Insurance regulation in a nutshell

(e)Assessments

The guaranty association covers the costs of providing benefits to policyholders by collecting the money it needs from other member insurers. The amounts to be paid by other member insurers depends on how much insurance they write of the same kind or kinds of coverage (life, health, annuities) for which the guaranty association is collecting. Annual assessments are capped at an amount expressed as a percentage of the member insurer’s previous year’s premiums written in the state. The Model Act has a 2% annual assessment limit for each account subject to special rules for assessments for any subaccount.¹³³
The present Model Act has two accounts, a life insurance and annuity account and a health insurance account. The life insurance and annuity account has 3 subaccounts: life insurance, annuity and unallocated annuity subaccounts.¹³⁴

(f)Trigger of Guaranty Association Involvement

Under the Model Act, the guaranty association must act if a member insurer is insolvent (placed under an order of liquidation) or, subject to certain pre-conditions, if a member insurer is impaired (deemed by the insurance regulator to be potentially unable to fulfill its contractual obligations or placed under an order of rehabilitation or conservation) and is not paying claims timely. The guaranty association may act, subject to specified conditions, if a domestic member insurer is impaired.¹³⁵

Section IX.4.Property/Casualty Guaranty Association

(a)Member Insurers

Under the NAIC Post-Assessment Property and Liability Insurance Guaranty Association Model Act, a “member insurer” of a property/casualty guaranty association is defined to mean any person who writes any kind of insurance to which the Model Act applies, including the exchange of reciprocal or inter-insurance contracts, and is licensed to transact insurance in the state (except at the option of the state).¹³⁶