Life & Health · Chapter 20 · Guaranty Funds
Impaired vs Insolvent Insurer
Definition
An impaired insurer is a member insurer that is NOT insolvent but is deemed by the department potentially unable to fulfill its contractual obligations. An insolvent insurer is a member insurer against which a court of competent jurisdiction has entered an order of liquidation with a finding of insolvency. For guaranty proceedings, the Department is appointed liquidator or rehabilitator of a domestic insurer — and conservator if the member is an alien or foreign insurer.
In plain English
Impaired = wobbling (the regulator's judgment call). Insolvent = fallen (a court order says so).
Exam tip
The definitional tell: insolvent requires a COURT order of liquidation; impaired is the department's designation before things reach court.
Easy to confuse with
These are what this term gets tested against — if you can't tell them apart cold, drill the contrast.
Related terms