2006 Code of Virginia § 38.2-1213 - Nonassessable policies

38.2-1213. Nonassessable policies.

A. The Commission may issue a certificate authorizing the reciprocal toreduce or extinguish the contingent assessment liability of subscribers underits policies then in force in this Commonwealth, and to omit provisionsimposing contingent assessment liability in all policies delivered or issuedfor delivery in this Commonwealth for as long as all such surplus topolicyholders remains unimpaired. The certificate may be issued if, in thecase of a domestic or foreign reciprocal, the reciprocal has surplus topolicyholders of at least four million dollars, or, if in the case of analien reciprocal, the reciprocal has a trusteed surplus, as defined in 38.2-1031, of at least four million dollars. No certificate may be issueduntil an application of the attorney has been approved by the subscribers'advisory committee.

However, any reciprocal that on June 30, 1991, was authorized to issue andwas engaged in issuing policies without contingent liability may continue todo so until July 1, 1994, by maintaining at all times the minimum surplus topolicyholders if a domestic or foreign reciprocal, and the minimum trusteedsurplus if an alien reciprocal, required at the time of authorization.

B. The Commission shall issue this certificate if it determines that thereciprocal's surplus to policyholders is reasonable in relation to thereciprocal's outstanding liabilities and adequate to meet its financialneeds. In making that determination the following factors, among others,shall be considered:

1. The size of the reciprocal as measured by its assets, capital and surplus,reserves, premium writings, insurance in force and other appropriate criteria;

2. The extent to which the reciprocal's business is diversified amongdifferent classes of insurance;

3. The number and size of risks insured in each class of insurance;

4. The extent of the geographical dispersion of the reciprocal's insuredrisks;

5. The nature and extent of the reciprocal's reinsurance program;

6. The quality, diversification, and liquidity of the reciprocal's investmentportfolio;

7. The recent past and trend in the size of the reciprocal's surplus topolicyholders;

8. The surplus to policyholders maintained by other comparable insurers; and

9. The adequacy of the reciprocal's reserves.

C. Upon impairment of the surplus to policyholders, the Commission shallrevoke the certificate. After revocation, the reciprocal shall not issue orrenew any policy without providing for the contingent assessment liability ofsubscribers.

D. The Commission shall not authorize a domestic reciprocal to extinguish thecontingent assessment liability of any of its subscribers or in any of itspolicies to be issued, unless it has the required surplus to policyholdersand extinguishes the contingent assessment liability of all of itssubscribers and in all policies to be issued for all classes of insurancewritten by it. However, if required by the laws of another state in which thedomestic reciprocal is transacting the business of insurance as a licensedinsurer, it may issue policies providing for the contingent assessmentliability of its subscribers acquiring policies in that state and need notextinguish the contingent assessment liability applicable to policies alreadyin force in that state.

(1952, c. 317, 38.1-703; 1977, cc. 58, 322; 1986, c. 562; 1991, c. 261.)