General insurance Who Will Pay Clients If An Insurance Company Files For Bankruptcy?

[kayode10]

Bankruptcy is one of the unforeseen circumstances that happens to different companies including financial institutions.

One thing I know about banking sector is that, once a bank files for bankruptcy, the Central Bank in that country will take over the bank and pay off the investors and the customers.

This happened recently in my country when bank filed for bankruptcy due to lots of unservice loans incured by the customers.

The bank later filed for bankruptcy after struggling with finance and negative cash flow for a long period of time.

The Central Bank take over the company and merge it with another highest bidder financial institution.

A situation may happen in which the insurance company someone is using files for bankruptcy. So I want to ask that who will pay back all the premium made by the clients of the company?

 

[Wisdom01]

Most insurance company usually have shares which shareholders holds some part and they share the risk both the loss and profit , so it would be paid by the shareholders , and most insurance companies usually merge or borrow from banks if they are already noticing that the company is running bankrupt

 

[Mataracy]

You are right with the analysis you made concerning the banks that fold up due to bankruptcy. But in the case of insurance company I also belive that they have apex insurance company which is the overall as the bank has.
So such apex insurance will also be responsible so far that particular insurance company is under it.

 

[Wisdom01]

You are right with the analysis you made concerning the banks that fold up due to bankruptcy. But in the case of insurance company I also belive that they have apex insurance company which is the overall as the bank has.
So such apex insurance will also be responsible so far that particular insurance company is under it.

Yeah they are financial institutions so they basically have apex too that would be in control of the other smaller insurance companies , and if a particular one is running bankrupt they could get funds else where for back up and prevent the insurance company from closing up too , these are the means

 

[btaliat]

There are some institutions that are responsible for the loss of insurance companies. In Nigeria, we have NICON among others which insurance companies also subscribe for. This body is responsible for any loss that may happen to the insurance companies. Just like the NDIC will cover for the loss that banks may face as well.

 

[Mika]

Just like the Central Bank is there to manage all banks and take over the banks when they file for bankruptcy, here in our home county we have National Insurance Corporation that regulates all insurance companies and it takes over an insurance company if it files for bankruptcy. But this has never happened here.

 

[Good luck]

It will be a serious issue if the insurance company dealing with has a problem with the bank or probably if their account as a customer has been frozen due to one issue or the other.it will affect their clients because they will not be able to meet up their customers demand or target when unforseen circumstances arise and it won't speak well of them

 

[Lens1000]

This is the more reason why you need to confirm the legitimacy of the insurance company. Always ensure the insurance company is registered with the apex insurance body. Some insurance broker do not insure depositors fund and if you fall victim of such company, you will lose a great deal. There is an apex regulatory body that oversee the functions of the insurance company.

 

[Mandy96]

I think that’s what the state insurance is there for, like I just read in the previous post because the insurance company is also a business organization which means it could also face any financial challenges at any unknown time. So I will say the insurance company also does not have 100% coverage or assurance over your insurance