What are the two possible outcomes from receivership?

• A. Rehabilitation and Liquidation
• B. Merger and Acquisition
• C. Reinsurance and Reorganization
• D. Capital infusion and dissolution

Answer: (A)

When a regulator places an insurer into receivership, the goal is to protect policyholders while resolving the insurer’s financial distress. There are two main paths:

• Rehabilitation: the insurer is guided back to solvency under a court-approved plan. This often involves changes in management or operations, a revised business plan, capital support, or asset adjustments. The company continues to operate under supervision while the plan is implemented and, if successful, it can return to normal operations.

• Liquidation: if restoring solvency isn’t feasible, the insurer is dissolved. Its assets are sold to pay creditors and policyholders to the extent possible; remaining obligations are settled according to priority, and the company is ultimately dissolved.

These are the standard outcomes of receivership; other concepts like mergers or reinsurance aren’t the defined outcomes of the receivership process.