California Insurance Code

§ 1560.11

INS § 1560.11 Effective Jan 1, 1999Div. 1 · Part 2 · Ch. 3 · Art. 17

Statute text

(a)Upon the effective date of a plan of conversion in accordance with Section 1560.10, the domestic reciprocal insurer immediately becomes a stock corporation, the interests and rights in surplus of its subscribers are extinguished, the subscribers of the insurer immediately become members of the reciprocal holding company, and are granted rights in surplus in the reciprocal holding company equivalent to those rights in surplus previously held in the converted company, all of the voting stock initially issued by the converted insurer is owned by the stock holding company, and all of the voting stock initially issued by the stock holding company is owned by the reciprocal holding company. Except for the subscribership interests in the reciprocal insurer, which becomes membership interests in the reciprocal holding company, nothing herein is intended to, nor shall eliminate, curtail or otherwise diminish the contract rights of policyholders of a converted company. The stock holding company may thereafter, subject to compliance with Article 8 (commencing with Section 820) of Chapter 1, issue securities to other persons. After the effective date, owners of policies that are issued by a stock insurer that has been converted from a domestic reciprocal insurer pursuant to proceedings under this article shall become members of the reciprocal holding company immediately upon issuance of the policies, except that an owner solely of a reporting endorsement to a claims-made policy shall not be members of the reciprocal holding company.

(b)The converted insurer shall be a continuation of the original reciprocal insurer, and the conversion shall in no way annul, modify, or change any of the original reciprocal insurer’s existing suits, rights, contracts, or liabilities except as provided in the approved plan. The converted insurer shall exercise all the rights and powers and perform all the duties conferred or imposed by law upon insurers writing the classes of insurance written by it, and shall retain the rights and contracts existing prior to conversion subject to the effect of the plan.

(c)From the effective date, the reciprocal holding company shall hold at least 51 percent of the issued and outstanding voting stock of the stock holding company and the stock holding company thereafter shall at all times hold all of the issued and outstanding voting stock of the converted insurer. The stock holding company may issue additional voting stock to the reciprocal holding company and, in addition, to other persons an amount of voting stock and securities convertible into voting stock, if in the aggregate, the issued and outstanding voting stock of the stock holding company held by the reciprocal holding company is not less than 51 percent of the issued and outstanding voting stock of the stock holding company. For purposes of the 51 percent limitation, any issued and outstanding securities of the stock holding company that are convertible into voting stock are considered issued and outstanding voting stock, provided that securities having voting power only because of the occurrence of a contingency shall not be considered securities convertible into voting stock where the contingency has not occurred. From the effective date, the reciprocal holding company’s equity interest in the stock holding company shall not be less than 51 percent of the total stockholders’ equity in the stock holding company. For purposes of the 51 percent limitation, any issued and outstanding securities of the stock holding company that are convertible into equity securities, whether voting or nonvoting, shall be considered stockholders’ equity. Debt securities that include a default contingency conversion interest shall not be considered stockholders’ equity for compliance with the foregoing limitation.

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Legislative history

Added by Stats. 1998, Ch. 421, Sec. 2. Effective January 1, 1999.