After a conversion, existing policies stay in force, some policyholder rights are cut off, dividends rights remain for participating policyholders, the resulting company may issue substitute nonparticipating policies, and subscriber-account reductions are limited without commissioner approval.
Sec. 829.154. EFFECT OF CONVERSION ON POLICIES; SUBSCRIBER ACCOUNTS. (a) Each policy in effect on the effective date remains in effect under the terms of that policy, except that the following rights, to the extent they existed in the converting exchange in favor of policyholders or members, are extinguished on the effective date: (1) any membership and voting rights; (2) except as provided by Subsection (b) or in the conversion plan approved by the commissioner, a right to share in the surplus or profits of the converting exchange; and (3) any assessment provisions. (b) The holder of a participating policy in effect on the effective date of the conversion continues to have a right to receive dividends as provided by the participating policy. (c) On the renewal date of a participating policy, the resulting company may issue to the insured a nonparticipating policy as a substitute for the participating policy. (d) All the costs and expenses connected with a conversion plan shall be paid or reimbursed by the converting exchange or the resulting company. (e) If a converting exchange maintains subscriber accounts as surplus, the subscriber accounts shall continue as surplus in the resulting company, unless otherwise provided in a conversion plan approved by the commissioner. Subject to Subsection (f), the balances of the subscriber accounts are payable to the members to the extent and in the manner as is provided in the conversion plan. (f) The board of directors of the resulting company may reduce the balances of the subscriber accounts without payment to members of the mutual holding company who were members of the converting exchange if the board of directors of the resulting company determines in the board's discretion that the amounts are necessary to support the operations of the resulting company. The board of directors of the resulting company may not, without the approval of the commissioner, reduce the balance of a subscriber account under this subsection before the third anniversary of the effective date. Added by Acts 2007, 80th Leg., R.S., Ch. 412 (S.B. 1056), Sec. 1, eff. June 15, 2007.