Virginia Life, Accident, & Sickness Insurance Guaranty Association

Contact Information

Virginia Life, Accident, & Sickness Insurance Guaranty Association
c/o APM Management Services, Inc.
1503 Santa Rosa Road, Suite 101
Henrico, VA 23229-5105
(p) 804.282.2240 (f) 804.282.1816
Association Web site: http://www.valifega.org
State Insurance Department: http://www.scc.virginia.gov/boi/

Law Summaries Report

[ Current as of January 01, 2020 ] ]

Coverages

Covered Contracts

§38.2-1700.C. This chapter shall: 1. Provide coverage to the persons specified in subsection B for policies or contracts of direct, nongroup life insurance, accident and sickness insurance, which for the purposes of this chapter includes health maintenance organization subscriber contracts and certificates, or annuities, and supplemental contracts to any of these, for certificates under direct group policies and contracts, and for unallocated annuity contracts issued by member insurers, in each case except as limited by this chapter. Annuity contracts and certificates under group annuity contracts include guaranteed investment contracts, deposit administration contracts, unallocated funding agreements, allocated funding agreements, structured settlement annuities, and any immediate or deferred annuity contracts. This chapter shall apply also to dental benefit contracts entered into with a dental plan organization as provided in Chapter 61 (§ 38.2-6100 et seq.).

Non-Covered Contracts

§38.2-1700.C.2. Except as otherwise provided in subdivision 3, not provide coverage for: a. A portion of a policy or contract not guaranteed by a member insurer or under which the risk is borne by the policy or contract owner; b. A policy or contract of reinsurance, unless assumption certificates have been issued pursuant to the reinsurance policy or contract; c. A portion of a policy or contract to the extent that the rate of interest on which it is based, or the interest rate, crediting rate, or similar factor determined by use of an index or other external reference stated in the policy or contract employed in calculating returns or changes in value: (1) Averaged over the period of four years prior to the date on which the member insurer becomes an impaired or insolvent insurer under this chapter, whichever is earlier, exceeds the rate of interest determined by subtracting two percentage points from Moody's Corporate Bond Yield Average averaged for that same four-year period or for such lesser period if the policy or contract was issued less than four years before the member insurer becomes an impaired or insolvent insurer under this chapter, whichever is earlier; and (2) On and after the date on which the member insurer becomes an impaired or insolvent insurer under this chapter, whichever is earlier, exceeds the rate of interest determined by subtracting three percentage points from Moody's Corporate Bond Yield Average as most recently available; d. A portion of a policy or contract issued to a plan or program of an employer, association, or other person to provide life, health, or annuity benefits to its employees, members, or others, to the extent that the plan or program is self-funded or uninsured, including but not limited to benefits payable by an employer, association, or other person under: (1) A multiple employer welfare arrangement as defined in 29 U.S.C. § 1144; (2) A minimum premium group insurance plan; (3) A stop-loss agreement described in subsection B of § 38.2-109; or (4) An administrative services only contract; e. A portion of a policy or contract to the extent that it provides for: (1) Dividends or experience rating credits; (2) Voting rights; or (3) Payment of any fees or allowances to any person, including the policy or contract owner, in connection with the service to or administration of the policy or contract; f. A policy or contract issued in the Commonwealth by a member insurer at a time when its license to issue the policy or contract in the Commonwealth had been suspended, revoked, not renewed, or voluntarily withdrawn; g. An unallocated annuity contract issued to or in connection with a benefit plan protected under the federal Pension Benefit Guaranty Corporation, regardless of whether the federal Pension Benefit Guaranty Corporation has yet become liable to make any payments with respect to the benefit plan; h. A portion of an unallocated annuity contract that is not issued to or in connection with a specific employee, union, or association of natural persons benefit plan; i. A portion of a policy or contract to the extent that the assessments required by § 38.2-1705 with respect to the policy or contract are preempted by federal or state law; j. An obligation that does not arise under the express written terms of the policy or contract issued by the member insurer to the enrollee, certificate holder, contract owner, or policy owner, including: (1) Claims based on marketing materials; (2) Claims based on side letters, riders, or other documents that were issued by the member insurer without meeting applicable policy or contract form filing or approval requirements; (3) Misrepresentations of or regarding policy or contract benefits; (4) Extra-contractual claims; or (5) A claim for penalties or consequential or incidental damages; k. A contractual agreement that establishes the member insurer's obligations to provide a book value accounting guaranty for defined contribution benefit plan participants by reference to a portfolio of assets that is owned by the benefit plan or its trustee, which in each case is not an affiliate of the member insurer; l. A portion of a policy or contract to the extent it provides for interest or other changes in value to be determined by the use of an index or other external reference stated in the policy or contract, but which have not been credited to the policy or contract, or as to which the policy or contract owner's rights are subject to forfeiture, as of the date the member insurer becomes an impaired or insolvent insurer under this chapter, whichever is earlier. If a policy's or contract's interest or changes in value are credited less frequently than annually, then for purposes of determining the values that have been credited and are not subject to forfeiture under this subdivision, the interest or change in value determined by using the procedures defined in the policy or contract will be credited as if the contractual date of crediting interest or changing values was the date of impairment or insolvency, whichever is earlier, and will not be subject to forfeiture; m. A policy or contract providing any hospital, medical, prescription drug, or other health care benefits pursuant to Part C or Part D of Subchapter XVIII, Chapter 7 of Title 42 of the United States Code (known as Medicare Parts C and D); Subchapter XIX, Chapter 7 of Title 42 of the United States Code (known as Medicaid); § 32.1-352 (known as FAMIS); or any regulations issued pursuant thereto; or n. A charitable gift annuity as defined in § 38.2-106.1.

Non-Resident Coverage

§38.2-1700.B.2.b. Yes, covers non residents if (i) the member insurer that issued the policies or contracts is domiciled in the Commonwealth, (ii) the states in which the persons reside have associations similar to the Association, and (iii) the persons are not eligible for coverage by an association in any other state due to the fact that the insurer or health maintenance organization was not licensed in the state at the time specified in the state's guaranty association law.

Benefit Limits

§38.2-1700.D.The benefits that the Association may become obligated to cover shall in no event exceed the lesser of: 1. The contractual obligations for which the insurer is liable or would have been liable if it were not an impaired or insolvent insurer; or 2. With respect to: a. One life, regardless of the number of policies or contracts: (1) $ 300,000 in life insurance death benefits, but not more than $ 100,000 in net cash surrender and net cash withdrawal values for life insurance; (2) For accident and sickness insurance benefits, (i) $ 100,000 for coverage not defined as disability income insurance, health benefit plans, or long-term care insurance including any net cash surrender and net cash withdrawal values; (ii) $ 300,000 for disability income insurance and $ 300,000 for long-term care insurance; and (iii) $ 500,000 for health benefit plans; and (3) $ 250,000 in the present value of annuity benefits, including net cash surrender and net cash withdrawal values; b. Each individual participating in a benefit plan established under Section 401, 403(b) or 457 of the U.S. Internal Revenue Code who (i) selected an investment option that includes investment in unallocated annuity contracts and (ii) is covered by such an unallocated annuity contract, including the beneficiaries of each such individual if deceased, in the aggregate, $ 250,000 in present value of annuity benefits, including net cash surrender and net cash withdrawal values; c. Each payee of a structured settlement annuity (or beneficiary or beneficiaries of the payee if deceased), $ 250,000 in present value annuity benefits, in the aggregate, including net cash surrender and net cash withdrawal values, if any; and d. One plan sponsor whose plans own directly or in trust one or more unallocated annuity contracts part or all of any of which is not included in subdivision 2 b, $ 5 million in benefits, irrespective of the number of contracts with respect to the plan sponsor. However, in the case where one or more unallocated annuity contracts are covered contracts under this chapter and are owned by a trust or other entity for the benefit or two or more plan sponsors, coverage shall be afforded by the Association if the largest interest in the trust or entity owning the contract or contracts is held by a plan sponsor whose principal place of business is in the Commonwealth and in no event shall the Association be obligated to cover more than $ 5 million in benefits with respect to all such unallocated contracts. e. In no event shall the Association be obligated to cover (i) more than an aggregate of $ 350,000 in benefits with respect to any one life under subdivisions D 2 a, b, and c except with respect to benefits for health benefit plans under subdivision D 2 a (2), in which case the aggregate liability of the Association shall not exceed $ 500,000 with respect to any one individual, or (ii) with respect to one owner of multiple nongroup policies of life insurance, whether the policy or contract owner is an individual, firm, corporation, or other person, and whether the persons insured are officers, managers, employees, or other persons, more than $ 5 million in benefits, regardless of the number of policies and contracts held by the owner.

Triggers

Discretionary Triggers

§38.2-1704.A. If the member insurer is an impaired insurer. Amended effective 7/1/2010.

Mandatory Triggers

§38.2-1704.B. If the member insurer is an insolvent insurer. Amended effective 7/1/2010.

Foreign Triggers

No separate provision.

"Impaired Insurer"

§38.2-1701. A member insurer considered by the Commission to be potentially unable to fulfill its contractual obligations. Amended effective 7/1/2010.

"Insolvent Insurer"

§38.2-1701. A member insurer that is placed under an order of liquidation by a court of competent jurisdiction with a finding of insolvency. Amended effective 7/1/2010.

"Member Insurer"

§38.2-1701. "Member insurer" means an insurer or health maintenance organization licensed to transact in the Commonwealth any class of insurance or health maintenance organization business to which this chapter applies under § 38.2-1700, including an insurer or health maintenance organization whose license to transact the business of insurance in the Commonwealth has been suspended, revoked, not renewed, or voluntarily withdrawn, but does not include cooperative nonprofit life benefit companies, mutual assessment life, accident and sickness insurance companies, burial societies, fraternal benefit societies, dental and optometric services plans, and health services plans not subject to this chapter pursuant to § 38.2-4213.

Account Structure

§38.2-1702. A. For purposes of administration and assessment, the Association shall maintain two accounts: (i) the accident and sickness insurance account; and (ii) the life insurance and annuity account, which includes the following subaccounts: (a) the life insurance account, (b) the annuity account, which shall include unallocated annuity contracts covered under subdivision D 2 b of § 38.2-1700, but shall otherwise exclude unallocated annuities, and (c) the unallocated annuity account, which shall consist of contracts covered under subdivisions D 2 d, e, and f of § 38.2-1700, but shall otherwise exclude unallocated annuities.

Assessments

Assessment Limits

§38.2-1705.E. 1. a. Subject to the provisions of subdivision E 1 b, the total of all assessments authorized by the Association with respect to a member insurer for each subaccount of the life insurance and annuity account and for the accident and sickness account shall not in any one calendar year exceed two percent of that member insurer's average annual premiums received in the Commonwealth on the policies and contracts covered by the subaccount or account during the three calendar years preceding the year in which the member insurer became an impaired or insolvent insurer.

Assessment Classes

§38.2-1705.B. There shall be two classes of assessments, as follows: 1. Class A assessments shall be authorized and called for the purpose of meeting administrative and legal costs and other expenses. Class A assessments may be authorized and called whether or not related to a particular impaired or insolvent insurer. 2. Class B assessments shall be authorized and called to the extent necessary to carry out the powers and duties of the Association under § 38.2-1704 with regard to an impaired or an insolvent insurer.

Interest Rate Adjustments

§38.2-1700 C.2.c. Guaranty Association excludes from coverage: A portion of a policy or contract to the extent that the rate of interest on which it is based, or the interest rate, crediting rate, or similar factor determined by use of an index or other external reference stated in the policy or contract employed in calculating returns or changes in value: (1) Averaged over the period of four years prior to the date on which the member insurer becomes an impaired or insolvent insurer under this chapter, whichever is earlier, exceeds the rate of interest determined by subtracting two percentage points from Moody's Corporate Bond Yield Average averaged for that same four-year period or for such lesser period if the policy or contract was issued less than four years before the member insurer becomes an impaired or insolvent insurer under this chapter, whichever is earlier; and (2) On and after the date on which the member insurer becomes an impaired or insolvent insurer under this chapter, whichever is earlier, exceeds the rate of interest determined by subtracting three percentage points from Moody's Corporate Bond Yield Average as most recently available;

Tax Offsets

§38.2-1709. Yes. A member may show a certificate of contribution as an asset, in the form approved by the Commission, at the original face amount for the calendar year of issuance. Such amount may be amortized as follows: 1. Certificates of contribution issued before Jan. 1, 1998 shall be amortized in each succeeding calendar year through December 31, 1997, at an amount not to exceed 0.05 of 1% of the direct gross premium income for the classes of insurance in the account for which the member is assessed. If the amount of the certificate has not been fully amortized by the contributing insurer by December 31, 1997, the unamortized balance of the certificate amount shall be amortized at the option of the contributing insurer, either (i) in the same manner as the certificate was amortized prior to Jan. 1, 1998; however, if not amortized in full prior to calendar year 2010, the unamortized balance of the certificate shall be amortized in full during the calendar year 2010, or (ii) over the 10 successive calendar years commencing Jan. 1, 1998, in amounts each equal to 10% of such unamortized balance. A contributing insurer whose certificate has not been fully amortized by December 31, 1997, shall notify the Commission in writing of the amortization schedule option it has selected on or before March 1, 1998. If a contributing insurer fails to notify the Commission by such date, the insurer shall be deemed to have selected to continue amortization under the original schedule.

Definition of Premium

§ 38.2-1701 "Premiums" means amounts or considerations, by whatever name called, received on covered policies or contracts, less any returned premiums, considerations, and deposits and less dividends and experience credits. "Premiums" does not include amounts or considerations received for policies or contracts or for the portions of policies or contracts for which coverage is not provided under subsection C of § 38.2-1700 except that assessable premium shall not be reduced on account of subdivision C 2 of § 38.2-1700 relating to interest limitations and subdivision D 2 of § 38.2-1700 relating to limitations with respect to one individual, one participant, and one policy or contract owner. "Premiums" shall not include (i) premiums for coverage in excess of $ 5 million on an unallocated annuity contract covered under subdivisions D 2 d, e, and f of § 38.2-1700 or (ii) with respect to multiple nongroup policies of life insurance owned by one owner, whether the policy or contract owner is an individual, firm, corporation, or other person, and whether the persons insured are officers, managers, employees or other persons, premiums for coverage in excess of $ 5 million with respect to these policies or contracts, regardless of the number of policies or contracts held by the owner.

Advertising Prohibition

§ 38.2-1715. Prohibited advertisement of Association coverage in insurance sales; notice to policy owners A. No person, including a member insurer, agent, or affiliate of a member insurer, shall make, publish, disseminate, circulate, or place before the public, or cause, directly or indirectly, to be made, published, disseminated, circulated or placed before the public, in any newspaper, magazine, or other publication, or in the form of a notice, circular, pamphlet, letter, or poster, or over any radio station or television station, or in any other way, any advertisement, announcement, or statement, written or oral, that uses the existence of the Association of the Commonwealth for the purpose of sales, solicitation, or inducement to purchase any form of insurance or other coverage covered by this chapter. This subsection shall not apply to the Association or any other entity that does not sell or solicit insurance or coverage by a health maintenance organization.

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