What defines an unauthorized (nonadmitted) insurer?

An unauthorized or nonadmitted insurer is defined as one that is not licensed to do business in a particular state. In the context of insurance, each state has regulatory authority over insurers that operate within its borders. An insurer must obtain a certificate of authority from the state to be recognized as a licensed provider. If an insurer does not have this certification, it is categorized as unauthorized for that state. This impacts their ability to offer insurance policies legally, meaning they may operate in some states but not be authorized in others. The definition hinges on the licensing status, emphasizing the importance of regulatory compliance within the insurance industry.

In contrast, an insurer with a certificate of authority is considered authorized and can provide insurance products in that state. Insurers that can operate in all states typically hold licenses from each state, not being classified as unauthorized. Also, the focus on high-risk clients does not determine an insurer's authorized status; rather, it pertains to the type of business they might choose to operate, which is separate from legal licensure.