                                 CODE OF VIRGINIA

ASSESSMENTS (§ 38.2-1705)

A. For the purpose of providing the funds necessary to carry out the powers and
duties of the Association, the board of directors shall assess the member
insurers, separately for each account, at such time and for any amounts as the
board finds necessary. Assessments shall be due not less than 30 days after
prior written notice has been given to the member insurers. Late payments shall
accrue interest from the due date compounded quarterly, based upon the average
90-day treasury bill rate for the most recently completed calendar quarter as
published in the Federal Reserve Bulletin and shall be subject to a minimum
charge of $50.

B. There shall be two classes of assessments, as follows:

   1. Class A assessments shall be authorized and called for the purpose of
   meeting administrative and legal costs and other expenses. Class A assessments
   may be authorized and called whether or not related to a particular impaired
   or insolvent insurer.

   2. Class B assessments shall be authorized and called to the extent necessary
   to carry out the powers and duties of the Association under &#xA7; 38.2-1704
   with regard to an impaired or an insolvent insurer.

C. 1. The amount of any Class A assessment shall be determined by the board and
may be authorized and called for current member insurers on a pro rata or
non-pro rata basis. If pro rata, the board may provide that it be credited
against future Class B assessments. The amount of a Class B assessment, except
for assessments related to long-term care insurance, shall be allocated for
assessment purposes between the accounts and among the subaccounts of the life
insurance and annuity account, pursuant to an allocation formula which may be
based on the premiums or reserves of the impaired or insolvent insurer or any
other standard deemed by the board in its sole discretion as being fair and
reasonable under the circumstances. The amount of the Class B assessment for
long-term care insurance written by the impaired or insolvent insurer shall be
allocated according to a methodology included in the plan of operation and
approved by the Commission. The methodology shall provide for 50 percent of the
assessment to be allocated to accident and sickness member insurers and 50
percent to be allocated to life and annuity member insurers.

   2. In determining the shares that shall be allocated to the life insurance and
   annuity account pursuant to the methodology in subdivision C 1, the guaranty
   association shall use the following formula: =(0.50 &#8211; Life and annuity
   member insurers&#8217; share of Accident and Sickness Account) / (Life and
   annuity member insurers&#8217; share of Life Insurance and Annuity Account
   &#8211; Life and annuity member insurers&#8217; share of Accident and Sickness
   Account).

   3. For the purposes of the methodology in subdivision C 1 and the formula in
   subdivision C 2 only, &#8220;life and annuity member insurer&#8221; means a
   member insurer for which (i) the sum of its assessable life insurance premiums
   and annuity premiums is greater than or equal to (ii) its assessable accident
   and sickness insurance premiums, which shall include its assessable health
   maintenance organization premiums but shall exclude its assessable premiums
   written for disability income and long-term care insurance. For purposes of
   this definition, assessable premiums shall be measured within the state. An
   &#8220;accident and sickness member insurer&#8221; means any member insurer
   not defined as a &#8220;life and annuity member insurer.&#8221;

   4. Class B assessments against member insurers for each account and subaccount
   shall be in the proportion that the premiums received on business in the
   Commonwealth by each assessed member insurer on policies or contracts covered
   by each account and subaccount for the three most recent calendar years for
   which information is available preceding the year in which the member insurer
   became insolvent or, in the case of an assessment with respect to an impaired
   insurer, the three most recent calendar years for which information is
   available preceding the year in which the insurer became impaired, bear to
   such premiums received on business in the Commonwealth for those calendar
   years by all assessed member insurers.

   5. Assessments for funds to meet the requirements of the Association with
   respect to an impaired or insolvent insurer shall not be authorized or called
   until necessary to implement the purposes of this chapter. Classification of
   assessments under subsection B and computation of assessments under this
   subsection shall be made with a reasonable degree of accuracy, recognizing
   that exact determinations may not always be possible. The Association shall
   notify each member insurer of its anticipated pro rata share of an authorized
   assessment not yet called within 180 days after the assessment is authorized.

D. The Association may abate or defer, in whole or in part, the assessment of a
member insurer if, in the opinion of the board, payment of the assessment would
endanger the ability of the member insurer to fulfill its contractual
obligations. In the event an assessment against a member insurer is abated or
deferred in whole or in part, the amount by which the assessment is abated or
deferred may be assessed against the other member insurers in a manner
consistent with the basis for assessments set forth in this section. Once the
conditions that caused a deferral have been removed or rectified, the member
insurer shall pay all assessments that were deferred pursuant to a repayment
plan approved by the Association.

E. 1. a. Subject to the provisions of subdivision E 1 b, the total of all
assessments authorized by the Association with respect to a member insurer for
each subaccount of the life insurance and annuity account and for the accident
and sickness account shall not in any one calendar year exceed two percent of
that member insurer&#8217;s average annual premiums received in the Commonwealth
on the policies and contracts covered by the subaccount or account during the
three calendar years preceding the year in which the member insurer became an
impaired or insolvent insurer.
			b. If two or more assessments are authorized in one calendar year with
respect to member insurers that become impaired or insolvent in different
calendar years, the average annual premiums for purposes of the aggregate
assessment percentage limitation referenced in subdivision E 1 a shall be equal
and limited to the higher of the three-year average annual premiums for the
applicable subaccount or account as calculated pursuant to this section.
			c. If the maximum assessment, together with the other assets of the
Association in an account, does not provide in one year in that account an
amount sufficient to carry out the responsibilities of the Association, the
necessary additional funds shall be assessed as soon thereafter as permitted by
this chapter.

   2. The board may provide in the plan of operation a method of allocating funds
   among claims, whether relating to one or more impaired or insolvent insurers,
   when the maximum assessment will be insufficient to cover anticipated claims.

   3. If the maximum assessment for a subaccount of the life and annuity account
   in one year does not provide an amount sufficient to carry out the
   responsibilities of the Association, then pursuant to subdivision C 2, the
   board shall access the other subaccounts of the life and annuity account for
   the necessary additional amount, subject to the maximum stated in subdivision
   E 1.

F. If the Board of Directors of the Association determines that it has surplus
funds on hand with respect to an insolvency, the Association shall, in
accordance with the process set forth in the certificate of contribution for
adjusting or cancelling the unamortized portion of the member insurer&#8217;s
certificate of contribution in the event of a reimbursement of assessment
payments, use such surplus funds to reimburse member insurers for assessment
costs not otherwise amortized and offset pursuant to &#xA7; 38.2-1709 and pay
the remaining surplus to the Department of Taxation, for deposit with the State
Treasurer for credit to the general fund of the Commonwealth. Within 90 days of
making payment of surplus funds to the Department of Taxation for deposit with
the State Treasurer, the Association shall notify its member insurers of such
payment. If any member insurer contends that it is entitled to any portion of
the surplus refunded to the Commonwealth in order to recover assessment costs
not otherwise amortized and offset pursuant to &#xA7; 38.2-1709, then the member
insurer may present evidence of such entitlement to the Department of Taxation.
If the Department of Taxation determines that the member insurer is entitled to
a portion of the surplus funds in order to recover assessment costs not
otherwise amortized and offset pursuant to &#xA7; 38.2-1709, then the State
Treasurer shall pay to the member insurer the sum that the Department of
Taxation determines that the member insurer is entitled to receive. A reasonable
amount may be retained in any account to provide funds for the continuing
expenses of the Association and for future losses and claims. For purposes of
this subsection, &#8220;surplus funds&#8221; includes funds that the Association
obtains by way of distributions or recoveries from receivers and third parties
as reimbursement for its costs in connection with insolvencies and impairments
in excess of reasonable amounts retained in an account to provide funds for the
continuing expenses of the Association and for future losses and claims.

G. It shall be proper for any member insurer, in determining its premium rates
and policy owner dividends as to any kind of insurance or health maintenance
organization business within the scope of this chapter, to consider the amount
reasonably necessary to meet its assessment obligations under this chapter.

H. The Association shall issue to each member insurer paying an assessment under
this chapter, other than a Class A assessment, a certificate of contribution, in
a form prescribed by the Commission, for the amount of the assessment so paid
excluding interest penalties. All outstanding certificates shall be of equal
dignity and priority without reference to amounts or dates of issue. A
certificate of contribution may be shown by the member insurer in its financial
statement as an asset in such form and for such amount, if any, and period of
time as the Commission may approve.

I. 1. A member insurer that wishes to protest all or part of an assessment shall
pay when due the full amount of the assessment as set forth in the notice
provided by the Association. The payment shall be available to meet Association
obligations during the pendency of the protest or any subsequent appeal. Payment
shall be accompanied by a statement in writing that the payment is made under
protest and setting forth a brief statement of the grounds for the protest.

   2. Within 60 days following the payment of an assessment under protest by a
   member insurer, the Association shall notify the member insurer in writing of
   its determination with respect to the protest unless the Association notifies
   the member insurer that additional time is required to resolve the issues
   raised by the protest.

   3. Within 30 days after a final decision has been made, the Association shall
   notify the protesting member insurer in writing of that final decision. Within
   60 days of receipt of notice of the final decision, the protesting member
   insurer may appeal that final action to the Commission.

   4. In the alternative to rendering a final decision with respect to a protest
   based on a question regarding the assessment base, the Association may refer
   the protest to the Commission for a final decision, with or without a
   recommendation from the Association.

   5. If the protest or appeal on the assessment is upheld, the amount paid in
   error or excess shall be returned to the member insurer. Interest on a refund
   due a protesting member insurer shall be paid at the rate actually earned by
   the Association.

J. The Association may request information of member insurers in order to aid in
the exercise of its power under this section and member insurers shall promptly
comply with a request.

HISTORY: 1976, c. 330, § 38.1-482.23; 1980, c. 186; 1986, c. 562; 1992, c. 299;
2010, c. 510; 2011, c. 682; 2014, c. 154; 2018, c. 706.