USA Statutes : oregon
Title : TITLE 56 INSURANCE
Chapter : Chapter 732 Organization and Corporate Procedures of Domestic Insurers; Regulation of Insurers Generally
(1)
Except where inconsistent with the express provisions of the Insurance
Code, ORS chapter 60, shall, to the extent applicable, govern the powers,
duties and relationships of domestic insurers.

(2) The following sections in ORS chapter 60 do not apply to
insurers: ORS 60.004, 60.007 to 60.014, 60.016, 60.017 to 60.024, 60.031,
60.044, 60.051 to 60.057, 60.094 to 60.101, 60.311, 60.470 to 60.534,
60.701 to 60.717, 60.734 to 60.744, 60.787, 60.954, 60.957 to 60.967 and
60.992.

(3) ORS 60.224, 60.774 (2)(c) and 60.777 (4) do not apply to
insurers without capital stock.

(4) The enumeration in subsections (2) and (3) of this section of
inapplicable sections in ORS chapter 60 is not exclusive or a limitation
upon subsection (1) of this section.

(5) To the extent applicable and not inconsistent with subsections
(1) to (4) of this section, ORS chapter 60 shall apply to insurers
without capital stock as well as to insurers with capital stock. Where
applicable to insurers without capital stock, references in ORS chapter
60 to “shareholders” shall be deemed references to “policyholders” or
“subscribers” as the case may be.

(6) In applying ORS chapter 60 as provided in this section, unless
the context requires otherwise:

(a) “Office of Secretary of State” or “office” means the Department
of Consumer and Business Services.

(b) “Secretary of State” means the Director of the Department of
Consumer and Business Services.

(c) “Corporation” and “domestic corporation” mean a domestic
insurer. [1967 c.359 §146; 1985 c.728 §108; 1987 c.846 §1; 2001 c.352 §7;
2003 c.14 §446]ORGANIZATION No person shall
organize or solicit or receive any money for the organization of a
domestic insurer without a subsisting permit to organize an insurer
issued by the Director of the Department of Consumer and Business
Services pursuant to ORS 732.055. The director shall not require a fee
for filing an application for such a permit in the case of the
organization of a reciprocal insurer that exchanges policies of insurance
covering only wet marine hull insurance for persons whose earned income,
in whole or in part, is derived from taking and selling food resources
living in an ocean, bay or river. [1967 c.359 §147; 1977 c.651 §4; 1989
c.413 §6; 1991 c.401 §3; 1993 c.709 §6]
Any person or persons desiring to organize a domestic stock insurer
shall, as prospective incorporators, first file an application with the
Director of the Department of Consumer and Business Services for a permit
to organize such an insurer. The applicants shall pay the applicable fee
to the director at the time the application is filed. The application
shall be on forms provided by the director, shall be signed by the
applicants and verified. The form shall specify information with regard
to the following:

(1) The class or classes of insurance to be transacted.

(2) The full names and addresses of each person who will own or
control, directly or indirectly, 10 percent or more of the stock.

(3) The full name and residence address of each person associated
or to be associated in the formation, organization, operation,
management, stock underwriting or financing of the insurer.

(4) Full disclosure of the terms of all pertinent agreements and
understandings existing or proposed among and between such persons so
associated. A copy of all such agreements and understandings shall be
filed with the application.

(5) The full name and residence address of the proposed directors
and officers, including information regarding the character, financial
responsibility, business ability and experience in the business of
insurance or businesses related thereto, of each.

(6) The proposed capitalization, the plan of financing and for
solicitation of stock, and a summary of the plan of operation, including
types of policies to be issued.

(7) Such additional information, including but not limited to
financial data, actuarial projections and copies of proposed policies,
which the director may by rule or otherwise require. [1967 c.359 §148;
1989 c.413 §7; 1991 c.401 §4]Any one or more persons desiring to organize a domestic insurer
without capital stock shall, as prospective organizers, first file an
application with the Director of the Department of Consumer and Business
Services for a permit to organize such an insurer. The provisions and
requirements of ORS 732.025 shall govern such application; in addition,
the application shall be accompanied by:

(1) A copy of each policy for which applications are proposed to be
solicited, together with a copy of the proposed application form, and
application literature to be used in such solicitation; and

(2) A schedule of premiums or premium rates proposed to be charged
in connection with such insurance for which applications shall be
solicited. [1967 c.359 §149] Upon
receipt of an application for a permit to organize an insurer, the
Director of the Department of Consumer and Business Services shall make
such investigation of the facts and conditions as the director deems
necessary, including the holding of a public hearing on the application
if the director considers it desirable or if requested by the applicant.
[1967 c.359 §150] (1)
Within 90 days after the filing of the application for a permit to
organize an insurer, the Director of the Department of Consumer and
Business Services shall approve or disapprove the application.

(2) The 90-day period referred to in subsection (1) of this section
may be extended by the director for an additional period not to exceed 30
days if the director gives written notice within such 90-day period to
the applicant that the director needs such additional time.

(3) The director shall approve an application for a permit to
organize an insurer only if the director finds that:

(a) The application is complete;

(b) The documents filed with the application are in proper form;

(c) The proposed financial structure is adequate;

(d) The character, reputation, financial responsibility and general
fitness of the persons named in the application or otherwise found to be
associated with or have an interest in the proposed insurer are such as
to command the confidence of the public;

(e) The proposed directors are collectively competent to assume
responsibility for the management and general policies and procedures of
an insurer proposing to issue the class or classes of insurance specified;

(f) The proposed management, collectively, possesses the requisite
general business ability and experience in the business of insurance of
the class or classes specified in the application; and

(g) No fact is then known to the director which would prevent the
proposed insurer from completing its organization and receiving a
certificate of authority to transact insurance in this state. [1967 c.359
§151] Any
changes in the information furnished in the application for a permit to
organize an insurer shall be reported immediately to the Director of the
Department of Consumer and Business Services by the persons to whom the
permit was issued. [1967 c.359 §152] After
notice to the applicant stating the grounds therefor, the Director of the
Department of Consumer and Business Services may revoke or suspend a
permit to organize an insurer for any ground for which the issuance of
the permit could be denied. [1967 c.359 §153] One or more natural persons of the age of 21
years or older or one or more financially responsible corporations may
act as incorporators of a domestic insurer upon compliance with the
provisions of the Insurance Code. [1967 c.359 §154] (1) To the extent not otherwise
inconsistent with the Insurance Code, the articles of incorporation of a
domestic insurer shall conform to ORS 60.047 and, in addition, shall
contain the purpose or purposes for which the insurer is organized and
the class or classes of insurance or reinsurance to be made. It shall be
sufficient to state, either alone or with other purposes, that the
purpose of the insurer is to make insurance and reinsurance of all
classes for which an insurer may be authorized under the Insurance Code.
By such statement, all such classes shall be within the purposes of the
insurer, except for express limitations in the articles, if any.

(2) The articles or other basic document of a mutual or reciprocal
insurer shall include the qualifications and rights of members or
subscribers of the insurer. [1967 c.359 §155; 1987 c.846 §4]The incorporators shall file with the Director of the
Department of Consumer and Business Services within six months of the
issuance of the organization permit under ORS 732.055:

(1) Duplicate originals of the articles of incorporation signed by
all of the incorporators.

(2) A corporate surety bond payable to the director and the
director’s successors, as trustee, in the sum of $25,000, or, in lieu
thereof, a like amount in an irrevocable letter of credit issued by an
insured institution as defined in ORS 706.008 or in approved securities
or cash, conditioned upon the faithful accounting to the insurer upon
completion of its organization and the receipt of its certificate of
authority from the director, or to the shareholders, members, applicants
for policies and creditors, or to the trustee, receiver or assignee of
the insurer, duly appointed in any proceeding in any court or department
of competent jurisdiction in this state, in accordance with their
respective rights in case the organization of the insurer is not
completed and the certificate of authority is not procured from the
director. Such bond, letter of credit or deposit shall be in the form
prescribed by the director. [1967 c.359 §156; 1991 c.331 §127; 1997 c.631
§546](1) If the Director of the
Department of Consumer and Business Services finds that the articles of
incorporation and the bond, letter of credit or securities filed with the
director conform to law and the sureties on any bond are acceptable, the
director shall, when all fees established by the director have been paid:

(a) Indorse on each of such duplicate originals of the articles the
word “filed,” and the month, day and year of the filing thereof.

(b) File one of such duplicate originals in the director’s office.

(c) Issue a certificate of incorporation to which the director
shall affix the other duplicate original.

(d) Return to the incorporators or their representative the
certificate of incorporation with the duplicate original.

(2) Upon the issuance of the certificate of incorporation, the
insurer’s corporate existence shall begin and the insurer shall have all
authority and power, subject to the limitations prescribed in the
Insurance Code, as may be necessary and proper to complete its
organization, obtain its initial capital and otherwise complete the
requirements to qualify for a certificate of authority to transact the
class or classes of insurance proposed in its articles of incorporation.
In the case of an insurer without capital stock, the authority and power
shall include the solicitation of applications for insurance and receipt
in advance of premium payments for any insurance for which the proposed
form of application, policies, literature and advertisements pertaining
thereto have been filed with and approved by the director. An insurer
shall not otherwise transact any business or incur any indebtedness until
its certificate of authority to transact insurance has been granted.

(3) The issuance of the certificate of incorporation shall be
conclusive evidence that all conditions precedent required to be
performed by the incorporators have been complied with and that the
insurer has been incorporated under the laws of this state, except as
against this state in a proceeding to cancel or revoke the certification
of incorporation or any certificate of authority to transact insurance or
for involuntary dissolution of the insurer. [1967 c.359 §157; 1989 c.413
§8; 1991 c.331 §128]If the proposed
domestic insurer is to issue securities, it shall comply with the
applicable provisions of ORS 59.005 to 59.451, 59.660 to 59.830, 59.991
and 59.995. However, the Director of the Department of Consumer and
Business Services shall not allow the registration of securities of a
proposed domestic insurer unless the organizers of such insurer have been
issued an organization permit under ORS 732.055, and have received a
certificate of incorporation under ORS 732.115. [1967 c.359 §158; 1987
c.414 §162] No person shall
solicit subscriptions for the capital stock of, or, in the case of an
insurer without capital stock, applications for insurance in, any insurer
in the process of organization unless the insurer has filed the insurer’s
name and address with the Director of the Department of Consumer and
Business Services. [1967 c.359 §159](1) Every subscription to the capital
stock of an insurer in the process of organization shall contain a
stipulation that no sum shall be used for commission, promotion or
organization expenses in excess of a stated percent of the amount paid
upon the subscription. This stated amount shall not exceed 15 percent.

(2) All sums paid by subscribers and applicants shall be deposited
under an escrow agreement approved by the Director of the Department of
Consumer and Business Services in a bank, trust company or savings and
loan association in the state until the insurer has procured a
certificate of authority from the director.

(3) Every subscription for stock or every application for insurance
in an insurer made prior to its receipt of a certificate of authority
shall contain a stipulation that the money, securities or evidences of
debt advanced by the subscriber or applicant shall be returned to the
subscriber or applicant without any deduction in case the insurer fails
to complete its organization or procure its certificate of authority or
issue the policy applied for. [1967 c.359 §160](1) If the Director of the
Department of Consumer and Business Services finds that any domestic
insurer has not completed its organization and qualified for a
certificate of authority within two years from the date of filing its
articles of incorporation, the director may order the application
abandoned and close the files in which event its corporate powers shall
expire and the director shall proceed as for an impaired insurer.

(2) If any domestic insurer does not commence to issue policies
within one year from the date of receiving its certificate of authority,
the director shall proceed as for an impaired insurer. [1967 c.359 §161] The directors,
incorporators, and organizers of any insurer organized under the
Insurance Code and those entitled to participation in the profits of such
insurer shall be jointly and severally liable for all debts or
liabilities of such insurer until it has received a certificate of
authority. [1967 c.359 §162]Any person who assumes to act as a corporate insurer without a
permit to organize and without the issuance of a certificate of
incorporation by the Director of the Department of Consumer and Business
Services or who assumes to transact insurance business without a
certificate of authority to transact such business issued by the director
shall be jointly and severally liable for all liabilities created while
so acting. [1967 c.359 §163; 1981 c.633 §80; 1987 c.846 §5]CORPORATE PROCEDURES GENERALLY Except as otherwise provided in
the Insurance Code or the articles of incorporation of an insurer, a
domestic insurer shall have:

(1) The general and emergency powers granted to corporations by ORS
60.077 and 60.081;

(2) The powers granted to insurers by the Insurance Code; and

(3) All powers necessary or convenient to effect any or all of the
purposes for which the corporation is organized or to perform any or all
of the acts expressly or impliedly authorized or required under the
Insurance Code. [1967 c.359 §164; 1987 c.846 §6] The provision of
ORS 60.084 shall not affect the right of any policyholder of a domestic
insurer or the Director of the Department of Consumer and Business
Services from asserting the lack of capacity or power of an insurer, by
reason of any provision of the Insurance Code, to do any act or make any
conveyance or transfer of real or personal property. [1967 c.359 §165;
1987 c.846 §7] No domestic insurer shall
make any contract whereby any person is granted or is to enjoy in fact
the management of the insurer to the substantial exclusion of its board
of directors or other governing body. [1967 c.359 §166] (1) No domestic insurer shall
make any contract whereby any person is granted or is to enjoy in fact
the controlling or preemptive right to produce substantially all
insurance business for the insurer, unless the contract is filed with and
approved by the Director of the Department of Consumer and Business
Services. The contract filed with the director shall be accompanied by
such application for approval as the director by rule may consider
reasonably appropriate to the purposes of this section. The contract
shall be deemed approved unless disapproved by the director within 20
days after date of filing, subject to such reasonable extension of time
as the director may require by notice given within such 20 days. Notice
of any disapproval shall be delivered to the insurer in writing, stating
the grounds therefor.

(2) Any such contract shall provide that any such producer of an
insurer’s business shall within 90 days after expiration of each calendar
year furnish the insurer’s board of directors or other governing body a
written statement of:

(a) Amounts received under or on account of the contract and
amounts expended thereunder during such calendar year, including the
emoluments received therefrom by the respective directors, trustees,
officers, and other principal management personnel of the producer;

(b) Amounts paid by the producer during such calendar year, for any
purpose, to any director, trustee, officer, agent or employee of the
insurer or to any person who is directly or indirectly the beneficial
owner of more than 10 percent of any class of any equity security of the
insurer; and

(c) Such classification of items and further detail as the
insurer’s board of directors or other governing body may reasonably
require.

(3) The director shall disapprove any such contract if, taking into
account the customary and prevailing practices of the insurance business
and such opportunities for abuse as may be apparent in any conflicts of
interest revealed by the contract or application, the director finds that
such contract:

(a) Subjects the insurer to charges that are disproportionate to
those that the insurer might reasonably be expected to incur under
alternative arrangements for the production of the insurer’s business;

(b) Is to extend for an unreasonable length of time, taking into
account the incentives reasonably necessary to induce the producer to
undertake the contract, the prospect of changes which are reasonably
likely to render the contract unfavorable to the insurer and such other
factors as the director reasonably considers appropriate;

(c) Does not contain fair and adequate standards of performance; or

(d) Contains other inequitable provision or provisions which impair
the proper interests of stockholders, policyholders, members or
subscribers of the insurer.

(4) The director may, after a hearing held thereon, withdraw
approval of any such contract theretofore approved by the director, if
the director finds that the bases of the original approval no longer
exist, or that the contract has, in actual operation, shown itself to be
subject to disapproval on any of the grounds referred to in subsection
(3) of this section.

(5) This section does not apply as to any contract entered into
prior to June 8, 1967, nor to any extension or amendment to such contract
to the extent that such extension or amendment may be effected merely by
notice and without further consideration. [1967 c.359 §167] No
domestic insurer shall reduce its combined capital and surplus by partial
distribution of its assets, by payment in the form of a dividend to
stockholders or otherwise, below:

(1) Its required capitalization; or

(2) A greater amount which the Director of the Department of
Consumer and Business Services, by rule or by order after hearing upon
the motion of the director or the petition of any interested person,
finds necessary to avoid injury or prejudice to the interest of
policyholders or creditors. [1967 c.359 §168] (1)
Whenever the Director of the Department of Consumer and Business Services
determines from any showing or statement made to the director or from any
examination made by the director that the assets of a domestic insurer
are less than its liabilities plus required capitalization, the director
may proceed immediately under the provisions of ORS chapter 734 or the
director may allow the insurer a period of time, not to exceed 90 days,
in which to make good the amount of the impairment with cash or
authorized investments.

(2) If the amount of any such impairment is not made good within
the time prescribed by the director under subsection (1) of this section,
the director shall proceed under the provisions of ORS chapter 734.

(3) An order directing an insurer to cure an impairment is
confidential as provided in ORS 705.137, for such time as the director
considers proper but not exceeding the time prescribed by the director
for making the amount of the impairment good. If the director determines
that the public interest in disclosure outweighs the public interest in
protecting or salvaging the solvency of the insurer, the director may
make the order available for public inspection. [1967 c.359 §169; 1991
c.401 §5; 2001 c.377 §9] (1) No insurer may be
dissolved voluntarily until the Director of the Department of Consumer
and Business Services has approved a plan for liquidation of the
insurer’s assets and obligations. The preparation and approval of such
plan shall follow the provisions of ORS 732.517 to 732.546.

(2) The plan of dissolution must provide for reinsurance of
substantially all insurance in force of the insurer in accordance with
the provisions of ORS 731.512.

(3) The director shall require that the plan of dissolution provide
adequate reserves in trust or otherwise for satisfaction of all
obligations of the insurer. [1967 c.359 §170; 1993 c.447 §107] (1) Any domestic insurer
may hold in trust the proceeds of any life insurance policy issued by it.
Such a trust shall be upon such terms and subject to such limitations as
to revocation by the policyholder and control by the beneficiary
thereunder as are agreed to in writing by the insurer and the
policyholder.

(2) Trust provisions authorized by this section shall in no manner
subject the insurer to any of the provisions of the laws of this state
relating to banks or trust companies.

(3) The forms of such trust agreements shall be first submitted to
and approved by the Director of the Department of Consumer and Business
Services. [Formerly 739.410] (1) Every
domestic insurer shall have and maintain its principal place of business
and home office in this state, and shall keep therein accurate and
complete accounts and records of its assets, transactions, and affairs in
accordance with the provisions of the Insurance Code.

(2) Every domestic insurer shall have and maintain its assets in
this state, except as to:

(a) Real property and personal property appurtenant thereto
lawfully owned by the insurer and located outside this state, and

(b) Such property of the insurer as may be customary, necessary and
convenient to enable and facilitate the operation of its branch offices
and regional home offices located outside this state as referred to in
subsection (4) of this section.

(3) Removal or attempted removal of all or a material part of the
records or assets of a domestic insurer from this state except pursuant
to a merger approved by the Director of the Department of Consumer and
Business Services under ORS 732.517 to 732.546, or for such reasonable
purposes and periods of time as may be approved by the director in
writing in advance of such removal, or concealment or attempted
concealment of such records or assets or such material part thereof from
the director, is prohibited. Upon violation of this section, the director
may institute delinquency proceedings against the insurer as provided in
ORS 734.150.

(4) This section shall not prohibit an insurer from:

(a) Establishing and maintaining branch offices or regional home
offices in other states where necessary or convenient to the transaction
of its business, and keeping therein the detailed records and assets
customary and necessary for the servicing of its insurance in force and
affairs in the territory served by such an office, as long as such
records and assets are made readily available at such office for
examination by the director at the director’s request;

(b) Having, depositing or transmitting funds and assets of the
insurer in or to jurisdictions outside of this state required by the law
of such jurisdiction or as reasonably and customarily required in the
regular course of its business; or

(c) Using custodial arrangements for the holding of securities
owned by the insurer, either in or outside of this state, and either
segregated from or commingled with securities owned by others, if the
arrangements conform to rules adopted by the director for safeguarding
the assets and facilitating the director’s examination of insurers using
such custodial arrangements. [1967 c.359 §172; 1979 c.846 §3; 1993 c.447
§108]
(1) The specific purpose of this section is to facilitate the continued
operation of all domestic insurers in the event a national emergency
makes it impossible or impracticable for an insurer to conduct its
business in strict accordance with applicable provisions of law, its
bylaws or its charter.

(2) The board of directors of any domestic insurer may at any time
adopt emergency bylaws, subject to repeal or change by action of those
having power to adopt regular bylaws for the insurer, which shall be
operative during such a national emergency and which may, notwithstanding
any different provisions of the regular bylaws, or of the applicable
statutes or of the insurer’s charter, make any provision that may be
reasonably necessary for the operation of the insurer during the period
of such emergency.

(3) In the event the board of directors of a domestic insurer has
not adopted emergency bylaws, the following provisions shall become
effective upon the occurrence of such a national emergency:

(a) Three directors shall constitute a quorum for the transaction
of business at all meetings of the board; and

(b) Any vacancy in the board may be filled by a majority of the
remaining directors, though less than a quorum, or by a sole remaining
director.

(4) If there are no surviving directors, but at least three vice
presidents of the insurer survive, the three vice presidents with the
longest term of service shall be the directors and shall possess all of
the powers of the previous board of directors and such powers as are
granted by this section. By majority vote such emergency board of
directors may elect other directors. If there are not at least three
surviving vice presidents, the Director of the Department of Consumer and
Business Services shall appoint three persons as directors who shall
possess all of the powers of the previous board of directors and such
powers as are granted by this section, and these persons by majority vote
may elect other directors.

(5) At any time the board of directors of a domestic insurer may,
by resolution, provide that in the event of such a national emergency and
in the event of the death or incapacity of the president, the secretary
or the treasurer of the insurer, such officers or any of them shall be
succeeded in the office by the person named or described in a succession
list adopted by the board of directors. Such list may be on the basis of
named persons or position titles, shall establish the order of priority
and may prescribe the conditions under which the powers of the office
shall be exercised.

(6) At any time the board of directors of a domestic insurer may,
by resolution, provide that in the event of such a national emergency the
home office or principal place of business of the insurer shall be at
such location as is named or described in the resolution. Such resolution
may provide for alternate locations and establish an order of preference.
[1967 c.359 §173]DIRECTORS, OFFICERS AND EMPLOYEES The number of directors of a domestic
insurer shall be not fewer than five. Directors need not be shareholders
or members of the insurer unless the articles of incorporation so require
but shall be 21 years of age or older. Not fewer than five directors or
one-third of the directors, whichever is fewer, shall be residents of
this state. A majority of directors shall be persons who are not salaried
officers of the insurer. [1967 c.359 §174; 1997 c.771 §18] No domestic insurer
shall make any disbursement of $100 or more unless the sum is evidenced
by:

(1) A voucher signed by or on behalf of the person receiving the
money or, if a voucher cannot be obtained, by an affidavit stating the
reason for not obtaining the voucher;

(2) A bill, invoice, statement or similar document commonly in
business use submitted on account of goods supplied or services rendered
or both;

(3) An authorization of the board of directors, or a committee
thereof or officer duly delegated by the board with authority to so
authorize, in regard to compensation of officers, employees and agents; or

(4) Satisfactory proof of claim, accepted and approved in the
manner prescribed by the insurer, based upon provisions of a policy
issued by the insurer. [Formerly 738.420](1) Except as set forth in a statement of acquisition
described in ORS 732.523 and, in the case of the issuance or sale of the
insurer’s securities, as approved by a majority of the board of directors
having no interest therein except as shareholders or directors or failing
such majority by the shareholders, a director, trustee, officer, agent or
employee, or spouse or relative thereof, shall not receive any fee,
commission, compensation or other valuable consideration whatsoever,
directly or indirectly, for aiding, promoting or assisting:

(a) The planning, preparing or executing of an activity described
in ORS 732.521 (1); or

(b) The planning, preparing or executing of any plan for the
issuance, sale or acquisition of shares or other securities of the
insurer for any purpose.

(2) Except as provided in subsections (4) and (5) of this section,
a director, trustee or officer of an insurer shall not:

(a) Accept any money or thing of value for negotiating, procuring,
recommending or aiding in:

(A) The purchase or sale of property by the insurer; or

(B) The making of a loan to or from the insurer.

(b) Have a pecuniary interest, whether as principal, agent or
beneficiary, in a purchase, sale or loan under paragraph (a) of this
subsection.

(3) Except as provided in subsections (4) and (5) of this section,
an insurer shall not do any of the following:

(a) Pay any money or thing of value to a director, trustee or
officer of the insurer for negotiating, procuring, recommending or aiding
in:

(A) The purchase or sale of property by the insurer; or

(B) The making of a loan to or from the insurer.

(b) Make a loan to a director, trustee or officer of the insurer.

(c) Make any advances to a director, trustee or officer of the
insurer for future services to be performed.

(d) Guarantee any financial obligations of a director, trustee or
officer of the insurer. The prohibition under this paragraph does not
apply to any guarantee of payments to be made upon death of a person
insured under a credit life insurance policy.

(4) An insurer may contract, or otherwise enter into a transaction,
for the provision of goods or services to the insurer in the normal
course of business with a director, trustee or officer, or a partnership
or corporation in which a director, trustee or officer has, directly or
indirectly, a proprietary interest in excess of five percent, if the
interest of the director, trustee or officer is fully disclosed to the
board of directors of the insurer and the board thereafter approves and
authorizes the contract or transaction by a vote sufficient for the
purpose without counting the vote of the interested person.

(5) The prohibitions set forth in this section shall not apply to
or affect:

(a) The payment to any director, officer or trustee of reasonable
compensation, whether based in whole or in part upon commission or
otherwise;

(b) The payment of a fee to any approved person for legal or other
specialized or professional services rendered to the insurer and approved
by the board of directors;

(c) The making of loans or advances to agents or other employees of
an insurer as required or as is expedient in the conduct of its business;

(d) The exercising of any rights under any policy of insurance;

(e) The issuance of a debt obligation by an insurer to a director,
officer or trustee of the insurer; and

(f) The advance of expenses to a director, officer or trustee for
travel or other related business activities of the insurer. [1967 c.359
§178; 1971 c.231 §17; 1983 c.498 §20; 1989 c.425 §1; 1993 c.447 §109]SHARES, SHAREHOLDERS AND MEMBERS(General Provisions) No domestic insurer shall issue or have
outstanding more than one class of shares, whether with or without par
value. [1967 c.359 §179] A domestic insurer shall have
the right to purchase or otherwise acquire, hold, pledge, transfer or
dispose of its own issued shares. An insurer may acquire any such shares
by purchase, exchange or disposition of its assets only from earned
surplus as defined by rule, that is not otherwise restricted or, with the
prior written approval of the Director of the Department of Consumer and
Business Services, from other of its surplus. [1967 c.359 §180; 1987
c.846 §8] (1)
A proxy may be authorized in writing to vote the shares of any
stockholder, or where authorized of a policyholder, of a domestic stock
insurer at any regular or special stockholders’ meeting.

(2) Such stockholders and policyholders shall be provided with
adequate and accurate information with respect to the affairs of the
insurer, the interests of those involved in the solicitation of proxies
or consents, and the matters regarding which the proxies or consents are
solicited.

(3) Every form of proxy or consent and soliciting material to be
used in connection therewith shall be filed with the Director of the
Department of Consumer and Business Services in advance of any
circulation or other use by at least 10 days, or such shorter period as
the director may authorize. Circulation or use of a filed document may be
made when such 10-day or shorter period has expired, unless or until the
director has disapproved the filing by written notice showing wherein the
document does not comply with this section or the pertinent rules. Any
proxy or consent obtained in violation of this section shall be void.

(4) The director may issue rules to carry out the purposes of this
section and to prevent fraud or deception in connection with proxies and
consents. Such rules may differ as to different types of insurers, and
may include, but not by way of limitation, provisions as to:

(a) Exemption from the requirements of this section for insurers
subject to similar provisions of federal law, or with less than a
prescribed number of stockholders;

(b) Disclosure of equivalent information when no proxies or
consents are solicited;

(c) Form and content of proxies, consents and solicitation
materials, and filing procedures therefor;

(d) Procedure for presentation of stockholder proposals; and

(e) Election contests. [Formerly 738.190](Insider Trading)As used in ORS 732.220
and 732.420 to 732.455, “equity security” means:

(1) Any stock or similar security;

(2) Any security convertible, with or without consideration, into
such a security, or carrying any warrant or right to subscribe to or
purchase such a security;

(3) Any such warrant or right; or

(4) Any other security which the Director of the Department of
Consumer and Business Services shall consider to be of similar nature and
consider necessary or appropriate, by such rules as the director may
prescribe in the public interest or for the protection of investors, to
treat as an equity security. [Formerly 738.710] The provisions
of ORS 732.430, 732.435 and 732.440 do not apply to equity securities of
a domestic stock insurer if:

(1) Such securities are registered, or are required to be
registered, pursuant to section 12 of the Securities Exchange Act of
1934, as amended; or

(2) Such insurer does not have any class of its equity securities
held of record by 100 or more persons on the last business day of the
year next preceding the year in which equity securities of the insurer
would be subject to the provisions of ORS 732.430, 732.435 and 732.440
except for the provisions of this subsection. [Formerly 738.720] Every
person who is directly or indirectly the beneficial owner of more than 10
percent of any class of any equity security of a domestic stock insurer,
or who is a director or an officer of the insurer, shall file with the
Director of the Department of Consumer and Business Services within 10
days after the person becomes a beneficial owner, director or officer, a
statement, on a form prescribed by the director, of the amount of all
equity securities of the insurer of which the person is the beneficial
owner. If there is a change in the ownership by a person to whom this
section applies, the person shall file with the director a statement, on
a form prescribed by the director, indicating the person’s ownership and
the changes in the person’s ownership. The person shall file the
statement of change in ownership before the end of the second business
day following the day on which the transaction was executed. If it is not
feasible for the person to file the statement by the end of the second
business day, the person shall file the statement according to rules
adopted by the director. [Formerly 738.730; 2005 c.185 §9] (1)
For the purpose of preventing the unfair use of information which may
have been obtained by a beneficial owner, director or officer as
described in ORS 732.430 by reason of the beneficial owner, director or
officer’s relationship to such insurer, any profit realized by the
beneficial owner, director or officer from any purchase and sale, or any
sale and purchase, of any equity security of such insurer within any
period of less than six months, unless such security was acquired in good
faith in connection with a debt previously contracted, shall inure to and
be recoverable by the insurer, irrespective of any intention on the part
of such beneficial owner, director or officer in entering into such
transaction of holding the security purchased or of not repurchasing the
security sold for a period exceeding six months. An action to recover
such profit may be instituted at law or in equity in any court of
competent jurisdiction by the insurer, or by the owner of any security of
the insurer in the name and in behalf of the insurer if the insurer shall
fail or refuse to bring such action within 60 days after request or shall
fail diligently to prosecute the same thereafter; but no such action
shall be brought more than two years after the date such profit was
realized.

(2) This section shall not be construed to cover any transaction
where such beneficial owner was not such both at the time of the purchase
and sale, or the sale and purchase, of the security involved, or any
transaction or transactions that the Director of the Department of
Consumer and Business Services by rules may exempt as not comprehended
within the purpose of this section. [Formerly 738.740] (1) No beneficial owner,
director or officer, as described in ORS 732.430 directly or indirectly,
shall sell any equity security of such insurer if the person selling the
security or the person’s principal:

(a) Does not own the security sold; or

(b) If owning the security, does not deliver it against such sale
within 20 days thereafter, or does not within five days after such sale
deposit it in the mails or other usual channels of transportation.

(2) No person shall be deemed to have violated this section if the
person proves that notwithstanding the exercise of good faith the person
was unable to make such delivery or deposit within such time, or that to
do so would cause undue inconvenience or expense. [Formerly 738.750](1) The provisions of ORS 732.435 do not apply to any
purchase and sale, or sale and purchase, and the provisions of ORS
732.440 do not apply to any sale, of an equity security of a domestic
stock insurer not then or theretofore held by the insurer in an
investment account, by a security dealer in the ordinary course of the
insurer’s business and incident to the establishment or maintenance by
the insurer of a primary or secondary market (otherwise than on an
exchange as defined in the Securities Exchange Act of 1934) for such
security.

(2) The Director of the Department of Consumer and Business
Services may, by such rules as the director considers necessary or
appropriate in the public interest, define and prescribe terms and
conditions with respect to securities held in an investment account and
transactions made in the ordinary course of business and incident to the
establishment or maintenance of a primary or secondary market. [Formerly
738.760] The provisions of ORS
732.430, 732.435 and 732.440 do not apply to foreign or domestic
arbitrage transactions unless made in contravention of such rules as the
Director of the Department of Consumer and Business Services may adopt in
order to carry out the purposes of ORS 732.420 to 732.455. [Formerly
738.770] The Director of the Department of Consumer and
Business Services shall have the power to make such rules as may be
necessary for the execution of the functions vested in the director by
ORS 732.420 to 732.455, and may for such purpose classify domestic stock
insurers, securities, and other persons or matters within the director’s
jurisdiction. No provision of ORS 732.430, 732.435 and 732.440 imposing
any liability shall apply to any act done or omitted in good faith in
conformity with any rule of the director, notwithstanding that such rule
may, after such act or omission, be amended or rescinded or determined by
judicial or other authority to be invalid for any reason. [Formerly
738.780](Shareholders and Members) Every domestic
stock insurer shall send to each shareholder within 90 days after the end
of each fiscal year of such insurer and every domestic insurer without
capital stock shall make available at its annual meeting an annual report
of the organization, operation and activities of such insurer, its parent
if any and its subsidiaries and affiliates if any, and financial
statements showing the financial condition of the insurer at the end of
such fiscal year and the results of its operations for such fiscal year.
The annual report shall contain such other information and financial
statements and shall be in such form as the Director of the Department of
Consumer and Business Services may by rule prescribe. [1967 c.359 §190] (1) A domestic mutual
insurer shall be owned by and operated in the interest of its members.

(2) Each owner of one or more valid and existing policies of
insurance issued by a domestic mutual insurer, other than a policy of
reinsurance, is a member of such insurer possessing the rights and
obligations of such membership. However, two or more persons who qualify
as owners under a single policy of insurance collectively shall be
considered to be one member.

(3) An owner is the person given the rights of ownership or the
power to make transactions with the insurer under terms of the policy,
including an assignee, other than the insurer which issued the policy,
who has received an assignment absolute on its face subject to any
reasonable minimum requirements relating to assignments found in the
policy or in the bylaws of the insurer. In a policy of group life or
health insurance the person contracting with the insurer and to whom the
master contract is issued is the member; the lives insured and
individuals holding certificates thereunder are not policyholders or
members.

(4) A person who, because of the death of the life insured in a
policy of insurance or the death of the life referred to in an annuity
policy, has obtained rights as a beneficiary to death benefits or
settlement payments is not a policyholder or member. [Formerly 739.165;
2001 c.352 §5] (1) Each member
of a domestic mutual insurer is entitled to one vote on each matter
coming before a meeting of the members and for each director to be
elected regardless of the number of policies or amount of insurance and
benefits held by such member.

(2) The member under a group policy shall have but one vote
regardless of the number of individuals insured or benefited thereunder.

(3) Two or more persons who qualify as policyholders under a single
policy shall be deemed one policyholder and member for purposes of voting
and collectively shall be entitled to one vote.

(4) Fractional voting may not be permitted.

(5) When a member is a minor, the vote shall be vested in the
parent or legal guardian of the minor.

(6) Cumulative voting for directors may not be permitted unless
expressly provided for in the insurer’s articles of incorporation.

(7) The right to vote shall be subject to such reasonable minimum
requirements as to duration of membership as may be made in the articles
of incorporation and bylaws of the insurer.

(8) A member may in every case vote in person or by proxy. The
right to vote by proxy shall be subject to reasonable provisions
pertaining thereto, including the duration of proxies, contained in the
articles of incorporation or bylaws of the insurer. [Formerly 739.170;
2001 c.352 §6; 2003 c.14 §447]The following provisions shall apply to and govern
meetings of members of a domestic mutual insurer and, to the extent
applicable, meetings of subscribers of a domestic reciprocal insurer:

(1) Unless the notice of the meeting is by personal mail or
delivery to the members, or as provided in subsection (5) of this
section, the annual meeting, and all special meetings of members shall be
held at or in the immediate vicinity of the home office of the insurer.

(2) In lieu of personal notice mailed or delivered to members,
notice of the annual meeting or of a special meeting of members may be
given by publishing a notice thereof once a week for two consecutive
weeks in the newspaper with the largest general circulation in this state
and, if the home office is located outside the city of such newspaper,
then also in the newspaper with the largest general circulation published
at or nearest the home office city of the insurer. The published notice
shall state the time and place of the meeting and the matters to be
presented and considered and, if a special meeting, shall also state the
purpose for which it is called. The date of the first publication thereof
shall be not less than 20 nor more than 50 days prior to the meeting date.

(3) A copy of the meeting notice mailed, delivered or published
shall be mailed or delivered to the Director of the Department of
Consumer and Business Services at least 20 days prior to the meeting
date. The director may attend any such meeting.

(4) The date and time of the annual meeting shall be set forth in
the bylaws. Such date and time and location of the home office of the
insurer shall be set forth in the policy issued to the member or in a
notice forwarded to the policyholder within 30 days after the issuance of
the policy. If the date or time of such meeting is changed by amendment
to the bylaws, which amendment may be adopted in the same manner as any
other amendment to the bylaws, there shall be mailed or delivered to each
member not less than 30 days before the date of the annual meeting, the
date or time of which has been changed, a notice of the change thereof.
Such a notice may be given by policy or policy indorsement or by a
separate notice document.

(5) Notwithstanding the provisions of subsections (1) to (4) of
this section, if the director finds, after inquiry and investigation,
that the operations of an insurer are not financially sound or that its
management is not acting in a sound and prudent manner for the benefit of
the members or that certain practices and procedures of or involving the
insurer’s operations or management ought to be presented to the members,
the director may direct that the insurer call a special meeting for such
purpose or that such matters be put on the agenda at an annual meeting.
In such case, the director may further direct that notice of such meeting
be given in the manner prescribed in ORS 60.214. The notice shall also
state that the special meeting is called, or that the particular matters
are included on the agenda of the regular meeting, at the direction of
the director.

(6) The members present in person or represented by proxy shall
constitute a quorum at a duly called meeting of members. The affirmative
vote of a majority of members voting on any matter presented at such
meeting shall constitute the act of the members unless the voting of a
greater number is required by law or the insurer’s articles of
incorporation or bylaws. [1967 c.359 §193; 1971 c.231 §43; 1987 c.846 §9]A copy of the bylaws of a domestic mutual
insurer, including any amendments, shall be provided to the Director of
the Department of Consumer and Business Services. The bylaws of a mutual
insurer may contain any provision for managing the business and
regulating the affairs of the insurer that is not inconsistent with law
or the articles of incorporation. The bylaws shall contain a provision
that governs the involvement of the mutual insurer in a member’s
communication with other members regarding the business and affairs of
the insurer. The bylaws may contain a provision eliminating or limiting
the personal liability of a member of the board of directors to the
mutual insurer or its members for monetary damages for conduct as a
director, provided that no such provision may eliminate or limit the
liability of a director for any act or omission occurring prior to the
date when such provision becomes effective and no such provision may
eliminate or limit the liability of a director for:

(1) Any breach of the director’s duty of loyalty to the mutual
insurer or its members;

(2) Acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;

(3) Any unlawful distribution; or

(4) Any transaction from which the director derived an improper
personal benefit. [2001 c.352 §4]ACQUISITIONS AND MERGERS The purpose of ORS
732.517 to 732.546 is that of regulating the control or ownership of an
insurer or of an insurance holding company system. A further purpose of
ORS 732.517 to 732.546 is that of promoting the public interest and the
interests of policyholders and shareholders by facilitating, consistent
with those interests, better use of management skills and services,
diversification through acquisitions, free access to capital markets,
sound tax planning and open competition. [1983 c.498 §5; 1993 c.447 §25] As used in ORS
732.517 to 732.546:

(1) “Acquiring party” means each person by whom or on whose behalf
an acquisition of control referred to in ORS 732.521 (1)(a), a merger or
other acquisition of control referred to in ORS 732.521 (1)(b) or an
activity referred to in ORS 732.521 (1)(c) is to be effected. The term
includes any intermediary or subsidiary corporation or insurer who
acquires or holds, directly or indirectly, the assets or voting
securities or assumes the liabilities of an insurer or other corporation.

(2) A “domestic insurer” includes any person controlling a domestic
insurer.

(3) “Person” does not include any securities broker holding, in the
usual and customary broker’s function, less than 20 percent of the voting
securities of an insurer or of any person that controls an insurer.

(4) “A significant portion” means, when acquired in one transaction
or in a related or integrated series of transactions, within any 12
consecutive month period, 10 percent or more of the following:

(a) The assets of the insurer; or

(b) The insurance or a major class of insurance in force of the
insurer. [1993 c.447 §26](1) Unless the provisions of ORS 732.517 to 732.546
are first satisfied, a person shall not engage in any of the activities
described in this subsection as follows:

(a) A person other than the issuer of voting securities of a
domestic insurer shall not acquire or attempt to acquire control of the
domestic insurer. For purposes of this paragraph, a person acquires or
attempts to acquire control of a domestic insurer when the person engages
in any of the actions described in this paragraph, in the open market or
otherwise, and if after consummation thereof the person would directly or
indirectly, or by conversion or by exercise of any right to acquire, be
in control of the domestic insurer. The actions are as follows:

(A) Making a tender offer for or a request or invitation for
tenders of any voting security of the domestic insurer;

(B) Entering into any agreement to exchange securities for any
voting security of the domestic insurer; or

(C) Acquiring or seeking to acquire any voting security of the
domestic insurer.

(b) A person shall not enter into an agreement to merge with or
otherwise acquire control of a domestic insurer.

(c) A person shall not engage or attempt to engage in any of the
following activities:

(A) Acquiring, directly or indirectly, ownership of all or a
significant portion of the assets of a domestic insurer. For purposes of
this subparagraph, such an acquisition includes an offer, a request or
invitation for offers, an acquisition or series of acquisitions in the
open market, an exchange offer or agreement, an agreement providing an
option to purchase, or a purchase of or offer to purchase securities
convertible into voting securities.

(B) Bulk reinsurance by one insurer of all or a significant portion
of the insurance, or a major class of such insurance, in force with
another insurer or related or affiliated group of insurers. The
provisions of this subparagraph do not apply to ordinary or customary
reinsurance, or reinsurance pursuant to a treaty or treaties approved by
the director.

(C) Any other arrangement that brings together under common
ownership, control or responsibility all or a significant portion of the
assets, liabilities or insurance in force of two or more persons, at
least one of which is a domestic insurer.

(2) The provisions of subsection (1) of this section do not apply
to any offer, request, invitation, agreement or acquisition exempted by
the Director of the Department of Consumer and Business Services by order
as:

(a) Not having been made or entered into for the purpose and not
having the effect of changing or influencing the control or ownership of
a domestic insurer; or

(b) Otherwise not comprehended within the purposes of subsection
(1) of this section.

(3) Subject to the requirements of ORS 732.517 to 732.546, a
domestic stock insurer, domestic mutual insurer, domestic reciprocal
insurer or domestic health care service contractor that is a corporation
for profit may merge or consolidate with a stock insurer, mutual insurer,
reciprocal insurer or health care service contractor that is a
corporation for profit. [1993 c.447 §§27,28; 1997 c.771 §19; 1999 c.362
§65](1) An acquiring party:

(a) Must file with the Director of the Department of Consumer and
Business Services for approval a statement containing the information
required in this section. If more than one acquiring party is required to
file a statement under this paragraph, any or all such parties acting in
concert may file a joint statement.

(b) Must deliver or mail to the domestic insurer to which the
activity described in ORS 732.521 (1) applies, concurrently with filing
the statement under paragraph (a) of this subsection, a statement
containing the information required by this section. A statement mailed
under this paragraph shall be sent by certified mail, return receipt
requested. If a joint statement is filed under paragraph (a) of this
subsection, the joint statement shall be the statement mailed or
delivered under this paragraph.

(2) The statement to be filed with the director under this section
shall be made under oath or affirmation and shall contain the following
information:

(a) The name and address of the domestic insurer involved and each
acquiring party required to file the statement, and additional
biographical and business information about each acquiring party required
to file the statement, business plans and information regarding persons
who will serve as or perform functions of directors or officers, as
required by the director.

(b) The source, nature and amount of the consideration used or to
be used in effecting the activity, a description of any transaction in
which funds were or are to be obtained for the activity and the identity
of persons furnishing the consideration. However, when a source of
consideration is a loan made in the lender’s ordinary course of business,
the identity of the lender shall remain confidential as provided in ORS
705.137, if the acquiring party filing the statement so requests.

(c) Fully audited financial information as to the earnings and
financial condition of each acquiring party for the preceding five fiscal
years of the acquiring party, or for such lesser period as the acquiring
party and any predecessors of the acquiring party have been in existence,
and similar unaudited information as of a date not earlier than 90 days
prior to the filing of the statement.

(d) Any plan or proposals of each acquiring party required to file
a statement to liquidate the insurer, to sell its assets or merge or
consolidate it with any person, or to make any other material change in
its business or corporate structure or management.

(e) As required by the director, information regarding shares to be
acquired by an acquiring party in connection with the activity,
information regarding related offers or agreements, information regarding
classes of security to be acquired and related contracts, arrangements or
understandings, and information regarding related purchases of securities
and recommendations to purchase.

(f) Any additional information required by the director.

(3) All requests or invitations for tenders or advertisements
making a tender offer or requesting or inviting tenders of securities for
control of a domestic insurer made by or on behalf of any acquiring party
required to file the statement under this section shall contain such
information specified in subsection (2) of this section as the director
may prescribe. Copies of the materials shall be filed with the director
at least 10 days prior to the time the materials are first published or
sent or given to security holders. Any additional materials soliciting or
requesting the tenders subsequent to the initial solicitation or request
shall contain such information as the director may prescribe. Copies of
the additional materials shall be filed with the director at least 10
days prior to the time the materials are first published or sent or given
to security holders.

(4) If any acquiring party required to file the statement under
this section is a partnership, limited partnership, syndicate or other
group, the director may require that the information called for by
subsection (2) of this section be given with respect to each partner of
the partnership or limited partnership, each member of the syndicate or
group and each person who controls the partner or member. If any such
partner, member or person is a corporation or if the acquiring party is a
corporation, the director may require that the information called for by
subsection (2) of this section be given with respect to the corporation
and each officer and director of the corporation and each person who is
directly or indirectly the beneficial owner of more than 10 percent of
the outstanding securities of the corporation.

(5) If any material change occurs in the facts set forth in the
statement filed under this section, the party who filed the statement
must file with the director and send to the insurer, within two business
days after the party learns of the change, an amendment setting forth the
change together with copies of all documents and other material relevant
to the change.

(6) If an offer, request, invitation, agreement or acquisition
referred to in ORS 732.521 (1) is proposed to be made by means of a
registration statement under the Securities Act of 1933 or in
circumstances requiring the disclosure of similar information under the
Securities Exchange Act of 1934, or under a state law requiring similar
registration or disclosure, the party or parties required to file the
statement under this section may use such documents in furnishing the
information called for by that statement.

(7) Any acquiring party may file with the completed statement or
within 10 days thereafter a written request for a hearing on the
acquisition. The insurer to be acquired may file with the director a
written request for a hearing on the acquisition within 10 days after the
filing of the completed statement. [1983 c.498 §9; 1993 c.447 §29; 1995
c.79 §359; 2001 c.377 §10] (1) If a written
request for a hearing has been duly filed or if, within 10 days after the
filing of a completed statement, the Director of the Department of
Consumer and Business Services considers it necessary or advisable to
hold a hearing, the director shall direct that a hearing be held.

(2) The hearing shall be held within 30 days after the filing of
the written request for hearing or within 30 days after the director’s
order directing that a hearing be held, at a time and place designated by
the director. One or more of the insurers or other parties to the
proposed activity shall give notice as required by the director to
parties designated by the director. The acquiring party shall bear the
expense of providing the notice and, as security for the payment of the
expense, shall file with the director a bond or other deposit in a form
and amount acceptable to the director. [Formerly 732.535](1) The Director of the Department of Consumer and Business
Services shall approve the proposed activity described in ORS 732.521 (1)
not later than the 60th day before the effective date of the activity
unless the director finds that any of the grounds specified in this
subsection apply to the proposed activity. The grounds upon which the
director may refuse to approve a proposed activity are as follows:

(a) The activity is contrary to law or would result in a prohibited
combination of risks or classes of insurance.

(b) The activity is inequitable or unfair to the policyholders or
shareholders of any insurer involved or to any other person affected by
the proposed activity. However, in connection with an acquisition of the
voting securities of an insurer from the shareholders of the insurer, the
director shall evaluate the fairness of the proposed acquisition to the
shareholders of the insurer to be acquired only with respect to any
shareholders remaining after consummation of the acquisition who are
unaffiliated with the acquiring party or parties.

(c) The activity would substantially reduce the security of and
service to be rendered to policyholders of any domestic insurer involved,
or would otherwise prejudice the interests of such policyholders in this
state or elsewhere.

(d) The activity provides for a foreign or alien insurer to be an
acquiring party, and the director further finds that the insurer cannot
satisfy the requirements of this state for transacting an insurance
business involving the classes of insurance affected by the activity.

(e) The activity or its consummation would substantially lessen
competition in insurance in this state or tend to create a monopoly.

(f) After the change of control or ownership, the domestic insurer
to which the activity described in ORS 732.521 (1) applies would not be
able to satisfy the requirements for the issuance of a certificate of
authority to transact the line or lines of insurance for which it is
currently authorized.

(g) The financial condition of any acquiring party might jeopardize
the financial stability of the insurer.

(h) The plans or proposals that the acquiring party has to
liquidate the insurer, sell its assets or consolidate or merge it with
any person, or to make any other material change in its business or
corporate structure or management, are unfair and unreasonable to
policyholders of the insurer and not in the public interest.

(i) The competence, experience and integrity of those persons who
would control the operation of the insurer are such that it would not be
in the interest of policyholders of the insurer and of the public to
permit the activity or its consummation.

(j) The activity or its consummation is likely to be hazardous or
prejudicial to the insurance-buying public.

(k) The activity is subject to other material and reasonable
objections.

(2) If the director does not approve the proposed activity, the
director shall promptly notify each insurer and each acquiring party to
the proposed activity in writing, specifying the bases, factors and
reasons for the disapproval and giving each insurer and each acquiring
party who filed the statement relating to the proposed activity an
opportunity to amend the statement, if possible, to obviate the
director’s objections.

(3) Any amendment to the statement filed under ORS 732.523 pursuant
to the director’s objection shall be filed by the acquiring party or
parties filing the statement and, if a hearing was held on the proposed
activity, shall be resubmitted at a hearing held pursuant to this section
unless the director finds that such a hearing is not necessary for the
protection of the policyholders, shareholders or any other person
affected by the proposed activity.

(4) The director may retain at the acquiring person’s expense any
actuaries, accountants and other experts not otherwise a part of the
director’s staff as may be reasonably necessary to assist the director in
reviewing the proposed activity.

(5) The director may establish the effective date of an activity to
which ORS 732.521 (1) applies in the order approving the activity.

(6) Any insurer or other party to a proposed activity, including
the insurer proposed to be acquired, within 60 days after receipt of a
notice of approval or disapproval, may appeal the final order of the
director as provided in ORS chapter 183. For purposes of the judicial
review the specifications required to be set forth in the written notice
from the director shall be deemed the findings of fact and conclusions of
law of the department.

(7) On petition to the court, the court’s power shall extend to
affirming the order of the director, modifying all or any part of the
director’s objections, adding additional objections, approving the
proposed activity as submitted or subject to such modifications or
changes as the court may find proper, and requiring resubmission to the
boards of directors or other governing bodies or for hearing as provided
in ORS 732.526. [Formerly 732.540; 2001 c.377 §37; 2003 c.802 §169](1) Following approval of a proposed activity by the Director
of the Department of Consumer and Business Services or pursuant to a
court order or judgment, the proposed activity shall be submitted for
approval to the members of a domestic mutual insurer, the subscribers of
a domestic reciprocal insurer or the shareholders of a domestic stock
insurer.

(2) A notice of the meeting at which the proposed activity will be
submitted for approval shall set forth the time, place and purpose of the
meeting. The notice, the procedure to be followed at the meeting, quorum
requirements and voting at the meeting shall be governed by the
provisions in the Insurance Code and the articles of incorporation and
bylaws of the insurer applicable to annual or special meetings of
members, subscribers or shareholders. The notice of the meeting must
contain or be accompanied by a copy or summary of the statement filed
under ORS 732.523.

(3)(a) Unless the articles of incorporation require a greater
number of affirmative votes, the proposed activity is approved:

(A) By the subscribers of a domestic reciprocal insurer or the
shareholders of a domestic stock insurer entitled to vote at a meeting
duly called and held if the votes cast in favor of the proposed activity
exceed the votes cast opposing the proposed activity; or

(B) By the members of a domestic mutual insurer entitled to vote at
a meeting duly called and held if the proposed activity is approved by
two-thirds or more of the members voting on the proposed activity.

(b) If provided in the statement filed under ORS 732.523 and
approved by the director, voting on the proposed activity by the members
of a domestic mutual insurer may be limited to eligible members
determined in accordance with ORS 732.531 (2), and voting on the proposed
activity by the subscribers of a domestic reciprocal insurer may be
limited to eligible subscribers determined in accordance with ORS 732.531
(2).

(c) The board of directors of a domestic mutual insurer may
condition its submission of the proposed activity to the members on any
legal basis.

(4) If the proposed activity is approved by the members,
subscribers or shareholders in accordance with this section and the
activity is consummated, the activity shall bind all members of a
domestic mutual insurer, all subscribers of a domestic reciprocal insurer
and all shareholders of a domestic stock insurer.

(5) Dissenters’ rights provided in ORS 60.551 to 60.594 are not
available to any member of a domestic mutual insurer or any subscriber of
a domestic reciprocal insurer with respect to an activity that is subject
to the approval of the director.

(6) An insurer, other than a domestic insurer, or another
corporation that is a party to a proposed activity described in a
statement filed under ORS 732.523 is subject to the laws of its
domiciliary jurisdiction governing approval of its members, subscribers
or shareholders. [1997 c.771 §22; 2001 c.352 §1; 2003 c.576 §554](1) If a statement filed under ORS 732.523 will result in the
acquisition by a stock insurer of all or a significant portion of the
assets of a domestic mutual insurer or domestic reciprocal insurer, or
reinsurance in a stock insurer of all or a significant portion of the
insurance in force of a domestic mutual insurer or domestic reciprocal
insurer, the plan must provide for consideration to each eligible member
of the domestic mutual insurer or each eligible subscriber of the
domestic reciprocal insurer as provided in this section.

(2) A member of a domestic mutual insurer or a subscriber of a
domestic reciprocal insurer shall be an eligible member or eligible
subscriber if the policy of the member or subscriber is in force as of
the record date, which is the date that the board of directors of the
domestic mutual insurer or the domestic reciprocal insurer approves the
proposed activity or some other date specified as the record date in the
statement and approved by the Director of the Department of Consumer and
Business Services.

(3) Any consideration to be received by the eligible members or
eligible subscribers shall be described in the statement. The
consideration shall be allocated among the eligible members or eligible
subscribers in the manner described in ORS 732.612 (6) if the domestic
mutual insurer or domestic reciprocal insurer transacts primarily life or
health insurance, or both. The consideration shall be allocated among the
eligible members or eligible subscribers in the manner described in ORS
732.612 (7) if the domestic mutual insurer or domestic reciprocal insurer
transacts primarily property or casualty insurance, or both. The
allocation of the consideration among the eligible members or eligible
subscribers shall be approved by the director.

(4) If the proposed activity described in the statement is
primarily a plan to convert the domestic mutual insurer or domestic
reciprocal insurer to a stock insurer, the director may require that the
proposed activity be governed by ORS 732.600 to 732.630. [Formerly
732.550; 1997 c.771 §20] Not later than the 30th day after
consummation of an activity described in ORS 732.521 (1), the acquiring
party shall submit to the Director of the Department of Consumer and
Business Services a statement that the activity has been consummated. The
statement must be made under the oath of the presiding officer of the
board of directors of the acquiring party. [1993 c.447 §33] (1) The action taken
by any foreign or alien insurer or other party to the proposed activity
described in ORS 732.521 (1) must be authorized by the laws of the state,
country or province under which it is incorporated or organized, and each
foreign or alien insurer or other party must satisfy and comply with any
applicable laws thereof and with the provisions of its articles of
incorporation and bylaws.

(2) If a foreign or alien insurer or other party to the proposed
activity is to be the acquiring, surviving, resulting or continuing
insurer, it must qualify for and receive a certificate of authority to
transact insurance in this state. [Formerly 732.560] (1) When a merger or
consolidation becomes effective, the effect on the insurers and other
parties to the merger or consolidation is as follows:

(a) The several insurers and other parties to the plan of merger or
consolidation shall be a single insurer or other corporation, which, in
the case of a merger, shall be that insurer or other corporation
designated in the plan of merger as the surviving insurer or corporation,
and, in the case of a consolidation, shall be the new insurer or other
corporation provided for in the plan of consolidation.

(b) The separate existence of all insurers and other corporations
party to the plan of merger or consolidation, except the surviving or new
insurer or other corporation, shall cease.

(c) The surviving or new insurer or other corporation shall have
all the rights, privileges, immunities and powers and shall be subject to
all the duties and liabilities of an insurer organized under this
chapter. If the surviving corporation is a health care service
contractor, the corporation shall be subject to all the duties and
liabilities of a health care service contractor under the Insurance Code.

(d) The surviving or new insurer or other corporation shall
thereupon and thereafter possess all the rights, privileges, immunities
and franchises, as well of a public as of a private nature, of each of
the merging or consolidating insurers and other corporations. All
property, real, personal and mixed, and all debts due on whatever
account, including subscriptions to shares, and all other choses in
action, and all and every other interest, of or belonging to or due to
each of the insurers and other corporations so merged or consolidated,
shall be taken and deemed to be transferred to and vested in the single
insurer or corporation without further act or deed. The title to any real
estate, or any interest therein, vested in any of such insurers and other
corporations shall not revert or be in any way impaired by reason of the
merger or consolidation.

(e) The surviving or new insurer or other corporation shall
thenceforth be responsible and liable for all the liabilities and
obligations of each of the insurers and other corporations so merged or
consolidated. Any claim existing or action or proceeding pending by or
against any of such insurers or other corporations may be prosecuted as
if the merger or consolidation had not taken place, or such surviving or
new insurer or other corporation may be substituted in its place. Neither
the rights of creditors nor any liens upon the property of any such
insurer or other corporation shall be impaired by such merger or
consolidation.

(f) In the case of a merger, the articles of incorporation of the
surviving insurer or other corporation shall be deemed to be amended to
the extent, if any, that changes in its articles of incorporation are
stated in the plan of merger. In the case of a consolidation, the
statements set forth in the articles of consolidation that are required
or permitted to be set forth in the articles of incorporation of
corporations organized under ORS chapter 60 shall be deemed to be the
original articles of incorporation of the new corporation.

(2) Subject to any shareholder rights under ORS 60.554 and 60.557,
when a merger or consolidation becomes effective, in the case of an
insurer or other corporation that has ceased to exist because of a merger
or consolidation, the shares of that insurer or other corporation that
are to be converted under the plan of merger or consolidation are void.

(3) As of the date on which a merger or consolidation becomes
effective, the holders of converted shares are entitled only to the
shares, obligations, other securities, cash or other property into which
the shares have been converted in accordance with the plan of merger or
consolidation.

(4) In the event of reinsurance pursuant to the plan, the
applicable provisions of the Insurance Code shall govern the effects
thereof. [Formerly 732.570; 1999 c.362 §66]The courts of this state are vested with jurisdiction over every
person not resident, domiciled or authorized to do business in this state
who is required to file a statement with the Director of the Department
of Consumer and Business Services under ORS 732.523 and over all actions
involving such a person arising out of violations of ORS 732.517 to
732.546. Each such person shall be considered to have appointed the
director for the purpose of service of process. [Formerly 732.580] (1)
Whenever it appears to the Director of the Department of Consumer and
Business Services that any person has committed or is about to commit a
violation of any provision of ORS 732.517 to 732.546 or of any rule or
order issued by the director under ORS 732.517 to 732.546, the director
may apply to the Circuit Court for Marion County for an order enjoining
the person, and any director, officer, employee or agent of the person,
from the violation, and for such other equitable relief as the nature of
the case and the interests of the policyholders, creditors and
shareholders of any insurer or the public may require.

(2) No security that is the subject of any agreement or arrangement
regarding acquisition, or that is acquired or to be acquired, in
contravention of ORS 732.517 to 732.546 or of any rule or order issued by
the director under ORS 732.517 to 732.546, may be voted at any
shareholder’s meeting, or may be counted for quorum purposes, and any
action of shareholders requiring the affirmative vote of a percentage of
shares may be taken as though such securities were not issued and
outstanding. However, no action taken at any such meeting shall be
invalidated by the voting of such securities unless the action would
materially affect control of the insurer or unless the courts of this
state have so ordered. If an insurer or the director has reason to
believe that any security of the insurer has been or is about to be
acquired in contravention of ORS 732.517 to 732.546 or any rule or order
issued by the director under ORS 732.517 to 732.546, the insurer or the
director may apply to the Circuit Court for Marion County, or to the
circuit court for the county in which the insurer has its principal place
of business in this state, if any, to enjoin the violation, to enjoin the
voting of any security so acquired, to void any vote of such security
already cast at any meeting of shareholders, and for such other equitable
relief as the nature of the case and the interests of the insurer’s
policyholders, creditors and shareholders or the public may require.

(3) In any case in which a person has acquired or is proposing to
acquire any voting securities of an insurer in violation of ORS 732.517
to 732.546 or any rule or order issued by the director under ORS 732.517
to 732.546, the Circuit Court for Marion County, or the circuit court for
the county in which the insurer has its principal place of business in
this state, if any, upon the application of the insurer or the director
and on such notice as the court deems appropriate, may seize or sequester
any voting securities of the insurer owned directly or indirectly by the
person, and issue any order with respect to the voting securities as may
be appropriate to effect the provisions of ORS 732.517 to 732.546.
Notwithstanding any other provision of law, for the purposes of this
section, the situs of the ownership of the securities of domestic
insurers is located in this state.

(4) The director may exercise remedies available under this section
in addition to or in lieu of any other remedy or administrative action
available to the director under the Insurance Code. [Formerly 732.590]If any provision of ORS 732.517 to 732.546 or
the application thereof to any person or circumstance is held invalid,
such invalidity shall not affect other provisions or applications of ORS
732.517 to 732.546 which can be given effect without the invalid
provision or application, and to this end the provisions of ORS 732.517
to 732.546 are declared to be severable. [Formerly 732.595]INSURANCE HOLDING COMPANY REGISTRATION As used in ORS
732.517 to 732.592:

(1) “Affiliate” of, or person “affiliated” with, a specified person
means a person that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control
with, the person specified.

(2) “Control,” including its use in the terms “controlling,”
“controlled,” “controlled by” and “under common control with,” means the
possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of a person, whether through the
ownership of voting securities, by contract other than a commercial
contract for goods or nonmanagement services, or otherwise, unless the
power is the result of an official position with or corporate office held
by the person. Control shall be presumed to exist if any person, directly
or indirectly, owns, controls, holds with the power to vote, or holds
proxies representing, 10 percent or more of the voting securities of any
other person. This presumption may be rebutted by a showing made in the
manner provided by ORS 732.568 that control does not exist in fact. The
Director of the Department of Consumer and Business Services may
determine, after furnishing all persons in interest notice and
opportunity to be heard and making specific findings of fact to support
such determination, that control exists in fact, notwithstanding the
absence of a presumption to that effect.

(3) “Insurance holding company system” means two or more affiliated
persons, one or more of which is an insurer, and includes a financial
holding company as referred to in section 103 of the federal
Gramm-Leach-Bliley Act (P.L. 106-102).

(4) A “subsidiary” of a specified person is an affiliate controlled
by the specified person directly or indirectly through one or more
intermediaries.

(5) A “voting security” includes any security convertible into a
voting security or evidencing a right to acquire a voting security.
[Formerly 732.605; 2001 c.377 §38] (1) A domestic insurer, either by itself or
in cooperation with one or more persons, may organize or acquire one or
more subsidiaries engaged only in one or more of the kinds of business
described in ORS 733.635.

(2) If an insurer ceases to control a subsidiary, the insurer must
dispose of any investment in the subsidiary made pursuant to this section
within three years after the time of the cessation of control or within
such further time as the Director of the Department of Consumer and
Business Services may prescribe, unless at any time after the investment
was made, the investment meets the requirements for investment under any
other provision of the Insurance Code and the insurer has notified the
director of that fact. [1993 c.447 §24]
(1) Every authorized insurer that is a member of an insurance holding
company system shall register with the Director of the Department of
Consumer and Business Services as provided in this section. A foreign
insurer need not register if the foreign insurer is subject to
registration requirements and standards adopted by statute or rule in the
jurisdiction of its domicile that are substantially similar to those
contained in:

(a) This section, ORS 732.552, 732.553 and 732.554;

(b) ORS 732.574 (1), 732.576 and 732.582; and

(c) ORS 732.574 (2) or a provision that requires each registered
insurer to keep current the information required to be disclosed in its
registration statement by reporting all material changes or additions not
later than 15 days after the end of the month in which it learns of each
such change or addition.

(2) An insurer that is subject to registration under this section
shall register not later than 15 days after the date the insurer becomes
subject to registration, and annually thereafter on or before April 30
for the previous calendar year, unless the director for good cause shown
extends the time for registration, and then within such extended time.
The director may require any authorized insurer that is a member of a
holding company system and is not subject to registration under this
section to furnish a copy of the registration statement, the summary
required in ORS 732.552 or other information filed by the insurer with
the insurance regulatory authority of its domiciliary jurisdiction.
[Formerly 732.615] (1) Every insurer
subject to the registration requirements of ORS 732.551 shall file a
registration statement on a form prescribed by the Director of the
Department of Consumer and Business Services. For purposes of the form,
the director shall consider and may prescribe the registration statement
form prescribed by the National Association of Insurance Commissioners.
The registration statement shall contain current information about:

(a) The capital structure, general financial condition, ownership
and management of the insurer and any person controlling the insurer.

(b) The identity and relationship of every member of the insurance
holding company system.

(c) The following agreements in force and transactions currently
outstanding or that have occurred during the last calendar year between
such insurer and its affiliates:

(A) Loans, other investments, or purchases, sales or exchanges of
securities of the affiliates by the insurer or of the insurer by its
affiliates;

(B) Purchases, sales or exchanges of assets;

(C) Transactions not in the ordinary course of business;

(D) Guarantees or undertakings for the benefit of an affiliate that
result in an actual contingent exposure of the insurer’s assets to
liability, other than insurance contracts entered into in the ordinary
course of the insurer’s business;

(E) All management agreements, service contracts and all
cost-sharing arrangements;

(F) Reinsurance agreements;

(G) Dividends and other distributions to shareholders; and

(H) Consolidated tax allocation agreements.

(d) Any pledge of the stock of the insurer, including stock of any
subsidiary or controlling affiliate, for a loan made to any member of the
insurance holding company system.

(e) Other matters concerning transactions between registered
insurers and any affiliates as may be included from time to time in any
registration forms prescribed by the director.

(2) Each registration statement must contain a summary outlining
all items in the current registration statement representing changes from
the prior registration statement. [Formerly 732.625]
Information that is not material for the purposes of registration under
ORS 732.517 to 732.592 need not be disclosed on the registration
statement filed pursuant to ORS 732.552. Unless the Director of the
Department of Consumer and Business Services by rule or order provides
otherwise, sales, purchases, exchanges, loans or extensions of credit,
investments or guarantees involving one-half of one percent or less of an
insurer’s admitted assets as of the December 31 next preceding the date
of the registration statement or amendment shall not be deemed material
for purposes of registration under ORS 732.517 to 732.592. [Formerly
732.635]Each registered insurer shall keep current
the information required to be disclosed on its registration statement by
reporting all material changes or additions on amendment forms prescribed
by the Director of the Department of Consumer and Business Services
within 15 days after the end of the month in which the insurer learns of
each such change or addition. However, except as provided in ORS 732.576,
each registered insurer shall so report all dividends and other
distributions to shareholders within five business days following the
declaration thereof and not less than 10 business days prior to payment
of the dividends and distributions, commencing from the date of receipt
of the report by the director. [Formerly 732.645]Any person within an insurance holding company system subject
to registration shall provide complete and accurate information to an
insurer when such information is necessary to enable the insurer to
comply with the registration requirements of ORS 732.517 to 732.592.
[1993 c.447 §41] The Director of
the Department of Consumer and Business Services shall terminate the
registration of any insurer which demonstrates that it no longer is a
member of an insurance holding company system. [Formerly 732.655] The Director of the Department
of Consumer and Business Services may require or allow two or more
affiliated insurers subject to registration to file a consolidated
registration statement. [Formerly 732.665] The Director of the
Department of Consumer and Business Services may allow an authorized
insurer that is part of an insurance holding company system to register
on behalf of an affiliated insurer that is required to register under ORS
732.551 and to file all information and material required to be filed
under the registration requirements of ORS 732.517 to 732.592. [Formerly
732.675] The
registration requirements of ORS 732.517 to 732.592 do not apply to any
insurer, information or transaction exempted by the Director of the
Department of Consumer and Business Services by rule or order. [Formerly
732.685]Any person may file
with the Director of the Department of Consumer and Business Services a
disclaimer of affiliation with any authorized insurer, or such a
disclaimer may be filed by any insurer or any member of an insurance
holding company system. The disclaimer must fully disclose all material
relationships and bases for affiliation between the person and the
insurer as well as the basis for disclaiming the affiliation. After a
disclaimer has been filed, the insurer shall be relieved of any duty to
register or report under ORS 732.517 to 732.592 that may arise out of the
insurer’s relationship with such person unless the director disallows
such a disclaimer. The director may disallow such a disclaimer only after
furnishing all parties in interest with notice and opportunity to be
heard and after making specific findings of fact to support the
disallowance. [Formerly 732.695] The
Director of the Department of Consumer and Business Services may adopt
rules to carry out ORS 732.517 to 732.592. [Formerly 732.705]STANDARDS AND MANAGEMENT OF INSURER WITHIN AN INSURANCE HOLDING COMPANY
SYSTEM
(1) A transaction within an insurance holding company system to which an
insurer subject to registration is a party is subject to the following
standards:

(a) The terms must be fair and reasonable.

(b) Charges or fees for services performed must be reasonable.

(c) Expenses incurred and payment received must be allocated to the
insurer in conformity with customary insurance accounting practices
consistently applied.

(d) The books, accounts and records of each party to the
transaction must be so maintained as to disclose clearly and accurately
the nature and details of the transaction, including accounting
information necessary to support the reasonableness of the charges or
fees to the respective parties.

(e) The combined capital and surplus of the insurer following any
transaction with an affiliate or any shareholder dividend must be
reasonable in relation to the insurer’s outstanding liabilities and
adequate to its financial needs.

(2) A transaction described in this subsection that involves a
domestic insurer and any person in its insurance holding company system
may be entered into only if the insurer has notified the Director of the
Department of Consumer and Business Services in writing not later than
the 30th day before the transaction, or a shorter period allowed by the
director, of its intention to enter into the transaction and if the
director has not disapproved the transaction within the period. This
subsection does not authorize or permit any transaction that, in the case
of an insurer not a member of the same insurance holding company system,
would be otherwise contrary to law. This subsection applies to the
following transactions:

(a) Sales, purchases, exchanges, loans or extensions of credit,
guarantees or investments, when the transactions equal or exceed the
following:

(A) With respect to insurers not authorized to transact life
insurance, the lesser of three percent of the insurer’s allowed assets or
25 percent of the insurer’s combined capital and surplus, each as of the
31st day of December immediately preceding.

(B) With respect to insurers authorized to transact life insurance,
three percent of the insurer’s allowed assets, as of the 31st day of
December immediately preceding.

(b) Loans or extensions of credit to any person who is not an
affiliate, when the insurer makes the loans or extensions of credit with
the agreement or understanding that the proceeds of the transactions, in
whole or in substantial part, are to be used to make loans or extensions
of credit to, to purchase assets of, or to make investments in any
affiliate of the insurer making such loans or extensions of credit. This
paragraph applies to such transactions that equal or exceed the following:

(A) With respect to insurers not authorized to transact life
insurance, the lesser of three percent of the insurer’s allowed assets or
25 percent of the insurer’s combined capital and surplus, each as of the
31st day of December immediately preceding.

(B) With respect to insurers authorized to transact life insurance,
three percent of the insurer’s allowed assets, as of the 31st day of
December immediately preceding.

(c) Reinsurance agreements or modifications thereto in which the
reinsurance premium or a change in the liabilities of the insurer equals
or exceeds five percent of the insurer’s combined capital and surplus, as
of the 31st day of December immediately preceding, including those
agreements that may require as consideration the transfer of assets from
an insurer to a nonaffiliate if an agreement or understanding exists
between the insurer and nonaffiliate that any portion of such assets will
be transferred to one or more affiliates of the insurer.

(d) All management agreements, service contracts and all
cost-sharing arrangements.

(e) Any material transactions, as specified by rule, that the
director determines may adversely affect the interests of the
policyholders of the insurer.

(3) A domestic insurer may not enter into one or more transactions
during any 12-month period that are part of a plan or series of like
transactions with persons within the insurance holding company system if
the purpose of those separate transactions is to avoid the statutory
threshold amount and thus avoid the review that would occur otherwise.

(4) In reviewing a transaction pursuant to subsection (2) of this
section, the director must consider whether the transaction complies with
the standards set forth in subsection (1) of this section and whether the
transaction may adversely affect the interests of policyholders.

(5) A domestic insurer shall notify the director not later than the
30th day after any investment of the domestic insurer in any one
corporation if the total investment in the corporation by the insurance
holding company system exceeds 10 percent of the voting securities of the
corporation. [1993 c.447 §47] The following provisions of
this section apply to dividends and other distributions within an
insurance holding company system:

(1) A domestic insurer subject to registration shall not pay any
extraordinary dividend or make any other extraordinary distribution to
its shareholders either until 30 days after the Director of the
Department of Consumer and Business Services has received notice of the
declaration thereof if the director has not disapproved the payment
within the 30-day period, or until the date on which the director
approves the payment if approval occurs within the 30-day period.

(2) For purposes of this section, an extraordinary dividend or
distribution includes any dividend or distribution of cash or other
property whose fair market value, together with that of other dividends
or distributions made within the period of 12 consecutive months ending
on the date on which the proposed dividend or other distribution is
scheduled to be paid or made, exceeds the greater of:

(a) Ten percent of the combined capital and surplus of the insurer
as of the 31st day of December immediately preceding; or

(b) The net gain from operations of the insurer after dividends to
policyholders and federal income taxes and before realized capital gains
or losses, if the insurer is authorized to transact life insurance, or
the net income, if the insurer is not authorized to transact life
insurance, for the 12-month period ending the 31st day of December
immediately preceding.

(3) An extraordinary dividend or distribution does not include pro
rata distributions of any class of the insurer’s own securities.

(4) Except as provided in this subsection, a domestic insurer may
declare or pay dividends to shareholders only from earned surplus. A
domestic insurer may declare a dividend from other than earned surplus
only if the director approves the declaration prior to payment of the
dividend.

(5) For purposes of this section, earned surplus does not include
surplus arising from unrealized capital gains or revaluation of assets.

(6) An insurer may declare an extraordinary dividend or
distribution that is conditional upon the director’s approval thereof.
Such a declaration confers no rights upon shareholders until the date on
which the director approves the payment of such a dividend or
distribution or until 30 days after the director received notice of the
declaration thereof under subsection (1) of this section if the director
does not disapprove the payment within the 30-day period. [1993 c.447 §48]Control by any person of a domestic
insurer subject to registration does not relieve the officers and
directors of the insurer of any obligation or liability to which they
would otherwise be subject by law. The insurer must be managed so as to
assure its separate operating identity in accordance with the Insurance
Code. [1993 c.447 §49]For purposes of ORS 732.517 to 732.592, in order to determine
whether the combined capital and surplus is reasonable in relation to the
outstanding liabilities of the insurer and adequate to its financial
needs, the Director of the Department of Consumer and Business Services
must consider at least the applicable factors stated in ORS 731.554 for
determining the reasonableness and adequacy of the insurer’s capital and
surplus. [1993 c.447 §50]EXAMINATIONS, CONFIDENTIALITY, REGULATORY POWERS (1) In addition to other powers of the
Director of the Department of Consumer and Business Services under the
Insurance Code relating to the examination and investigation of insurers,
the director may also order any insurer registered under ORS 732.517 to
732.592 to produce such books, records, accounts, papers, documents and
computer and other recordings in the possession of the insurer or its
affiliates as are necessary to ascertain the financial condition of the
insurer or to determine compliance with the Insurance Code. If the
insurer fails to comply with such an order, the director may examine the
affiliates to obtain such information.

(2) An insurer shall pay the costs of an examination of the insurer
under this section as provided in ORS 731.316. [1993 c.447 §51] (1)
All information, documents and copies thereof obtained by or disclosed to
the Director of the Department of Consumer and Business Services or any
other person in the course of an examination or investigation made
pursuant to ORS 732.584 are subject to the provisions of ORS 731.312.

(2) All information reported pursuant to ORS 732.552, 732.554,
732.574 and 732.576 is confidential and may not be made public except as
provided in this subsection. The director may disclose reported
information only as provided in ORS 705.137. Otherwise, the director may
disclose such reported information only as follows:

(a) If the director obtains the prior written consent of the
insurer to which the reported information pertains; or

(b) If the director, after giving the insurer and its affiliates
who would be affected thereby notice and opportunity to be heard,
determines that the interest of policyholders, shareholders or the public
will be served by the publication thereof. If the director determines
that one or more of such interests will be so served, the director may
publish all or any part thereof in any manner that the director
determines to be appropriate. [1993 c.447 §52; 2001 c.377 §11] If the Director
of the Department of Consumer and Business Services determines that a
violation by any person of any provision of ORS 732.517 to 732.592 so
impairs the financial condition of a domestic insurer as to threaten
insolvency or make the further transaction of business by it hazardous to
its policyholders, creditors, shareholders or the public, the director
may place the insurer under supervision or in rehabilitation or
liquidation as provided in ORS chapter 734. [1993 c.447 §53](1) If an
order for liquidation or rehabilitation of a domestic insurer has been
entered, the receiver appointed under the order may recover, on behalf of
the insurer, from any parent corporation or holding company or person or
affiliate who otherwise controlled the insurer, the amount of
distributions, other than distributions of shares of the same class of
stock, paid by the insurer on its capital stock, or any payment in the
form of a bonus, termination settlement or extraordinary lump sum salary
adjustment made by the insurer or its subsidiary to a director, officer
or employee, when such a distribution or payment is made at any time
during the 12 calendar months preceding the petition for liquidation,
conservation or rehabilitation, as the case may be, subject to the
limitations of subsections (2), (3) and (4) of this section.

(2) A distribution to which subsection (1) of this section applies
is not recoverable if the parent or affiliate shows that the distribution
was lawful and reasonable when paid and that the insurer did not know and
could not reasonably have known that the distribution might adversely
affect the ability of the insurer to fulfill its contractual obligations.

(3) Any person who was a parent corporation or holding company or a
person who otherwise controlled the insurer or affiliate at the time a
distribution to which subsection (1) of this section applies was paid
shall be liable in an amount that is not more than the amount of
distributions or payments received by the person under subsection (1) of
this section. Any person who otherwise controlled the insurer at the time
such distributions were declared shall be liable up to the amount of
distributions the person would have received if the distributions had
been paid immediately. If two or more persons are liable with respect to
the same distributions, they shall be jointly and severally liable.

(4) The maximum amount recoverable under this section is the amount
needed in excess of all other available assets of the impaired or
insolvent insurer to pay the contractual obligations of the impaired or
insolvent insurer and to reimburse any guaranty funds.

(5) To the extent that any person liable under subsection (3) of
this section is insolvent or otherwise fails to pay claims due from the
person pursuant to subsection (3) of this section, its parent corporation
or holding company or other person who otherwise controlled the person
liable under subsection (3) of this section when the distribution was
paid shall be jointly and severally liable for any resulting deficiency
in the amount recovered from the parent corporation or holding company or
person who otherwise controlled it. [1993 c.447 §54; 1995 c.638 §6]CONVERSION OR REORGANIZATION OF DOMESTIC MUTUAL INSURER As used in ORS
732.600 to 732.630:

(1) “Conversion” means the process by which a domestic mutual
insurer is converted to a domestic stock insurer in accordance with ORS
732.600 to 732.630.

(2) “Converted stock insurer” means the domestic stock insurer to
which the domestic mutual insurer is converted in accordance with ORS
732.600 to 732.630.

(3) “Converting mutual insurer” means the domestic mutual insurer
that is converted to a domestic stock insurer in accordance with ORS
732.600 to 732.630.

(4) “Effective date” means, with respect to a plan, the date on
which the plan becomes effective as set forth in an order of the Director
of the Department of Consumer and Business Services. If the plan
establishes different effective dates for separate parts of the plan, the
effective date for a part of a plan is the date on which that part
becomes effective as set forth in an order of the director.

(5) “Intermediate stock holding company” means a corporation that
owns, either directly or through a wholly owned subsidiary, all of the
outstanding shares of capital stock of the converted stock insurer and:

(a) A majority of whose outstanding shares of voting capital stock
are owned by a mutual holding company; and

(b) A majority in total value of whose outstanding shares of
capital stock are owned by a mutual holding company.

(6) “Issuer” means any of the following, and in addition, any other
corporation approved by the director:

(a) With respect to a conversion in which there is no
reorganization, the converted stock insurer.

(b) With respect to a reorganization involving the organization of
a stock holding company, the stock holding company.

(c) With respect to a restructuring, the restructured stock holding
company.

(7) “Member” means:

(a) With respect to a domestic mutual insurer, any owner of one or
more policies of insurance, other than a policy of reinsurance, issued by
the mutual insurer. For purposes of this definition, “owner” has the
meaning given that term in ORS 732.465 (3). A member is an eligible
member of a domestic mutual insurer for purposes of ORS 732.600 to
732.630 if the policy of the member is in force as of the record date for
the plan of conversion or reorganization, which is the date the board of
directors of the mutual insurer adopts the plan or some other date
specified as the record date in the plan and approved by the director.

(b) With respect to a mutual holding company, any owner of one or
more policies of insurance, other than a policy of reinsurance, issued by
the stock insurer resulting from a reorganization involving the
organization of a mutual holding company and, if set forth in an order of
the director, any owner of one or more policies of insurance, other than
a policy of reinsurance, issued by any other insurer that is a direct or
indirect subsidiary of the mutual holding company. For purposes of this
definition, “owner” has the meaning given that term in ORS 732.465 (3). A
member is an eligible member of a mutual holding company for purposes of
ORS 732.622 and 732.624 if the policy of the member is in force as of the
record date for the plan of restructuring, which is the date the board of
directors of the mutual holding company adopts the plan or some other
date specified as the record date in the plan and approved by the
director.

(8) “Membership interest” means:

(a) With respect to a domestic mutual insurer, any right that a
member of the mutual insurer may hold by virtue of membership in the
mutual insurer.

(b) With respect to a mutual holding company, any right that a
member of the mutual holding company may hold by virtue of membership in
the mutual holding company.

(9) “Mutual holding company” means a corporation organized under
the laws of this state in accordance with ORS 732.620.

(10) “Plan” means a plan of conversion, reorganization or
restructuring.

(11) “Reorganization” means the process by which a domestic mutual
insurer is converted to a domestic stock insurer and either a stock
holding company or a mutual holding company is organized in accordance
with ORS 732.600 to 732.630.

(12) “Restructured stock holding company” means the stock holding
company resulting from the restructuring of a mutual holding company.

(13) “Restructuring” means the process by which a mutual holding
company is restructured to a stock holding company in accordance with ORS
732.622 and 732.624.

(14) “Restructuring mutual holding company” means the mutual
holding company that is restructured to a stock holding company.

(15) “Stock holding company” means a corporation that:

(a) Owns, either directly or through one or more subsidiaries, all
or part of the outstanding shares of capital stock of the converted stock
insurer;

(b) Is organized either as a result of a reorganization or as a
result of a restructuring; and

(c) Immediately after the effective date of the reorganization or
restructuring, is not controlled by any other person, as “controlled” is
defined in ORS 732.548, unless the control by such person is set forth in
the plan and approved by the director.

(16) “Voting capital stock” means capital stock whose holder has
the right to vote in the election of directors. Voting capital stock does
not include capital stock as to which the right to vote in the election
of directors is conditional upon the occurrence or nonoccurrence of a
specified event. [1997 c.771 §2]ORS 732.600 to 732.630
are intended to enable a domestic mutual insurer, to the extent
consistent with the interests of its members and the insurance buying
public, to:

(1) Adopt any other type of organizational structure, including a
stock insurer, stock holding company or mutual holding company, that
enhances its financial strength and flexibility; and

(2) Support long-term growth through creative internal strategies,
mergers and acquisitions. [1997 c.771 §17] (1)
A domestic mutual insurer may engage in either of the following actions:

(a) A conversion to a domestic stock insurer; or

(b) A reorganization in which the domestic mutual insurer is
converted to a domestic stock insurer; and

(A) A mutual holding company is organized; or

(B) A stock holding company is organized.

(2) A mutual holding company may restructure into a stock holding
company, as provided in ORS 732.622 and 732.624.

(3) A reorganization involving the organization of a mutual holding
company also may include the organization of an intermediate stock
holding company and any other corporation that is permitted to be
organized under ORS 732.600 to 732.630. A reorganization involving the
organization of a stock holding company also may include the organization
of any other corporation that is permitted to be organized under ORS
732.600 to 732.630.

(4) The Director of the Department of Consumer and Business
Services may adopt rules for any of the following purposes:

(a) Implementing ORS 732.600 to 732.630.

(b) Ensuring full and proper review of any action described in ORS
732.600 to 732.630.

(c) Protecting the rights of policyholders, members and the
insurance-buying public with respect to a conversion, reorganization or
restructuring. [1997 c.771 §3](1) In order for a domestic mutual
insurer to engage in a conversion or reorganization as provided in ORS
732.604, the board of directors of the mutual insurer must adopt a plan
that meets the requirements of ORS 732.610.

(2) After the board of directors of a mutual insurer has adopted a
plan and before the board of directors seeks approval of the plan by the
eligible members of the mutual insurer, the mutual insurer shall file the
following documents with the Director of the Department of Consumer and
Business Services:

(a) The plan of conversion or reorganization.

(b) The form of notice of the meeting at which the eligible members
vote on the plan.

(c) The form of any proxies to be solicited from the eligible
members. Proxies must offer the eligible members the option of voting in
favor or voting against the plan or abstaining.

(d) Information required by ORS 732.523.

(e) Other information or documentation required by the director.

(3) The director shall approve, conditionally approve or disapprove
a plan and other documents submitted under subsection (2) of this
section, according to the standards established in ORS 732.626. The
director must take such action not later than the 60th day after the
director has received a completed filing of the plan and all information
requested by the director or not later than the 30th day after the
completion of a hearing on the plan, whichever date is later.

(4) At any time before approval of a plan by the director, the
board of directors of the mutual insurer may amend or withdraw the plan.

(5) After approval by the director, the plan must be approved by
the eligible members of the mutual insurer. Approval by the eligible
members is subject to the following requirements:

(a) All eligible members must be given notice of the plan and of
their opportunity to vote on the plan. A copy of the plan or a summary of
the plan must accompany the notice. The notice shall be mailed to the
last known address of each eligible member, as shown on the records of
the mutual insurer, not later than the 45th day after approval of the
plan by the director. The meeting of the eligible members at which a vote
on the plan will occur shall be set for a date that is not earlier than
the 30th day after the date on which the mutual insurer mailed the notice
of the meeting. If the mutual insurer complies substantially and in good
faith with the notice requirements of this section, the mutual insurer’s
failure to give any member or members any required notice does not impair
the validity of any action taken under this section.

(b) The vote required for approval must be conducted as provided in
ORS 732.470 and 732.475, except as follows:

(A) Only eligible members may vote on the plan.

(B) An eligible member may vote in person or by proxy at the
meeting at which the plan is voted upon.

(C) The plan is approved by the eligible members upon the
affirmative vote of two-thirds or more of the eligible members voting on
the plan, unless the articles of incorporation require a greater number
of affirmative votes.

(6) The plan shall be carried out in accordance with its terms on
the effective date of the conversion or reorganization. [1997 c.771 §4;
2001 c.352 §2] The Director of the
Department of Consumer and Business Services may waive the requirements
of ORS 732.606 if:

(1) The director determines that a domestic mutual insurer is in
hazardous financial condition according to standards established under
ORS 731.385 or if a rehabilitation or liquidation proceeding or an
administrative supervision proceeding has been instituted against the
insurer; and

(2) The director determines that the transfer of the policies is in
the best interests of the policyholders. [1997 c.771 §16] A plan of conversion or reorganization of
a domestic mutual insurer must include the following:

(1) A statement of the reasons for the proposed action.

(2) A description of how the plan will be carried out, including,
but not limited to, any merger, transfer, assumption, exchange,
acquisition, contribution or other transaction included within the plan
and a description of any stock holding company, mutual holding company,
intermediate stock holding company or other corporation organized
pursuant to the plan.

(3) A description of all significant terms of the conversion or
reorganization.

(4) A description of the overall effect of the plan on policies
issued by the converting mutual insurer. The description must show that
policyholder interests collectively are properly preserved and protected
and that the plan is fair and equitable to the policyholders.

(5) A statement of the manner and method by which membership
interests in the converting mutual insurer will be extinguished and
consideration will be provided to the eligible members in accordance with
ORS 732.612.

(6) The record date for determining whether a member of the
converting mutual insurer is an eligible member.

(7) The proposed effective date of the conversion or reorganization
or the manner in which the proposed effective date of the conversion or
reorganization is established.

(8) 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 stock holding
company, mutual holding company, intermediate stock holding company or
other corporation organized pursuant to the plan.

(9) Except as otherwise provided in ORS 732.612, the valuation of
the converting mutual insurer immediately before the effective date of
the conversion.

(10) A description of the significant terms of any offering of
shares of capital stock or other securities of an issuer.

(11) The intention, if any, that a director or officer of the
converting mutual insurer or converted stock insurer or any stock holding
company, mutual holding company, intermediate stock holding company or
other corporation organized pursuant to the plan may, within the
six-month period following the effective date of the conversion or
reorganization, purchase or acquire shares of capital stock or other
securities of an issuer to be issued pursuant to the plan.

(12) A provision that all policies in force on the effective date
of the conversion or reorganization will remain in force under the terms
of those policies. The plan also must provide that on the effective date
of the conversion or reorganization, any voting rights of the members
provided for under the policies or under the Insurance Code are
extinguished. Except for individual policies of life insurance,
guaranteed renewable health insurance and noncancelable health insurance
issued by the converting mutual insurer, the plan may authorize the
converted stock insurer to issue nonparticipating policies as a
substitute for participating policies upon the renewal dates of the
participating policies.

(13) If applicable, a provision establishing a closed block of
individual policies of life insurance, guaranteed renewable health
insurance and noncancelable health insurance issued by the converting
mutual insurer that are participating policies and in force on the
effective date of the conversion or reorganization and for which the
converting mutual insurer has an experience-based dividend scale payable
in the year in which the plan is adopted by the board of directors of the
converting mutual insurer. The plan may provide for conditions under
which the converted stock insurer may cease to maintain the closed block
and its allocated assets. Regardless of such a cessation, the obligations
under the individual policies constituting the closed block business
remain the obligations of the converted stock insurer. Dividends on those
policies must be apportioned by the board of directors of the converted
stock insurer in accordance with the terms of the policies. Assets of the
insurer must be allocated to the closed block in an amount producing cash
flows that, together with anticipated revenues from the closed block
business, are expected to be sufficient to support the closed block
business, including payment of claims and those expenses and taxes
specified in the plan, and provide for continuation of dividend scales in
effect on the effective date if the experience underlying the dividend
scales continues. The provision establishing the closed block must
provide for appropriate adjustments in the dividend scales if the
experience changes. [1997 c.771 §5](1) In the case of a conversion or in the case of a
reorganization involving the organization of a stock holding company,
consideration for the membership interests of the eligible members of a
converting mutual insurer shall consist of one or any combination of the
following:

(a) Nontransferable subscription rights to purchase shares of
capital stock of the issuer as described in subsection (2) of this
section;

(b) Shares of capital stock of the issuer as described in
subsection (3) of this section;

(c) Cash;

(d) Premium credits;

(e) In the case of a converting mutual insurer transacting
primarily property or casualty insurance, or both, certificates of
contribution that bear interest as established in the plan, that are
repayable within 10 years or, if approved by the Director of the
Department of Consumer and Business Services, within a longer period and
that are repayable on terms set forth in the plan;

(f) In the case of individual policies of life insurance, credits
to policy account values or other enhancements in policy benefits; and

(g) Any other form of consideration described in the plan and
approved by the director.

(2) A plan may provide for allocation to eligible members, without
payment, of nontransferable subscription rights to purchase shares of
capital stock of the issuer, and the plan shall contain the following
provisions:

(a) The plan must allocate the subscription rights in whole shares
among the eligible members. In the case of a converting mutual insurer
transacting primarily life or health insurance, or both, the subscription
rights shall be allocated in accordance with subsection (6) of this
section. In the case of a converting mutual insurer transacting primarily
property or casualty insurance, or both, the subscription rights shall be
allocated in accordance with subsection (7) of this section.

(b) The plan must specify the expiration date of the subscription
rights or authorize the board of directors of the converting mutual
insurer to establish the expiration date. The subscription rights may be
exercised, in whole or in part, by an eligible member in the manner
described in the plan including, but not limited to, the payment of the
subscription exercise price for the shares purchased. The plan may
require an eligible member who exercises subscription rights to purchase
a minimum number of shares unless the director determines that such
minimum purchase requirement is unreasonable based on the interests of
the eligible members, the converted stock insurer and the issuer. The
proposed subscription exercise price per share shall be set forth in the
plan and shall be less than the price at which shares of capital stock of
the issuer will be first offered in accordance with paragraph (e) of this
subsection. The proposed subscription exercise price per share shall be
determined by the boards of directors of the converting mutual insurer
and the issuer and shall be approved by the director based on the
interests of the eligible members, the policyholders, the converted stock
insurer and the issuer.

(c) The plan must provide that to the extent an eligible member
does not exercise, in whole or in part, subscription rights allocated to
the eligible member, the eligible member instead will receive one or more
of the forms of consideration described in subsection (1) of this section
that are specified in the plan.

(d) The plan must set the pro forma market value of the converted
stock insurer, which is the value that is estimated to be necessary to
attract full subscription for all shares offered by the issuer. The pro
forma market value of the converted stock insurer shall be determined by
an independent valuation by a qualified person. The price per share at
which the shares of capital stock of the issuer are first offered in
accordance with paragraph (e) of this subsection shall be equal to such
pro forma market value of the converted stock insurer divided by the
number of shares that would be issued if all subscription rights
allocated to the eligible members are exercised.

(e) The plan must further provide that any shares of capital stock
of the issuer for which subscription rights are allocated to the eligible
members but which are not purchased by the eligible members pursuant to
the exercise of such subscription rights must be sold in a public
offering through an underwriter, unless the number of shares that are not
purchased by the eligible members is so small in number so as not to
warrant the expense of a public offering, in which case the plan may
provide for the sale of such shares by private placement or through any
other fair and equitable means approved by the director. If the director
finds that market conditions or other circumstances may cause the
interests of the eligible members to be adversely affected, the director
may require such offering of shares to be postponed or the terms of such
offering to be modified.

(3) A plan may provide for the allocation to the eligible members,
without payment, of shares of capital stock of the issuer. The plan must
allocate the shares of capital stock of the issuer in whole shares among
the eligible members. In the case of a converting mutual insurer
transacting primarily life or health insurance, or both, the shares shall
be allocated in accordance with subsection (6) of this section. In the
case of a converting mutual insurer transacting primarily property or
casualty insurance, or both, the shares shall be allocated in accordance
with subsection (7) of this section. If shares of capital stock of the
issuer constitute the only consideration to be received by the eligible
members and the plan does not provide for the sale of additional shares
of capital stock or other securities of the issuer, the plan does not
need to include the valuation of the converting mutual insurer. If the
plan provides for the allocation to the eligible members, without
payment, of shares of capital stock of the issuer, the plan may establish
a reasonable period within which the eligible members to whom such shares
are issued may not dispose of such shares.

(4) If shares of capital stock of the issuer are issued in
accordance with subsection (2) or (3) of this section, the issuer must
use its best efforts to encourage and assist in the establishment of a
public market for such shares unless the director finds that such public
market is not feasible or is not in the best interests of the eligible
members, the converted stock insurer and the issuer. The director may
provide that subscription rights or shares of capital stock of the issuer
do not need to be allocated under subsection (2) or (3) of this section
to eligible members residing in a foreign country or other jurisdiction
if there is a small number of eligible members residing in such foreign
country or other jurisdiction and any registration, qualification, filing
or other compliance matters under the laws of such foreign country or
other jurisdiction with respect to the shares of capital stock of the
issuer would be impracticable or unduly burdensome upon the issuer.

(5) Regardless of the form of consideration for the membership
interests of the eligible members of a converting mutual insurer, the
plan may provide for the sale of additional shares of capital stock or
other securities of the issuer to persons other than the eligible
members. The issuer shall offer such additional shares or other
securities at a price and on terms determined by the boards of directors
of the converting mutual insurer and the issuer.

(6) For a converting mutual insurer transacting primarily life or
health insurance, or both, the consideration specified in subsection (1)
of this section must be allocated among the eligible members pursuant to
a fair and equitable formula. The formula for allocating the
consideration among the eligible members must either:

(a) Allocate a fixed component of consideration per capita among
the eligible members and allocate a variable component of consideration
among the eligible members in proportion to the cash value of policies
held by them; or

(b) Allocate the consideration among the eligible members in any
other manner approved by the director.

(7) For a converting mutual insurer transacting primarily property
or casualty insurance, or both, the consideration specified in subsection
(1) of this section must be allocated among the eligible members pursuant
to a fair and equitable formula. The formula for allocating the
consideration among the eligible members must do either of the following:

(a) Allocate the consideration among the eligible members in the
proportion that the aggregate premiums earned by the converting mutual
insurer on the policies in force of the eligible member during a
specified period before the record date described in ORS 732.600 (7) bear
to the aggregate premiums so earned by the converting mutual insurer
during the same period on all policies in force of all eligible members.
The specified period must be 36 months unless another period is specified
in the plan.

(b) Allocate the consideration among the eligible members in any
other manner approved by the director.

(8) The form of consideration to be given to a class or category of
eligible members may differ from the form of consideration to be given to
another class or category of eligible members. The choice of the form of
consideration to be given to a class or category of eligible members may
take into account the type of policy, size of policy, tax status of the
eligible member and other factors that the director determines are
appropriate.

(9) In the case of a conversion or in the case of a reorganization
involving the organization of a stock holding company, a member of the
converting mutual insurer who is not an eligible member is not entitled
to receive any consideration for the membership interest of such member.

(10) In the case of a reorganization involving the organization of
a mutual holding company, the membership interests of the members of the
converting mutual insurer, whether or not such members are eligible
members, shall be merged into the mutual holding company, and
consequently the membership interests of the members of the converting
mutual insurer shall become membership interests in the mutual holding
company. [1997 c.771 §6] (1) Upon the effective date of a
conversion, the membership interests of all members of the converting
mutual insurer, whether or not eligible members, shall be extinguished,
and the eligible members of the converting mutual insurer shall be
entitled to receive the consideration described in ORS 732.612 in
accordance with the plan.

(2) A converting mutual insurer becomes a stock insurer on the
effective date of the conversion. The amended or restated articles of
incorporation of the converting mutual insurer shall be filed with the
Director of the Department of Consumer and Business Services and shall
become effective on the effective date of the conversion. The certificate
of authority of the converting mutual insurer shall be amended by the
director on the effective date of the conversion.

(3) A converted stock insurer continues the corporate existence of
the converting mutual insurer. Except as provided in the plan, the
conversion does not annul, modify or change any existing license or other
authority or any of the existing civil actions, rights, contracts or
liabilities of the converting mutual insurer. All property, debts and
choses in action and every other interest belonging to the converting
mutual insurer before the conversion are retained by the converted stock
insurer without further action needed. On and after the effective date of
the conversion, the converted stock insurer shall exercise all rights and
powers and perform all duties conferred or imposed by law upon insurers
writing the classes of insurance written by the converted stock insurer,
shall retain the rights and contracts of the converting mutual insurer
existing immediately before the conversion and shall be subject to all
obligations and liabilities of the converting mutual insurer existing
immediately before the conversion, subject to the terms of the plan.

(4) Notwithstanding subsections (2) and (3) of this section, the
conversion may be carried out through any other method described in the
plan and approved by the director.

(5) Unless otherwise specified in the plan, the directors and
officers of the converting mutual insurer shall serve as directors and
officers of the converted stock insurer until new directors and officers
are elected.

(6) The provisions of this section apply to the conversion of the
converting mutual insurer whether or not the conversion is part of a
reorganization. [1997 c.771 §7](1) Upon the effective date of a reorganization
involving the organization of a stock holding company, the membership
interests of all members of the converting mutual insurer, whether or not
eligible members, shall be extinguished, and the eligible members of the
converting mutual insurer shall be entitled to receive the consideration
described in ORS 732.612 in accordance with the plan.

(2) The stock holding company and any direct or indirect subsidiary
of the stock holding company shall be organized at the time or times set
forth in the plan.

(3) As part of the plan of reorganization or in a separate
transaction after the effective date of the reorganization, a stock
holding company may organize one or more direct or indirect subsidiaries
to conduct noninsurance business or businesses. The subsidiaries may be
affiliated with the converted stock insurer or any direct or indirect
parent corporation of the converted stock insurer.

(4) Shares of capital stock or other securities of the converted
stock insurer, the stock holding company or any direct or indirect
subsidiary of the stock holding company may be issued or sold in
accordance with the plan or after the effective date of the
reorganization.

(5) Unless otherwise specified in the plan, the directors and
officers of the converting mutual insurer shall serve as directors and
officers of the stock holding company and any direct or indirect
subsidiary of the stock holding company until new directors and officers
are elected.

(6) The Director of the Department of Consumer and Business
Services retains jurisdiction over the stock holding company and any
direct or indirect subsidiary of the stock holding company as provided in
this section and as provided in ORS 732.517 to 732.592. [1997 c.771 §8](1) Upon the effective date of a reorganization
involving the organization of a mutual holding company, the membership
interests of all members of the converting mutual insurer, whether or not
such members are eligible members, shall be merged into the mutual
holding company. Consequently, the members of the converting mutual
insurer shall become members of the mutual holding company, and the
membership interests of the members of the converting mutual insurer
shall become membership interests in the mutual holding company. Upon the
effective date of the reorganization, the membership interests of all
members of the converting mutual insurer shall be extinguished. Any owner
of one or more policies of insurance, other than a policy of reinsurance,
issued by the converted stock insurer after the effective date of the
conversion and, if set forth in an order of the Director of the
Department of Consumer and Business Services, any owner of one or more
policies of insurance, other than a policy of reinsurance, issued by any
other insurer that is a direct or indirect subsidiary of the mutual
holding company after the effective date of the reorganization becomes a
member of the mutual holding company.

(2) The articles of incorporation of the mutual holding company
shall be filed with the director and shall become effective at the time
specified in the plan. Any intermediate stock holding company and any
subsidiary of an intermediate stock holding company shall be organized at
the time or times set forth in the plan.

(3) Upon the effective date of a reorganization involving the
organization of a mutual holding company either:

(a) All outstanding shares of capital stock of the converted stock
insurer must be issued to the mutual holding company; or

(b) All outstanding shares of capital stock of the intermediate
stock holding company must be issued to the mutual holding company.

(4) If there is no intermediate stock holding company, the mutual
holding company shall own at all times after the effective date of the
reorganization a majority of the outstanding shares of voting capital
stock of the converted stock insurer and a majority of the total value of
all outstanding shares of capital stock of the converted stock insurer.
Subject to such requirement of share ownership by the mutual holding
company in this subsection, shares of capital stock of the converted
stock insurer may be issued by the converted stock insurer or may be sold
or otherwise transferred by the mutual holding company.

(5) If there is an intermediate stock holding company, the mutual
holding company shall own at all times after the effective date of the
reorganization a majority of the outstanding shares of voting capital
stock of the intermediate stock holding company and a majority of the
total value of all outstanding shares of capital stock of the
intermediate stock holding company. At all times after the effective date
of the reorganization, the intermediate stock holding company shall own,
either directly or through a wholly owned subsidiary, all outstanding
shares of capital stock of the converted stock insurer. Subject to such
requirement of share ownership by the mutual holding company and any
intermediate stock holding company in this subsection, shares of capital
stock of the intermediate stock holding company may be issued by the
intermediate stock holding company or may be sold or otherwise
transferred by the mutual holding company.

(6) After the effective date of the reorganization, the mutual
holding company must at all times have the direct or indirect power to
cast at least a majority of the votes for the election of directors of:

(a) The converted stock insurer; and

(b) The intermediate stock holding company, if any.

(7) As part of the plan of reorganization or in a separate
transaction after the effective date of the reorganization, a mutual
holding company may organize or acquire one or more direct or indirect
subsidiaries to conduct noninsurance business or businesses. The
subsidiaries may be affiliated with the converted stock insurer or any
intermediate stock holding company.

(8) Unless otherwise specified in the plan, the directors and
officers of the converting mutual insurer shall serve as directors and
officers of the mutual holding company, any intermediate stock holding
company and any subsidiary of an intermediate stock holding company until
new directors and officers are elected. [1997 c.771 §9](1) A mutual holding company is a corporation. To the
extent not inconsistent with the provisions of the Insurance Code or ORS
732.600 to 732.630, ORS chapter 60 governs the powers, duties and
relationships of a mutual holding company. The following sections in ORS
chapter 60 do not apply to a mutual holding company: ORS 60.004, 60.007
to 60.014, 60.016, 60.017 to 60.024, 60.027, 60.031, 60.051 to 60.057,
60.131 to 60.147, 60.154 to 60.177, 60.224, 60.227, 60.234, 60.241 to
60.265, 60.470 to 60.534, 60.551 to 60.594, 60.701 to 60.747, 60.787,
60.801 to 60.816 and 60.825 to 60.845. The enumeration in this subsection
of inapplicable sections in ORS chapter 60 is not exclusive.

(2) In applying ORS chapter 60 as provided in this section, unless
the context requires otherwise, references to:

(a) “Corporation” shall be deemed references to “mutual holding
company.”

(b) “Shareholders” shall be deemed references to “members.”

(c) “Secretary of State” shall be deemed references to “Director of
the Department of Consumer and Business Services.”

(3) A mutual holding company is not an insurer for purposes of the
Insurance Code. However, in the event a mutual holding company engages in
an activity described in ORS 732.521, then ORS 732.517 to 732.546 shall
apply to the mutual holding company and the effect of such activity shall
be governed by ORS 732.517 to 732.546. A mutual holding company may merge
with another corporation in accordance with a plan of restructuring
described in ORS 732.622 and 732.624.

(4) A mutual holding company shall not dissolve or liquidate
without approval by the director or unless required by judicial order.
The director retains jurisdiction over a mutual holding company, any
intermediate stock holding company and any subsidiary of an intermediate
stock holding company as provided in this section and as provided in ORS
732.517 to 732.592.

(5) The members of a mutual holding company have the rights and
obligations set forth in this section and in the articles of
incorporation and bylaws of the mutual holding company. No member of a
mutual holding company may transfer membership in the mutual holding
company or any right arising from such membership. Such limitation on the
transfer of membership or rights arising from membership shall not
restrict the assignment of a policy that is otherwise permissible. A
member of a mutual holding company is not personally liable for the acts,
debts, liabilities or obligations of the mutual holding company merely by
reason of being a member. No assessment of any kind may be imposed upon a
member of a mutual holding company.

(6) A membership interest in a mutual holding company shall not
constitute a security as defined in ORS 59.015.

(7) Each member of a mutual holding company is entitled to one vote
on each matter coming before a meeting of the members and for each
director to be elected regardless of the number of policies or amount of
insurance and benefits held by such member. The voting rights of the
members of a mutual holding company shall be determined in accordance
with ORS 732.470.

(8) Meetings of the members of a mutual holding company shall be
governed by ORS 732.475 in the same manner as if the mutual holding
company were a domestic mutual insurer, except for provisions governing
quorum requirements, the approval of matters by the members and the
election of directors by the members. The members present in person or
represented by proxy shall constitute a quorum at a duly called meeting
of the members. If a quorum exists, action on a matter, other than the
election of directors, is approved by the members if the votes cast in
favor of the action exceed the votes cast opposing the action, unless the
articles of incorporation require a greater number of affirmative votes.
Unless otherwise provided in the articles of incorporation, directors are
elected by a plurality of the votes cast by the members entitled to vote
in the election at a meeting at which a quorum exists.

(9) The articles of incorporation of a mutual holding company must
contain the following provisions:

(a) The name of the mutual holding company. The name must include
the words “mutual holding company” or “mutual insurance holding company”
or other words connoting the mutual character of the mutual holding
company that are approved by the director.

(b) A provision specifying that the mutual holding company is not
authorized to issue capital stock, whether voting or nonvoting.

(c) A provision setting forth any rights of the members of the
mutual holding company upon dissolution or liquidation.

(10) A mutual holding company shall automatically be a party to any
rehabilitation or liquidation proceeding involving the converted stock
insurer that as a result of a reorganization is a direct or indirect
subsidiary of the mutual holding company. In such a proceeding, the
assets of the mutual holding company shall be counted as assets of the
estate of the converted stock insurer for the purpose of satisfying the
claims of the policyholders of the converted stock insurer. [1997 c.771
§10] (1) A mutual
holding company may restructure to a stock holding company in accordance
with a plan of restructuring. The restructuring may include the
continuation or organization of one or more corporations that become
direct or indirect subsidiaries of the restructured stock holding company
in accordance with the plan of restructuring.

(2) In order to restructure a mutual holding company, the board of
directors of the mutual holding company must adopt a plan as provided in
this section.

(3) A plan of restructuring must include the following:

(a) A statement of the reasons for the proposed action.

(b) The proposed articles of incorporation and bylaws of the
restructured stock holding company, the proposed articles of
incorporation and bylaws of any other corporation to be organized
pursuant to the plan and the proposed amendments to or restatement of the
articles of incorporation and bylaws of any other existing corporation
included in the plan.

(c) A description of how the plan will be carried out, including,
but not limited to, any merger, transfer, assumption, exchange,
acquisition, contribution or other transaction included within the plan,
and a description of the restructured stock holding company and any other
corporation organized pursuant to the plan.

(d) A description of all significant terms of the restructuring.

(e) A description of the overall effect of the plan on policies
issued by any insurer that is a direct or indirect subsidiary of the
restructuring mutual holding company. The description must show that
policyholder interests collectively are properly preserved and protected
and that the plan is fair and equitable to the policyholders.

(f) A statement of the manner and method by which membership
interests in the restructuring mutual holding company will be
extinguished and consideration will be provided to the eligible members.

(g) The record date for determining whether a member of the
restructuring mutual holding company is an eligible member.

(h) The proposed effective date of the restructuring or the manner
in which the proposed effective date of the restructuring is established.

(i) Except as otherwise provided in ORS 732.624, the valuation of
the restructuring mutual holding company immediately before the effective
date of the restructuring.

(j) A description of the significant terms of any offering of
shares of capital stock or other securities of an issuer.

(k) The intention, if any, that a director or officer of the
restructuring mutual holding company, any direct or indirect subsidiary
of the restructuring mutual holding company or any other corporation
organized pursuant to the plan may, within the six-month period following
the effective date of the restructuring, purchase or acquire shares of
capital stock or other securities of an issuer to be issued pursuant to
the plan.

(4) After the board of directors of a mutual holding company has
adopted a plan and before the board of directors seeks approval of the
plan by the eligible members of the mutual holding company, the mutual
holding company shall file the following documents with the Director of
the Department of Consumer and Business Services:

(a) The plan of restructuring.

(b) The form of notice of the meeting at which the eligible members
vote on the plan.

(c) The form of any proxies to be solicited from the eligible
members. Proxies must offer the eligible members the option of voting in
favor or voting against the plan or abstaining.

(d) Information required by ORS 732.523.

(e) Other information or documentation required by the director.
[1997 c.771 §11](1) The Director of the Department of
Consumer and Business Services shall approve, conditionally approve or
disapprove a plan of restructuring and other documents submitted under
ORS 732.622 according to the standards established in ORS 732.626. The
director must take such action not later than the 60th day after the
director has received a completed filing of the plan and all information
requested by the director or not later than the 30th day after the
completion of a hearing on the plan, whichever date is later.

(2) At any time before approval of a plan by the director, the
board of directors of the mutual holding company may amend or withdraw
the plan.

(3) After approval by the director, the plan must be approved by
the eligible members of the mutual holding company. Approval by the
eligible members is subject to the following requirements:

(a) All eligible members must be given notice of the plan and of
their opportunity to vote on the plan. A copy of the plan or a summary of
the plan must accompany the notice. The notice shall be mailed to the
last known address of each eligible member, as shown on the records of
the mutual holding company, not later than the 45th day after approval of
the plan by the director. The meeting of the eligible members at which a
vote on the plan will occur shall be set for a date that is not earlier
than the 30th day after the date on which the mutual holding company
mailed the notice of the meeting. If the mutual holding company complies
substantially and in good faith with the notice requirements of this
section, the mutual holding company’s failure to give any member or
members any required notice does not impair the validity of any action
taken under this section.

(b) The vote required for approval must be conducted as provided in
ORS 732.620, except as follows:

(A) Only eligible members may vote on the plan.

(B) An eligible member may vote in person or by proxy at the
meeting at which the plan is voted upon.

(4) The plan shall be carried out in accordance with its terms on
the effective date of the restructuring. A restructuring may be carried
out through any method approved by the director, including, but not
limited to, the organization of an interim subsidiary of the mutual
holding company and the merger of the mutual holding company with and
into such subsidiary.

(5) The restructured stock holding company and any other
corporation included in the plan of restructuring shall be organized at
the time or times set forth in the plan.

(6) Upon the effective date of the restructuring, the membership
interests of all members of the restructuring mutual holding company,
whether or not eligible members, shall be extinguished, and the eligible
members of the restructuring mutual holding company shall be entitled to
receive any form of consideration described in ORS 732.612 in accordance
with the plan. In applying ORS 732.612 to the members of the
restructuring mutual holding company, references in ORS 732.612 to the
“converting mutual insurer” shall mean the restructuring mutual holding
company, and references to the policies of the eligible members shall
mean those policies of the eligible members that result in membership in
the restructuring mutual holding company. For this purpose, ORS 732.612
shall be construed and applied so that the effect upon the eligible
members of the restructuring mutual holding company is similar to the
effect upon the eligible members of a converting mutual insurer. If the
consideration for the membership interests of the eligible members is
nontransferable subscription rights to purchase shares of capital stock
of the issuer, the plan must set the pro forma market value of the
restructured stock holding company in the same manner as the pro forma
market value of the converted stock insurer is determined in accordance
with ORS 732.612. If shares of capital stock of the issuer constitute the
only consideration to be received by the eligible members of the
restructuring mutual holding company and the plan does not provide for
the sale of additional shares of capital stock or other securities of the
issuer, the plan does not need to include the valuation of the
restructuring mutual holding company.

(7) Unless otherwise specified in the plan, the directors and
officers of the restructuring mutual holding company shall serve as
directors and officers of the restructured stock holding company until
new directors and officers are elected.

(8) The director retains jurisdiction over the restructured stock
holding company and any direct or indirect subsidiary of the restructured
stock holding company as provided in this section and as provided in ORS
732.517 to 732.592.

(9) A restructured stock holding company shall automatically be a
party to any rehabilitation or liquidation proceeding involving a
converted stock insurer if the restructuring mutual holding company would
have been a party to such proceeding under ORS 732.620. [1997 c.771 §12] (1) The
Director of the Department of Consumer and Business Services shall review
a plan of conversion, reorganization or restructuring that is submitted
to the director. Upon review, the director shall approve or conditionally
approve the plan if the director finds all of the following:

(a) The applicable provisions of ORS 732.600 to 732.630, and other
applicable provisions of law, have been fully met.

(b) The plan protects the rights of policyholders.

(c) The plan will be fair and equitable to the members, and the
plan will not prejudice the interests of the members.

(d) The allocation of consideration among the eligible members is
fair and equitable.

(e) The converted stock insurer will have capital or surplus, or
any combination thereof, that is required of a domestic stock insurer on
initial authorization to transact like kinds of insurance, and otherwise
will be able to satisfy the requirements of this state for transacting
its insurance business.

(f) The plan will not substantially reduce the security of the
policyholders and the service to be rendered to the policyholders.

(g) If a stock holding company or mutual holding company is
organized, the financial condition of the stock holding company, the
mutual holding company or any subsidiary thereof will not jeopardize the
financial stability of the converted stock insurer.

(h) The financial condition of the converting mutual insurer will
not be jeopardized by the conversion or reorganization, and the
conversion or reorganization will not jeopardize the financial stability
of the stock holding company, the mutual holding company or any
subsidiary thereof.

(i) The competence, experience and integrity of those persons who
will control the operation of the converted stock insurer are not
contrary to the interests of policyholders of the converted stock insurer
and of the public in allowing the plan to proceed.

(j) Implementation of the plan will protect the interests of the
insurance-buying public.

(k) The activity is not subject to other material and reasonable
objections.

(L) All modifications required by the director have been made.

(2) An approval or conditional approval of a plan by the director
expires if the plan is not carried out within one year after the date of
the approval or conditional approval, unless the time period is extended
by the director for good cause, upon written application for such
extension.

(3) In connection with an approval or disapproval of a plan, when
the plan must include a valuation, the director shall separately review
and approve or disapprove the valuation stated in the plan, and shall
make a specific finding thereon in the approval or disapproval.

(4) The director may retain, at the expense of the converting
mutual insurer or restructuring mutual holding company, qualified experts
not otherwise a part of the staff of the Department of Consumer and
Business Services to assist in reviewing the plan and supplemental
documents and valuations, and in making the finding in subsection (3) of
this section.

(5) The director may hold a hearing for the purposes of receiving
comment on whether a plan should be approved and on any other matter
relating to the conversion, reorganization or restructuring. The hearing
shall be held within 60 days after the director has received a completed
filing of the plan and all information required by the director. [1997
c.771 §13](1) For a period of
three years following the effective date of a conversion, reorganization
or restructuring, unless authorized by the Director of the Department of
Consumer and Business Services, the directors, officers and employees of
the converted stock insurer, any stock holding company, any mutual
holding company or any subsidiary of a stock holding company or mutual
holding company collectively shall not own, whether directly or
indirectly, more than 25 percent of all outstanding shares issued by the
converted stock insurer, any stock holding company or any subsidiary of a
stock holding company or mutual holding company.

(2) Except as otherwise provided in ORS 732.600 to 732.630, neither
a person nor a group of persons acting in concert may acquire, through
public offering, exchange or subscription rights or otherwise, more than
five percent of the shares of capital stock of the converted stock
insurer, any stock holding company or any subsidiary of a stock holding
company or mutual holding company for a period of five years from the
effective date of the conversion, reorganization or restructuring except
with the approval of the director.

(3) If the plan so provides and not otherwise, directors and
officers of the converting mutual insurer, the converted stock insurer,
any stock holding company or any subsidiary of a stock holding company or
mutual holding company may, within the six-month period following the
effective date of the conversion, reorganization or restructuring,
purchase or acquire shares of capital stock or other securities of an
issuer offered pursuant to the plan. [1997 c.771 §14](1) Dissenters’ rights
provided in ORS 60.551 to 60.594 are not available to any member, whether
or not eligible, of a converting mutual insurer or a restructuring mutual
holding company.

(2) An action challenging the validity of or arising from the
conversion, reorganization or restructuring or other acts taken or
proposed to be taken under the plan or ORS 732.600 to 732.630 must be
commenced not later than the 60th day after the effective date of the
conversion, reorganization or restructuring or other acts so taken and
may be pursued only if they are unlawful or fraudulent. There shall be a
rebuttable presumption that any act set forth in an order of the Director
of the Department of Consumer and Business Services is lawful. [1997
c.771 §15]PRODUCER-CONTROLLED PROPERTY AND CASUALTY INSURERS As used in ORS
732.810 to 732.814:

(1) “Control” and “controlled” have the meanings given those terms
in ORS 732.548.

(2) “Controlled insurer” means an authorized insurer that is
controlled directly or indirectly by an insurance producer.

(3) “Controlling producer” means an insurance producer who directly
or indirectly controls an insurer.

(4) “Insurance producer” has the meaning given that term in ORS
731.104, but excludes a person who sells, solicits or negotiates an
insurance contract on behalf of the insurance producer. [1993 c.447 §58;
2003 c.364 §82]Note: 732.810 to 732.814 were added to and made a part of the
Insurance Code by legislative action but were not added to ORS chapter
732 or any smaller series therein. See Preface to Oregon Revised Statutes
for further explanation.(1) ORS 732.810 to
732.814 apply to an insurer who is authorized in this state to transact
property insurance or casualty insurance, or both, and is:

(a) Domiciled in this state; or

(b) Domiciled in a state that is not accredited by the National
Association of Insurance Commissioners and does not have in effect a law
that the Director of the Department of Consumer and Business Services
determines to be substantially similar to ORS 732.810 to 732.814. For
purposes of this paragraph, a state is accredited if its insurance
department or regulatory agency is determined by the National Association
of Insurance Commissioners to meet the minimum financial regulatory
standards promulgated and established from time to time by the National
Association of Insurance Commissioners.

(2) ORS 732.517 to 732.592 apply to all parties within a holding
company system that is subject to ORS 732.810 to 732.814, to the extent
that ORS 732.517 to 732.592 are not inconsistent with ORS 732.810 to
732.814.

(3) ORS 732.810 to 732.814 do not apply to any of the following
persons:

(a) A risk retention group as defined in the Superfund Amendments
Reauthorization Act of 1986, P.L. 99-499, 100 Stat. 1613 (1986), the
Liability Risk Retention Act, 15 U.S.C. § 3901 et seq. or ORS 735.305.

(b) A residual market pool or a joint underwriting authority or
association.

(c) An insurer that is owned by another organization whose
exclusive purpose is to insure risks of the parent organization and
affiliated companies or, in the case of groups and associations, an
insurer that is owned by the insureds and whose exclusive purpose is to
insure risks to member organizations or group members and their
affiliates, or any combination thereof. [1993 c.447 §59]Note: See note under 732.810.(1) A controlled insurer shall file quarterly
financial statements with the Director of the Department of Consumer and
Business Services.

(2) Subsections (4) to (7) of this section apply to a controlled
insurer and a controlling producer if, in any calendar year, the
aggregate amount of gross written premium on insurance placed with a
controlled insurer by a controlling producer is equal to or greater than
five percent of the allowed assets of the controlled insurer, as reported
in the quarterly financial statement of the controlled insurer filed as
of September 30 of the prior year.

(3) Subsections (4) to (7) of this section do not apply to a
controlled insurer and a controlling producer if:

(a) The controlling producer places insurance only with the
controlled insurer or only with the controlled insurer and a member or
members of the holding company system of the controlled insurer or the
parent, affiliate or subsidiary of the controlled insurer, and receives
no compensation based upon the amount of premiums written in connection
with the insurance, and accepts insurance placements only from
nonaffiliated subproducers and not directly from insureds; and

(b) The controlled insurer, except for insurance written through a
residual market facility, accepts insurance placements only from a
controlling producer, an insurance producer controlled by the controlled
insurer or an insurance producer that is a subsidiary of the controlled
insurer.

(4) A controlled insurer shall not accept insurance placements from
a controlling producer, and a controlling producer shall not place
insurance with a controlled insurer, unless there is a written contract
between the controlling producer and the insurer that complies with the
requirements of this subsection. The contract must be approved by the
board of directors of the insurer before it becomes effective. The
contract must specify the responsibilities of each party and contain the
following minimum provisions:

(a) A provision authorizing the controlled insurer to terminate the
contract for cause, upon written notice to the controlling producer, and
requiring the controlled insurer to suspend the authority of the
controlling producer to write insurance during the pendency of any
dispute regarding the cause for the termination.

(b) A provision requiring the controlling producer to render
accounts to the controlled insurer detailing all material transactions,
including information necessary to support all commissions, charges and
other fees received by or owing to the controlling producer.

(c) A provision requiring the controlling producer to remit all
funds due under the terms of the contract to the controlled insurer on at
least a monthly basis. The due date must be fixed so that premiums or
installments thereof collected are remitted not later than the 90th day
after the effective date of any policy placed with the controlled insurer
under the contract.

(d) A provision requiring that all funds collected for the
controlled insurer’s account be held by the controlling producer in a
fiduciary capacity, in one or more appropriately identified trust
accounts in accordance with ORS 744.083. ORS 744.084 does not apply for
purposes of this paragraph. If a controlling producer is not required to
be licensed in this state, the contract must require that the funds of
the controlling producer be maintained in compliance with the
requirements of the domiciliary jurisdiction of the controlling producer.

(e) A provision requiring the controlling producer to maintain
separately identifiable records of insurance written for the controlled
insurer.

(f) A provision prohibiting the contract from being assigned in
whole or in part by the controlling producer.

(g) A provision requiring the controlled insurer to provide the
controlling producer with its underwriting standards, rules and
procedures, manuals setting forth the rates to be charged and the
conditions for the acceptance or rejection of risks. The provision under
this paragraph must also require the controlling producer to adhere to
the standards, rules, procedures, rates and conditions, and must require
the standards, rules, procedures, rates and conditions to be the same as
those applicable to comparable business placed with the controlled
insurer by an insurance producer other than the controlling producer.

(h) A provision establishing the rates and terms of the controlling
producer’s commissions, charges or other fees and the purposes for those
charges or fees. The rates of the commissions, charges and other fees
must not be greater than those applicable to comparable business placed
with the controlled insurer by insurance producers other than controlling
producers. For purposes of this paragraph and paragraph (g) of this
subsection, examples of comparable business include the same lines of
insurance, same kinds of insurance, same kinds of risks, similar policy
limits and similar quality of business.

(i) If the contract provides that the controlling producer, on
insurance placed with the insurer, is to be compensated contingent upon
the insurer’s profits on that insurance, a provision that the
compensation must not be determined and paid until at least five years
after the premiums on casualty insurance are earned and at least one year
after the premiums are earned on any other insurance. The provision under
this paragraph must also require that the commissions not be paid until
the adequacy of the controlled insurer’s reserves on remaining claims has
been independently verified pursuant to subsection (6) of this section.

(j) A provision establishing a limit on insurance written by the
controlling producer in relation to the surplus and total insurance
transacted by the controlled insurer. The insurer may establish a
different limit for each line or subline of insurance. The provision
under this paragraph:

(A) Must require the controlled insurer to notify the controlling
producer when the applicable limit is approached and prohibit the
controlled insurer from accepting insurance from the controlling producer
if the limit is reached.

(B) Must prohibit the controlling producer from placing insurance
with the controlled insurer if it has been notified by the controlled
insurer that the limit has been reached.

(k) A provision that the controlling producer may negotiate but
shall not bind reinsurance on behalf of the controlled insurer on
insurance the controlling producer places with the controlled insurer,
except that the controlling producer may bind facultative reinsurance
contracts pursuant to obligatory facultative agreements if the contract
with the controlled insurer contains underwriting guidelines including,
for reinsurance assumed and for reinsurance ceded, a list of reinsurers
with which such automatic agreements are in effect, the coverages and
amounts or percentages that may be reinsured and commission schedules.

(5) A controlled insurer must have an audit committee of the board
of directors composed of independent directors. The audit committee shall
meet annually with management, the independent certified public
accountants of the insurer and an independent casualty actuary or other
independent loss reserve specialist acceptable to the director to review
the adequacy of the loss reserves of the insurer.

(6) In addition to any other required loss reserve certification,
on April 1 of each year, a controlled insurer shall file with the
director an opinion of an independent casualty actuary, or an independent
loss reserve specialist that is acceptable to the director, reporting
loss ratios for each line of insurance written and attesting to the
adequacy of loss reserves established for losses incurred and outstanding
as of year end, including losses incurred but not reported, on insurance
placed by the insurance producer.

(7) A controlled insurer shall annually report to the director the
amount of commissions paid to the insurance producer, the percentage such
amount represents of the net premiums written and comparable amounts and
percentage paid to noncontrolling producers for placements of the same
kinds of insurance. [1993 c.447 §60; 2003 c.364 §83]Note: See note under 732.810. A controlling producer,
prior to the effective date of a policy, shall deliver written notice to
the prospective insured disclosing the relationship between the producer
and the controlled insurer. If the insurance is placed through a
subproducer who is not a controlling producer, the controlling producer
must retain in the records of the controlling producer a signed
commitment from the subproducer that the subproducer is aware of the
relationship between the insurer and the producer and that the
subproducer has or will notify the insured of the relationship. [1993
c.447 §61]Note: See note under 732.810.(1) If the Director of the Department of Consumer and
Business Services believes that the controlling producer or any other
person has not complied with ORS 732.810 to 732.814 or any rule adopted
or order issued thereunder, the director may order the controlling
producer to cease placing insurance with the controlled insurer.

(2) If the director finds that the controlled insurer or any
policyholder of the controlled insurer has suffered any loss or damage
because the controlling producer or any other person has not complied
with ORS 732.810 to 732.814 or any rule adopted or issued thereunder, the
director may maintain a civil action or intervene in an action brought by
or on behalf of the insurer or policyholder for recovery of compensatory
damages for the benefit of the insurer or policyholder or other
appropriate relief.

(3) If an order for liquidation or rehabilitation of the controlled
insurer has been entered pursuant to ORS chapter 734 and the receiver
appointed under that order believes that the controlling producer or any
other person has not complied with ORS 732.810 to 732.814 or any rule
adopted or order issued thereunder, and if the insurer suffered any loss
or damage because of the noncompliance, the receiver may maintain a cause
of action for recovery of damages or other appropriate sanctions for the
benefit of the insurer.

(4) This section does not affect the authority of the director to
take any other administrative action under the Insurance Code.

(5) This section does not alter or affect the rights of
policyholders, claimants, creditors or other third parties. [1993 c.447
§62]Note: See note under 732.810.

_______________