What does 'insurer insolvency' refer to?

Insurer insolvency refers to a situation where an insurance company is unable to fulfill its financial obligations to policyholders and creditors. This condition can arise when the insurer's liabilities exceed its assets, indicating that it does not have sufficient funds to pay out claims or other financial commitments. When an insurer is insolvent, it may lead to significant consequences for policyholders, such as delays in receiving claims payments or, in some cases, the loss of coverage altogether.

Understanding insurer insolvency is critical for consumers and professionals in the insurance field, as it highlights the importance of evaluating an insurer's financial health and stability prior to purchasing a policy. An insurer that is financially sound will meet its obligations, whereas an insolvent company poses a risk to those it insures.