Town Mutuals and Converted Town Mutuals (Mergers, Conversions, Affiliations, Transfer of Business, Voluntary Dissolutions)

Merger between two or more town mutual insurers

The following are the filing requirements for a town mutual insurer into another town mutual insurer under ch. 612.21:

1. Transmittal Letter
1. ​Note that submitting for OCI approval pursuant to 612.21, Wis. Stat.
2. List of included exhibits (documents listed below)
3. Proposed date, time, and location of policyholder meeting(s)
   
   
2. Agreement of Merger
1. ​​Required information
1. Operating area of the surviving company, cannot be greater than 16-counties
2. The reason for and the purpose of the proposed action
3. The proposed terms, conditions, and procedures for and estimated expenses of implementing the merger
4. The proposed name of the surviving or new town mutual and the location of its principal offices
5. The proposed articles of incorporation and bylaws for the surviving or new town mutual
2. Approved and signed by each company's board
   
   
3. List of Directors and Officers of the Surviving Company – this should include the name, title, end of term (month and year)
   
   
4. Proposed Certificate of Assumption and Endorsement
   
   
5. Board Resolution Adopting the Agreement of Merger – this should be the same for each company and be signed
   
   
6. Summary of Merger Plan
   
   
7. Policyholder Meeting Announcement – this should be for each company with a minimum of 30-days notice
   
   
8. Proposed Policyholder Resolution for each company
   
   
9. Proposed Report of Policyholder Vote
1. ​Required information for each company
1. Number of members entitled to vote
2. Number of members who voted
3. Number of votes cast in person and number of votes cast by mail
   
   
10. Most Recent Year-End Financial Statements for each company
    
    
11. Most Recent Quarterly Financial Statements for each company
    
    

After OCI Approval letter is sent to companies:

• Report of Policyholder Vote: Filled out with information from the vote for each company
  
  

After OCI Vote Certification Confirmation Letter

• Email to ocicompanylicensing@wisconsin.gov stating the effective date of the merger
  
  

Merger of a town mutual into a ch. 611 mutual insurer

The following are the filing requirements for a town mutual insurer into a ch. 611, Wis. Stat. mutual insurer under ch. 612.22:

1. Transmittal Letter
1. ​Note that submitting for OCI approval pursuant to 612.22, Wis. Stat.
2. List of included exhibits (documents listed below)
3. Proposed date, time, and location of policyholder meeting(s)
   
   
2. Agreement of Merger
1. ​Required information
1. As to each constituent entity, its name, type of entity, and governing law
2. The terms and conditions of the merger
3. The manner and basis of converting the interest in each constituent entity into interests, securities, or obligations of the surviving entity, rights to acquire such interests or securities, money, other property, or any combination of the foregoing
4. If the surviving entity preexists the merger, any proposed amendments to its organizational documents that are to be in a record immediately after the merger becomes effective
5. If the surviving entity is to be created in the merger, and of its organizational documents that are to be in a record immediately after the merger becomes effective
6. Any other matters required under the governing law of any constituent entyt
2. Approved and signed by each company's board
   
   
3. List of Directors and Officers of the Surviving Company – this should include the name, title, end of term (month and year)
   
   
4. Proposed Certificate of Assumption and Endorsement
   
   
5. Board Resolution Adopting the Agreement of Merger – this should be the same for each company and be signed
   
   
6. Summary of Merger Plan
   
   
7. Policyholder Meeting Announcement – this should be for each company with a minimum of 30-days notice
   
   
8. Proposed Policyholder Resolution for each company
   
   
9. Proposed Report of Policyholder Vote
1. ​Required information for each company
1. Number of members entitled to vote
2. Number of members who voted
3. Number of votes cast in person and number of votes cast by mail
   
   
10. Most Recent Year-End Financial Statements for each company
    
    
11. Most Recent Quarterly Financial Statements for each company
    
    

After OCI Approval letter is sent to companies:

• Report of Policyholder Vote: Filled out with information from the vote for each company
  
  

After OCI Vote Certification Confirmation Letter

• Email to ocicompanylicensing@wisconsin.gov stating the effective date of the merger​
  

Mergers in General

• A merger occurs when the non-surviving company merges into the surviving company. The non-surviving company no longer exists after a set point.
• The surviving company will use its own forms and/or will use the non-surviving company forms either under the old name or under the surviving company name.
• Policy terms can only be changed by a renewal with altered terms notice under section 631.36 (5), Wis. Stats. In a merger, the surviving company must wait until each policy renewal to change the policy terms -including a premium increase or a policy endorsement.
  
  

Merger Information Needed by Market Regulation

• Submit the following through the SERFF* system:
•  A merger endorsement form with its own form number and contain the following:
• A statement that the endorsement is attached to and made a part of the insurance contract. 
• The effective date of the merger, name of the previously authorized company, and the name of the surviving company.
• A statement that the surviving company shall honor all liabilities of the former company and will not change the status or terms of the coverage.
• If the surviving company is going to continue to use/issue any of non-surviving company's forms after the merger, the surviving company must provide OCI with a list of the forms that will be used. This list must be submitted as a separate filing, and should include:
• The name of the form and the form number.
• The class and code for each form.
• The date the form was given the status “deemed" “approved" or “filed" in Wisconsin.
• The SERFF tracking number for each form. 
• A written statement that the only change that will be made to the forms is the name logo and address of the company. 
• OCI will review the list, and forms that are too old may have to be resubmitted as a separate filing.
  

Generally, merger endorsements cannot be approved until our Financial Analysis & Examinations Division has approved and recorded the financial transaction with the surviving company. However, OCI can work with Town Mutuals as needed to support the merger process. Please reach out to ociratesforms@wisconsin.gov with any questions.

*Electronic submission is recommended. After July 1, 2024, OCI will no longer accept paper submissions. If paper submissions must be made prior to July 1, 2024, they can be sent to ociratesforms@wisconsin.gov. 

Agent Appointments

Note: A company cannot accept business directly from any agent or enter into an agency contract with an agent unless the agent is a licensed agent appointed with the company.  Any questions regarding appointment requirements can be directed to Agent Licensing at (608) 266-8699 or ociagentlicensing@wisconsin.gov.

Merger process for agent appointments & Company agent appointment invoicing

• In a merger, there are two options for the non-surviving company to terminate agent appointments:
• The non-surviving company can terminate its agent appointments on 12/31/2023. An agent appointment invoice will not be generated in 2024 for the non-surviving company if all their appointed agents were terminated by 12/31/2023.
• If the non-surviving company does not terminate the appointed agents as of 12/31/23, an agent appointment invoice will be generated in 2024. The non-surviving company can allow that invoice to lapse due to nonpayment. The 2024 agent appointments for the non-surviving company will terminate with the lapse.
• The surviving company must ensure that all transitioning agents are appointed with them on the effective date of the merger.
• The surviving company will pay the initial appointment fee at the time it enters the new appointment information through NIPR.
  
  

Agent Appointment and Termination resources

• How to verify appointed agents before and/or after the merger:
• Instructions on how to pull the company record and pull a list of active appointments can be found here: oci.wi.gov/Pages/Consumers/Look-Up.aspx
  
• The link to look up the company record can be found here: sbs.naic.org/solar-external-lookup ​​
• ​Once you pull up the company record, go to the Appointments section and verify the active appointed agents.
• Note: as a best practice, the surviving and non-surviving companies should verify their appointed agents before and after the merger to be sure the correct agents terminated with the non-surviving company and appointed with the surviving company.
• The OCI webpage has detailed information on the appointment/termination process here: oci.wi.gov/Pages/Agents/AgentAppointments.aspx
  
• The NIPR Gateway to appointments/terminations can be found here: nipr.com/products-and-services/nipr-gateway ​
  

​A town mutual insurer licensed under ch. 612, Wis. Stat., may convert to being licensed under ch. 611, Wis. Stat., if they meet the following requirements:

• Must meet the compulsory/security surplus requirements (net of any Wisconsin Reinsurance Corporation stock)
• Must have a qualified actuary opine on reserves annually
• Must comply with all other ch. 611, Wis. Stat., requirements, which includes but is not limited to annual and quarterly reporting.
  
  

Filing Requirements for a conversion

The following are the filing requirements for a town mutual insurer into another town mutual insurer under ch. 612.23:

1. Transmittal Letter
   
1. ​Note that submitting for OCI approval pursuant to 612.23, Wis. Stat.
2. List of included exhibits (documents listed below)
3. Proposed date, time, and location of policyholder meeting(s)
   
   
2. Conversion Plan
1. ​Required information
1. The reasons for and the purpose of the proposed action
2. The proposed terms, conditions, and procedures and estimated expenses of implementing the conversion
3. The proposed name of the corporation
4. The proposed articles of incorporation and bylaws
2. Approved and signed by the company's board
   
   
3. List of Directors and Officers – this should include the name, title, end of term (month and year)
1. ​Biographical Affidavits for Directors and Officers - Completed no greater than six months prior to the filing date (https://content.naic.org/sites/default/files/ucaa-industry-naic-biographical-affidavit.pdf)
   
   
4. Copies of any Affiliated Agreements (if applicable)
   
   
5. The proposed compensation of directors and officers
   
   
6. Business plan – presented in a narrative format and addressing the applicable questions in the https://content.naic.org/sites/default/files/ucaa-industry-questionairre-primary-expansion.pdf
   
   
7. Financial Projections for three years using the OCI projections template for converting town mutual insurers. The projections should include a calculation of compulsory and security surplus. Use the following link to calculate compulsory and security surplus: Compulsory and Security Surplus Calculation.
   
   
8. Board Resolution Adopting the Conversion Plan
   
   
9. Summary of Conversion Plan
   
   
10. Policyholder Meeting Announcement – this should be for each company with a minimum of 30-days notice
    
    
11. Proposed Policyholder Resolution for each company
    
    
12. Proposed Report of Policyholder Vote
1. ​Required information for each company
1. Number of members entitled to vote
2. Number of members who voted
3. Number of votes cast in person and number of votes cast by mail
   
   
13. Most Recent Year-End Financial Statements for each company
    
    
14. Most Recent Quarterly Financial Statements for each company
    
    

After OCI Approval letter is sent to companies:

• Report of Policyholder Vote: Filled out with information from the vote for each company
  
  

After OCI Vote Certification Confirmation Letter

• Email to ocicompanylicensing@wisconsin.gov stating the effective date of the merger​

The filing documentation should be submitted through OCI's Online Licensing Application Form as a “Change in Control" filing type and Domestic Insurers. Ch 611 application type. For documents that are marked as required on the Form A that are not applicable for an affiliation, please upload a document marked “NA".

The following documents are required to be submitted with the Form A filing for affiliations:

1. Transmittal Letter
   
1. Note that submitting for OCI approval pursuant to 611.72, Wis. Stat.
2. List of included exhibits (documents listed below)
3. Filing the Form A
   
   
2. From A Filing
   
   
3. Final Affiliation Agreement approved and signed by each company
   
   
4. List of Directors and Officers – this should include the name, title, end of term (month and year)
   
   
5. Copies of Affiliated Agreements for each company (if applicable)
   
   
6. Form Ds (if applicable) – May be filed after approval, with OCI order
   
   
7. Bylaws for each company
   
   
8. Articles of Incorporation for each company
   
   
9. Financial Projections for three years using OCI projections template for converted town mutual insurers for each affiliated company. The projections should include a calculation of compulsory and security surplus. Use the following link to calculate compulsory and security surplus: Compulsory and Security Surplus Calculation.​
   
   
10. Pre Close Organizational Chart
    
    
11. Post Close Organizational Chart
    
    
12. Business Plan for each company post close that includes the impact of the affiliation on each company. The business plan should be presented in a narrative format and address the applicable questions outlined in the NAIC questionnaire​
    
    
13. Biographical Affidavits for Directors and Officers - Completed no greater than six months prior to the filing date (https://content.naic.org/sites/default/files/ucaa-industry-naic-biographical-affidavit.pdf)
    
    
14. Financial Statements for each company
1. Five years of audited financial statements
2. Most recent quarterly unaudited financial statements
   
   
15. Other documents may be requested later as necessary​
    
    

After OCI Approval letter is sent to companies:

• Form D’s (if applicable)
• Email to ocicompanylicensing@wisconsin.gov stating the effective date of the affiliation ​
  

The following are the filing requirements for a town mutual insurer into another town mutual insurer under ch. 612.24:

1. Transmittal Letter
1. ​Note that submitting for OCI approval pursuant to s. 612.24, Wis. Stat.
2. List of included exhibits (documents listed below)
   
   
2. Transfer agreement
1. ​Required information
1. As to each constituent entity, its name, type of entity, and governing law
2. The terms and conditions of the transfer
3. Any other matters required under the governing law of any constituent entyt
2. Approved and signed by each company's board
   
   
3. Approval by the members
   
   
4. Report to the Commissioner that includes:
1. ​A copy of any board resolution approving the transfer of business at least 30-days prior to the action proposed
2. Statement indicating the
1. Number of members entitled to vote
2. Number of members who voted
3. Number of votes cast in person and number of votes cast by mail
4. Number of votes approving the transfer of business​
   

The following are the filing requirements for a town mutual insurer into another town mutual insurer under ch. 612.25:

1. Transmittal Letter
   
1. Note that submitting for OCI approval pursuant to s. 612.25, Wis. Stat.
2. List of included exhibits (documents listed below)
   
   
2. Plan for Dissolution
   
1. ​​Required information
1. The reason for the proposal
2. The proposed terms, conditions, and procedures for and estimated expenses of implementing the dissolution
3. The financial condition of the town mutual
   
   
3. Approval by the member
   
   
4. Report to the Commissioner that includes:
   
1. ​A copy of any board resolution approving the transfer of business at least 30-days prior to the action proposed
   
2. ​Statement indicating the
   
1. ​​Number of members entitled to vote
2. Number of members who voted
3. Number of votes cast in person and number of votes cast by mail
4. Number of votes approving the transfer of business
   

Section Ins 13.09 (4), Wis. Adm. Code requires town mutual insurance companies to have unlimited aggregate excess of loss reinsurance based on the following:

• Lower capital and financial requirements
• Limited filing requirements
• No actuarial opinion requirements
• The CPA may provide certain bookkeeping services in addition to the auditor
• Geographical concentration

Converted Town Mutuals (ch. 611 companies)

To ensure financial solvency town mutual insurers that have converted to a ch. 611, Wis. Stat., company must meet the following requirements:

• For companies reporting prior year-end policyholder surplus less than $10 million excluding Wisconsin Reinsurance Stock
• If not included within the aggregate excess of loss cover, the company shall not retain more than $50,000 in liability losses and loss adjustment expense.
  
• No later than October 15, the company shall submit to OCI for approval its reinsurance proposal for the upcoming year.​
  

The proposed reinsurance coverage, at a minimum, shall protect the company from an annual aggregate loss accumulation that is no greater than the .4% exceedance probability (e.g., 1 in 250-year event), as determined by the software model.

The maximum attachment point for the aggregate loss coverage shall be determined in accordance with s. Ins. 13.09, Wis. Adm. Code, as prescribed by the table below:​

​​The company can use any other method to determine the attachment point if it can demonstrate that the maximum attachment point calculated under s. Ins 13.09, Wis. Adm. Code is not exceeded.

• Approval process may also consider the following metrics:
• Results of CAT models based on the company's exposure, total value at risk (TIV) and geographical concentration
• Net surplus at risk
• Direct and net written premium volume and the relationship between prior year-end surplus and prior year-end premium written
• Any other metrics that the commissioner considers pertinent for the protection of the company's financial position to ensure consumer protection

• For companies with policyholder surplus greater than $10 million excluding Wisconsin Reinsurance Stock with no limited or unlimited aggregates excess of loss coverage that complies with the section above:
• Must file annual RBC calculation
• Must obtain an independent Certified Public Account (CPA) annual audit opinion
• Must obtain a CAT model annually and present it to the board prior to approval of the reinsurance contract for the upcoming calendar year​
  
  

Affiliation Pools

Merger

One town mutual insurer merges (merging company) into another town mutual or other insurance carrier (surviving company).

1. The surviving company must accept the merged company's policies “as is". There cannot be a change of policy terms that is less favorable to the policyholder (including premium increases) until each policy renewal/anniversary date.
1. ​The surviving company may not cancel, nonrenew or alter the policy until the policy renewal/anniversary date.
2. Any cancellation or nonrenewal must comply with the requirements of s. 631.36 (4), Wis. Stat.
   
   
2. Any increase in premium or other change in policy terms that are less favorable to the policyholder can only happen at the policy renewal/anniversary date.
1. ​To change the policy terms at the renewal/anniversary date, the surviving company must issue a “Renewal with Altered Terms" notice to affected policyholders in compliance with s. 631.36 (5), Wis. Stat..
2. For personal lines property and casualty policies – the notice must go out at least 45 days prior to the policy renewal/anniversary date. For any other type of policy, the notice must go out at least 60 days prior to the policy renewal anniversary date.
   
   
3. The merged town mutual and the surviving town mutual or other insurance carrier should send notification to the policyholders so that they are aware of the coming change of insurer. This notice should be issued as soon as practicable.
   
   
4. Early cancellation fees should not be imposed on policyholders subject to this transaction who opt to cancel their policy prior to the merger date.
   
   

Transfer of Business

One town mutual insurer transfers its business (the transferring company) to another town mutual or other insurance carrier (the receiving company).

1. The receiving company must accept the transferred policies “as is". There cannot be a change of policy terms that is less favorable to the policyholder (including premium increase) until each policy renewal/anniversary date.
1. ​The receiving company may not cancel, nonrenew or alter the terms of the policy until the policy renewal/anniversary date.
2. Any cancellation or nonrenewal must comply with the requirements of s. 631.36 (4), Wis. Stat.
   
   
2. An increase in premium or other change in policy terms that are less favorable to the policyholder can only happen at the policy renewal/anniversary date.
1. ​To change the policy terms at the renewal/anniversary date, the surviving company must issue a “Renewal with Altered Terms" notice to affected policyholders in compliance with s. 631.36 (5), Wis. Stat..
2. For personal lines property and casualty policies – the notice must go out at least 45 days prior to the policy renewal/anniversary date. For any other type of policy, the notice must go out at least 60 days prior to the policy renewal anniversary date.
   
   
3. The transferring company and the receiving company should send notification to the policyholders being transferred as soon as practical to make them aware of the coming change of insurer.
   
   
4. Early cancellation fees should not be imposed on policyholders subject to this transaction who opt to cancel their policy prior to the transfer date.
   
   

Voluntary Dissolution

When a town mutual insurer decides to voluntary wind down and voluntary dissolve.

1. For policies with a renewal/anniversary date on or before December 31, 2023, a Notice of Nonrenewal must be sent to policyholders. The notice should:
1. ​Be sent 60-days prior to the policy renewal/anniversary date.
2. Inform the policyholder of the intent to nonrenew the policy.
3. Explain that the nonrenewal is based on the town mutual insurer dissolution and cessation of business as of December 31, 2023.
4. Provide instructions to policyholder for apply for insurance through a risk-sharing plan under Chapter 619, Wis. Stat., if a risk sharing plan exists for the kind of coverage being nonrenewed.
   
   
2. For policies with a renewal/anniversary date after December 31, 2023:
1. ​The town mutual must make every effort to transfer the business to another town mutual or other insurer prior to December 31, 2023. See point 1c. above.
2. If a transfer of business is not an option, the town mutual must contact each remaining policyholder to obtain written agreement to a termination of the policy as of December 31, 2023, based on the pending dissolution of the town mutual insurer.
3. If neither point 2a or 2b is feasible after best attempts, the town mutual insurer should:
1. Contact OCI Division of Market Regulation no later than October 15, 2023, with the list of remaining policyholders and their renewal/anniversary date.
2. Send out a notice of mid-term cancellation based on the substantial change in risk resulting from the company’s inability to obtain reinsurance as required by law. This notice must be issued no later than November 1, 2023, stating that the policy will end as of December 31, 2023.