or (b) A timeframe established by the commissioner in accordance with the reporting standards prescribed by the National Association of Insurance Commissioners. (6) All registration statements shall contain a summary outlining all items in the current registration statement representing changes from the prior registration statement. (7) Subject to KRS 304.37-030(5), each registered insurer shall report to the commissioner all dividends and other distributions to shareholders within fifteen (15) business days following the dividend or distribution declaration. (8) Any person within an insurance holding company system subject to registration shall be required to provide complete and accurate information to an insurer, if the information is reasonably necessary to enable the insurer to comply with the provisions of this subtitle. (9) The commissioner shall terminate the registration of any insurer which demonstrates that it no longer is a member of an insurance holding company system. (10) The commissioner may require or allow two (2) or more affiliated insurers subject to registration to file a consolidated registration statement or consolidated reports amending their consolidated registration statement or their individual registration statements. (11) The commissioner may allow an insurer that is authorized to do business in this state and which is part of an insurance holding company system to: (a) Register on behalf of any affiliated insurer that is required to register under subsection (2) of this section; and (b) File all information and material required to be filed under this section. (12) The provisions of this section shall not apply to any insurer, information, or transaction if and to the extent that the commissioner by administrative regulation or order exempts it from the provisions of this section. (13) (a) Any person may file with the commissioner a disclaimer of affiliation with any authorized insurer or a disclaimer may be filed by the insurer or any member of an insurance holding company system. (b) The disclaimer shall fully disclose all material relationships and bases for affiliation between the persons and the insurer as well as the basis for disclaiming the affiliation. (c) A disclaimer of affiliation shall be deemed to have been granted unless the commissioner, within thirty (30) days following receipt of a complete disclaimer, notifies the filing party the disclaimer is disallowed. (d) In the event of disallowance, the disclaiming party may request an administrative hearing, which shall be granted. (e) The disclaiming party shall be relieved of its duty to register under this section if: 1. Approval of the disclaimer has been granted by the commissioner; or 2. The disclaimer is deemed to have been approved. (14) (a) The ultimate controlling person of every insurer subject to registration shall also file an annual enterprise risk report. (b) The report shall: 1. To the best of the ultimate controlling person's knowledge and belief, identify the material risks within the insurance holding company system that could pose enterprise risk to the insurer; and 2. Be filed with the lead state commissioner of the insurance holding company system, as determined by the procedures within the Financial Analysis Handbook adopted by the NAIC. (15) (a) Except as provided in this subsection, the ultimate controlling person of every insurer subject to registration shall concurrently file with the registration an annual group capital calculation as directed by the lead state commissioner. (b) The report shall be: 1. Completed in accordance with the group capital calculation instructions, which may permit the lead state commissioner to allow a controlling person that is not the ultimate controlling person to file the group capital calculation; and 2. Filed with the lead state commissioner of the insurance holding company system as determined by the commissioner in accordance with the procedures within the Financial Analysis Handbook adopted by the NAIC. (c) An insurance holding company system shall be exempt from filing the group capital calculation if: 1. The system: a. Has only one (1) insurer within its holding company structure; b. Only writes business in its domestic state; and c. Assumes no business from any other insurer; 2. a. The system is required to perform a group capital calculation specified by the United States Federal Reserve Board. b. The lead state commissioner shall req uest the calculation from the Federal Reserve Board under the terms of information sharing agreements in effect. If the Federal Reserve Board cannot share the calculation with the lead state commissioner, the insurance holding company system is not exempt from the group capital calculation filing; 3. The system's non-United States groupwide supervisor is located within a reciprocal jurisdiction, as defined in KRS 304.5-140, that recognizes the United States state regulatory approach to group supervision and group capital; or 4. The system: a. Provides information to the lead state that meets the requirements for accreditation under the NAIC Financial Regulation Standards and Accreditation Program, either directly or indirectly, through the groupwide supervisor, who has determined the information is satisfactory to allow the lead state to comply with the NAIC group supervision approach, as detailed in the NAIC Financial Analysis Handbook; and b. Has a non-United States groupwide supervisor, which is not in a reciprocal jurisdiction as defined in KRS 304.5 -140, that recognizes and accepts, as specified by the commissioner in administrative regulation, the group capital calculation as the worldwide group capital assessment for United States insurance groups who operate in that jurisdiction. (d) Notwithstanding the provisions of paragraph (c)3. and 4. of this subsection, a lead state commissioner shall require the group capital calculation for the United States operations of any insurance holding company system not based in the United States where, after any necessary consultation with other supervisors or officials, it is deemed appropriate by the lead state commissioner for: 1. Prudential oversight and solvency monitoring purposes; or 2. Ensuring the competitiveness of the insurance marketplace. (e) In addition to the exemptions established in paragraph (c) of this subsection, the lead state commissioner may exempt the ultimate controlling person from filing the annual group capital calculation or accept a limited group capital filing or report in accordance with criteria specified by the commissioner in administrative regulation. (f) If the lead state commissioner determines that an insurance holding company system no longer meets one (1) or more of the requirement s for an exemption from filing the group capital calculation under this subsection, the system shall file the group capital calculation at the next annual filing date unless given an extension by the lead state commissioner based on reasonable grounds shown. (16) (a) The ultimate controlling person of every insurer subject to registration and also scoped into the NAIC Liquidity Stress Test Framework shall file the results of a specific year's liquidity stress test. (b) The filing shall be made to the lead state commissioner of the insurance holding company system, as determined by the procedures within the Financial Analysis Handbook adopted by the NAIC. (c) 1. The NAIC Liquidity Stress Test Framework shall include scope criteria: a. Applicable to a specific data year; and b. Reviewed at least annually by the NAIC's Financial Stability Task Force or its successor. 2. Any change to the NAIC Liquidity Stress Test Framework or to the data year for which the scope criteria ar e to be measured shall be effective on January 1 of the year following the calendar year when the changes are adopted. 3. a. Insurers meeting at least one (1) threshold of the scope criteria shall be considered scoped into the NAIC Liquidity Stress Test Framework for the specified data year unless the lead state commissioner, in consultation with the NAIC Financial Stability Task Force or its successor, determines the insurer should not be scoped into the framework for that data year. b. Insurers that do not trigger at least one (1) threshold of the scope criteria shall be considered scoped out of the NAIC Liquidity Stress Test Framework for the specified data year, unless the lead state commissioner, in consultation with the NAIC Financial Stability Task Force or its successor, determines the insurer should be scoped into the framework for that data year. 4. The lead state commissioner, in consultation with the NAIC Financial Stability Task Force or its successor, shall assess concerns related to insurers being scoped in and out of the NAIC Liquidity Stress Test Framework on a frequent basis as part of the scope criteria determination for an insurer. (d) The performance of, and the filing of the results from, a specified year's liquidity stress test shall com ply with: 1. The NAIC Liquidity Stress Test Framework's instructions and reporting templates for that year; and 2. Any lead state commissioner determinations, made in consultation with the NAIC Financial Stability Task Force or its successor, provided within the NAIC Liquidity Stress Test Framework. (17) The failure to file a registration statement or any amendment thereto, a summary of the registration statement, an enterprise risk filing, or any other filing or report required by this section within the t ime specified for the filing or report shall be a violation of this subtitle. Effective: July 15, 2024 History: Amended 2024 Ky. Acts ch. 129, sec. 2, effective July 15, 2024. -- Amended 2022 Ky. Acts ch. 133, sec. 8, effective July 14, 2022. -- Amended 2012 Ky. Acts ch. 74, sec. 14, effective July 12, 2012. -- Amended 2010 Ky. Acts ch. 24, sec. 1473, effective July 15, 2010. -- Amended 1996 Ky. Acts ch. 326, sec. 4, effective July 15, 1996. -- Amended 1994 Ky. Acts ch. 92, sec. 5, effective July 15, 1994; and ch. 93, sec. 17, effective July 15, 1994. – Amended 1992 Ky. Acts ch. 267, sec. 4, effective July 14, 1992. -- Created 1972 Ky. Acts ch. 52, sec. 2, effective June 16, 1972.

KRS 304.37-030 Standards for insurance holding company system -- Factors to be considered -- Prohibited transactions

304.37-030. Standards for insurance holding company system -- Factors to be considered -- Prohibited transactions (1) Material transactions by registered insurers with their affiliates shall be subject to the following standards: (a) The terms shall be fair and reasonable; (b) Agreements for cost sharing services and management shall include provisions as required by administrative regulations promulgated by the commissioner; (c) Charges or fees for services performed shall be reasonable; (d) Expenses incurred and payment received shall be allocated to the insurer in conformity with consistently applied accounting practices; (e) The books, accounts, and records of each party shall be maintained to clearly and accurately disclose the precise nature and details of the transactions; and (f) The insurer's surplus as regards policyholders, following any dividends or distributions to shareholder affiliates, shall be reasonable in relation to the insurer's outstanding liabilities and adequate to its financial needs. (2) (a) The following transactions involving a domestic insurer and any person in its insurance holding company system, including amendments or modifications of affiliate agreements previously filed pursuant to this subsection, which are subject to any materiality standards contained in this subsection, shall not be entered into unless the insurer has notified the commissioner in writing of its intention to enter into the transaction at least thirty (30) days prior to the transaction, or a shorter period as the commissioner may permit, and the commissioner has not disapproved it within that time. The notice for amendments or modifications shall include the reasons for the change and the financial impact on the domestic insurer. Informal notice shall be reported, within thirty (30) days after a termination of a previously filed agreement, to the commissioner for determination of the type of filing required, if any: 1. Sales, purchases, exchanges, loans, or extensions of credit, guarantees, or investments, if the transactions are equal to or exceed, with respect to non-life insurers, the lesser of three percent (3%) of the insurer's admitted assets or twenty-five percent (25%) of surplus as regards policyholders, or with respect to life insurers, three percent (3%) of the insurer's admitted assets, each as of December 31 next preceding; 2. Loans or extensions of credit to any person who is not an affiliate, if the insurer makes the loans or extensions of credit with the agreement or understanding that the proceeds of the transactions, in whole or in substantial part, are to be used to make loans or extensions of credit to, to purchase assets of, or to make investments in, any affiliate of the insurer making the loans or extensions of credit if the transactions are equal to or exceed, with respect to non-life insurers, the lesser of three percent (3%) of the insurer's admitted assets or twenty-five percent (25%) of surplus as regards policyholders, or, with respect to life insurers, three percent (3%) of the insurer's admitted assets, each as of December 31 next preceding; 3. Reinsurance agreements or modifications including: a. All reinsurance pooling agreements; and b. Agreements in which the reinsurance premium or a change in the insurer's liabilities, or the projected reinsurance premium or a change in the insurer's liability in any of the next three (3) years, equals or exceeds five percent (5%) of the insurer's surplus as regards policyholders, as of December 31 next preceding, including those agreements which may require as consideration the transfer of assets from an insurer to a nonaffiliate, if an agreement or understanding exists between the insurer and nonaffiliate that any portion of the assets will be transferred to one (1) or more affiliates of the insurer; 4. All management agreements, service contracts, and all cost sharing arrangements; 5. Guarantees when made by a domestic insurer; provided, however, that a guarantee which is quantifiable as to amount is not subject to the notice requirements of this paragraph unless it exceeds the lesser of one-half of one percent (0.5%) of the insurer's admitted assets or ten percent (10%) of surplus, regarding policyholders as of the thirty-first day of December of the preceding year. All guarantees which are not quantifiable as to amount shall be subject to the notice requirements of this paragraph; 6. Direct or indirect acquisitions or investments in a person that controls the insurer or in an affiliate of the insurer in an amount which, together with its present holding in investments, exceeds two and one-half percent (2.5%) of the insurer's surplus to policyholders. Direct or indirect acquisitions or investments in subsidiaries acquired pursuant to KRS 304.37-110, authorized under this subtitle, or in nonsubsidiary insurance affiliates that are subject to the provisions of this subtitle are exempt from this requirement; and 7. Any material transactions, specified by regulation, which the commissioner determines may adversely affect the interests of the insurer's policyholders. (b) This subsection shall not authorize or permit any transactions which, in the case of an insurer not a member of the same holding company system, would be otherwise contrary to law. (c) A domestic insurer shall not enter into transactions which are part of a plan or series of like transactions with persons within the holding company system if the purpose of those separate transactions is to avoid the statutory threshold amount and thus avoid the review that would otherwise occur. If the commissioner determines that the separate transactions were entered into over any twelve (12) month period for avoidance purposes, the commissioner may exercise his or her authority under KRS 304.99-151. (d) The commissioner, in reviewing transactions pursuant to this subsection, shall consider whether the transactions comply with the standards set forth in subsection (1) of this section and whether they may adversely affect the interests of policyholders. (e) The commissioner shall be notified within thirty (30) days of any investment of the domestic insurer in any one (1) corporation if the total investment in the corporation by the insurance holding company exceeds ten percent (10%) of the corporation's voting securities. (3) (a) Notwithstanding the control of a domestic insurer by any person, the officers and directors of the insurer shall not be relieved of any obligation or liability to which they would otherwise be subject by law, and the insurer shall be managed so as to assure its separate operating identity consistent with this chapter. (b) Nothing in this section precludes a domestic insurer from having or sharing a common management or cooperative or joint use of personnel, property, or services with one (1) or more other persons under arrangements which meet the standards of subsection (1) of this section. (4) The following factors, among others, shall be considered in determining whether an insurer's surplus as regards policyholders is reasonable in relation to the insurer's outstanding liabilities and adequate to its financial needs: (a) The size of the insurer as measured by its assets, capital and surplus, reserves, premium writings, insurance in force, and other appropriate criteria; (b) The extent to which the insurer's business is diversified among the several lines of insurance; (c) The number and size of risks insured in each line of business; (d) The extent of the geographical dispersion of the insurer's insured risks; (e) The nature and extent of the insurer's reinsurance program; (f) The quality, diversification, and liquidity of the insurer's investment portfolio; (g) The recent past and projected future trend in the size of the insurer's surplus as regards policyholders; (h) The surplus as regards policyholders maintained by other comparable insurers; (i) The adequacy of the insurer's reserves; and (j) The quality and liquidity of investments in subsidiaries. The commissioner may treat any investment as a disallowed asset for purposes of determining the adequacy of surplus as regards policyholders if in his or her judgment the investment warrants. (5) No insurer subject to registration under KRS 304.37-020 shall pay any extraordinary dividend or make any other extraordinary distribution to its stockholders until thirty (30) days after the commissioner has received notice of the declaration thereof and has not within the period disapproved the payment, or the commissioner shall have approved the payment within the thirty (30) day period. For purposes of this section, an extraordinary dividend or distribution is any dividend or distribution which, together with other dividends or distribution made within the preceding twelve (12) months, exceeds the lesser of (a) ten percent (10%) of the insurer's surplus as regards policyholders as of December 31 next preceding, or (b) the net gain from operations of the insurer company, if the insurer is a life insurer, or the net income, if the insurer is not a life insurer, for the twelve (12) month period ending December 31 next preceding, but shall not include pro rata distribution of any class of the insurer's own securities. Notwithstanding any other provision of law, an insurer may declare an extraordinary dividend or distribution which is conditional upon the commissioner's approval thereof, and the declaration shall confer no rights upon stockholders until the commissioner has approved the payment of the dividend or distribution or until the commissioner has not disapproved the payment within the thirty (30) day period referred to in this section. Effective: July 12, 2012 History: Amended 2012 Ky. Acts ch. 74, sec. 15, effective July 12, 2012. -- Amended 2010 Ky. Acts ch. 24, sec. 1474, effective July 15, 2010. -- Amended 1996 Ky. Acts ch. 326, sec. 3, effective July 15, 1996. -- Amended 1992 Ky. Acts ch. 267, sec. 5, effective July 14, 1992. -- Created 1972 Ky. Acts ch. 52, sec. 3, effective June 16, 1972.

KRS 304.37-040 Examination by commissioner

304.37-040. Examination by commissioner (1) Subject to the limitation contained in this section and in addition to the powers which the commissioner has under KRS Chapter 304 relating to the examination of insurers, the commissioner shall also have the power to: (a) Examine an insurer registered under KRS 304.37-020 and its affiliates to ascertain the financial condition of the insurer, including the enterprise risk, to the insurer by: 1. The ultimate controlling party; 2. Any entity or combination of entities within the insurance holding company system; or 3. The insurance holding company system on a consolidated basis; (b) Order any insurer registered under KRS 304.37-020 to produce such records, books, or other information in the possession of the insurer or its affiliates as shall be necessary to determine compliance with this subtitle; and (c) Order any insurer registered under KRS 304.37-020 to produce information not in the possession of the insurer if the insurer can obtain access to the information pursuant to contractual relationships, statutory obligations, or another method. In the event the insurer cannot obtain the information requested by the commissioner, the insurer shall provide the commissioner a detailed explanation of the reason that the insurer cannot obtain the information and the identity of the holder of information. Failure of the insurer to provide the information without good cause may result in a civil penalty pursuant to KRS 304.99-020. (2) The commissioner shall exercise his or her power under subsection (1) of this section only if the examination of the insurer under KRS Chapter 304 is inadequate or the interests of the policyholders of such insurer may be adversely affected. (3) The commissioner may retain at the registered insurer's expense such attorneys, actuaries, accountants, and other experts not otherwise a part of the commissioner's staff as shall be reasonably necessary to assist in the conduct of the examination under subsection (1) of this section. Any persons so retained shall be under the direction and control of the commissioner and shall act in a purely advisory capacity. (4) Each registered insurer producing for examination records, books, and papers pursuant to subsection (1) of this section shall be liable for and shall pay the expense of such examination in accordance with the provisions of KRS Chapter 304. (5) If the insurer fails to comply with an order, the commissioner shall have the power to examine its affiliates to obtain the information, and may subpoena witnesses in accordance with KRS 304.2-340. Effective: July 12, 2012 History: Amended 2012 Ky. Acts ch. 74, sec. 16, effective July 12, 2012. -- Amended 2010 Ky. Acts ch. 24, sec. 1475, effective July 15, 2010. -- Created 1972 Ky. Acts ch. 52, sec. 4, effective June 16, 1972.

KRS 304.37-050 Confidential treatment of information obtained by commissioner -- Sharing and use of information

304.37-050. Confidential treatment of information obtained by commissioner -- Sharing and use of information (1) (a) Subject to paragraph (b) of this subsection and subsection (3) of this section, all documents, materials, or other information in the possession or control of the department that are obtained by or disclosed to the commissioner or any other person in the course of an examination, analysis, or investigation made under KRS 304.37-040 and all information reported or provided to the department under KRS 304.37-020, 304.37-030, and 304.37-160 shall: 1. Be confidential by law and privileged; 2. Not be subject to: a. The Kentucky Open Records Act, KRS 61.872 to 61.884; b Subpoena; or c. Discovery or admission into evidence in any private civil action; and 3. Be recognized as being proprietary and containing trade secrets. (b) The commissioner may use the documents, materials, or other information in the furtherance of any regulatory or legal action brought as a part of the commissioner's official duties. (c) The commissioner shall not otherwise make the documents, materials, or other information public without the prior written consent of the insurer to which it pertains unless the commissioner, after giving the insurer and its affiliates who would be affected thereby notice and opportunity to be heard, determines that the interests of policyholders, shareholders, or the public will be served by the publication thereof, in which event the commissioner may publish all or any part thereof in such manner as the commissioner may deem appropriate. (d) For purposes of the information reported and provided to the department pursuant to KRS 304.37-020, 304.37-030, 304.37-040, and 304.37-160, the commissioner shall maintain the confidentiality of the: 1. Group capital calculation and the group capital ratio produced within the calculation and any group capital information received from an insurance holding company supervised by the Federal Reserve Board or any United States groupwide supervisor; and 2. Liquidity stress test results and supporting disclosures and any liquidity stress test information received from an insurance holding company supervised by the Federal Reserve Board and non-United States groupwide supervisors. (2) Neither the commissioner nor any person who received documents, materials, or other information while acting under the authority of the commissioner or with whom the documents, materials, or other information are shared, pursuant to this subtitle, shall be permitted or required to testify in any private civil action concerning any confidential documents, materials, or other information subject to subsection (1) of this section. (3) The commissioner: (a) May share documents, materials, or other information, including confidential and privileged documents, materials, or other information subject to subsection (1) of this section, including documents and materials containing trade secrets or proprietary information, with: 1. Other state, federal, and international regulatory agencies; 2. The NAIC; 3. Any third-party consultants designated by the commissioner; and 4. State, federal, and international law enforcement authorities, including members of any supervisory college described in KRS 304.37-055; if the recipient agrees in writing to maintain the confidentiality and privileged status of the documents, materials, or other information, and has verified in writing the legal authority to maintain confidentiality; (b) May only share confidential and privileged documents, materials, or other information reported pursuant to KRS 304.37-020(14), notwithstanding paragraph (a) of this subsection, with commissioners of states having statutes or regulations substantially similar to subsection (1) of this section, and who have agreed in writing not to disclose the information; (c) 1. May receive documents, materials, or other information, including confidential and privileged documents, materials, or other information, including proprietary information or trade secrets, from the NAIC and its affiliates and subsidiaries and from regulatory and law enforcement officials of other foreign or domestic jurisdictions; and 2. Shall maintain as confidential or privileged any documents, materials, or other information received with notice or the understanding that it is confidential or privileged under the laws of the jurisdiction that is the source of the documents, materials, or other information; and (d) Shall enter into written agreements with the NAIC and any third-party consultant designated by the commissioner governing sharing and use of information provided pursuant to this subtitle and consistent with this subsection that: 1. Specify procedures and protocols regarding the confidentiality and security of information shared with the NAIC or a designated third-party consultant pursuant to this subtitle, including procedures and protocols for sharing by the NAIC with other state, federal, or international regulators. The agreement shall provide that the recipient agrees in writing to maintain the confidentiality and privileged status of the documents, materials, or other information and has verified in writing the legal authority to maintain such confidentiality; 2. Specify that ownership of information shared with the NAIC or a third- party consultant pursuant to this subtitle remains with the commissioner, and the NAIC's or a designated third-party consultant's use of the information is subject to the direction of the commissioner; 3. Except for documents, material, or information reported pursuant to KRS 304.37-020(16), prohibit the NAIC or designated third-party consultant from storing the information shared pursuant to this subtitle in a permanent database after the underlying analysis is completed; 4. Require prompt notice be given to an insurer whose confidential information in the possession of the NAIC or a designated third-party consultant pursuant to this subtitle is subject to a request or subpoena to the NAIC or a designated third-party consultant for disclosure or production; 5. Require the NAIC or a designated third-party consultant to consent to intervention by an insurer in any judicial or administrative action in which the NAIC or a designated third-party consultant may be required to disclose confidential information about the insurer shared with the NAIC or a designated third-party consultant pursuant to this subtitle; and 6. For documents, material, or information reporting pursuant to KRS 304.37-020(16), in the case of an agreement involving a third-party consultant, provide for notification of the identity of the consultant to the applicable insurers. (4) The sharing of information by the commissioner shall not constitute a delegation of regulatory authority or rulemaking, and the commissioner is solely responsible for administration, execution, and enforcement of this subtitle. (5) A waiver of any applicable privilege or claim of confidentiality in the documents, materials, or information shall not occur as a result of disclosure to the commissioner under this section or as a result of sharing as authorized in subsection (3) of this section. (6) Documents, materials, or information in the possession or control of the NAIC or a third-party consultant designated by the commissioner pursuant to this subtitle shall: (a) Be confidential by law and privileged; and (b) Not be subject to: 1. The Kentucky Open Records Act, KRS 61.872 to 61.884; 2. Subpoena; or 3. Discovery or admission into evidence in any private civil action. (7) (a) The group capital calculation and resulting group capital ratio, and the liquidity stress test along with its results and supporting disclosures, required under KRS 304.37-020 are regulatory tools for assessing group risks and capital adequacy and group liquidity risks, respectively, and are not intended as a means to rank insurers or insurance holding company systems generally. (b) Except as permitted under paragraph (c) of this subsection or as may otherwise be required under the provisions of this subtitle, no person shall make, publish, disseminate, circulate, or place before the public, or cause directly or indirectly to be made, published, disseminated, circulated, or placed before the public: 1. In a newspaper, magazine, or other publication; 2. In the form of a notice, circular, pamphlet, letter, or poster; 3. Over any radio or television station or any electronic means of communication available to the public; or 4. In any other way as an advertisement, announcement, or statement; containing a representation or statement with regard to the group capital calculation, group capital ratio, the liquidity stress test results, or supporting disclosures for the liquidity stress test of any insurer or insurer group or of any component derived in the calculation by any insurer, broker, or other person engaged in any manner in the insurance business. (c) If any materially false statement with respect to the: 1. Group capital calculation, resulting group capital ratio, an inappropriate comparison of any amount to an insurer's or insurance group's group capital calculation or resulting group capital ratio; or 2. Liquidity stress test result, supporting disclosures for the liquidity stress test, or an inappropriate comparison of any amount to an insurer's or insurance group's liquidity stress test result or supporting disclosures; is published in any written publication and the insurer is able to demonstrate to the commissioner with substantial proof the falsity of such statement or the inappropriateness, as the case may be, then the insurer may publish announcements in a written publication if the sole purpose of the announcement is to rebut the materially false statement. Effective: July 14, 2022 History: Amended 2022 Ky. Acts ch. 133, sec. 9, effective July 14, 2022. -- Amended 2019 Ky. Acts ch. 156, sec. 4, effective June 27, 2019. -- Amended 2015 Ky. Acts ch. 57, sec. 2, effective June 24, 2015. -- Amended 2010 Ky. Acts ch. 24, sec. 1476, effective July 15, 2010. -- Created 1972 Ky. Acts ch. 52, sec. 5, effective June 16, 1972.

KRS 304.37-055 Supervisory colleges for certain domestic insurers -- Powers of commission

304.37-055. Supervisory colleges for certain domestic insurers -- Powers of commission (1) With respect to any insurer registered pursuant to KRS 304.37-020, and in accordance with subsection (3) of this section, the commissioner shall have the authority to participate in a supervisory college for any domestic insurer that is part of an insurance holding company system with international operations in order to determine compliance by the insurer with this subtitle. The powers of the commissioner with respect to supervisory colleges include, but are not limited to: (a) Initiating the establishment of a supervisory college; (b) Clarifying the membership and participation of other supervisors in the supervisory college; (c) Clarifying the functions of the supervisory college and the role of other regulators, including the establishment of a groupwide supervisor; (d) Coordinating the ongoing activities of the supervisory college, including planning meetings, supervising activities, and establishing processes for information sharing; and (e) Establishing a crisis management plan. (2) Each registered insurer subject to this section shall be liable for and shall pay the reasonable expenses of the commissioner's participation in a supervisory college in accordance with subsection (3) of this section, including reasonable travel expenses. For purposes of this section, a supervisory college may be convened as either a temporary or permanent forum for communication and cooperation between the regulators charged with the supervision of the insurer or its affiliates, and the commissioner may establish a regular assessment to the insurer for the payment of these expenses. (3) In order to assess the business strategy, financial position, legal and regulatory position, risk exposure, risk management, and governance processes, and as part of the examination of individual insurers in accordance with KRS 304.37-040, the commissioner may participate in a supervisory college with other regulators charged with supervision of the insurer or its affiliates, including other state, federal, and international regulatory agencies. The commissioner may enter into agreements in accordance with KRS 304.37-050 providing the basis for cooperation between the commissioner and the other regulatory agencies, and the activities of the supervisory college. Nothing in this section shall delegate to the supervisory college the authority of the commissioner to regulate or supervise the insurer or its affiliates within its jurisdiction. Effective: July 15, 2014 History: Created 2012 Ky. Acts ch. 74, sec. 12, effective July 15, 2014.

KRS 304.37-060 Rules and regulations

304.37-060. Rules and regulations The commissioner may, upon notice and opportunity for all interested persons to be heard, issue such orders as shall be necessary to carry out the provisions of this subtitle. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1477, effective July 15, 2010. -- Created 1972 Ky. Acts ch. 52, sec. 6, effective June 16, 1972.

KRS 304.37-070 Receivership

304.37-070. Receivership Whenever it appears to the commissioner that any person has committed a violation of this subtitle which so impairs the financial condition of a domestic insurer as to threaten insolvency or make the further transaction of business by it hazardous to its policyholders, creditors, shareholders, or the public, then the commissioner may proceed as provided in KRS Chapter 304 to take possession of the property of such domestic insurer and to conduct the business thereof. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1478, effective July 15, 2010. -- Created 1972 Ky. Acts ch. 52, sec. 7, effective June 16, 1972.

KRS 304.37-080 Revocation, suspension, or nonrenewal of insurer's license

304.37-080. Revocation, suspension, or nonrenewal of insurer's license Whenever it appears to the commissioner that any person has committed a violation of this subtitle which makes the continued operation of an insurer contrary to the interest of policyholders or the public, the commissioner may, after giving notice and an opportunity to be heard, determine to suspend, revoke, or refuse to renew such insurer's license or authority to do business in this state for such period as the commissioner finds is required for the protection of policyholders or the public. Any such determination shall be accompanied by specific findings of fact and conclusions of law. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1479, effective July 15, 2010. -- Created 1972 Ky. Acts ch. 52, sec. 8, effective June 16, 1972.

KRS 304.37-090 Record of hearing

304.37-090. Record of hearing The commissioner shall, if requested by any interested party served with notice as required herein, make a complete record of any testimony, evidence, and proceedings at any hearing conducted pursuant to this subtitle. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1480, effective July 15, 2010. -- Created 1972 Ky. Acts ch. 52, sec. 9, effective June 16, 1972.

KRS 304.37-100 Judicial review -- Injunction

304.37-100. Judicial review -- Injunction (1) Any person aggrieved by any act, determination, rule, regulation, order, or any other action of the commissioner pursuant to this subtitle, may file appropriate proceedings in the Franklin Circuit Court or other court of competent jurisdiction for proper relief. (2) The filing of an appeal pursuant to this section or other court proceeding shall not stay the application of such order or other action of the commissioner unless the court, after giving notice to the parties and an opportunity to be heard, determines that such a stay would not be detrimental to the interest of policyholders, shareholders, creditors, or the public. (3) Any person aggrieved by any failure of the commissioner to act or make a determination required by this subtitle may petition the Franklin Circuit Court for a mandatory injunction or other injunctive relief directing the commissioner to act or make such determination forthwith. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1481, effective July 15, 2010. -- Created 1972 Ky. Acts ch. 52, sec. 10, effective June 16, 1972.

KRS 304.37-110 Subsidiaries that may be organized or acquired by domestic insurer -- Investments of domestic insurers

304.37-110. Subsidiaries that may be organized or acquired by domestic insurer -- Investments of domestic insurers (1) Any domestic insurer, either by itself or in cooperation with one (1) or more persons, may organize or acquire one (1) or more subsidiaries engaged in the following kinds of business: (a) Any kind of insurance business authorized by the jurisdiction in which it is incorporated; (b) Acting as an insurance agent for its parent or any of its parent's insurer subsidiaries; (c) Investing, reinvesting, or trading in securities for its own account, that of its parent, any subsidiary of its parent, or any affiliate or subsidiary; (d) Management of any investment company subject to or registered pursuant to the Investment Company Act of 1940, as amended, including related sales and services; (e) Acting as a broker-dealer subject to or registered pursuant to the Securities Exchange Act of 1934, as amended; (f) Rendering investment advice to governments, government agencies, corporations, or other organizations or groups; (g) Rendering other services related to the operations of an insurance business, such as actuarial, loss prevention, safety engineering, data processing, accounting, claims, appraisal, and collection services; (h) Ownership and management of assets which the parent corporation may own or manage if the aggregate investment by the insurer and its subsidiaries acquired or organized pursuant to this paragraph shall not exceed the limitations applicable to these investments by the insurer. This paragraph shall not prohibit investments permitted under KRS 304.7-120; (i) Acting as an administrative agent for a governmental instrumentality which is performing an insurance function; (j) Financing of insurance premiums, agents, and other forms of consumer financing; (k) Any other business activity determined by the commissioner to be reasonably ancillary to an insurance business; and (l) Owning a corporation or corporations engaged or organized to engage exclusively in one (1) or more businesses specified in this section. (2) In addition to investments in common stock, preferred stock, debt obligations, and other securities permitted under this chapter, a domestic insurer may also: (a) Invest, in common stock, preferred stock, debt obligations, and other securities of one (1) or more subsidiaries, amounts which do not exceed the lesser of ten percent (10%) of the insurer's assets or fifty percent (50%) of the insurer's surplus as regards policyholders, if after these investments, the insurer's surplus as regards policyholders will be reasonable in relation to the insurer's outstanding liabilities and adequate to meet its financial needs. In calculating the amount of these investments, investments in domestic or foreign insurance subsidiaries shall be excluded, and there shall be included: 1. Total net moneys or other consideration expended and obligations assumed in the acquisition or formation of a subsidiary, including all organizational expenses and contributions to capital and surplus of the subsidiary whether or not represented by the purchase of capital stock or issuance of other securities; and 2. All amounts expended in acquiring additional common stock, preferred stock, debt obligations, and other securities and all contributions to the capital or surplus, of a subsidiary subsequent to its acquisition or formation; (b) Invest any amount in common stock, preferred stock, debt obligations, and other securities of one (1) or more subsidiaries engaged or organized to engage exclusively in the ownership and management of assets authorized as investments for the insurer, if each subsidiary agrees to limit its investments in any asset so that the investments will not cause the amount of the total investment of the insurer to exceed any of the investment limitations specified in paragraph (a) of this subsection or in Subtitle 7 of KRS Chapter 304. For the purpose of this paragraph, "the total investment of the insurer" shall include: 1. Any direct investment by the insurer in an asset; and 2. The insurer's proportionate share of any investment in an asset by any subsidiary of the insurer, which shall be calculated by multiplying the amount of the subsidiary's investment by the percentage of the ownership of the subsidiary; (c) With the approval of the commissioner, invest any greater amount in common stock, preferred stock, debt obligations, or other securities of one (1) or more subsidiaries, if after the investment the insurer's surplus as regards policyholders will be reasonable in relation to the insurer's outstanding liabilities and adequate to its financial needs. (3) Investments in common stock, preferred stock, debt obligations, or other securities of subsidiaries made pursuant to subsection (2) of this section shall not be subject to any of the otherwise applicable restrictions or prohibitions contained in this chapter applicable to the investments of insurers. (4) Whether any investment pursuant to subsection (2) of this section meets the requirements shall be determined before the investment is made, by calculating the applicable investment limitations as though the investment had already been made, taking into account the then outstanding principal balance on all previous investments in debt obligations, and the value of all previous investments in equity securities as of the day they were made, net of any return of capital invested, not including dividends. (5) If an insurer ceases to control a subsidiary, it shall dispose of any investment made pursuant to this section within three (3) years of the time of the cessation of control, or within an extension of time as the commissioner may prescribe, unless at any time after the investment has been made, the investment has met the requirements for investment under any other provision of this chapter, and the insurer has notified the commissioner. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1482, effective July 15, 2010. -- Amended 1998 Ky. Acts ch. 483, sec. 27, effective July 15, 1998. -- Created 1992 Ky. Acts ch. 267, sec. 1, effective July 14, 1992.

KRS 304.37-120 Preacquisition notification -- Review -- Exceptions -- Jurisdiction of Kentucky courts

304.37-120. Preacquisition notification -- Review -- Exceptions -- Jurisdiction of Kentucky courts (1) No person other than the issuer shall make a tender offer for, a request or invitation for tenders of, enter into any agreement to exchange securities, seek to acquire, or acquire in the open market or otherwise, any voting security of a domestic insurer if, after the consummation, the person would, directly or indirectly, or by conversion, or by exercise of any right to acquire, be in control of the insurer. No person shall enter into an agreement to merge with or to acquire control of a domestic insurer or any person controlling a domestic insurer unless, at the time of the offer, request, or invitation is made, or any agreement is entered into, or prior to the acquisition of these securities if no offer or agreement is involved, the person has filed with the commissioner and has sent to the insurer, a statement containing the information required by this section and the offer, request, invitation, agreement, or acquisition has been approved by the commissioner in the manner prescribed in this section. (a) For purposes of this section a domestic insurer shall include any person controlling a domestic insurer unless the person as determined by the commissioner is either directly or through its affiliates primarily engaged in business other than the business of insurance. For the purposes of this section, "person" shall not include any securities broker holding, in the usual and customary brokers function, less than twenty percent (20%) of the voting securities of an insurance company or of any person which controls an insurance company. (b) For purposes of this section, any controlling person of a domestic insurer seeking to divest its controlling interest in the domestic insurer, in any manner, shall file with the commissioner, with a copy to the insurer, confidential notice of its proposed divestiture at least thirty (30) days prior to the cessation of control. The commissioner shall determine those instances in which the party seeking to divest or to acquire a controlling interest in an insurer will be required to file for and obtain approval of the transaction. The information shall remain confidential until the conclusion of the transaction unless the commissioner, in his or her discretion, determines that confidential treatment will interfere with the enforcement of this section. If the statement referred to in this subsection is otherwise filed, this paragraph shall not apply. (c) With respect to a transaction subject to this section, the acquiring person shall also file a preacquisition notification with the commissioner, which shall contain the information set forth in KRS 304.37-130. A failure to file the notification may be subject to penalties specified in KRS 304.37-130. (2) The statement to be filed with the commissioner under this section shall be made under oath or affirmation and shall contain the following information: (a) The name and address of each person by whom or on whose behalf the merger or other acquisition of control referred to in subsection (1) of this section is to be effected; and 1. If the person is an individual, his or her principal occupation and all offices and positions held during the past five (5) years, and any conviction of crimes other than minor traffic violations during the past ten (10) years; or 2. If the person is not an individual, a report of the nature of its business operations during the past five (5) years or for a lesser period that the person and any predecessors have been in existence, an informative description of the business intended to be done by the person and the person's subsidiaries, and a list of all individuals who are or who have been selected to become directors or executive officers of the person, or who perform or will perform functions appropriate to these functions. The list shall include for each individual the information required by subparagraph 1. of this paragraph; (b) The source, nature, and amount of the consideration used or to be used in effecting the merger or other acquisition of control, a description of any transaction in which funds were or are to be obtained for merger or other acquisition of control, including any pledge of the insurer's stock, or the stock of any of its subsidiaries or controlling affiliates, and the identity of persons furnishing the consideration; but if a source of the consideration is a loan made in the lender's ordinary course of business, the identity of the lender shall remain confidential, if the person filing the statement so requests; (c) Fully audited financial information as to the earnings and financial condition of each acquiring party for the preceding five (5) fiscal years of each acquiring party, or for a lesser period that the acquiring party and any predecessors have been in existence, and similar unaudited information as of a date not earlier than ninety (90) days prior to the filing of the statement; (d) Any plans or proposals which each acquiring party may have to liquidate the insurer, to sell its assets, or merge or consolidate it with any person, or to make any other material change in its business or corporate structure or management; (e) The number of shares of any security referred to in subsection (1) of this section which the acquiring party proposes to acquire, and the terms of the offer, request, invitation, agreement, or acquisition referred to in subsection (1) of this section, and a statement as to the method used to determine the fairness of the proposal; (f) The amount of each class of any security referred to in subsection (1) of this section which is beneficially owned, or concerning any security referred to in subsection (1) of this section which there is a right to acquire beneficial ownership of by each acquiring party; (g) A full description of any contracts, arrangements, or understandings with respect to any security referred to in subsection (1) of this section in which any acquiring party is involved, such as transfer of any of the securities, joint ventures, loan or option arrangements, puts or calls, guarantees of loans, guarantees against loss or guarantees of profits, division of losses or profits, or the giving or withholding of proxies. The description shall identify the persons with whom these contracts, arrangements, or understandings have been entered into; (h) A description of the purchase of any security referred to in subsection (1) of this section during the twelve (12) calendar months preceding the filing of the statement by any acquiring party, including the dates of purchase, names of the purchasers, and consideration paid or agreed to be paid; (i) A description of any recommendations to purchase any security referred to in subsection (1) of this section made during the twelve (12) calendar months preceding the filing of the statement, by any acquiring party, or by anyone based upon interviews or at the suggestion of the acquiring party; (j) Copies of all tender offers for requests, or invitations for tenders of, exchange offers for, and agreements to acquire or exchange any securities referred to in subsection (1) of this section, and of additional soliciting material distributed which relates; (k) The term of any agreement, contract, or understanding made with, or proposed to be made with any broker-dealer, as to solicitation of securities referred to in subsection (1) of this section for tender, and the amount of any fees, commissions, or other compensation to be paid to broker-dealers with regard to subsection (1) of this section; (l) An agreement by the person required to file the statement referred to in subsection (1) of this section that it will provide the annual report specified in KRS 304.37-020 for so long as control exists; (m) An acknowledgement by the person required to file the statement referred to in subsection (1) of this section that the person and all subsidiaries within its control in the insurance holding company system will provide information to the commissioner upon request as necessary to evaluate enterprise risk to the insurer; (n) Any additional information as the commissioner may by regulation prescribe as necessary or appropriate for the protection of policyholders of the insurer or in the public interest; (o) If the person required to file the statement referred to in subsection (1) of this section is a partnership, limited partnership, syndicate, or other group, the commissioner may require that the information called for by paragraphs (a) to (m) of this subsection shall be given with respect to each partner of the partnership or limited partnership, each member of the syndicate or other group, and each person who controls the partner or member. If any partner, member, or person is a corporation, or the person required to file the statement referred to in subsection (1) of this section is a corporation, the commissioner may require that the information called for by paragraphs (a) to (l) of this subsection shall be given with respect to the corporation, each officer and director of the corporation, and each person who is directly or indirectly the beneficial owner of more than ten percent (10%) of the outstanding voting securities of the corporation; and (p) If any material change occurs in the facts in the statement filed with the commissioner and sent to the insurer pursuant to this section, an amendment stating the change, with copies of all documents and other materials relevant to the change, shall be filed with the commissioner and sent to the insurer within two (2) business days after the person learns of the change. (3) If any offer, request, invitation, agreement, or acquisition referred to in subsection (1) of this section is proposed to be made by means of a registration statement under the Securities Act of 1933, or in circumstances requiring the disclosure of similar information under the Securities Exchange Act of 1934, or under a state law requiring similar registration or disclosure, the person required to file the statement referred to in subsection (1) of this section may utilize those documents in furnishing the information required by the statement referred to in subsection (1) of this section. (4) (a) The commissioner shall approve any merger or other acquisition of control referred to in subsection (1) of this section unless, after a public hearing the commissioner finds that: 1. After the change of control, the domestic insurer referred to in subsection (1) of this section would not be able to satisfy the requirements for issuance of a certificate of authority to write the line or lines of insurance for which it is presently authorized; 2. The effect of the merger or other acquisition of control would be substantially to lessen competition in insurance in Kentucky or tend to create a monopoly. In applying the competitive standard in this paragraph: a. The informational requirements of KRS 304.37-130(3)(a) and the standards of KRS 304.37-130(4)(b) shall apply; b. The merger or other acquisition shall not be disapproved if the commissioner finds that any of the situations meeting the criteria provided by KRS 304.37-130(4)(c) exist; and c. The commissioner may condition the approval of the merger or other acquisition on the removal of the basis of disapproval within a specified period of time; 3. The financial condition of the acquiring party might jeopardize the financial stability of the insurer or prejudice the interest of its policyholders; 4. The plans or proposals which the acquiring party has to liquidate the insurer, sell its assets, consolidate or merge it with any person, or to make any other material change in its business or corporate structure or management are unfair and unreasonable to policyholders of the insurer and not in the public interest; 5. The competence, experience, and integrity of persons who would control the operation of the insurer would not be in the interest of policyholders of the insurer and of the public to permit the merger or other acquisition of control; or 6. The acquisition is likely to be hazardous or prejudicial to the insurance buying public. (b) The public hearing required by this section shall be conducted as directed in Subtitle 2 of this chapter. (c) The commissioner may retain at the acquiring person's expense any attorneys, actuaries, accountants, and other experts not otherwise a part of the commissioner's staff that may be necessary to assist the commissioner in reviewing the proposed acquisition of control. (5) The provisions of this section shall not apply to: (a) Any transaction which is subject to the provisions of KRS 304.24-390, dealing with the merger or consolidation of a domestic insurer; or (b) Any offer, request, invitation, agreement, or acquisition which the commissioner, by order, shall exempt from the section as not having been made or entered into for the purpose of and not having the effect of changing or influencing the control of, a domestic insurer, or not comprehended within the purposes of this section; or (c) Any acquisition of stock of a former mutual by an affiliate company that occurs in connection with the conversion of a mutual insurer to a stock insurer under KRS 304.24-600 to 304.24-625, provided that no person acquires control of the parent company. For purposes of this paragraph, "former mutual" has the meaning provided in KRS 304.24-601. (6) The following shall be violations of this section: (a) The failure to file any statement, amendment, or other material required to be filed pursuant to subsection (1) or (2) of this section; or (b) The effectuation or any attempt to effectuate an acquisition of control of, or merger with, a domestic insurer unless the commissioner has given his or her approval. (7) The courts of this state shall have jurisdiction over every person not resident, domiciled, or authorized to do business in this state who files a statement with the commissioner under this section, and overall actions involving such person arising out of violations of this section. Each person shall be deemed to have performed acts equivalent to and constituting an appointment by the person of the Secretary of State to be his or her true and lawful attorney upon whom may be served all lawful process in any action, suit, or proceeding arising out of the violations of this section. Copies of all lawful process shall be served on the Secretary of State and transmitted to the person at his or her last known address by the Secretary of State in the same manner as service of process on foreign insurers. Effective: July 12, 2012 History: Amended 2012 Ky. Acts ch. 74, sec. 17, effective July 12, 2012. -- Amended 2010 Ky. Acts ch. 24, sec. 1483, effective July 15, 2010. -- Amended 2000 Ky. Acts ch. 42, sec. 15, effective July 14, 2000. -- Created 1992 Ky. Acts ch. 267, sec. 2, effective July 14, 1992.

KRS 304.37-130 Acquisition of control or merger of domestic insurers

304.37-130. Acquisition of control or merger of domestic insurers (1) The following definitions shall apply for the purposes of this section only: (a) "Acquisition" means any agreement, arrangement, or activity the consummation of which results in a person acquiring directly or indirectly the control of another person, such as the acquisition of voting securities, the acquisition of assets, bulk reinsurance, and mergers; and (b) An "involved insurer" includes an insurer which either acquires or is acquired, is affiliated with an acquirer or acquired, or is the result of a merger. (2) (a) This section applies to any acquisition in which there is a change of control of an insurer authorized to do business in Kentucky, except as set forth in paragraph (b) of this subsection. (b) This section shall not apply to the following: 1. An acquisition subject to approval or disapproval of the commissioner pursuant to KRS 304.37-120; 2. A purchase of securities solely for the investment purposes so long as the securities are not used by voting or otherwise to cause or attempt to cause the substantial lessening of competition in any insurance market in Kentucky. If a purchase of securities results in a presumption of control under KRS 304.37-010(3), it is not solely for investment purposes unless the insurance regulatory official of the insurer's state of domicile accepts a disclaimer of control, or affirmatively finds that control does not exist, and the disclaimer action or affirmative finding is communicated by the domiciliary insurance regulatory official to the commissioners; 3. If the acquisition of a person by another person when both persons are neither directly nor through affiliates primarily engaged in the business of insurance, if preacquisition notification is filed with the commissioner in accordance with subsection (3)(a) of this section thirty (30) days prior to the proposed effective date of the acquisition. However, the acquisition notification shall not be required for exclusion from this section if the acquisition would otherwise be excluded from this section by any other subparagraph of this paragraph; 4. The acquisition of already affiliated persons; 5. An acquisition if, as an immediate result of the acquisition: a. The combined market share of the involved insurers would not exceed five percent (5%) of the total market; b. There would be no increase in any market share; or c. The combined market share of the involved insurers would not exceed twelve percent (12%) of the total market; and the market share would not increase by more than two percent (2%) of the total market. For the purpose of this subparagraph (b)5., a market means direct written insurance premium in Kentucky for a line of business as contained in the annual statement required to be filed by insurers authorized to do business in Kentucky; 6. An acquisition for which a preacquisition notification would be required pursuant to this section due solely to the resulting effect on the ocean marine insurance line of business; and 7. An acquisition of an insurer whose domiciliary insurance regulatory official affirmatively finds that the insurer is in failing condition, there is lack of feasible alternative to improving the condition, the public benefits of improving the insurer's condition through the acquisition exceed the public benefits that would arise from not lessening competition, and the findings are communicated by the domiciliary insurance regulatory official to the commissioner. (3) An acquisition covered by subsection (2) of this section may be subject to an order pursuant to subsection (5) of this section or KRS 304.37-010 unless the acquiring person files a preacquisition notification and the waiting period has expired. The acquired person may file a preacquisition notification. The commissioner shall give confidential treatment to information submitted under this subsection in the same manner as provided in KRS 304.37-050. (a) The preacquisition notification shall be in the form and contain the information prescribed by the National Association of Insurance Commissioners relating to those markets which, under subsection (2)(b)5. of this section, cause the acquisition not to be exempted from the provisions of this section. The commissioner may require additional material and information the commissioner deems necessary to determine whether the proposed acquisition, if consummated, would violate the competitive standard of subsection (4) of this section. The required information may include an opinion of an economist as to the competitive impact of the acquisition in Kentucky accompanied by a summary of the education and experience of the economist indicating his or her ability to render an informed opinion. (b) The waiting period required shall begin on the date of receipt by the commissioner of a preacquisition notification and shall end on the earlier of the thirtieth day after the date of receipt, or termination of the waiting period by the commissioner. Prior to the end of the waiting period, the commissioner may, on a one-time basis, require the submission of additional needed information relevant to the proposed acquisition; if the submission is required, the waiting period shall end on the earlier of the thirtieth day after receipt of the additional information by the commissioner or termination of the waiting period by the commissioner. (4) (a) The commissioner may enter an order under subsection (5)(a) of this section with respect to an acquisition if there is substantial evidence that the effect of the acquisition may be to lessen substantially competition in any line of insurance in Kentucky or tend to create a monopoly, or if the insurer fails to file adequate information in compliance with subsection (3) of this section. (b) In determining whether a proposed acquisition would violate the competitive standard of paragraph (a) of this subsection, the commissioner shall consider the following: 1. Any acquisition covered under subsection (2) of this section involving two (2) or more insurers competing in the same market is prima facie evidence of violation of the competitive standards: a. If the market is highly concentrated and the involved insurers possess the following shares of the market: Insurer A Insurer B 4% 4% or more 10% 2% or more 15% 1% or more; or b. If the market is not highly concentrated and the involved insurers possess the following shares of the market: Insurer A Insurer B 5% 5% or more 10% 4% or more 15% 3% or more 19% 1% or more. A highly concentrated market means one in which the share of the four (4) largest insurers is seventy-five percent (75%) or more of the market. Percentages not shown in the tables are interpolated proportionately to the percentages that are shown. If more than two (2) insurers are involved, exceeding the total of the two (2) columns in the table is prima facie evidence of violation of the competitive standard in paragraph (a) of this subsection. For the purpose of this subparagraph, the insurer with the largest share of the market shall be deemed to be insurer A; 2. There is a significant trend toward increased concentration when the aggregate market share of any grouping of the largest insurers in the market, from the two (2) largest to the eight (8) largest, has increased by seven percent (7%) or more of the market over a period of time extending from any base year five (5) to ten (10) years prior to the acquisition up to the time of the acquisition. Any acquisition or merger covered under subsection (2) of this section involving two (2) or more insurers competing in the same market is prima facie evidence of violation of the competitive standard in paragraph (a) of this subsection if: a. There is a significant trend toward increased concentration in the market; b. One of the insurers involved is one of the insurers in a grouping of the large insurers showing the requisite increase in the market share; and c. Another involved insurer's market is two percent (2%) or more; 3. For the purposes of subsection (4)(b) of this section: a. The term "insurer" includes any company or group of companies under common management, ownership or control; b. The term "market" means the relevant product and geographical markets. In determining the relevant product and geographical markets, the commissioner shall give due consideration to factors such as the definitions or guidelines, if any, promulgated by the National Association of Insurance Commissioners and to information, if any, submitted by parties to the acquisition. In the absence of sufficient information to the contrary, the relevant product market is assumed to be the direct written insurance premium for a line of business, the line being that used in the annual statement required to be filed by insurers doing business in Kentucky, and the relevant geographical market is assumed to be Kentucky; and c. The burden of showing prima facie evidence of violation of the competitive standard rests upon the commissioner; and 4. Even though an acquisition is not prima facie violative of the competitive standard under paragraph (b) of this subsection, the commissioner may establish the requisite anticompetitive effect based upon other substantial evidence. Even though an acquisition is prima facie violative of the competitive standard under paragraph (b) of this subsection, a party may establish the absence of the requisite anticompetitive effect based upon other substantial evidence. Relevant factors in making this determination shall be such factors as market shares, volatility of ranking of market leaders, number of competitors, concentration, trend of concentration in the industry, and ease of entry into and exit from the market. (c) An order shall not be entered under subsection (5)(a) of this section if: 1. The acquisition will yield substantial economies of scale or economies in resource utilization that cannot be feasibly achieved in any other way, and the public benefits which would arise from the economies exceed the public benefits which would arise from not lessening competition; or 2. The acquisition will substantially increase the availability of insurance, and the public benefits of the increase exceed the public benefits which would arise from not lessening competition. (5) (a) If an acquisition violates the standards of this section, the commissioner may enter an order: 1. Requiring an involved insurer to cease and desist from doing business in Kentucky with respect to the line or lines of insurance involved in the violation; or 2. Denying the application of an acquired or acquiring insurer for a certificate of authority to do business in Kentucky. (b) The order referred to in paragraph (a) of this subsection shall be entered pursuant to a hearing held under Subtitle 2 of this chapter. Effective: June 27, 2019 History: Amended 2019 Ky. Acts ch. 156, sec. 8, effective June 27, 2019. -- Amended 2010 Ky. Acts ch. 24, sec. 1484, effective July 15, 2010. -- Created 1992 Ky. Acts ch. 267, sec. 3, effective July 14, 1992.

KRS 304.37-140 Recovery of distributions

304.37-140. Recovery of distributions (1) If an order for liquidation or rehabilitation of a domestic insurer has been entered, the receiver appointed under the order shall have the right to recover on behalf of the insurer, from any parent corporation or holding company or person or affiliate who otherwise controlled the insurer, the amount of distributions, other than distribution of shares of the same class of stock paid by the insurer on its capital stock, or any payment in the form of a bonus, termination settlement, or extraordinary lump sum salary adjustment made by the insurer, or its subsidiary, or subsidiaries to a director, officer, or employee if the distribution or payment is made at any time during one (1) year preceding the petition for liquidation, conservation, or rehabilitation, as the case may be, subject to the limitations of subsections (2), (3), and (4) of this section. (2) No distribution shall be recoverable if the parent or affiliate shows that when paid, the distribution was lawful and reasonable, and that the insurer did not know and could not reasonably have known that the distribution might adversely affect the ability of the insurer to fulfill its contractual obligations. (3) Any person who was a parent corporation or holding company or a person who otherwise controlled the insurer or affiliate at the time the distributions were paid shall be liable up to the amount of distributions or payment under subsection (1) of this section received by that person. Any person who otherwise controlled the insurer at the time the distributions were declared shall be liable up to the amount of distributions he would have received if they had been paid immediately. If two (2) or more persons are liable with respect to the same distributions, they shall be jointly and severally liable. (4) The maximum amount recoverable under this section shall be the amount needed in excess of all other available assets of the impaired or insolvent insurer to pay the contractual obligations of the impaired or insolvent insurer and to reimburse any guaranty fund. (5) To the extent that any person liable under subsection (3) of this section is insolvent or otherwise fails to pay claims due from it, its parent corporation, holding company, or person who otherwise controlled it at the time the distribution was paid shall be jointly and severally liable for any resulting deficiency in the amount recovered from the parent corporation, holding company, or person who otherwise controlled it. Effective: July 14, 1992 History: Created 1992 Ky. Acts ch. 267, sec. 6, effective July 14, 1992.

KRS 304.37-150 Voting rights of holder of security acquired in contravention of chapter or action of commissioner -- Legal actions to enjoin voting and to seize or sequester security

304.37-150. Voting rights of holder of security acquired in contravention of chapter or action of commissioner -- Legal actions to enjoin voting and to seize or sequester security (1) No security which is the subject of any agreement or arrangement regarding acquisition, or which is acquired or to be acquired, in contravention of the provisions of this chapter or of any rule, administrative regulation, or order issued by the commissioner may be voted at any shareholders' meeting, or may be counted for quorum purposes, and any action of shareholders requiring the affirmative vote of a percentage of shares may be taken as though the securities were not issued and outstanding; but no action taken at the meeting shall be invalidated by the voting of the securities, unless the action would materially affect control of the insurer or unless the courts of this state have so ordered. If an insurer or the commissioner has reason to believe that any security of the insurer has been or is about to be acquired in contravention of the provisions of this chapter or of any rule, administrative regulation, or order issued by the commissioner, the insurer or the commissioner may apply to the Circuit Court for the county in which the insurer has its principal place of business to enjoin any offer, request, invitation, agreement, or acquisition made in contravention of KRS 304.37-130 or any other provision of this chapter, or any rule, administrative regulation, or order issued by the commissioner to enjoin the voting of any security so acquired, to void any vote of the security already cast at any meeting of shareholders, and for any other equitable relief as required by the nature of the case and the interest of the insurer's policyholders, creditors, shareholders, or the public. (2) In any case where a person has acquired or is proposing to acquire any voting securities in violation of this chapter or any rule, administrative regulation, or order issued by the commissioner, the Circuit Court for Franklin County or the Circuit Court for the county in which the insurer has its principal place of business may, upon notice the court deems appropriate, upon the application of the insurer or the commissioner seize or sequester any voting securities of the insurer owned directly or indirectly by the person, and issue the appropriate order to effectuate the provisions of this subtitle. (3) Notwithstanding any other provisions of law, for the purposes of this chapter the situs of the ownership of the securities of domestic insurers shall be deemed to be in this state. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1485, effective July 15, 2010. -- Amended 2000 Ky. Acts ch. 42, sec. 16, effective July 14, 2000. -- Created 1994 Ky. Acts ch. 92, sec. 6, effective July 15, 1994.

KRS 304.37-160 Identification of groupwide supervisor for internationally active insurance company -- Commissioner's powers when acting as supervisor -- Cooperation with other regulatory officials -- Agreements and documentation - - Commissioner's expenses

304.37-160. Identification of groupwide supervisor for internationally active insurance company -- Commissioner's powers when acting as supervisor -- Cooperation with other regulatory officials -- Agreements and documentation - - Commissioner's expenses (1) (a) The commissioner may: 1. Act as the groupwide supervisor for any internationally active insurance group in accordance with this section; or 2. Acknowledge another regulatory official as the groupwide supervisor, if the internationally active insurance group: a. Does not have substantial insurance operations in the United States; b. Has substantial insurance operations in the United States, but not in this state; or c. Has substantial insurance operations in the United States and in this state, but the commissioner determines under this section that the other regulatory official is the appropriate groupwide supervisor. (b) An insurance holding company system that does not otherwise qualify as an internationally active insurance group may request the commissioner to make a determination or acknowledgment as to a groupwide supervisor under this section. (2) (a) In cooperation with other state, federal, and international regulatory agencies, the commissioner shall identify a single groupwide supervisor for an internationally active insurance group. (b) For an internationally active insurance group that conducts substantial insurance operations in this state, the commissioner may: 1. Determine that he or she is the appropriate groupwide supervisor; or 2. Acknowledge a regulatory official from another jurisdiction as the appropriate groupwide supervisor. (c) In making a determination or acknowledgment of a groupwide supervisor, the commissioner shall consider the following factors: 1. With regard to the internationally active insurance group: a. The place of domicile of: i. The insurers within the group that hold the largest share of the group's written premiums, assets, or liabilities; and ii. The top-tiered insurer or insurers in the insurance holding company system of the group; and b. The location of the executive officers or largest operational officers of the group; and 2. Whether another regulatory official acting or seeking to act as the groupwide supervisor: a. Acts under a regulatory system that the commissioner determines to be: i. Substantially similar to the system of regulation provided under the laws of this state; or ii. Otherwise sufficient in terms of providing for groupwide supervision, enterprise risk analysis, and cooperation with other regulatory officials; and b. Provides the commissioner with reasonably reciprocal recognition and cooperation. (d) If the commissioner is identified under this section as the groupwide supervisor, he or she may determine that it is appropriate to acknowledge another supervisor to serve as the groupwide supervisor. This acknowledgement shall be made: 1. After consideration of the factors set forth in paragraph (c) of this subsection; 2. In cooperation with and subject to the acknowledgement of other regulatory officials involved with supervision of members of the internationally active insurance group; and 3. In consultation with the internationally active insurance group. (3) (a) Notwithstanding any other provision of law, when another regulatory official is acting as the groupwide supervisor of an internationally active insurance group, the commissioner shall acknowledge that regulatory official as the groupwide supervisor until there is a material change in the internationally active insurance group that results in: 1. Insurers domiciled in this state holding the largest share of the group's premiums, assets, or liabilities; or 2. This state being the place of domicile of the top-tiered insurer or insurers in the insurance company holding system of the group. (b) In the event of a material change under paragraph (a) of this subsection, the commissioner shall make a determination or acknowledgement as to the appropriate groupwide supervisor in accordance with subsection (2) of this section. (4) (a) Pursuant to KRS 304.37-040, the commissioner may collect from any insurer registered under KRS 304.37-020 all information necessary to make a determination or acknowledgment of groupwide supervisor under this section. (b) Prior to making a determination that he or she is the appropriate groupwide supervisor for an internationally active insurance group, the commissioner shall notify the insurer registered under KRS 304.37-020 and the ultimate controlling person within the group. (c) The internationally active insurance group shall have at least thirty (30) days to provide the commissioner with additional information pertinent to the pending determination. (d) The commissioner shall publish the identity of internationally active insurance groups that the commissioner has determined are subject to groupwide supervision by him or her. (5) The commissioner may engage in any of following activities when acting as a groupwide supervisor of an internationally active insurance group: (a) Assess the enterprise risks within the group to ensure that: 1. The material financial condition and liquidity risks to the members of the group engaged in the business of insurance are identified by management; and 2. Reasonable and effective mitigation measures are in place; (b) Request from any member of the group subject to the commissioner's supervision information necessary and appropriate to assess enterprise risk, including but not limited to information about the group member's: 1. Governance, risk assessment, and management; 2. Capital adequacy; and 3. Material intercompany transactions; (c) Coordinate and, through the authority of the regulatory officials of the jurisdictions where members of the group are domiciled, compel development and implementation of reasonable measures designed to ensure that the group is able to timely recognize and mitigate enterprise risks to group members that are engaged in the business of insurance; (d) Communicate with other state, federal, and international regulatory agencies for members of the group and share relevant information, subject to the confidentiality provisions of KRS 304.37-050, through supervisory colleges as set forth in KRS 304.37-055 or otherwise; (e) Enter into agreements with or obtain documentation from any insurer registered under KRS 304.37-020, any member of the group, and any other state, federal, and international regulatory agencies for group members, providing the basis for or otherwise clarifying the commissioner's role as groupwide supervisor, including provisions for resolving disputes with other regulatory officials. These agreements or documentation shall not serve or be admissible as evidence in any proceeding seeking to establish that an insurer or person within an insurance holding company system not domiciled or incorporated in this state is doing business or is otherwise subject to the personal jurisdiction of a court in this state; and (f) Other groupwide supervision activities, consistent with the authority and purposes set forth in this section, considered necessary by the commissioner. (6) If the commissioner acknowledges that another regulatory official from a jurisdiction that is not accredited by the National Association of Insurance Commissioners is the appropriate groupwide supervisor, the commissioner may reasonably cooperate, through supervisory colleges or otherwise, with groupwide supervision undertaken by the groupwide supervisor if: (a) The commissioner's cooperation is in compliance with the laws of this state; and (b) The regulatory official acknowledged as the groupwide supervisor also recognizes and cooperates with the commissioner's activities as a groupwide supervisor for other internationally active insurance groups where applicable. If recognition and cooperation is not reasonably reciprocal, the commissioner may refuse recognition and cooperation. (7) The commissioner may enter into agreements with or obtain documentation from: (a) Any insurer registered under KRS 304.37-020, including any affiliate of the insurer; and (b) Other state, federal, and international regulatory agencies for members of an internationally active insurance group, if the regulatory officials for the state, federal, or international agencies provide the basis for or otherwise clarify the officials' roles as groupwide supervisors for the group. (8) An insurer registered under KRS 304.37-020 and subject to this section shall be liable for and pay the reasonable expenses of the commissioner's participation in the administration of this section, including: (a) The engagement of attorneys, actuaries, and any other professionals; and (b) All reasonable travel expenses. Effective: June 27, 2019 History: Created 2019 Ky. Acts ch. 156, sec. 3, effective June 27, 2019.

KRS 304.37-500 Definitions for KRS 304.37-500 to 304.37-580

304.37-500. Definitions for KRS 304.37-500 to 304.37-580 The following definitions shall apply to KRS 304.37-500 to 304.37-580: (1) "Interested person" means: (a) Any affiliated person of a company; (b) Any member of the immediate family of any natural person who is an affiliated person of a company; (c) Any person or partner or employee of any person who at any time since the beginning of the last two (2) completed fiscal years of a company has acted as legal counsel for the company; or (d) Any natural person whom the commissioner by order shall have determined to be an interested person by reason of having had, at any time since the beginning of the last two (2) completed fiscal years of a company, a material business or professional relationship with a company or with the principal executive officer of the company; (2) "Intermediate holding company" means a holding company which is a subsidiary of a mutual insurance holding company and which either directly or through a subsidiary intermediate holding company has one (1) or more subsidiary reorganized insurance companies of which a majority of the voting shares of the capital stock would otherwise have been required by KRS 304.37-505, to be at all times owned by the mutual insurance holding company. The commissioner shall have jurisdiction over an intermediate holding company as if it were a mutual insurance holding company; (3) "Majority of the voting shares of the capital stock of the reorganized insurance company" means shares of the capital stock of the reorganized insurance company which carry the right to cast a majority of the votes entitled to be cast by all of the outstanding shares of the capital stock of the reorganized insurance company for the election of directors and on all other matters submitted to a vote of the shareholders of the reorganized insurance company. The ownership of a majority of the voting shares of the capital stock of the reorganized insurance company which are required by KRS 304.37-505 to be held by the mutual insurance holding company may be held by indirect ownership through one (1) or more intermediate holding companies in a corporate structure approved by the commissioner, provided, however, that indirect ownership through one (1) or more intermediate holding companies shall not result in the mutual insurance holding company owning less than the equivalent of a majority of the voting shares of the capital stock of the reorganized insurance company; (4) "Mutual insurance holding company" means a holding company organized on the mutual plan and incorporated under the laws of Kentucky, resulting from the reorganization of a domestic mutual insurance company in accordance with KRS 304.37-505 and 304.37-510, with one (1) or more stock insurance holding company subsidiaries or stock insurance company subsidiaries; (5) "Plan of reorganization" means a plan to reorganize a domestic mutual insurance company by forming a mutual insurance holding company; and (6) "Stock offering" means any proposed sale, exchange, transfer, or other change of ownership of stock or of securities convertible into or exchangeable or exercisable for stock; including but not limited to an initial public offering, private equity placement, or grants of stock options and other equity based compensation. For purposes of KRS 304.37-570, 304.37-575, and 304.37-580, "stock offering" shall not mean: (a) An offering of preferred stock which is not convertible or exchangeable into common stock and which has no ordinary voting rights; or (b) A transfer of stock between a mutual insurance holding company, an insurance company subsidiary of a mutual holding company, and an insurance company subsidiary of an intermediate holding company subsidiary to a mutual holding company. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1486, effective July 15, 2010. -- Created 1998 Ky. Acts ch. 546, sec. 1, effective July 15, 1998.

KRS 304.37-505 Reorganization of domestic mutual insurance company by forming mutual insurance holding company -- Hearing -- Approval

304.37-505. Reorganization of domestic mutual insurance company by forming mutual insurance holding company -- Hearing -- Approval (1) A domestic mutual insurance company, upon approval of the commissioner, may reorganize by forming an insurance holding company based upon a mutual plan and continuing the corporate existence of the reorganizing insurance company as a stock insurance company. The commissioner, after a public hearing conducted in accordance with KRS Chapter 13B, if satisfied that the interests of the policyholders are properly protected and that the plan of reorganization is fair and equitable to the policyholders, may approve the proposed plan of reorganization and may require as a condition of approval modification of the proposed plan of reorganization as the commissioner finds necessary for the protection of the policyholders' interests. A reorganization under this section is subject to KRS 304.37-120(1), (2), (3), (6), and (7). The commissioner shall retain jurisdiction over a mutual insurance holding company organized under this section to assure that policyholder interests are protected. (2) All of the initial shares of the capital stock of the reorganized insurance company shall be issued to the mutual insurance holding company. The membership interests of the policyholders of the reorganized insurance company shall become membership interests in the mutual insurance holding company. Policyholders of the reorganized insurance company shall be members of the mutual insurance holding company in accordance with the articles of incorporation and bylaws of the mutual insurance holding company. The mutual insurance holding company shall at all times own a majority of the voting shares of the capital stock of the reorganized insurance company. (3) A domestic mutual insurance company, upon the approval of the commissioner, may reorganize by merging its policyholders' membership interests into a mutual insurance holding company formed under this section and continuing the corporate existence of the reorganizing insurance company as a stock insurance company subsidiary of the mutual insurance holding company. The commissioner, after a public hearing conducted in accordance with KRS Chapter 13B, if satisfied that the interests of the policyholders are properly protected and that the merger is fair and equitable to the policyholders, may approve the proposed merger and may require as a condition of approval modification of the proposed merger as the commissioner finds necessary for the protection of the policyholders' interests. A merger under this section is subject to KRS 304.37-120(1), (2), (3), (6), and (7). The commissioner shall retain jurisdiction over a mutual insurance holding company organized under this section to assure that policyholder interests are protected. (4) A merger of policyholders' membership interests in a mutual insurance company into a mutual insurance holding company shall be deemed to be a merger of the insurance companies under Subtitle 37 of KRS Chapter 304. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1487, effective July 15, 2010. -- Created 1998 Ky. Acts ch. 546, sec. 2, effective July 15, 1998. Legislative Research Commission Note (5/7/99). Under KRS 7.136(1)(h), the phrases "the interest of policyholders" and "plan or reorganization" in the second sentence of subsection (1) of this statute have been changed to "the interests of policyholders" and "plan of reorganization" to correct manifest clerical or typographical errors.

KRS 304.37-510 Reorganization of foreign mutual insurance company forming mutual insurance holding company -- Hearing -- Approval

304.37-510. Reorganization of foreign mutual insurance company forming mutual insurance holding company -- Hearing -- Approval (1) A foreign mutual insurance company may reorganize upon the approval of the commissioner and in compliance with the requirement of any law or regulation which is applicable to the foreign mutual insurance company by merging its policyholders' membership interests into a mutual insurance holding company formed under KRS 304.37-505 and continuing the corporate existence of the reorganizing foreign mutual insurance company as a foreign stock insurance company subsidiary of the mutual insurance holding company. The commissioner, after a public hearing as provided in KRS 304.37-120(4)(b), may approve the proposed merger. A merger under this section is subject to KRS 304. 37-120(1), (2), (3), (6), and (7). (2) The reorganizing foreign mutual insurance company may remain a foreign company after the merger and may be admitted to do business in this state. A foreign mutual insurance company which is a party to the merger may at the same time redomesticate in this state by complying with the applicable requirements of this state and its state of domicile. The provisions of KRS 304.37-120 shall apply to a merger authorized under this section. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1488, effective July 15, 2010. -- Created 1998 Ky. Acts ch. 546, sec. 3, effective July 15, 1998.

KRS 304.37-515 Incorporation of reorganizing corporation

304.37-515. Incorporation of reorganizing corporation A mutual insurance holding company resulting from the reorganization of a domestic mutual insurance company organized under KRS Chapter 271B shall be incorporated under KRS Chapter 271B. The articles of incorporation and any amendments to the articles of the mutual insurance holding company shall be subject to approval of the commissioner and the Attorney General in the same manner as those of an insurance company. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1489, effective July 15, 2010. -- Created 1998 Ky. Acts ch. 546, sec. 4, effective July 15, 1998.

KRS 304.37-520 Applicability of Subtitle 33

304.37-520. Applicability of Subtitle 33 A mutual insurance holding company is deemed to be an insurer subject to Subtitle 33 of this chapter and shall automatically be a party to any proceeding under Subtitle 33 of this chapter involving an insurance company which, as a result of a reorganization under KRS 304.37-505, is a subsidiary of the mutual insurance company. In any proceeding under Subtitle 33 of this chapter involving the reorganized insurance company, the assets of the mutual insurance holding company are deemed to be assets of the estate of the reorganized insurance company for purposes of satisfying the claims of the recognized insurance company's policyholders. A mutual insurance holding company shall not dissolve or liquidate without the approval of the commissioner or as ordered by the court under Subtitle 33 of this chapter. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1490, effective July 15, 2010. -- Created 1998 Ky. Acts ch. 546, sec. 5, effective July 15, 1998.

KRS 304.37-525 Applicability of KRS 304.24-600 to 304.24-625

304.37-525. Applicability of KRS 304.24-600 to 304.24-625 (1) KRS 304.24-600 to 304.24-625 is not applicable to a reorganization or merger under KRS 304.37-505 and 304.37-510. (2) KRS 304.24-600 to 304.24-625 is applicable to demutualization of a mutual insurance holding company which resulted from the reorganization of a domestic mutual insurance company organized under Subtitle 24 of this chapter as if it were a mutual insurance company. Effective: July 14, 2000 History: Amended 2000 Ky. Acts ch. 42, sec. 17, effective July 14, 2000. -- Created 1998 Ky. Acts ch. 546, sec. 6, effective July 15, 1998.

KRS 304.37-530 Membership interest not a security

304.37-530. Membership interest not a security A membership interest in a domestic mutual insurance holding company shall not constitute a security as defined in KRS 292.310(19). Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 82, sec. 17, effective July 15, 2010. -- Created 1998 Ky. Acts ch. 546, sec. 7, effective July 15, 1998.

KRS 304.37-535 Capital stock

304.37-535. Capital stock (1) The majority of the voting shares of the capital stock of the reorganized insurance company, which is required by KRS 304.37-505 to be at all times owned by a mutual insurance holding company, shall not be conveyed, transferred, assigned, pledged, subjected to a security interest or lien, encumbered, or otherwise hypothecated or alienated by the mutual insurance holding company or intermediate holding company. (2) Any conveyance, transfer, assignment, pledge, security interest, lien, encumbrance, hypothecation, or alienation of, in, or on the majority of the voting shares of the reorganized insurance company, which is required by KRS 304.37-505 to be at all times owned by a mutual insurance holding company, is in violation of KRS 304.37-505, and shall be void in inverse chronological order of the date of the conveyance, transfer, assignment, pledge, security interest, lien, encumbrance, hypothecation, or alienation, as to the shares necessary to constitute a majority of the voting shares. (3) The majority of the voting shares of the capital stock of the reorganized insurance company, which is required by KRS 304.37-505 to be at all times owned by a mutual insurance holding company, shall not be subject to execution and levy as provided in KRS Chapter 426. (4) The shares of the capital stock of the surviving or new company resulting from a merger or consolidation of two (2) or more reorganized insurance companies or two (2) or more intermediate holding companies which were subsidiaries of the same mutual insurance holding company are subject to the same requirements, restrictions, and limitations as provided in this section to which the shares of the merging or consolidating reorganized insurance companies or intermediate holding companies were subject by KRS 304.37-505, prior to the merger or consolidation. Effective: July 15, 1998 History: Created 1998 Ky. Acts ch. 546, sec. 8, effective July 15, 1998.

KRS 304.37-540 Annual statement -- Limitation on aggregate pledges and encumbrances of assets -- Investment of net worth in subsidiaries

304.37-540. Annual statement -- Limitation on aggregate pledges and encumbrances of assets -- Investment of net worth in subsidiaries (1) In addition to any other items required to be filed with the department under this chapter, each mutual insurance holding company shall supply to the Department of Insurance, by March 1 of each year, an annual statement consisting of the following: (a) An income statement; (b) A balance sheet; (c) A cash flow statement; (d) Complete information on the status of any closed block of business formed as a part of a plan or reorganization; (e) An investment plan covering all assets; and (f) A statement disclosing any intention to pledge, borrow against, alienate, hypothecate, or in any way encumber the assets of the mutual insurance holding company. (2) The aggregate pledges and encumbrances of a mutual holding company's assets shall not affect more than forty-nine percent (49%) of the company's stock in any subsidiary insurance holding company or subsidiary insurance company that resulted from a reorganization or merger. (3) At least fifty percent (50%) of the generally accepted accounting practices net worth of a mutual insurance holding company shall be invested in insurance company subsidiaries. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1491, effective July 15, 2010. -- Created 1998 Ky. Acts ch. 546, sec. 9, effective July 15, 1998.

KRS 304.37-545 Approval of policy credit, dividend, or distribution

304.37-545. Approval of policy credit, dividend, or distribution No policyholder who is a member of a mutual insurance holding company shall receive because of a membership interest any payment of a policy credit, dividend, or other distribution unless the payment has been approved by the commissioner. The commissioner, after a public hearing, if satisfied the proposed payment is fair and equitable to policyholders who are members, may approve the proposed payment and may require as a condition of approval modification of the proposed payment as the commissioner finds necessary for the protection of policyholders. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1492, effective July 15, 2010. -- Created 1998 Ky. Acts ch. 546, sec. 10, effective July 15, 1998.

KRS 304.37-550 Application for approval of reorganization or merger

304.37-550. Application for approval of reorganization or merger The reorganizing or merging insurer shall file with the commissioner an application requesting approval of the proposed reorganization or merger. The application shall include the following: (1) A Form A filing as described in KRS 304.37-120 and the administrative regulations promulgated thereunder; (2) A plan of reorganization as described in KRS 304.37-555; (3) A plan to obtain the approval by a majority of two-thirds (2/3) of the participating policyholders in accordance with the applicant's articles of incorporation and bylaws. Policyholders must be provided with sufficient information to evaluate the merits of the proposed transaction, including a description of the purpose of the transaction, risks associated with the transaction, and alternatives considered. Policyholders shall be given not less than twenty (20) days' notice of any vote on approval of the reorganization; (4) A copy of the mutual insurance holding company's proposed articles of incorporation and bylaws specifying all membership rights; (5) The names, addresses, and occupational information of all corporate officers and members of the initial mutual insurance holding company board of directors; (6) Information sufficient to demonstrate that the financial condition of the applicant will not be diminished upon reorganization; (7) A copy of the proposed articles of incorporation and bylaws for any insurance company subsidiary or intermediate holding company subsidiary; (8) An index demonstrating where in the application information supplied in compliance with each of the foregoing provisions is found; and (9) Any other information requested by the commissioner at any time during the proceedings. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1493, effective July 15, 2010. -- Created 1998 Ky. Acts ch. 546, sec. 11, effective July 15, 1998.

KRS 304.37-555 Plan of reorganization

304.37-555. Plan of reorganization The reorganizing or merging insurer shall file a plan of reorganization, approved by the affirmative vote of a majority of its board of directors, for review and approval by the commissioner. The plan shall provide the following: (1) Establishing a mutual insurance holding company with at least one (1) stock insurance company subsidiary or one (1) wholly owned intermediate holding company with a stock insurance subsidiary, the shares of which shall be held exclusively by the wholly owned intermediate holding company; (2) Protecting the immediate and long term interests of existing policyholders; (3) Ensuring immediate membership in the mutual insurance holding company of all existing policyholders of the reorganizing domestic mutual insurance company; (4) Providing for membership interest of future policyholders; (5) Describing the number of members of the board of directors of the mutual insurance holding company required to be policyholders; (6) Demonstrating that, in the event of proceedings under Subtitle 33 of KRS Chapter 304 involving a stock insurance company subsidiary of the mutual insurance holding company which resulted from the reorganization of a domestic mutual insurance company, the assets of the mutual insurance holding company will be available to satisfy the policyholder obligations of the stock insurance company; (7) Describing how any accumulation or prospective accumulation of earnings by the mutual insurance holding company, which is or would be in excess of that determined by the board of directors of the mutual insurance holding company to be necessary, shall inure to the exclusive benefit of the policyholders of its insurance company subsidiaries who are members; (8) Describing the nature and content of the annual report and financial statement to be sent to each member; (9) Describing the applicant's plan for a stock offering in accordance with the provisions of KRS 304.37-570; and (10) Describing other relevant matters the applicant deems appropriate. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1494, effective July 15, 2010. -- Created 1998 Ky. Acts ch. 546, sec. 12, effective July 15, 1998.

KRS 304.37-560 Purpose of application and plan

304.37-560. Purpose of application and plan The application and plan of reorganization submitted to the commissioner shall demonstrate that: (1) Policyholder interests are properly preserved and protected; (2) The plan is fair and equitable to policyholders; and (3) The financial condition of the applicant will not be diminished. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1495, effective July 15, 2010. -- Created 1998 Ky. Acts ch. 546, sec. 13, effective July 15, 1998.

KRS 304.37-565 Hearing -- Agreement to adopt foreign findings -- Notice -- Application and plan review -- Order -- Revocation -- Notice and documentation of completion

304.37-565. Hearing -- Agreement to adopt foreign findings -- Notice -- Application and plan review -- Order -- Revocation -- Notice and documentation of completion (1) A public hearing required by KRS 304.37-505 and 304.37-510 shall be conducted as directed in Subtitle 2 of this chapter and KRS Chapter 13B. (2) In lieu of an administrative hearing, the commissioner may, upon agreement of the parties, adopt the findings by the insurance supervisory official of another state. (3) In addition to any notice required by this chapter and KRS Chapter 13B, the department shall supplement any notice by newspaper publication and broadcast announcements, in accordance with KRS Chapter 424. (4) The commissioner may retain at the applicant's expense any attorneys, actuaries, accountants, investment bankers, or other experts not otherwise a part of the commissioner's staff that may be necessary to assist the commissioner in reviewing the proposed application and plan of reorganization or merger. (5) Upon receipt of the application and plan of reorganization or merger, the commissioner shall submit any application to the Attorney General for examination. The Attorney General shall have access to the commissioner's staff and all consultants retained by the commissioner for review of the application. The Attorney General may examine the application and plan of reorganization or merger for compliance with the standards in KRS 304.37-555. The Attorney General may submit written findings and a recommendation of approval, disapproval, or conditional approval of the application and plan of reorganization or merger to the commissioner. Written findings and recommendations shall be delivered to the commissioner no later than five (5) days prior to the public hearing required by KRS 304.37-505 and 304.37-510 and shall be entered into the record at the hearing. (6) The commissioner shall at all times retain jurisdiction over the mutual insurance holding company and its intermediate holding company subsidiaries with stock insurance company subsidiaries. (7) Following the hearing required in KRS 304.37-505 and 304.37-510, the commissioner shall, by order, approve, conditionally approve, or deny an application. The commissioner may require, as a condition of approval of the proposed reorganization, modification of the proposed plan of reorganization as the commissioner finds necessary. The applicant shall accept required modifications by filing appropriate amendments to the proposed plan of reorganization with the commissioner within thirty (30) days of the date of the order of the commissioner requiring modifications. If the applicant does not accept the required modifications by failing to file the required amendments to the proposed plan of reorganization within thirty (30) days, the proposed reorganization shall be deemed denied. (8) An approval or conditional approval of a plan of reorganization shall expire if the reorganization is not completed within one hundred eighty (180) days unless the time period is extended by the commissioner upon a showing of good cause. (9) The commissioner may revoke approval or conditional approval of an applicant's plan of reorganization if the commissioner finds the applicant has failed to comply with the plan of reorganization. The commissioner may compel completion of a plan of reorganization unless the plan is abandoned in its entirety. The commissioner shall retain jurisdiction over the applicant until a plan of reorganization has been completed. (10) Upon completion of all elements of a plan of reorganization and any conditions placed on the reorganization by the commissioner, the applicant shall provide a notice of and documentation of completion to the commissioner. (11) Within twelve (12) months after the commissioner receives the notice specified in subsection (9) of this section, the commissioner shall examine the affairs, transactions, accounts, records, and assets of the mutual holding company, reorganized insurer, and its affiliated persons for compliance with the plan of reorganization and for protection of policyholder interests. Effective: July 12, 2012 History: Amended 2012 Ky. Acts ch. 74, sec. 18, effective July 12, 2012. -- Amended 2010 Ky. Acts ch. 24, sec. 1496, effective July 15, 2010. -- Created 1998 Ky. Acts ch. 546, sec. 14, effective July 15, 1998.

KRS 304.37-570 Stock offering -- Application -- Conditions for approval -- Hearing -- Filing of registration statement with Securities and Exchange Commission

304.37-570. Stock offering -- Application -- Conditions for approval -- Hearing -- Filing of registration statement with Securities and Exchange Commission (1) No stock offering by a mutual insurance holding company, an insurance company subsidiary of a mutual insurance holding company, an intermediate holding company subsidiary of a mutual insurance holding company, or an insurance company subsidiary of an intermediate holding company subsidiary to a mutual insurance holding company shall occur without the prior approval of the commissioner. The commissioner's approval may be obtained only through an application and hearing process. (2) Every application for approval of a stock offering shall contain the following information: (a) A description of the stock intended to be offered by the applicant, including a description of all shareholder rights; (b) The total number of shares authorized to be issued, the estimated number of shares the applicant requests permission to offer, and the intended date or range of dates for the offering; (c) A justification for a uniform planned offering price or a justification of the method by which the offering price will be determined; (d) The name or names of any underwriter, syndicate member, or placement agent involved and, if known, the name or names of each entity, person, or group of persons to whom the stock offering is to be made who will control five percent (5%) or more of the total outstanding class of shares, and the manner in which the offer is to be tendered. If any entity or person is a corporation or business organization, the name of each member of its board of directors or equivalent management team shall be provided along with the name of each member of the board of directors of the offeror. Copies of any filings with the Securities and Exchange Commission disclosing intended acquisitions of the stock shall be included in the application; (e) A description of stock subscription rights to be afforded members of the mutual insurance holding company in conjunction with the stock offering; (f) A detailed description of all expenses to be incurred in conjunction with the stock offering; (g) An explanation of how funds raised by the stock offering are to be used; and (h) Any other information requested by the commissioner. (3) No application regarding a planned stock offering shall be approved unless the plan contains provisions: (a) Requiring a majority of the members of the board of directors of the mutual insurance holding company to be persons who are not interested persons of the mutual insurance holding company or of any subsidiary or affiliated person of the company. The commissioner may waive this requirement upon a showing of good cause based on clear and convincing evidence; (b) For the mutual insurance holding company to adopt articles of incorporation prohibiting any waiver of dividends from stock subsidiaries except under conditions specified in its articles of incorporation and after approval of the waiver by the board of directors of the mutual insurance holding company and the commissioner; (c) Requiring that the board of directors of any insurance company subsidiary of a mutual insurance holding company, any intermediate holding company subsidiary of a mutual holding company, or the insurance company subsidiary of an intermediate holding company shall include at least three (3) directors who are not interested persons of the mutual insurance holding company; (d) Establishing, within the board of directors of the corporation offering stock, a pricing committee consisting exclusively of directors who are not interested persons who shall have sole responsibility for evaluating and approving the price of any stock offering; (e) Establishing, within the board of directors of the mutual insurance holding company, any insurance company subsidiary of a mutual insurance holding company, any intermediate holding company subsidiary, and any insurance company subsidiary of an intermediate holding company subsidiary to a mutual insurance holding company, an executive compensation committee consisting exclusively of directors who are not interested persons, who shall have sole responsibility for evaluating and approving compensation for directors, officers, and employees; (f) Establishing that for any committee of the mutual insurance holding company, any insurance company subsidiary of a mutual insurance holding company, any intermediate holding company subsidiary, and any insurance company subsidiary of an intermediate holding company subsidiary to a mutual insurance holding company, at least two-thirds (2/3) of any committee having responsibility for making decisions affecting capital structure or mergers and acquisitions shall not be interested persons; (g) Prohibiting officers, directors, and insiders of the mutual insurance holding company and its subsidiaries and affiliates from the purchase or beneficial ownership of any shares of the stock offering, or issuance of stock options to or for the benefit of the officers, directors, and insiders for a period of at least six (6) months following the first date the offering was publicly and regularly traded. This paragraph shall not be construed to limit the rights of officers, directors, and insiders from exercising subscription rights generally accorded members of the mutual insurance holding company, except that, in accordance with any subscription rights, the officers, directors, and insiders of the mutual insurance holding company and its subsidiaries and affiliates may not purchase or own, in the aggregate, more than one percent (1%) of the stock offering for a period of at least six (6) months following the first date the offering was publicly and regularly traded; (h) For a period of two (2) years after the six (6) month period referred to in paragraph (g) of this section, the officers, directors, and insiders of the mutual insurance holding company and its subsidiaries and affiliates may not purchase or beneficially own, in the aggregate, more than five percent (5%) of the stock of the insurance company subsidiary of a mutual insurance holding company, an intermediate holding company subsidiary of a mutual insurance company, or an insurance company subsidiary of an intermediate holding company subsidiary to a mutual insurance holding company; and (i) Requiring that all members of the mutual insurance holding company are granted stock subscription rights in any initial stock offering. This requirement may be waived by the commissioner upon a showing of good cause at public hearing. For purposes of this paragraph, good cause may only be found where the members of the mutual insurance holding company are given rights to participate in the appreciation of the stock offered that are comparable to stock subscription rights. (4) An insurance company subsidiary of a mutual insurance holding company, an intermediate holding company subsidiary of a mutual insurance company, or an insurance company subsidiary of an intermediate holding company subsidiary to a mutual insurance holding company may issue more than one (1) class of stock if: (a) At all times a majority of the voting stock is held by the mutual insurance holding company or its subsidiary; and (b) No class of common stock possesses greater dividend or other rights than the class held by the mutual insurance holding company or its subsidiary. (5) The commissioner shall hire, at the applicant's expense, attorneys, actuaries, accountants, investment bankers, and other experts as may reasonably be necessary to assist the commissioner in reviewing the application. (6) The commissioner shall, in the commissioner's discretion, hold a public hearing in accordance with KRS Chapter 13B regarding any application for approval of a stock offering. Upon receipt of an application for approval of a stock offering which includes an initial offering of stock, the commissioner shall hold a public hearing at which all interested parties may appear and present evidence and argument regarding the applicant's planned offering. The commissioner shall provide the applicant adequate notice of the hearing so that the applicant can provide notice of the hearing to members of the mutual insurance holding company, in a manner approved by the commissioner, not less than twenty (20) days prior to the hearing. Following the hearing, the commissioner may approve, conditionally approve, or deny the application. The commissioner may approve the plan if: (a) The offering complies with these rules and other provisions of law; (b) The method for establishing the price of a stock offering is consistent with generally accepted market or industry practices for establishing stock offering prices in similar transactions; and (c) The plan and offering will not unfairly impact the interests of members of the mutual insurance holding company. (7) Nothing in this section shall be deemed to prohibit the filing of a registration statement with the Securities and Exchange Commissioner prior to or concurrently with the giving of notice to members. (a) Notwithstanding subsections (1) to (6) of this section, a stock offering which is not an initial stock offering and which offers stock regularly traded on the New York Stock Exchange, the American Stock Exchange, or another exchange approved by the commissioner, or designated on the national association of securities dealers automated quotations-national market system may be sold if a mutual insurance holding company, an insurance company subsidiary of a mutual insurance holding company, an intermediate holding company, or an insurance company subsidiary of an intermediate holding company intends to make a stock offering which would be governed by the provisions of KRS 304.37-500 to 304.37-580. The entity shall deliver to the commissioner not less than thirty (30) days prior to the offering a notice of the planned stock offering and information regarding the following: 1. The total number of shares intended to be offered; 2. The intended date of sale; 3. Evidence that the stock is regularly traded on one (1) of the public exchanges noted in subsection (a) of this section; and 4. A record of the trading pace and trading volume of the stock during the prior fifty-two (52) weeks. (b) The commissioner shall be deemed to have approved the sale unless, within thirty (30) days following receipt of the notice, the commissioner issues an objection to the sale. If the commissioner issues an objection to the sale, the procedures set forth in subsection (2) of this section shall be followed to determine whether the commissioner approves the proposed sale; (c) Approval of a stock offering obtained under either subsection (6) or (7) of this section shall expire ninety (90) days following the date of the approval or deemed approval, except as otherwise provided by the order of the commissioner; and (d) No prospectus, information, sales material, or sales presentation by the applicant, or by any representative, agent, or affiliate of the applicant shall contain a representation that the commissioner's approval of a stock offering constitutes an endorsement of the price, price range, or any other information relating to the stock. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1497, effective July 15, 2010. -- Created 1998 Ky. Acts ch. 546, sec. 15, effective July 15, 1998.

KRS 304.37-575 Prohibited practices

304.37-575. Prohibited practices The following practices are prohibited: (1) Borrowing funds from the mutual insurance holding company, or its subsidiaries and affiliates, to finance the purchase of any portion of a stock offering; (2) Payment of commissions, "special fees," and any other special payment or extraordinary compensation to officers, directors, interested persons, and affiliates, for arranging, promoting, aiding, or assisting in reorganization to a mutual insurance holding company, or for arranging, promoting, aiding, assisting, or participating in the structuring and placement of a stock offering; and (3) Entering into an understanding or agreement transferring legal or beneficial ownership of stock to another person in avoidance of these rules. Effective: July 15, 1998 History: Created 1998 Ky. Acts ch. 546, sec. 16, effective July 15, 1998.

KRS 304.37-580 Prohibited ownership interests -- Prohibited acquisition offer to acquire

304.37-580. Prohibited ownership interests -- Prohibited acquisition offer to acquire (1) At no time shall the officers, directors, or insiders of the mutual insurance holding company and its subsidiaries and affiliates beneficially own, in the aggregate, more than eighteen percent (18%) of the voting stock of the insurance company subsidiary of a mutual insurance holding company, an intermediate holding company subsidiary of a mutual insurance company, or an insurance company subsidiary of an intermediate holding company subsidiary to a mutual insurance holding company. (2) This subsection applies to directors of the mutual insurance holding company and its subsidiaries and affiliates. These directors shall not purchase or beneficially own, in the aggregate, more than three percent (3%) of the voting stock of an insurance company subsidiary of a mutual insurance company or an insurance company subsidiary of an intermediate holding company subsidiary to a mutual insurance holding company. (3) No person may directly or indirectly offer to acquire or acquire, in any manner, beneficial ownership of more than fifteen percent (15%) of any class of voting securities of an insurance company subsidiary of a mutual insurance holding company, an intermediate holding company subsidiary of a mutual insurance company, or an insurance company subsidiary of an intermediate holding company subsidiary to a mutual insurance holding company. Effective: July 15, 1998 History: Created 1998 Ky. Acts ch. 546, sec. 17, effective July 15, 1998.
Source: Kentucky Legislative Research Commission (legislature.ky.gov)URL: https://apps.legislature.ky.gov/law/statutes/chapter.aspx?id=38752Fetched: 10/20/2026

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