Guarantee fund established by law
Guarantee funds established by law exist in many jurisdictions. Typically they require insurers to contribute funds into a pool in order to pay policyholder claims in the event of insurer insolvencies. They may be funded by periodic (usually annual) levies or by levies only when an insolvency arises. The basis of the funding requirement varies although typically most are based on an insurer’s premium income.
The commitment of participants to contribute to the fund is not established by contract so there is no insurance contract. Obligations to guarantee funds are within the scope of IAS 37.