Why Do Non-Admitted Insurance Carriers Exist?

Non-admitted insurance carriers exist to provide insurance when admitted carriers are not able to meet the insurance needs of all insurance buyers. Many specialized risks, such as California professional liability insurance (sometimes called California errors and omissions insurance) or those with frequent claims such as California contractors insurance, can represent high risk exposures that admitted carriers are not willing to accept for many reasons including constraints imposed by their admitted status. However, non-admitted carriers are generally well suited to provide these lines because they have greater flexibility in terms of coverage’s and pricing to cope with fluctuating underwriting conditions. Without non-admitted carriers, individuals seeking some high risk lines of insurance would not be able to purchase it.

What Is An Admitted vs. a Non-Admitted Insurance Carrier?

An admitted California insurance carrier is one that submits to specific requirements set forth by the California Department of Insurance (CDI). Admitted insurance carriers are required to file their rates with the CDI and cannot deviate from these rates without prior approval. In addition, admitted carriers are required to participate in the California Insurance Guarantee Association (CIGA) which covers the claims of policy holders up to a specified amount in the event an insurer becomes insolvent. In contrast, a non-admitted carrier (also known as a surplus lines insurer) is not required to file their rates with the California Department of Insurance, which gives them the flexibility to adjust rates in light of fluctuating underwriting performance. In addition to increased pricing flexibility, non-admitted carriers also have greater flexibility in regards to the coverage’s they provide. It should be noted that “non-admitted” does not mean “not-regulated”. Non-admitted carriers must be approved by showing minimum financial and capital requirements before providing insurance in California. Once these requirements have been met, California will place the approved non-admitted carrier on a list known as “The List of Eligible Surplus Lines Insurers” (LESLI).