Jose Montemayor, a former Texas insurance commissioner and a principal in an insurance-focused private equity firm, is leading efforts to acquire a Virginia insurer that has been in receivership since February 2009.

The Virginia State Corporation Commission has worked out a negotiating agreement with Prosperity Life Insurance Group L.L.C., Austin, that could lead to the sale of Shenandoah Life Insurance Company, Roanoke, Va., officials say.

Alfred Gross, the Virginia insurance commissioner, has been Shenandoah Life’s deputy receiver and has been trying to rehabilitate the company.

When Shenandoah Life was placed in receivership, it was writing life insurance, annuities and dental insurance in 31 states and the District of Columbia. The company has not been selling new coverage but has been paying most types of claims.

Gross and Prosperity Life are still negotiating a definitive purchase agreement, and any agreement would have to be approved by the State Corporation Commission, officials say.

Montemayor, who was the Texas commissioner from 1992 and 2005, is now president of Prosperity Life Insurance Group L.L.C., which was formed in March, and of Prosperity Life Insurance Group Inc., Austin, a holding company formed in May.

Incorporation papers list Montemayor as the Prosperity Life companies’ registered agent, and they list Montemayor’s address as the address of the headquarters of Black Diamond Capital Partners, Austin. Montemayor has worked for Black Diamond, a private equity firm led by Jay Novik, since 2005.

Black Diamond made news in November 2007 when it helped the senior managers of AmeriLife Group L.L.C., Clearwater, Fla., buy the company from the previous owners. Black Diamond also has invested in Integro Ltd., New York, an insurance brokerage firm.

A deal with Prosperity Life would create an opportunity for Shenandoah Life “to remain an important presence in the regions it serves and to preserve jobs in Roanoke,” Virginia officials say.

Montemayor says his team is pleased to have the opportunity to develop and refine plans to recapitalize Shenandoah Life.

“The recapitalization aims to restore Shenandoah’s financial strength to allow it to continue to serve policyholders as it has been doing since its founding in 1916,” Montemayor says in a statement.