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Question

Difficulty: HardTypes of Insurers

Vanguard Aerospace, a commercial aviation contractor based in Texas, requires specialized liability coverage that standard insurers will not underwrite. Their broker procures a policy through Kensington Global, an insurance entity incorporated and headquartered in London, England. Kensington Global is owned entirely by its participating policyholders and is not licensed by the Texas Department of Insurance, though it is legally permitted to write this coverage as an approved surplus lines carrier. Based on these characteristics, how is Kensington Global classified from the regulatory perspective of Texas?

  1. An alien, non-admitted, mutual insurerAnswer
  2. B
    An alien, non-admitted, stock insurer
  3. C
    A foreign, non-admitted, mutual insurer
  4. D
    An alien, admitted, mutual insurer

Answer

An alien, non-admitted, mutual insurer
The correct answer accurately combines the three dimensions of insurer classification based on the scenario. Because Kensington Global is incorporated outside of the United States (in England), it is classified as an alien insurer. Because it is owned by its participating policyholders, it is a mutual insurer. Finally, because it operates without a standard license from the state department of insurance (acting as an approved surplus lines carrier), it is considered a non-admitted or unauthorized insurer.

Step-by-Step Solution

1
Determine the domicile of the insurer.
The insurer is incorporated in London, England (outside the U.S.), making it an alien insurer.
Domicile classification is based on where the insurer is incorporated. Domestic is in-state, foreign is out-of-state, and alien is out-of-country.
2
Determine the ownership structure.
The insurer is owned entirely by its participating policyholders, making it a mutual insurer.
Stock insurers are owned by shareholders, whereas mutual insurers are owned by the policyholders.
3
Determine the regulatory authority (licensing status).
The insurer is not licensed by the Texas Department of Insurance, making it a non-admitted (unauthorized) insurer.
An admitted insurer has a Certificate of Authority in the state. Approved surplus lines carriers operate legally but are technically non-admitted.

Key Concept

Insurer Classification (Domicile, Ownership, and Authority)
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Topics

Types of Insurers

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