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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
12/26/2024

14VAC5-320-40. Premium reserves.

A. General.

1. Unearned premium reserves are required for all contracts with respect to the period of coverage for which premiums, other than premiums paid in advance, have been paid beyond the date of valuation.

2. If premiums due and unpaid are carried as an asset, such premiums must be treated as premiums in force, subject to unearned premium reserve determination. The value of unpaid commissions, premium taxes, and the cost of collection associated with due and unpaid premiums must be carried as an offsetting liability.

3. The gross premiums paid in advance for a period of coverage commencing after the next premium due date which follows the date of valuation may be appropriately discounted to the valuation date and shall be held either as a separate liability or, unless questioned by the Commission, as an addition to the unearned premium reserve which would otherwise be required as a minimum.

B. Minimum standards for unearned premium reserves.

1. The minimum unearned premium reserve with respect to any contract is the pro-rata unearned modal premium that applies to the premium period beyond the valuation date, with such premium determined on the basis of:

a. The valuation net modal premium on the contract reserve basis applying to the contract; or

b. The gross modal premium for the contract if no contract reserve applies.

2. However, in no event may the sum of the unearned premium and contract reserves for all contracts of the company subject to contract reserve requirements be less than the gross modal unearned premium reserve on all such contracts, as of the date of valuation. Such reserve shall never be less than the expected claims for the period beyond the valuation date represented by such unearned premium reserve, to the extent not provided for elsewhere.

C. Premium reserve methods generally. When computing premium reserves, the company may employ suitable approximations and estimates including, but not limited to, groupings, averages and aggregate estimation. Such approximations or estimates should be tested periodically to determine their continuing adequacy and reliability.

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, § 5, eff. January 1, 1994.

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