The insurance laws of several states, including Minnesota, provide for the creation of “mutual insurance holding companies”. A mutual insurance company can convert to a mutual insurance holding company structure by electing to do so under the applicable insurance statutes, and obtaining the necessary approvals of members, board of directors and insurance regulators. Under the mutual insurance holding company structure, a parent mutual holding company is created, and the mutual insurance company is converted to a stock insurance company, which is a subsidiary of the mutual holding company. The policyholders of the stock insurance company continue as members of the mutual holding company. The mutual holding company must at all times own at least 51% of the stock of the stock insurance company. The great advantage of this structure is that the mutual holding company can raise funds by selling up to 49% of the equity interests in the stock insurance company subsidiary to third parties either directly or through intermediary subsidiaries, in private or public transactions. This allows the company to access the capital markets, something which has always been difficult for mutual insurance companies, while maintaining the policyholder ownership and other advantages of the mutual structure.
In 2011, Best & Flanagan represented a Minnesota insurer in creating only the second mutual insurance holding company structure created under the Minnesota statute.