38.2-1705 - Assessments.
§ 38.2-1705. Assessments.
A. For the purpose of providing the funds necessary to carry out the powersand duties of the Association, the board of directors shall assess the memberinsurers, separately for each account, at such time and for any amounts asthe board finds necessary. Assessments shall be due not less than 30 daysafter prior written notice has been given to the member insurers. Latepayments shall accrue interest from the due date compounded quarterly, basedupon the average 90 day treasury bill rate for the most recently completedcalendar quarter as published in the Federal Reserve Bulletin and shall besubject to a minimum charge of $50.
B. There shall be two classes of assessments, as follows:
1. Class A assessments shall be authorized and called for the purpose ofmeeting administrative and legal costs and other expenses. Class Aassessments may be authorized and called whether or not related to aparticular impaired or insolvent insurer.
2. Class B assessments shall be authorized and called to the extent necessaryto carry out the powers and duties of the Association under § 38.2-1704 withregard to an impaired or an insolvent insurer.
C. 1. The amount of any Class A assessment shall be determined by the boardand may be authorized and called for current member insurers on a pro-rata ornonpro-rata basis. If pro rata, the board may provide that it be creditedagainst future Class B assessments. The total of all nonpro-rata assessmentsshall not exceed $500 per member insurer in any one calendar year. The amountof a Class B assessment shall be allocated for assessment purposes among theaccounts pursuant to an allocation formula which may be based on the premiumsor reserves of the impaired or insolvent insurer or any other standard deemedby the board in its sole discretion as being fair and reasonable under thecircumstances.
2. Class B assessments against member insurers for each account andsubaccount shall be in the proportion that the premiums received on businessin this Commonwealth by each assessed member insurer on policies or contractscovered by each account and subaccount for the three most recent calendaryears for which information is available preceding the year in which theinsurer became insolvent or, in the case of an assessment with respect to animpaired insurer, the three most recent calendar years for which informationis available preceding the year in which the insurer became impaired, bear tosuch premiums received on business in this Commonwealth for those calendaryears by all assessed member insurers.
3. Assessments for funds to meet the requirements of the Association withrespect to an impaired or insolvent insurer shall not be authorized or calleduntil necessary to implement the purposes of this chapter. Classification ofassessments under subsection B and computation of assessments under thissubsection shall be made with a reasonable degree of accuracy, recognizingthat exact determinations may not always be possible. The Association shallnotify each member insurer of its anticipated pro-rata share of an authorizedassessment not yet called within 180 days after the assessment is authorized.
D. The Association may abate or defer, in whole or in part, the assessment ofa member insurer if, in the opinion of the board, payment of the assessmentwould endanger the ability of the member insurer to fulfill its contractualobligations. In the event an assessment against a member insurer is abated ordeferred in whole or in part, the amount by which the assessment is abated ordeferred may be assessed against the other member insurers in a mannerconsistent with the basis for assessments set forth in this section. Once theconditions that caused a deferral have been removed or rectified, the memberinsurer shall pay all assessments that were deferred pursuant to a repaymentplan approved by the Association.
E. 1. a. Subject to the provisions of subdivision E 1 b, the total of allassessments authorized by the Association with respect to a member insurerfor each subaccount of the life insurance and annuity account and for theaccident and sickness insurance account shall not in any one calendar yearexceed two percent of that member insurer's average annual premiums receivedin the Commonwealth on the policies and contracts covered by the subaccountor account during the three calendar years preceding the year in which theinsurer became an impaired or insolvent insurer.
b. If two or more assessments are authorized in one calendar year withrespect to insurers that become impaired or insolvent in different calendaryears, the average annual premiums for purposes of the aggregate assessmentpercentage limitation referenced in subdivision E 1 a shall be equal andlimited to the higher of the three-year average annual premiums for theapplicable subaccount or account as calculated pursuant to this section.
c. If the maximum assessment, together with the other assets of theAssociation in an account, does not provide in one year in that account anamount sufficient to carry out the responsibilities of the Association, thenecessary additional funds shall be assessed as soon thereafter as permittedby this chapter.
2. The board may provide in the plan of operation a method of allocatingfunds among claims, whether relating to one or more impaired or insolventinsurers, when the maximum assessment will be insufficient to coveranticipated claims.
3. If the maximum assessment for a subaccount of the life and annuity accountin one year does not provide an amount sufficient to carry out theresponsibilities of the Association, then pursuant to subdivision C 2, theboard shall access the other subaccounts of the life and annuity account forthe necessary additional amount, subject to the maximum stated in subdivisionE 1.
F. The board, by an equitable method as established in the plan of operation,may refund to member insurers, in proportion to the contribution of eachinsurer to that account, the amount by which the assets of the account exceedthe amount the board finds is necessary to carry out during the coming yearthe obligations of the Association with regard to that account, includingassets accruing from assignment, subrogation, net realized gains and incomefrom investments. A reasonable amount may be retained in any account toprovide funds for the continuing expenses of the Association and for futurelosses and claims.
G. It shall be proper for any member insurer, in determining its premiumrates and policy owner dividends as to any kind of insurance within the scopeof this chapter, to consider the amount reasonably necessary to meet itsassessment obligations under this chapter.
H. The Association shall issue to each insurer paying an assessment underthis chapter, other than a Class A assessment, a certificate of contribution,in a form prescribed by the Commission, for the amount of the assessment sopaid excluding interest penalties. All outstanding certificates shall be ofequal dignity and priority without reference to amounts or dates of issue. Acertificate of contribution may be shown by the insurer in its financialstatement as an asset in such form and for such amount, if any, and period oftime as the Commission may approve.
I. 1. A member insurer that wishes to protest all or part of an assessmentshall pay when due the full amount of the assessment as set forth in thenotice provided by the Association. The payment shall be available to meetAssociation obligations during the pendency of the protest or any subsequentappeal. Payment shall be accompanied by a statement in writing that thepayment is made under protest and setting forth a brief statement of thegrounds for the protest.
2. Within 60 days following the payment of an assessment under protest by amember insurer, the Association shall notify the member insurer in writing ofits determination with respect to the protest unless the Association notifiesthe member insurer that additional time is required to resolve the issuesraised by the protest.
3. Within 30 days after a final decision has been made, the Association shallnotify the protesting member insurer in writing of that final decision.Within 60 days of receipt of notice of the final decision, the protestingmember insurer may appeal that final action to the Commission.
4. In the alternative to rendering a final decision with respect to a protestbased on a question regarding the assessment base, the Association may referthe protest to the Commission for a final decision, with or without arecommendation from the Association.
5. If the protest or appeal on the assessment is upheld, the amount paid inerror or excess shall be returned to the member company. Interest on a refunddue a protesting member shall be paid at the rate actually earned by theAssociation.
J. The Association may request information of member insurers in order to aidin the exercise of its power under this section and member insurers shallpromptly comply with a request.
(1976, c. 330, § 38.1-482.23; 1980, c. 186; 1986, c. 562; 1992, c. 299; 2010,c. 510.)