What is a 'nonadmitted insurer'?

A 'nonadmitted insurer' refers to an insurance company that is not authorized or licensed to operate within a particular state. This status means that the insurer has not completed the necessary regulatory requirements, such as securing a license from the state’s insurance department. As a result, nonadmitted insurers are typically used to underwrite coverage that may not be available through admitted insurers, particularly for unique or high-risk situations.

This is significant because nonadmitted insurers can offer flexibility in rates and coverage options that might not be present in the admitted market, where insurers are subject to strict regulation and oversight. Consequently, businesses or individuals with exposure that traditional markets won't insure can often turn to nonadmitted insurers for coverage solutions.