A. Transactions by nonstock corporations licensed under this chapter with their affiliates shall be subject to the following standards:

Terms Used In Virginia Code 38.2-4232

  • Assets: (1) The property comprising the estate of a deceased person, or (2) the property in a trust account.
  • Commission: means the State Corporation Commission. See Virginia Code 38.2-100
  • Corporation: A legal entity owned by the holders of shares of stock that have been issued, and that can own, receive, and transfer property, and carry on business in its own name.
  • Insurer: means an insurance company. See Virginia Code 38.2-100
  • Liabilities: The aggregate of all debts and other legal obligations of a particular person or legal entity.
  • Nonstock corporation: means a foreign or domestic nonstock corporation which is subject to regulation and licensing under this chapter and which offers or administers subscription contracts to contract holders as part of a plan. See Virginia Code 38.2-4201
  • Surplus: means the excess of total admitted assets over the liabilities of a nonstock corporation licensed under this chapter, and shall include any contingency reserves maintained pursuant to § 38. See Virginia Code 38.2-4230
  • Transaction: means any (i) sale, purchase, exchange, renting or leasing arrangement, loan or extension of credit, arrangement for the assumption, extension or renewal of any obligation or liability, guaranty or surety arrangement, or investment; (ii) dividend or distribution of cash or property; (iii) reinsurance treaty or risk-sharing arrangement; (iv) management contract, service contract or cost-sharing arrangement; or (v) other arrangement, relationship or dealings that the Commission by order, rule or regulation determines to be a transaction contemplated by this article. See Virginia Code 38.2-4230

1. The terms shall be fair and reasonable;

2. Charges and fees for service performed shall be reasonable;

3. Expenses incurred and payments received shall be allocated to the insurer in conformity with customary insurance accounting practices consistently applied;

4. The books, accounts, and records of each party shall disclose clearly and accurately the precise nature and details of the transactions;

5. The nonstock corporation‘s surplus following any transaction with affiliates involving more than one-sixth of one percent of admitted assets or one percent of surplus as of the immediately preceding December 31, whichever is less, shall be reasonable in relation to the nonstock corporation‘s outstanding liabilities and adequate to its financial needs; and

6. The transaction is in the best interest of the subscribers.

B. For purposes of this article, in determining whether a nonstock corporation’s surplus is reasonable in relation to the nonstock corporation’s outstanding liabilities and adequate to its financial needs, the following factors, among others, shall be considered:

1. The size of the nonstock corporation as measured by its assets, surplus, reserves, business in force, and other appropriate criteria;

2. The nonstock corporation’s method of operation and manner of doing business;

3. The nature and extent of the nonstock corporation’s risk-sharing arrangements;

4. The quality, diversification, and liquidity of the nonstock corporation’s investment portfolio;

5. The recent past and projected future trend in the size of the nonstock corporation’s surplus;

6. The adequacy of the nonstock corporation’s reserves; and

7. The quality and liquidity of investments in subsidiaries. The Commission in its judgment may classify any investment as a nonadmitted asset for the purpose of determining the adequacy of surplus.

1989, c. 606; 1992, c. 588.

  Previous section
Next section  
 Article 2 Contents