                                 CODE OF VIRGINIA

POLICY FORMS; APPLICANTS TO BE ISSUED POLICIES; CANCELLATION OF POLICIES; RATES;
EXAMINATION OF BUSINESS OF ASSOCIATION (§ 38.2-2806)

A. All policies issued by the association shall be subject to the group
retrospective premium adjustment and to the stabilization reserve fund required
by &#xA7; 38.2-2807. No policy form shall be used by the association unless it
has been filed with the Commission and either (i) the Commission has approved it
or (ii) thirty days have elapsed and the Commission has not disapproved the form
or endorsement for one or more of the reasons enumerated in subsection A of
&#xA7; 38.2-317.

B. Policies shall be issued by the association, after receipt of the premium or
portion of the premium prescribed by the plan of operation, to applicants that
(i) meet the minimum underwriting standards, and (ii) have no unpaid or
uncontested premium due as evidenced by the applicant having failed to make
written objection to premium charges within thirty days after billing.

C. Any policy issued by the association may be cancelled for any one of the
following reasons: (i) nonpayment of premium or portion of the premium; (ii)
suspension or revocation of the insured&#8217;s license; (iii) failure of the
insured to meet the minimum underwriting standards; (iv) failure of the insured
to meet other minimum standards prescribed by the plan of operation; and (v)
nonpayment of any stabilization reserve fund charge.

D. The rates, rating plans, rating rules, rating classifications, premium
payment plans and territories applicable to the insurance written by the
association, and related statistics shall be subject to the provisions of
Chapter 20 (&#xA7; 38.2-2000 et seq.) of this title. Due consideration shall be
given to the past and prospective loss and expense experience for medical
malpractice insurance written and to be written in this Commonwealth, trends in
the frequency and severity of losses, the investment income of the association,
and other information the Commission requires. All rates shall be on an
actuarially sound basis, giving due consideration to the stabilization reserve
fund, and shall be calculated to be self-supporting. The Commission shall take
all appropriate steps to make available to the association the loss and expense
experience of insurers writing or having written medical malpractice insurance
in this Commonwealth.

E. All policies issued by the association shall be subject to a nonprofit group
retrospective premium adjustment to be approved by the Commission under which
the final premium for all policyholders of the association, as a group, will be
calculated based upon the experience of all policyholders. The experience of all
policyholders shall be calculated following the end of each fiscal period and
shall be based upon earned premiums, administrative expenses, loss and loss
adjustment expenses, and taxes, plus a reasonable allowance for contingencies
and servicing. Policyholders shall be given full credit for all investment
income, net of expenses and a reasonable management fee on policyholder supplied
funds. Any final premium resulting from a retrospective premium adjustment will
be collected from the stabilization fund set forth in &#xA7; 38.2-2807. The
maximum premium for all policyholders as a group shall be limited as provided in
&#xA7; 38.2-2807.

F. 1. The association shall certify to the Commission the estimated amount of
any deficit remaining after the stabilization reserve fund has been exhausted in
payment of the maximum final premium for all policyholders of the association.
Within sixty days after such certification, the Commission shall authorize the
association to recover from the members their respective share of the deficit.

   2. Members shall be permitted to recover any assessment made by the
   association under subdivision 1 by deducting the members&#8217; share of the
   deficit from future premium taxes due the Commonwealth. The amount of premium
   tax deduction for each member&#8217;s share of the deficit shall be
   apportioned by the Commission so that the amount of each member&#8217;s
   premium tax deduction in each of the ten calendar years following the payment
   of the member&#8217;s assessment is equal to ten percent of the assessment
   paid by the member.

G. In the event that sufficient funds are not available for the sound financial
operation of the association, subject to recoupment as provided in this chapter
and the plan of operation, all members shall, on a temporary basis, contribute
to the financial requirements of the association in the manner provided in this
chapter. The contribution shall be reimbursed to the members by the procedure
set forth in subdivision F 2.

H. The Commission shall examine the business of the association as often as it
deems appropriate to make certain that the group retrospective premium
adjustments are being calculated and applied in a manner consistent with this
section. If the Commission finds that they are not being calculated and applied
in a manner consistent with this section, it shall issue an order to the
association, specifying (i) how the calculation and application are not
consistent and (ii) stating what corrective action shall be taken.

HISTORY: 1976, c. 85, § 38.1-780; 1986, c. 562; 1987, cc. 520, 554; 1988, c.
341; 1997, c. 160.