Your insurance company just went bankrupt. No warning, no transition plan, just a Chapter 15 filing that left thousands of California policyholders scrambling for answers.
Long Beach Insurance Company collapsed in October 2025, marking one of the year’s most significant insurance failures. The Chapter 15 bankruptcy filing—typically reserved for foreign companies seeking U.S. court protection—signals complex cross-border financial entanglements that could delay policyholder claims for months.
This isn’t just a Long Beach problem. When insurers fail, the ripple effects hit customers nationwide who hold policies with affiliated companies or subsidiaries. The question isn’t whether you’re affected. It’s what you do next.
What Chapter 15 Bankruptcy Actually Means for Your Policy
Chapter 15 differs fundamentally from standard U.S. bankruptcy proceedings. This provision allows foreign insurance entities to coordinate insolvency proceedings across multiple countries, which sounds complicated because it is.
For policyholders, here’s what matters:
- Your claims enter legal limbo during court proceedings, which typically stretch 12-18 months minimum for complex international cases.
- State guaranty associations may step in—but only after the court determines how much coverage qualifies for protection under California law.
- Chapter 15 prioritizes foreign creditors differently than domestic bankruptcy, potentially placing U.S. policyholders lower in the payout hierarchy.
- Your premiums paid don’t guarantee full coverage continuation. Courts can modify or terminate policies mid-term based on available assets.
The National Association of Insurance Commissioners (NAIC) tracks these failures, but individual state regulators ultimately decide how to handle stranded policyholders.
Check If Your Coverage Is Actually Protected
California has safety nets, but they come with fine print most policyholders never read.
The California Insurance Guarantee Association (CIGA) covers up to $500,000 for homeowners policies, but commercial policies face different limits. Health insurance gets separate treatment through the California Life and Health Insurance Guarantee Association.
| Policy Type | CIGA Coverage Limit | Typical Processing Time |
|---|---|---|
| Homeowners/Property | $500,000 | 6-12 months |
| Auto Insurance | $500,000 | 4-8 months |
| Workers Compensation | Unlimited (medical), $500,000 (death) | 8-18 months |
| Commercial Property | $100,000 | 12-24 months |
Notice those processing times? Your claim from today won’t get resolved until mid-2026 at the earliest. During that gap, you’re financially exposed.
3 Steps to Take This Week If You’re Affected
Step 1: Document everything immediately. Photograph all policy documents, premium payment records, and correspondence. Courts require proof of coverage, and your insurer’s records may become inaccessible during proceedings.
Step 2: Contact the California Department of Insurance. File a formal complaint at insurance.ca.gov within 30 days of learning about the bankruptcy. This creates an official record that prioritizes your claim when guaranty associations take over.
Step 3: Secure replacement coverage before cancellation. Don’t wait for the bankruptcy court to terminate your policy. Shop for alternatives now while you still have some coverage, even if technically in limbo. Gaps in insurance history increase future premiums by 10-20% with most carriers.
If you have an active claim pending with Long Beach Insurance Company, hire an attorney specializing in insurance bankruptcies. The $500,000 CIGA limit sounds generous until you realize it applies per person, not per claim. Multi-claimant disasters get complicated fast.
Why California Insurers Keep Failing (And Who’s Next)
Long Beach Insurance Company isn’t an isolated case. California’s insurance market faces structural problems that bankruptcy courts can’t fix.
Three pressure points drive insurer failures in 2025:
- Wildfire liability exploded past actuarial models. The 2023-2024 fire seasons generated $12.8 billion in insured losses, forcing smaller carriers to deplete reserves while larger insurers fled the state entirely.
- Proposition 103 rate restrictions prevent pricing adjustments that reflect real risk, trapping companies in money-losing markets they can’t exit without regulatory approval.
- Investment portfolio losses from 2023 interest rate volatility left many insurers holding depreciated bonds while facing increased claim payouts—a fatal cash flow mismatch.
The California Department of Insurance publishes financial solvency ratings, but they lag real-time market conditions by 6-12 months. By the time a company appears on the watch list, it’s often too late for policyholders to switch without penalties.
Should you worry about your current insurer? Check their A.M. Best rating. Anything below A- deserves scrutiny, especially if you’re in a wildfire-prone area.
What Happens to Premiums You Already Paid
You paid $1,200 in January for annual coverage. The company collapsed in October. Do you get a refund?
Not likely.
Chapter 15 bankruptcy treats premium payments as unsecured creditor claims, placing you behind secured lenders, employees, and regulatory obligations. The bankruptcy trustee calculates a pro-rata distribution based on remaining assets after priority claims get paid.
Historical data from California insurance bankruptcies shows unsecured creditors recover an average of 12-18 cents per dollar owed. Your $400 refund for unused coverage becomes roughly $50-75 after years of legal proceedings.
State guaranty associations don’t cover premium refunds—only unpaid claims. You’re out of luck on prepaid premiums unless the bankruptcy estate recovers more than expected, which rarely happens.
Frequently Asked Questions
Will my insurance policy automatically cancel after the bankruptcy filing?
Not immediately. Chapter 15 bankruptcy doesn’t automatically terminate existing policies. However, the bankruptcy court or state insurance commissioner can order cancellation within 30-90 days if the company lacks funds to pay claims. You’ll receive written notice before termination, but don’t rely on it—start shopping for replacement coverage now.
How long does CIGA take to process claims from bankrupt insurers?
Expect 6-12 months for straightforward claims, 18-24 months for complex cases involving multiple parties or disputed coverage. CIGA must first verify your policy qualifies, determine available assets, and coordinate with the bankruptcy trustee. During this period, you receive no claim payments. Some policyholders wait over two years for resolution in complicated bankruptcies.
Can I file a claim against a bankrupt insurance company?
Yes, but you must file through the bankruptcy court, not with the defunct insurer. California requires you to submit a proof of claim form to the bankruptcy trustee within the deadline specified in your official notice—typically 90-180 days from the bankruptcy filing date. Miss this deadline and your claim gets dismissed, forfeiting any potential payout from guaranty associations or remaining assets.
Does CIGA cover all types of insurance policies?
No. CIGA excludes several policy types: surplus lines insurance, ocean marine coverage, mortgage guaranty, financial guaranty, and any policies issued by unauthorized insurers. Additionally, policies held by government entities, large commercial policyholders (over $50 million in annual revenue), and certain self-insured entities don’t qualify. Check your specific policy type at ciga.org immediately.
Should I pay premiums to a bankrupt insurance company?
Stop paying immediately once bankruptcy is confirmed. Your premiums won’t improve your claim position and likely won’t be refunded. However, this creates a gap in coverage that makes you uninsurable for that period. Instead, purchase replacement coverage first, then stop payments to the bankrupt insurer. Document the overlap period carefully—you may need proof you maintained continuous coverage to avoid penalties with your new carrier.
Protect Yourself Before the Next Insurer Collapses
California’s insurance market remains unstable. Long Beach Insurance Company won’t be the last failure of 2025.
Review your insurer’s financial strength annually. Carriers rated below A- by A.M. Best should trigger immediate shopping for alternatives. The inconvenience of switching insurers beats the nightmare of bankruptcy claims by a wide margin.
Consider diversifying coverage across multiple carriers if you hold substantial policies. Spreading $2 million in coverage across four $500,000 policies with different companies limits your exposure if one fails. Yes, it’s more complicated to manage, but CIGA’s $500,000 per-insurer limit makes this strategy financially prudent for high-value properties.
Most importantly, maintain an emergency fund specifically for insurance gaps. When your carrier fails, you’re self-insured until replacement coverage activates or CIGA processes your claim. Having 6-12 months of premium payments saved separately gives you options when others face forced decisions.
The Long Beach Insurance Company collapse teaches one lesson clearly: Your insurance is only as strong as your insurer’s balance sheet. Check it before you need to file a claim.