Which of the following is true regarding the funding of the Connecticut Insurance Guaranty Association?

The Connecticut Insurance Guaranty Association (CIGA) is primarily funded through assessments levied on member insurance companies. This structure allows the association to pool the financial resources necessary to pay covered claims when an insurance company fails, thereby protecting policyholders and beneficiaries. Member insurers contribute to this fund based on their market share and the types of insurance they offer.

This assessment-based funding model helps ensure that the association is adequately capitalized to meet its obligations to policyholders, providing a safety net in situations where an insurer cannot fulfill its contractual liabilities. The reliance on assessments distinguishes CIGA from entities that might depend on taxes or federal funding, which are not part of its operational framework.

In contrast, the other options suggest funding sources that are either not applicable or not used in this context. For example, state taxes or federal funding do not play a role in the financial structure of the Connecticut Insurance Guaranty Association. Understanding this funding mechanism is crucial for grasping how the guaranty association ensures the protection and stability of insurance coverage in Connecticut.