Converting mutual insurer.

(1) A mutual insurer may become a stock insurer under such plan and procedure as may be approved by the office.

(2) The office shall not approve any such plan or procedure unless:

(a) It is equitable to the insurer’s members;

(b) It is subject to approval by vote of not less than three-fourths of the insurer’s current members voting thereon in person, by proxy, or by mail at a meeting of members called for the purpose pursuant to such reasonable notice and procedure as may be approved by the office; if a life insurer, the right to vote may be limited to members who hold policies other than term or group policies, and whose policies have been in force for not less than 1 year;

(c) The corporate equity of each policyholder in the insurer, other than as to unearned premiums, nonforfeiture rights, and benefit claims under his or her policy, is determinable under a fair formula approved by the office, which equity shall be based upon not less than the insurer’s entire surplus, after deducting contributed or borrowed surplus funds, plus a reasonable present equity in its reserves and in all nonadmitted assets;

(d) The policyholders entitled to participate in the purchase of stock or distribution of assets shall include all current policyholders and all existing persons who had been policyholders of the insurer within 3 years prior to the date such plan was submitted to the office;

(e) The plan gives to each policyholder of the insurer as specified in paragraph (d) a preemptive right to acquire his or her proportionate part of all of the proposed capital stock of the insurer, within a designated reasonable period, and to apply upon the purchase thereof the amount of his or her equity in the insurer as determined under paragraph (c);

(f) Shares are so offered to policyholders at a price not greater than to be thereafter offered to others;

(g) The plan provides for payment of cash to each policyholder not electing to apply his or her equity in the insurer toward the purchase price of stock to which he or she is preemptively entitled. The amount so paid shall be not less than 50 percent of the amount of the policyholder’s equity not so used for the purchase of stock. Such cash payment together with stock so purchased, if any, shall constitute full payment and discharge of the policyholder’s corporate equity in such mutual insurer; and

(h) The plan, when completed, would provide for the converted insurer paid-in capital stock in an amount not less than the minimum paid-in capital required of a domestic stock insurer transacting like kinds of insurance, together with surplus funds in amounts not less than one-half of such required capital.