Nevada Insurance Guaranty Association (NIGA)

The Nevada Insurance Guaranty Association (NIGA) protects Nevada policyholders when property and casualty insurance companies become insolvent and cannot pay claims.

Purpose and Function

Why NIGA Exists

When an insurance company fails financially:

• Policyholders could be left without coverage
• Unpaid claims could cause severe financial hardship
• Consumer confidence in insurance industry could erode
• State has interest in protecting insurance consumers

NIGA's Role:

• Steps in when member insurer becomes insolvent
• Pays covered claims up to statutory limits
• Continues essential coverage temporarily
• Protects policyholders from insurer insolvency

Exam Tip: NIGA is NOT an insurance company—it's an association of all P&C insurers licensed in Nevada, created by state law to protect policyholders.

Membership and Funding

Member Insurers

Who Must Be Members:

• All property and casualty insurers licensed to do business in Nevada
• Both domestic (Nevada-based) and foreign (out-of-state) insurers
• Membership is mandatory—not voluntary

Exemptions from Membership:

• Life and health insurers (separate guaranty fund)
• Title insurers
• Surplus lines insurers
• Risk retention groups
• Self-insurance programs

Funding: Assessments

NIGA is funded by assessments on member insurers:

Assessment Process:

1. Insolvency Declared: Nevada Commissioner declares an insurer insolvent
2. NIGA Takes Over: Association assumes covered claims
3. Assessment Needed: NIGA determines funding needs
4. Insurers Assessed: Each member insurer pays proportional share
5. Assessment Basis: Based on insurer's premiums written in Nevada

Assessment Limits:

• Maximum 2% of insurer's Nevada premiums per year
• Assessments can continue for multiple years if needed
• Insurers may offset assessments against Nevada premium taxes

Exam Tip: Policyholders do NOT pay NIGA assessments directly. Member insurers are assessed, and costs are indirectly spread across all policyholders through rates.

Coverage Provided by NIGA

What NIGA Covers

NIGA covers most property and casualty insurance policies:

Covered Lines:

• Personal auto insurance
• Homeowners insurance
• Commercial property insurance
• Commercial auto insurance
• General liability insurance
• Workers' compensation insurance
• Inland marine coverage
• Most other P&C lines

Covered Claim Types:

• Unpaid claims from policies issued by insolvent insurers
• Unearned premiums (for cancelled policies)
• Defense costs for liability claims
• Claim adjustment expenses

Coverage Limits

NIGA provides coverage subject to statutory limits:

Important Limitations:

• Limits apply per claim, not per policy
• Deductibles from original policy still apply
• NIGA does not cover interest on delayed claim payments
• Coverage is subject to terms of original policy

Exam Tip: Nevada's standard NIGA limit is $300,000 per claim for most coverages. The exception is homeowner claims, which have a $500,000 limit. These specific dollar amounts are commonly tested.

Exclusions from NIGA Coverage

NIGA does NOT cover:

Excluded Policies:

• Surplus lines insurance (non-admitted insurers)
• Reinsurance and financial guaranty insurance
• Title insurance
• Ocean marine insurance (if separate fund exists)
• Mortgage guaranty insurance

Excluded Claims:

• Claims filed after deadline set by NIGA
• Amounts exceeding policy limits
• Amounts exceeding NIGA statutory limits
• Punitive damages
• Penalties
• Attorney fees (except as part of defense costs)

Excluded Amounts Above Limits:

• If claim is $400,000 and NIGA limit is $300,000, claimant receives $300,000 from NIGA
• Remaining $100,000 is claimant's loss (may recover from insolvency estate)

Claims Process

How NIGA Handles Claims

When Insurer Becomes Insolvent:

1. Commissioner Action:

   • Nevada Commissioner declares insurer insolvent
   • Court appoints liquidator for insurer
   • NIGA is notified of insolvency

2. NIGA Notification:

   • NIGA sends notice to policyholders
   • Provides information about covered claims
   • Establishes claim filing deadlines

3. Filing Claims with NIGA:

   • Policyholders submit claims to NIGA
   • Must file within deadlines established by NIGA
   • Provide documentation supporting claim

4. NIGA Review and Payment:

   • NIGA evaluates claims under policy terms
   • Applies policy deductibles
   • Pays up to NIGA statutory limits
   • Issues payment directly to claimant

5. Excess Claims:

   • Amounts over NIGA limits filed with liquidator
   • May receive partial payment from insolvency estate
   • Often results in loss to claimant

Continuing Coverage

For Unexpired Policies:

• NIGA may continue coverage for limited period (typically 30 days)
• Policyholder must obtain replacement coverage
• Unearned premiums returned (up to $10,000 limit)
• NIGA does not provide long-term coverage

Exam Tip: NIGA provides temporary coverage continuation to allow policyholders time to obtain replacement insurance, but this is short-term only (typically 30 days).

Producer Responsibilities

Prohibited Use in Sales

Producers CANNOT:

• ✗ Use NIGA as selling point or inducement
• ✗ Advertise NIGA coverage in marketing materials
• ✗ Suggest NIGA makes insurer's financial condition irrelevant
• ✗ Tell clients "don't worry about company strength—NIGA will protect you"
• ✗ Imply NIGA coverage equals full insurance protection

This prohibition exists because:

• Could encourage risky insurer selections
• Undermines insurer financial strength importance
• Creates moral hazard in marketplace
• NIGA is safety net, not primary protection

Permitted Communications

Producers MAY:

• ✓ Explain NIGA exists if asked by client
• ✓ Provide factual information about NIGA limits
• ✓ Discuss NIGA in context of insurer insolvency (after it occurs)
• ✓ Direct clients to NIGA website for information

When Insolvency Occurs:

• Inform affected clients about NIGA claims process
• Assist clients with filing NIGA claims (if requested)
• Help clients obtain replacement coverage
• Provide factual information about coverage limits

Exam Tip: It is a violation for producers to advertise or use NIGA coverage as a sales inducement. You can answer client questions about NIGA factually, but cannot promote it. This prohibition is frequently tested.

Nevada Insurance Guaranty Association Details

NIGA Contact Information

Nevada Insurance Guaranty Association:

• Website: www.nevadaiga.org
• Phone: (775) 337-5222
• Mailing Address: Check website for current address

Purpose of Contact:

• Policyholder inquiries about insolvent insurers
• Claim filing information
• Coverage questions
• Status of pending claims

NIGA Board of Directors

Board Composition:

• Representatives from member insurers
• Selected by association members
• Oversees NIGA operations
• Makes coverage and payment decisions

Board Responsibilities:

• Determine assessment amounts
• Establish claim handling procedures
• Set payment priorities
• Manage NIGA investments and reserves
• Report to Nevada Commissioner

Comparison with Other Protections

NIGA vs. Other Safety Nets

Exam Tip: NIGA covers Property & Casualty insurance only. Life and health insurance has a separate guaranty association. Don't confuse the two on the exam.

Exam Focus Areas

Key Points to Remember

NIGA Structure:

• Association of all P&C insurers licensed in Nevada
• Funded by assessments on member insurers
• Activated when insurer becomes insolvent

Coverage Limits:

• $300,000 per claim (most coverages)
• $500,000 per claim (homeowner coverage)
• $10,000 unearned premium return
• Workers' comp: full statutory benefits

Producer Rules:

• CANNOT advertise or use NIGA in sales
• Can answer factual questions if asked
• Must emphasize insurer financial strength
• Can help with claims after insolvency

Exclusions:

• Surplus lines insurance
• Ocean marine (if separate fund)
• Amounts over policy limits
• Amounts over NIGA statutory limits
• Punitive damages and penalties