California Insurance Commissioner John Garamendi recently authorized an emergency bailout of the California Insurance Guarantee Association (CIGA), the industry fund on the brink of collapse due to the numerous insolvencies of workers compensation carriers in California over the past few years.
According to the Los Angeles Times, CIGA, which steps in to pay claims on workers’ compensation, auto, homeowners and liability policies when private insurers go insolvent, is faced with a $1.6 million bill per day to pay benefits to disabled workers. As early as last week, CIGA was faced with delaying or cutting payments altogether to workers.
Garamendi stepped in May 14, permitting CIGA to use funds allocated for unpaid claims for auto and homeowners policies to act as a stopgap measure, allowing for payment to injured workers.
CIGA will likely ask the legislature for permission to sell approximately $500 million in revenue bonds to ease its financial situation.
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