Colorado Insurance Guaranty Association

CIGA is part of a non-profit, state-based, statutorily-created system that pays certain covered claims of insolvent insurance companies. By paying these claims, guaranty associations protect policyholders and claimants.

Guaranty associations are active in every state, the District of Columbia, Puerto Rico and the Virgin Islands. State laws require that licensed property and casualty insurance companies belong to the guaranty associations in all states where they are licensed to do business.

A guaranty association system also exists in each state for the life, health and annuity insurance industry; but they operate independently from the property and casualty system. This information concerns only the property and casualty guaranty association. CIGA does not handle life, health, or annuity insurance. Please visit the corresponding life and health guaranty association via the "Resources" group in the navigational menu on this page.

Guaranty associations ease the burden on policyholders and claimants of an insolvent insurer by stepping in to assume responsibility for most policy claims following the insolvency. The coverage guaranty associations provide is fixed by policy language and state law; they do not offer a "replacement policy."

By virtue of the authority given to the guaranty associations by state law, they are able to provide two important benefits: prompt payment of covered claims and payment of the full value of covered claims up to the limits set by the policy or state law.

The potential failure of insurance companies, like the potential failure of all businesses, is an unfortunate, but inevitable, part of doing business in a free-market system. Since inception of the property and casualty guaranty association system, there have been about 600 insolvencies. In all, the system has paid out about $24.2 billion.

Insurance is a state regulated industry and many federal statutes, including bankruptcy laws, do not apply to them. When an insurance company becomes insolvent, the company's estate is administered, in its state of domicile, by the Commissioner of Insurance, as liquidator, and overseen by a state court.

The associations are largely funded by industry assessments, which are collected following insolvencies. These assessments raise funds to pay claims and administrative and other costs related to the association’s claim paying activities.

CIGA's assessments are capped at 2.0% of a company's net direct premium for the previous year. The other sources of funding are recoveries from distributions of the insolvent insurance companies and government backed investment income.

Association assessments are computed and billed based on the immediate needs of the claims it is obligated to pay. Claim files come in from the insolvent insurance company; the adjusters review them and set appropriate reserves on those files. (Reserves are the projected ultimate liability under terms of a given policy.)

Liquidation is similar to bankruptcy. When a company is liquidated, the Liquidator (also referred to as the Receiver), collects the assets of the company and verifies the liabilities such as claim payments and bills. The Liquidator then develops a plan to distribute the company’s assets according to the law and submits the plan to the Court for approval.

In most cases, an estate will not yield sufficient money to pay claims in full; and most are not able to pay claims in a timely manner. For this reason, the guaranty association and other state guaranty associations step in (depending on the number of states in which the failed company wrote business) to cover certain claims. The estate’s creditors not covered by the guaranty associations usually receive only partial payment on their claims.

Yes. Most liquidation orders cancel all policies within a certain time period after liquidation, typically 30 days. You will need to obtain coverage with another insurance company. However, guaranty associations do not recommend any particular company. You may contact any licensed insurance agent to get the names of other insurers.

The purpose of the guaranty association is to protect policyholders and claimants from losses due to unpaid claims against policies issued by the insolvent insurance company. Guaranty funds cannot sell insurance policies. To obtain new coverage, you will need to contact a licensed insurance carrier or an insurance agent or broker.

No. Guaranty associations cover only licensed insurers. If you purchased insurance from a company not licensed in your state you can contact your State Department of Insurance to provide additional information.

Please contact us or your assigned adjuster directly.

The definition of a covered claim varies by state statute(s). Please view the statute(s) via the "Resources" group in the navigational menu on this page.

Yes. If your insurance company has been declared insolvent, covered claims will be paid by the guaranty association up the limits (cap) prescribed by state statutes and the applicable policy. Although there is no maximum for workers compensation claims, the maximum amount CIGA can pay on other claims is $300,000 ($100,000 prior to August 2011). You may file a claim against the assets of the insurance company estate for amounts over that cap that are still within the limits of the applicable policy. The Receiver will send proof of claim forms and instructions for filing a claim.

Claims not covered by the guaranty association may be claims against the remaining assets (estate) of the insolvent insurance company and will be considered in the liquidation process.

It varies, but claim payments begin as soon as possible once a company is ordered to be liquidated. The guaranty association, coordinating with the receivers of the liquidating companies, works hard to avoid delays but in some instances, delays may occur.

No. The associations are designed as a safety net to pay certain claims arising out of policies issued by licensed insurance companies. The associations may not pay non-policy claims or claims of self-insured groups or other entities that are exempt from participation in the guaranty association system. These limits on guaranty association coverage are necessary to balance the need to provide a safety net to those who would be most harmed by the insolvency of their insurance company and keep the burden of providing the safety net at an acceptable level.

Guaranty association coverage is limited to licensed insurers (the members of the guaranty associations that, in turn, pay insolvency-related assessments.) When a licensed insurance company becomes insolvent, the guaranty association pays eligible claims; but a company does not have guaranty association coverage if it is writing non-admitted or unlicensed products, such as surplus lines or is a self-insurer covered in the non-admitted market.

In addition, although most claims are covered by guaranty associations, coverage for a few types of claims may be excluded.

These limits on guaranty association coverage are necessary to balance the need to provide a safety net to those who would be most harmed by the insolvency of an insurance company and keep the burden of providing the safety net at an acceptable level.

CIGA is governed by a Board of Directors that is elected by guaranty association members (that is, all companies writing licensed business in the state). There is also oversight authority by the Colorado Insurance Department, which reviews the association's plan of operation, and may also audit the guaranty association.

While many of the associations are based on a model set forth by the National Association of Insurance Commissioners (NAIC), there are differences in statutes that govern the associations and their operation from state to state, including the amount of coverage provided by the association.

CIGA will pay unearned premium claims after the Receiver completes its processing of the policy records and sends the unearned premium record to CIGA. This may take several weeks or even months depending on the condition of the data at the insolvent insurance company.

Associations are not responsible for outstanding service provider or vendor invoices as these liabilities of the insolvent entity are not “covered claims” under the statute. You are, however, not without recourse as these outstanding invoices may be evaluated for payment by the Receiver.

In most instances, the guaranty association for your state of residence will be responsible for your claims. However, if your claim relates to property located in another state, that state's guaranty association will generally have responsibility for the claim.