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2023 Code of Virginia › Title 38.2 - Insurance › Chapter 14 - Investments › § 38.2-1405. Dates of determination

A. The classification by investment category of each investment, based on type of investment as set forth in §§ 38.2-1415 through 38.2-1442, inclusive, shall be determined as of the date of investment.
B. In applying any percentage limitations based on the insurer's total admitted assets or surplus to policyholders, there shall be used as a base, without regard to percentage limitations, those assets or surplus to policyholders as shown by the insurer's most recent annual or quarterly statement on file with the Commission pursuant to §§ 38.2-1300 and 38.2-1301.
1983, c. 457, § 38.1-217.6; 1986, c. 562; 1992, c. 588.
2023 Code of Virginia › Title 38.2 - Insurance › Chapter 14 - Investments › § 38.2-1406. Investment conversions

Investments converted to a new form and resulting in a different investment classification under § 38.2-1402, at the election of the insurer, shall retain their previous investment classification for a period not exceeding three years unless the Commission prescribes in writing that a longer period is reasonable. Any prohibited investments shall be divested within that period. The investment conversions shall include those resulting (i) from investments acquired in satisfaction of or on account of loans, mortgages, liens, judgments, or other debts previously owing to the insurer in the course of its business, or (ii) from investments acquired through lawful distributions of assets, lawful plans of reorganization, or lawful and bona fide agreements of bulk reinsurance or of consolidation.
1983, c. 457, § 38.1-217.7; 1986, c. 562.
2023 Code of Virginia › Title 38.2 - Insurance › Chapter 14 - Investments › § 38.2-1407. Prohibited investments

A. No domestic insurer shall invest in or loan funds secured by:
1. Issued shares of its own capital stock without the Commission's approval. This approval shall be based on an evaluation that indicates the investment does not adversely affect the insurer or its policyholders. The insurer shall not invest in or own more than 20 percent of its outstanding issued stock, except for the purpose of mutualization;
2. Securities of an insolvent entity;
3. Securities that, by their terms, will subject the insurer to any assessment other than for taxes or for wages; however, the term "assessment" shall not include ordinary contractual payments or the transfer of collateral or margin made under derivative instruments invested in or owned under § 38.2-1428;
4. Investments that, as determined by the Commission, are designed to evade any prohibition of this title; or
5. Any obligation or investment prohibited by § 38.2-1411.2.
B. Notwithstanding the provisions of this chapter, the Commission may order a domestic insurer to limit or withdraw from certain investments, or discontinue certain investment practices, to the extent the Commission finds that such investment or investment practice endangers the solvency of the insurer or is otherwise hazardous to policyholders, creditors or the public in this Commonwealth.
1983, c. 457, § 38.1-217.8; 1986, c. 562; 1992, c. 588; 2011, c. 198.
2023 Code of Virginia › Title 38.2 - Insurance › Chapter 14 - Investments › § 38.2-1408. Authorization of investments

No domestic insurer shall make any loan, investment, or any sale or exchange of a loan or investment, except policy loans of an insurer issuing life insurance policies or annuities, unless authorized or approved. Authorization or approval shall be made by (i) its board of directors, or other governing body, or (ii) a committee authorized by the governing body or bylaws, to make investments, loans, sales or exchanges. The minutes of the committee shall be recorded, and reports of the investments, loans, sales or exchanges authorized or approved shall be submitted to the board or other governing body at its next meeting.
1983, c. 457, § 38.1-217.9; 1986, c. 562.
2023 Code of Virginia › Title 38.2 - Insurance › Chapter 14 - Investments › § 38.2-1409. Powers with respect to property

Subject to any applicable limitations and restrictions in this chapter, a domestic insurer may own, hold, maintain, manage, operate, lease, sell, convey, and collect and receive income from any property acquired as permitted in this chapter.
1983, c. 457, § 38.1-217.10; 1986, c. 562.
2023 Code of Virginia › Title 38.2 - Insurance › Chapter 14 - Investments › § 38.2-1410. Items not deemed to be prior liens or encumbrances

In construing and applying this title, the following shall not be deemed prior liens or encumbrances: easements; rights-of-way; joint driveways; party wall agreements; current taxes and assessments not delinquent; restrictions as to building, use and occupancy unless there is a right of reentry or forfeiture for violation; instruments reserving mineral, oil, or timber rights; title matters for which the insurer is insured against loss by a title insurer; and leases under which rents are reserved to the owner of the real estate.
1983, c. 457, § 38.1-217.11; 1986, c. 562.
2023 Code of Virginia › Title 38.2 - Insurance › Chapter 14 - Investments › § 38.2-1411.1. Investment limits generally

A. Any securities described in 15 U.S.C. § 77r-1 shall be subject to all the limitations prescribed by this chapter for investments not guaranteed by the full faith and credit of the United States. However, upon prior written application by an insurer, the Commission may, until July 1, 1992, at its discretion, allow such insurer to increase its investments in § 77r-1 securities to an amount not to exceed ten percent of the insurer's total admitted assets.
B. On and after July 1, 1992, investments made in any securities described in 15 U.S.C. § 77r-1 shall be subject to the percentage limitations and requirements set forth in this chapter.
1991, c. 283; 1992, c. 588.
2023 Code of Virginia › Title 38.2 - Insurance › Chapter 14 - Investments › § 38.2-1412. Scope of article

This article sets forth requirements for qualifying as a Category 1 investment. If an investment or portion thereof does not comply either with this article or Article 3 (§ 38.2-1443 et seq.) of this chapter, then that investment or portion of it shall be classified as a Category 2 investment or a prohibited investment, as provided in this chapter.
1983, c. 457, § 38.1-217.15; 1986, c. 562.
2023 Code of Virginia › Title 38.2 - Insurance › Chapter 14 - Investments › § 38.2-1413. Investment limits for one obligor, one issue or one loan

A. No domestic insurer shall have at any one time any combination of investments in or loans upon the security of the property and securities of any one obligor or issuer aggregating an amount exceeding the lesser of five percent of the insurer's total admitted assets or twenty percent of the insurer's surplus to policyholders. The limitations prescribed by this section shall not apply to the following:
1. Investments in or loans upon the security of general obligations of the United States;
2. Investments in foreign securities made eligible by subsection A of § 38.2-1433;
3. Investments in mortgage pass-through securities made eligible by § 38.2-1437.1;
4. Deposits in institutions insured by a federal deposit insuring agency to the extent of coverage by such deposit insuring agency;
5. Investments in subsidiaries made eligible by § 38.2-1427.3;
6. Investments in obligations of an agency or instrumentality of the United States made eligible by subsection B of § 38.2-1415; provided that at no time shall the insurer invest pursuant to subsection B of § 38.2-1415 in excess of ten percent of its total admitted assets in any one obligor or issuer of such obligations; or
7. Other assets defined or classified by the National Association of Insurance Commissioners accounting practices and procedure manual, or any successor publication, as cash or cash equivalents or as a short term investment that is rated "AAA" or better or the equivalent rating by Moody's Investors Service, Inc., Standard & Poor's or Fitch IBCA, or any successor to the rating business of any of them, provided that at no time shall the amount of any such asset placed for or by the insurer in or with any one depository, issue, obligor, or issuer exceed the lesser of ten percent of the insurer's total admitted assets or twenty percent of the insurer's surplus to policyholders.
B. No domestic insurer shall invest in excess of one percent of its total admitted assets in any one issue of any obligations made eligible for investment under § 38.2-1423 or § 38.2-1424.
C. No domestic insurer shall invest in excess of one-half of one percent of its total admitted assets in any one loan made eligible by subdivision 3 of § 38.2-1434.
D. The principal loan amount disbursed, excluding advances made to enforce or protect the security for the loan, by a domestic insurer under any single wrap-around mortgage made pursuant to § 38.2-1435 shall not exceed one percent of its total admitted assets.
E. The amount loaned under § 38.2-1430 shall be subject to the limitations of this section applicable to the kinds of securities or obligations pledged in connection with the loan.
1983, c. 457, § 38.1-217.16; 1986, c. 562; 1990, c. 893; 1992, c. 588; 1995, c. 60; 1998, c. 414; 2002, c. 73.
2023 Code of Virginia › Title 38.2 - Insurance › Chapter 14 - Investments › § 38.2-1416. Canadian governmental obligations

A. Obligations of Canada. -- A domestic insurer may invest in bonds, notes, warrants, and other evidences of indebtedness which are direct obligations of the government of Canada or for which the full faith and credit of the government of Canada are pledged for the payment of principal and interest.
B. No domestic insurer shall invest in any obligation under this section unless the obligation is payable both as to principal and interest in lawful money of the United States or of Canada.
C. Obligations of provinces. -- A domestic insurer may invest in direct, general obligations of any province of Canada for the payment of money, or obligations for the payment of money to the extent guaranteed or insured as to the payment of principal and interest by any province of Canada, on the following conditions:
1. The province has the power to levy taxes for the prompt payment of the principal and interest of its obligations;
2. The province is not in default in the payment of principal or interest on any of its direct, guaranteed or insured obligations as of the date of investment; and
3. An insurer shall not invest under this subsection more than five percent of its admitted assets in obligations issued or guaranteed by any one province.
D. Local government obligations. -- A domestic insurer may invest in direct, general obligations of any political subdivision of any province of Canada for the payment of money, or obligation for the payment of money, to the extent guaranteed as to the payment of principal and interest, by any such political subdivision, on the following conditions:
1. The obligations are payable or guaranteed from ad valorem taxes;
2. Such political subdivision is not in default in the payment of principal or interest on any of its direct or guaranteed obligations;
3. No investment shall be made under this subsection in obligations which are secured only by special assessments for local improvements; and
4. An insurer shall not invest more than two percent of its admitted assets in obligations issued or guaranteed by any one such political subdivision.
1983, c. 457, § 38.1-217.19; 1986, c. 562; 1992, c. 588.
2023 Code of Virginia › Title 38.2 - Insurance › Chapter 14 - Investments › § 38.2-1417. Canadian corporate obligations

A domestic insurer may invest in obligations issued, assumed or guaranteed by any solvent corporation created or existing under the laws of Canada, or any province of Canada. However, those obligations shall meet the standards specified in § 38.2-1421 for obligations of any business entity created or existing under the laws of the United States or any state.
1983, c. 457, § 38.1-217.20; 1986, c. 562; 1992, c. 588.
2023 Code of Virginia › Title 38.2 - Insurance › Chapter 14 - Investments › § 38.2-1418. Obligations of certain international agencies

A domestic insurer may invest in valid and legally authorized high grade obligations issued, assumed or guaranteed by an international development bank of which the United States is a member.
1983, c. 457, § 38.1-217.21; 1985, c. 370; 1986, c. 562; 1992, c. 588.
2023 Code of Virginia › Title 38.2 - Insurance › Chapter 14 - Investments › § 38.2-1419. Railroad terminal and other securities

A domestic insurer may invest in obligations secured by first mortgages, first deeds of trust or other similar liens upon terminal, depot or tunnel property, including lands, buildings and appurtenances, used in the service of transportation by one or more railroad corporations whose obligations are eligible as investments under § 38.2-1421. However, these obligations shall be (i) the direct obligation of the corporation or corporations, or (ii) guaranteed by endorsement by, or guaranteed by endorsement assumed by the corporation for the payment of principal and interest of those obligations. If the guarantee or assumption of guarantee is by two or more of the corporations, it shall be joint and several as to each. No such investment shall be made if there has been any default in the payment of principal or interest since the issuance of the obligations but not to exceed five years from the date of investment.
1983, c. 457, § 38.1-217.22; 1986, c. 562.
2023 Code of Virginia › Title 38.2 - Insurance › Chapter 14 - Investments › § 38.2-1420. Transportation equipment trust certificates

A domestic insurer may invest in adequately secured equipment trust certificates or other adequately secured instruments evidencing (i) an interest in transportation equipment wholly or partly within the United States and (ii) a right to receive determined portions of rental, purchase or other fixed obligatory payments for the use or purchase of the transportation equipment.
1983, c. 457, § 38.1-217.23; 1986, c. 562.
2023 Code of Virginia › Title 38.2 - Insurance › Chapter 14 - Investments › § 38.2-1421. Business entity obligations

A. High grade. A domestic insurer may invest in any high grade obligations issued, assumed or guaranteed by any solvent business entity that is not in default as to principal or interest on the date of investment and which is created or existing under the laws of the United States or any state.
B. Medium grade. A domestic issuer may invest in medium grade obligations issued, assumed or guaranteed by any solvent business entity that is not in default as to principal or interest on the date of investment and which is created or existing under the laws of the United States or any state.
C. Lower grade. A domestic insurer may invest in lower grade obligations rated 4 by the Securities Valuation Office of the National Association of Insurance Commissioners or, if not rated by the Securities Valuation Office, rated in an equivalent grade by a national rating agency recognized by the Commission that are issued, assumed or guaranteed by any solvent business entity that is not in default as to principal or interest on the date of investment and which is created or existing under the laws of the United States or any state.
D. As used in this section, "business entity obligations" shall not include any mortgage pass-through securities described in § 38.2-1437.1.
1983, c. 457, § 38.1-217.24; 1986, c. 562; 1992, c. 588; 1998, c. 414.
2023 Code of Virginia › Title 38.2 - Insurance › Chapter 14 - Investments › § 38.2-1422. Obligations secured by certain leases

A. A domestic insurer may invest in obligations of any solvent company other than companies referred to in § 38.2-1419, incorporated under the laws of the United States or of any state if:
1. The obligations are secured by an assignment to the insurer of a lease, and the rents payable under the lease, of real or personal property or both to (i) a domestic governmental entity; (ii) Canada, or any province of Canada; or (iii) one or more companies incorporated under the laws of the United States, any state, Canada or any province of Canada;
2. The rentals assigned are sufficient to repay the indebtedness within the unexpired term of the lease, excluding any term that may be provided by an enforceable option of renewal;
3. The lessee on any lease securing an obligation under this section, or the guarantor of the lease, is an entity whose obligations would be eligible for investment by an insurer in accordance with §§ 38.2-1415, 38.2-1421 or § 38.2-1425;
4. The lessee or guarantor has not defaulted in payment of interest or principal on any of its obligations during the five fiscal years immediately preceding the date of investment; and
5. A first lien on the interest of the lessor in the unencumbered leased property is obtained as additional security for any obligation acquired pursuant to this section.
B. No domestic insurer shall invest under this section more than two percent of the insurer's admitted assets in the obligations of any one business entity or in the obligations secured by leases to any one business entity.
1983, c. 457, § 38.1-217.25; 1986, c. 562; 1992, c. 588.
2023 Code of Virginia › Title 38.2 - Insurance › Chapter 14 - Investments › § 38.2-1423. Preferred stocks

A domestic insurer may invest in preferred stocks of any company incorporated under the laws of the United States or any state if:
1. a. The preferred stock under consideration is not in arrears as to dividends if cumulative, or
b. Full dividends on the preferred stock under consideration have been paid in the last three years, or since issue if issued less than three years before the date of investment, if noncumulative;
2. Required sinking fund payments are on a current basis; and
3. The preferred stock is rated highest quality, high quality, or medium quality by the Securities Valuation Office of the National Association of Insurance Commissioners, or if not rated by the Securities Valuation Office, is rated in an equivalent grade by a national rating agency recognized by the Commission.
1983, c. 457, § 38.1-217.26; 1986, c. 562; 1998, c. 414; 2008, c. 93.
2023 Code of Virginia › Title 38.2 - Insurance › Chapter 14 - Investments › § 38.2-1424. Guaranteed stocks

A domestic insurer may invest in stocks guaranteed by a solvent company incorporated under the laws of the United States or of any state if for the past three years the guarantor's net earnings available for meeting fixed charges is at least 1 1/4 times the sum of (i) the fixed charges of the guarantor and (ii) the dividends on the guaranteed stock.
1983, c. 457, § 38.1-217.27; 1986, c. 562.
2023 Code of Virginia › Title 38.2 - Insurance › Chapter 14 - Investments › § 38.2-1425. Common stock of banks or trust companies

A. A domestic insurer may invest in the common capital stock of any bank or trust company that is a member of the Federal Deposit Insurance Corporation.
B. No domestic insurer shall invest in more than ten percent of the actually issued and outstanding common capital stock of any one such bank or trust company.
C. For the purpose of this section, the term "bank" includes a registered bank holding company as defined by the Federal Bank Holding Act of 1956, as amended, and a registered bank holding company shall be considered a member of the Federal Deposit Insurance Corporation if all its subsidiary banks are members of the Federal Deposit Insurance Corporation.
1983, c. 457, § 38.1-217.28; 1986, c. 562; 2000, c. 155.
2023 Code of Virginia › Title 38.2 - Insurance › Chapter 14 - Investments › § 38.2-1426. Application of earnings tests

If the issuing, assuming or guaranteeing business entity has not been in operation for the entire period for which earnings are being applied pursuant to § 38.2-1424, the earnings tests shall be based upon pro forma statements incorporating statements of any predecessor or constituent business entity for that portion of the earnings tests period that the current business entity was not in operation, if:
1. The current business entity was formed as a consolidation or a merger of two or more business entities, at least one of which was in operation at the beginning of the period; or
2. The current business entity has acquired all of the assets of a business entity or any division or other unit of a business entity that was in operation at the beginning of the test period.
1983, c. 457, § 38.1-217.29; 1986, c. 562; 1992, c. 588; 2000, c. 155; 2002, c. 147.
2023 Code of Virginia › Title 38.2 - Insurance › Chapter 14 - Investments › § 38.2-1427. Common stock; covered call options

A. A domestic insurer may invest in the common capital stock of any company incorporated under the laws of the United States or any state, if the common capital stock of the corporation is traded on a securities exchange or on an over-the-counter market regulated under the Securities Exchange Act of 1934, as amended.
B. A domestic insurer also may write exchange-traded, covered call options on shares of common capital stock it owns.
C. No domestic insurer shall invest, pursuant to this section, in more than ten percent of the issued and outstanding common capital stock of any one corporation or issuer.
1983, c. 457, § 38.1-217.30; 1986, c. 562; 1992, c. 588.
2023 Code of Virginia › Title 38.2 - Insurance › Chapter 14 - Investments › § 38.2-1427.2. Investment company shares and units of beneficial interest

A domestic insurer may invest in shares of common stock or units of beneficial interest issued by any solvent business corporation or trust incorporated or organized under the laws of the United States, or of any state of the United States, under the following conditions:
1. If the issuing corporation or trust is advised by an investment advisor which is the insurer or an affiliate of the insurer, the issuing corporation or trust shall have assets of $100,000 or more (which may be provided by the insurer or affiliate), or if the issuing corporation or trust has an unaffiliated investment advisor, the issuing corporation or trust shall have net assets of ten million dollars or more, and
2. The issuing corporation or trust is registered as an investment company with the Federal Securities and Exchange Commission under the Investment Company Act of 1940, as amended.
1992, c. 588; 2002, c. 147.
2023 Code of Virginia › Title 38.2 - Insurance › Chapter 14 - Investments › § 38.2-1427.3. Investment authority; subsidiary corporations

A domestic insurer may invest in common stock, preferred stock, debt obligations, and other securities of a subsidiary.
For investments in subsidiary corporations made prior to July 1, 1995, July 1, 1995, may be deemed the date of investment.
1992, c. 588; 1993, c. 47; 1995, c. 60.
2023 Code of Virginia › Title 38.2 - Insurance › Chapter 14 - Investments › § 38.2-1429. Lending of securities

A. A domestic insurer may lend securities held by it pursuant to §§ 38.2-1415 through 38.2-1427.2 if:
1. Simultaneously with the delivery of the securities, the insurer receives collateral from the borrower consisting of cash or consisting of securities issued, assumed or guaranteed by the United States, an agency of the United States or any state. The securities shall have a present market value of at least 102 percent of the market value of the securities loaned;
2. The securities are loaned only for the purpose of making delivery of securities in the case of short sales, in the case of failure to receive securities requested for delivery or in other similar cases;
3. Prior to the loan, the borrower furnishes the insurer with the most recent statement of the borrower's financial condition and a representation by the borrower that there has been no material adverse change in its financial condition since the date of that statement;
4. The insurer receives a reasonable fee related to the value of the borrowed securities and to the duration of the loan;
5. The loan is made pursuant to a written loan agreement; and
6. The borrower is required to furnish by the close of each business day during the term of the loan a report of the market value of all collateral and the market value of all borrowed securities as of the close of trading on the previous business day. If at the close of any business day the market value of the collateral is less than 102 percent of the market value of the securities loaned, then the borrower shall deliver by the close of the next business day an additional amount of cash or securities. The market value of these additional securities, together with the market value of all previously delivered collateral, shall equal at least 102 percent of the market value of the securities loaned.
B. For the purposes of this section, "market value" includes accrued interest.
1983, c. 457, § 38.1-217.32; 1986, c. 562; 1992, c. 588.
2023 Code of Virginia › Title 38.2 - Insurance › Chapter 14 - Investments › § 38.2-1430. Collateral loans

A domestic insurer may make loans secured by securities eligible for investment under this article. At the date of investment, the loan shall not exceed eighty percent of the market value of the collateral pledged. However, if the collateral consists of obligations issued, assumed or guaranteed by the United States, the loan may equal the market value of the collateral pledged.
1983, c. 457, § 38.1-217.33; 1986, c. 562.
2023 Code of Virginia › Title 38.2 - Insurance › Chapter 14 - Investments › § 38.2-1431. Policy loans

A domestic insurer issuing life insurance policies or annuities may loan any sum not exceeding the cash surrender value specified in the policy to its policyholder upon the pledge of the policy as collateral.
1983, c. 457, § 38.1-217.34; 1986, c. 562.
2023 Code of Virginia › Title 38.2 - Insurance › Chapter 14 - Investments › § 38.2-1432. Savings, certificates, etc.

A domestic insurer may invest in any of the following:
1. Interest-bearing checking or savings accounts, certificates of deposit, or other short-term investments made available or issued by any solvent bank or trust company that is a member of the Federal Deposit Insurance Corporation;
2. Interest-bearing savings or share accounts, certificates of deposit or any other short-term investments made available or issued by any solvent building and loan or savings institution insured by the Federal Deposit Insurance Corporation or other federal insurance agency;
3. Bankers acceptances of the kinds and maturities made eligible by law for rediscount with Federal Reserve Banks, provided that these securities are accepted by a bank or trust company that is a member of the Federal Reserve System;
4. Money market mutual funds, provided that the Commission has granted prior written approval to the insurer with respect to its investment in any money market mutual fund sponsored by affiliates of the insurer and that such money market fund sponsored by affiliates meets the requirements set forth in subdivisions 1 and 2 of § 38.2-1427.2; or
5. United States government bond mutual funds.
1983, c. 457, § 38.1-217.35; 1986, c. 562; 1990, c. 3; 1995, c. 60; 1996, c. 77.
2023 Code of Virginia › Title 38.2 - Insurance › Chapter 14 - Investments › § 38.2-1433. Foreign securities

A. A domestic insurer transacting the business of insurance in a foreign country may invest in securities of or issued in that country of substantially the same kinds, classes, and investment grades as the insurer may acquire in the United States.
B. A domestic insurer may invest in securities of or issued in a foreign country of substantially the same kinds, classes and investment grades as the insurer may acquire in the United States, provided (i) all such securities are rated medium grade or higher by the Securities Valuation Office of the National Association of Insurance Commissioners or by a national rating agency recognized by the Commission and no more than one percent of the insurer's admitted assets are invested in such securities which are rated medium grade, and (ii) the aggregate amount of foreign investment held by the insurer under this section for a single foreign jurisdiction does not exceed (a) five percent of the insurer's admitted assets as to a foreign jurisdiction that has a sovereign debt rating of SVO 1 by the Securities Valuation Office of the National Association of Insurance Commissioners or (b) three percent of the insurer's admitted assets as to any other foreign jurisdiction.
C. Investments made eligible by this section shall be payable in lawful currency of the United States, except (i) where payment in other lawful currencies is required to match obligations denominated in such other lawful currencies or (ii) if the investment is denominated in other lawful currency, the investment is effectively hedged, substantially in its entirety, against the lawful currency of the United States in accordance with § 38.2-1428.
1983, c. 457, § 38.1-217.36; 1986, c. 562; 1998, c. 414; 2014, cc. 159, 206.
2023 Code of Virginia › Title 38.2 - Insurance › Chapter 14 - Investments › § 38.2-1434. Mortgage loans

Subject to the provisions of § 38.2-1437, a domestic insurer may invest in:
1. Obligations secured by first mortgages or first deeds of trust on improved unencumbered real property located in the United States;
2. Obligations secured by first mortgages or first deeds of trust upon leasehold estates on improved and otherwise unencumbered real property where:
a. The leasehold interest lasts for a term of not less than ten years beyond the maturity of the loan as made or as extended; and
b. The mortgagee is subrogated to all the rights of the lessee on foreclosure or on taking a deed in lieu of foreclosure; or
3. Obligations secured by first mortgages or first deeds of trust on unimproved and unencumbered real property in the United States for the purpose of financing the construction of a building or other improvements on the real property subject to the mortgage or deed of trust, if:
a. These obligations mature not more than sixty months from the effective date of the mortgage or deed of trust and are the unlimited and unconditional liability of the obligor;
b. The obligor provides the insurer with a completion bond for the building or improvements at the time of making the loan; and
c. The insurer at or prior to the making of the loan (i) enters into an agreement with another party to provide permanent financing or (ii) agrees to provide permanent financing upon completion of the building or other improvement.
1983, c. 457, § 38.1-217.37; 1986, c. 562.
2023 Code of Virginia › Title 38.2 - Insurance › Chapter 14 - Investments › § 38.2-1435. Second mortgages; wrap-around mortgages

A domestic insurer may invest in obligations secured by second mortgages or second deeds of trust on real property encumbered only by a first mortgage or first deed of trust complying with §§ 38.2-1434 and 38.2-1437, subject to either of the following conditions:
1. The insurer also owns the obligation secured by the first mortgage or first deed of trust, and the aggregate value of both loans does not exceed the applicable loan-to-value ratio specified in § 38.2-1437; or
2. The obligation is secured by a wrap-around mortgage where:
a. Only one preexisting mortgage or deed of trust encumbers the real property;
b. The mortgage or deed of trust securing the loan is (i) recorded and (ii) insured for at least the total amount of the obligation of the borrower to the insurer by title insurance; and
c. The insurer agrees to make the payments due under the first mortgage or first deed of trust upon receipt of payments due from the borrower under the wrap-around mortgage.
1983, c. 457, § 38.1-217.38; 1986, c. 562.
2023 Code of Virginia › Title 38.2 - Insurance › Chapter 14 - Investments › § 38.2-1436. Mortgage participations

Notwithstanding the provisions of §§ 13.1-627 and 13.1-826, a domestic insurer may acquire or sell participation interests in any loans secured by a mortgage or deed of trust qualifying under § 38.2-1434 if the insurer has all or substantially all the rights of a first mortgagee.
1983, c. 457, § 38.1-217.39; 1986, c. 562.
2023 Code of Virginia › Title 38.2 - Insurance › Chapter 14 - Investments › § 38.2-1437. Limitations on mortgages

A. The amount of any loan secured by a mortgage or deed of trust referred to in §§ 38.2-1434 through 38.2-1436 shall not exceed the following percentages of the fair market value of the real estate:
1. Seventy-five percent for a leasehold loan made pursuant to subdivision 2 of § 38.2-1434;
2. Ninety percent for a loan made to an employee of the insurer, other than a director or trustee thereof, whether such loan be made in connection with the initial employment of the employee or in connection with the transfer of the place of employment of the employee; or
3. Eighty percent for all other loans.
However, the percentage limits specified in this subsection may be exceeded if the excess is (i) insured or guaranteed or is to be insured or guaranteed by the United States, any state or any agency of either or (ii) insured by an insurer licensed to insure mortgage guaranty risks in this Commonwealth.
B. Any loan made pursuant to §§ 38.2-1434 through 38.2-1436 not in compliance with the requirements of subsection A of this section shall be classified as a Category 2 investment in its entirety.
C. The fair market value of the real estate interest mortgaged shall be determined by a written appraisal of at least one competent real estate appraiser as of the date of the initial loan commitment, which appraiser shall not be an employee of the insurer nor an employee of any company controlled by or under common control with the insurer. If the loan commitment is revised to reflect a change in the value of the real estate, the fair market value shall be determined as of the date of that revision.
D. Buildings and other improvements on the mortgaged premises shall be insured against fire loss for the benefit of the mortgagee in an amount not less than the lesser of their insurable value or the unpaid principal balance of the obligation.
E. The maximum term of any mortgage or deed of trust referred to in §§ 38.2-1434 through 38.2-1436 secured by real property primarily improved by a single-family residence shall not exceed thirty years.
F. A domestic insurer shall not invest, under §§ 38.2-1434 through 38.2-1436, more than two percent of its admitted assets, directly or indirectly, in mortgages covering any one secured location, nor more than four percent in the mortgages of any one obligor.
1983, c. 457, § 38.1-217.40; 1986, c. 562; 1992, c. 588.
2023 Code of Virginia › Title 38.2 - Insurance › Chapter 14 - Investments › § 38.2-1437.1. Mortgage pass-through securities

A domestic insurer may invest in mortgage pass-through securities backed by a pool of mortgages of the kind, class and investment quality as those eligible for investment under §§ 38.2-1434 through 38.2-1437, under the following conditions:
1. The servicer of the pool of mortgages shall be a business entity created under the laws of the United States or any state;
2. The pool of mortgages is assigned to a business entity, other than a sole proprietorship, having a net worth of at least five million dollars, as trustee for the benefit of the holders of the securities;
3. A domestic insurer shall not invest under this section more than two percent of its admitted assets in securities backed by any single mortgage pass-through pool;
4. All mortgage pass-through securities acquired by a domestic insurer under this section shall provide for flow-through of both principal and interest payments payable on the underlying mortgage loan assets; mortgage pass-through securities promising principal-only, interest-only or residual interests-only in the underlying mortgage assets shall not be acquired; and
5. The securities on the date of investment shall be high grade obligations.
1992, c. 588; 1999, c. 483.
2023 Code of Virginia › Title 38.2 - Insurance › Chapter 14 - Investments › § 38.2-1438. Renewals and extensions when value of property decreases

Nothing in this chapter shall prohibit a domestic insurer from renewing or extending, or consenting to the renewal or extension of, evidences of indebtedness secured by real property or leasehold estates for the original or a lesser amount when a decrease in value of the property or estate causes the indebtedness to exceed the applicable loan-to-value ratio specified by § 38.2-1437. Nothing in this chapter shall prohibit a domestic insurer from accepting as part payment for any real property or leasehold estate sold by it, a mortgage or other lien on the real property or leasehold estate securing a loan that exceeds the applicable loan-to-value ratio specified in § 38.2-1437.
1983, c. 457, § 38.1-217.41; 1986, c. 562.
2023 Code of Virginia › Title 38.2 - Insurance › Chapter 14 - Investments › § 38.2-1439. Chattel mortgages

A. In connection with a mortgage loan on the security of real property designed and used primarily for residential purposes and acquired pursuant to § 38.2-1434, a domestic insurer may make a loan on the security of a chattel mortgage, deed of trust or other appropriate lien. The chattel mortgage or other lien may be created separately or in combination with the mortgage loan on the real estate. It shall not exceed five years and shall constitute a first and prior lien, except for taxes not then delinquent, on personal property comprised of durable equipment owned by the mortgagor and kept and used on the mortgaged premises.
B. The term "durable equipment" includes only mechanical refrigerators, mechanical laundering machines, heating and cooking stoves and ranges, mechanical kitchen aids, vacuum cleaners, and fire extinguishing devices; and, for apartment houses and hotels, may also include room furniture and furnishings.
C. Before any loan or investment is made under this section, the items of property included in the security shall be separately appraised by a competent appraiser and the fair market value of the items determined. No loan made under this section shall exceed the lesser of (i) an amount obtained by multiplying the loan to the value ratio applicable to the companion loan on the real property by the fair market value of the personal property or (ii) an amount equal to twenty percent of the amount secured by the lien on the real property.
1983, c. 457, § 38.1-217.42; 1986, c. 562.
2023 Code of Virginia › Title 38.2 - Insurance › Chapter 14 - Investments › § 38.2-1440. Investment in personal property

A. A domestic insurer may invest in interests in tangible personal property for the production of income, evidenced by trust certificates or other instruments.
B. The investments shall be accompanied by (i) a right to receive rental, charter hire, purchase or other payments for the use or purchase of the personal property, (ii) a valid, binding and enforceable contract or lease for the purchase or use of the tangible personal property, and (iii) a provision for contractual payments to be made that will return the cost of the property and provide earnings on the investments within the anticipated useful life of the property which shall be at least three years.
C. The payments must be made payable or guaranteed by one or more domestic governmental entities or business entities whose obligations would qualify for investment under § 38.2-1421.
D. The unit cost of such property shall not be less than $25,000, and the cost of all property covered by any single contract or lease shall not be less than $100,000.
E. The tangible personal property shall not include furniture or fixtures.
1983, c. 457, § 38.1-217.43; 1986, c. 562; 1992, c. 588.
2023 Code of Virginia › Title 38.2 - Insurance › Chapter 14 - Investments › § 38.2-1442. Guaranty association obligations

A domestic insurer may invest in any obligation not in default of the Virginia Life, Accident and Sickness Insurance Guaranty Association issued pursuant to subdivision L 3 of § 38.2-1704 or the Virginia Property and Casualty Insurance Guaranty Association issued pursuant to subdivision 2 of subsection B of § 38.2-1606.
1986, c. 562; 2010, c. 510.
2023 Code of Virginia › Title 38.2 - Insurance › Chapter 14 - Investments › § 38.2-1443. Investment of amounts allocated to separate accounts for variable life insurance and variable annuities

The amounts allocated to separate accounts for variable life insurance and variable annuities, pursuant to the provisions of § 38.2-3113, and accumulations on them, may be invested and reinvested by a domestic insurer in any type of Category 1 investment. Any percentage limitations based on the insurer's total admitted assets or surplus to policyholders shall not apply to investments made pursuant to this section.
1983, c. 457, § 38.1-217.45; 1986, c. 562; 1992, c. 588.
2023 Code of Virginia › Title 38.2 - Insurance › Chapter 14 - Investments › § 38.2-1443.1. Investment of amounts allocated to separate accounts for modified guaranteed life insurance, modified guaranteed annuities, and funding agreements

A. Unless otherwise provided by regulation, the amounts allocated to separate accounts for modified guaranteed life insurance and modified guaranteed annuities pursuant to the provisions of § 38.2-3113.1, and for funding agreements pursuant to the provisions of § 38.2-3100.2, and accumulations on them, may be invested and reinvested by a domestic insurer in any type of Category 1 investment.
B. Investments made pursuant to this section shall be taken into account in applying the investment limitations of §§ 38.2-1413 and 38.2-1414 to investments made by the insurer, by combining the investments under this section with all other investments subject to such limitations. In addition to the general account meeting these investment limitations, both the separate account and the general account together shall meet these investment limitations. The limitations of §§ 38.2-1413 and 38.2-1414 shall not otherwise apply to investments made pursuant to this section.
1992, c. 210; 2008, c. 216.
2023 Code of Virginia › Title 38.2 - Insurance › Chapter 14 - Investments › § 38.2-1444. Establishment of separate accounts for pension, retirement or profit-sharing plans; investment of funds in such accounts

A. A domestic insurer, after adoption of a resolution by its board of directors and certification of that adoption to the Commission, may allocate to one or more separate accounts, in accordance with the terms of a written agreement, any amounts paid to or held by the insurer in connection with a pension, retirement or profit-sharing plan. The plan may provide (i) retirement benefits pursuant to the terms of the agreement or under the insurer's policies or contracts and (ii) other benefits incidental to the agreement or policies. The retirement benefits may vary according to the terms of the agreement, policies or contracts and any standards incorporated in them. Any income and any realized or unrealized gain or loss on each account shall be credited to or charged against that account in accordance with the agreement, without regard to the other income, gains or losses of the insurer.
B. Notwithstanding any other provision in this title, the amounts allocated to the accounts and accumulations on them may be invested and reinvested in any kinds of investment specified in the agreement other than those prohibited by § 38.2-1407. The investments shall not be taken into account in applying the investment limitations of this chapter to investments made by the insurer.
C. Amounts allocated by an insurer to separate accounts pursuant to this section shall be owned by the insurer, and the insurer shall not be, nor hold itself out to be, a trustee for the amounts. The insurer's liability under the accounts shall be limited to the amount of funds in the account.
1983, c. 457, § 38.1-217.46; 1986, c. 562.
2023 Code of Virginia › Title 38.2 - Insurance › Chapter 14 - Investments › § 38.2-1445. Separate accounts deemed Category 1 investments

All investments made in compliance with this article shall be deemed Category 1 investments except that nothing contained in this section shall be construed to affect or apply to any insurer licensed pursuant to the provisions of Chapter 42 (§ 38.2-4200 et seq.) or 45 (§ 38.2-4500 et seq.) of this title.
1983, c. 457, § 38.1-217.47; 1986, c. 562; 1992, c. 588.
2023 Code of Virginia › Title 38.2 - Insurance › Chapter 14 - Investments › § 38.2-1446. Prohibition of hypothecation

A. Every domestic insurer subject to the provisions of this chapter shall at all times have and maintain free and unencumbered admitted assets in an amount equal to the sum total of its reserve liabilities and minimum capital and surplus, and no such insurer shall pledge, hypothecate, or otherwise encumber its assets in an amount in excess of the amount of its surplus to policyholders; nor shall such insurer pledge, hypothecate or otherwise encumber more than five percent of its admitted assets. However, the Commission, upon written application, may approve the hypothecation or encumbrance of any of the assets of such an insurer in any amount upon a determination that such hypothecation or encumbrance will not adversely affect the solvency of such insurer.
B. Any such insurer which pledges, hypothecates, or otherwise encumbers any of its assets shall within ten days thereafter report in writing to the Commission the amount and identity of the assets so pledged, hypothecated, or encumbered and the terms and conditions of such transaction. In addition, each such insurer shall annually, or more often if required by the Commission, file with the Commission a statement sworn to by an executive officer of the insurer that (i) title to assets in an amount equal to the reserve liability and minimum capital and surplus of the insurer that are not pledged, hypothecated or otherwise encumbered is vested in the insurer, (ii) the only assets of the insurer that are pledged, hypothecated or otherwise encumbered are as identified and reported in the sworn statement and no other assets of the insurer are pledged, hypothecated or otherwise encumbered, and (iii) the terms and limitations of any such transaction of pledge, hypothecation or encumbrance are as reported in the sworn statement.
C. Any person who accepts a pledge, hypothecation or encumbrance of any asset of a domestic insurer as security for a debt or other obligation of such insurer not in accordance with the terms and limitations of this article shall be deemed to have accepted such asset subject to a superior, preferential and automatically perfected lien in favor of claimants; however, such superior, preferential and automatically perfected lien in favor of claimants shall not apply to assets of a company in receivership pursuant to Chapter 15 (§ 38.2-1500 et seq.) of this title, if the receiver approves the pledge, hypothecation or encumbrance of such assets.
D. In the event of involuntary or voluntary liquidation of any domestic insurer subject to this chapter, claimants of such insurer shall have a prior and preferential claim against all assets of the insurer except those that have been pledged, hypothecated or encumbered in accordance with the terms and limitations of this article. All claimants shall have equal status and their prior and preferential claim shall be superior to any claim or cause of action against the insurer by any person, corporation, association or legal entity.
1992, c. 588; 2002, c. 147.