Glossary of Terms

Ancillary Receivership: A receivership proceeding in a state other than the state in which the insurer is legally domiciled. Also see “Domiciliary Receivership.”

Assessments: Sums of money paid periodically to the guaranty association by solvent member insurers to provide funds to pay claims of impaired insurers. [Statutory reference Tex.Ins.Code art. 21.28-C, Secs.18-20]

Bar Date: Deadline for filing proofs of claim against a receivership estate [Statutory reference art. 21.28, Sec.3(a)] or the guaranty association. [Statutory reference art. 21.28-C, Sec.8(d)]

Cap: The statutory maximum amount payable by the guaranty association on an individual covered claim. For claims arising out of receiverships instituted on or after September 1, 1997, the cap is $300,000 or the limits of the policy, whichever is less.

Claimant: Any insured making a first-party claim or any person instituting a liability claim against an insured. A person who is an affiliate of the impaired insurer may not be a claimant. [Statutory reference art. 21.28-C, Sec.5]

Conservation/Supervision: Administrative remedies employed by the Texas Department of Insurance with respect to financially troubled insurance companies. Each action has timetables and requirements of Departmental approval for specific activities of companies placed under such proceedings. [Statutory reference art. 21.28-A]

Covered Claim: An unpaid claim of an insured or third-party liability claimant that arises out of and is within the coverage of an insurance policy issued or assumed by an insurer licensed to do business in this state, if that insurer becomes an impaired insurer and claimant or insured is a resident of this state at the time of the insured event or the claim is a first-party claim for damage to property that is permanently located in this state. Refer to “Exceptions to TPCIGA Coverage,” below, and to Art. 21.28-C for additional limitations on covered claims. [Statutory reference art. 21.28-C, Sec.5]

Delinquency Proceeding: A proceeding commenced in court against an insurer for the purpose of liquidating, rehabilitating, reorganizing or conserving such insurer. [Statutory reference art. 21.28, Sec.1(b)]

Distribution of Assets: Claims against the assets of a receivership estate are paid in a certain order of priority pursuant to the liquidation statute’s “Priority of Distribution of Assets.” Class 1 includes claims for the administrative expenses of the receiver and insurance guaranty associations. Class 2 includes claims by policyholders and liability claimants for amounts not covered by the guaranty association, such as claims in excess of the statutory cap, as well as claims by guaranty associations for reimbursement of covered claims payments. [Statutory reference art. 21.28, Sec.8]

Domiciliary Receivership: The receivership proceeding instituted in the state where the impaired insurer was originally incorporated.

Early Access: A court-approved process whereby receivers can distribute estate assets to guaranty associations prior to a final estate distribution in order to decrease the need for assessments against member insurers. [Statutory reference art. 21.28, Sec.7A]

Exceptions to TPCIGA Coverage:

Types of Insurance Not Covered [Statutory reference art. 21.28-C, Sec.3]

  • - Surplus Lines Insurance
  • - Life, annuity, health, or disability
  • - Mortgage guaranty, financial guaranty, or other forms of protection against investment risk
  • - Fidelity or surety bonds, or any other bonding obligations
  • - Credit insurance, vendors’ single interest, collateral protection, or similar insurance protecting interests or a creditor arising out of a creditor-debtor transaction
  • - Warranties or service contracts
  • - Title
  • - Ocean Marine
  • - Transactions that involve transfer of investment or credit risk unaccompanied by transfer of insurance risk
  • - Insurance provided by or guaranteed by government
  • Policy Items Not Covered [Statutory reference art. 21.28-C, Sec.5(8)]
  • - Unearned premium claims over $25,000
  • - Return of premiums under retrospective rating plans
  • - Individual covered claims over $300,000 (except for workers’ compensation claims)
  • - Any claims by reinsurers, insurers, insurance pools or underwriting associations, including those for subrogation recoveries, reinsurance recoveries, contributions, indemnification or otherwise.
  • - Supplementary payment obligations including adjustment fees and expenses, attorneys’ fees and expenses, court costs, interest and penalties and interest and bond premiums incurred prior to impairment
  • - Prejudgment or postjudgment interest
  • - Punitive, exemplary, extracontractual or bad-faith damages

General Creditor Claims: Claims which are lesser priority in receivership distributions than policyholder level claims. [Statutory reference art. 21.28, Sec.8(a)]

Guaranty Act: Refers to Texas Insurance Code article 21.28-C.

Impaired Insurer: A member insurer that has been placed in receivership based upon a court finding of insolvency and that has been designated as an “impaired” insurer by the Commissioner; or a member insurer that has been deemed insolvent, placed in conservatorship and designated as an impaired insurer by the Commissioner. [Statutory reference art. 21.28-C, Sec.5(9)]

Line Account/Line of Business: The types of property and casualty coverage for which TPCIGA makes assessments: Auto, Other Lines and Workers Compensation. [Statutory reference art. 21.28-C, Sec.6]

Liquidation Oversight: Division within the Texas Department of Insurance responsible for managing special deputy receivers and overseeing the insolvency process.

Liquidator: Means “receiver.” The term includes the commissioner of insurance or the person designated by the commissioner of insurance to act as special deputy receiver. [Statutory reference art. 21.28-C, Sec.1(d)]

Member Insurer: Insurers writing any kind of business to which Art. 21.28-C applies. [Statutory reference art. 21.28-C, Sec.5(10)]

Net Worth Provision: Provision in the Guaranty Act that allows the guaranty association to recover amounts paid on behalf of insureds whose net worth exceeds $50 million. [Statutory reference art. 21.28-C, Sec.11(b)(1)]

Non-Duplication of Recovery: Statutory provision requiring claimants to first exhaust their rights, including the right to a defense, under insurance policies of solvent insurers, including health insurance and uninsured motorists’ coverage. The provision allows TPCIGA to offset any amounts recovered from other insurance. Also requires claimants to exhaust claims against other guaranty associations based upon residence of claimant for workers compensation claims and residence of insured for all other claims. [Statutory reference art. 21.28-C, Sec.12]

Over the Cap Claims: Claims for amounts in excess of the guaranty association’s cap but within the limits of the insurance policy issued by the impaired insurer.

Plan of Operation: A document created by the guaranty association providing for the fair, reasonable and equitable administration of the association. [Statutory reference art. 21.28-C, Sec.9]

Pre-‘92 Estates: Prior to 1992, covered claims were paid by the Receiver with funds advanced by the guaranty association, and such claim handling did not include the duty to defend policyholders under liability policies. Effective January 1, 1992, the legislature gave TPCIGA direct responsibility for handling claims and defending insureds of insurers who became impaired on or after that date. Insurers placed into receivership before 1/1/92 are referred to as “pre-’92 estates.” Although the new law also phased claims handling responsibility for the pre-’92 estates to TPCIGA over a two-year period, no duty to defend was assumed for these estates. [Statutory reference art. 21.28-C, Footnotes: Acts 1991, 1993]

Premium Tax Offset: In Texas, assessments paid by member insurers can be allowed as an offset to the insurers’ future insurance premium taxes at a rate of 10% for 10 years. Some guaranty associations utilize other methods of recoupment including policy surcharges and incorporation of recoupment into premium rate filings. [Statutory reference art. 21.28-C, Sec.21]

Proof of Claim (POC): A written statement filed with the receiver on a form approved by the receivership court by a claimant (including guaranty associations) stating amounts claimed against the assets of the receivership estate. [Statutory reference art. 21.28, Sec.3(c)(5)]

Receivership Court: Texas insurance receivership proceedings are filed in the Travis County District Court, which maintains control over the receivership process. The receivership court appoints the Texas Commissioner of Insurance as receiver of the insolvent company. [Statutory reference art. 21.28, Sec. 1(f) & 21.28, Sec. 2(i)]

SDR: Special Deputy Receiver. Private sector individuals contracted to administer receivership estates under the authority of the Commissioner as Receiver.

Special Master: A person appointed by the receivership court to provide additional oversight and recommendations to the court regarding Texas insurance receivership proceedings. Many legal matters entrusted to the receivership court are referred to the Special Master for hearing and recommendations. Also holds status conferences related to receiverships which normally include Insurance Department representatives, Special Deputy Receivers, guaranty associations and other interested parties.

TDI: Texas Department of Insurance

Trigger: Event which causes a guaranty association to become responsible for payment of covered claims. An impairment order signed by the Commissioner is the trigger in Texas. Many other guaranty associations are triggered by a final order of liquidation of an insurer that contains a finding of insolvency.