Virginia Bureau of Insurance Issues Updated Guidance Regarding Minimum Capital and Surplus, Seasoning, and Procedures for Companies Seeking to be Licensed as Insurers
On August 6, the Virginia Bureau of Insurance (BOI) issued Administrative Letter 2025-03 (the Letter)[1] to all companies seeking to be licensed as insurers in Virginia.[2] The Letter addresses requirements for domestic, foreign, and alien insurance companies seeking admission to do business in Virginia, and the Letter replaces, supersedes, and withdraws Administrative Letter 2002-07, which previously addressed those requirements for foreign and alien companies.[3]
The Letter appears primarily targeted at clarifying the requirements for minimum capital and surplus, service of process, and application procedures by enunciating requirements directly in the Letter rather than referencing requirements by citation to the applicable statutory provisions (as was the approach in Administrative Letter 2002-07). However, there are also some substantive rephrasing of expectations and requirements.
1. Service of Process
The first section of the Letter appears targeted at clarifying that the BOI does not accept the Uniform Consent to Service of Process form (UCAA Form 12) and incorporating the statutory requirements regarding service of process generally (e.g., requirements to maintain a registered agent, scenarios for statutory appointment of the Clerk of the Commission as agent of a business entity for the purpose of accepting service of process) into the Letter to increase visibility of those requirements. The Letter also maintains guidance that reciprocal insurers must file a written power of attorney appointing the Clerk of the Commission as agent.
2. Qualifications for Both Domestic and Foreign Applicants (Minimum Capital and Surplus)
The second section of the Letter revises the previously issued minimum capital and surplus references found in Administrative Letter 2002-07[4] and expands the information to encompass minimum requirements for domestic insurers. The result is a more user-friendly chart (excerpted directly below).
| Insurance Company Type | Minimum Capital and Surplus Requirements | Applicable Statute(s) – Title 38.2 of the Code |
| Stock | Fully paid in capital stock of at Stock least $1 million and surplus of at least $3 million. | § 38.2-1028 |
| Non-assessable mutual insurers (domestic or foreign) | At least $4 million of surplus | § 38.2-1030 |
| Non-assessable alien insurers | At least $4 million of trusted surplus | § 38.2-1030; § 38.2-1031 |
| Mutual Insurers issuing assessable policies | At least $1.6 million in surplus | § 38.2-1029 |
| Domestic or foreign reciprocal insurers issuing non-assessable policies | At least $4 million in surplus | § 38.2-1213 |
| Alien reciprocal insurers issuing non-assessable policies | At least $4 million of trusted surplus | § 38.2-1213; § 38.2-1031 |
| Domestic or foreign reciprocals issuing assessable policies | At least $1.6 million in surplus | § 38.2-1206 |
| Alien reciprocals issuing assessable policies | At least $1.6 million in trusted surplus | § 38.2-1206; § 38.2-1031 |
The Letter also rephrases the previously issued guidance regarding required buffers above the minimums shown above, stating in relevant part, “The applicant must have surplus of not less than $500,000 above the relevant minimum to obtain a license.”
3. Application and Licensure Procedure
In the Letter, the BOI clarifies that “to transact the business of insurance in Virginia, an insurance company must obtain both . . . 1. A license issued through the Bureau in compliance with Title 38.2 of the Code; and 2. A Certificate of Incorporation (domestic) or a Certificate of Authority (foreign/alien) issued through the Clerk of the State Corporation Commission.”[5] The BOI further clarifies that “the applicant must obtain tentative approval for its application for licensing by the Bureau before securing a Certificate of Incorporation or Certificate of Authority” from the Clerk of the State Corporation Commission.
In the third and fourth sections of the Letter, the BOI mostly restructures and rephrases procedural points. However, the BOI also adds two points of guidance not previously found in Administrative Letter 2002-07. First, that “an applicant must pay a nonrefundable $500 application fee,” and, second, that “All license applicants must include with their UCAA Primary Application pro forma financial projections and an actuarial certification regarding the methodology for determining premium reserves.”
The BOI also appears to extend the previously stated timeline for plans describing commencement of direct writings in Virginia. Administrative Letter 2002-07 stated that the following is required: “A definitive plan of operations for Virginia, including plans to commence direct writings in Virginia within six months after licensure.” Whereas, the new Letter states that the following is required: “A definitive plan of operations for Virginia, including plans to commence direct writings in Virginia within one year after licensure.”[6]
The BOI then adds a section addressing specific qualifications for domestic applicants as distinguished from foreign and alien applicants. In the revised guidance for foreign and alien applicants, the BOI inserts new language re-emphasizing the seasoning requirements for foreign insurers, as shown directly below. This language (and the parallel language found in the qualification requirements section of the Letter) eliminates “severity, cause(s), and timing of statutory losses” as express components of mitigating consideration (those elements having been previously included in the coordinate qualifications language found in Administrative Letter 2002-07).[7]
All license applicants are subject to a “seasoning” or “track record” requirement, defined as profitable operations as a direct writer for each of the three immediately preceding calendar years. For applicants that do not strictly comply with this standard, the Bureau—at its discretion—may consider mitigating factors, including, but not limited to, the surplus strength of the applicant, financial strength of a parent insurer licensed in Virginia, and affiliation with other insurers licensed in Virginia.
Finally, the BOI appears to shift the temporal scope for historical examination reports submitted as part of the licensure application package. Previously, the BOI stated in Administrative Letter 2002-07: “acceptable reports of examination must be relevant for the applicant’s current operations,” and “reports with balance sheet date[s] more than three years prior to the date of the current NAIC annual statement may be viewed as immaterial for the purpose of the Bureau’s analysis, and may result in refusal of a license.” Whereas the new Letter states: “Depending on circumstances, the Bureau may deny licensure an applicant whose exam report’s balance sheet date is more than five years prior to the applicant’s current annual statement.”
[1] Available at: https://pxl-sccvirginiagov.terminalfour.net/prod01/channel_3/media/sccvirginiagov-home/regulated-industries/insurance/insurance-companies/administration-of-insurance-regulation-in-virginia/administrative-letters/AL-2025-03.pdf
[2] Specifically, to all companies seeking to be licensed as insurers in accordance with Chapter 10 (Organization, Admission and Licensing; e.g., of stock and mutual insurers), 12 (Reciprocal Insurers), 41 (Fraternal Benefit Societies), or 46 (Title Insurance) of Title 38.2 (the Insurance Title) of the Code of Virginia.
[3] See the following linked PDF redline, which we have prepared showing the differences between Administrative Letter 2002-07 and 2025-03: https://www.foley.com/wp-content/uploads/2025/08/Redline-Administrative-Letter-2002-7-and-Administrative-Letter-2025-3-1.pdf
[4] Administrative Letter 2002-07 included the below-excerpted references:
(a) Stock insurance companies must maintain capital and surplus at the minimum levels prescribed by § 38.2-1028.
(b) Non-assessable mutual insurers must maintain a surplus at the minimum levels prescribed by § 38.2-1030, or § 38.2-1029 if the company issues assessable policies.
(c) Non-assessable reciprocal insurers must maintain a surplus at the minimum levels prescribed by § 38.2-1213, or § 38.2-1206 if the company issues assessable policies.
(d) Alien insurance companies (stock and mutual) incorporated or organized outside the United States must maintain a trusteed surplus at the minimum levels prescribed by § 38.2-1031.
[5] See the introductory paragraph to the Letter, above the Service of Process Section.
[6] Emphasis added in both quotations.
[7] Administrative Letter 2002-07 included the following language (emphasis added): “The following are essential for a qualified applicant . . . (a) Profitable operations as a direct writer for each of the three immediately preceding calendar years. For applicants that do not strictly comply with this standard, the Bureau, at its discretion, may give due consideration to such mitigating factors as the severity, cause(s), and timing of statutory losses, surplus strength of the applicant, financial strength of a parent insurer licensed in Virginia, etc.”
