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Insurer Safety and Failures terms
Private equity, offshore reinsurance, downgrades and what happens when an insurer fails.
Bank-owned life insurance (BOLI)Permanent life insurance a bank buys on its employees, owns and names itself beneficiary of, mainly to offset the cost of employee benefits.Corporate-owned life insurance (COLI)Life insurance a business buys on its employees or executives, owns and is the beneficiary of, often to fund benefits or offset the loss of key people.Guaranty associationA state safety net, funded by assessments on insurers, that continues coverage or pays claims up to set limits when a life or annuity insurer fails.Insurer liquidationA court-ordered process that closes a failed insurer, sells its assets and pays claims, with guaranty associations protecting policyholders up to limits.Insurer rehabilitationA court-supervised receivership in which a state regulator takes control of a troubled insurer to restore it to health rather than shut it down.Lapse-supported pricingPricing that counts on many owners dropping coverage before it pays out, letting the insurer charge less than if everyone kept the policy.Mutual holding companyA structure in which a policyholder-owned mutual parent controls a stock insurer, letting it raise outside capital without fully demutualizing.ReceivershipA court-ordered process in which a state insurance regulator takes control of a financially troubled insurer to rehabilitate or liquidate it.ReinsuranceInsurance that insurance companies buy, passing part of the risk on policies they've sold to another company called a reinsurer.