What is an 'Alien Insurer'

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

BREAKING DOWN 'Alien Insurer'

Alien insurers may market to individuals or business 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. If a person in New York bought coverage from the same company, however, the insurance company would be considered an alien insurer.

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 United States, 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). 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 Compared to Foreign Insurer

In the United States, an insurance company represented by an agent in a state other than the company's incorporated state is considered a foreign insurer. This terminology distinguishes companies based in the U. S.  but selling policies across state lines from alien insurers, located in another country, but selling in the U. S.

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 who sells insurance throughout much of the United States. 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 found in Nebraska.

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