What is Non Admitted Insurance

Non - Admitted Insurance - also written as nonadmitted - and also called Surplus Lines Insurance is all the rage these days. While most of the admitted insurers are temporarily shut down or leaving the state - Nonadmitted insurers are stepping in to fill the gap. Nonadmitted Insurers are writing new California Home Insurance Policies.

But what exactly is Non Admitted Insurance?

The simplest explanation is that Non Admitted Insurance companies are "Not" Admitted. Benchmark states that "The term “admitted” simply refers to whether or not an insurance company has been licensed by a particular state." Source. Therefore that simply means that a non admitted insurer is not one of those companies that "has been licensed by a particular state".

According to the Harford"Non-admitted carriers do business through wholesale brokers in states where they do not have insurance licenses. This means they aren’t required to follow the same state regulations as admitted carriers. It also means that if the insurance company fails, the state would not step in to make payments on claims. However, non-admitted insurance carriers are regulated by the state surplus lines office. "

Our simple explanation is that Nonadmitted Insurers are not ruled and regulated by the California DOI and they do NOT participate in the state guarantee fund.

In years past, Brokers such as Marindependent usually used Non Admitted Insurers for commercial accounts or very expensive homes. Sometimes if the property had several underwriting challenges we would use it. But now, with all of the California Insurance Chaos - we use it all the time.

The most common non admitted insurer that folks have heard of is Lloyds of London. But they are NOT the only, there are dozens and dozens more.

When purchasing a nonadmitted insurance policy it is common to sign a state D1 form which discloses some differences. The California D1 States:

1. The insurance policy that you are applying to purchase is being
issued by an insurer that is not licensed by the State of California.
These companies are called “nonadmitted” or “surplus line”
insurers.

2. The insurer is not subject to the financial solvency regulation
and enforcement that apply to California licensed insurers.

3. The insurer does not participate in any of the insurance
guarantee funds created by California law. Therefore, these funds
will not pay your claims or protect your assets if the insurer becomes
insolvent and is unable to make payments as promised.

4. The insurer should be licensed either as a foreign insurer in
another state in the United States or as a non-United States (alien)
insurer. You should ask questions of your insurance agent, broker, or
“surplus line” broker or contact the California Department of
Insurance at the toll-free number 1-800-927-4357 or internet website
www.insurance.ca.gov. Ask whether or not the insurer is licensed as
a foreign or non-United States (alien) insurer and for additional
information about the insurer. You may also visit the NAIC’s internet
website at www.naic.org. The NAIC—the National Association of
Insurance Commissioners—is the regulatory support organization
created and governed by the chief insurance regulators in the United
States.

5. Foreign insurers should be licensed by a state in the United
States and you may contact that state’s department of insurance to
obtain more information about that insurer. You can find a link to
each state from this NAIC internet website:
https://naic.org/state_web_map.htm.

6. For non-United States (alien) insurers, the insurer should be
licensed by a country outside of the United States and should be on
the NAIC’s International Insurers Department (IID) listing of
approved nonadmitted non-United States insurers. Ask your agent,
broker, or “surplus line” broker to obtain more information about
that insurer.

7. California maintains a “List of Approved Surplus Line Insurers
(LASLI).” Ask your agent or broker if the insurer is on that list, or
view that list at the internet website of the California Department of
Insurance: www.insurance.ca.gov/01-consumers/120-company/07-
lasli/lasli.cfm.

8. If you, as the applicant, required that the insurance policy you
have purchased be effective immediately, either because existing
coverage was going to lapse within two business days or because you
were required to have coverage within two business days, and you did
not receive this disclosure form and a request for your signature until
after coverage became effective, you have the right to cancel this
policy within five days of receiving this disclosure. If you cancel
coverage, the premium will be prorated and any broker’s fee charged
for this insurance will be returned to you.

D-1 (Effective January 1, 2020) And then there is a signature line.

What does all of this mean and should you be willing to get a Home Insurance policy in the great state of California from a NonAdmitted Insurer? This is a question for you and your broker to discuss.

Scott W Johnson is the owner of Marindependent Insurance Services LLC. CA license 0H11625.

Writers Note: do not make any insurance decision based solely on reading this article. Always speak with a licensed agent in your jurisdiction.