     |  |
 |
|
White Papers |
|
|
|
Non-admitted Insurance Company: An insurance company not licensed to do business in a particular state; such a company, however, may sell excess and surplus insurance in that state if admitted insurers lack the capacity or expertise. The designation "Surplus Lines" or "Non-admitted" does not equate to "fly-by-night" in describing an insurance carrier. The basic characteristics of these insurors have to do with their method of operations, types of insurance accepted and regulatory domains: The use of non-admitted insurance companies has been widespread for years, having developed as insurance consumers sought types of coverage which conventional companies refused to supply. In addition, there are needs for insurance on exceptionally high-risk or unique exposures, as well as needs for very large amounts of insurance which are better suited to highly specialized and/or layered types of policies and underwriters. Of principal interest is that these carriers are not supported by state guarantee funds. (Meaning that if they fail, your premium and your insurance is probably lost.) Non-admitteds are generally not subject to regulation by your individual state insurance department, although some states maintain a list of so-called "Approved" insurors who are permitted to operate, with all others excluded. Clearly, the financial ratings for a non-admitted insuror are of great importance before you buy. One of the foremost references for ratings is Best's. Most states require that your business be first offered to admitted carriers before it is placed in the surplus lines market. Non-admitteds contract with specialized brokers in individual states to underwrite & service their business, typically paying them on a commission basis per policy, similar to what is received by retailing agents. (These brokers are required to hold a special license & are themselves scrutinized by state regulators.) Some or all of servicing fees, inspection fees or other costs may be passed on to you as a separate item in your premium invoice. Record-keeping entities may also charge fees, and state taxes are collected on policies individually, for subsequent payment to the state. |
