Admitted Company

A license issued by a state insurance department that authorizes an insurance company to transact insurance business in that state. Also called a license to do business, the certificate of authority is granted after the insurer demonstrates it meets the state's financial, organizational, and regulatory requirements. The certificate specifies which lines of insurance the company is authorized to write. Insurers must maintain compliance with ongoing requirements including financial reporting, examinations, and solvency standards to keep their certificate of authority in force. Companies holding a certificate of authority in a state are considered 'admitted' carriers in that state and are subject to full state regulatory oversight.

Insurance placed with carriers not licensed (admitted) in the state where the insured risk is located. Non-admitted insurers, also called surplus lines insurers, are not subject to state rate and form approval requirements, giving them flexibility to underwrite unique or high-risk exposures. However, they must meet financial requirements and be listed on the state's approved eligible surplus lines insurer list. Non-admitted policies are not protected by state guaranty funds in the event of insurer insolvency, though historical insolvency rates for surplus lines carriers are low. Non-admitted insurance can only be placed after a surplus lines broker conducts a diligent search in the admitted market and documents that coverage is not available from admitted carriers.

A funding mechanism employed by states to provide funds to cover policyholder obligations of insolvent insurance companies. State guaranty associations are established by state law and funded by assessments on insurance companies licensed in that state. When an admitted insurer becomes insolvent, the guaranty fund steps in to pay covered claims up to statutory limits, ensuring policyholders receive benefits they were promised. Coverage limits vary by state but typically range from $300,000 to $500,000 per claim. Guaranty fund protection applies only to policies issued by admitted carriers; surplus lines (non-admitted) insurance is not covered by guaranty funds. All licensed insurers in a state are required to participate in and contribute to the state guaranty association.

The state in which an insurance company is incorporated or organized. The domiciliary state has primary regulatory authority over the insurer, including conducting financial examinations, approving corporate changes, and overseeing solvency. The domiciliary state insurance department serves as the lead regulator even when the company is licensed to do business in multiple states. If an insurer becomes insolvent, the domiciliary state's insurance commissioner typically serves as the receiver or liquidator. Insurers must comply with the insurance laws and regulations of their domiciliary state as well as any other states where they are licensed to write business (called 'foreign' states from the insurer's perspective).

A business professional who analyzes probabilities of risk and risk management, including calculation of premiums, dividends, and other applicable insurance industry standards.

The process by which an insurer evaluates the risk of insuring a person or property and determines coverage terms and premium rates.

The ratio of losses paid plus loss reserves to premiums earned, used by insurers to measure underwriting profitability and pricing adequacy.

The sum of the loss ratio and expense ratio, measuring an insurer's overall underwriting profitability. A ratio below 100% indicates underwriting profit.