Which of the following describes the main purpose of the Insurance Guaranty Fund?

The main purpose of the Insurance Guaranty Fund is to protect policyholders during instances of insurer insolvency. This fund is established to ensure that individuals or businesses that have purchased insurance policies are compensated for their claims when their insurer is unable to meet its financial obligations due to bankruptcy or insolvency.

The existence of such a fund is crucial because it provides a safety net for policyholders, allowing them to receive benefits or claims payments that they would otherwise lose due to the failure of their insurance company. This protects the insured from the financial repercussions of the insurer's inability to pay, thereby maintaining trust in the insurance system as a whole.

While the other options touch on aspects related to insurance, they do not represent the fundamental purpose of the Insurance Guaranty Fund. For instance, encouraging competition, providing reinsurance, and regulating premium rates address different functions of the insurance marketplace and regulatory environment, but they do not directly relate to safeguarding policyholders' rights in the event of an insurer's financial collapse.