{"formats":[{"name":"JSON","format":"json","url":"\/downloads\/2025\/code-json\/38.2-1446.json"},{"name":"Plain Text","format":"text","url":"\/downloads\/2025\/code-text\/38.2-1446.txt"},{"name":"XML","format":"xml","url":"\/downloads\/2025\/code-xml\/38.2-1446.xml"},{"name":"HTML","format":"html","url":"\/downloads\/2025\/code-html\/38.2-1446.html"}],"law_id":60790,"edition_id":1,"section_id":60790,"structure_id":15784,"section_number":"38.2-1446","catch_line":"Prohibition of hypothecation","history":"1992, c. 588; 2002, c. 147.","full_text":"A\n\nEvery domestic insurer subject to the provisions of this chapter shall at all times have and maintain free and unencumbered admitted assets in an amount equal to the sum total of its reserve liabilities and minimum capital and surplus, and no such insurer shall pledge, hypothecate, or otherwise encumber its assets in an amount in excess of the amount of its surplus to policyholders; nor shall such insurer pledge, hypothecate or otherwise encumber more than five percent of its admitted assets. However, the Commission, upon written application, may approve the hypothecation or encumbrance of any of the assets of such an insurer in any amount upon a determination that such hypothecation or encumbrance will not adversely affect the solvency of such insurer.B\n\nAny such insurer which pledges, hypothecates, or otherwise encumbers any of its assets shall within ten days thereafter report in writing to the Commission the amount and identity of the assets so pledged, hypothecated, or encumbered and the terms and conditions of such transaction. In addition, each such insurer shall annually, or more often if required by the Commission, file with the Commission a statement sworn to by an executive officer of the insurer that (i) title to assets in an amount equal to the reserve liability and minimum capital and surplus of the insurer that are not pledged, hypothecated or otherwise encumbered is vested in the insurer, (ii) the only assets of the insurer that are pledged, hypothecated or otherwise encumbered are as identified and reported in the sworn statement and no other assets of the insurer are pledged, hypothecated or otherwise encumbered, and (iii) the terms and limitations of any such transaction of pledge, hypothecation or encumbrance are as reported in the sworn statement.C\n\nAny person who accepts a pledge, hypothecation or encumbrance of any asset of a domestic insurer as security for a debt or other obligation of such insurer not in accordance with the terms and limitations of this article shall be deemed to have accepted such asset subject to a superior, preferential and automatically perfected lien in favor of claimants; however, such superior, preferential and automatically perfected lien in favor of claimants shall not apply to assets of a company in receivership pursuant to Chapter 15 (§ 38.2-1500 et seq.) of this title, if the receiver approves the pledge, hypothecation or encumbrance of such assets.D\n\nIn the event of involuntary or voluntary liquidation of any domestic insurer subject to this chapter, claimants of such insurer shall have a prior and preferential claim against all assets of the insurer except those that have been pledged, hypothecated or encumbered in accordance with the terms and limitations of this article. All claimants shall have equal status and their prior and preferential claim shall be superior to any claim or cause of action against the insurer by any person, corporation, association or legal entity.","order_by":null,"text":{"0":{"id":222255,"text":"Every domestic insurer subject to the provisions of this chapter shall at all times have and maintain free and unencumbered admitted assets in an amount equal to the sum total of its reserve liabilities and minimum capital and surplus, and no such insurer shall pledge, hypothecate, or otherwise encumber its assets in an amount in excess of the amount of its surplus to policyholders; nor shall such insurer pledge, hypothecate or otherwise encumber more than five percent of its admitted assets. However, the Commission, upon written application, may approve the hypothecation or encumbrance of any of the assets of such an insurer in any amount upon a determination that such hypothecation or encumbrance will not adversely affect the solvency of such insurer.","type":"section","prefixes":["A"],"prefix":"A","entire_prefix":"A","prefix_anchor":"A","level":1,"next_prefix":"B"},"1":{"id":222256,"text":"Any such insurer which pledges, hypothecates, or otherwise encumbers any of its assets shall within ten days thereafter report in writing to the Commission the amount and identity of the assets so pledged, hypothecated, or encumbered and the terms and conditions of such transaction. In addition, each such insurer shall annually, or more often if required by the Commission, file with the Commission a statement sworn to by an executive officer of the insurer that (i) title to assets in an amount equal to the reserve liability and minimum capital and surplus of the insurer that are not pledged, hypothecated or otherwise encumbered is vested in the insurer, (ii) the only assets of the insurer that are pledged, hypothecated or otherwise encumbered are as identified and reported in the sworn statement and no other assets of the insurer are pledged, hypothecated or otherwise encumbered, and (iii) the terms and limitations of any such transaction of pledge, hypothecation or encumbrance are as reported in the sworn statement.","type":"section","prefixes":["B"],"prefix":"B","entire_prefix":"B","prefix_anchor":"B","level":1,"prior_prefix":"A","next_prefix":"C"},"2":{"id":222257,"text":"Any person who accepts a pledge, hypothecation or encumbrance of any asset of a domestic insurer as security for a debt or other obligation of such insurer not in accordance with the terms and limitations of this article shall be deemed to have accepted such asset subject to a superior, preferential and automatically perfected lien in favor of claimants; however, such superior, preferential and automatically perfected lien in favor of claimants shall not apply to assets of a company in receivership pursuant to Chapter 15 (§ 38.2-1500 et seq.) of this title, if the receiver approves the pledge, hypothecation or encumbrance of such assets.","type":"section","prefixes":["C"],"prefix":"C","entire_prefix":"C","prefix_anchor":"C","level":1,"prior_prefix":"B","next_prefix":"D"},"3":{"id":222258,"text":"In the event of involuntary or voluntary liquidation of any domestic insurer subject to this chapter, claimants of such insurer shall have a prior and preferential claim against all assets of the insurer except those that have been pledged, hypothecated or encumbered in accordance with the terms and limitations of this article. All claimants shall have equal status and their prior and preferential claim shall be superior to any claim or cause of action against the insurer by any person, corporation, association or legal entity.","type":"section","prefixes":["D"],"prefix":"D","entire_prefix":"D","prefix_anchor":"D","level":1,"prior_prefix":"C"}},"ancestry":[{"id":15784,"edition_id":1,"name":"Asset Protection Act","identifier":"4","label":"article","depth":3,"order_by":1,"parent_id":13282,"metadata":{},"date_created":"2026-06-26 03:59:29","date_modified":"2026-06-26 03:59:29","permalink":{"id":212107,"object_type":"structure","relational_id":15784,"identifier":"4","token":"38.2\/14\/4","url":"\/38.2\/14\/4\/","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":60790,"structure_id":15784,"section_number":"38.2-1446","catch_line":"Prohibition of hypothecation","url":"\/38.2-1446\/","token":"38.2\/14\/4\/38.2-1446","metadata":false},{"id":81029,"structure_id":15784,"section_number":"38.2-1447","catch_line":"Exception","url":"\/38.2-1447\/","token":"38.2\/14\/4\/38.2-1447","metadata":false}],"next_section":{"id":81029,"structure_id":15784,"section_number":"38.2-1447","catch_line":"Exception","url":"\/38.2-1447\/","token":"38.2\/14\/4\/38.2-1447","metadata":false},"metadata":false,"official_url":"https:\/\/law.lis.virginia.gov\/vacode\/38.2-1446\/","history_text":"

This law was first created in 1992. The record of its establishment is cataloged in chapter 588 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 1992 \u201cActs\u201d aren\u2019t available online. It has been modified 1 time. 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. That modification is as follows: in 2002, chapter 147<\/a>.<\/p>","references":[{"id":55347,"section_number":"38.2-4214","catch_line":"Application of certain provisions of law","order_by":null,"url":"\/38.2-4214\/"},{"id":67952,"section_number":"38.2-4319","catch_line":"Statutory construction and relationship to other laws","order_by":null,"url":"\/38.2-4319\/"},{"id":62548,"section_number":"38.2-4509","catch_line":"Application of certain laws","order_by":null,"url":"\/38.2-4509\/"}],"refers_to":[{"id":66658,"section_number":"38.2-1500","catch_line":"Scope of chapter","order_by":null,"url":"\/38.2-1500\/"}],"permalink":{"id":212109,"object_type":"law","relational_id":60790,"identifier":"38.2-1446","token":"38.2\/14\/4\/38.2-1446","url":"\/38.2-1446\/","edition_id":1,"permalink":0,"preferred":1},"url":"\/38.2-1446\/","token":"38.2\/14\/4\/38.2-1446","dublin_core":{"Title":"Prohibition of hypothecation","Type":"Text","Format":"text\/html","Identifier":"\u00a7 38.2-1446","Relation":"Code of Virginia"},"html":"\n\t\t\t\t\t\t

A.<\/span> Every domestic insurer<\/span> subject to the provisions of this chapter shall at all times have and maintain free and unencumbered admitted assets<\/span> in an amount equal to the sum total of its reserve liabilities<\/span> and minimum capital and surplus<\/span>, and no such insurer<\/span> shall pledge, hypothecate, or otherwise encumber its assets<\/span> in an amount in excess of the amount of its surplus to policyholders<\/span>; nor shall such insurer<\/span> pledge, hypothecate or otherwise encumber more than five percent of its admitted assets<\/span>. However, the Commission<\/span>, upon written application, may approve the hypothecation or encumbrance of any of the assets<\/span> of such an insurer<\/span> in any amount upon a determination that such hypothecation or encumbrance will not adversely affect the solvency of such insurer<\/span>. <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

B.<\/span> Any such insurer<\/span> which pledges, hypothecates, or otherwise encumbers any of its assets<\/span> shall within ten days thereafter report in writing to the Commission<\/span> the amount and identity of the assets<\/span> so pledged, hypothecated, or encumbered and the terms and conditions of such transaction. In addition, each such insurer<\/span> shall annually, or more often if required by the Commission<\/span>, file with the Commission<\/span> a statement sworn to by an executive officer of the insurer<\/span> that (i) title to assets<\/span> in an amount equal to the reserve liability and minimum capital and surplus<\/span> of the insurer<\/span> that are not pledged, hypothecated or otherwise encumbered is vested in the insurer<\/span>, (ii) the only assets<\/span> of the insurer<\/span> that are pledged, hypothecated or otherwise encumbered are as identified and reported in the sworn statement and no other assets<\/span> of the insurer<\/span> are pledged, hypothecated or otherwise encumbered, and (iii) the terms and limitations of any such transaction of pledge, hypothecation or encumbrance are as reported in the sworn statement. <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

C.<\/span> Any person<\/span> who accepts a pledge, hypothecation or encumbrance of any asset of a domestic insurer<\/span> as security for a debt or other obligation<\/span> of such insurer<\/span> not in accordance with the terms and limitations of this article shall be deemed to have accepted such asset subject to a superior, preferential and automatically perfected lien<\/span> in favor of claimants<\/span>; however, such superior, preferential and automatically perfected lien<\/span> in favor of claimants<\/span> shall not apply to assets<\/span> of a company<\/span> in receivership pursuant to Chapter 15 (§ 38.2-1500<\/a> et seq.) of this title, if the receiver approves the pledge, hypothecation or encumbrance of such assets<\/span>. <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

D.<\/span> In the event of involuntary or voluntary liquidation<\/span> of any domestic insurer<\/span> subject to this chapter, claimants<\/span> of such insurer<\/span> shall have a prior and preferential claim against all assets<\/span> of the insurer<\/span> except those that have been pledged, hypothecated or encumbered in accordance with the terms and limitations of this article. All claimants<\/span> shall have equal status and their prior and preferential claim shall be superior to any claim or cause of action<\/span> against the insurer<\/span> by any person<\/span>, corporation, association or legal entity. <\/i><\/a><\/p><\/section>","plain_text":" CODE OF VIRGINIA\n\nPROHIBITION OF HYPOTHECATION (\u00a7 38.2-1446)\n\nA. Every domestic insurer subject to the provisions of this chapter shall at all\ntimes have and maintain free and unencumbered admitted assets in an amount equal\nto the sum total of its reserve liabilities and minimum capital and surplus, and\nno such insurer shall pledge, hypothecate, or otherwise encumber its assets in\nan amount in excess of the amount of its surplus to policyholders; nor shall\nsuch insurer pledge, hypothecate or otherwise encumber more than five percent of\nits admitted assets. However, the Commission, upon written application, may\napprove the hypothecation or encumbrance of any of the assets of such an insurer\nin any amount upon a determination that such hypothecation or encumbrance will\nnot adversely affect the solvency of such insurer.\n\nB. Any such insurer which pledges, hypothecates, or otherwise encumbers any of\nits assets shall within ten days thereafter report in writing to the Commission\nthe amount and identity of the assets so pledged, hypothecated, or encumbered\nand the terms and conditions of such transaction. In addition, each such insurer\nshall annually, or more often if required by the Commission, file with the\nCommission a statement sworn to by an executive officer of the insurer that (i)\ntitle to assets in an amount equal to the reserve liability and minimum capital\nand surplus of the insurer that are not pledged, hypothecated or otherwise\nencumbered is vested in the insurer, (ii) the only assets of the insurer that\nare pledged, hypothecated or otherwise encumbered are as identified and reported\nin the sworn statement and no other assets of the insurer are pledged,\nhypothecated or otherwise encumbered, and (iii) the terms and limitations of any\nsuch transaction of pledge, hypothecation or encumbrance are as reported in the\nsworn statement.\n\nC. Any person who accepts a pledge, hypothecation or encumbrance of any asset of\na domestic insurer as security for a debt or other obligation of such insurer\nnot in accordance with the terms and limitations of this article shall be deemed\nto have accepted such asset subject to a superior, preferential and\nautomatically perfected lien in favor of claimants; however, such superior,\npreferential and automatically perfected lien in favor of claimants shall not\napply to assets of a company in receivership pursuant to Chapter 15 (§\n38.2-1500 et seq.) of this title, if the receiver approves the pledge,\nhypothecation or encumbrance of such assets.\n\nD. In the event of involuntary or voluntary liquidation of any domestic insurer\nsubject to this chapter, claimants of such insurer shall have a prior and\npreferential claim against all assets of the insurer except those that have been\npledged, hypothecated or encumbered in accordance with the terms and limitations\nof this article. All claimants shall have equal status and their prior and\npreferential claim shall be superior to any claim or cause of action against the\ninsurer by any person, corporation, association or legal entity.\n\nHISTORY: 1992, c. 588; 2002, c. 147.","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}}