CA Ins Code Section 1560.05

(a)

The commissioner shall examine the plan submitted pursuant to Section 1560.03. As a part of the examination the commissioner shall order a public hearing of the plan after written notice of the hearing to the domestic reciprocal insurer and its subscribers and the public, all of whom shall have the right to appear at the hearing. The hearing shall occur before the policyholder vote. The commissioner may require as a condition of consent that the domestic reciprocal insurer make modifications of the proposed plan that the commissioner finds necessary for the protection of policyholders. The commissioner shall consent to the plan if he or she finds all of the following:

(1)

The plan is fair, just, and equitable to the insurer and its policyholders.

(2)

The plan does not violate the law.

(3)

The converted insurer will, after the conversion, satisfy the requirements for the issuance of a license to write the line or lines of insurance for which it is presently licensed.

(4)

The plan will not require subscribers to pay additional funds to retain their rights in surplus, but nothing herein is intended to prohibit or restrict a reciprocal insurer that is converting to a stock insurer by establishing a reciprocal holding company from offering to its subscribers subscription rights that are in addition to the rights in surplus to be held in the reciprocal holding company.

(5)

Any stock issued to officers, directors, employees, or employee benefit plans for their benefit, if any, will be fair, just, and equitable and not hazardous to policyholders, stockholders, or creditors.

(6)

The plan provides sufficient means for the accumulated earnings, cash, and/or other non-operating assets held by the reciprocal holding company to inure to the exclusive benefit of its members.

(b)

The commissioner may appoint one or more actuarial, financial, or other consultants, including legal counsel, as the commissioner finds necessary to advise the commissioner in making the determination of whether the proposed plan of conversion meets the applicable requirements of this article. The domestic reciprocal insurer is responsible for the reasonable fees and expenses of any actuarial, financial, or other consultants, including legal counsel, appointed, and for the mailing and publication of notices to the domestic reciprocal insurer and its members.