20-171. Conservatorship; liquidation
A. If, after notice, and after hearing, at the conclusion of the sixty day period,
it is determined that such insurance company has failed to comply with the lawful
requirements of the director or upon consent by an insurance company, the director may
appoint a conservator, who shall immediately take charge of such insurance company and
all of the property, books, records, and effects thereof, and conduct the business
thereof, and take such steps toward the removal of the causes and conditions, which have
necessitated such order, as the director may direct. During the pendency of
conservatorship, the conservator shall make such reports to the director from time to
time as may be required by the director and shall be empowered to take all necessary
measures to preserve, protect, and recover any assets or property of such insurance
company, including claims or causes of action belonging to or which may be asserted by
such insurance company, and to deal with the same in his own name as conservator, and
shall be empowered to file, prosecute, and defend any suit or suits which have been filed
or which may thereafter be filed by or against such insurance company which are deemed by
the conservator to be necessary to protect all of the interested parties or any property
affected thereby. If at the time of appointment of a conservator or at any time during
the pendency of such conservatorship it appears that the interest of the policyholders or
certificate holders of such insurance company can best be protected by reinsuring the
same, the conservator may, with the approval of or at the direction of the director:
1. Reinsure all or any part of such insurance company's policies or certificates of
insurance with some solvent insurance company authorized to transact business in this
state, and
2. To the extent that such insurance company in conservatorship is possessed of
reserves attributable to such policies or certificates of insurance, the conservator may
transfer to the reinsuring company such reserves or any portion thereof as may be
required to consummate the reinsurance of such policies, and any such reserves so
transferred shall not be deemed a preference of creditors.
B. If the director is satisfied that such insurance company is not in condition to
continue business in the interest of its policy or certificate holders, under the
conservator as above provided, the director shall give notice to the attorney general who
shall thereupon apply to any court in Arizona having jurisdiction thereof for leave to
file a suit in the nature of quo warranto to forfeit the certificate of authority of such
insurance company or to require it to comply with the law or to satisfy the director as
to its solvency, and to satisfy the requirement that its condition is such as to render
the continuance of its business not hazardous to the public or to the holders of its
policies or certificates of insurance. It shall be in the discretion of the director to
determine whether or not he will operate the insurance company through a conservator, or
report it to the attorney general. When all the policies of an insurance company are
reinsured or terminated, and all of its affairs concluded, the director shall report the
same to the attorney general, who shall take such action as may be necessary to effect
the forfeiture or cancellation of the certificate of authority of the insurance company
so reinsured and liquidated. Where the director lends his approval to the merger,
consolidation or reinsurance of all the policies of one insurance company with that of
another, the same shall be reported to the attorney general who shall proceed to effect
the forfeiture or cancellation of the certificate of authority of the insurance company
from which the policies were merged, consolidated or reinsured, in the same manner as is
provided for the charters of companies totally reinsured or liquidated.
C. The cost incident to the supervisor's and conservator's service shall be fixed
and determined by the director and shall be a charge against the assets and funds of the
insurance company to be allowed and paid as the director may determine.
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