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PART I
Run‐Off, Administration, Supervision, Rehabilitation and Liquidation
Law has developed at the state level empowering a state’s insurance commissioner to petition for and conduct
the liquidation of insolvent insurers. Thus, unlike federal bankruptcies, which are directed by one law, insurer
insolvency is addressed by fifty different state regulators. Among the significant milestones in the
development of such law was the 1967 enactment in Wisconsin of a sophisticated insurer rehabilitation and
liquidation statute. In 1968, the National Association of Insurance Commissioners (the “NAIC”) recommended
that the Wisconsin law serve as the basis for model legislation in the various statutes.
In 1977, the NAIC replaced the Wisconsin law with a model act. This model, among other things, recognized
the existence of guaranty funds and their relationship to the liquidation process. This model act, with
amendments, has been adopted by most of the states and represents the current state of the law of insurance
receiverships. In December 2005, the NAIC adopted a new model act, which provides for innovative
procedures in several areas, including an enhanced role for the conservation process, as well as reinsurance
commutations and arbitrations. Only two states have thus far enacted provisions of the new model act. In
addition, some states, such as Rhode Island, have adopted innovative procedures to facilitate insurance
company run‐off. These laws are supplemented by state guaranty fund laws.
The following reference material is included in Part I:
• The NAIC Insurers Supervision, Rehabilitation and Liquidation Act with all amendments adopted by the NAIC
through January, 1998.
• The NAIC Insurance Receivership Model Act (“IRMA”) as amended through October, 2007, with a listing of
those states that have adopted legislation based on IRMA or related insurance company receivership laws
and the statutory references of those enactments.
• Chapter 27‐14.5 of the Rhode Island Insurance Code, which provides for the voluntary restructuring of
solvent insurers.
• A digest of cases addressing insolvency related issues. This digest incorporates and adds to the case
summaries which appeared in the first, second, third and fourth editions of the Reference Handbook.
Summaries of court decisions pertaining to the property and liability guaranty fund systems and to the life
and health guaranty fund system are located at PARTS III and IV, respectively.