Chapter 613

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.

613.40(2) (2) Voting and quorum. Sections 181.0721, 181.0723 and 181.0724 apply to service insurance corporations and s. 181.0722 applies to service insurance corporations except as modified by ss. 613.72 (4) and 613.75 (2).

613.40(3) (3) Delegates. Section 181.0640 applies to service insurance corporations.

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

613.41 613.41 Communications to members or policyholders and attendance at meetings.

613.41(1) (1) Copies of communications. The commissioner may by rule prescribe that copies of specified classes of communications circulated generally by a corporation to members or policyholders shall be communicated to the commissioner at the same time.

613.41(2) (2) Attendance at meetings. The commissioner may attend any members’ or policyholders’ meeting.

613.41 History History: 1975 c. 223, 421.

613.51 613.51 Board of directors.

613.51(1) (1) General. The affairs of a corporation shall be managed by a board of directors. Directors need not be residents of this state or members of the corporation unless the articles of incorporation or bylaws so require. The articles of incorporation or bylaws may prescribe other qualifications for directors.

613.51(2) (2) Number, selection and classification of directors. Section 611.51 (2) and the first sentence of s. 611.51 (5) apply to service insurance corporations. Sections 181.0803 to 181.0811 apply to service insurance corporations except as modified by ss. 613.53 and 613.54.

613.51(3) (3) Inside directors. Employees and representatives of a service insurance corporation may not constitute a majority of its board.

613.51(3m) (3m) Subsidiaries and closely held corporations. Subsection (3) and s. 611.51 (2) (a) do not apply to an insurance subsidiary authorized under s. 613.26 nor to a nonstock insurance corporation with a single voting member or all of whose voting members are either members of or are individually represented on the board.

613.51(4) (4) Unlawful delegation. The board shall manage the business and affairs of the corporation and may not delegate its power or responsibility to do so, except to the extent authorized by ss. 181.0841 and 613.56.

613.51(5) (5) Quorum and voting. Section 181.0824 applies to service insurance corporations, except as modified by s. 613.60.

613.51(6) (6) Books and records. Sections 181.1601 to 181.1605 apply to service insurance corporations.

613.51(7) (7) Place and notice of directors’ meetings. Sections 181.0820, 181.0822 and 181.0823 apply to service insurance corporations.

613.51 History History: 1975 c. 223; 1997 a. 79; 2021 a. 258.

613.52 613.52 Officers.

613.52(1) (1) General. Sections 181.0840 and 181.0841 apply to service insurance corporations, as modified by s. 613.12 (3).

613.52(2) (2) Removal. Sections 181.0843 and 181.0844 apply to service insurance corporations.

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

613.53 613.53 Policyholder or public members of board of directors. The articles may provide that any number of the directors shall be chosen from among the policyholders, the general public or both, under a plan designed to assure independent directors truly representing the interests of policyholders or the public interest. The persons to be named as directors under this section shall be persons whose experience and existing relationships qualify them to serve responsibly and impartially as independent policyholder or public directors.

613.53 History History: 1975 c. 223.

613.54 613.54 Supervision of management changes. Section 611.54 applies to service insurance corporations.

613.54 History History: 1975 c. 223.

613.55 613.55 Continuity of management in emergencies. Section 611.55 applies to service insurance corporations.

613.55 History History: 1975 c. 223.

613.56 613.56 Committees of directors.

613.56(1) (1) Appointment. If the articles or bylaws of a corporation so provide, the board by resolution adopted by a majority of the full board may designate one or more committees, each consisting of 3 or more directors serving thereon at the pleasure of the board. The board may designate one or more directors as alternate members of any committee to substitute for any absent member at any meeting of the committee. The designation of a committee and delegation of authority to it shall not relieve the board or any director of responsibility imposed by law.

613.56(2) (2) Delegation; major committees. When the board is not in session, a committee satisfying all of the requirements for the composition of a full board under s. 613.51 may exercise any of the powers of the board in the management of the business and affairs of the corporation, including action under ss. 611.60 and 611.61 as applied to service insurance corporations by s. 613.60, to the extent authorized in the resolution or in the articles or bylaws.

613.56(3) (3) Delegation; ordinary committees. When the board is not in session, a committee not satisfying the requirements of sub. (2) may exercise the powers of the board in the management of the business and affairs of the corporation to the extent authorized in the resolution or in the articles or bylaws, except action in respect to:

613.56(3)(a) (a) Compensation or indemnification of any person who is a director, principal officer or one of the 3 most highly paid employees, and any benefits or payments requiring member or policyholder approval;

613.56(3)(b) (b) Approval of any contract required to be approved by the board under ss. 611.60 and 611.61 as applied to service insurance corporations by s. 613.60, or of any other transaction in which a director has a material interest adverse to the corporation;

613.56(3)(c) (c) Amendment of the articles or bylaws;

613.56(3)(d) (d) Merger under s. 613.72, conversion under s. 613.75, voluntary dissolution under s. 613.74 or transfer of business or assets under s. 613.78;

613.56(3)(e) (e) Any other decision requiring member or policyholder approval;

613.56(3)(f) (f) Amendment or repeal of any action previously taken by the full board which by its terms is not subject to amendment or repeal by a committee;

613.56(3)(g) (g) Dividends or other distributions to members or policyholders, other than in the routine implementation of policy determinations of the full board;