In an insolvency situation, what is the last resort action that the Guaranty Association may take?

In an insolvency situation, the Guaranty Association's role is primarily to protect policyholders and ensure that claims are paid when an insurer cannot meet its obligations. The last resort action that the Guaranty Association may take is the liquidation of the insurer. Liquidation is a formal process where the assets of the insolvent insurer are sold off to pay claims and debts owed to policyholders and creditors. It is a necessary step taken when the financial examination reveals that the insurer's liabilities exceed its assets, and no other corrective measures are viable.

This action effectively brings an end to the insurer's operations, ensuring that the policyholders receive some compensation through the Guaranty Association's fund, which mitigates the impact of the insurer's insolvency. Other options like raising premiums, merging with another insurer, or reorganizing the business structure may not address the immediate needs or protect the policyholders effectively in the case of insolvency, as they often require operational viability and the ability to assume or manage existing liabilities, which is not the case in insolvency.