What is required for insurers before they can legally transact business?

A Certificate of Authority is the correct requirement for insurers before they can legally transact business. This certificate is issued by the state’s regulatory authority to ensure that the insurer complies with state laws and regulations governing insurance practices. It confirms that the insurance company is authorized to operate within that particular state and sell insurance products, protecting both consumers and the integrity of the insurance market.

Licenses of Operation and business registrations, while important for many types of businesses, do not specifically confer the legal authority to operate as an insurer. Insurers must meet certain financial stability requirements and regulatory assessments to obtain the Certificate of Authority, ensuring they have the necessary capital and operational capabilities to fulfill their obligations to policyholders. An insurance endorsement does not relate to the authority to transact business; rather, it typically modifies or adds to the coverage of an existing insurance policy. Thus, the Certificate of Authority is the key requirement that establishes a legal basis for insurers to operate.