(1) Guaranty fund certificates may be issued to provide a guaranty fund for domestic life and fire insurance companies incorporated upon the mutual plan and for domestic casualty insurance associations incorporated upon the assessment plan, such fund to be held as security for the payment of all losses and other policy liabilities of such companies. Guaranty fund certificates may draw interest or dividends not exceeding in the aggregate eight percent per annum, which shall only be paid from the profits of the company. The certificates may only be retired or redeemed by using the profits of the company for that purpose, but the full fund as required of each kind of mutual and assessment company by this title (except article 15), and article 14 of title 24, C.R.S., shall at all times be maintained. Such guaranty fund shall be a liability until redeemed or retired. It shall only be used to pay policy claims or liabilities when the contingent mutual liability of the policyholders has been drawn upon and found insufficient to meet the losses of policy claims or when the directors for any cause fail to provide for the payment of policy claims.

(2) Upon satisfying himself of such failure, the commissioner shall suspend the certificate of authority of such company and apply to the district court for an order restraining said company from doing further business; and the court may appoint a receiver or issue such decrees and orders as may best serve the interests of the members or policyholders and of the public; and the disbursement or distribution of the guaranty fund shall then be made under the court's direction; but the fund shall first be used to pay policy claims or losses, and, if any of the fund then remains, it shall be used to pay creditors, if any, and the then remaining portion of the fund shall be used to redeem outstanding guaranty fund certificates, or, if none are outstanding, it shall be distributed among the members of the company as the court may direct. The profits of a domestic mutual insurance company or association are that portion of its cash funds not required for the payment of losses and expenses and not set apart for the unearned premium reserve or any other purpose required by law.