A_AB618

2001 REGULAR SESSION (71st) A AB618 443

Amendment No. 443

Assembly Amendment to Assembly Bill No. 618 (BDR 57‑564)

Proposed by: Committee on Commerce and Labor

Amendment Box:

Resolves Conflicts with: N/A

Amends: Summary: Title: Preamble: Joint Sponsorship:

Adoption of this amendment will MAINTAIN a 2/3s majority vote requirement for final passage of AB618 (§§ 67, 88, 89, 166.5, 183, 209).

ASSEMBLY ACTION Initial and Date |SENATE ACTION Initial and Date

Adopted Lost | Adopted Lost

Concurred In Not |Concurred In Not

Receded Not | Receded Not

Amend sec. 4, page 2, line 3, by deleting “certified”.

Amend sec. 63, page 17, by deleting line 29 and inserting:

“2. Except as otherwise provided in subsections 3[, 5 and 6,] and 5 to 9,”.

Amend sec. 63, page 18, by deleting lines 1 through 39 and inserting:

“(b) Documents obtained or received from other sources upon the express condition that they remain confidential.

6. All information and documents in the possession of the division or any of its employees which are related to cases or matters under investigation by the commissioner or his staff are confidential for the period of the investigation and may not be made public unless the commissioner finds the existence of an imminent threat of harm to the safety or welfare of the policyholder, shareholders or the public and determines that the interests of the policyholder, shareholders or the public will be served by publication thereof, in which event he may make a record public or publish all or any part of the record in any manner he deems appropriate.

7. The commissioner may classify as confidential the records of a consumer or information relating to a consumer to protect the health, welfare or safety of the consumer.

8. In performing his duties, the commissioner may:”.

Amend sec. 63, page 19, line 8, by deleting “10.” and inserting “9.”.

Amend sec. 71, page 26, line 38, after “NRS” by inserting “677.247 or”.

Amend the bill as a whole by adding a new section designated sec. 137.5, following sec. 137, to read as follows:

“Sec. 137.5. NRS 687A.033 is hereby amended to read as follows:

687A.033 1. “Covered claim” means an unpaid claim or judgment, including a claim for unearned premiums, which arises out of and is within the coverage of an insurance policy to which this chapter applies issued by an insurer which becomes an insolvent insurer, if one of the following conditions exists:

(a) The claimant or insured, if a natural person, is a resident of this state at the time of the insured event.

(b) The claimant or insured, if other than a natural person, maintains its principal place of business in this state at the time of the insured event.

(d) The claim is not a covered claim pursuant to the laws of any other state and the premium tax imposed on the insurance policy is payable in this state pursuant to NRS 680B.027.

2. The term does not include:

(a) An amount that is directly or indirectly due a reinsurer, insurer, insurance pool or underwriting association, as recovered by subrogation, indemnity or contribution, or otherwise.

(b) That part of a loss which would not be payable because of a provision for a deductible or a self-insured retention specified in the policy.

(1) Eighteen months after the date of the order of liquidation; or

(2) The final date set by the court for the filing of claims against the liquidator or receiver of the insolvent insurer,

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whichever is earlier. The provisions of this paragraph do not apply to a claim for workers’ compensation that is reopened pursuant to the provisions of NRS 616C.390.

(d) A claim filed with the association for a loss that is incurred but is not reported to the association before the expiration of the period specified in subparagraph (1) or (2) of paragraph (c).

(e) An obligation to make a supplementary payment for adjustment or attorney’s fees and expenses, court costs or interest and bond premiums incurred by the insolvent insurer before the appointment of a liquidator, unless the expenses would also be a valid claim against the insured.

(f) A first party or third party claim brought by or against an insured, if the aggregate net worth of the insured and any affiliate of the insured, as determined on a consolidated basis, is more than $25,000,000 on December 31 of the year immediately preceding the date the insurer becomes an insolvent insurer. The provisions of this paragraph do not apply to a claim for workers’ compensation.”.

Amend the bill as a whole by adding a new section designated sec. 166.5, following sec. 166, to read as follows:

“Sec. 166.5. NRS 690C.160 is hereby amended to read as follows:

690C.160 1. A provider who wishes to issue, sell or offer for sale service contracts in this state must submit to the commissioner:

(a) A registration application on a form prescribed by the commissioner;

(b) Proof that he has complied with the requirements for security set forth in NRS 690C.170;

(d) The name, address and telephone number of each administrator with whom the provider intends to contract; and

(e) A fee of $1,000.

2. In addition to the fee required by subsection 1, a provider must pay a fee of $25 for each type of service contract he files with the commissioner.

3. A certificate of registration is valid for 1 year after the date the commissioner issues the certificate to the provider. A provider may renew his certificate of registration if, before the certificate expires, he submits to the commissioner an application on a form prescribed by the commissioner and a fee of [$500.] $1,000.”.

Amend the bill as a whole by renumbering sections 174 and 175 as sections 227 and 228 and adding new sections designated sections 173.5 through 226, following sec. 173, to read as follows:

“Sec. 173.5. Chapter 693A of NRS is hereby amended by adding thereto the provisions set forth as sections 174 to 226, inclusive, of this act.

Sec. 174. As used in sections 174 to 202, inclusive, of this act, unless the context otherwise requires, the words and terms defined in sections 175 to 180, inclusive, of this act have the meanings ascribed to them in those sections.

Sec. 175. “Closed block” means an allocation of assets of the converting mutual sufficient to maintain payments of guaranteed benefits and the continuation of the current dividends for eligible members.

Sec. 176. “Consideration” means cash, stock or other valuable compensation approved by the commissioner.

Sec. 177. “Converting mutual” means a domestic mutual insurance company or a mutual insurance holding company that has adopted a plan of conversion to a domestic stock insurance company pursuant to sections 174 to 202, inclusive, of this act.

Sec. 178. “Eligible member” means a person who has a membership interest in the converting mutual on the date on which the board of directors of the converting mutual adopts a resolution proposing a plan of conversion and an amendment to its articles of incorporation.

Sec. 179. “New stock insurer” means the domestic stock insurer that is created when the commissioner issues a certificate of authority to a converting mutual pursuant to section 188 of this act.

Sec. 180. “Policyholder” means a person who holds a policy issued by the converting mutual on the day on which the plan of conversion is initially approved by the board of directors of the converting mutual.

Sec. 181. A domestic mutual insurer or a mutual insurance holding company may amend its articles of incorporation to become a domestic stock insurer by complying with sections 174 to 202, inclusive, of this act and obtaining a certificate of authority from the commissioner.

Sec. 182. 1. The board of directors of a domestic mutual insurer or a mutual insurance holding company may adopt a resolution proposing a plan of conversion and an amendment to its articles of incorporation. The resolution must be approved by a vote of not less than two-thirds of the members of the board.

2. The plan of conversion must:

(a) Require the distribution of consideration equal to not less than the fair market value of the surplus of the converting mutual to the eligible members in exchange for the extinguishment of their membership interests in the converting mutual.

(b) Describe the manner in which the fair market value of the converting mutual and its surplus has been or will be determined.

(c) Require the distribution of consideration to the eligible members upon extinguishment of their membership interests in the converting mutual.

(d) Provide that membership interests in the converting mutual are extinguished as of the effective date of conversion.

(e) Specify the structure and form of the proposed consideration, including, without limitation, the projected range of the number of shares of capital stock to be:

(1) Issued to policyholders by the new stock insurer or the holding company of the new stock insurer; and

(2) Sold or reserved for sale to investors by the new stock insurer or the holding company of the new stock insurer, or to the trust established pursuant to this section.

(f) If the distribution of consideration will not be made immediately following the final order of the commissioner approving the conversion, provide for the establishment of a trust for the exclusive benefit of policyholders into which shares of the capital stock of the new stock insurer or the holding company of the new stock insurer must be placed pending distribution to the policyholders. The terms of the trust are subject to the approval of the commissioner. Such a trust may exist only for a period of 6 months after the final approval of the conversion, during which time the distribution of consideration to eligible policyholders and other persons must be completed.

(g) Provide for the determination of the reasonable dividend expectations of eligible members and other policyholders of policies that provide for distribution of policy dividends and the preservation of such expectations through the establishment of a closed block of assets.

(h) Provide for such other proposed conditions and provisions as the board of directors of the converting mutual determines are necessary and are not inconsistent with the provisions of sections 174 to 202, inclusive, of this act.

Sec. 183. A converting mutual shall file with the commissioner an application to convert to a domestic stock insurer. The application must be accompanied by a nonrefundable fee of $2,450. The application must include, without limitation:

1. The plan of conversion adopted by the board of directors.

2. A certification that the plan of conversion was duly adopted by a vote of not less than two-thirds of the members of the board of directors of the converting mutual.

3. A certification that the plan of conversion is fair and equitable to the policyholders. This certification must be adopted by a vote of not less than two-thirds of the members of the board of directors of the converting mutual.

4. A statement of the reasons for the proposed conversion and why the conversion is in the best interest of the converting mutual, including, without limitation, a:

(a) Detailed analysis of the risks and benefits of the proposed conversion to the converting mutual and its members; and

(b) Comparison of the risks and benefits of the conversion with the risks and benefits of a reasonable alternative to the conversion.

5. A written opinion addressed to the board of directors of the converting mutual from a qualified, independent financial advisor attesting that the:

(a) Consideration to be provided to the membership of the converting mutual is fair to the eligible members as a group; and

(b) Total consideration to be provided to the membership is equal to or greater than the surplus of the converting mutual.

6. An opinion from a qualified actuary attesting that all methodologies and formulas used to allocate the consideration among eligible members are reasonable.

7. Certified copies of the proposed amendments to the articles of incorporation and bylaws to effect the conversion.

8. A copy of the form of the trust agreement of any trust to be used in connection with the conversion.

9. A plan of operation for a closed block to preserve the reasonable dividend expectations of eligible members and other policyholders of policies that provide for the distribution of policy dividends.

10. A form of the proposed notice to be mailed by the converting mutual to its policyholders as required by section 186 of this act.

11. A 5-year business plan and at least 2 years of financial projections for the new stock insurer and a parent company, if any.

12. A list of natural persons who are or have been selected to become directors or officers of the new stock insurer and the following information concerning each person on the list, unless the information is already on file with the commissioner:

(a) Occupation;

(b) Criminal convictions, other than traffic violations, during the immediately preceding 7 years;

(d) Information regarding any consent decree entered into by the person; and

(e) Whether the person has been refused a fidelity or other bond during the immediately preceding 7 years.

13. Any plans that the new stock insurer or its parent company, if any, may have to:

(a) Raise additional capital through the issuance of stock or otherwise;

(b) Sell or issue stock to any person;

(d) Merge, consolidate or pursue any other form of reorganization with any person; or

(e) Make any material change in its investment policy, business, corporate structure or management.

14. Copies of proposed articles of incorporation and any proposed bylaws of the new stock insurer.

15. Such additional information as the commissioner may by regulation prescribe as necessary or appropriate for the protection of policyholders and security holders of the converting mutual, or for the protection of the public interest.

Sec. 184. The commissioner shall conduct a public hearing not later than 120 days after the date on which the application is filed unless, for good cause, he extends this time. Any interested person may appear or otherwise be heard at the public hearing. The commissioner may continue the hearing for a reasonable period, not to exceed 60 days. The converting mutual shall give such reasonable notice of the hearing as the commissioner requires. The hearing must be conducted pursuant to NRS 679B.320 to 679B.370, inclusive.

Sec. 185. 1. The commissioner shall issue an order making an initial determination of approval or disapproval of the application not later than 30 days after the public hearing.

2. The commissioner shall not approve the application unless he finds that the:

(a) Plan of conversion is fair and equitable to the policyholders;

(b) Plan of conversion does not deprive the policyholders of their property rights or due process of law;

(c) New stock insurer meets the minimum requirements for a certificate of authority to transact the business of insurance in this state; and

(d) Continued operation of the new stock insurer is not hazardous to future policyholders and the public.

3. For the purposes of this section, the commissioner may consider any relevant factor, including, without limitation:

(a) The capital requirements of the new stock insurer;

(b) Whether a sufficient portion of the surplus of the converting mutual was contributed by persons or entities whose policies or contracts were not in force on the date on which the plan of conversion was initially approved by the board of directors of the converting mutual to require the reduction of the consideration to policyholders to an amount equal to less than the surplus;

(c) Whether the plan of conversion includes preemptive rights for policyholders to purchase securities offered in the initial sale of securities by the new stock insurer;

(d) Whether the plan of conversion includes establishment of a preference account from which the payment of any shareholder dividends, including a regular, special or liquidation dividend, would be prohibited for such a reasonable period as the commissioner may require;

(e) The suitability of the trustees of any trust created to effect the conversion; and

(f) Whether the utilization of a trust, if included in the plan of conversion, has a material adverse effect on policyholders, other than delaying the receipt of shares of capital stock.

4. If the commissioner makes a determination to disapprove the application, the commissioner shall issue a final order setting forth specific findings for the disapproval.

Sec. 186. 1. Unless the commissioner for good cause establishes a different time, the converting mutual shall, not less than 45 days after the date of the initial determination of approval by the commissioner, hold a meeting of its policyholders at a reasonable time and place to vote upon the plan of conversion.

2. The converting mutual shall give notice not less than 30 days before the meeting, by first-class mail to the last known address of each policyholder, that the plan of conversion will be voted upon at a regular or special meeting of the policyholders. The notice must include, without limitation, a:

(a) Brief description of the plan of conversion;

(b) Statement that the commissioner has initially approved the plan of conversion; and

3. The commissioner shall supervise and direct the conducting of the vote on the plan of conversion as necessary to ensure that the vote is fair and consistent with the requirements of this section. Each policyholder is entitled to only one vote regardless of the number of policies owned by the policyholder.

4. A plan of conversion is approved only if not less than two-thirds of the policyholders voting in person or by proxy at the meeting vote in favor of the plan of conversion.

5. For the purposes of notice and voting, the policyholder of a policy of group insurance is the entity to which the group policy is issued and not any person covered under the group policy.

Sec. 187. A converting mutual may, by not less than a two-thirds vote of the members of its board of directors and with the approval of the commissioner, abandon the plan of conversion at any time before the issuance of the certificate of authority by the commissioner pursuant to section 188 of this act. Upon abandonment, all rights and obligations arising out of the plan of conversion terminate and the converting mutual shall continue to conduct its business as a domestic mutual insurer or a mutual insurance holding company as though no plan of conversion had ever been adopted.

Sec. 188. 1. The commissioner shall:

(a) Enter a final order approving the application to convert to a stock insurer within 10 days after receiving a valid certification from the converting mutual setting forth the vote and certifying that the plan of conversion was approved by not less than two-thirds of the policyholders voting in person or by proxy on the plan of conversion; and

(b) Publish notification of the issuance of the final order in a newspaper of general circulation in Carson City and in the county of domicile of the converting mutual if different from Carson City.

2. Except as otherwise provided in section 187 of this act, the commissioner shall issue a certificate of authority to the new stock insurer when the converting mutual files a certificate with the commissioner stating that all the conditions set forth in the plan of conversion have been satisfied.

3. The conversion is effective upon the issuance of the certificate of authority by the commissioner.

4. Upon issuance of the certificate of authority, the articles of incorporation of the insurer shall be deemed to be amended in compliance with NRS 692B.030.

Sec. 189. Any person aggrieved by a final order of the commissioner issued pursuant to sections 174 to 202, inclusive, of this act may petition for judicial review in the manner provided by chapter 233B of NRS.

Sec. 190. In determining whether a plan of conversion meets the requirements of sections 174 to 202, inclusive, of this act, or with regard to any other matters relating to the development of a plan of conversion, the commissioner may engage the services of experts. All reasonable costs related to the review of a plan of conversion or such other matters, including those costs attributable to the use of experts, must be paid by the converting mutual filing the application or initiating discussions with the commissioner about such matters.

Sec. 191. 1. Except as otherwise provided in subsection 2, all information and documents obtained by or disclosed to the commissioner or any other person in the course of preparing, filing and processing an application of a converting mutual, other than information and documents distributed to policyholders in connection with the meeting of policyholders pursuant to section 186 of this act or filed or submitted as evidence in connection with the public hearing pursuant to section 184 of this act, are confidential and not subject to subpoena, and must 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 such information and documents pertain.

2. If the commissioner, after giving the insurer and its affiliates who would be affected notice and opportunity to be heard, determines that the interests of policyholders, shareholders or the public will be best served by the publication of such information and documents, the commissioner may publish all or any part thereof in such a manner as he determines appropriate.

Sec. 192. Whenever it appears to the commissioner that any person or any director, officer, employee or agent of the person has committed or is about to commit a violation of any provision of sections 174 to 202, inclusive, of this act or of any regulation or order of the commissioner relating thereto, the commissioner may apply to the First Judicial District Court in and for Carson City for an order enjoining the person, director, officer, employee or agent from violating or continuing to violate any provision of sections 174 to 202, inclusive, of this act or any such regulation or order, and for such other equitable relief as the nature of the case and the interest of the policyholders, creditors and shareholders of the insurer, or the public, may require.

Sec. 193. The corporate existence of a converting mutual pursuant to sections 174 to 202, inclusive, of this act does not terminate, and the new stock insurer shall be deemed to be a continuation of the converting mutual and to have been organized on the date the converting mutual was originally organized.

Sec. 194. The provisions of sections 174 to 202, inclusive, of this act do not prohibit the inclusion in the plan of conversion of provisions under which members of the board of directors, officers, employees or agents of the new stock insurer, and persons acting as trustees of employee stock ownership plans or other employee benefit plans may be entitled to purchase for cash capital stock of the new stock insurer at the same price initially issued by the new stock insurer under the plan of conversion, except that no such purchase may be made while any shares of capital stock are held in a trust established pursuant to the plan of conversion.

Sec. 195. 1. No director, officer, employee or agent of the converting mutual, or any other person, may receive any fee, commission or other valuable consideration, other than his usual regular salary and compensation, for aiding, promoting or assisting in a plan of conversion except as set forth in the plan of conversion approved by the commissioner.

2. Subsection 1 does not prohibit a management incentive compensation program that is contained in the plan of conversion and approved by the commissioner to be adopted upon conversion to the new stock insurer or prohibit such a program to be adopted later by the new stock insurer.

3. Subsection 1 does not prohibit the payment of reasonable fees and compensation to attorneys, accountants, actuaries and investment bankers for services performed in the independent practice of their professions if the person is also a member of the board of directors of the converting mutual.

Sec. 196. 1. Except as otherwise specifically provided in the plan of conversion, before and for a period of 5 years after the issuance of a certificate of authority to a new stock insurer pursuant to section 188 of this act, no person other than the new stock insurer may directly or indirectly offer to acquire or acquire in any manner the beneficial ownership of 5 percent or more of any class of a voting security of the new stock insurer or of any institution that owns a majority of the voting securities of the new stock insurer without the prior approval by the commissioner of an application for acquisition.

2. The commissioner shall not approve an application for acquisition filed pursuant to subsection 1 unless he finds that:

(a) The acquisition will not frustrate the plan of conversion as approved by the policyholders and the commissioner;

(b) The board of directors of the new stock insurer has approved the acquisition or extraordinary circumstances not contemplated in the plan of conversion have arisen which would warrant approval of the acquisition; and

(c) The acquisition is consistent with the purpose of sections 174 to 202, inclusive, of this act to permit conversions on terms and conditions that are fair and equitable to the policyholders.

3. An application for acquisition filed pursuant to subsection 1 must describe in sufficient detail all information necessary for the approval of the application.

4. If any material change occurs in the facts set forth in an application for acquisition filed pursuant to subsection 1, an amendment setting forth the change, together with copies of all documents and other material relevant to the change, must be filed with the commissioner.

5. The commissioner may hold a public hearing on an application for acquisition filed pursuant to subsection 1. If the commissioner decides to hold a public hearing, the hearing must be held not later than 30 days after the person seeking to acquire securities files an application for acquisition with the commissioner pursuant to subsection 1. The commissioner shall give at least 20 days’ notice of the hearing to the person filing the application for acquisition. The person filing the application for acquisition shall give not less than 7 days’ notice of the hearing to the new stock insurer and to such other persons as may be designated by the commissioner. In connection with the hearing, the person filing the application for acquisition, the new stock insurer, any other person to whom notice of the hearing was given, and any other person whose interest may be affected may conduct discovery proceedings in the same manner as is allowed in the district court. All discovery proceedings must be concluded not later than 3 days before the commencement of the hearing. At the hearing the person filing the application for acquisition, the new stock insurer, any other person to whom notice of the hearing was given, and any other person whose interest may be affected may present evidence, examine and cross-examine witnesses, and offer oral and written arguments. If any acquisition referred to in the application for acquisition is proposed by means of a registration statement under the Securities Act of 1933, 15 U.S.C. §§ 77a et seq., in circumstances requiring the disclosure of similar information under the Securities Exchange Act of 1934, 15 U.S.C. §§ 78a et seq., or under a state law requiring similar registration or disclosure, the person required to file the statement may utilize such documents in furnishing the information required by the application for acquisition. The person filing the application shall serve the new stock insurer and any institution that owns a majority of the voting securities of the new stock insurer with a copy of the application for acquisition and any amendments thereto on the day the documents are filed with the commissioner.

6. The new stock insurer and any institution that owns a majority of the voting securities of the new stock insurer must be permitted to become parties to the hearing upon request.

7. The commissioner shall make a determination not later than 30 days after the conclusion of the hearing or, if no hearing is held, not later than 30 days after the date on which the application for acquisition is filed with the commissioner pursuant to subsection 1. Approval or disapproval of an application for acquisition must be by written order. Any person who is aggrieved by the order may petition for judicial review in the manner provided by chapter 233B of NRS.

8. The commissioner may retain, at the expense of the person filing an application for acquisition pursuant to subsection 1, any attorneys, actuaries, accountants and other experts who are not employees of the division as may be reasonably necessary to assist the commissioner in reviewing the application.

Sec. 197. 1. No security which is the subject of any agreement or arrangement regarding acquisition, or which is acquired or to be acquired, in contravention of section 196 of this act or of any regulation or order of the commissioner may be voted at any shareholders’ meeting or may be counted for quorum purposes, and any action of the shareholders requiring the affirmative vote of a percentage of shares may be taken as though such securities were not issued and outstanding, but no action taken at any such meeting may be invalidated by the voting of such securities unless:

(a) The action would materially affect control of the new stock insurer or an institution that owns a majority of the voting securities of the new stock insurer; or

(b) A court of competent jurisdiction has so ordered.

2. If a new stock insurer or the commissioner has reason to believe that any security of the new stock insurer or an institution that owns a majority of the voting securities of the new stock insurer has been or is about to be acquired in contravention of sections 174 to 202, inclusive, of this act or of any regulation or order of the commissioner, the new stock insurer or the commissioner may apply to the First Judicial District Court in and for Carson City for an order to enjoin any offer or acquisition made in contravention of section 196 of this act or any regulation or order of the commissioner to enjoin the voting of any security so acquired, to void any vote of such a security already cast at any shareholders’ meeting, and for such other equitable relief as the nature of the case and the interest of the policyholders, creditors and shareholders of the new stock insurer, or the public, may require.

Sec. 198. In any case where a person has acquired or is proposing to acquire any voting securities in violation of sections 174 to 202, inclusive, of this act or any regulation or order of the commissioner, the First Judicial District Court in and for Carson City may, upon the application of the commissioner or the new stock insurer, and on such notice as the court determines appropriate, seize or sequester any voting securities of the new stock insurer or an institution that owns a majority of the voting securities of the new stock insurer owned directly or indirectly by such a person and issue any order with respect thereto as the court determines appropriate to effectuate the provisions of sections 174 to 202, inclusive, of this act. Notwithstanding any other provision of law, for the purposes of sections 174 to 202, inclusive, of this act, the situs of the ownership of such securities shall be deemed to be in this state.

Sec. 199. A person who offers to acquire or acquires a security in violation of subsection 1 of section 196 of this act may be required by the commissioner, after notice and hearing, to pay an administrative penalty of $100 for each day that the person remains in violation, except that the aggregate penalty pursuant to this section may not exceed $10,000.

Sec. 200. Any director or officer of a person, or an agent of the person, who knowingly violates or assents to or permits any officer or agent of the person to violate the requirements of section 196 of this act may be required by the commissioner, after notice and hearing, to pay, in his individual capacity, an administrative penalty of not more than $5,000 per violation. In determining the amount of the penalty, the commissioner shall take into account the appropriateness of the penalty with respect to the gravity of the violation, the history of previous violations, and such other matters as the commissioner determines are required in the interest of justice.

Sec. 201. 1. If the commissioner has reason to believe that any person or any director, officer, employee or agent of the person is engaged in any conduct in violation of section 196 of this act, the commissioner may order the person to cease and desist immediately from engaging in any further such conduct. The order is permanent unless the person, not later than 20 days after receipt of the order, files a written request for a hearing with the commissioner.

2. If, after a hearing pursuant to subsection 1, the commissioner determines that such action is in the best interest of the policyholders, the creditors or the public, the commissioner may also order the person to void any contract entered into in violation of section 196 of this act.

3. An order of the commissioner pursuant to this section is a final decision in a contested case for the purpose of judicial review pursuant to chapter 233B of NRS.

Sec. 202. The commissioner may adopt such regulations and issue such orders as he determines are necessary to carry out the provisions of sections 174 to 202, inclusive, of this act.

Sec. 203. As used in sections 203 to 226, inclusive, of this act, unless the context otherwise requires, the words and terms defined in sections 204 to 207, inclusive, of this act have the meanings ascribed to them in those sections.

Sec. 204. “Intermediate stock holding company” means a holding company of which at least a majority of the voting securities are owned by a mutual insurance holding company and which directly owns all the voting securities of a reorganized stock insurer.

Sec. 205. “Mutual insurance holding company” means a holding company based on a mutual plan which at all times owns a majority of the voting securities of a single intermediate stock holding company or, if no such intermediate stock holding company exists, which owns a majority of the voting securities of a reorganized stock insurer.

Sec. 206. “Reorganized stock insurer” means a stock insurer subsidiary that results from a reorganization of a domestic mutual insurer pursuant to sections 203 to 226, inclusive, of this act.

Sec. 207. “Voting securities” means securities of any class or any ownership interest having voting power for the election of directors, trustees or management, other than securities having voting power only because of the occurrence of a contingency.

Sec. 208. A domestic mutual insurer may, by complying with sections 203 to 226, inclusive, of this act and obtaining the approval of the commissioner, reorganize by:

1. Merging the membership interests of its policyholders into:

(a) A mutual insurance holding company formed for the purpose of the reorganization; or

(b) An existing mutual insurance holding company; and

2. Continuing the corporate existence of the mutual insurer as a stock insurer subsidiary of the mutual insurance holding company.

Sec. 209. A domestic mutual insurer shall file with the commissioner for review and approval a proposed plan of reorganization that has been approved by a vote of not less than two-thirds of the members of the board of directors of the domestic mutual insurer. The proposed plan of reorganization must be accompanied by a nonrefundable fee of $2,450. The plan of reorganization must include:

1. An analysis of the benefits and risks of the proposed reorganization, including, without limitation, the rationale and comparative benefits and risks of converting to a domestic stock insurer pursuant to sections 174 to 202, inclusive of this act;

2. A statement of how the plan is fair and equitable to the policyholders;

3. Information sufficient to demonstrate that the financial condition of the mutual insurer will not be diminished upon reorganization;

4. Provisions to ensure immediate membership in the mutual insurance holding company for all existing policyholders of the mutual insurer;

5. Provisions for membership interests for future policyholders of the reorganized stock insurer;

6. Provisions to ensure that, in the event of proceedings for rehabilitation or liquidation involving a stock insurer subsidiary of the mutual insurance holding company, the assets of the mutual insurance holding company will be available to satisfy the obligations of the stock insurer subsidiary to policyholders;

7. Provisions for the periodic distribution of the accumulated earnings of the mutual insurance holding company;

8. Certified copies of the proposed articles of incorporation and bylaws of the mutual insurance holding company, intermediate stock holding company and reorganized stock insurer, or proposed amendments thereto as necessary to carry out the reorganization;

9. A certification that the plan of reorganization has been duly adopted by a vote of not less than two-thirds of the members of the board of directors of the mutual insurer;

10. A certification adopted by not less than two-thirds of the members of the board of directors of the mutual insurer that the plan of reorganization is fair and equitable to the policyholders;

11. The names, addresses and occupations of all persons who are or have been selected to become directors or officers of the mutual insurance holding company;

12. A description of the nature and content of the annual report and financial statement to be sent by the mutual insurance holding company to each policyholder;

13. The number of members of the board of directors of the mutual insurance holding company who are required to be policyholders;

14. A description of any plans for the initial sale of stock of the intermediate stock holding company or reorganized stock insurer;

15. A form of the proposed notice to be mailed by the mutual insurer to its policyholders as required by section 212 of this act; and

16. Such additional information as the commissioner may by regulation prescribe as necessary or appropriate for the protection of policyholders and security holders of the domestic mutual insurer or for the protection of the public interest.

Sec. 210. Unless the commissioner, for good cause, extends the time, the commissioner shall conduct a public hearing regarding a proposed plan of reorganization not later than 120 days after the date on which the completed proposed plan of reorganization is filed pursuant to section 209 of this act. Any interested person may appear or otherwise be heard at the public hearing. The commissioner may continue the public hearing for a reasonable period, not to exceed 60 days. The mutual insurer shall give such reasonable notice of the public hearing as the commissioner requires.

Sec. 211. 1. The commissioner shall issue an order approving or disapproving a proposed plan of reorganization not later than 30 days after the public hearing required by section 210 of this act.

2. The commissioner shall not approve a proposed plan of reorganization unless he finds that the:

(a) Plan of reorganization is fair and equitable to the policyholders;

(b) Plan of reorganization does not deprive the policyholders of their property rights or due process of law;

(c) Reorganized stock insurer meets the minimum requirements for a certificate of authority to transact the business of insurance in this state; and

(d) Continued operation of the reorganized stock insurer is not hazardous to future policyholders and the public.

3. If the commissioner approves a plan of reorganization, the commissioner shall publish notification of the issuance of the order in a newspaper of general circulation in Carson City and in the county of domicile of the mutual insurer if different from Carson City.

4. If the commissioner approves a plan of reorganization, the approval expires if the reorganization is not completed within 180 days after the date of approval, unless the period is extended by the commissioner for good cause.

5. If the commissioner disapproves a plan of reorganization, the commissioner shall issue an order setting forth specific findings for the disapproval.

Sec. 212. 1. Within 45 days after the date of the commissioner’s approval of a plan of reorganization pursuant to section 211 of this act, unless extended by the commissioner for good cause, the mutual insurer shall hold a meeting of its policyholders at a reasonable time and place to vote upon the plan of reorganization. The mutual insurer shall give notice not less than 30 days before the meeting, by first-class mail to the last known address of each policyholder, that the plan of reorganization will be voted upon at a regular or special meeting of the policyholders. The notice must include a brief description of the plan of reorganization, a statement that the commissioner has approved the plan of reorganization, and a written proxy permitting the policyholder to vote for or against the plan of reorganization. For the purposes of notice and voting, the policyholder of a policy of group insurance is the entity to which the group policy is issued and not any person covered under the group policy. A plan of reorganization is approved only if not less than two-thirds of the policyholders voting in person or by proxy at the meeting vote in favor of the plan of reorganization. Each policyholder is entitled to only one vote regardless of the number of policies owned by the policyholder. The commissioner shall supervise and direct the conducting of the vote on the plan of reorganization as necessary to ensure that the vote is fair and consistent with the requirements of this section.

2. If a mutual insurer complies substantially and in good faith with the notice requirements of this section, the mutual insurer’s failure to give any policyholder the required notice does not impair the validity of any action taken pursuant to this section.

3. If the meeting of policyholders to vote upon the plan of reorganization is held coincident with the mutual insurer’s annual meeting of policyholders, only one combined notice of meeting is required.

4. The form of any proxy must be filed with and approved by the commissioner.

5. For the purposes of notice and voting, a person is not a policyholder unless he was a policyholder of the mutual insurer on the date on which the plan of reorganization was initially approved by the board of directors of the mutual insurer.

Sec. 213. A mutual insurer may, by not less than a two-thirds vote of the members of its board of directors and with the approval of the commissioner, abandon a plan of reorganization at any time before the issuance of the certificate of authority by the commissioner pursuant to section 214 of this act. Upon abandonment, all rights and obligations arising out of the plan of reorganization terminate and the mutual insurer shall continue to conduct its business as a domestic mutual insurer as though no plan of reorganization had ever been adopted.

Sec. 214. 1. The commissioner shall issue a certificate of authority to a reorganized stock insurer when the mutual insurer files with the commissioner a:

(a) Certificate stating that all the conditions set forth in the plan of reorganization have been satisfied, so long as the board of directors of the mutual insurer has not abandoned the plan of reorganization pursuant to section 213 this act.

(b) Certificate from the mutual insurer setting forth the vote and certifying that the plan of reorganization was approved by not less than two-thirds of the policyholders voting in person or by proxy on the plan of reorganization.

2. The reorganization is effective upon the issuance of a certificate of authority by the commissioner.

3. Upon issuance of the certificate of authority, the articles of incorporation of the mutual insurer shall be deemed to be amended in compliance with NRS 692B.030.

Sec. 215. Any person aggrieved by a final order of the commissioner issued pursuant to the provisions of sections 203 to 226, inclusive, of this act may petition for judicial review in the manner provided by chapter 233B of NRS.

Sec. 216. In determining whether a plan of reorganization meets the requirements of the provisions of sections 203 to 226, inclusive, of this act, or with regard to any other matters relating to the development of a plan of reorganization, the commissioner may engage the services of experts. All reasonable costs related to the review of a plan of reorganization or such other matters, including those costs attributable to the use of experts, must be paid by the mutual insurer filing the application or initiating discussions with the commissioner about such matters.

Sec. 217. 1. Except as otherwise provided in subsection 2, all information and documents obtained by or disclosed to the commissioner or any other person in the course of preparing, filing and processing an application to reorganize pursuant to section 209 of this act, other than information and documents distributed to policyholders in connection with the meeting of policyholders pursuant to section 212 of this act or filed or submitted as evidence in connection with the public hearing pursuant to section 210 of this act, are confidential and not subject to subpoena, and must 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 such information and documents pertain.

Sec. 218. The corporate existence of a mutual insurer reorganizing pursuant to sections 203 to 226, inclusive, of this act does not terminate, and the reorganized stock insurer shall be deemed to be a continuation of the mutual insurer and to have been organized on the date on which the mutual insurer was originally organized.

Sec. 219. 1. All the initial shares of the capital stock of a reorganized stock insurer must be issued to the mutual insurance holding company or to a single intermediate stock holding company.

2. Policyholders of a domestic mutual insurer that has been reorganized are members of the mutual insurance holding company and their voting rights must be determined in accordance with the articles of incorporation and bylaws of the mutual insurance holding company. The mutual insurance holding company shall provide its members with the same membership rights as were provided to policyholders of the mutual insurer immediately before reorganization. The reorganization must not reduce, limit or otherwise affect the number or identity of the policyholders who may become members of the mutual insurance holding company or secure for managerial personnel any unfair advantage through or connected with the reorganization.

3. A mutual insurance holding company or an intermediate stock holding company formed pursuant to sections 203 to 226, inclusive, of this act:

(a) Must not be authorized to transact the business of insurance;

(b) Is subject to the jurisdiction of the commissioner, who shall ensure that policyholder interests are protected; and

4. An intermediate stock holding company formed pursuant to sections 203 to 226, inclusive, of this act shall be deemed to be a mutual insurance holding company subject to the provisions of sections 174 to 202, inclusive, of this act.

5. A mutual insurance holding company formed pursuant to sections 203 to 226, inclusive, of this act:

(a) Shall not issue stock.

(b) Shall invest in insurers not less than 50 percent of its net worth as determined by generally accepted accounting practices.

6. The aggregate pledges and encumbrances of the assets of a mutual insurance holding company must not affect more than 49 percent of the mutual insurance holding company’s stock in an intermediate stock holding company or a reorganized stock insurer.

7. If any proceeding under chapter 696B of NRS is brought against a reorganized stock insurer, the mutual insurance holding company and intermediate stock holding company must be named parties to the proceeding. All the assets of the mutual insurance holding company and the intermediate stock holding company shall be deemed assets of the estate of the reorganized stock insurer to the extent necessary to satisfy claims against the reorganized stock insurer.

8. No distribution to members of a mutual insurance holding company may occur without the prior written approval of the commissioner. The commissioner may give such approval only if he is satisfied that the distribution is fair and equitable to policyholders as members of the mutual insurance holding company.

9. No solicitation for the sale of the stock of an intermediate stock holding company or a reorganized stock insurer may be made without the prior written approval of the commissioner.

10. A mutual insurance holding company or an intermediate stock holding company may not voluntarily dissolve without the approval of the commissioner.

Sec. 220. Nothing contained in sections 203 to 226, inclusive, of this act prohibits a mutual insurance holding company from converting to a domestic stock insurance company pursuant to sections 174 to 202, inclusive, of this act.

Sec. 221. A membership interest in a mutual insurance holding company does not constitute a security under the laws of this state.

Sec. 222. 1. No director, officer, employee or agent of the mutual insurer, or any other person, may receive any fee, commission or other valuable consideration, other than his usual regular salary and compensation, for aiding, promoting or assisting in a plan of reorganization except as set forth in the plan of reorganization approved by the commissioner.

2. Subsection 1 does not prohibit a management incentive compensation program that is contained in the plan of reorganization and approved by the commissioner to be adopted upon reorganization to the reorganized stock insurer or prohibit such a program to be adopted later by the reorganized stock insurer.

Sec. 223. 1. A mutual insurance holding company shall file with the commissioner, by March 1 of each year, an annual statement consisting of an income statement, balance sheet and cash flows prepared in accordance with generally accepted accounting practices and a confidential statement disclosing any intention to pledge, borrow against, alienate, hypothecate or in any way encumber the assets of the mutual insurance holding company.

2. A mutual insurance holding company shall, on or before June 1 of each year, file with the commissioner in a form approved by the commissioner a financial statement as of December 31 of the preceding calendar year that is certified by a certified public accountant.

Sec. 224. The commissioner may order the production of any records, books or other information and papers in the possession of a mutual insurance holding company or its affiliates as is reasonably necessary to ascertain the financial condition of the reorganized stock insurer or to determine compliance with this Title.

Sec. 225. Whenever it appears to the commissioner that any person or any director, officer, employee or agent of the person has committed or is about to commit a violation of any provision of sections 203 to 226, inclusive, of this act or of any regulation or order of the commissioner relating thereto, the commissioner may apply to the First Judicial District Court in and for Carson City for an order enjoining the person, director, officer, employee or agent from violating or continuing to violate any provision of sections 203 to 226, inclusive, of this act or any such regulation or order, and for such other equitable relief as the nature of the case and the interest of the policyholders, creditors and shareholders of the insurer, or the public, may require.

Sec. 226. The commissioner may adopt such regulations and issue such orders as he determines are necessary to carry out the provisions of sections 203 to 226, inclusive, of this act.”.

Amend the bill as a whole by deleting sec. 176 and renumbering sections 177 through 193 as sections 229 through 245.

Amend sec. 191, page 83, line 16, by deleting “692C.420” and inserting “693A.360”.

Amend sec. 193, page 83, by deleting lines 19 through 21 and inserting:

“Sec. 245. 1. This section and section 242 of this act become effective upon passage and approval.

2. Sections 1 to 241, inclusive, 243 and 244 of this act become”.

Amend the leadlines of repealed sections by deleting the leadline of NRS 692C.420.

Amend the leadlines of repealed sections by adding the leadline of NRS 693A.360.

Amend the title of the bill to read as follows:

“AN ACT relating to insurance; providing for the regulation of the business of viatical settlements; requiring the commissioner of insurance to adopt regulations governing the use of electronic records and signatures; temporarily authorizing the adoption of regulations to enforce federal law concerning a bill of rights for patients; limiting the disclosure of certain information concerning consumers; providing for the conversion of domestic mutual insurers into domestic stock insurers; providing for the reorganization of domestic mutual insurers into mutual insurance holding companies; making various other changes concerning the regulation of insurance; providing penalties; and providing other matters properly relating thereto.”.