The business of insurance is regulated on a state basis – that is, each state has the responsibility of regulating the business of insurance that is transacted within its own borders.

This process exists in two major forms. First, the state where the insurance company is incorporated has the primary responsibility and authority for monitoring and regulating the financial integrity of their respective insurance companies. Second, the marketing and overall treatment of consumers by any insurance company within a particular state is regulated by that specific state. The following example will help explain the regulatory mechanism for insurance companies:
A company that is incorporated in Illinois applies to conduct the business of insurance in the Missouri. The Missouri Department of Commerce and Insurance will issue the company a license and regulate the way that company does business with Missouri residents. However, the state regulatory agency of insurance companies in the State of Illinois will be responsible for monitoring the financial integrity of that company.
If the Illinois regulator determines that the insurance company is hopelessly insolvent – that is, unable to pay its claims due to financial reasons – then the State of Illinois takes over the company in a process called a receivership. Each state has the authority to order any one of their respective insurance companies into receivership if it is determined that a company is insolvent. Receivership is a legal process that requires the state insurance department to appear before a court in that state and request that the court issue an order against the insurance company. As with any court order, it may vary as to what action the court authorizes the insurance department to take.
Typically, the phases of dealing with a financially impaired insurance company can range from administrative supervision, to rehabilitation, to the ultimate liquidation of the company.
If your claim is one as a policyholder or claimant, you may not need to file a Proof of Claim against the estate. Your claim or policy values may be protected by the guaranty associations.
In general, if the receiver finds that the impaired company cannot be restored or taken over by another insurer, the company will be placed into liquidation. Once this occurs, guaranty association money can be used to pay claims against the company. Where permitted by law, policies are cancelled with 30 days notice and deadlines for filing claims are set, usually between 90 days and 12 months of notice. The receiver will mail a “Proof of Claim” forms to policyholders and known claimants. These forms are to be used to file a claim against the assets of the estate of the insolvent insurance company.
Over the past years, the Missouri Insurance Guaranty Associations have stepped in to provide protection to claimants and policyholders of member insurers that were liquidated due to insolvency. A listing of past and active insolvent members is provided for your reference. Some important points to note are that not all insurance companies are members of the guaranty association system. Further, if the Claims Bar Date has passed, then no new claims can be filed with either the receivership or the guaranty associations. Finally, if you see the company that you are looking for on the listing, there may a possibility that policies that are permanent in nature, such as cash value life policies or annuity contracts, were assumed by another insurance company. Please feel free to contact this office, or the insurance department in the company’s state of domicile for additional information.