When an insurance company is placed into liquidation by a court of competent jurisdiction the state guaranty funds respond to the insolvency. The primary way that guaranty funds are funded is through the form of assessments on member insurance companies. This will examine how assessments work under the guaranty fund system.

What is a member insurer? A member insurer under the guaranty fund model act is defined as any person who writes any kind of insurance to which the act applies including the exchange of reciprocal or inter-insurance contacts. This excludes insurers who write only non-covered lines of business, such as fidelity or surety bonds, ocean marine, title insurance or warranty only coverages. Life, health and annuity coverages are also excluded under the property & casualty guaranty act, but are covered under the life and health insurance model act and the life and health guaranty funds.

A member insurer who surrenders their license will cease to be a member insurer but will still be responsible for all assessments assessed during the time they were a member insurer or later assessed for insolvencies that occurred during the time they were a member insurer.