Struggling to Keep the Promise

Insolvency provisions are set up to protect the interests of policyholders, but expect that process to move slowly and in a limited fashion.

If people want to get access to their cash values they’ve had to fi le and wait a long time and then there are limits.

Carole Ann King, A.M. Best Company

The likelihood that policyholders of an insolvent insurer will collect what’s due them in a timely manner is becoming less and the situation is growing worse, Mark Keenan said. However, in the United Kingdom that situation may becoming easier and results quicker.

“What I see in the future is either a) the big stall will increase because they can’t pay; or b) a movement more like the British system where basically you bring in the pros and you start a partial payment process to move out the money quicker and faster and hopefully keep people more happy,” Keenan said.

Some policyholders in high-profi le property/casualty insolvencies have waited two decades for compensation, Carole Ann King said. Some of that delay is because overseers have pursued reinsurance reimbursement; sometimes the long-tailed nature of asbestos and environmental claims will contribute to delays.

On the life side, policyholders have struggled with personal hardship as they awaited payment from insolvent insurers. Requests for reimbursement are often negotiated; individual compensation is often limited to $300,000, with some states limiting cash value to $100,000, King said.

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