Section 7311. Conversion of domestic mutual property/casualty insurance companies or advance premium corporations into domestic stock property/casualty insurance companies; insurers in rehabilitation

(a) A  domestic  mutual  insurer organized under article twelve of this chapter
  and licensed pursuant to article forty-one of this chapter and operating
  pursuant to an order of rehabilitation, or a  domestic  advance  premium
  corporation  organized  and  licensed  under  article  sixty-six of this
  chapter and operating pursuant to an order of rehabilitation, may,  upon
  application  of  the  superintendent and pursuant to an order granted by
  the court in which the rehabilitation is pending, be  converted  by  the
  superintendent  into  a  domestic  stock insurer in rehabilitation to be
  organized under article twelve and licensed under article  forty-one  of
  this  chapter,  in  accordance  with the provisions of subsection (b) of
  this section.
    (b) Before making such application to the  court,  the  superintendent
  shall  hold  a  public  hearing,  notice  of  which  shall  be  given by
  publication in a newspaper of general circulation in the county in which
  the insurer has its principal office and in the two  largest  cities  in
  each  state  in  which the insurer has underwritten insurance within one
  year preceding the date of the order of rehabilitation.
    (c) If, after such hearing, the  superintendent  concludes  that  such
  conversion   is   appropriate   and   is   necessary  for  a  successful
  rehabilitation or is likely to materially enhance the probability  of  a
  successful  rehabilitation,  he  may  apply  to  the  court in which the
  rehabilitation is pending for an order directing  him  to  convert  such
  insurer into a domestic stock insurer in rehabilitation, pursuant to the
  plan  of  conversion  that  the superintendent shall propose, subject to
  court  approval.  The  primary  objective  of  the  plan  shall  be  the
  successful  rehabilitation  of  the  insurer. In the development of such
  plan the superintendent  shall  take  into  account  the  policyholders'
  equity,  if  any,  at  the  time of conversion and may in his discretion
  provide for a distribution of such equity  to  each  person  who  had  a
  policy  in  effect  at  any  time  during the three year period (or such
  shorter  period  that  the  superintendent  determines  is  practicable)
  preceding   the   date   of   the  filing  of  the  application  by  the
  superintendent.  The  plan  shall  provide  for  appropriate  procedures
  necessary  for the implementation of the proposed conversion. Such stock
  insurer in rehabilitation shall be subject  to  all  of  the  applicable
  provisions   of  this  chapter,  except  those  provisions  relating  to
  licensing and financial requirements from which it is  exempted  by  the
  superintendent. Upon the termination of the order of rehabilitation, the
  exemptions  granted  by  the  superintendent shall cease and the insurer
  shall become subject to all applicable provisions of this chapter.
    (d) The authorized capital stock of the  new  domestic  stock  insurer
  shall be held for the benefit of the qualifying prospective shareholders
  or  purchasers  by an escrow agent appointed by the superintendent. Such
  stock shall be released to the owners of record after the court approves
  the conversion and the order of rehabilitation is terminated.
    (e) All expenses of the conversion, including the expenses incurred by
  the insurance department, shall be borne by the company being converted.