What is an alien insurance company?

What is an alien insurance company? | Insurance Business

What is an alien insurance company?

While there may well be alien insurance companies with extra-terrestrial agents in a galaxy far, far away, that unfortunately is not what the term ‘alien insurance company’ means to us Homo sapiens on Earth.

An alien insurance company is defined by the US Insurance Information Institute as: “an insurance company incorporated under the laws of a foreign country, as opposed to a ‘foreign’ insurance company which does business in states outside its own.”

Let’s break that down a little. An alien insurer provides insurance coverage in a country or countries other than its country of domicile. For example, if a company’s home office is located in Toronto, Canada, but its insurance business is conducted in California, USA, that company would be known as an alien insurer in California.

A company based in the UK would be considered a domestic insurer of a policy if someone from London purchases a policy. However, if someone in New York bought a policy from the same UK-domiciled company, it would then be considered an alien insurer.

It doesn’t matter where an insurance company is domiciled; it must always follow the rules, regulations and governing insurance practices in each and every locale where it offers or sells policies. Those rules apply to all insurance companies … even those from outer space.   

Domestic vs. foreign vs. alien

To understand the concept of alien insurance companies, it’s useful to know the definitions of a domestic insurance company and a foreign insurance company.

A domestic insurance company is a term used by countries to refer to companies incorporated in those countries.

In the US, a foreign insurance company is the name given to an insurer based in the US but outside the state in which the insurance is to be written. To be deemed ‘foreign,’ the insurer cannot be chartered or domiciled in those states. 

Is Lloyd’s of London the biggest alien of them all?  

One of the first names that springs to mind when US insurers think internationally-domiciled insurance companies is Lloyd’s of London, the 333-year-old specialty insurance market based in London, UK. Lloyd’s writes a huge amount of business in the US. Approximately 41% of its global premiums are held by US customers, worth about $15 billion. Technically speaking, the Lloyd’s syndicated underwriters are ‘alien insurers’.

In order to write surplus lines business in the US, Lloyd’s syndicates must be listed on the National Association of Insurance Commissioners (NAIC)’s ‘Quarterly Listing of Alien Insurers,’ which is maintained by the International Insurers Department (IID).

An explanation on the Lloyd’s website states: “To appear on the IID list, syndicates must pay a fee and complete an application with the IID. To remain on the list, syndicates are required to pay an annual fee and complete a filing, including financial statements, copies of auditors’ reports and details of US trust accounts. Full criteria are set forth in the IID ‘Plan of Operation for Listing of Alien Nonadmitted Insurers’.

“Once listed, each syndicate is assigned its own NAIC ‘alien identification number’, sometimes referred to as an ‘NAIC code’ or ‘Alien ID’. The listing assures brokers and insureds as to the eligibility of non-US/alien insurers with which surplus lines insurance is being placed.”

These rules not only apply to Lloyd’s syndicates. They apply to all ‘alien insurers’ operating on US soil.