Insurance Department

Insurance Security Funds

When an insurance company incorporated in New York State becomes insolvent, the Insurance Department assumes control of the company and pays the company's outstanding insurance claims. These payments are made from the liquidated assets of the company and from three security funds maintained by the Department. The three funds are financed by periodic assessments against active insurance companies. We examined the use and status of the three security funds. We found that fund disbursements were appropriate and the combined fund balance, though declining, was still adequate to meet anticipated future needs. We did note that improvements could be made in the procedures used to collect receivables due from insolvent insurance companies that are incorporated in another state but operate in New York State. When such companies become insolvent, the claims of New Yorkers are paid by the Department from the security funds, and these payments are later reimbursed by the other state after the company is liquidated. At the time of our audit, the Department was owed about $296 million from out-of-state liquidators. We recommend that the Department more actively pursue the collection of these receivables.

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