Close Close

Life Health > Life Insurance

Model Law Project Could Help Insurers Divide

Your article was successfully shared with the contacts you provided.

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.

Summer Session

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.

Talcott Resolution head of government affairs Bridget Dunn said her firm would like to use the insurer division process to acquire blocks of annuity business from other insurers.

Karen Melchert, regional vice president of state relations with the American Council of Life Insurers, said the ACLI likes the idea of the NCOIL developing insurer division model, and it wants to see that any model includes strong protections for policyholders, guaranty associations and other stakeholders. Tor example, she said, a dividing insurer would be required to give policyholders and other stakeholders access to the review process, and to send stakeholders notices about about hearings.

A dividing insurer also should pay for an independent review of the proposed transaction by outside experts, to protect the interests of the policyholders and other stakeholders. Further, the insurance commissioner should have the discretion to reject a proposed division, Melchert said, according to the draft meeting minutes.

Paul Martin, vice president of state relations at the Reinsurance Association of America, also talked about the need to give stakeholders access to the review process, protect the contractual rights of the parties, and set strong notice requirements. He suggested that, due to the nature of a division, another concern may be protecting the confidentiality of sensitive financial information.

Cost is another concern, said Kath Belfi, director of financial regulation at the Connecticut Department of Insurance. That state’s law lets the insurance department hire an independent expert to review transactions but does not require it to do so, Belfi said, according to the draft meeting minutes

That flexibility is helpful, because the department staff often can evaluate a transaction on its own, and hiring contracted experts is expensive, Belfi said.

— Read Business Transfer Model Could Apply to Life, Health and Annuity Businesson ThinkAdvisor.

— Connect with ThinkAdvisor Life/Health on FacebookLinkedIn and Twitter.