Meaning – An insurance company that is potentially unable to fulfill its policy obligations, and has been placed under rehabilitation or conservation.
An impaired insurer is not insolvent, but does pose a potential threat to its policyholders. People consider impaired insurers a risk because they may be unable to fulfill obligations afforded to its citizens in the case of an emergency. A court can place the insurer in conservation or rehabilitation until the health of the company improves enough that the risk of insolvency has ended. An impaired insurer that is unable to exit court ordered conservation or rehabilitation may be considered an insolvent insurer, and may be forced into liquidation.