Property & Casualty Pre-Liquidation Planning: Readiness Framework

Executive Summary

Coordinated Action for a Stronger Resolution

Insurance company liquidation is complicated. State regulators have done an excellent job monitoring solvency, so failures are now more uncommon, resulting in fewer practitioners with experience in the administration of liquidations. The NAIC has, in recent years, approved new regulatory and statutory tools that will produce a more seamless experience for policyholders.
As the domiciliary state for a multi-state insurer, even a single insolvency can impact policyholders across the country. That’s why early preparation matters. By relying on the NAIC tools throughout this framework, regulators, receivers, and guaranty associations can align early, close information gaps, and secure operational readiness before financial distress escalates. The goal is clear and achievable: Early engagement means Guaranty Funds should be able to assume policy and claims responsibilities on Day 1 of liquidation.  This is an expectation of the NAIC Receivers’ Handbook for Insurance Company Insolvencies.1 This readiness framework empowers teams to:

Act early

Stay coordinated

Protect policyholders when it matters most.

Guaranty funds are the safety net for policyholders when an insurer fails. By statute 2, they are required to:

Cover claims quickly

Minimize losses

Prevent unnecessary delays

References

1 Chapter 6, Section I, Paragraph 5 of the NAIC Receivers’ Handbook.

2 Section 2, Purpose: P&C NAIC Model Act 540

Early Engagement to Produce Stronger Outcomes

Early planning by P&C guaranty funds centers on two priorities:

Open Claim Count

  • Get an accurate count by line of business.
  • Ensures proper staffing and determines if TPAs are needed for claims processing.

Data Preparation

  • Test and confirm data conversion to the NAIC UDS format.
  • Missing this step delays data transfer, burdens guaranty funds, and slows payments to policyholders.

Engage early

Involve experts familiar with guaranty fund challenges at the first signs of financial trouble. Their early engagement helps resolve the issues that commonly arise during insolvency, enabling regulators and receivers to concentrate on the full scope of their responsibilities while guaranty funds address their core operational needs.

Property & Casualty

A 100-Day Prep Window before potential insolvency to coordinate and have alignment between the regulators, receiver, and guaranty funds to address common insolvency hurdles such as data transition and coordinated communication with policyholders.

Primary Benefit to Early Engagement

Claims data organized to meet the NAIC Uniform Data Standard (UDS) which organizes and transfers claims data to the guaranty funds and is necessary to process claims payments to consumers  Ensuring this data transition can occur is essential to satisfy guaranty fund statutory requirements

How: Use a narrowly-tailored confidentiality agreement (see Step 2) or hire an IT Vendor (see Step 3) to share data securely, test readiness, and fix issues that complicate liquidations. This can be done concurrently with regulator efforts to support recovery of the carrier.
NCIGF keeps a list of recommended discussion topics by timeline Essential Information for Efficient Transition to Liquidation
Key Takeaway:

Confidential early engagement = faster protection, cleaner data, lower costs. It keeps consumers safe while regulators stay ready.

The Insolvency Readiness Framework:
Quick-Start Checklist

This checklist supports a smooth transition for troubled companies to proactively prepare for a potential future insolvency.

Planning proactively, engaging key partners discreetly, and validating data rigorously, the company protects policyholders and ensures Guaranty Funds can respond quickly and accurately under statutory requirements.

Each step corresponds to the framework below for a deeper dive and NAIC tools.

1
While the Regulator Identifies Risk

Flag outdated systems or complex corporate structures

2
Engage Key Partners (IT Vendor, Domiciliary Guaranty Fund &/or NCIGF)

Execute confidentiality agreements (per statutes)

Keep group small + secure

3
Test and Prepare Claims Data * Most Critical Step

Hire IT vendor familiar with NAIC UDS

Flag non-standard/legacy systems

Check for comingled company data

4
Ready the Guaranty Fund

Provide claims count by line of business

Pre-negotiate agreements to address critical claims, i.e. pharmacy or workers’ compensation

5
Guaranty Fund Operational Readiness

Prepare exposure analysis + reserve estimates

Build hardship claim triage plan

6
Maintain Readiness

Continue confidentially validating data + monitoring claim exposures

Retain key company staff + vital outside services

Key Takeaway:
Step 3 delivers the most value. It can be done at almost any troubled company stage by an IT vendor—with or without guaranty association involvement.