§ 38.2-1331. Commission approval required for certain transactions
A. Prior written approval of the Commission shall be required for:
1. Any material transaction between a domestic insurer and any of its affiliates involving (i) more than either three percent of the insurer's admitted assets or twenty-five percent of the insurer's surplus to policyholders, whichever is less, as of the immediately preceding December 31 and/or (ii) any reinsurance treaty or risk-sharing arrangement, or modifications thereto, in which the reinsurance premium or anticipated change in the insurer's liabilities equals or exceeds five percent of the insurer's surplus to policyholders reported on the immediately preceding December 31; and/or
2. Any investment in affiliated companies if on the date of investment, the sum of the insurer's investments in affiliated companies exceeds or will exceed one or more of the following: fifty percent of the surplus to policyholders reported on the immediately preceding December 31, ten percent of admitted assets reported on the immediately preceding December 31, or fifty percent of the surplus to policyholders at the time application is made to the Commission for approval of the transaction.
For the purpose of this section, an insurer's investment in affiliated companies is the sum of (i) the assets held by the insurer that represent securities issued by or, if not in security form, equity or debt interests in companies of the affiliate system; (ii) loans or extensions of credit to any person who is not an affiliate, where the insurer makes such loans or extensions of credit with the agreement or understanding that the proceeds of such transactions, in whole or substantial part, are to be used to make loans or extensions of credit to, to purchase assets of, or to make investments in, any affiliate of the insurer making such loans or such extensions of credit; (iii) the assets of the insurer that are pledged on behalf of companies in the holding company system; and (iv) the aggregate guarantees for loans or extensions of credit made to affiliates which result in an actual contingent exposure of the insurer's assets to liability. To the extent not already provided in this paragraph, the sum shall include for all affiliated companies other than domestic and foreign insurance company subsidiaries and health maintenance organization subsidiaries (i) total net moneys or other considerations expended and obligations assumed in the acquisition or formation of a subsidiary, including all organizational expenses and contributions to capital and surplus of such subsidiary whether or not represented by the purchase of capital stock or issuance of other securities and (ii) all amounts expended in acquiring additional common stock, preferred stock, debt obligations, and other securities and all contributions to the capital or surplus of a subsidiary subsequent to its acquisition or formation.
For the purposes of this section, a "transaction between a domestic insurer and any of its affiliates" includes any transaction between a domestic insurer and a nonaffiliate if such transaction involves (i) any loan or extension of credit where the insurer 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 insurer or (ii) a reinsurance agreement or risk-sharing arrangement, or modifications thereto, which requires as consideration the transfer of assets from an insurer to a nonaffiliate, if an agreement or understanding exists between the insurer and the nonaffiliate that any portion of such assets will be transferred to one or more affiliates of the insurer.
Failure of the Commission to act within sixty days after notification by the insurer 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 material transaction under this section, shall consider whether the material transaction complies with the standards set forth in § 38.2-1330 and whether it may adversely affect the interest of policyholders. The Commission shall set forth the specific reasons for the disapproval of any material transactions.
D. The approval of any material transaction under this section shall be deemed an amendment under subsection E of § 38.2-1329 to an insurer's registration statement without further filing.
E. This section shall not apply to a material transaction that is a dividend or distribution.
(1977, c. 414, § 38.1-178.3:1; 1986, c. 562; 1989, c. 606; 1992, c. 588; 1993, c. 158; 1994, c. 308; 2000, c. 187.)
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