Chap. 412.—-An ACT to amend and re-enact Sections 4250, 4256 and 4257 of the
Code of Virginia, and to repeal Section 4258 of the Code of Virginia, all of
which sections relate to legal reserve life insurance companies. [S B 203]

Approved March 30, 1936

1. Be it enacted by the General Assembly of Virginia, That sec-
tions forty-two hundred and fifty, forty-two hundred and fifty-six and
forty-two hundred and fifty-seven of the Code of Virginia be amended
and re-enacted so as to read as follows:

Section 4250. Corporation Commission to Suspend or Revoke
License When Funds Are Not of Certain Net Cash Value; Appeal;
Penalties—When the actual funds of any life insurance company,
doing .business in this Commonwealth, are not of a value equal to its
liabilities, counting as such the net value of its policies, which shall be
valued according to the provisions of section forty-two hundred and
fifty-seven, it shall be the duty of the State Corporation Commission
to give ten days’ notice to such company to appear before the said
commission and show cause why its license or certificate of authority,
as the case may be, to transact business in this State, should not be
suspended or revoked, until such time as the value of its funds be-
comes equal to its liabilities, valuing its policies in the manner afore-
said. After proceeding in the manner prescribed by section forty-
one hundred and eighty, the said commission may either suspend or
revoke the license or certificate of authority of such company to trans-
act business in this State, subject, however, to the right of appeal by
such company to the Supreme Court of Appeals, as in said section is
provided. The action of the said State Corporation Commission, either
suspending or revoking the license or certificate of authority of any
such company shall, upon final judgment, or unless it shall appeal
from the action of the commission in sixty days, be published in like
manner as provided by said section forty-one hundred and eighty. Any
such company or any officer or agent thereof, who, after such suspen-
sion or revocation of its license or certificate of authority to do busi-
ness in this State, issues a new policy for or on behalf of such com-
pany, before its said license or certificate of authority to do business
is restored, shall be subject to a fine for each offense of not less than
one hundred dollars nor more than one thousand dollars.

Section 4256. What Regarded as Legal Reserve Companies.—
Any foreign, alien, or domestic life insurance company, association or
society, any of whose policies or certificates is required to contain any
provision to the effect that a person insured shall, upon surrender of
such policy during his or her lifetime, receive a surrender value there-
for, either in cash, paid-up insurance, or extended insurance, shall be
regarded as a regular, or “legal reserve company,” and shall be re-
quired to maintain a reserve calculated in accordance with the pro-
visions of section forty-two hundred and fifty-seven; but nothing in
this section shall be construed to apply to any industrial sick benefit
company, nor to fraternal benefit societies, as defined and regulated in
chapter one hundred and seventy-one.

Section 4257. State Corporation Commission to Value Policies—
Legal Standard of Valuation—-(a) The State Corporation Commis-
sion shall annually make valuations of all outstanding policies, addi-
tions thereto, and all other insurance and annuity contracts of all life
insurance companies doing business in this State, except as otherwise
provided, and for this purpose may require said companies to furnish,
under oath, such information as may be necessary to enable it to
make such valuation. The commission shall keep in its office a record
of all valuations made and shall certify same at the request of any
company for which a valuation has been made. All valuations made
by the commission, or by its authority, shall be made upon the net
premium basis, and in every case in which the actual annual premium
charged for an insurance is less than the net annual premium for such
insurance, computed as specified in this section, the company shall set
up an additional reserve equal to the value of an annuity of the dif-
ference between the actual premium charged and the net premium re-
quired by this section, and the term of which at the date of the val-
uation shall equal the period during which future payments are to
become due on the insurance, and such annuity shall be valued accord-
ing to the table of mortality with the rate of interest at which such
net annual premium is calculated.

(b) The legal minimum standard for the valuation of life insur-
ance contracts issued prior to the first day of January, nineteen hun-
dred and thirty-seven, shall be on the basis of the American Experience
Table of Mortality, with interest at four per centum per annum, and
for life insurance contracts issued on and after said date shall be the
one year preliminary term method of valuation, as hereinafter mod-
ified, on the basis of the American Experience Table of Mortality with
interest at three and one-half per centufnm per annum.

(c) If the net renewal premium under a limited payment life pre-
liminary term policy providing for the payment of less than twenty
annual premiums thereon, or under an endowment preliminary term
policy, exceeds that under a twenty payment life preliminary term
policy, the reserve for such policy at the end of any year, including
the first, shall be not less than the reserve on a twenty payment life
preliminary term policy issued in the same year and at the same age,
together with an amount which shall be equivalent to the accumula-
tion of a net level premium sufficient to provide for a pure endow-
ment maturing one year after the date on which the last annual pre-
mium is due, equal to the difference between the value at the end of
such period of such a twenty payment life preliminary term policy
and the full net level premium reserve at such time of such a limited
payment life or endowment policy. Policies valued by the above
method shall contain a clause specifying either that the reserve thereof
shall be computed in accordance with the twenty payment life mod-
ification of the preliminary term method of valuation, or that the first
year’s insurance is term insurance.

(d) The legal minimum standard for the valuation of annuities
issued on and after the first day of January, nineteen hundred and
thirty-seven shall be the Combined Annuity Table, with interest at
four per centum per annum, but annuities deferred ten or more years
and written in connection with life insurance shall be valued on the
same basis as that used in computing the consideration or premiums
therefor, or upon any higher standard, at the option of the company.

(e) The legal minimum standard for the calculation of the reserve
liability for insurance against disability incorporated in life insurance
policies issued on and after the first day of January, nineteen hundred
and thirty-seven, shall be on the basis of any table adopted by the
company and approved by the State Corporation Commission, with
interest at three and one-half per centum per annum; provided, that
in no case shall said liability be less than one-half of the net annual
premium for the disability benefit computed by such table. The com-
mission may accept a certificate of valuation from the company for the
reserve liability for the disability provision if the commission is satis-
fied (by the use of general averages and percentages), that such re-
serve has been computed in accordance with the foregoing rule.

(£) The legal standard for the valuation of group insurance writ-
ten as yearly renewable term insurance issued on and after the first
day of January, nineteen hundred and thirty-seven, shall be on the
basis of the “American Men Mortality Table,” with interest at three
and one-half per centum per annum.

(g) The legal minimum standard for the valuation of industrial
policies, issued on and after the first day of January, nineteen hundred
and thirty-seven, shall be the American Experience Table of Mortal-
ity, with interest at three and one-half per centum per annum, pro-
vided, that any life insurance company may voluntarily value its indus-
trial policies on the basis of the standard industrial mortality table or
the sub-standard industrial nfortality table, and by level net premium
method or in accordance with their terms by the modified preliminary
term method hereinabove described, or the full preliminary term
method.

All industrial policies issued on and after the date set forth herein
shall be valued under the rules set forth in this section, whether or not
such policies provide for surrender values, either in cash, paid up
insurance or extended insurance.

(h) Any life insurance company may voluntarily value its policies,
or any class thereof, according to either the American Experience
Table of Mortality or the American Men Ultimate Table of Mortality,
and at a lower rate of interest than that above prescribed, but not
lower than three per centum per annum; and upon either the level
net premium or the modified preliminary term method of valuation
provided for herein; and in every such case shall report the standards
used by it in making the same to the State Corporation Commission
in its annual statement, provided that no such standards, if adopted,
shall be abandoned without the consent of the commission first ob-
tained in writing.

(i) The commission may vary the standards of interest and mor-
tality in the case of alien companies as to contracts issued by such com-
panies in other countries than the United States, and in particular cases
of invalid lives and other extra hazards; may value policies in groups,
use approximate averages for fractions of a year and otherwise, and
may accept the valuation of the insurance department of any other
State or country, if made upon a basis and according to standards
producing a reserve not lower than herein required or authorized,
instead of the valuation herein required if the insurance official of such
State or country accepts as sufficient and valid for all purposes the cer-
tificate of valuation of the commission of this State.

(j) The commission is hereby authorized to assess against every
company whose policies are valued, a sum not exceeding one cent for
each one thousand dollars of insurance in force, which shall be paid
into the treasury of the Commonwealth, as provided in section forty-
one hundred and ninety-seven, and placed by the State Comptroller to
the credit of the fund for the maintenance of the Bureau of Insurance.
Every company organized under the laws of another State or country
shall furnish to the commission, at the time of filing its annual state-
ment, a certificate from the Commissioner of Insurance (or similar
officer), of that State or country, that he has made a valuation of the
policies of said company in force on December thirty-first, and that
he finds the value of said policies to be as reported in the company’s
annual statement. Any company failing to furnish such certificate
shall have its policies valued by the commission, as above provided.

(kx) Nothing in this section shall be construed to apply to fraternal
benefit societies, as defined and regulated in chapter one hundred and
seventy-one, nor to industrial sick benefit companies as defined and
regulated in chapter one hundred and seventy-five.

2. Be it further enacted by the General Assembly of Virginia,
That section forty-two hundred and fifty-eight of the Code of Virginia
be, and the same is hereby, repealed.