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Form a Business

Domestic Stock and Mutual Insurers

KRS tit. XXV, ch. 304, subtit. 24
in effect

KRS 304.24-010 Scope

304.24-010. Scope (1) This subtitle shall apply only to domestic stock insurers, domestic combined stock and mutual life insurers, and domestic mutual insurers transacting or proposing to transact insurance on the cash premium or legal reserve plan, except that KRS 304.24-160, 304.24-250, and 304.24-310 shall also apply to foreign and alien insurers. (2) All provisions of this subtitle relating to stock companies and all such provisions relating to mutual companies shall, so far as applicable, relate to and govern combined stock and mutual life companies and the rights of stockholders and participating policyholder members thereof. Effective: July 13, 1984 History: Amended 1984 Ky. Acts ch. 343, sec. 4, effective July 13, 1984. -- Created 1970 Ky. Acts ch. 301, subtit. 24, sec. 1, effective June 18, 1970.

KRS 304.24-020 Definitions

304.24-020. Definitions (1) A "stock" insurer is as defined in KRS 304.3-010. (2) A "mutual" insurer is as defined in KRS 304.3-020. (3) A "combined stock and mutual life" insurer is as defined in KRS 304.3-025. Effective: July 13, 1984 History: Amended 1984 Ky. Acts ch. 343, sec. 5, effective July 13, 1984. -- Created 1970 Ky. Acts ch. 301, subtit. 24, sec. 2, effective June 18, 1970.

KRS 304.24-030 Applicability of general corporation statutes

304.24-030. Applicability of general corporation statutes Domestic stock, combined stock and mutual life, or mutual insurers shall be governed by the applicable provisions of the general statutes of this state relating to private corporations organized for profit, as such statutes are now or hereafter may be constituted, except where such general statutes are in conflict with the express provisions of this subtitle and the reasonable implications thereof, and in which case the provisions of this subtitle shall govern. Effective: July 13, 1984 History: Amended 1984 Ky. Acts ch. 343, sec. 6, effective July 13, 1984. -- Created 1970 Ky. Acts ch. 301, subtit. 24, sec. 3, effective June 18, 1970.

KRS 304.24-040 Incorporation of domestic stock, combined stock and mutual life, or mutual insurers -- Votes allotted to stockholders and policyholders

304.24-040. Incorporation of domestic stock, combined stock and mutual life, or mutual insurers -- Votes allotted to stockholders and policyholders (1) This section applies to stock, combined stock and mutual life, or mutual insurers hereafter incorporated in this state. Such an insurer may be formed for the purpose of transacting any kind or kinds of insurance, as well as annuity business. (2) Incorporators. Three (3) or more individuals, none of whom is less than eighteen (18) years of age, may incorporate a stock insurer; ten (10) or more individuals may incorporate a mutual insurer. At least a majority of the incorporators must be citizens of the United States. At least a majority of the incorporators must be residents of Kentucky. (3) Articles. The incorporators shall deposit the articles of incorporation, in quadruplicate originals, with the commissioner, and the articles shall not be filed with the Secretary of State until approved by the commissioner as provided in KRS 304.24-050, and the commissioner's approval has been stamped upon or otherwise attached to the articles. In addition to the applicable requirements of laws in this state governing the incorporation of business corporations generally: (a) The name of the corporation, which shall be subject to KRS 304.3-100, shall contain the words "insurance company;" if a mutual, or a combined stock and mutual, the word "mutual" must be a part of the name. (b) The articles of incorporation shall specify the kind or kinds of insurance proposed to be transacted. (c) Each share of capital stock shall have a par value of not less than $1.00. (d) If a mutual, or a combined stock and mutual life, the articles of incorporation shall state the maximum contingent liability of its participating policyholder members, other than as to nonassessable policies, for payment of losses and expenses incurred. Such liability shall be as stated in the articles of incorporation, but shall not be less than one (1) or more than six (6) times the premium for member's policy at the annual premium rate for a term of one (1) year. (e) The names and residence addresses of the incorporators. (4) Unless otherwise provided in the articles of incorporation or an amendment thereto, each stockholder of a combined stock and mutual life insurance company shall, at all meetings, be entitled to one (1) vote for each share of common stock held by him, and each holder of a policy entitled to participate in profits or savings shall be a member and, as such, shall be entitled to vote on the same basis to which he would be entitled in a mutual company under KRS 304.24-210. Effective: July 15, 1998 History: Amended 1998 Ky. Acts ch. 483, sec. 24, effective July 15, 1998. -- Amended 1984 Ky. Acts ch. 343, sec. 7, effective July 13, 1984. -- Created 1970 Ky. Acts ch. 301, subtit. 24, sec. 4, effective June 18, 1970.

KRS 304.24-050 Procedures preliminary to qualification

304.24-050. Procedures preliminary to qualification (1) Upon receipt of the articles of incorporation of the proposed insurer, the commissioner shall submit such articles to the Attorney General for examination. Within ten (10) days after receipt thereof the Attorney General shall return the articles to the commissioner with a written statement as to whether the articles comply with law. (2) If the Attorney General has found the articles to be in compliance with law and has so stated to the commissioner, the commissioner shall stamp or otherwise certify his or her approval thereon, retain one (1) copy of the articles for his or her files and deliver the remaining three (3) copies of the articles to the incorporators for filing as provided by laws governing business corporations generally. (3) The incorporators shall concurrently file with the commissioner duplicates of filings made on behalf of the corporation with the commissioner of the Department of Financial Institutions pursuant to KRS Chapter 292, and upon compliance with the provisions of such chapter governing sale of securities, the incorporators may open books to receive subsections for capital stock of the corporation. (4) After all stock stated by the articles as to the amount of capital with which the corporation will begin business (which shall not be less than the applicable minimum amounts required by the provisions of this code to qualify for authority to transact the kind of insurance specified by the articles) has been subscribed and paid for either in cash or in assets of the kind eligible for investment of a domestic insurer under this code, the incorporators shall make application for a certificate of authority as provided in Subtitle 3 of this chapter. (5) In addition to the requirements of this subtitle, the incorporators shall also comply with such other applicable laws governing the organization of domestic business corporations as are not in conflict with the provisions of this subtitle. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1322, effective July 15, 2010. -- Amended 1994 Ky. Acts ch. 165, sec. 24, effective July 15, 1994. -- Created 1970 Ky. Acts ch. 301, subtit. 24, sec. 5, effective June 18, 1970.

KRS 304.24-060 Qualification of newly organized stock insurer

304.24-060. Qualification of newly organized stock insurer (1) Upon receiving the application provided for in subsection (4) of KRS 304.24-050, the commissioner shall make an examination of the affairs of the proposed corporation to ascertain whether it has complied with requirements of law and has fully paid-in capital stock and assets in amount necessary to qualify for authority to transact the kind or kinds of insurance proposed to be transacted. As a part of such examination the commissioner shall require the incorporators or directors to certify, under oath, that assets exhibited to him or her are the bona fide property of the proposed corporation. (2) If after such examination the commissioner finds that the proposed corporation is fully entitled thereto, the commissioner shall issue to it his or her certificate of authority to transact the kind or kinds of insurance for which it has qualified. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1323, effective July 15, 2010. -- Created 1970 Ky. Acts ch. 301, subtit. 24, sec. 6, effective June 18, 1970.

KRS 304.24-070 Completion of incorporation -- General powers and duties

304.24-070. Completion of incorporation -- General powers and duties The incorporation of an insurer shall be effective as of the date of issuance by the Secretary of State of its articles of incorporation; and thereupon the corporation shall be vested with all the powers, rights and privileges, and be subject to all the duties, liabilities and restrictions applicable to insurer corporations; subject, however, to qualification and application for, and issuance to the corporation of, a certificate of authority as an insurer by the commissioner under the provisions of this code. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1324, effective July 15, 2010. -- Created 1970 Ky. Acts ch. 301, subtit. 24, sec. 7, effective June 18, 1970.

KRS 304.24-080 Amendment of articles of incorporation -- Mutual insurers

304.24-080. Amendment of articles of incorporation -- Mutual insurers (1) A domestic mutual insurer heretofore or hereafter formed may amend its articles of incorporation for any lawful purpose by affirmative vote of a majority of those of its members present or represented by proxy at any regular annual meeting of its members, or at any special meeting of members called for the purpose. Written notice of the proposed amendment shall be given members at least thirty (30) days prior to the meeting, and may be given in the same manner and at the same time as notice of the meeting is given or in any other appropriate manner. (2) Upon adoption of the amendment the insurer shall prepare articles of amendment in quadruplicate, setting forth the amendment and the date and manner of the adoption thereof. The articles of amendment shall be executed by the insurer's president or vice president and secretary or assistant secretary, and be acknowledged by them before an officer authorized by law to take acknowledgments of deeds. (3) The quadruplicate originals of the articles of amendment shall be delivered to the commissioner, shall be subject to examination and certification by the Attorney General, to approval by the commissioner, and to filing, all as provided for original articles of incorporation under KRS 304.24-040. For filing articles of amendment of the articles of incorporation of a domestic mutual insurer the Secretary of State shall charge and collect a fee of ten dollars ($10), for credit to the general fund. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1325, effective July 15, 2010. -- Created 1970 Ky. Acts ch. 301, subtit. 24, sec. 8, effective June 18, 1970.

KRS 304.24-090 Amendment of articles of incorporation -- Stock insurers

304.24-090. Amendment of articles of incorporation -- Stock insurers (1) A domestic stock insurer may amend its articles of incorporation for any lawful purpose through the same procedures prescribed in KRS Chapter 271B. (2) Quadruplicate originals of articles of amendment shall be delivered to the commissioner, shall be subject to examination and certification by the Attorney General, to approval by the commissioner, and to filing, all as provided for original articles of incorporation under KRS 304.24-040. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1326, effective July 15, 2010. -- Amended 1972 Ky. Acts ch. 274, sec. 162, effective July 1, 1972. -- Created 1970 Ky. Acts ch. 301, subtit. 24, sec. 9, effective June 18, 1970. Legislative Research Commission Note. As of January 1, 1989, KRS Ch. 271A becomes KRS Ch. 271B. Therefore, the reference in subsection (1) of this section to KRS Ch. 271A has been changed to KRS Ch. 271B.

KRS 304.24-095 Articles of incorporation of a combined stock and mutual life insurance company -- Possible amendments

304.24-095. Articles of incorporation of a combined stock and mutual life insurance company -- Possible amendments (1) A domestic stock or mutual life insurance company may amend its articles of incorporation so as to become a combined stock and mutual life company; provided, that no such amendment shall deprive any stockholder or member or policyholder of the right, at any and all meetings of stockholders and members or policyholders held thereafter, to cast as many votes for directors as are provided by the articles of incorporation in force at the time of the adoption of such amendment, or by the law in force at such time. No such amendment shall be construed to change the identity of the corporation and it shall thereafter continue to be governed by the laws applicable thereto at the time of such amendment and as amended hereafter and not inconsistent with this subtitle, as well as those relating to the added characteristic of capital stock or mutuality which it shall have acquired by such amendment. (2) The articles of incorporation of a combined stock and mutual insurance company may be amended in any respect provided by KRS Chapter 271B and this subtitle, in the manner therein provided. The articles of incorporation of a combined stock and mutual life insurance company may also be amended in respect to any matter which the original articles of incorporation of a combined stock and mutual life insurance company might lawfully have contained, or so as to vest in its board of directors authority to make and alter bylaws subject to the power of the stockholders and members to change or repeal such bylaws, by the affirmative vote, at a regular meeting of stockholders and members or at a special meeting of stockholders and members called for that expressly stated purpose by the board of directors which shall first have proposed the amendment and declared it to be advisable, of: (a) A majority of the total number of votes to which stockholders are entitled; and (b) At least one-fifth (1/5) of the total number of votes to which participating policyholder members are entitled, provided the proposed amendment does not receive the negative vote of more than five percent (5%) of the total number of votes to which all participating policyholder members are entitled. (3) The articles of incorporation of a combined stock and mutual life insurance company may also be amended so as to increase or decrease its capital stock, or so as to change the number and par value of the shares of its capital stock, or so as to limit or deny to stockholders the preemptive right to subscribe to any or all shares of stock which may be authorized to be thereafter issued, by a majority vote of all its shares but without the vote of its members, at a regular meeting or at a special meeting of stockholders called for that expressly stated purpose by the board of directors which shall first have proposed the amendment and declared it to be advisable and not adverse to or in conflict with the rights and interests of the members, provided that if the proposed amendment is to increase or decrease the capital stock or to change the number of the shares of the capital stock, the resolution specifying the proposed amendment and the certificate of amendment shall expressly provide: (a) That the stockholders holding all its shares shall, at all meetings, be entitled to the same number of total votes after the amendment is adopted as they were entitled to before the amendment; and (b) That each stockholder shall, at all meetings, be entitled to a fraction of one (1) vote for each share of stock held by him, the numerator of which fraction shall be the number of shares outstanding before the first such amendment is adopted and the denominator of which fraction shall be the number of shares outstanding. Effective: July 13, 1984 History: Created 1984 Ky. Acts ch. 343, sec. 2, effective July 13, 1984. Legislative Research Commission Note. As of January 1, 1989, KRS Ch. 271A becomes KRS Ch. 271B. Therefore, the reference in subsection (2) of this section to KRS Ch. 271A has been changed to KRS Ch. 271B.

KRS 304.24-100 Formation of mutual -- Initial qualifications

304.24-100. Formation of mutual -- Initial qualifications (1) When newly organized, a domestic mutual insurer may be authorized to transact any one of the kinds of insurance listed in the schedule contained in subsection (2) of this section. (2) When applying for an original certificate of authority, the insurer must be otherwise qualified therefor under this code, and must have received and accepted bona fide applications as to substantial insurable subjects for insurance coverage of a substantial character of the kind of insurance proposed to be transacted, must have collected in cash the full premium therefor at a rate not less than that usually charged by other insurers for comparable coverages, and must have surplus funds on hand and deposited as of the date such insurance coverages are to become effective, all in accordance with that part of the following schedule which applies to the kind of insurance the insurer proposes to transact: (a) (b) (c) (d) (e) Min. No. Min. No. Minimum Min. Amt. Kind of of Apps. Subjects Premium Ins. ea. Insurance Accepted Covered Collected Subject Life (i) 500 500 Annual $1,000 Disability (ii) 500 500 Quarterly $ 15 Life & Health 500 500 Quarterly (weekly indem.) Property (iii) 100 250 Annual $1,000 Casualty (iv) 250 500 Annual $1,000 excluding surety and workers' compensation Casualty with 250 1,500 Quarterly $1,000 workers' compensation (a) (f) (g) Max.Amt. Deposit of Ins. ea. Min. Sur- Kind of Subject plus Funds Insurance (v) (vi) Life (i) $ 2,500 $ 500,000 Disability (ii) $ 30 $ 500,000 Life & Health (weekly $ 500,000 indem.) Property (iii) $ 3,000 $ 500,000 Casualty (iv) $10,000 $1,000,000 excluding surety and workers' compensation Casualty with $10,000 $1,500,000 workers' compensation Expendable Surplus: In addition to surplus deposited and thereafter to be maintained as shown in column (g) above, the insurer when first authorized must have on hand surplus funds, which it can thereafter expend in the conduct of its business, in amount not less than $500,000 or 50 percent of the deposited surplus required of it under the above schedule, whichever is the larger amount. (3) The following provisions are respectively applicable to the foregoing schedule and provisions as indicated by like Roman numerals appearing in such schedule: (i) No group insurance or term policies for terms of less than ten (10) years shall be included. (ii) No group, blanket or family plans of insurance shall be included. In lieu of weekly indemnity a like premium value in medical, surgical, and hospital benefits may be provided. Any accidental death or dismemberment benefit provided shall not exceed $2,500. (iii) Only insurance of the owner's interest in real property may be included. (iv) Must include insurance of legal liability for bodily injury and property damage, to which the maximum and minimum insured amounts apply. (v) The maximums provided for in this column (f) are net of applicable reinsurance. (vi) The deposit of surplus in the amount specified in column (g) must thereafter be maintained unimpaired. The deposit is subject to the provisions of Subtitle 8. Effective: July 5, 1982 History: Amended 1982 Ky. Acts ch. 128, sec. 3, effective July 15, 1982. -- Created 1970 Ky. Acts ch. 301, subtit. 24, sec. 10, effective June 18, 1970.

KRS 304.24-110 Formation of mutual -- Bond

304.24-110. Formation of mutual -- Bond (1) Before soliciting any applications for insurance required under KRS 304.24-100 as qualification for the original certificate of authority, the incorporators of the proposed insurer shall file with the commissioner a corporate surety bond in the penal sum of one hundred thousand dollars ($100,000), in favor of the state and for the use and benefit of the state and of applicant members and creditors of the corporation. The bond shall be conditioned as follows: (a) For the prompt return to applicant members of all premiums collected in advance; (b) For payment of all indebtedness of the corporation; (c) For payment of costs incurred by the state in event of any legal proceedings for liquidation or dissolution of the corporation; all in the event the corporation fails to complete its organization and secure a certificate of authority within one (1) year after the date of its certificate of incorporation; and (d) That it is not subject to cancellation unless thirty (30) days' advance notice in writing of cancellation is given both the incorporators and the commissioner. (2) In lieu of such bond, the incorporators may deposit with the commissioner one hundred thousand dollars ($100,000) in cash or United States government bonds negotiable and payable to the bearer, with a market value of not less than one hundred thousand dollars ($100,000), to be held in trust upon the same conditions as required for the bond. (3) Any such bond filed or deposit or remaining portion thereof held under this section shall be released and discharged upon settlement and termination of all liabilities against it. (4) In addition to the bond the proposed insurer shall file with the commissioner copies of any proposed form or policy to be offered and schedule of premium rates therefor, copies of all advertising and sales literature proposed to be used in such solicitation, and such other information relative to the solicitation of such insurance or procuring of such funds as the commissioner may reasonably require, all of which must comply with the law. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1327, effective July 15, 2010. -- Amended 1982 Ky. Acts ch. 128, sec. 4, effective July 15, 1982. -- Created 1970 Ky. Acts ch. 301, subtit. 24, sec. 11, effective June 18, 1970.

KRS 304.24-120 Formation of mutual -- Applications for insurance

304.24-120. Formation of mutual -- Applications for insurance (1) Upon receipt of the commissioner's approval of the bond or deposit as provided in KRS 304.24-110, the directors and officers of the proposed domestic mutual insurer may commence solicitation of such requisite applications for insurance policies as they may accept, and may receive deposits of premiums thereon. (2) All such applications shall be in writing signed by the applicant, covering subjects of insurance resident, located or to be performed in this state. (3) All such applications shall provide that: (a) Issuance of the policy is contingent upon the insurer qualifying for and receiving a certificate of authority; (b) No insurance is in effect unless and until the certificate of authority has been issued; and (c) The prepaid premium or deposit, and membership or policy fee, if any, shall be refunded in full to the applicant if organization is not completed and the certificate of authority is not issued and received by the insurer before a specified reasonable date, which date shall be not later than one (1) year after the date of the certificate of incorporation. (4) All qualifying premiums collected shall be in cash. (5) Solicitation for such qualifying applicants for insurance shall be by licensed agents of the corporation, and the commissioner shall, upon the corporation's application therefor, issue temporary agent's licenses expiring on the date specified pursuant to paragraph (c) of subsection (3) of this section to individuals qualified as for a resident's license except as to the taking or passing of an examination. The commissioner may suspend or revoke any such license for any of the causes and pursuant to the same procedures as are applicable to suspension or revocation of licenses of agent's in general under Subtitle 9. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1328, effective July 15, 2010. -- Created 1970 Ky. Acts ch. 301, subtit. 24, sec. 12, effective June 18, 1970.

KRS 304.24-130 Formation of mutual -- Trust deposit of premiums

304.24-130. Formation of mutual -- Trust deposit of premiums (1) All sums collected by a domestic mutual corporation as premiums or fees on qualifying applications for insurance therein shall be deposited in trust in a bank or trust company in this state under a written trust agreement consistent with this section and with paragraph (c) of subsection (3) of KRS 304.24-120 and 304.24- 140. The corporation shall file an executed copy of such trust agreement with the commissioner. (2) Upon issuance to the corporation of a certificate of authority as an insurer for the kind of insurance for which such applications were solicited, all funds so held in trust shall become the funds of the insurer, and the insurer shall thereafter in due course issue and deliver its policies for which premiums had been paid and accepted. The insurance provided by such policies shall be effective as of the date of the certificate of authority or thereafter as provided by the respective policies. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1329, effective July 15, 2010. -- Created 1970 Ky. Acts ch. 301, subtit. 24, sec. 13, effective June 18, 1970.

KRS 304.24-140 Formation of mutual -- Failure to qualify

304.24-140. Formation of mutual -- Failure to qualify If the proposed domestic insurer fails to complete its organization and to secure its original certificate of authority within one (1) year after the date of its certificate of incorporation, its corporate powers shall cease, and the commissioner shall return or cause to be returned to the persons entitled thereto all advance deposits or payments of premiums held in trust under KRS 304.24-130. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1330, effective July 15, 2010. -- Created 1970 Ky. Acts ch. 301, subtit. 24, sec. 14, effective June 18, 1970.

KRS 304.24-150 Additional kinds of insurance -- Mutuals

304.24-150. Additional kinds of insurance -- Mutuals After being authorized to transact one (1) kind of insurance a mutual insurer may be authorized by the commissioner to transact additional kinds of insurance by compliance with the applicable financial requirements set forth in KRS 304.24-100 and by otherwise complying with the applicable provisions of this code. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1331, effective July 15, 2010. -- Created 1970 Ky. Acts ch. 301, subtit. 24, sec. 15, effective June 18, 1970.

KRS 304.24-160 Membership in mutuals

304.24-160. Membership in mutuals (1) Each policyholder of a domestic mutual insurer, other than of a reinsurance contract, is a member of the insurer with all rights and obligations of such membership, and the policy shall so specify. (2) Any person, government or governmental agency, state or political subdivision thereof, public or private corporation, board, association, firm, estate, trustee or fiduciary may be a member of a domestic, foreign, or alien mutual insurer. Any officer, stockholder, trustee or legal representative of any such corporation, board, association or estate may be recognized as acting for or on its behalf for the purpose of such membership, and shall not be personally liable upon any contract of insurance for acting in such representative capacity. (3) Any domestic corporation may participate as a member of a mutual insurer as an incidental purpose for which such corporation is organized. Effective: June 18, 1970 History: Created 1970 Ky. Acts ch. 301, subtit. 24, sec. 16, effective June 18, 1970.

KRS 304.24-170 Bylaws of mutual

304.24-170. Bylaws of mutual (1) A domestic mutual insurer shall have bylaws for the government of its affairs. The insurer's initial board of directors shall adopt original bylaws, subject to the approval of the insurer's members at the next meeting of members. (2) The bylaws shall contain provisions, consistent with this code, relating to: (a) The voting rights of members; (b) Election of directors, and the number, qualifications, terms of office and powers of directors; (c) Annual and special meetings of members; (d) The number, designation, election, terms and powers and duties of the respective corporate officers; (e) Deposit, custody, disbursement and accounting for corporate funds; (f) Fidelity bonds covering officers and employees of the insurer handling its funds, to be issued by the corporate surety and to be in such amount as may be reasonable; and (g) Such other matters as may be customary, necessary, or convenient for the management or regulation of corporate affairs. (3) The insurer shall promptly file with the commissioner a copy, certified by the insurer's secretary, of its bylaws and of every modification thereof or addition thereto. The commissioner shall disapprove any bylaw provision deemed by him or her, after a hearing held thereon, to be unlawful, unreasonable, inadequate, unfair or detrimental to the proper interests or protection of the insurer's members or any class thereof. The insurer shall not, after receiving written notice of such disapproval and during the existence thereof, effectuate any bylaw provision so disapproved. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1332, effective July 15, 2010. -- Created 1970 Ky. Acts ch. 301, subtit. 24, sec. 17, effective June 18, 1970.

KRS 304.24-180 Rights of mutual members in general

304.24-180. Rights of mutual members in general (1) A domestic mutual insurer is owned by and shall be operated in the interest of its members. (2) With respect to the management, records and affairs of the insurer, a member of a mutual insurer shall have the same character of rights and relationship as a stockholder has toward a domestic stock insurer, subject to the provisions of this code. Effective: June 18, 1970 History: Created 1970 Ky. Acts ch. 301, subtit. 24, sec. 18, effective June 18, 1970.

KRS 304.24-190 Meetings of members of mutual insurer

304.24-190. Meetings of members of mutual insurer (1) Meetings of members of a domestic mutual insurer shall be held in the city or town of its registered office in this state, except as may otherwise be provided in the insurer's bylaws with the commissioner's approval. (2) Each such insurer shall, during the first six (6) months of each calendar year, hold the annual meeting of its members to fill vacancies existing or occurring in the board of directors, receive and consider reports of the insurer's officers as to its affairs and transact such other business as may properly be brought before it. (3) Written notice of the time and place of the annual meeting of members shall be given members not less than thirty (30) days prior to the meeting. Notice may be given by imprinting the notice plainly on the policies issued by the insurer or in any other appropriate manner. Any change of the date or place of the annual meeting shall be made only by an annual meeting of members. Notice of such change, among other appropriate methods may be given: (a) By imprinting such new date or place on all policies which will be in effect as of the date of such changed meeting; and (b) Unless the commissioner otherwise orders, notice of the new date or place need be given only through policies issued after the date of the annual meeting at which such change was made and in premium notices and renewal certificates issued during the twenty-four (24) months immediately following such meeting. (4) If more than six (6) months are allowed to elapse after an annual meeting of members is due to be held without such annual meeting being held, the commissioner shall, upon written request of any officer, director, or member of the insurer, cause written notice of such meeting to be given to the insurer's members, and the meeting shall be held as soon as reasonably possible thereafter. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1333, effective July 15, 2010. -- Created 1970 Ky. Acts ch. 301, subtit. 24, sec. 19, effective June 18, 1970.

KRS 304.24-200 Special meetings of members of mutual insurer

304.24-200. Special meetings of members of mutual insurer (1) A special meeting of the members of a mutual insurer may be held for any lawful purpose. The meeting shall be called by the corporate secretary pursuant to request of the insurer's president or of its board of directors, or upon request in writing signed by not less than one-tenth (1/10) of the insurer's members. The meeting shall be held at such time as the secretary may fix, but not less than ten (10) nor more than thirty (30) days after receipt of the request. If the secretary fails to issue such call, the president, directors, or members making the request may do so. (2) Not less than ten (10) days' written notice of the meeting shall be given. Notice addressed to the insurer's members at their respective post office addresses last of record with the insurer and deposited, postage prepaid, in a letter depository of the United States post office, shall be deemed to have been given when so mailed. In lieu of mailed notice the insurer may publish the notice in such publication or publications as shall afford a majority of its members a reasonable opportunity to have actual advance notice of the meeting. The notice shall state the purpose of the meeting, and no business shall be transacted at the meeting of which notice was not so given. Effective: June 18, 1970 History: Created 1970 Ky. Acts ch. 301, subtit. 24, sec. 20, effective June 18, 1970.

KRS 304.24-210 Voting rights of mutual members

304.24-210. Voting rights of mutual members (1) Each member of a mutual insurer is entitled to one (1) vote upon each matter coming to a vote at meetings of members. (2) A member shall have the right to vote in person or by his written proxy filed with the corporate secretary not less than five (5) days prior to the meeting, and votes may be cast as prescribed in Section 207 of the Constitution of this state. No such proxy shall be made irrevocable, nor be valid beyond the earlier of the following dates: (a) The date of expiration set forth in the proxy; or (b) The date of termination of membership. (3) No member's vote upon any proposal to divest the insurer of its business or assets, or the major part thereof, shall be registered or taken except in person or by proxy newly executed and specified as to the matter to be voted upon. Effective: June 18, 1970 History: Created 1970 Ky. Acts ch. 301, subtit. 24, sec. 21, effective June 18, 1970.

KRS 304.24-220 Contingent liability of mutual member

304.24-220. Contingent liability of mutual member (1) Except as otherwise provided in KRS 304.24-260 with respect to nonassessable policies, each member of a domestic mutual insurer shall have a contingent liability, pro rata and not one for another, for the discharge of its obligations, which contingent liability shall be in such maximum amount as is specified in the insurer's articles of incorporation consistent with paragraph (d) of subsection (3) of KRS 304.24-040. (2) Every policy issued by the insurer shall contain a statement of the contingent liability. (3) Termination of the policy of any such member shall not relieve the member of contingent liability for his proportion of the obligations of the insurer which accrued while the policy was in force as provided in KRS 304.24-230. (4) Unrealized contingent liability of members does not constitute an asset of the insurer in any determination of its financial condition. Effective: June 18, 1970 History: Created 1970 Ky. Acts ch. 301, subtit. 24, sec. 22, effective June 18, 1970.

KRS 304.24-230 Levy of contingent liability

304.24-230. Levy of contingent liability (1) If at any time the assets of a domestic mutual insurer are less than its liabilities and the minimum amount of surplus required to be maintained by it under this code for authority to transact the kinds of insurance being transacted, and the deficiency is not cured from other sources, its directors may, if the same is approved by the commissioner, levy an assessment only on its members who held policies providing for contingent liability at any time within the twelve (12) months next preceding the date the levy was authorized by the board of directors, and such members shall be liable to the insurer for the amount so assessed. (2) The levy of assessment shall be for such an amount, subject to the commissioner's approval, as is required to cure such deficiency and to provide a reasonable amount of working funds above such minimum amount of surplus, but such working funds so provided shall not exceed five percent (5%) of the sum of the insurer's liabilities and such minimum required surplus as of the date of the levy. (3) As to the respective policies subject to the levy, the assessment shall be computed upon such reasonable basis as may be approved by the commissioner in writing in advance of the levy. (4) No member shall have an offset against any assessment for which he or she is liable, on account of any claim for unearned premium or loss payable. (5) As to life insurance, any part of such assessment upon a member which remains unpaid following notice of assessment, demand for payment, and lapse of a reasonable waiting period as specified in such notice, may, if approved by the commissioner as being in the best interests of the insurer and its members, be secured by placing a lien upon the cash surrender values and accumulated dividends held by the insurer to the credit of the member. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1334, effective July 15, 2010. -- Created 1970 Ky. Acts ch. 301, subtit. 24, sec. 23, effective June 18, 1970.

KRS 304.24-240 Enforcement of contingent liability

304.24-240. Enforcement of contingent liability (1) The insurer shall notify each member of the amount of the assessment to be paid by written notice mailed to the member's last address of record with the insurer. Failure of the member to receive the notice so mailed, within the time specified therein for the payment of the assessment or at all, shall be no defense in any action to collect the assessment. (2) If a member fails to pay the assessment within the period specified in the notice, which period shall not be less than twenty (20) days after mailing, the insurer may institute suit to collect the same. Effective: June 18, 1970 History: Created 1970 Ky. Acts ch. 301, subtit. 24, sec. 24, effective June 18, 1970.

KRS 304.24-250 Nonassessable policies -- Mutual insurers

304.24-250. Nonassessable policies -- Mutual insurers (1) A domestic mutual insurer while maintaining unimpaired surplus funds not less in amount than the minimum paid-in capital stock and surplus required to be maintained by a domestic stock insurer, formed under this code, for authority to transact the same kinds or kind of insurance, may, upon receipt of the commissioner's order so authorizing, extinguish the contingent liability to assessment of its members as to all its policies in force and may omit provisions imposing contingent liability in all policies currently issued. (2) The commissioner shall not authorize a domestic insurer to extinguish the contingent liability of any of its members or in any of its policies to be issued, unless it qualifies to and does extinguish such liability of all its members and in all such policies for all kinds of insurance transacted by it. (3) A foreign or alien mutual insurer may issue nonassessable policies to its members in this state pursuant to its charter and the laws of its domicile. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1335, effective July 15, 2010. -- Created 1970 Ky. Acts ch. 301, subtit. 24, sec. 25, effective June 18, 1970.

KRS 304.24-260 Nonassessable policies -- Revocation of authority

304.24-260. Nonassessable policies -- Revocation of authority (1) The commissioner shall revoke the authority of a domestic mutual insurer to issue policies without contingent liability if: (a) At any time the insurer's assets are less than the sum of its liabilities and the surplus required for such authority; or (b) The insurer, by resolution of its board of directors approved by a majority of its members, requests that the authority be revoked. (2) During the absence of such authority the insurer shall not issue any policy without providing therein for the contingent liability of the policyholder, nor renew any policy which is then in force without indorsing the same to provide for such contingent liability. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1336, effective July 15, 2010. -- Created 1970 Ky. Acts ch. 301, subtit. 24, sec. 26, effective June 18, 1970.

KRS 304.24-270 Prohibited pecuniary interests

304.24-270. Prohibited pecuniary interests No director or officer of any insurer shall receive any money or thing of value for negotiating, procuring, recommending or aiding in any purchase or sale by the insurer of any property or investment, or any loan from or to the insurer, nor be pecuniarily interested, either as principal, co-principal, agent, or beneficiary, in any such purchase, sale, or loan, nor shall such insurer guarantee in any manner any financial obligation of any such officer or director. Effective: June 18, 1970 History: Created 1970 Ky. Acts ch. 301, subtit. 24, sec. 27, effective June 18, 1970.

KRS 304.24-280 Management and exclusive agency contracts

304.24-280. Management and exclusive agency contracts (1) No insurer shall hereafter make any contract whereby any person is granted or is to enjoy in fact the management of the insurer to the substantial exclusion of its board of directors, or to have the controlling or preemptive right to produce substantially all insurance business for the insurer, or, if an officer, director or otherwise part of the insurer's management, is to receive any commission, bonus or compensation based upon the volume of the insurer's business or transactions, unless the contract is filed with and approved by the commissioner. The contract shall be deemed approved unless disapproved by the commissioner within twenty (20) days after date of filing, subject to such reasonable extension of time as the commissioner may require by notice given within such twenty (20) days. Any disapproval shall be delivered to the insurer in writing, stating the grounds therefor. (2) Any such contract shall provide that any such manager or producer of its business shall within ninety (90) days after expiration of each calendar year furnish the insurer's board of directors a written statement of amounts received under or on account of the contract and amounts expended thereunder during such calendar year, including the emoluments received therefrom by the respective directors, officers, and other principal management personnel of the manager or producer, and with such classification of items and further detail as the insurer's board of directors may reasonably require. (3) The commissioner shall disapprove any such contract if he or she finds that it: (a) Subjects the insurer to excessive charges; or (b) Is to extend for any unreasonable length of time; or (c) Does not contain fair and adequate standards of performance, or (d) Contains other inequitable provision or provisions which impair the proper interests of stockholders or policyholders of the insurer. (4) The commissioner may, after a hearing held thereon, withdraw his or her approval of any such contract theretofore approved by him or her, if he or she finds that the bases of his or her original approval no longer exist, or that the contract has in actual operation, shown itself to be subject to disapproval on any of the grounds referred to in subsection (3) of this section. (5) This section does not apply as to contracts entered into prior to June 18, 1970, nor to extensions or amendments to such contracts, nor to relationships and agreements between parents, subsidiaries, or affiliates. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1337, effective July 15, 2010. -- Created 1970 Ky. Acts ch. 301, subtit. 24, sec. 28, effective June 18, 1970.

KRS 304.24-290 Principal office -- Records

304.24-290. Principal office -- Records The insurer shall establish and maintain in this state its principal office and place of business. The insurer's principal records shall be kept either at its principal office or, with the approval of the commissioner, at its place of business in any other state where it, or its affiliate as defined in KRS 304.37-010, is engaged in the business of entering into contracts of insurance. Effective: June 27, 2019 History: Amended 2019 Ky. Acts ch. 156, sec. 7, effective June 27, 2019. -- Amended 2010 Ky. Acts ch. 24, sec. 1338, effective July 15, 2010. -- Amended 1984 Ky. Acts ch. 261, sec. 1, effective July 13, 1984. -- Created 1970 Ky. Acts ch. 301, subtit. 24, sec. 29, effective June 18, 1970.

KRS 304.24-300 Borrowed surplus

304.24-300. Borrowed surplus (1) A domestic stock or mutual insurer may borrow money to defray the expenses of its organization, provide it with surplus funds, or for any purpose of its business, upon a written agreement that such money is required to be repaid only out of the insurer's surplus in excess of that stipulated in such agreement. The agreement may provide for interest, which interest shall or shall not constitute a liability of the insurer as to its funds other than such excess of surplus, as stipulated in the agreement. No commission or promotion expense shall be paid in connection with any such loan, except that if public offering and sale is made of the loan securities, the insurer may pay the reasonable costs thereof approved by the commissioner. (2) Money so borrowed, together with the interest thereon if so stipulated in the agreement, shall not form a part of the insurer's legal liabilities except as to its surplus in excess of the amount thereof stipulated in the agreement, or be the basis of any setoff; but until repaid, financial statements filed or published by the insurer shall show as a footnote thereto the amount thereof then unpaid together with any interest thereon accrued but unpaid. A surplus note shall be reported as surplus and not as debt only if the surplus note contains the following provisions: (a) Subordination to policyholder; (b) Subordination to claimant and beneficiary claims; (c) Subordination to all other classes of creditors other than surplus note holders; and (d) Interest payments and principal repayments require prior approval of the state of domicile. (3) Any such loan shall be subject to the commissioner's approval. The insurer shall in advance of the loan, file with the commissioner a statement of the purpose of the loan and a copy of the proposed loan agreement. The loan and agreement shall be deemed approved unless within fifteen (15) days after date of such filing the insurer is notified of the commissioner's disapproval and the reasons therefor. The commissioner shall disapprove any proposed loan or agreement if he or she finds the loan is unnecessary or excessive for the purpose intended, or that the terms of the loan agreement are not fair and equitable to the parties and to other similar lenders, if any, to the insurer, or that the information so filed by the insurer is inadequate. (4) Any such loan or substantial portion thereof shall be repaid by the insurer when no longer reasonably necessary for the purpose originally intended. No repayment of such a loan shall be made unless approved in advance by the commissioner. (5) This section shall not apply to other kinds of loans obtained by the insurer in ordinary course of business, nor to loans secured by pledge or mortgage of assets. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1339, effective July 15, 2010. -- Amended 2004 Ky. Acts ch. 24, sec. 30, effective July 13, 2004. -- Created 1970 Ky. Acts ch. 301, subtit. 24, sec. 30, effective June 18, 1970.

KRS 304.24-310 Participating policies

304.24-310. Participating policies (1) If provided for in its articles of incorporation or charter, a stock insurer or mutual insurer may issue any or all of its policies or contracts with or without participation in profits, savings, unabsorbed portions of premiums, may classify policies issued and risks insured on a participating and nonparticipating basis, and subject to KRS 304.15-380, may determine the right to participate and the extent of participation of any class or classes of policies. Any such classification or determination shall be reasonable. (2) A life insurer may issue both participating and nonparticipating policies or contracts, only if the right or absence of right to participate is reasonably related to the premium charged. A combined stock and mutual life insurer shall only issue participating policies or contracts in its "mutual" branch, and shall only issue nonparticipating policies or contracts in its "stock" branch. (3) No dividend, otherwise earned, shall be made contingent upon the payment of renewal premium on any policy or contract. Effective: July 13, 1984 History: Amended 1984 Ky. Acts ch. 343, sec. 8, effective July 13, 1984. -- Created 1970 Ky. Acts ch. 301, subtit. 24, sec. 31, effective June 18, 1970.

KRS 304.24-320 Dividends to stockholders

304.24-320. Dividends to stockholders (1) An insurer shall not pay any dividend to stockholders except out of that part of its surplus funds which is derived from any realized net profits. No cash dividend shall be paid nor distribution of assets made out of any surplus funds resulting from a decrease of capital stock effective within two (2) years prior to the declaration of the dividend. (2) "Surplus funds" means the excess of the insurer's assets over its liabilities, including its capital stock as a liability. Effective: June 18, 1970 History: Created 1970 Ky. Acts ch. 301, subtit. 24, sec. 32, effective June 18, 1970.

KRS 304.24-330 Dividends to policyholders

304.24-330. Dividends to policyholders (1) The directors of a mutual insurer may from time to time apportion and pay to its members dividends only out of that part of its surplus which is in excess of its required minimum surplus and which represents net realized savings and net realized earnings. (2) Such dividends shall be paid or credited to policyholders according to such reasonable classifications of its policies as the directors may in their discretion from time to time establish. No dividend shall be paid which unfairly discriminates as between policies within the same classification. Effective: June 18, 1970 History: Created 1970 Ky. Acts ch. 301, subtit. 24, sec. 33, effective June 18, 1970.

KRS 304.24-340 Issuance of policies in other states

304.24-340. Issuance of policies in other states A domestic insurer duly authorized to transact insurance in another jurisdiction may issue policies for delivery in such jurisdiction pursuant to applications for insurance solicited and obtained therein, in accordance with the laws thereof, subject only to such restrictions, if any, as may be contained in the insurer's charter or bylaws. Effective: June 18, 1970 History: Created 1970 Ky. Acts ch. 301, subtit. 24, sec. 34, effective June 18, 1970.

KRS 304.24-350 Impairment of capital or assets

304.24-350. Impairment of capital or assets (1) If the assets of an insurer at any time are less than its liabilities, including its capital stock as a liability, if a stock insurer, or its minimum required surplus if a mutual insurer, the commissioner shall forthwith determine the amount of such deficiency and give notice to the insurer to make good the deficiency within ninety (90) days after the giving of such notice. (2) The insurer may cure the deficiency by a decrease of its capital stock or by other lawful means. The deficiency shall be made good in cash or in assets eligible under this code for investment of the insurer's funds or by decrease of the insurer's capital stock to an amount not below the minimum required for the kinds of insurance to be thereafter transacted. (3) If the deficiency is not made good and proof thereof filed with the commissioner within such ninety-day period, the commissioner shall revoke the insurer's certificate of authority, the insurer shall be deemed insolvent, and shall be proceeded against as authorized by this code. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1340, effective July 15, 2010. -- Created 1970 Ky. Acts ch. 301, subtit. 24, sec. 35, effective June 18, 1970.

KRS 304.24-360 Mutualization of stock insurer

304.24-360. Mutualization of stock insurer (1) A stock insurer may become a mutual insurer under such reasonable plan and procedure as may be approved by the commissioner after a hearing thereon. (2) The commissioner shall not approve any such plan or procedure of mutualization unless: (a) The commissioner finds that it is equitable to stockholders and policyholders; (b) It is subject to approval by the holders of not less than three-fourths (3/4) of the insurer's outstanding capital stock having voting rights, and by not less than two-thirds (2/3) of the insurer's policyholders, who vote on such plan in person, by proxy, or by mail, pursuant to such reasonable notice and procedure as may be approved by the commissioner; (c) If a life insurer, the right to vote thereon is limited to holders of policies, other than term or group policies, whose policies have been in force for more than one (1) year; (d) Mutualization will result in retirement of shares of the insurer's capital stock at a price not in excess of the fair market value thereof as determined by competent disinterested appraisers; (e) The plan provides for the purchase of the shares of any dissenting stockholder in the same manner and subject to the same applicable conditions as provided by KRS Chapter 271B as to rights of dissenting stockholders with respect to merger or consolidation of business corporations; (f) The plan provides for definite conditions to be fulfilled by a designated early date upon which such mutualization will be deemed effective; and (g) The mutualization leaves the insurer with surplus funds reasonably adequate for the security of its policyholders and to enable it to continue successfully in business in the states in which it is then authorized to transact insurance and for the kinds of insurance included in its certificates of authority in such states. (3) This section shall not apply to mutualization under order of court pursuant to rehabilitation or reorganization of an insurer under Subtitle 33 of this chapter. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1341, effective July 15, 2010. -- Amended 1972 Ky. Acts ch. 274, sec. 163, effective July 1, 1972. -- Created 1970 Ky. Acts ch. 301, subtit. 24, sec. 36, effective June 18, 1970. Legislative Research Commission Note. As of January 1, 1989, KRS Ch. 271A becomes KRS Ch. 271B. Therefore, the reference in subdivision (2)(e) of this section to KRS Ch. 271A has been changed to KRS Ch. 271B.

KRS 304.24-370 Conversion of stock insurer to ordinary business corporation

304.24-370. Conversion of stock insurer to ordinary business corporation A domestic stock insurer may convert to a Kentucky ordinary business corporation through the following procedures: (1) The insurer shall give the commissioner written notice of its intent to convert to an ordinary business corporation; (2) The insurer shall bulk reinsure all of its insurance, if any, in force, with another authorized insurer under a bulk reinsurance agreement approved by the commissioner as provided in KRS 304.24-420. The agreement of bulk reinsurance may be made contingent upon approval of stockholders as provided in subsection (4) of this section; (3) The insurer shall set aside funds in a special reserve in such amount and subject to such administration as may be found by the commissioner to be reasonable and adequate for the purpose, for payment of all obligations, if any, of the insurer incurred by it and remaining unpaid under its insurance contracts prior to the effective date of such bulk reinsurance, or make other reasonable disposition satisfactory to the commissioner for such payment; (4) The proposed conversion shall be approved by affirmative vote of not less than two- thirds (2/3) of each class of outstanding securities of the insurer having voting rights, at a special meeting of holders of such securities called for the purpose; and at such meeting and by a like vote the certificate of organization of the corporation shall be amended to remove therefrom the power to transact an insurance business as an insurer, to provide for such new powers and purposes authorized by the general corporation laws of this state as may be consistent with the purposes for which the corporation is thereafter to exist, and to make such further alterations in the certificate of organization as may be required under such general corporation laws of an ordinary business corporation; (5) Security holders of the corporation who dissent from such proposed conversion shall have the same applicable rights as exist under such general corporation laws with respect to dissent from a proposed merger of the corporation; and (6) Upon compliance with subsections (1) to (4) of this section, inclusive, and upon filing of the amendment of the certificate of organization with the commissioner and otherwise as required by laws applicable to ordinary business corporations, the conversion shall thereupon become effective. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1342, effective July 15, 2010. -- Created 1970 Ky. Acts ch. 301, subtit. 24, sec. 37, effective June 18, 1970.

KRS 304.24-380 Repealed, 2000

304.24-380. Repealed, 2000 Catchline at repeal: Converting mutual insurer. History: Repealed 2000 Ky. Acts ch. 42, sec. 19, effective July 14, 2000. -- Amended 1970 Ky. Acts ch. 301, subtit. 24, sec. 38, effective June 18, 1970.

KRS 304.24-390 Merger -- Consolidation of insurers

304.24-390. Merger -- Consolidation of insurers (1) A domestic insurer may merge or consolidate with one (1) or more domestic or foreign insurers, by complying with the applicable provisions of the statutes of this state governing the merger or consolidation of corporations formed for profit, but subject to subsections (2), (3), and (4) of this section. (2) No such merger or consolidation shall be effectuated unless in advance thereof the plan and agreement therefor have been filed with the commissioner and approved in writing by him or her after a hearing thereon. The commissioner shall give such approval within a reasonable time after such filing unless the commissioner finds such plan or agreement: (a) Is contrary to law; or (b) Inequitable to the stockholders or members of the insurers involved; or (c) Would substantially reduce the security of and service to be rendered to policyholders of the domestic insurer in this state or elsewhere; or (d) Would materially tend to lessen competition in the insurance business in this state or elsewhere as to the kinds of insurance involved, or would materially tend to create a monopoly as to such business; or (e) Is subject to other material and reasonable objections. (3) No director, officer, agent or employee of any insurer party to such merger or consolidation, or member of the family of such director, officer, agent, or employee, shall receive any fee, commission, compensation or other valuable consideration whatsoever for in any manner aiding, promoting or assisting therein except as set forth in such plan or agreement. (4) If members of an insurer are entitled to vote, two-thirds (2/3) of the votes cast by such members of such insurer, as are represented at the meeting in person or by proxy, is necessary for the approval of any such agreement or plan. (5) If the commissioner does not approve any such plan or agreement he or she shall so notify the insurer in writing specifying his or her reasons therefor. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1343, effective July 15, 2010. -- Amended 1982 Ky. Acts ch. 272, sec. 1, effective July 15, 1982. -- Amended 1980 Ky. Acts ch. 256, sec. 1, effective July 15, 1980. -- Created 1970 Ky. Acts ch. 301, subtit. 24, sec. 39, effective June 18, 1970.

KRS 304.24-400 Affiliations of stock insurers

304.24-400. Affiliations of stock insurers (1) A domestic stock insurer shall not acquire a controlling interest in the shares of another stock insurer by an exchange of securities or partly in exchange for securities and partly for cash or property, unless the insurer has first submitted the plan for such acquisition and exchange to the commissioner and the commissioner has approved the same. (2) The commissioner shall not so approve unless he or she finds the plan for such acquisition and exchange and the terms and conditions thereof to be fair and equitable to all parties concerned therein, after a hearing to which all persons to whom it is proposed to issue securities in such exchange shall have the right to appear. (3) Notice and conduct of such hearing shall be as provided in Subtitle 2. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1344, effective July 15, 2010. -- Created 1970 Ky. Acts ch. 301, subtit. 24, sec. 40, effective June 18, 1970.

KRS 304.24-410 Repealed, 2000

304.24-410. Repealed, 2000 Catchline at repeal: Acquisition of insurer's securities -- Approval by commissioner -- Presumption of control. History: Repealed 2000 Ky. Acts ch. 380, sec. 30, effective July 14, 2000. -- Amended 1996 Ky. Acts ch. 318, sec. 239, effective July 15, 1996; and ch. 326, sec. 1, effective July 15, 1996. -- Amended 1980 Ky. Acts ch. 227, sec. 1, effective July 15, 1980. -- Created 1970 Ky. Acts ch. 301, subtit. 24, sec. 41, effective June 18, 1970.

KRS 304.24-415 Report disclosing material acquisitions and dispositions of assets, nonrenewals, cancellations, or revisions of ceded reinsurance agreements -- Exceptions

304.24-415. Report disclosing material acquisitions and dispositions of assets, nonrenewals, cancellations, or revisions of ceded reinsurance agreements -- Exceptions (1) (a) Every insurer domiciled in this state shall file a report with the commissioner disclosing material acquisitions and dispositions of assets or material nonrenewals, cancellations, or revisions of ceded reinsurance agreements unless the acquisitions and dispositions of assets or material nonrenewals, cancellations, or revisions of ceded reinsurance agreements have been submitted to the commissioner for review, approval, or information purposes pursuant to other provisions of this chapter. (b) The report required in paragraph (a) of this subsection is due within fifteen (15) days after the end of the calendar month in which any of the foregoing transactions occur. (c) One (1) complete copy of the report, including any exhibits or other attachments, shall be filed with: 1. The insurance department of the insurer's state of domicile; and 2. The National Association of Insurance Commissioners. (d) All reports obtained by or disclosed to the commissioner pursuant to this section shall be given confidential treatment and shall not be subject to subpoena and shall not be made public by the commissioner, the National Association of Insurance Commissioners, or any other person, except to insurance departments of other states, without the prior written consent of the insurer to which it pertains unless the commissioner, after giving the insurer who would be affected notice and opportunity to be heard, determines that the interest of policyholders, shareholders, or the public will be served by publication, in which event the commissioner may publish all or any part in the manner the commissioner may deem appropriate. (2) (a) No acquisitions or dispositions of assets need be reported pursuant to subsection (1) of this section if the acquisitions or dispositions are not material. For purposes of this section, a material acquisition, or the aggregate of any series of related acquisitions during any thirty (30) day period, is one that is nonrecurring and not in the ordinary course of business and involves more than five percent (5%) of the reporting insurer's total admitted assets as reported in its most recent statutory statement filed with the insurance department of the insurer's state of domicile. (b) 1. Asset acquisitions subject to this section include every purchase, lease exchange, merger, consolidation, succession, or other acquisition other than the construction or development of real property by or for the reporting insurer or the acquisition of materials for such purpose. 2. Asset dispositions subject to this section include every sale, lease, exchange, merger, consolidation, mortgage, hypothecation, assignment (whether for the benefit of creditors or otherwise), abandonment, destruction, or other disposition. (c) 1. The following information is required to be disclosed in any report of a material acquisition or disposition of assets: a. Date of the transaction; b. Manner of acquisition or disposition; c. Description of the assets involved; d. Nature and amount of the consideration given or received; e. Purpose of, or reason for, the transaction; f. Manner by which the amount of consideration was determined; g. Gain or loss recognized or realized as a result of the transaction; and h. Names of the persons from which the assets were acquired or to whom they were disposed. 2. Insurers are required to report material acquisitions and dispositions on a nonconsolidated basis unless the insurer is part of a consolidated group of insurers which utilizes a pooling arrangement or one hundred percent (100%) reinsurance agreement that affects the solvency and integrity of the insurer's reserves and the insurer ceded substantially all of its direct and assumed business to the pool. An insurer is deemed to have ceded substantially all of its direct and assumed business to a pool if the insurer has less than one million dollars ($1,000,000) total direct plus assumed written premiums during a calendar year that are not subject to a pooling arrangement and the net income of the business not subject to the pooling arrangement represents less than five percent (5%) of the insurer's capital and surplus. (3) (a) No nonrenewals, cancellations, or revisions of ceded reinsurance agreements need be reported pursuant to subsection (1) of this section if the nonrenewals, cancellations or revisions are not material. For purposes of this section, a material nonrenewal, cancellation, or revision is one that affects: 1. As respects property and casualty business, including accident and health business written by a property and casualty insurer: a. More than fifty percent (50%) of the insurer's total ceded written premium; or b. More than fifty percent (50%) of the insurer's total ceded indemnity and loss adjustment reserves. 2. As respects life, annuity, and accident and health business, more than fifty percent (50%) of the total reserve credit taken for business ceded, on an annualized basis, as indicated in the insurer's most recent annual statement. 3. As respects either property and casualty or life, annuity, and accident and health business, either of the following events shall constitute a material revision which must be reported: a. An authorized reinsurer representing more than ten percent (10%) of a total cession is replaced by one (1) or more unauthorized reinsurers; or b. Previously established collateral requirements have been reduced or waived as respects one (1) or more unauthorized reinsurers representing collectively more than ten percent (10%) of a total cession. (b) No filing shall be required if: 1. As respects property and casualty business, including accident and health business written by a property and casualty insurer, the insurer's total ceded written premium represents, on an annualized basis, less than ten percent (10%) of its total written premium for direct and assumed business; or 2. As respects life, annuity, and accident and health business, the total reserve credit taken for business ceded represents, on an annualized basis, less than ten percent (10%) of the statutory reserve requirements prior to any cession. (c) The following information is required to be disclosed in any report of a material nonrenewal, cancellation, or revision of ceded reinsurance agreements: 1. Effective date of the nonrenewal, cancellation, or revision; 2. The description of the transaction with an identification of the initiator thereof; 3. Purpose of, or reason for, the transaction; and 4. If applicable, the identity of the replacement reinsurers. (d) Insurers are required to report all material nonrenewals, cancellations, or revisions of ceded reinsurance agreements on a nonconsolidated basis unless the insurer is part of a consolidated group of insurers which utilizes a pooling arrangement or one hundred percent (100%) reinsurance agreement that affects the solvency and integrity of the insurer's reserves and the insurer ceded substantially all of its direct and assumed business to a pool if the insurer has less than one million dollars ($1,000,000) total direct plus assumed written premiums during a calendar year that are not subject to a pooling arrangement and the net income of the business not subject to the pooling arrangement represents less than five percent (5%) of the insurer's capital and surplus. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1345, effective July 15, 2010. -- Created 1996 Ky. Acts ch. 289, sec. 5, effective July 15, 1996.

KRS 304.24-420 Bulk reinsurance

304.24-420. Bulk reinsurance (1) A domestic insurer may reinsure all or substantially all of its business in force, or all or substantially all of a major class thereof, with another insurer, stock or mutual, by an agreement of bulk reinsurance after compliance with this section. No such agreement shall become effective unless filed with the commissioner and approved by him or her in writing. (2) The commissioner shall approve such agreements within a reasonable time after filing if he or she finds: (a) That the plan and agreement are fair and equitable to each insurer and to the policyholders involved; (b) That the reinsurance, if effectuated, would not substantially reduce the protection or service to the policyholders of any domestic insurer involved; (c) That the agreement embodies adequate provisions by which the reinsuring insurer becomes liable to the original insureds for any loss or damage occurring under the policies reinsured in accordance with the original terms of such policies, and that the reinsuring insurer shall duly furnish each such insured with a certificate evidencing such assumption of liability; (d) That the assuming reinsurer is authorized to transact such insurance in this state, or is qualified as for such authorization and will appoint the commissioner and his or her successors as its irrevocable attorney for service of process, so long as any policy so reinsured or claim thereunder remains in force or outstanding; (e) That such reinsurance would not materially tend to lessen competition in the insurance business in this state or elsewhere as to the kinds of insurance involved, and would not materially tend to create a monopoly as to such business; and (f) That the proposed bulk reinsurance is free of other reasonable objections. (3) If the commissioner does not so approve he or she shall forthwith notify each insurer involved in writing, specifying his or her reasons therefor. (4) If for reinsurance of all or substantially all of the business in force of a mutual insurer at a time when the insurer's surplus is not impaired, the plan and agreement for such reinsurance must be approved by vote of not less than two-thirds (2/3) of the mutual insurer's members voting thereon at a meeting of members called for the purpose, pursuant to such reasonable notice and procedure as is provided for in the agreement. If a life insurer, right to vote may be limited to members whose policies are other than term or group policies, and have been in effect for more than one (1) year. (5) No director, officer, agent or employee of any insurer party to such reinsurance, nor any other person shall receive any compensation for arranging such bulk reinsurance other than as provided in the agreement submitted to and approved by the commissioner. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1346, effective July 15, 2010. -- Created 1970 Ky. Acts ch. 301, subtit. 24, sec. 42, effective June 18, 1970.

KRS 304.24-430 Voluntary dissolution

304.24-430. Voluntary dissolution (1) A solvent domestic stock or mutual insurer, which then is not the subject of a delinquency proceeding under Subtitle 33 of this chapter, may voluntarily dissolve under a plan therefor in writing authorized by its board of directors, approved or adopted by stockholders or members as hereinafter provided, and filed with and approved by the commissioner. The plan shall provide for the disposition, by bulk reinsurance or other lawful procedure, of all insurance in force in the insurer, for full discharge of all obligations of the insurer, and designate or provide for trustees to conduct and administer the settlement of the insurer's affairs. (2) The commissioner shall approve the plan unless found by him or her to be unlawful or unfair or inequitable or prejudicial to the interests of stockholders, policyholders, or creditors. (3) If a mutual insurer, the plan must have been approved by vote of not less than two- thirds (2/3) of the policyholders voting thereon at a special meeting of such policyholders called and held for the purpose pursuant to such reasonable notice and information as the commissioner may have approved. (4) If a stock insurer, the plan must have been adopted by vote of not less than two- thirds (2/3) of all outstanding voting securities of the insurer at a special meeting of such security holders called and held for the purpose. (5) Following approval of the dissolution and plan therefor by members or adoption thereof by stockholders as above provided, and approval by the commissioner, the trustees designated or provided for in the plan shall proceed to execute the plan. When all liabilities of the corporation have been discharged or otherwise adequately provided for, and all assets of the corporation have been liquidated and distributed in accordance with the plan, the trustees shall so certify in quadruplicate under oath in writing. The trustees shall deliver the original and the three (3) copies of such certificate to the commissioner. The commissioner shall make such examination of the affairs of the corporation, and of the liquidation and distribution of its assets and discharge of or provision for its liabilities as the commissioner deems advisable. If upon such examination the commissioner finds that the facts set forth in the certificate of the trustees are true, the commissioner shall inscribe his or her approval on the certificate, file the original thereof so inscribed in the office of the Secretary of State, file copy thereof in the department, and return the remaining two (2) copies to the trustees. The trustees shall file one (1) of such copies for recording in the office of the county clerk of the county in which the corporation's principal place of business is located, and retain the fourth copy for the corporate files. (6) Upon filing the certificate of the trustees with the Secretary of State as provided in subsection (5) of this section, the Secretary of State shall issue to the trustees his or her certificate of dissolution, and the corporate existence of the corporation shall thereupon forever terminate. The Secretary of State shall charge and collect a fee of twenty-five dollars ($25) for the filing of the trustee's certificate, and shall deposit the same with the State Treasurer for credit to the general fund. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1347, effective July 15, 2010. -- Amended 1978 Ky. Acts ch. 384, sec. 468, effective June 17, 1978. -- Created 1970 Ky. Acts ch. 301, subtit. 24, sec. 43, effective June 18, 1970.

KRS 304.24-440 Mutual member's share of assets on liquidation

304.24-440. Mutual member's share of assets on liquidation (1) Upon any liquidation of a domestic mutual insurer, its assets remaining after discharge of its indebtedness, policy obligations, repayment of contributed or borrowed surplus, if any, and expenses of administration, shall be distributed to currently existing persons who had been members of the insurer for at least one (1) year and who were its members at any time within thirty-six (36) months next preceding the date such liquidation was authorized or ordered, or date of last termination of the insurer's certificate of authority whichever date is the earlier; except, that if the commissioner has reason to believe that those in charge of the management of the insurer have caused or encouraged the reduction of the number of members of the insurer in anticipation of liquidation and for the purpose of reducing thereby the number of persons who may be entitled to share in distribution of the insurer's assets, the commissioner may enlarge the thirty-six (36) month qualification period above provided for by such additional period as he or she may deem to be reasonable. (2) The insurer shall make a reasonable classification of its policies so held by such members, and a formula based upon such classification for determining the equitable distributive share of each such member. Such classification and formula shall be subject to the approval of the commissioner. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1348, effective July 15, 2010. -- Created 1970 Ky. Acts ch. 301, subtit. 24, sec. 44, effective June 18, 1970.

KRS 304.24-500 Approval of foreign insurer as domestic insurer -- Transfer of domicile of domestic insurer to another state -- Continuance of certificate of authority upon transfer of corporate domicile after merger or consolidation

304.24-500. Approval of foreign insurer as domestic insurer -- Transfer of domicile of domestic insurer to another state -- Continuance of certificate of authority upon transfer of corporate domicile after merger or consolidation (1) The purpose of this section is to: (a) Provide a means whereby any insurer organized under the laws of any other state may become a domestic insurer; (b) Provide a means for any domestic insurer to transfer its domicile to another state; and (c) Provide a means for the continuation of a certificate of authority and other approvals pertaining to any foreign insurer which transfers its corporate domicile to another state by merger, consolidation, or any other lawful method. (2) Any insurer which is organized under the laws of any other state and is admitted to do business in this state for the purpose of writing insurance may, upon approval of the commissioner, become a domestic insurer by complying with all of the requirements of this chapter relating to the organization and authorization of a domestic insurer of the same type and by designating its principal place of business at a place in this state. The domestic insurer shall be entitled to like certificates of authority to transact business in this state, and shall be subject to the authority and jurisdiction of this state. (3) Any domestic insurer may, upon approval of the commissioner, transfer its domicile to any other state in which it is admitted to transact the business of insurance. Upon the transfer, the insurer shall cease to be a domestic insurer, and shall be authorized to transact insurance business in this state if qualified as a foreign insurer. The commissioner shall approve the proposed transfer unless the commissioner shall determine the transfer is not in the interest of the policyholders of this state. (4) The certificate of authority, agents' appointments and licenses, rates, and other items which the commissioner allows, in the commissioner's discretion, which are in existence at the time any insurer authorized to transact the business of insurance in this state transfers its corporate domicile to this or any other state by merger, consolidation, or merger pursuant to KRS 271B.11-070, or any other lawful method, shall continue in full force and effect upon the transfer if the insurer remains duly qualified to transact the business of insurance in this state. All outstanding policies of any transferring insurer shall remain in full force and effect and need not be endorsed as to the new name of the insurer or its new location unless so ordered by the commissioner. Every transferring insurer shall file new policy forms with the commissioner on or before the effective date of the transfer but may use existing policy forms with appropriate endorsements if allowed by, and under such conditions as approved by, the commissioner. However, every transferring insurer shall notify the commissioner in writing of the details of the proposed transfer and shall file promptly appropriate amendments to corporate documents required to be filed with the commissioner. (5) (a) Any insurer transferring its domicile in accordance with subsections (2) or (3) of this section shall file an application for redomestication and transfer of domicile with the commissioner. This transfer of domicile must be approved by order of the commissioner. If the commissioner does not approve the transfer of domicile, the applicant insurer may request a hearing in accordance with KRS 304.2-310(2)(b). (b) An applicant filing to become a domestic insurer in accordance with subsection (2) of this section shall include a notice of transfer of domicile to the Secretary of State and the articles, amended articles, or restated articles of incorporation in compliance with KRS 271B.2-020. (c) An application filed by a domestic insurer to transfer its domicile to another state in accordance with subsection (3) of this section shall include a copy of the order approving the redomestication issued by the new state of domicile. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1349, effective July 15, 2010. -- Amended 2004 Ky. Acts ch. 24, sec. 31, effective July 13, 2004. -- Amended 1988 Ky. Acts ch. 23, sec. 187, effective January 1, 1989. -- Created 1986 Ky. Acts ch. 88, sec. 1, effective July 15, 1986.

KRS 304.24-600 Conversion of domestic mutual insurer to stock insurer

304.24-600. Conversion of domestic mutual insurer to stock insurer (1) A domestic mutual insurer may convert to a stock insurer by amendment of its articles of incorporation and upon compliance with the requirements of KRS 304.24-600 to 304.24-625 and the applicable requirements of this subtitle and Subtitle 3 of this chapter. (2) A domestic mutual insurer shall only convert to a stock insurer in accordance with a plan of conversion approved by the commissioner. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1350, effective July 15, 2010. -- Created 2000 Ky. Acts ch. 42, sec. 1, effective July 14, 2000.

KRS 304.24-601 Definitions for KRS 304.24-600 to 304.24-625

304.24-601. Definitions for KRS 304.24-600 to 304.24-625 As used in KRS 304.24-600 to 304.24-625, unless the context requires otherwise: (1) "Converting mutual" means a domestic mutual insurer that adopts a plan of conversion under KRS 304.24-603 that will result in the insurer converting into a domestic stock insurer. (2) "Eligible member" means: (a) Any person who is a member of the converting mutual on the date the converting mutual's board of directors adopts a resolution proposing a plan of conversion; (b) Any person who has been a member of the converting mutual within the last three (3) years prior to the date the converting mutual's board of directors adopts a resolution proposing a plan of conversion; and (c) Any person who is a certificate holder under a group policy if the person meets the condition in paragraph (a) or (b) of this subsection and inclusion of the certificate holder as an eligible member is necessary for a fair and equitable distribution. (3) "Former mutual" means the domestic stock insurer resulting from the conversion of a converting mutual to a stock insurer pursuant to a plan of conversion in accordance with KRS 304.24-600 to 304.24-625. (4) "Membership interests" means: (a) The voting rights of members of a domestic mutual insurer as provided by law and by the insurer's articles of incorporation and bylaws; and (b) The rights of members of a domestic mutual insurer to receive cash, stock, or other consideration in the event of a conversion to a stock insurer under KRS 304.24-600 to 304.24-625 or a dissolution under KRS 304.24-430. (5) "Plan of conversion" means the plan of conversion described in KRS 304.24-603 and includes the proposed amendment to the converting mutual's articles of incorporation, unless the context requires otherwise. Effective: July 14, 2000 History: Created 2000 Ky. Acts ch. 42, sec. 2, effective July 14, 2000.

KRS 304.24-603 Amendment of articles of incorporation -- Plan of conversion

304.24-603. Amendment of articles of incorporation -- Plan of conversion (1) The board of directors of the converting mutual shall adopt a resolution proposing the amendment of its articles of incorporation in accordance with KRS 304.24-080 and proposing a plan of conversion. (2) The plan of conversion shall: (a) Describe the manner in which the proposed conversion shall occur and the insurer and any other business entity that will result from or be directly affected by the conversion, including the former mutual and any affiliate; (b) Provide that the membership interests in the converting mutual shall be extinguished as of the effective date of the conversion; (c) Require the fair and equitable distribution of aggregate consideration to the eligible members, upon the extinguishing of their membership interests, which shall be equal to the fair value of the converting mutual as determined under a fair formula: 1. Describe the manner in which the fair value of the converting mutual shall be determined or established; 2. Describe the form or forms of consideration that shall be distributed to the eligible members; and 3. Specify relevant classes, categories, or groups of eligible members, and describe the method or formula that shall be used for the equitable allocation of the aggregate consideration among the eligible members; (d) Provide for the determination and preservation of the reasonable dividend expectations of eligible members and other policyholders with policies that provide for the distribution of policy dividends that shall be implemented through establishment of a closed block or other method acceptable to the commissioner in compliance with KRS 304.24-600 to 304.24-625; (e) Specify the effective date of the plan of conversion and distributions to eligible members; and (f) Include all other provisions that are necessary for, or material to, the implementation of the conversion. (3) The plan of conversion may include any other provisions that the converting mutual deems necessary or reasonable. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1351, effective July 15, 2010. -- Created 2000 Ky. Acts ch. 42, sec. 3, effective July 14, 2000.

KRS 304.24-605 Application for approval of plan of conversion -- Actuarial opinion

304.24-605. Application for approval of plan of conversion -- Actuarial opinion (1) The converting mutual shall file with the commissioner an application for approval of the plan of conversion. (2) The application shall consist of the following: (a) The plan of conversion; (b) A certificate of the secretary of the converting mutual regarding the adoption of the plan of conversion; (c) A statement of the reasons for the proposed conversion and why it is in the best interests of the converting mutual and its eligible members, including an analysis of the risks and benefits to the converting mutual and its members and a comparison of the risks and benefits of reasonable alternatives to a conversion; (d) A five (5) year business plan of the former mutual, including five (5) year financial projections, detailed descriptive narrative, and all relevant assumptions; (e) Any plans or proposals that the former mutual or any affiliate company may have to raise additional capital through the issuance of stock or otherwise; and any other plans that the former mutual or any affiliate company may have to sell or otherwise issue stock to any person, including the adoption of any employee compensation or benefit plan under which stock may be issued; (f) Any plans or proposals that the former mutual or any affiliate company may have to liquidate or dissolve any company, to sell any material assets, or to merge or consolidate with any person, or to make any other material change in investment policy, business, corporate structure, or management; (g) Any plans or arrangement for a delayed distribution of consideration to eligible members, or restrictions on sale or transfer of stock or other securities; (h) A plan of operation for any closed block established for the preservation of the reasonable dividend expectations of eligible members and other policyholders with policies that provide for the distribution of policy dividends; (i) Copies of the current articles of incorporation and bylaws of the converting mutual; (j) Copies of any proposed articles of incorporation and bylaws of the former mutual; (k) A list of individuals who are or have been selected to become directors or officers of the former mutual and of any affiliate, or the individuals who perform or will perform duties customarily performed by a director or officer, including the following information: 1. The individual's principal occupation; 2. All offices and positions the individual has held in the preceding five (5) years; 3. Any criminal convictions of the individual; 4. Information concerning any personal bankruptcy of the individual or the individual's spouse during the previous seven (7) years; 5. Information concerning the supervision, rehabilitation, or liquidation of any insurer or the bankruptcy of any corporation or other entity of which the individual was an officer or director; 6. Information concerning any state or federal securities law allegations against the individual that resulted in a determination that the individual violated the state or federal securities law, a plea of nolo contendere, or a consent decree; 7. Information concerning the revocation of any state or federal license issued to the individual; and 8. Information as to whether the individual was refused a fidelity or other bond during the previous ten (10) years. (l) A fairness opinion addressed to the board of directors of the converting mutual from a qualified independent financial advisor, that the provision of stock, cash, policy benefits, or other forms of consideration upon extinguishing the converting mutual's membership interests under the plan of conversion, is fair and equitable to the eligible members, as a group, from a financial point of view; (m) An actuarial opinion and supporting memorandum; (n) A description of the plans of the former mutual or its affiliates to assure that an active trading market for any stock or other securities distributed to eligible members will develop within a reasonable amount of time after the effective date of the plan of conversion and that eligible members who receive stock or other securities will be able to sell their stock or other securities, subject to any delayed distribution or transfer restrictions, at reasonable cost and effort. These plans may consist of: 1. Appointing a registrar and transfer agent for the stock or other securities; 2. Making filings, applications, or registrations for the stock or other securities with the Federal Securities and Exchange Commission and with appropriate state securities regulators; 3. Listing the stock or other securities on a national or other securities exchange; 4. Facilitating coverage of the stock or other securities by research analysts and securing the commitment of at least one (1) market maker to make a market in the stock or other securities; 5. Conducting an underwritten public offering of the same class of stock or other securities, promptly following the effective date of the plan of conversion, in order to facilitate the development of a public market; and 6. Making available a procedure for eligible members holding small numbers or amounts of stock or other securities to sell their stock or other securities to the former mutual or an affiliate at market value without the payment of brokerage commissions or similar fees, or to sell their stock or other securities in the market through a broker with discounted brokerage commissions or fees; (o) Any additional information, documents, or materials that the converting mutual deems necessary or reasonable; and (p) Any other additional information, documents, or materials that the commissioner may request in writing. (3) (a) The actuarial opinion shall address whether: 1. The methodology or formulas used to determine the total aggregate consideration to be distributed to eligible members is reasonable and appropriate; 2. The methodology or formulas used to allocate consideration among the eligible members is reasonable and appropriate; 3. The financial condition of the former mutual will not be adversely diminished; and 4. If a closed block is used for the preservation of the reasonable dividend expectations of eligible members and other policyholders with policies that provide for the distribution of the policy dividends, the plan of operation, and the sufficiency of the assets allocated to the closed block, is reasonable. (b) The actuarial opinion shall be provided by a qualified and independent actuary who is a member of the American Academy of Actuaries. The opinion shall be given in accordance with professional standards and practices generally accepted by the actuarial profession and those other factors as the actuary believes are reasonable and appropriate in the exercise of professional judgment at the time the opinion is given. (c) The opinion shall be supported by a memorandum of the actuary, describing the calculations made and the assumptions used in the calculations. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1352, effective July 15, 2010. -- Created 2000 Ky. Acts ch. 42, sec. 4, effective July 14, 2000.

KRS 304.24-607 Commissioner's review of plan of conversion -- Hearing and comments -- Approval or disapproval

304.24-607. Commissioner's review of plan of conversion -- Hearing and comments -- Approval or disapproval (1) The commissioner shall have ninety (90) days to review the plan of conversion after it is filed. Upon completion of the review, the commissioner shall schedule a public hearing on the plan of conversion. (2) The commissioner shall hold a hearing upon the plan of conversion in accordance with KRS 304.2-310. (3) The converting insurer shall present evidence that the plan of conversion complies with KRS 304.24-600 to 304.24-625. (4) Persons wishing to make comments and submit information may submit written statements prior to the public hearing and may appear and be heard at the hearing. These comments shall be part of the record and shall be considered by the commissioner before issuing an order on the plan of conversion. (5) At least forty-five (45) days prior to the hearing date, the converting mutual shall provide information regarding the hearing to the eligible members and its other policyholders and certificate holders. The information provided shall include a brief statement of the subject of the hearing, the date, time, and location of the hearing, a description of members eligible to vote on the plan of conversion, and a statement indicating the location at which the public portion of the application may be examined. This information shall be provided by mail or by other means approved by the commissioner. (6) Following the hearing, the commissioner shall, by order, approve, conditionally approve, or disapprove the plan of conversion. The commissioner may require, as a condition of approval of the plan of conversion, modification of the proposed plan of conversion. The insurer shall file the amendments required by the conditional approval within thirty (30) days of the date of the order. The commissioner may grant an extension for filing amendments for good cause shown. If the applicant does not timely file the required amendments, the plan of conversion shall be deemed disapproved. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1353, effective July 15, 2010. -- Created 2000 Ky. Acts ch. 42, sec. 5, effective July 14, 2000.

KRS 304.24-609 Findings requiring commissioner's approval of plan -- Hiring of experts -- Deposits in anticipation of expenses -- Commissioner may consider effect of insurer's past actions

304.24-609. Findings requiring commissioner's approval of plan -- Hiring of experts -- Deposits in anticipation of expenses -- Commissioner may consider effect of insurer's past actions (1) The commissioner shall approve the plan of conversion if the commissioner finds, following the hearing, that the plan of conversion: (a) Complies with the provisions of this chapter and all other applicable laws; (b) Is fair and equitable to the eligible members and the other policyholders of the converting mutual; (c) Is actuarially reasonable and appropriate; (d) Will not jeopardize the financial stability of the former mutual or prejudice the interest of its policyholders; and (e) Provides that the former mutual shall be able to satisfy the requirements for issuance of a certificate of authority to write the kinds of insurance for which the converting mutual is presently authorized. (2) The commissioner shall, at the converting mutual's expense, hire accountants, actuaries, attorneys, financial advisors, investment bankers, and other experts as may be necessary to assist the commissioner in reviewing all matters under KRS 304.24-600 to 304.24-625 that are related to the plan of conversion and the application. The commissioner may at any time require the converting mutual to deposit an amount of money with the department in anticipation of expenses to be incurred by the commissioner under this subsection. (3) The commissioner may consider the effect of any action taken by the converting insurer within a three (3) year period immediately prior to the filing of the plan of conversion if the action taken by the insurer has a material effect on the fairness and equity of the plan of conversion. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1354, effective July 15, 2010. -- Created 2000 Ky. Acts ch. 42, sec. 6, effective July 14, 2000.

KRS 304.24-611 Vote on plan of conversion and proposed amendments -- Meeting of members -- Notice of right to vote and accompanying materials -- Voting by proxy

304.24-611. Vote on plan of conversion and proposed amendments -- Meeting of members -- Notice of right to vote and accompanying materials -- Voting by proxy (1) The plan of conversion and the proposed amendment to the articles of incorporation of the converting mutual shall be submitted to a vote of the members of the converting mutual, as provided in this section and in KRS 304.24-095. (2) The meeting of members shall be held no later than ninety (90) days after the issuance of the commissioner's order of approval of the plan of conversion or after the filing of all amendments in compliance with the order of conditional approval of the plan of conversion. (3) The converting mutual shall give written notice of the right to vote on the plan of conversion to the members of the converting mutual entitled to vote. The notice shall be accompanied by explanatory information concerning the plan of conversion and may be accompanied by proxy solicitation materials. The notice and accompanying information and materials shall not be provided to the members until approved by the commissioner. The notice and accompanying materials shall include: (a) A brief statement of the subject of the meeting; (b) The date, time, and location of the meeting; (c) A description of the member's right to attend and participate in the meeting; (d) A description of the nature and amount of consideration that will be provided to the eligible members upon completion of the conversion; (e) If reasonably ascertainable by the converting mutual, a description of the form and amount or approximate amount of consideration to be provided to the particular member to whom the notice is addressed; (f) A copy of the plan of conversion and summary of the plan; and (g) A reference to the applicable statutory provisions. (4) The notice required by subsection (3) of this section shall achieve a minimum score of forty (40) on the Flesch reading ease test or an equivalent score on a comparable test approved by the commissioner. (5) The notice shall be mailed, or provided by some other method or methods as may be approved by the commissioner, not less than thirty (30) days before the date of the meeting of members to vote on the plan of conversion. (6) Only persons who are members of the converting mutual on both the date the converting mutual's board of directors adopts the resolution proposing the plan of conversion and the record date for the meeting established by the board of directors shall be entitled to vote on the plan of conversion and the proposed amendment to the articles of incorporation of the converting mutual. Each voting member shall be entitled to vote in accordance with KRS 304.24-210. (7) Notwithstanding KRS 304.24-210, a member may vote by proxy only if: (a) The proxy was solicited and obtained from the member for the express and sole purpose of voting on the plan of conversion, amendments to the articles of incorporation and bylaws, and any other matter materially related to the plan of conversion; and (b) The proxy solicitation materials were provided to the commissioner prior to sending the materials to the members. (8) The plan of conversion and the proposed amendment to the converting mutual's articles of incorporation shall be approved by the members upon receiving the affirmative votes of at least two-thirds (2/3) of the members voting at the meeting in person or by proxy. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1355, effective July 15, 2010. -- Created 2000 Ky. Acts ch. 42, sec. 7, effective July 14, 2000.

KRS 304.24-613 Effect of conversion

304.24-613. Effect of conversion (1) Upon the effective date of the plan of conversion: (a) The converting mutual shall be converted from a domestic mutual insurer to a domestic stock insurer, and the former mutual shall have all the rights, privileges, immunities, and powers and shall be subject to all the duties and liabilities of a stock insurer existing under this chapter; (b) The membership interests of every member and policyholder of the converting mutual shall be extinguished and cease; and (c) The rights of every policyholder, certificate holder, and other insured of the converting mutual under any contract of insurance shall continue in force in accordance with the terms, provisions, and conditions of the contract, including rights, if any, to dividends. (2) The former mutual shall be a continuation of the existence of the original converting mutual. The conversion in no way shall annul, modify, or change any of the original converting mutual's existing suits, rights, contracts, or liabilities. The former mutual shall be vested in all the rights, franchises, and interests of the converting mutual in and to every species of property without any deed or transfer, and the former mutual shall succeed to all the obligations and liabilities of the converting mutual and retain all rights and contracts existing prior to effectiveness of the conversion. Effective: July 14, 2000 History: Created 2000 Ky. Acts ch. 42, sec. 8, effective July 14, 2000.

KRS 304.24-615 Consideration distributed to eligible members

304.24-615. Consideration distributed to eligible members (1) The total aggregate consideration to be distributed to the eligible members shall be determined under a fair formula. The total aggregate consideration shall not be less than the converting mutual's total surplus or surplus as regards policyholders; plus the value of all nonadmitted assets; plus a reasonable present equity in reserves, if any; minus any adjustments for contributed or borrowed surplus. (2) The consideration to be distributed to the eligible members shall be cash, stock, or other securities of the former mutual or of an affiliate, additional paid up insurance or annuity benefits, or any combination of these forms of consideration or other forms of consideration described in the plan of conversion and approved by the commissioner. (3) The form of consideration to be distributed to a class, category, or group of eligible members may differ from the form of consideration to be distributed to another class, category, or group of eligible members. The choice of the form of consideration may take into account such factors as the type of policies with respect to which the consideration is being distributed, the country or state of residence or tax status of the eligible members, the length of time that eligible members have been members of the converting mutual, or other appropriate factors or circumstances described in the plan of conversion. (4) Distribution of all or part of the consideration to some or all of the eligible members may be delayed, or restrictions on sale or transfer of any stock or other securities to be distributed to eligible members may be required, for a reasonable period of time following the effective date of the conversion. That period of time shall not exceed six (6) months, unless approved by the commissioner. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1356, effective July 15, 2010. -- Created 2000 Ky. Acts ch. 42, sec. 9, effective July 14, 2000.

KRS 304.24-617 Fairness of method or formula in plan of conversion

304.24-617. Fairness of method or formula in plan of conversion In determining whether the method or formula in the plan of conversion is fair and equitable, the commissioner may consider the following factors: (1) Voting rights; (2) Number of eligible members; (3) Length of membership in the converting mutual; (4) Premiums paid by members; (5) Policy limits; (6) Risk of line of insurance; (7) Sources of the proportionate contributions to historical surplus, based on such groupings, classification, historical information, assumptions, and projections as are actuarially sound and reasonable; (8) For a converting mutual that is a property and casualty company, the net earned premiums each eligible member has paid to the converting mutual, compared to the total net earned premiums paid by all eligible members, in each case during the period of time specified in the plan of conversion; and (9) Any other relevant factors the commissioner may deem appropriate. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1357, effective July 15, 2010. -- Created 2000 Ky. Acts ch. 42, sec. 10, effective July 14, 2000.

KRS 304.24-619 Dividend preservation provisions

304.24-619. Dividend preservation provisions (1) No dividend preservation provisions shall provide in any way or substitute for the distribution of consideration to eligible members upon extinguishing their membership interests. (2) Any dividend preservation provision may be limited to participating individual life insurance policies and participating individual annuity contracts in force or deemed to be in force by the plan of conversion on the effective date of the plan of conversion for which the converting mutual insurer has an experience-based dividend scale due, paid, or accrued by action of the board of directors of the converting mutual in the year in which the plan of reorganization is adopted, except that: (a) Policies that would be included but for the fact that their recent issuance results in no dividends for an initial period, may be included; (b) Policies that are in force as extended term insurance may be included; and (c) Other categories of policies and benefits not described in this subsection may be included or excluded with approval of the commissioner. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1358, effective July 15, 2010. -- Created 2000 Ky. Acts ch. 42, sec. 11, effective July 14, 2000.

KRS 304.24-621 Use of closed block to preserve dividend expectations

304.24-621. Use of closed block to preserve dividend expectations (1) The provisions of this section apply if a closed block is used for the preservation of the reasonable dividend expectations of eligible members and other policyholders. (2) The converting mutual shall prepare a written plan of operation for the closed block, consistent with the requirements of this section and the other applicable requirements of KRS 304.24-600 to 304.24-625. (3) The closed block shall be operated for the exclusive benefit of policies and contracts included in it. No costs or expenses incurred in connection with the conversion shall be charged to the closed block. (4) The assets allocated to the closed block, together with the revenue from the closed block, shall be calculated to be reasonably sufficient to support the business in the closed block until the last policy in the closed block has terminated, including payment of claims and those expenses and taxes as are specified in the plan of conversion, and to provide for continuation of dividend scales in effect on the adoption date of the plan of conversion, if the experience underlying those scales continues and for appropriate adjustments in the scales if the experience changes. (5) The assets to a closed block shall be specified in the plan of operation and must consist of: (a) A list of designated assets of the converting mutual's general account or specified segments, which list shall change periodically to reflect the acquisition and disposition of assets; (b) A designated portion of each asset of the converting mutual's general account or specified segments thereof, which portion shall change periodically to reflect the cash flows of the closed block; or (c) Assets designated by a combination of the methods described in paragraphs (a) and (b) of this subsection. (6) The plan of operation shall specify which of those methods of assignment of closed block assets is being used and shall set forth the methods by which the designations referred to in subsection (5) of this section are changed during the course of closed block operations. (7) The former mutual shall submit to the commissioner annual reports, in a form acceptable to the commissioner, that account for and describe the operations of the closed block; and as specified in the plan of operation provide for annual reviews of, and reports and opinions on, the closed block by an independent actuary. (8) The plan of operation shall provide for the conditions under which the former mutual may terminate the closed block. (9) The former mutual shall not distribute any residual assets of the closed block until the plan for distribution of the residual assets is approved by the commissioner. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1359, effective July 15, 2010. -- Created 2000 Ky. Acts ch. 42, sec. 12, effective July 14, 2000.

KRS 304.24-623 Acquisition of beneficial ownership of voting securities after conversion

304.24-623. Acquisition of beneficial ownership of voting securities after conversion (1) Except as specifically provided in the plan of conversion, for a period of five (5) years following the effective date of the conversion, no person or persons acting in concert, other than the former mutual, any affiliate, any employee benefit plans, or trusts sponsored by the former mutual or affiliate, shall directly or indirectly offer to acquire or acquire in any manner the beneficial ownership of five percent (5%) or more of any class of a voting security of the former mutual or any affiliate company without the prior approval by the commissioner of a statement filed by that person with the commissioner. The statement shall contain the information required by KRS 304.37-120(2) and any other information required by the commissioner. (2) The commissioner shall not approve the acquisition if the commissioner finds that: (a) The requirements of KRS 304.37-120(4)(a) have not been satisfied; (b) The acquisition will frustrate the fair and equitable plan of conversion as approved by the members and the commissioner; (c) The acquisition or change of control will result in unjust enrichment of the acquiring persons to the detriment of the eligible members of the converting mutual; and (d) The acquisition would not be in the best interest of the present and future policyholders of the former mutual, without regard to any interest of policyholders as shareholders of the former mutual or any affiliate company. (3) The requirements of this section shall be in addition and supplemental to any other filings or approvals required by this chapter or otherwise by law. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1360, effective July 15, 2010. -- Created 2000 Ky. Acts ch. 42, sec. 13, effective July 14, 2000.

KRS 304.24-625 Sale or issuance of stock or other security after conversion

304.24-625. Sale or issuance of stock or other security after conversion During the one (1) year period following the effective date of the plan of conversion, neither the former mutual nor any affiliate company shall sell or issue, or adopt any plan or benefit program providing for the sale or issuance of, any stock or other equity security except: (1) As disclosed in the approved plan of conversion; or (2) As otherwise approved by the commissioner, upon a finding that the stock transaction: (a) Will not frustrate the plan of conversion as approved by the members and the commissioner; and (b) Is not adverse to the best interests of the policyholders of the former mutual, without regard to any interests of policyholders as shareholders of the former mutual or any affiliate company. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1361, effective July 15, 2010. -- Created 2000 Ky. Acts ch. 42, sec. 14, effective July 14, 2000.
Source: Kentucky Legislative Research Commission (legislature.ky.gov)URL: https://apps.legislature.ky.gov/law/statutes/chapter.aspx?id=38737Fetched: 10/20/2026

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