Claims that Kingsway's sham transactions impacted one of its subsidiaries in Pennsylvania
Pennsylvania Insurance Department has filed a complaint in Commonwealth Court to force Kingsway Financial Services to unwind a set of sham transactions that negatively impacted one of its subsidiaries in Pennsylvania.
Joel Ario, insurance commissioner, said: “Kingsway attempted to dispose of its interest in the Lincoln General Insurance Company through stock donations to 20 unsuspecting charities. Today, we are asking the Commonwealth Court to unwind this transaction for the benefit of Lincoln General and its policyholders.”
According to Ario, the reasons for the legal action are that Kingsway engaged in a series of sham transactions for the sole purpose of evading its obligations under multiple provisions of insurance law designed to protect an insurance subsidiary from being abandoned by its parent holding company.
The company tried to pawn off its ownership interests in Lincoln General on 20 unsuspecting charities and then claiming that neither Kingsway nor any of the charities had ownership interests in Lincoln General.
In addition, failure to take action against Kingsway will invite others to engage in similar sham transactions and undermine the web of laws that protect insurance companies against abandonment by their parent holding companies.
“Rather than consulting with the department about its options with respect to Lincoln General, Kingsway came up with this sham transaction to divest its interest in Lincoln General in an attempt to protect the holding company from any impact from the insurer’s financial difficulties. We believe this action is unlawful,” he added.