The Non-admitted Market (aka: surplus line carriers) is often misunderstood. The Non-admitted market is not unregulated, as some believe. The Non-admitted insurance carriers are regulated in their domiciliary jurisdiction and must be eligible under federal and California law before business can be placed with them (exported to them). Additionally, the surplus line broker in California is licensed and regulated directly by the California Department of Insurance. Surplus line brokers are also subject to periodic audits by the California Department of Insurance. In a summation, the non-admitted market is a well-functioning, well-regulated market that serves as an appropriate place for consumers to obtain coverage when the admitted market is unable to meet their insurance needs. (as noted on the SLACAL.com website)
One of main differences between Admitted & Non-admitted carriers is participation in The California Insurance Guarantee Association (CIGA). This entity was established to meet the obligations of insolvent insurers by “administering” (reviewing and paying, as appropriate) covered claims. The valuation of each claim is determined in accordance with policy provisions and statutory requirements. Valid policyholder claims that are either not covered by the insurance guarantee associations or are in excess of the limits (in California, the limit for CIGA is $500,000, except for Workers’ Compensation claims) paid by the insurance guarantee associations are administered by the The Conservation & Liquidation Office (inside the CA Dept. of Insurance). (as noted on the Insurance.CA.gov website)
When Admitted carriers are unavailable for a specific risk, Non-admitted carriers are a usually a stellar option as long as their AM Best Rating is favorable. Upon requesting insurance through a Non-admitted carrier, a potential policy holder will be required to acknowledge, by signing a CA D1 form.