The distribution of an insolvent estate's remaining assets are critical to state's ability to pay the claims of a failed insurance company, writes the NCIGF. In 2011 and 2012, more than $475 million and $456 million of funds were recovered from estate assets, respectively. So far in 2013, the total distributions received or proposed to guaranty associations are more than $66.5 million.

Currently, the liquidator for Ohio's Credit General Insurance Company and Credit General Indemnity expects to propose a plan for estate closure by the end of the year. The insolvency of American Mutual, which distributed $110 million to guaranty funds in 2011, was court-approved to put away an additional $50 million in 2011. In both cases, the receivers needed to settle on the value of open claims such as long-term workers' compensation cases.

Several pieces of state legislation have been enacted or proposed this year in regards to guaranty funds, reports the NCIGF. Arizona is considering the transfer of its workers' compensation “special funds” to its P&C Guaranty Fund after it receives an actuarial opinion on the amount in the fund that is available for the payment of WC claims; this may take place in 2014.

Oklahoma has enacted a bill to privatize its state-run guaranty fund, ComSource, and make it a member of its P&C guaranty fund in 2015. It also enacted legislation to permit employers to opt out of the WC system entirely to purchase alternative insurance or to self-insure; the state's guaranty association would create a special fund for companies choosing this road.

Washington State has introduced legislation to make the state's workers' compensation fund a competitive rather than monopolistic fund. Claims from private carrier insolvencies would flow to the Washington Insurance Guaranty Association.

Vermont is trying to clarify what happens to non-admitted closed blocks of commercial policies and reinsurance agreements since guaranty funds don't usually cover reinsurance and surplus claims, says the NCIGF. If that transaction is approved, a fee and tax would apply to any non-admitted block of business that is transferred to a company licensed to do business in the state.

On a national level, the National Association of Insurance Commissioners (NAIC) has adopted a guideline to assist states in modifying their insurance liquidation acts to deal with the closure of a systemically important insurance company. So far, California and Texas have adopted these guidelines. Earlier this month, the G-20 Financial Stability Board named nine insurers, including AIG, Metlife and Prudential, as systemically important to the global financial system.