News Release

KANSAS CITY, MO. -- The National Association of Insurance Commissioners’ (NAIC) Financial Condition (EX4) Subcommittee has adopted a White Paper on Mutual Insurance Holding Company (MIHC) Reorganizations. The White Paper will be considered by the full membership in December during its Winter National Meeting in Orlando.

"Having concluded the discussion of the concerns surrounding bankruptcy jurisdiction and the precautions regulators should consider, the working group has put the finishing touches on its study of mutual insurance holding company transactions," said Colorado Insurance Commissioner and Mutual Holding Company Working Group chair Jack Ehnes.

"The final development of this white paper reflects a concerted effort by regulators to provide a systematic study of the restructuring of mutual insurers. This will prove to be a useful guide for legislators, regulators, insurers and consumers who are involved in such important changes," according to NAIC President and North Dakota Insurance Commissioner Glenn Pomeroy.

"The mutual insurance holding company white paper supports the states’ efforts to provide effective consumer safeguards. Jack Ehnes and the members of this Working Group have done an excellent job. In particular, Jack Ehnes has been very committed to keeping this process open and allowing competing views a thorough discussion," Pomeroy said. Commissioners Alfred Gross of Virginia and Commissioner Terri Vaughan of Iowa also echoed Pomeroy’s remarks during the subcommittee’s meeting.

The Mutual Holding Company Working Group moved the white paper Tuesday during its working session. The Working Group, comprised of chief regulatory officials and senior level regulatory staff, undertook this task and began its work in September 1997. The white paper analyzes MIHC reorganizations in the context of states’ regulatory framework and discusses some of the principal drivers behind this new form of corporate structure. The treatment of policyholders under a MIHC reorganization and suggested guidelines for regulatory review and approval procedures of proposed plans of reorganizations are also covered. Finally, the white paper outlines a regulatory framework for protecting the on-going membership interests of policyholders in the MIHC system.

Presently, 21 states and the District of Columbia have passed legislation enabling a mutual insurer to reorganize by forming a MIHC and converting the insurer into a stock corporation. The reorganized stock insurer becomes a wholly owned subsidiary of the MIHC or in some cases, an intermediate stock holding company. Policyholder contractual rights and membership interest in the mutual insurer are separated, with the corresponding contractual duties remaining obligations of the stock insurer, while matters regarding membership interests are transferred to the MIHC.

The NAIC is located on the World Wide Web at www.naic.org. It is the nation's oldest association of state government officials, consisting of insurance regulators from the 50 states, the District of Columbia, and four U.S. territories.