Reference is to the bill as introduced.
Amend the bill, as and if amended, by deleting all after the enacting words and inserting:
/ SECTION 1. Article 1, Chapter 90, Title 38 of the 1976 Code is amended by adding:
"Section 38-90-165.
(A) The director may declare inactive
by order a captive insurance company other than a risk retention
group or association captive if such captive insurance company
has no outstanding liabilities and agrees to cease providing
insurance coverage.
(B) During the period
the captive insurance company is inactive, the director may by
order:
(1)
modify the minimum premium tax applicable to the captive
insurance company to an amount no less than two thousand dollars
and the captive insurance company shall pay no other premium
taxes; and
(2)
exempt the captive insurance company from the requirement
to file such reports as set forth in the order."
SECTION 2. Article 1, Chapter 90, Title 38 of the 1976 Code is amended by adding:
"Section 38-90-215.
(A) A protected cell may be either
unincorporated or incorporated.
(B) With regard to
unincorporated protected cells:
(1)
The unincorporated protected cell shall have its own
distinct name or designation, which shall include the words
'Protected Cell' or the abbreviation 'PC'. Any captive
insurance company or protected cell formed prior to the
effective date of this section may not be required to change its
name to comply with the provisions of this paragraph.
(2)
An unincorporated protected cell must meet the paid-in
capital and free surplus requirements applicable to a special
purpose captive insurance company and either:
(a)
establish loss and loss expense reserves for business
written through the unincorporated protected cell; or
(b)
the business written through the unincorporated protected
cell must be:
(i)
fronted by an insurance company licensed pursuant to the
laws of:
(A)
any state; or
(B)
any jurisdiction if the insurance company is a wholly
owned subsidiary of an insurance company licensed pursuant to
the laws of any state;
(ii)
reinsured by a reinsurer authorized or approved by this
State; or
(iii)
secured by a trust fund in the United States for the
benefit of policyholders and claimants funded by an irrevocable
letter of credit or other asset acceptable to the director. The
amount of security provided by the trust fund may not be less
than the reserves associated with those liabilities, including
reserves for losses, allocated loss adjustment expenses,
incurred but unreported losses, and unearned premiums for
business written through the participant's protected cell. The
director may require the sponsored captive to increase the
funding of a trust established pursuant to this item. If the
form of security in the trust is a letter of credit, the letter
of credit must be established, issued, or confirmed by a bank
chartered in this State, a member of the federal reserve system,
or a bank chartered by another state if that state-chartered
bank is acceptable to the director. A trust and trust instrument
maintained pursuant to this item must be in a form and upon
terms approved by the director.
(3)
The creation of an unincorporated protected cell does not
create, with respect to that protected cell, a legal person
separate from the sponsored captive insurance company. Amounts
attributed to a protected cell, including assets transferred to
a protected cell account, are owned by the sponsored captive
insurance company of which the protected cell is a part, and the
sponsored captive insurance company may not be, or may not hold
itself out to be, a trustee with respect to those protected cell
assets of that protected cell account. Notwithstanding the
provisions of this subsection, the sponsored captive insurance
company may allow for a security interest to attach to protected
cell assets or a protected cell account when in favor of a
creditor of the protected cell and otherwise allowed under
applicable law.
(4)
This subsection may not be construed to prohibit the
sponsored captive insurance company from:
(a)
entering into contracts of insurance on behalf of the
protected cell; or
(b)
contracting with or arranging for third-party managers or
advisors to manage the protected cell to manage the assets of a
protected cell, if all remuneration, expenses, and other
compensation of the third party manager or advisor is payable
from the protected cell assets of that protected cell and not
from the protected cell assets of other protected cells or the
assets of the sponsored captive insurance company's general
account.
(C) Incorporated
protected cells shall be subject to all of the following:
(1)
An incorporated protected cell may be organized and
operated in any form of business organization set forth in
Section 38-90-60(A).
(2)
Except as specifically set forth in this chapter, each
incorporated protected cell of a sponsored captive insurance
company shall be licensed and treated as a special purpose
captive insurance company.
(3)
A participant in an incorporated protected cell need not
be a shareholder of the protected cell or of the sponsored
captive insurance company or any affiliate thereof.
(D) The name of an
incorporated protected cell must include the words 'Incorporated
Cell' or the abbreviation 'IC'.
(E) Any captive
insurance company or protected cell formed prior to July 31,
2013 shall not be required to change its name to comply with the
provisions of subsection (D)."
SECTION 3. Article 1, Chapter 90, Title 38 of the 1976 Code is amended by adding:
"Section 38-90-250. A licensed captive insurance company that meets the necessary requirements of this title imposed upon an insurer must be considered for issuance of a certificate of authority to act as an insurer in this State."
SECTION 4. Section 38-90-10 of the 1976 Code, as last amended by Act 291 of 2004, is further amended to read:
"Section 38-90-10.
As used in this chapter, unless the context requires
otherwise:
(1) 'Alien captive
insurance company' means an insurance company formed to write
insurance business for its parents and affiliates and licensed
pursuant to the laws of an alien jurisdiction which imposes
statutory or regulatory standards in a form acceptable to the
director on companies transacting the business of insurance in
such jurisdiction.
(2) 'Affiliated
company' means a company in the same corporate system as a
parent, an industrial insured, or a member organization by
virtue of common ownership, control, operation, or management.
(3) 'Association' means
a legal association of individuals, corporations, limited
liability companies, partnerships, political subdivisions, or
associations that has been in continuous existence for at least
one year:
(a)
the member organizations of which collectively, or which
does itself:
(i)
own, control, or hold with power to
vote all of the outstanding voting securities of an association
captive insurance company incorporated as a stock insurer or
organized as a limited liability company; or
(ii)
have complete voting control over an association captive
insurance company organized as a mutual insurer; or
(b)
the member organizations of which collectively constitute
all of the subscribers of an association captive insurance
company formed as a reciprocal insurer.
(4) 'Association
captive insurance company' means a company that insures risks of
the member organizations of the association and their affiliated
companies.
(5) 'Branch business'
means any insurance business transacted by a branch captive
insurance company in this State.
(6) 'Branch captive
insurance company' means an alien captive insurance company
licensed by the director to transact the business of insurance
in this State through a business unit with a principal place of
business in this State.
(7) 'Branch operations'
means any business operations of a branch captive insurance
company in this State.
(8) 'Captive insurance
company' means a pure captive insurance company, association
captive insurance company, captive reinsurance company,
sponsored captive insurance company, special purpose captive
insurance company, or industrial insured captive insurance
company formed or licensed under this chapter. For purposes of
this chapter, a branch captive insurance company must be a pure
captive insurance company with respect to operations in this
State, unless otherwise permitted by the director.
(9) 'Captive
reinsurance company' means a reinsurance company that is formed
or licensed pursuant to this chapter and is wholly owned by a
qualifying reinsurance parent company. A captive reinsurance
company is a stock corporation.
(10) 'Consolidated debt
to total capital ratio' means the ratio of the sum of (a) all
debts and hybrid capital instruments including, but not limited
to, all borrowings from banks, all senior debt, all subordinated
debts, all trust preferred shares, and all other hybrid capital
instruments that are not included in the determination of
consolidated GAAP net worth issued and outstanding to (b) total
capital, consisting of all debts and hybrid capital instruments
as described in subitem (a) plus owners' equity determined in
accordance with GAAP for reporting to the United States
Securities and Exchange Commission.
(11) 'Consolidated GAAP
net worth' means the consolidated owners' equity determined in
accordance with GAAP for reporting to the United States
Securities and Exchange Commission.
(12) 'Controlled
unaffiliated business' means a company:
(a)
that is not in the corporate system of a parent and
affiliated companies;
(b)
that has an existing contractual relationship with a
parent or affiliated company; and
(c)
whose risks are managed by a captive insurance company in
accordance with Section 38-90-190.
(13) 'Director' means
the Director of the South Carolina Department of Insurance or
the director's designee.
(14) 'Department' means
the South Carolina Department of Insurance.
(15) 'GAAP' means
generally accepted accounting principles.
(16) 'General
account' means the assets and liabilities of a sponsored captive
insurance company other than protected cell assets and protected
cell liabilities.
(1617)
'Industrial insured' means an insured as defined in
Section 38-25-150(8).
(1718)
'Industrial insured captive insurance company'
means a company that insures risks of the industrial insureds
that comprise the industrial insured group and their affiliated
companies.
(1819)
'Industrial insured group' means a group that meets
either of the following criteria:
(a)
a group of industrial insureds that collectively:
(i)
own, control, or hold with power to
vote all of the outstanding voting securities of an industrial
insured captive insurance company incorporated as a stock
insurer or limited liability company; or
(ii)
have complete voting control over an industrial insured
captive insurance company incorporated as a mutual insurer; or
(b)
a group which is created under the Liability Risk
Retention Act of 1986 15 U.S.C. Section 3901, et seq., as
amended, and Chapter 87, Title 38, as a corporation or other
limited liability association taxable as a stock insurance
company or a mutual insurer under this title.
(1920)
'Member organization' means any individual,
corporation, limited liability company, partnership, or
association that belongs to an association.
(2021)
'Parent' means any corporation, limited liability
company, partnership, or individual that directly or indirectly
owns, controls, or holds with power to vote more than fifty
percent of the outstanding voting interests of a captive
insurance company.
(2122)
'Participant' means an entity as defined in Section
38-90-230 38-90-240, and any affiliates
of that entity, that are insured by a sponsored captive
insurance company, where the losses of the participant are
limited through a participant contract to the assets of a
protected cell.
(2223)
'Participant contract' means a contract by which a
sponsored captive insurance company insures the risks of a
participant and limits the losses of the participant to the
assets of a protected cell.
(2324)
'Protected cell' means a separate account
established and maintained by a sponsored captive insurance
company for one participant an identified pool of
assets and liabilities of a sponsored captive insurance company
for one or more participants that is segregated and insulated
from the remainder of the sponsored captive insurance company's
assets and liabilities as set forth in this chapter. A
protected cell may be unincorporated or incorporated.
(25)
'Protected cell account' means a specifically
identified bank or custodial account established by a sponsored
captive insurance company for the purpose of segregating the
protected cell assets of one protected cell from the protected
cell assets of other protected cells and from the assets of the
sponsored captive insurance company's general account.
(26)
'Protected cell assets' means all assets, contract
rights, and general intangibles, identified with and
attributable to a specific protected cell of a sponsored captive
insurance company.
(27)
'Protected cell liabilities' means all liabilities and
other obligations identified with and attributable to a specific
protected cell of a sponsored captive insurance company.
(2428)
'Pure captive insurance company' means a company
that insures risks of its parent, affiliated companies,
controlled unaffiliated business, or a combination thereof.
(2529)
'Qualifying reinsurer parent company' means a
reinsurer authorized to write reinsurance by this State and that
has a consolidated GAAP net worth of not less than five hundred
million dollars and consolidated debt to total capital ratio not
greater than 0.50.
(2630)
'Special purpose captive insurance company' means a
captive insurance company that is formed or licensed under this
chapter that does not meet the definition of any other type of
captive insurance company defined in this section.
(2731)
'Sponsor' means an entity that meets the
requirements of Section 38-90-220 and is approved by
the director to provide all or part of the capital and surplus
required by applicable law and to organize and operate a
sponsored captive insurance company.
(2832)
'Sponsored captive insurance company' means a
captive insurance company:
(a)
in which the minimum capital and surplus required by
applicable law is provided by one or more sponsors;
(b)
that is formed or licensed under this chapter;
(c)
that insures the risks of separate participants
through the contract segregates liability through
one or more protected cells; and
(d)
that segregates each participant's liability
through one or more protected cells insures the
risks of participants through participant contracts.
(2933)
'Treasury rates' means the United States Treasury
strips asked yield as published in the Wall Street Journal as of
a balance sheet date."
SECTION 5. Section 38-90-20(F) of the 1976 Code, as last amended by Act 291 of 2004, is further amended to read:
"(F) A foreign or
alien captive insurance company, upon approval of the director
or his designee, may become a domestic captive insurance company
by complying with all of the requirements of law relative to the
organization and licensing of a domestic captive insurance
company of the same or equivalent type in this State and by
filing with the Secretary of State its articles of association,
charter, or other organizational document, together with
appropriate amendments to them adopted in accordance with the
laws of this State bringing those articles of association,
charter, or other organizational document into compliance with
the laws of this State, along with a certificate of
general good issued by the director. After this is
accomplished, the captive insurance company is entitled to the
necessary or appropriate certificates and licenses to continue
transacting business in this State and is subject to the
authority and jurisdiction of this State. In connection with
this redomestication, the director may waive any requirements
for public hearings. It is not necessary for a company
redomesticating into this State to merge, consolidate, transfer
assets, or otherwise engage in any other reorganization, other
than as specified in this section."
SECTION 6. Section 38-90-35 of the 1976 Code, as added by Act 291 of 2004, is amended to read:
"Section 38-90-35.
(A) Information submitted
pursuant to the provisions of this chapter is confidential and
may not be made public by the director or an agent or employee
of the director without the written consent of the company,
except that:
(1) information may be discoverable by a
party in a civil action or contested case to which the
submitting captive insurance company is a party, upon a showing
by the party seeking to discover the information that:
(a1) the
information sought is relevant to and necessary for the
furtherance of the action or case and the information sought
is unavailable from other nonconfidential sources; or
(b2)
a subpoena applicable to the information
sought is unavailable from other nonconfidential
sources; or
(c) a
subpoena issued by a judicial or administrative law officer of
competent jurisdiction has been submitted to the director;
and is issued by a judicial or administrative law
officer of competent jurisdiction has been submitted to the
director.
(2B)
the The director may
disclose the information to the public officer having
jurisdiction over the regulation of insurance in another state
if:
(a1) the
public official agrees in writing to maintain the
confidentiality of the information; and
(b2)
the laws of the state in which the public official
serves require the information to be confidential."
SECTION 7. Section 38-90-40 of the 1976 Code, as last amended by Act 217 of 2010, is further amended to read:
"Section 38-90-40.
(A)(1) The director may not issue a
license to a captive insurance company unless the company
possesses and maintains unimpaired paid-in capital of:
(a)
in the case of a pure captive insurance company, not less
than one hundred thousand dollars;
(b)
in the case of an association captive insurance company
incorporated as a stock insurer or organized as a limited
liability company, not less than four hundred thousand dollars;
(c)
in the case of an industrial insured captive insurance
company incorporated as a stock insurer or organized as a
limited liability company, not less than two hundred thousand
dollars;
(d)
in the case of a sponsored captive insurance company, not
less than five hundred thousand dollars; however, if the
sponsored captive insurance company does not assume any risk,
the risks insured by the protected cells are homogeneous and
there are no more than ten cells, the director may reduce this
amount to an amount not less than one hundred fifty thousand
dollars;
(e)
in the case of a special purpose captive insurance
company, an amount determined by the director after giving due
consideration to the company's business plan, feasibility study,
and pro-formas, including the nature of the risks to be insured.
(2)(a)
Except for a sponsored captive insurance company that does
not assume any risk, the unimpaired, paid-in capital
required in subsection (A)(1) must be in the form of
cash, cash equivalent, or an irrevocable letter of
credit issued by a bank chartered by this State or a member bank
of the Federal Reserve System with a branch office in this State
or as approved by the director.:
(i)
cash on deposit with a bank
located in South Carolina;
(ii)
cash equivalent accessible through a bank or
investment manager located in South Carolina; or
(iii)
an irrevocable letter of credit in a form
approved by the director and issued by a bank chartered by this
State or a member bank of the Federal Reserve System with a
branch office in this State or as approved by the director.
(b)
For a sponsored captive insurance company that does not
assume any risk, the capital also may be in the form of other
high quality securities as approved by the director.
(B)(1) The director may
not issue a license to a captive insurance company incorporated
as a nonprofit corporation unless the company possesses and
maintains unrestricted net assets of:
(a)
in the case of a pure captive insurance company, not less
than two hundred fifty thousand dollars; and
(b)
in the case of a special purpose captive insurance
company, an amount determined by the director after giving due
consideration to the company's business plan, feasibility study,
and pro-formas, including the nature of the risks to be insured.
(2)
Contributions to a captive insurance company incorporated
as a nonprofit corporation must be in the form of cash,
cash equivalent, or an irrevocable letter of credit issued by a
bank chartered by this State or a member bank of the Federal
Reserve System with a branch office in this State or as approved
by the director conform with the requirements of
subsection (A)(2)(a).
(C) For purposes of
subsections (A) and (B), the director may issue a license
expressly conditioned upon the captive insurance company
providing to the director satisfactory evidence of possession of
the minimum required unimpaired paid-in capital. Until this
evidence is provided, the captive insurance company may not
issue any policy, assume any liability, or otherwise provide
coverage. The director summarily may revoke the conditional
license without legal recourse by the company if satisfactory
evidence of the required capital is not provided within a
maximum period of time, not to exceed one year, to be
established by the director at the time the conditional license
is issued.
(D) Notwithstanding
the provisions of this section, the director may prescribe
additional capital or net assets based upon the type, volume,
and nature of insurance business transacted including, but not
limited to, the net amount of risk retained for an individual
risk. Contributions in connection with these prescribed
additional net assets or capital must be in the form of:
(1)
cash;
(2)
cash equivalent;
(3)
an irrevocable letter of credit issued by a bank chartered
by this State or a member bank of the Federal Reserve System
with a branch office in this State or as approved by the
director; or
(4)
securities invested as provided in Section 38-90-100.
(E) In the case of a
branch captive insurance company, as security for the payment of
liabilities attributable to branch operations, the director
shall require that a trust fund, funded by an irrevocable letter
of credit or other acceptable asset, be established and
maintained in the United States for the benefit of United States
policyholders and United States ceding insurers under insurance
policies issued or reinsurance contracts issued or assumed, by
the branch captive insurance company through its branch
operations. The amount of the security may be no less than the
capital and surplus required by this chapter and the reserves on
these insurance policies or reinsurance contracts, including
reserves for losses, allocated loss adjustment expenses,
incurred but not reported losses and unearned premiums with
regard to business written through branch operations; however,
the director may permit a branch captive insurance company that
is required to post security for loss reserves on branch
business by its reinsurer or front company to reduce the funds
in the trust account required by this section by the same amount
so long as the security remains posted with the reinsurer or
front company. If the form of security selected is a letter of
credit, the letter of credit must be established by, or issued
or confirmed by, a bank chartered in this State or a member bank
of the Federal Reserve System.
(F)(1) A captive
insurance company may not pay a dividend out of, or other
distribution with respect to, capital or surplus, in excess of
the limitations set forth in Section 38-21-250 through Section
38-21-270, without the prior approval of the director. Approval
of an ongoing plan for the payment of dividends or other
distributions must be conditioned upon the retention, at the
time of each payment, of capital or surplus in excess of amounts
specified by, or determined in accordance with formulas approved
by, the director.
(2)
A captive insurance company incorporated as a nonprofit
corporation may not make any distributions without the prior
approval of the director.
(G) An irrevocable
letter of credit, which is issued by a financial institution
other than a bank chartered by this State or a member bank of
the Federal Reserve System, shall meet the same standards as an
irrevocable letter of credit which has been issued by either
entity."
SECTION 8. Section 38-90-50 of the 1976 Code, as last amended by Act 217 of 2010, is further amended to read:
"Section 38-90-50.
(A)(1) The director may not issue a
license to a captive insurance company unless the company
possesses and maintains free surplus of:
(a)
in the case of a pure captive insurance company, not less
than one hundred fifty thousand dollars;
(b)
in the case of an association captive insurance company
incorporated as a stock insurer or organized as a limited
liability company, not less than three hundred fifty thousand
dollars;
(c)
in the case of an industrial insured captive insurance
company incorporated as a stock insurer or organized as a
limited liability company, not less than three hundred thousand
dollars;
(d)
in the case of an association captive insurance company
incorporated as a mutual insurer, not less than seven hundred
fifty thousand dollars;
(e)
in the case of an industrial insured captive insurance
company incorporated as a mutual insurer, not less than five
hundred thousand dollars;
(f)
in the case of a sponsored captive insurance company, not
less than five hundred thousand dollars; however, if the
sponsored captive insurance company does not assume any risk,
the risks insured by the protected cells are homogeneous and
there are no more than ten cells, the director may reduce this
amount to an amount not less than one hundred fifty thousand
dollars; and
(g)
in the case of a special purpose captive insurance
company, an amount determined by the director after giving due
consideration to the company's business plan, feasibility study,
and pro-formas, including the nature of the risks to be insured.
(2)(a)
Except for a sponsored captive insurance company that does
not assume any risk, the free surplus required in
subsection (A)(1) must be in the form of cash, cash
equivalent, or an irrevocable letter of credit issued by a bank
chartered by this State or a member bank of the Federal Reserve
System with the branch office in this State and approved by the
director:
(i)
cash on deposit with a bank
located in South Carolina;
(ii)
cash equivalent accessible through a bank or
investment manager located in South Carolina; or
(iii)
an irrevocable letter of credit in a form
approved by the director and issued by a bank chartered by this
State or a member bank of the Federal Reserve System with a
branch office in this State or as approved by the director.
(b)
For a sponsored captive insurance company that does not
assume any risk, the surplus also may be in the form of other
high quality securities as approved by the director.
(B) Notwithstanding the
requirements of subsection (A) a captive insurance company
organized as a reciprocal insurer under this chapter may not be
issued a license unless it possesses and thereafter maintains
free surplus of one million dollars.
(C) For purposes of
subsections (A) and (B), the director may issue a license
expressly conditioned upon the captive insurance company
providing to the director satisfactory evidence of possession of
the minimum required free surplus. Until this evidence is
provided, the captive may not issue any policy, assume any
liability, or otherwise provide coverage. The director
summarily may revoke the conditional license without legal
recourse by the company if satisfactory evidence of the required
capital is not provided within a maximum period of time, not to
exceed one year, to be established by the director at the time
the conditional license is issued.
(D) Notwithstanding
another provisions of this section, the director may
prescribe additional surplus based upon the type, volume, and
nature of insurance business transacted including, but not
limited to, the net amount of risk retained for an individual
risk. This additional surplus must be in the form of:
(1)
cash;
(2)
cash equivalent;
(3)
an irrevocable letter of credit issued by a bank chartered
by this State, or a member bank of the Federal Reserve System
with a branch in this State or as approved by the director; or
(4)
securities invested as provided in Section 38-90-100.
(E) A captive insurance
company may not pay a dividend out of, or other distribution
with respect to, capital or surplus in excess of the limitations
set forth in Section 38-21-270, without the prior approval of
the director. Approval of an ongoing plan for the payment of
dividends or other distribution must be conditioned upon the
retention, at the time of each payment, of capital or surplus in
excess of amounts specified by, or determined in accordance with
formulas approved by, the director.
(F) An irrevocable
letter of credit, which is issued by a financial institution
other than a bank chartered by this State or a member bank of
the Federal Reserve System, shall meet the same standards as an
irrevocable letter of credit which has been issued by either
entity."
SECTION 9. Section 38-90-55 of the 1976 Code, as last amended by Act 28 of 2009, is further amended to read:
"Section 38-90-55.
(A) A captive reinsurance company must
be incorporated as a stock insurer with its capital divided into
shares and held by its shareholders.
(B) A captive
reinsurance company may not have fewer than three incorporators
of whom at least two must be residents of this State.
(C) Before the articles of
incorporation are transmitted to the Secretary of State, the
incorporators shall petition the director to issue a certificate
finding that the establishment and maintenance of the proposed
corporation promotes the general good of this State. In
arriving at this finding the director may consider:
(1)
the character, reputation, financial standing, and purposes of
the incorporators;
(2)
the character, reputation, financial responsibility, insurance
experience, and business qualifications of the officers and
directors; and
(3)
other factors the director considers advisable.
(D) The capital stock of a
captive reinsurance company must be issued at par value or
greater.
(E)
At least one of the members of the board of directors of a
captive reinsurance company incorporated in this State must be a
resident of this State."
SECTION 10. Section 38-90-60 of the 1976 Code, as last amended by Act 28 of 2009, is further amended to read:
"Section 38-90-60.
(A) A pure captive insurance
company or a sponsored captive insurance company may
be:
(1)
incorporated as a stock insurer with its capital
divided into shares and held by the stockholders;
(2)
incorporated as a public benefit, mutual benefit,
or religious nonprofit corporation with members
in accordance with the South Carolina Nonprofit Corporation Act
of 1994; or
(3)
organized as a limited liability company with its
capital divided into capital accounts and held by its
members;
(4)
incorporated as a mutual insurer without capital
stock, the governing body of which is elected by the members of
the insurer; or
(5)
organized as a reciprocal insurer pursuant to
Chapter 17.
(B) An
association captive insurance company or an industrial insured
captive insurance company may be:
(1)
incorporated as a stock insurer with its capital
divided into shares and held by the stockholders;
(2) organized
as a limited liability company with its capital divided into
capital accounts and held by its members;
(3)
incorporated as a mutual insurer without capital
stock, the governing body of which is elected by the member
organizations of its association; or
(4) organized
as a reciprocal insurer in accordance with Chapter 17.
(C)
A captive insurance company may not have fewer
than three incorporators or organizers of whom not fewer than
two must be residents of this State.
(D)
In the case of a captive insurance company formed
as a corporation, a nonprofit corporation, or a limited
liability company, before the articles of incorporation or
articles of organization are transmitted to the Secretary of
State, the incorporators or organizers shall petition the
director to issue a certificate setting forth a finding that the
establishment and maintenance of the proposed entity will
promote the general good of the State. In arriving at this
finding the director may consider:
(1) the
character, reputation, financial standing, and purposes of the
incorporators or organizers;
(2) the
character, reputation, financial responsibility, insurance
experience, and business qualifications of the officers and
directors or managers; and
(3) other
aspects as the director considers advisable.
(E)
The articles of incorporation or articles of
organization, the certificate issued pursuant to subsection (D),
and the organization fees required by Section 33-1-220,
33-31-122, or 33-44-1204, as applicable, must be transmitted to
the Secretary of State, who shall record both the articles of
incorporation or articles of organization and the certificate.
(F)
In the case of a captive insurance company formed
as a reciprocal insurer, the organizers shall petition the
director to issue a certificate setting forth the director's
finding that the establishment and maintenance of the proposed
association will promote the general good of the State. In
arriving at this finding the director may consider:
(1) the
character, reputation, financial standing, and purposes of the
incorporators or organizers;
(2) the
character, reputation, financial responsibility, insurance
experience, and business qualifications of the officers and
directors or managers; and
(3) other
aspects the director considers advisable. No captive
insurance company shall do any business in this State unless it
first obtains from the director a certificate of authority
authorizing it to do business in this State. In determining
whether to issue a certificate of authority to a captive
insurance company, the director may consider:
(1)
the character, reputation, financial
responsibility, insurance experience, and business
qualifications of the incorporators, officers, and directors or
managers; and
(2)
other aspects the director considers
advisable.
(GC)
In the case of a captive insurance company licensed as a
branch captive insurance company, the alien captive insurance
company shall petition the director to issue a
certificate setting forth the director's finding that the
licensing and maintenance of the branch operations will promote
the general good of the State. In arriving at this finding, the
director or his designee may consider the character, reputation,
financial responsibility, insurance experience, and business
qualifications of the officers and directors or managers of the
alien captive insurance company and other aspects the director
considers advisable. The alien captive insurance company
may must register to do business in this State
after the director's certificate of
authority has been issued.
(H)
The capital stock or membership interests of a
captive insurance company incorporated as a stock insurer or
limited liability company must be issued at not less than par
value.
(I)
In the case of a captive insurance company formed
as a corporation or a nonprofit corporation, at least one of the
members of the board of directors of a captive insurance company
incorporated in this State must be a resident of this State.
(J)
In the case of a captive insurance company formed
as a limited liability company, at least one of the managers of
the captive insurance company must be a resident of this State.
(K)
In the case of a captive insurance company formed
as a reciprocal insurer, at least one of the members of the
subscribers' advisory committee must be a resident of this
State.
(D) The
articles of incorporation, articles of organization, or the
application of a branch captive insurance company to qualify to
do business in South Carolina, and the organization fees
required by Section 33-1-220, 33-31-122, or 33-44-1204, as
applicable, must be transmitted to the Secretary of State, who
shall record the articles of incorporation, articles of
organization, or application to qualify to do business in South
Carolina.
(LE)
A captive insurance company formed as a
corporation, a nonprofit corporation, or a limited liability
company, pursuant to the provisions of this chapter has the
privileges and is subject to the provisions of the general
corporation law, including the South Carolina Nonprofit
Corporation Act of 1994 for nonprofit corporations and the South
Carolina Uniform Limited Liability Company Act of 1996 for
limited liability companies, as applicable, as well as the
applicable provisions contained in this chapter. If a conflict
occurs between a provision of the general corporation law,
including the South Carolina Nonprofit Corporation Act of 1994
for nonprofit corporations and the South Carolina Uniform
Limited Liability Company Act of 1996 for limited liability
companies, as applicable, and a provision of this chapter, the
latter controls. The provisions of this title pertaining to
mergers, consolidations, conversions, mutualizations, and
redomestications apply in determining the procedures to be
followed by a captive insurance company in carrying out any of
the transactions described in those provisions, except the
director may waive or modify the requirements for public notice
and hearing in accordance with regulations which the director
may promulgate addressing categories of transactions. If a
notice of public hearing is required, but no one requests a
hearing, the director may cancel the hearing.
(MF)
A captive insurance company formed as a reciprocal insurer
pursuant to the provisions of this chapter has the privileges
and is subject to Chapter 17 in addition to the applicable
provisions of this chapter. If a conflict occurs between the
provisions of Chapter 17 and the provisions of this chapter, the
latter controls. To the extent a reciprocal insurer is made
subject to other provisions of this title pursuant to Chapter
17, the provisions are not applicable to a reciprocal insurer
formed pursuant to the provisions of this chapter unless the
provisions are expressly made applicable to a captive insurance
company pursuant to the provisions of this chapter.
(G) In the
case of a captive insurance company formed as a corporation, a
mutual insurer, or a nonprofit corporation, at least one of the
members of the board of directors of a captive insurance company
incorporated in this State must be a resident of this State.
(H) In
the case of a captive insurance company formed as a limited
liability company, at least one of the managers of the captive
insurance company must be a resident of this State.
(I) In
the case of a captive insurance company formed as a reciprocal
insurer, at least one of the members of the subscribers'
advisory committee must be a resident of this State.
(NJ)
The articles of incorporation or bylaws of a captive
insurance company may authorize a quorum of a board of directors
to consist of no fewer than one-third of the fixed or prescribed
number of directors as provided for in Section 33-8-240(b). In
the case of a limited liability company, the articles of
organization or operating agreement of a captive insurance
company may authorize a quorum to consist of no fewer than
one-third of the managers required by the articles of
organization or the operating agreement."
SECTION 11. Section 38-90-80(A) of the 1976 Code, as last amended by Act 28 of 2009, is further amended to read:
"(A) At least once
every five years, and whenever the director determines it to be
prudent, the director personally, or by a competent person
appointed by the director, shall visit each captive insurance
company and thoroughly inspect and examine its affairs to
ascertain its financial condition, its ability to fulfill its
obligations, and whether it has complied with this chapter. The
director may waive the requirement for a visit to the captive
insurance company for pure captive insurance companies
and for special purpose captive insurance companies.
The expenses and charges of the examination must be paid to the
State by the company or companies examined and the department
shall issue its warrants for the proper charges incurred in all
examinations."
SECTION 12. Section 38-90-90(C) of the 1976 Code, as added by Act 28 of 2009, is amended to read:
"(C)
Instead In lieu of suspending or
revoking the license of a captive insurance company, the
director may impose fines as provided for in Section
38-2-10."
SECTION 13. Section 38-90-100(C) of the 1976 Code is amended to read:
"(C) Only a pure
captive insurance company or a sponsored captive insurance
company may make loans to its parent company or affiliates
and only upon the prior written approval by
order of the director and must be evidenced by a note in a
form approved by the director. Loans of minimum capital and
surplus funds required by Sections 38-90-40(A) and 38-90-50(A)
are prohibited."
SECTION 14. Section 38-90-130 of the 1976 Code, as last amended by Act 28 of 2009, is further amended to read:
"Section 38-90-130. A captive insurance company, including a captive insurance company organized as a reciprocal insurer under this chapter, may not join or contribute financially to a plan, pool, association, or guaranty or insolvency fund in this State, and a captive insurance company, or its insured or its parent or any affiliated company or any member organization of its association, or in the case of a captive insurance company organized as a reciprocal insurer, a subscriber of the company, may not receive a benefit from a plan, pool, association, or guaranty or insolvency fund for claims arising out of the operations of such captive insurance company. Subject to the prior written approval of the director or his designee, participation by a captive insurance company, including a pure captive insurance company, in a pool for the purpose of commercial risk sharing is not prohibited under this section. Nothing in this section may be interpreted to permit the writing of third-party risk by a captive insurance company outside of a commercial risk sharing arrangement approved by the director."
SECTION 15. Section 38-90-180(B) of the 1976 Code, as last amended by Act 58 of 2001, is further amended to read:
"(B) In the case
of a sponsored captive insurance company:
(1)
the assets of the protected cell may not be used to pay
expenses or claims other than those attributable to the
protected cell; and
(2)
its capital and surplus at all times must be available to
pay expenses of or claims against the sponsored captive
insurance company and may not be used to pay expenses or claims
attributable to a protected cell.
(3)
Notwithstanding another provision of law or
regulation, upon an order of conservation, rehabilitation, or
liquidation of a sponsored captive insurance company, the
receiver shall deal with the sponsored captive insurance
company's assets and liabilities, including protected cell
assets and protected cell liabilities, pursuant to the
requirements of this chapter."
SECTION 16. Section 38-90-210 of the 1976 Code is amended to read:
"Section 38-90-210.
(A) One or more sponsors may form a
sponsored captive insurance company under this chapter.
(B) A sponsored captive
insurance company formed or licensed under this chapter may
establish and maintain one or more protected cells to insure
risks of one or more participants, subject to the following
conditions:
(1)
the shareholders of a sponsored captive insurance company
must be limited to its participants and sponsors;
(2)
each protected cell must be accounted for separately on
the books and records of the sponsored captive insurance company
to reflect the participants of the protected cell, the
financial condition and results of operations of the protected
cell, net income or loss, dividends or other distributions to
participants, and other factors may be provided in the
participant contract or required by the director;
(3)
the assets of a protected cell must not be chargeable with
liabilities arising out of any other insurance business the
sponsored captive insurance company may conduct;
(4)
no sale, exchange, or other transfer of assets may be made
by the sponsored captive insurance company between or among any
of its protected cells without the consent of the protected
cells;
(5)
no sale, exchange, transfer of assets, dividend, or
distribution may be made from a protected cell to a sponsor or
participant without the director's approval and in no event may
the approval be given if the sale, exchange, transfer, dividend,
or distribution would result in insolvency or impairment with
respect to a protected cell;
(6)
a sponsored captive insurance company annually shall file
with the director financial reports the director requires, which
shall include, but are not limited to, accounting statements
detailing the financial experience of each protected cell;
(7)
a sponsored captive insurance company shall notify the
director in writing within ten business days of a protected cell
that is insolvent or otherwise unable to meet its claim or
expense obligations;
(8)
no participant contract shall take effect without the
director's prior written approval, and the addition of each new
protected cell and withdrawal of any participant of any existing
protected cell constitutes a change in the business plan
requiring the director's prior written approval.
(C) The name
of a sponsored captive insurance company shall include the words
'Sponsored Captive' or the abbreviation 'SC'. Any captive
insurance company or protected cell formed prior to July 31,
2013 may not be required to change its name to comply with the
provisions of this subsection.
(D) A
sponsored captive insurance company may establish one or more
protected cells with the prior written approval of the director
of a plan of operation or amendments submitted by the sponsored
captive insurance company with respect to each protected cell.
Upon the written approval of the director of the plan of
operation, which shall include, but is not limited to, the
specific business objectives and investment guidelines of the
protected cell, the sponsored captive insurance company, in
accordance with the approved plan of operation, may attribute to
the protected cell insurance obligations with respect to its
insurance business and assets to fund the obligations. The
sponsored captive insurance company shall transfer all assets
attributable to a protected cell to one or more separately
established and identified protected cell accounts bearing the
name or designation of that protected cell. Protected cell
assets must be held in the protected cell accounts for the
purpose of satisfying the obligations of that protected cell.
(E) All
attributions of assets and liabilities between a protected cell
and the general account must be in accordance with the plan of
operation approved by the director. No other attribution of
assets or liabilities may be made by a sponsored captive
insurance company between the sponsored captive insurance
company's general account and its protected cells.
(F) A
sponsored captive insurance company shall establish
administrative and accounting procedures necessary to properly
identify the one or more protected cells of the sponsored
captive insurance company and the protected cell assets and
protected cell liabilities attributable to the protected cells.
The directors of a sponsored captive insurance company shall
keep protected cell assets and protected cell liabilities:
(1)
separate and separately identifiable from the
assets and liabilities of the sponsored captive insurance
company's general account; and
(2)
attributable to one protected cell separate and
separately identifiable from protected cell assets and protected
cell liabilities attributable to other protected cells.
Notwithstanding the provisions of
this subsection, if this subsection is violated, the remedy of
tracing is applicable to protected cell assets when commingled
with protected cell assets of other protected cells or the
assets of the sponsored captive insurance company's general
account. The remedy of tracing must not be construed as an
exclusive remedy.
(G) When
establishing a protected cell, the sponsored captive insurance
company shall attribute to the protected cell assets with a
value at least equal to the reserves and other insurance
liabilities attributed to that protected cell."
SECTION 17. Section 38-90-220 of the 1976 Code, as last amended by Act 58 of 2001, is further amended to read:
"Section 38-90-220.
A sponsor of a sponsored captive insurance company
must be an insurer licensed pursuant to the laws of a state, an
insurance holding company that controls an insurer licensed
pursuant to the laws of any state and subject to registration
pursuant to the insurance holding company system laws of the
state of domicile of the insurer, a reinsurer authorized or
approved pursuant to the laws of a state, or a captive insurance
company formed or licensed pursuant to this chapter. A risk
retention group may not be either a sponsor or a participant of
a sponsored captive insurance company. The business written by
a sponsored captive insurance company with respect to each
protected cell must be:
(1)
fronted by an insurance company licensed pursuant
to the laws of:
(a) any
state; or
(b) any
jurisdiction if the insurance company is a wholly owned
subsidiary of an insurance company licensed pursuant to the laws
of any state;
(2)
reinsured by a reinsurer authorized or approved by
this State; or
(3)
secured by a trust fund in the United States for
the benefit of policyholders and claimants funded by an
irrevocable letter of credit or other asset acceptable to the
director. The amount of security provided by the trust fund may
not be less than the reserves associated with those liabilities,
including reserves for losses, allocated loss adjustment
expenses, incurred but unreported losses, and unearned premiums
for business written through the participant's protected cell.
The director may require the sponsored captive to increase the
funding of a trust established pursuant to this item. If the
form of security in the trust is a letter of credit, the letter
of credit must be established, issued, or confirmed by a bank
chartered in this State, a member of the federal reserve system,
or a bank chartered by another state if that state-chartered
bank is acceptable to the director. A trust and trust
instrument maintained pursuant to this item must be in a form
and upon terms approved by the director.
(A) The
sponsored captive insurance company shall attribute all
insurance obligations, assets, and liabilities relating to a
participant's risks to the participant's protected cell.
(B) The
protected cell assets of a protected cell may not be charged
with liabilities arising out of any other business the sponsored
captive insurance company may conduct. All contracts or other
documentation reflecting protected cell liabilities shall
clearly indicate that only the protected cell assets are
available for the satisfaction of those protected cell
liabilities. Under no circumstances may a protected cell be
authorized to issue insurance or reinsurance contracts directly
to policyholders or reinsureds or have any obligation to the
policyholders or reinsureds of the sponsored captive insurance
company's general account.
(C) The
income, gains and losses, realized or unrealized, from protected
cell assets and protected cell liabilities must be credited to
or charged against the protected cell without regard to other
income, gains or losses of the sponsored captive insurance
company, including income, gains or losses of other protected
cells. Investments must be handled pursuant to Section
38-90-100(B).
(D) In
all sponsored captive insurance company transactions, the
contracts or other documentation effecting the transaction shall
contain provisions identifying the protected cell to which the
transaction will be attributed. In addition, the contracts or
other documentation must clearly disclose that the assets of
that protected cell, and only those assets are available to pay
the obligations of that protected cell. Notwithstanding the
provisions of this subsection and subject to the provisions of
this chapter and any other applicable law or regulation, the
failure to include such language in the contracts or other
documentation may not be used as the sole basis by creditors,
reinsurers, or other claimants to circumvent the provisions of
this chapter.
(E)
Assets attributed to a protected cell must be valued at
their market value on the date of valuation or if there is no
readily available market, as provided in the contract or the
rules or other written documentation applicable to the protected
cell.
(F) At
the cessation of business of a protected cell in accordance with
the plan approved by the director, the sponsored captive
insurance company voluntarily shall close out the protected cell
account."
SECTION 18. Section 38-90-230 of the 1976 Code, as last amended by Act 58 of 2001, is further amended to read:
"Section 38-90-230.
(A) An association, a
corporation, a limited liability company, a partnership, a
trust, or other business entity may be a participant in a
sponsored captive insurance company formed or licensed pursuant
to this chapter.
(B) A sponsor may be a
participant in a sponsored captive insurance company.
(C) A participant need not
be a shareholder of the sponsored captive insurance company or
an affiliate of the company.
(D) A participant shall
insure only its own risks through a sponsored captive insurance
company, unless otherwise approved by the director.
Protected cell assets are only available to the creditors of
the sponsored captive insurance company that are creditors with
respect to that protected cell and are therefore entitled, in
conformity with this chapter, to have recourse to the protected
cell assets attributable to that protected cell. Protected cell
assets are absolutely protected from the creditors of the
sponsored captive insurance company that are not creditors with
respect to that protected cell and who, therefore, are not
entitled to have recourse to the protected cell assets
attributable to that protected cell. Creditors with respect to a
protected cell are not entitled to have recourse against the
protected cell assets of other protected cells or the assets or
the sponsored captive insurance company's general account.
Protected cell assets are only available to creditors of a
sponsored captive insurance company after all protected cell
liabilities have been extinguished or otherwise provided for in
accordance with the plan of operation relating to that protected
cell.
(B) When
an obligation of a sponsored captive insurance company to a
person arises from a transaction, or is otherwise imposed, with
respect to a protected cell:
(1)
that obligation of the sponsored captive
insurance company extends only to the protected cell assets
attributable to that protected cell, and the person, with
respect to that obligation, is entitled to have recourse only to
the protected cell assets attributable to that protected cell;
and
(2)
that obligation of the sponsored captive
insurance company does not extend to the protected cell assets
of any other protected cell or the assets of the sponsored
captive insurance company's general account, and that person,
with respect to that obligation, is not entitled to have
recourse to the protected cell assets of any other protected
cell or the assets of the sponsored captive insurance company's
general account.
(C) When
an obligation of a sponsored captive insurance company relates
solely to the general account, the obligation of the sponsored
captive insurance company extends only to the sponsored captive
insurance company, and that person, with respect to that
obligation, is entitled to have recourse only to the assets of
the sponsored captive insurance company's general account.
(D) The
establishment of one or more protected cells alone does not
constitute, and may not be deemed to be, a fraudulent
conveyance, an intent by the sponsored captive insurance company
to defraud creditors, or the carrying out of business by the
sponsored captive insurance company for any other fraudulent
purpose."
SECTION 19. Section 38-90-240 of the 1976 Code is amended to read:
"Section 38-90-240.
A licensed captive insurance company that meets
the necessary requirement of this title imposed upon an insurer
must be considered for issuance of a certificate of authority to
act as an insurer in this State. (A)
The following may be participants in a sponsored
captive insurance company formed or licensed pursuant to this
chapter:
(1)
an association, a corporation, limited liability
company, partnership, trust, or other business entity; and
(2)
a sponsor may be a participant in a sponsored
captive insurance company.
(B) A
participant does not need to be a shareholder of the sponsored
captive insurance company or an affiliate of the company.
(C) A
participant shall insure only its own risks through a sponsored
captive insurance company, unless otherwise approved by the
director.
(D) A
risk retention group may not be either a sponsor or participant
in a sponsored captive insurance company.
(E) A
sponsored captive insurance company established pursuant to
Section 38-90-210 may not be used to facilitate insurance
securitizations, but may be established for the purpose of
isolating the expenses and claims. Insurance securitization
transactions utilizing protected cells are governed by Chapter
10 of this title."
SECTION 20. Section 38-90-450 of the 1976 Code, as last amended by Act 28 of 2009, is further amended to read:
"Section 38-90-450.
(A) A SPFC may be established as a
stock corporation, limited liability company, mutual,
partnership, or other form of organization approved by the
director.
(B) The SPFC's
organizational documents must limit the SPFC's authority to
transact the business of insurance or reinsurance to those
activities the SPFC conducts to accomplish its purpose as
expressed in this article.
(C) The SPFC may not
adopt a name that is the same as, deceptively similar to, or
likely to be confused with or mistaken for another existing
business name registered in this State.
(D) A SPFC may
not have fewer than three incorporators or organizers of whom
not fewer than two must be residents of this State.
(E)
Before transmitting its organizational documents
to the Secretary of State, the incorporators or organizers shall
petition the director to issue a certificate setting forth a
finding that the establishment and maintenance of the proposed
SPFC promotes the general good of the State. In arriving at
this finding the director may consider:
(1) the
character, reputation, financial standing, and purposes of the
incorporators or organizers;
(2) the
character, reputation, financial responsibility, insurance
experience, and business qualifications of the officers,
directors, partners, members, manager, or organizers, as
applicable;
(3) other
aspects as the director considers advisable.
(F)
The organizational documents, the certificate
issued pursuant to subsection (E), and the required
organization fees must be transmitted to the Secretary of State,
who shall record the relevant organizational documents.
(GE)
At least one of the members of the management of the SPFC
must be a resident of this State.
(HF)
A SPFC formed pursuant to the provisions of this article
has the privileges of and is subject to the provisions of the
1976 Code, applicable to its formation, as well as the
applicable provisions contained in this article. If a conflict
occurs between a provision of the applicable law and a provision
of this article, the latter controls. Nothing contained in this
provision with respect to a SPFC shall abrogate, limit, or
rescind in any way the authority of the Securities Commissioner
pursuant to the provisions of Title 35."
SECTION 21. Section 38-90-235 of the 1976 Code is repealed.
SECTION 22. This act takes effect upon approval by the Governor. /
Renumber sections to conform.
Amend title to conform.