It is enacted by the General Assembly as follows:

SECTION 1. Chapter 1 of title 27 of the General Laws entitled "Domestic Insurance Companies" is hereby amended by adding after section 27-1-40 a new section 27-1-40.1 to read as follows:

{ADD 27-1-40.1. Mutual insurance holding companies. -- ADD} {ADD (a) Any mutual insurance company created under the laws of this state (whether pursuant to section 5 of chapter 1 of title 7 or by special act of the general assembly) and any foreign mutual insurance company which has been domesticated or redomesticated pursuant to chapter 2.2 of title 27 which meets or exceeds all capital and surplus funds required by law for the transaction of business in Rhode Island may, in any manner permitted by subsection (b) hereof, reorganize into a mutual insurance holding company structure upon adoption of a plan of reorganization by two-thirds (2/3) vote of the board of directors or other governing body, approval of a plan of reorganization by the director of the department of business regulation and the affirmative vote of one-half (1/2) of those members or policyholders, constituting a quorum, present in person or by proxy at a meeting called by the board of directors or other governing body. Unless otherwise provided in this charter, bylaws or in the plan of reorganization, each member or policyholder shall have one (1) vote, and in the case of any policy or contract of group life or other group insurance, the employer or other person to whom or in whose name the master policy or contract has been issued shall be deemed to be the member or policyholder and shall be entitled to one (1) vote for each policy or contract of group insurance irrespective of the number of individuals insured.

(b) A plan of reorganization of a mutual insurance company into a mutual insurance holding company structure may provide for such reorganization to be effected in one (1) of the following manners:

(1) A domestic mutual insurance company may form a mutual insurance holding company in accordance with the provisions of section 5 of chapter 1 of title 7 except that the approval of the plan of reorganization by the director of the department of business regulation shall be deemed to constitute the approval of the director of the department of business regulation required under section 5 of chapter 1 of title 7. Upon such formation, the domestic mutual insurance company shall be converted to a stock insurance company and shall issue to the mutual insurance holding company all of the authorized shares of the voting stock of the stock insurance company. The articles of incorporation and bylaws of the mutual insurance holding company so formed shall provide for all then current policyholders of the converted mutual insurance company to become members of the mutual insurance holding company and to retain such membership interest so long as such policyholder has a policy in force with the converted mutual insurance company. The articles of incorporation and bylaws of the mutual insurance holding company also shall set forth the terms and conditions under which future policyholders of the stock insurance company shall become members of the mutual insurance holding company. The mutual insurance holding company at all times shall retain a majority of the issued and outstanding shares of each class of voting stock of the stock insurance company.

(2) A domestic mutual insurance company may merge its policyholder's membership interests into a mutual insurance holding company previously formed under the provisions of this section. Upon such merger, the domestic mutual insurance company shall be converted to a stock insurance company and shall issue to the mutual insurance holding company all of the authorized shares of voting stock of the stock insurance company. In connection with such merger and in accordance with the articles of incorporation and bylaws of the mutual insurance holding company, the then current policyholders of the converted mutual insurance company shall become members of the mutual insurance holding company and shall retain such membership interest so long as such policyholder has a policy in force with the converted mutual insurance company. The mutual insurance holding company at all times shall retain a majority of the issued and outstanding shares of each class of voting stock of the stock insurance company.

(3) A domestic mutual insurance company may establish a subsidiary stock insurance company in accordance with the provisions of section 5 of chapter 1 of title 7 (approval of the plan of reorganization by the director of the department of business regulation constituting any approval required under section 5 of chapter 1 of title 7) and then transfer to such subsidiary stock insurance company substantially all of its assets and liabilities. Upon such transfer, all persons who prior thereto held policy rights with respect to or other rights as creditors of such mutual insurance company shall have such rights solely with respect to the subsidiary stock insurance company created hereby and the corresponding liability or obligation of the mutual insurance company to such persons shall be assumed by the subsidiary stock insurance company. All policyholders of the mutual insurance company at the time of said transfer of assets and liabilities shall continue to have a membership interest in the mutual insurance company and the articles of incorporation and bylaws of said mutual insurance company shall be amended to so provide. The articles of incorporation and bylaws of said mutual insurance company shall also be amended to set forth the terms and conditions under which future policyholders of the subsidiary stock insurance company shall become members of the mutual insurance company. The mutual insurance company thereafter shall be considered a mutual insurance holding company for purposes of this section and at all times shall retain a majority of the issued and outstanding shares of each class of voting stock of the subsidiary stock insurance company.

(c) The plan of reorganization shall specify in such detail as may be required by the director of the department of business regulation the manner under subsection (b) in which the mutual holding company structure shall be created, the capital structure of the stock insurance company and the mutual insurance holding company, the management of the stock insurance company and the mutual insurance holding company, the purposes for the reorganization, the articles of incorporation and bylaws of both the mutual insurance holding company and the stock insurance company, and the terms of and use of proceeds from any proposed sale of capital stock by the stock insurance company.

(d) The corporate existence of any mutual insurance company reorganizing into a mutual insurance holding company structure under this section shall not terminate, but the reorganized institution shall be deemed to be a continuation of entity of the mutual insurance company so reorganized.

(e) The director of the department of business regulation may employ staff personnel as well as professional consultants and other persons to assist in the review of the plan of reorganization and may hold public hearings as, in the director's discretion, are desirable prior to granting approval of the plan of reorganization. All reasonable costs related to the review of the plan of reorganization, including the costs attributable to staff personnel and professional consultants, shall be borne by the mutual insurance company filing a plan of reorganization for approval.

(f) The department of business regulation shall issue rules and regulations implementing this section, which shall be administered by the director of the department of business regulation.

(g) Subject to applicable provisions of this title 27, a mutual insurance holding company formed pursuant to this section may: (1) invest in the stock of one (1) or more domestic or foreign insurance companies; (2) acquire a domestic or foreign insurance company through consolidation or merger of such institution with its subsidiary insurance company; (3) merge with another mutual insurance holding company; (4) invest in a corporation, the purchase of the capital stock of which is permitted for a mutual insurance company under the laws of this state; (5) exercise any other power or engage in any activity permitted to a mutual insurance company organized under the laws of this state; and (6) exercise such powers and engage directly or indirectly in such activities as are now or may hereafter be permitted for business corporations under chapter 1.1 of title 7.

(h) A mutual insurance holding company formed pursuant to this section shall, subsequent to such formation, be subject to the provisions of chapter 35 of title 27. ADD}

SECTION 2. This act shall take effect upon passage.