2.2 Virginia Commercial Property Insurance

Rate Regulation: File-and-Use

Virginia uses a file-and-use (also called "competitive rating") system for most property and casualty lines. The insurer files the rate and supporting data with the Bureau of Insurance and may begin using it; the SCC retains authority to disapprove a rate that is excessive, inadequate, or unfairly discriminatory. "Excessive" generally cannot occur in a competitive market, "inadequate" threatens solvency, and "unfairly discriminatory" means price differences not justified by expected loss/expense differences.

Surplus Lines Insurance

When the admitted market (insurers licensed in Virginia) will not write a risk, coverage can be placed in the surplus (non-admitted) lines market. The exam tests four conditions:

Key trap: Surplus lines insurers are not backed by the Virginia property/casualty guaranty association. If a non-admitted insurer becomes insolvent, the insured has no guaranty-fund safety net — the broker must disclose the non-admitted status to the client in writing.

Worked example: A specialty manufacturing risk is declined by three admitted carriers and placed with an eligible non-admitted insurer at a $40,000 premium. The surplus lines tax is 2.25% × $40,000 = $900, which the surplus lines broker collects from the insured and remits to Virginia Tax.

Admitted vs. Non-Admitted — Why It Matters

Because non-admitted carriers offer freedom of rate and form, they can write hard-to-place commercial risks (vacant buildings, coastal warehouses, environmental, large excess layers) that no admitted carrier wants. The price for that flexibility is the loss of guaranty-fund backing — the single most tested distinction.

Terrorism Coverage (TRIA)

The federal Terrorism Risk Insurance Act (TRIA) creates a government backstop for losses from certified acts of terrorism. For commercial property and casualty lines, an insurer must:

• Offer terrorism coverage to every commercial policyholder.
• Disclose the premium charged for terrorism coverage and the existence of the federal backstop.
• Allow the insured to accept or reject the coverage in writing.

TRIA applies the backstop only after an event is certified by the federal government and aggregate industry losses exceed the statutory program trigger; individual insurers retain a deductible based on prior-year premium before federal sharing begins.

Commercial VPIA

The VPIA / FAIR Plan also writes commercial property when the voluntary market declines it: basic fire and extended coverage on the building and business personal property, with higher available limits than the residential plan. Evidence of voluntary-market declination is still required.

Business Income (Interruption) Coverage

Business income (commonly written on the ISO Business Income (and Extra Expense) Coverage Form, CP 00 30) pays the policyholder's lost net income plus continuing normal operating expenses (such as payroll and rent) during the period of restoration — the time it should reasonably take to repair or replace the damaged property after a covered direct physical loss.

Waiting period: Most BI forms apply a 72-hour waiting period (a time deductible) before coverage begins, and may extend recovery under an extended period of indemnity after operations resume but before income returns to normal.

Extra Expense vs. Business Income

Extra expense stands alone for businesses that must stay open at almost any cost (e.g., a newspaper or data center). It reimburses the additional cost of continuing operations — leasing temporary space, expediting repairs, paying overtime — and carries its own limit separate from the business income limit.

Exam tip: Business income replaces income you lost by shutting down; extra expense pays what you spent to keep running. A pure Extra Expense form has no "period of restoration" income calculation — it pays only the added costs.