Quote:
Originally Posted by Bill Douglas
Around here their are lots of insurance companies, but they are owned or have an affiliation with a big company like Lloyd's of London. So even if they go bust Lloyd's pays out. I'm sure you guys are much the same.
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Bill, that is not correct. If a subsidiary becomes insolvent the parent company does not bail them out. They just go bankrupt. Most states have an insurance fund incase an insurer does become insolvent (bankrupt) the public has a place to get help. Look up Hurricane Andrew that hit Florida. Hundreds of insurance companies became insolvent including subsidiaries of State Farm, Allstate, Prudential, etc.
I think what you are thinking of is re-insurance where insurance companies sell off part of the risk to a second insurance company.
Also, Lloyd's isn't an insurance company as in State Farm is an insurance company. Lloyd's is made up of syndicates, essentially wealthy individuals buying the risk. They form a group under the Lloyd's name and buy your risk.