If The Insurance Company Fails
Insurance companies are regulated by the state governments of the individual states where they are licensed. When a state determines that an insurer is insolvent the state guaranty associations are activated. When there is a shortfall of funds needed to meet the obligations to policyholders, the remaining member insurers doing business in a particular state are assessed a share of the amount required to meet the claims of resident policyholders. The amount member insurers are assessed is based on the amount of premiums they collect in that state on the kind of business for which benefits are required. In 1983 the state guaranty associations founded the National Organization of Life and Health Insurance Guaranty Associations (www.nolhga.com). If the insolvency affects three or more states NOHLGA coordinates the development of a plan to protect policyholders.

Death versus Intensive Care
When FDIC steps in and takes over a bank you can order the coffin and set the time for the wake because the bank is not coming back to life. It is dead.

When state insurance regulators step in they will often attempt rehabilitation of the insurer and there are insurers that have entered state receivership, been rehabilitated, and emerged from state care.

Since 2001 twenty two banks have been taken over by FDIC and liquidated. During that same time period four annuity carriers have been placed under state control and one has been liquidated.

London Pacific Life & Annuity Company entered liquidation 9 July 2004. Our interpretation is that owners of London Pacific annuities will be 100% covered up to state guarantee fund limits, but that amounts over state guarantee fund limits will take an 8% or 9% hit to total annuity value. http://www.radtrust.com/lonpac3.htm   This is our opinion and is not legal advice. If you own a London Pacific annuity contact your state insurance department. (you can link to your state insurance departments)

There were three other annuity carriers that entered rehab during this period and all were affiliated with the holding companies of Metropolitan Mortgage & Securities and Summit Securities Inc. The three annuity carriers in rehab are Old Standard Life Insurance Company (ID), Old West Life & Annuity (AZ) and Western United Life Assurance Company (WA). Old West Life & Annuity policies and Old Standard Life Insurance Company policies were fully assumed by Great American 17 January 2006. Western United was acquired by a joint venture formed by Global Secured Capital and DLB Capital in June 2008 and continues to operate. 

The data above reflects annuity carriers only. If you include non-annuity carriers like property & casualty companies, bail bond insurance, health insurance and malpractice insurance carriers eleven have been liquidated and eight entered rehab since 2001.

Data Sources:
Florida Department Of Financial Services          http://www.fldfs.com/receiver/receivership_list.asp

 NOLHGA          http://www.nolhga.com/insolvencycorner/main.cfm/location/fundamentals

 Illinois Office of the Special Deputy Receiver http://www.osdchi.org/receivership_order_menu_a.htm