What happens when an insurance company is placed into liquidation?
It may be helpful to think of a liquidation as similar to a bankruptcy. When an insurance company is liquidated, its assets (real estate, automobiles, artwork, etc.) are sold and converted to cash. The proceeds are invested for the estate until they are distributed to claimants. Next, the company’s liabilities are determined. The Liquidator sends the company’s customers, vendors, and creditors a form, called a Proof of Claim (POC), on which they can make a claim. When the Proof of Claim forms are returned, the Liquidator evaluates them for merit. A distribution plan of the company’s assets is prepared and sent to the court for approval. Finally, the assets are distributed. As you can imagine, this process is complex and time consuming. Some liquidations can take many years to complete.
