Section 50. Security deposit and bond requirements

A. Except as provided in subsection B of this section, each group self-insurance pool licensed by the Commission shall maintain with the State Treasurer a security deposit of acceptable securities or surety bond in an amount not less than $100,000, or such other amount as the Commission deems reasonable for each plan year. The Commission may, from time to time, release or reduce the security deposit or surety bond requirement. The security deposit or surety bond shall be held by the State Treasurer pursuant to the Act, and so far as not inconsistent with the provisions of the Act or this chapter shall be subject to the provisions of Article 7 (§ 38.2-1045 et seq.) of Chapter 10 of Title 38.2 of the Code of Virginia.

For the purposes of this chapter, acceptable securities shall be (i) investments allowed by § 2.1-327 of the Code of Virginia (legal investments for public sinking funds) and § 2.1-328 of the Code of Virginia (legal investments for other public funds), (ii) securities issued by other states, other than Virginia, and their municipalities or political subdivisions rated A or better by Moody's Investors Services, Inc., or Standard and Poor's, Inc., (iii) revenue bonds rated Aa (AA) or better by Moody's Investors Services, Inc., or Standard and Poor's, Inc. that are bonds issued by municipalities or political subdivisions of this Commonwealth or any other state, (iv) securities issued by the Federal Home Loan Bank, and (v) securities issued by the Federal Intermediate Credit Banks.

Surety bonds deposited pursuant to this section shall be issued by an insurer duly licensed in this Commonwealth to transact a surety business and shall not either directly nor indirectly be under the same ownership or management as the principal on this bond.

In addition to the minimum security deposit or surety bond required by this section, the Commission may require additional securities or surety it considers appropriate after giving consideration to such factors as excess insurance and the financial ability of the group to meet its obligations under the Act.

B. As an alternative to the security deposit or surety bond required by subsection A of this section, a group self-insurance association may have an appropriate endorsement attached to its contracts for excess insurance. The endorsement must provide that in the event the group self-insurance association fails to pay its liabilities under the Act, the excess coverage insurer will become liable immediately for 100% of the total liability and will make payment as directed by the State Corporation Commission of Virginia.

Historical Notes

Derived from Regulation 33, Case No. INS890261, § 6, eff. September 1, 1989.

Statutory Authority

§ 62.1-44.34:12 of the Code of Virginia.