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Insurance companies, like other businesses, can struggle financially—sometimes so severely that they become insolvent. A state-appointed receiver will oversee distribution of the insolvent insurer’s assets. For example, Real Legacy Assurance Company in Puerto Rico suffered large losses related to claims from hurricanes Irma and Maria. As a result, Real Legacy became insolvent and entered liquidation proceedings. According to reports, Puerto Rico’s Insurance Commissioner has fined various insurers for delays in handling claims, which suggests that other insurance companies operating in Puerto Rico may be struggling to handle the large number of claims resulting from the storms. Generally, policyholders’ claims have first priority in insolvency proceedings. Priority is the order in which claims are satisfied from the assets of the defunct entity. Even though claims by policyholders enjoy a high level of priority, full payment of claims is often unlikely. Thus, other sources of recovery can prove valuable.


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