Virginia § 38.2-1446 Prohibition of hypothecation

Virginia Statutes

§ 38.2-1446 — Prohibition of hypothecation

Virginia § 38.2-1446

Title 38.2INSURANCE

Ch. 14INVESTMENTS

Art. 4ASSET PROTECTION ACT

This text of Virginia § 38.2-1446 (Prohibition of hypothecation) is published on Counsel Stack Legal Research, covering Virginia primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook

Va. Code Ann. § 38.2-1446 (2026).

Text

A.Every domestic insurer subject to the provisions of this chapter shall at all times have and maintain free and unencumbered admitted assets in an amount equal to the sum total of its reserve liabilities and minimum capital and surplus, and no such insurer shall pledge, hypothecate, or otherwise encumber its assets in an amount in excess of the amount of its surplus to policyholders; nor shall such insurer pledge, hypothecate or otherwise encumber more than five percent of its admitted assets. However, the Commission, upon written application, may approve the hypothecation or encumbrance of any of the assets of such an insurer in any amount upon a determination that such hypothecation or encumbrance will not adversely affect the solvency of such insurer.

B.Any such insurer which pledge

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A. Every domestic insurer subject to the provisions of this chapter shall at all times have and maintain free and unencumbered admitted assets in an amount equal to the sum total of its reserve liabilities and minimum capital and surplus, and no such insurer shall pledge, hypothecate, or otherwise encumber its assets in an amount in excess of the amount of its surplus to policyholders; nor shall such insurer pledge, hypothecate or otherwise encumber more than five percent of its admitted assets. However, the Commission, upon written application, may approve the hypothecation or encumbrance of any of the assets of such an insurer in any amount upon a determination that such hypothecation or encumbrance will not adversely affect the solvency of such insurer.

B. Any such insurer which pledges, hypothecates, or otherwise encumbers any of its assets shall within ten days thereafter report in writing to the Commission the amount and identity of the assets so pledged, hypothecated, or encumbered and the terms and conditions of such transaction. In addition, each such insurer shall annually, or more often if required by the Commission, file with the Commission a statement sworn to by an executive officer of the insurer that (i) title to assets in an amount equal to the reserve liability and minimum capital and surplus of the insurer that are not pledged, hypothecated or otherwise encumbered is vested in the insurer, (ii) the only assets of the insurer that are pledged, hypothecated or otherwise encumbered are as identified and reported in the sworn statement and no other assets of the insurer are pledged, hypothecated or otherwise encumbered, and (iii) the terms and limitations of any such transaction of pledge, hypothecation or encumbrance are as reported in the sworn statement.

C. Any person who accepts a pledge, hypothecation or encumbrance of any asset of a domestic insurer as security for a debt or other obligation of such insurer not in accordance with the terms and limitations of this article shall be deemed to have accepted such asset subject to a superior, preferential and automatically perfected lien in favor of claimants; however, such superior, preferential and automatically perfected lien in favor of claimants shall not apply to assets of a company in receivership pursuant to Chapter 15 (§ 38.2-1500 et seq.) of this title, if the receiver approves the pledge, hypothecation or encumbrance of such assets.

D. In the event of involuntary or voluntary liquidation of any domestic insurer subject to this chapter, claimants of such insurer shall have a prior and preferential claim against all assets of the insurer except those that have been pledged, hypothecated or encumbered in accordance with the terms and limitations of this article. All claimants shall have equal status and their prior and preferential claim shall be superior to any claim or cause of action against the insurer by any person, corporation, association or legal entity.