{"formats":[{"name":"JSON","format":"json","url":"\/downloads\/2025\/code-json\/38.2-1330.json"},{"name":"Plain Text","format":"text","url":"\/downloads\/2025\/code-text\/38.2-1330.txt"},{"name":"XML","format":"xml","url":"\/downloads\/2025\/code-xml\/38.2-1330.xml"},{"name":"HTML","format":"html","url":"\/downloads\/2025\/code-html\/38.2-1330.html"}],"law_id":77796,"edition_id":1,"section_id":77796,"structure_id":13290,"section_number":"38.2-1330","catch_line":"Standards for transactions within an insurance holding company system; adequacy of surplus","history":"1973, c. 505, \u00a7 38.1-178.3; 1986, c. 562; 1987, c. 417; 1992, c. 588; 2006, c. 577; 2014, c. 309; 2022, c. 113.","full_text":"A\n\nTransactions within an insurance holding company system to which an insurer subject to registration is a party shall be subject to the following standards:1\n\nThe terms shall be fair and reasonable;2\n\nAgreements for cost-sharing services and management shall include such provisions as required by rule or regulation promulgated by the Commission;3\n\nCharges or fees for services performed shall be reasonable;4\n\nExpenses incurred and payments received shall be allocated to the insurer in conformity with customary insurance accounting practices consistently applied;5\n\nThe books, accounts, and records of each party shall disclose clearly and accurately the precise nature and details of the transactions, including such accounting information as is necessary to support the reasonableness of the charges or fees to the respective parties;6\n\nThe insurer’s surplus as regards policyholders following any dividends or distributions to shareholder affiliates shall be reasonable in relation to the insurer’s outstanding liabilities and adequate to meet its financial needs;7\n\nIf an insurer subject to this article is deemed by the Commission to be in a hazardous financial condition as defined by 14VAC5-290 or a condition that would be grounds for supervision, conservation, or a delinquency proceeding, then the Commission may require the insurer to secure and maintain either a deposit held by the Commission or a bond as determined by the insurer at the insurer’s discretion, for the protection of the insurer for the duration of the contract, agreement, or existence of the condition for which the Commission required deposit or bond.\n\t\t\t\tIn determining if a deposit or bond is required, the Commission shall consider whether concerns exist with respect to the affiliated person’s ability to fulfill the contract or agreement if the insurer were to be put into liquidation. Once the insurer is deemed to be in a hazardous financial condition or a condition that would be grounds for supervision, conservation, or a delinquency proceeding, and a deposit or bond is necessary, the Commission has the discretion to determine the amount of the deposit or bond, not to exceed the value of the contract or agreement in any one year, and whether such deposit or bond shall be required for a single contract, multiple contracts, or a contract only with a specific person;8\n\nAll records and data of the insurer held by an affiliate are and remain the property of the insurer, are subject to the control of the insurer, are identifiable, and are segregated or readily capable of segregation at no additional cost to the insurer from all other persons’ records and data. This includes all records and data that are otherwise the property of the insurer, in whatever form maintained, including claims and claim files, policyholder lists, application files, litigation files, premium records, rate books, underwriting manuals, personnel records, financial records, or similar records within the possession, custody, or control of the affiliate. At the request of the insurer, the affiliate shall provide that the receiver may (i) obtain a complete set of all records of any type that pertain to the insurer’s business, (ii) obtain access to the operating systems on which the data is maintained, (iii) obtain the software that runs those systems either through assumption of licensing agreements or otherwise, and (iv) restrict the use of the data by the affiliate if it is not operating the insurer’s business. The affiliate shall provide a waiver of any landlord lien or other encumbrance to give the insurer access to all records and data in the event of the affiliate’s default under a lease or other agreement; and9\n\nPremiums or other funds belonging to the insurer that are collected by or held by an affiliate are the exclusive property of the insurer and subject to the control of the insurer. Any right of offset in the event that an insurer is placed into receivership shall be subject to Chapter 15 (§ 38.2-1500 et seq.).B\n\nTransactions described in subdivisions 1 through 7 that involve a domestic insurer and any person in its insurance holding company system, including amendments or modifications of affiliate agreements previously filed pursuant to this section, that are subject to materiality standards contained in such subdivisions may not be entered into unless the insurer has notified the Commission in writing of its intention to enter into the transaction at least 30 days prior thereto, or such shorter period as the Commission may permit, and the Commission has not disapproved it within that period. The notice for amendments or modifications shall include the reasons for the change and the financial impact on the domestic insurer. Informal notice shall be reported, within 30 days after a termination of a previously filed agreement, to the Commission for determination of the type of filing required, if any. Transactions to which this subsection applies, with their materiality standards, are:1\n\nSales, purchases, exchanges, loans, extensions of credit, or investments, provided the transactions are equal to or exceed:\n\t\t\t\ta. With respect to nonlife insurers, the lesser of three percent of the insurer’s admitted assets or 25 percent of surplus as regards policyholders as of the immediately preceding December 31; or\n\t\t\t\tb. With respect to life insurers, three percent of the insurer’s admitted assets as of the immediately preceding December 31;2\n\nLoans or extensions of credit to any person who is not an affiliate, where the insurer makes loans or extensions of credit with the agreement or understanding that the proceeds of the transactions, in whole or in substantial part, are to be used to make loans or extensions of credit to, to purchase assets of, or to make investments in, any affiliate of the insurer making the loans or extensions of credit, provided the transactions are equal to or exceed:\n\t\t\t\ta. With respect to nonlife insurers, the lesser of three percent of the insurer’s admitted assets or 25 percent of surplus as regards policyholders as of the immediately preceding December 31; or\n\t\t\t\tb. With respect to life insurers, three percent of the insurer’s admitted assets as of the immediately preceding December 31;3\n\nReinsurance agreements or modifications thereto, including:\n\t\t\t\ta. All reinsurance pooling agreements; and\n\t\t\t\tb. Agreements in which the reinsurance premium or a change in the insurer’s liabilities, or the projected reinsurance premium or a change in the insurer’s liabilities in any of the next three years, equals or exceeds five percent of the insurer’s surplus as regards policyholders, as of the immediately preceding December 31, including those agreements that may require as consideration the transfer of assets from an insurer to a nonaffiliate, if an agreement or understanding exists between the insurer and nonaffiliate that any portion of the assets will be transferred to one or more affiliates of the insurer;4\n\nAll management agreements, service contracts, tax allocation agreements, guarantees, and cost-sharing arrangements;5\n\nGuarantees when made by a domestic insurer, provided, however, that a guarantee that is quantifiable as to amount is not subject to the notice requirements of this subdivision unless it exceeds the lesser of one-half of one percent of the insurer’s admitted assets or 10 percent of surplus as regards policyholders as of the immediately preceding December 31. Further, all guarantees that are not quantifiable as to amount are subject to the notice requirements of this subdivision;6\n\nDirect or indirect acquisitions or investments in a person that controls the insurer or in an affiliate of the insurer in an amount that, together with its present holdings in such investments, exceeds two and one-half percent of the insurer’s surplus to policyholders. The Commission may exempt such a transaction by regulation; and7\n\nAny material transactions that the Commission determines may adversely affect the interests of the insurer’s policyholders.\n\t\t\t\tNothing in this subsection shall be deemed to authorize or permit any transactions that, in the case of an insurer not a member of the same insurance holding company system, would be otherwise contrary to law.C\n\nIn addition:1\n\nNotwithstanding the control of a domestic insurer by any person, the officers and directors of the insurer shall not thereby be relieved of any obligation or liability to which they would otherwise be subject by law, and the insurer shall be managed so as to assure its separate operating identity consistent with this article;2\n\nNothing in this section shall preclude a domestic insurer from having or sharing a common management or cooperative or joint use of personnel, property, or services with one or more other persons under arrangements meeting the standards of subsection A;3\n\nNot less than one-third of the directors of a domestic insurer, and not less than one-third of the members of each committee of the board of directors of any domestic insurer, shall be persons who are not officers or employees of the insurer or of any entity controlling, controlled by, or under common control with the insurer and who are not beneficial owners of a controlling interest in the voting stock of the insurer or entity. At least one such person shall be included in any quorum for the transaction of business at any meeting of the board of directors or any committee thereof;4\n\nThe board of directors of a domestic insurer shall establish one or more committees composed solely of directors who are not officers or employees of the insurer or of any entity controlling, controlled by, or under common control with the insurer and who are not beneficial owners of a controlling interest in the voting stock of the insurer or any such entity. The committee or committees shall have responsibility for nominating candidates for director for election by shareholders or policyholders, evaluating the performance of officers deemed to be principal officers of the insurer, and recommending to the board of directors the selection and compensation of the principal officers;5\n\nThe provisions of subdivisions 3 and 4 shall not apply to a domestic insurer if the person controlling the insurer, such as an insurer, a mutual insurance holding company, or a publicly held corporation, has a board of directors and committees thereof that meet the requirements of subdivisions 3 and 4 with respect to such controlling entity; and6\n\nAn insurer may make application to the Commission for a waiver from the requirements of this subsection if the insurer’s annual direct written and assumed premium, excluding premiums reinsured with the Federal Crop Insurance Corporation and National Flood Insurance Program, is less than $300 million. An insurer may also make application to the Commission for a waiver from the requirements of this subsection based upon unique circumstances. The Commission may consider various factors including the type of business entity, volume of business written, availability of qualified board members, or ownership or organizational structure of the entity.D\n\nFor purposes of this article, in determining whether an insurer’s surplus as regards policyholders is reasonable in relation to the insurer’s outstanding liabilities and adequate to meet its financial needs, the following factors, among others, shall be considered:1\n\nThe size of the insurer as measured by its assets, capital and surplus, reserves, premium writings, insurance in force, and other appropriate criteria;2\n\nThe extent to which the insurer’s business is diversified among different lines of insurance;3\n\nThe number and size of risks insured in each line of business;4\n\nThe extent of the geographical dispersion of the insurer’s insured risk;5\n\nThe nature and extent of the insurer’s reinsurance program;6\n\nThe quality, diversification, and liquidity of the insurer’s investment portfolio;7\n\nThe recent past and projected future trend in the size of the insurer’s surplus to policyholders;8\n\nThe recent past and projected future trend in the size of the insurer’s investment portfolio;9\n\nThe surplus as regards policyholders maintained by other comparable insurers;10\n\nThe adequacy of the insurer’s reserves;11\n\nThe quality of the insurer’s earnings and the extent to which the reported earnings of the insurer include extraordinary items; and12\n\nThe quality and liquidity of investments in affiliates. The Commission in its judgment may classify any investment as a nonadmitted asset for the purpose of determining the adequacy of surplus as regards policyholders.E\n\nNo domestic insurer shall enter into transactions that are part of a plan or series of like transactions with persons within the insurance holding company system if the purpose of those separate transactions is to avoid the statutory threshold amount and thus avoid the review that otherwise would be required. If the Commission determines that separate transactions were entered into over any 12-month period for that purpose, the Commission may exercise its authority under § 38.2-1334.2:2.F\n\nThe Commission, in reviewing transactions pursuant to subsection B, shall consider whether the transactions comply with the standards set forth in subsection A and whether they may adversely affect the interests of policyholders.G\n\nThe Commission shall be notified in writing within 30 days of any investment of the domestic insurer in any one corporation if the total investment in such corporation by the insurance holding company system exceeds 10 percent of such corporation’s voting securities.H\n\nAny affiliate that is party to a contract or agreement described in subdivision B 4 with a domestic insurer shall be subject to the jurisdiction of any supervision, seizure, conservatorship, or receivership proceedings against the insurer and to the authority of any supervisor, conservator, rehabilitator, or liquidator for the insurer appointed pursuant to Chapter 15 (§ 38.2-1500 et seq.) for the purpose of interpreting, enforcing, and overseeing the affiliate’s obligations under the agreement or contract to perform services for the insurer that are (i) an integral part of the insurer’s operation, including management, administrative, accounting, data processing, marketing, underwriting, claims handling, investment, or any other similar functions or (ii) essential to the insurer’s ability to fulfill its obligations under insurance policies. The Commission may require that an agreement or contract described in subdivision B 4 for the provision of services described in clause (i) or (ii) specify that the affiliate consents to the jurisdiction as set forth in this subsection.","order_by":null,"text":{"0":{"id":279001,"text":"Transactions within an insurance holding company system to which an insurer subject to registration is a party shall be subject to the following standards:","type":"section","prefixes":["A"],"prefix":"A","entire_prefix":"A","prefix_anchor":"A","level":1,"next_prefix":"A1"},"1":{"id":279002,"text":"The terms shall be fair and reasonable;","type":"section","prefixes":["A","1"],"prefix":"1","entire_prefix":"A1","prefix_anchor":"A1","level":2,"prior_prefix":"A","next_prefix":"A2"},"2":{"id":279003,"text":"Agreements for cost-sharing services and management shall include such provisions as required by rule or regulation promulgated by the Commission;","type":"section","prefixes":["A","2"],"prefix":"2","entire_prefix":"A2","prefix_anchor":"A2","level":2,"prior_prefix":"A1","next_prefix":"A3"},"3":{"id":279004,"text":"Charges or fees for services performed shall be reasonable;","type":"section","prefixes":["A","3"],"prefix":"3","entire_prefix":"A3","prefix_anchor":"A3","level":2,"prior_prefix":"A2","next_prefix":"A4"},"4":{"id":279005,"text":"Expenses incurred and payments received shall be allocated to the insurer in conformity with customary insurance accounting practices consistently applied;","type":"section","prefixes":["A","4"],"prefix":"4","entire_prefix":"A4","prefix_anchor":"A4","level":2,"prior_prefix":"A3","next_prefix":"A5"},"5":{"id":279006,"text":"The books, accounts, and records of each party shall disclose clearly and accurately the precise nature and details of the transactions, including such accounting information as is necessary to support the reasonableness of the charges or fees to the respective parties;","type":"section","prefixes":["A","5"],"prefix":"5","entire_prefix":"A5","prefix_anchor":"A5","level":2,"prior_prefix":"A4","next_prefix":"A6"},"6":{"id":279007,"text":"The insurer’s surplus as regards policyholders following any dividends or distributions to shareholder affiliates shall be reasonable in relation to the insurer’s outstanding liabilities and adequate to meet its financial needs;","type":"section","prefixes":["A","6"],"prefix":"6","entire_prefix":"A6","prefix_anchor":"A6","level":2,"prior_prefix":"A5","next_prefix":"A7"},"7":{"id":279008,"text":"If an insurer subject to this article is deemed by the Commission to be in a hazardous financial condition as defined by 14VAC5-290 or a condition that would be grounds for supervision, conservation, or a delinquency proceeding, then the Commission may require the insurer to secure and maintain either a deposit held by the Commission or a bond as determined by the insurer at the insurer’s discretion, for the protection of the insurer for the duration of the contract, agreement, or existence of the condition for which the Commission required deposit or bond.\n\t\t\t\tIn determining if a deposit or bond is required, the Commission shall consider whether concerns exist with respect to the affiliated person’s ability to fulfill the contract or agreement if the insurer were to be put into liquidation. Once the insurer is deemed to be in a hazardous financial condition or a condition that would be grounds for supervision, conservation, or a delinquency proceeding, and a deposit or bond is necessary, the Commission has the discretion to determine the amount of the deposit or bond, not to exceed the value of the contract or agreement in any one year, and whether such deposit or bond shall be required for a single contract, multiple contracts, or a contract only with a specific person;","type":"section","prefixes":["A","7"],"prefix":"7","entire_prefix":"A7","prefix_anchor":"A7","level":2,"prior_prefix":"A6","next_prefix":"A8"},"8":{"id":279009,"text":"All records and data of the insurer held by an affiliate are and remain the property of the insurer, are subject to the control of the insurer, are identifiable, and are segregated or readily capable of segregation at no additional cost to the insurer from all other persons’ records and data. This includes all records and data that are otherwise the property of the insurer, in whatever form maintained, including claims and claim files, policyholder lists, application files, litigation files, premium records, rate books, underwriting manuals, personnel records, financial records, or similar records within the possession, custody, or control of the affiliate. At the request of the insurer, the affiliate shall provide that the receiver may (i) obtain a complete set of all records of any type that pertain to the insurer’s business, (ii) obtain access to the operating systems on which the data is maintained, (iii) obtain the software that runs those systems either through assumption of licensing agreements or otherwise, and (iv) restrict the use of the data by the affiliate if it is not operating the insurer’s business. The affiliate shall provide a waiver of any landlord lien or other encumbrance to give the insurer access to all records and data in the event of the affiliate’s default under a lease or other agreement; and","type":"section","prefixes":["A","8"],"prefix":"8","entire_prefix":"A8","prefix_anchor":"A8","level":2,"prior_prefix":"A7","next_prefix":"A9"},"9":{"id":279010,"text":"Premiums or other funds belonging to the insurer that are collected by or held by an affiliate are the exclusive property of the insurer and subject to the control of the insurer. Any right of offset in the event that an insurer is placed into receivership shall be subject to Chapter 15 (§ 38.2-1500 et seq.).","type":"section","prefixes":["A","9"],"prefix":"9","entire_prefix":"A9","prefix_anchor":"A9","level":2,"prior_prefix":"A8","next_prefix":"B"},"10":{"id":279011,"text":"Transactions described in subdivisions 1 through 7 that involve a domestic insurer and any person in its insurance holding company system, including amendments or modifications of affiliate agreements previously filed pursuant to this section, that are subject to materiality standards contained in such subdivisions may not be entered into unless the insurer has notified the Commission in writing of its intention to enter into the transaction at least 30 days prior thereto, or such shorter period as the Commission may permit, and the Commission has not disapproved it within that period. The notice for amendments or modifications shall include the reasons for the change and the financial impact on the domestic insurer. Informal notice shall be reported, within 30 days after a termination of a previously filed agreement, to the Commission for determination of the type of filing required, if any. Transactions to which this subsection applies, with their materiality standards, are:","type":"section","prefixes":["B"],"prefix":"B","entire_prefix":"B","prefix_anchor":"B","level":1,"prior_prefix":"A9","next_prefix":"B1"},"11":{"id":279012,"text":"Sales, purchases, exchanges, loans, extensions of credit, or investments, provided the transactions are equal to or exceed:\n\t\t\t\ta. With respect to nonlife insurers, the lesser of three percent of the insurer’s admitted assets or 25 percent of surplus as regards policyholders as of the immediately preceding December 31; or\n\t\t\t\tb. With respect to life insurers, three percent of the insurer’s admitted assets as of the immediately preceding December 31;","type":"section","prefixes":["B","1"],"prefix":"1","entire_prefix":"B1","prefix_anchor":"B1","level":2,"prior_prefix":"B","next_prefix":"B2"},"12":{"id":279013,"text":"Loans or extensions of credit to any person who is not an affiliate, where the insurer makes loans or extensions of credit with the agreement or understanding that the proceeds of the transactions, in whole or in substantial part, are to be used to make loans or extensions of credit to, to purchase assets of, or to make investments in, any affiliate of the insurer making the loans or extensions of credit, provided the transactions are equal to or exceed:\n\t\t\t\ta. With respect to nonlife insurers, the lesser of three percent of the insurer’s admitted assets or 25 percent of surplus as regards policyholders as of the immediately preceding December 31; or\n\t\t\t\tb. With respect to life insurers, three percent of the insurer’s admitted assets as of the immediately preceding December 31;","type":"section","prefixes":["B","2"],"prefix":"2","entire_prefix":"B2","prefix_anchor":"B2","level":2,"prior_prefix":"B1","next_prefix":"B3"},"13":{"id":279014,"text":"Reinsurance agreements or modifications thereto, including:\n\t\t\t\ta. All reinsurance pooling agreements; and\n\t\t\t\tb. Agreements in which the reinsurance premium or a change in the insurer’s liabilities, or the projected reinsurance premium or a change in the insurer’s liabilities in any of the next three years, equals or exceeds five percent of the insurer’s surplus as regards policyholders, as of the immediately preceding December 31, including those agreements that may require as consideration the transfer of assets from an insurer to a nonaffiliate, if an agreement or understanding exists between the insurer and nonaffiliate that any portion of the assets will be transferred to one or more affiliates of the insurer;","type":"section","prefixes":["B","3"],"prefix":"3","entire_prefix":"B3","prefix_anchor":"B3","level":2,"prior_prefix":"B2","next_prefix":"B4"},"14":{"id":279015,"text":"All management agreements, service contracts, tax allocation agreements, guarantees, and cost-sharing arrangements;","type":"section","prefixes":["B","4"],"prefix":"4","entire_prefix":"B4","prefix_anchor":"B4","level":2,"prior_prefix":"B3","next_prefix":"B5"},"15":{"id":279016,"text":"Guarantees when made by a domestic insurer, provided, however, that a guarantee that is quantifiable as to amount is not subject to the notice requirements of this subdivision unless it exceeds the lesser of one-half of one percent of the insurer’s admitted assets or 10 percent of surplus as regards policyholders as of the immediately preceding December 31. Further, all guarantees that are not quantifiable as to amount are subject to the notice requirements of this subdivision;","type":"section","prefixes":["B","5"],"prefix":"5","entire_prefix":"B5","prefix_anchor":"B5","level":2,"prior_prefix":"B4","next_prefix":"B6"},"16":{"id":279017,"text":"Direct or indirect acquisitions or investments in a person that controls the insurer or in an affiliate of the insurer in an amount that, together with its present holdings in such investments, exceeds two and one-half percent of the insurer’s surplus to policyholders. The Commission may exempt such a transaction by regulation; and","type":"section","prefixes":["B","6"],"prefix":"6","entire_prefix":"B6","prefix_anchor":"B6","level":2,"prior_prefix":"B5","next_prefix":"B7"},"17":{"id":279018,"text":"Any material transactions that the Commission determines may adversely affect the interests of the insurer’s policyholders.\n\t\t\t\tNothing in this subsection shall be deemed to authorize or permit any transactions that, in the case of an insurer not a member of the same insurance holding company system, would be otherwise contrary to law.","type":"section","prefixes":["B","7"],"prefix":"7","entire_prefix":"B7","prefix_anchor":"B7","level":2,"prior_prefix":"B6","next_prefix":"C"},"18":{"id":279019,"text":"In addition:","type":"section","prefixes":["C"],"prefix":"C","entire_prefix":"C","prefix_anchor":"C","level":1,"prior_prefix":"B7","next_prefix":"C1"},"19":{"id":279020,"text":"Notwithstanding the control of a domestic insurer by any person, the officers and directors of the insurer shall not thereby be relieved of any obligation or liability to which they would otherwise be subject by law, and the insurer shall be managed so as to assure its separate operating identity consistent with this article;","type":"section","prefixes":["C","1"],"prefix":"1","entire_prefix":"C1","prefix_anchor":"C1","level":2,"prior_prefix":"C","next_prefix":"C2"},"20":{"id":279021,"text":"Nothing in this section shall preclude a domestic insurer from having or sharing a common management or cooperative or joint use of personnel, property, or services with one or more other persons under arrangements meeting the standards of subsection A;","type":"section","prefixes":["C","2"],"prefix":"2","entire_prefix":"C2","prefix_anchor":"C2","level":2,"prior_prefix":"C1","next_prefix":"C3"},"21":{"id":279022,"text":"Not less than one-third of the directors of a domestic insurer, and not less than one-third of the members of each committee of the board of directors of any domestic insurer, shall be persons who are not officers or employees of the insurer or of any entity controlling, controlled by, or under common control with the insurer and who are not beneficial owners of a controlling interest in the voting stock of the insurer or entity. At least one such person shall be included in any quorum for the transaction of business at any meeting of the board of directors or any committee thereof;","type":"section","prefixes":["C","3"],"prefix":"3","entire_prefix":"C3","prefix_anchor":"C3","level":2,"prior_prefix":"C2","next_prefix":"C4"},"22":{"id":279023,"text":"The board of directors of a domestic insurer shall establish one or more committees composed solely of directors who are not officers or employees of the insurer or of any entity controlling, controlled by, or under common control with the insurer and who are not beneficial owners of a controlling interest in the voting stock of the insurer or any such entity. The committee or committees shall have responsibility for nominating candidates for director for election by shareholders or policyholders, evaluating the performance of officers deemed to be principal officers of the insurer, and recommending to the board of directors the selection and compensation of the principal officers;","type":"section","prefixes":["C","4"],"prefix":"4","entire_prefix":"C4","prefix_anchor":"C4","level":2,"prior_prefix":"C3","next_prefix":"C5"},"23":{"id":279024,"text":"The provisions of subdivisions 3 and 4 shall not apply to a domestic insurer if the person controlling the insurer, such as an insurer, a mutual insurance holding company, or a publicly held corporation, has a board of directors and committees thereof that meet the requirements of subdivisions 3 and 4 with respect to such controlling entity; and","type":"section","prefixes":["C","5"],"prefix":"5","entire_prefix":"C5","prefix_anchor":"C5","level":2,"prior_prefix":"C4","next_prefix":"C6"},"24":{"id":279025,"text":"An insurer may make application to the Commission for a waiver from the requirements of this subsection if the insurer’s annual direct written and assumed premium, excluding premiums reinsured with the Federal Crop Insurance Corporation and National Flood Insurance Program, is less than $300 million. An insurer may also make application to the Commission for a waiver from the requirements of this subsection based upon unique circumstances. The Commission may consider various factors including the type of business entity, volume of business written, availability of qualified board members, or ownership or organizational structure of the entity.","type":"section","prefixes":["C","6"],"prefix":"6","entire_prefix":"C6","prefix_anchor":"C6","level":2,"prior_prefix":"C5","next_prefix":"D"},"25":{"id":279026,"text":"For purposes of this article, in determining whether an insurer’s surplus as regards policyholders is reasonable in relation to the insurer’s outstanding liabilities and adequate to meet its financial needs, the following factors, among others, shall be considered:","type":"section","prefixes":["D"],"prefix":"D","entire_prefix":"D","prefix_anchor":"D","level":1,"prior_prefix":"C6","next_prefix":"D1"},"26":{"id":279027,"text":"The size of the insurer as measured by its assets, capital and surplus, reserves, premium writings, insurance in force, and other appropriate criteria;","type":"section","prefixes":["D","1"],"prefix":"1","entire_prefix":"D1","prefix_anchor":"D1","level":2,"prior_prefix":"D","next_prefix":"D2"},"27":{"id":279028,"text":"The extent to which the insurer’s business is diversified among different lines of insurance;","type":"section","prefixes":["D","2"],"prefix":"2","entire_prefix":"D2","prefix_anchor":"D2","level":2,"prior_prefix":"D1","next_prefix":"D3"},"28":{"id":279029,"text":"The number and size of risks insured in each line of business;","type":"section","prefixes":["D","3"],"prefix":"3","entire_prefix":"D3","prefix_anchor":"D3","level":2,"prior_prefix":"D2","next_prefix":"D4"},"29":{"id":279030,"text":"The extent of the geographical dispersion of the insurer’s insured risk;","type":"section","prefixes":["D","4"],"prefix":"4","entire_prefix":"D4","prefix_anchor":"D4","level":2,"prior_prefix":"D3","next_prefix":"D5"},"30":{"id":279031,"text":"The nature and extent of the insurer’s reinsurance program;","type":"section","prefixes":["D","5"],"prefix":"5","entire_prefix":"D5","prefix_anchor":"D5","level":2,"prior_prefix":"D4","next_prefix":"D6"},"31":{"id":279032,"text":"The quality, diversification, and liquidity of the insurer’s investment portfolio;","type":"section","prefixes":["D","6"],"prefix":"6","entire_prefix":"D6","prefix_anchor":"D6","level":2,"prior_prefix":"D5","next_prefix":"D7"},"32":{"id":279033,"text":"The recent past and projected future trend in the size of the insurer’s surplus to policyholders;","type":"section","prefixes":["D","7"],"prefix":"7","entire_prefix":"D7","prefix_anchor":"D7","level":2,"prior_prefix":"D6","next_prefix":"D8"},"33":{"id":279034,"text":"The recent past and projected future trend in the size of the insurer’s investment portfolio;","type":"section","prefixes":["D","8"],"prefix":"8","entire_prefix":"D8","prefix_anchor":"D8","level":2,"prior_prefix":"D7","next_prefix":"D9"},"34":{"id":279035,"text":"The surplus as regards policyholders maintained by other comparable insurers;","type":"section","prefixes":["D","9"],"prefix":"9","entire_prefix":"D9","prefix_anchor":"D9","level":2,"prior_prefix":"D8","next_prefix":"D10"},"35":{"id":279036,"text":"The adequacy of the insurer’s reserves;","type":"section","prefixes":["D","10"],"prefix":"10","entire_prefix":"D10","prefix_anchor":"D10","level":2,"prior_prefix":"D9","next_prefix":"D11"},"36":{"id":279037,"text":"The quality of the insurer’s earnings and the extent to which the reported earnings of the insurer include extraordinary items; and","type":"section","prefixes":["D","11"],"prefix":"11","entire_prefix":"D11","prefix_anchor":"D11","level":2,"prior_prefix":"D10","next_prefix":"D12"},"37":{"id":279038,"text":"The quality and liquidity of investments in affiliates. The Commission in its judgment may classify any investment as a nonadmitted asset for the purpose of determining the adequacy of surplus as regards policyholders.","type":"section","prefixes":["D","12"],"prefix":"12","entire_prefix":"D12","prefix_anchor":"D12","level":2,"prior_prefix":"D11","next_prefix":"E"},"38":{"id":279039,"text":"No domestic insurer shall enter into transactions that are part of a plan or series of like transactions with persons within the insurance holding company system if the purpose of those separate transactions is to avoid the statutory threshold amount and thus avoid the review that otherwise would be required. If the Commission determines that separate transactions were entered into over any 12-month period for that purpose, the Commission may exercise its authority under § 38.2-1334.2:2.","type":"section","prefixes":["E"],"prefix":"E","entire_prefix":"E","prefix_anchor":"E","level":1,"prior_prefix":"D12","next_prefix":"F"},"39":{"id":279040,"text":"The Commission, in reviewing transactions pursuant to subsection B, shall consider whether the transactions comply with the standards set forth in subsection A and whether they may adversely affect the interests of policyholders.","type":"section","prefixes":["F"],"prefix":"F","entire_prefix":"F","prefix_anchor":"F","level":1,"prior_prefix":"E","next_prefix":"G"},"40":{"id":279041,"text":"The Commission shall be notified in writing within 30 days of any investment of the domestic insurer in any one corporation if the total investment in such corporation by the insurance holding company system exceeds 10 percent of such corporation’s voting securities.","type":"section","prefixes":["G"],"prefix":"G","entire_prefix":"G","prefix_anchor":"G","level":1,"prior_prefix":"F","next_prefix":"H"},"41":{"id":279042,"text":"Any affiliate that is party to a contract or agreement described in subdivision B 4 with a domestic insurer shall be subject to the jurisdiction of any supervision, seizure, conservatorship, or receivership proceedings against the insurer and to the authority of any supervisor, conservator, rehabilitator, or liquidator for the insurer appointed pursuant to Chapter 15 (§ 38.2-1500 et seq.) for the purpose of interpreting, enforcing, and overseeing the affiliate’s obligations under the agreement or contract to perform services for the insurer that are (i) an integral part of the insurer’s operation, including management, administrative, accounting, data processing, marketing, underwriting, claims handling, investment, or any other similar functions or (ii) essential to the insurer’s ability to fulfill its obligations under insurance policies. The Commission may require that an agreement or contract described in subdivision B 4 for the provision of services described in clause (i) or (ii) specify that the affiliate consents to the jurisdiction as set forth in this subsection.","type":"section","prefixes":["H"],"prefix":"H","entire_prefix":"H","prefix_anchor":"H","level":1,"prior_prefix":"G"}},"ancestry":[{"id":13290,"edition_id":1,"name":"Insurance Holding Companies","identifier":"5","label":"article","depth":3,"order_by":1,"parent_id":13289,"metadata":{},"date_created":"2026-06-26 03:44:35","date_modified":"2026-06-26 03:44:35","permalink":{"id":211609,"object_type":"structure","relational_id":13290,"identifier":"5","token":"38.2\/13\/5","url":"\/38.2\/13\/5\/","edition_id":1,"permalink":0,"preferred":1}},{"id":13289,"edition_id":1,"name":"Reports, Reserves and Examinations, Insurance Holding Companies, Reinsurance Intermediaries, and Managing General Agents","identifier":"13","label":"chapter","depth":2,"order_by":1,"parent_id":12698,"metadata":{},"date_created":"2026-06-26 03:44:35","date_modified":"2026-06-26 03:44:35","permalink":{"id":211347,"object_type":"structure","relational_id":13289,"identifier":"13","token":"38.2\/13","url":"\/38.2\/13\/","edition_id":1,"permalink":0,"preferred":1}},{"id":12698,"edition_id":1,"name":"Insurance","identifier":"38.2","label":"title","depth":1,"order_by":1,"parent_id":null,"metadata":{},"date_created":"2026-06-26 03:43:49","date_modified":"2026-06-26 03:43:49","permalink":{"id":210661,"object_type":"structure","relational_id":12698,"identifier":"38.2","token":"38.2","url":"\/38.2\/","edition_id":1,"permalink":0,"preferred":1}}],"structure_contents":[{"id":66587,"structure_id":13290,"section_number":"38.2-1322","catch_line":"Definitions","url":"\/38.2-1322\/","token":"38.2\/13\/5\/38.2-1322","metadata":false},{"id":84939,"structure_id":13290,"section_number":"38.2-1323","catch_line":"Acquisition of control of insurers","url":"\/38.2-1323\/","token":"38.2\/13\/5\/38.2-1323","metadata":false},{"id":72444,"structure_id":13290,"section_number":"38.2-1324","catch_line":"Contents of application","url":"\/38.2-1324\/","token":"38.2\/13\/5\/38.2-1324","metadata":false},{"id":77095,"structure_id":13290,"section_number":"38.2-1325","catch_line":"Alternate filing materials","url":"\/38.2-1325\/","token":"38.2\/13\/5\/38.2-1325","metadata":false},{"id":54281,"structure_id":13290,"section_number":"38.2-1326","catch_line":"Approval by Commission","url":"\/38.2-1326\/","token":"38.2\/13\/5\/38.2-1326","metadata":false},{"id":82872,"structure_id":13290,"section_number":"38.2-1327","catch_line":"Time for hearing; order of Commission","url":"\/38.2-1327\/","token":"38.2\/13\/5\/38.2-1327","metadata":false},{"id":65563,"structure_id":13290,"section_number":"38.2-1328","catch_line":"Exemption","url":"\/38.2-1328\/","token":"38.2\/13\/5\/38.2-1328","metadata":false},{"id":71281,"structure_id":13290,"section_number":"38.2-1329","catch_line":"Registration of insurers that are members of holding company system","url":"\/38.2-1329\/","token":"38.2\/13\/5\/38.2-1329","metadata":false},{"id":77796,"structure_id":13290,"section_number":"38.2-1330","catch_line":"Standards for transactions within an insurance holding company system; adequacy of surplus","url":"\/38.2-1330\/","token":"38.2\/13\/5\/38.2-1330","metadata":false},{"id":71817,"structure_id":13290,"section_number":"38.2-1330.1","catch_line":"Dividends and other distributions","url":"\/38.2-1330.1\/","token":"38.2\/13\/5\/38.2-1330.1","metadata":false},{"id":70122,"structure_id":13290,"section_number":"38.2-1331","catch_line":"Repealed","url":"\/38.2-1331\/","token":"38.2\/13\/5\/38.2-1331","metadata":false},{"id":84275,"structure_id":13290,"section_number":"38.2-1332","catch_line":"Examinations","url":"\/38.2-1332\/","token":"38.2\/13\/5\/38.2-1332","metadata":false},{"id":57304,"structure_id":13290,"section_number":"38.2-1332.1","catch_line":"Supervisory colleges","url":"\/38.2-1332.1\/","token":"38.2\/13\/5\/38.2-1332.1","metadata":false},{"id":62040,"structure_id":13290,"section_number":"38.2-1332.2","catch_line":"Group-wide supervision of internationally active insurance groups","url":"\/38.2-1332.2\/","token":"38.2\/13\/5\/38.2-1332.2","metadata":false},{"id":68581,"structure_id":13290,"section_number":"38.2-1333","catch_line":"Confidential treatment of information and documents","url":"\/38.2-1333\/","token":"38.2\/13\/5\/38.2-1333","metadata":false},{"id":56656,"structure_id":13290,"section_number":"38.2-1334","catch_line":"Revocation, suspension, or nonrenewal of insurer's license","url":"\/38.2-1334\/","token":"38.2\/13\/5\/38.2-1334","metadata":false},{"id":76185,"structure_id":13290,"section_number":"38.2-1334.1","catch_line":"Voting of securities, injunctions, and sequestration of voting securities","url":"\/38.2-1334.1\/","token":"38.2\/13\/5\/38.2-1334.1","metadata":false},{"id":57406,"structure_id":13290,"section_number":"38.2-1334.2","catch_line":"Recovery","url":"\/38.2-1334.2\/","token":"38.2\/13\/5\/38.2-1334.2","metadata":false},{"id":60684,"structure_id":13290,"section_number":"38.2-1334.2:1","catch_line":"Rules and regulations","url":"\/38.2-1334.2_1\/","token":"38.2\/13\/5\/38.2-1334.2_1","metadata":false},{"id":78719,"structure_id":13290,"section_number":"38.2-1334.2:2","catch_line":"Sanctions","url":"\/38.2-1334.2_2\/","token":"38.2\/13\/5\/38.2-1334.2_2","metadata":false},{"id":56478,"structure_id":13290,"section_number":"38.2-1334.2:3","catch_line":"Statutory construction and relationship to other laws","url":"\/38.2-1334.2_3\/","token":"38.2\/13\/5\/38.2-1334.2_3","metadata":false}],"previous_section":{"id":71281,"structure_id":13290,"section_number":"38.2-1329","catch_line":"Registration of insurers that are members of holding company system","url":"\/38.2-1329\/","token":"38.2\/13\/5\/38.2-1329","metadata":false},"next_section":{"id":71817,"structure_id":13290,"section_number":"38.2-1330.1","catch_line":"Dividends and other distributions","url":"\/38.2-1330.1\/","token":"38.2\/13\/5\/38.2-1330.1","metadata":false},"metadata":false,"official_url":"https:\/\/law.lis.virginia.gov\/vacode\/38.2-1330\/","history_text":"

This law was first created in 1973. The record of its establishment is cataloged in chapter 505 of that year\u2019s edition of \u201cActs of Assembly,\u201d the annual state publication listing all changes made to the Code of Virginia in that year. Unfortunately, the 1973 \u201cActs\u201d aren\u2019t available online. It has been modified 6 times. Those modifications are cataloged by \u201cThe Acts of Assembly,\u201d a state publication, by year and chapter. Those modifications that can be read on the General Assembly\u2019s website will be linked accordingly. Those modifications are as follows: in 1986, chapter 562; in 1987, chapter 417; in 1992, chapter 588; in 2006, chapter 577<\/a>; in 2014, chapter 309<\/a>; in 2022, chapter 113<\/a>.<\/p>","references":[{"id":71281,"section_number":"38.2-1329","catch_line":"Registration of insurers that are members of holding company system","order_by":null,"url":"\/38.2-1329\/"},{"id":68581,"section_number":"38.2-1333","catch_line":"Confidential treatment of information and documents","order_by":null,"url":"\/38.2-1333\/"}],"refers_to":[{"id":66658,"section_number":"38.2-1500","catch_line":"Scope of chapter","order_by":null,"url":"\/38.2-1500\/"}],"permalink":{"id":211643,"object_type":"law","relational_id":77796,"identifier":"38.2-1330","token":"38.2\/13\/5\/38.2-1330","url":"\/38.2-1330\/","edition_id":1,"permalink":0,"preferred":1},"url":"\/38.2-1330\/","token":"38.2\/13\/5\/38.2-1330","dublin_core":{"Title":"Standards for transactions within an insurance holding company system; adequacy of surplus","Type":"Text","Format":"text\/html","Identifier":"\u00a7 38.2-1330","Relation":"Code of Virginia"},"html":"\n\t\t\t\t\t\t

A.<\/span> Transactions within an insurance holding company system<\/span> to which an insurer<\/span> subject to registration is a party<\/span> shall be subject to the following standards: <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

1.<\/span> The terms shall be fair and reasonable; <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

2.<\/span> Agreements for cost-sharing services and management shall include such provisions as required by rule or regulation promulgated by the Commission<\/span>; <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

3.<\/span> Charges or fees for services performed shall be reasonable; <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

4.<\/span> Expenses incurred and payments received shall be allocated to the insurer<\/span> in conformity with customary insurance accounting practices consistently applied; <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

5.<\/span> The books, accounts, and records of each party<\/span> shall disclose clearly and accurately the precise nature and details of the transactions, including such accounting information as is necessary to support the reasonableness of the charges or fees to the respective parties; <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

6.<\/span> The insurer<\/span>’s surplus as regards policyholders following any dividends or distributions to shareholder affiliates<\/span> shall be reasonable in relation to the insurer<\/span>’s outstanding liabilities and adequate to meet its financial needs; <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

7.<\/span> If an insurer<\/span> subject to this article is deemed by the Commission<\/span> to be in a hazardous financial condition as defined by 14VAC5-290 or a condition that would be grounds for supervision, conservation, or a delinquency proceeding, then the Commission<\/span> may require the insurer<\/span> to secure and maintain either a deposit held by the Commission<\/span> or a bond<\/span> as determined by the insurer<\/span> at the insurer<\/span>’s discretion, for the protection of the insurer<\/span> for the duration of the contract<\/span>, agreement, or existence of the condition for which the Commission<\/span> required deposit or bond<\/span>.\n\t\t\t\tIn determining if a deposit or bond<\/span> is required, the Commission<\/span> shall consider whether concerns exist with respect to the affiliated<\/span> person<\/span>’s ability to fulfill the contract<\/span> or agreement if the insurer<\/span> were to be put into liquidation<\/span>. Once the insurer<\/span> is deemed to be in a hazardous financial condition or a condition that would be grounds for supervision, conservation, or a delinquency proceeding, and a deposit or bond<\/span> is necessary, the Commission<\/span> has the discretion to determine the amount of the deposit or bond<\/span>, not to exceed the value of the contract<\/span> or agreement in any one year, and whether such deposit or bond<\/span> shall be required for a single contract<\/span>, multiple contracts<\/span>, or a contract<\/span> only with a specific person<\/span>; <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

8.<\/span> All records and data of the insurer<\/span> held by an affiliate<\/span> are and remain the property of the insurer<\/span>, are subject to the control of the insurer<\/span>, are identifiable, and are segregated or readily capable of segregation at no additional cost to the insurer<\/span> from all other persons<\/span>’ records and data. This includes all records and data that are otherwise the property of the insurer<\/span>, in whatever form maintained, including claims and claim files, policyholder lists, application files, litigation<\/span> files, premium records, rate<\/span> books, underwriting manuals, personnel records, financial records, or similar records within the possession<\/span>, custody<\/span>, or control of the affiliate<\/span>. At the request of the insurer<\/span>, the affiliate<\/span> shall provide that the receiver may (i) obtain a complete set of all records of any type that pertain to the insurer<\/span>’s business, (ii) obtain access to the operating systems on which the data is maintained, (iii) obtain the software that runs those systems either through assumption of licensing agreements or otherwise, and (iv) restrict the use of the data by the affiliate<\/span> if it is not operating the insurer<\/span>’s business. The affiliate<\/span> shall provide a waiver<\/span> of any landlord lien<\/span> or other encumbrance to give the insurer<\/span> access to all records and data in the event of the affiliate<\/span>’s default<\/span> under a lease or other agreement; and <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

9.<\/span> Premiums or other funds belonging to the insurer<\/span> that are collected by or held by an affiliate<\/span> are the exclusive property of the insurer<\/span> and subject to the control of the insurer<\/span>. Any right of offset in the event that an insurer<\/span> is placed into receivership shall be subject to Chapter 15 (§ 38.2-1500<\/a> et seq.). <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

B.<\/span> Transactions described in subdivisions 1 through 7 that involve a domestic insurer<\/span> and any person<\/span> in its insurance holding company system<\/span>, including amendments or modifications of affiliate<\/span> agreements previously filed pursuant to this section, that are subject to materiality standards contained in such subdivisions may not be entered into unless the insurer<\/span> has notified the Commission<\/span> in writing of its intention to enter into the transaction at least 30 days prior thereto, or such shorter period as the Commission<\/span> may permit, and the Commission<\/span> has not disapproved it within that period. The notice for amendments or modifications shall include the reasons for the change and the financial impact on the domestic insurer<\/span>. Informal notice shall be reported, within 30 days after a termination of a previously filed agreement, to the Commission<\/span> for determination of the type of filing required, if any. Transactions to which this subsection applies, with their materiality standards, are: <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

1.<\/span> Sales, purchases, exchanges, loans, extensions of credit, or investments, provided the transactions are equal to or exceed:\n\t\t\t\ta. With respect to nonlife insurers<\/span>, the lesser of three percent of the insurer<\/span>’s admitted assets<\/span> or 25 percent of surplus as regards policyholders as of the immediately preceding December 31; or\n\t\t\t\tb. With respect to life insurers<\/span>, three percent of the insurer<\/span>’s admitted assets<\/span> as of the immediately preceding December 31; <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

2.<\/span> Loans or extensions of credit to any person<\/span> who is not an affiliate<\/span>, where the insurer<\/span> makes loans or extensions of credit with the agreement or understanding that the proceeds of the transactions, in whole or in substantial part, are to be used to make loans or extensions of credit to, to purchase assets<\/span> of, or to make investments in, any affiliate<\/span> of the insurer<\/span> making the loans or extensions of credit, provided the transactions are equal to or exceed:\n\t\t\t\ta. With respect to nonlife insurers<\/span>, the lesser of three percent of the insurer<\/span>’s admitted assets<\/span> or 25 percent of surplus as regards policyholders as of the immediately preceding December 31; or\n\t\t\t\tb. With respect to life insurers<\/span>, three percent of the insurer<\/span>’s admitted assets<\/span> as of the immediately preceding December 31; <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

3.<\/span> Reinsurance agreements or modifications thereto, including:\n\t\t\t\ta. All reinsurance pooling agreements; and\n\t\t\t\tb. Agreements in which the reinsurance premium or a change in the insurer<\/span>’s liabilities, or the projected reinsurance premium or a change in the insurer<\/span>’s liabilities in any of the next three years, equals or exceeds five percent of the insurer<\/span>’s surplus as regards policyholders, as of the immediately preceding December 31, including those agreements that may require as consideration the transfer of assets<\/span> from an insurer<\/span> to a nonaffiliate, if an agreement or understanding exists between the insurer<\/span> and nonaffiliate that any portion of the assets<\/span> will be transferred to one or more affiliates<\/span> of the insurer<\/span>; <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

4.<\/span> All management agreements, service contracts<\/span>, tax allocation agreements, guarantees, and cost-sharing arrangements; <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

5.<\/span> Guarantees when made by a domestic insurer<\/span>, provided, however, that a guarantee that is quantifiable as to amount is not subject to the notice requirements of this subdivision unless it exceeds the lesser of one-half of one percent of the insurer<\/span>’s admitted assets<\/span> or 10 percent of surplus as regards policyholders as of the immediately preceding December 31. Further, all guarantees that are not quantifiable as to amount are subject to the notice requirements of this subdivision; <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

6.<\/span> Direct or indirect acquisitions or investments in a person<\/span> that controls the insurer<\/span> or in an affiliate<\/span> of the insurer<\/span> in an amount that, together with its present holdings in such investments, exceeds two and one-half percent of the insurer<\/span>’s surplus to policyholders<\/span>. The Commission<\/span> may exempt such a transaction by regulation; and <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

7.<\/span> Any material transactions<\/span> that the Commission<\/span> determines may adversely affect the interests of the insurer<\/span>’s policyholders.\n\t\t\t\tNothing in this subsection shall be deemed to authorize or permit any transactions that, in the case of an insurer<\/span> not a member of the same insurance holding company system<\/span>, would be otherwise contrary to law<\/span>. <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

C.<\/span> In addition: <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

1.<\/span> Notwithstanding the control of a domestic insurer<\/span> by any person<\/span>, the officers and directors of the insurer<\/span> shall not thereby be relieved of any obligation or liability to which they would otherwise be subject by law<\/span>, and the insurer<\/span> shall be managed so as to assure its separate operating identity consistent with this article; <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

2.<\/span> Nothing in this section shall preclude a domestic insurer<\/span> from having or sharing a common management or cooperative or joint use of personnel, property, or services with one or more other persons<\/span> under arrangements meeting the standards of subsection A; <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

3.<\/span> Not less than one-third of the directors of a domestic insurer<\/span>, and not less than one-third of the members of each committee of the board of directors of any domestic insurer<\/span>, shall be persons<\/span> who are not officers or employees of the insurer<\/span> or of any entity controlling, controlled by<\/span>, or under common control with the insurer<\/span> and who are not beneficial owners of a controlling interest in the voting stock of the insurer<\/span> or entity. At least one such person<\/span> shall be included in any quorum for the transaction of business at any meeting of the board of directors or any committee thereof; <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

4.<\/span> The board of directors of a domestic insurer<\/span> shall establish one or more committees composed solely of directors who are not officers or employees of the insurer<\/span> or of any entity controlling, controlled by<\/span>, or under common control with the insurer<\/span> and who are not beneficial owners of a controlling interest in the voting stock of the insurer<\/span> or any such entity. The committee or committees shall have responsibility for nominating candidates for director for election by shareholders or policyholders, evaluating the performance of officers deemed to be principal officers of the insurer<\/span>, and recommending to the board of directors the selection and compensation of the principal officers; <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

5.<\/span> The provisions of subdivisions 3 and 4 shall not apply to a domestic insurer<\/span> if the person<\/span> controlling the insurer<\/span>, such as an insurer<\/span>, a mutual insurance holding company, or a publicly held corporation, has a board of directors and committees thereof that meet the requirements of subdivisions 3 and 4 with respect to such controlling entity; and <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

6.<\/span> An insurer<\/span> may make application to the Commission<\/span> for a waiver<\/span> from the requirements of this subsection if the insurer<\/span>’s annual direct written and assumed premium, excluding premiums reinsured with the Federal Crop Insurance Corporation and National Flood Insurance Program, is less than $300 million. An insurer<\/span> may also make application to the Commission<\/span> for a waiver<\/span> from the requirements of this subsection based upon unique circumstances. The Commission<\/span> may consider various factors including the type of business entity, volume of business written, availability of qualified board members, or ownership or organizational structure of the entity. <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

D.<\/span> For purposes of this article, in determining whether an insurer<\/span>’s surplus as regards policyholders is reasonable in relation to the insurer<\/span>’s outstanding liabilities and adequate to meet its financial needs, the following factors, among others, shall be considered: <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

1.<\/span> The size of the insurer<\/span> as measured by its assets<\/span>, capital and surplus, reserves, premium writings, insurance in force, and other appropriate criteria; <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

2.<\/span> The extent to which the insurer<\/span>’s business is diversified among different lines of insurance; <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

3.<\/span> The number and size of risks insured in each line of business; <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

4.<\/span> The extent of the geographical dispersion of the insurer<\/span>’s insured risk; <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

5.<\/span> The nature and extent of the insurer<\/span>’s reinsurance program; <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

6.<\/span> The quality, diversification, and liquidity of the insurer<\/span>’s investment portfolio; <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

7.<\/span> The recent past and projected future trend in the size of the insurer<\/span>’s surplus to policyholders<\/span>; <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

8.<\/span> The recent past and projected future trend in the size of the insurer<\/span>’s investment portfolio; <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

9.<\/span> The surplus as regards policyholders maintained by other comparable insurers<\/span>; <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

10.<\/span> The adequacy of the insurer<\/span>’s reserves; <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

11.<\/span> The quality of the insurer<\/span>’s earnings and the extent to which the reported earnings of the insurer<\/span> include extraordinary items; and <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

12.<\/span> The quality and liquidity of investments in affiliates<\/span>. The Commission<\/span> in its judgment<\/span> may classify any investment as a nonadmitted asset for the purpose of determining the adequacy of surplus as regards policyholders. <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

E.<\/span> No domestic insurer<\/span> shall enter into transactions that are part of a plan or series of like transactions with persons<\/span> within the insurance holding company system<\/span> if the purpose of those separate transactions is to avoid the statutory threshold amount and thus avoid the review that otherwise would be required. If the Commission<\/span> determines that separate transactions were entered into over any 12-month period for that purpose, the Commission<\/span> may exercise its authority under § 38.2-1334.2:2<\/a>. <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

F.<\/span> The Commission<\/span>, in reviewing transactions pursuant to subsection B, shall consider whether the transactions comply with the standards set forth in subsection A and whether they may adversely affect the interests of policyholders. <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

G.<\/span> The Commission<\/span> shall be notified in writing within 30 days of any investment of the domestic insurer<\/span> in any one corporation if the total investment in such corporation by the insurance holding company system<\/span> exceeds 10 percent of such corporation’s voting securities. <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

H.<\/span> Any affiliate<\/span> that is party<\/span> to a contract<\/span> or agreement described in subdivision B 4 with a domestic insurer<\/span> shall be subject to the jurisdiction<\/span> of any supervision, seizure, conservatorship, or receivership proceedings against the insurer<\/span> and to the authority of any supervisor, conservator, rehabilitator, or liquidator for the insurer<\/span> appointed pursuant to Chapter 15 (§ 38.2-1500<\/a> et seq.) for the purpose of interpreting, enforcing, and overseeing the affiliate<\/span>’s obligations under the agreement or contract<\/span> to perform services for the insurer<\/span> that are (i) an integral part of the insurer<\/span>’s operation, including management, administrative, accounting, data processing, marketing, underwriting, claims handling, investment, or any other similar functions or (ii) essential to the insurer<\/span>’s ability to fulfill its obligations under insurance policies<\/span>. The Commission<\/span> may require that an agreement or contract<\/span> described in subdivision B 4 for the provision of services described in clause (i) or (ii) specify that the affiliate<\/span> consents to the jurisdiction<\/span> as set forth in this subsection. <\/i><\/a><\/p><\/section>","plain_text":" CODE OF VIRGINIA\n\nSTANDARDS FOR TRANSACTIONS WITHIN AN INSURANCE HOLDING COMPANY SYSTEM; ADEQUACY\nOF SURPLUS (\u00a7 38.2-1330)\n\nA. Transactions within an insurance holding company system to which an insurer\nsubject to registration is a party shall be subject to the following standards:\n\n 1. The terms shall be fair and reasonable;\n\n 2. Agreements for cost-sharing services and management shall include such\n provisions as required by rule or regulation promulgated by the Commission;\n\n 3. Charges or fees for services performed shall be reasonable;\n\n 4. Expenses incurred and payments received shall be allocated to the insurer\n in conformity with customary insurance accounting practices consistently\n applied;\n\n 5. The books, accounts, and records of each party shall disclose clearly and\n accurately the precise nature and details of the transactions, including such\n accounting information as is necessary to support the reasonableness of the\n charges or fees to the respective parties;\n\n 6. The insurer’s surplus as regards policyholders following any\n dividends or distributions to shareholder affiliates shall be reasonable in\n relation to the insurer’s outstanding liabilities and adequate to meet\n its financial needs;\n\n 7. If an insurer subject to this article is deemed by the Commission to be in\n a hazardous financial condition as defined by 14VAC5-290 or a condition that\n would be grounds for supervision, conservation, or a delinquency proceeding,\n then the Commission may require the insurer to secure and maintain either a\n deposit held by the Commission or a bond as determined by the insurer at the\n insurer’s discretion, for the protection of the insurer for the duration\n of the contract, agreement, or existence of the condition for which the\n Commission required deposit or bond.\n \t\t\t\tIn determining if a deposit or bond is required, the Commission shall\n consider whether concerns exist with respect to the affiliated person’s\n ability to fulfill the contract or agreement if the insurer were to be put\n into liquidation. Once the insurer is deemed to be in a hazardous financial\n condition or a condition that would be grounds for supervision, conservation,\n or a delinquency proceeding, and a deposit or bond is necessary, the\n Commission has the discretion to determine the amount of the deposit or bond,\n not to exceed the value of the contract or agreement in any one year, and\n whether such deposit or bond shall be required for a single contract, multiple\n contracts, or a contract only with a specific person;\n\n 8. All records and data of the insurer held by an affiliate are and remain the\n property of the insurer, are subject to the control of the insurer, are\n identifiable, and are segregated or readily capable of segregation at no\n additional cost to the insurer from all other persons’ records and data.\n This includes all records and data that are otherwise the property of the\n insurer, in whatever form maintained, including claims and claim files,\n policyholder lists, application files, litigation files, premium records, rate\n books, underwriting manuals, personnel records, financial records, or similar\n records within the possession, custody, or control of the affiliate. At the\n request of the insurer, the affiliate shall provide that the receiver may (i)\n obtain a complete set of all records of any type that pertain to the\n insurer’s business, (ii) obtain access to the operating systems on which\n the data is maintained, (iii) obtain the software that runs those systems\n either through assumption of licensing agreements or otherwise, and (iv)\n restrict the use of the data by the affiliate if it is not operating the\n insurer’s business. The affiliate shall provide a waiver of any landlord\n lien or other encumbrance to give the insurer access to all records and data\n in the event of the affiliate’s default under a lease or other\n agreement; and\n\n 9. Premiums or other funds belonging to the insurer that are collected by or\n held by an affiliate are the exclusive property of the insurer and subject to\n the control of the insurer. Any right of offset in the event that an insurer\n is placed into receivership shall be subject to Chapter 15 (§ 38.2-1500\n et seq.).\n\nB. Transactions described in subdivisions 1 through 7 that involve a domestic\ninsurer and any person in its insurance holding company system, including\namendments or modifications of affiliate agreements previously filed pursuant to\nthis section, that are subject to materiality standards contained in such\nsubdivisions may not be entered into unless the insurer has notified the\nCommission in writing of its intention to enter into the transaction at least 30\ndays prior thereto, or such shorter period as the Commission may permit, and the\nCommission has not disapproved it within that period. The notice for amendments\nor modifications shall include the reasons for the change and the financial\nimpact on the domestic insurer. Informal notice shall be reported, within 30\ndays after a termination of a previously filed agreement, to the Commission for\ndetermination of the type of filing required, if any. Transactions to which this\nsubsection applies, with their materiality standards, are:\n\n 1. Sales, purchases, exchanges, loans, extensions of credit, or investments,\n provided the transactions are equal to or exceed:\n \t\t\t\ta. With respect to nonlife insurers, the lesser of three percent of the\n insurer’s admitted assets or 25 percent of surplus as regards\n policyholders as of the immediately preceding December 31; or\n \t\t\t\tb. With respect to life insurers, three percent of the insurer’s\n admitted assets as of the immediately preceding December 31;\n\n 2. Loans or extensions of credit to any person who is not an affiliate, where\n the insurer makes loans or extensions of credit with the agreement or\n understanding that the proceeds of the transactions, in whole or in\n substantial part, are to be used to make loans or extensions of credit to, to\n purchase assets of, or to make investments in, any affiliate of the insurer\n making the loans or extensions of credit, provided the transactions are equal\n to or exceed:\n \t\t\t\ta. With respect to nonlife insurers, the lesser of three percent of the\n insurer’s admitted assets or 25 percent of surplus as regards\n policyholders as of the immediately preceding December 31; or\n \t\t\t\tb. With respect to life insurers, three percent of the insurer’s\n admitted assets as of the immediately preceding December 31;\n\n 3. Reinsurance agreements or modifications thereto, including:\n \t\t\t\ta. All reinsurance pooling agreements; and\n \t\t\t\tb. Agreements in which the reinsurance premium or a change in the\n insurer’s liabilities, or the projected reinsurance premium or a change\n in the insurer’s liabilities in any of the next three years, equals or\n exceeds five percent of the insurer’s surplus as regards policyholders,\n as of the immediately preceding December 31, including those agreements that\n may require as consideration the transfer of assets from an insurer to a\n nonaffiliate, if an agreement or understanding exists between the insurer and\n nonaffiliate that any portion of the assets will be transferred to one or more\n affiliates of the insurer;\n\n 4. All management agreements, service contracts, tax allocation agreements,\n guarantees, and cost-sharing arrangements;\n\n 5. Guarantees when made by a domestic insurer, provided, however, that a\n guarantee that is quantifiable as to amount is not subject to the notice\n requirements of this subdivision unless it exceeds the lesser of one-half of\n one percent of the insurer’s admitted assets or 10 percent of surplus as\n regards policyholders as of the immediately preceding December 31. Further,\n all guarantees that are not quantifiable as to amount are subject to the\n notice requirements of this subdivision;\n\n 6. Direct or indirect acquisitions or investments in a person that controls\n the insurer or in an affiliate of the insurer in an amount that, together with\n its present holdings in such investments, exceeds two and one-half percent of\n the insurer’s surplus to policyholders. The Commission may exempt such a\n transaction by regulation; and\n\n 7. Any material transactions that the Commission determines may adversely\n affect the interests of the insurer’s policyholders.\n \t\t\t\tNothing in this subsection shall be deemed to authorize or permit any\n transactions that, in the case of an insurer not a member of the same\n insurance holding company system, would be otherwise contrary to law.\n\nC. In addition:\n\n 1. Notwithstanding the control of a domestic insurer by any person, the\n officers and directors of the insurer shall not thereby be relieved of any\n obligation or liability to which they would otherwise be subject by law, and\n the insurer shall be managed so as to assure its separate operating identity\n consistent with this article;\n\n 2. Nothing in this section shall preclude a domestic insurer from having or\n sharing a common management or cooperative or joint use of personnel,\n property, or services with one or more other persons under arrangements\n meeting the standards of subsection A;\n\n 3. Not less than one-third of the directors of a domestic insurer, and not\n less than one-third of the members of each committee of the board of directors\n of any domestic insurer, shall be persons who are not officers or employees of\n the insurer or of any entity controlling, controlled by, or under common\n control with the insurer and who are not beneficial owners of a controlling\n interest in the voting stock of the insurer or entity. At least one such\n person shall be included in any quorum for the transaction of business at any\n meeting of the board of directors or any committee thereof;\n\n 4. The board of directors of a domestic insurer shall establish one or more\n committees composed solely of directors who are not officers or employees of\n the insurer or of any entity controlling, controlled by, or under common\n control with the insurer and who are not beneficial owners of a controlling\n interest in the voting stock of the insurer or any such entity. The committee\n or committees shall have responsibility for nominating candidates for director\n for election by shareholders or policyholders, evaluating the performance of\n officers deemed to be principal officers of the insurer, and recommending to\n the board of directors the selection and compensation of the principal\n officers;\n\n 5. The provisions of subdivisions 3 and 4 shall not apply to a domestic\n insurer if the person controlling the insurer, such as an insurer, a mutual\n insurance holding company, or a publicly held corporation, has a board of\n directors and committees thereof that meet the requirements of subdivisions 3\n and 4 with respect to such controlling entity; and\n\n 6. An insurer may make application to the Commission for a waiver from the\n requirements of this subsection if the insurer’s annual direct written\n and assumed premium, excluding premiums reinsured with the Federal Crop\n Insurance Corporation and National Flood Insurance Program, is less than $300\n million. An insurer may also make application to the Commission for a waiver\n from the requirements of this subsection based upon unique circumstances. The\n Commission may consider various factors including the type of business entity,\n volume of business written, availability of qualified board members, or\n ownership or organizational structure of the entity.\n\nD. For purposes of this article, in determining whether an insurer’s\nsurplus as regards policyholders is reasonable in relation to the\ninsurer’s outstanding liabilities and adequate to meet its financial\nneeds, the following factors, among others, shall be considered:\n\n 1. The size of the insurer as measured by its assets, capital and surplus,\n reserves, premium writings, insurance in force, and other appropriate\n criteria;\n\n 2. The extent to which the insurer’s business is diversified among\n different lines of insurance;\n\n 3. The number and size of risks insured in each line of business;\n\n 4. The extent of the geographical dispersion of the insurer’s insured\n risk;\n\n 5. The nature and extent of the insurer’s reinsurance program;\n\n 6. The quality, diversification, and liquidity of the insurer’s\n investment portfolio;\n\n 7. The recent past and projected future trend in the size of the\n insurer’s surplus to policyholders;\n\n 8. The recent past and projected future trend in the size of the\n insurer’s investment portfolio;\n\n 9. The surplus as regards policyholders maintained by other comparable\n insurers;\n\n 10. The adequacy of the insurer’s reserves;\n\n 11. The quality of the insurer’s earnings and the extent to which the\n reported earnings of the insurer include extraordinary items; and\n\n 12. The quality and liquidity of investments in affiliates. The Commission in\n its judgment may classify any investment as a nonadmitted asset for the\n purpose of determining the adequacy of surplus as regards policyholders.\n\nE. No domestic insurer shall enter into transactions that are part of a plan or\nseries of like transactions with persons within the insurance holding company\nsystem if the purpose of those separate transactions is to avoid the statutory\nthreshold amount and thus avoid the review that otherwise would be required. If\nthe Commission determines that separate transactions were entered into over any\n12-month period for that purpose, the Commission may exercise its authority\nunder § 38.2-1334.2:2.\n\nF. The Commission, in reviewing transactions pursuant to subsection B, shall\nconsider whether the transactions comply with the standards set forth in\nsubsection A and whether they may adversely affect the interests of\npolicyholders.\n\nG. The Commission shall be notified in writing within 30 days of any investment\nof the domestic insurer in any one corporation if the total investment in such\ncorporation by the insurance holding company system exceeds 10 percent of such\ncorporation’s voting securities.\n\nH. Any affiliate that is party to a contract or agreement described in\nsubdivision B 4 with a domestic insurer shall be subject to the jurisdiction of\nany supervision, seizure, conservatorship, or receivership proceedings against\nthe insurer and to the authority of any supervisor, conservator, rehabilitator,\nor liquidator for the insurer appointed pursuant to Chapter 15 (§ 38.2-1500\net seq.) for the purpose of interpreting, enforcing, and overseeing the\naffiliate’s obligations under the agreement or contract to perform\nservices for the insurer that are (i) an integral part of the insurer’s\noperation, including management, administrative, accounting, data processing,\nmarketing, underwriting, claims handling, investment, or any other similar\nfunctions or (ii) essential to the insurer’s ability to fulfill its\nobligations under insurance policies. The Commission may require that an\nagreement or contract described in subdivision B 4 for the provision of services\ndescribed in clause (i) or (ii) specify that the affiliate consents to the\njurisdiction as set forth in this subsection.\n\nHISTORY: 1973, c. 505, \u00a7 38.1-178.3; 1986, c. 562; 1987, c. 417; 1992, c. 588;\n2006, c. 577; 2014, c. 309; 2022, c. 113.","edition":{"id":1,"name":"2025","slug":"2025","date_created":"2026-06-21 22:39:22","date_modified":"2026-06-21 22:39:22","current":1,"order_by":1,"last_import":null}}