760 IAC 1-3-5 New companies; enlargement of established companies

Sec. 5. RULES AND PRINCIPLES. The Commissioner of Insurance, in considering questions relating to the organization of a new stock company, or relating to the enlargement of the capital of an established stock insurance company, will be guided by the following concepts, rules and principles, among others: (1) The organization and promotion of new insurance companies on a sound basis is to be commended and encouraged. (2) The business of insurance, because of its direct and vital effects upon stockholders, policyholders and the economy generally, is vital in the public interest and welfare. (3) The organization and capitalization of insurance companies should be carefully scrutinized in keeping with the concepts, rules and principles herein enunciated. (4) Organization and promotion expenses, inclusive of commissions paid for sale of stock, but exclusive of legal expenses and statutory organization fees and charges, should not under any circumstances exceed ten percent of the sale price of stock actually sold. In the instance of the organization of a new company, the funds derived from the sale of stock, in excess of expenses as limited herein, must be placed in trust or escrow until such funds can be delivered to the company upon, or subsequent to, the issuance of its certificate of authority under Section 77 [ IC 27-1-6-18] of the Indiana Insurance Law. (5) In the event a new stock issue is approved by the Department within the period of five years immediately subsequent to the date of the company's original license to do an insurance business, the sale price for the new issue shall be subject to the Commissioner's approval and may not exceed two hundred percent of the lowest price at which any shares were previously issued, except that a higher price may be fixed for a new issue, if in the opinion of the Commissioner the condition of the company justifies, taking into consideration the company's financial condition, business in force and facts relating to the stock's history, such as stock splits, stock dividends, changes in par value, and the like. (6) The sale price of stock should be payable either in cash or by an interest-bearing promissory note payable within ninety days. In event a promissory note is given in payment for stock, there should be no tie-in with or inter-dependence between the note obligation and the purchase of insurance or with projected dividends from such insurance. (7) With respect to stock companies hereafter organized, any arrangement, device, plan or scheme, however contrived or formulated, having as its end or purpose a diversion, either directly or indirectly, of the company's funds, other than in payment of legitimate dividends or costs of doing business, to any officer(s), director(s), organizer(s), or promoter(s) of the company, or to any association, corporation, partnership or trust owned or controlled by any officer(s), director(s), organizer(s) or promoter(s) of the company, is hereby declared in violation of the statutory mandate that "every insurance company conduct and transact its business in a safe and prudent manner" and "maintain safe and sound business methods."