What may happen to an insurer that is determined to be at high risk of insolvency?

An insurer determined to be at high risk of insolvency may indeed be required to raise rates as a means of stabilizing its financial condition. When a company is assessed as being financially unstable or at risk of failing to meet its obligations, one of the regulatory responses can involve requiring the insurer to implement rate increases. This action is intended to bolster the insurer's financial reserves, thereby improving its ability to pay claims and maintain overall solvency.

Raising rates can help ensure that the insurer collects sufficient premium income to cover incurred losses and anticipated expenses. By doing so, the insurer may avoid further financial deterioration and work toward regaining a sound financial footing. This approach is generally guided by regulatory authorities who oversee the financial health of insurance companies to protect consumers and ensure that insurers can fulfill their claim obligations.

While there are various measures that can be taken with regards to high-risk insurers, such as regulatory penalties or increased scrutiny, the most typical immediate response concerning their solvency issues is often the adjustment of premiums.