                                 CODE OF VIRGINIA

STABILIZATION RESERVE FUND (§ 38.2-2906)

A. When an Association is activated under this chapter, a stabilization reserve
fund shall be created for the lines, subclassifications and types of commercial
liability insurance for which such activation occurred. The fund shall be
administered by five directors appointed by the Commission, one of whom shall be
a representative of the Commission, two of whom shall be representatives of the
Association, and two of whom shall be representatives of the Association&#8217;s
policyholders.

B. The directors of the fund shall act by majority vote of those present with
three directors constituting a quorum for the transaction of any business or the
exercise of any power of the fund. The directors shall serve without salary, but
each director shall be reimbursed for actual and necessary expenses incurred in
the performance of his or her official duties as a director of the fund. The
directors shall not be subject to any personal liability with respect to the
administration of the fund.

C. Each policyholder shall pay to the Association a stabilization reserve fund
charge equal to one-third of the annual premium due for commercial liability
insurance obtained through the Association. The means of payment shall be set
forth in the plan of operation and shall be separately stated in the policy. The
Association shall cancel the policy of any policyholder who fails to pay the
stabilization reserve fund charge. Upon the termination of any policy during the
term of the policy, payments made to the stabilization reserve fund shall be
returned to the policyholder on a pro rata basis identical to that applied in
computing that portion of the premium which is returned to the policyholder.

D. All moneys received by the fund shall be held in a separate restricted cash
account or accounts under the sole control of an independent fund manager to be
selected by the directors of the fund. The fund manager shall account separately
for the moneys paid to the fund for each year&#8217;s policies written for a
given line, subclassification or type of commercial liability insurance. The
fund manager may invest the moneys held, subject to the approval of the
directors. All investment income shall be credited to the fund. All expenses of
administration of the fund shall be charged against the fund. The moneys held
shall be used solely for the following purposes: (i) to reimburse the
Association for any and all expenses, taxes, licenses and fees paid by the
Association which are properly chargeable or allocable to the stabilization
reserve fund, and (ii) to pay any retrospective premium adjustment charge levied
by the Association. Payment of retrospective premium adjustment charges and
other authorized payments shall be made by the directors of the fund upon
certification to them by the Association of the amount due. If all moneys
accruing to the fund for a particular year&#8217;s policies for a given line,
subclassification or type of commercial liability insurance are exhausted in
payment of retrospective premium adjustment charges for the particular year, all
liability and obligations of the holders of said policies with respect to the
payment of retrospective premium adjustment charges shall terminate and shall be
conclusively presumed to have been discharged.

E. The Association shall promptly pay the fund manager all stabilization reserve
fund charges that it collects from its policyholders under subsection C of this
section.

F. Upon dissolution of the Association, all assets remaining in the fund shall
be distributed equitably to the policyholders who have contributed to the fund
under procedures authorized by the directors. Distribution of assets remaining
in the fund shall be made after final disposition of all claims, expenses, and
liabilities against the fund, including reimbursement of preliminary
organizational assessments made pursuant to subsection B of &#xA7; 38.2-2904.

HISTORY: 1988, cc. 769, 783.