NJ Rev Stat § 17:17C-3 (2021)
2021 New Jersey Revised Statutes|Title 17 - Corporations and Institutions for Finance and Insurance|Section 17:17C-3 - Reorganization process.

17:17C-3 Reorganization process.  3. The reorganization of a mutual insurer shall be accomplished pursuant to a plan of reorganization that complies with the following requirements: a. The plan of reorganization shall have been duly adopted by action of not less than three-fourths of the members of the entire board of directors of the mutual insurer. b. The plan of reorganization shall: (1) specify the manner in which the proposed reorganization shall occur and the reasons for the proposed reorganization; (2) be fair and equitable to the policyholders of the mutual insurer; (3) promote the best interest of the mutual insurer and its policyholders; (4) provide for the enhancement of the operations of the reorganized insurer; (5) not be contrary to law; and (6) not be detrimental to the public. c. The plan of reorganization shall provide that all membership interests in the mutual insurer shall be extinguished as of the effective date; shall require the distribution of consideration, in a fair and equitable manner, to all eligible policyholders upon extinguishment of their membership interests; shall specify the manner in which the aggregate value of the consideration shall be determined and the method by which the consideration shall be allocated among eligible policyholders; and shall provide for the reasonable dividend expectations of policyholders. (1) With respect to that consideration, eligible policyholders shall be allocated in the aggregate one hundred per centum (100%) of the common stock of the reorganized insurer or its parent corporation, provided, however, that the commissioner may approve the sale of additional shares of stock of the reorganized insurer or its parent corporation if the mutual insurer demonstrates: (a) a need for additional capital, or (b) that the sale would not significantly dilute the value of the shares distributed to the policyholders. (2) The method for allocating consideration among eligible policyholders shall be fair and equitable. The method shall provide for each eligible policyholder to receive (a) a fixed component of consideration or a variable component of consideration, or both; or (b) any other component of consideration acceptable to the commissioner. Any component shall reflect, based upon fair and equitable formulas, methods and assumptions, factors such as estimated proportionate contributions of classes or groupings of policies and contracts to the aggregate component of consideration being distributed to eligible policyholders or other factors the commissioner may approve. (3) The consideration to be distributed to eligible policyholders shall consist of cash, stock of the reorganized insurer or the parent corporation, or if appropriate for tax or other reasons, additional life insurance or annuity benefits, any combination of these forms of consideration, or other forms of consideration acceptable to the commissioner. The form or forms of consideration to be distributed to a class or category of eligible policyholders may differ from the form or forms of consideration to be distributed to another class or category of eligible policyholders. The choice of the form or forms of consideration to be distributed to a class or category of eligible policyholders shall take into account such factors as the type of policy with respect to which the consideration is being distributed, the country of residence or tax status of the eligible policyholders or other appropriate factors; provided, however, that, if the consideration to be distributed to one or more classes or categories of eligible policyholders will be in a form other than common stock of a publicly traded company, the plan of reorganization shall include a provision for determining, in a reasonable manner, the value of the consideration by means of reference to (a) the estimated market value of the reorganized insurer based upon an independent evaluation by a qualified expert; (b) the per share public market value of the registered common stock of the reorganized insurer or its parent corporation; or (c) by another method acceptable to the commissioner. (4) If the plan of reorganization does not provide for registration and public trading of the common stock of the reorganized insurer or the parent corporation as of the effective date, the plan of reorganization shall require the reorganized insurer or the parent corporation, as applicable, to use good faith efforts, to encourage and assist in the establishment of a market for the common stock of the reorganized insurer or the parent corporation as soon as reasonably possible and in any event not later than two years after the effective date of the reorganization, including obtaining a listing for the stock on a national exchange, facilitating coverage by research analysts, conducting management presentations to potential investors and analysts and securing the commitment of at least one market maker, which may be a specialist firm, to make a market in the common stock. (5) Within two years after the effective date of the reorganization, the reorganized insurer or its parent corporation, as applicable, shall make available to each eligible policyholder who received and retained shares of stock with minimal aggregate value upon reorganization, a procedure to dispose of those shares of stock at market value without brokerage commissions or similar fees under a plan approved by the commissioner. The plan of reorganization shall include a provision for determining, in a reasonable manner, the market value of the shares by means of reference to (a) the estimated market value of the reorganized insurer based upon an independent evaluation by a qualified expert; (b) the per share public market value of the registered common stock of the reorganized insurer or its parent corporation; or (c) by another method acceptable to the commissioner. d. (1) The plan of reorganization of a mutual insurer shall provide for the reasonable dividend expectations of policyholders through establishment of a closed block or other method acceptable to the commissioner. The sole purpose of any dividend protection provision shall be to provide for reasonable policyholder dividend expectations, and it is not intended that the provision shall provide in any way for the distribution of consideration to eligible policyholders for the extinguishment of membership interests as set forth in subsection c. of this section. If a closed block is utilized, (a) the closed block shall be operated for the exclusive benefit of policies and contracts included therein, (b) no costs or expenses incurred in connection with the reorganization shall be charged to the closed block, and (c) subject to termination of the closed block pursuant to paragraph (3) of this subsection d., none of the assets, including the revenue therefrom, allocated to the closed block shall revert to the benefit of the stockholders of the reorganized insurer. (2) Any provision for dividend expectations 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 reorganization on the effective date of the plan of reorganization for which the mutual insurer has an experience-based dividend scale due, paid or accrued by action of the board of directors of the mutual insurer in the year in which the plan of reorganization is adopted; provided, however, that (a) policies that would be includible but for the fact that their recent issuance results in no dividends for an initial period, may be included, and (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 subparagraph may be included or excluded, subject to the approval of the commissioner. (3) If a closed block is utilized, the assets allocated therein, together with the revenue from the closed block, shall be reasonably sufficient to support the business in the closed block until the time 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 reorganization, and to provide for continuation of dividend scales in effect on the adoption date, if the experience underlying those scales continues, and for appropriate adjustments in the scales if the experience changes. The plan of reorganization shall provide that the assets assigned to a closed block will consist of: (a) a list of designated assets of the mutual insurer's general account or specified segments thereof, which list shall change periodically to reflect the acquisition and disposition of assets, or (b) a designated portion of each and every asset of the mutual insurer's general account or specified segments thereof, which portion shall change periodically to reflect the cash flows of the closed block, or (c) a combination of both. The plan of operation for any closed block that is established shall specify which of the methods of assignment of closed block assets is being used, and shall set forth the methods by which the designations referred to in subparagraphs (a), (b) and (c) of this paragraph are changed during the course of closed block operations. The plan of reorganization shall: require the reorganized insurer to submit to the commissioner periodic 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, provide for periodic reviews of, and reports on, the closed block by an independent actuary in accordance with paragraph (4) of this subsection d. The plan of reorganization may provide for conditions under which the reorganized insurer, with the approval of the commissioner, may cease to maintain the closed block. (4) Both the mutual insurer and the commissioner shall each appoint one or more qualified and independent actuaries for the purpose of providing actuarial certifications with respect to: (a) The reasonableness and sufficiency of the assets allocated to the closed block, if a closed block is provided; and (b) The reasonableness and appropriateness of the methodology and underlying assumptions used to allocate consideration among eligible policyholders. The actuaries shall be members of the American Academy of Actuaries. The certifications provided shall be in a form satisfactory to the commissioner and shall be made in accordance with professional standards and practices generally accepted by the actuarial profession and those other factors as the actuary in his professional judgment believes are reasonable and appropriate at the time the certification is made. The certification shall be accompanied by a memorandum of the actuary, in a form satisfactory to the commissioner, describing the calculations made in support of the certification and the assumptions used in the calculations. The memoranda shall be and remain confidential and shall not be subject to public inspection or copying pursuant to P.L.1963, c.73 (C.47:1A-1 et seq.). L.1998,c.46,s.3.