With the increasing number of insurance company insolvencies especially in Florida and Louisiana, an explanation of the unearned premium process for insolvencies may be helpful. While the guaranty fund statutes in each state may differ in the amount of unearned premium that is covered, including any applicable floors, maximums or statutory deductibles, the process that all guaranty funds go through in calculating unearned premium by the liquidator/receiver of the insolvent insurer is the same.

In a property and casualty insurance company insolvency, the liquidation order in most cases will cancel all policies of the insolvent insurer 30 days post-liquidation date. On rare occasions, like in the case of the St. Johns' insolvency, the liquidator will transfer the policies and reserves to another insurer.

In the case of Avatar Insurance Company, another insurer was not willing to take the policies; and all policies will be cancelled on April 13, 2022. The approximately 37,000 Avatar policyholders must seek new coverage prior to that cancellation date in order to avoid a lapse in coverage. Unfortunately, because of the way that unearned premium claims are handled in an insolvency, they will have to make a new premium payment prior to receiving any unearned premium refund from the Florida Insurance Guaranty Association (FIGA).