The California Insurance Guarantee Association (also known as "CIGA") has three separate funds organized by line of business that cover (1) workers' compensation claims, (2) homeowners and automobile claims (including personal injury), and (3) all other claims (e.g., products liability and commercial property and liability). Claims and/or statutory benefits pursuant to a policy under categories (2) and (3) above are limited to no more than $500,000. CIGA's revenue for each of its three funds is derived from assessments of Member Insurers, distributions from the estates of insolvent Member Insurers, and investment income. Revenues received are allocated into the three separate funds and are used to pay the claims and costs allocated to the applicable line of business.
In addition, California Insurance Code section §1063.73 provides for the ability of CIGA to request the issuance of bonds to more expeditiously and effectively provide for the payment of covered claims that arise as a result of the insolvencies of insurance companies providing workers' compensation insurance. On August 18, 2004, CIGA issued $750 million in bonds.
California Insurance Code section §1063.74 authorizes a special bond assessment to pay principal and interest due on those bonds issued for the Workers' Compensation Bond Fund established to provide additional funding to pay for workers' compensation covered claims. The amount of the special bond assessment is not limited by statute. CIGA executed a Loan Agreement in connection with the issuance of the bonds. CIGA covenanted in the Loan Agreement to levy Special Bond Assessments in an amount not less than 1% of net direct written premium and in an amount not less than 110% of the Adjusted Debt Service as defined in the Loan Agreement.
For more detailed information about the Annual Premium Assessment or the Special Bond Assessment, please click this link on Member Insurer Advice.