FREQUENTLY ASKED QUESTIONS
ABOUT CONSERVATION AND LIQUIDATION

1. What is "conservation"?

   "Conservation" is when the Insurance Commissioner ("Commissioner"), upon a Superior Court's order, takes over the operations of an insurance company licensed in California. There are many different reasons for the Superior Court to issue such a "Conservation Order", but most of the time it is because the insurance company is insolvent, and the Commissioner must operate the company in order to conserve assets for the benefit of policyholders, creditors, and other persons interested in the assets of the company. As a court-appointed Conservator, the Commissioner may continue as much, or as little, of the insurance business as the Commissioner deems appropriate. During conservation, one of the Commissioner's main duties is to conduct a thorough examination of the insurance company's books and records to determine whether the company can be rehabilitated so that it may continue operating as a "regular" insurance company (i.e., without the day-to-day management by the Commissioner).

2. What is "liquidation"?

   "Liquidation" is the process whereby the Commissioner, upon a Superior Court's order, terminates an insurance company's insurance business by canceling all insurance policies and by not issuing any new or renewal policies. During liquidation, the Commissioner sells the company's assets, e.g., furniture, fixtures, equipment, in order to generate cash to pay policyholders' claims and other creditors. Liquidation usually occurs after conservation and after the Commissioner has determined that the insurance company cannot be rehabilitated and that it would be futile to continue with the conservation. A company that is in conservation or liquidation is called an "estate".

3. What is the "Conservation & Liquidation Office"?

   The Conservation & Liquidation Office ("CLO") is comprised of insurance professionals, e.g., Claims Officer, Reinsurance Officer, Chief Financial Officer, Information Technology Officer, etc., who oversee departments that operate and liquidate insurance companies. The CLO was created by the Commissioner to assist him in fulfilling his duties as a court-appointed Conservator and Liquidator.

4. Why does the Commissioner conserve an insurance company?

   There are many different reasons, but the most common is that the company is in financial trouble such that its further transaction of business would be hazardous to its policyholders, or creditors, or to the public. See Insurance Code Section 1011 for the full list of reasons.

5. What happens when a company is liquidated?

   Upon the Superior Court's issuance of a liquidation order, the Commissioner publishes a notice to the company's policyholders, creditors, shareholders and all parties interested in the company's assets. The notice informs persons who might have a claim against the company to file a proof of claim with the Commissioner before the final claims filing date, which is published in the notice and in the court's liquidation order. In addition, the Commissioner notifies all policyholders by mail that his/her insurance policy with this particular company will be cancelled effective 30 days from the date of the liquidation order.

6. If the insurance company is insolvent, who pays policyholders' claims?

   The California Insurance Guarantee Association (CIGA) and the California Life and Health Insurance Guarantee Association (CLHIGA) have been established to meet the obligations of insolvent insurers by "administering" (reviewing and paying, as appropriate) covered claims. The valuation of each claim is determined in accordance with policy provisions and statutory requirements. Valid policyholder claims that are either not covered by the insurance guarantee associations or are in excess of the limits (in California, the limit for CIGA is $500,000, except for Workers' Compensation claims) paid by the insurance guarantee associations are administered by the CLO. The extent of payment of the claims administered by the CLO is dependent upon the assets remaining in the insolvent insurance company. Generally, recovery will not be 100 percent.

7. How many companies does the CLO manage?

   Although the larger estates generate more attention, the CLO continues to liquidate assets in 9 other estates, as of 12/06/2023. As this process continues, there will be more "distributions" (disbursement of funds) to claimants in California. Since 2000, the CLO has closed 78 estates. Unfortunately, not all of these estates have assets available for the payment of claims. In many of these instances, the claimants are paid by CIGA and CLHIGA.

   A complete list of open estates and list of closed estates are available on this website.

   The CLO has become one of the premier receivership operations in the country and will continue to manage the affairs of conservatorship and receivership in California for the benefit and protection of policyholders and other creditors interested in the assets of the estates.