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.
The goal is clear and achievable. Relying on the NAIC tools throughout this framework, regulators, receivers, and guaranty associations can:
Act early
Stay coordinated
Protect policyholders when it matters most.
This is an expectation embedded in the NAIC Receivers’ Handbook for Insurance Company Insolvencies.1
Guaranty funds are the safety net. 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.
Early Engagement to Produce Stronger Outcomes
Planning by P&C guaranty funds centers on two priorities:
- Accurate count by line of business.
- Ensures proper staffing and determines if TPAs are needed for claims processing.
- Test and confirm data conversion to the NAIC UDS format.
- Missing this step delays data transfer, burdens guaranty funds, and slows payments to policyholders.
100-Day Prep Window before a potential insolvency is ideal to help 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.
Refer to the Insolvency Readiness Framework for estimated timelines.
How to Engage: Use a narrowly tailored confidentiality agreement (see Step 2) or hire an IT Vendor (see Step 3) to share data securely, test its readiness, and fix issues that complicate liquidations. This can be done concurrently with regulatory efforts to support company recovery.
Confidential early engagement = faster protection, cleaner data, lower costs.
Consumers are protected while regulators stay ready.
Quick-Start Checklist
This checklist supports a smooth transition for troubled companies to proactively prepare for a potential future insolvency. Each step corresponds to the framework below for a deeper dive and NAIC tools.
Flag outdated systems or complex corporate structures
Execute confidentiality agreements (per statutes)
Keep group small + secure
Hire IT vendor familiar with NAIC UDS
Flag non-standard/legacy systems
Check for comingled company data
Provide claims count by line of business
Pre-negotiate agreements to address critical claims, i.e. pharmacy or workers’ compensation
Prepare exposure analysis + reserve estimates
Build hardship claim triage plan
Continue confidentially validating data + monitoring claim exposures
Retain key company staff + vital outside services
Greatest Value: Step 3. It can be done at almost any troubled company stage by an expert UDS IT vendor.