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Virginia Administrative Code
Title 14. Insurance
Agency 5. State Corporation Commission, Bureau of Insurance
Chapter 320. Rules Establishing Minimum Reserve Standards for Individual and Group Accident and Sickness Insurance Contracts
11/24/2024

14VAC5-320-20. General.

A. Scope.

1. These standards apply to all individual and group accident and sickness insurance coverages, except credit accident and sickness insurance coverages, provided by policies or contracts delivered or issued for delivery by any domestic, foreign or alien company licensed to transact the business of insurance in this Commonwealth.

2. When a company determines that adequacy of its accident and sickness insurance reserves requires reserves in excess of the minimum standards specified herein, such increased reserves shall be held and shall be considered the minimum reserves for that company.

3. With respect to any block of contracts, or with respect to a company's accident and sickness business as a whole, a prospective gross premium valuation is the ultimate test of reserve adequacy as of a given valuation date. Such a gross premium valuation will take into account for contracts in force, in a claims status, or in a continuation of benefits status on the valuation date, the present value as of the valuation date of: all expected benefits unpaid, all expected expenses unpaid, and all unearned or expected premiums, adjusted for future premium increases reasonably expected to be put into effect.

Such a gross premium valuation is to be performed whenever a significant doubt exists as to reserve adequacy with respect to any major block of contracts, or with respect to the company's accident and sickness business as a whole. In the event inadequacy is found to exist, immediate loss recognition shall be made and the reserves restored to adequacy. Adequate reserves (inclusive of claim, premium and contract reserves, if any) shall be held with respect to all contracts, regardless of whether contract reserves are required for such contracts under these standards. Whenever minimum reserves, as defined in these standards, exceed reserve requirements as determined by a prospective gross premium valuation, such minimum reserves remain the minimum requirement under these standards.

B. Categories of reserves. The following sections of this chapter (14VAC5-320-10 et seq.) set forth minimum standards for three categories of accident and sickness insurance reserves:

14VAC5-320-30. Claim Reserves

14VAC5-320-40. Premium Reserves

14VAC5-320-50. Contract Reserves

Adequacy of a company's accident and sickness insurance reserves is to be determined on the basis of all three categories combined. However, these standards emphasize the importance of determining appropriate reserves for each of the three categories separately.

C. Appendices. These standards contain two appendices which are in integral part of the standards, and one additional "supplementary" appendix which is not part of the standards as such, but is included for explanatory and illustrative purposes only.

Appendix A. Specific minimum standards with respect to morbidity, mortality and interest, which apply to claim reserves according to year of incurral and to contract reserves according to year of issue.

Appendix B. Glossary of Technical Terms used.

Appendix C. (Supplementary) Waiver of Premium Reserves.

Statutory Authority

§§ 12.1-13, 38.2-223, 38.2-1311 and 38.2-1314 of the Code of Virginia.

Historical Notes

Derived from Regulation 15, Case No. INS930382, § 3, eff. January 1, 1994.

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