Chapter 613

613.12(1)(e) (e) The articles shall state, for corporations having members, how persons may become members and that only members may vote; and

613.12(1)(f) (f) The articles of a corporation not having members shall state how the directors of the corporation shall be selected.

613.12(2) (2) Bylaws. The bylaws of a service insurance corporation shall comply with this chapter, and with ss. 181.0206, 181.0207 and 181.1020 to 181.1022. A copy of any amendments to the bylaws shall be filed with the commissioner within 60 days after adoption.

613.12(3) (3) Principal officers. The articles or bylaws shall specifically designate 3 or more offices, the holders of which shall be the principal officers of the corporation. The principal offices shall be held by at least 3 separate natural persons.

613.12(4) (4) Forum selection provisions. The articles or bylaws of a service insurance corporation may require, consistent with applicable jurisdictional requirements, that any or all claims pertaining to the internal affairs of the service insurance corporation shall be brought solely and exclusively in the courts in this state.

613.12 History History: 1975 c. 223; 1997 a. 79; 2015 a. 197 s. 51; 2023 a. 212.

613.13 613.13 Certificate of incorporation and authority.

613.13(1) (1) Application. The application for a certificate of incorporation and authority shall be signed and acknowledged by or on behalf of each incorporator, and shall include or have attached:

613.13(1)(a) (a) The names, and for the preceding 10 years, all addresses and all occupations of all incorporators and proposed directors and officers.

613.13(1)(b) (b) For all corporate incorporators, their articles and bylaws, a list of the names, addresses and occupations of all directors and principal officers, and for the 3 most recent years their annual financial statements and reports.

613.13(1)(c) (c) The proposed articles which shall be signed and acknowledged by or on behalf of each incorporator, and the proposed bylaws.

613.13(1)(d) (d) All agreements relating to the corporation to which any incorporator or proposed director or officer is a party.

613.13(1)(e) (e) The amount and sources of the funds available for organization expenses and the proposed arrangements for reimbursement and compensation of incorporators or other persons.

613.13(1)(f) (f) The proposed compensation of directors and officers.

613.13(1)(g) (g) The forms to be used for any contracts between the corporation and its members or other persons concerning the provision of services to insureds.

613.13(1)(h) (h) The proposed minimum permanent surplus, and the proposed initial expendable surplus.

613.13(1)(i) (i) The plan for conducting the insurance business, including:

613.13(1)(i)1. 1. The geographical area in which business is intended to be done in the first 5 years.

613.13(1)(i)2. 2. The types of insurance intended to be written in the first 5 years including specification whether and to what extent indemnity rather than services are to be provided.

613.13(1)(i)3. 3. The proposed marketing methods.

613.13(1)(i)4. 4. To the extent requested by the commissioner, the proposed method for the establishment of premium rates and other charges to policyholders.

613.13(1)(j) (j) A projection of the anticipated operating results of the corporation at the end of each of the first 5 years of operation, based on reasonable assumptions of loss experience, premium and other income, operating expenses and acquisition costs.

613.13(1)(k) (k) Such other relevant documents or information as the commissioner reasonably requires.

613.13(2) (2) Issuance of certificate of incorporation. The commissioner shall issue a certificate of incorporation if:

613.13(2)(a) (a) The commissioner finds that all requirements of law have been met;

613.13(2)(b) (b) The commissioner is satisfied that all natural persons who are incorporators, the directors and principal officers of corporate incorporators, and the proposed directors and officers of the corporation being formed are trustworthy and competent and collectively have the competence and experience to engage in the particular insurance business proposed; and

613.13(2)(c) (c) The commissioner is satisfied that the business plan is consistent with the interests of the corporation’s potential insureds and of the public.

613.13(3) (3) Issuance of certificate of authority.

613.13(3)(a) (a) The commissioner shall issue a certificate of authority if all of the following apply:

613.13(3)(a)1. 1. The commissioner finds that cash or property has been received sufficient to satisfy the requirements of s. 613.19.

613.13(3)(a)2. 2. A principal officer of the corporation submits a statement of any material changes that have already taken place or are likely to take place in the facts on which the issuance of the certificate of incorporation was based, and if any material changes are proposed in the business plan, the additional information about such changes that would be required if a certificate of incorporation were then being applied for.

613.13(3)(a)3. 3. The commissioner finds that all other applicable requirements of the law have been met.

613.13(3)(b) (b) The certificate of authority shall specify any limits placed on the insurance business that may be carried on by the corporation and may, within the powers given the commissioner by law, specify limits on its methods of operation.

613.13(4) (4) Legal existence. Upon the issuance of the certificate of incorporation the legal existence of the corporation shall begin, the articles and bylaws shall become effective and the proposed directors and officers shall take office. The certificate is conclusive evidence of compliance with this section, except in a proceeding by the state against the corporation.

613.13 History History: 1975 c. 223, 421; 1979 c. 102; 2021 a. 258.

613.19 613.19 Financial and contractual resources.

613.19(1) (1) Minimum permanent surplus. The commissioner may by rule establish the minimum permanent surplus for a corporation organized under this chapter. In the absence of such a rule, the minimum permanent surplus shall be $2,000,000 or such greater amount as the commissioner specifies by order.

613.19(2) (2) Initial expendable surplus. A corporation organized under this chapter shall have an initial expendable surplus, after payment of all organizational expenses, of at least 50 percent of the minimum permanent surplus specified under sub. (1), or such other percentage as the commissioner specifies by order.

613.19(3) (3) Providers’ contracts. A service insurance corporation may make contracts with its members and other persons for the provision of services to policyholders in order to ensure performance of the insurance contracts to be issued. The selection of members and other providers with whom such contracts are made and the terms of the contracts, together with the surplus provided under subs. (1), (2) and (5), shall reflect the benefits and other terms provided in the insurance contracts and the number and distribution of existing and expected policyholders in such a way that it is reasonably to be expected that services will be provided as promised.

613.19(4) (4) Assessments against policyholders. There may not be any assessments against policyholders.

613.19(5) (5) Reduction of minimum surplus. The commissioner may by order reduce the minimum amounts of surplus required under subs. (1) and (2) if in the commissioner’s opinion the extent and nature of providers’ contracts under sub. (3), financial guarantees and other support by financially sound private or public corporations, a pressing social need in a particular community for the formation of a service insurance corporation, or other special circumstances, justify the proposed reduction in the required surplus. A person who will directly compete with the proposed insurer is aggrieved within the meaning of s. 601.62 (3) (a).

613.19(5m) (5m) Capital requirements rule. Notwithstanding subs. (1), (2) and (5), the commissioner shall promulgate a rule that establishes for a corporation that is organized under this chapter and that is not a health maintenance organization insurer the same compulsory and security surplus requirements that apply to a corporation that is organized under ch. 611, subject to ch. 646 and authorized to write the same line of business as a corporation that is organized under this chapter and that is not a health maintenance organization insurer.

613.19(6) (6) Health maintenance organization insurer. This section does not apply to a health maintenance organization insurer that is subject to s. 609.96.

613.19 History History: 1975 c. 223, 421; 1979 c. 261; 1985 a. 335; 1989 a. 23; 1995 a. 236.

613.20 613.20 Alteration of certificate of authority.

613.20(1) (1) Upon application. A service insurance corporation may at any time apply to the commissioner for a new or amended certificate of authority, removing, altering or adding limits on its business or methods of operation. The application shall contain or be accompanied by so much of the information in s. 613.13 (1) as the commissioner requires. The commissioner shall issue the new certificate as requested if the commissioner finds that the:

613.20(1)(a) (a) Corporation’s surplus and providers’ contracts are adequate to support the proposed operations under the new certificate; and

613.20(1)(b) (b) Proposed business would not be contrary to the law or to the interests of insureds or the public.

613.20(2) (2) By commissioner. If the commissioner issues a summary order under s. 645.21 against a corporation, the commissioner may also revoke the corporation’s certificate and issue a new one with such limits as deemed necessary.

613.20 History History: 1975 c. 223, 421.

613.24 613.24 Segregated asset and special accounts. Service insurance corporations are subject to ss. 611.24 and 611.25.

613.24 History History: 1975 c. 223.

613.26 613.26 Subsidiaries. Service insurance corporations may act under s. 611.26.

613.26 History History: 1975 c. 223.

613.28 613.28 Changes in business plan. Service insurance corporations are subject to s. 611.28.

613.28 History History: 1975 c. 223.

613.29 613.29 Amendment of articles.

613.29(1) (1) Right to amend articles. A service insurance corporation may amend its articles under ss. 181.1001 to 181.1007 in any desired respect including substantial changes of its original purposes not inconsistent with this chapter. No amendment may be made contrary to s. 613.12.

613.29(2) (2) Filing. For 5 years after the initial issuance of a certificate of authority, proposed amendments of the articles which are not changes in the business plan shall be filed with the commissioner at least 30 days before the amendment is submitted to the members for approval, or if such approval is not required, at least 30 days before the effective date. No amendment may become effective until the articles of amendment have been filed with the commissioner.

613.29(3) (3) Effect of amendment. Section 181.1008 applies to service insurance corporations.

613.29 History History: 1975 c. 223; 1997 a. 79.

subch. III of ch. 613 SUBCHAPTER III

SECURITIES OF SERVICE INSURANCE CORPORATIONS

613.31 613.31 Securities regulation.

613.31(1) (1) Registration. No securities issued by a service insurance corporation may be sold by or for the corporation unless they are registered or exempt from registration under ch. 551.

613.31(2) (2) Approval by commissioner. Securities of a service insurance corporation may not be registered under ch. 551 without prior approval of the commissioner of insurance.

613.31 History History: 1975 c. 223.

613.33 613.33 Authorized securities.

613.33(1) (1) Service insurance corporation bonds. The articles of a service insurance corporation may authorize service insurance corporation bonds of one or more classes and shall specify the amount of each class of bonds the corporation is authorized to issue, their designations, preferences, limitations, rates of interest and relative rights, subject to the following provisions:

613.33(1)(a) (a) During the first year after the initial issuance of a certificate of authority, the corporation may issue only a single class of bonds with identical rights.

613.33(1)(b) (b) After the first year but within 5 years after the initial issuance of a certificate of authority, additional classes of bonds may be authorized after approval of the commissioner, who shall approve on a finding that policyholders and prior bondholders will not be prejudiced.

613.33(1)(c) (c) The rate of interest shall be fair and reasonable.

613.33(1)(d) (d) The bonds shall bear a maturity date not later than 10 years from the date of issuance, when principal and accrued interest shall be due and payable, subject to sub. (4).

613.33(2) (2) Contribution notes. Any service insurance corporation may issue contribution notes if the commissioner approves. The commissioner may approve only on a finding that:

613.33(2)(a) (a) The notes will not be issued in denominations of less than $500, and no single issue will be sold to more than 15 persons;

613.33(2)(b) (b) No discount, commission or other fee will be paid or allowed;

613.33(2)(c) (c) The notes will not be the subject of a public offering;

613.33(2)(d) (d) Their terms are not prejudicial to policyholders, holders of service insurance corporation bonds or of prior contribution notes; and

613.33(2)(e) (e) The corporation’s articles and bylaws do not forbid their issuance.

613.33(3) (3) Prohibited transactions. No service insurance corporation may:

613.33(3)(a) (a) If it has any outstanding obligations on service insurance corporation bonds or contribution notes, borrow on contribution notes from, or sell bonds to, any other insurer without approval of the commissioner; or

613.33(3)(b) (b) Make any loan to another insurer except a fully secured loan at usual market rates of interest.

613.33(4) (4) Repayment. Payment of the principal or interest on service insurance corporation bonds or contribution notes may be made in whole or in part only after approval by the commissioner. Approval shall be given if all financial requirements of the issuer to do the insurance business it is then doing will continue to be satisfied after payment and if the interests of its insureds and the public are not thereby endangered. In the event of liquidation under ch. 645, unpaid amounts of principal and interest on contribution notes shall be subordinated to the payment of principal and interest on any service insurance corporation bonds issued by the corporation at any time.

613.33(5) (5) Other obligations. Nothing in this section prevents a service insurance corporation from borrowing money on notes which are its general obligations, nor from pledging any part of its disposable assets therefor.

613.33 History History: 1975 c. 223, 421; 1979 c. 102.

subch. IV of ch. 613 SUBCHAPTER IV

MANAGEMENT OF CORPORATIONS

613.40 613.40 Members and meetings. In a service insurance corporation that has members:

613.40(1) (1) Meetings of members. Sections 181.0160, 181.0701, 181.0702 and 181.0705 apply to service insurance corporations.