# Are Surplus Insurers Reliable? What California Homeowners Need to Know > Source: https://www.coveragecat.com/insurance-types/home/are-surplus-insurers-reliable > Description: Surplus or non-admitted insurers aren't backed by the state guarantee fund, so there's a small added risk. Before you buy make sure you consider your options. > Updated: 2026-08-13 ## Short Answer It depends on the specific carrier's financial strength. Surplus-line insurers are not covered by the California Insurance Guarantee Association, meaning if one becomes insolvent, claims can go unpaid. However, many surplus-line carriers maintain strong A.M. Best ratings and must demonstrate at least $45 million in capital and surplus to appear on California's approved list. Homeowners should verify a carrier is rated A or better and understand that surplus-line policies may include unique exclusions and additional costs such as a 3% surplus-line tax. > "It feels like trading one risk (fire) for another (insurer bankruptcy)." > — [r/California](https://www.reddit.com/r/California/) With admitted carriers retreating from California's highest-risk ZIP codes, many homeowners must turn to **non-admitted** (surplus-line) insurers. That shift sparks a new question: **What if the insurer itself goes under?** As [California's insurance crisis deepens](https://www.coveragecat.com/blog/between-the-fault-and-the-flames-californias-home-insurance-market), more homeowners are exploring unfamiliar territory: the non-admitted insurance market. With major carriers like [State Farm, Allstate, and Farmers either limiting coverage or pulling out](https://www.coveragecat.com/blog/did-state-farm-drop-california-homeowners-before-wildfires) of California entirely, many property owners have little choice but to turn to surplus & excess line carriers for protection. That shift sparks a variety of new questions: **What if the insurer itself goes under?** Is the coverage comparable? And perhaps most importantly, is this added risk worth taking? - - - ## Admitted vs. Non-Admitted Carriers ### Admitted Insurers * **Licensed and regulated** by the California Department of Insurance (CDI) * **Subject to CDI rate and form approval** before selling policies ([(Surplus Line Association of California, "Primer on the Non-Admitted Market - California SLA", 2025)](https://www.slacal.com/general-information/primer-on-the-non-admitted-market)) * **Covered by California Insurance Guarantee Association (CIGA)**, which pays valid claims up to statutory limits if the insurer becomes insolvent ([(L Squared Insurance Agency, "Admitted vs non-Admitted Insurer (Surplus Line)", 2024)](https://www.l2insuranceagency.com/blog/admitted-vs-non-admitted-insurer-surplus-line/)) ### Non-Admitted (Surplus-Line) Insurers * **Not licensed** by CDI, though regulated in their home jurisdiction ([(Justia Law, "2009 California Insurance Code - Section 1760-1780 :: :: Chapter 6.", 2009)](https://law.justia.com/codes/california/2009/ins/1760-1780.html)) * **Set their own rates** and use custom policy language without CDI approval; * **Do not participate** in CIGA or state guarantee funds * **May write unusual or hard-to-place risks** > "Surplus lines policies cost me 30% more, plus fees. But at least someone would write my risk." > — [r/homeowners](https://www.reddit.com/r/homeowners/) - - - ## Understanding the Guarantee Fund ### What is the California Insurance Guarantee Association (CIGA)? For a property & casualty insurance company to legally operate in a state where they're "admitted" they have to pay into a state guaranty fund. California's fund, CIGA, operates as a non-profit and manages claim payments if your insurance company goes bankrupt and can no longer payout your claim. If a non-admitted insurer fails, CIGA does not step in. That means claims can go unpaid, leaving homeowners on the hook for rebuilding or repairs. ### Financial Strength Provides Additional Protection Without CIGA Homeowners on Reddit urge checking **A.M. Best**, **Moody's** or **S&P** ratings when selecting a surplus-line carrier: * **A or better** suggests robust capital and claims-paying ability * Many top surplus carriers (e.g., Lloyd's of London) hold century-old pedigrees and strong ratings; > "I only considered surplus carriers rated A− or above. My broker agreed that's non-negotiable." > — [r/Insurance](https://www.reddit.com/r/Insurance/) - - - ## Researching Surplus-Line Options ### California's List of Approved Surplus Line Insurers (LASLI) The state of California compiles LASLI - a list of carriers pre-approved by CDI under CIC § 1765.2. To appear on LASLI, insurers must demonstrate: * ≥ $45 million capital and surplus * Home-state licensing and solvency metrics; While LASLI can be a great place to start, the fast-moving California market does mean some insurers aren't listed even if they meet these requirements as the CDI may take longer to review non-admitted carriers. For a broader view of [companies still writing coverage in California](https://www.coveragecat.com/blog/companies-still-insuring-homes-in-california), both admitted and non-admitted, homeowners should compare multiple options. \###Additional Regulatory Bodies (NAIC and SLA) While the CDI doesn't directly regulate non-admitted carriers, they do operate a non-profit organization to offer regulatory guidance and protect consumers called the Surplus Lines Association of California. Additionally, all foreign insurers (U.S. based, but not California admitted) are regulated by the National Association of Insurance Commissioners (NAIC). These two organizations provide regulatory details on non-admitted carriers and guidance on how to navigate non-admitted carriers, including: A detailed guide to the non-admitted insurance market in California A list of the NAICs quarterly listing of Alien Insurers (Alien insurers are those that are non-US based and must meet the requirements of the International Insurers Department Plan of Operation) ### Policy Differences between Admitted and Non-admitted carriers Surplus-line policies often include **unique exclusions** and other differences between a standard form policy. Always review your coverages carefully, and review any required endorsements or deductibles, such as: Limited Liability Coverage Peril-specific Deductibles Additional requirements - - - ## Cost Considerations Surplus-line premiums include extra charges: | Fee Type | Typical Rate | | ---------------------- | ------------------------ | | Surplus-line tax | ~ 3% of premium | | Broker placement fee | $50–$500 per policy | | Minimum earned premium | 25–50% of annual premium | - - - Turning to non-admitted insurers can feel uneasy but it can become a necessary choice in today's California market. Without state guarantee-fund backing, homeowners face an added **insolvency risk**. By focusing on understanding their risk, and **careful policy review**, they can manage the uncertainty of surplus-line coverage. Ultimately, each owner must weigh the peril of no insurance against the risk of insurer failure. ## Frequently Asked Questions ### Q: What happens to my claim if my non-admitted insurer goes bankrupt? If a non-admitted insurer becomes insolvent, CIGA does not cover your claims. You would need to file with the insurer's court-appointed liquidator, but recovery may be limited or delayed. This differs from admitted insurers, where CIGA covers most claims up to $500,000 or your policy limit, whichever is less. ### Q: How do I verify that a surplus-line carrier is financially stable? Check the insurer's financial strength rating from agencies like A.M. Best, Moody's, or S&P. Look for ratings of A or better, which suggest robust capital and claims-paying ability. You can also verify the carrier appears on [California's List of Approved Surplus Line Insurers (LASLI)](https://www.coveragecat.com/insurance-types/are-surplus-insurers-reliable#californias-list-of-approved-surplus-line-insurers-lasli), which requires at least $45 million in capital and surplus. ### Q: Can I use a regular insurance agent to buy non-admitted coverage? No, you need a licensed surplus line broker to place coverage with non-admitted insurers. California law requires surplus line brokers to hold both Property and Casualty Broker-Agent licenses plus a Surplus Line Broker license. Regular agents cannot legally transact non-admitted insurance. ### Q: Are surplus-line policies different from standard homeowners insurance? Yes, surplus-line policies often include unique exclusions and different terms because non-admitted insurers set their own policy language without CDI approval. Review all coverage limits, peril-specific deductibles, and additional requirements carefully before purchasing. ### Q: What extra fees should I expect with a surplus-line policy? Surplus-line policies include a surplus-line tax of approximately 3% of premium plus broker placement fees ranging from $50 to $500 per policy. Many policies also have minimum earned premium requirements of 25% to 50% of the annual premium if you cancel early.