                                 CODE OF VIRGINIA

EXAMINATION OF RATE SERVICE ORGANIZATIONS AND JOINT UNDERWRITING AND JOINT
REINSURANCE ORGANIZATIONS (§ 38.2-1925)

A. Whenever the Commission considers it necessary to be informed about any
matter related to the enforcement of the insurance laws, it may examine the
affairs and condition of any rate service organization under subsection A of
&#xA7; 38.2-1913 and of any joint underwriting or joint reinsurance organization
under &#xA7; 38.2-1915.

B. So far as reasonably necessary for any examination under subsection A of this
section, the Commission may examine the accounts, records, documents or evidence
of transactions, so far as they relate to the examinee, of any (i) officer, (ii)
manager, (iii) general agent, (iv) employee, (v) person who has executive
authority over or is in charge of any segment of the examinee&#8217;s affairs,
(vi) person controlling or having a contract under which he has the right to
control the examinee whether exclusively or with others, (vii) person who is
under the control of the examinee, or (viii) person who is under the control of
a person who controls or has a right to control the examinee whether exclusively
or with others.

C. On demand every examinee under subsection A of this section shall make
available to the Commission for examination any of its own accounts, records,
documents or evidences of transactions and any of those of the persons listed in
subsection B of this section.

D. The Commission may examine every licensed rate service organization at
intervals established by the Commission.

E. 1. Instead of all or part of an examination under subsections A and B of this
section, or in addition to it, the Commission may order an independent audit by
certified public accountants or actuarial evaluation by actuaries approved by it
of any person subject to the examination requirement. Any accountant or actuary
selected shall be subject to standards respecting conflicts of interest used by
the Commission. Any audit or evaluation under this subsection shall be subject
to subsections H through O of this section, so far as appropriate.

   2. Instead of all or part of an examination under this section, the Commission
   may accept the report of an audit already made by certified public accountants
   or actuarial evaluation by actuaries approved by it, or the report of an
   examination made by the insurance department of another state.

F. [Reserved.]

G. An examination may cover comprehensively all aspects of the examinee&#8217;s
affairs and condition. The Commission shall determine the exact nature and scope
of each examination, and in doing so shall take into account all relevant
factors, including but not limited to (i) the length of time the examinee has
been operating, (ii) the length of time it has been licensed in this
Commonwealth, (iii) the nature of the services provided, (iv) the nature of the
accounting records available and (v) the nature of examinations performed
elsewhere.

H. For each examination under this section, the Commission shall issue an order
stating the scope of the examination and designating the examiner in charge. On
demand a copy of the order shall be exhibited to the examinee.

I. Any examiner authorized by the Commission shall, so far as necessary for the
purposes of the examination, have access at all reasonable hours to the premises
and to any books, records, files, securities, documents or property of the
examinee and to those of persons under subsection B of this section so far as
they relate to the affairs of the examinee.

J. The officers, employees and agents of the examinee and of persons under
subsection B of this section shall comply with every reasonable request of the
examiners for assistance in any matter relating to the examination. No person
shall obstruct or interfere with the examination in any way other than by legal
process.

K. If the Commission finds the accounts or records to be inadequate for proper
examination of the condition and affairs of the examinee or improperly kept or
posted, it may employ experts to rewrite, post or balance them at the expense of
the examinee.

L. The examiner in charge of an examination shall make a proposed report of the
examination that shall include the information and analysis as is ordered in
subsection H of this section, together with the examiner&#8217;s
recommendations. At the discretion of the examiner in charge, preparation of the
proposed report may include conferences with the examinee or its
representatives. The proposed report shall remain confidential until filed under
subsection M of this section.

M. The Commission shall serve a copy of the proposed report upon the examinee.
Within twenty days after service, the examinee may serve upon the Commission a
written demand for a hearing on the contents of the report. If a hearing is
demanded the Commission shall give notice and hold a hearing, and on demand by
the examinee the hearing shall be informal and private. The Commission shall
adopt the report with any necessary modifications and file it for public
inspection, or it may order a new examination within either (i) sixty days after
the hearing or (ii) if no hearing is demanded, sixty days after the last day on
which the examinee might have demanded a hearing.

N. The Commission shall forward a copy of the examination report to the examinee
immediately upon adoption, except that if the proposed report is adopted without
change, the Commission need only so notify the examinee.

O. The examinee shall furnish copies of the adopted report to each member of its
board of directors or other governing board.

P. The Commission may furnish, without cost or at a price to be determined by
it, a copy of the adopted report to the insurance commissioner of any
jurisdiction in which the examinee is licensed and to any other interested
person in this Commonwealth or elsewhere.

Q. In any proceeding by or against the examinee or any officer or agent of the
examinee, the examination report as adopted by the Commission shall be
admissible as evidence of the facts stated in the examination report. In any
proceeding by or against the examinee the facts asserted in any report properly
admitted in evidence shall be presumed to be true in the absence of contrary
evidence.

R. The reasonable costs of an examination under this section shall be paid by
the examinee except as provided in subsection U of this section. The costs shall
include the salary and expenses of each examiner and any other expenses directly
apportioned to the examination.

S. The amount payable under subsection R of this section shall become due ten
days after the examinee has been served a detailed account of the costs.

T. The Commission may require any examinee, before or during an examination, to
deposit with the State Treasurer any deposits the Commission considers necessary
to pay the cost of the examination. Any deposit and any payment made under
subsections R and S of this section shall be credited to the special fund of the
Bureau of Insurance.

U. On the examinee&#8217;s request or on its own motion, the Commission may pay
all or part of the costs of an examination whenever it finds that, because of
the frequency of examinations or other factors, imposition of the costs would
place an unreasonable burden on the examinee. The Commission shall include in
its annual report information about any instance in which it applied this
subsection.

V. Deposits and payments under subsections R through U of this section shall not
be considered to be a tax or license fee within the meaning of any law. If any
other state charges a per diem fee for examination of examinees domiciled in
this Commonwealth, any examinee domiciled in that other state shall pay the same
fee when examined by the Commission.

HISTORY: 1973, c. 504, § 38.1-279.53; 1986, c. 562.