H.B. 5014: COMMITTEE SUMMARY INSURANCE COMPANY DIVIDENDS
House Bill 5014
Sponsor: Representative John Llewellyn House Committee: Insurance
Senate Committee: Financial Services
Date Completed: 10-30-95
The bill would amend the Insurance Code to delete a provision permitting the Insurance Commissioner to enter an order prohibiting the payment of an ordinary shareholder dividend by a domestic insurer that is a member of a holding company. The bill, instead, would apply that provision to extraordinary dividends of insurers.
The provision allows the Commissioner to enter an order prohibiting the payment of the dividend if he or she determines that the insurer’s surplus as regards policyholders is not reasonable in relation to outstanding liabilities and is not adequate to its financial needs so that it will not continue to comply with the Code’s public confidence requirements.
The Code specifies that an extraordinary dividend or distribution includes any dividend or distribution of cash or other property, whose fair market value together with that of other dividends or distributions made within the preceding 12 months exceeds the greater of 10% of the insurer’s surplus as regards policyholders as of December 31 of the immediately preceding year, or the net gain from the operations of the insurer, if the insurer is a life insurer, or the net income, if the insurer is not a life insurer, not including realized capital gains, for the 12-month period, but does not include pro rata distributions of any class of the insurer’s own securities.
MCL 500.1343 Legislative Analyst: P. Affholter
The bill would have no fiscal impact on State or local government.
Fiscal Analyst: K. Lindquist
S9596\S5014SA
This analysis was prepared by nonpartisan Senate staff for use by the Senate in its deliberations and does not constitute an official statement of legislative intent.
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