Understanding Non-Admitted Insurance

Non-Admitted, what is it? The first thing you check when looking to place or write international insurance? Probably. More complicated than it first appears? Almost certainly. A key set of regulatory requirements that you have to understand if you operate in multinational insurance?  Definitely.

So, now we’re past the possibly overly constructed introduction – what is the definition of Non-Admitted Insurance: Non-admitted insurance refers to the placing of insurance outside the regulatory system of the country in which the risk is located.

Put differently, a non-admitted insurance policy may be one that is issued abroad, or one in which the risk may be included in a global master policy by an insurer that is unauthorised in the country in which the risk is located.  An authorised insurer is one that has been granted permission to do business in a country, or region, or jurisdiction by the local supervisory authority.

So, now we have the basic premise. What makes it so complicated? Firstly, it is often not as simple as ‘yes’ or ‘no’. There are often exceptions, variations between different lines of business in a territory, and different restrictions for insurance buyers, intermediaries, and carriers.

For insurance buyers and intermediaries, it is comparatively simpler to understand the non-admitted position within a territory. At Axco, when compiling our content around non-admitted, for insurance buyers, it is mostly a binary answer of ‘yes’ or ‘no’; for intermediaries, the requirement for local brokers is easily understood.

When it comes to carriers, things get a little more complicated. Sometimes, it is as simple as yes or no, but there are in-between scenarios as well. For example, in some territories, foreign insurers are allowed to write business, but they are not allowed to solicit business within the territory. You also have situations where non-admission is permitted, but any negotiations, invoicing, and similar business activities cannot take place in the territory.

While those are not the only nuances, one of the further wrinkles in non-admitted insurance is that there is often a considerable gulf between the regulations and the common market practice.  This leads to a further grey area within the realm of non-admitted insurance, differing interpretations. It is quite common for buyers, to get different interpretations from their insurer and broker both of which are viable and reasonable interpretations.

An example of this is in Argentina, where the regulator has indicated verbally that they consider it legal to insure cargo imports with foreign insurers. However, the regulation itself is still fairly vague, and with personnel changes within regulators, it’s hard to tell if what has previously been said is still valid.   

This has resulted in a situation where different brokers may give different advice to their clients. Some recommend insuring all marine cargo import business or all marine cargo business with locally registered insurers, while others may inform clients and customers that they're allowed to place the business abroad. With both answers being viable, we may have to wait until a court ruling to get a definitive answer.

These are just some of the complexities that non-admitted insurance can present, with a host of further complexities and nuances that require dedicated consideration, whether you are an insurance buyer, intermediary or insurer.

To learn more about non-admitted, watch Axco’s non-life insurance team discuss it in detail here:

Understanding Non-Admitted Insurance