Admitted insurance refers to policies issued by insurers that are licensed and regulated by a country’s or region’s insurance authority. These categories—admitted and non-admitted—play a key role in determining how insurance is structured, governed, and delivered across jurisdictions. They affect everything from policy issuance and pricing to claims resolution and regulatory compliance.
This article offers a global perspective on the differences between admitted and non-admitted insurance, exploring how each operates in various markets, what implications they have for policyholders, and how self-insured structures and fronting arrangements can support international risk programs:
What is ‘admitted insurance’?
Admitted insurance refers to coverage provided by insurers that are formally licensed by the regulatory authority in the country or region where the policy is sold. This includes bodies such as:
- The Financial Conduct Authority (FCA) in the UK
- European Insurance and Occupational Pensions Authority (EIOPA) under the European Union’s Solvency II framework
- Insurance Regulatory and Development Authority of India (IRDAI) in India
- Australian Prudential Regulation Authority (APRA) in Australia
- Office of the Superintendent of Financial Institutions in Canada (as well as different provincial regulators)
- State insurance departments in the United States such as California Department of Insurance or New York State Department of Financial Services
What makes an insurer ‘admitted’?
An admitted insurer is a company that gets licensed by the local regulator. To get this license, the insurer must follow specific rules. These rules help protect customers and make sure the insurer stays financially strong.
Typically an admitted insurer is required to:
- Keep enough money in reserve to pay future claims
- Get approval for their policy wording and pricing (in most places)
- Follow strict consumer protection rules
These rules are not the same everywhere. Some countries have very detailed systems. For example, in the European Union, insurers must follow Solvency II, which sets tough capital and risk rules.
Other places focus on different things. In India or Brazil, the government may care more about low prices and access to insurance. Meanwhile, countries like Singapore or the UK enforce strong oversight to protect customers. Some developing regions have lighter or less consistent rules.
Admitted insurers must follow the law in each place they work. That’s why admitted insurance can look very different depending on the country.
Other considerations
Beyond licensing and financial strength, several practical and legal factors shape how insurers operate and how policyholders experience coverage. These include cross-border rules, customer protections, and the legal environment insurers must navigate.
Cross-border rules and access
Insurance rules change depending on where a company wants to do business. Some regions make it easier for insurers to operate across borders, while others make it harder.
In the European Union (EU), insurers can use a system called passporting. If a company is licensed in one EU country, it can sell insurance in other EU countries without needing new licenses.
The United Kingdom (UK) used to be part of this system. But when the UK left the EU (Brexit), that changed. Now, UK insurers must get licensed in each EU country where they want to sell admitted insurance. EU insurers must do the same if they want to operate in the UK. This adds cost and complexity to doing business between the UK and the EU.
Some small European countries follow different rules. For example, Liechtenstein is part of the European Economic Area (EEA), so it still uses passporting. Switzerland, which is outside the EEA, makes its own deals and has its own rules. Gibraltar, which used to rely on UK-EU passporting, now handles licensing on its own.
In the United States, the system is even more complex. Each state controls its own insurance rules. An insurer must apply for a license in every state where it wants to sell admitted policies. There is no national license. Even U.S.-based insurers must go through this state-by-state process.
This creates challenges for companies that want to sell admitted insurance in many U.S. states or across different countries. Some insurers choose non-admitted routes because it’s faster and more flexible—but that comes with trade-offs.
Policyholder protection
Admitted insurance offers more protection for customers. In many countries, admitted policies are backed by special safety nets. These help if the insurance company runs out of money or goes bankrupt.
For example:
- In the United Kingdom, the Financial Services Compensation Scheme (FSCS) protects policyholders.
- In Australia, the Financial Claims Scheme steps in during insurer failure.
- In the United States, each state has its own guaranty fund. These funds pay claims if an admitted insurer fails.
These programs don’t cover everything. Some have limits on how much they will pay. Others only protect certain types of insurance. But overall, they give customers extra peace of mind.
In many developing countries, these safety nets may not exist. If an insurer fails, customers might lose their coverage or not get paid. That’s why admitted insurance in well-regulated countries is often seen as safer for the policyholder.
What is ‘non-admitted’ insurance?
Non-admitted insurance—also known as surplus lines, excess lines, or unauthorized insurance—refers to policies from insurers that are not licensed in the country or region where the risk is located. These insurers can still offer coverage, but only under certain conditions.
How does non-admitted insurance work?
Non-admitted insurers usually work through licensed brokers. Before placing a policy, the broker must show that admitted insurers declined the risk. This is often called a diligent search. Once that’s done, the broker places the coverage with a non-admitted carrier. These carriers are often based in specialty markets like:
- Lloyd’s of London
- Bermuda
- Cayman Islands or other offshore jurisdictions
In some regions, such as the EU, non-admitted insurers may operate under limited conditions, especially for specialty or niche risks.
What does this mean for policyholders
Non-admitted insurers do not take part in local guaranty funds or compensation schemes. If the insurer fails, the policyholder must rely on the insurer’s own financial strength.
Some non-admitted markets, like Lloyd’s of London, offer strong internal safeguards. Lloyd’s maintains a central fund and enforces capital rules, which protect policyholders better than less-regulated markets.
Other considerations
Non-admitted insurance can offer flexibility and access to specialized coverage. But it also comes with extra factors that policyholders and brokers need to understand. These include how reinsurers treat non-admitted carriers, how taxes and fees are handled, and when legal rules limit the use of non-admitted policies.
Access to reinsurance
Many small or unrated non-admitted carriers struggle to get reinsurance. Some global reinsurers only work with licensed insurers. This makes it harder for those carriers to write large policies or stay financially stable.
Taxes and fees
Non-admitted policies usually carry higher tax obligations, such as:
- Insurance Premium Tax (IPT) in the UK
- Surplus lines taxes in the U.S.
These taxes are often paid by the broker or passed on to the policyholder, contributing to a higher total cost compared to admitted policies.
Legal restrictions
In many jurisdictions, non-admitted policies do not meet contract or statutory requirements for certain clients or projects. For instance, government tenders, mortgages, and vendor agreements frequently require proof of admitted insurance. A clear example is ERISA fidelity bonds in the United States, which are legally required to be issued by a surety insurer admitted in the same state where the employee benefit plan operates. In such cases, placing coverage through a non-admitted insurer—even if financially sound—is not permitted under the law.
Common scenarios
- A Lloyd’s syndicate insures a multinational’s global logistics operations
- A non-admitted policy in Singapore covers rare art and collectibles
- A Florida coastal property is insured via a non-admitted market after admitted carriers decline due to hurricane risk
Captive insurance companies and fronting
Some companies create their own insurance entities, known as a captive, to cover internal or specialized risks. These are typically owned by the insured entity, not by third-party insurers, and are not licensed in most foreign jurisdictions. As such, they operate similarly to non-admitted insurers when covering external or international exposures.
These self-insured programs may not meet regulatory requirements for admitted insurance. To work around this, organizations often use a fronting insurer.
What is fronting?
A fronting insurer is a licensed (admitted) carrier that issues the insurance policy locally, satisfying regulatory or contractual obligations. The risk is then transferred to the self-insured entity through a reinsurance agreement.
Why fronting matters:
This arrangement enables companies to:
- Meet legal requirements for admitted policies
- Retain control of risk and underwriting
- Access global reinsurance markets, which often only back admitted risks
Example
A global tech company with a captive in Guernsey needs cyber liability coverage in the U.S. and EU. Admitted insurers are required in both regions for regulatory compliance. The company uses an admitted fronting insurer in
the U.S. (e.g., AIG) and EU (e.g., AXA) to issue policies, with the captive reinsuring 90% of the risk. The fronting insurer handles claims and regulatory filings, charges a 10% fee, and requires collateral from the captive. The captive reinsures excess losses to a global reinsurer, optimizing cost and risk management.
Key takeaways
- Licensed insurers offer admitted insurance and follow local rules for capital, pricing, and consumer protection. Guaranty funds or compensation schemes often support these policies.
- Brokers use non-admitted insurance when admitted markets decline coverage or can’t handle complex risks. It provides flexibility but adds taxes, reduces protections, and faces legal limits in some cases.
- Cross-border rules differ by region. The EU allows “passporting” within member states, while the UK lost this access after Brexit. The U.S. requires insurers to get licensed in each state.
- Many countries provide stronger policyholder protections through admitted insurance, though not all guarantee them. Some developing regions lack these safety nets.
- Some contracts—like ERISA bonds in the U.S.—require admitted insurers, ruling out non-admitted or fronted policies.
- Reinsurance access, tax costs, and legal rules can shape whether non-admitted insurance makes sense for a specific placement.
- Captives and fronting help global companies meet admitted requirements and keep control of their risk. Fronting insurers issue local policies and transfer most of the risk to the company’s captive.
More…
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