2006 Code of Virginia § 38.2-1034 - How domestic mutual insurers may acquire initial surplus

38.2-1034. How domestic mutual insurers may acquire initial surplus.

Any domestic mutual insurer or mutual assessment property and casualtyinsurer may, without pledging any of its assets, provide a guaranty fundsufficient to defray the expenses of its organization and its initial minimumsurplus required to obtain a license to do the business of insurance. Thefund may be increased with the prior approval of the Commission by receivingadvances or by borrowing funds upon an agreement that the funds, includinginterest at a rate not exceeding the one-year treasury bill interest rateplus three percentage points at the time the loan is made or renewed, shallbe repaid only if the insurer has sufficient earned surplus. The agreementshall provide that the insurer may repay the advances or loans or any part ofthem whenever it is able to do so in accordance with the requirements of thisarticle. No commission or brokerage shall be paid in acquiring the funds. Norepayments of principal, either in whole or in part, and no payments ofinterest, shall be made without the prior written approval of the Commission.Neither the principal advanced or borrowed nor any interest accrued thereonunder this provision shall form a part of the legal liabilities of theinsurer until the Commission approves the repayment of such principal or thepayment of interest thereon. However, all statements published or filed bythe insurer shall show accrued interest and the amount of principal remainingunpaid. All claims under the instrument shall be subordinated topolicyholder, claimant and beneficiary claims as well as debts owed to allother classes of creditors.

(Code 1950, 38-512; 1952, c. 317, 38.1-92; 1960, c. 291, 38.1-92.1;1970, c. 595; 1980, c. 187; 1986, c. 562; 1994, c. 503.)