Every insurer gets two labels. One answers "may it do business here?" The other answers "where was it born?" Keep the two questions apart and these terms stop blurring together.
May it do business here?
Admitted insurer: has met California's conditions and is entitled to transact insurance in this state.
Nonadmitted insurer: is not entitled to transact insurance here.
Where was it organized?
- Domestic: organized under the laws of California.
- Foreign: not organized under California law, whether or not it is admitted. A company from Arizona is foreign.
- Alien: a foreign insurer organized outside the United States. So every alien insurer is also foreign, but an Arizona company is not alien.
The labels combine: an Arizona company that has not met California's conditions is "foreign and nonadmitted."
Why it matters to the consumer: when a California risk is placed with a nonadmitted insurer through a surplus line broker, the required notice tells the insured that the insurer is not subject to California's financial solvency regulation and does not participate in the state's guarantee funds. If that insurer fails, no California guarantee fund pays the claim, even if the insurer was on the state's approved surplus line list. This is the main risk of a nonadmitted placement.