HBA-TBM C.S.S.B. 1598 77(R) BILL ANALYSIS Office of House Bill AnalysisS.B. 1598 By: Wentworth Insurance 5/7/2001 Engrossed BACKGROUND AND PURPOSE Under current law, a non-life mutual insurance company is allowed to convert to a stock insurance company or a mutual holding company. A mutual holding company is a procedure for reorganization for a mutual insurance company that allows the policyholders to own the stock in a mutual holding company and the mutual insurance company becomes a stock insurance company. A mutual life insurance company is currently authorized to convert only to a stock insurance company. Reorganizing as a mutual holding company may benefit such companies by increasing capital and surplus as necessary to ensure the financial viability of the company for its policyholders. Senate Bill 1598 authorizes a mutual life insurance company to reorganize as a mutual holding company. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that this bill does not expressly delegate any additional rulemaking authority to a state officer, department, agency, or institution. ANALYSIS Senate Bill 1598 amends the Insurance Code to authorize a mutual life insurance company to reorganize by forming an insurance holding company based on a mutual plan and continuing the corporate existence of the reorganizing mutual life insurance company as a stock insurance company if the commissioner of insurance (commissioner) determines that the reorganization is fair and equitable to the policyholders of the company and approves the proposed plan of reorganization. The commissioner is required to retain jurisdiction over a company that is reorganized. A mutual holding company that results from a reorganization of a domestic mutual life insurance company must be incorporated pursuant to the Insurance Code and the Texas Non-Profit Corporation Act. The articles of incorporation of the mutual holding company and any amendments to the articles are subject to approval by the commissioner. A sale, issuance, or offering of securities is exempt from the registration and licensing provisions of The Securities Act. An officer, director, or employee who participates in a reorganization is exempt from the registration and licensing provisions of The Securities Act. The bill prohibits a person from being compensated for services performed under these exemptions. EFFECTIVE DATE September 1, 2001.