Fundamental distinction in the US market between an insurer licensed in a state, whose rates and forms are filed and whose policyholders are protected by a guaranty fund, and an unlicensed one.
In the United States insurance is regulated state by state rather than federally, and each state distinguishes two statuses. An admitted insurer is licensed in the state: it files rates and forms there, often for prior approval, it is subject to local financial supervision, and its policyholders are covered by the state guaranty fund if it fails. A non-admitted insurer is not licensed: it files neither rates nor forms, which gives it considerable freedom of wording and price, it operates in the surplus lines market, and its policyholders have no guaranty fund protection. Access to that second market is framed rather than open: the broker must in principle establish that it searched without success for admitted capacity, the diligent search procedure, and pay a specific tax. The commercial consequence is clear: standard risks stay in the admitted market, and everything new, poorly understood or declined elsewhere, early cyber, liability for exposed manufacturers, buildings in hurricane zones, is placed in the non-admitted market, which acts as the sector's laboratory.
The federal Nonadmitted and Reinsurance Reform Act, effective in July 2011, simplified the regime by reserving to the insured's home state the right to collect surplus lines tax and apply its rules, ending the allocation across several states for one multistate risk. The non-admitted market has since grown steadily, driven by admitted insurers withdrawing from catastrophe-exposed areas.
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