Horizon Guaranty is an insurance company that was chartered and incorporated under the laws of New York. To raise its initial operating capital, the company issued shares to independent investors. These investors elect the board of directors and receive a portion of the company's profits as taxable dividends. Recently, a specialty surplus lines broker in Pennsylvania successfully placed a complex commercial liability policy with Horizon Guaranty, despite the fact that the company has not applied for or received a Certificate of Authority from the Pennsylvania Department of Insurance. Based on these operational characteristics, how is Horizon Guaranty classified by the state of Pennsylvania?
- A foreign, non-admitted, stock insurer.Answer
- BA foreign, non-admitted, mutual insurer.
- CAn alien, non-admitted, stock insurer.
- DA foreign, admitted, stock insurer.
Answer
A foreign, non-admitted, stock insurer.
Horizon Guaranty is properly classified by combining three distinct operational traits. First, it is a stock insurer because it is owned by independent investors who hold shares and receive taxable dividends. Second, it is a foreign insurer in Pennsylvania because it was incorporated under the laws of another U.S. state (New York). Third, it is a non-admitted (or unauthorized) insurer because it lacks a Certificate of Authority from the Pennsylvania Department of Insurance, which remains true even though surplus lines brokers can legally place specific complex risks with them.
Step-by-Step Solution
Key Concept
Insurer classifications based on ownership, domicile, and authorization status.