Insurance is a particularly highly regulated industry. There are regulations on what must be in certain types of policies, how certain provisions may be applied, and how claims are handled. Insurers have to comply with reporting regulations and financial stability rules. These regulations and requirements vary from state to state. So, what follows is a very broad-stroke picture.
States have guarantee funds to protect policyholders if an insurance company goes belly up. But, the state won’t just guarantee insurance for every risk that’s out there. So states draw lines. “Admitted” carriers – carriers backed by the state guarantee – can only write* certain types of risks.
For insurance for other types of risks, risks which are typically more unique to the situation of each given policyholder and circumstances, you have to go to excess and surplus lines carriers. But, such policies are not backed by the state’s guarantee fund.
*To “write” coverage, or to “write” a risk, in insurance lingo means to issue an insurance policy for the subject matter at issue.