If The Insurance Company Fails
Insurance companies are regulated by the state governments of the individual states where they are licensed. When a state determines that an insurer is insolvent the state guaranty associations are activated. When there is a shortfall of funds needed to meet the obligations to policyholders, the remaining member insurers doing business in a particular state are assessed a share of the amount required to meet the claims of resident policyholders. The amount member insurers are assessed is based on the amount of premiums they collect in that state on the kind of business for which benefits are required. In 1983 the state guaranty associations founded the National Organization of Life and Health Insurance Guaranty Associations (www.nolhga.com). If the insolvency affects three or more states NOHLGA coordinates the development of a plan to protect policyholders.

Death versus Intensive Care
When FDIC steps in and takes over a bank you can order the coffin and set the time for the wake because the bank is not coming back to life. It is dead.

When state insurance regulators step in they will often attempt rehabilitation of the insurer and there are insurers that have entered state receivership, been rehabilitated, and emerged from state care.

Since 2001 hundreds of banks have been taken over by FDIC and liquidated. During that same time period 7 annuity carriers have been placed under state control and three have been liquidated.

Golden State Mutual In Conservatorship
Update: 2 March 2010.Golden State Mutual Life Insurance Company has entered into a letter of intent with IA American Life Insurance Company to transfer all of its in-force insurance policies to IA American. IA American was established just weeks ago in Scottsdale, Ariz., as a subsidiary of Industrial Alliance Insurance and Financial Services Inc., Quebec City, Quebec.

 On 30 September 2009 the California Insurance Commissioner served Golden State Mutual Life Insurance Company with a conservation order and ordered it to cease selling products. In 2008 Golden State was active in 12 states with assets of $90 million. Annuities represented 12% of premiums (I estimate 2008 annuity premiums at $3.4 million) with life insurance accounting for 85% of other premiums. This action was not unexpected; Golden State had been under scrutiny by California Department of Insurance since 2004 and posted operational losses for the last three years. For more information policyowners should contact Golden State at  www.gsmlife.com

London Pacific Life & Annuity Company entered liquidation 9 July 2004. Our interpretation is that owners of London Pacific annuities will be 100% covered up to state guarantee fund limits, but that amounts over state guarantee fund limits will take an 8% or 9% hit to total annuity value. This is our opinion and is not legal advice. If you own a London Pacific annuity contact your state insurance department. (you can link to your state insurance departments).

Standard Life Insurance Company of Indiana entered state control on 18 December 2008. The state says it is operating on " a normal basis with the exception of partial and full surrenders" (policy surrenders were under a 6 month moratorium, that moratorium has since been extended indefinitely). http://www.state.in.us/idoi 

Shenandoah Life Insurance Company entered receivership with the Virginia State Corporation Commission on 12 February 2009. All annuity withdrawals, surrenders and transfers have been frozen, but death claims will be paid. More information is available here 
Update: 22 July 2009. Annuity renewal rates have been cut to contractual minimum rates. Link To News  

There were three other annuity carriers that entered rehab since 2001 and all were affiliated with the holding companies of Metropolitan Mortgage & Securities and Summit Securities Inc. The three annuity carriers were Old Standard Life Insurance Company (ID), Old West Life & Annuity (AZ) and Western United Life Assurance Company (WA). Old West Life & Annuity policies and Old Standard Life Insurance Company policies were fully assumed by Great American 17 January 2006. Western United was acquired by a joint venture formed by Global Secured Capital and DLB Capital in June 2008 and continues to operate. 

The data above reflects annuity carriers only. If you include non-annuity carriers like property & casualty companies, bail bond insurance, health insurance and malpractice insurance carriers over a dozen have been liquidated and nine entered rehab since 2001.

Data Sources:
Florida Department Of Financial Services          http://www.fldfs.com/receiver/receivership_list.asp

 NOLHGA          http://www.nolhga.com/insolvencycorner/main.cfm/location/fundamentals

 Illinois Office of the Special Deputy Receiver http://www.osdchi.org/receivership_order_menu_a.htm