It's mentioned in our notes and I quote.
"
Every insurance company operating in the state contributes an amount to the state guaranty fund depending on the premium income it collects. When a particular insurance company becomes insolvent, this fund is then used to pay the small policyholders of that company. Thus, the guaranty system of a bank differs from that an insurance company in the US.
Whereas for banks a permanent fund is created from premiums paid by banks to the FDIC to protect depositors, for insurance companies no permanent fund is created but the companies make contributions after an insolvency has occurred".
What I interpret:
So all the insurance companies pay for guaranty fund as per the premium they are earning in case particular insurance company goes insolvent. But does this payment happen when an event of insolvency happen, i.e particular company declare bankruptcy and no regular payment happen otherwise? Is this the case?
"
Every insurance company operating in the state contributes an amount to the state guaranty fund depending on the premium income it collects. When a particular insurance company becomes insolvent, this fund is then used to pay the small policyholders of that company. Thus, the guaranty system of a bank differs from that an insurance company in the US.
Whereas for banks a permanent fund is created from premiums paid by banks to the FDIC to protect depositors, for insurance companies no permanent fund is created but the companies make contributions after an insolvency has occurred".
What I interpret:
So all the insurance companies pay for guaranty fund as per the premium they are earning in case particular insurance company goes insolvent. But does this payment happen when an event of insolvency happen, i.e particular company declare bankruptcy and no regular payment happen otherwise? Is this the case?
