Virginia Law

Article 2. Holding Companies.

As used in this article:

"Affiliate" of a specific person or a person "affiliated" with a specific person means a person that directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control with the person specified.

"Control," including the terms "controlling," "controlled by" and "under common control with," means direct or indirect possession of the power to direct or cause the direction of the management and policies of a person through (i) the ownership of voting securities, (ii) by contract other than a commercial contract for goods or nonmanagement services, or (iii) otherwise, unless the power is the result of an official position with or corporate office held by the person. Control shall be presumed to exist if any person directly or indirectly owns, controls, holds with the power to vote, or holds proxies representing collectively ten percent or more of the voting securities of any other person. This presumption may be rebutted by a showing made in the manner provided by subsection H of § 38.2-4231 that control does not exist. After giving all interested persons notice and opportunity to be heard and making specific findings to support its determination, the Commission may determine that control exists, notwithstanding the absence of a presumption to that effect.

"Holding company system" means two or more affiliated persons, one or more of which is a nonstock corporation licensed under this chapter.

"Surplus" means the excess of total admitted assets over the liabilities of a nonstock corporation licensed under this chapter, and shall include any contingency reserves maintained pursuant to § 38.2-4208 and any voluntary reserves.

"Transaction" means any (i) sale, purchase, exchange, renting or leasing arrangement, loan or extension of credit, arrangement for the assumption, extension or renewal of any obligation or liability, guaranty or surety arrangement, or investment; (ii) dividend or distribution of cash or property; (iii) reinsurance treaty or risk-sharing arrangement; (iv) management contract, service contract or cost-sharing arrangement; or (v) other arrangement, relationship or dealings that the Commission by order, rule or regulation determines to be a transaction contemplated by this article. A transaction shall not include any transaction which the Commission by rule or regulation exempts as not being material for the purpose of §§ 38.2-4231 and 38.2-4233. Any series of transactions occurring within a twelve-month period that are sufficiently similar in nature as to be reasonably construed as a single transaction and that in the aggregate exceed any minimum set forth in §§ 38.2-4231 and 38.2-4233 shall be deemed a transaction subject to the provisions of such sections.

"Voting security" means any security that enables the owner to vote for the election of directors. Voting security includes any security convertible into or evidencing a right to acquire a voting security.

1989, c. 606; 1992, c. 588.

A. Each nonstock corporation licensed under this chapter that is a member of a holding company system shall register with the Commission. Any nonstock corporation subject to registration under this section shall register within fifteen days after it becomes subject to registration, unless the Commission extends the time for registration for good cause shown.

B. 1. This section shall not apply to:

a. Any foreign nonstock corporation 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 this section;

b. Any nonstock corporation licensed under this chapter, information, or transaction if and to the extent that the Commission exempts the same from this section; or

c. Any transaction involving less than one-sixth of one percent of admitted assets or one percent of surplus as of the immediately preceding December 31, whichever is less.

2. Any nonstock corporation licensed under this chapter that is a member of a holding company system but not subject to registration under this section may be required by the Commission to furnish a copy of the registration statement, or other information filed by the nonstock corporation, with the regulatory authority of its domiciliary jurisdiction.

C. Each nonstock corporation subject to registration under this section shall file a registration statement on a form provided by the Commission. Such statement shall contain current information on:

1. The capital structure, general financial condition, ownership, and management of the nonstock corporation and any person controlling the nonstock corporation;

2. The identity of every member of the insurance holding company system;

3. The following agreements in force, continuing relationships and transactions currently outstanding between the nonstock corporation and its affiliates:

a. Loans or extensions of credit, other investments, or purchases, sales or exchanges of securities of the affiliates by the nonstock corporation or of the nonstock corporation by its affiliates;

b. Purchases, sales, renting or leasing arrangements, or exchanges of assets;

c. Guarantees or undertakings for the benefit of an affiliate that result in an actual contingent exposure of the nonstock corporation's assets to liability;

d. All management and service contracts and all cost-sharing arrangements;

e. Reinsurance agreements or other risk-sharing arrangements;

f. Transactions not in the ordinary course of business; and

4. Other matters relating to transactions between a registered nonstock corporation and any affiliates which may be included from time to time in any registration forms adopted or approved by the Commission.

D. Each registered nonstock corporation shall report all additional transactions with affiliates and any changes in previously reported transactions with affiliates on amendment forms provided by the Commission. Each nonstock corporation shall make its report within fifteen days after the end of the month in which it learns of each additional transaction or change in a transaction. Each registered nonstock corporation shall also keep current the information required by subsection C of this section by filing an amendment to its registration statement within 120 days after the end of each fiscal year of the ultimate controlling person of the holding company system.

E. The Commission shall terminate the registration of any nonstock corporation that demonstrates it no longer is a member of a holding company system.

F. The Commission may require or allow two or more affiliated nonstock corporations subject to registration under this section to file a consolidated registration statement or consolidated reports amending their consolidated registration statement or their individual registration statements.

G. The Commission may allow a nonstock corporation which is licensed under this chapter and which is part of a holding company system, to register on behalf of any affiliated nonstock corporation required to register under subsection A of this section and to file all information and material required to be filed under this section.

H. Any person may file with the Commission a disclaimer of affiliation with any licensed nonstock corporation. The disclaimer shall fully disclose all relationships and bases for affiliation between the person and the nonstock corporation as well as the basis for disclaiming the affiliation. After a disclaimer has been filed, the nonstock corporation shall be relieved of any registration or reporting requirements under this section that may arise out of the nonstock corporation's relationship with the person unless and until the Commission disallows the disclaimer. The Commission shall disallow the disclaimer only after giving all interested parties notice and opportunity to be heard. Any disallowance shall be supported by specific findings of fact.

1989, c. 606; 1992, c. 588.

A. Transactions by nonstock corporations licensed under this chapter with their affiliates shall be subject to the following standards:

1. The terms shall be fair and reasonable;

2. Charges and fees for service 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;

5. The nonstock corporation's surplus following any transaction with affiliates involving more than one-sixth of one percent of admitted assets or one percent of surplus as of the immediately preceding December 31, whichever is less, shall be reasonable in relation to the nonstock corporation's outstanding liabilities and adequate to its financial needs; and

6. The transaction is in the best interest of the subscribers.

B. For purposes of this article, in determining whether a nonstock corporation's surplus is reasonable in relation to the nonstock corporation's outstanding liabilities and adequate to its financial needs, the following factors, among others, shall be considered:

1. The size of the nonstock corporation as measured by its assets, surplus, reserves, business in force, and other appropriate criteria;

2. The nonstock corporation's method of operation and manner of doing business;

3. The nature and extent of the nonstock corporation's risk-sharing arrangements;

4. The quality, diversification, and liquidity of the nonstock corporation's investment portfolio;

5. The recent past and projected future trend in the size of the nonstock corporation's surplus;

6. The adequacy of the nonstock corporation's reserves; and

7. The quality and liquidity of investments in subsidiaries. The Commission in its judgment may classify any investment as a nonadmitted asset for the purpose of determining the adequacy of surplus.

1989, c. 606; 1992, c. 588.

A. Prior written approval of the Commission shall be required for any transaction between a nonstock corporation licensed under this chapter and any of its affiliates, if such transaction involves more than three-fourths of one percent of admitted assets or five percent of surplus as of the immediately preceding December 31, whichever is less. Failure of the Commission to act within sixty days after notification by the nonstock corporation shall constitute approval of the transaction.

B. Nothing contained in this section shall authorize or permit any transaction that would be otherwise contrary to law.

C. The Commission, in reviewing any transaction under this section, shall consider whether the transaction complies with the standards set forth in § 38.2-4232. The Commission shall set forth the specific reasons for the disapproval of any transaction.

D. The approval of any transaction under this section shall be deemed an amendment under subsection D of § 38.2-4231 to a nonstock corporation's registration statement without further filing.

E. The Commission shall have continuing oversight over the terms and conditions of all continuing transactions by a nonstock corporation licensed under this chapter with its affiliates. The Commission may prohibit the continuation of any continuing transaction if the Commission finds that, because of changed circumstances or material information unknown to the Commission at the time of the approval of the transaction, the transaction does not comply with the standards set forth in § 38.2-4232.

F. Existing transactions entered into between a nonstock corporation and its affiliates prior to July 1, 1989, shall be filed with the Commission for approval no later than September 1, 1989, if such transaction involves more than three-fourths of one percent of admitted assets or five percent of surplus as of the immediately preceding December 31, whichever is less. Failure of the Commission to act within 120 days after such filings shall constitute approval of such transactions. The Commission shall not disapprove any transaction entered into prior to July 1, 1989, if such transaction was lawful when entered into, but if any such transaction is found not to meet the standards of this section, such transaction shall not be renewed or extended except upon terms approved by the Commission.

G. Any nonstock corporation aggrieved by a disapproval or withdrawal of approval under this section may proceed under the provisions of § 38.2-222.

H. For the purposes of this section, a "transaction between a nonstock corporation licensed under this chapter and any of its affiliates" includes any transaction between a nonstock corporation licensed under this chapter and a nonaffiliate if such transaction involves (i) any loan or extension of credit where the licensee makes such loan or extension of credit with the agreement or understanding that the proceeds of such transaction, in whole or substantial part, are to be used to make any loan or extension of credit to, to purchase assets of, or to make investments in any affiliate of the licensee or (ii) any reinsurance agreement or risk-sharing arrangement, or modifications thereto, which requires as consideration the transfer of assets from a licensee to a nonaffiliate, if an agreement or understanding exists between the licensee and the nonaffiliate that any portion of such assets will be transferred to one or more affiliates of the licensee.

1989, c. 606; 1993, c. 158.

A. In addition to the powers the Commission has under Article 4 of Chapter 13 (§ 38.2-1317 et seq.) of this title, the Commission shall also have the power to order any nonstock corporation registered under § 38.2-4231 to produce any records, books, or other information papers in the possession of the nonstock corporation or its affiliates necessary to determine the financial condition or legality of conduct of the nonstock corporation. If the nonstock corporation fails to comply with the order, the Commission shall have the power to examine its affiliates to obtain the information.

B. The Commission shall exercise its power under subsection A of this section only if the examination of the nonstock corporation under Article 4 of Chapter 13 (§ 38.2-1317 et seq.) of this title is inadequate or the interests of the subscribers of the nonstock corporation may be adversely affected.

C. The Commission may retain at the expense of the registered nonstock corporation any attorneys, actuaries, accountants and other experts reasonably necessary to assist in the conduct of the examination under subsection A of this section. Any persons so retained shall be under the direction and control of the Commission and shall act in a purely advisory capacity.

D. Each nonstock corporation producing books and papers for examination records pursuant to subsection A of this section shall be liable for and shall pay the expense of the examination in accordance with the provisions of Article 4 of Chapter 13 (§ 38.2-1317 et seq.) of this title.

1989, c. 606; 1992, c. 588.

All information, documents and copies obtained by or disclosed to the Commission or any other person in the course of an examination or investigation made pursuant to § 38.2-4234, and all information reported pursuant to § 38.2-4231, shall be confidential, shall not be subject to subpoena, and shall not be made public by the Commission or any other person without the prior written consent of the nonstock corporation to which they pertain. However, this provision shall not apply to information disclosed to (i) a regulatory official of any state or country; (ii) the National Association of Insurance Commissioners, its affiliate or its subsidiary; or (iii) a law-enforcement authority of any state or country. Any such disclosure by the Commission shall not constitute a waiver of confidentiality of such information. After the licensed nonstock corporation and its affiliates have been given notice and opportunity to be heard, the Commission may publish all or any part of the information and materials referred to in this section in any manner it considers appropriate, if it determines that the interests of subscribers or the public will be served by the publication.

1989, c. 606; 2001, c. 519.