|
ADMITTED VS. NON-ADMITTED INSURANCE CARRIERS
Your
insurance broker just informed you that they can provide the business insurance
you need, but it will be with a non-admitted carrier. What does that mean?
Should you be concerned? While the term “non-admitted” may sound like you’re
using a lesser carrier, that’s not the case.
WHAT IS AN ADMITTED
CARRIER?
An
admitted carrier in California follows guidelines set forth by the
California Department of Insurance (DOI). These carriers are required to
file their rates with the DOI, which then approves their use. The carriers
must use these filed rates on all clients and cannot deviate.
Admitted carriers are also a part of the California Insurance Guarantee
Association (CIGA), which provides protection for policyholders should their
carrier be declared insolvent. Claims that occurred before the carrier went
bankrupt can be paid up to $500,000.
WHY DO WE NEED
NON-ADMITTED CARRIERS?
Admitted carriers often do not meet all the needs of many insurance
buyers. Specialty Risks, earthquake and professional liability coverages
are among those that are often not written by admitted carriers. Without
the non-admitted carriers, high loss-potential risks, those with loss issues
or specialty risks would be uninsurable. However, because the non-admitted
carriers do not have to file their rates with the DOI, they retain the
flexibility to price risks according to their specific exposures.
FINANCIAL RATINGS:
Non-admitted carriers are often U.S.-based companies that have chosen not to
become an admitted carrier in California. In fact, many non-admitted
companies are owned by admitted carriers. Some of the largest insurance
companies, such as Hartford Insurance, AIG and Lloyds of London have
non-admitted companies they use for specialty risks.
Regardless of whether a carrier is admitted or non-admitted, the best gauge
for determining the security of one’s policy is to check the financial
rating of the company. The independent industry standard for rating
insurance companies is AM Best Company. AM Best rates a carrier on
financial strength and size based on policyholder reserves. Below is a
summary of AM Best’s rating guidelines.
GUIDE TO A.M. BEST’S RATING
Financial Performance
Rating
A++ and A+ –
Superior
Secure
A and A- –
Excellent Secure
B++ and B+ – Good
Secure
B and B- – Fair
Vulnerable
C++ and C+ –
Marginal Vulnerable
C and C- – Weak
Vulnerable
D – Poor
Vulnerable
E – Under
Regulatory Supervision
F – In Liquidation
S – Suspended
Financial Size Category (Capital, Surplus and
Reserve Funds)
All Values below in millions
XV –
Greater than 2 Billion
(no category higher)
XIV – 1,500 to
2,000
(all ratings in
millions)
XIII – 1,250 to 1,500
XII – 1,000 to 1,250
XI –
750 to 1,000
X –
500 to
750
IX – 250 to
500
VIII
– 100 to 250
VII – 50 to 100
VI – 25 to 50
V
– 10 to 25
IV
– 5 to 10
III – 2 to 5
II – 1 to 2
I
– Less than 1
CONCLUSION:
Non-admitted carriers
play an important component inside and outside the California marketplace.
They provide coverage that would be otherwise unavailable or with inferior
limits. The buyer should be aware of market conditions and make sure that
they are buying a policy from a reputable carrier by investigating the
carrier’s AM Best financial rating (available online at www.ambest.com).
This
summary is intended to provide a brief overview of the admitted verses
not-admitted markets. If you have special concerns about a particular
carrier, call the Department of Insurance at 800-927-4357.
| 
