A. Prior written approval of the Commission shall be required for a materialtransaction between a domestic reciprocal and any of its related parties orbetween any two or more of the reciprocal's related parties when the materialtransaction occurs on or after July 1, 2004, and involves more than threepercent of the domestic reciprocal's admitted assets as reported in its mostrecent statutory statement filed with the Commission. All other materialtransactions between any such parties involving more than 0.5 percent of thedomestic reciprocal's admitted assets as reported in its most recentstatutory statement filed with the Commission shall be reported to theCommission within 15 days after the end of the month in which the transactionoccurs. In addition, all transactions shall meet the following standards:
1. The terms shall be fair and equitable;
2. Charges or fees for services performed shall be reasonable;
3. Expenses incurred and payments received shall be allocated to thereciprocal on an equitable basis in conformity with statutory insuranceaccounting practices consistently applied;
4. The books, accounts, and records of each party shall disclose clearly andaccurately the precise nature and details of the transaction; and
5. The reciprocal's surplus following any dividends or distribution to anyof the reciprocal's related parties shall be reasonable in relation to thereciprocal's outstanding liabilities and adequate to its financial needs.
B. The Commission, in reviewing a material transaction under this section,shall consider whether the material transaction complies with the standardsset forth in subsection A and also whether the transaction may adverselyaffect the interests of the subscribers or the solvency of the reciprocal.
C. Within 60 days after written notification of any transaction requiringapproval pursuant to this section, the Commission shall notify the insurer ofits approval or disapproval, and, in the event of disapproval, its reasonthereof. Failure of the Commission to act within 60 days of notification bythe insurer shall constitute approval of the transaction.
D. For the purposes of this section:
1. "Affiliate" of a specific person means a person that directly orindirectly through one or more intermediaries, owns, is owned by, or is undercommon ownership with the person specified. An affiliate relationship shallbe presumed to exist if any person, directly or indirectly, owns or holdswith the power to vote, or holds proxies representing collectively 10 percentor more of the voting securities of the person specified.
2. "Control" means the possession, directly or indirectly, of the power todirect or cause the direction of the management and policies of a person orentity, whether (i) through the ownership of voting securities, (ii) bycontract, other than a commercial contract for goods or nonmanagementservices, (iii) by contract for goods or nonmanagement services where thevolume of activity results in a reliance relationship, (iv) by commonmanagement, or (v) by any other means. Control shall be presumed to exist ifa reporting entity and its affiliates directly or indirectly, own, control,hold with the power to vote, or hold proxies representing 10 percent or moreof the voting interests of the entity.
3. "Material transaction" means a transaction, other than a claim paymentor a premium payment, that (i) affects surplus or involves an exchange ofassets or liabilities of the reciprocal, requires performance by or createsan obligation for the reciprocal, or results in transfer of the risks orrewards of ownership to or by the reciprocal and (ii) exceeds any minimumlimits set forth in subsection A of this section. Any series of transactionsaffecting, involving, or impacting the reciprocal as described in clause (i)and occurring within a 12-month period that are sufficiently similar innature as to be reasonably construed as a single transaction and that in theaggregate exceed any minimum limits set forth in subsection A of this sectionshall be deemed a material transaction.
4. "Related parties" means entities that have common interests as a resultof ownership, control, or affiliation or by contract. The related parties ofa domestic reciprocal include, but are not limited to: (i) an affiliate ofthe reciprocal; (ii) the attorney of the reciprocal; (iii) an affiliate ofthe attorney; (iv) any insurer or other reciprocal managed by the attorney ofthe reciprocal or by an affiliate of the attorney of the reciprocal; or (v)any other person who, directly or indirectly, by contract or otherwise, actson behalf of, or at the direction of, the attorney of the reciprocal or anyaffiliate of the attorney of the reciprocal.
E. Any report or other information filed pursuant to this section shall notbe open to public inspection and shall receive confidential treatment by theCommission consistent with the treatment described in § 38.2-1320.5.
F. A domestic reciprocal and its attorney shall annually file a relatedparties summary containing current information on:
1. The capital structure, general financial condition, ownership, andmanagement of the reciprocal, its attorney, and any person controlling thereciprocal;
2. The identity of "related parties";
3. The following agreements in force, continuing relationships, andtransactions currently outstanding between the reciprocal and any relatedparty or among any two or more related parties:
a. Loans, other investments or purchases, or sales or exchanges of securitiesof the reciprocal or a related party made by the reciprocal or by any one ormore related party;
b. Purchases, sales, or exchanges of assets;
c. Transactions not in the ordinary course of business;
d. Guarantees or undertakings by the reciprocal for the benefit of a relatedparty or by a related party for the benefit of the reciprocal that result inan actual contingent exposure of the reciprocal's assets to liability, otherthan insurance contracts entered into in the ordinary course of thereciprocal's business;
e. All management and service contracts and all cost-sharing arrangements;
f. Reinsurance agreements or other risk-sharing arrangements; and
g. Dividend and other distributions to any of the reciprocal's relatedparties.
Unless the Commission prescribes otherwise, information about transactionsthat are not material transactions as defined in subsection D shall not bedeemed material for purposes of this subsection and need not be disclosed inthe related parties summary required by this subsection.
G. A reciprocal shall file its initial related parties summary required bysubsection F with the Commission on or before the later of (i) August 15,2004, or (ii) 15 days after initial licensure as a reciprocal by theCommission. Thereafter, a licensed domestic reciprocal shall file a relatedparties summary on or before April 1 of each year reporting information as ofDecember 31 of the previous year.
A. Prior written approval of the Commission shall be required for a materialtransaction between a domestic reciprocal and any of its related parties orbetween any two or more of the reciprocal's related parties when the materialtransaction occurs on or after July 1, 2004, and involves more than threepercent of the domestic reciprocal's admitted assets as reported in its mostrecent statutory statement filed with the Commission. All other materialtransactions between any such parties involving more than 0.5 percent of thedomestic reciprocal's admitted assets as reported in its most recentstatutory statement filed with the Commission shall be reported to theCommission within 15 days after the end of the month in which the transactionoccurs. In addition, all transactions shall meet the following standards:
1. The terms shall be fair and equitable;
2. Charges or fees for services performed shall be reasonable;
3. Expenses incurred and payments received shall be allocated to thereciprocal on an equitable basis in conformity with statutory insuranceaccounting practices consistently applied;
4. The books, accounts, and records of each party shall disclose clearly andaccurately the precise nature and details of the transaction; and
5. The reciprocal's surplus following any dividends or distribution to anyof the reciprocal's related parties shall be reasonable in relation to thereciprocal's outstanding liabilities and adequate to its financial needs.
B. The Commission, in reviewing a material transaction under this section,shall consider whether the material transaction complies with the standardsset forth in subsection A and also whether the transaction may adverselyaffect the interests of the subscribers or the solvency of the reciprocal.
C. Within 60 days after written notification of any transaction requiringapproval pursuant to this section, the Commission shall notify the insurer ofits approval or disapproval, and, in the event of disapproval, its reasonthereof. Failure of the Commission to act within 60 days of notification bythe insurer shall constitute approval of the transaction.
D. For the purposes of this section:
1. "Affiliate" of a specific person means a person that directly orindirectly through one or more intermediaries, owns, is owned by, or is undercommon ownership with the person specified. An affiliate relationship shallbe presumed to exist if any person, directly or indirectly, owns or holdswith the power to vote, or holds proxies representing collectively 10 percentor more of the voting securities of the person specified.
2. "Control" means the possession, directly or indirectly, of the power todirect or cause the direction of the management and policies of a person orentity, whether (i) through the ownership of voting securities, (ii) bycontract, other than a commercial contract for goods or nonmanagementservices, (iii) by contract for goods or nonmanagement services where thevolume of activity results in a reliance relationship, (iv) by commonmanagement, or (v) by any other means. Control shall be presumed to exist ifa reporting entity and its affiliates directly or indirectly, own, control,hold with the power to vote, or hold proxies representing 10 percent or moreof the voting interests of the entity.
3. "Material transaction" means a transaction, other than a claim paymentor a premium payment, that (i) affects surplus or involves an exchange ofassets or liabilities of the reciprocal, requires performance by or createsan obligation for the reciprocal, or results in transfer of the risks orrewards of ownership to or by the reciprocal and (ii) exceeds any minimumlimits set forth in subsection A of this section. Any series of transactionsaffecting, involving, or impacting the reciprocal as described in clause (i)and occurring within a 12-month period that are sufficiently similar innature as to be reasonably construed as a single transaction and that in theaggregate exceed any minimum limits set forth in subsection A of this sectionshall be deemed a material transaction.
4. "Related parties" means entities that have common interests as a resultof ownership, control, or affiliation or by contract. The related parties ofa domestic reciprocal include, but are not limited to: (i) an affiliate ofthe reciprocal; (ii) the attorney of the reciprocal; (iii) an affiliate ofthe attorney; (iv) any insurer or other reciprocal managed by the attorney ofthe reciprocal or by an affiliate of the attorney of the reciprocal; or (v)any other person who, directly or indirectly, by contract or otherwise, actson behalf of, or at the direction of, the attorney of the reciprocal or anyaffiliate of the attorney of the reciprocal.
E. Any report or other information filed pursuant to this section shall notbe open to public inspection and shall receive confidential treatment by theCommission consistent with the treatment described in § 38.2-1320.5.
F. A domestic reciprocal and its attorney shall annually file a relatedparties summary containing current information on:
1. The capital structure, general financial condition, ownership, andmanagement of the reciprocal, its attorney, and any person controlling thereciprocal;
2. The identity of "related parties";
3. The following agreements in force, continuing relationships, andtransactions currently outstanding between the reciprocal and any relatedparty or among any two or more related parties:
a. Loans, other investments or purchases, or sales or exchanges of securitiesof the reciprocal or a related party made by the reciprocal or by any one ormore related party;
b. Purchases, sales, or exchanges of assets;
c. Transactions not in the ordinary course of business;
d. Guarantees or undertakings by the reciprocal for the benefit of a relatedparty or by a related party for the benefit of the reciprocal that result inan actual contingent exposure of the reciprocal's assets to liability, otherthan insurance contracts entered into in the ordinary course of thereciprocal's business;
e. All management and service contracts and all cost-sharing arrangements;
f. Reinsurance agreements or other risk-sharing arrangements; and
g. Dividend and other distributions to any of the reciprocal's relatedparties.
Unless the Commission prescribes otherwise, information about transactionsthat are not material transactions as defined in subsection D shall not bedeemed material for purposes of this subsection and need not be disclosed inthe related parties summary required by this subsection.
G. A reciprocal shall file its initial related parties summary required bysubsection F with the Commission on or before the later of (i) August 15,2004, or (ii) 15 days after initial licensure as a reciprocal by theCommission. Thereafter, a licensed domestic reciprocal shall file a relatedparties summary on or before April 1 of each year reporting information as ofDecember 31 of the previous year.
A. Prior written approval of the Commission shall be required for a materialtransaction between a domestic reciprocal and any of its related parties orbetween any two or more of the reciprocal's related parties when the materialtransaction occurs on or after July 1, 2004, and involves more than threepercent of the domestic reciprocal's admitted assets as reported in its mostrecent statutory statement filed with the Commission. All other materialtransactions between any such parties involving more than 0.5 percent of thedomestic reciprocal's admitted assets as reported in its most recentstatutory statement filed with the Commission shall be reported to theCommission within 15 days after the end of the month in which the transactionoccurs. In addition, all transactions shall meet the following standards:
1. The terms shall be fair and equitable;
2. Charges or fees for services performed shall be reasonable;
3. Expenses incurred and payments received shall be allocated to thereciprocal on an equitable basis in conformity with statutory insuranceaccounting practices consistently applied;
4. The books, accounts, and records of each party shall disclose clearly andaccurately the precise nature and details of the transaction; and
5. The reciprocal's surplus following any dividends or distribution to anyof the reciprocal's related parties shall be reasonable in relation to thereciprocal's outstanding liabilities and adequate to its financial needs.
B. The Commission, in reviewing a material transaction under this section,shall consider whether the material transaction complies with the standardsset forth in subsection A and also whether the transaction may adverselyaffect the interests of the subscribers or the solvency of the reciprocal.
C. Within 60 days after written notification of any transaction requiringapproval pursuant to this section, the Commission shall notify the insurer ofits approval or disapproval, and, in the event of disapproval, its reasonthereof. Failure of the Commission to act within 60 days of notification bythe insurer shall constitute approval of the transaction.
D. For the purposes of this section:
1. "Affiliate" of a specific person means a person that directly orindirectly through one or more intermediaries, owns, is owned by, or is undercommon ownership with the person specified. An affiliate relationship shallbe presumed to exist if any person, directly or indirectly, owns or holdswith the power to vote, or holds proxies representing collectively 10 percentor more of the voting securities of the person specified.
2. "Control" means the possession, directly or indirectly, of the power todirect or cause the direction of the management and policies of a person orentity, whether (i) through the ownership of voting securities, (ii) bycontract, other than a commercial contract for goods or nonmanagementservices, (iii) by contract for goods or nonmanagement services where thevolume of activity results in a reliance relationship, (iv) by commonmanagement, or (v) by any other means. Control shall be presumed to exist ifa reporting entity and its affiliates directly or indirectly, own, control,hold with the power to vote, or hold proxies representing 10 percent or moreof the voting interests of the entity.
3. "Material transaction" means a transaction, other than a claim paymentor a premium payment, that (i) affects surplus or involves an exchange ofassets or liabilities of the reciprocal, requires performance by or createsan obligation for the reciprocal, or results in transfer of the risks orrewards of ownership to or by the reciprocal and (ii) exceeds any minimumlimits set forth in subsection A of this section. Any series of transactionsaffecting, involving, or impacting the reciprocal as described in clause (i)and occurring within a 12-month period that are sufficiently similar innature as to be reasonably construed as a single transaction and that in theaggregate exceed any minimum limits set forth in subsection A of this sectionshall be deemed a material transaction.
4. "Related parties" means entities that have common interests as a resultof ownership, control, or affiliation or by contract. The related parties ofa domestic reciprocal include, but are not limited to: (i) an affiliate ofthe reciprocal; (ii) the attorney of the reciprocal; (iii) an affiliate ofthe attorney; (iv) any insurer or other reciprocal managed by the attorney ofthe reciprocal or by an affiliate of the attorney of the reciprocal; or (v)any other person who, directly or indirectly, by contract or otherwise, actson behalf of, or at the direction of, the attorney of the reciprocal or anyaffiliate of the attorney of the reciprocal.
E. Any report or other information filed pursuant to this section shall notbe open to public inspection and shall receive confidential treatment by theCommission consistent with the treatment described in § 38.2-1320.5.
F. A domestic reciprocal and its attorney shall annually file a relatedparties summary containing current information on:
1. The capital structure, general financial condition, ownership, andmanagement of the reciprocal, its attorney, and any person controlling thereciprocal;
2. The identity of "related parties";
3. The following agreements in force, continuing relationships, andtransactions currently outstanding between the reciprocal and any relatedparty or among any two or more related parties:
a. Loans, other investments or purchases, or sales or exchanges of securitiesof the reciprocal or a related party made by the reciprocal or by any one ormore related party;
b. Purchases, sales, or exchanges of assets;
c. Transactions not in the ordinary course of business;
d. Guarantees or undertakings by the reciprocal for the benefit of a relatedparty or by a related party for the benefit of the reciprocal that result inan actual contingent exposure of the reciprocal's assets to liability, otherthan insurance contracts entered into in the ordinary course of thereciprocal's business;
e. All management and service contracts and all cost-sharing arrangements;
f. Reinsurance agreements or other risk-sharing arrangements; and
g. Dividend and other distributions to any of the reciprocal's relatedparties.
Unless the Commission prescribes otherwise, information about transactionsthat are not material transactions as defined in subsection D shall not bedeemed material for purposes of this subsection and need not be disclosed inthe related parties summary required by this subsection.
G. A reciprocal shall file its initial related parties summary required bysubsection F with the Commission on or before the later of (i) August 15,2004, or (ii) 15 days after initial licensure as a reciprocal by theCommission. Thereafter, a licensed domestic reciprocal shall file a relatedparties summary on or before April 1 of each year reporting information as ofDecember 31 of the previous year.
