Virginia § 38.2-2906 - Stabilization reserve fund

§ 38.2-2906. Stabilization reserve fund

A. When an Association is activated under this chapter, a stabilization reserve fund shall be created for the lines, subclassifications and types of commercial liability insurance for which such activation occurred. The fund shall be administered by five directors appointed by the Commission, one of whom shall be a representative of the Commission, two of whom shall be representatives of the Association, and two of whom shall be representatives of the Association's policyholders.

B. The directors of the fund shall act by majority vote of those present with three directors constituting a quorum for the transaction of any business or the exercise of any power of the fund. The directors shall serve without salary, but each director shall be reimbursed for actual and necessary expenses incurred in the performance of his or her official duties as a director of the fund. The directors shall not be subject to any personal liability with respect to the administration of the fund.

C. Each policyholder shall pay to the Association a stabilization reserve fund charge equal to one-third of the annual premium due for commercial liability insurance obtained through the Association. The means of payment shall be set forth in the plan of operation and shall be separately stated in the policy. The Association shall cancel the policy of any policyholder who fails to pay the stabilization reserve fund charge. Upon the termination of any policy during the term of the policy, payments made to the stabilization reserve fund shall be returned to the policyholder on a pro rata basis identical to that applied in computing that portion of the premium which is returned to the policyholder.

D. All moneys received by the fund shall be held in a separate restricted cash account or accounts under the sole control of an independent fund manager to be selected by the directors of the fund. The fund manager shall account separately for the moneys paid to the fund for each year's policies written for a given line, subclassification or type of commercial liability insurance. The fund manager may invest the moneys held, subject to the approval of the directors. All investment income shall be credited to the fund. All expenses of administration of the fund shall be charged against the fund. The moneys held shall be used solely for the following purposes: (i) to reimburse the Association for any and all expenses, taxes, licenses and fees paid by the Association which are properly chargeable or allocable to the stabilization reserve fund, and (ii) to pay any retrospective premium adjustment charge levied by the Association. Payment of retrospective premium adjustment charges and other authorized payments shall be made by the directors of the fund upon certification to them by the Association of the amount due. If all moneys accruing to the fund for a particular year's policies for a given line, subclassification or type of commercial liability insurance are exhausted in payment of retrospective premium adjustment charges for the particular year, all liability and obligations of the holders of said policies with respect to the payment of retrospective premium adjustment charges shall terminate and shall be conclusively presumed to have been discharged.

E. The Association shall promptly pay the fund manager all stabilization reserve fund charges that it collects from its policyholders under subsection C of this section.

F. Upon dissolution of the Association, all assets remaining in the fund shall be distributed equitably to the policyholders who have contributed to the fund under procedures authorized by the directors. Distribution of assets remaining in the fund shall be made after final disposition of all claims, expenses, and liabilities against the fund, including reimbursement of preliminary organizational assessments made pursuant to subsection B of § 38.2-2904.

1988, cc. 769, 783.