In accordance with section §1063.5 of the California Insurance Code, the California Insurance Guarantee Association (also known as "CIGA") is required to collect initial premium charges from the member companies for the insolvency insurance provided by CIGA in the amount necessary to pay covered claims and expenses of insolvent member insurers. The statute authorizes separate premium charges for each of the three categories of covered claims (automobile and homeowners claims, workers' compensation claims, and all other claims) that CIGA pays. It also currently limits premium charges to one percent of written premiums for any category of covered claims.
The CIGA plan of operation, in accordance with section §1063.14 of the California Insurance Code, requires each member insurer to recoup a sum reasonably calculated to recoup the assessment paid by the member insurer through a surcharge on premium charged for insurance policies. The amount of the surcharge shall be separately stated on either a billing or policy declaration sent to an insured. CIGA shall determine the rate of the surcharge and the collection period for each category and these shall be mandatory for all member insurers of CIGA who write business in the three categories.
Nothing in the following frequently asked questions (FAQs) and answers alters the statutory and case law definitions of covered claims for which CIGA is responsible. The actual terms of the applicable statutes, other controlling laws, and legal opinions shall prevail over the information provided on this web site. These FAQs and answers are not intended to provide legal advice.