{"formats":[{"name":"JSON","format":"json","url":"\/downloads\/2025\/code-json\/38.2-1401.json"},{"name":"Plain Text","format":"text","url":"\/downloads\/2025\/code-text\/38.2-1401.txt"},{"name":"XML","format":"xml","url":"\/downloads\/2025\/code-xml\/38.2-1401.xml"},{"name":"HTML","format":"html","url":"\/downloads\/2025\/code-html\/38.2-1401.html"}],"law_id":57145,"edition_id":1,"section_id":57145,"structure_id":13283,"section_number":"38.2-1401","catch_line":"Definitions","history":"1983, c. 457, \u00a7 38.1-217.2; 1986, c. 562; 1992, c. 588; 1994, c. 503; 1998, c. 42; 2004, c. 668; 2008, c. 216; 2011, c. 198.","full_text":"As used in this chapter:\n\t\t“Admitted assets” means, for purposes of the limitations and standards imposed by Articles 1 and 2 of this chapter, the amount thereof as permitted to be reported on the statutory financial statement of the insurer most recently required to be filed with the Commission pursuant to \u00a7\u00a7 38.2-1300 and 38.2-1301 or other similar provisions within this title, but excluding the assets allocated to separate accounts pursuant to Article 3 (\u00a7 38.2-1443 et seq.) of this chapter.\n\t\t“Business entity” means a corporation, association, partnership, joint venture, trust, church, or religious body.\n\t\t“Cap” means an agreement obligating the seller to make payments to the buyer, with each payment based on the amount by which a reference price or level or the performance or value of one or more underlying interests exceeds a predetermined number, sometimes called the strike rate or strike price.\n\t\t“Category 1 investment” means any investment complying with Article 1 (\u00a7 38.2-1400 et seq.) and either Article 2 (\u00a7 38.2-1412 et seq.) or 3 (\u00a7 38.2-1443 et seq.), or both Articles 2 and 3, of this chapter.\n\t\t“Category 2 investment” means any investment complying with Article 1, but with neither Article 2 nor Article 3, of this chapter.\n\t\t“Claimants” means any owners, beneficiaries, assignees, certificate holders, or third-party beneficiaries of any insurance benefit or right arising out of and within the coverage of an insurance policy, annuity contract, benefit contract, or subscription contract.\n\t\t“Collar” means an agreement to receive payments as the buyer of an option, cap, or floor and to make payments as the seller of a different option, cap, or floor.\n\t\t“Counterparty exposure amount” means the amount of credit risk attributable to an over-the-counter derivative instrument, which amount of credit risk is equal to (i) the market value of the over-the-counter derivative instrument if the liquidation of the derivative instrument would result in a final cash payment to the insurer or (ii) zero if the liquidation of the derivative instrument would not result in a final cash payment to the insurer. However, if an over-the-counter derivative instrument is entered into under a written master agreement that provides for netting of payments owed by the respective parties, and the domicile of the counterparty is either within the United States or, if not within the United States, within a foreign jurisdiction listed in the Purposes and Procedures Manual of the Securities Valuation Office as eligible for netting, the amount of credit risk attributable to the over-the-counter derivative instrument shall be the greater of zero or the net sum of (a) the market value of the over-the-counter derivative instruments entered into under the agreement, the liquidation of which would result in a final cash payment to the insurer, and (b) the market value of the over-the-counter derivative instruments entered into under the agreement, the liquidation of which would result in a final cash payment by the insurer to the business entity. With respect to open transactions, the market value of the over-the-counter derivative instrument shall be determined at the end of the most recent quarter of the insurer’s fiscal year and shall be reduced by the market value of acceptable collateral held by the insurer or placed in escrow by one or both parties.\n\t\t“Date of investment” means the date on which funds are disbursed for an investment.\n\t\t“Derivative instrument” means an agreement, instrument, or a series or combination thereof (i) to make or take delivery of, or assume or relinquish, a specified amount of one or more underlying interests or to make a cash settlement in lieu thereof or (ii) that has a price, performance, value, or cash flow based primarily upon the actual or expected price, level, performance, value, or cash flow of one or more underlying interests. Derivative instruments include options, warrants used in a hedging transaction and not attached to another financial instrument, caps, floors, collars, swaps, forwards, futures, and any other agreements, options, or instruments substantially similar thereto or any series or combination thereof and any agreements or instruments permitted under rules adopted under \u00a7 38.2-1428.\n\t\t“Derivative transaction” means a transaction involving the use of one or more derivative instruments.\n\t\t“Domestic governmental entity” means the United States, any state, or any municipality or district in any such state, or any political subdivision, civil division, agency or instrumentality of one or more of the foregoing.\n\t\t“Fair market value” means the price that property will bring when (i) offered for sale by one who desires, but who is not obligated, to sell it; (ii) bought by one who is under no necessity of having it; and (iii) sufficient time has elapsed to allow interested buyers the opportunity to become informed of the offer for sale.\n\t\t“Fixed charges” means actual interest incurred in each year on funded and unfunded debt, excluding interest on bank deposit accounts, and annual apportionment of debt discount or premium. Where interest is partially or entirely contingent upon earnings, “fixed charges” includes contingent interest payments.\n\t\t“Floor” means an agreement obligating the seller to make payments to the buyer in which each payment is based on the amount by which a predetermined number, sometimes called the floor rate or price, exceeds a reference price, a level, or the performance or value of one or more underlying interests.\n\t\t“Forward” means an agreement, other than a future, to make or take delivery of, or effect a cash settlement based on the actual or expected price, level, performance or value of, one or more underlying interests.\n\t\t“Future” means an agreement, traded on a qualified exchange or qualified foreign exchange, to make or take delivery of, or effect a cash settlement based on the actual or expected price, level, performance or value of, one or more underlying interests and includes an insurance future.\n\t\t“Hedging transaction” means:\n\n1\n\nA derivative transaction that is entered into and maintained to reduce:\n\t\t\ta. The risk of a change in the value, yield, price, cash flow, or quantity of assets or liabilities that the insurer has acquired or incurred or anticipates acquiring or incurring; or\n\t\t\tb. The currency exchange rate risk or the degree of exposure as to assets or liabilities that the insurer has acquired or incurred or anticipates acquiring or incurring; or2\n\nAny other derivative transaction specified as constituting a hedging transaction in rules adopted pursuant to § 38.2-1428.\n\t\t\t“High grade obligations” means obligations which (i) are rated one or two by the Securities Valuation Office of the National Association of Insurance Commissioners or (ii) if not rated by the Securities Valuation Office, are rated in an equivalent grade by a national rating agency recognized by the Commission.\n\t\t\t“Insurance future” means a future relating to an index or pool that is based on insurance-related items.\n\t\t\t“Insurance futures option” means an option on an insurance future.\n\t\t\t“Insurer” means a company licensed pursuant to Chapter 10 (§ 38.2-1000 et seq.), 11 (§ 38.2-1100 et seq.), 12 (§ 38.2-1200 et seq.), 25 (§ 38.2-2500 et seq.), 26 (§ 38.2-2600 et seq.), 38 (§ 38.2-3800 et seq.), 39 (§ 38.2-3900 et seq.), 40 (§ 38.2-4000 et seq.), 41 (§ 38.2-4100 et seq.), 42 (§ 38.2-4200 et seq.), 43 (§ 38.2-4300 et seq.), 45 (§ 38.2-4500 et seq.), 46 (§ 38.2-4600 et seq.), 51 (§ 38.2-5100 et seq.), or 61 (§ 38.2-6100 et seq.) of this title.\n\t\t\t“Life insurer” means any insurer authorized to transact life insurance or to grant annuities as defined in §§ 38.2-102 through 38.2-107 or authorized pursuant to the provisions of Chapter 38, 39, 40 or 41, or any other chapter of this title, to provide any one of the following contractual benefits in any form: death benefits, endowment benefits, annuity benefits or monument or tombstone benefits.\n\t\t\t“Lower grade obligations” means obligations which (i) are rated four, five, or six by the Securities Valuation Office of the National Association of Insurance Commissioners or (ii) if not rated by the Securities Valuation Office, are rated in an equivalent grade by a national rating agency recognized by the Commission.\n\t\t\t“Medium grade obligations” means obligations which (i) are rated three by the Securities Valuation Office of the National Association of Insurance Commissioners or (ii) if not rated by the Securities Valuation office, are rated in an equivalent grade by a national rating agency recognized by the Commission.\n\t\t\t“Minimum capital and surplus” means the minimum surplus to policyholders, or minimum net worth, a particular insurer must have to obtain and maintain its license to transact business in this Commonwealth pursuant to the applicable provisions of this title. In no case shall an insurer’s minimum capital and surplus be less than zero.\n\t\t\t“Net earnings available for fixed charges” means income minus operating expenses, maintenance expenses, taxes other than income taxes, depreciation, and depletion. Extraordinary nonrecurring income and expense items are excluded from the calculation of “net earnings available for fixed charges.”\n\t\t\t“Obligation” means a bond, debenture, note or other evidence of indebtedness.\n\t\t\t“Option” means an agreement giving the buyer the right to buy or receive, sell or deliver, enter into, extend, terminate, or effect a cash settlement based on the actual or expected price, level, performance, or value of one or more underlying interests. “Option” includes an insurance futures option.\n\t\t\t“Over-the-counter derivative instrument” means a derivative instrument that is entered into with a business entity other than through a qualified exchange or qualified foreign exchange or that is cleared other than through a qualified clearinghouse.\n\t\t\t“Potential exposure” means the amount determined in accordance with the National Association of Insurance Commissioners Annual Statement Instructions.\n\t\t\t“Prohibited investment” means any investment prohibited by § 38.2-1407.\n\t\t\t“Qualified clearinghouse” means a clearinghouse for, and that is subject to the rules of, a qualified exchange or a qualified foreign exchange, which clearinghouse provides clearing services, including acting as a counterparty to each of the parties to a transaction such that the parties no longer have credit risk as to each other.\n\t\t\t“Qualified exchange” means:1\n\nA securities exchange registered as a national securities exchange, or a securities market regulated under the Securities Exchange Act of 1934 (15 U.S.C. § 78a et seq.), as amended;2\n\nA board of trade or commodities exchange designated as a contract market by the Commodity Futures Trading Commission or any successor thereof;3\n\nPrivate Offerings, Resales and Trading through Automated Linkages (PORTAL);4\n\nA designated offshore securities market as defined in Securities Exchange Commission Regulation S, 17 C.F.R. Part 230, as amended; or5\n\nA qualified foreign exchange.\n\t\t\t“Qualified foreign exchange” means a foreign exchange, board of trade, or contract market located outside the United States:1\n\nThat has received regulatory comparability relief under Commodity Futures Trading Commission (CFTC) Rule 30.10 (as set forth in Appendix C to Part 30 of the CFTC’s regulations at 17 C.F.R. Part 30);2\n\nThat is, or whose members are, subject to the jurisdiction of a foreign futures authority that has received regulatory comparability relief under CFTC Rule 30.10 (as set forth in Appendix C to Part 30 of the CFTC’s regulations at 17 C.F.R. Part 30) as to futures transactions in the jurisdiction where the exchange, board of trade, or contract market is located; or3\n\nUpon which foreign stock index futures contracts are listed that are the subject of no-action relief issued by the CFTC’s Office of General Counsel, provided that an exchange, board of trade, or contract market that qualifies as a “qualified foreign exchange” only under this subsection shall only be a “qualified foreign exchange” as to foreign stock index futures contracts that are the subject of no-action relief.\n\t\t\t“Replication transaction” means a derivative transaction that is intended to replicate the performance of one or more assets that an insurer is authorized to acquire under this chapter. A derivative transaction that is entered into as a hedging transaction shall not be considered a replication transaction.\n\t\t\t“Reserve liabilities” means those liabilities which are required to be established by an insurer for all of its outstanding insurance policies, annuity contracts, benefit contracts and subscription contracts, in accordance with this title, as amended or as hereafter amended.\n\t\t\t“Statement value” means the amount determined in accordance with the National Association of Insurance Commissioners Annual Statement Instructions.\n\t\t\t“Swap” means an agreement to exchange or to net payments at one or more times based on the actual or expected price, level, performance, or value of one or more underlying interests.\n\t\t\t“Underlying interest” means the assets, liabilities, or other interests, or a combination thereof, underlying a derivative instrument, such as any one or more securities, currencies, rates, indices, commodities, or derivative instruments.\n\t\t\t“Warrant” means an instrument that gives the holder the right to purchase an underlying financial instrument at a given price and time or at a series of prices and times outlined in the warrant agreement. Warrants may be issued alone or in connection with the sale of other securities.\n\t\t\t“Wrap-around mortgage” means a loan made by an insurer to a borrower, secured by a mortgage or deed of trust on real property encumbered by a first mortgage or first deed of trust, where the total amount of the obligation of the borrower to the insurer under the loan is not less than the sum of (i) the principal amount initially disbursed by the insurer on account of the loan and (ii) the unpaid principal balance of the obligation secured by the preexisting mortgage or deed of trust.","order_by":null,"text":{"0":{"id":209272,"text":"As used in this chapter:\n\t\t“Admitted assets” means, for purposes of the limitations and standards imposed by Articles 1 and 2 of this chapter, the amount thereof as permitted to be reported on the statutory financial statement of the insurer most recently required to be filed with the Commission pursuant to \u00a7\u00a7 38.2-1300 and 38.2-1301 or other similar provisions within this title, but excluding the assets allocated to separate accounts pursuant to Article 3 (\u00a7 38.2-1443 et seq.) of this chapter.\n\t\t“Business entity” means a corporation, association, partnership, joint venture, trust, church, or religious body.\n\t\t“Cap” means an agreement obligating the seller to make payments to the buyer, with each payment based on the amount by which a reference price or level or the performance or value of one or more underlying interests exceeds a predetermined number, sometimes called the strike rate or strike price.\n\t\t“Category 1 investment” means any investment complying with Article 1 (\u00a7 38.2-1400 et seq.) and either Article 2 (\u00a7 38.2-1412 et seq.) or 3 (\u00a7 38.2-1443 et seq.), or both Articles 2 and 3, of this chapter.\n\t\t“Category 2 investment” means any investment complying with Article 1, but with neither Article 2 nor Article 3, of this chapter.\n\t\t“Claimants” means any owners, beneficiaries, assignees, certificate holders, or third-party beneficiaries of any insurance benefit or right arising out of and within the coverage of an insurance policy, annuity contract, benefit contract, or subscription contract.\n\t\t“Collar” means an agreement to receive payments as the buyer of an option, cap, or floor and to make payments as the seller of a different option, cap, or floor.\n\t\t“Counterparty exposure amount” means the amount of credit risk attributable to an over-the-counter derivative instrument, which amount of credit risk is equal to (i) the market value of the over-the-counter derivative instrument if the liquidation of the derivative instrument would result in a final cash payment to the insurer or (ii) zero if the liquidation of the derivative instrument would not result in a final cash payment to the insurer. However, if an over-the-counter derivative instrument is entered into under a written master agreement that provides for netting of payments owed by the respective parties, and the domicile of the counterparty is either within the United States or, if not within the United States, within a foreign jurisdiction listed in the Purposes and Procedures Manual of the Securities Valuation Office as eligible for netting, the amount of credit risk attributable to the over-the-counter derivative instrument shall be the greater of zero or the net sum of (a) the market value of the over-the-counter derivative instruments entered into under the agreement, the liquidation of which would result in a final cash payment to the insurer, and (b) the market value of the over-the-counter derivative instruments entered into under the agreement, the liquidation of which would result in a final cash payment by the insurer to the business entity. With respect to open transactions, the market value of the over-the-counter derivative instrument shall be determined at the end of the most recent quarter of the insurer’s fiscal year and shall be reduced by the market value of acceptable collateral held by the insurer or placed in escrow by one or both parties.\n\t\t“Date of investment” means the date on which funds are disbursed for an investment.\n\t\t“Derivative instrument” means an agreement, instrument, or a series or combination thereof (i) to make or take delivery of, or assume or relinquish, a specified amount of one or more underlying interests or to make a cash settlement in lieu thereof or (ii) that has a price, performance, value, or cash flow based primarily upon the actual or expected price, level, performance, value, or cash flow of one or more underlying interests. Derivative instruments include options, warrants used in a hedging transaction and not attached to another financial instrument, caps, floors, collars, swaps, forwards, futures, and any other agreements, options, or instruments substantially similar thereto or any series or combination thereof and any agreements or instruments permitted under rules adopted under \u00a7 38.2-1428.\n\t\t“Derivative transaction” means a transaction involving the use of one or more derivative instruments.\n\t\t“Domestic governmental entity” means the United States, any state, or any municipality or district in any such state, or any political subdivision, civil division, agency or instrumentality of one or more of the foregoing.\n\t\t“Fair market value” means the price that property will bring when (i) offered for sale by one who desires, but who is not obligated, to sell it; (ii) bought by one who is under no necessity of having it; and (iii) sufficient time has elapsed to allow interested buyers the opportunity to become informed of the offer for sale.\n\t\t“Fixed charges” means actual interest incurred in each year on funded and unfunded debt, excluding interest on bank deposit accounts, and annual apportionment of debt discount or premium. Where interest is partially or entirely contingent upon earnings, “fixed charges” includes contingent interest payments.\n\t\t“Floor” means an agreement obligating the seller to make payments to the buyer in which each payment is based on the amount by which a predetermined number, sometimes called the floor rate or price, exceeds a reference price, a level, or the performance or value of one or more underlying interests.\n\t\t“Forward” means an agreement, other than a future, to make or take delivery of, or effect a cash settlement based on the actual or expected price, level, performance or value of, one or more underlying interests.\n\t\t“Future” means an agreement, traded on a qualified exchange or qualified foreign exchange, to make or take delivery of, or effect a cash settlement based on the actual or expected price, level, performance or value of, one or more underlying interests and includes an insurance future.\n\t\t“Hedging transaction” means:","type":"section","prefixes":[""],"prefix":"","entire_prefix":"","prefix_anchor":"","level":1,"next_prefix":"1"},"1":{"id":209273,"text":"A derivative transaction that is entered into and maintained to reduce:\n\t\t\ta. The risk of a change in the value, yield, price, cash flow, or quantity of assets or liabilities that the insurer has acquired or incurred or anticipates acquiring or incurring; or\n\t\t\tb. The currency exchange rate risk or the degree of exposure as to assets or liabilities that the insurer has acquired or incurred or anticipates acquiring or incurring; or","type":"section","prefixes":["1"],"prefix":"1","entire_prefix":"1","prefix_anchor":"1","level":1,"prior_prefix":"","next_prefix":"2"},"2":{"id":209274,"text":"Any other derivative transaction specified as constituting a hedging transaction in rules adopted pursuant to § 38.2-1428.\n\t\t\t“High grade obligations” means obligations which (i) are rated one or two by the Securities Valuation Office of the National Association of Insurance Commissioners or (ii) if not rated by the Securities Valuation Office, are rated in an equivalent grade by a national rating agency recognized by the Commission.\n\t\t\t“Insurance future” means a future relating to an index or pool that is based on insurance-related items.\n\t\t\t“Insurance futures option” means an option on an insurance future.\n\t\t\t“Insurer” means a company licensed pursuant to Chapter 10 (§ 38.2-1000 et seq.), 11 (§ 38.2-1100 et seq.), 12 (§ 38.2-1200 et seq.), 25 (§ 38.2-2500 et seq.), 26 (§ 38.2-2600 et seq.), 38 (§ 38.2-3800 et seq.), 39 (§ 38.2-3900 et seq.), 40 (§ 38.2-4000 et seq.), 41 (§ 38.2-4100 et seq.), 42 (§ 38.2-4200 et seq.), 43 (§ 38.2-4300 et seq.), 45 (§ 38.2-4500 et seq.), 46 (§ 38.2-4600 et seq.), 51 (§ 38.2-5100 et seq.), or 61 (§ 38.2-6100 et seq.) of this title.\n\t\t\t“Life insurer” means any insurer authorized to transact life insurance or to grant annuities as defined in §§ 38.2-102 through 38.2-107 or authorized pursuant to the provisions of Chapter 38, 39, 40 or 41, or any other chapter of this title, to provide any one of the following contractual benefits in any form: death benefits, endowment benefits, annuity benefits or monument or tombstone benefits.\n\t\t\t“Lower grade obligations” means obligations which (i) are rated four, five, or six by the Securities Valuation Office of the National Association of Insurance Commissioners or (ii) if not rated by the Securities Valuation Office, are rated in an equivalent grade by a national rating agency recognized by the Commission.\n\t\t\t“Medium grade obligations” means obligations which (i) are rated three by the Securities Valuation Office of the National Association of Insurance Commissioners or (ii) if not rated by the Securities Valuation office, are rated in an equivalent grade by a national rating agency recognized by the Commission.\n\t\t\t“Minimum capital and surplus” means the minimum surplus to policyholders, or minimum net worth, a particular insurer must have to obtain and maintain its license to transact business in this Commonwealth pursuant to the applicable provisions of this title. In no case shall an insurer’s minimum capital and surplus be less than zero.\n\t\t\t“Net earnings available for fixed charges” means income minus operating expenses, maintenance expenses, taxes other than income taxes, depreciation, and depletion. Extraordinary nonrecurring income and expense items are excluded from the calculation of “net earnings available for fixed charges.”\n\t\t\t“Obligation” means a bond, debenture, note or other evidence of indebtedness.\n\t\t\t“Option” means an agreement giving the buyer the right to buy or receive, sell or deliver, enter into, extend, terminate, or effect a cash settlement based on the actual or expected price, level, performance, or value of one or more underlying interests. “Option” includes an insurance futures option.\n\t\t\t“Over-the-counter derivative instrument” means a derivative instrument that is entered into with a business entity other than through a qualified exchange or qualified foreign exchange or that is cleared other than through a qualified clearinghouse.\n\t\t\t“Potential exposure” means the amount determined in accordance with the National Association of Insurance Commissioners Annual Statement Instructions.\n\t\t\t“Prohibited investment” means any investment prohibited by § 38.2-1407.\n\t\t\t“Qualified clearinghouse” means a clearinghouse for, and that is subject to the rules of, a qualified exchange or a qualified foreign exchange, which clearinghouse provides clearing services, including acting as a counterparty to each of the parties to a transaction such that the parties no longer have credit risk as to each other.\n\t\t\t“Qualified exchange” means:","type":"section","prefixes":["2"],"prefix":"2","entire_prefix":"2","prefix_anchor":"2","level":1,"prior_prefix":"1","next_prefix":"1"},"3":{"id":209275,"text":"A securities exchange registered as a national securities exchange, or a securities market regulated under the Securities Exchange Act of 1934 (15 U.S.C. § 78a et seq.), as amended;","type":"section","prefixes":["1"],"prefix":"1","entire_prefix":"1","prefix_anchor":"1","level":1,"prior_prefix":"2","next_prefix":"2"},"4":{"id":209276,"text":"A board of trade or commodities exchange designated as a contract market by the Commodity Futures Trading Commission or any successor thereof;","type":"section","prefixes":["2"],"prefix":"2","entire_prefix":"2","prefix_anchor":"2","level":1,"prior_prefix":"1","next_prefix":"3"},"5":{"id":209277,"text":"Private Offerings, Resales and Trading through Automated Linkages (PORTAL);","type":"section","prefixes":["3"],"prefix":"3","entire_prefix":"3","prefix_anchor":"3","level":1,"prior_prefix":"2","next_prefix":"4"},"6":{"id":209278,"text":"A designated offshore securities market as defined in Securities Exchange Commission Regulation S, 17 C.F.R. Part 230, as amended; or","type":"section","prefixes":["4"],"prefix":"4","entire_prefix":"4","prefix_anchor":"4","level":1,"prior_prefix":"3","next_prefix":"5"},"7":{"id":209279,"text":"A qualified foreign exchange.\n\t\t\t“Qualified foreign exchange” means a foreign exchange, board of trade, or contract market located outside the United States:","type":"section","prefixes":["5"],"prefix":"5","entire_prefix":"5","prefix_anchor":"5","level":1,"prior_prefix":"4","next_prefix":"1"},"8":{"id":209280,"text":"That has received regulatory comparability relief under Commodity Futures Trading Commission (CFTC) Rule 30.10 (as set forth in Appendix C to Part 30 of the CFTC’s regulations at 17 C.F.R. Part 30);","type":"section","prefixes":["1"],"prefix":"1","entire_prefix":"1","prefix_anchor":"1","level":1,"prior_prefix":"5","next_prefix":"2"},"9":{"id":209281,"text":"That is, or whose members are, subject to the jurisdiction of a foreign futures authority that has received regulatory comparability relief under CFTC Rule 30.10 (as set forth in Appendix C to Part 30 of the CFTC’s regulations at 17 C.F.R. Part 30) as to futures transactions in the jurisdiction where the exchange, board of trade, or contract market is located; or","type":"section","prefixes":["2"],"prefix":"2","entire_prefix":"2","prefix_anchor":"2","level":1,"prior_prefix":"1","next_prefix":"3"},"10":{"id":209282,"text":"Upon which foreign stock index futures contracts are listed that are the subject of no-action relief issued by the CFTC’s Office of General Counsel, provided that an exchange, board of trade, or contract market that qualifies as a “qualified foreign exchange” only under this subsection shall only be a “qualified foreign exchange” as to foreign stock index futures contracts that are the subject of no-action relief.\n\t\t\t“Replication transaction” means a derivative transaction that is intended to replicate the performance of one or more assets that an insurer is authorized to acquire under this chapter. A derivative transaction that is entered into as a hedging transaction shall not be considered a replication transaction.\n\t\t\t“Reserve liabilities” means those liabilities which are required to be established by an insurer for all of its outstanding insurance policies, annuity contracts, benefit contracts and subscription contracts, in accordance with this title, as amended or as hereafter amended.\n\t\t\t“Statement value” means the amount determined in accordance with the National Association of Insurance Commissioners Annual Statement Instructions.\n\t\t\t“Swap” means an agreement to exchange or to net payments at one or more times based on the actual or expected price, level, performance, or value of one or more underlying interests.\n\t\t\t“Underlying interest” means the assets, liabilities, or other interests, or a combination thereof, underlying a derivative instrument, such as any one or more securities, currencies, rates, indices, commodities, or derivative instruments.\n\t\t\t“Warrant” means an instrument that gives the holder the right to purchase an underlying financial instrument at a given price and time or at a series of prices and times outlined in the warrant agreement. Warrants may be issued alone or in connection with the sale of other securities.\n\t\t\t“Wrap-around mortgage” means a loan made by an insurer to a borrower, secured by a mortgage or deed of trust on real property encumbered by a first mortgage or first deed of trust, where the total amount of the obligation of the borrower to the insurer under the loan is not less than the sum of (i) the principal amount initially disbursed by the insurer on account of the loan and (ii) the unpaid principal balance of the obligation secured by the preexisting mortgage or deed of trust.","type":"section","prefixes":["3"],"prefix":"3","entire_prefix":"3","prefix_anchor":"3","level":1,"prior_prefix":"2"}},"ancestry":[{"id":13283,"edition_id":1,"name":"General Provisions","identifier":"1","label":"article","depth":3,"order_by":1,"parent_id":13282,"metadata":{},"date_created":"2026-06-26 03:44:34","date_modified":"2026-06-26 03:44:34","permalink":{"id":211889,"object_type":"structure","relational_id":13283,"identifier":"1","token":"38.2\/14\/1","url":"\/38.2\/14\/1\/","edition_id":1,"permalink":0,"preferred":1}},{"id":13282,"edition_id":1,"name":"Investments","identifier":"14","label":"chapter","depth":2,"order_by":1,"parent_id":12698,"metadata":{},"date_created":"2026-06-26 03:44:34","date_modified":"2026-06-26 03:44:34","permalink":{"id":211887,"object_type":"structure","relational_id":13282,"identifier":"14","token":"38.2\/14","url":"\/38.2\/14\/","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":64362,"structure_id":13283,"section_number":"38.2-1400","catch_line":"Scope and purpose of chapter","url":"\/38.2-1400\/","token":"38.2\/14\/1\/38.2-1400","metadata":false},{"id":57145,"structure_id":13283,"section_number":"38.2-1401","catch_line":"Definitions","url":"\/38.2-1401\/","token":"38.2\/14\/1\/38.2-1401","metadata":false},{"id":58035,"structure_id":13283,"section_number":"38.2-1402","catch_line":"Authority to invest; classification of investments by category","url":"\/38.2-1402\/","token":"38.2\/14\/1\/38.2-1402","metadata":false},{"id":85308,"structure_id":13283,"section_number":"38.2-1403","catch_line":"Category 2 investments limits","url":"\/38.2-1403\/","token":"38.2\/14\/1\/38.2-1403","metadata":false},{"id":71387,"structure_id":13283,"section_number":"38.2-1404","catch_line":"Classification of existing investments","url":"\/38.2-1404\/","token":"38.2\/14\/1\/38.2-1404","metadata":false},{"id":80503,"structure_id":13283,"section_number":"38.2-1405","catch_line":"Dates of determination","url":"\/38.2-1405\/","token":"38.2\/14\/1\/38.2-1405","metadata":false},{"id":72007,"structure_id":13283,"section_number":"38.2-1406","catch_line":"Investment conversions","url":"\/38.2-1406\/","token":"38.2\/14\/1\/38.2-1406","metadata":false},{"id":87237,"structure_id":13283,"section_number":"38.2-1407","catch_line":"Prohibited investments","url":"\/38.2-1407\/","token":"38.2\/14\/1\/38.2-1407","metadata":false},{"id":68250,"structure_id":13283,"section_number":"38.2-1408","catch_line":"Authorization of investments","url":"\/38.2-1408\/","token":"38.2\/14\/1\/38.2-1408","metadata":false},{"id":63266,"structure_id":13283,"section_number":"38.2-1409","catch_line":"Powers with respect to property","url":"\/38.2-1409\/","token":"38.2\/14\/1\/38.2-1409","metadata":false},{"id":54275,"structure_id":13283,"section_number":"38.2-1410","catch_line":"Items not deemed to be prior liens or encumbrances","url":"\/38.2-1410\/","token":"38.2\/14\/1\/38.2-1410","metadata":false},{"id":64344,"structure_id":13283,"section_number":"38.2-1411","catch_line":"Repealed","url":"\/38.2-1411\/","token":"38.2\/14\/1\/38.2-1411","metadata":false},{"id":60703,"structure_id":13283,"section_number":"38.2-1411.1","catch_line":"Investment limits generally","url":"\/38.2-1411.1\/","token":"38.2\/14\/1\/38.2-1411.1","metadata":false},{"id":82699,"structure_id":13283,"section_number":"38.2-1411.2","catch_line":"Investment limits in medium grade and lower grade obligations","url":"\/38.2-1411.2\/","token":"38.2\/14\/1\/38.2-1411.2","metadata":false}],"previous_section":{"id":64362,"structure_id":13283,"section_number":"38.2-1400","catch_line":"Scope and purpose of chapter","url":"\/38.2-1400\/","token":"38.2\/14\/1\/38.2-1400","metadata":false},"next_section":{"id":58035,"structure_id":13283,"section_number":"38.2-1402","catch_line":"Authority to invest; classification of investments by category","url":"\/38.2-1402\/","token":"38.2\/14\/1\/38.2-1402","metadata":false},"metadata":false,"official_url":"https:\/\/law.lis.virginia.gov\/vacode\/38.2-1401\/","history_text":"

This law was first created in 1983. The record of its establishment is cataloged in chapter 457 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 1983 \u201cActs\u201d aren\u2019t available online. It has been modified 7 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 1992, chapter 588; in 1994, chapter 503<\/a>; in 1998, chapter 42<\/a>; in 2004, chapter 668<\/a>; in 2008, chapter 216<\/a>; in 2011, chapter 198<\/a>.<\/p>","references":[{"id":65404,"section_number":"38.2-1704","catch_line":"Powers and duties of Association","order_by":null,"url":"\/38.2-1704\/"}],"refers_to":[{"id":58285,"section_number":"38.2-1000","catch_line":"Incorporation of domestic stock insurers","order_by":null,"url":"\/38.2-1000\/"},{"id":57209,"section_number":"38.2-102","catch_line":"Life","order_by":null,"url":"\/38.2-102\/"},{"id":64558,"section_number":"38.2-107","catch_line":"Variable annuity","order_by":null,"url":"\/38.2-107\/"},{"id":65109,"section_number":"38.2-1100","catch_line":"Scope of chapter","order_by":null,"url":"\/38.2-1100\/"},{"id":85789,"section_number":"38.2-1200","catch_line":"Scope of chapter","order_by":null,"url":"\/38.2-1200\/"},{"id":81115,"section_number":"38.2-1300","catch_line":"Annual statements","order_by":null,"url":"\/38.2-1300\/"},{"id":85708,"section_number":"38.2-1301","catch_line":"Additional reports","order_by":null,"url":"\/38.2-1301\/"},{"id":64362,"section_number":"38.2-1400","catch_line":"Scope and purpose of chapter","order_by":null,"url":"\/38.2-1400\/"},{"id":87237,"section_number":"38.2-1407","catch_line":"Prohibited investments","order_by":null,"url":"\/38.2-1407\/"},{"id":78849,"section_number":"38.2-1412","catch_line":"Scope of article","order_by":null,"url":"\/38.2-1412\/"},{"id":69711,"section_number":"38.2-1428","catch_line":"Derivative instruments","order_by":null,"url":"\/38.2-1428\/"},{"id":55404,"section_number":"38.2-1443","catch_line":"Investment of amounts allocated to separate accounts for variable life insurance and variable annuities","order_by":null,"url":"\/38.2-1443\/"},{"id":86737,"section_number":"38.2-2500","catch_line":"Scope of chapter","order_by":null,"url":"\/38.2-2500\/"},{"id":85986,"section_number":"38.2-2600","catch_line":"Definitions","order_by":null,"url":"\/38.2-2600\/"},{"id":82567,"section_number":"38.2-3800","catch_line":"Scope of chapter","order_by":null,"url":"\/38.2-3800\/"},{"id":85422,"section_number":"38.2-3900","catch_line":"Scope of chapter","order_by":null,"url":"\/38.2-3900\/"},{"id":65613,"section_number":"38.2-4000","catch_line":"Societies to which chapter applies","order_by":null,"url":"\/38.2-4000\/"},{"id":79636,"section_number":"38.2-4100","catch_line":"Fraternal benefit societies","order_by":null,"url":"\/38.2-4100\/"},{"id":78890,"section_number":"38.2-4200","catch_line":"Applicability of chapter","order_by":null,"url":"\/38.2-4200\/"},{"id":72005,"section_number":"38.2-4300","catch_line":"Definitions","order_by":null,"url":"\/38.2-4300\/"},{"id":59325,"section_number":"38.2-4500","catch_line":"Applicability of chapter","order_by":null,"url":"\/38.2-4500\/"},{"id":60163,"section_number":"38.2-4600","catch_line":"Class of insurance and insurance companies to which chapter applies","order_by":null,"url":"\/38.2-4600\/"},{"id":72747,"section_number":"38.2-5100","catch_line":"Purpose","order_by":null,"url":"\/38.2-5100\/"},{"id":64365,"section_number":"38.2-6100","catch_line":"Applicability of chapter","order_by":null,"url":"\/38.2-6100\/"}],"permalink":{"id":211895,"object_type":"law","relational_id":57145,"identifier":"38.2-1401","token":"38.2\/14\/1\/38.2-1401","url":"\/38.2-1401\/","edition_id":1,"permalink":0,"preferred":1},"url":"\/38.2-1401\/","token":"38.2\/14\/1\/38.2-1401","dublin_core":{"Title":"Definitions","Type":"Text","Format":"text\/html","Identifier":"\u00a7 38.2-1401","Relation":"Code of Virginia"},"html":"\n\t\t\t\t\t\t

As used in this chapter:\n\t\t“Admitted assets<\/span>” means, for purposes of the limitations and standards imposed by Articles 1 and 2 of this chapter, the amount thereof as permitted to be reported on the statutory financial statement of the insurer<\/span> most recently required to be filed with the Commission<\/span> pursuant to \u00a7\u00a7 38.2-1300<\/a> and 38.2-1301<\/a> or other similar provisions within this title, but excluding the assets<\/span> allocated to separate accounts pursuant to Article 3 (\u00a7 38.2-1443<\/a> et seq.) of this chapter.\n\t\t“Business entity<\/span>” means a corporation, association, partnership, joint venture, trust, church, or religious body.\n\t\t“Cap<\/span>” means an agreement obligating the seller to make payments to the buyer, with each payment based on the amount by which a reference price or level or the performance or value of one or more underlying interests<\/span> exceeds a predetermined number, sometimes called the strike rate<\/span> or strike price.\n\t\t“Category 1 investment” means any investment complying with Article 1 (\u00a7 38.2-1400<\/a> et seq.) and either Article 2 (\u00a7 38.2-1412<\/a> et seq.) or 3 (\u00a7 38.2-1443<\/a> et seq.), or both Articles 2 and 3, of this chapter.\n\t\t“Category 2 investment” means any investment complying with Article 1, but with neither Article 2 nor Article 3, of this chapter.\n\t\t“Claimants<\/span>” means any owners, beneficiaries, assignees, certificate holders, or third-party<\/span> beneficiaries of any insurance benefit or right arising out of and within the coverage of an insurance policy, annuity contract<\/span>, benefit contract<\/span>, or subscription contract<\/span>.\n\t\t“Collar<\/span>” means an agreement to receive payments as the buyer of an option<\/span>, cap<\/span>, or floor<\/span> and to make payments as the seller of a different option<\/span>, cap<\/span>, or floor<\/span>.\n\t\t“Counterparty exposure amount<\/span>” means the amount of credit risk attributable to an over-the-counter derivative instrument<\/span>, which amount of credit risk is equal to (i) the market value of the over-the-counter derivative instrument<\/span> if the liquidation<\/span> of the derivative instrument would result in a final cash payment to the insurer<\/span> or (ii) zero if the liquidation<\/span> of the derivative instrument would not result in a final cash payment to the insurer<\/span>. However, if an over-the-counter derivative instrument<\/span> is entered into under a written master agreement that provides for netting of payments owed by the respective parties, and the domicile of the counterparty is either within the United States<\/span> or, if not within the United States<\/span>, within a foreign jurisdiction<\/span> listed in the Purposes and Procedures Manual of the Securities Valuation Office as eligible for netting, the amount of credit risk attributable to the over-the-counter derivative instrument<\/span> shall be the greater of zero or the net sum of (a) the market value of the over-the-counter derivative instruments<\/span> entered into under the agreement, the liquidation<\/span> of which would result in a final cash payment to the insurer<\/span>, and (b) the market value of the over-the-counter derivative instruments<\/span> entered into under the agreement, the liquidation<\/span> of which would result in a final cash payment by the insurer<\/span> to the business entity<\/span>. With respect to open transactions, the market value of the over-the-counter derivative instrument<\/span> shall be determined at the end of the most recent quarter of the insurer<\/span>’s fiscal year and shall be reduced by the market value of acceptable collateral<\/span> held by the insurer<\/span> or placed in escrow by one or both parties.\n\t\t“Date of investment<\/span>” means the date on which funds are disbursed for an investment.\n\t\t“Derivative instrument” means an agreement, instrument, or a series or combination thereof (i) to make or take delivery of, or assume or relinquish, a specified amount of one or more underlying interests<\/span> or to make a cash settlement<\/span> in lieu thereof or (ii) that has a price, performance, value, or cash flow based primarily upon the actual or expected price, level, performance, value, or cash flow of one or more underlying interests<\/span>. Derivative instruments include options<\/span>, warrants<\/span> used in a hedging transaction and not attached to another financial instrument, caps<\/span>, floors<\/span>, collars<\/span>, swaps<\/span>, forwards<\/span>, futures<\/span>, and any other agreements, options<\/span>, or instruments substantially similar thereto or any series or combination thereof and any agreements or instruments permitted under rules adopted under \u00a7 38.2-1428<\/a>.\n\t\t“Derivative transaction<\/span>” means a transaction involving the use of one or more derivative instruments.\n\t\t“Domestic governmental entity<\/span>” means the United States<\/span>, any state<\/span>, or any municipality or district in any such state<\/span>, or any political subdivision, civil division, agency or instrumentality of one or more of the foregoing.\n\t\t“Fair market value<\/span>” means the price that property will bring when (i) offered for sale by one who desires, but who is not obligated, to sell it; (ii) bought by one who is under no necessity of having it; and (iii) sufficient time has elapsed to allow interested buyers the opportunity to become informed of the offer for sale.\n\t\t“Fixed charges<\/span>” means actual interest incurred in each year on funded and unfunded debt, excluding interest on bank deposit accounts, and annual apportionment of debt discount or premium. Where interest is partially or entirely contingent upon earnings, “fixed charges<\/span>” includes contingent interest payments.\n\t\t“Floor<\/span>” means an agreement obligating the seller to make payments to the buyer in which each payment is based on the amount by which a predetermined number, sometimes called the floor<\/span> rate<\/span> or price, exceeds a reference price, a level, or the performance or value of one or more underlying interests<\/span>.\n\t\t“Forward<\/span>” means an agreement, other than a future, to make or take delivery of, or effect a cash settlement<\/span> based on the actual or expected price, level, performance or value of, one or more underlying interests<\/span>.\n\t\t“Future” means an agreement, traded on a qualified exchange or qualified foreign exchange<\/span>, to make or take delivery of, or effect a cash settlement<\/span> based on the actual or expected price, level, performance or value of, one or more underlying interests<\/span> and includes an insurance future<\/span>.\n\t\t“Hedging transaction” means:<\/p><\/section>\n\t\t\t\t\t\t

1.<\/span> A derivative transaction<\/span> that is entered into and maintained to reduce:\n\t\t\ta. The risk of a change in the value, yield, price, cash flow, or quantity of assets<\/span> or liabilities that the insurer<\/span> has acquired or incurred or anticipates acquiring or incurring; or\n\t\t\tb. The currency exchange rate<\/span> risk or the degree of exposure as to assets<\/span> or liabilities that the insurer<\/span> has acquired or incurred or anticipates acquiring or incurring; or <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

2.<\/span> Any other derivative transaction<\/span> specified as constituting a hedging transaction in rules adopted pursuant to § 38.2-1428<\/a>.\n\t\t\t“High grade obligations<\/span>” means obligations which (i) are rated one or two by the Securities Valuation Office of the National Association of Insurance Commissioners<\/span> or (ii) if not rated by the Securities Valuation Office, are rated in an equivalent grade by a national rating agency recognized by the Commission<\/span>.\n\t\t\t“Insurance future<\/span>” means a future relating to an index or pool that is based on insurance-related items.\n\t\t\t“Insurance futures option<\/span>” means an option on an insurance future<\/span>.\n\t\t\t“Insurer” means a company<\/span> licensed pursuant to Chapter 10 (§ 38.2-1000<\/a> et seq.), 11 (§ 38.2-1100<\/a> et seq.), 12 (§ 38.2-1200<\/a> et seq.), 25 (§ 38.2-2500<\/a> et seq.), 26 (§ 38.2-2600<\/a> et seq.), 38 (§ 38.2-3800<\/a> et seq.), 39 (§ 38.2-3900<\/a> et seq.), 40 (§ 38.2-4000<\/a> et seq.), 41 (§ 38.2-4100<\/a> et seq.), 42 (§ 38.2-4200<\/a> et seq.), 43 (§ 38.2-4300<\/a> et seq.), 45 (§ 38.2-4500<\/a> et seq.), 46 (§ 38.2-4600<\/a> et seq.), 51 (§ 38.2-5100<\/a> et seq.), or 61 (§ 38.2-6100<\/a> et seq.) of this title.\n\t\t\t“Life insurer<\/span>” means any insurer authorized to transact life insurance or to grant annuities as defined in §§ 38.2-102<\/a> through 38.2-107<\/a> or authorized pursuant to the provisions of Chapter 38, 39, 40 or 41, or any other chapter of this title, to provide any one of the following contractual benefits in any form: death benefits, endowment benefits, annuity benefits or monument or tombstone benefits.\n\t\t\t“Lower grade obligations<\/span>” means obligations which (i) are rated four, five, or six by the Securities Valuation Office of the National Association of Insurance Commissioners<\/span> or (ii) if not rated by the Securities Valuation Office, are rated in an equivalent grade by a national rating agency recognized by the Commission<\/span>.\n\t\t\t“Medium grade obligations<\/span>” means obligations which (i) are rated three by the Securities Valuation Office of the National Association of Insurance Commissioners<\/span> or (ii) if not rated by the Securities Valuation office, are rated in an equivalent grade by a national rating agency recognized by the Commission<\/span>.\n\t\t\t“Minimum capital and surplus<\/span>” means the minimum surplus to policyholders<\/span>, or minimum net worth, a particular insurer must have to obtain and maintain its license to transact business in this Commonwealth pursuant to the applicable provisions of this title. In no case shall an insurer’s minimum capital and surplus<\/span> be less than zero.\n\t\t\t“Net earnings available for fixed charges<\/span>” means income minus operating expenses, maintenance expenses, taxes other than income taxes, depreciation, and depletion. Extraordinary nonrecurring income and expense items are excluded from the calculation of “net earnings available for fixed charges<\/span>.”\n\t\t\t“Obligation<\/span>” means a bond<\/span>, debenture, note or other evidence<\/span> of indebtedness.\n\t\t\t“Option” means an agreement giving the buyer the right to buy or receive, sell or deliver, enter into, extend, terminate, or effect a cash settlement<\/span> based on the actual or expected price, level, performance, or value of one or more underlying interests<\/span>. “Option” includes an insurance futures option<\/span>.\n\t\t\t“Over-the-counter derivative instrument<\/span>” means a derivative instrument that is entered into with a business entity<\/span> other than through a qualified exchange or qualified foreign exchange<\/span> or that is cleared other than through a qualified clearinghouse<\/span>.\n\t\t\t“Potential exposure<\/span>” means the amount determined in accordance with the National Association of Insurance Commissioners<\/span> Annual Statement Instructions.\n\t\t\t“Prohibited investment<\/span>” means any investment prohibited by § 38.2-1407<\/a>.\n\t\t\t“Qualified clearinghouse<\/span>” means a clearinghouse for, and that is subject to the rules of, a qualified exchange or a qualified foreign exchange<\/span>, which clearinghouse provides clearing services, including acting as a counterparty to each of the parties to a transaction such that the parties no longer have credit risk as to each other.\n\t\t\t“Qualified exchange” means: <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

1.<\/span> A securities exchange registered as a national securities exchange, or a securities market regulated under the Securities Exchange Act of 1934 (15 U.S.C. § 78a et seq.), as amended; <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

2.<\/span> A board of trade or commodities exchange designated as a contract<\/span> market by the Commodity Futures Trading Commission<\/span> or any successor thereof; <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

3.<\/span> Private Offerings, Resales and Trading through Automated Linkages (PORTAL); <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

4.<\/span> A designated offshore securities market as defined in Securities Exchange Commission<\/span> Regulation S, 17 C.F.R. Part 230, as amended; or <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

5.<\/span> A qualified foreign exchange<\/span>.\n\t\t\t“Qualified foreign exchange<\/span>” means a foreign exchange, board of trade, or contract<\/span> market located outside the United States<\/span>: <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

1.<\/span> That has received regulatory comparability relief under Commodity Futures Trading Commission<\/span> (CFTC) Rule 30.10 (as set forth in Appendix C to Part 30 of the CFTC’s regulations at 17 C.F.R. Part 30); <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

2.<\/span> That is, or whose members are, subject to the jurisdiction<\/span> of a foreign futures authority that has received regulatory comparability relief under CFTC Rule 30.10 (as set forth in Appendix C to Part 30 of the CFTC’s regulations at 17 C.F.R. Part 30) as to futures transactions in the jurisdiction<\/span> where the exchange, board of trade, or contract<\/span> market is located; or <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

3.<\/span> Upon which foreign stock index futures contracts<\/span> are listed that are the subject of no-action relief issued by the CFTC’s Office of General Counsel<\/span>, provided that an exchange, board of trade, or contract<\/span> market that qualifies as a “qualified foreign exchange<\/span>” only under this subsection shall only be a “qualified foreign exchange<\/span>” as to foreign stock index futures contracts<\/span> that are the subject of no-action relief.\n\t\t\t“Replication transaction<\/span>” means a derivative transaction<\/span> that is intended to replicate the performance of one or more assets<\/span> that an insurer is authorized to acquire under this chapter. A derivative transaction<\/span> that is entered into as a hedging transaction shall not be considered a replication transaction<\/span>.\n\t\t\t“Reserve liabilities<\/span>” means those liabilities which are required to be established by an insurer for all of its outstanding insurance policies<\/span>, annuity contracts<\/span>, benefit contracts<\/span> and subscription contracts<\/span>, in accordance with this title, as amended or as hereafter amended.\n\t\t\t“Statement value<\/span>” means the amount determined in accordance with the National Association of Insurance Commissioners<\/span> Annual Statement Instructions.\n\t\t\t“Swap<\/span>” means an agreement to exchange or to net payments at one or more times based on the actual or expected price, level, performance, or value of one or more underlying interests<\/span>.\n\t\t\t“Underlying interest<\/span>” means the assets<\/span>, liabilities, or other interests, or a combination thereof, underlying a derivative instrument, such as any one or more securities, currencies, rates<\/span><\/span>, indices, commodities, or derivative instruments.\n\t\t\t“Warrant<\/span>” means an instrument that gives the holder the right to purchase an underlying financial instrument at a given price and time or at a series of prices and times outlined in the warrant<\/span> agreement. Warrants<\/span> may be issued alone or in connection with the sale of other securities.\n\t\t\t“Wrap-around mortgage<\/span>” means a loan made by an insurer to a borrower, secured by a mortgage or deed of trust on real property encumbered by a first mortgage or first deed of trust, where the total amount of the obligation<\/span> of the borrower to the insurer under the loan is not less than the sum of (i) the principal amount initially disbursed by the insurer on account of the loan and (ii) the unpaid principal balance of the obligation<\/span> secured by the preexisting mortgage or deed of trust. <\/i><\/a><\/p><\/section>","plain_text":" CODE OF VIRGINIA\n\nDEFINITIONS (\u00a7 38.2-1401)\n\nAs used in this chapter:\n\t\t“Admitted assets” means, for purposes of the limitations and\nstandards imposed by Articles 1 and 2 of this chapter, the amount thereof as\npermitted to be reported on the statutory financial statement of the insurer\nmost recently required to be filed with the Commission pursuant to \u00a7\u00a7\n38.2-1300 and 38.2-1301 or other similar provisions within this title, but\nexcluding the assets allocated to separate accounts pursuant to Article 3 (\u00a7\n38.2-1443 et seq.) of this chapter.\n\t\t“Business entity” means a corporation, association, partnership,\njoint venture, trust, church, or religious body.\n\t\t“Cap” means an agreement obligating the seller to make payments to\nthe buyer, with each payment based on the amount by which a reference price or\nlevel or the performance or value of one or more underlying interests exceeds a\npredetermined number, sometimes called the strike rate or strike price.\n\t\t“Category 1 investment” means any investment complying with\nArticle 1 (\u00a7 38.2-1400 et seq.) and either Article 2 (\u00a7 38.2-1412 et seq.) or\n3 (\u00a7 38.2-1443 et seq.), or both Articles 2 and 3, of this chapter.\n\t\t“Category 2 investment” means any investment complying with\nArticle 1, but with neither Article 2 nor Article 3, of this chapter.\n\t\t“Claimants” means any owners, beneficiaries, assignees,\ncertificate holders, or third-party beneficiaries of any insurance benefit or\nright arising out of and within the coverage of an insurance policy, annuity\ncontract, benefit contract, or subscription contract.\n\t\t“Collar” means an agreement to receive payments as the buyer of an\noption, cap, or floor and to make payments as the seller of a different option,\ncap, or floor.\n\t\t“Counterparty exposure amount” means the amount of credit risk\nattributable to an over-the-counter derivative instrument, which amount of\ncredit risk is equal to (i) the market value of the over-the-counter derivative\ninstrument if the liquidation of the derivative instrument would result in a\nfinal cash payment to the insurer or (ii) zero if the liquidation of the\nderivative instrument would not result in a final cash payment to the insurer.\nHowever, if an over-the-counter derivative instrument is entered into under a\nwritten master agreement that provides for netting of payments owed by the\nrespective parties, and the domicile of the counterparty is either within the\nUnited States or, if not within the United States, within a foreign jurisdiction\nlisted in the Purposes and Procedures Manual of the Securities Valuation Office\nas eligible for netting, the amount of credit risk attributable to the\nover-the-counter derivative instrument shall be the greater of zero or the net\nsum of (a) the market value of the over-the-counter derivative instruments\nentered into under the agreement, the liquidation of which would result in a\nfinal cash payment to the insurer, and (b) the market value of the\nover-the-counter derivative instruments entered into under the agreement, the\nliquidation of which would result in a final cash payment by the insurer to the\nbusiness entity. With respect to open transactions, the market value of the\nover-the-counter derivative instrument shall be determined at the end of the\nmost recent quarter of the insurer’s fiscal year and shall be reduced by\nthe market value of acceptable collateral held by the insurer or placed in\nescrow by one or both parties.\n\t\t“Date of investment” means the date on which funds are disbursed\nfor an investment.\n\t\t“Derivative instrument” means an agreement, instrument, or a\nseries or combination thereof (i) to make or take delivery of, or assume or\nrelinquish, a specified amount of one or more underlying interests or to make a\ncash settlement in lieu thereof or (ii) that has a price, performance, value, or\ncash flow based primarily upon the actual or expected price, level, performance,\nvalue, or cash flow of one or more underlying interests. Derivative instruments\ninclude options, warrants used in a hedging transaction and not attached to\nanother financial instrument, caps, floors, collars, swaps, forwards, futures,\nand any other agreements, options, or instruments substantially similar thereto\nor any series or combination thereof and any agreements or instruments permitted\nunder rules adopted under \u00a7 38.2-1428.\n\t\t“Derivative transaction” means a transaction involving the use of\none or more derivative instruments.\n\t\t“Domestic governmental entity” means the United States, any state,\nor any municipality or district in any such state, or any political subdivision,\ncivil division, agency or instrumentality of one or more of the foregoing.\n\t\t“Fair market value” means the price that property will bring when\n(i) offered for sale by one who desires, but who is not obligated, to sell it;\n(ii) bought by one who is under no necessity of having it; and (iii) sufficient\ntime has elapsed to allow interested buyers the opportunity to become informed\nof the offer for sale.\n\t\t“Fixed charges” means actual interest incurred in each year on\nfunded and unfunded debt, excluding interest on bank deposit accounts, and\nannual apportionment of debt discount or premium. Where interest is partially or\nentirely contingent upon earnings, “fixed charges” includes\ncontingent interest payments.\n\t\t“Floor” means an agreement obligating the seller to make payments\nto the buyer in which each payment is based on the amount by which a\npredetermined number, sometimes called the floor rate or price, exceeds a\nreference price, a level, or the performance or value of one or more underlying\ninterests.\n\t\t“Forward” means an agreement, other than a future, to make or take\ndelivery of, or effect a cash settlement based on the actual or expected price,\nlevel, performance or value of, one or more underlying interests.\n\t\t“Future” means an agreement, traded on a qualified exchange or\nqualified foreign exchange, to make or take delivery of, or effect a cash\nsettlement based on the actual or expected price, level, performance or value\nof, one or more underlying interests and includes an insurance future.\n\t\t“Hedging transaction” means:\n\n1. A derivative transaction that is entered into and maintained to reduce:\n\t\t\ta. The risk of a change in the value, yield, price, cash flow, or quantity of\nassets or liabilities that the insurer has acquired or incurred or anticipates\nacquiring or incurring; or\n\t\t\tb. The currency exchange rate risk or the degree of exposure as to assets or\nliabilities that the insurer has acquired or incurred or anticipates acquiring\nor incurring; or\n\n2. Any other derivative transaction specified as constituting a hedging\ntransaction in rules adopted pursuant to § 38.2-1428.\n\t\t\t“High grade obligations” means obligations which (i) are rated\none or two by the Securities Valuation Office of the National Association of\nInsurance Commissioners or (ii) if not rated by the Securities Valuation Office,\nare rated in an equivalent grade by a national rating agency recognized by the\nCommission.\n\t\t\t“Insurance future” means a future relating to an index or pool\nthat is based on insurance-related items.\n\t\t\t“Insurance futures option” means an option on an insurance\nfuture.\n\t\t\t“Insurer” means a company licensed pursuant to Chapter 10 (§\n38.2-1000 et seq.), 11 (§ 38.2-1100 et seq.), 12 (§ 38.2-1200 et\nseq.), 25 (§ 38.2-2500 et seq.), 26 (§ 38.2-2600 et seq.), 38 (§\n38.2-3800 et seq.), 39 (§ 38.2-3900 et seq.), 40 (§ 38.2-4000 et\nseq.), 41 (§ 38.2-4100 et seq.), 42 (§ 38.2-4200 et seq.), 43 (§\n38.2-4300 et seq.), 45 (§ 38.2-4500 et seq.), 46 (§ 38.2-4600 et\nseq.), 51 (§ 38.2-5100 et seq.), or 61 (§ 38.2-6100 et seq.) of this\ntitle.\n\t\t\t“Life insurer” means any insurer authorized to transact life\ninsurance or to grant annuities as defined in §§ 38.2-102 through\n38.2-107 or authorized pursuant to the provisions of Chapter 38, 39, 40 or 41,\nor any other chapter of this title, to provide any one of the following\ncontractual benefits in any form: death benefits, endowment benefits, annuity\nbenefits or monument or tombstone benefits.\n\t\t\t“Lower grade obligations” means obligations which (i) are rated\nfour, five, or six by the Securities Valuation Office of the National\nAssociation of Insurance Commissioners or (ii) if not rated by the Securities\nValuation Office, are rated in an equivalent grade by a national rating agency\nrecognized by the Commission.\n\t\t\t“Medium grade obligations” means obligations which (i) are rated\nthree by the Securities Valuation Office of the National Association of\nInsurance Commissioners or (ii) if not rated by the Securities Valuation office,\nare rated in an equivalent grade by a national rating agency recognized by the\nCommission.\n\t\t\t“Minimum capital and surplus” means the minimum surplus to\npolicyholders, or minimum net worth, a particular insurer must have to obtain\nand maintain its license to transact business in this Commonwealth pursuant to\nthe applicable provisions of this title. In no case shall an insurer’s\nminimum capital and surplus be less than zero.\n\t\t\t“Net earnings available for fixed charges” means income minus\noperating expenses, maintenance expenses, taxes other than income taxes,\ndepreciation, and depletion. Extraordinary nonrecurring income and expense items\nare excluded from the calculation of “net earnings available for fixed\ncharges.”\n\t\t\t“Obligation” means a bond, debenture, note or other evidence of\nindebtedness.\n\t\t\t“Option” means an agreement giving the buyer the right to buy or\nreceive, sell or deliver, enter into, extend, terminate, or effect a cash\nsettlement based on the actual or expected price, level, performance, or value\nof one or more underlying interests. “Option” includes an insurance\nfutures option.\n\t\t\t“Over-the-counter derivative instrument” means a derivative\ninstrument that is entered into with a business entity other than through a\nqualified exchange or qualified foreign exchange or that is cleared other than\nthrough a qualified clearinghouse.\n\t\t\t“Potential exposure” means the amount determined in accordance\nwith the National Association of Insurance Commissioners Annual Statement\nInstructions.\n\t\t\t“Prohibited investment” means any investment prohibited by §\n38.2-1407.\n\t\t\t“Qualified clearinghouse” means a clearinghouse for, and that is\nsubject to the rules of, a qualified exchange or a qualified foreign exchange,\nwhich clearinghouse provides clearing services, including acting as a\ncounterparty to each of the parties to a transaction such that the parties no\nlonger have credit risk as to each other.\n\t\t\t“Qualified exchange” means:\n\n1. A securities exchange registered as a national securities exchange, or a\nsecurities market regulated under the Securities Exchange Act of 1934 (15 U.S.C.\n§ 78a et seq.), as amended;\n\n2. A board of trade or commodities exchange designated as a contract market by\nthe Commodity Futures Trading Commission or any successor thereof;\n\n3. Private Offerings, Resales and Trading through Automated Linkages (PORTAL);\n\n4. A designated offshore securities market as defined in Securities Exchange\nCommission Regulation S, 17 C.F.R. Part 230, as amended; or\n\n5. A qualified foreign exchange.\n\t\t\t“Qualified foreign exchange” means a foreign exchange, board of\ntrade, or contract market located outside the United States:\n\n1. That has received regulatory comparability relief under Commodity Futures\nTrading Commission (CFTC) Rule 30.10 (as set forth in Appendix C to Part 30 of\nthe CFTC’s regulations at 17 C.F.R. Part 30);\n\n2. That is, or whose members are, subject to the jurisdiction of a foreign\nfutures authority that has received regulatory comparability relief under CFTC\nRule 30.10 (as set forth in Appendix C to Part 30 of the CFTC’s\nregulations at 17 C.F.R. Part 30) as to futures transactions in the jurisdiction\nwhere the exchange, board of trade, or contract market is located; or\n\n3. Upon which foreign stock index futures contracts are listed that are the\nsubject of no-action relief issued by the CFTC’s Office of General\nCounsel, provided that an exchange, board of trade, or contract market that\nqualifies as a “qualified foreign exchange” only under this\nsubsection shall only be a “qualified foreign exchange” as to\nforeign stock index futures contracts that are the subject of no-action relief.\n\t\t\t“Replication transaction” means a derivative transaction that is\nintended to replicate the performance of one or more assets that an insurer is\nauthorized to acquire under this chapter. A derivative transaction that is\nentered into as a hedging transaction shall not be considered a replication\ntransaction.\n\t\t\t“Reserve liabilities” means those liabilities which are required\nto be established by an insurer for all of its outstanding insurance policies,\nannuity contracts, benefit contracts and subscription contracts, in accordance\nwith this title, as amended or as hereafter amended.\n\t\t\t“Statement value” means the amount determined in accordance with\nthe National Association of Insurance Commissioners Annual Statement\nInstructions.\n\t\t\t“Swap” means an agreement to exchange or to net payments at one\nor more times based on the actual or expected price, level, performance, or\nvalue of one or more underlying interests.\n\t\t\t“Underlying interest” means the assets, liabilities, or other\ninterests, or a combination thereof, underlying a derivative instrument, such as\nany one or more securities, currencies, rates, indices, commodities, or\nderivative instruments.\n\t\t\t“Warrant” means an instrument that gives the holder the right to\npurchase an underlying financial instrument at a given price and time or at a\nseries of prices and times outlined in the warrant agreement. Warrants may be\nissued alone or in connection with the sale of other securities.\n\t\t\t“Wrap-around mortgage” means a loan made by an insurer to a\nborrower, secured by a mortgage or deed of trust on real property encumbered by\na first mortgage or first deed of trust, where the total amount of the\nobligation of the borrower to the insurer under the loan is not less than the\nsum of (i) the principal amount initially disbursed by the insurer on account of\nthe loan and (ii) the unpaid principal balance of the obligation secured by the\npreexisting mortgage or deed of trust.\n\nHISTORY: 1983, c. 457, \u00a7 38.1-217.2; 1986, c. 562; 1992, c. 588; 1994, c. 503;\n1998, c. 42; 2004, c. 668; 2008, c. 216; 2011, c. 198.","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}}