A Certificate of Authority is required for an insurer to transact insurance business in a state. However, some insurers are exempt from this requirement, such as:
- Surplus lines insurers, who provide coverage for hard-to-insure risks. They are not directly regulated by states.
- Reinsurers, when they are transacting reinsurance business authorized by their state of domicile.
- Insurers providing wet marine and transportation insurance.
In addition, a Certificate of Authority is not required for certain activities, like investigating, settling, or litigating claims under policies written in the state. Or liquidating assets and liabilities, other than collecting new premiums.
Obtaining a Certificate of Authority
To obtain a Certificate of Authority, insurers must submit an application to the state. This includes documentation like certificates of good standing, appointment of a registered agent, and other corporate details. States review these filings to confirm eligibility and financial stability requirements are met. The Certificate of Authority allows an insurer to conduct business in that state.
Considerations for Holding a Certificate of Authority
A Certificate of Authority allows an insurer to legally conduct insurance business in a state. Some insurers are exempt from this requirement, including surplus lines insurers, reinsurers transacting authorized reinsurance business, and insurers of wet marine and transportation insurance. Certain activities also do not require a Certificate, such as investigating, settling, or litigating claims under policies written in the state, and liquidating assets and liabilities.