2006 Code of Virginia § 38.2-1705 - Assessments

38.2-1705. Assessments.

A. For the purpose of providing the funds necessary to carry out the powersand duties of the Association, the board of directors shall assess the memberinsurers, separately for each account, at any time and for any amounts as theboard finds necessary. Assessments shall be due not less than thirty daysafter written notice has been given to the member insurers. Interest shall becompounded quarterly and be based upon the average ninety day treasury billrate for the most recently completed calendar quarter as published in theFederal Reserve Bulletin. Interest will accrue on and after the due date.

B. There shall be two classes of assessments, as follows:

1. Class A assessments shall be made for the purpose of meetingadministrative and legal costs and other expenses, including the cost ofexaminations conducted under the authority of 38.2-1708 E. Class Aassessments may be made whether or not related to a particular impaired orinsolvent insurer.

2. Class B assessments shall be made to the extent necessary to carry out thepowers and duties of the Association under 38.2-1704 with regard to animpaired or an insolvent insurer.

C. 1. The amount of any Class A assessment shall be determined by the boardand may be made on a pro-rata or nonpro-rata basis. If pro rata, the boardmay provide that it be credited against future Class B assessments. Anonpro-rata assessment shall not exceed $200 per member insurer in any onecalendar year. With respect to any insurer that became impaired or insolventafter January 1, 1991, the amount of any Class B assessment shall beallocated for assessment purposes among the accounts pursuant to anallocation formula which may be based on the premiums or reserves of theimpaired or insolvent insurer or any other standard deemed by the board inits sole discretion as being fair and reasonable under the circumstances.

2. Class B assessments against member insurers for each account shall be inthe proportion that the premiums received on business in this Commonwealth byeach assessed member insurer on policies or contracts covered by each accountfor the three most recent calendar years for which information is availablepreceding the year in which the insurer became impaired or insolvent bear tosuch premiums received on business in this Commonwealth for such calendaryears by all assessed member insurers.

3. Assessments for funds to meet the requirements of the Association withrespect to an impaired or insolvent insurer shall not be made until necessaryto implement the purposes of this chapter. Classification of assessmentsunder subsection B of this section and computation of assessments under thissubsection shall be made with a reasonable degree of accuracy, recognizingthat exact determinations may not always be possible.

D. The Association may abate or defer, in whole or in part, the assessment ofa member insurer if, in the opinion of the board, payment of the assessmentwould endanger the ability of the member insurer to fulfill its contractualobligations. In the event an assessment against a member insurer is abated ordeferred in whole or in part, the amount by which the assessment is abated ordeferred may be assessed against the other member insurers in a mannerconsistent with the basis for assessments set forth in this section.

E. The total of all assessments upon a member insurer for each account shallnot in any one calendar year exceed two percent of the member insurer'spremiums received on the policies covered by the account in this Commonwealthduring the calendar year preceding the assessment. If the maximum assessment,together with the other assets of the Association in any account, does notprovide in any one year in any account an amount sufficient to carry out theresponsibilities of the Association, the necessary additional funds shall beassessed as soon as permitted by this chapter.

F. The board may refund to member insurers, in proportion to the contributionof each insurer to that account, the amount the assets of the account exceedthe amount the board finds necessary to fulfill the Association's obligationsduring the coming year. In determining the refunds, assets accruing from netrealized gains and income from investments shall be included. A reasonableamount may be retained in any account to provide funds for the continuingexpenses of the Association and for future losses if refunds are impractical.

G. It shall be proper for any member insurer to consider the amountreasonably necessary to meet its Class A assessment obligations indetermining its premium rates and policyowner dividends for any class ofinsurance covered by this chapter.

H. The Association shall issue to each insurer paying an assessment underthis chapter, other than a Class A assessment, a certificate of contributionin a form prescribed by the Commission, for the amount of the assessmentpaid, excluding interest penalties. All outstanding certificates shall be ofequal priority without reference to amounts or dates of issue. A certificateof contribution may be shown by the insurer on its financial statement as anasset. This shall be shown in a form, in an amount, and for a period of timeapproved by the Commission.

(1976, c. 330, 38.1-482.23; 1980, c. 186; 1986, c. 562; 1992, c. 299.)