Virginia Law

Article 5.1. Licensing of Surplus Lines Brokers.

The Commission may issue a surplus lines broker's license to any individual or business entity actively licensed as a property and casualty insurance agent for the procuring of insurance of the classes enumerated in §§ 38.2-109 through 38.2-122.2 and §§ 38.2-124 through 38.2-134 from eligible nonadmitted insurers in the Commonwealth. However, nothing in this article or in Chapter 48 (§ 38.2-4805.1 et seq.) shall apply to the sale, solicitation, or negotiation of (i) the contracts of insurance cited in subsection C of § 38.2-1802 or (ii) contracts of insurance for any insured whose home state, as defined in § 38.2-4805.2, is a state other than the Commonwealth.

2001, c. 706; 2011, c. 498; 2018, c. 205.

A. Every original applicant for a surplus lines broker license shall apply for such license in a form and manner prescribed by the Commission, and containing any information the Commission requires. Each applicant shall, at the time of applying for a license, pay a nonrefundable application processing fee in an amount and in a manner prescribed by the Commission. The prescribed application fee shall be collected by the Commission and paid directly into the state treasury and credited to the fund for the maintenance of the Bureau of Insurance as provided in subsection B of § 38.2-400.

B. Each applicant for a surplus lines broker license shall, at the time of applying for a new license, be fingerprinted in a form and manner prescribed by the Commission and shall provide personal descriptive information to be forwarded along with the applicant's fingerprints through the Central Criminal Records Exchange to the Federal Bureau of Investigation for the purpose of obtaining criminal history record information regarding such applicant. The results of the state and national records search shall be forwarded to the Commissioner or the Commissioner's designee, who shall be an employee of the Commission. The cost of fingerprinting and the criminal history record check shall be paid by the applicant. If an applicant's application for a license is denied, the Commission shall provide a copy of the information obtained from the Central Criminal Records Exchange to the applicant upon request. The information provided to the Commission shall not be disseminated except as provided in this subsection.

C. Prior to issuance of a license, the applicant shall file with the Commission a certification or attestation that the applicant has, and thereafter shall keep in force for as long as the license remains in effect, a bond in favor of the Commonwealth in the amount of $25,000 with corporate sureties licensed by the Commission. The bond shall be conditioned that the broker will conduct business under the license in accordance with the provisions of the surplus lines insurance law and that he will promptly remit the taxes provided by such law. The bond shall not be terminated unless at least 30 calendar days' prior written notice of the termination is filed with the Commission. If, prior to the expiration date of the bond, the licensed surplus lines broker fails to file with the Commission a certification or attestation that a new bond satisfying the requirements of this section has been put into effect, the surplus lines broker license shall terminate and the licensee shall be required to apply for a new surplus lines broker license.

D. Notwithstanding any other provisions of this title, a person licensed as a surplus lines broker in his home state, as defined in § 38.2-1800, shall receive a nonresident surplus lines broker license subject to meeting the requirements set forth in § 38.2-1857.9.

E. Except where prohibited by state or federal law, by submitting an application for license, the applicant shall be deemed to have appointed the clerk of the Commission as the agent for service of process on the applicant in any action or proceeding arising in the Commonwealth out of or in connection with the exercise of the license. Such appointment of the clerk of the Commission as agent for service of process shall be irrevocable during the period within which a cause of action against the applicant may arise out of transactions with respect to subjects of insurance in the Commonwealth. Service of process on the clerk of the Commission shall conform to the provisions of Chapter 8 (§ 38.2-800 et seq.).

F. A business entity acting as a surplus lines broker is required to obtain a surplus lines broker license. In addition to the other requirements in this section, and before approving the application, the Commission shall find that:

1. The business entity has paid the fee set forth in subsection A; and

2. If:

a. A resident of the Commonwealth, the business entity has designated an employee, officer, director, manager, member, or partner to serve as the licensed Virginia Property and Casualty insurance agent to be responsible for the business entity's compliance with the insurance laws, rules and regulations of the Commonwealth; or

b. Not a resident of the Commonwealth, the business entity has designated an employee, officer, director, manager, member, or partner licensed in his home state to be responsible for the business entity's compliance with the insurance laws, rules and regulations of the Commonwealth.

G. The Commission may require any documents reasonably necessary to verify the information contained in an application.

2001, c. 706; 2008, c. 213; 2011, c. 498; 2016, c. 552; 2018, c. 131; 2019, c. 675.

Repealed by Acts 2019, c. 675, cl. 2, effective January 1, 2021.

A. Beginning January 1, 2021, each individual surplus lines broker shall submit biennially to the Commission a renewal application in a form and manner prescribed by the Commission, along with a nonrefundable renewal application processing fee prescribed by the Commission, for the renewal of the license. Licenses shall be renewed biennially based on the broker's month and year of birth. The license for a surplus lines broker born in an even-numbered year shall expire at the end of the broker's birth month in even-numbered years. The license for a surplus lines broker born in an odd-numbered year shall expire at the end of the broker's birth month in odd-numbered years. Any surplus lines broker license for which the renewal application and nonrefundable renewal application processing fee have been received by the Commission and all other applicable licensing and renewal provisions in this chapter have been met shall, unless the license has been terminated, suspended, or revoked, be renewed for a two-year period. Any surplus lines broker license for which the renewal application and nonrefundable renewal application processing fee have not been received by the Commission shall automatically be terminated.

B. On or before May 1, 2021, and biennially thereafter, each business entity licensed as a surplus lines broker shall submit to the Commission a renewal application, along with a nonrefundable renewal application processing fee prescribed by the Commission, for the renewal of the license. Any surplus lines broker license for which the required renewal application and nonrefundable renewal application processing fee have been received by the Commission and all other applicable licensing and renewal provisions in this chapter have been met shall, unless the license has been terminated, suspended, or revoked, be renewed for a two-year period. Any surplus lines broker license for which the required renewal application and nonrefundable renewal application processing fee have not been received by the Commission shall automatically be terminated.

C. The nonrefundable renewal application processing fee shall be paid in a manner and in an amount prescribed by the Commission. The nonrefundable renewal processing fee shall be collected by the Commission and paid directly into the state treasury and credited to the fund for the maintenance of the Bureau of Insurance as provided in subsection B of § 38.2-400.

D. An individual surplus lines broker whose license terminates due to failure to renew may, within 12 months from the renewal date, reinstate the same license by submitting the renewal application and a nonrefundable reinstatement processing fee equivalent to double the nonrefundable renewal application processing fee and by complying with all other applicable licensing and renewal provisions in this chapter.

E. A licensed surplus lines broker's failure to file the maintenance assessment report required by § 38.2-406 or pay the maintenance assessment and any related fines, penalties, and interest required by § 38.2-403 on or before the first day of March of each year shall result in the termination of the surplus lines broker license.

F. An individual surplus lines broker who is unable to comply with the license renewal requirements due to military service or another extenuating circumstance such as a long-term illness or incapacity may request a waiver of those requirements. Requests for waivers of renewal requirements shall be made in a form and manner prescribed by the Commission. Surplus lines brokers seeking a waiver of renewal requirements shall submit all documentation specified by the Commission so as to be received by the Commission no later than the last day of the renewal period. After the renewal period, surplus lines brokers who have failed to complete the renewal waiver requirements may request a waiver from the reinstatement requirements set forth in subsection D within the 12-month reinstatement period. The Commission shall approve or disapprove the waiver request within 30 calendar days of receipt thereof, and shall provide written notice of its decision to the applicant for waiver within five calendar days of rendering its decision. Any waiver granted pursuant to this section shall be valid only for the renewal period or reinstatement period for which the waiver request was made.

2019, c. 675.

A. Each licensed surplus lines broker shall report within 30 calendar days to the Commission any change in his residence address, email address, or name.

B. In addition to the requirements of §§ 59.1-69 and 59.1-70, any individual or business entity licensed as a surplus lines broker in the Commonwealth and operating under an assumed or fictitious name shall notify the Commission, at the earlier of the time the application for a surplus lines broker license is filed or within 30 calendar days from the date the assumed or fictitious name is adopted, setting forth the name under which the surplus lines broker intends to operate in Virginia. The Commission shall also be notified within 30 calendar days from the date of cessation of the use of such assumed or fictitious name.

C. Each licensed surplus lines broker convicted of a felony shall report within 30 calendar days to the Commission the facts and circumstances regarding the criminal conviction.

D. Each licensed surplus lines broker shall report to the Commission within 30 calendar days of the final disposition of the matter any administrative action taken against him in another jurisdiction or by another governmental agency in the Commonwealth. Such report shall include a copy of the order, consent to order or other relevant legal documents.

E. Any licensed resident surplus lines broker who has moved his residence from the Commonwealth shall have all licenses immediately terminated by the Commission, whether or not the surplus lines broker has notified the Commission of such move. Nothing shall prohibit such surplus lines broker from applying for a license as a nonresident surplus lines broker.

F. The license authority of any business entity licensed as a surplus lines broker shall terminate immediately if the sole licensed responsible producer designated pursuant to subdivision F 2 of § 38.2-1857.2 for the business entity's compliance with the insurance laws, rules and regulations of the Commonwealth is removed for any reason, and a new responsible producer has not been designated and the Commission notified within 30 calendar days of such removal and of the newly designated responsible producer.

2001, c. 706; 2008, c. 213; 2011, c. 498; 2019, c. 675.

No surplus lines broker shall accept surplus lines business from any person other than an applicant for insurance or a duly licensed property or casualty insurance agent, nor shall such surplus lines broker compensate any person other than a duly licensed property or casualty insurance agent for such business. No person other than an applicant for insurance or a duly licensed property or casualty insurance agent shall place surplus lines business with a surplus lines broker licensed under this article nor shall any person other than a duly licensed property or casualty insurance agent accept compensation for such business.

2001, c. 706; 2011, c. 498.

The Commission may, in addition to or in lieu of a penalty imposed under § 38.2-218, place on probation, suspend, revoke or refuse to issue or renew any surplus lines broker's license for any one or more of the following causes:

1. Providing materially incorrect, misleading, incomplete or untrue information in the license application or any other document filed with the Commission;

2. Violating any insurance laws, or violating any regulation, subpoena or order of the Commission or of another state's insurance regulatory authority;

3. Obtaining or attempting to obtain a license through misrepresentation or fraud;

4. Improperly withholding, misappropriating or converting any moneys or properties received in the course of doing business;

5. Engaging in the practice of rebating;

6. Engaging in twisting or any form thereof, where "twisting" means inducing an insured to terminate an existing policy and purchase a new policy through misrepresentation;

7. Intentionally misrepresenting the terms of an actual or proposed insurance contract or application for insurance;

8. Having been convicted of a felony;

9. Having admitted or been found to have committed any insurance unfair trade practice or fraud;

10. Using fraudulent, coercive, or dishonest practices, or demonstrating incompetence, or untrustworthiness in the conduct of business in this Commonwealth or elsewhere, or demonstrating financial irresponsibility in the handling of applicant, policyholder, agency, or insurance company funds;

11. Having an insurance producer, surplus lines broker, or consultant license, or its equivalent, denied, suspended or revoked in any other state, province, district or territory;

12. Forging another's name to an application for insurance or to any document related to an insurance transaction;

13. Improperly using notes or any other reference material to complete an examination for an insurance license;

14. Knowingly accepting insurance business from an individual who is not licensed;

15. Failing to comply with an administrative or court order imposing a child support obligation; or

16. Failing to pay state income or premium license tax or comply with any administrative or court order directing payment of state income tax.

2001, c. 706; 2011, c. 498.

A. If the Commission is of the opinion that any applicant for a surplus lines broker's license is not of good character or does not have a good reputation for honesty, it may refuse to issue the license, subject to the right of the applicant to demand a hearing on the application. The Commission shall not revoke or suspend an existing license until the licensee is given an opportunity to be heard before the Commission. If the Commission refuses to issue a new license or proposes to revoke or suspend an existing license, it shall give the applicant or licensee at least ten calendar days' notice in writing of the time and place of the hearing, if a hearing is requested. The notice shall contain a statement of the objections to the issuance of the license, or the reason for its proposed revocation or suspension as the case may be. The notice may be given to the applicant or licensee by registered or certified mail, sent to the last known address of record pursuant to § 38.2-1857.5, or the last known business address if the address of record is incorrect, or in any other lawful manner the Commission prescribes. The Commission may summon witnesses to testify with respect to the applicant or licensee, and the applicant or licensee may introduce evidence in his or its behalf. No applicant to whom a license is refused after a hearing, nor any licensee whose license is revoked, shall again apply for a license until the expiration of a period of five years from the date of the Commission's order, or such other period of time as the Commission prescribes in its order.

B. The license of a business entity may be suspended, revoked or refused if the Commission finds, after notice and an opportunity to be heard, that a violation by an individual licensee acting at the direction of, on behalf of, or with the permission of the business entity was known to be a violation by one or more of the partners, officers or managers acting on behalf of the business entity, and the violation was neither reported to the Commission nor corrective action taken.

C. In addition to or in lieu of any applicable denial, suspension or revocation of a license, a person may, after notice and an opportunity to be heard, be subject to a penalty pursuant to § 38.2-218.

D. The Commission shall retain the authority to enforce the provisions of and impose any penalty or remedy authorized by this title against any person who is under investigation for or charged with a violation of this title, even if the person's license or registration has been surrendered, terminated, suspended, revoked, or has lapsed by operation of law.

2001, c. 706.

A. An individual or business entity who is not a resident as defined in § 38.2-1800, but who is a resident of another state, territory, or province of Canada, shall receive a nonresident surplus lines broker license if:

1. The applicant presents proof in a form acceptable to the Commission that the applicant is currently licensed or otherwise authorized as a resident surplus lines broker and is in good standing in his home state;

2. The applicant has submitted the proper application for licensure, or in lieu thereof has submitted a copy of the application for a Surplus Lines Broker license submitted to the home state, and has paid the fees prescribed by the Commission; and

3. The applicant's home state issues nonresident surplus lines broker licenses to residents of the Commonwealth on the same basis, or will permit a resident of the Commonwealth to act as a surplus lines broker in such state without requiring a license.

B. For the purposes of this article, any individual whose place of residence and place of business are in a city or town located partly within the Commonwealth and partly within another state may be considered as meeting the requirements as a resident of the Commonwealth, provided the other state has established by law or regulation similar requirements as to residence of such individuals.

C. The Commission may enter into a reciprocal agreement with an appropriate official of any other state or province of Canada if such an agreement is required in order for a Virginia resident to be similarly licensed as a nonresident in that state or province.

D. The Commission may verify the surplus lines broker's licensing status through the Producer Database maintained by the NAIC, its affiliates or subsidiaries.

E. A nonresident surplus lines broker who moves from one state or province to another state or province shall file a change of address within 30 calendar days of the change of legal residence. No fee or license application is required.

F. Any licenses issued to nonresidents pursuant to this section shall be terminated at any time that the nonresident's equivalent authority in his home state is terminated, suspended, or revoked.

G. As used in this section, "home state" has the same meaning that is ascribed to the term in § 38.2-1800.

2001, c. 706; 2008, c. 213; 2011, c. 498; 2019, c. 675.