An insurer incorporated under the laws of another country and admitted to transact business in this state is classified as a(n):
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
State law classifies insurers by their place of incorporation. An insurer incorporated in this state is a domestic insurer, one incorporated in another state is a foreign insurer, and one incorporated in another country is an alien insurer. These classifications determine which regulatory, filing, and reporting requirements apply to the insurer. An alien insurer must still be admitted, that is, it must hold a certificate of authority from the Commissioner, before it may lawfully transact insurance in this state. The domestic, foreign, and alien labels describe jurisdiction of formation, not ownership structure, and they are distinct from terms such as mutual, stock, or fraternal that describe how the insurer is organized.
Why the other options are wrong
- B) A domestic insurer is one incorporated in this state itself. An insurer formed under the laws of another country is classified as alien, while the domestic classification is reserved for insurers chartered in this state.
- C) A foreign insurer is one incorporated in another U.S. state. Incorporation outside the United States makes the insurer alien, while incorporation in another state of the United States makes it foreign; the two classifications are distinct.
- D) Mutual describes an ownership structure in which policyholders own the company, not the place of incorporation. A mutual insurer could be domestic, foreign, or alien depending on where it is chartered, so ownership form is a separate concept.
Memory hook
Other country means alien; other state means foreign; home is domestic.