What Is an Alien Insurer?

An alien insurer is an insurance provider offering coverage in a country other than the company's home country. The relationship between the country where the insurer is incorporated and the location where it sells a given policy defines whether it's considered an alien insurer. When the policy is sold in a country other than where the insurer is domiciled, the provider is considered "alien."

Key Takeaways

  • An alien insurer is one that sells an insurance policy in a country other than where it's domiciled.
  • Alien insurers cater to those that find it too costly or difficult to purchase insurance from a domestic provider.
  • Regardless of the insurer's location, it must follow the rules and regulations governing insurance practices in each locale where it offers or sells policies.
  • A foreign insurer is different from an alien insurer, as it's an insurer that's based in the U.S. but sells policies in states other than where it's domiciled.

How an Alien Insurer Works

Alien insurers may market to individuals or businesses who would find it too costly or difficult to purchase insurance from a domestic provider. A company based in Switzerland would be considered a domestic insurer of a policy purchased in Zurich (the largest city in Switzerland). If a person in New York bought coverage from the same company, however, the insurance company would be considered an alien insurer.

Special Considerations

Regardless of the insurer's location, it must follow the rules and regulations governing insurance practices in each locale where it offers or sells policies. These regulations may exist at multiple levels of government. 

For example, in the U.S., different states have their specific requirements for alien insurers operating under their jurisdiction. Chief insurance regulators from each state and territory in the U. S. collectively govern the National Association of Insurance Commissioners (NAIC).

The NAIC meets three times a year and establishes regulatory standards at the national level. The group also publishes a quarterly listing of alien insurers who have provided the Commission with information indicating they fulfill a set of standard criteria for operation in foreign countries.

Lloyd’s of London underwrites a large number of policies in the U. S., where its syndicated underwriters would be considered alien insurers. Because Lloyd’s operates under a different structure than most commercial insurers, it can often offer surplus lines insurance which may be difficult, or impossible, to cover under a regular domestic insurer.

For example, prominent American singers, such as Bruce Springsteen, Bob Dylan, and Mariah Carey, have held insurance through Lloyd’s for their voices, covering potential lost work in the event of damage to their vocal cords.

Alien Insurer vs. Foreign Insurer

In the U.S., an insurance company represented by an agent in a state other than the company's incorporated state is considered a foreign insurer. This is different from an alien insurer, which might be located in another country, but sell policies in the U.S. A foreign insurer is based in the U.S. but sells policies in states other than where it's domiciled.

As with alien insurers, foreign insurers must comply with laws governing the jurisdiction in which they issue policies. For example, Mutual of Omaha is a Nebraska-based insurance company that sells insurance throughout much of the U.S. Agents selling the company’s policies in the state of Washington would be considered representatives of a foreign insurer and would need to abide by the regulations established in Washington, rather than those in Nebraska.