KentuckyHB 1842025 Regular SessionHouse

AN ACT relating to insurance.

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Bill Overview

Analyzed Economic Effects

5 provisions identified: 1 benefits, 0 costs, 4 mixed.

More time to test insurance innovations

Eligible applicants now have until December 31, 2030, instead of December 31, 2025, to apply to Kentucky’s insurance sandbox. The sandbox allows limited tests of new insurance products and processes under state oversight. The extension does not itself provide household payments or change application requirements.

Agents face insurer asset transfer rules

After receiving notice of liquidation, insurance agents must transfer insurer assets to the liquidator within 30 days. This covers assets held on the liquidation date or received afterward. The duty is subject to the law’s financial-contract protections and a separate statutory exception. Agents must also promptly notify policyholders at their last address on file, with oral notice where practical.

Financial contract rights survive insurer distress

Parties to covered insurer financial contracts retain enforceable rights to end contracts, collect collateral, and settle balances during insolvency proceedings. Court pauses, liquidator powers, and debt-offset restrictions must respect these protections. Netting or debt offsets require the counterparty or its guarantor to be organized in the United States or an approved foreign jurisdiction. Contracts between an insurer and its affiliate are excluded. Separate accounts qualify only when their assets serve solely their own contract counterparties; termination amounts owed to the insurer go to its receiver.

Insurer contract rejection limits damage claims

A receiver rejecting a covered financial agreement must reject the whole agreement and all related transactions together. The counterparty’s claim is treated as arising before the liquidation or rehabilitation petition. If rehabilitation becomes liquidation, the claim dates to before the rehabilitation petition. Recovery is limited to actual direct losses measured on the rejection date. Punitive damages, lost profits, lost opportunities, and pain and suffering are excluded.

Insurer contract transfers gain new protections

A receiver transferring covered financial contracts must move all contracts involving the same counterparty and its affiliates together, including collateral and guarantees. The new holder cannot be an insurer in delinquency proceedings. The receiver must make best efforts to notify counterparties by noon local time on the next business day. Earlier contract transfers are protected from recovery unless made with actual intent to hinder, delay, or defraud the insurer, receiver, or creditors. These protections also limit ordinary rules for fraudulent transfers, post-petition property transfers, and preferential payments to creditors.

Sponsors & Cosponsors

Sponsor

Mike Clines
Republican • House

Cosponsors

There are no cosponsors for this bill.

Roll Call Votes

All Roll Calls

Yes: 218 • No: 0

Senate vote • 3/14/2025

passed

Yes: 89 • No: 0

Senate vote • 3/13/2025

3rd reading, passed

Yes: 36 • No: 0

House vote • 2/18/2025