How are these assessments computed?

The vast majority of state guaranty funds assess after an insolvency occurs. Depending on the guaranty association, assessments may be computed and billed based on the immediate cash needs of the guaranty association or upon an estimate of total lifetime exposure.

In most states the assessment cap is two percent of net direct-written premium. Guaranty funds cannot assess an insurance company over the statutorily set cap on assessments for a single year. In exceptional circumstances, for instance when a natural catastrophe causes several large insolvencies and creates a need for additional assessments, state legislatures may enact emergency legislation that grants additional assessments or permits guaranty funds to borrow money, such as through a bond issue.





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