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ACT NO. 86

(H.596)

Conversion of Mutual Insurance Companies and Mutual Insurance Holding Companies

This act modernizes Vermont insurance law relating to demutualization, the process by which a mutual insurance company or a mutual insurance holding company

converts from a member-owned to a shareholder-owned company. The act revises the procedures that are in current law for demutualization, with emphasis on providing policyholders with adequate notice, rights, and value for their interests. Three-quarters of the board of directors of the company must approve a demutualization plan. Compensation may be provided in a variety of ways, including cash, shares of the demutualizing company, policy credits, additional policy benefits, or increased policy dividends. For five years, a takeover of a newly demutualized company is restricted, and requires approval of the Commissioner of Banking, Insurance, Securities, and Health Care Administration. The procedure for appealing an order of the Commissioner concerning a demutualization plan is established. The act provides that

the demutualization statutes would apply as well to cooperative fire insurance companies and captive insurance companies.

Effective Date: April 27, 2000