Indiana Administrative Code › Title 760 - DEPARTMENT OF INSURANCE › Article 1 - GENERAL PROVISIONS › Rule 3 - Domestic Stock Insurance Companies-Organization, Promotion and Capital Enlargement › Section 3-5 - New companies; enlargement of established companies

Current through July 10, 2024
Authority: IC
				  27-1-3-7
Affected: IC
				  27-1-3-4;
				  IC
				  27-1-6-18
Sec. 5.
RULES AND PRINCIPLES. The Commissioner of Insurance, in
				  considering questions relating to the organization of a new stock company, or
				  relating to the enlargement of the capital of an established stock insurance
				  company, will be guided by the following concepts, rules and principles, among
				  others:
(1) The organization and
				promotion of new insurance companies on a sound basis is to be commended and
				encouraged.
(2) The business of
				insurance, because of its direct and vital effects upon stockholders,
				policyholders and the economy generally, is vital in the public interest and
				welfare.
(3) The organization and
				capitalization of insurance companies should be carefully scrutinized in
				keeping with the concepts, rules and principles herein enunciated.
(4) Organization and promotion expenses,
				inclusive of commissions paid for sale of stock, but exclusive of legal
				expenses and statutory organization fees and charges, should not under any
				circumstances exceed ten percent of the sale price of stock actually sold. In
				the instance of the organization of a new company, the funds derived from the
				sale of stock, in excess of expenses as limited herein, must be placed in trust
				or escrow until such funds can be delivered to the company upon, or subsequent
				to, the issuance of its certificate of authority under Section 77
[IC
				27-1-6-18
				]
of the Indiana Insurance Law.
(5) In the event a new stock issue is
				approved by the Department within the period of five years immediately
				subsequent to the date of the company's original license to do an insurance
				business, the sale price for the new issue shall be subject to the
				Commissioner's approval and may not exceed two hundred percent of the lowest
				price at which any shares were previously issued, except that a higher price
				may be fixed for a new issue, if in the opinion of the Commissioner the
				condition of the company justifies, taking into consideration the company's
				financial condition, business in force and facts relating to the stock's
				history, such as stock splits, stock dividends, changes in par value, and the
				like.
(6) The sale price of stock
				should be payable either in cash or by an interest-bearing promissory note
				payable within ninety days. In event a promissory note is given in payment for
				stock, there should be no tie-in with or inter-dependence between the note
				obligation and the purchase of insurance or with projected dividends from such
				insurance.
(7) With respect to
				stock companies hereafter organized, any arrangement, device, plan or scheme,
				however contrived or formulated, having as its end or purpose a diversion,
				either directly or indirectly, of the company's funds, other than in payment of
				legitimate dividends or costs of doing business, to any officer(s),
				director(s), organizer(s), or promoter(s) of the company, or to any
				association, corporation, partnership or trust owned or controlled by any
				officer(s), director(s), organizer(s) or promoter(s) of the company, is hereby
				declared in violation of the statutory mandate that "every insurance company
				conduct and transact its business in a safe and prudent manner" and "maintain
				safe and sound business methods."