What action can be taken when an insurer's solvency is in question?

When there are concerns about an insurer's solvency, monitoring their financial stability is a critical action that can be taken. This involves ongoing assessments of the insurer’s financial statements, reserve levels, and overall operational effectiveness to ensure that they are capable of meeting their obligations to policyholders. The aim of monitoring is to detect any potential financial issues early on, enabling regulators or industry bodies to intervene promptly if necessary.

Monitoring solvency is vital in the insurance industry because it protects policyholders' interests and helps maintain public confidence in the insurance system overall. If a company is deemed to be at risk of insolvency, this scrutiny allows regulators to work on solutions or take precautionary measures before the situation escalates into a crisis.

Other actions, such as issuing cease and desist orders or withdrawing coverage, are more aggressive steps that may be taken once a definitive decision has been made regarding the insurer's financial status. Meanwhile, simply issuing new policies may not address the underlying concerns over the insurer's ability to fulfill its commitments, thereby creating potentially more risk rather than alleviating it. Monitoring the solvency provides a proactive approach to safeguard customers and the industry.