§ 7311. Conversion of domestic mutual property/casualty insurance
companies or advance premium corporations into domestic stock
property/casualty insurance companies; insurers in rehabilitation. (a) A
domestic mutual insurer organized under article twelve of this chapter
and licensed pursuant to article forty-one of this chapter and operating
pursuant to an order of rehabilitation, or a domestic advance premium
corporation organized and licensed under article sixty-six of this
chapter and operating pursuant to an order of rehabilitation, may, upon
application of the superintendent and pursuant to an order granted by
the court in which the rehabilitation is pending, be converted by the
superintendent into a domestic stock insurer in rehabilitation to be
organized under article twelve and licensed under article forty-one of
this chapter, in accordance with the provisions of subsection (b) of
this section.

(b) Before making such application to the court, the superintendent
shall hold a public hearing, notice of which shall be given by
publication in a newspaper of general circulation in the county in which
the insurer has its principal office and in the two largest cities in
each state in which the insurer has underwritten insurance within one
year preceding the date of the order of rehabilitation.

(c) If, after such hearing, the superintendent concludes that such
conversion is appropriate and is necessary for a successful
rehabilitation or is likely to materially enhance the probability of a
successful rehabilitation, he may apply to the court in which the
rehabilitation is pending for an order directing him to convert such
insurer into a domestic stock insurer in rehabilitation, pursuant to the
plan of conversion that the superintendent shall propose, subject to
court approval. The primary objective of the plan shall be the
successful rehabilitation of the insurer. In the development of such
plan the superintendent shall take into account the policyholders'
equity, if any, at the time of conversion and may in his discretion
provide for a distribution of such equity to each person who had a
policy in effect at any time during the three year period (or such
shorter period that the superintendent determines is practicable)
preceding the date of the filing of the application by the
superintendent. The plan shall provide for appropriate procedures
necessary for the implementation of the proposed conversion. Such stock
insurer in rehabilitation shall be subject to all of the applicable
provisions of this chapter, except those provisions relating to
licensing and financial requirements from which it is exempted by the
superintendent. Upon the termination of the order of rehabilitation, the
exemptions granted by the superintendent shall cease and the insurer
shall become subject to all applicable provisions of this chapter.

(d) The authorized capital stock of the new domestic stock insurer
shall be held for the benefit of the qualifying prospective shareholders
or purchasers by an escrow agent appointed by the superintendent. Such
stock shall be released to the owners of record after the court approves
the conversion and the order of rehabilitation is terminated.

(e) All expenses of the conversion, including the expenses incurred by
the department of financial services, shall be borne by the company
being converted.