Code of Virginia — Title 38.2 (Insurance), Chapter 12 (RECIPROCAL INSURANCE)
§ 38.2-1213. Nonassessable policies.
A. The Commission may issue a certificate authorizing the reciprocal to reduce or extinguish the contingent assessment liability of subscribers under its policies then in force in this Commonwealth, and to omit provisions imposing contingent assessment liability in all policies delivered or issued for delivery in this Commonwealth for as long as all such surplus to policyholders remains unimpaired. The certificate may be issued if, in the case of a domestic or foreign reciprocal, the reciprocal has surplus to policyholders of at least four million dollars, or, if in the case of an alien reciprocal, the reciprocal has a trusteed surplus, as defined in § 38.2-1031, of at least four million dollars. No certificate may be issued until an application of the attorney has been approved by the subscribers' advisory committee.

However, any reciprocal that on June 30, 1991, was authorized to issue and was engaged in issuing policies without contingent liability may continue to do so until July 1, 1994, by maintaining at all times the minimum surplus to policyholders if a domestic or foreign reciprocal, and the minimum trusteed surplus if an alien reciprocal, required at the time of authorization.

B. The Commission shall issue this certificate if it determines that the reciprocal's surplus to policyholders is reasonable in relation to the reciprocal's outstanding liabilities and adequate to meet its financial needs. In making that determination the following factors, among others, shall be considered:

1. The size of the reciprocal as measured by its assets, capital and surplus, reserves, premium writings, insurance in force and other appropriate criteria;

2. The extent to which the reciprocal's business is diversified among different classes of insurance;

3. The number and size of risks insured in each class of insurance;

4. The extent of the geographical dispersion of the reciprocal's insured risks;

5. The nature and extent of the reciprocal's reinsurance program;

6. The quality, diversification, and liquidity of the reciprocal's investment portfolio;

7. The recent past and trend in the size of the reciprocal's surplus to policyholders;

8. The surplus to policyholders maintained by other comparable insurers; and

9. The adequacy of the reciprocal's reserves.

C. Upon impairment of the surplus to policyholders, the Commission shall revoke the certificate. After revocation, the reciprocal shall not issue or renew any policy without providing for the contingent assessment liability of subscribers.

D. The Commission shall not authorize a domestic reciprocal to extinguish the contingent assessment liability of any of its subscribers or in any of its policies to be issued, unless it has the required surplus to policyholders and extinguishes the contingent assessment liability of all of its subscribers and in all policies to be issued for all classes of insurance written by it. However, if required by the laws of another state in which the domestic reciprocal is transacting the business of insurance as a licensed insurer, it may issue policies providing for the contingent assessment liability of its subscribers acquiring policies in that state and need not extinguish the contingent assessment liability applicable to policies already in force in that state.

1952, c. 317, § 38.1-703; 1977, cc. 58, 322; 1986, c. 562; 1991, c. 261.