What happens if an insurer operates without a necessary certificate of authority?

When an insurer operates without a necessary certificate of authority, it is subject to legal penalties from the state. This is because state regulations mandate that insurance companies must obtain and maintain this certificate to ensure they are compliant with local laws and capable of fulfilling their contractual obligations to policyholders. Operating without such certification undermines the regulatory framework designed to protect consumers and the insurance market itself, leading to legal ramifications such as fines, sanctions, or even prohibition from conducting any business within the state.

The certificate of authority is essential as it signifies that the insurer meets specific operational standards and is authorized to engage in providing insurance coverage. Therefore, violations of this requirement can result in significant penalties enforced by state insurance regulators, emphasizing the importance of adhering to established regulations in the insurance industry.