The concept of admitted insurance can seem slightly confusing. Admitted insurance is licensed by the relevant state department of insurance and subject to its oversight. Non-admitted insurance, also known as excess and surplus lines insurance, is legitimate but is sold through licensed intermediaries in states where the non-admitted insurer doesn’t have a license.
When considering what non-admitted insurance is, it’s important to note that this cover says nothing about the insurer’s financial stability or product quality. However, it does impact regulatory oversight, protection for the insured, and cost. Admitted vs non-admitted insurance also indicates a carrier’s risk appetite and the flexibility likely to be offered.
Central to an admitted insurer definition is that the carrier must file its product with the state insurance commissioner and cannot write risk until approved. Once operating, it must continue to follow state regulations, and a percentage of its income goes to the state guaranty fund.
Regulations vary by state, covering solvency, product design, market conduct and claims handling. The goal is that insurers can pay legitimate claims and treat policyholders fairly.
Admitted insurance offers two key protections: the state guaranty fund may pay claims if the carrier becomes insolvent, and policyholders have recourse to the state in claims disputes.
Non-admitted insurance has grown as admitted carriers have pulled back on certain risks, now accounting for more than 20% of commercial premiums written. A non-admitted insurer writes risk without a license in that state and can only offer coverage unavailable on the admitted market. Examples include US insurers operating out of state, Lloyd’s syndicates and non-US insurers on the NAIC Quarterly Listing of Alien Insurers.
Regulation still exists. US-domiciled insurers are supervised by their home state, while Lloyd’s syndicates and non-US insurers follow NAIC International Insurers Department requirements and the Surplus Lines Working Group rules. Listed insurers must maintain trust funds. The licensed broker acting as intermediary must also follow specific rules.
Insureds do not have access to the state guaranty fund or state appeals mechanisms, and non-admitted insurance often comes with additional fees. However, cover may be more flexible, bespoke and wide‑ranging.
When choosing between admitted and non-admitted insurance, different factors should be evaluated.
Admitted insurers avoid certain fees and taxes. Non-admitted policies typically incur surplus lines premium tax (around 2%–6%), stamping fees (around 0.1%–0.5%), and potentially other broker or state‑specific fees.
Admitted insurers provide policyholder protections including regulatory oversight, guaranty fund access and appeals mechanisms. Non-admitted policyholders lack these safeguards and must rely solely on the insurer’s financial strength.
Businesses with unusual, high or emerging risks may need non-admitted cover. Non-admitted carriers can charge rates without state approval and build bespoke policy wording unavailable on the admitted market.
Admitted insurance suits standard risks. It’s highly regulated, easier to compare and benefits from guaranty funds and appeals processes.
Non-admitted insurers fill essential gaps by covering risks that admitted carriers avoid. Careful attention to financial strength reduces insolvency concerns. It is widely used in high‑risk sectors like construction, transportation, legal cannabis and emerging areas such as AI and cyber.
In property catastrophe, it plays a growing role as weather patterns and secondary perils become more volatile. Conversely, in stable industries without unusual exposures, admitted insurance will likely suffice.
Both admitted and non-admitted insurance serve different purposes, each with benefits and limitations.