Administrative Code

Virginia Administrative Code
Title 14. Insurance
Agency 5. State Corporation Commission, Bureau of Insurance
1/26/2020

Chapter 260. Rules Governing Insurance Holding Companies

14VAC5-260-10. Applicability.

This chapter sets forth rules and procedural requirements which the commission deems necessary to carry out the provisions of Articles 5 and 6 (§ 38.2-1322 et seq. and § 38.2-1335 et seq.) of Chapter 13 of Title 38.2 ("the Act") of the Code of Virginia, concerning insurance holding companies and subsidiaries of insurance companies. The information called for by this chapter is necessary and appropriate for the protection of the policyholders in this Commonwealth.

Statutory Authority

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

Historical Notes

Derived from Regulation 14, Case No. 20159, § 1, eff. January 1, 1980; amended, Case No. INS940114, Virginia Register Volume 11, Issue 7, eff. January 1, 1995; Volume 23, Issue 2, eff. October 2, 2006.

14VAC5-260-20. [Repealed]

Historical Notes

Derived from Regulation 14, Case No. 20159, § 2, eff. January 1, 1980; amended, Case No. INS940114, Virginia Register Volume 11, Issue 7, eff. January 1, 1995; repealed, Virginia Register Volume 23, Issue 2, eff. October 2, 2006.

14VAC5-260-30. Definitions.

The following words and terms when used in this chapter shall have the following meanings unless the context clearly indicates otherwise:

"Commission" means the State Corporation Commission.

"Commissioner of Insurance" means the administrative or executive officer of the division or bureau of state government established to administer the insurance laws of a state other than Virginia.

"Executive officer" means chief executive officer, chief operating officer, chief financial officer, president, vice president, treasurer, secretary, controller, and any other individual performing functions corresponding to those performed by the foregoing officers under whatever title.

"Foreign insurer" shall include an alien insurer except where clearly noted otherwise.

"NAIC" means National Association of Insurance Commissioners.

"The Act" means Articles 5 and 6 of Chapter 13 (§ 38.2-1322 et seq. and § 38.2-1335 et seq.) of Title 38.2 of the Code of Virginia.

"Ultimate controlling person" means that person which is not controlled by any other person.

Other terms found in this chapter are used as defined in § 38.2-1322 of the Code of Virginia, or industry usage if not defined by the Code of Virginia.

Statutory Authority

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

Historical Notes

Derived from Regulation 14, Case No. 20159, § 3, eff. January 1, 1980; amended, Case No. INS940114, Virginia Register Volume 11, Issue 7, eff. January 1, 1995; Volume 23, Issue 2, eff. October 2, 2006.

14VAC5-260-40. Acquisition of control; approval of applications.

A. A person filing an application or statement pursuant to § 38.2-1323 A, or any related provision of §§ 38.2-1324 through 38.2-1328, of the Act shall furnish the required information designated on Form A. A failure to file complete and accurate information as required by this chapter is grounds for a denial by the commission pursuant to § 38.2-1326.

B. Where applicable and required by Form A, Form E shall also be filed. Whenever an application includes information in the format required by Form E, the commission may require an opinion of an economist as to the competitive impact of the proposed acquisition.

C. When the person being acquired controls a domestic insurer, the person shall, for purposes of completing a Form A application, be deemed to be a "domestic insurer."

1. The name of the domestic subsidiary insurer should be indicated on the cover page as follows:

"ABC Insurance Company, a subsidiary of XYZ Holding Company"; and

2. References to "the insurer" contained in Form A shall refer to both the domestic subsidiary insurer and the person being acquired.

D. The applicant shall promptly advise the commission of any material changes in the information so furnished on Form A, or any attachments thereto, arising subsequent to the date upon which the information was furnished, but prior to the commission's disposition of the application and consummation of the acquisition of control. Within two business days after the person filing the application learns of the change, an amendment setting forth the change, together with copies of all documents and other material relevant to the change, shall be filed with the commission. The filing shall be made with the clerk of the commission. Except where the applicant is also the insurer, the applicant shall show on each such filing that a copy has also been sent to the insurer.

E. Where "control" is derived from a management agreement, including any other agreement between a domestic insurer and another person other than a contract for goods or nonmanagement services, any termination of the agreement or any substitution of persons under the agreement shall be deemed a change of control requiring notice and application to the commission pursuant to § 38.2-1323 of the Act.

F. A person seeking to merge with or acquire a domestic insurer may apply to the commission for an order exempting the person from the provisions of §§ 38.2-1323 through 38.2-1327 if the merger or acquisition meets the standards for exemption provided in § 38.2-1328.

1. The application shall be in writing and shall be filed with the clerk of the commission. Filing instructions are the same as for a Form A filing. See Section III of the Form A Instructions for information regarding number of copies, signature requirements, and electronic filing. The applicant shall identify the parties to the merger or acquisition and shall state (i) the purpose of the merger or acquisition, (ii) the method of merger or acquisition, and (iii) why the person believes the exemption criteria of § 38.2-1328 will be met.

2. Within 30 days after the application for exemption is filed with the clerk of the commission, the commission shall enter an order granting the exemption or giving notice of a hearing to determine the merits of the application.

G. Any hearing held to consider an application filed pursuant to the provisions of this section and § 38.2-1323 of the Act shall be held pursuant to § 38.2-1326 and shall begin, unless waived by the insurer, within 40 days of the date the application is filed with the commission. An application shall be deemed filed upon receipt by the commission of all material required by this section or § 38.2-1324 of the Act.

Statutory Authority

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

Historical Notes

Derived from Regulation 14, Case No. 20159, § 4, eff. January 1, 1980; amended, Case No. INS940114, Virginia Register Volume 11, Issue 7, eff. January 1, 1995; Volume 23, Issue 2, eff. October 2, 2006; Volume 26, Issue 2, eff. September 30, 2009; Volume 31, Issue 9, eff. January 1, 2015.

14VAC5-260-50. Acquisitions involving insurers not otherwise covered.

A. An acquisition covered by § 38.2-1323 B of the Act may be subject to orders pursuant to § 38.2-1323 B and C of the Act unless the acquiring party files a pre-acquisition notification or an acquisition statement in the format prescribed by Form E. The person being acquired may file the statement. If a nondomiciliary insurer licensed to do business in this Commonwealth is proposing a merger or acquisition pursuant to § 38.2-1323 A of the Act, that person shall file a pre-acquisition notification form, Form E. No pre-acquisition notification form need be filed if the acquisition is beyond the scope of § 38.2-1323 A as set forth in subdivision B 2 of this section.

In addition to the information required by Form E, the commission may wish to require an expert opinion as to the competitive impact of the proposed acquisition.

B. 1. Except as exempted in subdivision 2 of this subsection, this section applies to any acquisition in which there is a change in control of an insurer authorized to do business in this Commonwealth.

2. This section shall not apply to the following:

a. A purchase of securities solely for investment purposes so long as the securities are not used to cause or attempt to cause the substantial lessening of competition in any insurance market in this Commonwealth. If a purchase of securities results in a presumption of control, as defined in § 38.2-1322 of the Act, it is not solely for investment purposes unless the commissioner of the insurer's state of domicile accepts a disclaimer of control or affirmatively finds that control does not exist and the disclaimer action or affirmative finding is communicated by the domiciliary insurance commissioner, director, or superintendent to the commission;

b. The acquisition of a person by another person when both persons are neither directly nor through affiliates primarily engaged in the business of insurance, if pre-acquisition notification is filed with the commission in accordance with subdivision C 1 of this section 30 days prior to the proposed effective date of the acquisition. However, such pre-acquisition notification is not required for exclusion from this section if the acquisition would otherwise be excluded from this section by any other provision in this subdivision B 2;

c. The acquisition of already affiliated persons; or

d. An acquisition if, as an immediate result of the acquisition:

(1) In no market would the combined market share of the involved insurers exceed 5.0% of the total market;

(2) There would be no increase in any market share; or

(3) In no market would the combined market share of the involved insurers exceed 12% of the total market, and the market share increase by more than 2.0% of the total market.

For the purpose of this subdivision, a market means direct written insurance premium in this Commonwealth for a line of business as contained in the annual statement required to be filed by insurers licensed to do business in this Commonwealth.

C. An acquisition covered by subsection B of this section may be subject to an order pursuant to subsection E of this section unless the acquiring person files a pre-acquisition notification and the waiting period has expired. The acquired person may file a pre-acquisition notification. The commission shall give confidential treatment to information submitted under this subsection in the same manner as provided in § 38.2-1333 of the Act.

1. The pre-acquisition notification shall be in such form and contain such information as prescribed by the NAIC relating to those markets that, under subdivision B 2 d of this section, cause the acquisition not to be exempted from the provisions of this section. The commission may require such additional material and information as deemed necessary to determine whether the proposed acquisition, if consummated, would violate the competitive standard of subsection D of this section. The required information may include an opinion of an economist as to the competitive impact of the acquisition in this Commonwealth accompanied by a summary of the education and experience of the economist indicating his ability to render an informed opinion.

2. The waiting period required shall begin on the date of receipt by the commission of a pre-acquisition notification and shall end on the earlier of the 30th day after the date of receipt or termination of the waiting period by the commission. Prior to the end of the waiting period, the commission may require the submission of additional needed information relevant to the proposed acquisition, in which event the waiting period shall end on the earlier of the 30th day after receipt of the additional information by the commission or termination of the waiting period by the commission.

D. 1. The commission may enter an order under subdivision E 1 of this section with respect to an acquisition if there is substantial evidence that the effect of the acquisition may be substantially to lessen competition in any line of insurance in this Commonwealth or tend to create a monopoly or if the insurer fails to file adequate information in compliance with subsection C of this section.

2. In determining whether competition may be negatively impacted, the commission may consider, among other things, whether applicable competitive standards promulgated by the NAIC have or may be violated as a consequence of the acquisition. The standards may include any indicators of competition identified or enumerated by the NAIC in any model laws or portions of practice and procedure or instructional manuals developed to provide guidance in regulatory oversight of holding company systems, mergers and acquisitions, or competitive practices within the marketplace. The standards include the definitions, guidelines, or standards embodied in any model holding company act or model holding company regulation adopted by the NAIC. In addition, the commission may request and consider the opinion of an economist as to the competitive impact of the acquisition whenever pre-acquisition notification is submitted pursuant to § 38.2-1323 B of the Act.

E. 1. a. If an acquisition violates the standards of this section, the commission may enter an order:

(1) Requiring an involved insurer to cease and desist from doing business in this Commonwealth with respect to the line or lines of insurance involved in the violation.

(2) Denying the application of an acquired or acquiring insurer for a license to do business in this Commonwealth.

(3) Suspending the license of an insurer involved in an acquisition if there is substantial evidence that the effect of the acquisition may be substantially to lessen competition in any line of insurance in this Commonwealth or tend to create a monopoly therein, and is detrimental to policyholders or the public in general.

(4) Suspending the license if the insurer fails to file adequate information sufficient to rebut a reasonable belief that the merger or acquisition causes or tends to cause a substantial lessening of competition in any line of insurance, and also is detrimental to policyholders or the public.

b. An order suspending the license shall not be entered under § 38.2-1323 B of the Act unless the involved insurer has received 10 days' notice and an opportunity to be heard. The notice of hearing shall be accompanied by a request for information as required by § 38.2-1324 of the Act; it may include also a request for an opinion of an economist as to the competitive impact of the acquisition.

(1) Requested information shall be filed as an acquisition statement in the format of Form E.

(2) If the commission determines that the acquisition or merger causes or tends to cause a substantial lessening of competition in any line of insurance, the commission may request the insurer to furnish the additional information required by § 38.2-1324, in order to rebut the reasonable belief that the lessening of competition is detrimental to policyholders or the public in general.

c. An order suspending the license shall not be entered under § 38.2-1323 B of the Act and this section if:

(1) The acquisition will yield substantial economies of scale or economies in resource utilization that cannot be feasibly achieved in any other way, and the public benefits which would arise from the economies exceed the public benefits which would arise from not lessening competition; or

(2) The acquisition will substantially increase the availability of insurance, and the public benefits of the increase exceed the public benefits which would arise from not lessening competition.

d. The commission's order suspending the license entered under this section shall not become final earlier than 21 days after it is issued, during which time the involved insurer may submit a plan to remedy the anticompetitive impact of the acquisition within a reasonable time. Based upon the plan or other information, the commission shall specify the conditions, if any, under the time period during which the aspects of the acquisition causing a violation of the applicable competitive standards announced by the commission would be remedied and the order vacated or modified.

e. An order pursuant to this subsection shall not apply if the acquisition is not consummated.

2. Any person who violates a cease and desist order of the commission under subdivision 1 of this subsection and while the order is in effect may, after notice and hearing and upon order of the commission, be subject at the discretion of the commission to one or more of the following:

a. A monetary penalty pursuant to § 38.2-218 of the Code of Virginia; or

b. Suspension or revocation of the person's license.

3. Any insurer or other person who fails to make any filing required by this section, and who also fails to demonstrate a good faith effort to comply with any filing requirement, shall be subject to a monetary penalty pursuant to § 38.2-218.

F. Any hearing held pursuant to the provisions of this section shall begin, unless waived by the insurer, within 40 days of the date of receipt by the commission of all material required by § 38.2-1323 of the Act.

G. For the purposes of this section and § 38.2-1323 B of the Act, "acquisition" means any agreement, arrangement, or activity the consummation of which results in a person acquiring directly or indirectly control of another person, and includes but is not limited to the acquisition of voting securities, the acquisition of assets, bulk reinsurance, and mergers. "Involved insurer" includes an insurer that either acquires or is acquired, is affiliated with an acquirer or acquired, or is the result of a merger.

H. Section 38.2-1334.1 A and C and Chapter 15 (§ 38.2-1500 et seq.) of Title 38.2 of the Code of Virginia do not apply to acquisitions covered under subsection B of this section.

Statutory Authority

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

Historical Notes

Derived from Regulation 14, Case No. 20159, § 5, eff. January 1, 1980; amended, Case No. INS940114, Virginia Register Volume 11, Issue 7, eff. January 1, 1995; Volume 23, Issue 2, eff. October 2, 2006; Volume 31, Issue 9, eff. January 1, 2015.

14VAC5-260-55. Subsidiaries of insurers.

Investments in insurance subsidiaries are exempt from § 38.2-1330 B 6 of the Act to the extent they do not exceed the lesser of 10% of the insurer's assets or 50% of the insurer's surplus as regards policyholders. The authority to invest in subsidiaries under this section is in addition to any authority to invest in subsidiaries that may be contained in any other provision of Title 38.2 of the Code of Virginia.

Statutory Authority

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

Historical Notes

Derived from Virginia Register Volume 31, Issue 9, eff. January 1, 2015.

14VAC5-260-60. Annual registration of insurers; registration statement filings and amendments.

A. An insurer required to file a registration statement pursuant to § 38.2-1329 of the Act shall furnish the required information in the format designated on Form B.

1. The initial registration statement shall be filed with the commission within 15 days after the insurer becomes subject to registration under § 38.2-1329 of the Act.

2. Annually thereafter by April 30 of each year, for the previous calendar year, the registrant shall file a completely restated up-to-date registration statement in the format designated on Form B, with amendments consolidated therein. Each registration statement shall contain a summary outlining all items in the current registration statement representing changes from the prior registration statement. The summary shall be prepared in the format designated on Form C, as specified in the instructions of that form, which is a part of this chapter.

B. Amendments to Form B.

1. An amendment to Form B shall be filed under the following conditions:

a. Within 15 days after the end of any month in which there is a material change to the information provided in the annual registration statement;

b. Within 15 days after the end of any month in which the registrant or insurer learns there is a change in control of the registrant, in which case all of Form B and Form C shall be made current;

c. Within 15 days after the end of any month in which the registrant or insurer learns there is a material change in information given in Item 5 of Form B;

d. Within 30 days after the investment in any one corporation, if the total investment in that corporation, by the insurance holding company system, exceeds 10% of that corporation's voting securities;

e. Within 15 days after the end of any month in which there is a material change in any portion of the information given in Item 6 of Form B;

f. Within 15 days after the end of any month in which there is a change of the chief executive officer, president, or more than 1/3 of the directors reported in Item 4 of Form B;

g. Within five business days following the declaration of any dividend or other distribution to an insurer's shareholder or shareholders; and

h. Within 120 days after the end of each fiscal year of the ultimate controlling person of the insurance holding company system.

2. Amendments shall be filed in the Form B format. Subject to the provisions of subdivision A 2 of this section, only those items which are being amended need be reported. Each amendment shall include at the top of the cover page "Amendment No. (insert number) to Registrant Statement, brought current from (insert year)" and shall indicate as its "Date," the date of the change and not the date of the original filings. Filings made in the format of Forms A, D, E, or G may be deemed amendments filed in the Form B format when accompanied by certification under oath or affirmation that the transaction reported on Form A, D, E, or G has been consummated. If the commission's approval of the transaction is required by the Act, the certification shall state also that consummation was pursuant to terms and agreements approved by the commission.

3. As used in this section, "material transaction" has the meaning set forth in § 38.2-1322 of the Act except that, unless the commission by rule, order, or regulation prescribes otherwise, no sale, purchase, exchange, loan, or extension of credit or investment shall be considered "material" unless it involves at least 0.5% of an insurer's admitted assets or 5.0% of the insurer's surplus to policyholders, as of the immediately preceding December 31. Any sale or other transaction which is one of a series of transactions occurring within a 12-month period that are sufficiently similar in nature as to be reasonably construed as a single transaction and that in the aggregate exceed the minimum limits herein provided shall be deemed a material transaction.

C. Exemptions and alternative and consolidated registrations.

1. Any insurer which is authorized to do business in this Commonwealth may file a registration statement on behalf of any affiliated insurer or insurers which are required to register under § 38.2-1329 of the Act. A registration statement may include information not required by the Act regarding any insurer in the insurance holding company system even if the insurer is not authorized to do business in this Commonwealth. In lieu of filing a registration statement on Form B, the authorized insurer may file a copy of the registration statement or similar report which it is required to file in its state of domicile, provided:

a. The statement or report contains substantially similar information required to be furnished on Form B; and

b. The filing insurer is the principal insurance company in the insurance holding company system.

2. The question of whether the filing insurer is the principal insurance company in the insurance holding company system is a question of fact and an insurer filing a registration statement or report in lieu of Form B on behalf of an affiliated insurer, shall set forth a brief statement of facts which will substantiate the filing insurer's claim that it, in fact, is the principal insurer in the insurance holding company system.

3. With the prior approval of the commission, an insurer not licensed to transact the business of insurance in this Commonwealth may follow any of the procedures which could be done by an authorized insurer under subdivision 1 of this subsection.

4. Any insurer may take advantage of the provisions of § 38.2-1329 H or I of the Act without obtaining the prior approval of the commission. The commission, however, reserves the right to require individual filings if it deems the filings necessary in the interest of clarity, ease of administration, or the public good.

5. The state of entry of an alien insurer shall be deemed to be its state of domicile for the purpose of this chapter.

6. Any foreign insurer subject to disclosure requirements and standards adopted by statute or regulation in the jurisdiction of its domicile that are substantially similar to those contained in § 38.2-1329 of the Act, shall be exempted and excepted from registration in this Commonwealth pursuant to this section and § 38.2-1329 A of the Act; however, if requested by the commission, the insurer shall furnish to the commission a copy of the registration statement or other information filed with its state of domicile. The information shall be filed with the commission within 15 days after the commission makes its request.

7. Any insurer not otherwise exempt or excepted from § 38.2-1329 of the Act may apply for an exemption from the requirements of § 38.2-1329 of the Act by submitting a statement to the commission setting forth its reasons for being exempt.

Statutory Authority

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

Historical Notes

Derived from Regulation 14, Case No. 20159, § 6, eff. January 1, 1980; amended, Case No. INS940114, Virginia Register Volume 11, Issue 7, eff. January 1, 1995; Volume 23, Issue 2, eff. October 2, 2006; Volume 26, Issue 2, eff. September 30, 2009; Volume 31, Issue 9, eff. January 1, 2015.

14VAC5-260-70. Disclaimers and termination of registration.

A. A disclaimer of affiliation or a request for termination of registration claiming that a person does not, or will not upon the taking of some proposed action, control any other person (hereinafter referred to as the "subject") shall contain the following information:

1. The number of authorized, issued and outstanding voting securities of the subject;

2. With respect to the person whose control is denied and all affiliates of such person, the number and percentage of shares of the subject's voting securities which are held of record or known to be beneficially owned, and the number of such shares concerning which there is a right to acquire, directly or indirectly; and also information as to all transactions in any securities of the subject which were effected during the past six months by such persons;

3. All material relationships and bases for affiliation, including a description of all contracts and agreements, between the subject and the person whose control is denied and all affiliates of such person; and

4. A statement explaining why such person should not be considered to control the subject.

B. A request for termination of registration under § 38.2-1329 of the Act for lack of affiliation shall be deemed to have been granted unless the commission, within 30 days after receipt of the request and any additional information required by the commission, notifies the registrant otherwise. Thereafter, the subject shall be relieved of any registering or reporting requirements under § 38.2-1329 of the Act that may arise out of the subject's relationship with the person, unless and until the commission disallows the disclaimer.

1. The commission shall disallow the disclaimer only after giving all interested parties notice and opportunity to be heard.

2. Any disallowance shall be supported by specific findings of fact.

Statutory Authority

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

Historical Notes

Derived from Regulation 14, Case No. 20159, § 7, eff. January 1, 1980; amended, Case No. INS940114, Virginia Register Volume 11, Issue 7, eff. January 1, 1995; Volume 26, Issue 2, eff. September 30, 2009.

14VAC5-260-80. Transactions subject to prior notice filing.

A. An insurer required to give notice of a proposed transaction pursuant to § 38.2-1330 B of the Act shall furnish the required information in the format designated on Form D, as specified in the instructions of that form, which is a part of this chapter.

B. Agreements for cost-sharing services and management services shall at a minimum and as applicable:

1. Identify the person providing services and the nature of such services;

2. Set forth the methods to allocate costs;

3. Require timely settlement, not less frequently than on a quarterly basis, and compliance with the requirements in the National Association of Insurance Commissioners Accounting Practices and Procedures Manual, As of March 2014;

4. Prohibit advancement of funds by the insurer to the affiliate except to pay for services defined in the agreement;

5. State that the insurer will maintain oversight for functions provided to the insurer by the affiliate and that the insurer will monitor services annually for quality assurance;

6. Define books and records of the insurer to include all books and records developed or maintained under or related to the agreement;

7. Specify that all books and records of the insurer are and remain the property of the insurer and are subject to control of the insurer;

8. State that all funds and invested assets of the insurer are the exclusive property of the insurer, held for the benefit of the insurer, and subject to the control of the insurer;

9. Include standards for termination of the agreement with and without cause;

10. Include provisions for indemnification of the insurer in the event of gross negligence or willful misconduct on the part of the affiliate providing the services;

11. Specify that, if the insurer is placed in receivership or seized by the commission under the Rehabilitation and Liquidation of Insurers statute (Chapter 15 (§ 38.2-1500 et seq.) of Title 38.2 of the Code of Virginia):

a. All of the rights of the insurer under the agreement extend to the receiver or commission; and

b. All books and records will immediately be made available to the receiver or the commission, and shall be turned over to the receiver or commission immediately upon the receiver or the commission's request;

12. Specify that the affiliate has no automatic right to terminate the agreement if the insurer is placed in receivership pursuant to Chapter 15 of Title 38.2 of the Code of Virginia; and

13. Specify that the affiliate will continue to maintain any systems, programs, or other infrastructure notwithstanding a seizure by the commission under Chapter 15 of Title 38.2 of the Code of Virginia, and will make them available to the receiver for so long as the affiliate continues to receive timely payment for services rendered.

C. The approval of any material transactions pursuant to § 38.2-1330 B of the Act shall be deemed an amendment to an insurer's registration statement under § 38.2-1329 C 6 of the Act without further filing other than written confirmation under oath or affirmation by registrant that the transaction as approved by the commission has been consummated. The confirmation shall be filed within two business days following consummation of the approved transaction.

Statutory Authority

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

Historical Notes

Derived from Regulation 14, Case No. 20159, § 8, eff. January 1, 1980; amended, Virginia Register Volume 11, Issue 7, eff. January 1, 1995; Volume 23, Issue 2, eff. October 2, 2006; Volume 31, Issue 9, eff. January 1, 2015.

14VAC5-260-85. Enterprise risk report.

The ultimate controlling person of an insurer required to file an enterprise risk report pursuant to § 38.2-1329 L of the Act shall furnish the required information on Form F.

Statutory Authority

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

Historical Notes

Derived from Virginia Register Volume 31, Issue 9, eff. January 1, 2015.

14VAC5-260-90. Dividends and other distributions.

A. Each registered insurer shall report to the commission as required under § 38.2-1330.1 of the Act, all dividends and other distributions to shareholders within five business days following declaration. An insurer shall not pay a dividend or other distribution until 30 days after the commission has received written notice of the declaration thereof and has not within such period disapproved such payment. The commission may approve the payment of such dividend or other distribution prior to the 30 days. Such dividends and other distributions are to be paid out of earned surplus unless the commission has provided prior written approval for such dividends or other distributions to be paid from another source. Except as provided in subsection B of this section, the report shall be filed in the format prescribed by Form G and shall include at least the following:

1. A statement stating whether the dividend or distribution is extraordinary. If the dividend or distribution is extraordinary, the insurer also shall state the date of approval, if any, obtained pursuant to § 38.2-1330.1 A of the Act, or the earliest date on which approval may be deemed;

2. Earned surplus as of the immediately preceding December 31;

3. The amount of the proposed dividend;

4. The date of declaration, date of record, and date established for payment of the dividend;

5. A statement as to whether the dividend is to be in cash or other property and, if in property, a description thereof, its cost, and its fair market value together with an explanation of the basis for valuation;

6. The amounts, dates, and form of payment of all dividends or distributions (including regular dividends but excluding distributions of the insurer's own securities) paid within the period of 12 consecutive months ending on the date fixed for payment of the proposed dividend for which approval is sought and commencing on the day after the same day of the same month in the last preceding year;

7. A brief statement as to the effect of the proposed dividend upon the insurer's surplus and the reasonableness of surplus in relation to the insurer's outstanding liabilities and the adequacy of surplus relative to the insurer's financial needs; and

8. A statement identifying any and all revaluations of assets.

B. If payment of an extraordinary dividend or distribution has been approved prior to its declaration, the insurer may comply with the requirements of § 38.2-1329 F of the Act by filing written confirmation under oath or affirmation that the extraordinary dividend or distribution, as approved by the commission, has been declared. Confirmation shall be filed within five business days following declaration.

C. An insurer may obtain prior approval of an extraordinary dividend or distribution, as required by § 38.2-1330.1 A of the Act, by filing a request for approval with the commission. The request for approval shall be filed in the format prescribed by Form G and shall include at least the following:

1. All the information required in subsection A of this section;

2. Statements of financial condition and earnings for the period intervening from the last annual statement filed with the commission and the end of the month preceding the month in which the request for dividend approval is submitted; and, if the date of payment or distribution is more than 60 days removed from the date of the most current financial statement submitted by the insurer, the insurer shall include also a pro forma statement as of the day after the distribution or payment of the dividend showing its effect and other known and reasonably projected adjustments to the financial condition and earnings of the insurer; and

3. A copy of the calculations determining that the proposed dividend is extraordinary. The work paper shall include the following information:

a. The amounts, dates, and form of payment of all dividends or distributions (including regular dividends but excluding distributions of the insurer's own securities) paid within the period of 12 consecutive months ending on the date fixed for payment of the proposed dividend for which approval is sought, and commencing on the day after the same day of the same month in the last preceding year;

b. Surplus as regards to policyholders (total capital and surplus) as of the immediately preceding December 31;

c. If the insurer is a life insurer, the net gain from operations for the 12-month period ending the immediately preceding December 31;

d. If the insurer is not a life insurer, the net income less realized capital gains for the 12-month period ending the 31st day of December next preceding and the two preceding 12-month periods; and

e. If the insurer is not a life insurer, the dividends paid to shareholders excluding distributions of the insurer's own securities in the preceding two calendar years.

4. Statements on each factor set forth in § 38.2-1330 D of the Act must be submitted in support of the request for approval of an extraordinary dividend or distribution, although these factors are not intended to be an exhaustive list. In determining the adequacy and reasonableness of an insurer's surplus no single factor is controlling. The commission, instead, will consider the net effect of all of these factors plus other factors bearing on the financial condition of the insurer. In comparing the surplus maintained by other insurers, the commission will consider the extent to which each of these factors varies from company to company and in determining the quality and liquidity of investments in subsidiaries, the commission will consider the individual subsidiary and may discount or disallow its valuation to the extent that the individual investments so warrant.

5. In addition, in order to determine the possibility of any financial effect on the insurer, the commission may request the means of funding and the purpose of the extraordinary dividend or distribution.

D. No declaration of an extraordinary dividend or distribution shall confer any rights on shareholders without the prior approval thereof pursuant to § 38.2-1330.1 D of the Act. However, an insurer may declare an extraordinary dividend or distribution which is conditioned upon the commission's approval, and the declaration shall confer no rights upon shareholders until (i) the commission has approved the payment of the dividend or distribution or (ii) the commission has not disapproved the payment within the 30-day period provided by § 38.2-1330.1 A of the Act.

Statutory Authority

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

Historical Notes

Derived from Regulation 14, Case No. 20159, § 9, eff. January 1, 1980; amended, Case No. INS940114, Virginia Register Volume 11, Issue 7, eff. January 1, 1995; Volume 23, Issue 2, eff. October 2, 2006; Volume 26, Issue 2, eff. September 30, 2009; Volume 31, Issue 9, eff. January 1, 2015.

14VAC5-260-100. Management of controlled insurers and standards for transactions with affiliates.

A. Notwithstanding the control of an authorized insurer by any person, neither the officers and directors of the insurer nor any similarly situated person to whom authority has been delegated, shall thereby be relieved of any obligation or liability to which they would otherwise be subject by law, and the insurer shall be managed so as to assure its separate operating identity consistent with the Act and Title 38.2 of the Code of Virginia.

B. Nothing herein shall preclude an authorized insurer from having or sharing a common management or cooperative or joint use of personnel, property, or services with one or more other persons under arrangements meeting the standards of subsection A of § 38.2-1330 of the Act:

1. The terms shall be fair and reasonable;

2. Charges or fees for services performed shall be reasonable;

3. Expenses incurred and payments received shall be allocated to the insurer in conformity with customary insurance accounting practices consistently applied;

4. The books, accounts, and records of each party shall disclose clearly and accurately the precise nature and details of the transactions as agreed upon in writing by the parties; and

5. The insurer's surplus to policyholders following any dividends or distributions to shareholder affiliates shall be reasonable in relation to the insurer's outstanding liabilities and adequate to its financial needs.

Statutory Authority

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

Historical Notes

Derived from Regulation 14, Case No. 20159, § 10, eff. January 1, 1980; amended, Case No. INS940114, Virginia Register Volume 11, Issue 7, eff. January 1, 1995.

14VAC5-260-110. Severability clause.

If any provision in this chapter or the application thereof to any person or circumstance is for any reason held to be invalid, the remainder of the chapter and the application of the provision to other persons or circumstances shall not be affected thereby.

Statutory Authority

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

Historical Notes

Derived from Virginia Register Volume 23, Issue 2, eff. October 2, 2006; amended, Virginia Register Volume 31, Issue 9, eff. January 1, 2015.

Forms (14VAC5-260)

Form A, Instructions for Application for Approval of Acquisition of Control of or Merger with a Domestic Insurer Pursuant to § 38.2-1323 of the Code of Virginia, and Application (rev. 1/15)

Form B, Instructions for Insurance Holding Company System Annual Registration Statement Pursuant to § 38.2-1329 of the Code of Virginia, and Statement (rev. 1/15)

Form C, Instructions for Summary of Changes to Registration Statement Pursuant to § 38.2-1329 of the Code of Virginia, and Summary (rev. 1/15)

Form D, Instructions for Prior Notice and Application for Approval of Certain Transactions Pursuant to § 38.2-1330 B of the Code of Virginia, and Notice and Application (rev. 1/15)

Form E, Instructions for Pre-Acquisition Notification Form Regarding the Potential Competitive Impact of a Proposed Merger or Acquisition by a Non-Domiciliary Insurer Doing Business in this Commonwealth or by a Domestic Insurer Pursuant to § 38.2-1323 of the Code of Virginia, and Notification (rev. 1/15)

Form F, Instructions for Enterprise Risk Report Pursuant to § 38.2-1329 L of the Code of Virginia, and Report (eff. 1/15)

Form G, Instructions for Notice of Dividends and Distributions to Shareholders Pursuant to §§ 38.2-1329 F and 38.2-1330.1 of the Code of Virginia, and Notice (rev. 1/15)

Documents Incorporated by Reference (14VAC5-260)

Accounting Practices & Procedures Manual, As of March 2014, National Association of Insurance Commissioners, 1100 Walnut Street, Suite 1500, Kansas City, MO 64106, www.naic.org



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