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State guaranty associations provide coverage (up to the limits spelled out by state law) for resident policyholders of insurers licensed to do business in their state. NOLHGA assists its member associations in quickly and cost-effectively providing coverage to policyholders in the event of a multi-state life or health insurer insolvency.
When an insurer licensed in multiple states is declared insolvent, NOLHGA, on behalf of affected member state guaranty associations, assembles a task force of guaranty association officials. This task force analyzes the company’s commitments to policyholders; ensures that covered claims are paid; and, where appropriate, arranges for covered policies to be transferred to a healthy insurer.
The task force may also support the efforts of the receiver to dispose of the company’s assets in a way that maximizes their value. When there is a shortfall of estate assets needed to pay the claims of covered policyholders, guaranty associations assess the licensed insurers in their states a proportional share of the funds needed.
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Through NOLHGA, state guaranty associations decrease costs to the member insurers that fund them. Rather than each state association hiring its own legal and financial experts, the NOLHGA task force uses one team of experts, significantly reducing costs to guaranty associations. This coordination of effort also helps reduce the length of time a receiver may require to develop a plan of rehabilitation or otherwise resolve a multi-state insolvency.
Since its creation in 1983, NOLHGA has assisted its member guaranty associations in guaranteeing more than $27.1 billion in coverage benefits for policyholders and annuitants of insolvent companies. In that time, the associations have provided protection for more than 2.8 million policyholders and worked on more than 100 multi-state insolvencies.
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