What actions may the Guaranty Association take if a company becomes insolvent?

When a company becomes insolvent, the Guaranty Association has the responsibility to protect policyholders and ensure that they continue to receive the benefits of their insurance coverage. One of the primary actions the Association can take is to enter receivership for the insolvent company or facilitate a merger with a stronger, financially stable company. This process is designed to maintain the continuity of insurance services and uphold the obligations to the policyholders.

Receivership means that a court appoints a receiver to oversee the liquidation of the company's assets and manage its affairs, which helps in distributing available funds to pay claims. Alternatively, merging with a stronger company can provide the necessary financial backing to fulfill existing policies, ensuring that customers are not left without coverage. This approach not only helps protect the interests of the consumers but also stabilizes the insurance market by addressing the failures of the insolvent insurer.

Other options related to modifying policy terms, auditing financial statements, or increasing premium rates across the board are not standard actions taken during an insolvency case managed by the Guaranty Association. Instead, they may involve other regulatory measures but do not directly address the primary goal of ensuring stability and protection for policyholders during an insolvency situation.