Statutory Minimum Capital and Surplus Requirements - Industry UCAA
STATUTORY MINIMUM CAPITAL AND SURPLUS REQUIREMENTS
The chart below identifies the minimum capital and surplus requirement for each Uniform State. A link to the Application instructions for Primary Application, Section II, Filing Requirement Item 3; Expansion Application, Section II, Filing Requirement Item 3; and Corporate Amendment Application Section I and V, Filing Requirement Item 5 are provided.
Last Updated: 04/20/2022
Updates to the information will be noted with a " * " next tothe state name and edits will be italicized and bolded.
|State||Dollar Amount/ Code Citation/ Instructions|
§ 27-3-7 and 27-3-8 Code of Alabama, as amended.
AS 21.09.070 and 3 ACC 28.050 for companies writing variable lines of business.
A.R.S. § 20-210 through 20-212
Mortgage Guaranty A.R.S. 20-1541
Ark. Code Ann. 23-63-205 and 23-63-207
P&C: Statutory minimum paid-in capital is between $1 to $2.6 million and minimum surplus is between $1 to $2.8 million. (§ 700.01-700.05)
Life & disability:Both statutory minimum paid-in capital & statutory minimum surplus are $2.5 million. (§ 10510, 10511, 10512 and 700.02 and 700.05.)
Specific to the lines of business to be transacted (C.G.S. §38a-72).
The greater of:
[18 Del. C. § 511(a)]
Life & Health
Marine & Transportation
Property & Casualty - (Capital-$300,000 plus Surplus-$300,000); Total $600, 000.
Life - (Capital-$1,000,000. plus Surplus-50% of Capital). Total $1,500.000.
Health Maintenance Organization - Initial net worth requirement is $1,500,00.
Title Insurers – Minimum paid in capital of $500,000 and paid-in initial surplus of $500,000 for a total minimum capital and surplus of $1 million.
Property and Casualty Insurers – greater of $5 million or 10% of total liabilities (F.S. 624.407)
|GA||Minimum Capital and Surplus of $3,000,000 O.C.G.A. §33.-3-6 and 33-3-7|
|HI||Depends on the line of business to be transacted (§ 431:3-205, HRS), (§ 431:3-208 HRS)|
Life, Disability and Life and Disability
Property, General Casualty, Marine and Transportation, Vehicle and Surety
Any two of the following kinds of insurance: Property, marine & transportation, general casualty, vehicle, surety, disability.
Multiple lines (all insurance except life and title insurance)
Mortgage guaranty insurance
** If authorized for Limited Managed Care Plan, minimum capital and surplus may be determined by § 41-3905(2).
Primary& Expansion App:
Mutual - Life
Stock – P&C
Mutual – P&C
(For limited authority capital and surplus levels see 215 ILCS 5/13)
(Note: Minimum surplus to be maintained, $500,000)
IC 27-1-6-14 – Stock
IC 27-1-6-15– Mutual
IC 27-13-12-2– HMO
IC 27-7-3-5 – Title
IC 27-13-34-16 – LSHMO
Primary & Expansion Apps:
Stock - P&C - Capital $900,000
Stock - Life - Capital $600,000
*Minimum requires “market value” of securities held for deposit.
The minimum requirements for a property company only (stock and mutual) and a casualty company only (stock and mutual) are one-half of the requirements noted above.
All foreign stock life/health and property/casualty must have a minimum capital stock of $1,000,000 plus an initial free surplus of $2,000,000.
All foreign mutual life/health, property/casualty, reciprocal and Lloyd's insurers must have a minimum basic surplus of $1,000,000 plus an initial free surplus of $2,000,000. See KRS 304.3-120.
All HMOs must have a minimum capital stock of $1,000,000 plus an initial free surplus of $2,000,000. See KRS 304.38-070.
|LA||Please see Louisiana's State Specific Information in the State Charts for more information.|
Depends on line of business transacted (Title 24-A M.R.S.A. §410)
Minimum capital and surplus requirements are set forth in § 4-103, 4-104, and 4-105 of the Insurance Article of the Annotated Code of Maryland and in § 19-710 of Article Health-General of the Annotated Code of Maryland.
|MA||Please see Massachusetts' State Specific Information in the State Charts for more information.|
$7.5 million (MCL 500.410(2) and (3))
Specific to lines of business to be transacted (MN Stat §60A .07)
Stock Life, Accident & Health Insurance Companies and Stock Property & Casualty Insurance Companies:
Mutual or Reciprocal Companies:
Title Companies: $150,000 capital and $75,000 surplus (MCA 83-15-5)
Prepaid Legals: MCA 83-49-23
Fraternal Societies: MCA 83-29-29 and MCA 83-30-57
Health Maintenance Organization: MCA 83-41-325
See State Website at http://insurance.mo.gov/industry/filings/admissions/fees.php
All lines, including
Multiple Lines, two or more of
To begin transacting insurance, must have capital of at least $1 million and surplus of at least $1 million.
Thereafter, capital must be maintained (“unimpaired”) of at least $1 million.
Also, subject to Risk Based Capital Act.
Must maintain surplus of at least $1 million.
Also subject to Risk Based Capital Act §44-60
Variable annuities §44-2202
Required Capital & Surplus – NRS 680A.120 an insurer shall possess and thereafter maintain unimpaired paid-in capital stock, if a stock insurer, or unimpaired basic surplus, if a mutual or a reciprocal insurer, and free surplus not less than 100% of the minimum required capital stock or minimum required basic surplus, and when first so authorized shall possess initial free surplus.
Stock and Foreign Mutual Insurers $500,000 minimum required capital stock.
New Hampshire requires that all insurers have a minimum of $1,000,000 in combined capital and surplus. (RSA 401:4, 401:5, 405:2, and 405:4).
N.J.S.A. 17:17-6 and 17B:18-68
SCHEDULE I. Section 59A-5-16 NMSA 1978
Please be advised that NMSA 1978 Section 59A-5-16 Schedule I sets out minimum capital and surplus as well as deposits.The surplus required of any company applying for a Certificate of Authority before the Office of Superintendent of Insurance (OSI) is based upon the financial review, business plan and projections of the company as well as other documentation provided in their application. Generally, the OSI would look for the amount of capital that comparable licensed insurance companies have that write the premium volume for the line(s) of insurance being proposed and projected by the applying company.The OSI also looks for supported projections to keep RBC above 300% as this amount is considered the bare minimum.
Dollar Amount/Code Citation
§ 1113 (a)(3)(i) and 3(ii) of the N.Y. Ins. Law
A company may write "legal services insurance" if licensed for any of the above lines with no additional capitalization.
Primary & Expansion Apps:
NCGS 58-7-75, NCGS 58-16-5(2)
Accident and health:
Life, accident and health:
Mutual life, accident and health insurance company:
Fire & marine:
Multiple line fire and casualty:
Mutual multiple line fire and casualty insurance company:
Corporate Amendments App:
Initial net worth: $ 1,000,000
Life, Accident and Health companies:
Title insurance companies:
O.S. 36 §610 §611—all lines of business $1,500,000, except O.S. 36 §612.1, requires $2,000,000 when writing or issuing Non-Cancelable or Guaranteed Renewable Contracts.
Generally: $2,500,000 capital or surplus, or any combination thereof (ORS 731.554(1)) Must comply with ORS 733.580, investment of required capitalization.
Workers’ compensation: $5,000,000 (ORS 731.554(2))
Healthcare Service Contractors
Limited Healthcare Service Contractors (complementary, dental or vision only) $1,000,000
Dollar amount is specific to line(s) of business as defined by:
Life, Property& Casualty
§ 3.090 of the Insurance Code of Puerto Rico-Funds required from insurers
The Commissioner may increase the aforementioned requirements as may be determined by the economic condition of the country up to the amount he deems necessary for the adequate protection of the interests of the insured and the creditors of the insurer.’’
For more information see state specific requirements.
|SC||Statutory requirements outlined in S.C. Code Ann. §38-9-10 (stock companies) or 38-9-20 (mutual companies) or the statutory requirements of the applicant's home state, whichever is greater.|
Property and Casualty
Property and Casualty
Life, Accident, Health and Property and Casualty Insurers:
See Utah Code 31A-5-211
Traditional Stock Co.
For initial licensing purposes, an applicant must also have an additional amount of surplus (excluding capital stock) of not less than $500,000 (Virginia Administrative Letter 2002-7).
Specific to the lines of business to be transacted (RCW §48.05.340).
|WV||Fully paid in capital stock, if a stock insurer, or surplus, if a mutual insurer, of at least one million dollars. In addition, each insurer shall have and maintain additional surplus funds of at least one million dollars (W. Va. Code §33-3-5b)|
Minimum Capital and Surplus required is the greater of $3 million or percentage of prior 12 months premium. See Compulsory and Security Surplus Calculation Form from state web-site. Ref: 618.21(1)(a), 611.19, 623.11, 623.12 Wis Stats, Ins 51.80 Wis Adm Code
Capital and Surplus means the amount by which the value of all of the assets of the captive insurance company exceeds all of the liabilities of the captive insurance company, as determined under the method of accounting utilized by the captive insurance company in accordance with the applicable provisions of this ...How is the minimum capital requirement calculated? ›
Subject to paragraph 3, the Minimum Capital Requirement shall be calculated as a linear function of a set or sub-set of the following variables: the undertaking's technical provisions, written premiums, capital-at-risk, deferred tax and administrative expenses. The variables used shall be measured net of reinsurance.What is the minimum capital requirement Solvency II? ›
Under Solvency II, capital requirements are determined on the basis of a 99.5% value-at-risk measure over one year, meaning that enough capital must be held to cover the market-consistent losses that may occur over the next year with a confidence level of 99.5%, resulting from changes in market values of assets held by ...What does statutory capital mean? ›
Statutory Capital — the amount of capital and/or surplus required in order for an insurance company to obtain and retain a license to do business. May be stated as a minimum dollar amount or by reference to a solvency ratio or a solvency margin.What is minimum capital requirement for reinsurer company? ›
The minimum capital for a direct broker is 7.5 million rupees, 40 million rupees for a reinsurance broker and 50 million rupees for a composite broker.What are the capital and surplus requirements for insurance and reinsurance companies? ›
What are the capital and surplus requirements for insurance and reinsurance companies? Insurance companies are required to have a minimum paid-up equity capital of 1 billion rupees, whereas a minimum paid-up capital of 2 billion rupees has been prescribed for reinsurance companies.What is minimum capital requirement for company? ›
The Companies Act, 2013 earlier mandated that all Private Limited Companies have a minimum paid-up capital of Rs. 1 lakh.What is the usual minimum capital requirement rate? ›
The minimum capital requirement, which is the same for each firm and is 4.5 percent; The stress capital buffer requirement, which is determined from the stress test results, and is at least 2.5 percent; and.What is the purpose of minimum capital requirement? ›
Capital requirements are set to ensure that banks and depository institutions' holdings are not dominated by investments that increase the risk of default. They also ensure that banks and depository institutions have enough capital to sustain operating losses (OL) while still honoring withdrawals.What are the two types of capital requirement? ›
There are three types of business capital that every business needs to prepare: working capital, debt capital, and equity capital.
The solvency capital requirement is the amount of funds that insurance and reinsurance companies are required to hold under the European Union's Solvency II directive in order to have a 99.5% confidence they could survive the most extreme expected losses over the course of a year.What is the minimum Tier 2 capital ratio? ›
The capital reserve ratio for a bank is prescribed at 8%. It stands at 6% for Tier 1 capital and the balance 2% for Tier 2 capital. Usually, a bank's capital ratio is calculated by dividing its capital by its total risk-based assets.How do you calculate statutory surplus? ›
The balance sheet definition says surplus = assets-liabilities. The income statement definition says surplus = last year's surplus + current year's income.What is the difference between capital and surplus? ›
While capital doesn't replace loss reserves per se, it's part of the formula that determines asset adequacy. Surplus, on the other hand, is not part of this formula. Surplus is funds in excess of that which is required to meet the company's liabilities.What is a statutory example? ›
In their most basic form, statues are written laws that can be looked up or located in databases or books. These come in the form of bills or acts. Common examples of statutory law include traffic violations like running a red light and the minimum legal drinking age of 21, to name a few.What minimum capital stock or surplus must an insurer have? ›
To begin transacting insurance, must have capital of at least $1 million and surplus of at least $1 million. Thereafter, capital must be maintained (“unimpaired”) of at least $1 million. Also, subject to Risk Based Capital Act. Must maintain surplus of at least $1 million.What is required surplus in insurance? ›
Surplus — the amount by which an insurer's assets exceed its liabilities. It is the equivalent of "owners' equity" in standard accounting terms. The ratio of an insurer's premiums written to its surplus is one of the key measures of its solvency.Do insurance companies have capital requirements? ›
Issue: Regulators are charged with ensuring that insurance companies can fulfill their financial obligations to policyholders. One way they do this is by imposing a risk-based capital (RBC) requirement.What is the statutory surplus and why is it an important measure for an insurance company? ›
A statutory surplus refers to the money that remains after an accounting system by an insurance regulatory board has deducted an insurance company's liabilities from its assets. The remainder is expected to be used to offset possible losses the company might suffer in the future.What are the 3 most common insurance needs that all businesses must have? ›
When you're starting your own business, some types of coverage you should make sure to have are: General liability insurance. Professional liability insurance. Workers' compensation insurance.
Capital surplus, or share premium, most commonly refers to the surplus resulting after common stock is sold for more than its par value. Capital surplus includes equity or net worth otherwise not classifiable as capital stock or retained earnings.Why capital is required for setting up an industry? ›
Startup capital is what entrepreneurs use to pay for any or all of the required expenses involved in creating a new business. This includes paying for the initial hires, obtaining office space, permits, licenses, inventory, research and market testing, product manufacturing, marketing, or any other operational expense.What are examples of capital requirements? ›
The capital requirements include all investments you need, before you start. In practice, these are all expenses in the first month of your business. Classic examples would be notary, counseling or real estate brokerage costs. The startup expenses have to be considered.What is the minimum requirement of private limited company? ›
As mentioned above, to get itself legally registered, a private limited company must show a minimum number of two and a maximum number of 200 members. This is a statutory requirement as mandated by the Companies Act 2013.What is minimum capital adequacy ratio? ›
Definition: Capital Adequacy Ratio (CAR) is the ratio of a bank's capital in relation to its risk weighted assets and current liabilities. It is decided by central banks and bank regulators to prevent commercial banks from taking excess leverage and becoming insolvent in the process.Is capital requirement the same as reserve requirement? ›
Where a capital requirement specifies the amount of capital that a bank must hold, a reserve requirement specifies the amount of liquid assets that the bank must hold. This makes the early capital requirement that banks hold a certain amount of gold relative to their liabilities look a lot like a reserve requirement.What are the 4 types of capital? ›
The four major types of capital include working capital, debt, equity, and trading capital. Trading capital is used by brokerages and other financial institutions.
- Nature and Size of Business. The working capital need of a business depends a great deal on its nature and size. ...
- Business Cycle. Business cycle too has a significant impact on the working capital needs of a business. ...
- Production Cycle. ...
- Seasonal Fluctuations. ...
- Operational Efficiency.
It is useful to differentiate between five kinds of capital: financial, natural, produced, human, and social. All are stocks that have the capacity to produce flows of economically desirable outputs. The maintenance of all five kinds of capital is essential for the sustainability of economic development.How is SCR Solvency II calculated? ›
It is calculated by estimating the cost of capital equal to the SCR necessary to support the insurance and reinsurance obligations over their lifetime in respect of those risks which cannot be hedged – these include underwriting risk, reinsurance credit risk, operational risk and “unavoidable market risk”.
The main solvency ratios are the debt-to-assets ratio, the interest coverage ratio, the equity ratio, and the debt-to-equity (D/E) ratio.What is financial management SCR? ›
Sustainability. Climate Change Risk Policy, Culture, and Governance. Green and Sustainable Finance: Instruments and Markets. Climate Risk Measurement and Management.What is tier 1 and tier 2 and Tier 3? ›
Tier 1,2,3 cities. Cities in India have been classified into Tier 1, 2 and 3 categories. The most developed ones are called tier 1 and the underdeveloped ones are called tier 2 and tier 3 cities.What is tier 1 and tier 2 and Tier 3 capital? ›
A bank's total capital is calculated as a sum of its tier 1 and tier 2 capital. Regulators use the capital ratio to determine and rank a bank's capital adequacy. Tier 3 capital consists of subordinated debt to cover market risk from trading activities. Monetary Policy. Basel Accords Guard Against Financial Shocks.What is the difference between tier 1 and tier 2 capital? ›
Tier I capital consists mainly of share capital and disclosed reserves and it is a bank's highest quality capital because it is fully available to cover losses. Tier II capital, on the other hand, consists of certain reserves and certain types of subordinated debt.What is a statutory surplus? ›
Similar to owners' equity or net worth, the statutory surplus is the excess of assets over liabilities as determined by the accounting treatment of assets and liabilities by state insurance regulators.How statutory reserve is calculated? ›
There are two approaches used to calculate statutory reserves, namely a rule-based method and a principle-based method. The majority of states prefer the latter approach, which uses standardized models and assumptions to prescribe how much funds insurers must reserve to reach the required capital requirement.What is the formula for surplus for insurance companies? ›
A policyholder surplus is the assets of a policyholder-owned insurance company minus its liabilities.What is an example of surplus? ›
A surplus is when you have more of something than you need or plan to use. For example, when you cook a meal, if you have food remaining after everyone has eaten, you have a surplus of food.What are the types of surplus? ›
There are two types of economic surplus: consumer surplus and producer surplus. As a rule, consumer surplus and producer surplus are mutually exclusive, in that what's good for one is bad for the other.
This method is also known as Surplus Capital Method, Highest Relative Capital Method, Excess Capital Method or Quotient Method. Under this method, first the capitals are compared to the profit sharing ratio. The excess capital (actual capital less capital proportionate to the profit sharing ratio) is paid first.What are statutory requirements? ›
In general, a statutory requirement is an established rule by law, like copyright, trademark protections, Sarbanes-Oxley Act (SOX). A regulatory requirement is established by government agencies.What are the types of statutory? ›
- Codifying statute: Codifying statutes are those statutes which are in written form. ...
- Consolidating statute: ...
- Declaratory statute: ...
- Remedial statute: ...
- Enabling statute: ...
- Disabling statute: ...
- Penal statute: ...
- Taxing statute:
The statute is viewed as seeking to protect both the operation and the integrity of the government, and "covers all matters confided to the authority of an agency or department." United States v. Rogers, 466 U.S. 475, 479 (1984).What is surplus for an insurance company? ›
What is surplus? Surplus as shown in Figure 1 represents the difference between assets and liabilities for a health insurance company. It is a term that is applicable to both for-profit and not-for-profit insurance companies. FIGURE 1: ASSETS, LIABILITIES, AND SURPLUS.What is meant by capital surplus? ›
Capital surplus, or premium, is the excess remaining after common stock is sold for more than its par value. Capital surplus can also result from the proceeds of stock bought back and then resold and from donated stock.What is insurance excess and surplus? ›
Excess and Surplus is a specialty insurance market that is informed by the focused, industry knowledge of wholesale insurance distributors who can tailor coverage to meet limits for difficult exposures that a primary insurance policy (or even a secondary/excess policy procured for a different exposure) doesn't cover.What does capital mean in insurance? ›
Capital — in captive insurance, an all-purpose term having one of three different meanings: the amount initially needed to set up a captive, or the initial amount paid in; the total of this paid-in capital plus other forms of capital, like letters of credit; or the sum of these two plus accumulated surplus.What is statutory surplus insurance? ›
Similar to owners' equity or net worth, the statutory surplus is the excess of assets over liabilities as determined by the accounting treatment of assets and liabilities by state insurance regulators.How is surplus calculated in insurance business? ›
A policyholder surplus is the assets of a policyholder-owned insurance company minus its liabilities. Policyholder surplus reflects an insurance company's financial health and provides a source of funds.
Required Surplus means the amount of Closed Block Business Surplus required to maintain the Closed Block Business' Total Adjusted Capital, expressed as a percentage of the Closed Block Business' Company Action Level RBC, at 100% (for purposes of such calculation, (a) treating the Closed Block Business as if it were a ...What is surplus and example? ›
A surplus is when you have more of something than you need or plan to use. For example, when you cook a meal, if you have food remaining after everyone has eaten, you have a surplus of food. You can choose to throw the food out, stockpile it, or try to find someone else, like a neighbor, who wants to eat the food.What is a good premium to surplus ratio? ›
The ratio is computed by dividing net premiums written by surplus. The lower the ratio, the greater the company's financial strength. State regulators across USA have established a premium-to-surplus ratio of no higher than 3-to-1 as a guideline.What is the difference between surplus lines and admitted? ›
Non-admitted insurers, also known as excess and surplus lines carriers, sell policies that aren't backed by your state. While they don't fall under traditional insurance regulations, many states do regulate non-admitted carriers. These regulations are usually less strict than those followed by admitted insurers.What are the capital requirements for an insurance company? ›
To begin transacting insurance, must have capital of at least $1 million and surplus of at least $1 million. Thereafter, capital must be maintained (“unimpaired”) of at least $1 million. Also, subject to Risk Based Capital Act.