A new bill has been passed by the Georgia State Senate allowing insurers domiciled in the state to divide into multiple parts in order to separate themselves from unwanted exposures.
House Bill 754, passed on 15 March 2018, amends Title 33 of the Official Code of Georgia Annotated to allow for the division of domestic insurers and is similar to House Bill 7025 signed in Connecticut last year.
Dividing can allow insurers to separate exposures onto individual balance sheets, however, they may have to reassume their original obligation should one of the resulting insurers be found to be in breach of that original obligation.
According to Andrew Rothseid, principal at RunOff Re.Solve, the separation process appears user-friendly and the only significant hurdle is regulatory approval.
He explained: “The commissioner must approve a plan of division unless the interest of any policyholder or shareholder will not be adequately protected or the proposed division constitutes a fraudulent transfer.”
Rothseid suggested that the bill could, with respect to any legacy liabilities that may be on a Georgia-domiciled balance sheet, “pave the way to redomestication of that problematic portfolio to another jurisdiction (Rhode Island) where accelerated closure has been proven to be successful”.
He added that the bill is “a further sign of the increasing regulatory flexibility in this area”.
“However, there are ambiguities in the language of House Bill 754 and the resulting impact—indeed, the wording of the new legislation is as interesting for what it doesn’t say as what it does.”
