HMIC Will Convert to Hospitality Group Mutual Insurance coverage Holding Firm (HGMIHC)
The Massachusetts Division of Insurance coverage has authorised Hospitality Mutual Insurance coverage Firm’s (HMIC) plan to reorganize as a inventory insurance coverage firm beneath a mutual holding firm construction, marking a big evolution for the specialty insurer. The Division’s approval represents the fruits of a regulatory course of that started with HMIC’s August 13 submission and subsequent announcement of public hearings in September 2024. The proceedings, first reported by Company Checklists on September 23, 2024 (“Division of Insurance To Hold Hearing On Hospitality Mutual’s Reorganization”) centered on evaluating the reorganization’s impression on policyholders and compliance with statutory necessities.
Below the authorised plan, HMIC will convert to a inventory insurer owned by a newly created entity, Hospitality Group Mutual Insurance coverage Holding Firm (HGMIHC), via an intermediate holding firm. The reorganization features a $5.5 million strategic funding from Mutual Capital Funding Fund, LP (MCIF), which is able to purchase a forty five% possession stake within the intermediate holding firm.
The mutual holding firm construction gives HMIC a number of strategic benefits whereas sustaining policyholder management. This hybrid mannequin permits the insurer to entry capital markets and pursue strategic acquisitions like a inventory firm whereas preserving the mutual insurance coverage precept of policyholder possession. By legislation, HGMIHC should keep a minimum of 51% possession of HMIC, guaranteeing policyholders retain final management. The construction additionally supplies flexibility for future progress via potential acquisitions, strategic partnerships, or growth into new markets with out sacrificing the corporate’s mutual heritage.
HMIC President and CEO Richard Welch, who has led the corporate since 2018, offered detailed testimony in regards to the reorganization’s advantages and policyholder protections. Welch emphasised that HMIC’s roughly 1,844 policyholders would robotically develop into members of HGMIHC with unchanged insurance coverage insurance policies. He detailed how the reorganization preserves voting rights and policyholder dividends whereas enhancing the corporate’s strategic choices. Notably, Welch testified that for the primary 5 years post-reorganization, all dividends would require prior discover and non-disapproval from the Commissioner.
HMIC Chairman Richard Brewer, drawing on his expertise as former CEO of each Arbella Mutual and Coverys, testified in regards to the board’s complete strategic evaluation. Starting in 2019, an Advert Hoc Capital Committee evaluated varied organizational choices earlier than figuring out MCIF as a possible accomplice in January 2023. Brewer detailed the intensive due diligence course of and arm’s-length negotiations resulting in the board’s December 2023 approval to pursue reorganization.
Mark Noller, representing the Division’s Working Group, offered crucial impartial evaluation. Noller, a principal at Rudmose & Noller Advisors with 39 years of trade expertise, methodically evaluated the plan towards the six statutory standards beneath M.G.L. c. 175, §19H(d). His testimony confirmed that the reorganization met all necessities whereas sustaining applicable policyholder protections.
Listening to Officers Matthew Taylor and Jean Farrington’s detailed evaluation discovered the reorganization happy every statutory requirement: serving HMIC’s finest pursuits, guaranteeing equity to policyholders, enhancing operations, sustaining market competitors, preserving sufficient capital, and complying with all statutory provisions. Their determination notably famous the plan’s cautious steadiness of modernizing HMIC’s company construction whereas preserving policyholder rights.
The Division additionally authorised HMIC’s request to retain “mutual” in its title post-conversion, discovering it unlikely to mislead the general public given the persevering with mutual possession construction via HGMIHC and the corporate’s 15-year model funding within the Massachusetts market.
HMIC, which emerged from the conversion of the Liquor Legal responsibility Joint Underwriting Affiliation in 2008, has developed into a big specialty insurer. By way of HMIC and its Connecticut-domiciled subsidiary, Hospitality Insurance coverage Firm, it supplies basic legal responsibility, extra legal responsibility, industrial property, and enterprise proprietor’s insurance policies throughout seven states. For a abstract of HMIC’s historical past and product choices, See Company Checklists’ article of April 4, 2024, “Talking with Richard Welch: Growth and Innovation at Hospitality Mutual.”
The reorganization confronted a closing hurdle on Friday, December 13, 2024, at a policyholder assembly to tabulate the votes of HMIC policyholders’ on approving the corporate’s reorganization. The reorganization required a two-thirds majority for approval.
The ultimate outcomes of the December 13 vote had all votes solid, with none dissenting votes, in favor of administration’s plan, paving the way in which for the implementation of the reorganization plan in early 2025.
The entire textual content of the Division’s determination in Docket No. F2024-02 follows:
