What defines an insurer that holds a certificate of authority in a state?

An insurer that holds a certificate of authority in a state is identified as an authorized insurer. This designation indicates that the insurer has received the necessary approval from the state’s insurance department to operate and provide insurance products within that state. This certificate confirms that the insurer meets specific regulatory requirements, including financial standards, and complies with state laws governing insurance practices.

Authorized insurers are subject to oversight from regulatory bodies, which ensures consumer protection and financial stability within the insurance market. This also reassures policyholders that the insurer is deemed reputable and capable of fulfilling its contractual obligations in the event of a claim.

In contrast, an unauthorized insurer is one that has not obtained the proper certification; thus, it may not engage in business legally within that state, which poses risks for consumers. A risk-bearing entity generally refers to any organization that assumes the risk of loss but does not necessarily imply it is authorized. Self-insured organizations are those that set aside funds to cover potential losses rather than purchasing insurance, and they too do not correspond with the definition of holding a certificate of authority.