§ 27-14.5-4 - Commutation plans.
SECTION 27-14.5-4
§ 27-14.5-4 Commutation plans. – (a) Application. Any commercial run-off insurer may apply to the courtfor an order implementing a commutation plan.
(1) The applicant shall give notice of the application andproposed commutation plan.
(2) All creditors shall be given the opportunity to vote onthe plan.
(3) All creditors, assumption policyholders, reinsurers, andguaranty associations shall be provided with access to the same informationrelating to the proposed plan and shall be given the opportunity to filecomments or objections with the court.
(4) Approval of a commutation plan requires consent of: (i)fifty percent (50%) of each class of creditors; and (ii) the holders ofseventy-five percent (75%) in value of the liabilities owed to each class ofcreditors.
(1) The court shall enter an implementation order if: (i) theplan is approved under subdivision (b)(4) of this section; and (ii) the courtdetermines that implementation of the commutation plan would not materiallyadversely affect either the interests of objecting creditors or the interestsof assumption policyholders.
(2) The implementation order shall:
(i) Order implementation of the commutation plan;
(ii) Subject to any limitations in the commutation plan,enjoin all litigation in all jurisdictions between the applicant and creditorsother than with the leave of the court;
(iii) Require all creditors to submit information requestedby the bar date specified in the plan;
(iv) Require that upon a noticed application, the applicantobtain court approval before making any payments to creditors other than, tothe extent permitted under the commutation plan, payments in the ordinarycourse of business, this approval to be based upon a showing that theapplicant's assets exceed the payments required under the terms of thecommutation plan as determined based upon the information submitted bycreditors under paragraph (iii) of this subdivision;
(v) Release the applicant of all obligations to its creditorsupon payment of the amounts specified in the commutation plan;
(vi) Require quarterly reports from the applicant to thecourt and commissioner regarding progress in implementing the plan; and
(vii) Be binding upon the applicant and upon all creditorsand owners of the applicant, whether or not a particular creditor or owner isaffected by the commutation plan or has accepted it or has filed anyinformation on or before the bar date, and whether or not a creditor or ownerultimately receives any payments under the plan.
(3) The applicant shall give notice of entry of the order.
(1) Upon completion of the commutation plan, the applicantshall advise the court.
(2) The court shall then enter an order that:
(i) Is effective upon filing with the court proof that theapplicant has provided notice of entry of the order;
(ii) Transfers those liabilities subject to an assumptionreinsurance agreement to the assumption reinsurer, thereby notating theoriginal policy by substituting the assumption reinsurer for the applicant andreleasing the applicant of any liability relating to the transferredliabilities;
(iii) Assigns each assumption reinsurer the benefit ofreinsurance on transferred liabilities, except that the assignment shall onlybe effective upon the consent of the reinsurer if either:
(A) The reinsurance contract requires that consent; or
(B) The consent would otherwise be required under applicablelaw; and
(iv) Either:
(A) The applicant be discharged from the proceeding withoutany liabilities; or
(B) The applicant be dissolved.
(3) The applicant shall provide notice of entry of the order.
(e) Reinsurance. Nothing in this chapter shall beconstrued as authorizing the applicant, or any other entity, to compel paymentfrom a reinsurer on the basis of estimated incurred but not reported losses orloss expenses, or case reserves for unpaid losses and loss expenses.
(f) Modifications to plan. After provision of noticeand an opportunity to object, and upon a showing that some material factor inapproving the plan has changed, the court may modify or change a commutationplan, except that upon entry of an order under subdivision (d)(2) of thissection, there shall be no recourse against the applicant's owners absent ashowing of fraud.
(1) The commissioner and guaranty funds shall have the rightto intervene in any and all proceedings under this section; provided, thatnotwithstanding any provision of title 27, any action taken by a commercialrun-off insurer to restructure pursuant to chapter 14.5, including theformation or re-activation of an insurance company for the sole purpose ofentering into a voluntary restructuring shall not affect the guaranty fundcoverage existing on the business of such commercial run-off insurer prior tothe taking of such action.
(2) If, at any time, the conditions for placing an insurer inrehabilitation or liquidation specified in chapter 14.3 of this title exist,the commissioner may request and, upon a proper showing, the court shall orderthat the commissioner be named statutory receiver of the applicant.
(3) If no implementation order has been entered, then uponbeing named receiver, the commissioner may request, and if requested, the courtshall order, that the proceeding under this chapter be converted to arehabilitation or liquidation pursuant to chapter 14.3 of this title. If animplementation order has already been entered, then the court may order aconversion upon a showing that some material factor in approving the originalorder has changed.
(4) The commissioner, any creditor, or the court on its ownmotion may move to have the commissioner named as receiver. The court may entersuch an order only upon finding either that one or more grounds forrehabilitation or liquidation specified in chapter 14.3 of this title exist orthat the applicant has materially failed to follow the commutation plan or anyother court instructions.
(5) Unless and until the commissioner is named receiver, theboard of directors or other controlling body of the applicant shall remain incontrol of the applicant.