An insurance company based, licensed, and operated in one state under that state's government laws.
How Domestic Insurers Work
There are three main insurer types, domestic insurers being one of them. Domestic insurers are unique in that they operate in and abide by the laws of a single state. Domestic insurers are different from what is known as "foreign" and "alien" insurers. On the one hand, foreign insurers are formed under one state's laws and then operate in a completely different state, district, or territory. On the other hand, "alien" insurers are any insurance companies that don't fall under domestic or foreign insurers' categories.
Most of the time, the distinction between each type of insurer is made to easily relay which laws an insurance company has to abide by. This is important because these laws may influence how the insurance company treats its customers, keeps its books, and operates under the state's regulations. Each state will also have a different application process and operating procedure for each type of insurer.
The process to become a domestic insurer is relatively simple and straightforward. Most of the time, the process involves applying with the state. The application entails reporting how the company plans to abide by the regulations that are set, an explanation of the basic structure and operations of the insurance company, and general information about the company, such as their location and contact information, among other details. In many instances, the application for a license will come with a non-refundable fee. Of course, the required paperwork and rules around applying for a license will vary from state to state; these particular requirements are often listed on the state's official website.
Example of a Domestic Insurer
You want to create a new health insurance company in North Carolina. To find the requirements needed to apply for a North Carolina license, you go to the state's website, find the list of requirements and paperwork needed, and get to work. Once everything is in order, you will give all of this information and the state's requested documents to the state to look over and hopefully approve.
Your work pays off, and your new insurance company is approved and licensed to operate in North Carolina. You set up your headquarters in a city in North Carolina that serves residents throughout the state. At this point, your health insurance company is a domestic insurer as it is both headquartered in North Carolina and follows the state's laws.
Your business has grown and is doing well; you now want to expand your health insurance services to South Carolina as well. This requires more paperwork, this time specifically with South Carolina's state government, but it is significantly less than what was required to become a domestic insurer in North Carolina. When the South Carolina government eventually approves you, you can operate in the state with your headquarters in North Carolina. This would make your health insurance company a foreign insurer in South Carolina but a domestic insurer in North Carolina.