You may have heard the terms admitted or non-admitted in reference to insurance carriers. While non-admitted insurance carriers or products are available to any industry, many in the construction industry are insured by a non-admitted carrier.
An admitted carrier is an insurance company licensed or authorized to sell insurance to the general public. In the United States, admitted companies are licensed on a state-by-state basis and differentiated from surplus lines (non-admitted) insurers, which are authorized to sell insurance in a state on a non-admitted basis.
What is a non-admitted carrier? An insurance company not licensed to do business in a certain state or country. In U.S. jurisdictions, such insurers can nevertheless write coverage through an excess and surplus lines broker licensed in that jurisdiction.
Does this mean that non-admitted carriers are inferior companies? No. It means that the carrier’s insurance product design does not align with the state’s insurance regulations. Carriers do this by design to meet the needs of market.
The types of insurance risks typically written by non-admitted carriers are generally substandard risks (e.g., risks with adverse loss experience), unusual risks, and risks for which there is a shortage of capacity in the admitted market. Many types of contractors fall into this category simply by the inherent risk of the type of work they perform. In other cases, a company that has had access to admitted insurance carriers may not find an admitted carrier to insure them if they have experienced significant losses. In this case, they need to go to the non-admitted carriers for insurance coverage.
What is the impact of working with a non-admitted carrier?
- Typically, non-admitted carriers have a wider appetite for what they will insure than admitted carriers.
- Taxes and fees are paid separate from the premium when insured by a non-admitted carrier as opposed to the taxes and fees being included in the premium when you are insured by an admitted carrier.
- Non-admitted carriers are not part of the State Guaranty Fund. A state guaranty fund is administered by a U.S. state to protect policyholders if an insurance company defaults on benefit payments or becomes insolvent. The fund only protects beneficiaries of insurance companies that are licensed to sell insurance products in that state.
- You get insurance. Whether you have had a run bad luck with insurance claims or the nature of the work you perform is outside the scope of risk for admitted carriers, the non-admitted marketplace provides a solution so you can be insured.
While there are exceptions, I typically advise my clients to be in insured by an admitted carrier if it is available. The Non-admitted carriers play a crucial role in the insurance marketplace for those who are outside the risk tolerance of the admitted carriers or products.
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Or you can contact me directly if you prefer.