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General Laws

Section 19Q. In the case of a reorganizing insurer that is a mutual life insurer, upon the effective date the reorganizing insurer shall, at its option, either:

(1)(i) establish a closed block, for policyholder dividend purposes only, consisting of all of the participating individual policies of the reorganizing insurer in force on the effective date and for which the insurer had an experience based dividend scale payable in the year in which the plan of reorganization was adopted, to which, on or before the effective date, shall be allocated assets of the insurer in an amount that produces cash flows, together with anticipated revenues from the closed block business, expected to be sufficient to support the closed block business including provision for payment of claims and those expenses and taxes specified in the plan of reorganization and to provide for continuation of dividend scales in effect on the adoption date, if the experience underlying such scales continues, provided that no policies entering into force after the effective date will be included in the closed block; and

(ii) the terms for the establishment of the closed block may provide for conditions under which, with the approval of the commissioner, the reorganized insurer may cease to maintain the closed block and allocation of assets thereto, but regardless of such a cessation the policies constituting closed block business shall remain obligations of the reorganized insurer and dividends on such policies shall be apportioned by the board of directors of the reorganized insurer in accordance with the terms of such policies and contracts and applicable provisions of any general or special law; or

(2) provide as to participating individual policies of the reorganizing insurer in such manner as the commissioner may approve if he determines that such alternative is substantially as protective of the interests of individual participating policyholders as the establishment of a closed block pursuant to clause (1);

(3) the purpose of the closed block or of the alternate method so approved by the commissioner pursuant to paragraph (2) shall be to protect the contractual rights of the policyholders who own policies as of the effective date. The equity interest of the policyholders of the reorganized insurer shall be equal, in the aggregate, to the value of the entire capital and surplus of the mutual holding company, excluding any funds required to be held in segregated accounts by federal statute, and shall be the basis for consideration to policyholders in the event the mutual holding company converts into a domestic stock corporation as set forth in paragraph (5) of subsection (b) of section 19U;

(4) as of the end of the third year following the year of conversion and as of the end of each third year thereafter, or more frequently as determined by the commissioner, an independent accounting or actuarial firm shall attest to the commissioner, the board of directors of the mutual holding company and the board of directors of the reorganized insurer on whether or not the closed block and related assets, or practice provided for in paragraph (2), has been administered in accordance with the plan of conversion approved by the commissioner. Such firm shall take into consideration the dividend payments to policyholders resulting from the closed block and any other relevant factors. The expenses incurred in retaining the independent accounting or actuarial firm shall be paid by the reorganized insurer. The work of the independent accounting or actuarial firm shall be completed and delivered to the commissioner, the board of directors of the mutual holding company and the board of directors of the reorganized insurer by the close of business on the first day of April following the end of the period for which a report is being provided.

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