(a) In the case of a reorganizing insurer that is a mutual life insurer, upon the effective date the reorganizing insurer shall, at its option, either:

(1) (A) Establish a closed block for policyholder dividend purposes only, consisting of all participating individual policies of the reorganizing insurer in force on the effective date and for which the insurer had an experience-based dividend scale payable in the year in which the plan of reorganization was adopted. On or before the effective date, such insurer shall allocate assets to such closed block in an amount that produces cash flows, together with anticipated revenues from the closed block business that is sufficient to support the closed block business, including provision for payment of claims, expenses and taxes specified in the plan of reorganization and continuation of dividend scales in effect on the adoption date, if the experience underlying such scales continues. No policies entering into force after the effective date shall be included in the closed block; and

(B) May provide, with the approval of the commissioner, under its terms for the establishment of the closed block, for conditions under which the reorganized insurer may cease to maintain the closed block and allocation of assets thereto, provided the policies constituting closed block business shall remain obligations of the reorganized insurer and dividends on such policies shall be apportioned by the board of directors of the reorganized insurer in accordance with the terms of such policies and any applicable provisions of law; or

(2) Provide an alternative practice to subdivision (1) of this subsection that protects the contractual rights of individual policyholders of the reorganizing insurer with policies in force on the effective date, if the commissioner determines that such alternative is substantially as protective of the interests of individual participating policyholders as the establishment of a closed block pursuant to subdivision (1) of this subsection.

(b) The equity interest of the policyholders of the reorganized insurer shall be equal in the aggregate to the value of the entire capital and surplus of the mutual holding company, excluding any funds required to be held in segregated accounts by federal law. Such equity interest shall be the basis for consideration to policyholders in the event the mutual holding company converts into a domestic stock corporation as set forth in subparagraph (B) of subdivision (1) of subsection (b) of § 38a-156j.

(c) At the end of the third year following the year of reorganization and at the end of each third year thereafter or more frequently as determined by the commissioner, an independent accounting or actuarial firm shall provide a report to the commissioner, the board of directors of the mutual holding company and the board of directors of the reorganized insurer attesting to whether or not the closed block and related assets, or alternative practice pursuant to subdivision (2) of subsection (a) of this section, has been administered in accordance with the plan of reorganization. Such firm shall take into consideration the dividend payments to policyholders resulting from the closed block and any other relevant factors. The reorganized insurer shall pay the expenses incurred in retaining the independent accounting or actuarial firm. Such report shall be completed and delivered to the commissioner, the board of directors of the mutual holding company and the board of directors of the reorganized insurer not later than the close of business on April first following the end of the period for which such report is being provided.