                                 CODE OF VIRGINIA

DEFINITIONS (§ 38.2-1401)

As used in this chapter:
		&#8220;Admitted assets&#8221; 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 §§
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 (§
38.2-1443 et seq.) of this chapter.
		&#8220;Business entity&#8221; means a corporation, association, partnership,
joint venture, trust, church, or religious body.
		&#8220;Cap&#8221; 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.
		&#8220;Category 1 investment&#8221; means any investment complying with
Article 1 (§ 38.2-1400 et seq.) and either Article 2 (§ 38.2-1412 et seq.) or
3 (§ 38.2-1443 et seq.), or both Articles 2 and 3, of this chapter.
		&#8220;Category 2 investment&#8221; means any investment complying with
Article 1, but with neither Article 2 nor Article 3, of this chapter.
		&#8220;Claimants&#8221; 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.
		&#8220;Collar&#8221; 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.
		&#8220;Counterparty exposure amount&#8221; 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&#8217;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.
		&#8220;Date of investment&#8221; means the date on which funds are disbursed
for an investment.
		&#8220;Derivative instrument&#8221; 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 § 38.2-1428.
		&#8220;Derivative transaction&#8221; means a transaction involving the use of
one or more derivative instruments.
		&#8220;Domestic governmental entity&#8221; 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.
		&#8220;Fair market value&#8221; 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.
		&#8220;Fixed charges&#8221; 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, &#8220;fixed charges&#8221; includes
contingent interest payments.
		&#8220;Floor&#8221; 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.
		&#8220;Forward&#8221; 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.
		&#8220;Future&#8221; 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.
		&#8220;Hedging transaction&#8221; means:

1. A derivative transaction that is entered into and maintained to reduce:
			a. 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
			b. 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

2. Any other derivative transaction specified as constituting a hedging
transaction in rules adopted pursuant to &#xA7; 38.2-1428.
			&#8220;High grade obligations&#8221; 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.
			&#8220;Insurance future&#8221; means a future relating to an index or pool
that is based on insurance-related items.
			&#8220;Insurance futures option&#8221; means an option on an insurance
future.
			&#8220;Insurer&#8221; means a company licensed pursuant to Chapter 10 (&#xA7;
38.2-1000 et seq.), 11 (&#xA7; 38.2-1100 et seq.), 12 (&#xA7; 38.2-1200 et
seq.), 25 (&#xA7; 38.2-2500 et seq.), 26 (&#xA7; 38.2-2600 et seq.), 38 (&#xA7;
38.2-3800 et seq.), 39 (&#xA7; 38.2-3900 et seq.), 40 (&#xA7; 38.2-4000 et
seq.), 41 (&#xA7; 38.2-4100 et seq.), 42 (&#xA7; 38.2-4200 et seq.), 43 (&#xA7;
38.2-4300 et seq.), 45 (&#xA7; 38.2-4500 et seq.), 46 (&#xA7; 38.2-4600 et
seq.), 51 (&#xA7; 38.2-5100 et seq.), or 61 (&#xA7; 38.2-6100 et seq.) of this
title.
			&#8220;Life insurer&#8221; means any insurer authorized to transact life
insurance or to grant annuities as defined in &#xA7;&#xA7; 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.
			&#8220;Lower grade obligations&#8221; 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.
			&#8220;Medium grade obligations&#8221; 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.
			&#8220;Minimum capital and surplus&#8221; 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&#8217;s
minimum capital and surplus be less than zero.
			&#8220;Net earnings available for fixed charges&#8221; 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 &#8220;net earnings available for fixed
charges.&#8221;
			&#8220;Obligation&#8221; means a bond, debenture, note or other evidence of
indebtedness.
			&#8220;Option&#8221; 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. &#8220;Option&#8221; includes an insurance
futures option.
			&#8220;Over-the-counter derivative instrument&#8221; 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.
			&#8220;Potential exposure&#8221; means the amount determined in accordance
with the National Association of Insurance Commissioners Annual Statement
Instructions.
			&#8220;Prohibited investment&#8221; means any investment prohibited by &#xA7;
38.2-1407.
			&#8220;Qualified clearinghouse&#8221; 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.
			&#8220;Qualified exchange&#8221; means:

1. 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.
&#xA7; 78a et seq.), as amended;

2. A board of trade or commodities exchange designated as a contract market by
the Commodity Futures Trading Commission or any successor thereof;

3. Private Offerings, Resales and Trading through Automated Linkages (PORTAL);

4. A designated offshore securities market as defined in Securities Exchange
Commission Regulation S, 17 C.F.R. Part 230, as amended; or

5. A qualified foreign exchange.
			&#8220;Qualified foreign exchange&#8221; means a foreign exchange, board of
trade, or contract market located outside the United States:

1. 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&#8217;s regulations at 17 C.F.R. Part 30);

2. 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&#8217;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

3. Upon which foreign stock index futures contracts are listed that are the
subject of no-action relief issued by the CFTC&#8217;s Office of General
Counsel, provided that an exchange, board of trade, or contract market that
qualifies as a &#8220;qualified foreign exchange&#8221; only under this
subsection shall only be a &#8220;qualified foreign exchange&#8221; as to
foreign stock index futures contracts that are the subject of no-action relief.
			&#8220;Replication transaction&#8221; 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.
			&#8220;Reserve liabilities&#8221; 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.
			&#8220;Statement value&#8221; means the amount determined in accordance with
the National Association of Insurance Commissioners Annual Statement
Instructions.
			&#8220;Swap&#8221; 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.
			&#8220;Underlying interest&#8221; 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.
			&#8220;Warrant&#8221; 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.
			&#8220;Wrap-around mortgage&#8221; 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.

HISTORY: 1983, c. 457, § 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.