If an insurance company violates the provisions of the Insurance Law and harms the public interests, which may cause serious harm or has endangered the solvency of the insurance company, the insurance supervision and administration institution may take over the insurance company.
The purpose of the takeover is to take necessary measures for the insurance company to protect the interests of the insured and restore the normal operation of the insurance company.
Upon the expiration of the takeover period, the insurance regulatory agency may decide to extend it, but the longest takeover period shall not exceed 2 years. Upon the expiration of the takeover period, the insurance supervision and regulation institution may decide to terminate the takeover if the taken-over insurance company resumes its normal operation ability. If the takeover organization considers that the property of the insurance company to be taken over is insufficient to pay off its debts, it shall apply to the people's court for declaring the insurance company bankrupt according to law with the approval of the insurance supervision and regulation institution. If an insurance company is declared bankrupt, the people's court shall organize the insurance supervision and administration institution and other relevant departments and personnel to set up a liquidation group to carry out liquidation. Because the bankruptcy of an insurance company involves the protection of the interests of the insured and the beneficiary, the insurance law stipulates that the bankruptcy property of an insurance company shall be paid off in the following order after paying off the bankruptcy expenses first:
(1) Employee's salary and labor insurance expenses;
(2) Compensation or payment of insurance benefits;
(3) the taxes owed;
(4) corporate debt.
Further reading: How to buy insurance, which is good, and teach you how to avoid these "pits" of insurance.