{"formats":[{"name":"JSON","format":"json","url":"\/downloads\/2025\/code-json\/38.2-1380.json"},{"name":"Plain Text","format":"text","url":"\/downloads\/2025\/code-text\/38.2-1380.txt"},{"name":"XML","format":"xml","url":"\/downloads\/2025\/code-xml\/38.2-1380.xml"},{"name":"HTML","format":"html","url":"\/downloads\/2025\/code-html\/38.2-1380.html"}],"law_id":82780,"edition_id":1,"section_id":82780,"structure_id":14262,"section_number":"38.2-1380","catch_line":"Requirements of a principle-based valuation","history":"2014, c. 571.","full_text":"A\n\nAn insurer shall establish reserves using a principle-based valuation that meets the following conditions for policies or contracts as specified in the valuation manual:1\n\nQuantify the benefits and guarantees, and the funding, associated with the contracts and their risks at a level of conservatism that reflects conditions that include unfavorable events that have a reasonable probability of occurring during the lifetime of the contracts. For policies or contracts with significant tail risk, reflects conditions appropriately adverse to quantify the tail risk;2\n\nIncorporate assumptions, risk analysis methods and financial models, and management techniques that are consistent with, but not necessarily identical to, those utilized within the insurer’s overall risk assessment process, while recognizing potential differences in financial reporting structures and any prescribed assumptions or methods;3\n\nIncorporate assumptions that are derived in one of the following manners:\n\t\t\t\ta. The assumption is prescribed in the valuation manual.\n\t\t\t\tb. For assumptions that are not prescribed, the assumptions shall:1\n\nBe established utilizing the insurer’s available experience, to the extent it is relevant and statistically credible; or2\n\nTo the extent that insurer data is not available, relevant, or statistically credible, be established utilizing other relevant, statistically credible experience; and4\n\nProvide margins for uncertainty, including adverse deviation and estimation error, such that the greater the uncertainty the larger the margin and resulting reserve.B\n\nAn insurer using a principle-based valuation for one or more policies or contracts subject to this section as specified in the valuation manual shall:1\n\nEstablish procedures for corporate governance and oversight of the actuarial valuation function consistent with those described in the valuation manual.2\n\nProvide to the Commission and the board of directors an annual certification of the effectiveness of the internal controls with respect to the principle-based valuation. Such controls shall be designed to assure that all material risks inherent in the liabilities and associated assets subject to such valuation are included in the valuation, and that valuations are made in accordance with the valuation manual. The certification shall be based on the controls in place as of the end of the preceding calendar year.3\n\nDevelop, and file with the Commission upon request, a principle-based valuation report that complies with standards prescribed in the valuation manual.C\n\nA principle-based valuation may include a prescribed formulaic reserve component.","order_by":null,"text":{"0":{"id":296726,"text":"An insurer shall establish reserves using a principle-based valuation that meets the following conditions for policies or contracts as specified in the valuation manual:","type":"section","prefixes":["A"],"prefix":"A","entire_prefix":"A","prefix_anchor":"A","level":1,"next_prefix":"A1"},"1":{"id":296727,"text":"Quantify the benefits and guarantees, and the funding, associated with the contracts and their risks at a level of conservatism that reflects conditions that include unfavorable events that have a reasonable probability of occurring during the lifetime of the contracts. For policies or contracts with significant tail risk, reflects conditions appropriately adverse to quantify the tail risk;","type":"section","prefixes":["A","1"],"prefix":"1","entire_prefix":"A1","prefix_anchor":"A1","level":2,"prior_prefix":"A","next_prefix":"A2"},"2":{"id":296728,"text":"Incorporate assumptions, risk analysis methods and financial models, and management techniques that are consistent with, but not necessarily identical to, those utilized within the insurer’s overall risk assessment process, while recognizing potential differences in financial reporting structures and any prescribed assumptions or methods;","type":"section","prefixes":["A","2"],"prefix":"2","entire_prefix":"A2","prefix_anchor":"A2","level":2,"prior_prefix":"A1","next_prefix":"A3"},"3":{"id":296729,"text":"Incorporate assumptions that are derived in one of the following manners:\n\t\t\t\ta. The assumption is prescribed in the valuation manual.\n\t\t\t\tb. For assumptions that are not prescribed, the assumptions shall:","type":"section","prefixes":["A","3"],"prefix":"3","entire_prefix":"A3","prefix_anchor":"A3","level":2,"prior_prefix":"A2","next_prefix":"A31"},"4":{"id":296730,"text":"Be established utilizing the insurer’s available experience, to the extent it is relevant and statistically credible; or","type":"section","prefixes":["A","3","1"],"prefix":"1","entire_prefix":"A31","prefix_anchor":"A31","level":3,"prior_prefix":"A3","next_prefix":"A32"},"5":{"id":296731,"text":"To the extent that insurer data is not available, relevant, or statistically credible, be established utilizing other relevant, statistically credible experience; and","type":"section","prefixes":["A","3","2"],"prefix":"2","entire_prefix":"A32","prefix_anchor":"A32","level":3,"prior_prefix":"A31","next_prefix":"A4"},"6":{"id":296732,"text":"Provide margins for uncertainty, including adverse deviation and estimation error, such that the greater the uncertainty the larger the margin and resulting reserve.","type":"section","prefixes":["A","4"],"prefix":"4","entire_prefix":"A4","prefix_anchor":"A4","level":2,"prior_prefix":"A32","next_prefix":"B"},"7":{"id":296733,"text":"An insurer using a principle-based valuation for one or more policies or contracts subject to this section as specified in the valuation manual shall:","type":"section","prefixes":["B"],"prefix":"B","entire_prefix":"B","prefix_anchor":"B","level":1,"prior_prefix":"A4","next_prefix":"B1"},"8":{"id":296734,"text":"Establish procedures for corporate governance and oversight of the actuarial valuation function consistent with those described in the valuation manual.","type":"section","prefixes":["B","1"],"prefix":"1","entire_prefix":"B1","prefix_anchor":"B1","level":2,"prior_prefix":"B","next_prefix":"B2"},"9":{"id":296735,"text":"Provide to the Commission and the board of directors an annual certification of the effectiveness of the internal controls with respect to the principle-based valuation. Such controls shall be designed to assure that all material risks inherent in the liabilities and associated assets subject to such valuation are included in the valuation, and that valuations are made in accordance with the valuation manual. The certification shall be based on the controls in place as of the end of the preceding calendar year.","type":"section","prefixes":["B","2"],"prefix":"2","entire_prefix":"B2","prefix_anchor":"B2","level":2,"prior_prefix":"B1","next_prefix":"B3"},"10":{"id":296736,"text":"Develop, and file with the Commission upon request, a principle-based valuation report that complies with standards prescribed in the valuation manual.","type":"section","prefixes":["B","3"],"prefix":"3","entire_prefix":"B3","prefix_anchor":"B3","level":2,"prior_prefix":"B2","next_prefix":"C"},"11":{"id":296737,"text":"A principle-based valuation may include a prescribed formulaic reserve component.","type":"section","prefixes":["C"],"prefix":"C","entire_prefix":"C","prefix_anchor":"C","level":1,"prior_prefix":"B3"}},"ancestry":[{"id":14262,"edition_id":1,"name":"Standard Valuation","identifier":"10","label":"article","depth":3,"order_by":1,"parent_id":13289,"metadata":{},"date_created":"2026-06-26 03:47:30","date_modified":"2026-06-26 03:47:30","permalink":{"id":211387,"object_type":"structure","relational_id":14262,"identifier":"10","token":"38.2\/13\/10","url":"\/38.2\/13\/10\/","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":84586,"structure_id":14262,"section_number":"38.2-1365","catch_line":"Definitions","url":"\/38.2-1365\/","token":"38.2\/13\/10\/38.2-1365","metadata":false},{"id":80617,"structure_id":14262,"section_number":"38.2-1366","catch_line":"Reserve valuation","url":"\/38.2-1366\/","token":"38.2\/13\/10\/38.2-1366","metadata":false},{"id":70162,"structure_id":14262,"section_number":"38.2-1367","catch_line":"Actuarial opinion of reserves","url":"\/38.2-1367\/","token":"38.2\/13\/10\/38.2-1367","metadata":false},{"id":67907,"structure_id":14262,"section_number":"38.2-1368","catch_line":"Minimum valuation standard for policies issued prior to certain dates","url":"\/38.2-1368\/","token":"38.2\/13\/10\/38.2-1368","metadata":false},{"id":66783,"structure_id":14262,"section_number":"38.2-1369","catch_line":"Computation of minimum standard","url":"\/38.2-1369\/","token":"38.2\/13\/10\/38.2-1369","metadata":false},{"id":86779,"structure_id":14262,"section_number":"38.2-1370","catch_line":"Computation of minimum standard for annuities","url":"\/38.2-1370\/","token":"38.2\/13\/10\/38.2-1370","metadata":false},{"id":76954,"structure_id":14262,"section_number":"38.2-1371","catch_line":"Computation of minimum standard by calendar year of issue","url":"\/38.2-1371\/","token":"38.2\/13\/10\/38.2-1371","metadata":false},{"id":72346,"structure_id":14262,"section_number":"38.2-1372","catch_line":"Reserve valuation method; life insurance and endowment benefits","url":"\/38.2-1372\/","token":"38.2\/13\/10\/38.2-1372","metadata":false},{"id":76847,"structure_id":14262,"section_number":"38.2-1373","catch_line":"Reserve valuation method; annuity and pure endowment benefits","url":"\/38.2-1373\/","token":"38.2\/13\/10\/38.2-1373","metadata":false},{"id":77501,"structure_id":14262,"section_number":"38.2-1374","catch_line":"Minimum reserves","url":"\/38.2-1374\/","token":"38.2\/13\/10\/38.2-1374","metadata":false},{"id":84837,"structure_id":14262,"section_number":"38.2-1375","catch_line":"Optional reserve calculation","url":"\/38.2-1375\/","token":"38.2\/13\/10\/38.2-1375","metadata":false},{"id":55507,"structure_id":14262,"section_number":"38.2-1376","catch_line":"Reserve calculation; valuation net premium exceeding the gross premium charged","url":"\/38.2-1376\/","token":"38.2\/13\/10\/38.2-1376","metadata":false},{"id":76132,"structure_id":14262,"section_number":"38.2-1377","catch_line":"Reserve calculation; indeterminate premium plans","url":"\/38.2-1377\/","token":"38.2\/13\/10\/38.2-1377","metadata":false},{"id":71532,"structure_id":14262,"section_number":"38.2-1378","catch_line":"Minimum standard for accident and health insurance contracts","url":"\/38.2-1378\/","token":"38.2\/13\/10\/38.2-1378","metadata":false},{"id":86866,"structure_id":14262,"section_number":"38.2-1379","catch_line":"Valuation manual for policies issued on or after the operative date of the valuation manual","url":"\/38.2-1379\/","token":"38.2\/13\/10\/38.2-1379","metadata":false},{"id":82780,"structure_id":14262,"section_number":"38.2-1380","catch_line":"Requirements of a principle-based valuation","url":"\/38.2-1380\/","token":"38.2\/13\/10\/38.2-1380","metadata":false},{"id":56910,"structure_id":14262,"section_number":"38.2-1381","catch_line":"Experience reporting for policies in force on or after the operative date of the valuation manual","url":"\/38.2-1381\/","token":"38.2\/13\/10\/38.2-1381","metadata":false},{"id":67564,"structure_id":14262,"section_number":"38.2-1382","catch_line":"Confidentiality","url":"\/38.2-1382\/","token":"38.2\/13\/10\/38.2-1382","metadata":false},{"id":76707,"structure_id":14262,"section_number":"38.2-1383","catch_line":"Single state exemption","url":"\/38.2-1383\/","token":"38.2\/13\/10\/38.2-1383","metadata":false},{"id":63558,"structure_id":14262,"section_number":"38.2-1384","catch_line":"Assessment against insurers whose policies are valued","url":"\/38.2-1384\/","token":"38.2\/13\/10\/38.2-1384","metadata":false},{"id":65928,"structure_id":14262,"section_number":"38.2-1385","catch_line":"Article not applicable in certain cases","url":"\/38.2-1385\/","token":"38.2\/13\/10\/38.2-1385","metadata":false}],"previous_section":{"id":86866,"structure_id":14262,"section_number":"38.2-1379","catch_line":"Valuation manual for policies issued on or after the operative date of the valuation manual","url":"\/38.2-1379\/","token":"38.2\/13\/10\/38.2-1379","metadata":false},"next_section":{"id":56910,"structure_id":14262,"section_number":"38.2-1381","catch_line":"Experience reporting for policies in force on or after the operative date of the valuation manual","url":"\/38.2-1381\/","token":"38.2\/13\/10\/38.2-1381","metadata":false},"metadata":false,"official_url":"https:\/\/law.lis.virginia.gov\/vacode\/38.2-1380\/","history_text":"

This law was first created in 2014. The record of its establishment is cataloged in chapter 571<\/a> 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.<\/p>","references":[{"id":84586,"section_number":"38.2-1365","catch_line":"Definitions","order_by":null,"url":"\/38.2-1365\/"},{"id":80617,"section_number":"38.2-1366","catch_line":"Reserve valuation","order_by":null,"url":"\/38.2-1366\/"},{"id":86866,"section_number":"38.2-1379","catch_line":"Valuation manual for policies issued on or after the operative date of the valuation manual","order_by":null,"url":"\/38.2-1379\/"},{"id":67564,"section_number":"38.2-1382","catch_line":"Confidentiality","order_by":null,"url":"\/38.2-1382\/"}],"refers_to":false,"permalink":{"id":211449,"object_type":"law","relational_id":82780,"identifier":"38.2-1380","token":"38.2\/13\/10\/38.2-1380","url":"\/38.2-1380\/","edition_id":1,"permalink":0,"preferred":1},"url":"\/38.2-1380\/","token":"38.2\/13\/10\/38.2-1380","dublin_core":{"Title":"Requirements of a principle-based valuation","Type":"Text","Format":"text\/html","Identifier":"\u00a7 38.2-1380","Relation":"Code of Virginia"},"html":"\n\t\t\t\t\t\t

A.<\/span> An insurer<\/span> shall establish reserves using a principle-based valuation<\/span> that meets the following conditions for policies or contracts<\/span> as specified in the valuation manual<\/span>: <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

1.<\/span> Quantify the benefits and guarantees, and the funding, associated with the contracts<\/span> and their risks at a level of conservatism that reflects conditions that include unfavorable events that have a reasonable probability of occurring during the lifetime of the contracts<\/span>. For policies or contracts<\/span> with significant tail risk<\/span>, reflects conditions appropriately adverse to quantify the tail risk<\/span>; <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

2.<\/span> Incorporate assumptions, risk analysis methods and financial models, and management techniques that are consistent with, but not necessarily identical to, those utilized within the insurer<\/span>’s overall risk assessment process, while recognizing potential differences in financial reporting structures and any prescribed assumptions or methods; <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

3.<\/span> Incorporate assumptions that are derived in one of the following manners:\n\t\t\t\ta. The assumption is prescribed in the valuation manual<\/span>.\n\t\t\t\tb. For assumptions that are not prescribed, the assumptions shall: <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

1.<\/span> Be established utilizing the insurer<\/span>’s available experience, to the extent it is relevant and statistically credible; or <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

2.<\/span> To the extent that insurer<\/span> data is not available, relevant, or statistically credible, be established utilizing other relevant, statistically credible experience; and <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

4.<\/span> Provide margins for uncertainty, including adverse deviation and estimation error, such that the greater the uncertainty the larger the margin and resulting reserve. <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

B.<\/span> An insurer<\/span> using a principle-based valuation<\/span> for one or more policies or contracts<\/span> subject to this section as specified in the valuation manual<\/span> shall: <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

1.<\/span> Establish procedures for corporate governance and oversight of the actuarial valuation function consistent with those described in the valuation manual<\/span>. <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

2.<\/span> Provide to the Commission<\/span> and the board of directors an annual certification of the effectiveness of the internal controls with respect to the principle-based valuation<\/span>. Such controls shall be designed to assure that all material<\/span> risks inherent in the liabilities and associated assets<\/span> subject to such valuation are included in the valuation, and that valuations are made in accordance with the valuation manual<\/span>. The certification shall be based on the controls in place as of the end of the preceding calendar year. <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

3.<\/span> Develop, and file with the Commission<\/span> upon request, a principle-based valuation<\/span> report that complies with standards prescribed in the valuation manual<\/span>. <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

C.<\/span> A principle-based valuation<\/span> may include a prescribed formulaic reserve component. <\/i><\/a><\/p><\/section>","plain_text":" CODE OF VIRGINIA\n\nREQUIREMENTS OF A PRINCIPLE-BASED VALUATION (\u00a7 38.2-1380)\n\nA. An insurer shall establish reserves using a principle-based valuation that\nmeets the following conditions for policies or contracts as specified in the\nvaluation manual:\n\n 1. Quantify the benefits and guarantees, and the funding, associated with the\n contracts and their risks at a level of conservatism that reflects conditions\n that include unfavorable events that have a reasonable probability of\n occurring during the lifetime of the contracts. For policies or contracts with\n significant tail risk, reflects conditions appropriately adverse to quantify\n the tail risk;\n\n 2. Incorporate assumptions, risk analysis methods and financial models, and\n management techniques that are consistent with, but not necessarily identical\n to, those utilized within the insurer’s overall risk assessment process,\n while recognizing potential differences in financial reporting structures and\n any prescribed assumptions or methods;\n\n 3. Incorporate assumptions that are derived in one of the following manners:\n \t\t\t\ta. The assumption is prescribed in the valuation manual.\n \t\t\t\tb. For assumptions that are not prescribed, the assumptions shall:\n\n 1. Be established utilizing the insurer’s available experience, to the\n extent it is relevant and statistically credible; or\n\n 2. To the extent that insurer data is not available, relevant, or\n statistically credible, be established utilizing other relevant,\n statistically credible experience; and\n\n 4. Provide margins for uncertainty, including adverse deviation and estimation\n error, such that the greater the uncertainty the larger the margin and\n resulting reserve.\n\nB. An insurer using a principle-based valuation for one or more policies or\ncontracts subject to this section as specified in the valuation manual shall:\n\n 1. Establish procedures for corporate governance and oversight of the\n actuarial valuation function consistent with those described in the valuation\n manual.\n\n 2. Provide to the Commission and the board of directors an annual\n certification of the effectiveness of the internal controls with respect to\n the principle-based valuation. Such controls shall be designed to assure that\n all material risks inherent in the liabilities and associated assets subject\n to such valuation are included in the valuation, and that valuations are made\n in accordance with the valuation manual. The certification shall be based on\n the controls in place as of the end of the preceding calendar year.\n\n 3. Develop, and file with the Commission upon request, a principle-based\n valuation report that complies with standards prescribed in the valuation\n manual.\n\nC. A principle-based valuation may include a prescribed formulaic reserve\ncomponent.\n\nHISTORY: 2014, c. 571.","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}}