What is required for an insurer to legally transact insurance?

To legally transact insurance, an insurer must obtain a Certificate of Authority from the state in which it intends to operate. This certificate is a formal approval granted by the state insurance department, confirming that the insurer has met all regulatory requirements, such as financial stability and compliance with state laws. It serves as a license specifically for the company to conduct insurance business, ensuring that they are trustworthy and capable of fulfilling their obligations to policyholders.

While an insurance license is important, it typically refers to the credential required for individual agents, not for the insurer itself. An insurance bond and an insurance policy are also not necessary for the insurer to be legally authorized to transact business. An insurance bond may be required for certain types of operations, and an insurance policy is simply the contract that outlines the terms of coverage offered to consumers. The key requirement for the insurer is the Certificate of Authority, confirming that it is authorized by the state to write insurance policies.