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Insurance Company Acquisitions - Legal Considerations in New York State

Release Date: July 12, 2010




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In general, when one company wants to take over another company's business, it is assumed that the company will purchase the stock or assets of the other party. In a typical transaction, after considering matters such as the liabilities of the target company and the tax impacts of a structure, the parties negotiate whether an asset or stock deal is appropriate and then enter into an agreement.

For New York insurance companies, however, the analysis is often not so straightforward. Under the New York Insurance Law and related regulations, there are numerous obstacles which may impede one insurance company's ability to acquire another insurance company's stock or assets. In many cases, it is not possible for one insurance company to buy the stock or assets of another insurance company unless additional steps are taken or an alternative acquisition structure is used.

As an initial matter, under the New York Insurance Law, companies are typically prohibited from entering into fundamental transactions with dissimilar entities. For example, the law provides that, in general, a stock company may only merge or consolidate with another stock company or a reciprocal insurer and expressly provides that a stock insurer may not merge with a mutual company. In addition, an assessment co-operative may only merge with another assessment co-operative (provided it is licensed to do business either wholly or substantially in a common territory of New York) and an advance premium co-operative may only merge with another advance premium cooperative. In addition to these restrictions, New York law provides that a domestic insurance company can only merge or consolidate with a foreign company if such company is authorized to do business in New York and the laws of the state in which the foreign company is domiciled permit such a merger or consolidation.

To overcome these restrictions, an insurance company may elect to convert into a different type of entity, to the extent conversion is permitted under the New York Insurance Law. For example, the law more...



This Jaeckle Article, prepared by the attorneys at Jaeckle Fleischmann & Mugel, LLP, is intended for general information purposes only and should not be considered legal advice or an opinion on specific facts. For more information on these issues, contact one of the attorneys listed above or your existing Firm contact. Prior results do not guarantee a similar outcome. The invitation to contact is not a solicitation for legal work in any jurisdiction in which the contacted attorney is not admitted to practice. Any attorney/client relationship must be confirmed in writing.

Insurance Company Acquisitions: Legal Considerations in New York State