A Comprehensive Guide to Understanding White List States

Exploring the concept of white list states within the insurance sector and the role of surplus lines insurance in providing innovative risk coverage options.

White list states maintain a list of insurance companies that can utilize unauthorized insurers to provide specialized or supplemental coverage, known as surplus lines insurance.

Surplus lines insurance protects against a financial risk that is too high for a regular insurance company to take on. Surplus line insurance can be used by companies or purchased individually. Unlike standard insurance, this insurance can be bought from an insurer not licensed in the insured’s state. However, the surplus lines insurer must have a license in the state where it is based.

Key Takeaways

  • White list states permit admitted insurance companies to use non-admitted insurers to provide specialized liability or property coverage.
  • This practice is commonly referred to as surplus line insurance.
  • Surplus line insurers provide coverage for risks that licensed insurers will not accept due to the risk being unusual or large.

Understanding White List States

White list states are those that permit admitted insurance companies to utilize non-admitted insurers to provide specialized liability or property coverage in a policy. This practice is commonly referred to as surplus line insurance. Surplus line insurance is coverage provided by a non-admitted insurer when such coverage is unavailable from insurers licensed by the state. Surplus line producers can offer coverage for risks that licensed insurers will not accept because they don’t meet their guidelines or the risk is too unusual or large.

Each white list state may have an extensive list of eligible surplus line suppliers. If a firm is categorized as a surplus line insurer, it doesn’t mean the firm cannot become licensed in that state. Rather, they typically opt to operate on a surplus line and unlicensed basis in certain states. Being unlicensed in a specific state means that they are not subject to that state’s regulations, as established by the Department of Insurance, in the same way as licensed insurers. This provides them more leeway in terms of rate and form regulation.

The Role of Surplus Lines

The surplus lines market is also referred to as the specialty, non-admitted, or excess lines market. Surplus lines insurance protects against financial risk that is too high for regular insurance companies. Unlike standard insurance, surplus lines insurance can be purchased from an insurer not licensed in the insured’s state, although the surplus lines insurer still requires a license where it is based.

An insurance agent must have a surplus lines license to sell a surplus lines policy. Also known as excess lines insurance, surplus lines insurance allows entities with unique risks, which most insurers don’t cover, to obtain insurance coverage. This is especially crucial for those with claim histories that make them otherwise uninsurable.

Leading Surplus Lines Insurers

Examples of major surplus lines insurers include:

  • American International Group (AIG)
  • Nationwide Mutual Insurance
  • W.R. Berkley Corp.
  • Zurich Insurance Group
  • Markel Corp.
  • Chubb
  • Ironshore Inc.
  • Berkshire Hathaway Inc.
  • Fairfax Financial Holdings
  • CNA Financial Corp.
  • XL Group PLC
  • Lloyd’s of London

A notable example of surplus lines insurance that consumers might purchase is flood insurance. Lloyd’s offers this type of insurance through the Natural Catastrophe Insurance Program, providing an alternative to the Federal Emergency Management Agency’s (FEMA) flood insurance. Consumers who find FEMA’s insurance too expensive might find more affordable policies through surplus lines insurance. However, surplus lines insurance is often more expensive than regular insurance because it covers unusual or higher-than-usual risks that other insurers won’t approach.

Related Terms: insurance, surplus lines insurer, non-admitted insurer, property coverage.


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--- primaryColor: 'rgb(121, 82, 179)' secondaryColor: '#DDDDDD' textColor: black shuffle_questions: true --- ## What is the main purpose of creating a white list in a business or financial context? - [ ] To block certain parties from participating - [ ] To exclude certain entities from a process - [x] To authorize or approve specific entities for certain actions - [ ] To establish tax shelters ## What does a white list typically include in financial operations? - [ ] Unauthorized employees - [ ] High-risk customers - [x] Approved vendors or clients - [ ] All stakeholders ## In terms of cybersecurity, what is a white list used for? - [ ] Identifying malware - [ ] Blocking unapproved software - [x] Allowing specific programs or IP addresses to access a system - [ ] Detecting intrusions ## Which industry often uses white lists to comply with regulations? - [ ] Fashion industry - [ ] Entertainment industry - [x] Financial industry - [ ] Tourism industry ## How does white listing differ from black listing? - [ ] It excludes all activities - [ ] It allows previously restricted activities - [x] It includes only approved entities or actions - [ ] It applies to everything and everyone ## What is a common consequence of implementing a white list in a corporate environment? - [ ] Greater operational downtime - [ ] Lower security standards - [x] Enhanced control over processes and interactions - [ ] Increased unauthorized access ## Which regulation may require financial institutions to use white lists for compliance? - [ ] Entertainment Law - [ ] Environmental Protection Act - [ ] Fair Labor Standards Act - [x] Anti-Money Laundering (AML) laws ## What role do white lists play in customer vetting? - [ ] They centralize client information storage - [x] They identify trusted clients who meet predefined criteria - [ ] They red-flag suspicious activities - [ ] They automate client services without checks ## What does the term "application white listing" relate to in IT? - [x] Only allowing approved software to run on a system - [ ] Blocking all software installation - [ ] Allowing any software by default - [ ] Running periodic system audits ## Why would a processor-based system use white listing? - [ ] To automatically delete junk files - [ ] To increase system speed without restrictions - [x] To ensure only verified and trusted processes are executed - [ ] To prevent software updates