"This action will position us for continued success in serving the workers' compensation insurance needs of Maryland employers," says Thomas Phelan, president of IWIF in a statement. "The legislation will protect IWIF's surplus and will allow us to remain financially strong. In addition, there will be no change for our policyholders and the insurance agents with whom we partner."

Dennis Carroll, IWIF executive vice president and general counsel, says the change became necessary after the state's attorney general determined that the state had the right to access the insurer's surplus fund because IWIF is a state entity.

In 2010, the state transferred $4 million out of the insurer's surplus and last year, the state took $50 million to help close its budget gap.

As the state's insurer of last resort, the fund needed protection, says Carroll, and only by becoming an independent corporation could its surplus be protected.

He says the company will remain limited to workers' comp with no plans to venture into other markets.

"We're satisfied to remain as the comp insurer of last resort," says Carroll.

The IWIF has current assets totaling $1.7 billion. Carroll says the insurer remains in strong financial health with a $335 million surplus, adding that the $50 million transfer has not impaired the carrier.

Aside from the name change, the IWIF's existing nine-member board will become the directors of Chesapeake. The governor will continue to make appointments to the Chesapeake board.

The IWIF is the largest provider of workers' comp insurance in the state with more than 23 percent of the market, according to figures from SNL. The second largest provider of workers' comp in the state is Hartford Financial with more than 14 percent.

The IWIF was created in 1914 as the Maryland State Accident Fund and has operated solely from premium and investment income, not using state funds.