DEFINITION of Admitted Company
Admitted Company is an insurance company that is domiciled in one state but is admitted by another state to transact insurance business. Because insurance licenses are governed by the states, an insurance company must be licensed by each state where it intends to conduct business, and must comply with each state's insurance codes, including financial requirements.
BREAKING DOWN Admitted Company
An insurance company is considered a "foreign," "alien" or "non-resident" company except in the state in which its primary offices are domiciled. In addition, any person selling insurance of an admitted company must be licensed in that particular state.
States and Insurance
Ben Franklin was a founder of the insurance business in the U.S. in the 1700s but it wasn't until 1945 that Congress declared in the McCarran-Ferguson Act that states should regulate the business of insurance.
The National Association of Insurance Commissioners noted that, "State legislatures set broad policy for the regulation of insurance. They establish and oversee state insurance departments, regularly review and revise state insurance laws, and approve regulatory budgets. State insurance departments employ 12,500 regulatory personnel. Increases in staff and enhanced automation have allowed regulators to substantially boost the quality and intensity of their financial oversight of insurers and expand consumer protection activities. State regulation of insurance provides a major source of state revenue. In 2000, states collected more than $10.4 billion in revenues from insurance sources. Of this amount, $880 million— roughly 8.4 percent—went to regulate the business of insurance while the remaining $9.6 billion went to state general funds for other purposes."
Yet the quality of regulation in individual states can vary widely by some measures among states. The free-market think tank R Street Institute in 2020 assigned scores in 10 different areas to each state including solvency monitoring, anti-fraud efforts, rating and underwriting freedom, minimizing politicization of regulation, consumer protection and fostering competitive markets. Only one state got an A+, five states got an A and two states got an F.
After the financial crisis of 2008-09 and the spectacular failure of insurance giant AIG, some observers said that the American insurance regulation system was too focused on the local market and the protection of policy holders, instead of the global market and the stability of insurance firms.
State regulators, critics say, are mostly concerned about whether insurers can pay out on policies, not whether the system is sound or undue risk is being taken to boost short-term results at the expense another financial market meltdown.