What characterizes a nonadmitted insurer?

A nonadmitted insurer is one that does not hold a certificate of authority issued by the state in which it operates. This lack of authorization means that such insurers are not formally recognized by state regulators to conduct insurance business within that state. As a result, they are often utilized for insuring risks that standard insurers may not cover due to their unique or high-risk nature.

The distinction of a nonadmitted insurer is significant because it allows for more flexibility in underwriting and pricing, as these insurers can offer policies tailored to specific needs that admitted insurers may not be able to accommodate due to regulatory constraints. The use of nonadmitted insurers is essential in the surplus lines market, where insurance needs exceed the availability of standard market policies.

In contrast, admitted insurers are those that are licensed and regulated by state authorities and must comply with specific state insurance regulations, including filing rates and ensuring policy forms meet state standards.