When Company Insolvency and Regulators Leave You Empty Handed

Katt, Peter C.
August 1996
Journal of Financial Planning;Aug1996, Vol. 9 Issue 4, p18
Academic Journal
The article analyzes the implications of Confederation Life (Confed) policy on its clients in the U.S. Confed was seized by insurance regulators in August 1994. The first phase of rehabilitation is still in place. During the first stage of such rehabilitations, the established practice has been to freeze alt policy surrender and loan values, except for hardship cases, to allow sufficient time for the rehabilitators to evaluate the situation without a run on the company's assets by policyholders. Confed rehabilitates went far beyond the temporary freezing of policy surrender and loan values. Coned policyholders are prevented from having access in the money they put in prior to seizure, but in order to avoid a lapse in coverage they must pay new premiums to a failed company until such time the injunction is lifted. The replacement of a Confed policy masquerading as additional coverage would nor work if the insured is unable to qualify for the additional coverage due to financial underwriting considerations.


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