Washington Senate Bill Report SHB 1060 (March 8, 2023)
- Issuer
- Congressional materials
- Document type
- Report
- Date
- 2023-03-09
- Case
- 2023 03 09 A30915 D256510 Bill Report 1060 S Sba Bfgt 23
Summary
A Senate Bill Report on SHB 1060, an act relating to reorganization of domestic mutual insurers, prepared as of March 8, 2023 for the Senate Committee on Business, Financial Services, Gaming & Trade. It records that the bill was sponsored by the House Committee on Consumer Protection & Business and passed the House on 2/13/23 by a vote of 96-0. The background section explains the difference between mutual and stock insurers and states that Washington law does not provide for mutual insurance holding companies, while 34 states do. The summary of the bill describes how a domestic mutual insurer may reorganize as a stock corporation under a plan approved by the Office of the Insurance Commissioner, and lists what a reorganization plan must include. The report lists no appropriation, a fiscal note as available, and an effective date of ninety days after adjournment.
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Full text
SENATE BILL REPORT
SHB 1060
As of March 8, 2023
Title: An act relating to reorganization of domestic mutual insurers.
Brief Description: Concerning reorganization of domestic mutual insurers.
Sponsors: House Committee on Consumer Protection & Business (originally sponsored by
Representatives Corry, Berry, Walen and Reeves).
Brief History: Passed House: 2/13/23, 96-0.
Committee Activity:
Brief Summary of Bill
• Provides a process for domestic mutual insurers to reorganize as a stock
corporation pursuant to a plan approved by the Office of the Insurance
Commissioner (OIC).
• Enables domestic mutual insurer to be wholly reinsured in, its assets
transferred to, and its liabilities assumed by, another mutual or stock
insurer under terms and conditions approved by the OIC.
SENATE COMMITTEE ON BUSINESS, FINANCIAL SERVICES, GAMING & TRADE
Staff: Clinton McCarthy (786-7319)
Background: Insurance companies are often either mutual or stock insurance companies,
depending on their structure. A stock insurer is a public or private company owned by
shareholders, who have bought shares in the company that, in the case of a public company,
trade on a stock exchange. A mutual insurance company is a corporation with no
shareholders, owned by its members and operated in their interest.
Mutual insurers provide benefits to their direct policyholders, including voting rights and
This analysis was prepared by non-partisan legislative staff for the use of legislative
members in their deliberations. This analysis is not part of the legislation nor does it
constitute a statement of legislative intent.
Senate Bill Report -1- SHB 1060
access to dividends. These rights derive from the insurance contract; the corporation's
bylaws, charter, or articles of incorporation; state laws; and case law. A stock insurance
company is a corporation owned by its stockholders with the objective to make a profit for
the stockholders. Stock insurance companies have the ability to raise capital by selling
additional shares of the company.
Washington law does not provide for the creation of mutual insurance holding companies.
Nationally, 34 states provide statutory authority to create mutual insurance holding
companies. In these states, a mutual insurance company can convert to a mutual insurance
holding company structure by electing to do so under the applicable insurance statutes, and
obtaining the necessary approvals of members, board of directors, and insurance regulators.
Under the mutual insurance holding company structure, a parent mutual holding company is
created and the mutual insurance company is converted to a stock insurance company,
which is a subsidiary of the mutual holding company. The policyholders of the stock
insurance company continue as members of the mutual holding company.
Summary of Bill: Permitting the Reorganization of Mutual Insurers. A domestic mutual
insurer may reorganize as a stock corporation pursuant to a plan approved by the Office of
the Insurance Commissioner (OIC). A domestic mutual insurer may be wholly reinsured in,
its assets transferred to, and its liabilities assumed by, another mutual or stock insurer under
terms and conditions approved by the OIC.
A domestic mutual insurer may engage in a conversion as part of a reorganization as a
mutual holding company only if its board passes a resolution that the reorganization is fair
and equitable to the policyholders and adopts a plan that meets requirements. After the
board adopts a plan, and before approval by eligible members, the converting mutual
insurer must file the plan; the meeting notice at which the eligible members vote on the
plan; the form of any proxies to be solicited from the eligible members; information
required by the converting mutual insurer's bylaws; and other information or documentation
required by the OIC.
Reorganization Plan. The plan for reorganization must include the following:
• the reason for the reorganization;
• a description of how the plan will be carried out, any transaction included within the
plan, and a description of any mutual holding company, intermediate stock holding
company, or other corporation to be organized;
• a description of all significant terms of the reorganization;
• new or revised intercompany agreements;
• a description of the overall effect of the plan on policies issued by the converting
mutual insurer, which demonstrates that policyholder interests are preserved and
protected and the plan is fair and equitable for policyholders;
• the record date for determining whether a member of the converting mutual insurer is
an eligible member;
• either the proposed effective date of the reorganization or the manner in which the
Senate Bill Report -2- SHB 1060
proposed date will be established;
• the proposed amendments to or restatement of the articles of incorporation and
bylaws of the converting mutual insurer, and the proposed articles of incorporation
and bylaws of any mutual holding company, intermediate stock holding company, or
other corporation established;
• a description of any plans for the initial sale of voting stock to third parties by the
converted stock insurer or any intermediate stock holding company, or a statement
that there are no plans for the sale of voting stock;
• the intention that a commissioner or officer of the converting stock mutual insurer,
mutual holding company, intermediate stock holding company, or other corporation
organized has three years following the effective date of the reorganization to
purchase or acquire shares of capital stock or other securities; and
• a provision that all policies in force as of the effective date of the reorganization will
remain in force, and any member voting rights provided for under the policies or
under the mutual insurers statutes are extinguished.
A plan must also determine the amount of, and make provisions to pay members, reasonable
compensation for their equities as owners.
Appropriation: None.
Fiscal Note: Available.
Creates Committee/Commission/Task Force that includes Legislative members: No.
Effective Date: Ninety days after adjournment of session in which bill is passed.
Senate Bill Report -3- SHB 1060
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- Original
- app.leg.wa.gov