When I try to buy Atlas America insurance policy, I see the following notice:
- THE INSURANCE POLICY THAT YOU ARE APPLYING TO PURCHASE IS BEING ISSUED BY AN INSURER THAT IS NOT LICENSED BY THE STATE OF CALIFORNIA. THESE COMPANIES ARE CALLED "NONADMITTED" OR "SURPLUS LINE" INSURERS.
- THE INSURER IS NOT SUBJECT TO THE FINANCIAL SOLVENCY REGULATION AND ENFORCEMENT THAT APPLY TO CALIFORNIA LICENSED INSURERS.
- THE INSURER DOES NOT PARTICIPATE IN ANY OF THE INSURANCE GUARANTEE FUNDS CREATED BY CALIFORNIA LAW. THEREFORE, THESE FUNDS WILL NOT PAY YOUR CLAIMS OR PROTECT YOUR ASSETS IF THE INSURER BECOMES INSOLVENT AND IS UNABLE TO MAKE PAYMENTS AS PROMISED.
- CALIFORNIA MAINTAINS A LIST OF ELIGIBLE SURPLUS LINE INSURERS APPROVED BY THE INSURANCE COMMISSIONER. ASK YOUR AGENT OR BROKER IF THE INSURER IS ON THAT LIST, OR VIEW THAT LIST AT THE INTERNET WEB SITE OF THE CALIFORNIA DEPARTMENT OF INSURANCE: www.insurance.ca.gov
What does the above mean?
This simply means that if, due to insolvency, your insurance company is not able to pay out a liability claim, the State of California will not be liable for the claims.
Non-admitted does not mean non-regulated. Non-admitted carriers who are approved and monitored by LASLI List of Approved Surplus Line Insurers. The LASLI List have been reviewed and approved by the California Department of Insurance (CDI) for surplus line insurance in California. Non-admitted carriers on the LASLI List are actually admitted insurance carriers, in a state or domicile other than California The financial strength of insurance carrier is the most important factor to look for. Any carrier with A or higher AM Best rating indicates that company is in a good financial condition.
For example: Lloyds, which is the carrier for Atlas America insurance plan, is one of the reputed carriers. Even though this plan is categorized as non-admitted in the state of California, it has very strong financial strength and excellent business record. It is also endorsed by LASLI. It meets strict surplus line laws and regulations in order to provide insurance to California businesses and residents.
