Who declares an insurance company insolvent?
A court, upon application by the Commissioner of Banking and Insurance, has the power to declare a domestic insurance company insolvent. The court then appoints a Receiver (often referred to as the Liquidator) to liquidate the company, settle its affairs, and manage the estate. The receiver is usually the Commissioner of Banking and Insurance or his or her designee. The receiver stops payments to all creditors of the insolvent company, including general creditors, policy claimants, defense attorneys, and adjusters. Generally, the Receiver can only pay administrative expenses from the remaining assets of the insolvent company. The court can later order a distribution of assets, as available, to pay claimants.
