admitted vs non-admitted insurance

Admitted and Non-Admitted Insurance Carriers… What’s The Difference?

Admitted and non-admitted insurance carriers…? What do these terms mean, and what’s the difference between admitted vs. non-admitted insurance?

Admitted insurance carriers are licensed by the State Departments of Insurance in all the states where they write insurance. 

Non-admitted insurance carriers are not licensed by every state, but are allowed to do business through licensed wholesale brokers and agents in states where they’re not licensed.

Both admitted and non-admitted insurance carriers have benefits and each can be highly rated and excellent choices for personal or business insurance coverage… 

Admitted Vs. Non-Admitted Insurance

If you operate a business that needs insurance, your insurance broker  will talk with you about admitted and non-admitted insurance carriers.1

Admitted Insurance

An admitted insurance carrier is licensed in the states where it does business. 

Admitted carriers agree to follow rating guidelines and submit their rates for state approval. Admitted carriers also pay a fee to contribute a state reinsurance fund for every insurance policy they write. 

In return, admitted insurers receive a license and the promise of financial backing from the state’s reinsurance policy in the event they are unable to pay claims. 

Non-Admitted Insurance

Non- admitted insurance is also known as “surplus lines” insurance or sometimes excess lines insurance. 

Surplus lines insurance carriers are regulated, and also non-admitted insurance carriers are licensed in their “home states” but not in every state. 

In states where a surplus lines carrier is not licensed, it does not have to follow state criteria for underwriting, rate-setting and coverage limits.

Not being restricted to state guidelines means non-admitted carriers are able to offer specialty lines of insurance, such as for high-value properties, coverage of high-risk markets, geographic areas or operations that would not otherwise be available from standard “admitted” markets. 

The biggest difference non-admitted insurance carriers have is that they do not have financial backing from the state… 

Most admitted insurance carriers (such as The Hartford, Travelers, Liberty Mutual, etc.) own non-admitted insurance businesses so that they can offer these additional lines of insurance.

Non-admitted insurance carrier may be as highly rated as admitted insurance carriers.

Is Non-Admitted Insurance Bad?

When people hear the term “non-admitted” they think it sounds bad… 

However, non-admitted insurance is not “bad”… 

Indeed, it can be a very good thing… 

This is because non-admitted carriers can write policies for businesses or individuals who might not otherwise be able to get insurance from an admitted carrier following state requirements.

Some examples where availability of non-admitted insurance can be very useful include:

  • Properties in wildfire risk locations
  • Properties in high hazard wind locations
  • Businesses with a lot of prior claims 
  • Businesses that have no prior insurance history or financial losses
  • New innovations or industries (such and energy storage or digital assets and cryptocurrencies)

Non-admitted carriers can write unusual risks that admitted carriers might not be willing to write. 

Insurance brokers usually start by talking with admitted insurance carriers for coverage… However, they may have no luck. 

For instance, in parts of California where there’s a lot of wildfire risk or in places where there is historically been a lot of wind storms or things like that, where you might have a lot of property risk. 

What Are Examples of Surplus Lines Carriers?

An example of a famous non-admitted insurance carrier is Lloyd’s of London. 

Lloyd’s of London is a syndicate that underwrites certain insurance programs and is the largest writer of surplus lines insurance in the world. As mentioned above, non-admitted carriers can have higher A.M. Best ratings than “admitted” carriers… 

According to A.M. Best, Lloyd’s wrote almost one fourth (25%) of the global surplus lines market, followed by AIG. 

However, other carriers that you might recognize also provide surplus lines/non-admitted insurance, including Chubb, Travelers, Berkshire Hathaway and Liberty Mutual.  

At the end of the day, the carrier you choose should be the one that your broker – and you – agree is best for your business. 

IMHO, whether that carrier is providing admitted or non-admitted insurance shouldn’t factor into your decision (too much) at the end of the day.

Footnotes

  1. Non-admitted insurance carriers are also known as "surplus lines" or "excess lines" insurance.
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