                                 CODE OF VIRGINIA

HOW DOMESTIC MUTUAL INSURERS MAY ACQUIRE INITIAL SURPLUS (§ 38.2-1034)

Any domestic mutual insurer or mutual assessment property and casualty insurer
may, without pledging any of its assets, provide a guaranty fund sufficient to
defray the expenses of its organization and its initial minimum surplus required
to obtain a license to do the business of insurance. The fund may be increased
with the prior approval of the Commission by receiving advances or by borrowing
funds upon an agreement that the funds, including interest at a rate not
exceeding the one-year treasury bill interest rate plus three percentage points
at the time the loan is made or renewed, shall be repaid only if the insurer has
sufficient earned surplus. The agreement shall provide that the insurer may
repay the advances or loans or any part of them whenever it is able to do so in
accordance with the requirements of this article. No commission or brokerage
shall be paid in acquiring the funds. No repayments of principal, either in
whole or in part, and no payments of interest, shall be made without the prior
written approval of the Commission. Neither the principal advanced or borrowed
nor any interest accrued thereon under this provision shall form a part of the
legal liabilities of the insurer until the Commission approves the repayment of
such principal or the payment of interest thereon. However, all statements
published or filed by the insurer shall show accrued interest and the amount of
principal remaining unpaid. All claims under the instrument shall be
subordinated to policyholder, claimant and beneficiary claims as well as debts
owed to all other classes of creditors.

HISTORY: Code 1950, § 38-512; 1952, c. 317, § 38.1-92; 1960, c. 291, §
38.1-92.1; 1970, c. 595; 1980, c. 187; 1986, c. 562; 1994, c. 503.