Can an insurer legally transact business in another state without holding a certificate of authority?

In order for an insurer to legally conduct business in a state outside of its home jurisdiction, it must obtain a certificate of authority from that state. This certificate is a formal authorization that signifies the insurer has met the necessary regulatory requirements and is in compliance with that state’s insurance laws.

The importance of this regulation lies in protecting policyholders, ensuring that insurers are financially stable and capable of meeting their obligations. The certificate of authority serves as a validation that the insurer is subject to oversight by the state’s insurance department and adheres to local regulations, which helps to maintain the integrity of the insurance market and protect consumers.

While various exceptions might exist for certain operations, such as surplus lines insurers that can operate under different regulations, the general rule remains that without a certificate of authority, an insurer cannot legally transact business in another state. Thus, holding the certificate is a fundamental requirement for compliance in cross-state operations.