2006 Code of Virginia § 38.2-1330 - Standards for transactions with affiliates; adequacy of surplus

38.2-1330. Standards for transactions with affiliates; adequacy of surplus.

A. Material transactions by registered insurers with their affiliates shallbe subject to the following standards:

1. The terms shall be fair and reasonable;

2. Charges or fees for services performed shall be reasonable;

3. Expenses incurred and payments received shall be allocated to the insurerin conformity with customary insurance accounting practices consistentlyapplied;

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

5. The insurer's surplus to policyholders following any dividends ordistributions to shareholder affiliates shall be reasonable in relation tothe insurer's outstanding liabilities and adequate to its financial needs.

B. For purposes of this article, in determining whether an insurer's surplusto policyholders is reasonable in relation to the insurer's outstandingliabilities and adequate to its financial needs, the following factors, amongothers, shall be considered:

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

2. The extent to which the insurer's business is diversified among differentclasses of insurance;

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

4. The extent of the geographical dispersion of the insurer's insured risk;

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

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

7. The recent past and projected future trend in the size of the insurer'ssurplus to policyholders;

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

9. The adequacy of the insurer's reserves;

10. The quality of the insurer's earnings and the extent to which thereported earnings of the insurer include extraordinary items; and

11. The quality and liquidity of investments in subsidiaries. The Commissionin its judgment may classify any investment as a nonadmitted asset for thepurpose of determining the adequacy of surplus to policyholders.

C. No domestic insurer shall enter into transactions that are part of a planor series of like transactions with persons within the holding company systemif the purpose of those separate transactions is to avoid the statutorythreshold amount and thus avoid the review that otherwise would be required.

D. The Commission shall be notified in writing within 30 days of anyinvestment of the domestic insurer in any one corporation if the totalinvestment in such corporation by the insurance holding company systemexceeds ten percent of such corporation's voting securities.

(1973, c. 505, 38.1-178.3; 1986, c. 562; 1987, c. 417; 1992, c. 588; 2006,c. 577.)