(a) A mutual insurer may become a stock insurer under such plan and procedure as may be approved by the Insurance Commissioner after a hearing thereon.

(b) The commissioner shall not approve any plan or procedure unless:

(1) It is equitable to the insurer's members;

(2) It is subject to approval by vote of not less than three-fourths (3/4) 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 commissioner. 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 one (1) year;

(3) The equity of each policyholder in the insurer is determinable under a fair formula approved by the commissioner. The 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;

(4) 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 three (3) years prior to the date the plan was submitted to the commissioner;

(5) The plan gives each policyholder or former policyholder of the insurer entitled to participate in the purchase of stock or distribution of assets under subdivision (b)(4) of this section:

(A) A preemptive right to acquire within a designated reasonable period his or her proportionate part of all of the proposed capital stock of:

(i) The insurer; or

(ii) A holding company of the insurer formed for the purpose of facilitating a demutualization transaction under this section; and

(B) A right to apply to the exercise of the preemptive right under subdivision (b)(5)(A) of this section the amount of his or her equity in:

(i) The insurer, as determined under subdivision (b)(3) of this section; or

(ii) A holding company of the insurer formed for the purpose of facilitating a demutualization transaction under this section;

(6) Shares are offered to participating policyholders or former policyholders at a price not greater than the price offered to nonpolicyholders;

(7)

(A) The plan provides for a cash payment to each policyholder or former policyholder not electing to apply his or her equity to the purchase of stock under subdivision (b)(5) of this section.

(B) The cash payment shall:

(i) Be not less than fifty percent (50%) of the amount of the equity of the policyholder or former policyholder not used for the purchase of stock; and

(ii) Together with the stock purchased under subdivision (b)(5) of this section, if any, constitute full payment and discharge of the policyholder's or former policyholder's equity as an owner of the mutual insurer; and

(8) 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 amount not less than one-half (1/2) of the required capital.

(c) With regard to proposed transactions of a domestic insurer which is a subsidiary or affiliate of a depository institution, the hearing shall be concluded and the order issued within the sixty-day period preceding the effective date of the transaction, and the order shall be final upon entry, pursuant to federal law. Further, any restoration of capital, surplus, or special surplus required for approval of the transaction affecting the depository institution's affiliate or subsidiary shall also be accomplished within the same sixty-day period.

(d) This section shall not apply to formations of, or insurer conversions to, domestic mutual holding companies under other provisions of the Arkansas Insurance Code.