What term refers to an insurer's failure to meet financial obligations when due?

The term that refers to an insurer's failure to meet financial obligations when due is insolvency. This indicates a situation where an insurer's liabilities exceed its assets, meaning it lacks the necessary resources to satisfy its financial commitments to policyholders and creditors. Insolvency is a critical concept in the insurance industry, as it can impact the ability of an insurer to pay claims and maintain ongoing operations.

Insolvency is often triggered by a variety of factors, including poor management practices, unexpected catastrophic events, or prolonged periods of underwriting losses. When an insurer is known to be insolvent, it typically enters into rehabilitation or liquidation procedures to address its financial situation and protect the interests of policyholders.

Other terms mentioned, like bankruptcy, refer generally to a legal status of a person or entity unable to repay debts, but it is not specific to the insurance context. Incapacity pertains more to an individual's ability to manage their affairs rather than a company’s financial state. Receivership is a legal process that often follows insolvency, where a receiver is appointed to manage the company's assets to pay off debts, but it does not define the initial financial failure itself. Therefore, insolvency is the most accurate term for an insurer's failure to meet its financial obligations