State lawmakers are working on a model act that could help insurers break up. The National Council of Insurance Legislators (NCOIL) is discussing a draft Insurer Division Model Act.
Eventually, states could use the “model act,” or sample legislative text, to create their own insurer division laws.
An insurance company in a state with an insurer division law could use the law to split itself into two or more separate insurance companies. Each of the new, separate companies would inherit some assets, benefits obligations and other responsibilities from the parent.
- A copy of the 30-day materials packet for NCOIL’s upcoming meeting in Tampa, Florida, is available here.
- A working draft of the model act is available here.
- An article about NCOIL’s insurance business transfer model is available here.
Connecticut enacted a insurer division law in 2017, and Georgia, Illinois, Iowa and Michigan also have insurer division laws.
Connecticut state Sen. Matt Lesser, a Democrat, has been sponsoring the model act at NCOIL, with support from officials with the Connecticut Insurance Department.
NCOIL’s Financial Services and Multi-Lines Issuers Committee discussed the model at an in-person session in Alexandria, Virginia, Sept. 26, during NCOIL’s summer meeting, according to draft meeting minutes.
NCOIL’s upcoming annual meeting in Tampa, Florida is set to start Dec. 9.
The Draft Model
The current working draft of the model has 16 sections, including those covering:
- The insurer’s plan of division.
- The company-level approval process for insurers with and without shareholders.
- The regulator approval process.
- What happens when a proposed division falls through.
- Allocation of benefits liabilities.
- Appraisal rights.
- Guaranty association considerations.
Lesser noted that NCOIL recently completed work on an insurance business transfer model, according to the draft meeting minutes.
Jared Kosky, general counsel of the Connecticut Insurance Department, said during the meeting that the insurer division model is related to but different from the insurance business transfer model. The insurer division model would provide what amounts to a framework for a transaction that has finality for policyholders, reinsurers and other parties, and that is, in essence, the reverse of a merger.