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Admitting that Non-Admitted Insurance Is Here to Stay
Published Date : July 31, 2025
As natural disasters continue to adversely impact much of the country, standard (or admitted) insurance is becoming increasingly difficult for homeowners to secure. As a result, something called “non-admitted” insurance (which is often used interchangeably with the terms “excess and surplus lines”) is becoming more common and helping homeowners solve their coverage needs, usually at higher cost. In disaster-prone states like California and Florida—with their now almost routine devastating damages from wildfires and hurricanes—the need for non-admitted insurance is growing more dire all the time. Standard admitted carriers cannot collect enough premiums from their state-regulated policies to justify underwriting potentially ruinous risks, especially in areas of concentrated wealth where the potential cost of replacing widespread areas of destruction is more expensive. Indeed, it has become virtually impossible for many standard/admitted carriers to offer coverage that makes economic sense, leaving many homeowners with fewer choices to help protect what is likely their most valuable asset.
States regulate the insurance industry, and hence carriers that do business there must follow the state’s rules to be “admitted”—usually meaning proof of solvency and fair treatment to all customers, which is generally beneficial for all sides, since the state gives legitimacy to the carrier and in turn consumers feel more secure. Plus, importantly, the state will honor claims should the provider be unable to pay. In California, the Insurance Commissioner is an elected office—which adds an inevitable element of political considerations in policy making—and this tends to keep the focus on the consumer, but adequate pricing is also essential for long-term sustainability of the insurance market. Indeed, recent changes now allow for some “forecast pricing” plus passing through re-insurance expenses, which will partially help address the precarious situation that has been developing with admitted carriers.
Conversely, non-admitted carriers opt out of the admission process and thus have the freedom to set their own rates and coverage conditions. They can still do business in the state but without the state’s endorsement, and without access to the state guaranty fund protection for their policyholders. However, non-admitted status does not necessarily mean that the carrier is questionable; indeed, while not licensed by the state, they are still regulated, and many receive solid ratings from independent auditing agencies like AM Best. Moreover, many non-admitted carriers are owned by large, well-recognized national insurance companies, but they simply operate as fully separate entities in the non-admitted space (sort of like brand name versus private label in terms of consumer awareness). One key benefit of non-admitted insurance is its customization—rather than the state-controlled standards for admitted carriers—which can be useful for consumers (both individuals and businesses) with problematic loss history or risky property location. For example, someone with bad luck and multiple water losses over a few years will likely not get admitted coverage but could find a non-admitted carrier to accept the risk and provide coverage but with a high water-loss deductible, allowing the homeowner a reasonable level of protection and enabling the company to adequately manage the risk. Incidentally, non-admitted coverage is different than Cal FAIR Plan, which is a completely separate matter and only for fire coverage.
Bottom line, admitted carriers are still the normal, standard way of getting homeowners insurance and ostensibly they seem like the safer option. But non-admitted carriers exist for a reason, since they offer flexibility in an increasingly difficult insurance market. In fact, highly rated non-admitted insurers could be better options than lower-rated admitted carriers. If nothing else, one must admit that non-admitted insurance is going to continue to get more attention as an important solution for risk management.
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