by C. L. Easey

Created on: September 01, 2009

Insurance companies that provide insurance policies in a particular state are known as either an admitted insurer or a non-admitted insurer. The main difference between the two is that an admitted insurer has its headquarters located in a particular state. A non-admitted insurer has a license from a particular state to sell insurance policies such as California. Non-admitted insurers will normally provide policies or coverage that an admitted insurer does not.

Regulation

Admitted and non-admitted insurers in states such as California are subject to the regulation of the state in which they sell insurance policies. Unlike an admitted carrier most non-admitted carriers do not need to file their rates with a state's department of insurance. This depends however on the laws that exist in a particular state. In order for non-admitted carriers to offer insurance in a state they first need to go through an approval process before they can offer insurance.

Surplus Lines

Most types of non-admitted insurance carriers in a state such as California provide what is known as surplus lines insurance. A surplus lines insurer typically offer insurance products for specialty risks or risks that would normally not be insured by an admitted carrier in a state. This can include risks that is seen as hazardous, unusual or is a new type of business or a business that has a history of losses that can occur.

California Insurance Guaranty Association

Some states have established a guaranty association to protect claimants and policy-holder interests from losses suffered when an insurer becomes insolvent. An insurer that becomes insolvent can no longer meet their obligations contractually or financially. The CIGA or California Insurance Guaranty Association has been setup in which all admitted insurers in the state belong and need to contribute financially. Insured claims are guaranteed by the fund up to $500,000.

List of Eligible Surplus Lines Insurers

The state of California keeps a list of the non-admitted or surplus lines insurers known as LESLI that are approved to offer insurance products in the state. Non-admitted insurers in California are not required to belong to the California Insurance Guaranty Association. Most insurance carriers that are on the list of eligible surplus lines insurers are normally admitted insurance companies from other states. This is true for non-admitted insurers that offer insurance in other states as well.

Financial Stability

Admitted and non-admitted insurers in any state are rated on their financial strength and stability. An insurance companies financial strength is seen as its ability to pay claims. Financial rating of admitted and non-admitted insurers are determined by a company called A.M. Best. Their financial rating are based on a scale that ranges from weak or vulnerable to the best score an insurer can have which is a Superior rating

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