What is a Certificate of Authority?

A Certificate of Authority is a crucial document required for an insurance company to legally conduct business within a specific state. It is issued by the state’s insurance regulatory authority and signifies that the insurer has complied with local laws and regulatory requirements to operate in that jurisdiction. This ensures that the insurer is financially stable, adheres to operational guidelines, and is authorized to underwrite policies and process claims within the state.

This concept is essential because insurers must maintain a valid Certificate of Authority to offer insurance products, collect premiums, and provide services to policyholders legally. Without this certificate, any insurance activities conducted by the company would be considered illegal, potentially leading to significant penalties. Therefore, the Certificate of Authority is foundational to the operation of insurance companies within the regulatory framework of each state.