Company Division Statutes Gain Steam in the States

Company Division Statutes, also known as restructuring statutes or business transfer mechanisms, are gaining steam in the state legislatures. These are statutes that permit an ongoing insurance company to divest itself of certain liabilities, along with a calculated amount of assets, and relinquish any ongoing responsibility for this business. The business divested would be put into an existing or newly created insurance company.   The statutes proposed typically call for a plan to be filed with and approved by the state’s commissioner of insurance.  Sometimes review and approval by the court is also required.  Requirements for notice to policyholders vary from state to state.  The most current proposals do not limit lines of business that can be subject to divisions.  Hence, types of insurance such as personal lines, workers compensation and long- term care could be involved.

This concept began to take shape many years ago when Rhode Island adopted Chapter 14.5 of its insurance code known as “Voluntary Restructuring of Solvent Insurers.”  The mechanism was narrowly crafted and applies to “insuring of any line(s) of business other than life, workers’ compensation, and personal lines insurance.”  (See RI Statute s. 27-14.5-1(6)).

Pennsylvania also had a related law (PA Bus Corp. Law § 1951 (repealed)) that provided for division of a solvent company. The statute was used most notably in 1996 by Cigna to divide the business of its Insurance Company of North America (“INA”) unit.  The newly formed entity, known as Brandywine, assumed certain run‐off blocks of business while INA continued to write new business. The law has since been repealed and replaced with the more generalized Associations Transaction Act (15 Pa.C.S.A. § 361) though its application to insurance policyholders is unclear.

In 2014, Vermont passed its Legacy Insurance Management Act (LIMA). According to the RunOff Re.Solve website (, LIMA allows a non-admitted insurer to transfer its discontinued commercial business to a third‐party company.  Such a division would require approval from the Vermont regulator, but the law does not mandate court approval. Personal lines coverages are excluded and policyholders can opt out of the transfer process.

Most recently, a litany of division statutes have been proposed in the following states and have progressed in the 2017 and 2018 sessions.  The current status of the proposals in these states is as follows:

Connecticut:  Division statute enacted in 2017

Georgia: Passed both houses and recently vetoed by the governor.

Illinois:  Division statute enacted in 2018.

Iowa: “Study” bill floated in 2018.

Oklahoma:  Division statute enacted May 2018.

Michigan:  Enacted in late 2018

Nebraska:  Proposal introduced in 2019

Again, these most recent proposals are not limited to certain lines of business nor is policyholder approval required. Whether there is guaranty fund coverage for the divided entity is also an issue of concern.  The NCIGF will be monitoring the issue closely and providing updates as things develop.

For additional details on division statutes please go to and search for “division.”