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Insurance Department Takes Action in Commonwealth Court Against Kingsway Financial Services

HARRISBURG, Pa., Nov. 20 /PRNewswire-USNewswire/ -- The Pennsylvania Insurance Department today 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.

"Kingsway attempted to dispose of its interest in the Lincoln General Insurance Company through stock donations to 20 unsuspecting charities," said Insurance Commissioner Joel Ario. "Today, we are asking the Commonwealth Court to unwind this transaction for the benefit of Lincoln General and its policyholders."

Ario offered the following reasons for the legal action:

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.
Kingsway's sham transactions consisted of trying 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.
Kingsway's actions must be unwound so that its legal obligations to Lincoln General are reinforced, and so that the innocent charities are not harmed in any way by Kingsway's deceptive actions.
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," said Ario. "We believe this action is unlawful."

Lincoln General, a Pennsylvania insurance company specializing in commercial insurance for the trucking industry, had been experiencing financial difficulties. The department has been in discussions with both Lincoln General and Kingsway concerning Lincoln General's financial condition and the responsibilities of Kingsway as the ultimate controlling corporation for Lincoln General.

For a copy of the filed complaint, visit www.insurance.state.pa.us.

Media contact: Rosanne Placey, Melissa Fox, 717-787-3289.

SOURCE Pennsylvania Department of Insurance