                                 CODE OF VIRGINIA

PURPOSE AND APPLICABILITY OF CHAPTER (§ 38.2-1700)

A. The purpose of this chapter is to protect, subject to certain limitations,
the persons specified in subsection B against failure in the performance of
contractual obligations, under life, accident and sickness insurance, and
annuity policies, plans, or contracts specified in subsection C because of the
impairment or insolvency of the member insurer that issued the policies, plans,
or contracts. This chapter shall be construed to effect this purpose. To provide
this protection, an association of member insurers is created to pay benefits
and to continue coverage as limited by this chapter, and members of the
Association are subject to assessments to provide funds to carry out the purpose
of this chapter.

B. This chapter shall provide coverage for the policies and contracts specified
in subsection C as follows:

   1. This chapter shall provide coverage, for the policies and contracts
   specified in subsection C, to persons who, regardless of where they reside,
   except for nonresident certificate holders under group policies or contracts,
   are the beneficiaries, assignees, or payees, including health care providers
   rendering services covered under accident and sickness insurance policies or
   certificates, of the persons covered under subdivision B 2.

   2. This chapter shall provide coverage, for the policies and contracts
   specified in subsection C, to persons who are owners of or certificate holders
   or enrollees under the policies or contracts, other than unallocated annuity
   contracts and structured settlement annuities, and in each case who:
   				a. Are residents; or				b. Are not residents and (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&#8217;s guaranty association law.

   3. For unallocated annuity contracts specified in subsection C, subdivisions B
   1 and B 2 shall not apply, and this chapter, except as provided in
   subdivisions B 5 and B 6, shall provide coverage to persons who are the owners
   of the unallocated annuity contracts if the contracts are issued to or in
   connection with a specific benefit plan whose plan sponsor has its principal
   place of business in the Commonwealth.

   4. For structured settlement annuities specified in subsection C, subdivision
   B 1 and B 2 shall not apply and this chapter, except as provided in
   subdivisions B 5 and B 6, shall provide coverage to a person who is a payee
   under a structured settlement annuity, or beneficiary of a payee if the payee
   is deceased, if the payee:
   				a. Is a resident, regardless of where the contract owner resides; or				b.
   Is not a resident and both (i) the contract owner of the structured settlement
   annuity is (a) a resident or (b) not a resident but the insurer that issued
   the structured settlement annuity is domiciled in the Commonwealth and the
   state in which the contract owner resides has an association similar to the
   Association; and (ii) neither the payee or beneficiary, nor the contract owner
   is eligible for coverage by the association of the state in which the payee or
   contract owner resides.

   5. This chapter shall not provide coverage to:
   				a. A person who is a payee, or beneficiary, of a contract owner resident
   of the Commonwealth if the payee, or beneficiary, is afforded any coverage by
   the association of another state; or				b. A person covered under subdivision
   B 3 if any coverage is provided by the association of another state to the
   person.

   6. This chapter is intended to provide coverage to a person who is a resident
   of the Commonwealth and, in special circumstances, to a nonresident. In order
   to avoid duplicate coverage, if a person who would otherwise receive coverage
   under this chapter is provided coverage under the laws of any other state, the
   person shall not be provided coverage under this chapter. In determining the
   application of the provisions of this subdivision in situations where a person
   could be covered by the association of more than one state, whether as an
   owner, payee, enrollee, beneficiary, or assignee, this chapter shall be
   construed in conjunction with other state laws to result in coverage by only
   one association.

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 (&#xA7; 38.2-6100 et seq.).

   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&#8217;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&#8217;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. &#xA7;
      1144;

      2. A minimum premium group insurance plan;

      3. A stop-loss agreement described in subsection B of &#xA7; 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 &#xA7; 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&#8217;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&#8217;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&#8217;s or contract&#8217;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); &#xA7; 32.1-352 (known as
      FAMIS); or any regulations issued pursuant thereto; or					n. A charitable
      gift annuity as defined in &#xA7; 38.2-106.1.

   3. The exclusion from coverage referenced in subdivision 2 c shall not apply
   to any portion of a policy or contract, including a rider, that provides
   long-term care or any other accident and sickness insurance benefits.

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.					f. The limitations set forth in this subsection are
      limitations on the benefits for which the Association is obligated before
      taking into account either its subrogation and assignment rights or the
      extent to which those benefits could be provided out of the assets of the
      impaired or insolvent insurer attributable to covered policies. The costs of
      the Association&#8217;s obligations under this chapter may be met by the use
      of assets attributable to covered policies or reimbursed to the Association
      pursuant to its subrogation and assignment rights.					g. For purposes of
      this chapter, benefits provided by a long-term care rider to a life
      insurance policy or annuity contract shall be considered the same type of
      benefits as the base life insurance policy or annuity contract to which such
      rider relates.

E. In performing its obligations to provide coverage under &#xA7; 38.2-1704, the
Association shall not be required to guarantee, assume, reinsure, reissue, or
perform, or cause to be guaranteed, assumed, reinsured, reissued, or performed,
the contractual obligations of the insolvent or impaired insurer under a covered
policy or contract that the Association has determined, with the concurrence of
the Commission, do not materially affect the economic values or economic
benefits of the covered policy or contract.

HISTORY: 1976, c. 330, § 38.1-482.18; 1986, c. 562; 1988, c. 178; 1991, c. 340;
1992, c. 299; 2000, c. 206; 2004, c. 668; 2010, c. 510; 2018, c. 706.