Insolvency Process

Man falling on safety net

What happens when an insurance company is placed into liquidation?

In New Jersey, an insurance company is declared insolvent upon the application of the Commissioner of the New Jersey Department of Banking and Insurance and the Order of a court of competent jurisdiction in this State or the state in which the property-casualty insurer was domiciled.

The court then appoints a Liquidator (often referred to as the Receiver) to liquidate the company, settle its affairs and manage the estate. The Liquidator is usually the Commissioner of Banking and Insurance or his or her designee. The Liquidator stops payments to all creditors of the insolvent company and marshals the assets of the insolvent company for ultimate distribution to creditors pursuant to the state’s liquidation statute.

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Claims Related to:


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Claims Related to:


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Will policyholders receive official notification that their insurer was declared insolvent?

Notice of the liquidation is usually mailed to policyholders advising of the court determination. Generally, a notice of insolvency is also published in New Jersey newspapers of general circulation.

How and when are policy claimants paid?

The Liquidator will forward all files on unpaid New Jersey claims to the Association, Fund or WCSF for handling and payment pursuant to statute. This may include the defense of litigation.

Will any of the premiums paid to an insurer that becomes insolvent be refunded?

The unearned premiums due on a property-casualty insurance policy canceled upon liquidation may be refunded by the Association.

How does a claimant or creditor become eligible for any distribution of assets?

Claimants and general creditors must file a "Proof of Claim" (“POC”) with the Liquidator after an insolvency. POC’s must be filed even though claims were reported to the company prior to its insolvency. This must be done before the "bar date" which is a final date for filing claims established by the court. The filing of claims with the Association is not sufficient to perfect the claim with the Liquidator.