What Are White List States?
Let me explain what white list states are. These are U.S. states that keep a list of insurance companies allowed to use unauthorized insurers for providing specialized or supplemental coverage, which we call surplus lines insurance.
Surplus lines insurance is there to protect against financial risks that are just too high for a regular insurance company to handle. You can get this for companies or as an individual. Unlike standard insurance, you can buy it from an insurer that's not licensed in your state, but that insurer does need a license in its home state.
Key Takeaways
Essentially, white list states let admitted insurance companies team up with non-admitted insurers to offer specialized liability or property coverage. This is what we know as surplus lines insurance. These surplus lines providers cover risks that licensed insurers won't touch because they don't fit their guidelines or because the risk is too odd or too big.
Understanding White List States
As I mentioned, white list states are those U.S. states where admitted insurers can use non-admitted ones for specialized coverage. This is surplus lines insurance, stepping in when coverage isn't available from state-licensed insurers. Surplus lines producers handle risks that don't meet standard guidelines or are unusually large or unique.
Each of these states might have a lengthy list of eligible surplus lines suppliers. If a company is labeled as a surplus lines insurer, it doesn't mean they can't get licensed in that state; they just choose to operate on a surplus lines basis without a license there. Not being licensed means they're not bound by the state's insurance department regulations in the same way, giving them more freedom on rates and forms.
Surplus Lines
You might hear the surplus lines market called the specialty, non-admitted, or excess lines market. It protects against risks too high for regular insurers. Unlike normal insurance, you can buy it from an unlicensed insurer in your state, as long as they're licensed where they're based.
To sell a surplus lines policy, an insurance agent needs a surplus lines license. This type of insurance, also known as excess lines, helps entities with unique risks that most insurers avoid or those with bad claims histories that make them uninsurable otherwise.
Examples of Major Surplus Lines Insurers
- American International Group (AIG)
- Nationwide Mutual Insurance
- W.R. Berkley Corp.
- Zurich Insurance Group
- Markel Corp.
- Chubb
- Ironshore Inc.
- Berkshire Hathaway Inc.
- Fairfax Financial Holdings
- CNA Financial Corp.
- XL Group PLC
- Lloyd's of London
A Common Example
One surplus lines insurance you might buy as a consumer is flood insurance. Lloyd's provides this through their Natural Catastrophe Insurance Program, offering an alternative to FEMA's flood insurance. If you find FEMA's option too pricey, surplus lines might give you a cheaper policy. That said, surplus lines insurance often costs more than regular insurance because it covers unusual or higher risks that others won't.
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