Insurer rehabilitation

Rehabilitation is the stage of insurer receivership aimed at saving the company. A state court, at the request of the insurance commissioner of the insurer's home state, appoints the commissioner as rehabilitator. The rehabilitator takes control of the insurer's assets, management and operations, with broad power to restructure.

A rehabilitation plan may cut costs, sell or reinsure blocks of policies to stronger companies, raise capital, or modify policy terms with court approval. To stop a run on the company, the court often imposes a moratorium on surrenders, withdrawals and policy loans, while premiums remain due and death claims usually continue to be paid. Hypothetically, an annuity owner at a rehabilitated insurer might be unable to withdraw funds for a year or more, then be offered a restructured contract with a lower crediting rate.

If rehabilitation fails, the court can convert it to insurer liquidation, which triggers state guaranty association coverage once the insurer is found insolvent. Rehabilitations can take years. If your insurer enters one, keep paying premiums, read notices from the rehabilitator and your state's guaranty association, and compare options carefully before surrendering once restrictions lift. See what happens if your life insurance company fails.