Still, it's not obvious from court documents that the insurer will lose its case. But there's no question Kingsway has tried to creatively segregate its business from Lincoln General Insurance Co. Unfortunately for Kingsway, having taken action it believed was best for stockholders, the regulator wants the deal unwound. Sometimes creativity comes at the behest of regulators. Take MBIA ( MBI), for example. It separated credit default swaps from the business to try to create a solid municipal bond insurer. The move was championed by New York's insurance superintendant at the time. Interestingly, MBIA's creativity also is subject to lawsuits brought by, among others, JP Morgan ( JPM) and Bank of America ( BAC). It seems that no one likes these splits, no matter if the intentions are good. Ambac's regulator, Wisconsin's Sean Dilweg, has criticized the MBIA transaction and said he won't allow Ambac to do the same. If Kingsway and the regulator fail to reach a resolution out of court, the case could help define what control an insurer has over its own subsidiaries. By winning, the regulator could force the insurer into liquidation. Perhaps it sees the importance of establishing the rule of law is worth the cost of killing Kingsway. As such, Kingsway investors have to accept they could lose everything. Those include activist investor Joseph Stilwell, who owns 10.7% of the stock and is its largest investor. He bought 100,000 shares at $3.12 on Nov. 16, four days before the court filing. Reported by Gavin Magor in Jupiter, Fla.