38.2-4232 - Standards for transactions with affiliates; adequacy of surplus; dividends and other distributions. - Virginia Statutes

§ 38.2-4232. Standards for transactions with affiliates; adequacy of surplus;dividends and other distributions.

A. Transactions by nonstock corporations licensed under this chapter withtheir affiliates shall be subject to the following standards:

1. The terms shall be fair and reasonable;

2. Charges and fees for service performed shall be reasonable;

3. Expenses incurred and payments received shall be allocated to the insurerin conformity with customary insurance accounting practices consistentlyapplied;

4. The books, accounts, and records of each party shall disclose clearly andaccurately the precise nature and details of the transactions;

5. The nonstock corporation's surplus following any transaction withaffiliates involving more than one-sixth of one percent of admitted assets orone percent of surplus as of the immediately preceding December 31, whicheveris less, shall be reasonable in relation to the nonstock corporation'soutstanding liabilities and adequate to its financial needs; and

6. The transaction is in the best interest of the subscribers.

B. For purposes of this article, in determining whether a nonstockcorporation's surplus is reasonable in relation to the nonstock corporation'soutstanding liabilities and adequate to its financial needs, the followingfactors, among others, shall be considered:

1. The size of the nonstock corporation as measured by its assets, surplus,reserves, business in force, and other appropriate criteria;

2. The nonstock corporation's method of operation and manner of doingbusiness;

3. The nature and extent of the nonstock corporation's risk-sharingarrangements;

4. The quality, diversification, and liquidity of the nonstock corporation'sinvestment portfolio;

5. The recent past and projected future trend in the size of the nonstockcorporation's surplus;

6. The adequacy of the nonstock corporation's reserves; and

7. The quality and liquidity of investments in subsidiaries. The Commissionin its judgment may classify any investment as a nonadmitted asset for thepurpose of determining the adequacy of surplus.

(1989, c. 606; 1992, c. 588.)