If an insurance company transacts business without a Certificate of Authority, what is true regarding its policy obligations?

When an insurance company transacts business without a Certificate of Authority, it remains liable for the policies it has issued despite lacking the necessary authorization. This means that if policyholders make claims, the company can still be held accountable in court to fulfill its obligations under those policies. This principle is grounded in the idea that an insurer cannot simply evade its responsibilities simply because it failed to obtain the required licensing.

In contrast, simply lacking a Certificate of Authority does not automatically void the policies, nor can policies become void immediately upon issuing them without authorization. Additionally, while an unlicensed insurer may hope to resolve its standing by applying for retroactive authority, such a request does not shield it from its current obligations under existing contracts. Thus, the correct understanding revolves around the inherent liability that persists even without regulatory approval.