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(Statutory Authority: 1976 Code Sections 1-23-10 et seq., 1-23-110 et seq., 34-29-10 et seq., 34-31-10 et seq., 37-4-101 et seq., 38-1-20(34), 38-3-60, 38-3-110 et seq., 38-5-80, 38-9-180, 38-23-10 et seq., 38-33-10 et seq., 38-33-200, 38-38-550, 38-39-10 et seq., 38-43-10 to 38-43-80, 38-43-100, 38-43-106, 38-43-110, 38-45-50, 38-47-10 et seq., 38-47-40, 38-49-10 et seq., 38-50-90, 38-55-50, 38-57-20 et seq., 38-63-10, 38-65-10, 38-69-10, 38-71-730, 38-73-330, 38-73-730, 38-73-735, 38-73-760, 38-77-530, 38-78-110 1975 Act No. 306)

69-1. Adjustment of Claims Under Unusual Circumstances.

1. Licensed Adjusters in South Carolina are authorized to adjust claims for unlicensed companies under the following circumstances:

(a) Where the insured has an accident in South Carolina but is not a resident, being in a status of a transient.

(b) Where the insured is a new resident in the State and has an unexpired policy of an unlicensed company purchased before he moved into the State.

2. The law provides the conditions under which a Non-Resident Adjuster may be licensed. In the event of a catastrophe where there are insufficient Licensed Adjusters in South Carolina to handle claims expeditiously, Non-Resident Adjusters will be permitted to enter the State to handle the adjustments arising out of the catastrophe without being required to be licensed in South Carolina, provided that the Adjuster exhibits evidence of an Adjuster's License in his home state and remains in the State only for the period that is necessary to assist in the adjustments.

3. An unusual circumstance or catastrophe exists when, due to a specific, infrequent, and sudden natural or manmade disaster or phenomenon, there have arisen losses to property in South Carolina that are covered by insurance, and the losses are so numerous and severe that resolution of claims related to such covered property losses will not occur expeditiously without the authorization of emergency adjusters by the Department due to the magnitude of the catastrophic damage.

4. The Department will determine and announce when an emergency or catastrophe exists and also will determine and announce the expiration of the period of emergency or catastrophe.

69-2. Repealed by State Register Volume 30, Issue No. 3, eff March 24, 2006.

69-3. Definitions.

1. Except as may be otherwise set forth by the Statutes of this State, the following words and phrases, whenever and wherever they appear in matters under the cognizance of this Commission, shall have the meaning ascribed herein:

Accepting insurer--The Company that agrees to insure the risk.

Acquisition cost--That portion of premium, or part of a rate, representing the costs of securing lines of insurance.

Adjustor--A person who determines the extent of insured losses and assists in settling, or attempts to settle claims, usually representing the insurer.

Admitted assets--Those assets of an insurer which conform to the regulations of the South Carolina Insurance Commission.

Advisory organization--An organization that formulates policy and principles without the authority to apply them.

Affiliate--A corporation of which a majority of the capital stock is owned or controlled by any or all of the stockholders, directors or officers of another corporation, who also own or control a majority of the stock of such other corporation.

Agent--As defined in Section 38-43-10 of the S. C. Code of Laws, 1976.

Alien insurer--An insurer formed under the laws of a country other than the United States of America, its States, Commonwealths, Territories or insular possessions.

All risks--A term commonly used in insurance to denote the coverage of damage or loss of property from all hazards except depreciation, deterioration and wear and tear.

Ancillary state--Any state other than a domiciliary state.

Appraisal--Estimate of value made by qualified, impartial and disinterested persons, duly appointed for such purpose.

Articles--Articles of incorporation and all amendments thereto.

Assessment--An apportionment or call made on the entire membership of a mutual company or association for definite contributions or payment of money on account of losses sustained by particular members.

Assigned risk--The protection of a specific insurance risk that has been directed to a given insurer by qualified authority.

Assuming insurer--The company, party to a reinsurance transaction, which assumes insurance, annuity and endowment risks.

Authorized insurer--An insurer duly licensed to do business in this State.

Average rate--A composite unit measuring the various perils of more than a single subject of insurance and usually at separate locations, expressed in dollars and cents per $100.00 of protection.

Basic rate--The foundation unit expressed in monetary amounts to which fractional amounts are added to accurately develop the correct final rate for the insurance exposure.

Blanket coverage--Insurance which contemplates that the risk is shifting, fluctuating or varying, and which covers a class of property or persons rather than any particular thing or persons.

Board of directors--Synonymous with board of trustees, and means the body having power and responsibility for the management and control of a corporation, fraternal benefit association or other association, by whatever name called, and the advisory body having similar powers in reference to a reciprocal insurer or Lloyds underwriters.

Broker--As defined in Section 38-45-10, S. C. Code of Laws, 1976.

Brokerage--Any arrangement or agreement whereby any agent can be held to be the agent of the insured and not of the insurer, or whereby an agent is permitted to solicit or place any class of insurance other than those authorized to be issued in South Carolina by such agent's insurer.

Bureau--An organization designed to render specific services in regard to insurance.

Capital--The aggregate amount paid in on the shares of capital stock of a corporation issued and outstanding, and equal to the par or declared value of the stock issued.

Capital stock--The aggregate amount of the par or declared value of all shares of capital stock.

Ceding company--The Company, party to a reinsurance transaction, whose insurance, annuity and endowment risks or obligations are assumed.

Certificate of insurance--A memorandum copy, complete or abbreviated, of an insurance contract.

Charter--The basic instrument, by whatever name called, prescribing the powers, purposes and organization of a corporation.

Chief Insurance Commissioner--The chief officer of the Insurance Department, appointed by the Insurance Commission.

Co-insurance--A stipulation or requirement that the insured undertakes to be his own insurer to the extent that he fails to maintain insurance of a given percentage of the value of the property against loss or damage.

Commission--That part of the premium paid to the agent as compensation for his services.

Corporation--Except as otherwise indicated, "corporation" means a corporation formed or existing under the laws of this State.

Debit--A defined geographical area assigned to a particular agent, usually for the writing of industrial insurance.

Debit agent--One who collects weekly, bi-weekly or monthly premiums from a number of policyholders, generally small policies, in a designated territory, and generally industrial insurance.

Decreasing interest insurance--Same as decreasing balance insurance. Insurance written on a risk, generally in connection with a loan, wherein the coverage decreases commensurate with the decrease of obligation.

Department--The Insurance Department of this State; also, the Insurance Commission of this State.

Deputy--The first, or other deputy chief insurance commissioner of this State, so appointed by the Chief Insurance Commissioner.

Deviation--A departure, either in rate or coverage, from the prevailing standards.

Dividends--The excess of premiums collected, over costs of insurance, returned or credited to the policyholder.

Domestic insurer--An insurer formed under the laws of this State.

Domiciliary state--The State in which an insurer is incorporated or organized, or in the case of an insurer incorporated or organized in a foreign country, the State in which such insurer, having become authorized to do business in such State, has designated as its domiciliary State and/or State of entry into the United States.

Earned premium--That portion of the gross premium absorbed, at a given time, by costs of administration, risk, and profit.

Fire insurance and Allied lines--Insurance providing indemnity to the insured in case of loss or damage occasioned by fire and such other forms of property insurance as are undertaken by fire insurance companies in addition to marine and inland marine insurance.

Foreign domesticated insurer--A foreign insurer licensed to do business in this State.

Foreign insurer--An insurer, not an alien insurer, formed under laws other than the laws of this State.

Fraternal Benefit Association--As defined in Section 38-37-10, S. C. Code of Laws, 1976.

General Assets--All property, real, personal, or otherwise, not specifically mortgaged, pledged, deposited, or otherwise encumbered for the security or benefit of specified persons or a limited class or classes of persons and as to such specifically encumbered property the term includes such property or its proceeds in excess of the amount necessary to discharge the sum or sums secured thereby. Assets held in trust and assets held on deposit for the security or benefit of all policyholders, or all policyholders and creditors in the United States, shall be deemed general assets.

Gross Premium--The whole amount of the money consideration, given at fixed intervals during the lifetime of a policy of insurance, in exchange for the insurance set forth in the policy.

Group Insurance--A form of personal insurance which is issued to members of an organized body qualified, and not specifically prohibited, to be an insured, in which individual insurances are placed upon the persons of each member of that group, but in which the group acts as an entity in the payment of premiums, inception of the contract, and the like.

Holding company--Has the same meaning as parent corporation. (See "subsidiary".)

Incorporator--A person, natural or corporate, who signs the articles of incorporation.

Insurance--A contract whereby one undertakes to indemnify another or pay a specified amount upon determinable contingencies.

a. Accident Insurance--Insurance against loss or damage due to unexpected injury to the person insured and resulting in disability or death.

b. Casualty Insurance--Those forms of indemnity providing for payment for loss or damage, resulting from accidental or some unanticipated contingency, except fire and the elements.

c. Credit Insurance--An indemnity to merchants or traders against the insolvency of customers to whom they extend credit and under the Small Loan Act, various insurances on the lives, property and health of borrowers to the extent of the amount loaned and unrepaid.

d. Fidelity Insurance--Insurance against loss from the want of honesty, integrity or fidelity of employees or others in a position of trust.

e. Fire Insurance--A contract of indemnity against loss by fire and lightning.

f. Group Insurance--See specific heading.

g. Health Insurance--A contract of indemnity against expense and loss of time resulting from disease.

h. Industrial Insurance--A plan of insurance under which policies of insurance are issued in consideration of weekly, bi-weekly or monthly payments.

i. Inland Marine Insurance--A contract of indemnity against loss suffered in connection with inland land or water transportation or with communications equipment.

j. Liability Insurance--Insurance against loss or liability on account of bodily or property injury sustained by others.

k. Life Insurance--A contract whereby in consideration of the payment of premiums the insurer engages to pay a certain sum upon the death of the insured.

l. Marine Insurance--A contract of indemnity against loss from marine perils.

m. Reciprocal Insurance--See specific heading.

n. Surety Insurance--An insurance contract whereby one, for a consideration, agrees to indemnify another against losses arising from the want of integrity, fidelity or solvency of employees and persons holding positions of trust, or against insolvency of losses from nonpayments of notes and other evidence of indebtedness, or against other breaches of contract. As generally used, this insurance is synonymous with guaranty insurance.

Insurance rate--The mathematical figure per $100 of insurance which determines the premium.

Insurer--Any legal entity, engaged or attempting to engage in the business of making insurance or surety contracts.

Level insurance--Insurance in which the amount of insurance benefit does not decrease during its term.

License--A certificate of authority, issued by a qualified public agency, to act within prescribed limits.

Lien-endorsement coverage--An endorsement added to an automobile physical damage policy indemnifying a lending agency against loss resulting from prior existing liens.

Lodge--As set forth in Section 38-37-20, S. C. Code of Laws, 1976.

Member--One who holds a contract of insurance or is insured in an insurance company other than a stock corporation.

Minimum surplus--The minimum amount by which the admitted assets of an insurer, over and above the capital stock, must exceed its liabilities, in order to be licensed to do business in this State.

Multiple line insurance--A policy of insurance insuring more than one class of risk.

Net premium--That portion of the gross premium remaining after adjustments of debits, credits and dividends.

Non-Recording insurance--An insurance contract protecting a lender from loss occasioned by his failure to record a mortgage given as security for the loan made.

Officer--Any person charged with active management and control, in an executive capacity, of the affairs of a corporation.

Parent corporation--See "subsidiary".

Person--Any legal entity.

Policy--A contract of insurance.

Policyholder--Holder of a contract of insurance.

Preferred claim--Any claim with respect to which the law of a State or of the United States accords priority of payment from the general assets of the insurer.

Premium--Money or any other thing of value paid or given in consideration of a contract of insurance.

Premium reserves--A fund set aside for the payment of future benefits under a policy.

Reciprocal insurance exchange--A group or association of persons cooperating through an attorney-in-fact for the purpose of insuring themselves and each other.

Reinsurance--The assumption of a portion of the risk on a policy by another insurer.

Renewal license--A license which becomes effective immediately following the termination of a license previously issued and in force, and which differs from such previous license only in respect to the date of expiration.

Return premium--Return to the policyholder of the unearned portion of a premium upon cancellation, or adjustment in rate, of a policy.

Shareholder--A holder of record of shares of stock in a corporation.

Short rate--A penalty rate, using percentages slightly higher than would result from pro-rata calculations.

Single interest insurance--Insurance in which the benefit amount decreases during its term in accordance with predetermined scale.

Specific insurance--A contract of insurance which definitively describes the thing insured and the amount of insurance applying thereto.

Subsidiary--A corporation of which the majority of the capital stock is owned or controlled by another corporation, called the "parent corporation".

Surplus to policyholders--The excess of total admitted assets over the liabilities of an insurer which shall be the sum of all capital and surplus accounts minus any impairment thereof.

Unauthorized insurer--Any insurer not authorized to do business in this State.

Unearned premium--That portion of the gross premium, at a given time, that is unearned or unexhausted by the earned premium.

Unearned premium reserve--Funds, equal to the unearned premium, set aside for contingencies.

69-4. Life, Accident and Health Insurance--Reserve Tabulations.

Each and every domestic insurance company having life and/or accident and health insurance in force shall submit, with the annual statement required by this Department, a copy of the valuation tabulation used in the determination of its reported life and accident and health reserve. If the tabulation is a summarization, each company shall be prepared to support each and every phase of the summary by detailed cards, listings, or some form of acceptable running inventory. This detailed information shall be maintained until verification of the valuation has been made by a representative or representatives of this Department.

Each company shall take the necessary steps to acquire and maintain, in its home office, the necessary reserve tables for proper calculation of reserves on all contracts in force as of the applicable valuation date. If the insurance is of such a nature that no appropriate mortality or morbidity tables have been published, the company may use methods and approximations warranted by company experience and approved by the Chief Insurance Commissioner.

69-5. Policy Approvals.

On January 1, 1962, and thereafter, every industrial life insurance policy or contract submitted to this Department for approval by a domestic insurance company, must be accompanied by the appropriate net premium and terminal reserve, except in those instances where the applicable net premiums and terminal reserves have been published.

Every ordinary life policy or contract must be accompanied by the appropriate net premium, terminal and mean reserves, except in those instances when such premiums and reserves have been otherwise published.

If such premiums and reserves are not submitted because of publication, the name of the publication together with a statement that the company possesses and maintains a copy of the publication must be submitted in writing to this Department.

No approval of any industrial life policy or contract or any ordinary life policy or contract will be given except upon compliance with this Regulation.

69-5.1. Minimum Standards for the Readability of Commonly Purchased Insurance Policies.

This Regulation establishes minimum standards of readability applicable to all commonly purchased personal policies, contracts and certificates of insurance delivered or issued for delivery in this State.

A. Purpose: The purpose of this Regulation is to establish minimum standards of readability applicable to all commonly purchased personal policies, contracts and certificates of insurance delivered or issued for delivery in this State.

This Regulation is not intended to increase the risk assumed by insurance companies or other entities subject to this Act or to supersede their obligation to comply with the substance of other insurance legislation applicable to such forms of insurance policies. This Regulation is not intended to impede flexibility and innovation in the development of policy forms or content or to lead to the standardization of policy forms or content.

A policy is a legal document. Revision of the policy to make it more readable must not lead to its devaluation as a legal document. The policy must comply with all statutory and regulatory requirements.

B. Definitions--As used in this Regulation:

(1) "Commissioner" means the Chief Insurance Commissioner of this State.

(2) "Policy" or "Policy Forms" means any policy, certificate, rider, amendment, endorsement, contract, plan or agreement of personal insurance, and any renewal thereof including homeowners, dwelling fire, automobile, accident and health, life and all other forms of personal insurance delivered or issued for delivery in this State by any company subject to this Regulation; any certificate, contract or policy issued by a fraternal benefit society, and any certificate issued pursuant to a group insurance policy delivered or issued for delivery in this State. The Commissioner may add other policies as he deems advisable.

(3) "Company" or "Insurer" means any life and health, accident, property and casualty, title or marine insurance company, reciprocal, county mutuals, fraternal benefit society, nonprofit health services corporation, nonprofit hospital service corporation, nonprofit medical service corporation, prepaid health plan, dental care plan, vision care plan, pharmaceutical plan, health maintenance organization, and all similar type organizations.

C. Applicability:

(1) This Regulation shall apply to all policies delivered or issued for delivery in this State by any insurer on or after the date such forms must be approved under this Regulation, but nothing in this Regulation shall apply to:

(a) Any policy which is a security subject to Federal jurisdiction;

(b) Any group policy; however, this shall not exempt any certificate issued pursuant to a group policy delivered or issued for delivery in this State or mass marketed certificates subject to approval by this Department;

(c) Any group annuity contract which serves as a funding vehicle for pension, profit-sharing, or deferred compensation plans;

(d) Commercial, fleet vehicle and incidental personal coverages which are a part of a commercial policy;

(e) Any life, accident and health form used in connection with, as a conversion from, as an addition to, in exchange for or issued pursuant to a contractual provision for, a policy delivered or issued for delivery on a form approved or permitted to be issued prior to the date such forms must be approved under this Regulation;

(f) Renewal of a life or accident and health policy delivered or issued for delivery prior to the date such forms must be approved under this Regulation;

(g) Surety or Fidelity bonds.

D. Minimum Policy Readability Standards:

(1) In addition to any other requirements of law, no policy forms of personal insurance except as stated in Section C, shall be delivered or issued for delivery in this State on or after the dates such forms must be approved under this Regulation unless:

(a) The text achieves a minimum score of 40 on the Flesch Reading Ease Test or an equivalent score on any other comparable test as provided in subsection (3) of this Section;

(b) It is printed, except for specification pages, schedules and tables, in not less than ten point type, one point leaded;

DRAFTING NOTE: This subsection is not intended to include minor instructions concerning the preparation of an application which becomes part of the policy within the type size requirement (e. g., "Last Name," "RFD or Box Number.")

(c) The style, arrangement and overall appearance of the policy give no undue prominence to any portion of the text of the policy or to any endorsement or riders; and

(d) It contains a table of contents or an index of the principal sections of the policy, if the policy has more than 3,000 words or if the policy is printed on more than 3 pages.

(2) For the purposes of this Section, a Flesch Reading Ease Test Score shall be measured by the following method:

(a) For a policy containing 10,000 words or less of text, the entire policy shall be analyzed. For a policy containing more than 10,000 words, the readability of two 100 word samples per page may be analyzed instead of the entire form. The samples shall be separated by at least 20 printed lines.

(b) The number of words and sentences in the text shall be counted and the total number of words divided by the total number of sentences. The figure obtained shall be multiplied by a factor of 1.015.

(c) The total number of syllables shall be counted and divided by the total number of words. The figure obtained shall be multiplied by a factor of 84.6.

(d) The sum of the figures computed under (b) and (c) subtracted from 206.835 equals the Flesch Reading Ease Test Score for the policy form.

(e) For purposes of this Section, the following procedures shall be used:

(1) A contraction, hyphenated word, numbers and letters when separated by spaces shall be counted as one word;

(2) A unit of words ending with a period, semicolon, or colon, but excluding headings and captions shall be counted as a sentence;

(3) A syllable means a unit of spoken language consisting of one or more letters of a word as divided by an accepted dictionary. Where the dictionary shows two or more equally acceptable pronunciations of a word, the pronunciation containing fewer syllables may be used.

(f) The term "text" as used in this Section shall include all printed matter except the following:

(1) The name and address of the insurer; the name, number or title of the policy; the table of contents or index; captions and subcaptions; specification pages, schedules or tables;

(2) Any policy language which is drafted to conform to the requirements of any federal law, regulation or agency interpretation; any policy language required by any collectively bargained agreement; any medical terminology; any words which are defined in the policy; and any policy language required by law or regulation; provided, however, the insurer identifies the language or terminology excepted by this subsection and certifies, in writing that the language or terminology is entitled to be excepted by this subsection.

(3) Any other reading test may be approved by the Commissioner for use as an alternative to the Flesch Reading Ease Test if it is comparable in result to the Flesch Reading Ease Test.

DRAFTING NOTE: The Flesch Reading Ease Test (Rudolph Flesch, The Art of Readable Writing, 1949, as revised 1974) is the basic test set forth in this Regulation.

(4) Filings subject to this Section shall be accompanied by a certificate signed by an officer of the insurer or filing organization stating that it meets the minimum reading ease score on the test used or stating that the score is lower than the minimum required but should be approved in accordance with Section F of this Regulation. To confirm the accuracy of any certification, the Commissioner may require the submission of further information to verify the certification in question. If it is necessary to alter coverage, such change must be noted and explained upon submission for filing.

(5) At the option of the insurer, riders, endorsements, and other forms made a part of the policy may be scored as separate forms or as part of the policy with which they may be used.

E. Powers of the Commissioner: The Commissioner may approve a policy which does not meet the minimum Flesch Reading Ease Test Score required herein whenever, in his sole discretion, he finds such approval:

(1) will provide a more accurate reflection of the readability of a policy form;

(2) is warranted by the nature of a particular policy, or

(3) is warranted by certain policy language which is drafted to conform to the requirements of any State law, Regulation or Agency interpretation.

F. Approval of Forms: A policy meeting the requirements of Section (D)(1) shall be approvable notwithstanding the provisions of any other law which specify the content of policies, if the policy provides the policyholders and claimants protection not less favorable than they would be entitled to under such laws.

G. Effective Dates:

(1) Except as provided in Section C, no policy shall be delivered or issued for delivery in this State on or after two years next following final promulgation of this Regulation unless approved by the Commissioner or permitted to be issued under this Regulation. Any policy which has been approved or permitted to be issued prior to and which meets the standards set by this Regulation need not be refiled for approval, but may continue to be lawfully delivered or issued for delivery in this State upon the filing with the Commissioner of a list of such policies identified by form number, edition date, previous approval date accompanied by a certificate as to each such policy in the manner provided in Section D(4).

(2) In addition to the above requirements the effective date for all property and casualty policies shall be as follows:

(a) Renewal policies or continuous policies shall be reissued using forms in compliance with this Regulation on the first anniversary or billing date which occurs after a two year period following the final promulgation of this Regulation.

(b) The insurer shall provide, in the conversion to readable policies, generally and in overall effect, coverage which is substantially equal to or superior to that afforded by policies which they replace.

(c) If there are substantive differences in coverages, the insurer must explain in writing to the insured such differences.

(3) The Commissioner shall reserve the right to withdraw approval of all existing policies of commonly purchased insurance that do not comply with the provisions of this Regulation. The Commissioner may, in his sole discretion, extend the dates in Section G(1).

H. Penalties: Attention is directed to the penalties found in Section 5 of Act 550, "Any insurer who violates the provisions of this Act shall be deemed guilty of misdemeanor and upon conviction shall be fined not more than one thousand dollars for each offense and the Commissioner may revoke the license of any insurer who violates the provisions of this Act."

69-6. Brokers' Licenses.

1. No person shall be licensed as an insurance broker to represent citizens of this State for the placing of insurance unless such person, at the time the initial or renewal application is made for an insurance broker's license, possesses a valid, current insurance agent's license for that line of business for which the brokerage authority is intended to apply, and has been so licensed as such an insurance agent for not less than two (2) years.

2. Every broker's license issued shall be restricted to those lines of business for which specific application is made and must be supported by record of prior issuance of agent's license for such lines of business. The limits of authority of all broker's licenses shall be plainly set forth on the face of the license.

69-7. Minimum Reserve Standards for Individual and Group Accident and Health Insurance Contracts.

Section I. Introduction.

A. Scope.

1. These standards apply to all individual and group accident and health insurance coverages except credit insurance.

2. When an insurer determines that adequacy of its accident and health insurance reserves requires reserves in excess of the minimum standards specified herein, such increased reserves shall be held and shall be considered the minimum reserves for that insurer.

3. With respect to any block of contracts, or with respect to an insurer's accident and health business as a whole, a prospective gross premium valuation is the ultimate test of reserve adequacy as of a given valuation date. Such a gross premium valuation will take into account, for contracts in force, in a claims status, or in a continuation of benefits status on the valuation date, the present value as of the valuation date of all expected benefits unpaid, all expected expenses unpaid, and all unearned or expected premiums, adjusted for future premium increases reasonably expected to be put into effect.

4. Such a gross premium valuation is to be performed whenever a significant doubt exists as to reserve adequacy with respect to any major block of contracts, or with respect to the insurer's accident and health business as a whole. In the event inadequacy is found to exist, immediate loss recognition shall be made and the reserves restored to adequacy. Adequate reserves (inclusive of claim, premium, and contract reserves, if any) shall be held with respect to all contracts, regardless of whether contract reserves are required for such contracts under these standards.

5. Whenever minimum reserves, as defined in these standards, exceed reserve requirements as determined by a prospective gross premium valuation, such minimum reserves remain the minimum requirement under these standards.

B. Categories of Reserves.

1. The following sections set forth minimum standards for three categories of accident and health insurance reserves:

a. Section II. Claim Reserves.

b. Section III. Premium Reserves.

c. Section IV. Contract Reserves.

2. Adequacy of an insurer's accident and health insurance reserves is to be determined on the basis of all three categories combined. However, these standards emphasize the importance of determining appropriate reserves for each of the three categories separately.

C. Appendices.

1. These standards contain two appendices which are an integral part of the standards, and one additional "supplementary" appendix which is not part of the standards as such, but is included for explanatory and illustrative purposes only.

2. Appendix A. Specific minimum standards with respect to morbidity, mortality, and interest, which apply to claim reserves according to year of incurral and to contract reserves according to year of issue.

3. Appendix B. Glossary of Technical Terms Used.

4. Appendix C. (Supplementary) Waiver of Premium Reserves.

Section II. Claim Reserves.

A. General.

1. Claim reserves are required for all incurred but unpaid claims on all accident and health insurance policies.

2. Appropriate claim expense reserves are required with respect to the estimated expense of settlement of all incurred but unpaid claims.

3. All such reserves for prior valuation years are to be tested for adequacy and reasonableness along the lines of claim runoff schedules in accordance with the statutory financial statement including consideration of any residual unpaid liability.

B. Minimum Standards for Claim Reserves.

1. Disability Income.

a. Interest. The maximum interest rate for claim reserves is specified in Appendix A.

b. Morbidity. Minimum standards with respect to morbidity are those specified in Appendix A; except that, at the option of the insurer: (i) For claims with a duration from date of disablement of less than two years, reserves may be based on the insurer's experience, if such experience is considered credible, or upon other assumptions designed to place a sound value on the liabilities. (ii) For group disability income claims with a duration from the date of disablement of more than two years but less than five years, reserves may, with the approval of the Director of Insurance, be based upon the insurer's experience for which the insurer maintains underwriting and claim administration control. The request for such approval of a plan of modification to the reserve basis must include:

(I) An analysis of the credibility of the experience;

(II) A description of how all of the insurer's experience is proposed to be used in setting reserves;

(III) A description and quantification of the margins to be included;

(IV) A summary of the financial impact that the proposed plan of modification would have had on the insurer's last filed annual statement;

(V) A copy of the approval of the proposed plan of modification by the commissioner of the state of domicile; and

(VI) Any other information deemed necessary by the Director of Insurance.

DRAFTING NOTE: For experience to be considered credible for purposes of (ii), the company should be able to provide claim termination patterns over no more than six (6) years reflecting at least 5,000 claim terminations during the third through fifth claim durations on reasonably similar applicable policy forms.

For claim reserves to reflect "sound values" and/or reasonable margins, reserve tables based on credible experience should be adjusted regularly to maintain reasonable margins. Demonstrations may be required by the commissioner of the state of domicile based on published literature (e.g. Goldman, TSA XLII).

c. Duration of Disablement. For contracts with an elimination period, the duration of disablement should be measured as dating from the time that benefits would have begun to accrue had there been no elimination period.

2. All Other Benefits.

a. Interest. The maximum interest rate for claim reserves is specified in Appendix A.

b. Morbidity or Other Contingency. The reserve should be based on the insurer's experience, if such experience is considered credible, or upon other assumptions designed to place a sound value on the liabilities.

C. Claim Reserve Methods Generally.

1. Any generally accepted or reasonable actuarial method or combination of methods may be used to estimate all claim liabilities.

2. The methods used for estimating liabilities generally may be aggregate methods, or various reserve items may be separately valued. Approximations based on groupings and averages may also be employed. Adequacy of the claim reserves, however, shall be determined in the aggregate.

Section III. Premium Reserves.

A. General.

1. Unearned premium reserves are required for all contracts with respect to the period of coverage for which premiums, other than premiums paid in advance, have been paid beyond the date of valuation.

2. If premiums due and unpaid are carried as an asset, such premiums must be treated as premiums in force, subject to unearned premium reserve determination. The value of unpaid commissions, premium taxes, and the cost of collection associated with due and unpaid premiums must be carried as an offsetting liability.

3. The gross premiums paid in advance for a period of coverage commencing after the next premium due date which follows the date of valuation may be appropriately discounted to the valuation date and shall be held either as a separate liability or as an addition to the unearned premium reserve which would otherwise be required as a minimum.

B. Minimum Standards for Unearned Premium Reserves.

1. The minimum unearned premium reserve with respect to any contract is the pro rata unearned modal premium that applies to the premium period beyond the valuation date, with such premium determined on the basis of:

a. The valuation net modal premium on the contract reserve basis applying to the contract; or

b. The gross modal premium for the contract if no contract reserve applies.

2. However, in no event may the sum of the unearned premium and contract reserves for all contracts of the insurer subject to contract reserve requirements be less than the gross modal unearned premium reserve on all such contracts, as of the date of valuation. Such reserve shall never be less than the expected claims for the period beyond the valuation date represented by such unearned premium reserve to the extent not provided for elsewhere.

C. Premium Reserve Methods Generally.

1. The insurer may employ suitable approximations and estimates including, but not limited to groupings, averages, and aggregate estimation, in computing premium reserves.

2. Such approximations or estimates should be tested periodically to determine their continuing adequacy and reliability.

Section IV. Contract Reserves.

A. General.

1. Contract reserves are required, unless otherwise specified in Section IV.A.2. for:

a. all individual and group contracts with which level premiums are used; or

b. all individual and group contracts with respect to which, due to the gross premium pricing structure at issue, the value of the future benefits at any time exceeds the value of any appropriate future valuation net premiums at that time. The values specified in this subparagraph b. shall be determined on the basis specified in Section IV.B.

2. Contracts not requiring a contract reserve are:

a. contracts which cannot be continued after one year from issue; or

b. contracts already in force on the effective date of these standards for which no contract reserve was required under the immediately preceding standards.

3. The contract reserve is in addition to claim reserves and premium reserves.

4. The methods and procedures for contract reserves should be consistent with those for claim reserves for any contract, or else appropriate adjustment must be made when necessary to assure provision for the aggregate liability. The definition of the date of incurral must be the same in both determinations.

B. Minimum Standards for Contract Reserves--Basis.

1. Morbidity or Other Contingency.

a. Minimum standards with respect to morbidity are those set forth in Appendix A. Valuation net premiums used under each contract must have a structure consistent with the gross premium structure at issue of the contract as this relates to advancing age of insured, contract duration, and period for which gross premiums have been calculated.

b. Contracts for which tabular morbidity standards are not specified in Appendix A shall be valued using tables established for reserve purposes by a qualified actuary and acceptable to the Director of Insurance.

2. Interest. The maximum interest rate is specified in Appendix A.

3. Termination Rates.

a. Termination rates used in the computation of reserves shall be on the basis of a mortality table as specified in Appendix A. except as noted in the following paragraph.

b. Under contracts for which premium rates are not guaranteed, and where the effects of insurer underwriting are specifically used by policy duration in the valuation morbidity standard or for return of premium or other deferred cash benefits, total termination rates may be used at ages and durations where these exceed specified mortality table rates, but not in excess of the lesser of:

(1) Eighty percent of the total termination rate used in the calculation of the gross premiums, or

(2) Eight percent.

c. Where a morbidity standard specified in Appendix A is on an aggregate basis, such morbidity standard may be adjusted to reflect the effect of insurer underwriting by policy duration. The adjustments must be appropriate to the underwriting and be acceptable to the Director of Insurance.

4. Reserve Method.

a. For insurance except long-term care and return of premium or other deferred cash benefits, the minimum reserve is the reserve calculated on the two-year full preliminary term method; that is, under which the terminal reserve is zero at the first and also the second contract anniversary.

b. For long-term care insurance, the minimum reserve is the reserve calculated as follows:

(1) For individual policies and group certificates issued on or before December 31, 1997, reserves calculated on the two-year full preliminary term method.

(2) For individual policies and group certificates issued on or after January 1, 1998, reserves calculated on the one-year full preliminary term method.

c. For return of premium or other deferred cash benefits, the minimum reserve is the reserve calculated as follows:

(1) On the one year preliminary term method if such benefits are provided at any time before the twentieth anniversary.

(2) On the two year preliminary term method if such benefits are only provided on or after the twentieth anniversary.

d. The preliminary term method may be applied only in relation to the date of issue of a contract. Reserve adjustments introduced later as a result of rate increases, revisions in assumptions (e.g., projected inflation rates) or for other reasons, are to be applied immediately as of the effective date of adoption of the adjusted basis.

5. Negative Reserves. Negative reserves on any benefit may be offset against positive reserves for other benefits in the same contract, but the total contract reserve with respect to all benefits combined may not be less than zero.

C. Alternative Valuation Methods and Assumptions Generally.

1. Provided the contract reserve on all contracts to which an alternative method or basis is applied is not less in the aggregate than the amount determined according to the applicable standards specified above, an insurer may use any reasonable assumptions as to interest rates, termination and/or mortality rates, and rates of morbidity or other contingency.

2. Also, subject to the preceding condition, the insurer may employ methods stated above in determining a sound value of its liabilities under such contracts, including, but not limited to the following:

a. The net level premium method;

b. The one-year full preliminary term method;

c. Prospective valuation on the basis of actual gross premiums with reasonable allowance for future expenses;

d. The use of approximations such as those involving age groupings, groupings of several years of issue, average amounts of indemnity, grouping of similar contract forms;

e. The computation of the reserve for one contract benefit as a percentage of, or by other relation to, the aggregate contract reserves exclusive of the benefit or benefits so valued; and

f. The use of a composite annual claim cost for all or any combination of the benefits included in the contracts valued.

D. Tests for Adequacy and Reasonableness of Contract Reserves.

1. Annually, an appropriate review shall be made of the insurer's prospective contract liabilities on contracts valued by tabular reserves, to determine the continuing adequacy and reasonableness of the tabular reserves giving consideration to future gross premiums. The insurer shall make appropriate increments to such tabular reserves if such tests indicate that the basis of such reserves is no longer adequate; subject, however, to the minimum standards of Section IV.B.

2. In the event a company has a contract or a group of related similar contracts, for which future gross premiums will be restricted by contract, insurance department regulations, or for other reasons, such that the future gross premiums reduced by expenses for administration, commissions, and taxes will be insufficient to cover future claims, the company shall establish contract reserves for such shortfall in the aggregate.

Section V. Reinsurance.

Increases to, or credits against reserves carried, arising because of reinsurance assumed or reinsurance ceded, must be determined in a manner consistent with these minimum reserve standards and with all applicable provisions of the reinsurance contracts which affect the insurer's liabilities.

Section VI. Appendix A. Specific Standards for Morbidity, Interest and Mortality.

A. Morbidity.

1. Minimum morbidity standards for valuation of specified individual contract accident and health insurance benefits are as follows:

a. Disability Income Benefits Due to Accident or Sickness.

(1) Contract Reserves:

(a) Contracts issued on or after January 1, 1963, and prior to January 1, 1968: Conference Modification of Class III Disability Table.

(b) Contracts issued on or after January 1, 1968, and prior to January 1, 1990: The 1964 Commissioners Disability Table (64 CDT).

(c) Contracts issued on or after January 1, 1992: The 1985 Commissioners Individual Disability Tables A (85CIDA); or the 1985 Commissioners Individual Disability Tables B (85CIDB).

(1) Each insurer shall elect, with respect to all individual contracts issued in any one statement year, whether it will use Tables A or Tables B as the minimum standard.

(2) The insurer may, however, elect to use the other tables with respect to any subsequent statement year.

(d) Contracts issued during 1990 or 1991: Optional use of either the 1964 Table or the 1985 Tables.

(2) Claim Reserves: The minimum morbidity standard in effect for contract reserves on currently issued contracts, as of the date the claim is incurred.

b. Hospital Benefits, Surgical Benefits, and Maternity Benefits (Scheduled benefits or fixed time period benefits only).

(1) Contract Reserves:

(a) Contracts issued on or after January 1, 1963, and before January 1, 1990: The1956 Intercompany Hospital-Surgical Tables.

(b) Contracts issued on or after January 1, 1992: The 1974 Medical Expense Tables, Table A, Transactions of the Society of Actuaries, Volume XXX, page 63. Refer to the paper (in the same volume, page 9) to which this table is appended, including its discussions, for methods of adjustment for benefits not directly valued in Table A: "Development of the 1974 Medical Expense Benefits," Houghton and Wolf.

(c) Contracts issued during 1990 or 1991: Optional use of either the 1956 Tables or the 1974 Tables.

(2) Claim Reserves: No specific standard. See Section VI.A.1.e.

c. Cancer Expense Benefits (Scheduled benefits or fixed time period benefits only).

(1) Contract Reserves: Contracts issued on or after January 1, 1992: The 1985 NAIC Cancer Claim Cost Tables.

(2) Claim Reserves: No specific standard. See Section VI.A.1.e.

d. Accidental Death Benefits.

(1) Contract Reserves: Contracts issued on or after January 1, 1968: The 1959 Accidental Death Benefits Table.

(2) Claim Reserves: Actual amount incurred.

e. Other Individual Contract Benefits.

(1) Contract Reserves: For all other individual contract benefits, morbidity assumptions are to be determined as provided in the reserve standards.

(2) Claim Reserves: For all benefits other than disability, claim reserves are to be determined as provided in the standards.

2. Minimum morbidity standards for valuation of specified group contract accident and health insurance benefits are as follows:

a. Disability Income Benefits Due to Accident or Sickness.

(1) Contract Reserves:

(a) Contracts issued prior to January 1, 1992: The same basis, if any, as that employed by the insurer as of January 1, 1992;

(b) Contracts issued on or after January 1, 1992: The 1987 Commissioners Group Disability Income Table (87CGDT).

(2) Claim Reserves:

(a) For claims incurred on or after January 1, 1992: The 1987 Commissioners Group Disability Income Table (87CGDT);

(b) For claims incurred prior to January 1, 1992: Use of the 87CGDT is optional.

b. Other Group Contract Benefits.

(1) Contract Reserves: For all other group contract benefits, morbidity assumptions are to be determined as provided in the reserve standards.

(2) Claim Reserves: For all benefits other than disability, claim reserves are to be determined as provided in the standards.

B. Interest.

1. For contract reserves, the maximum interest rate is the maximum rate permitted by law in the valuation of whole life insurance issued on the same date as the accident and health insurance contract.

2. For claim reserves, on policies that require contract reserves, the maximum interest rate is the maximum rate permitted by law in the valuation of whole life insurance issued on the same date as the claim incurral date.

3. For claim reserves on policies not requiring contract reserves, the maximum interest rate is the maximum rate permitted by law in the valuation of single premium immediate annuities issued on the same date as the claim incurred date, reduced by one hundred basis points.

C. Mortality.

1. Except as provided in subsection 2, the mortality basis used shall be according to a table (but without use of selection factors) permitted by law for the valuation of whole life insurance issued on the same date as the accident and health insurance contract.

2. Other mortality tables adopted by the NAIC and promulgated by the Director of Insurance may be used in the calculation of the minimum reserves if appropriate for the type of benefits and if approved by the Director of Insurance. The request for such approval must include the proposed mortality table and the reason that the standard specified in Subsection 1 is inappropriate.

Section VII. Appendix B. Glossary of Technical Terms Used.

A. Annual-Claim Cost. The net annual cost per unit of benefit before the addition of expenses, including claim settlement expenses, and a margin for profit or contingencies. For example, the annual claim cost for a $100 monthly disability benefit, for a maximum disability benefit period of one year, with an elimination period of one week, with respect to a male at age 35, in a certain occupation might be $12, while the gross premium for this benefit might be $18. The additional $6 would cover expenses and profit or contingencies.

B. Claims Accrued. That portion of claims incurred on or prior to the valuation date which result in liability of the insurer for the payment of benefits for medical services which have been rendered on or prior to the valuation date, and for the payment of benefits for days of hospitalization and days of disability which have occurred on or prior to the valuation date, which the insurer has not paid as of the valuation date, but for which it is liable, and will have to pay after the valuation date. This liability is sometimes referred to as a liability for "accrued" benefits. A claim reserve, which represents an estimate of this accrued claim liability, must be established.

C. Claims Reported. When an insurer has been informed that a claim has been incurred, if the date reported is on or prior to the valuation date, the claim is considered as a reported claim for annual statement purposes.

D. Claims Unaccrued. That portion of claims incurred on or prior to the valuation date which result in liability of the insurer for the payment of benefits for medical services expected to be rendered after the valuation date, and for benefits expected to be payable for days of hospitalization and days of disability occurring after the valuation date. This liability is sometimes referred to as a liability for unaccrued benefits. A claim reserve, which represents an estimate of the unaccrued claim payments expected to be made (which may or may not be discounted with interest), must be established.

E. Claims Unreported. When an insurer has not been informed, on or before the valuation date, concerning a claim that has been incurred on or prior to the valuation date, the claim is considered as an unreported claim for annual statement purposes.

F. Date of Disablement. The earliest date the insured is considered as being disabled under the definition of disability in the contract, based on a doctor's evaluation or other evidence. Normally, this date will coincide with the start of any elimination period.

G. Elimination Period. A specified number of days, weeks, or months starting at the beginning of each period of loss, during which no benefits are payable.

H. Gross Premium. The amount of premium charged by the insurer. It includes the net premium (based on claim-cost) for the risk, together with any loading for expenses, profit, or contingencies.

I. Level Premium. A premium calculated to remain unchanged throughout either the lifetime of the policy, or for some shorter projected period of years. The premium need not be guaranteed, in which case, although it is calculated to remain level, it may be changed if any of the assumptions on which it is based are revised at a later time.

1. Generally, the annual claim costs are expected to increase each year and the insurer, instead of charging premiums that correspondingly increase each year, charges a premium calculated to remain level for a period of years or for the lifetime of the contract. In this case the benefit portion of the premium is more than needed to provide for the cost of benefits during the earlier years of the policy and less than the actual cost in the later years.

2. The building of a prospective contract reserve is a natural result of level premiums.

J. Long-Term Care Insurance. Any insurance policy or rider advertised, marketed, offered or designed to provide coverage for not less than twelve (12) consecutive months for each covered person on an expense incurred, indemnity, prepaid or other basis; for one or more necessary or medically necessary diagnostic, preventive, therapeutic, rehabilitative, maintenance or personal care services, provided in a setting other than an acute care unit of a hospital. Such term also includes a policy or rider which provides for payment of benefits based upon cognitive impairment or the loss of functional capacity. Long-term care insurance may be issued by insurers; fraternal benefit societies; nonprofit health, hospital, and medical service corporations; prepaid health plans; health maintenance organizations or any similar organization to the extent they are otherwise authorized to issue life or health insurance. Long-term care insurance shall not include any insurance policy which is offered primarily to provide basic Medicare supplement coverage, basic hospital expense coverage, basic medical-surgical expense coverage, hospital confinement indemnity coverage, major medical expense coverage, disability income or related asset-protection coverage, accident only coverage, specified disease or specified accident coverage, or limited benefit health coverage.

K. Modal Premium. This refers to the premium paid on a contract based on a premium term which could be annual, semi-annual, quarterly, monthly, or weekly. Thus, if the annual premium is $100 and if, instead, monthly premiums of $9 are paid, then the modal premium is $9.

L. Negative Reserve. Normally the terminal reserve is a positive value. However, if the values of the benefits are decreasing with advancing age or duration it could be a negative value, called a negative reserve.

M. Preliminary Term Reserve Method. Under this method of valuation, the valuation net premium for each year falling within the preliminary term period is exactly sufficient to cover the expected incurred claims of that year, so that the terminal reserves will be zero at the end of the year. As of the end of the preliminary term period, a new constant valuation net premium (or stream of changing valuation premiums) becomes applicable such that the present value of all such premiums is equal to the present value of all claims expected to be incurred following the end of the preliminary term period.

N. Present Value of Amounts Not Yet Due on Claims. The reserve for "claims unaccrued" (see definition), which may be discounted at interest.

O. Reserve. The term "reserve" is used to include all items of benefit liability, whether in the nature of incurred claim liability or in the nature of contract liability relating to future periods of coverage, and whether the liability is accrued or unaccrued.

1. An insurer under its contracts promises benefits which result in claims which have been incurred, that is, for which the insurer has become obligated to make payment, on or prior to the valuation date. On these claims, payments expected to be made after the valuation date for accrued and unaccrued benefits are liabilities of the insurer which should be provided for by establishing claim reserves; or

2. An insurer under its contracts promises benefits which result in claims which are expected to be incurred after the valuation date. Any present liability of the insurer for these future claims should be provided for by the establishment of contract reserves and unearned premium reserves.

P. Terminal Reserve. This is the reserve at the end of a contract year, and is defined as the present value of benefits expected to be incurred after that contract year minus the present value of future valuation net premiums.

Q. Unearned Premium Reserve. This reserve values that portion of the premium paid or due to the insurer which is applicable to the period of coverage extending beyond the valuation date. Thus if an annual premium of $120 was paid on November 1, $20 would be earned as of December 31 and the remaining $100 would be unearned. The unearned premium reserve could be on a gross basis as in this example, or on a valuation net premium basis.

R. Valuation Net Modal Premium. This is the modal fraction of the valuation net annual premium that corresponds to the gross modal premium in effect on any contract to which contract reserves apply. Thus, if the mode of payment in effect is quarterly, the valuation net modal premium is the quarterly equivalent of the valuation net annual premium.

Section VIII. Appendix C. Reserve for Waiver of Premium--(Supplementary explanatory material).

A. Waiver of premium reserves involve several special considerations. First, the disability valuation tables promulgated by the NAIC are based on exposures that include contracts on premium waiver as in-force contracts. Hence, contract reserves based on these tables are not reserves on "active lives" but rather reserves on contracts "in force." This is true for the 1964 CDT and for both the 1985 CIDA and CIDB tables.

B. Accordingly, tabular reserves using any of these tables should value reserves on the following basis:

1. Claim reserves should include reserves for premiums expected to be waived, valuing as a minimum the valuation net premium being waived.

2. Premium reserves should include contracts on premium waiver as in-force contracts, valuing as a minimum the unearned modal valuation net premium being waived.

3. Contract reserves should include recognition of the waiver of premium benefit in addition to other contract benefits provided for, valuing as a minimum the valuation net premium to be waived.

C. If an insurer is, instead, valuing reserves on what is truly an active life table, or if a specific valuation table is not being used but the insurer's gross premiums are calculated on a basis that includes in the projected exposure only those contracts for which premiums are being paid, then it may not be necessary to provide specifically for waiver of premium reserves. Any insurer using such a true "active life" basis should carefully consider, however, whether or not additional liability should be recognized on account of premiums waived during periods of disability or during claim continuation.

69-7.1. Repealed by State Register Volume 15, Issue No. 3, effective March 22, 1991.

69-8. Reserves for Mortgage Guaranty Insurance.

This Regulation shall apply to all insurers writing mortgage guaranty insurance in South Carolina. Mortgage guaranty insurance is defined for the purposes of this Regulation as the insurance of mortgage lenders against loss by reason of nonpayment of mortgage indebtedness by borrowers, and should not be confused with other kinds of insurance written incidental to mortgage loan transactions such as mortgage redemption life insurance, hazard insurance covering improvements to real property, and credit accident and health coverages.

1. Unearned premium reserves for mortgage guaranty insurance shall be computed in accordance with Sections 38-5-60, 38-9-170 and 38-9-180 which specify that such reserves are to be computed by the use of annual or more frequent pro rata fractions.

2. In addition to the unearned premium reserve, every mortgage guaranty insurer writing business in this State must establish and maintain a contingency reserve, computed as hereinafter described, for the further protection of such companies and their policyholders against the adverse effects of economic cycles and other causes of excessive loss experience. The contingency reserve shall be credited not less frequently than annually, as of the end of each calendar year, with an amount equal to fifty per cent of the premiums earned during the year, computed in accordance with Sections 38-5-60, 38-9-170 and 38-9-180. Each such amount credited to the contingency reserve shall be carried as a liability for fifteen years following the year for which the credit is established, unless used to pay mortgage guaranty losses as hereinafter provided.

3. If for any year the incurred losses and loss expenses for mortgage guaranty insurance shall exceed forty per cent of the premiums earned on such business, the contingency reserve may be charged with the amount of such excess if such charge is approved by the Chief Insurance Commissioner. Any such annual charges shall be treated so as to reduce or remove the amounts originally credited to said reserve on a first-in, first-out basis.

4. Annual statements reflecting mortgage guaranty insurance transactions by licensed insurers must be prepared in compliance with this Regulation to meet the requirements of Section 38-13-100.

69-9. Proxies, Consents and Authorizations of Domestic Insurers.

Effective Date: The following regulation shall be effective on and after April 1, 1966.

Section 1. Application of Regulation-- This regulation is applicable to all domestic insurers having one hundred or more stockholders; provided, however, that this regulation shall not apply to any insurer if ninety-five per cent or more of its stock is owned or controlled by a parent or an affiliated insurer and the remaining shares are held by less than five hundred stockholders. A domestic insurer which files with the Securities and Exchange Commission forms of proxies, consents and authorizations complying with the requirements of the Securities and Exchange Act of nineteen hundred thirty-four and the Securities and Exchange Acts Amendments of nineteen hundred sixty-four and Regulation X-14 of the Securities and Exchange Commission promulgated thereunder shall be exempt from the provisions of this regulation.

Section 2. Proxies, Consents and Authorizations-- any director, officer or employee of such insurer subject to Section 1 hereof, or any other person, shall solicit, or permit the use of his name to solicit, by mail or otherwise, any proxy, consent, or authorization in respect of any stock of such insurer in contravention of this regulation and Schedules A and B hereto annexed and hereby made a part of this regulation.

Section 3. Disclosure of Equivalent Information-- or authorizations in respect of a stock of a domestic insurer subject to Section 1 hereof are solicited by or on behalf of the management of such insurer from the holders of record of stock of such insurer in accordance with this regulation and the Schedules thereunder prior to any annual or other meeting, such insurer shall, in accordance with this regulation and/or such further regulations as the Commissioner may adopt, file with the Commissioner and transmit to all stockholders of record information substantially equivalent to the information which would be required to be transmitted if a solicitation were made.

Section 4. Definitions.

1. The definitions and instructions set out in Schedule SIS, as promulgated by the National Association of Insurance Commissioners, shall be applicable for purposes of this regulation.

2. The terms "solicit" and "solicitation" for purposes of this regulation shall include:

(a) any request for a proxy, whether or not accompanied by or included in a form of proxy; or

(b) any request to execute or not to execute, or to revoke, a proxy; or

(c) the furnishing of a proxy or other communication to stockholders under circumstances reasonably calculated to result in the procurement, withholding or revocation of a proxy.

3. The terms "solicit" and "solicitation" shall not include:

(a) any solicitation by a person in respect of stock of which he is the beneficial owner;

(b) action by a broker or other person in respect to stock carried in his name or in the name of his nominee in forwarding to the beneficial owner of such stock soliciting material received from the company, or impartially instructing such beneficial owner to forward a proxy to the person, if any, to whom the beneficial owner desires to give a proxy, or impartially requesting instructions from the beneficial owner with respect to the authority to be conferred by the proxy and stating that a proxy will be given if the instructions are received by a certain date;

(c) the furnishing of a form of proxy to a stockholder upon the unsolicited request of such stockholder, or the performance by any person of ministerial acts on behalf of a person soliciting a proxy.

Section 5. Information to Be Furnished to Stockholders.

1. No solicitation subject to this regulation shall be made unless each person solicited is concurrently furnished or has previously been furnished with a written proxy statement containing the information specified in Schedule A.

2. If the solicitation is made on behalf of the management of the insurer and relates to an annual meeting of stockholders at which directors are to be elected, each proxy statement furnished pursuant to Subsection 1 hereof shall be accompanied or preceded by an annual report (in preliminary or final form) to such stockholders containing such financial statements for the last fiscal year as are referred to in Schedule SIS under the heading "Financial Reporting to Stockholders." Subject to the foregoing requirements with respect to financial statements, the annual report to stockholders may be in any form deemed suitable by the management.

3. Two copies of each report sent to the stockholders pursuant to this Section shall be mailed to the Commissioner not later than the date on which such report is first sent or given to stockholders or the date on which preliminary copies of solicitation material are filed with the Commissioner pursuant to Subsection 1 of Section 7, whichever date is later.

Section 6. Requirements as to Proxy.

1. The form of proxy (a) shall indicate in bold face type whether or not the proxy is solicited on behalf of the management, (b) shall provide a specifically designated blank space for dating the proxy and (c) shall identify clearly and impartially each matter or group of related matters intended to be acted upon, whether proposed by the management or stockholders. No reference need be made to proposals as to which discretionary authority is conferred pursuant to Subsection 3 hereof.

2. Means shall be provided in the proxy for the person solicited to specify by ballot a choice between approval or disapproval of each matter or group of related matters referred to therein, other than elections to office. A proxy may confer discretionary authority with respect to matters as to which a choice is not so specified if the form of proxy states in bold face type how it is intended to vote the shares or authorization represented by the proxy in each such case.

3. A proxy may confer discretionary authority with respect to other matters which may come before the meeting, provided the persons on whose behalf the solicitation is made are not aware a reasonable time prior to the time the solicitation is made that any other matters are to be presented for action at the meeting and provided further that a specific statement to that effect is made in the proxy statement or in the form of proxy.

4. No proxy shall confer authority (a) to vote for the election of any person to any office for which a bona fide nominee is not named in the proxy statement, or (b) to vote at any annual meeting other than the next annual meeting (or any adjournment thereof) to be held after the date on which the proxy statement and form of proxy are first sent or given to stockholders.

5. The proxy statement or form of proxy shall provide, subject to reasonable, specified conditions, that the proxy will be voted and that where the person solicited specifies by means of ballot provided pursuant to Subsection 2 hereof a choice with respect to any matter to be acted upon, the vote will be in accordance with the specifications so made.

6. The information included in the proxy statement shall be clearly presented and the statements made shall be divided into groups according to subject matter, with appropriate headings. All printed proxy statements shall be clearly and legibly presented.

Section 7. Material Required to Be Filed.

1. Two preliminary copies of the proxy statement and form of proxy and other soliciting material to be furnished to stockholders concurrently therewith shall be filed with the Commissioner at least ten days prior to the date definitive copies of such material are first sent or given to stockholders, or such shorter period prior to that date as the Commissioner may authorize upon a showing of good cause therefor.

2. Two preliminary copies of any additional soliciting material relating to the same meeting or subject matter to be furnished to stockholders subsequent to the proxy statements shall be filed with the Commissioner at least two days (exclusive of Saturdays, Sundays or holidays) prior to the date copies of this material are first sent or given to stockholders or a shorter period prior to such date as the Commissioner may authorize upon a showing of good cause therefor.

3. Two definitive copies of the proxy statement, form of proxy and all other soliciting material, in the form in which this material is furnished to stockholders, shall be filed with, or mailed for filing to, the Commissioner not later than the date such material is first sent or given to the stockholders.

4. Where any proxy statement, form of proxy or other material filed pursuant to these rules is amended or revised, two of the copies shall be marked to clearly show such changes and shall be so filed with the Commissioner as herein provided.

5. Copies of replies to inquiries from stockholders requesting further information and copies of communications which do no more than request that forms of proxy theretofore solicited be signed and returned need not be filed pursuant to this Section.

6. Notwithstanding the provisions of Subsections 1 and 2 hereof and of Subsection 5 of Section 10, copies of soliciting material in the form of speeches, press releases and radio or television scripts may, but need not, be filed with the Commissioner prior to use or publication. Definitive copies, however, shall be filed with or mailed for filing to the Commissioner as required by Subsection 3 hereof not later than the date such material is used or published. The provisions of Subsections 1 and 2 hereof and Subsection 5 of Section 10 shall apply, however, to any reprints or reproductions of all or any part of such material.

Section 8. False or Misleading Statements--No solicitation subject to this regulation shall be made by means of any proxy statement, form of proxy, notice of meeting, or other communication, written or oral, containing any statement which at the time and in the light of the circumstances under which it is made, is false or misleading with respect to any material fact, or which omits to state any material fact necessary in order to make the statements therein not false or misleading or necessary to correct any statement in any earlier communication with respect to the solicitation of a proxy for the same meeting or subject matter which has become false or misleading.

Section 9. Prohibition of Certain Solicitations--No person making a solicitation which is subject to this regulation shall solicit any undated or postdated proxy or any proxy which provides that it shall be deemed to be dated as of any date subsequent to the date on which it is signed by the stockholder.

Section 10. Special Provisions Applicable to Election Contests.

1. Applicability--This Section shall apply to any solicitation subject to this regulation by any person or group for the purpose of opposing a solicitation subject to this regulation by any other person or group with respect to the election or removal of directors at any annual or special meeting of stockholders.

2. Participant or Participant in a Solicitation

(a) For purposes of this Section, the term "participant" and "participant in a solicitation" include: (i) the insurer; (ii) any director of the insurer, and any nominee for whose election as a director proxies are solicited; (iii) any other person, acting alone or with one or more other persons, committees or groups in organizing, directing or financing the solicitation.

(b) For the purpose of this Section, the terms "participant" and "participant in a solicitation" do not include: (i) a bank, broker, or dealer who, in the ordinary course of business, lends money or executes orders for the purchase or sale of stock and who is not otherwise a participant; (ii) any person or organization retained or employed by a participant to solicit stockholders or any person who merely transmits proxy soliciting material or performs ministerial or clerical duties; (iii) any person employed in the capacity of attorney, accountant, or advertising, public relations or financial adviser, and whose activities are limited to the performance of his duties in the course of such employment; (iv) any person regularly employed as an officer or employee of the insurer or any of its subsidiaries or affiliates who is not otherwise a participant; or (v) any officer or director of, or any person regularly employed by any other participant, if such officer, director, or employee is not otherwise a participant.

3. Filing of Information Required by Schedule B.

(a) No solicitation subject to this Section shall be made by any person other than the management of an insurer unless at least five business days prior thereto, or such shorter period as the Commissioner may authorize upon a showing of good cause therefor, there has been filed with the Commissioner, by or on behalf of each participant in such solicitation, a statement in duplicate containing the information specified by Schedule B and a copy of any material proposed to be distributed to stockholders in furtherance of such solicitation. Where preliminary copies of any materials are filed, distribution to stockholders should be deferred until the Commissioner's comments have been received and complied with, or until fifteen days have elapsed whichever shall first occur.

(b) Within five business days after a solicitation subject to this Section is made by the management of an insurer, or such longer period as the Commissioner may authorize upon a showing of good cause therefor, there shall be filed with the Commissioner by or on behalf of each participant in such solicitation, other than the insurer, and by or on behalf of each management nominee for director, a statement in duplicate containing the information specified by Schedule B.

(c) If any solicitation on behalf of management or any other person has been made, or if proxy material is ready for distribution, prior to a solicitation subject to this Section in opposition thereto, a statement in duplicate containing the information specified in Schedule B shall be filed with the Commissioner by or on behalf of each participant in such prior solicitation, other than the insurer, as soon as reasonably practicable after the commencement of the solicitation in opposition thereto.

(d) If, subsequent to the filing of the statements required by paragraphs (a), (b) and (c) of this Subsection, additional persons become participants in a solicitation subject to this rule, there shall be filed with the Commissioner, by or on behalf of each such person, a statement in duplicate containing the information specified by Schedule B, within three business days after such person becomes a participant, or such longer period as the Department may authorize upon a showing of good cause therefor.

(e) If any material change occurs in the facts reported in any statement filed by or on behalf of any participant, an appropriate amendment to such statement shall be filed promptly with the Commissioner.

(f) Each statement and amendment thereto filed pursuant to this paragraph shall be part of the public files of the Commissioner.

4. Solicitations Prior to Furnishing Required Written Proxy Statement-- Notwithstanding the provisions of Subsection 1 of Section 5, a solicitation subject to this Section may be made prior to furnishing stockholders a written proxy statement containing the information specified in Schedule A with respect to such solicitation, provided that:

(a) The statements required by Subsection 3 hereof are filed by or on behalf of each participant in such solicitation.

(b) No form of proxy is furnished to stockholders prior to the time the written proxy statement required by Subsection 1 of Section 5 is furnished to such persons; provided, however, that this paragraph (b) shall not apply where a proxy statement then meeting the requirements of Schedule A has been furnished to stockholders.

(c) At least the information specified in paragraphs (b) and (c) of the statements required by Subsection 3 hereof to be filed by each participant, or an appropriate summary thereof, are included in each communication sent or given to stockholders in connection with the solicitation.

(d) A written proxy statement containing the information specified in Schedule A with respect to a solicitation is sent or given stockholders at the earliest practicable date.

5. Solicitations Prior to Furnishing Required Written Proxy Statement--Filing Requirements--Two copies of any soliciting material proposed to be sent or given to stockholders prior to the furnishing of the written proxy statement required by Subsection 1 of Section 5 shall be filed with the Commissioner in preliminary form at least five business days prior to the date definitive copies of such material are first sent or given to such persons, or such shorter period as the Commissioner may authorize upon a showing of good cause therefor.

6. Application of This Section to Report--Notwithstanding the provisions of Subsections 2 and 3 of Section 5, two copies of any portion of the report referred to in Subsection 2 of Section 5 which comments upon or refers to any solicitation subject to this Section, or to any participant in any such solicitation, other than the solicitation by the management, shall be filed with the Commissioner in preliminary form at least five business days prior to the date copies of the report are first sent or given to stockholders.

Schedule A

Information Required in Proxy Statement

Item 1 Revocability of Proxy--State whether or not the person giving the proxy has the power to revoke it. If the right of revocation before the proxy is exercised is limited or is subject to compliance with any formal procedure, briefly describe such limitation or procedure.

Item 2 Dissenters' Right of Appraisal--Outline briefly the rights of appraisal or similar rights of dissenting stockholders with respect to any matter to be acted upon and indicate any statutory procedure required to be followed by such stockholders in order to perfect their rights. Where such rights may be exercised only within a limited time after the date of the adoption of a proposal, the filing of a charter amendment, or other similar act, state whether the person solicited will be notified of such date.

Item 3 Persons Making Solicitations Not Subject to Section 10

1. If the solicitation is made by the management of the insurer, so state. Give the name of any director of the insurer who has informed the management in writing that he intends to oppose any action intended to be taken by the management and indicate the action which he intends to oppose.

2. If the solicitation is made otherwise than by the management of the insurer, state the names and addresses of the persons by whom and on whose behalf it is made and the names and addresses of the persons by whom the cost of solicitation has been or will be borne, directly or indirectly.

3. If the solicitation is to be made by specially engaged employees or paid solicitors, state (a) the material features of any contract or arrangement for such solicitation and identify the parties, and (b) the cost or anticipated cost thereof.

Item 4 Interest of Certain Persons in Matters to Be Acted Upon--Describe briefly any substantial interest, direct or indirect, by stockholders or otherwise, of any director, nominee for election for director, officer, and, if the solicitation is made otherwise than on behalf of management, each person on whose behalf the solicitation is made, in any matter to be acted upon other than elections to office.

Item 5 Stocks and Principal Stockholders

1. State, as to each class of voting stock of the insurer entitled to be voted at the meeting, the number of shares outstanding and the number of votes to which each class is entitled.

2. Give the date as of which the record list of stockholders entitled to vote at the meeting will be determined. If the right to vote is not limited to stockholders of record on that date, indicate the conditions under which other stockholders may be entitled to vote.

3. If action is to be taken with respect to the election of directors and if the persons solicited have cumulative voting rights, make a statement that they have such rights and state briefly the conditions precedent to the exercise thereof.

Item 6 Nominees and Directors--If action is to be taken with respect to the election of directors, furnish the following information in tabular form to the extent practicable, with respect to each person nominated for election as a director and each other person whose term of office as a director will continue after the meeting:

1. Name each such person, state when his term of office or the term of office for which he is a nominee will expire, and all other positions and offices with the insurer presently held by him, and indicate which persons are nominees for election as directors at the meeting.

2. State his present principal occupation or employment and give the name and principal business of any corporation or other organization in which such employment is carried on. Furnish similar information as to all of his principal occupations or employments during the last five years, unless he is now a director and was elected to his present term of office by a vote of stockholders at a meeting for which proxies were solicited under this regulation.

3. If he is or has previously been a director of the insurer, state the period or periods during which he has served as such.

4. State, as of the most recent practicable date, the approximate amount of each class of stock of the insurer or any of its parents, subsidiaries or affiliates other than directors' qualifying shares, beneficially owned directly or indirectly by him. If he is not the beneficial owner of any such stocks, make a statement to that effect.

Item 7 Remuneration and Other Transactions With Management and Others--Furnish the information reported or required in Item 1 of Schedule SIS under the heading "Information Regarding Management and Directors" if action is to be taken with respect to (a) the election of directors, (b) any remuneration plan, contract or arrangement in which any director, nominee for election as a director, or officer of the insurer will participate, (c) any pension or retirement plan in which any such person will participate, or (d) the granting or extension to any such person of any options, warrants or rights to purchase any stocks, other than warrants or rights issued to stockholders, as such, on a pro-rata basis. If the solicitation is made on behalf of persons other than the management, information shall be furnished only as to Item 1A of the aforesaid heading of Schedule SIS.

Item 8 Bonus, Profit Sharing and Other Remuneration Plans--If action is to be taken with respect to any bonus, profit sharing, or other remuneration plan, of the insurer furnish the following information:

1. A brief description of the material features of the plan, each class of persons who will participate therein, the approximate number of persons in each such class, and the basis of such participation.

2. The amounts which would have been distributable under the plan during the last calendar year to (a) each person named in Item 7 of this schedule, (b) directors and officers as a group, and (c) all other employees as a group, if the plan had been in effect.

3. If the plan to be acted upon may be amended (other than by a vote of stockholders) in a manner which would materially increase the cost thereof to the insurer or to materially alter the allocation of the benefits as between the groups specified in paragraph 2 of this item, the nature of such amendments should be specified.

Item 9 Pension and Retirement Plans--If action is to be taken with respect to any pension or retirement plan of the insurer, furnish the following information:

1. A brief description of the material features of the plan, each class of persons who will participate therein, the approximate number of persons in each such class, and the basis of such participation.

2. State (a) the approximate total amount necessary to fund the plan with respect to past services, the period over which such amount is to be paid, and the estimated annual payments necessary to pay the total amount over such period; (b) the estimated annual payment to be made with respect to current services; and (c) the amount of such annual payments to be made for the benefit of (i) each person named in Item 7 of this schedule, (ii) directors and officers as a group, and (iii) employees as a group.

3. If the plan to be acted upon may be amended (other than by a vote of stockholders) in a manner which would materially increase the cost thereof to the insurer or to materially alter the allocation of the benefits as between the groups specified in sub-paragraph 2(c) of this item, the nature of such amendments should be specified.

Item 10 Options, Warrants, or Rights--If action is to be taken with respect to the granting or extension of any options, warrants or rights (all referred to herein as "warrants") to purchase stock of the insurer or any subsidiary or affiliate, other than warrants issued to all stockholders on a pro-rata basis, furnish the following information:

1. The title and amount of stock called for or to be called for, the prices, expiration dates and other material conditions upon which the warrants may be exercised, the consideration received or to be received by the insurer, subsidiary or affiliate for the granting or extension of the warrants and the market value of the stock called for or to be called for by the warrants, as of the latest practicable date.

2. If known, state separately the amount of stock called for or to be called for by warrants received or to be received by the following persons, naming each such person:

(a) each person named in Item 7 of this schedule, and

(b) each other person who will be entitled to acquire five per cent or more of the stock called for or to be called for by such warrants.

3. If known, state also the total amount of stock called for or to be called for by such warrants, received or to be received by all directors and officers of the company as a group and all employees, without naming them.

Item 11 Authorization or Issuance of Stock

1. If action is to be taken with respect to the authorization or issuance of any stock of the insurer, furnish the title, amount and description of the stock to be authorized or issued.

2. If the shares of stock are other than additional shares of common stock of a class outstanding, furnish a brief summary of the following, if applicable: dividend, voting, liquidation, preemptive, and conversion rights, redemption and sinking fund provisions, interest rate and date of maturity.

3. If the shares of stock to be authorized or issued are other than additional shares of common stock of a class outstanding, the Commissioner may require financial statements comparable to those contained in the annual report.

Item 12 Mergers, Consolidations, Acquisitions and Similar Matters

1. If action is to be taken with respect to a merger, consolidation, acquisition, or similar matter, furnish in brief outline the following information:

(a) The rights of appraisal or similar rights of dissenters with respect to any matters to be acted upon. Indicate any procedure required to be followed by dissenting stockholders in order to perfect such rights.

(b) The material features of the plan or agreement.

(c) The business done by the company to be acquired or whose assets are being acquired.

(d) If available, the high and low sales prices for each quarterly period within two years.

(e) The percentage of outstanding shares which must approve the transaction before it is consummated.

2. For each company involved in a merger, consolidation or acquisition, the following financial statements should be furnished:

(a) A comparative balance sheet as of the close of the last two fiscal years.

(b) A comparative statement of operating income and expenses for each of the last two fiscal years and, as a continuation of each statement, a statement of earning per share after related taxes and cash dividends paid per share.

(c) A pro forma combined balance sheet and income and expenses statement for the last fiscal year giving effect to the necessary adjustments with respect to the resulting company.

Item 13 Restatement of Accounts--If action is to be taken with respect to the restatement of any asset, capital, or surplus of the insurer, furnish the following information:

1. State the nature of the restatement and the date as of which it is to be effective.

2. Outline briefly the reasons for the restatement and for the selection of the particular effective date.

3. State the name and amount of each account affected by the restatement and the effect of the restatement thereon.

Item 14 Matters Not Required to Be Submitted--If action is to be taken with respect to any matter which is not required to be submitted to a vote of stockholders, state the nature of such matter, the reason for submitting it to a vote of stockholders and what action is intended to be taken by the management in the event of a negative vote on the matter by the stockholders.

Item 15 Amendment of Charter, By-Laws, or Other Documents--If action is to be taken with respect to any amendment of the insurer's charter, by-laws or other documents as to which information is not required above, state briefly the reasons for and general effect of such amendment and the vote needed for its approval.

Schedule B

Information to be Included in Statements Filed By or on Behalf of a Participant (Other Than the Insurer) in a Proxy Solicitation in an Election Contest

Item 1 Insurer--State the name and address of the insurer.

Item 2 Identity and Background

1. State the following:

(a) Your name and business address;

(b) Your present principal occupation or employment and the name, principal business and address of any corporation or other organization in which such employment is carried on.

2. State the following:

(a) Your residence address;

(b) Information as to all material occupations, positions, offices or employments during the last ten years, giving starting and ending dates of each and the name, principal business and address of any business corporation or other business organization in which each such occupation, position, office or employment was carried on.

3. State whether or not you are or have been a participant in any other proxy contest involving this company or other companies within the past ten years. If so, identify the principals, the subject matter and your relationship to the parties and the outcome.

4. State whether or not, during the past ten years, you have been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) and, if so, give dates, nature of conviction, name and location of court, and penalty imposed or other disposition of the case. A negative answer to this sub-item need not be included in the proxy statement or other proxy soliciting material.

Item 3 Interest in Stock of the Insurer

1. State the amount of each class of stock of the insurer which you own beneficially, directly or indirectly.

2. State the amount of each class of stock of the insurer which you own of record but not beneficially.

3. State with respect to the stock specified in 1 and 2 the amounts acquired within the past two years, the dates of acquisition and the amounts acquired on each date.

4. If any part of the purchase price or market value of any of the stock specified in paragraph 3 is represented by funds borrowed or otherwise obtained for the purpose of acquiring or holding such stock, so state and indicate the amount of the indebtedness as of the latest practicable date. If such funds were borrowed or obtained otherwise than pursuant to a margin account or bank loan in the regular course of business of a bank, broker or dealer, briefly describe the transaction and state the names of the parties.

5. State whether or not you are a party to any contracts, arrangements or understandings with any person with respect to any stock of the insurer, including but not limited to joint ventures, loan or option arrangements, puts or calls, guarantees against loss or guarantees of profits, division of losses or profits, or the giving or withholding of proxies. If so, name the persons with whom such contracts, arrangements, or understandings exist and give the details thereof.

6. State the amount of stock of the insurer owned beneficially, directly or indirectly, by each of your associates and the name and address of each such associate.

7. State the amount of each class of stock of any parent, subsidiary or affiliate of the insurer which you own beneficially, directly or indirectly.

Item 4 Further Matters

1. Describe the time and circumstances under which you became a participant in the solicitation and state the nature and extent of your activities or proposed activities as a participant.

2. Describe briefly, and where practicable state the approximate amount of, any material interest, direct or indirect, of yourself and of each of your associates in any material transactions since the beginning of the company's last fiscal year, or in any material proposed transactions, to which the company or any of its subsidiaries or affiliates was or is to be a party.

3. State whether or not you or any of your associates have any arrangement or understanding with any person

(a) with respect to any future employment by the insurer or its subsidiaries or affiliates; or

(b) with respect to any future transactions to which the insurer or any of its subsidiaries or affiliates will or may be a party.

If so, describe such arrangement or understanding and state the names of the parties thereto.

Item 5 Signature--The statement shall be dated and signed in the following manner:

I certify that the statements made in this statement are true, complete, and correct to the best of my knowledge and belief.

___________________________________ __________________________________________

Date Signature of participant or authorized

representative

69-10. Premium Service Companies.

1. Every premium service agreement which confers upon a premium service company authority to cause a policy of insurance covering lives, property or interests situate in South Carolina to be terminated shall be deemed made in South Carolina and such policy shall be so terminated only in accordance with the provisions of Chapter 39 of Title 38, Code of Laws of South Carolina, 1976, and the Regulations pursuant thereto.

2. The provisions of this Regulation do not apply to premiums financed under revolving charge account arrangements by a licensee which is a subsidiary of an insurer or group of affiliated insurers where maximum charges do not exceed 7% per annum on the amount actually financed. Such revolving charge account arrangements shall be submitted to the Commissioner for approval or disapproval by specific order for each such arrangement.

3. No licensee nor other person acting for or in behalf of the licensee shall retain the original policy in connection with any premium service agreement, and any such retention of the original contract shall be deemed cause for the revocation of, or refusal to renew, the license of such licensee.

4. Every application for a license or renewal of the license as a premium service company shall be made on the form prescribed by the Chief Insurance Commissioner which shall be completed and filed in accordance with the instructions of the Commissioner accompanied by all required supporting documents and the applicable fee.

5. In the case of an original application for a license, the application shall be signed by:

(a) The sole proprietor, if the applicant is a sole proprietor; or

(b) A general partner, if the applicant is a partnership;

(c) The chief executive officer and the secretary if the applicant is a corporation or other business entity whose ownership is manifested by shares. Such original application shall be accompanied by the certified resolution of the board of directors or similar governing body of the corporation or other entity.

6. In the case of the renewal of an existing license or a change in such license, reference may be made to the earlier application and only those sections of the application form where changes are necessary need be completed, provided the signators to the original application certify under the pains and penalties of perjury that no change has occurred which would require an answer differing from that contained in the original application.

7. Licenses hereunder are hereby declared personal and issued by reason of special confidence in the licensee so licensed. No license may be transferred, directly or indirectly, nor shall such license be used for, or in behalf of, any person, firm or corporation whatsoever other than the licensee. Any such transfer, attempted transfer or use shall be void and shall be deemed sufficient grounds for the revocation of, or refusal to renew, the license.

8. Every corporation, or similar business entity, partnership, or proprietor doing business under a name, other than his or its own, shall file, and keep on file, with the Commissioner, the names and addresses of officers, directors, partners and proprietors and shall designate therein the name and address of the person upon whom service of process may be made.

9. No foreign corporation or similar business entity shall be licensed as a premium service company unless it shall first become domesticated in South Carolina. Certification of such domestication by the Secretary of State of South Carolina shall accompany the application of each such foreign corporation or similar business entity.

10. Transfer or assignment to another, or a series of transfers or assignments within a 6 month period, of 10% or more of the premium service agreements of a licensee shall be deemed a bulk transfer or assignment. No licensee shall effect a bulk transfer or assignment of premium service agreements unless it shall first file the proposed agreement with, and secure the approval of, the Commissioner who shall grant such approval only if he is satisfied that such arrangements are just and equitable, that provision has been made for adequate notice to the insureds and insurers, that all funds due or payable to insureds and insurers have been paid or adequately secured, that the transferee or assignee has expressly assumed the obligations of the transferor or assignor arising out of such premium service agreements and/or that the transferor or assignor has provided indemnity or security with respect to such obligations.

11. Death of a proprietor shall terminate the license. Death or withdrawal of a partner shall suspend the license if the licensee is a partnership; provided, however, that if notice of such death or withdrawal is furnished to the Commissioner within 10 days of the event and the Commissioner is satisfied, by examination or otherwise, that the interests of insureds and insurers have been adequately protected, he may reinstate the suspended license.

Appointment of referee, receiver or trustee incident to bankruptcy or insolvency proceedings against the licensee shall suspend the license which may be reinstated only if the Commissioner finds that such proceedings have terminated and that the interests of insureds and insurers have been adequately protected.

12. The Commissioner shall be notified by registered or certified mail not later than 10 days after the event upon the occurrence of any of the following:

(a) When a partner dies or withdraws from a partnership which is a licensee, or when a new partner is admitted.

(b) When an officer, director or person owning or controlling 10% or more of the stock of a corporation or similar business entity, which is a licensee, ceases to be such, or, when a person becomes an officer, director or person owning or controlling 10% or more of the stock of such licensee.

(c) When any licensee, or any person who is a partner, officer, director or who owns 10% or more of the shares of the licensee is arrested, indicted or convicted with respect to any State or Federal offense involving moral turpitude other than a misdemeanor resulting from the operation of a motor vehicle.

(d) When a licensee suffers a revocation or suspension of license or is refused a license as a premium service company, premium finance company, insurance agency, or agent, in any other jurisdiction.

(e) When a voluntary or involuntary petition of bankruptcy or prayer for the appointment of a receiver or trustee is filed against the licensee or when the licensee enters into any assignment for the benefit of creditors or composition among creditors.

In the event of any of the foregoing, the Commissioner may conduct such examination and investigation as he deems necessary or appropriate for the protection of insureds and insurers, the expense of which shall be borne by the licensee. Without limitation upon the generality, he may require any of the affected persons to respond to interrogatories under oath or appear before him to testify under oath and may require such other or further disclosure as he deems necessary or appropriate.

13. Every premium service company shall, prior to their use, file the following forms with the Commissioner and receive his written approval:

(a) Insurance premium service agreement.

(b) Payment book.

(c) Notice of overdue payment.

(d) Request for cancellation.

(e) Notice to insurer that premium is financed under premium service agreement.

(f) Such other forms, other than advertising material and rate charts, as the licensee prepares or uses for delivery or mailing to insureds, insurers or insurance agents. This section does not apply to individual correspondence.

14. Forms filed with the Commission for approval shall be so filed in duplicate, one copy of which will be returned to the licensee endorsed with the approval or disapproval of the Commissioner.

15. No form, the filing of which is required hereunder, shall be used prior to its approval, and use of any such form which has not been approved, or which has been disapproved, shall constitute grounds for the revocation, suspension or refusal of renewal of the license or for the imposition of such penalty in lieu thereof as the Commissioner deems appropriate.

16. The records of the licensee relating to its business as a premium service company shall be kept entirely separate and distinct from records of any other business conducted by the licensee, and all items of accounts, whether real or nominal, control or subsidiary, in connection with its premium service company business shall be maintained separately and distinctly from accounts reflecting other business conducted by the licensee. Records and accounts with respect to premium service company business done in this State need not be maintained separately and distinctly from records of such business done in other states. Upon violation of this provision, the Commissioner may suspend the license of the licensee until such time as he has become satisfied, as a result of examination at the expense of the licensee, that proper separation and distinction of accounts has been made and will be maintained.

17. To comply with Section 38-39-50(b), every licensee shall maintain on file each premium service agreement, or a duplicate original or photocopy thereof, and every original document relating thereto, all of which must bear an identifying account number.

Every such licensee shall maintain records which will readily disclose, as to each premium service agreement:

(a) Date of contract or acquisition.

(b) Name of the insured.

(c) Account number.

(d) Name of agent or producer of record.

(e) Principal balance at inception.

(f) Amount of service charge.

(g) Time balance.

(h) Initial charge.

(i) Number, interval and amount of payments.

(j) Exact disbursement of proceeds including the date, amount and purpose of all payments and names of all persons to whom any part of proceeds was paid, credited or allocated.

(k) Date of notice to insured that cancellation would be requested.

(l) Date of request for cancellation to insurer and requested cancellation date.

(m) Amount of return premium and its disposition.

18. The service charge in connection with a premium service agreement shall be applied only to the difference between the down payment and the total premium and shall not apply as to the initial charge which may be added only after computation of the service charge.

19. No notice of intent to request cancellation shall be given in advance of an actual default on the premium service agreement. Upon the occurrence of such default, the licensee may notify the insured by mail of its intention to request cancellation of the policies which are the subject of the agreement not less than 10 days after the date of mailing unless all payments then in default are received before the end of such 10 day period.

20. Not less than 5 days after the expiration of such period, if the default has not been cured, the licensee may mail a request for cancellation to the insurer, which request shall be accompanied by the proffer of the original or a photocopy of its authorization if such original or photocopy was not earlier furnished to the insurer, in which event reference may be made thereto.

The licensee shall mail a copy of the request for cancellation to the insured, and with respect to a policy of automobile liability insurance, such copy shall expressly and prominently inform the insured of his statutory duty to replace such insurance on or before the date of cancellation.

21. Every insurer, upon receipt of such request for cancellation, shall, subject to Section 22 hereof, cancel such contract as of the date requested and shall within a reasonable time, not more than 30 days, cause the gross return premium, if any, to be computed and paid or credited to, or for, the account of the licensee. A copy of the statement relating to such return premiums shall be furnished by the insurer to the insured.

22. Where a valid statutory, regulatory or contractual provision requires that notice be given a particular period of time before cancellation shall become effective, the insurer shall not be required to effect cancellation prior to the elapse of the period of time prescribed by such statute, regulation or contract; the running of such time shall commence the second business day following receipt by the insurer of the request for cancellation.

23. Any excess of return premium over the amount to which the licensee is properly entitled under the premium service agreement shall be held and accounted for by the licensee in its fiduciary capacity and shall be promptly paid, and in no event more than 30 days after its receipt, to the insured.

Failure so to pay such funds to insureds or the commingling of such fiduciary funds with other funds of the licensee for longer than 30 days shall constitute sufficient grounds for the revocation, suspension or refusal of renewal of the license or the imposition of such lesser penalty as the Commissioner may deem appropriate.

24. This Regulation applies to a life insurance contract assigned to a licensee in connection with a premium service agreement and surrendered by such licensee for return by the insurer of any cash surrender value to the licensee; provided, however, that with respect to a life insurance contract, the licensee may retain, and the insurer may require surrender of, the original insurance contract.

25. In the event of cancellation of a premium service agreement by the insured, refund of the unearned service charge shall be in accordance with the customary short rate tables as used by insurers, copies of which are attached to and form a part of this Regulation.

26. No licensee shall sell or offer for sale, in connection with a premium service agreement or an application or request for such agreement, any insurance, commodity, or service of whatsoever nature as an inducement, condition, or consideration for entering into any such agreement.

The violation of this section shall constitute sufficient grounds for the revocation, suspension or refusal to renew the license.

27. No premium service agreement shall include, nor relate to, any subject other than the financing of premium with respect to the specific insurance policy or policies identified therein; and every agreement, undertaking or understanding relating to, affecting, or touching upon such premium service agreement shall be expressly incorporated therein so as to become a part thereof.

28. Each licensee shall furnish to the Commissioner, not later than March 1 of each year, on forms prescribed by him, an Annual Report on all business conducted under the license.

A special report shall be filed with the Commissioner each 6 months setting forth for each month of that period the following with totals:

(a) Number of premium service agreements written.

(b) Total premiums thereunder.

(c) Principal balances thereunder.

(d) Total service and initial charges.

(e) Number of policies cancelled pursuant to request.

29. No licensee shall accept or act pursuant to a premium service agreement which is not complete, nor shall any licensee or other person acting in its behalf complete, alter, vary or sign any such agreement except pursuant to the express, written instructions of the insured, a copy of which shall be retained and kept on file.

30. No premium service company, nor any employee, agent, or other person, acting in its behalf, shall give or offer to give any monies, supplies or services of whatsoever nature to any agent, producer of record or any other person as an inducement to such agent, producer or person to place premium service agreements with such premium service company; nor shall any such premium service company make or offer any rebate or other advantage or benefit to any borrower as an inducement to the effecting of a premium service agreement. Nothing herein shall preclude a premium service company from distributing advertising pieces or gifts containing the name and address of such premium service company and costing not more than one dollar.

31. Manifestly, in enacting the Premium Service Company Act of 1967, the General Assembly was responding to a vital public need, particularly with respect to the financing of premiums referable to automobile insurance, generally, and assigned risks, in particular. The legislation discloses a clear legislative design to erect safeguards around the financing of premiums for the protection not only of the insuring public but of the insurers themselves. In view of the General Assembly's obvious recognition of the public interest in connection with the subject of the financing of premiums, serious questions must arise as to whether any insurer which refuses recognition to premium service arrangements complying with the Act is serving the public trust implicit in its being licensed by South Carolina.

One Month Short Rate Table

Days Policy in Force Percent of One Month Premium

1 .............................. 11%

2 .............................. 17

3 .............................. 20

4 .............................. 24

5 .............................. 27

6 .............................. 30

7 .............................. 34

8 .............................. 37

9 .............................. 40

10 .............................. 43

11 .............................. 47

12 .............................. 50

13 .............................. 53

14 .............................. 57

15 .............................. 60

16 .............................. 63

17 .............................. 65

18 .............................. 68

19 .............................. 70

20 .............................. 73

21 .............................. 76

22 .............................. 78

23 .............................. 81

24 .............................. 84

25 .............................. 86

26 .............................. 89

27 .............................. 92

28 .............................. 94

29 .............................. 97

30 .............................. 100

Two Month Short Rate Table

Days Policy in Force Percent of Two Month Premium

1 .............................. 8%

2 .............................. 11

3 .............................. 14

4 .............................. 17

5 .............................. 19

6 .............................. 20

7 .............................. 22

8 .............................. 24

9 .............................. 25

10 .............................. 27

11 .............................. 29

12 .............................. 30

13 .............................. 32

14 .............................. 34

15 .............................. 35

16 .............................. 37

17 .............................. 38

18 .............................. 40

19 .............................. 42

20 .............................. 43

21 .............................. 45

22 .............................. 47

23 .............................. 48

24 .............................. 50

25 .............................. 52

26 .............................. 53

27 .............................. 55

28 .............................. 57

29 .............................. 58

30 .............................. 60

31 .............................. 61

32 .............................. 63

33 .............................. 64

34 .............................. 65

35 .............................. 67

36 .............................. 68

37 .............................. 69

38 .............................. 71

39 .............................. 72

40 .............................. 73

41 .............................. 75

42 .............................. 76

43 .............................. 77

44 .............................. 79

45 .............................. 80

46 .............................. 81

47 .............................. 83

48 .............................. 84

49 .............................. 85

50 .............................. 87

51 .............................. 88

52 .............................. 89

53 .............................. 91

54 .............................. 92

55 .............................. 93

56 .............................. 95

57 .............................. 96

58 .............................. 97

59 .............................. 99

60 .............................. 100

Three Month Short Rate Table

Days Policy in Force Percent of Three Month Premium

1 .............................. 6%

2 .............................. 7

3 .............................. 9

4 .............................. 12

5 .............................. 16

6 .............................. 17

7 .............................. 18

8 .............................. 19

9 .............................. 20

10 .............................. 21

11 .............................. 22

12 .............................. 23

13 .............................. 24

14 .............................. 26

15 .............................. 27

16 .............................. 28

17 .............................. 29

18 .............................. 30

19 .............................. 31

20 .............................. 32

21 .............................. 33

22 .............................. 34

23 .............................. 36

24 .............................. 37

25 .............................. 38

26 .............................. 39

27 .............................. 40

28 .............................. 41

29 .............................. 42

30 .............................. 43

31 .............................. 44

32 .............................. 46

33 .............................. 47

34 .............................. 48

35 .............................. 49

36 .............................. 50

37 .............................. 51

38 .............................. 52

39 .............................. 53

40 .............................. 54

41 .............................. 56

42 .............................. 57

43 .............................. 58

44 .............................. 59

45 .............................. 60

46 .............................. 61

47-48 ........................... 62

49 .............................. 63

50 .............................. 65

51-52 ........................... 66

53 .............................. 67

54 .............................. 68

55 .............................. 69

56-57 ........................... 70

58 .............................. 71

59 .............................. 73

60-61 ........................... 74

62 .............................. 75

63 .............................. 76

64 .............................. 77

65-66 ........................... 78

67 .............................. 79

68 .............................. 81

69-70 ........................... 82

71 .............................. 83

72 .............................. 84

73 .............................. 85

74-75 ........................... 86

76 .............................. 87

77 .............................. 89

78-79 ........................... 90

80 .............................. 91

81 .............................. 92

82 .............................. 93

83-84 ........................... 94

85 .............................. 95

86 .............................. 97

87-88 ........................... 98

89 .............................. 99

90-92 ........................... 100

Four Month Short Rate Table

Days Policy in Force Percent of Four Month Premium

1 ............................. 7%

2 ............................. 8

3 ............................. 10

4 ............................. 11

5 ............................. 13

6 ............................. 14

7 ............................. 16

8 ............................. 17

9 ............................. 18

10 ............................. 19

11-12 .......................... 20

13 ............................. 21

14 ............................. 22

15 ............................. 23

16-17 .......................... 24

18 ............................. 25

19 ............................. 26

20 ............................. 27

21 ............................. 28

22-23 .......................... 29

24 ............................. 30

25 ............................. 31

26 ............................. 32

27 ............................. 33

28-29 .......................... 34

30 ............................. 35

31 ............................. 36

32 ............................. 37

33-34 .......................... 38

35 ............................. 39

36 ............................. 40

37 ............................. 41

38 ............................. 42

39-40 .......................... 43

41 ............................. 44

42 ............................. 45

43 ............................. 46

44-45 .......................... 47

46 ............................. 48

47 ............................. 49

48 ............................. 50

49 ............................. 51

50-51 .......................... 52

52 ............................. 53

53 ............................. 54

54 ............................. 55

55 ............................. 56

56-57 .......................... 57

58 ............................. 58

59 ............................. 59

60 ............................. 60

61-62 .......................... 61

63 ............................. 62

64-65 .......................... 63

66 ............................. 64

67-68 .......................... 65

69 ............................. 66

70-71 .......................... 67

72 ............................. 68

73-74 .......................... 69

75-76 .......................... 70

77 ............................. 71

78-79 .......................... 72

80 ............................. 73

81-82 .......................... 74

83 ............................. 75

84-85 .......................... 76

86 ............................. 77

87-88 .......................... 78

89 ............................. 79

90-91 .......................... 80

92 ............................. 81

93-94 .......................... 82

95 ............................. 83

96-97 .......................... 84

98 ............................. 85

99-100 ......................... 86

101 ............................. 87

102-103 ......................... 88

104 ............................. 89

105-106 ......................... 90

107 ............................. 91

108-109 ......................... 92

110 ............................. 93

111-112 ......................... 94

113-114 ......................... 95

115 ............................. 96

116-117 ......................... 97

118 ............................. 98

119-120 ......................... 99

121-122 ......................... 100

Five Month Short Rate Table

Days Policy in Force Percent of Five Month Premium

1 ............................. 6%

2 ............................. 8

3 ............................. 9

4 ............................. 10

5 ............................. 11

6 ............................. 12

7 ............................. 14

8 ............................. 15

9 ............................. 16

10 ............................. 17

11-12 .......................... 18

13 ............................. 19

14-15 .......................... 20

16 ............................. 21

17-18 .......................... 22

19 ............................. 23

20-21 .......................... 24

22 ............................. 25

23-24 .......................... 26

25-26 .......................... 27

27 ............................. 28

28 ............................. 29

29-30 .......................... 30

31 ............................. 31

32-33 .......................... 32

34 ............................. 33

35-36 .......................... 34

37-38 .......................... 35

39 ............................. 36

40-41 .......................... 37

42 ............................. 38

43 ............................. 39

44-45 .......................... 40

46-47 .......................... 41

48 ............................. 42

49-50 .......................... 43

51 ............................. 44

52-53 .......................... 45

54 ............................. 46

55-56 .......................... 47

57 ............................. 48

58-59 .......................... 49

60-61 .......................... 50

62 ............................. 51

63 ............................. 52

64-65 .......................... 53

66 ............................. 54

67-68 .......................... 55

69 ............................. 56

70-71 .......................... 57

72-73 .......................... 58

74 ............................. 59

75-76 .......................... 60

77-78 .......................... 61

79 ............................. 62

80-81 .......................... 63

82-83 .......................... 64

84-85 .......................... 65

86-87 .......................... 66

88-89 .......................... 67

90-91 .......................... 68

92-93 .......................... 69

94-95 .......................... 70

96 ............................. 71

97-98 .......................... 72

99-100 ......................... 73

101-102 ......................... 74

103-104 ......................... 75

105-106 ......................... 76

107-108 ......................... 77

109-110 ......................... 78

111-112 ......................... 79

113 ............................. 80

114-115-116 ..................... 81

117 ............................. 82

118-119 ......................... 83

120-121 ......................... 84

122-123 ......................... 85

124-125 ......................... 86

126-127 ......................... 87

128-129 ......................... 88

130-131 ......................... 89

132-133 ......................... 90

134 ............................. 91

135-136 ......................... 92

137-138 ......................... 93

139-140 ......................... 94

141-142 ......................... 95

143-144 ......................... 96

145-146 ......................... 97

147-148 ......................... 98

149-150 ......................... 99

151-152 ......................... 100

Six Month Short Rate Table

Days Policy in Force Percent of Six Month Premium

1 ............................. 6%

2 ............................. 7

3 ............................. 8

4 ............................. 9

5 ............................. 10

6 ............................. 11

7 ............................. 12

8 ............................. 13

9 ............................. 14

10 ............................. 15

11 ............................. 16

12 ............................. 17

13-14 .......................... 18

15-16 .......................... 19

17-18 .......................... 20

19-20 .......................... 21

21 ............................. 22

22-23 .......................... 23

24-25 .......................... 24

26-27 .......................... 25

28-29 .......................... 26

30-31 .......................... 27

32 ............................. 28

33-34 .......................... 29

35-36 .......................... 30

37-38 .......................... 31

39-40 .......................... 32

41 ............................. 33

42-43 .......................... 34

44-45 .......................... 35

46-47 .......................... 36

48-49 .......................... 37

50-51 .......................... 38

52 ............................. 39

53-54 .......................... 40

55-56 .......................... 41

57-58 .......................... 42

59-60 .......................... 43

61-62 .......................... 44

63 ............................. 45

64-65 .......................... 46

66-67 .......................... 47

68-69 .......................... 48

70-71 .......................... 49

72-73 .......................... 50

74 ............................. 51

75-76 .......................... 52

77-78 .......................... 53

79-80 .......................... 54

81-82 .......................... 55

83 ............................. 56

84-85 .......................... 57

86-87 .......................... 58

88-89 .......................... 59

90-91 .......................... 60

92-93 .......................... 61

94-95 .......................... 62

96-98 .......................... 63

99-100 ......................... 64

101-102 ......................... 65

103-104 ......................... 66

105-107 ......................... 67

108-109 ......................... 68

110-111 ......................... 69

112-114 ......................... 70

115-116 ......................... 71

117-118 ......................... 72

119-120 ......................... 73

121-123 ......................... 74

124-125 ......................... 75

126-127 ......................... 76

128-130 ......................... 77

131-132 ......................... 78

133-134 ......................... 79

135-136 ......................... 80

137-139 ......................... 81

140-141 ......................... 82

142-143 ......................... 83

144-145 ......................... 84

146-148 ......................... 85

149-150 ......................... 86

151-152 ......................... 87

153-155 ......................... 88

156-157 ......................... 89

158-159 ......................... 90

160-161 ......................... 91

162-164 ......................... 92

165-166 ......................... 93

167-168 ......................... 94

169-171 ......................... 95

172-173 ......................... 96

174-175 ......................... 97

176-177 ......................... 98

178-180 ......................... 99

181-184 ......................... 100

Seven Month Short Rate Table

Days Policy in Force Percent of Seven Month Premium

1 ............................. 6%

2 ............................. 7

3 ............................. 8

4 ............................. 9

5-6 ........................... 10

7 ............................. 11

8 ............................. 12

9 ............................. 13

10 ............................. 14

11 ............................. 15

12-13 .......................... 16

14 ............................. 17

15-16-17 ....................... 18

18 ............................. 19

19-20-21 ....................... 20

22-23 .......................... 21

24-25 .......................... 22

26-27 .......................... 23

28-29-30 ....................... 24

31 ............................. 25

32-33-34 ....................... 26

35-36 .......................... 27

37-38 .......................... 28

39-40 .......................... 29

41-42 .......................... 30

43-44 .......................... 31

45-46 .......................... 32

47-48 .......................... 33

49-50-51 ....................... 34

52-53 .......................... 35

54-55 .......................... 36

56-57 .......................... 37

58-59 .......................... 38

60-61 .......................... 39

62-63 .......................... 40

64-65-66 ....................... 41

67 ............................. 42

68-69-70 ....................... 43

71-72 .......................... 44

73-74 .......................... 45

75-76 .......................... 46

77-78-79 ....................... 47

80 ............................. 48

81-82-83 ....................... 49

84-85 .......................... 50

86-87 .......................... 51

88-89 .......................... 52

90-91 .......................... 53

92-93 .......................... 54

94-95 .......................... 55

96-97 .......................... 56

98-99-100 ...................... 57

101-102 ......................... 58

103-104 ......................... 59

105-106 ......................... 60

107-108-109 ..................... 61

110-111 ......................... 62

112-113-114 ..................... 63

115-116 ......................... 64

117-118-119 ..................... 65

120-121-122 ..................... 66

123-124-125 ..................... 67

126-127 ......................... 68

128-129-130 ..................... 69

131-132-133 ..................... 70

134-135 ......................... 71

136-137-138 ..................... 72

139-140 ......................... 73

141-142-143 ..................... 74

144-145-146 ..................... 75

147-148-149 ..................... 76

150-151 ......................... 77

152-153-154 ..................... 78

155-156-157 ..................... 79

158-159 ......................... 80

160-161-162 ..................... 81

163-164 ......................... 82

165-166-167 ..................... 83

168-169-170 ..................... 84

171-172 ......................... 85

173-174-175 ..................... 86

176-177-178 ..................... 87

179-180-181 ..................... 88

182-183 ......................... 89

184-185-186 ..................... 90

187-188 ......................... 91

189-190-191 ..................... 92

192-193 ......................... 93

194-195-196 ..................... 94

197-198-199 ..................... 95

200-201-202 ..................... 96

203-204-205 ..................... 97

206-207 ......................... 98

208-209-210 ..................... 99

211-212-213 ..................... 100

Eight Month Short Rate Table

Days Policy in Force Percent of Eight Month Premium

1 ............................. 6%

2 ............................. 7

3-4 ........................... 8

5 ............................. 9

6 ............................. 10

7 ............................. 11

8-9 ........................... 12

10 ............................. 13

11-12 .......................... 14

13 ............................. 15

14 ............................. 16

15-16 .......................... 17

17-18-19 ....................... 18

20-21 .......................... 19

22-23-24 ....................... 20

25-26 .......................... 21

27-28 .......................... 22

29-30-31 ....................... 23

32-33-34 ....................... 24

35-36 .......................... 25

37-38 .......................... 26

39-40-41 ....................... 27

42-43 .......................... 28

44-45-46 ....................... 29

47-48 .......................... 30

49-50 .......................... 31

51-52-53 ....................... 32

54-55 .......................... 33

56-57-58 ....................... 34

59-60 .......................... 35

61-62 .......................... 36

63-64-65 ....................... 37

66-67-68 ....................... 38

69-70 .......................... 39

71-72 .......................... 40

73-74-75 ....................... 41

76-77 .......................... 42

78-79-80 ....................... 43

81-82 .......................... 44

83-84 .......................... 45

85-86-87 ....................... 46

88-89-90 ....................... 47

91-92 .......................... 48

93-94 .......................... 49

95-96-97 ....................... 50

98-99 .......................... 51

100-101-102 ..................... 52

103-104 ......................... 53

105-106 ......................... 54

107-108-109 ..................... 55

110-111 ......................... 56

112-113-114 ..................... 57

115-116 ......................... 58

117-118 ......................... 59

119-120-121 ..................... 60

122-123-124 ..................... 61

125-126-127 ..................... 62

128-129-130 ..................... 63

131-132-133 ..................... 64

134-135-136 ..................... 65

137-138-139 ..................... 66

140-141-142 ..................... 67

143-144-145 ..................... 68

146-147-148 ..................... 69

149-150-151-152 ................. 70

153-154 ......................... 71

155-156-157-158 ................. 72

159-160 ......................... 73

161-162-163-164 ................. 74

165-166 ......................... 75

167-168-169-170 ................. 76

171-172-173 ..................... 77

174-175-176 ..................... 78

177-178-179 ..................... 79

180-181-182 ..................... 80

183-184-185 ..................... 81

186-187-188 ..................... 82

189-190-191 ..................... 83

192-193-194 ..................... 84

195-196-197 ..................... 85

198-199-200 ..................... 86

201-202-203 ..................... 87

204-205-206 ..................... 88

207-208-209 ..................... 89

210-211-212 ..................... 90

213-214-215 ..................... 91

216-217-218 ..................... 92

219-220-221 ..................... 93

222-223-224 ..................... 94

225-226-227-228 ................. 95

229-230 ......................... 96

231-232-233-234 ................. 97

235-236 ......................... 98

237-238-239-240 ................. 99

241-242-243 ..................... 100

Nine Month Short Rate Table

Days Policy in Force Percent of Nine Month Premium

1 ............................. 5%

2-3 ........................... 7

4 ............................. 8

5-6 ........................... 9

7 ............................. 10

8-9 ........................... 11

10 ............................. 12

11-12 .......................... 13

13 ............................. 14

14-15 .......................... 15

16 ............................. 16

17-18-19 ....................... 17

20-21-22 ....................... 18

23-24 .......................... 19

25-26-27 ....................... 20

28-29-30 ....................... 21

31-32 .......................... 22

33-34-35 ....................... 23

36-37-38 ....................... 24

39-40 .......................... 25

41-42-43 ....................... 26

44-45-46 ....................... 27

47-48-49 ....................... 28

50-51-52 ....................... 29

53-54-55 ....................... 30

56-57 .......................... 31

58-59-60 ....................... 32

61-62 .......................... 33

63-64-65 ....................... 34

66-67-68 ....................... 35

69-70 .......................... 36

71-72-73 ....................... 37

74-75-76 ....................... 38

77-78-79 ....................... 39

80-81-82 ....................... 40

83-84-85 ....................... 41

86-87 .......................... 42

88-89-90 ....................... 43

91-92-93 ....................... 44

94-95 .......................... 45

96-97-98 ....................... 46

99-100-101 ..................... 47

102-103 ......................... 48

104-105-106 ..................... 49

107-108-109 ..................... 50

110-111-112 ..................... 51

113-114-115 ..................... 52

116-117 ......................... 53

118-119-120 ..................... 54

121-122-123 ..................... 55

124-125 ......................... 56

126-127-128 ..................... 57

129-130-131 ..................... 58

132-133 ......................... 59

134-135-136 ..................... 60

137-138-139-140 ................. 61

141-142-143 ..................... 62

144-145-146-147 ................. 63

148-149-150 ..................... 64

151-152-153-154 ................. 65

155-156-157 ..................... 66

158-159-160 ..................... 67

161-162-163 ..................... 68

164-165-166-167 ................. 69

168-169-170-171 ................. 70

172-173-174 ..................... 71

175-176-177-178 ................. 72

179-180-181 ..................... 73

182-183-184 ..................... 74

185-186-187 ..................... 75

188-189-190-191 ................. 76

192-193-194-195 ................. 77

196-197-198 ..................... 78

199-200-201-202 ................. 79

203-204-205 ..................... 80

206-207-208 ..................... 81

209-210-211 ..................... 82

212-213-214-215 ................. 83

216-217-218 ..................... 84

219-220-221-222 ................. 85

223-224-225-226 ................. 86

227-228-229 ..................... 87

230-231-232 ..................... 88

233-234-235 ..................... 89

236-237-238-239 ................. 90

240-241-242 ..................... 91

243-244-245-246 ................. 92

247-248-249 ..................... 93

250-251-252-253 ................. 94

254-255-256 ..................... 95

257-258-259 ..................... 96

260-261-262-263 ................. 97

264-265-266 ..................... 98

267-268-269-270 ................. 99

271-272-273-274 ................. 100

Ten Month Short Rate Table

Days Policy in Force Percent of Ten Month Premium

1 ............................. 5%

2 ............................. 6

3 ............................. 7

4-5 ........................... 8

6-7 ........................... 9

8 ............................. 10

9-10 .......................... 11

11-12 .......................... 12

13 ............................. 13

14-15 .......................... 14

16-17 .......................... 15

18 ............................. 16

19-20-21 ....................... 17

22-23-24 ....................... 18

25-26-27 ....................... 19

28-29-30 ....................... 20

31-32-33 ....................... 21

34-35-36 ....................... 22

37-38-39 ....................... 23

40-41-42 ....................... 24

43-44-45 ....................... 25

46-47-48 ....................... 26

49-50-51-52 .................... 27

53-54 .......................... 28

55-56-57 ....................... 29

58-59-60-61 .................... 30

62-63 .......................... 31

64-65-66-67 .................... 32

68-69 .......................... 33

70-71-72 ....................... 34

73-74-75-76 .................... 35

77-78 .......................... 36

79-80-81-82 .................... 37

83-84-85 ....................... 38

86-87 .......................... 39

88-89-90-91 .................... 40

92-93-94 ....................... 41

95-96-97 ....................... 42

98-99-100 ...................... 43

101-102-103 ..................... 44

104-105-106 ..................... 45

107-108-109 ..................... 46

110-111-112 ..................... 47

113-114-115 ..................... 48

116-117-118 ..................... 49

119-120-121-122 ................. 50

123-124 ......................... 51

125-126-127 ..................... 52

128-129-130 ..................... 53

131-132-133 ..................... 54

134-135-136-137 ................. 55

138-139 ......................... 56

140-141-142 ..................... 57

143-144-145-146 ................. 58

147-148 ......................... 59

149-150-151-152 ................. 60

153-154-155-156 ................. 61

157-158-159 ..................... 62

160-161-162-163 ................. 63

164-165-166-167 ................. 64

168-169-170-171 ................. 65

172-173-174 ..................... 66

175-176-177-178 ................. 67

179-180-181-182 ................. 68

183-184-185-186 ................. 69

187-188-189-190 ................. 70

191-192-193 ..................... 71

194-195-196-197 ................. 72

198-199-200-201 ................. 73

202-203-204-205 ................. 74

206-207-208 ..................... 75

209-210-211-212 ................. 76

213-214-215-216-217 ............. 77

218-219-220 ..................... 78

221-222-223-224 ................. 79

225-226-227 ..................... 80

228-229-230-231-232 ............. 81

233-234-235 ..................... 82

236-237-238-239 ................. 83

240-241-242 ..................... 84

243-244-245-246-247 ............. 85

248-249-250-251 ................. 86

252-253-254 ..................... 87

255-256-257-258 ................. 88

259-260-261-262 ................. 89

263-264-265-266 ................. 90

267-268-269 ..................... 91

270-271-272-273 ................. 92

274-275-276-277 ................. 93

278-279-280-281 ................. 94

282-283-284-285 ................. 95

286-287-288 ..................... 96

289-290-291-292 ................. 97

293-294-295-296 ................. 98

297-298-299-300 ................. 99

301-302-303-304 ................. 100

Eleven Month Short Rate Table

Days Policy in Force Percent of Eleven Month Premium

1 ............................. 5%

2 ............................. 6

3-4 ........................... 7

5 ............................. 8

6-7 ........................... 9

8-9 ........................... 10

10-11 .......................... 11

12-13 .......................... 12

14-15 .......................... 13

16 ............................. 14

17-18 .......................... 15

19-20 .......................... 16

21-22-23 ....................... 17

24-25-26-27 .................... 18

28-29 .......................... 19

30-31-32-33 .................... 20

34-35-36-37 .................... 21

38-39 .......................... 22

40-41-42-43 .................... 23

44-45-46-47 .................... 24

48-49 .......................... 25

50-51-52-53 .................... 26

54-55-56-57 .................... 27

58-59-60 ....................... 28

61-62-63 ....................... 29

64-65-66-67 .................... 30

68-69-70 ....................... 31

71-72-73 ....................... 32

74-75-76 ....................... 33

77-78-79-80 .................... 34

81-82-83 ....................... 35

84-85-86 ....................... 36

87-88-89-90 .................... 37

91-92-93 ....................... 38

94-95-96 ....................... 39

97-98-99-100 ................... 40

101-102-103-104 ................. 41

105-106 ......................... 42

107-108-109-110 ................. 43

111-112-113-114 ................. 44

115-116 ......................... 45

117-118-119-120 ................. 46

121-122-123-124 ................. 47

125-126 ......................... 48

127-128-129-130 ................. 49

131-132-133-134 ................. 50

135-136-137 ..................... 51

138-139-140 ..................... 52

141-142-143 ..................... 53

144-145-146-147 ................. 54

148-149-150 ..................... 55

151-152-153 ..................... 56

154-155-156-157 ................. 57

158-159-160 ..................... 58

161-162-163 ..................... 59

164-165-166-167 ................. 60

168-169-170-171 ................. 61

172-173-174-175 ................. 62

176-177-178-179-180 ............. 63

181-182-183 ..................... 64

184-185-186-187-188 ............. 65

189-190-191-192 ................. 66

193-194-195-196 ................. 67

197-198-199-200 ................. 68

201-202-203-204 ................. 69

205-206-207-208-209 ............. 70

210-211-212-213 ................. 71

214-215-216-217 ................. 72

218-219-220-221 ................. 73

222-223-224-225 ................. 74

226-227-228-229 ................. 75

230-231-232-233-234 ............. 76

235-236-237-238 ................. 77

239-240-241-242 ................. 78

243-244-245-246-247 ............. 79

248-249-250 ..................... 80

251-252-253-254-255 ............. 81

256-257-258 ..................... 82

259-260-261-262-263 ............. 83

264-265-266-267 ................. 84

268-269-270-271 ................. 85

272-273-274-275-276 ............. 86

277-278-279-280 ................. 87

281-282-283-284 ................. 88

285-286-287-288 ................. 89

289-290-291-292 ................. 90

293-294-295-296 ................. 91

297-298-299-300-301 ............. 92

302-303-304 ..................... 93

305-306-307-308-309 ............. 94

310-311-312-313 ................. 95

314-315-316-317 ................. 96

318-319-320-321-322 ............. 97

323-324-325 ..................... 98

326-327-328-329-330 ............. 99

331-332-333-334-335 ............. 100

One Year Short Rate Table

Days Policy in Force Percent of One Year Premium

1 ............................. 5%

2 ............................. 6

3-4 ........................... 7

5-6 ........................... 8

7-8 ........................... 9

9-10 .......................... 10

11-12 .......................... 11

13-14 .......................... 12

15-16 .......................... 13

17-18 .......................... 14

19-20 .......................... 15

21-22 .......................... 16

23-25 .......................... 17

26-29 .......................... 18

30-32 .......................... 19

33-36 .......................... 20

37-40 .......................... 21

41-43 .......................... 22

44-47 .......................... 23

48-51 .......................... 24

52-54 .......................... 25

55-58 .......................... 26

59-62 .......................... 27

63-65 .......................... 28

66-69 .......................... 29

70-73 .......................... 30

74-76 .......................... 31

77-80 .......................... 32

81-83 .......................... 33

84-87 .......................... 34

88-91 .......................... 35

92-94 .......................... 36

95-98 .......................... 37

99-102 ......................... 38

103-105 ......................... 39

106-109 ......................... 40

110-113 ......................... 41

114-116 ......................... 42

117-120 ......................... 43

121-124 ......................... 44

125-127 ......................... 45

128-131 ......................... 46

132-135 ......................... 47

136-138 ......................... 48

139-142 ......................... 49

143-146 ......................... 50

147-149 ......................... 51

150-153 ......................... 52

154-156 ......................... 53

157-160 ......................... 54

161-164 ......................... 55

165-167 ......................... 56

168-171 ......................... 57

172-175 ......................... 58

176-178 ......................... 59

179-182 ......................... 60

183-187 ......................... 61

188-191 ......................... 62

192-196 ......................... 63

197-200 ......................... 64

201-205 ......................... 65

206-209 ......................... 66

210-214 ......................... 67

215-218 ......................... 68

219-223 ......................... 69

224-228 ......................... 70

229-232 ......................... 71

233-237 ......................... 72

238-241 ......................... 73

242-246 ......................... 74

247-250 ......................... 75

251-255 ......................... 76

256-260 ......................... 77

261-264 ......................... 78

265-269 ......................... 79

270-273 ......................... 80

274-278 ......................... 81

279-282 ......................... 82

283-287 ......................... 83

288-291 ......................... 84

292-296 ......................... 85

297-301 ......................... 86

302-305 ......................... 87

306-310 ......................... 88

311-314 ......................... 89

315-319 ......................... 90

320-323 ......................... 91

324-328 ......................... 92

329-332 ......................... 93

333-337 ......................... 94

338-342 ......................... 95

343-346 ......................... 96

347-351 ......................... 97

352-355 ......................... 98

356-360 ......................... 99

361-365 ......................... 100

69-11.1. Regulation of Credit Insurance.

This regulation replaces Regulation 69-11 and provides one comprehensive regulation for all insurance sold in connection with the Consumer Finance Act or the Consumer Protection Code, as amended.

A. Background and Purpose. 1976 Code Sections 34-29-10 et seq. is known as the Consumer Finance Act and provides that accident and health or property insurance sold in conjunction with consumer loans, as defined in Act 988, shall be subject to rules and regulations adopted by the South Carolina Insurance Commission. Such rules and regulations are contained in Regulation 69-11 issued October 13, 1967. 1976 Code Title 37 is known as the South Carolina Consumer Protection Code. Act 686 of 1976 amended Act 1241 in many particulars, but neither Act 1241 nor Act 686 amended any of the insurance or provisions of 1976 Code Sections 34-29-10 et seq., except to provide that such sections shall apply only to restricted loans and restricted lenders, as defined in Act 686. It is the purpose of this Regulation to replace Regulation 69-11 and provide one comprehensive regulation for all insurance sold in connection with the Consumer Finance Act (1976 Code Sections 34-29-10 et seq) or the Consumer Protection Code (1976 Code Title 37 as amended by Act 686 of 1976).

B. Definitions. For the purpose of this Regulation definitions of words or phrases herein relating to types of loans and other financial transactions on which insurance is permitted and relating to all types of lenders and financial organizations that are subject to the types of supervision or regulation as defined in the Consumer Finance Act or the Consumer Protection Code, shall be those definitions set forth in said Act and said Code, respectively.

C. Provisions Applicable to Restricted Loans and Restricted Lenders.

(1) Forms.

(a) General: All forms of policies, certificates, or other evidence of insurance used in South Carolina or covering South Carolina lives, property or interests must be filed with and approved by the Chief Insurance Commissioner before use in this State. Forms offered for filing and approval must be submitted in duplicate and, if approved for use in the State, one counterpart of each form will be marked as approved and returned to the insurer affected to serve as evidence of compliance with the Act and Section 38-61-20 of the 1976 Code. Filing and approval of forms as required hereunder shall be deemed prima facie evidence of compliance with the provisions of the South Carolina Consumer Finance Act by the insurer and the agent.

The Chief Insurance Commissioner shall disapprove any form if it contains provisions which are unjust, unfair, inequitable, misleading, deceptive or which encourages misrepresentation of coverage or is contrary to any provision of the South Carolina Code of Laws or any rule or regulation issued thereunder.

(b) Life Insurance: Where the borrower pays for the cost of credit life insurance written individually or under a group contract, no form will be approved unless the insurer can demonstrate that the coverage provided in such form bears a reasonable and bona fide relation to the hazard or risk of loss to be assumed by the insurer proposing to issue such form of contract.

No form providing level term life insurance will be approved unless the insurer offering such form can demonstrate to the satisfaction of the Commission that the coverage provided thereunder is a lawful requirement of the Act.

If individual life insurance policies do not state the reserve method used by the insurer, the insurer must notify the Insurance Department of its reserve method pursuant to Sections 38-5-60, 38-9-170, and 38-9-180 of the 1976 Code.

(c) Accident and Health Insurance: All coverages must be written on forms providing for a maximum three (3) day waiting period for a covered disability with benefits to be retroactive to the first day of disability.

(d) Property Insurance: Property insurance must cover the property of a borrower used to secure a loan, and the amount of insurance must not exceed the reasonable value of the property insured.

Single interest coverage and dual interest coverage may be offered pursuant to the Act, but the borrower must have the option to purchase either single interest or dual interest. If the lender does not represent an insurer writing dual interest property insurance, a reasonable effort must be made by the lender to obtain dual interest property insurance for the account of the borrower if he requests such coverage. When a borrower specifically requests dual interest coverage, he may also request a term of coverage to exceed the term of the secured loan.

No insurer or agent may lawfully issue a policy or charge an insurance premium to cover property securing a loan if such a property is not eligible for coverage under the forms approved for use by such insurer in this State.

(e) Non-Filing Insurance: Non-filing insurance is authorized under the provisions of the South Carolina Consumer Protection Code, and such coverage may be written on forms and rates as approved by the Chief Insurance Commissioner, provided that the premiums payable for such insurance in lieu of perfecting a security interest do not exceed the fees and charges authorized by law.

(2) Basic Statistical Plan. To comply with 1976 Code Section 34-29-160, which specifies that credit accident and health and credit property insurance rates shall be deemed excessive if the loss ratio resulting from their use may reasonably be expected to be less than fifty percent, the Commission has adopted a Basic Statistical Plan to be used by all insurers writing insurance pursuant to the Act. The data specified in the Basic Statistical Plan shall be filed under oath by March 1 of each year for the business of the preceding calendar year, and shall be submitted both as part of the Annual Statement, on forms prescribed by the Chief Insurance Commissioner, and as a separate document, sworn to by an officer of the company. The data required are:

Line of Insurance Direct Direct Direct Direct

Premiums Premiums Losses Losses

Written Earned Paid Incurred

(Deducting

Salvage)

Accident & Health (1) (2) (3) (4)

(1) Group and Individual

Accident and

Health

Property

(1) Automobile Fire and Theft

Single Interest

(2) Automobile Collision

Single Interest

(3) Household Goods

Single Interest

(4) Household Goods

Dual Interest

The definitions of Direct Premiums Written, Direct Premiums Earned, Direct Losses Paid (Deducting Salvage) and Direct Losses Incurred shall be the definitions applicable to the Annual Statement.

The Commission may take all reasonable steps to insure the accuracy of the data submitted. Failure of the entries submitted as part of the Annual Statement to agree with the corresponding entries submitted as a separate document will be prima facie evidence of inaccuracy. Other indications of possible inaccuracy may be investigated.

(3) Compilation of Statistics by Commission--Determination of Rates. As soon as practicable after March 1 of each year, after satisfying itself of the accuracy of the data submitted under the Basic Statistical Plan, the Commission will compile the total earned premiums and incurred losses for all insurers submitting data, for each line of insurance, for the preceding calendar year. These totals, together with such corresponding totals for previous calendar years as are available, will be adjusted to a common rate base, to determine the rate for each line of insurance which may reasonably be expected to produce a loss ratio of not less than fifty percent for the following calendar year. In making this determination the Commission shall give due consideration to past and prospective loss experience and to all other relevant factors within and outside of this State.

(4) Promulgation of Tentative Rates by Commission. On or before August 1 of each year, the Commission shall notify all insurers writing credit insurance under 1976 Code Sections 34-29-10 et seq, of the rates which it believes may reasonably be expected to produce a loss ratio of not less than fifty percent in the following calendar year. Every insurer which feels aggrieved by any of the rates so promulgated shall have fifteen days to request a public hearing with respect to such rate or rates. Following such hearing or hearings, the Commission shall either modify its previous determination or reaffirm it. Such modification or reaffirmation shall be made before October 1.

(5) Promulgation of Final Rates by Commission. On or before October 1 of each year, the Commission shall notify all insurers of the rates which shall become effective on new policies issued on or after January 1 of the following year.

(6) Filing of Rates by Insurers. On or before December 1 of each year, each insurer shall notify the Commission of its intention to use rates no higher than the final rates promulgated by the Commission for the lines of insurance which it writes.

D. Provisions Applicable to Lenders and Financial Organizations and to Loans and Other Financial Transactions Subject to Article 4 of the Consumer Protection Code [1976 Code Title 37, Chapter 4].

(1) Application. These provisions are applicable to insurance provided or to be provided in relation to a consumer credit sale, a consumer credit lease, or a consumer loan, other than as excepted in 1976 Code Section 37-4-102, Subsection (2) of the Consumer Protection Code.

(2) Forms.

(a) General: All forms of policies, certificates or other evidence of insurance used in South Carolina or covering South Carolina lives, property or interests must be filed with and approved by the Chief Insurance Commissioner before use in this State. Forms offered for filing and approval must be submitted in duplicate, and if approved for use in the State, one counterpart of each form will be marked as approved and returned to the insurer affected to serve as evidence of compliance with the South Carolina Consumer Protection Code and Section 38-61-20 of the 1976 Code. Filing and approval of forms as required hereunder shall be deemed prima facie evidence of compliance with the provisions of the South Carolina Consumer Protection Code by the insurer and the agent.

The Chief Insurance Commissioner shall disapprove any form if it contains provisions which are unjust, unfair, inequitable, misleading, deceptive or encourages misrepresentation of coverage, or is contrary to any provision of the South Carolina Code of Laws or any rule or regulation issued thereunder.

(b) Life Insurance: Where the borrower pays for the cost of credit life insurance written individually or under a group contract, no form will be approved unless the insurer can demonstrate that the coverage provided in such form bears a reasonable and bona fide relation to the hazard or risk of loss to be assumed by the insurer proposing to issue such form of contract.

If individual life insurance policies do not state the reserve method used by the insurer, the insurer must notify the Insurance Department of its reserve method pursuant to Sections 38-5-60, 38-9-170 and 38-9-180 of the 1976 Code.

(c) Accident and Health Insurance: All coverages of credit accident and health insurance written hereunder must be written on forms providing for either a fourteen (14) or thirty (30) day retroactive coverage.

(d) Property Insurance: Property insurance must cover the property of a borrower used to secure a loan, and the amount of insurance must not exceed the reasonable value of the property insured.

No insurer or agent may lawfully issue a policy or charge an insurance premium to cover property securing a loan if such property is not eligible for coverage under the forms approved for use by such insurer in this State.

(e) Non-Filing Insurance. Non-filing insurance is authorized under the provisions of the South Carolina Consumer Protection Code, and such coverage may be written on forms and rates as approved by the Chief Insurance Commissioner, provided that the premiums payable for such insurance in lieu of perfecting a security interest do not exceed the fees and charges authorized by law.

(3) Basic Statistical Plan. To comply with 1976 Code Section 37-4-203(4) of the South Carolina Consumer Protection Code, which provides that premium rates and premium rate levels for credit accident and health insurance shall be calculated to produce and maintain a ratio of losses incurred to premiums earned, or reasonably expected to be earned, of approximately fifty percent, the Commission has adopted a Basic Statistical Plan to be used by all insurers writing such insurance under the Code. The data specified in the Basic Statistical Plan shall be filed under oath by March 1 of each year for the business of the preceding calendar year, and shall be submitted both as a part of the Annual Statement, and on separate forms prescribed by the Chief Insurance Commissioner, sworn to by an officer of the company.

The Commission may take all reasonable steps to insure the accuracy of the data submitted. Failure of the entries submitted as a part of the Annual Statement to agree with the corresponding entries submitted on the separate forms prescribed by the Chief Insurance Commissioner will be deemed prima facie evidence of inaccuracy. Other indications of possible inaccuracy may be investigated.

(4) Compilation of Statistics by Commission--Determination of Rates. As soon as practicable after March 1 of each year, after satisfying itself of the accuracy of the data submitted under the Basic Statistical Plan, the Commission will compile the total earned premiums and incurred losses for all insurers submitting data, for such credit accident and health insurance, for the preceding calendar year. These totals, together with such corresponding totals for previous calendar years as are available, will be adjusted to a common rate base, to determine the rate for each plan of benefits and class of business for credit accident and health insurance which may be calculated to produce and maintain a ratio of losses incurred, or reasonably expected to be incurred, to premiums earned, or reasonably expected to be earned, of approximately fifty percent. In making this determination, the Commission shall give due consideration to past and prospective loss experience and to all other relevant factors within and outside of this State.

(5) Promulgation of Tentative Rates by Commission. On or before August 1 of each year, the Commission shall notify all insurers writing credit accident and health insurance through Supervised Lenders under the South Carolina Consumer Protection Code, of the rates which it believes may reasonably be expected to produce and maintain a ratio of losses incurred, or reasonably expected to be incurred, to premiums earned, or reasonably expected to be earned, of approximately fifty percent in the following calendar year. Every insurer which feels aggrieved by any of the rates so promulgated shall have fifteen days to request a public hearing with respect to such rate or rates. Following such hearing, or hearings if more than one, the Commission shall either modify its previous determination or reaffirm it. Such modification or reaffirmation shall be made before October 1.

(6) Promulgation of Final Rates by Commission. On or before October 1 of each year, the Commission shall notify all insurers of the rates which shall become effective on new policies of credit accident and health insurance issued hereunder on or after January 1 of the following year.

(7) Filing of Rates by Insurers. On or before December 1 of each year, each insurer shall notify the Commission of its intention to use rates no higher than the final rates of credit accident and health insurance promulgated by the Commission for the plan of benefits of such insurance which it writes.

(8) Implementation of this Regulation. The Basic Statistical Plan applicable to all credit insurance sold in conjunction with Restricted loans, as defined in B., shall be the Basic Statistical Plan prescribed by C. (2). This Plan shall be used for the recording of statistics by insurers for calendar year 1977, to be reported by March 1, 1978.

The Basic Statistical Plan applicable to all credit insurance sold in conjunction with Supervised Loans, as defined in B., shall be in conformance with D. (3), and as promulgated by Order 01-77.

The South Carolina Insurance Commission will notify all interested insurers by Order of any change in either Basic Statistical Plan applicable to the business of a calendar year by July 1 of the preceding calendar year.

69-12. Variable Contracts.

PART A--VARIABLE ANNUITIES

Article I: Authority.

Part A of this Regulation, applicable to variable annuities, is promulgated under the authority of S. C. Code Section 38-67-40 (1976).

Article II: Definitions.

As used in Part A of this Regulation:

(1) The term "variable annuity" shall mean any policy or contract which provides for annuity benefits which vary according to the investment experience of any separate account or accounts maintained by the insurer as to such policy or contract, as provided for in S. C. Code Section 38-67-10 (1976) or pursuant to the corresponding section of the insurance laws of the state of domicile of a foreign or alien insurer.

(2) "Agent" shall mean any individual licensed by the Commissioner as a life insurance agent.

(3) "Commissioner" shall mean the Chief Insurance Commissioner of South Carolina.

Article III: Qualification of Insurance Companies to Issue Variable Annuities.

(1) No insurance company shall deliver or issue for delivery variable annuities within this State unless (a) it is licensed or organized to do a life insurance or annuity business in this State, and (b) the Commissioner is satisfied that its condition or method of operation in connection with the issuance of such contracts will not render its operation hazardous to the public or its policyholders in this State. In this connection, the Commissioner shall consider among other things:

(i) The history and financial condition of the company;

(ii) The character, responsibility and fitness of the officers and directors of the company;

(iii) The law and regulation under which the company is authorized in its state of domicile to issue variable annuities.

(2) If the company is a subsidiary of an admitted life insurance company, or affiliated with such company by common management or ownership, it may be deemed by the Commissioner to have satisfied the provisions of clause (b) of Paragraph (1) hereof if either it or such admitted life company satisfies the aforementioned provisions; provided, further, that companies licensed and having a satisfactory record of doing business in this State for a period of at least three years may be deemed to have satisfied the Commissioner with respect to clause (b) of Paragraph (1) above.

(3) Before any company shall deliver or issue for delivery variable annuities within this State it shall submit to the Commissioner (a) a general description of the kinds of variable annuities it intends to issue, (b) if requested by the Commissioner, a copy of the statutes and regulations of its state of domicile under which it is authorized to issue variable annuities, and (c) if requested by the Commissioner, biographical data with respect to officers and directors of the company on such forms as the Commissioner may approve.

Article IV: Separate Account.

A domestic company issuing variable annuities shall establish one or more separate accounts pursuant to S. C. Code Section 38-67-10 (1976), subject to the following provisions of this Article:

(1)(a) Except as may be provided with respect to reserves for guaranteed benefits and funds referred to in Paragraph (1)(b), (i) amounts allocated to any separate account and accumulations thereon may be invested and reinvested without regard to any requirements or limitations prescribed by the laws of this State governing the investments of life insurance companies, and (ii) the investments in such separate account or accounts shall not be taken into account in applying the investment limitations otherwise applicable to the investments of the company.

(b) Reserves for (i) benefits guaranteed as to dollar amount and duration, and (ii) funds guaranteed as to principal amount or stated rate of interest may be maintained in a separate account, if a portion of the assets of such separate account at least equal to such reserve liability is invested in accordance with the laws and regulations of this State governing the investments of life insurance companies. Such portion of the assets also shall not be taken into account in applying the investment limitations otherwise applicable to the investments of the company.

(c) With respect to 75% of the market value of the total assets in a separate account, no company shall purchase or otherwise acquire the securities of any issuer, other than securities issued or guaranteed as to principal or interest by the United States, if immediately after such purchase or acquisition the market value of such investment, together with prior investments of such separate account in such security taken at market, would exceed 10% of the market value of the assets of said separate account; provided, however, that the Commissioner may waive such limitation if, in his opinion, such waiver will not render the operation of such separate account hazardous to the public or policyholders in this State.

(d) Unless otherwise permitted by law or approved by the Commissioner, no company shall purchase or otherwise acquire for its separate accounts the voting securities of any issuer if as a result of such acquisition the insurance company and its separate accounts, in the aggregate, will own more than 10% of the total issued and outstanding voting securities of such issuer; provided, that the foregoing shall not apply with respect to securities held in separate accounts, the voting rights in which are exercisable only in accordance with instructions from persons having interest in such accounts.

(e) The limitations provided in Paragraphs (1)(c) and (1)(d) above shall not apply to the investment with respect to a separate account in the securities of an investment company registered under the Investment Company Act of 1940, provided that the investments of such investment company comply in substance with Paragraphs (1)(c) and (1)(d) hereof.

(2) Unless otherwise approved by the Commissioner, assets allocated to a separate account shall be valued at their market value on the date of valuation, or if there is no readily available market, then as provided under the terms of the contract or the rules or other written agreement applicable to such separate account; provided, that unless otherwise approved by the Commissioner, the portion, if any, of the assets of such separate account equal to the company's reserve liability with regard to the benefits and funds referred to in clauses (i) and (ii) of Paragraph (1)(b) shall be valued in accordance with the rules otherwise applicable to the company's assets.

(3) If and to the extent so provided under the applicable contracts, that portion of the assets of any such separate account equal to the reserves and other contract liabilities with respect to such account shall not be chargeable with liabilities arising out of any other business the company may conduct.

(4) Notwithstanding any other provisions of law, a company may

(a) with respect to any separate account registered with the Securities and Exchange Commission as a unit investment trust, exercise voting rights in connection with any securities of a regulated investment company registered under the Investment Company Act of 1940 and held in such separate accounts in accordance with instructions from persons having interests in such accounts ratably as determined by the company, or

(b) with respect to any separate account registered with the Securities and Exchange Commission as a management investment company, establish for such account a committee, board, or other body, the members of which may or may not be otherwise affiliated with such company and may be elected to such membership by the vote of persons having interests in such account ratably as determined by the company. Such committee, board or other body may have the power, exercisable alone or in conjunction with others, to manage such separate account and the investment of its assets.

A company, committee, board or other body may make such other provisions in respect to any such separate account as may be deemed appropriate to facilitate compliance with requirements of any federal or state law now or hereafter in effect; provided that the Commissioner approves such provisions as not hazardous to the public or the company's policyholders in this State.

(5) No sale, exchange or other transfer of assets may be made by a company between any of its separate accounts or between any other investment account and one or more of its separate accounts unless, in the case of a transfer into a separate account, such transfer is made solely to establish the account or to support the operation of the contracts with respect to the separate account to which the transfer is made, and unless such transfer, whether into or from a separate account, is made (a) by a transfer of cash, or (b) by a transfer of securities having a valuation which could be readily determined in the marketplace, provided that such transfer of securities is approved by the Commissioner. The Commissioner may authorize other transfers among such accounts, if, in his opinion, such transfers would not be inequitable.

(6) The company shall maintain in each separate account assets with a value at least equal to the reserves and other contract liabilities with respect to such account, except as may otherwise be approved by the Commissioner.

(7) Rules under any provision of the insurance laws of this State or any regulation applicable to the officers and directors of insurance companies with respect to conflict of interest shall also apply to members of any separate accounts committee, board or other similar body. No officer or director of such company nor any member of the committee, board or body of a separate account shall receive directly or indirectly any commission or any other compensation with respect to the purchase or sale of assets of such separate account.

Article V: Filing of Contracts.

The filing requirements applicable to variable annuities shall be those filing requirements otherwise applicable under existing statutes and regulations of this State with respect to individual and group life insurance and annuity contract form filings, to the extent appropriate.

Article VI: Variable Annuity Contracts.

(1) Any variable annuity providing benefits payable in variable amounts delivered or issued for delivery in this State shall contain a statement of the essential features of the procedures to be followed by the insurance company in determining the dollar amount of such variable benefits. Any such contract, including a group contract and any certificate in evidence of variable benefits issued thereunder, shall state that such dollar amount will vary to reflect investment experience and shall contain on its first page a clear and prominent statement to the effect that the benefits thereunder are on a variable basis.

(2) Illustrations of benefits payable under any variable annuity shall not include projections of past investment experience into the future or attempted predictions of future investment experience; provided that nothing contained herein is intended to prohibit use of hypothetical assumed rates of return to illustrate possible levels of benefits.

(3) No individual variable annuity contract calling for the payment of periodic stipulated payments to the insurer shall be delivered or issued for delivery in this State unless it contains in substance the following provision or provisions which in the opinion of the Commissioner are more favorable to the holders of such contracts:

(a) A provision that there shall be a period of grace of 30 days or of one month, within which any stipulated payment to the insurer falling due after the first may be made, during which period of grace the contract shall continue in force. The contract may include a statement of the basis for determining the date as of which any such payment received during the period of grace shall be applied to produce the values under the contract arising therefrom;

(b) A provision that, at any time within one year from the date of default, in making periodic stipulated payments to the insurer during the life of the annuitant and unless the cash surrender value has been paid, the contract may be reinstated upon payment to the insurer of such overdue payments as required by the contract, and of all indebtedness to the insurer on the contract, including interest. The contract may include a statement of the basis for determining the date as of which the amount to cover such overdue payments and indebtedness shall be applied to produce the values under the contract arising therefrom;

(4) Any variable annuity contract delivered or issued for delivery in this State shall stipulate the investment increment factors to be used in computing the dollar amount of variable benefits or other variable contractual payments or values thereunder, and may guarantee that expense and/or mortality results shall not adversely affect such dollar amounts. In the case of an individual variable annuity contract under which the expense and mortality results may adversely affect the dollar amount of benefits, the expense and mortality factors shall be stipulated in the contract.

In computing the dollar amount of variable benefits or other contractual payments or values under an individual variable annuity contract:

(a) The annual net investment increment assumption shall not exceed 5% except with the approval of the Commissioner.

(b) To the extent that the level of benefits may be affected by future mortality results, the mortality factor shall be determined from the Annuity Mortality Table for 1949, ultimate, or any modification of that table not having a lower life expectancy at any age, or, if approved by the Commissioner, from another table.

"Expense" as used in this Paragraph, may exclude some or all taxes, as stipulated in the contract.

(5) The reserve liability for variable annuities shall be established pursuant to the requirements of S. C. Code Section 38-9-180 (1976) (the Standard Valuation Law) in accordance with actuarial procedures that recognize the variable nature of the benefits provided and any mortality guarantees.

Article VII: Nonforfeiture Benefits.

(1) This Article shall not apply to any (i) reinsurance, (ii) group annuity contract purchased in connection with one or more retirement plans or plans of deferred compensation established or maintained by or for one or more employers (including partnerships or sole proprietorships), employee organizations, or any combination thereof, or other than plans providing individual retirement accounts or individual retirement annuities under Section 408 of the Internal Revenue Code, as now or hereafter amended, (iii) premium deposit fund, (iv) investment annuity, (v) immediate annuity, (vi) deferred annuity contract after annuity payments have commenced, (vii) reversionary annuity, or to any (viii) contract which is to be delivered outside this state through an agent or other representative of the company issuing the contract.

(2) To the extent that any variable annuity contract provides benefits which do not vary in accordance with the investment performance of a separate account before the annuity commencement date, such contract shall contain provisions which satisfy the requirements of Chapter 69 of Title 38 of 1976 Code, (the Standard Nonforfeiture Law for Deferred Annuities) and shall not otherwise be subject to this Article.

(3) In the case of a contract issued one hundred eighty (180) days after the effective date of this regulation, no variable annuity contract, except as stated in Paragraphs (1) and (2), shall be delivered or issued for delivery in this state unless it contains in substance the following provisions, or corresponding provisions which in the opinion of the Commissioner are at least as favorable to the contractholder, upon cessation of payment of considerations under the contract:

(a) That upon cessation of payment of considerations under a contract, the company will grant a paid-up annuity benefit on a plan described in the contract that complies with Paragraph (7). Such description will include a statement of the mortality table, if any, and guaranteed or assumed interest rates used in calculating annuity payments.

(b) If a contract provides for a lump sum settlement at maturity, or at any other time, that upon surrender of the contract at or prior to the commencement of any annuity payments, the company will pay in lieu of any paid-up annuity benefit a cash surrender benefit as described in the contract that complies with Paragraph (8). The contract may provide that the company reserves the right, at its option, to defer the determination and payment of any cash surrender benefit for any period during which the New York Stock Exchange is closed for trading (except for normal holiday closing) or when the Securities and Exchange Commission has determined that a state of emergency exists which may make such determination and payment impractical.

(c) A statement that any paid-up annuity, cash surrender or death benefits that may be available under the contract are not less than the minimum benefits required by any statute of the state in which the contract is delivered and an explanation of the manner in which such benefits are altered by the existence of any additional amounts credited by the company to the contract, any indebtedness to the company on the contract or any prior withdrawals from or partial surrenders of the contract.

(4) The minimum values as specified in this Article of any paid-up annuity, cash surrender or death benefits available under a variable annuity contract shall be based upon nonforfeiture amounts meeting the requirements of this paragraph.

The minimum nonforfeiture amount on any date prior to the annuity commencement date shall be an amount equal to the percentages of net considerations (as specified in Paragraph 5) increased (or decreased) by the net investment return allocated to the percentages of net considerations, which amount shall be reduced to reflect the effect of:

(i) any partial withdrawals from or partial surrenders of the contract;

(ii) the amount of any indebtedness on the contract, including interest due and accrued;

(iii) an annual contract charge not less than zero and equal to (a) the lesser of thirty dollars ($30.00) and 2% of the end of year contract value less (b) the amount of any annual contract charge deducted from any gross considerations credited to the contract during such contract year; and

(iv) a transaction charge of ten dollars ($10.00) for each transfer to another separate account or to another investment division within the same separate account.

"Net investment return" means the rate of investment return to be credited to the variable annuity contract in accordance with the terms of the contract after deductions for tax charges, if any, and for asset charges either at a rate not in excess of that stated in the contract, or in the case of a contract issued by a non-profit corporation under which the contractholder participates fully in the investment, mortality and expense experience of the account, in an amount not in excess of the actual expense not offset by other deductions. The net investment return to be credited to a contract shall be determined at least monthly.

The annual contract charge of thirty dollars ($30.00) and the transaction charge of ten dollars ($10.00) referred to above will be adjusted to reflect changes in the Consumer Price Index in accordance with Paragraph (6).

(5) The percentages of net considerations used to define the minimum nonforfeiture amount in Paragraph (4) shall meet the requirements of this paragraph.

(a) With respect to contracts providing for periodic considerations, the net considerations for a given contract year used to define the minimum nonforfeiture amount shall be an amount not less than zero and shall be equal to the corresponding gross considerations credited to the contract during that contract year less an annual contract charge of thirty dollars ($30.00) and less a collection charge of one dollar and twenty-five cents ($1.25) per consideration credited to the contract during that contract year less any charges for premium taxes. The percentages of net considerations shall be sixty-five percent (65%) for the first contract year and eighty-seven and one-half percent (87 1/2 %) for the second and later contract years. Notwithstanding the provisions of the preceding sentence, the percentage shall be sixty-five percent (65%) of the portion of the total net consideration for any renewal contract year which exceeds by not more than two times the sum of those portions of the net considerations in all prior contract years for which the percentage was sixty-five percent (65%).

(b) With respect to contracts providing for a single consideration, the net consideration used to define the minimum nonforfeiture amount shall be the gross consideration less a contract charge of seventy-five dollars ($75.00) and less any charge for premium taxes. The percentage of the net consideration shall be ninety percent (90%).

The annual contract charge of thirty dollars ($30.00), the collection charge of one dollar and twenty-five cents ($1.25) per collection, and the single consideration contract charge of seventy-five dollars ($75.00) referred to above, will be adjusted to reflect changes in the Consumer Price Index in accordance with Paragraph (6).

(6) Demonstration that a contract's nonforfeiture amounts comply with this Article shall be based on the following assumptions:

(a) Values should be tested at the ends of each of the first twenty (20) contract years;

(b) A net investment return of 7% per year should be used;

(c) If the contract provides for transfers to another separate account or to another investment division within the same separate account, one transfer per contract year should be assumed;

(d) In determining the state premium tax, if any, applicable to the contract, the state of residence should be assumed to equal the state of delivery;

(e) With respect to contracts providing for periodic considerations, monthly considerations of $100 should be assumed for each of the first 240 months;

(f) With respect to contracts providing for a single consideration, a $10,000 single consideration should be assumed; and

(g) The following contract charges should be used:

(1) For contracts filed in 1980 or earlier, the annual contract charge of thirty dollars ($30.00) referred to in Paragraphs (4) and (5), the charge of ten dollars ($10.00) per transfer referred to in Paragraph (4), the collection charge of one dollar and twenty-five cents ($1.25) per consideration referred to in Paragraph (5), and the contract charge of seventy-five dollars ($75.00) referred to in Paragraph (5)(b).

(2) For contracts filed in 1981 or later, the above contract charges multiplied by the ratio of (i) the Consumer Price Index for June of the calendar year preceding the date of filing, to (ii) the Consumer Price Index for June, 1979.

(h) If the contract provides for allocation of considerations to both fixed and variable accounts, 100% of the considerations should be assumed to be allocated to the variable account.

As used herein, the Consumer Price Index means such Index for all urban consumers for all items as published by the Bureau of Labor Statistics of the United States Department of Labor or its successor.

If publication of the Consumer Price Index ceases, or if such Index otherwise becomes unavailable or is altered in such a way as to be unusable, the Commissioner will substitute an index he deems to be suitable.

(7) Any paid-up annuity benefit available under a variable annuity contract shall be such that its present value on the annuity commencement date is at least equal to the minimum nonforfeiture amount on the date. Such present value shall be computed using the mortality table, if any, and the guaranteed or assumed interest rates used in calculating the annuity payments.

(8) For variable annuity contracts which provide cash surrender benefits, the cash surrender benefit at any time prior to the annuity commencement date shall not be less than the minimum nonforfeiture amount next computed after the request for surrender is received by the company. The death benefit under such contracts shall be at least equal to the cash surrender benefits.

(9) Any variable annuity contract which does not provide cash surrender benefits or does not provide death benefits at least equal to the minimum nonforfeiture amount prior to the annuity commencement date shall include a statement in a prominent place in the contract that such benefits are not provided.

(10) Notwithstanding the requirements of this Article, a variable annuity contract may provide under the situations specified in (a) or (b) below that the company, at its option, may cancel the annuity and pay the contractholder its accumulated value and by such payment be released of any further obligation under such contract:

(a) if at the time the annuity becomes payable the accumulated value is less than $2,000, or would provide an income the initial amount of which is less than $20 per month; or

(b) if prior to the time the annuity becomes payable under a periodic payment variable annuity contract no considerations have been received under the contract for a period of two (2) full years and both (i) the total considerations paid prior to such period, reduced to reflect any partial withdrawals from or partial surrenders of the contract and (ii) the accumulated value, amount to less than $2,000.

(11) For any variable annuity contract which provides, within the same contract by rider or supplemental contract provision, both annuity benefits and life insurance benefits that are in excess of the greater of cash surrender benefits or a return of the gross considerations with interest, the minimum nonforfeiture benefits shall be equal to the sum of the minimum nonforfeiture benefits for the annuity portion and the minimum nonforfeiture benefits, if any, for the life insurance portion computed as if each portion were a separate contract. Notwithstanding the provisions of Paragraph (4), additional benefits payable (a) in the event of total and permanent disability, (b) as reversionary annuity or deferred reversionary annuity benefits, or (c) as other policy benefits additional to life insurance, endowment, and annuity benefits, and considerations for all such additional benefits shall be disregarded in ascertaining the minimum nonforfeiture amounts, paid-up annuity, cash surrender and death benefits that may be required by this Article. The inclusion of such additional benefits shall not be required in any paid-up benefits, unless such additional benefits separately would require minimum nonforfeiture amounts, paid-up annuity, cash surrender and death benefits.

Article VIII: Required Reports.

(1) Any company issuing individual variable annuities shall mail to the contractholder at least once in each contract year after the first at his last address known to the company, a statement or statements reporting the investments held in the separate account. The company shall submit annually to the Commissioner a statement of business of its separate account or accounts in such form as may be approved by the Commissioner.

(2) Any company issuing individual variable annuities shall mail to the contractholder at least once in each contract year after the first at his last address known to the company a statement reporting as of a date not more than four months previous to the date of mailing. In the case of an annuity contract under which payments have not yet commenced, the report shall contain (a) the number of accumulation units credited to such contract and the dollar value of a unit, or (b) the value of the contractholder's account.

Article IX: Foreign Companies.

If the law or regulation in the place of domicile of a foreign company provides a degree of protection to policyholders and the public which is substantially equal to that provided by these regulations, the Commissioner, to the extent deemed appropriate by him in his discretion, may consider compliance with such law or regulation as compliance with these regulations.

Article X: Qualifications of Agents for the Sale of Variable Annuities.

(1)(a) No person may sell or offer for sale in this state any variable annuity contract unless such person is an agent and has filed with the Commissioner, in a form satisfactory to the Commissioner, evidence that such person holds any license or authorization which may be required for the solicitation or sale of variable annuity contracts by any federal or state securities law.

(b) Any examination required by the Commissioner for the purpose of determining the eligibility of any person for licensing as an agent shall, after the effective date of this regulation, include such questions concerning the history, purpose, regulation, and sale of variable annuity contracts as the Commissioner deems appropriate.

(2) Any person qualified in this state under this Article to sell or offer to sell variable annuity contracts shall immediately report to the Commissioner:

(a) Any suspension or revocation of his agents license in any other state or territory of the United States;

(b) The imposition of any disciplinary sanction, including suspension or expulsion from membership, suspension, or revocation of or denial of registration, imposed upon him by any national securities exchange, or national securities association, or any federal, state, or territorial agency with jurisdiction over securities or variable annuity contracts;

(c) Any judgment or injunction entered against him on the basis of conduct deemed to have involved fraud, deceit, misrepresentation, or violation of any insurance or securities law or regulation.

(3) The Commissioner may reject any application or suspend or revoke or refuse to renew any agent's qualification under this Article to sell or offer to sell variable annuity contracts or impose monetary penalties upon any ground that would warrant similar disciplinary action arising out of the agent's sale of other life insurance contracts in this state. The rules governing any proceeding relating to the suspension or revocation of an agent's license shall also govern any proceeding for suspension or revocation of an agent's qualification to sell or offer to sell variable annuity contracts.

PART B--VARIABLE LIFE INSURANCE

Article I: Authority.

Section 1. Authority.

Part B of this Regulation, applicable to variable life insurance, is promulgated under the authority of S. C. Code Section 38-67-40 (1976).

Article II: Definitions.

As used in Part B of this Regulation:

Section 1. Affiliate.

"Affiliate" of an insurer means any person, directly or indirectly, controlling, controlled by, or under common control with such insurer; any person who regularly furnishes investment advice to such insurer with respect to its separate accounts for which a specific fee or commission is charged; or any director, officer, partner, or employee of such insurer, controlling or controlled person, or person providing investment advice or any member of the immediate family of such person.

Section 2. Agent.

"Agent" means any individual licensed by the Commissioner as a life insurance agent.

Section 3. Assumed Investment Rate.

"Assumed investment rate" means the rate of investment return which would be required to be credited to a variable life insurance policy, after deduction of charges for taxes, investment expenses, and mortality and expense guarantees to maintain the variable death benefit equal at all times to the amount of death benefit, other than incidental insurance benefits, which would be payable under the plan of insurance if the death benefit did not vary according to the investment experience of the separate account.

Section 4. Benefit Base.

"Benefit base" means the amount to which the net investment return is applied.

Section 5. Commissioner.

"Commissioner" means the Chief Insurance Commissioner of South Carolina.

Section 6. Control.

"Control" (including the terms "controlling", "controlled by" and "under common control with") means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract other than a commercial contract for goods or non-management services, or otherwise, unless the power is the result of an official position with or corporate office held by the person. Control shall be presumed to exist if any person, directly or indirectly, owns, controls, holds with the power to vote, or holds proxies representing more than ten (10) percent of the voting securities of any other person. This presumption may be rebutted by a showing made to the satisfaction of the Commissioner that control does not exist in fact. The Commissioner may determine, after furnishing all persons in interest notice and opportunity to be heard and making specific findings of fact to support such determination, that control exists in fact, notwithstanding the absence of a presumption to that effect.

Section 7. Flexible Premium Policy.

"Flexible premium policy" means any variable life insurance policy other than a scheduled premium policy as defined in this Article.

Section 8. General Account.

"General account" means all assets of the insurer other than assets in separate accounts established pursuant to S. C. Code Section 38-67-10 (1976) or pursuant to the corresponding section of the insurance laws of the state of domicile of a foreign or alien insurer, whether or not for variable life insurance.

Section 9. Incidental Insurance Benefit.

"Incidental insurance benefit" means all insurance benefits in a variable life insurance policy, other than the variable death benefit and the minimum death benefit, including but not limited to accidental death and dismemberment benefits, disability benefits, guaranteed insurability options, family income, or term riders.

Section 10. May.

"May" is permissive.

Section 11. Minimum Death Benefit.

"Minimum death benefit" means the amount of the guaranteed death benefit, other than incidental insurance benefits, payable under a variable life insurance policy regardless of the investment performance of the separate account.

Section 12. Net Investment Return.

"Net Investment Return" means the rate of investment return in a separate account to be applied to the benefit base.

Section 13. Person.

"Person" means an individual, corporation, partnership, association, trust, or fund.

Section 14. Policy Processing Day.

"Policy processing day" means the day on which charges authorized in the policy are deducted from the policy's cash value.

Section 15. Scheduled Premium Policy.

"Scheduled premium policy" means any variable life insurance policy under which both the amount and timing of premium payments are fixed by the insurer.

Section 16. Separate Account.

"Separate account" means a separate account established pursuant to S. C. Code Section 38-67-10 (1976), or pursuant to the corresponding section of the insurance laws of the state of domicile of a foreign or alien insurer.

Section 17. Shall.

"Shall" is mandatory.

Section 18. Variable Death Benefit.

"Variable death benefit" means the amount of the death benefit, other than incidental insurance benefits, payable under a variable life insurance policy dependent on the investment performance of the separate account, which the insurer would have to pay in the absence of any minimum death benefit.

Section 19. Variable Life Insurance Policy.

"Variable life insurance policy" means any individual policy which provides for life insurance the amount or duration of which varies according to the investment experience of any separate account or accounts established and maintained by the insurer as to such policy, pursuant to S. C. Code Section 38-67-10 (1976), or pursuant to the corresponding section of the insurance laws of the state of domicile of a foreign or alien insurer.

Article III: Qualification of Insurer to Issue Variable Life Insurance.

The following requirements are applicable to all insurers either seeking authority to issue variable life insurance in this state or having authority to issue variable life insurance in this state.

Section 1. Licensing and Approval to do Business in this State.

An insurer shall not deliver or issue for delivery in this state any variable life insurance policies unless:

(a) the insurer is licensed or organized to do a life insurance business in this state;

(b) the insurer has obtained the written approval of the Commissioner for the issuance of variable life insurance policies in this state. The Commissioner shall grant such written approval only after he has found that:

(1) the plan of operation for the issuance of variable life insurance policies is not unsound;

(2) the general character, reputation, and experience of the management and those persons or firms proposed to supply consulting, investment, administrative, or custodial services to the insurer are such as to reasonably assure competent operation of the variable life insurance business of the insurer in this state; and

(3) the present and foreseeable future financial condition of the insurer and its method of operation in connection with the issuance of such policies is not likely to render its operation hazardous to the public or its policyholders in this state. The Commissioner shall consider, among other things:

(A) the history of operation and financial condition of the insurer;

(B) the qualifications, fitness, character, responsibility, reputation and experience of the officers and directors and other management of the insurer and those persons or firms proposed to supply consulting, investment, administrative, or custodial services to the insurer;

(C) the applicable law and regulations under which the insurer is authorized in its state of domicile to issue variable life insurance policies. The state of entry of an alien insurer shall be deemed its state of domicile for this purpose; and

(D) if the insurer is a subsidiary of, or is affiliated by common management or ownership with another company, its relationship to such other company and the degree to which the requesting insurer, as well as the other company, meets these standards.

Section 2. Filing for Approval to do Business in this State.

The Commissioner may, at his discretion, require that an insurer, before it delivers or issues for delivery any variable life insurance policy in this state, file with this Department the following information for the consideration of the Commissioner in making the determination required by Section 1, subsection (b) of this Article:

(a) copies of and a general description of the variable life insurance policies it intends to issue;

(b) a general description of the methods of operation of the variable life insurance business of the insurer, including methods of distribution of policies and the names of those persons or firms proposed to supply consulting, investment, administrative, custodial or distributive services to the insurer;

(c) with respect to any separate account maintained by an insurer for any variable life insurance policy, a statement of the investment policy the issuer intends to follow for the investment of the assets held in such separate account, and a statement of procedures for changing such investment policy. The statement of investment policy shall include a description of the investment objectives intended for the separate account;

(d) a description of any investment advisory services contemplated as required by Section 10 of Article VI;

(e) a copy of the statutes and regulations of the state of domicile of the insurer under which it is authorized to issue variable life insurance policies;

(f) biographical data with respect to officers and directors of the insurer on forms approved by the Commissioner; and

(g) a statement of the insurer's actuary describing the mortality and expense risks which the insurer will bear under the policy.

Section 3. Standards of Suitability.

Every insurer seeking approval to enter into the variable life insurance business in this state shall establish and maintain a written statement specifying the Standards of Suitability to be used by the insurer. Such Standards of Suitability shall specify that no recommendation shall be made to an applicant to purchase a variable life insurance policy and that no variable life insurance policy shall be issued in the absence of reasonable grounds to believe that the purchase of such policy is not unsuitable for such applicant on the basis of information furnished after reasonable inquiry of such applicant concerning the applicant's insurance and investment objectives, financial situation and needs, and any other information known to the insurer or the agent making the recommendation.

Section 4. Use of Sales Materials.

An insurer authorized to transact variable life insurance business in this state shall not use any sales material, advertising material, or descriptive literature or other materials of any kind in connection with its variable life insurance business in this state which is false, misleading, deceptive, or inaccurate.

Section 5. Requirements Applicable to Contractual Services.

Any material contract between an insurer and suppliers of consulting, investment, administrative, sales, marketing, custodial, or other services with respect to variable life insurance operations shall be in writing and provide that the supplier of such services shall furnish the Commissioner with any information or reports in connection with such services which the Commissioner may request in order to ascertain whether the variable life insurance operations of the insurer are being conducted in a manner consistent with these regulations, and any other applicable law or regulations.

Section 6. Reports to the Commissioner.

Any insurer authorized to transact the business of variable life insurance in this state shall submit to the Commissioner, in addition to any other materials which may be required by this regulation or any other applicable laws or regulations:

(a) an Annual Statement of the business of its separate account or accounts in such forms as may be approved by the Commissioner; and

(b) prior to its use in this state, any information furnished to applicants as provided for in Article VII; and

(c) prior to its use in this state, the form of any of the Reports to Policyholders as provided for in Article IX; and

(d) such additional information concerning its variable life insurance operations or its separate accounts as the Commissioner shall deem necessary.

Any material submitted to the Commissioner under this Section shall be disapproved if it is found to be false, misleading, deceptive, or inaccurate in any material respect and, if previously distributed, the Commissioner shall require the distribution of amended material.

Section 7. Authority of Commissioner to Disapprove.

Any material required to be filed with and approved by the Commissioner shall be subject to disapproval if at any time it is found by him not to comply with the standards established in this regulation.

Article IV: Insurance Policy Requirements.

Policy Qualification. The Commissioner shall not approve any variable life insurance form filed pursuant to this regulation unless it conforms to the requirements of this Article.

Section 1. Filing of Variable Life Insurance Policies.

All variable life insurance policies, and all riders, endorsements, applications and other documents which are to be attached and made a part of the policy, and which relate to the variable nature of the policy, shall be filed with the Commissioner and approved by him prior to delivery or issuance for delivery in this state.

(a) The procedures and requirements for such filing and approval shall be, to the extent appropriate and not inconsistent with this regulation, the same as those otherwise applicable to other life insurance policies.

(b) The Commissioner may approve variable life insurance policies and related forms with provisions the Commissioner deems to be not less favorable to the policyholder and the beneficiary than those required by this regulation.

Section 2. Mandatory Policy Benefit and Design Requirements.

Variable life insurance policies delivered or issued for delivery in this state shall comply with the following minimum requirements.

(a) Mortality and expense risks shall be borne by the insurer. The mortality and expense charges shall be subject to the maximums stated in the contract.

(b) For scheduled premium policies, a minimum death benefit shall be provided in an amount at least equal to the initial face amount of the policy so long as premiums are duly paid [subject to the provisions of Section 4(b) of this Article];

(c) The policy shall reflect the investment experience of one or more separate accounts established and maintained by the insurer. The insurer must demonstrate that the reflection of investment experience in the variable life insurance policy is actuarially sound.

(d) Each variable life insurance policy shall be credited with the full amount of the net investment return applied to the benefit base.

(e) Any changes in variable death benefits of each variable life insurance policy shall be determined at least annually.

(f) The cash value of each variable life insurance policy shall be determined at least monthly. The method of computation of cash values and other non-forfeiture benefits, as described either in the policy or in a statement filed with the Commissioner of the state in which the policy is delivered, or issued for delivery, shall be in accordance with the actuarial procedures that recognize the variable nature of the policy. The method of computation must be such that, if the net investment return credited to the policy at all times from the date of issue should be equal to the assumed investment rate with premiums and benefits determined accordingly under the terms of the policy, then the resulting cash values and other non-forfeiture benefits must be at least equal to the minimum values required by Chapter 63 of Title 38 of the 1976 Code (the Standard Nonforfeiture Law for Life Insurance) for a general account policy with such premiums and benefits. The assumed investment rate shall not exceed the maximum interest rate permitted under the Standard Nonforfeiture Law of this state. If the policy does not contain an assumed investment rate, this demonstration shall be based on the maximum interest rate permitted under the Standard Nonforfeiture Law. The method of computation may disregard incidental minimum guarantees as to the dollar amounts payable. Incidental minimum guarantees include, but are not limited to, a guarantee that the amount payable at death or maturity shall be at least equal to the amount that otherwise would have been payable if the net investment return credited to the policy at all times from the date of issue had been equal to the assumed investment rate.

(g) The computation of values required for each variable life insurance policy may be based upon such reasonable and necessary approximations as are acceptable to the Commissioner.

Section 3. Mandatory Policy Provisions.

Every variable life insurance policy filed for approval in this state shall contain at least the following:

(a) The coverage page or pages corresponding to the cover page of each such policy shall contain:

(1) A prominent statement in either contrasting color or in boldface type that the amount or duration of death benefit may be variable or fixed under specified conditions;

(2) A prominent statement in either contrasting color or in boldface type that cash values may increase or decrease in accordance with the experience of the separate account subject to any specified minimum guarantees;

(3) A statement describing any minimum death benefit required pursuant to Section 2(b) of this Article;

(4) The method, or a reference to the policy provision which describes the method, for determining the amount of insurance payable at death;

(5) A captioned provision that the policyholder may return the variable life insurance policy within 10 days of receipt of the policy by the policyholder, and receive a refund of premiums. Unless otherwise provided by state law, the policy may provide that the refund shall equal the total of all premium payments for the policy, or shall equal the sum of (A) the difference between the premiums paid including any policy fees or other charges and the amounts allocated to any separate accounts under the policy and (B) the value of the amounts allocated to any separate accounts under the policy, on the date the returned policy is received by the insurer or its agent.

(6) Such other items as are currently required for fixed benefit life insurance policies and which are not inconsistent with this regulation.

(b)(1) For scheduled premium policies, a provision for a grace period of not less than thirty-one days from the premium due date which shall provide that when the premium is paid within the grace period, policy values will be the same, except for the deduction of any overdue premium, as if the premium were paid on or before the due date.

(2) For flexible premium policies, a provision for a grace period beginning on the policy processing day when the total charges authorized by the policy that are necessary to keep the policy in force until the next policy processing day exceed the amounts available under the policy to pay such charges in accordance with the terms of the policy. Such grace period shall end on a date not less than 61 days after the mailing date of the Report to Policyholders required by Section 3 of Article IX.

The death benefit payable during the grace period will equal the death benefit in effect immediately prior to such period less any overdue charges. If the policy processing days occur monthly, the insurer may require the payment of not more than 3 times the charges which were due on the policy processing day on which the amounts available under the policy were insufficient to pay all charges authorized by the policy that are necessary to keep such policy in force until the next policy processing day.

(c) For scheduled premium policies, a provision that the policy will be reinstated at any time within two years from the date of default upon the written application of the insured and evidence of insurability, including good health, satisfactory to the insurer, unless the cash surrender value has been paid or the period of extended insurance has expired, upon the payment of any outstanding indebtedness arising subsequent to the end of the grace period following the date of default together with accrued interest thereon to the date of reinstatement and payment of an amount not exceeding the greater of:

(1) All overdue premiums with interest at a rate not exceeding the policy loan interest rate in effect for the period during and after the lapse of the policy and any indebtedness in effect at the end of the grace period following the date of default with interest at a rate not exceeding the policy loan interest rate in effect for the period during and after the lapse of the policy; or

(2) 110% of the increase in cash value resulting from reinstatement plus all overdue premiums for incidental insurance benefits with interest at a rate not exceeding the policy loan interest at a rate not exceeding the policy loan interest rate in effect for the period during and after the lapse of the policy.

(d) A full description of the benefit base and of the method of calculation and application of any factors used to adjust variable benefits under the policy;

(e) A provision designating the separate account to be used and stating that:

(1) The assets of such separate account shall be available to cover the liabilities of the general account of the insurer only to the extent that the assets of the separate account exceed the liabilities of the separate account arising under the variable life insurance policies supported by the separate account.

(2) The assets of such separate account shall be valued as often as any policy benefits vary, but at least monthly.

(f) A provision specifying what documents constitute the entire insurance contract under state law;

(g) A designation of the officers who are empowered to make an agreement or representation on behalf of the insurer and an indication that statements by the insured, or on his behalf, shall be considered as representations and not warranties;

(h) An identification of the owner of the insurance contract;

(i) A provision setting forth conditions or requirements as to the designation, or change of designation, of a beneficiary and a provision for disbursement of benefits in the absence of a beneficiary designation;

(j) A statement of any conditions or requirements concerning the assignment of the policy;

(k) A description of any adjustments in policy values to be made in the event of misstatement of age or sex of the insured;

(l) A provision that the policy shall be incontestable by the insurer after two years from the date of issue, provided, however, that any increase in the amount of the policy's death benefits subsequent to the policy issue date, which increase occurred upon a new application or request of the owner and was subject to satisfactory proof of the insured's insurability, shall be incontestable after two years from the date of issue of such increase;

(m) A provision stating that the investment policy of the separate account shall not be changed without the approval of the Commissioner of the state of domicile of the insurer, and that the approval process is on file with the Commissioner of this state;

(n) A provisions that payment of variable death benefits in excess of any minimum death benefits, cash values, policy loans, or partial withdrawals (except when used to pay premiums) or partial surrenders may be deferred:

(1) For up to six months from the date of request, if such payments are based on policy values which do not depend on the investment performance of the separate account, or

(2) Otherwise, for any period during which the New York Stock Exchange is closed for trading (except for normal holiday closing) or when the Securities and Exchange Commission has determined that a state of emergency exists which may make such payment impractical.

(o) If settlement options are provided, at least one such option shall be provided on a fixed basis only;

(p) A description of the basis for computing the cash value and the surrender value under the policy shall be included;

(q) Premiums or charges for incidental insurance benefits shall be stated separately;

(r) Any other policy provision required by this regulation;

(s) Such other items as are currently required for fixed benefit life insurance policies and are not inconsistent with this regulation.

(t) A provision for nonforfeiture insurance benefits. The insurer may establish a reasonable minimum cash value below which any nonforfeiture insurance options will not be available.

Section 4. Policy Loan Provisions.

Every variable life insurance policy, other than term insurance policies and pure endowment policies, delivered or issued for delivery in this state shall contain provisions which are not less favorable to the policyholder than the following:

(a) A provision for policy loans after the policy has been in force for three (3) full years which provides the following:

(1) At least 75% of the policy's cash surrender value may be borrowed.

(2) The amount borrowed shall bear interest at a rate not to exceed that permitted by state insurance law.

(3) Any indebtedness shall be deducted from the proceeds payable on death.

(4) Any indebtedness shall be deducted from the cash surrender value upon surrender or in determining any nonforfeiture benefit.

(5) For scheduled premium policies, whenever the indebtedness exceeds the cash surrender value, the insurer shall give notice of any intent to cancel the policy if the excess indebtedness is not repaid within thirty-one days after the date of mailing of such notice. For flexible premium policies, whenever the total charges authorized by the policy that are necessary to keep the policy in force until the next following policy processing day exceed the amounts available under the policy to pay such charges, a report must be sent to the policyholder containing the information specified by Section 3 or Article IX.

(6) The policy may provide that if, at any time, so long as premiums are duly paid, the variable death benefit is less than it would have been if no loan or withdrawal had ever been made, the policyholder may increase such variable death benefit up to what it would have been if there had been no loan or withdrawal by paying an amount not exceeding 110% of the corresponding increase in cash value and by furnishing such evidence of insurability as the insurer may request.

(7) The policy may specify a reasonable minimum amount which may be borrowed at any time but such minimum shall not apply to any automatic premium loan provision.

(8) No policy loan provision is required if the policy is under the extended insurance nonforfeiture option.

(9) The policy loan provisions shall be constructed so that variable life insurance policyholders who have not exercised such provisions are not disadvantaged by the exercise thereof.

(10) Amounts paid to the policyholders upon the exercise of any policy loan provision shall be withdrawn from the separate account and shall be returned to the separate account upon repayment except that a stock insurer may provide the amounts for policy loans from the general account.

Section 5. Other Policy Provisions.

The following provision may in substance be included in a variable life insurance policy or related form delivered or issued for delivery in this state:

(a) An exclusion for suicide within two (2) years of the issue date of the policy; provided, however, that to the extent of the increased death benefits only, the policy may also provide an exclusion for suicide within two (2) years of any increase in death benefits which result from an application of the owner subsequent to the policy issue date;

(b) Incidental insurance benefits may be offered on a fixed or variable basis;

(c) Policies issued on a participating basis shall offer to pay dividend amounts in cash. In addition, such policies may offer the following dividend options:

(1) the amount of the dividend may be credited against premium payments;

(2) the amount of the dividend may be applied to provide amounts of additional fixed or variable benefit life insurance;

(3) the amount of the dividend may be deposited in the general account at a specified minimum rate of interest;

(4) the amount of the dividend may be applied to provide paid-up amounts of fixed benefit one-year term insurance;

(5) the amount of the dividend may be deposited as a variable deposit in a separate account.

(d) A provision allowing the policyholder to elect in writing in the application for the policy or thereafter an automatic premium loan on a basis not less favorable than that required of policy loans under Section 4 of this Article, except that a restriction may be imposed that no more than two consecutive premiums can be paid under this provision.

(e) A provision allowing the policyholder to make partial withdrawals;

(f) Any other policy provision approved by the Commissioner.

Article V: Reserve Liabilities for Variable Life Insurance.

(1) Reserve liabilities for variable life insurance policies shall be established under S. C. Code Section 38-9-180 (1976) (the Standard Valuation Law) in accordance with actuarial procedures that recognize the variable nature of the benefits provided and any mortality guarantees.

(2) For scheduled premium policies, reserve liabilities for the guaranteed minimum death benefit shall be the reserve needed to provide for the contingency of death occurring when the guaranteed minimum death benefit exceeds the death benefit that would be paid in the absence of the guarantee, and shall be maintained in the general account of the insurer and shall not be less than the greater of the following minimum reserve:

(a) The aggregate total of the term costs, if any, covering a period of one full year from the valuation date, of the guarantee on each variable life insurance contract, assuming an immediate one-third depreciation in the current value of the assets in the separate account followed by a net investment return equal to the assumed investment rate; or

(b) The aggregate total of the "attained age level" reserved on each variable life insurance contract. The "attained age level" reserve on each variable life insurance contract shall not be less than zero and shall equal the "residue", as described in Paragraph (1), of the prior year's "attained age level" reserve on the contract, with any such "residue", increased or decreased by a payment computed on an attained age basis as described in Paragraph (2) below.

(1) The "residue" of the prior year's "attained age level" reserve on each variable life insurance contract shall not be less than zero and shall be determined by adding interest at the valuation interest rate to such prior year's reserve, deducting the tabular claims based on the "excess", if any, of the guaranteed minimum death benefit over the death benefit that would be payable in the absence of such guarantee, and dividing the net result by the tabular probability of survival. The "excess" referred to in the preceding sentence shall be based on the actual level of death benefits that would have been in effect during the preceding year in the absence of the guarantee, taking appropriate account of the reserve assumptions regarding the distribution of death claim payments over the year.

(2) The payment referred to in Subsection 2(b) of this Article shall be computed so that the present value of a level payment of that amount each year over the future premium paying period of the contract is equal to (A) minus (B) minus (C), where (A) is the present value of the future guaranteed minimum death benefits, (B) is the present value of the future death benefits that would be payable in the absence of such guarantee, and (C) is any "residue", as described in Paragraph (1), of the prior year's "attained age level" reserve on such variable life insurance contract. If the contract is paid-up, the payment shall equal (A) minus (B) minus (C). The amounts of the future death benefits referred to in (B) shall be computed assuming a net investment return of the separate account which may differ from the assumed investment rate and/or the valuation interest but in no event may exceed the maximum interest rate permitted for the valuation of life contracts.

(c) The valuation interest rate and mortality table used in computing the two minimum reserves described in (a) and (b) above shall conform to permissible standards for the valuation of life insurance contracts. In determining such minimum reserve, the company may employ suitable approximations and estimates, including but not limited to groupings and averages.

(3) For flexible premium policies, reserve liabilities for any guaranteed minimum death benefit shall be maintained in the general account of the insurer and shall not be less than the aggregate total of the term costs, if any, covering the period provided for in the guarantee not otherwise provided for by the reserves held in the separate account assuming an immediate one-third depreciation in the current value of the assets of the separate account followed by a net investment return equal to the valuation interest rate.

The valuation interest rate and mortality table used in computing this additional reserve, if any, shall conform to permissible standards for the valuation of life insurance contracts. In determining such minimum reserve, the company may employ suitable approximations and estimates, including but not limited to groupings and averages.

(4) Reserve liabilities for all fixed incidental insurance benefits and any guarantees associated with variable accidental insurance benefits shall be maintained in the general account and reserve liabilities for all variable aspects of the variable incidental insurance benefits shall be maintained in a separate account, in amounts determined in accordance with the actuarial procedures appropriate to such benefit.

Article VI: Separate Accounts.

The following requirements apply to the establishment and administration of variable life insurance separate accounts by any domestic insurer:

Section 1. Establishment and Administration of Separate Accounts.

Any domestic insurer issuing variable life insurance shall establish one or more separate accounts pursuant to S. C. Code Section 38-67-10 (1976).

(a) If no law or other regulation provides for the custody of separate account assets and if such insurer is not the custodian of such separate account assets, all contracts for custody of such assets shall be in writing and the Commissioner shall have authority to review and approve of both the terms of any such contract and the proposed custodian prior to the transfer of custody.

(b) Such insurer shall not without prior written approval of the Commissioner employ in any material in connection with the handling of separate account assets any person who:

(1) within the last ten years has been convicted of any felony or a misdemeanor arising out of such person's conduct involving embezzlement, fraudulent conversion, or misappropriation of funds or securities or involving violation of Sections 1341, 1342 or 1343 of Title 18, United States Code; or

(2) within the last ten years has been found by any state regulatory authority to have violated or has acknowledged violation of any provision of any state insurance law involving fraud, deceit, or knowing misrepresentation; or

(3) within the last ten years has been found by federal or state regulatory authorities to have violated or has acknowledged violation of any provision of federal or state securities laws involving fraud, deceit, or knowing misrepresentation.

(c) All persons with access to the cash, securities, or other assets of the separate account shall be under bond in such amounts as the Commissioner may in his discretion prescribe.

(d) The assets of such separate accounts shall be valued at least as often as variable benefits are determined but in any event at least monthly.

Section 2. Amounts in the Separate Account.

The insurer shall maintain in each separate account assets with a value at least equal to the greater of the valuation reserves for the variable portion of the variable life insurance policies or the benefit base for such policies.

Section 3. Investments by the Separate Account.

(a) No sale, exchange, or other transfer of assets may be made by any insurer or any of its affiliates between any of its separate accounts or between any other investment account and one or more of its separate accounts unless:

(1) in case of transfer into a separate account, such transfer is made solely to establish the account or to support the operation of the policies with respect to the separate account to which the transfer is made; and

(2) such transfer, whether into or from a separate account, is made by a transfer of cash; but other assets may be transferred if approved by the Commissioner in advance.

(b) The separate account shall have sufficient net investment income and readily marketable assets to meet anticipated withdrawals under policies funded by the account.

Section 4. Limitations on Ownership.

(a) A separate account shall not purchase or otherwise acquire the securities of any issuer, other than securities issued or guaranteed as to principal and interest by the United States, if immediately after such purchase or acquisition the value of such investment, together with prior investments of such account in such security valued as required by these regulations, would exceed 10% of the value of the assets of the separate account. The Commissioner may waive this limitation in writing if he believes such waiver will not render the operation of the separate account hazardous to the public or the policyholders in this state.

(b) No separate account shall purchase or otherwise acquire the voting securities of any issuer if as a result of such acquisition the insurer and its separate accounts in the aggregate, will own more than 10% of the total issued and outstanding voting securities of such issuer. The Commissioner may waive this limitation in writing if he believes such waiver will not render the operation of the separate account hazardous to the public or the policyholders in this state or jeopardize the independent operation of the issuer of such securities.

(c) The percentage limitation specified in Subsection (a) of this Section shall not be construed to preclude the investment of the assets of separate accounts in shares of investment companies registered pursuant to the Investment Company Act of 1940 or other pools of investment assets if the investments and investment policies of such investment companies or asset pools comply substantially with the provisions of Section 3 of this Article and other applicable portions of this regulation.

Section 5. Valuation of Separate Account Assets.

Investments of the separate account shall be valued at their market value on the date of valuation, or at amortized cost if it approximates market value.

Section 6. Separate Account Investment Policy.

The investment policy of a separate account operated by a domestic insurer filed under Section 2(c) of Article II shall not be changed without first filing such change with the Commissioner.

(1) Any change filed pursuant to this Section shall be effective sixty days after the date it was filed with the Commissioner, unless the Commissioner notifies the insurer before the end of such sixty-day period of his disapproval of the proposed change. At any time the Commissioner may, after notice and public hearing, disapprove any change that has become effective pursuant to this Section.

(2) The Commissioner may disapprove the change if he determines that the change would be detrimental to the interests of the policyholders participating in such separate accounts.

Section 7. Charges Against Separate Account.

The insurer must disclose in writing, prior to or contemporaneously with delivery of the policy, all charges that may be made against the separate account, including, but not limited to, the following:

(1) taxes or reserves for taxes attributable to investment gains and income of the separate account;

(2) actual cost of reasonable brokerage fees and similar direct acquisition and sale costs incurred in the purchase or sale of separate account assets;

(3) actuarially determined costs of insurance (tabular costs) and the release of separate account liabilities;

(4) charges for administrative expenses and investment management expenses, including internal costs attributable to the investment management of assets of the separate account;

(5) a charge, at a rate specified in the policy, for mortality and expense guarantees;

(6) any amounts in excess of those required to be held in the separate accounts;

(7) charges for incidental insurance benefits.

Section 8. Standards of Conduct.

Every insurer seeking approval to enter into the variable life insurance business in this state shall adopt by formal action of its Board of Directors a written statement specifying the Standards of Conduct of the insurer, its officers, directors, employees, and affiliates with respect to the purchase or sale of investments of separate accounts. Such Standards of Conduct shall be binding on the insurer and those to whom it refers. A code or codes of ethics meeting the requirements of Section 17(j) under the Investment Company Act of 1940 and applicable rules and regulations thereunder shall satisfy the provisions of this Section.

Section 9. Conflicts of Interest.

Rules under any provision of the insurance laws of this state or any regulation applicable to the officers and directors of insurance companies with respect to conflicts of interest shall also apply to members of any separate account's committee or other similar body.

Section 10. Investment Advisory Services to a Separate Account.

An insurer shall not enter into a contract under which any person undertakes, for a fee, to regularly furnish investment advice to such insurer with respect to its separate accounts maintained for variable life insurance policies unless:

(1) the person providing such advice is registered as an investment adviser under the Investment Advice Act of 1940; or

(2) the person providing such advice is an investment manager under the Employee Retirement Income Security Act of 1974, with respect to the assets of each employee benefit plan allocated to the separate account; or

(3) the insurer has filed with the Commissioner and continues to file annually the following information and statements concerning the proposed advisor:

(a) the name and form of organization, state of organization, and its principal place of business;

(b) the names and addresses of its partners, officers, directors, and persons performing similar functions or, if such an investment advisory be an individual, of such individual;

(c) a written Standard of Conduct complying in substance with the requirements of Section B of this Article which has been adopted by the investment advisor and is applicable to the investment advisor, its officers, directors, and affiliates;

(d) a statement provided by the proposed advisor as to whether the advisor or any person associated therewith:

(i) has been convicted within ten years of any felony or misdemeanor arising out of such person's conduct as an employee, salesman, officer or director of an insurance company, a banker, an insurance agent, a securities broker, or an investment advisor involving embezzlement, fraudulent conversion, or misappropriation of funds or securities, or involving the violation of Sections 1341, 1342, or 1343 of Title 18 of United States Code;

(ii) has been permanently or temporarily enjoined by an order, judgment or decree of any court of competent jurisdiction from acting as an investment advisor, underwriter, broker or dealer, or as an affiliated person or as an employee of any investment company, bank, or insurance company, or from engaging in or continuing any conduct or practice in connection with any such activity;

(iii) has been found by federal or state regulatory authorities to have violated or have acknowledged violation of any provision of federal or state securities laws or state insurance laws or of any rule or regulation under any such laws; or

(iv) has been censured, denied an investment advisor registration, had a registration as an investment advisor revoked or suspended, or been barred or suspended from being associated with an investment advisor by order of federal or state regulatory authorities; and

(4) such investment advisory contract shall be in writing and provide that it may be terminated by the insurer without penalty to the insurer or the separate account upon no more than sixty days' written notice to the investment advisor.

The Commissioner may, after notice and opportunity for hearing, by order require such investment advisory contract to be terminated if he deems continued operation thereunder to be hazardous to the public or the insurer's policyholders.

Article VII: Information Furnished to Applicants.

An insurer delivering or issuing for delivery in this state any variable life insurance policies shall deliver to the applicant for such policy, and obtain a written acknowledgment of receipt from such applicant coincident with or prior to the execution of the application, the following information. The requirements of this Article shall be deemed to have been satisfied to the extent that a disclosure containing information required by this Article is delivered, either in the form of (1) a prospectus included in the requirements of the Securities Act of 1933 and which was declared effective by the Securities Exchange Commission; or (2) all information and reports required by the Employee Retirement Income Security Act of 1974 if the policies are exempted from the registration requirements of the Securities Act of 1933 pursuant to Section 3(a)(2) thereof.

(1) A summary explanation, in non-technical terms, of the principal features of the policy, including a description of the manner in which the variable benefits will reflect the investment experience of the separate account and the factors which affect such variation. Such explanation must include notices of the provision required by Article IV, Sections 3(a)(5) and 3(f).

(2) A statement of the investment policy of the separate account, including:

(a) a description of the investment objectives intended for the separate account and the principal types of investments intended to be made; and

(b) any restrictions or limitations on the manner in which the operations of the separate account are intended to be conducted.

(3) A statement of the net investment return of the separate account for each of the last ten years or such lesser period as the separate account has been in existence.

(4) A statement of the charges levied against the separate account during the previous year.

(5) A summary of the method to be used in valuing assets held by the separate account.

(6) A summary of the federal income tax aspects of the policy applicable to the insured, the policyholder, and the beneficiary.

(7) Illustrations of benefits payable under the variable life insurance contract. Such illustrations shall be prepared by the insurer and shall not include projections of past investment experience into the future or attempted predictions of future investments experience, provided that nothing contained herein prohibits use of hypothetical assumed rates of return to illustrate possible levels of benefits if it is made clear that such assumed rates are hypothetical only.

Article VIII: Applications.

The application for a variable life insurance policy shall contain:

(1) a prominent statement that the death benefit may be variable or fixed under specified conditions;

(2) a prominent statement that cash values may increase or decrease in accordance with the experience of the separate account (subject to any specified minimum guarantees);

(3) questions designed to elicit information which enables the insurer to determine the suitability of variable life insurance for the applicant.

Article IX: Reports to Policyholders.

Any insurer delivering or issuing for delivery in this state any variable life insurance policies shall mail to each variable life insurance policyholder at his or her last known address the following reports:

(1) Within thirty days after each anniversary of the policy, a statement or statements of the cash surrender value, death benefit, any partial withdrawal or policy loan, any interest charge, any optional payments allowed pursuant to Section (4) of Article IV under the policy computed as of the policy anniversary date. Provided, however, that such statement may be furnished within thirty days after a specified date in each policy year so long as the information contained therein is computed as of a date not more than sixty days prior to the mailing of such notice. This statement shall state that, in accordance with the investment experience of the separate account, the cash values and the variable death benefit may increase or decrease, and shall prominently identify any value described therein which may be recomputed prior to the next statement required by this Section. If the policy guarantees that the variable death benefit on the next policy anniversary date will not be less than the variable death benefit specified in such statement, the statement shall be modified to so indicate. For flexible premium policies, the report must contain a reconciliation of the change since the previous report in cash value and cash surrender value, if different, because of payments made (less deductions for expense charges), withdrawals, investment experience, insurance charges and any other charges made against the cash value. In addition, the report must show the projected cash value and cash surrender value, if different, as of one year from the end of the period covered by the report assuming that: (i) planned periodic premiums, if any, are paid as scheduled; (ii) guaranteed costs of insurance are deducted; and (iii) the net return is equal to the guaranteed rate or, in the absence of a guaranteed rate, is not greater than zero. If the projected value is less than zero, a warning message must be included that states that the policy may be in danger of terminating without value in the next 12 months unless additional premium is paid.

(2) Annually, a statement or statements including:

(a) a summary of the financial statement of the separate account based on the annual statement last filed with the Commissioner;

(b) the net investment return of the separate account for the last year and, for each year after the first, a comparison of the investment rate of the separate account during the last year with the investment rate during prior years, up to a total of not less than five years when available;

(c) a list of investments held by the separate account as of a date not earlier than the end of the last year for which an annual statement was filed with the Commissioner;

(d) any charges levied against the separate account during the previous year;

(e) a statement of any change, since the last report, in the investment objective and orientation of the separate account, in any investment restriction or material quantitative or qualitative investment requirement applicable to the separate account or in the investment advisor of the separate account.

(3) For flexible premium policies, a report must be sent to the policyholder if the amounts available under the policy on any policy processing day to pay the charges authorized by the policy are less than the amount necessary to keep the policy in force until the next following policy processing day. The report must indicate the minimum payment required under the terms of the policy to keep it in force and the length of the grace period for payment of such amount.

Article X: Foreign Companies.

If the law or regulation in the place of domicile of a foreign company provides a degree of protection to the policyholders and the public which is substantially similar to that provided by these regulations, the Commissioner to the extent deemed appropriate by him in his discretion, may consider compliance with such law or regulation as compliance with these regulations.

Article XI: Qualifications of Agents for the Sale of Variable Life Insurance.

(1) Qualification to Sell Variable Life Insurance.

(a) No person may sell or offer for sale in this state any variable life insurance policy unless such person is an agent and has filed with the Commissioner, in a form satisfactory to the Commissioner, evidence that such person holds any license or authorization which may be required for the solicitation or sale of variable life insurance.

(b) Any examination required by the Commissioner for the purpose of determining the eligibility of any person for licensing as an agent shall, after the effective date of this regulation, include such questions concerning the history, purpose, regulation, and sale of variable life insurance as the Commissioner deems appropriate.

(2) Reports of Disciplinary Actions. Any person qualified in this state under this Article to sell or offer to sell variable life insurance shall immediately report to the Commissioner:

(a) any suspension or revocation of his agent's license in any other state or territory of the United States;

(b) the imposition of any disciplinary sanction, including suspension or expulsion from membership, suspension, or revocation of or denial of registration, imposed upon him by any national securities exchange, or national securities association, or any federal, state, or territorial agency with jurisdiction over securities or variable life insurance;

(c) any judgment or injunction entered against him on the basis of conduct deemed to have involved fraud, deceit, misrepresentation, or violation of any insurance or securities law or regulation.

(3) Refusal to Qualify Agent to Sell Variable Life Insurance: Suspension, Revocation, or Non-renewal of Qualification. The Commissioner may reject any application or suspend or revoke or refuse to renew any agent's qualification under this Article to sell or offer to sell variable life insurance or impose monetary penalties upon any ground that would warrant similar disciplinary arising out of the agent's sale of other life insurance contracts in this state. The rules governing any proceeding relating to the suspension or revocation of an agent's license shall also govern any proceeding for suspension or revocation of an agent's qualification to sell or offer to sell variable life insurance.

PART C--SEPARABILITY

If any provision of this Regulation or the application thereof to any person or circumstances is for any reason held to be invalid, the remainder of the Regulation and the application of such provision to other persons or circumstances shall not be affected thereby.

PART D--EFFECTIVE DATE

This Regulation shall take effect on July 1, 1988.

69-12.1. Replacement of Life Insurance and Annuities.

Statutory Authority: 1976 Code Sections 1-23-10, 38-3-110, 38-57-60, 38-63-10, 38-63-20, 38-63-660, 38-65-10, 38-65-20, 38-69-10, 38-69-20, 38-69-330

Section 1. Purpose and Scope

A. The purpose of this regulation is:

(1) To regulate the activities of insurers and producers with respect to the replacement of existing life insurance and annuities.

(2) To protect the interests of life insurance and annuity purchasers by establishing minimum standards of conduct to be observed in replacement or financed purchase transactions. It will:

(a) Assure that purchasers receive information with which a decision can be made in his or her own best interest;

(b) Reduce the opportunity for misrepresentation and incomplete disclosure; and

(c) Establish penalties for failure to comply with requirements of this regulation.

B. Unless otherwise specifically included, this regulation shall not apply to transactions involving:

(1) Credit life insurance;

(2) Group life insurance or group annuities where there is no direct solicitation of individuals by an insurance producer. Direct solicitation shall not include any group meeting held by an insurance producer solely for the purpose of educating or enrolling individuals or, when initiated by an individual member of the group, assisting with the selection of investment options offered by a single insurer in connection with enrolling that individual. Group life insurance or group annuity certificates marketed through direct response solicitation shall be subject to the provisions of Section 7;

(3) Group life insurance and annuities used to fund prearranged funeral contracts;

(4) An application to the existing insurer that issued the existing policy or contract when a contractual change or a conversion privilege is being exercised; or, when the existing policy or contract is being replaced by the same insurer pursuant to a program filed with and approved by the director; or, when a term conversion privilege is exercised among corporate affiliates;

(5) Proposed life insurance that is to replace life insurance under a binding or conditional receipt issued by the same company;

(6) (a) Policies or contracts used to fund (i) an employee pension or welfare benefit plan that is covered by the Employee Retirement and Income Security Act (ERISA); (ii) a plan described by Sections 401(a), 401(k) or 403(b) of the Internal Revenue Code, where the plan, for purposes of ERISA, is established or maintained by an employer; (iii) a governmental or church plan defined in Section 414, a governmental or church welfare benefit plan, or a deferred compensation plan of a state or local government or tax exempt organization under Section 457 of the Internal Revenue Code; or (iv) a nonqualified deferred compensation arrangement established or maintained by an employer or plan sponsor;

(b) Notwithstanding Subparagraph (a), this regulation shall apply to policies or contracts used to fund any plan or arrangement that is funded solely by contributions an employee elects to make, whether on a pre-tax or after-tax basis, and where the insurer has been notified that plan participants may choose from among two (2) or more insurers and there is a direct solicitation of an individual employee by an insurance producer for the purchase of a contract or policy. As used in this subsection, direct solicitation shall not include any group meeting held by an insurance producer solely for the purpose of educating individuals about the plan or arrangement or enrolling individuals in the plan or arrangement or, when initiated by an individual employee, assisting with the selection of investment options offered by a single insurer in connection with enrolling that individual employee;

(7) Where new coverage is provided under a life insurance policy or contract and the cost is borne wholly by the insured's employer or by an association of which the insured is a member;

(8) Existing life insurance that is a non-convertible term life insurance policy that will expire in five (5) years or less and cannot be renewed;

(9) Immediate annuities that are purchased with proceeds from an existing contract. Immediate annuities purchased with proceeds from an existing policy are not exempted from the requirements of this regulation; or

(10) Structured settlements.

C. Registered contracts shall be exempt from the requirements of Sections 5.A. (2) and 6.B. with respect to the provision of illustrations or policy summaries; however, premium or contract contribution amounts and identification of the appropriate prospectus or offering circular shall be required instead.

Section 2. Definitions

A. "Direct-response solicitation" means a solicitation through a sponsoring or endorsing entity or individual solely through mails, telephone, the Internet or other mass communication media.

B. "Existing insurer" means the insurance company whose policy or contract is or will be changed or affected in a manner described within the definition of "replacement."

C. "Existing policy or contract" means an individual life insurance policy (policy) or annuity contract (contract) in force, including a policy under a binding or conditional receipt or a policy or contract that is within an unconditional refund period.

D. "Financed purchase" means the purchase of a new policy involving the actual or intended use of funds obtained by the withdrawal or surrender of, or by borrowing from values of an existing policy to pay all or part of any premium due on the new policy. For purposes of a regulatory review of an individual transaction only, if a withdrawal, surrender or borrowing involving the policy values of an existing policy is used to pay premiums on a new policy owned by the same policyholder and issued by the same company within four (4) months before or thirteen (13) months after the effective date of the new policy, it will be deemed prima facie evidence of the policyholder's intent to finance the purchase of the new policy with existing policy values. This prima facie standard is not intended to increase or decrease the monitoring obligations contained in Section 4.A. (5) of this regulation.

E. "Illustration" means a presentation or depiction that includes non-guaranteed elements of a policy of life insurance over a period of years as defined in Regulation 69-40.

F. "Policy summary," for the purposes of this regulation:

(1) For policies or contracts other than universal life policies, means a written statement regarding a policy or contract which shall contain to the extent applicable, but need not be limited to, the following information: current death benefit; annual contract premium; current cash surrender value; current dividend; application of current dividend; and amount of outstanding loan;

(2) For universal life policies, means a written statement that shall contain at least the following information: the beginning and end date of the current report period; the policy value at the end of the previous report period and at the end of the current report period; the total amounts that have been credited or debited to the policy value during the current report period, identifying each by type (e.g., interest, mortality, expense and riders); the current death benefit at the end of the current report period on each life covered by the policy; the net cash surrender value of the policy as of the end of the current report period; and the amount of outstanding loans, if any, as of the end of the current report period.

G. "Producer," for the purpose of this regulation, shall be defined to include agents, brokers and producers.

H. "Replacing insurer" means the insurance company that issues or proposes to issue a new policy or contract that replaces an existing policy or contract or is a financed purchase.

I. "Registered contract" means a variable annuity contract or variable life insurance policy subject to the prospectus delivery requirements of the Securities Act of 1933.

J. "Replacement" means a transaction in which a new policy or contract is to be purchased, and it is known or should be known to the proposing producer, or to the proposing insurer if there is no producer, that by reason of the transaction, an existing policy or contract has been or is to be:

(1) Lapsed, forfeited, surrendered or partially surrendered, assigned to the replacing insurer or otherwise terminated;

(2) Converted to reduced paid-up insurance, continued as extended term insurance, or otherwise reduced in value by the use of nonforfeiture benefits or other policy values;

(3) Amended so as to effect either a reduction in benefits or in the term for which coverage would otherwise remain in force or for which benefits would be paid;

(4) Reissued with any reduction in cash value; or

(5) Used in a financed purchase.

K. "Sales material" means a sales illustration and any other written, printed or electronically presented information created, or completed or provided by the company or producer and used in the presentation to the policy or contract owner related to the policy or contract purchased.

Section 3. Duties of Producers

A. A producer who initiates an application shall submit to the insurer, with or as part of the application, a statement signed by both the applicant and the producer as to whether the applicant has existing policies or contracts. If the answer is "no," the producer's duties with respect to replacement are complete.

B. If the applicant answered "yes" to the question regarding existing coverage referred to in Subsection A, the producer shall present and read to the applicant, not later than at the time of taking the application, a notice regarding replacements in the form as described in Appendix A or other substantially similar form approved by the director. However, no approval shall be required when amendments to the notice are limited to the omission of references not applicable to the product being sold or replaced. The notice shall be signed by both the applicant and the producer attesting that the notice has been read aloud by the producer or that the applicant did not wish the notice to be read aloud (in which case the producer need not have read the notice aloud) and left with the applicant.

C. The notice shall list all life insurance policies or annuities proposed to be replaced, properly identified by name of insurer, the insured or annuitant, and policy or contract number if available; and shall include a statement as to whether each policy or contract will be replaced or whether a policy will be used as a source of financing for the new policy or contract. If a policy or contract number has not been issued by the existing insurer, alternative identification, such as an application or receipt number, shall be listed.

D. In connection with a replacement transaction the producer shall leave with the applicant at the time an application for a new policy or contract is completed the original or a copy of all sales material. With respect to electronically presented sales material, it shall be provided to the policy or contract owner in printed form no later than at the time of policy or contract delivery.

E. Except as provided in Section 5.C., in connection with a replacement transaction the producer shall submit to the insurer to which an application for a policy or contract is presented, a copy of each document required by this section, a statement identifying any preprinted or electronically presented company approved sales materials used, and copies of any individualized sales materials, including any illustrations related to the specific policy or contract purchased.

Section 4. Duties of Insurers that Use Producers

Each insurer shall:

A. Maintain a system of supervision and control to insure compliance with the requirements of this regulation that shall include at least the following:

(1) Inform its producers of the requirements of this regulation and incorporate the requirements of this regulation into all relevant producer training manuals prepared by the insurer;

(2) Provide to each producer a written statement of the company's position with respect to the acceptability of replacements providing guidance to its producer as to the appropriateness of these transactions;

(3) A system to review the appropriateness of each replacement transaction that the producer does not indicate is in accord with Paragraph (2) above;

(4) Procedures to confirm that the requirements of this regulation have been met; and

(5) Procedures to detect transactions that are replacements of existing policies or contracts by the existing insurer, but that have not been reported as such by the applicant or producer. Compliance with this regulation may include, but shall not be limited to, systematic customer surveys, interviews, confirmation letters, or programs of internal monitoring;

B. Have the capacity to monitor each producer's life insurance policy and annuity contract replacements for that insurer, and shall produce, upon request, and make such records available to the Insurance Department. The capacity to monitor shall include the ability to produce records for each producer's:

(1) Life replacements, including financed purchases, as a percentage of the producer's total annual sales for life insurance;

(2) Number of lapses of policies by the producer as a percentage of the producer's total annual sales for life insurance;

(3) Annuity contract replacements as a percentage of the producer's total annual annuity contract sales;

(4) Number of transactions that are unreported replacements of existing policies or contracts by the existing insurer detected by the company's monitoring system as required by Subsection A. (5) of this section; and

(5) Replacements, indexed by replacing producer and existing insurer;

C. Require with or as a part of each application for life insurance or an annuity a signed statement by both the applicant and the producer as to whether the applicant has existing policies or contracts;

D. Require with each application for life insurance or an annuity that indicates an existing policy or contract a completed notice regarding replacements as contained in Appendix A;

E. When the applicant has existing policies or contracts, each insurer shall be able to produce copies of any sales material required by Section 3.E., the basic illustration and any supplemental illustrations related to the specific policy or contract that is purchased, and the producer's and applicant's signed statements with respect to financing and replacement for at least five (5) years after the termination or expiration of the proposed policy or contract;

F. Ascertain that the sales material and illustrations required by Section 3.E. of this regulation meet the requirements of this regulation and are complete and accurate for the proposed policy or contract;

G. If an application does not meet the requirements of this regulation, notify the producer and applicant and fulfill the outstanding requirements; and

H. Maintains records in paper, photograph, microprocess, magnetic, mechanical or electronic media or by any process that accurately reproduces the actual document.

Section 5. Duties of Replacing Insurers that Use Producers

A. Where a replacement is involved in the transaction, the replacing insurer shall:

(1) Verify that the required forms are received and are in compliance with this regulation;

(2) Notify any other existing insurer that may be affected by the proposed replacement within five (5) business days of receipt of a completed application indicating replacement or when the replacement is identified if not indicated on the application, and mail a copy of the available illustration or policy summary for the proposed policy or available disclosure document for the proposed contract within five (5) business days of a request from an existing insurer;

(3) Be able to produce copies of the notification regarding replacement required in Section 3.B., indexed by producer, for at least five (5) years or until the next regular examination by the Insurance Department of a company's state of domicile, whichever is later; and

(4) Provide to the policy or contract owner notice of the right to return the policy or contract within thirty (30) days of the delivery of the contract and receive an unconditional full refund of all premiums or considerations paid on it, including any policy fees or charges or, in the case of a variable or market value adjustment policy or contract, a payment of the cash surrender value provided under the policy or contract plus the fees and other charges deducted from the gross premiums or considerations or imposed under such policy or contract; such notice may be included in Appendix A or C.

B. In transactions where the replacing insurer and the existing insurer are the same or subsidiaries or affiliates under common ownership or control, allow credit for the period of time that has elapsed under the replaced policy's or contract's incontestability and suicide period up to the face amount of the existing policy or contract. With regard to financed purchases, the credit may be limited to the amount the face amount of the existing policy is reduced by the use of existing policy values to fund the new policy or contract.

C. If an insurer prohibits the use of sales material other than that approved by the company, as an alternative to the requirements made of an insurer pursuant to Section 3.E., the insurer may:

(1) Require with each application a statement signed by the producer that:

(a) Represents that the producer used only company-approved sales material; and

(b) States that copies of all sales material were left with the applicant in accordance with Section 3.D.; and

(2) Within ten (10) days of the issuance of the policy or contract:

(a) Notify the applicant by sending a letter or by verbal communication with the applicant by a person whose duties are separate from the marketing area of the insurer, that the producer has represented that copies of all sales material have been left with the applicant in accordance with Section 3.D.;

(b) Provide the applicant with a toll free number to contact company personnel involved in the compliance function if such is not the case; and

(c) Stress the importance of retaining copies of the sales material for future reference; and

(3) Be able to produce a copy of the letter or other verification in the policy file for at least five (5) years after the termination or expiration of the policy or contract.

Section 6. Duties of the Existing Insurer

Where a replacement is involved in the transaction, the existing insurer shall:

A. Retain and be able to produce all replacement notifications received, indexed by replacing insurer, for at least five (5) years or until the conclusion of the next regular examination conducted by the Insurance Department of its state of domicile, whichever is later;

B. Send a letter to the policy or contract owner of the right to receive information regarding the existing policy or contract values including, if available, an in force illustration or policy summary if an in force illustration cannot be produced within five (5) business days of receipt of a notice that an existing policy or contract is being replaced. The information shall be provided within five (5) business days of receipt of the request from the policy or contract owner;

C. Upon receipt of a request to borrow, surrender or withdraw any policy values, send a notice, advising the policy owner that the release of policy values may affect the guaranteed elements, non-guaranteed elements, face amount or surrender value of the policy from which the values are released. The notice shall be sent separate from the check if the check is sent to anyone other than the policy owner. In the case of consecutive automatic premium loans, the insurer is only required to send the notice at the time of the first loan.

Section 7. Duties of Insurers with Respect to Direct Response Solicitations

A. In the case of an application that is initiated as a result of a direct response solicitation, the insurer shall require, with or as part of each completed application for a policy or contract, a statement asking whether the applicant, by applying for the proposed policy or contract, intends to replace, discontinue or change an existing policy or contract. If the applicant indicates a replacement or change is not intended or if the applicant fails to respond to the statement, the insurer shall send the applicant, with the policy or contract, a notice regarding replacement in Appendix B, or other substantially similar form approved by the director.

B. If the insurer has proposed the replacement or if the applicant indicates a replacement is intended and the insurer continues with the replacement, the insurer shall:

(1) Provide to applicants or prospective applicants with the policy or contract a notice, as described in Appendix C, or other substantially similar form approved by the director. In these instances the insurer may delete the references to the producer, including the producer's signature, and references not applicable to the product being sold or replaced, without having to obtain approval of the form from the director. The insurer's obligation to obtain the applicant's signature shall be satisfied if it can demonstrate that it has made a diligent effort to secure a signed copy of the notice referred to in this paragraph. The requirement to make a diligent effort shall be deemed satisfied if the insurer includes in the mailing a self-addressed postage prepaid envelope with instructions for the return of the signed notice referred to in this section; and

(2) Comply with the requirements of Section 5.A. (2), if the applicant furnishes the names of the existing insurers, and the requirements of Sections 5.A. (3), 5.A. (4) and 5.B.

Section 8. Violations and Penalties

A. Any failure to comply with this regulation shall be considered a violation of S.C. Code Ann. 38-57-10 et seq. Examples of violations include:

(1) Any deceptive or misleading information set forth in sales material;

(2) Failing to ask the applicant in completing the application the pertinent questions regarding the possibility of financing or replacement;

(3) The intentional incorrect recording of an answer;

(4) Advising an applicant to respond negatively to any question regarding replacement in order to prevent notice to the existing insurer; or

(5) Advising a policy or contract owner to write directly to the company in such a way as to attempt to obscure the identity of the replacing producer or company.

B. Policy and contract owners have the right to replace existing life insurance policies or annuity contracts after indicating in or as a part of applications for new coverage that replacement is not their intention; however, patterns of such action by policy or contract owners of the same producer shall be deemedprima facie evidence of the producer's knowledge that replacement was intended in connection with the identified transactions, and these patterns of action shall be deemed prima facie evidence of the producer's intent to violate this regulation.

C. Where it is determined that the requirements of this regulation have not been met the replacing insurer shall provide to the policy owner an in force illustration if available or policy summary for the replacement policy or available disclosure document for the replacement contract and the appropriate notice regarding replacements in Appendix A or C.

D. Violations of this regulation shall subject the violators to penalties that may include the revocation or suspension of a producer's or company's license and monetary fines. In addition, where the director has determined that the violations were material to the sale, the insurer may be required to make restitution, restore policy or contract values and pay interest at the legal rate on the amount refunded in cash.

Section 9. Severability

If any section or portion of a section of this regulation, or its applicability to any person or circumstances, is held invalid by a court, the remainder of this regulation, or the applicability of its provisions to other persons, shall not be affected.

Section 10. Effective Date

This regulation shall be effective ninety days after final publication in the State Register.

APPENDIX A

IMPORTANT NOTICE: REPLACEMENT OF LIFE INSURANCE OR ANNUITIES

This document must be signed by the applicant and the producer, if there is one, and a copy left with the applicant.

You are contemplating the purchase of a life insurance policy or annuity contract. In some cases this purchase may involve discontinuing or changing an existing policy or contract. If so, a replacement is occurring. Financed purchases are also considered replacements.

A replacement occurs when a new policy or contract is purchased and, in connection with the sale, you discontinue making premium payments on the existing policy or contract, or an existing policy or contract is surrendered, forfeited, assigned to the replacing insurer, or otherwise terminated or used in a financed purchase.

A financed purchase occurs when the purchase of a new life insurance policy involves the use of funds obtained by the withdrawal or surrender of or by borrowing some or all of the policy values, including accumulated dividends, of an existing policy to pay all or part of any premium or payment due on the new policy. A financed purchase is a replacement.

You should carefully consider whether a replacement is in your best interests. You will pay acquisition costs and there may be surrender costs deducted from your policy or contract. You may be able to make changes to your existing policy or contract to meet your insurance needs at less cost. A financed purchase will reduce the value of your existing policy and may reduce the amount paid upon the death of the insured.

We want you to understand the effects of replacements before you make your purchase decision and ask that you answer the following questions and consider the questions on the back of this form.

1. Are you considering discontinuing making premium payments, surrendering, forfeiting, assigning to the insurer, or otherwise terminating your existing policy or contract?

___YES ___ NO

2. Are you considering using funds from your existing policies or contracts to pay premiums due on the new policy or contract? ___ YES ___ NO

If you answered "yes" to either of the above questions, list each existing policy or contract you are contemplating replacing (include the name of the insurer, the insured or annuitant, and the policy or contract number if available) and whether each policy or contract will be replaced or used as a source of financing:

INSURER CONTRACT OR #INSURED OR REPLACED (R) OR FINANCING

NAME POLICY ANNUITANT (F)

1.

2.

3.

Make sure you know the facts. Contact your existing company or its agent for information about the old policy or contract. If you request one, an in force illustration, policy summary or available disclosure documents must be sent to you by the existing insurer. Ask for and retain all sales material used by the agent in the sales presentation. Be sure that you are making an informed decision.

The existing policy or contract is being replaced because__________.

I declare that the responses herein are, to the best of my knowledge, accurate:

______________________________________ ___________________________________

Applicant's Signature and Printed Name Date

______________________________________ ___________________________________

Producer's Signature and Printed Name Date

I do not want this notice read aloud to me. ___ (Applicants must initial only if they do not want the notice read aloud.)

A replacement may not be in your best interest, or your decision could be a good one. You should make a careful comparison of the costs and benefits of your existing policy or contract and the proposed policy or contract. One way to do this is to ask the company or agent that sold you your existing policy or contract to provide you with information concerning your existing policy or contract. This may include an illustration of how your existing policy or contract is working now and how it would perform in the future based on certain assumptions. Illustrations should not, however, be used as a sole basis to compare policies or contracts. You should discuss the following with your agent to determine whether replacement or financing your purchase makes sense:

PREMIUMS: Are they affordable?

Could they change?

You're older--are premiums higher for the proposed new policy?

How long will you have to pay premiums on the new policy? On

the old policy?

POLICY VALUES: New policies usually take longer to build cash values and to

pay dividends.

Acquisition costs for the old policy may have been paid; you

will incur costs for the new one.

What surrender charges do the policies have?

What expense and sales charges will you pay on the new policy?

Does the new policy provide more insurance coverage?

INSURABILITY: If your health has changed since you bought your old policy,

the new one could cost you more, or you could be turned down.

You may need a medical exam for a new policy.

Claims on most new policies for up to the first two years can

be denied based on inaccurate statements.

Suicide limitations may begin anew on the new coverage.

IF YOU ARE KEEPING THE OLD POLICY AS WELL AS THE NEW POLICY:

How are premiums for both policies being paid?

How will the premiums on your existing policy be affected?

Will a loan be deducted from death benefits?

What values from the old policy are being used to pay premiums?

IF YOU ARE SURRENDERING AN ANNUITY OR INTEREST SENSITIVE LIFE PRODUCT:

Will you pay surrender charges on your old contract?

What are the interest rate guarantees for the new contract?

Have you compared the contract charges or other policy

expenses?

OTHER ISSUES TO CONSIDER FOR ALL TRANSACTIONS:

What are the tax consequences of buying the new policy?

Is this a tax free exchange? (See your tax advisor.)

Is there a benefit from favorable "grandfathered" treatment of

the old policy under the federal tax code?

Will the existing insurer be willing to modify the old policy?

How does the quality and financial stability of the new company

compare with your existing company?

APPENDIX B

NOTICE REGARDING REPLACEMENT REPLACING YOUR LIFE INSURANCE POLICY OR ANNUITY?

Are you thinking about buying a new life insurance policy or annuity and discontinuing or changing an existing one? If you are, your decision could be a good one--or a mistake. You will not know for sure unless you make a careful comparison of your existing benefits and the proposed policy or contract's benefits.

Make sure you understand the facts. You should ask the company or agent that sold you your existing policy or contract to give you information about it.

Hear both sides before you decide. This way you can be sure you are making a decision that is in your best interest.

APPENDIX C

IMPORTANT NOTICE: REPLACEMENT OF LIFE INSURANCE OR ANNUITIES

You are contemplating the purchase of a life insurance policy or annuity contract. In some cases this purchase may involve discontinuing or changing an existing policy or contract. If so, a replacement is occurring. Financed purchases are also considered replacements.

A replacement occurs when a new policy or contract is purchased and, in connection with the sale, you discontinue making premium payments on the existing policy or contract, or an existing policy or contract is surrendered, forfeited, assigned to the replacing insurer, or otherwise terminated or used in a financed purchase.

A financed purchase occurs when the purchase of a new life insurance policy involves the use of funds obtained by the withdrawal or surrender of or by borrowing some or all of the policy values, including accumulated dividends, of an existing policy, to pay all or part of any premium or payment due on the new policy. A financed purchase is a replacement.

You should carefully consider whether a replacement is in your best interests. You will pay acquisition costs and there may be surrender costs deducted from your policy or contract. You may be able to make changes to your existing policy or contract to meet your insurance needs at less cost. A financed purchase will reduce the value of your existing policy and may reduce the amount paid upon the death of the insured.

We want you to understand the effects of replacements and ask that you answer the following questions and consider the questions on the back of this form.

1. Are you considering discontinuing making premium payments, surrendering, forfeiting, assigning to the insurer, or otherwise terminating your existing policy or contract? ___ YES ___ NO

2. Are you considering using funds from your existing policies or contracts to pay premiums due on the new policy or contract? ___ YES ___ NO

Please list each existing policy or contract you are contemplating replacing (include the name of the insurer, the insured, and the policy or contract number if available) and whether each policy or contract will be replaced or used as a source of financing:

INSURER CONTRACT OR #INSURED OR REPLACED (R) OR FINANCING

NAME POLICY ANNUITANT (F)

1.

2.

3.

Make sure you know the facts. Contact your existing company or its agent for information about the old policy or contract. If you request one, an in force illustration, policy summary or available disclosure documents must be sent to you by the existing insurer. Ask for and retain all sales material used by the agent in the sales presentation. Be sure that you are making an informed decision.

I declare that the responses herein are, to the best of my knowledge, accurate:

______________________________________ ___________________________________

Applicant's Signature and Printed Name Date

A replacement may not be in your best interest, or your decision could be a good one. You should make a careful comparison of the costs and benefits of your existing policy or contract and the proposed policy or contract. One way to do this is to ask the company or agent that sold you your existing policy or contract to provide you with information concerning your existing policy or contract. This may include an illustration of how your existing policy or contract is working now and how it would perform in the future based on certain assumptions. Illustrations should not, however, be used as a sole basis to compare policies or contracts. You should discuss the following with your agent to determine whether replacement or financing your purchase makes sense:

PREMIUMS: Are they affordable?

Could they change?

You're older--are premiums higher for the proposed new policy?

How long will you have to pay premiums on the new policy? On

the old policy?

POLICY VALUES: New policies usually take longer to build cash values and to

pay dividends.

Acquisition costs for the old policy may have been paid; you

will incur costs for the new one.

What surrender charges do the policies have?

What expense and sales charges will you pay on the new policy?

Does the new policy provide more insurance coverage?

INSURABILITY: If your health has changed since you bought your old policy,

the new one could cost you more, or you could be turned down.

You may need a medical exam for a new policy.

Claims on most new policies for up to the first two years can

be denied based on inaccurate statements.

Suicide limitations may begin anew on the new coverage.

IF YOU ARE KEEPING THE OLD POLICY AS WELL AS THE NEW POLICY:

How are premiums for both policies being paid?

How will the premiums on your existing policy be affected?

Will a loan be deducted from death benefits?

What values from the old policy are being used to pay premiums?

IF YOU ARE SURRENDERING AN ANNUITY OR INTEREST SENSITIVE LIFE PRODUCT:

Will you pay surrender charges on your old contract?

What are the interest rate guarantees for the new contract?

Have you compared the contract charges or other policy

expenses?

OTHER ISSUES TO CONSIDER FOR ALL TRANSACTIONS:

What are the tax consequences of buying the new policy?

Is this a tax free exchange? (See your tax advisor.)

Is there a benefit from favorable "grandfathered" treatment of

the old policy under the federal tax code?

Will the existing insurer be willing to modify the old policy?

How does the quality and financial stability of the new company

compare with your existing company?

69-12.2. Repealed by State Register Volume 10, Issue No. 2, eff. February 28, 1986.

69-13 to 69-13.2. Repealed by State Register Volume 25, Issue No. 3, eff. March 23, 2001.

69-13 to 69-13.2. Repealed by State Register Volume 25, Issue No. 3, eff. March 23, 2001.

69-13 to 69-13.2. Repealed by State Register Volume 25, Issue No. 3, eff. March 23, 2001.

69-13.3. Uniform Class and Territory Plan--Motorcycles.

The purpose of this Order is to amend portions of Order O9-74 which promulgated a uniform class plan and territory plan for motorcycle risks.

For physical damage insurance purposes, the subgroups are discontinued and the class plan is amended to provide for a rate per $100.00 of the original cost new for all physical damage coverages.

Age Group F.O.B. List Price

Age Group 1 Original Price

Age Group 2, 3 85% Of Original F.O.B.

Age Group 4, 5 75% Of Original F.O.B.

Age Group 6 55% Of Original F.O.B.

Accordingly, the companies shall file, with this Department, premium rates for Class 01 and Class 02 as called for in Order O9-74 on the above bases for the following coverages:

(1) No Deductible Fire, Theft, and Combined Additional Coverage

(2) $50 Deductible Collision

(3) $100 Deductible Collision

(4) $250 Deductible Collision

(A broader range of deductibles may be filed in addition to the above).

This revised uniform class plan will become effective July 1, 1977. (Based on Insurance Commission designation O5-76.)

69-13.4. Repealed by State Register Volume 20, Issue 6, Part 1, eff. June 28, 1996.

69-14. Insurance Holding Company Systems.

(Statutory Authority: 1976 Code Sections 38-3-110(2), 38-21-300, and 1-23-10 et seq.)

Section I. Forms--General Requirements.

A. Forms A, B, C, and D are intended to be guides in the preparation of the statements required by S. C. Code Sections 38-21-60, 38-21-70, 38-21-140, 38-21-150 and 38-21-250. They are not intended to be blank forms which are to be filled in. These statements filed shall contain the number and captions of all items, but the text of the items may be omitted provided the answers thereto are prepared in such a manner as to indicate clearly the scope and coverage of the items. All instructions, whether appearing under the items of the form or elsewhere therein, are to be omitted. Unless expressly provided otherwise, if any item is inapplicable or the answer thereto is in the negative, an appropriate statement to that effect shall be made.

B. Three complete copies of each statement including exhibits and all other papers and documents filed as a part thereof, shall be filed with the Commissioner. A copy of Form C shall be filed in each state in which an insurer is authorized to do business, if the commissioner of that state has notified the insurer of its request in writing, in which case the insurer has ten days from receipt of the notice to file such form. At least one of the copies shall be manually signed in the manner prescribed on the form. Unsigned copies shall be conformed. If the signature of any person is affixed pursuant to a power of attorney or other similar authority, a copy of such power of attorney or other authority shall also be filed with the statement.

C. Statements should be prepared on paper 8 1/2 "' × 11"' (or 8 1/2 "' × 14"') in size and preferably bound at the top or the top left-hand corner. Exhibits and financial statements, unless specifically prepared for the filing, may be submitted in their original size. All copies of any statement, financial statements, or exhibits shall be clear, easily readable and suitable for photocopying. Debits in credit categories and credits in debit categories shall be designated so as to be clearly distinguishable as such on photocopies. Statements shall be in the English language and monetary values shall be stated in United States currency. If any exhibit or other paper or document filed with the statement is in a foreign language, it shall be accompanied by a translation into the English language and any monetary value normally shown in foreign currency shall be converted into United States currency.

Section II. Forms--Incorporation by Reference, Summaries and Omissions.

A. Information required by any item of Form A, Form B or Form D may be incorporated by reference in answer or partial answer to any other item. Information contained in any financial statement, annual report, proxy statement, statement filed with a governmental authority, or any other document may be incorporated by reference in answer or partial answer to any item of Form A, Form B or Form D, provided such document or paper is filed as an exhibit to the statement. Excerpts of documents may be filed as exhibits if the documents are extensive. Documents currently on file with the Commissioner which were filed within three years need not be attached as exhibits. to information contained in exhibits or in documents already on file shall clearly identify the material and shall specifically indicate that such material is to be incorporated by reference in answer to the item. Matter shall not be incorporated by reference in any case where such incorporation would render the statement incomplete, unclear or confusing.

B. Where an item requires a summary or outline of the provisions of any document, only a brief statement shall be made as to the pertinent provisions of the document. In addition to such statement, the summary or outline may incorporate by reference particular parts of any exhibit or document currently on file with the Commissioner which was filed within three years and may be qualified in its entirety by such reference. In any case where two or more documents required to be filed as exhibits are substantially identical in all material respects except as to the parties thereto, the dates of execution, or other details, a copy of only one of such documents need be filed with a schedule identifying the omitted documents and setting forth the material details in which such documents differ from the documents a copy of which is filed.

Section III. Forms--Information Unknown or Unavailable and Extension of Time to Furnish.

A. Information required need be given only insofar as it is known or reasonably available to the person filing the statement. If any required information is unknown and not reasonably available to the person filing, either because the obtaining thereof would involve unreasonable effort or expense, or because it rests peculiarly within the knowledge of another person not affiliated with the person filing, the information may be omitted, subject to the following conditions:

1. The person filing shall give such information on the subject as it possesses or can acquire without unreasonable effort or expense, together with the sources thereof, and

2. The person filing shall include a statement either showing that unreasonable effort or expense would be involved or indicating the absence of any affiliation with the person within whose knowledge the information rests and stating the result of a request made to such person for the information.

B. If it is impractical to furnish any required information, document or report at the time it is required to be filed, there may be filed with the Commissioner a separate document:

1. identifying the information, document or report in question;

2. stating why the filing thereof at the time required is impractical; and

3. requesting an extension of time for filing the information, document or report to a specified date. The request for extension shall be deemed granted unless the Commissioner within sixty days after receipt thereof enters an order denying the request.

Section IV. Forms--Additional Information and Exhibits.

In addition to the information expressly required to be included in Form A, Form B, Form C and Form D, there shall be added such further material information, if any, as may be necessary to make the information contained therein not misleading. The person filing may also file such exhibits as it may desire in addition to those expressly required by the statement. Such exhibits shall be so marked as to indicate clearly the subject matter to which they refer. Changes to Forms A, B, C or D shall include on the top of the cover page the phrase: "Change No. (insert number) to" and shall indicate the date of the change and not the date of the original filing.

Section V. Definitions.

A. "Executive officer" means chief executive officer, chief operating officer, chief financial officer, treasurer, secretary, controller, and any other individual performing functions corresponding to those performed by the foregoing officers under whatever title.

B. "Foreign insurer" shall include an alien insurer except where clearly noted otherwise.

C. "Ultimate controlling person" means that person which is not controlled by any other person.

D. Unless the context otherwise requires, other terms found in these regulations and in South Carolina Code Section 38-21-10 are used as defined in Section 38-21-10. Other nomenclature or terminology is defined according to Title 38 of the South Carolina Code, or industry usage if not defined by Title 38 of the South Carolina Code.

Section VI. Subsidiaries of Domestic Insurers.

The authority to invest in subsidiaries under South Carolina Code Section 38-21-30 is in addition to any authority to invest in subsidiaries which may be contained in any other provision of Title 38 of the Code.

Section VII. Acquisition of Control--Statement Filing.

A person required to file a statement pursuant to South Carolina Code Sections 38-21-60 and 38-21-70 shall furnish the required information on Form A, hereby made a part of this regulation.

Section VIII. Amendments to Form A.

The applicant shall promptly advise the Commissioner of any changes in the information so furnished on Form A arising subsequent to the date upon which such information was furnished but prior to the Commissioner's disposition of the application.

Section IX. Acquisition of Section 38-21-60 Insurers.

A. If the person being acquired is deemed to be a "domestic insurer" solely because of the provisions of South Carolina Code Section 38-21-60, the name of the domestic insurer on the cover page should be indicated as follows: "ABC Insurance Company, a subsidiary of XYZ Holding Company".

B. Where a Section 38-21-60 insurer is being acquired, references to "the insurer" contained in Form A shall refer to both the domestic subsidiary insurer and the person being acquired.

Section X. Annual Registration of Insurers--Statement Filing.

An insurer required to file an annual registration statement pursuant to South Carolina Code Sections 38-21-130 and 38-21-140 shall furnish the required information on Form B, hereby made a part of these regulations.

Section XI. Summary of Registration--Statement Filing.

An insurer required to file an annual registration statement pursuant to Sections 38-21-130 and 38-21-140 is also required, under Section 38-21-150, to furnish information specified on Form C, hereby made a part of these regulations. An insurer shall file a copy of Form C in each state in which the insurer is authorized to do business, if requested by the regulatory authorities of that state.

Section XII. Alternative and Consolidated Registrations.

A. Any authorized insurer may file a registration statement on behalf of any affiliated insurer or insurers which are required to register under Section 38-21-130. A registration statement may include information not required by law regarding any insurer in the insurance holding company system even if such insurer is not authorized to do business in this State. In lieu of filing a registration statement on Form B, the authorized insurer may file a copy of the registration statement or similar report which it is required to file in its state of domicile, provided:

1. the statement or report contains substantially similar information required to be furnished on Form B; and

2. the filing insurer is the principal insurance company in the insurance holding company system.

B. The question of whether the filing insurer is the principal insurance company in the insurance holding company system is a question of fact and an insurer filing a registration statement or report in lieu of Form B on behalf of an affiliated insurer, shall set forth a brief statement of facts which will substantiate the filing insurer's claim that it, in fact, is the principal insurer in the insurance holding company system.

C. Any authorized insurer may utilize the provisions of Sections 38-21-200 and 38-21-210 without obtaining prior approval of the Commissioner. The Commissioner, however, reserves the right to require individual filings if he deems such filings necessary in the interest of clarity, ease of administration or the public good.

Section XIII. Disclaimers of Affiliation and Termination of Registration.

A. A disclaimer of affiliation or a request for termination of registration claiming that a person does not, or will not upon the taking of some proposed action, control another person (hereinafter referred to as the "subject") shall contain the following information:

1. the number of authorized, issued and outstanding voting securities of the subject;

2. with respect to the person whose control is denied and all affiliates of such person, the number and percentage of shares of the subject's voting securities which are held of record or known to be beneficially owned, and the number of such shares concerning which there is a right to acquire, directly or indirectly;

3. all material relationships and bases for affiliation between the subject and the person whose control is denied and all affiliates of such person;

4. a statement explaining why such person should not be considered to control the subject.

B. A request for termination of registration shall be deemed to have been granted unless the Commissioner, within thirty days after he receives the request, notifies the registrant otherwise.

Section XIV. Transactions Subject to Prior Notice--Notice Filing.

An insurer required to give notice of a proposed transaction pursuant to South Carolina Code Section 38-21-250 shall furnish the required information on Form D, hereby made a part of these regulations.

Section XV. Extraordinary Dividends and Other Distributions.

A. Requests for approval of extraordinary dividends or any other extraordinary distribution to shareholders shall include the following:

1. The amount of the proposed dividend;

2. The date established for payment of the dividend;

3. A statement as to whether the dividend is to be in cash or other property and, if in property, a description thereof, its cost, and its fair market value together with an explanation of the basis for valuation;

4. A copy of the calculations determining that the proposed dividend is extraordinary. The work paper shall include the following information:

(a) The amounts, dates and form of payment of all dividends or distributions (including regular dividends but excluding distributions of the insurer's own securities) paid within the period of twelve consecutive months ending on the date fixed for payment of the proposed dividend for which approval is sought and commencing on the day after the same day of the same month in the last preceding year.

(b) Surplus as regards policyholders (total capital and surplus) as shown in the insurer's most recent annual statement;

(c) If the insurer is a life insurer, the net gain from operations as shown in the insurer's most recent annual statement;

(d) If the insurer is not a life insurer, the net income less net realized capital gains or losses as shown in the insurer's most recent annual statement; and

(e) The dividends paid to stockholders excluding distributions of the insurer's own securities.

5. A balance sheet and statement of income for the period intervening from the last annual statement filed with the Commissioner and the end of the month preceding the month in which the request for dividend approval is submitted; and

6. A brief statement as to the effect of the proposed dividend upon the insurer's surplus and the reasonableness of surplus in relation to the insurer's outstanding liabilities and the adequacy of surplus relative to the insurer's financial needs.

B. Subject to South Carolina Code Section 38-21-270, each registered insurer shall report to the Commissioner all dividends and other distributions to shareholders within five business days following the declaration thereof, and at least ten days prior to the payment thereof, including the same information required by South Carolina Code Section 38-21-260 and Subsections (A)(4) (a)-(e) of this Section.

Section XVI. Adequacy of Surplus.

The factors set forth in South Carolina Code Section 38-21-260 are not intended to be an exhaustive list. In determining the adequacy and reasonableness of an insurer's surplus no single factor is necessarily controlling. The Commissioner, instead, will consider the net effect of all of these factors plus other factors bearing on the financial condition of the insurer. In comparing the surplus maintained by other insurers, the Commissioner will consider the extent to which each of these factors varies from company to company and in determining the quality and liquidity of investments in subsidiaries, the Commissioner will consider the individual subsidiary and may discount or disallow its valuation to the extent that the individual investments so warrant.

Section XVII. Severability.

If any provision of this regulation or the application thereof to any person or circumstance is for any reason held to be invalid, the remainder of the regulation and the application of such provision to other persons or circumstances shall not be affected thereby.

Section XVIII. Effective Date.

This regulation shall become effective January 1, 1994.

FORM A

STATEMENT REGARDING THE ACQUISITION OF CON-

TROL OF OR MERGER WITH A DOMESTIC INSURER

_________________________________________________________

Name of Domestic Insurer

By

_________________________________________________________

Name of Acquiring Person (Applicant)

Filed with the Insurance Department of _____________________________________

(State of domicile of insurer being acquired)

Dated:__________, 19____

Name, Title, Address and Telephone Number of Individual to Whom Notices

and Correspondence Concerning This Statement Should be Addressed:

____________________________________________________________________________

____________________________________________________________________________

ITEM 1. INSURER AND METHOD OF ACQUISITION.

State the name and address of the domestic insurer to which this application relates and a brief description of how control is to be acquired.

ITEM 2. IDENTITY AND BACKGROUND OF THE APPLICANT.

(a) State the name and address of the applicant seeking to acquire control over the insurer.

(b) If the applicant is not an individual, state the nature of its business operations for the past five years or for such lesser period as such person and any predecessors thereof shall have been in existence. Briefly describe the business intended to be done by the applicant and the applicant's subsidiaries.

(c) Furnish a chart or listing clearly presenting the identities of the inter-relationships among the applicant and all affiliates of the applicant. No affiliates need be identified if its total assets are equal to less than 1/2 of 1% of the total assets of the ultimate controlling person affiliated with the applicant. Indicate in such chart or listing the percentage of voting securities of each such person which is owned or controlled by the applicant or by any other such person. If control of any person is maintained other than by the ownership or control of voting securities, indicate the basis of such control. As to each person specified in such chart or listing indicate the type of organization (e.g. corporation, trust, partnership) and the state or other jurisdiction of domicile. If court proceedings involving a reorganization or liquidation are pending with respect to any such person, indicate which person, and set forth the title of the court, nature of proceedings and the date when commenced.

ITEM 3. IDENTITY AND BACKGROUND OF INDIVIDUALS ASSOCIATED WITH THE APPLICANT.

State the following with respect to (1) the applicant if (s)he is an individual or (2) all persons who are directors, executive officers or owners of 10% or more of the voting securities of the applicant if the applicant is not an individual.

(a) Name and business address;

(b) Present principal business activity, occupation or employment including position and office held and the name, principal business and address of any corporation or other organization in which such employment is carried on;

(c) Material occupations, positions, offices or employment during the last five years, giving the starting and ending dates of each and the name, principal business and address of any business corporation or other organization in which each such occupation, position, office or employment was carried on; if any such occupation, position, office or employment required licensing by or registration with any federal, state or municipal governmental agency, indicate such fact, the current status of such licensing or registration, and an explanation of any surrender, revocation, suspension or disciplinary proceedings in connection therewith.

(d) Whether or not such person has ever been convicted in a criminal proceeding (excluding minor traffic violations) during the last ten years and, if so, give the date, nature of conviction, name and location of court, and penalty imposed or other disposition of the case.

ITEM 4. NATURE, SOURCE AND AMOUNT OF CONSIDERATION.

(a) Describe the nature, source and amount of funds or other considerations used or to be used in effecting the merger or other acquisition of control. If any part of the same is represented or is to be represented by funds or other consideration borrowed or otherwise obtained for the purpose of acquiring, holding or trading securities, furnish a description of the transaction, the names of the parties thereto, the relationship, if any, between the borrower and the lender, the amounts borrowed or to be borrowed, and copies of all agreements, promissory notes and security arrangements relating thereto.

(b) Explain the criteria used in determining the nature and amount of such consideration.

(c) If the source of the consideration is a loan made in the lender's ordinary course of business and if the applicant wishes the identity of the lender to remain confidential, he must specifically request that the identity be kept confidential.

ITEM 5. FUTURE PLANS OF INSURER.

Describe any plans or proposals which the applicant may have to declare an extraordinary dividend, to liquidate such insurer, to sell its assets to or merge it with any person or persons or to make any other material change in its business operations or corporate structure or management.

ITEM 6. VOTING SECURITIES TO BE ACQUIRED.

State the number of shares of the insurer's voting securities which the applicant, its affiliates and any person listed in Item 3 plan to acquire, and the terms of the offer, request, invitation, agreement or acquisition, and a statement as to the method by which the fairness of the proposal was arrived at.

ITEM 7. OWNERSHIP OF VOTING SECURITIES.

State the amount of each class of any voting security of the insurer which is beneficially owned or concerning which there is a right to acquire beneficial ownership by the applicant, its affiliates or any person listed in Item 3.

ITEM 8. CONTRACTS, ARRANGEMENTS, OR UNDERSTANDING WITH RESPECT TO VOTING SECURITIES OF THE INSURER.

Give a full description of any contracts, arrangements or understandings with respect to any voting security of the insurer in which the applicant, its affiliates or any person listed in Item 3 is involved, including but not limited to transfer of any of the securities, joint ventures, loan or option arrangements, puts or calls, guarantees of loans, guarantees against loss or guarantees of profits, division of losses or profits, or the giving or withholding of proxies. Such description shall identify the person with whom such contracts, arrangements or understandings have been entered into.

ITEM 9. RECENT PURCHASES OF VOTING SECURITIES.

Describe any purchases of any voting securities of the insurer by the applicant, its affiliates or any person listed in Item 3 during the twelve calendar months preceding the filing of this statement. Include in such description the dates of purchase, the names of the purchasers, and the consideration paid or agreed to be paid therefor. State whether any such shares so purchased are hypothecated.

ITEM 10. RECENT RECOMMENDATIONS TO PURCHASE.

Describe any recommendations to purchase any voting security of the insurer made by the applicant, its affiliates or any person listed in Item 3, or by anyone based upon interviews or at the suggestion of the applicant, its affiliates or any person listed in Item 3 during the twelve calendar months preceding the filing of this statement.

ITEM 11. AGREEMENTS WITH BROKER-DEALERS.

Describe the terms of any agreement, contract or understanding made with any broker-dealer as to solicitation of voting securities of the insurer for tender and the amount of any fees, commissions or other compensation to be paid to broker-dealers with regard thereto.

ITEM 12. FINANCIAL STATEMENTS AND EXHIBITS.

(a) Financial statements and exhibits shall be attached to this statement as an appendix, but list under this item the financial statements and exhibits so attached.

(b) The financial statements shall include the annual financial statements of the persons identified in Item 2(c) for the preceding five fiscal years (or for such lesser period as such applicant and its affiliates and any predecessors thereof shall have been in existence), and similar information covering the period from the end of such person's last fiscal year, if such information is available. Such statements may be prepared on either an individual basis, or, unless the Commissioner otherwise requires, on a consolidated basis if such consolidated statements are prepared in the usual course of business.

The annual financial statements of the applicant shall be accompanied by the certificate of an independent public accountant to the effect that such statements present fairly the financial position of the applicant and the results of its operations for the year then ended, in conformity with generally accepted accounting principles or with requirements of insurance or other accounting principles prescribed or permitted under law. If the applicant is an insurer which is actively engaged in the business of insurance, the financial statements need not be certified, provided they are based on the Annual Statement of such person filed with the insurance department of the person's domiciliary state and are in accordance with the requirements of insurance or other accounting principles prescribed or permitted under the law and regulations of such state.

(c) File as exhibits copies of all tender offers for, requests or invitations for, tenders of, exchange offers for, and agreements to acquire or exchange any voting securities of the insurer and (if distributed) of additional soliciting material relating thereto, any proposed employment, consultation, advisory or management contracts concerning the insurer, annual reports to the stockholders of the insurer and the applicant for the last two fiscal years, and any additional documents or papers required by Form A or Regulation 69-14.

ITEM 13. SIGNATURE AND CERTIFICATION

Signature and certification required as follows:

SIGNATURE

Pursuant to the requirements of South Carolina Code Sections 38-21-60 and

38-21-70, _________ has caused this application to be duly signed on its

behalf in the City of _________ and State of _________ on the ____ day of

_________, 19____.

(SEAL) _______________________________

Name of Applicant

BY ___________________________________

(Name) (Title)

Attest:

____________________________________

(Signature of Officer)

____________________________________

(Title)

CERTIFICATION

The undersigned deposes and says that (s)he has duly executed the attached

application dated _________, 19____, for and on behalf of _________ (Name

of Applicant); that (s)he is the _________ (Title of Officer) of such

company and that (s)he is authorized to execute and file such instrument.

Deponent further says that (s)he is familiar with such instrument and the

contents thereof, and that the facts therein set forth are true to the

best of his/her knowledge, information and belief.

(Signature)_______________________

(Type or print name beneath) _______________________

FORM B

INSURANCE HOLDING COMPANY SYSTEM ANNUAL

REGISTRATION STATEMENT

Filed with the Insurance Department of the

State of _________

By

__________________

Name of Registrant

On Behalf of Following Insurance Companies

Name Address

_______________________________________________________________________________

_______________________________________________________________________________

Date: _________, 19____

Name, Title, Address and telephone number of Individual to Whom Notices and

Correspondence Concerning This Statement Should Be Addressed:

_______________________________________________________________________________

_______________________________________________________________________________

ITEM 1. IDENTITY AND CONTROL OF REGISTRANT.

Furnish the exact name of each insurer registering or being registered (hereinafter called "the Registrant"), the home office address and principal executive offices of each; the date on which each Registrant became part of the insurance holding company system; and the method(s) by which control of each Registrant was acquired and is maintained.

ITEM 2. ORGANIZATIONAL CHART.

Furnish a chart or listing clearly presenting the identities of and interrelationships among all affiliated persons within the insurance holding company system. No affiliate need be shown if its total assets are equal to less than 1/2 of 1% of the total assets of the ultimate controlling person within the insurance holding company system unless it has assets valued at or exceeding (insert amount). The chart or listing should show the percentage of each class of voting securities of each affiliate which is owned, directly or indirectly, by another affiliate. If control of any person within the system is maintained other than by the ownership or control of voting securities, indicate the basis of such control. As to each person specified in such chart or listing indicate the type of organization (e.g., corporation, trust, partnership) and the state or other jurisdiction of domicile.

ITEM 3. THE ULTIMATE CONTROLLING PERSON

As to the ultimate controlling person in the insurance holding company system furnish the following information:

(a) Name.

(b) Home office address.

(c) Principal executive office address.

(d) The organizational structure of the person, i.e., corporation, partnership, individual, trust, etc.

(e) The principal business of the person.

(f) The name and address of any person who holds or owns 10% or more of any class of voting security, the class of such security, the number of shares held of record or known to be beneficially owned, and the percentage of class so held or owned.

(g) If court proceedings involving a reorganization or liquidation are pending, indicate the title and location of the court, the nature of proceedings and the date when commenced.

ITEM 4. BIOGRAPHICAL INFORMATION.

Furnish the following information for the directors and executive officers of the ultimate controlling person: the individual's name and address, his or her principal occupation and all offices and positions held during the past five years, and any conviction of crimes other than minor traffic violations during the past ten years.

ITEM 5. TRANSACTIONS AND AGREEMENTS.

Briefly describe the following agreements in force, and transactions currently outstanding or which have occurred during the last calendar year between the Registrant and its affiliates:

(1) loans, other investments, or purchases, sales or exchanges of securities of the affiliates by the Registrant or of the Registrant by its affiliates;

(2) purchases, sales or exchanges of assets;

(3) transactions not in the ordinary course of business;

(4) guarantees or undertakings for the benefit of an affiliate which result in an actual contingent exposure of the Registrant's assets to liability, other than insurance contracts entered into in the ordinary course of the Registrant's business;

(5) all management agreements, service contracts and all cost-sharing arrangements;

(6) leases;

(7) reinsurance agreements;

(8) dividends and other distributions to shareholders;

(9) consolidated tax allocation agreements;

(10) any pledge of the Registrant's stock and/or of the stock of any subsidiary or controlling affiliate, for a loan made to any member of the insurance holding company system; and

(11) contributions by the Registrant to the surplus of an affiliate.

No information need be disclosed if such information is not material for purposes of South Carolina Code Section 38-21-160.

Sales, purchases, exchanges, loans or extensions of credit, investments or guarantees involving one-half of 1% or less of the Registrant's admitted assets as of the previous 31st day of December shall not be deemed material, unless the Commissioner by order or regulation provides otherwise.

The description shall be in a manner as to permit the proper evaluation thereof by the Commissioner, and shall include at least the following: the nature and purpose of the transaction, the nature and amounts of any payments or transfers of assets between the parties, the identity of all parties to such transaction, and relationship of the affiliated parties to the Registrant.

ITEM 6. LITIGATION OR ADMINISTRATIVE PROCEEDINGS.

A brief description of any litigation or administrative proceedings of the following types, either then pending or concluded within the preceding fiscal year, to which the ultimate controlling person or any of its directors or executive officers was a party or of which the property of any such person is or was the subject; give the names of the parties and the court or agency in which such litigation or proceeding is or was pending:

(a) Criminal prosecutions or administrative proceedings by any government agency or authority; and

(b) Proceedings which may have a material effect upon the solvency or capital structure of the ultimate holding company including, but not necessarily limited to, bankruptcy, receivership or other corporate reorganizations.

ITEM 7. STATEMENT REGARDING PLAN OR SERIES OF TRANSACTIONS.

The insurer shall furnish a statement that transactions entered into since the filing of the prior year's annual registration statement are not part of a plan or series of like transactions, the purpose of which is to avoid statutory threshold amounts and the review that might otherwise occur.

ITEM 8. FINANCIAL STATEMENTS AND EXHIBITS.

(a) Financial statements and exhibits should be attached to this statement as an appendix, but list under this item the financial statements and exhibits so attached.

(b) The financial statements shall include the annual financial statements of the ultimate controlling person in the insurance holding company system as of the end of the person's latest fiscal year.

If at the time of the initial registration, the annual financial statements for the latest fiscal year are not available, annual statements for the previous fiscal year may be filed and similar financial information shall be filed for any subsequent period to the extent such information is available. Such financial statements may be prepared on either an individual basis, or unless the Commissioner otherwise requires, on a consolidated basis if such consolidated statements are prepared in the usual course of business.

Unless the Commissioner otherwise permits, the annual financial statements shall be accompanied by the certificate of an independent public accountant to the effect that such statements present fairly the financial position of the ultimate controlling person and the results of its operations for the year then ended, in conformity with generally accepted accounting principles or with requirements of insurance or other accounting principles prescribed or permitted under law. If the ultimate controlling person is an insurer which is actively engaged in the business of insurance, the annual financial statements need not be certified, provided they are based on the Annual Statement of such insurer filed with the insurance department of the insurer's domiciliary state and in accordance with requirements of insurance or other accounting principles prescribed or permitted under the law and regulations of such state.

(c) Exhibits shall include copies of the latest annual reports to shareholders of the ultimate controlling person and proxy material used by the ultimate controlling person and any additional documents or papers required by Form B or Regulation 69-14.

ITEM 9. FORM C REQUIRED.

A Form C, Summary of Registration Statement, must be prepared and filed with this Form B.

ITEM 10. SIGNATURE AND CERTIFICATION.

Signature and certification required as follows:

SIGNATURE

Pursuant to the requirements of South Carolina Code Sections 38-21-130 and

38-21-140, the Registrant has caused this annual registration statement to

be duly signed on its behalf in the City of _________ and State of

_________ on the ____ day of _________, 19____.

(SEAL) _______________________________

Name of Registrant

BY ___________________________________

(Name) (Title)

Attest:

____________________________________

(Signature of Officer)

____________________________________

(Title)

CERTIFICATION

The undersigned deposes and says that (s)he has duly executed the attached

annual registration statement dated _________, 19____, for and on behalf

of _________ (Name of Company); that (s)he is the _________ (Title of

Officer) of such company and that (s)he is authorized to execute and file

such instrument. Deponent further says that (s)he is familiar with such

instrument and the contents thereof, and that the facts therein set forth

are true to the best of his/her knowledge, information and belief.

(Signature) _______________________

(Type or print name beneath) _______________________

FORM C

SUMMARY OF REGISTRATION STATEMENT

Filed with the Insurance Department of the

State of _________

By

__________________

Name of Registrant

On Behalf of Following Insurance Companies

Name Address

_______________________________________________________________________________

_______________________________________________________________________________

Date: _________, 19____

Name, Title, Address and Telephone number of Individual to Whom Notices and

Correspondence Concerning This Statement Should Be Addressed:

_______________________________________________________________________________

_______________________________________________________________________________

Furnish a brief description of all items in the current annual registration statement which represent changes from the prior year's annual registration statement. The description shall be in a manner as to permit the proper evaluation thereof by the Commissioner, and shall include specific references to Item numbers in the annual registration statement and to the terms contained therein.

Changes occurring under Item 2 of Form B insofar as changes in the percentage of each class of voting securities held by each affiliate is concerned, need only be included where such changes are ones which result in ownership or holdings of 10 percent or more of voting securities, loss or transfer of control, or acquisition or loss of partnership interest.

Changes occurring under Item 4 of Form B need only be included where: an individual is, for the first time, made a director or executive officer of the ultimate controlling person; a director or executive officer terminates his or her responsibilities with the ultimate controlling person; or in the event an individual is named president of the ultimate controlling person.

If a transaction disclosed on the prior year's annual registration statement has been changed, the nature of such change shall be included. If a transaction disclosed on the prior year's annual registration statement has been effectuated, furnish the mode of completion and any flow of funds between affiliates resulting from the transaction.

The insurer shall furnish a statement that transactions entered into since the filing of the prior year's annual registration statement are not part of a plan or series of like transactions whose purpose it is to avoid statutory threshold amounts and the review that might otherwise occur.

SIGNATURE AND CERTIFICATION

Signature and certification required as follows:

SIGNATURE

Pursuant to the requirements of South Carolina Code Section 38-21-150, the Registrant

has caused this summary of registration statement to be duly signed on its

behalf in the City of _________ and State of _________ on the ____ day of

_________, 19____.

(SEAL) ________________________________

Name of Registrant

BY ____________________________________

(Name) (Title)

Attest:

______________________________________

(Signature of Officer)

______________________________________

(Title)

CERTIFICATION

The undersigned deposes and says that (s)he has fully executed the attached

summary of registration statement dated _________, 19____, for and on behalf

of _________ (Name of Company); that (s)he is the _________ (Title of

Officer) of such company and that (s)he is authorized to execute and file

such instrument. Deponent further says that (s)he is familiar with such

instrument and the contents thereof, and that the facts therein set forth are

true to the best of his/her knowledge, information and belief.

(Signature) _______________________

(Type or print name beneath) _______________________

FORM D PRIOR NOTICE OF A TRANSACTION

Filed with the Insurance Department of the State of _________

By

________________________

Name of Registrant

On Behalf of Following Insurance Companies

Name Address

_______________________________________________________________________________

_______________________________________________________________________________

Date: _________, 19____.

Name, Title, Address and Telephone Number of Individual to Whom Notices and

Correspondence Concerning This Statement Should Be Addressed:

_______________________________________________________________________________

_______________________________________________________________________________

ITEM 1. IDENTITY OF PARTIES TO TRANSACTION.

Furnish the following information for each of the parties to the transaction:

(a) Name.

(b) Home office address.

(c) Principal executive office address.

(d) The organizational structure, i.e., corporation, partnership, individual, trust, etc.

(e) A description of the nature of the parties' business operations.

(f) Relationship, if any, of other parties to the transaction to the insurer filing the notice, including any ownership or debtor/creditor interest by any other parties to the transaction in the insurer seeking approval, or by the insurer filing the notice in the affiliated parties.

(g) Where the transaction is with a non-affiliate, the name(s) of the affiliate(s) which will receive, in whole or in substantial part, the proceeds of the transaction.

ITEM 2. DESCRIPTION OF THE TRANSACTION.

Furnish the following information for each transaction for which notice is being given:

(a) A statement as to whether notice is being given under South Carolina Code Sections 38-21-250(2)(i), (ii), (iii), (iv) or (v).

(b) A statement of the nature of the transaction.

(c) The proposed effective date of the transaction.

ITEM 3. SALES, PURCHASES, EXCHANGES, LOANS, EXTENSIONS OF CREDIT, GUARANTEES OR INVESTMENTS.

Furnish a brief description of the amount and source of funds, securities, property or other consideration for the sale, purchase, exchange, loan, extension of credit, guarantee, or investment, whether any provision exists for purchase by the insurer filing notice, by any party to the transaction, or by any affiliate of the insurer filing notice, a description of the terms of any securities being received, if any, and a description of any other agreements relating to the transaction such as contracts or agreements for services, consulting agreements and the like. If the transaction involves other than cash, furnish a description of the consideration, its cost and its fair market value, together with an explanation of the basis for evaluation.

If the transaction involves a loan, extension of credit or a guarantee, furnish a description of the maximum amount which the insurer will be obligated to make available under such loan, extension of credit or guarantee, the date on which the credit or guarantee will terminate, and any provisions for the accrual of or deferral of interest.

If the transaction involves an investment, guarantee or other arrangement, state the time period during which the investment, guarantee or other arrangement will remain in effect, together with any provisions for extensions or renewals of such investments, guarantees or arrangements. Furnish a brief statement as to the effect of the transaction upon the insurer's surplus.

No notice need be given if the maximum amount which can at any time be outstanding or for which the insurer can be legally obligated under the loan, extension of credit or guarantee is less than, (a) in the case of non-life insurers, the lesser of 3% of the insurer's admitted assets or 25% of surplus as regards policyholders or, (b) in the case of life insurers, 3% of the insurer's admitted assets, each as of the 31st day of December next preceding.

ITEM 4. LOANS OR EXTENSIONS OF CREDIT TO A NON-AFFILIATE.

If the transaction involves a loan or extension of credit to any person who is not an affiliate, furnish a brief description of the agreement or understanding whereby the proceeds of the proposed transaction, in whole or in substantial part, are to be used to make loans or extensions of credit to, to purchase the assets of, or to make investments in, any affiliate of the insurer making such loans or extensions of credit, and specify in what manner the proceeds are to be used to loan to, extend credit to, purchase assets of or make investments in any affiliate. Describe the amount and source of funds, securities, property or other consideration for the loan or extension of credit and, if the transaction is one involving consideration other than cash, a description of its cost and its fair market value together with an explanation of the basis for evaluation. Furnish a brief statement as to the effect of the transaction upon the insurer's surplus.

No notice need be given if the loan or extension of credit is one which equals less than, in the case of non-life insurers, the lesser of 3% of the insurer's admitted assets or 25% of surplus as regards policyholders or, with respect to life insurers, 3% of the insurer's admitted assets, each as of the 31st day of December next preceding.

ITEM 5. REINSURANCE.

If the transaction is a reinsurance agreement or modification thereto, as described by South Carolina Code Section 38-21-250(2)(iii), furnish a description of the known and/or estimated amount of liability to be ceded and/or assumed in each calendar year, the period of time during which the agreement will be in effect, and a statement whether an agreement or understanding exists between the insurer and non-affiliate to the effect that any portion of the assets constituting the consideration for the agreement will be transferred to one or more of the insurer's affiliates. Furnish a brief description of the consideration involved in the transaction, and a brief statement as to the effect of the transaction upon the insurer's surplus.

No notice need be given for reinsurance agreements or modifications thereto if the reinsurance premium or a change in the insurer's liabilities in connection with the reinsurance agreement or modification thereto is less than 5% of the insurer's surplus as regards policyholders, as of the 31st day of December next preceding.

ITEM 6. MANAGEMENT AGREEMENTS, SERVICE AGREEMENTS AND COST-SHARING ARRANGEMENTS.

For management and service agreements, furnish:

(a) a brief description of the managerial responsibilities, or services to be performed.

(b) a brief description of the agreement, including a statement of its duration, together with brief descriptions of the basis for compensation and the terms under which payment or compensation is to be made.

For cost-sharing arrangements, furnish:

(a) a brief description of the purpose of the agreement.

(b) a description of the period of time during which the agreement is to be in effect.

(c) a brief description of each party's expenses or costs covered by the agreement.

(d) a brief description of the accounting basis to be used in calculating each party's costs under the agreement.

ITEM 7. ALL OTHER TRANSACTIONS DETERMINED BY THE COMMISSIONER TO BE MATERIAL,INCLUDING, BUT NOT LIMITED TO, REAL OR PERSONAL PROPERTY. LEASES.

For leases, furnish:

(a) a brief description of the purpose of the lease.

(b) a description of the period of time during which the lease agreement is to be in effect.

(c) the aggregate payments to be made during the term of the lease.

(d) copy of the lease agreement.

ITEM 8. SIGNATURE AND CERTIFICATION.

Signature and certification required as follows:

SIGNATURE

Pursuant to the requirements of South Carolina Code Section 38-21-250,

_________ has caused this notice to be duly signed on its behalf in the City

of _________ and State of _________ on the ____ day of _________, 19____.

(SEAL) ________________________________

Name of Applicant

BY ____________________________________

(Name) (Title)

Attest:

______________________________________

(Signature of Officer)

______________________________________

(Title)

CERTIFICATION

The undersigned deposes and says that (s)he has fully executed the attached

notice dated _________, 19____, for and on behalf of _________ (Name of

Applicant); and (s)he is the _________ (Title of Officer) of such company and

that (s)he is authorized to execute and file such instrument. Deponent

further says that (s)he is familiar with such instrument and the contents

thereof, and that the facts therein set forth are true to the best of his/her

knowledge, information and belief.

(Signature) _______________________

(Type or print name beneath) _______________________

69-15. South Carolina Deposits Required of Insurers.

Under S. C. Code Section 38-9-80 (1976), every domestic, foreign or alien insurance company, transacting or desiring to transact business in South Carolina is required to make deposits with the director or his designee in accordance with standards promulgated by him. The director or his designee is empowered to prescribe the amounts required, within the limits set forth in the statute, and he is specifically authorized to subsequently increase or decrease the amount of deposit required of any particular insurer.

The amount which an insurer is required to deposit is related to its surplus as regards policyholders (capital and surplus for stock insurers or surplus for mutual, fraternal benefit societies and reciprocal insurers), as set forth in its most recent annual statement filed pursuant to S. C. Code Section 38-13-80 (1976). Such amount is to be determined in accordance with the following table:

Surplus as Regards Policyholders Market Value of Deposit

Under $1,000,000 $200,000

$1,000,000 or more but less than $3,000,000 $175,000

$3,000,000 or more but less than $5,000,000 $150,000

$5,000,000 or more $125,000

The director or his designee may subsequently increase or decrease the amount of deposit required of an insurer depending upon particular circumstances, such as the current financial condition of the insurer in relation to its previous financial condition, the type or amount of business written by the insurer, the method of operation of the insurer, etc. The insurer will be notified of the amount of deposit it is required to make.

69-16. Motor Vehicle Damage Appraisers; General Methods by Which Such Appraisers Shall Conduct Their Business; Suspension or Revocation of an Appraiser's License.

1. As used herein, the word "appraiser" means any person who, or any partnership, association, or corporation which, practices as a business the appraising of damages to motor vehicles insured under automobile physical damage policies or in respect to third party property damage liability claims and who or which is licensed by the Commissioner to act as an appraiser.

1.1 Employees of insurance companies who are licensed as adjusters, and other persons who are licensed as adjusters and who perform loss or claim adjustments in behalf of insurers, are not required to be licensed as appraisers if their activities as appraisers are in behalf of an insurer which directly and for its own account will perform the repairs itself or which will have the repairs effected directly by a repair shop as its agent for its own account and become responsible itself for such repairs and make payment directly to the repair shop for such repairs.

1.2 Employees of insurance companies who are licensed as adjusters, and other persons who are licensed as adjusters and who perform loss or claim adjustments in behalf of insurers, are required to be licensed as appraisers if their activities consist of making appraisals of damaged motor vehicles solely for purposes of arriving at an agreed price for repairing such motor vehicles under circumstances wherein the contract or agreement to repair the damaged motor vehicle is expected to be made between the repair shop and the owner and wherein the insurer assumes no direct responsibility for the adequacy of the repairs or payment therefor or other than inclusion of the repair shop as a joint payee on the settlement check or draft.

1.3 Before being issued a license, an applicant shall stand a written examination to determine that the applicant is qualified as an appraiser. Such examination shall be subject to, and administered in accordance with, the procedures set forth in Regulation 69-23(6)(f). Any examination fees which may be charged by an outside testing authority shall be in addition to, and not in lieu of, the annual license fee required by Code Section 56-13-20.

2. Every appraiser, while engaged in his duties as such appraiser, shall carry the license issued to him by the Commissioner and shall offer to display it to an owner whose motor vehicle is being inspected, to the repair shop representative involved, or to any authorized representative of the Commissioner.

3. An appraiser may agree on a price for repairing a damaged motor vehicle only with a repair shop.

4. The appraiser shall leave a legible signed copy of his appraisal with the repair shop selected to make the repairs, which appraisal shall contain the name of the owner of the motor vehicle, the name of the insurer ordering the appraisal and its claim number, if known, the number of the appraiser's license and the proper number of the motor vehicle inspected.

4.1. All damage to the motor vehicle which is considered by the appraiser to be unrelated or old damage and which is not included in the repair price shall be clearly indicated on the appraisal.

5. If the appraiser and the repair shop fail to agree on a price for repairs, the appraiser shall not obtain a competitive estimate from another repair shop unless the owner thereof or his authorized agent shall have actually inspected the vehicle. No such competitive estimate shall be obtained by the use of photographs, telephone calls, or in any manner whatsoever other than actual, personal inspection.

6. No appraiser shall request that repairs be made in a specified repair shop.

7. Every appraiser shall reinspect damaged motor vehicles when supplementary allowances are requested by repair shops.

8. Every appraiser shall:

(1) Conduct himself in such a manner as to inspire public confidence by fair and honorable dealing;

(2) Approach the appraisal of damaged motor vehicles without prejudice against, or favoritism toward, any party involved in order to make fair and impartial appraisals;

(3) Disregard any efforts on the part of others to influence his judgment in the interest of any of the parties involved;

(4) Prepare an independent, objective appraisal of damage.

8.1 No appraiser shall:

(1) Receive directly or indirectly any gratuity or consideration in connection with his appraisal services from any person except his employer or, if self-employed, his customer;

(2) Traffic in, or acquire for himself, his employer, or any relative of either, any salvage if such salvage is obtained in any way as a result of, or incident to, appraisal services rendered by him.

9. The Commissioner may suspend or revoke the license issued to an appraiser or refuse to renew such license upon his finding that any such appraiser has violated any law involving moral turpitude, or has violated, or failed to comply with, any law of this State relating to his duties or conduct as an appraiser or any provision of this Regulation.

69-17. Advertising of Accident and Health Insurance.

(Statutory Authority: 1976 Code Section 38-3-60(1))

Section 1. Purpose. The purpose of these rules is to assure truthful and adequate disclosure of all material and relevant information in the advertising of accident and sickness insurance. This purpose is intended to be accomplished by the establishment of, and adherence to, certain minimum standards and guidelines of conduct in the advertising of accident, health, and accident and health insurance in a manner which prevents unfair competition among insurers and is conducive to the accurate presentation and description to the insurance consumer of a policy of such insurance offered through various advertising media or through the mails.

Section 2. Applicability.

A. These rules shall apply to any accident, health, or accident and health insurance "advertisement," as that term is hereinafter defined, intended for presentation, distribution or dissemination in this State when such presentation, distribution or dissemination is made either directly or indirectly by or on behalf of an insurer, agent or broker as those terms are defined in the Insurance Code of this State, or these rules.

B. Every insurer shall establish and at all times maintain a system of control over the content, form and method of dissemination of all advertisements of its policies. All such advertisements, regardless of by whom written, created, designed or presented, shall be the responsibility of the insurer whose policies are so advertised.

Section 3. Definitions.

A. An advertisement for the purpose of these rules shall include:

1. printed and published material, audio visual material, and descriptive literature of an insurer used in direct mail, newspapers, magazines, radio script, TV script, billboards and similar displays; and

2. descriptive literature and sales aids of all kinds issued by an insurer, agent or broker for presentation to members of the insurance buying public, including but not limited to circulars, leaflets, booklets, depictions, illustrations, and form letters; and

3. prepared sales talks, presentations and material for use by agents, brokers and solicitors.

B. "Policy" for the purpose of these rules shall include any policy, plan, certificate, contract, agreement, statement of coverage, rider or endorsement which provides accident or sickness benefits or medical, surgical or hospital expense benefits, whether on an indemnity, reimbursement, service or prepaid basis, except when issued in connection with another kind of insurance other than life and except disability, waiver of premium and double indemnity benefits included in life insurance and annuity contracts.

C. "Insurer" for the purpose of these rules shall include any individual, corporation, association, partnership, reciprocal exchange, inter-insurer, Lloyds, fraternal benefit society, and any other legal entity which is defined as an "insurer" in the Insurance Code of this State and is engaged in the advertisement of a policy as "policy" is herein defined.

D. "Exception" for the purpose of these rules shall mean any provision in a policy whereby coverage for a specified hazard is entirely eliminated; it is a statement of a risk not assumed under the policy.

E. "Reduction" for the purpose of these rules shall mean any provision which reduces the amount of the benefit; a risk of loss is assumed but payment upon the occurrence of such loss is limited to some amount or period less than would be otherwise payable had such reduction not been used.

F. "Limitation" for the purpose of these rules shall mean any provision which restricts coverage under the policy other than an exception or a reduction.

Section 4. Method of Disclosure of Required Information. All information required to be disclosed by these rules shall be set out conspicuously and in close conjunction with the statements to which such information relates or under appropriate captions of such prominence that it shall not be minimized, rendered obscure or presented in an ambiguous fashion or intermingled with the context of the advertisement so as to be confusing or misleading.

Section 5. Form and Content of Advertisements.

A. The format and content of an advertisement of an accident or sickness insurance policy shall be sufficiently complete and clear to avoid deception or the capacity or tendency to mislead or deceive. Whether an advertisement has a capacity or tendency to mislead or deceive shall be determined by the Commissioner of Insurance from the overall impression that the advertisement may be reasonably expected to create upon a person of average education or intelligence, within the segment of the public to which it is directed.

B. Advertisements shall be truthful and not misleading in fact or in implication. Words or phrases, the meaning of which is clear only by implication or by familiarity with insurance terminology, shall not be used. An advertisement is misleading if it omits any material information necessary to render it not misleading.

Section 6. Advertisements of Benefits Payable, Losses Covered or Premiums Payable.

A. Deceptive Words, Phrases or Illustrations Prohibited

1. No advertisement shall omit information or use words, phrases, statements, references or illustrations if the omission of such information or use of such words, phrases, statements, references or illustrations has the capacity, tendency or effect of misleading or deceiving purchasers or prospective purchasers as to the nature or extent of any policy benefit payable, loss covered or premium payable. The fact that the policy offered is made available to a prospective insured for inspection prior to consummation of the sale or an offer is made to refund the premium if the purchaser is not satisfied, does not remedy misleading statements.

2. No advertisement shall contain or use words or phrases such as, "all"; "full"; "complete"; "comprehensive"; "unlimited"; "up to"; "as high as"; "this policy will help fill some of the gaps that Medicare and your present insurance leave out"; "this policy will help to replace your income" (when used to express loss of time benefits); or similar words and phrases, in a manner which exaggerates any benefits beyond the terms of the coverage or otherwise renders the advertisement misleading or deceptive.

3. An advertisement shall not contain descriptions of a policy limitation, exception or reduction, worded in a positive manner to imply that it is a benefit, such as describing a waiting period as a "benefit builder," or stating "even pre-existing conditions are covered after two years"; nor shall such advertisement be so worded as to imply that provisions required by statute, such as, but not limited to, the ten-day inspection period provision or the two year incontestability provision, were voluntarily adopted by the insurer or differ from similar provisions in the policies of other insurers. Words and phrases used in an advertisement to describe such policy limitations, exceptions and reductions shall fairly and accurately describe the negative features of such limitations, exceptions and reductions of the policy offered.

4. No advertisement of a benefit for which payment is conditional upon confinement in a hospital or similar facility shall use words or phrases such as "tax free"; "extra cash"; "extra income"; "extra pay"; or substantially similar words or phrases because such words and phrases have the capacity, tendency or effect of misleading the public into believing that the policy advertised will, in some way, enable them to make a profit from being hospitalized.

5. No advertisement of a hospital or other similar facility confinement shall advertise that the amount of the benefit is payable on a monthly or weekly basis when, in fact, the amount of the benefit payable is based upon a daily pro rata basis relating to the number of days of confinement; except that a statement of the benefit payable on a daily basis may be followed immediately by a statement of no greater prominence setting forth the monthly or weekly benefit amounts. When the policy contains a limit on the number of days of coverage provided, such limit must appear in the advertisement.

6. No advertisement of a policy covering only one disease or a list of specified diseases shall imply coverage beyond the terms of the policy. Synonymous terms shall not be used to refer to any disease so as to imply broader coverage than is the fact.

7. An advertisement for a policy providing benefits for specified illnesses only, such as cancer, or for specified accidents only, such as automobile accidents, shall clearly and conspicuously in prominent type state the limited nature of the policy. The statement shall be worded in language identical to or substantially similar to the following: "THIS IS A LIMITED POLICY"; "THIS IS A CANCER ONLY POLICY"; "THIS IS AN AUTOMOBILE ACCIDENT ONLY POLICY".

8. An advertisement of a direct response insurance product shall not imply that because "no insurance agent will call and no commissions will be paid to agents" that it is "a low cost plan", or use other similar words or phrases because the cost of advertising and servicing such policies is a substantial cost in the marketing of a direct response insurance product.

B. Exceptions, Reductions and Limitations

1. When an advertisement refers to either dollar amount, or a period of time for which any benefit is payable, or the cost of the policy, or specific policy benefit, or the loss for which such benefit is payable, it shall also disclose those exceptions, reductions and limitations affecting the basic provisions of the policy without which the advertisement would have the capacity or tendency to mislead or deceive.

2. When a policy contains a waiting, elimination, probationary or similar time period between the effective date of the policy and the effective date of coverage under the policy or a time period between the date a loss occurs and the date benefits begin to accrue for such loss, an advertisement which is subject to the requirements of the preceding paragraph shall disclose the existence of such periods.

3. An advertisement shall not use the words "only"; "just"; "merely"; "minimum" or similar words or phrases to describe the applicability of any exceptions and reductions, such as: "This policy is subject to the following minimum exceptions and reductions".

C. Pre-Existing Conditions

1. An advertisement which is subject to the requirements of Section 6B shall, in negative terms, disclose the extent to which any loss is not covered if the cause of such loss is traceable to a condition existing prior to the effective date of the policy. The use of the term "pre-existing condition" without an appropriate definition or description shall not be used.

2. When a policy does not cover losses resulting from pre-existing conditions, no advertisement of the policy shall state or imply that the applicant's physical condition or medical history will not affect the issuance of the policy or payment of a claim thereunder. This rule prohibits the use of the phrase "no medical examination required" and phrases of similar import, but does not prohibit explaining "automatic issue". If an insurer requires a medical examination for a specified policy, the advertisement shall disclose that a medical examination is required.

3. When an advertisement contains an application form to be completed by the applicant and returned by mail for a direct response insurance product, such application form shall contain a question or statement which reflects the pre-existing condition provisions of the policy immediately preceding the blank space for the applicant's signature. For example, such an application form shall contain a question (or statement) substantially as follows:

Do you understand that this policy will not pay benefits during the first ____ Year(s) after the issue date for a disease or physical condition which you now have or have had in the past?-- YES

Section 7. Necessity for Disclosing Policy Provisions Relating To Renewability, Cancellability and Termination. When an advertisement refers to either a dollar amount or a period of time for which any benefit is payable, or the cost of the policy, or specific policy benefit, or the loss for which such benefit is payable, it shall disclose the provisions relating to renewability, cancellability and termination and any modification of benefits, losses covered or premiums because of age or for other reasons, in a manner which shall not minimize or render obscure the qualifying conditions.

Section 8. Testimonials or Endorsements by Third Parties.

A. Testimonials used in advertisements must be genuine, represent the current opinion of the author, be applicable to the policy advertised and be accurately reproduced. The insurer, in using a testimonial, makes as its own all of the statements contained therein, and the advertisement, including such statement, is subject to all the provisions of these rules.

B. If the person making a testimonial, an endorsement or an appraisal has a financial interest in the insurer or a related entity as a stockholder, director, officer, employee, or otherwise, such fact shall be disclosed in the advertisement. If a person is compensated for making a testimonial, endorsement or appraisal, such fact shall be disclosed in the advertisement by language substantially as follows: "Paid Endorsement". This rule does not require disclosure of union "scale" wages required by union rules if the payment is actually for such "scale" for TV or radio performances. The payment of substantial amounts, directly or indirectly, for "travel and entertainment" for filming or recording of TV or radio advertisements remove the filming or recording from the category of an unsolicited testimonial and require disclosure of such compensation.

C. An advertisement shall not state or imply that an insurer or a policy has been approved or endorsed by any individual group of individuals, society, association or other organizations, unless such is the fact, and unless any proprietary relationship between an organization and the insurer is disclosed. If the entity making the endorsement or testimonial has been formed by the insurer or is owned or controlled by the insurer or the person or persons who own or control the insurer, such fact shall be disclosed in the advertisement. If the entity making such endorsement or testimonial has any direct or indirect financial interest in the insurance by way of commission; retrospective plan rate or commission adjustment; profit sharing allowance; policy dividend; or any similar refund, return or participation of whatsoever nature, such fact shall be fully disclosed.

D. When a testimonial refers to benefits received under a policy, the specific claim data, including claim number, date of loss, and other pertinent information shall be retained by the insurer for inspection for a period of four years or until the filing of the next regular report on examination of the insurer, whichever is the longer period of time.

Section 9. Use of Statistics.

A. An advertisement relating to the dollar amounts of claims paid, the number of persons insured, or similar statistical information relating to any insurer or policy shall not use irrelevant facts, and shall not be used unless it accurately reflects all of the relevant facts. Such an advertisement shall not imply that such statistics are derived from the policy advertised unless such is the fact, and when applicable to other policies or plans shall specifically so state.

B. An advertisement shall not represent or imply that claim settlements by the insurer are "liberal" or "generous", or use words of similar import, or that claim settlements are or will be beyond the actual terms of the contract. An unusual amount paid for a unique claim for the policy advertised is misleading and shall not be used.

C. The source of any statistics used in an advertisement shall be identified in such advertisement.

Section 10. Identification of Plan or Number of Policies.

A. When a choice of the amount of benefits is referred to, an advertisement shall disclose that the amount of benefits provided depends upon the plan selected and that the premium will vary with the amount of the benefits selected.

B. When an advertisement refers to various benefits which may be contained in two or more policies, other than group master policies, the advertisement shall disclose that such benefits are provided only through a combination of such policies.

Section 11. Disparaging Comparisons and Statements. An advertisement shall not directly or indirectly make unfair or incomplete comparisons of policies or benefits or comparisons of non-comparable policies of other insurers, and shall not disparage competitors, their policies, services or business methods, and shall not disparage or unfairly minimize competing methods of marketing insurance.

Section 12. Jurisdictional Licensing and Status of Insurer.

A. An advertisement which is intended to be seen or heard beyond the limits of the jurisdiction in which the insurer is licensed shall not imply licensing beyond those limits.

B. An advertisement shall not create the impression directly or indirectly that the insurer, its financial condition or status, or the payment of its claims, or the merits, desirability, or advisability of its policy forms or kinds or plans of insurance are approved, endorsed, or accredited by any division or agency of this State or the United States Government.

Section 13. Identity of Insurer.

A. The name of the actual insurer and the form number or numbers advertised shall be identified and made clear in all of its advertisements. An advertisement shall not use a trade name, any insurance group designation, name of the parent company of the insurer, name of a particular division of the insurer, service mark, slogan, symbol or other device which without disclosing the name of the actual insurer would have the capacity and tendency to mislead or deceive as to the true identity of the insurer.

B. No advertisement shall use any combination of words, symbols, or physical materials which by their content, phraseology, shape, color or other characteristics are so similar to combination of words, symbols or physical materials used by agencies of the Federal government or of this State, or otherwise appear to be of such a nature that it tends to confuse or mislead prospective insureds into believing that the solicitation is in some manner connected with an agency of the municipal, state or federal government.

Section 14. Group or Quasi-Group Implications. An advertisement of a particular policy shall not state or imply that prospective insureds become group or quasi-group members covered under a group policy and as such enjoy special rates or underwriting privileges, unless such is the fact.

Section 15. Introductory, Initial or Special Offers.

A.1. An advertisement of an individual policy shall not directly or by implication represent that a contract or combination of contracts is an introductory, initial or special offer, or that applicants will receive substantial advantages not available at a later date, or that the offer is available only to a specified group of individuals, unless such is the fact. An advertisement shall not contain phrases describing an enrollment period as "special", "limited", or similar words or phrases when the insurer uses such enrollment periods as the usual method of advertising accident and sickness insurance.

2. An enrollment period during which a particular insurance product may be purchased on an individual basis shall not be offered within this State unless there has been a lapse of not less than six months between the close of the immediately preceding enrollment period for the same product and the opening of the new enrollment period. The advertisement shall indicate the date by which the applicant must mail the application, which shall be not less than ten days and not more than forty days from the date that such enrollment period is advertised for the first time. This rule applies to all advertising media, i.e., mail, newspapers, radio, television, magazines and periodicals, by any one insurer. It is inapplicable to solicitations of employees or members of a particular group or association which otherwise would be eligible under specific provisions of the Insurance Code for group, blanket or franchise insurance. The phrase "any one insurer" includes all the affiliated companies of a group of insurance companies under common management or control.

3. This rule prohibits any statement or implication to the effect that only a specific number of policies will be sold, or that a time is fixed for the discontinuance of the sale of the particular policy advertised because of special advantages available in the policy, unless such is the fact.

4. The phrase "a particular insurance product" in Paragraph (2) of this section means an insurance policy which provides substantially different benefits than those contained in any other policy. Different terms of renewability; an increase or decrease in the dollar amounts of benefits; an increase or decrease in any elimination period or waiting period from those available during an enrollment period for another policy shall not be sufficient to constitute the product being offered as a different product eligible for concurrent or overlapping enrollment periods.

B. An advertisement shall not offer a policy which utilizes a reduced initial premium rate in a manner which overemphasizes the availability and the amount of the initial reduced premium. When an insurer charges an initial premium that differs in amount from the amount of the renewal premium payable on the same mode, the advertisement shall not display the amount of the reduced initial premium either more frequently or more prominently than the renewal premium, and both the initial reduced premium and the renewal premium must be stated in juxtaposition in each portion of the advertisement where the initial reduced premium appears.

C. Special awards, such as a "safe drivers' award" shall not be used in connection with advertisements of accident or accident and sickness insurance.

Section 16. Statements About an Insurer. An advertisement shall not contain statements which are untrue in fact, or by implication misleading, with respect to the assets, corporate structure, financial standing, age or relative position of the insurer in the insurance business. An advertisement shall not contain a recommendation by any commercial rating system unless it clearly indicates the purpose of the recommendation and the limitations of the scope and extent of the recommendation.

Section 17. Enforcement Procedures.

A. Advertising File. Each insurer shall maintain at its home or principal office a complete file containing every printed, published or prepared advertisement of its individual policies and typical printed, published or prepared advertisements of its blanket, franchise and group policies hereafter disseminated in this or any other state, whether or not licensed in such other state, with a notation attached to each such advertisement which shall indicate the manner and extent of distribution and the form number of any policy advertised. Such file shall be subject to regular and periodical inspection by this Department. All such advertisements shall be maintained in said file for a period of either four years or until the filing of the next regular report on examination of the insurer, whichever is the longer period of time.

B. Certificate of Compliance. Each insurer required to file an Annual Statement which is now or which hereafter becomes subject to the provisions of these rules must file with this Department, with its Annual Statement, a Certificate of Compliance executed by an authorized officer of the insurer wherein it is stated that, to the best of his knowledge, information and belief, the advertisements which were disseminated by the insurer during the preceding statement year complied or were made to comply in all respects with the provisions of these rules and the Insurance Laws of this State as implemented and interpreted by these rules.

Section 18. Severability Provision. If any Section or portion of a Section of these rules or the applicability thereof to any person or circumstance is held invalid by a court, the remainder of the rules, or the applicability of such provision to other persons or circumstances, shall not be affected thereby.

Section 19. Filing for Prior Review. The Commissioner may, in his discretion, require the filing with this Department, for review prior to use, of all direct response material, or all or any of such material issued by certain insurers upon his finding that such insurers have been named in an excessive number of complaints made to the Department, or of all such material relating to a particular line or type of insurance, such as, but not limited to, accident policies, cancer policies, or Medicare Supplement policies. All such advertising material required to be filed by any such insurer or insurers shall be so filed with the Department not less than 30 days prior to the date the insurer desires to use the advertisement unless the Commissioner consents to a shorter time for the filing of such material prior to its use.

Section 20. Subsection A of Section 17 of this Regulation shall take effect immediately, and all other provisions of the Regulation shall take effect July 1, 1974.

69-18. Title Insurance.

Section 1. Purposes. The within Regulation is predicated upon recognition of the fact that, as presently constituted, the title insurance business is characterized by reverse competition, which is to say that competition among title insurers regularly takes the form of insurers vying with each other for the favor of mortgage lenders, attorneys, or others who control, or who may control, the placement of the title insurance with title insurers. Such reverse competition tends to increase title insurance premiums or to prevent lowering of such premiums in order that greater commissions or other allowances may be paid to agents or mortgage lenders for such business as a means of obtaining the placement of business controlled by the agent with the insurer paying the highest commissions. In addition, other inducements are made to mortgage lenders, attorneys, or others who control, or who may control, such business by title insurers as a means of securing the placement of such business with the insurers offering the inducements. The reciprocal of such inducements is that mortgage lenders or others have resorted to practices which constitute or border upon coercion, intimidation, or boycott in order to obtain or increase their participation in the title insurance premiums. Manifestly, reverse competition works to the detriment, rather than in favor of, the consumer who is called upon to pay the title insurance premiums, and this reverse competition operates to thwart normal economic forces which would otherwise tend to lower title insurance premiums.

(a) Inasmuch as acts of coercion, boycott, or intimidation are not saved by the McCarran-Ferguson Act from application of the Federal antitrust and Federal Trade Commission laws, even though such acts relate to the business of insurance, this State is in danger of being ousted of its regulatory authority over title insurance if prevalent practices and abuses are suffered by this State to continue.

(b) Title insurers which abstain from the payment of excessive commissions or the offering of such inducements either because they deem the same to be morally wrong, or because they fear Federal prosecution, cannot operate or expand their operations within this State because of the competitive disadvantage which they suffer through refusing to offer such inducements.

Section 2. Unlawful Rebates and Inducements. No title insurer or other person controlled by it shall pay or offer to pay, either directly or indirectly, any referral commission or fee or any part of the premiums for title insurance or any other consideration whatsoever as an inducement for or as compensation on any title insurance business in connection with which a title insurance policy is issued to any of the following:

(a) Any owner or prospective owner or lessee or prospective lessee of real property or any interest therein.

(b) Any obligee or prospective obligee of an obligation secured or to be secured either in whole or part by real property or any interest therein.

(c) Any person who is acting as or who is in the business of acting as agent, representative, attorney, or employee of any of the persons described in (a) or (b); provided, however, that this subdivision shall not be deemed to preclude payment by a title insurer of normal commission to an agent, representative or attorney of any of the persons described in the said subdivisions (a) or (b), but who is not the employee of any such person, except that if any such person entitled to receive and receiving commission hereunder stands in a fiduciary relation to any of the persons described in subdivisions (a) or (b), he must disclose in writing to such person the rate or amount of the commission to be received; further provided, that the commission received from the insurer may not be shared either directly or indirectly with any other person except a duly licensed agent who is not in the employment or under the control of any of the persons described in subdivisions (a) or (b) hereof.

(1) The rule is based, in part, upon recognition of the fact that the agent, representative or attorney of the purchaser or seller paying for the title insurance policy stands in a fiduciary or quasi-fiduciary relationship with such purchaser or seller and that the receipt by him of money or other economic benefit beyond that which such agent, representative or attorney is entitled to as normal commission for services rendered would be inconsistent with his fiduciary relationship in selecting the title insurance for the purchaser or seller. Given a fair disclosure of the rate or amount of such commission to such purchaser or seller, the payment of reasonable agents' commissions is not inappropriate provided there is no division of such commissions in a manner which constitutes a rebate or a benefit to the lender. It is reasonable to assume that when there is no possibility of an unearned and undisclosed material personal benefit or rebate to the said agent, representative or attorney of the purchaser or seller, he would either make no recommendation as to the title insurer or would recommend a listing of title insurers known to be competitive in terms of price or service in order to enhance his own business reputation and competitive position.

(i) In connection with any such disclosure in writing pursuant to paragraph (1) of this subsection, the agent, representative or attorney shall inform the purchaser or seller in writing of his right to choose the title insurer notwithstanding the recommendation of any such agent, representative, or attorney. Such writing shall also fairly and fully inform the purchaser of the limitations of the mortgagee-type title insurance policy as regards protection of the owner's separate interest in the property and shall inform him as respects the availability and cost of an owner's-type policy from the title insurer. If the particular title insurer represented by the said agent, representative or attorney does not provide owner's-type coverage, the written disclosure must state that many insurers provide both mortgagee-type policies and owner's-type policies.

(2) Any of the following activities by a title insurer will be deemed to constitute an unlawful rebate or inducement, but the listing of such activities is not to be construed as exhaustive of such unlawful activities and it may not be inferred that an omission from the listing constitutes a justification for engaging in a particular practice which has not been specifically listed. The term "such person" as used herein refers to any person described in subdivisions (a), (b), or (c) of Section 2:

(A) Charging either more or less than the scheduled rate for a policy of title insurance.

(B) Furnishing a preliminary title report, printed copies of covenants, conditions, and restrictions, or plats, maps, and like materials without charge to any such person. Any charge made for any such reports or materials must have a reasonable relation to the cost of production and the same shall be the same to all persons.

(C) Furnishing reports containing publicly recorded information, appraisals, estimates of income production potential, information kits or similar packages containing information about one or more parcels of real property helpful to any such person without making a charge that is commensurate with the actual cost of the work performed and the material furnished.

(D) Delaying the issuance of a policy beyond the close of escrow and crediting or deferring the charge therefor in order to qualify a later transaction for a lower rate.

(E) Providing, or offering to provide, either directly or indirectly a "compensating balance" or deposit in a lending institution either for the express or implied purpose of influencing the extension of credit by such lending institution to any such person or for the express or implied purpose of influencing the placement or channeling of title insurance business by such lending institution.

(F) Paying for, or offering to pay for, the fees or charges of an outside professional, such as an attorney, engineer, appraiser, or surveyor, whose services are required or useful by any such person to structure or complete a particular transaction.

(G) Paying for, or offering to pay for, the salary or any part of the salary of an employee of any such person, or paying for, or offering to pay for, the salary or any part of the salary of a relative of any such person.

(H) Paying, or offering to pay, any fee to any such person for making an inspection or appraisal of property whether such fee bears a reasonable relationship to the services performed or not.

(I) Furnishing or offering to furnish, paying for or offering to pay for, furniture, office supplies, telephones, equipment or automobiles to any such person, or paying for, or offering to pay for, any portion of the cost of renting, leasing, operating or maintaining any of the aforementioned items.

(J) Paying for, furnishing, or waiving, or offering to pay for, furnish, or waive, all or any part of the rent for space occupied by any such person.

(K) Renting, or offering to rent, space from any such person, regardless of the purpose, at a rent which is excessive when compared with rents for comparable space in the geographic area, or paying, or offering to pay, rent based in whole or in part on the volume of title insurance business generated by any such person.

(L) Paying for, or offering to pay for, entertainment, vacations, business trips, convention expenses, travel expenses, membership fees, registration fees, lodging or meals on behalf of any such person, directly or indirectly or supplying letters of credit, credit cards or any such benefits to any such person for any purpose whatsoever.

(M) Paying for or furnishing, or offering to pay for or furnish, any brochures, billboards, or advertisements appearing in newspapers, on the radio, or on television, or other advertising or promotional material published or distributed by or on behalf of any such person whether used in connection with the promotion, sale, or encumbrance of real property or not.

(N) Paying for or furnishing, or offering to pay for or furnish, any business form to any such person other than a form regularly used in the conduct of the title insurer's business and furnished solely for its convenience in the conduct of its normal business.

(O) Buying from or selling to, or exchanging with, or offering to buy from, sell to, or exchange with any such person, shares of stock in the title insurer or any business concern controlling or controlled by or affiliated with the title insurer except for purchases or exchanges made through a general public offering.

Section 3. Rates, Rating Plans, and Rating Organizations. On or before the one hundred twentieth day following the effective date of this Regulation, title insurers shall file, or cause to be filed in their behalf by a duly constituted and qualified rating organization, their rates for title insurance policies together with the rating plans and rating systems used by them in the making of rates; and such rating plans and rating systems shall be so structured as to produce rates which are adequate, not excessive and not unfairly discriminatory. Such rates whether made and filed by the insurer independently or in its behalf by a lawfully constituted rating organization shall be adequate, not excessive, and not unfairly discriminatory and shall be approved by the Chief Insurance Commissioner prior to their use.

69-19. Improper Claims Practices [Reserved for future use]

69-20. Campus Life Insurance.

Complaints and abuses related to life insurance sold on or around the campuses of our universities and colleges have grown to intolerable proportions bringing into disrepute not only such campus life insurance but all life insurance. In particular, practices surrounding the making and acceptance of notes signed by the student-insured for the first-year premium with payment of such notes to be made out of the cash values of the policy at some future time has given rise to constant misunderstandings and has constituted a vehicle for fraudulent, deceptive, or misleading practices. In particular, failure to disclose adequately and clearly that lapse of the policy for any reason renders the note due and payable immediately has constituted a constant source of friction and complaint.

Accordingly, we propose to issue the following regulations relating to the sale and marketing of campus life insurance:

1. Purposes. The purpose of these regulations is to prohibit false, deceptive or misleading practices in respect to the marketing of campus life insurance and so to regulate the sale or attempted sale of campus life insurance as to prevent such practices in connection with the sale or attempted sale of such insurance.

2. Definition. "Campus Life Insurance" is hereby defined to mean any program of life insurance, including supplemental benefits, such as waiver of premium, accidental death, or like benefits, sold to university or college students under such circumstances that the premium, or any part thereof, for the first or any following year of coverage is deferred or is made through the execution of a promissory note or similar instrument.

3. Applicability of Premium Service Company Act or other laws. Nothing herein shall be deemed to supersede the Premium Service Company Act, nor any other law otherwise applicable, nor to suggest that the Premium Service Company Act, or other law, is not applicable to the financing of premiums for campus life insurance.

4. Registration and Approval. (1) No insurer conducting or proposing to conduct a campus life insurance program, and no agent, broker, or other person conducting or proposing to conduct such a program shall do so, or continue to do so, unless such insurer, agent, broker, or other person shall first file with the Chief Insurance Commissioner (Commissioner) notice of intent to conduct such program and receive from the Commissioner his approval. Such approval shall not be granted by the Commissioner unless the insurer, agent, broker, or other person has filed with him a copy of every promissory note or other security instrument, brochure, pamphlet, circular, flyer, leaflet or other advertising or sales piece together with a copy of every planned or prepared oral presentation to be made in connection with the sale or attempted sale of campus life insurance; nor shall the Commissioner grant such approval unless he finds all of such material to be complete, fair, unambiguous, and free from any tendency to mislead, deceive or confuse the student to whom it is to be addressed.

(2) No such insurer, agent, broker, or other person conducting or proposing to conduct a campus life insurance program on or about the campus of any university or college shall do so or continue to do so unless it or he shall first register with the president, dean, or other authorized official of such university or college and provide such official with evidence of the Commissioner's approval. Nothing herein shall be deemed to limit or impair the right of any authorized official of a university or college to impose other or further limitations in respect to sales on campus or to prohibit such sales in accordance with the rules of the particular institution.

(3) The Commissioner may, after due notice and public hearing, withdraw any such approval previously granted by him for any reason which would have justified his refusal to grant approval had the reason then existed or been known; and upon withdrawal of such prior approval, the Commissioner shall so advise the president, dean or other authorized official of every such university or college.

5. Limitations Upon Financing Agreements. No insurer and no agent, broker, or other person representing any insurer shall accept, transmit, or otherwise assist in the preparation or transmission of any promissory note or other instrument, agreement or document in connection with campus life insurance under which any holder, including the payee, may claim to be a holder in due course without notice, and no such holder acquiring any such note, instrument, agreement, or document in connection with the sale and purchase of campus life insurance shall be deemed a holder in due course without notice. Every assignment of such a note, instrument, agreement or document shall be with recourse against the assignor and shall make express reference to the fact that it is subject to this Regulation. It is the purpose of this Regulation to render any such note, instrument, document, or agreement accepted and transmitted in connection with the sale and purchase of campus life insurance subject to all defenses existing between the original parties and to imbue every such note, instrument, agreement or document taken in connection with, or related to, an application for life insurance completed or accepted in South Carolina covering a life then situate in South Carolina subject to the provisions of this Regulation and the public policy of this State.

6. Prohibited Practices. (1) No insurer, agent, broker, or other person representing any insurer shall sell, attempt to sell, or participate in any way in the sale or attempted sale of any policy or contract of campus life insurance unless it or he has first complied with all of the requirements of this Regulation.

(2) No insurer, agent, broker, or other person representing any insurer shall sell, attempt to sell or participate in any way in the sale or attempted sale of any policy or contract of campus life insurance unless the student making application for such insurance is at the time of such application actually a student who in the absence of course failure or withdrawal would be expected to complete his degree within 18 months, or a graduate student at the university or college. The confirmation of two or more occurrences by the Commissioner that the applicant for campus life insurance was not, at the time, such a student or graduate student shall constitute sufficient grounds for withdrawing any approval granted under Section 4 of this Regulation in respect to the insurer, agent, broker, or other person involved in such two or more occurrences.

(3) No insurer, agent, broker, or other person representing any insurer shall accept any application for campus life insurance unless the applicant for such insurance shall himself pay in cash or its equivalent not less than 10 percent, or $20, whichever is the lesser, of the first year's premium for such insurance; and no such insurer, agent, broker, or other person shall lend, extend credit for, or in any other manner whatsoever defer or forgive such payment. Any violation of this section shall be sufficient grounds for the withdrawal of any approval previously granted the affected insurer, agent, broker, or other person under Section 4 of this Regulation in addition to any other penalty which such insurer, agent, broker or other person may incur as a result of such violation. Any approval withdrawn by the Commissioner after due notice and hearing on account of the violation of this Section shall not be restored for a period of at least twenty-four months from the effective date of such withdrawal.

(4) No insurer, agent, broker, or other person transacting a campus life insurance business shall finally consummate any such contract or policy of campus life insurance unless it or he shall first deliver or cause to be delivered a disclosure statement, in form approved by the Commissioner, fully, fairly and unambiguously stating the terms of the policy or contract, including, but not limited to, any exclusions of, or limitations upon coverage, and fully, fairly, and unambiguously disclosing the terms, including, but not limited to, the effective rate of interest, in connection with any promissory note, instrument, agreement or other document related to the premium for such policy or contract. Without limitation upon the generality, such disclosure statement shall include a brief description of every supplemental benefit, if any, contained in the policy, the amount of premium for each such supplemental benefit and the time period over which such premium is to be paid in respect to any such benefit. The disclosure statement shall require the signature of the applicant and shall make provision for the absolute right of rejection of the policy or contract of campus life insurance within 10 days of the applicant's receipt of such disclosure statement and repayment to him of any amount paid by him in respect to any premium for such insurance. (a) If a disclosure statement is delivered in person by any agent, broker, or other person representing the insurer, no confirmation of the transaction through signature by the applicant shall be valid unless an interval of not less than three days shall separate the delivery of the disclosure statement and its redelivery to such agent, broker, or other person. Any violation of this provision shall be sufficient grounds for the withdrawal of any approval granted pursuant to Section 4 of this Regulation in respect to such agent, broker, or other person found by the Commissioner, upon due notice and hearing, to have participated in such violation.

7. Records and Inspections. Every insurer, agent, broker, or other person representing an insurer transacting a campus life insurance business shall maintain and keep for a period of not less than three years, records of such business including all sales and advertising material, copies of applications, promissory notes, instruments, agreements or other documents, disclosure statements and like relevant material in respect to each transaction and all such records shall be open to the Commissioner or his representative at all reasonable times. Such records need not be duplicatively and separately maintained by an insurer and its representative but it is the responsibility of the insurer to inform the Commissioner where such records are being maintained. In the event such records are maintained without this State, the Commissioner may upon his own or the complaint of another person inspect and examine such records in person or through his designated representative and the reasonable expenses of such inspection and examination shall be borne by the insurer or other person maintaining such records and such expenses shall be collected by the Commissioner for the general revenues of the State. Failure or refusal by any person having custody of such records to open them, upon demand, to inspection by the Commissioner or his designated representative shall be sufficient grounds for the withdrawal of any approval previously granted by the Commissioner pursuant to Section 4 of this Regulation upon the Commissioner's finding, after due notice and hearing, of such failure or refusal.

8. Effective Date. This Regulation shall become effective 120 days after its filing with the Secretary of State, except that its provisions shall become effective immediately and be controlling in respect to any forms, advertising or other material filed with the Commissioner for approval.

69-21. Repealed by State Register Volume 32, Issue 2, eff February 22, 2008.

69-21.1 to 69-21.3. Repealed by State Register Volume 12, Issue No. 5, eff. May 27, 1988.

69-21.1 to 69-21.3. Repealed by State Register Volume 12, Issue No. 5, eff. May 27, 1988.

69-22. Health Maintenance Organizations.

Section I. Definitions.

Unless the context otherwise requires, the following definitions shall apply as the terms are used in both this regulation and Chapter 33 of Title 38 of the 1976 South Carolina Code, as amended (the Health Maintenance Organization Act of 1987):

A. "Basic health care services" means emergency care, inpatient hospital and physician care, and outpatient medical services. "Basic health care services" does not include dental services, mental health services, or services for alcohol or drug abuse, although a health maintenance organization may at its option elect to provide these services in its coverage.

B. "Contractholder" means a person or entity consisting of employees or eligible persons which has entered into a group contract with a health maintenance organization for the provision of specified health care services to its eligible employees or eligible persons.

C. "Commissioner" means the Chief Insurance Commissioner.

D. "Copayment" or "deductible" means the amount specified in the evidence of coverage that the enrollee shall pay directly to the provider for covered health care services, which may be stated in either specific dollar amounts or as a percentage of the provider's usual or customary charge.

E. "Department" means the Department of Health and Environmental Control.

F. "Eligible dependent" means any member of a subscriber's family who meets the eligibility requirements set forth in Subsection D of Section III of this regulation.

G. "Emergency care services" means:

1. Within the service area: covered health care services rendered by affiliated or non-affiliated providers under unforeseen conditions that require immediate medical attention. Emergency care services within the service area shall include covered health care services from non-affiliated providers only when delay in receiving care from the health maintenance organization could reasonably be expected to cause severe jeopardy to the enrollee's condition.

2. Outside the service area: medically necessary health care services that are immediately required because of unforeseen illness or injury while the enrollee is outside the geographical limits of the health maintenance organization's service area.

H. "Enrollee" or "member" means an individual who is enrolled in a health maintenance organization.

I. "Evidence of coverage" means any certificate, agreement or contract issued to an enrollee setting out the coverage to which he is entitled.

J. "Group contract" means a contract for health care services which by its terms limits eligibility to members of a specified group.

K. "Health care services" means any services included in the furnishing to any individual of medical or dental care or hospitalization, or incident to the furnishing of such care or hospitalization, as well as the furnishing to any person of any and all other services for the purposes of preventing, alleviating, curing, or healing human illness, injury or physical disability.

L. "Health maintenance organization" means any person that undertakes to provide or arrange for basic health care services to enrollees for a fixed prepaid premium.

M. "Health professional" means any professional engaged in the delivery of health care services who is licensed, and practicing within the scope of such a license, where such licensing is required by state law.

N. "Hospital" means a duly licensed institution which provides general and specialized inpatient medical care. The term "hospital" shall not include a convalescent facility, nursing home, or any institution or part thereof which is used principally as a convalescent facility, rest facility, nursing facility, or facility for the aged.

O. "Individual contract" or "nongroup contract" means a contract for health care services issued to and covering an individual or a family.

P. "Medical necessity" or "medically necessary" means appropriate and necessary services as determined by any provider affiliated with the health maintenance organization which are rendered to an enrollee for any condition requiring, according to generally accepted principles of good medical practice, the diagnosis or direct care and treatment of an illness or injury and are not provided only as a convenience.

Q. "Out-of-area services" means the health care services that a health maintenance organization covers when its enrollees are outside of the service area.

R. "Person" means any natural or artificial person including but not limited to individuals, partnerships, associations, trusts, or corporations.

S. "Physician" means a duly licensed doctor of medicine or osteopathy practicing within the scope of such a license.

T. "Primary care physician" means a physician who supervises, coordinates, and provides initial and basic care to members; initiates their referral for specialist care and maintains continuity of patient care.

U. "Provider" means any physician, dentist, hospital, pharmacist, or other person properly licensed, where required, to furnish health care services.

V. "Service area" means the geographical area as approved by the Commissioner within which the health maintenance organization provides or arranges for health care services that are available and accessible to enrollees.

W. "Skilled nursing facility" means a facility that is operated pursuant to law and primarily engaged in providing, in addition to room and board accommodations, skilled nursing care under the supervision of a duly licensed physician.

X. "Subscriber" means the individual whose employment or other status, except for family dependency, is the basis for eligibility for enrollment in the health maintenance organization and who is in fact enrolled in the health maintenance organization.

Y. "Supplemental health care services" means any health care services other than basic health care services.

Section II. License Requirements.

A. Health Maintenance Organizations.

1. No person may undertake to provide or arrange for any basic health care service for a fixed prepaid premium in this State without first obtaining a certificate of authority from the Commissioner to transact business as a health maintenance organization.

2. No health maintenance organization chartered, organized and existing under the laws of the State will be licensed by the Commissioner unless it meets all requirements of law and this regulation and it maintains its records, accounts, home office and principal place of business in this State.

3. No health maintenance organization chartered, organized and existing under the laws of another state will be licensed by the Commissioner unless it meets all requirements of law and this regulation and the Commissioner has determined that:

a. the applicant is registered as a foreign corporation to do business in this State;

b. the applicant is subject to regulation of its financial condition in its state of domicile, including regular financial examination not less frequently than once every three years; and

c. the applicant complies with such conditions as the Commissioner may prescribe with respect to the maintenance of books, records, accounts and facilities in this State.

B. Agents.

1. An "agent" means a person who is appointed or employed by a health maintenance organization and who engages in solicitation of membership in the health maintenance organization. The term "agent" does not include an employee of an employer, union or other contractholder to whom a master subscriber contract has been issued whose duties include enrolling members in the health maintenance organization on behalf of the employer, union or other contractholder.

2. No person may act as an agent on behalf of a health maintenance organization in this State unless he has been licensed by the Commissioner as an accident and health insurance agent for that health maintenance organization. No health maintenance organization may accept members solicited by, or otherwise transact business through, persons who are not licensed by the Commissioner as accident and health insurance agents for the health maintenance organization. Salaried employees of the health maintenance organization are exempt from licensing requirements.

Section III. Requirements for Contracts and Evidence of Coverage.

A. Each subscriber shall be entitled to a contract or evidence of coverage as approved by the Commissioner. A contract or evidence of coverage shall be delivered or issued for delivery to a subscriber or to the contractholder for delivery to the subscriber within a reasonable time after enrollment, but not more than thirty (30) days from the later of the effective date of coverage or the date on which the health maintenance organization is notified of enrollment.

B. Health Maintenance Organization Information.

1. The contract and evidence of coverage shall contain the name, address and telephone number of the health maintenance organization, and where and in what manner information is available as to how services may be obtained.

2. A toll-free or local phone number within the service area for calls, without charge to members, to the health maintenance organization's administrative office shall be made available and disseminated to enrollees to adequately provide telephone access for member services, problems or questions.

C. Entire Contract.

1. The contract shall contain a statement that the contract, all applications and any amendments thereto shall constitute the entire agreement between the parties.

2. No portion of the charter, bylaws or other document of the health maintenance organization shall be part of such a contract unless set forth in full in the contract or attached thereto.

D. Term of Coverage.

1. The contract shall contain the time and date or occurrence upon which coverage takes effect, including any applicable waiting periods, or describe how the time and date or occurrence upon which coverage takes effect is determined.

2. The contract shall contain the time and date or occurrence upon which coverage will terminate.

E. Eligibility Requirements.

1. The contract and evidence of coverage shall contain eligibility requirements indicating the conditions that must be met to enroll as a subscriber or eligible dependent, the limiting age for subscribers and eligible dependents including the effects of Medicare eligibility, and a clear statement regarding coverage of newborn children.

2. The definition of an eligible dependent shall as a minimum include:

a. the spouse of the subscriber;

b. an unmarried dependent child of the subscriber who has not reached age 19;

c. an unmarried dependent child of the subscriber age 19 or over, who is both incapable of self support because of mental retardation, mental illness or physical incapacity which began before the child reached age 19, and chiefly dependent upon the subscriber for support and maintenance; or

d. an unmarried dependent child of the subscriber age 19 through 22 who is attending a recognized college or university, trade or secondary school on a full-time basis.

3. The definition of a dependent child shall as a minimum include children who are:

a. related to the subscriber as either a natural child, a legally adopted child, a stepchild, a foster child, or a child under legal guardianship; or

b. any other child residing in the subscriber's household and who qualifies as a dependent of the subscriber or the subscriber's spouse under the United States Internal Revenue Code and federal tax regulations.

4. All contracts and evidences of coverage shall provide coverage for a newly-born child of the subscriber from the moment of birth. Medically diagnosed congenital defects and birth abnormalities shall be treated the same as any other illness or injury for which coverage is provided. The contract and evidence of coverage may require that notification of birth of a newborn child and payment of any required premium must be furnished to the health maintenance organization within thirty-one (31) days after the date of birth in order for such coverage to have become effective and to continue beyond such thirty-one (31) day period.

F. Benefits and Services within the Service Area. The contract and evidence of coverage shall contain a specific description of benefits and services available within the service area.

G. Emergency Care Services. The contract and evidence of coverage shall contain a specific description of benefits and services available for emergencies twenty-four (24) hours a day, seven (7) days a week, including disclosure of any restrictions on emergency care services. No contract or evidence of coverage shall limit the coverage of emergency services within the service area to affiliated providers only.

H. Out-of-Area Benefits and Services. The contract and evidence of coverage shall contain a specific description of benefits and services available out of the service area.

I. Copayments, Deductibles, Limitations and Exclusions. The contract and evidence of coverage shall contain a description of any copayments, deductibles, limitations or exclusions on the services, kind of services, benefits, or kind of benefits to be provided, including any copayments, deductibles, limitations or exclusions due to preexisting conditions, waiting periods or an enrollee's refusal of treatment.

J. Cancellation or Termination. The contract and evidence of coverage shall contain the conditions upon which cancellation or termination may be effected by the health maintenance organization or the subscriber.

K. Renewal. The contract and evidence of coverage shall contain the conditions for, and any restrictions upon, the subscriber's right to renewal.

L. Reinstatement. The contract and evidence of coverage shall contain the conditions for, and any restrictions upon, the subscriber's right to reinstatement.

M. Grace Period.

1. The contract and evidence of coverage shall provide for a grace period of not less than thirty-one (31) days for the payment of any premium except the first, during which coverage shall remain in effect if payment is made during the grace period.

2. During the grace period, the health maintenance organization shall remain liable for providing the services and benefits contracted for, the contractholder shall remain liable for the payment of the premium for the time coverage was in effect during the grace period, and the subscriber shall remain liable for any copayments or deductibles owed.

N. Claims. The contract and evidence of coverage shall contain procedures for filing claims that include:

1. any required notice to the health maintenance organization;

2. if any claim forms are required, how, when and where to obtain and submit them;

3. any requirements for filing proper proofs of loss;

4. any time limit on payment of claims;

5. notice of any requirement for resolving disputed claims including arbitration; and

6. a statement of restrictions, if any, on assignment of sums payable to the enrollee by the health maintenance organization.

O. Complaint System and Arbitration. The contract and evidence of coverage shall contain a description of the health maintenance organization's method for resolving enrollee complaints, incorporating procedures to be followed by the enrollee in the event any dispute arises under the contract, including any requirements for arbitration.

P. Conversion of Coverage.

1. The contract and evidence of coverage shall contain a conversion provision which provides that each enrollee has the right to convert coverage to an individual health maintenance organization contract or to a policy of health insurance issued by a licensed insurer on a form previously approved by the Chief Insurance Commissioner in the following circumstances:

a. upon termination of eligibility for coverage under a group or individual contract; or

b. upon termination of the group contract.

2. To obtain the conversion contract, an enrollee shall submit a written application and the applicable premium payment within the time period and in the manner prescribed by Section 38-71-770. The enrollee shall be entitled to the same right of continuation of coverage as provided therein.

3. A conversion contract shall not be required to be made available if:

a. the enrollee's termination of coverage occurred for any of the reasons listed in Subparagraphs 1.a. (1), (2), or (3) of Subsection B of Section IV of this regulation;

b. the enrollee is covered by or is eligible for benefits under Medicare, Title XVIII of the United States Social Security Act;

c. the enrollee is covered by or is eligible for similar hospital, medical or surgical benefits under state or federal law;

d. the enrollee is covered by or is eligible for similar hospital, medical or surgical benefits under any arrangement of coverage for individuals in a group;

e. the enrollee is covered for similar benefits by an individual policy or contract; or

f. the enrollee has not been continuously covered during the three-month period immediately preceding that person's termination of coverage.

4. As a minimum, the conversion contract shall provide basic health care services if conversion is to a health maintenance organization contract or shall provide benefits meeting the minimum requirements of Section 38-71-770, if conversion is to a policy of health insurance.

5. Coverage shall be provided without requiring evidence of insurability and shall not impose any preexisting condition limitations or exclusions as described in Subsection A of Section IV other than those remaining unexpired under the contract from which conversion is exercised. Any probationary or waiting period set forth in the conversion contract shall be deemed to commence on the effective date of the enrollee's coverage under the prior contract.

Q. Group Contract Discontinuance and Replacement. The provision of S. C. Code Section 38-71-760 governing discontinuance and replacement of coverage are applicable to group health maintenance organization contracts.

R. Coordination of Benefits.

1. The contract and evidence of coverage may contain a provision for coordination of benefits that shall be consistent with that applicable to other health insurers and health maintenance organizations in South Carolina.

2. Any provisions or rules for coordination of benefits established by a health maintenance organization shall not relieve a health maintenance organization of its duty to provide or arrange for a covered health care service to any enrollee because the enrollee is entitled to coverage under any other contract, policy or plan, including coverage provided under government programs.

S. Right to Examine Contract.

1. An individual contract shall contain a provision stating that a person who has entered into an individual contract with a health maintenance organization shall be permitted to return the contract within ten (10) days of receiving it and to receive a refund of the premium paid if the person is not satisfied with the contract for any reason.

2. If the contract is returned to the health maintenance organization or to the agent through whom it was purchased, it is considered void from the beginning.

3. However, if services are rendered or claims are paid for such person by the health maintenance organization during the ten-day examination period, the person shall not be permitted to return the contract and receive a refund of the premium paid.

T. Subrogation/Injuries Caused by Third Parties. Any provisions concerning subrogation for injuries caused by third parties shall conform to the requirements of S. C. Code Section 38-71-190 (1976), as amended.

U. Conformity with State Law. Any contract and evidence of coverage that contains any provision not in conformity with the Health Maintenance Organization Act of 1987 shall not be rendered invalid but shall be construed and applied as if it were in full compliance with this regulation and the Health Maintenance Organization Act of 1987.

Section IV. Prohibited Practices.

A. Preexisting Conditions.

1. A health maintenance organization contract may contain a provision limiting coverage for preexisting conditions.

2. The preexisting conditions must be covered no later than twelve months without medical care, treatment, or supplies ending after the effective date of the coverage or twelve months after the effective date of the coverage, whichever occurs first.

3. Preexisting conditions are defined as "those conditions for which medical advice or treatment was received or recommended no more than twelve months prior to the effective date of a person's coverage".

B. Termination of Coverage.

1. Cancellation.

a. No health maintenance organization shall cancel coverage of services provided an enrollee under an individual or group health maintenance organization contract except for one or more of the following reasons:

(1) failure to pay the amounts due under the contract;

(2) fraud or material misrepresentation in enrollment or in the use of services or facilities;

(3) material violation of the terms of the contract;

(4) failure to meet the eligibility requirements under a group contract, provided that a conversion option is offered.

b. However, coverage shall not be cancelled, terminated or nonrenewed on the basis of the status of the enrollee's health nor on the fact that the enrollee has exercised his rights under the health maintenance organization's complaint system by registering a complaint against the health maintenance organization.

3. Nonrenewal.

a. Group Contracts. No health maintenance organization shall nonrenew a group health maintenance organization contract except on the anniversary date of the contract.

b. Individual Contracts. No health maintenance organization shall nonrenew coverage of services provided an enrollee under an individual health maintenance organization contract unless it has received prior approval from the Commissioner, upon such terms as he deems just, to nonrenew all individual health maintenance organization contracts in this State.

4. No health maintenance organization shall cancel, terminate or nonrenew an enrollee's coverage for services provided under a health maintenance organization contract without giving the enrollee or contractholder written notice of termination which shall be effective at least thirty-one (31) days from the date of mailing or, if not mailed, from the date of delivery and which shall include the reason for termination. For termination due to nonpayment of premium, the grace period as required in Subsection M of Section III of this regulation shall apply. No written notice of termination shall be required to be given for termination due to nonpayment of premium.

5. No health maintenance organization that provides in the contract and evidence of coverage, that coverage of a dependent child shall terminate upon attainment of the limiting age for dependent children shall terminate the coverage of such child if the child is and continues to be both:

a. incapable of self support because of mental retardation, mental illness or physical incapacity, and

b. chiefly dependent upon the subscriber for support and maintenance.

6. Proof of such incapacity and dependency shall be furnished to the health maintenance organization by the subscriber within thirty-one (31) days of the child's attainment of the limiting age and subsequently as reasonably required by the health maintenance organization, but not more frequently than annually after the two-year period following the child's attainment of the limiting age.

C. Unfair Discrimination.

1. No health maintenance organization shall unfairly discriminate against any enrollee or applicant for enrollment on the basis of the age, sex, race, color, creed, national origin, ancestry, religion, marital status or lawful occupation of an enrollee, or because of the frequency of utilization of services by an enrollee.

2. However, nothing shall prohibit a health maintenance organization from setting rates or establishing a schedule of charges in accordance with relevant actuarial data.

3. No health maintenance organization shall expel or refuse to re-enroll any enrollee nor refuse to enroll individual members of a group on the basis of the health status or health care needs of the individual enrollee or member.

Section V. Services.

A. Access to Care.

1. A health maintenance organization shall establish and maintain adequate arrangements to provide the health services contracted for by its subscribers including:

a. reasonable proximity to the business or personal residences of the enrollees so as not to result in unreasonable barriers to accessibility;

b. reasonable hours of operation and after-hours services;

c. emergency care services available and accessible within the service area twenty-four (24) hours a day, seven (7) days a week; and

d. sufficient providers and personnel, including health professionals, administrators and support staff, to assure that all services contracted for will be accessible to enrollees on an appropriate basis without delays detrimental to the health of enrollees.

2. A health maintenance organization utilizing primary care physicians shall make primary care physician services available to each enrollee and shall provide accessibility to medically necessary specialists through staffing, contracting or referral. Such a health maintenance organization shall provide for continuity of care for enrollees referred to specialists.

3. A health maintenance organization shall have written procedures governing the availability of frequently utilized services contracted for by enrollees, including at least the following:

a. well-patient examinations and immunizations;

b. emergency telephone consultation on a twenty-four (24) hours per day, seven (7) days per week basis;

c. treatment of emergencies;

d. treatment of minor illness; and

e. treatment of chronic illnesses.

B. Basic Health Care Services. A health maintenance organization shall provide, or arrange for the provision of, as a minimum, basic health care services which shall include the following:

1. Emergency care services, as defined in Section 1 of this regulation.

2. Inpatient hospital services, meaning medically necessary hospital services including, but not limited to, room and board; general nursing care; special diets when medically necessary; use of operating room and related facilities; use of intensive care units and services; x-ray, laboratory and other diagnostic tests; drugs, medications, biologicals, anesthesia and oxygen services; special nursing when medically necessary; physical therapy, radiation therapy and inhalation therapy; administration of whole blood and blood plasma; and short-term rehabilitation services.

3. Inpatient physician care services, meaning medically necessary health care services performed, prescribed, or supervised by physicians or other health professionals including diagnostic, therapeutic, medical, surgical, preventive, referral and consultative health care services.

4. Outpatient medical services, meaning preventive and medically necessary health care services provided in a physician's office, a non-hospital-based health care facility, or at a hospital. Outpatient medical services shall include but are not limited to diagnostic services; treatment services; laboratory services; x-ray services; referral services; and physical therapy, radiation therapy and inhalation therapy. Outpatient services shall also include preventive health services which shall include, at least a broad range of voluntary family planning counseling services, well-child care from birth, periodic health evaluations for adults, screening to determine the need for vision and hearing correction, and pediatric and adult immunizations in accordance with accepted medical practice.

C. Out-of-Area Services and Benefits.

1. Copayments or deductibles for out-of-area services shall be shown in the contract and evidence of coverage.

2. When an enrollee is traveling or temporarily out of a health maintenance organization's service area, a health maintenance organization shall provide benefits for reimbursement for emergency care services subject to the following condition:

a. the condition could not reasonably have been foreseen;

b. the enrollee could not reasonably arrange to return to the service area to receive treatment from the health maintenance organization's provider;

c. the travel must be for some purpose other than the receipt of medical treatments; and

d. the health maintenance organization is notified by telephone within twenty-four (24) hours of the commencement of such care unless it is shown that it was not reasonably possible to communicate with the health maintenance organization in such time limits.

3. Services received by an enrollee outside of the health maintenance organization's service area will be covered only so long as it is unreasonable to return the enrollee to the service area.

D. Supplemental Health Care Services.

1. In addition to the basic health care services required to be provided in Subsection B of this Section, a health maintenance organization may offer to its enrollee any supplemental health care services it chooses to provide.

2. Limitations as to time and cost may vary from those applicable to basic health care services.

Section VI. Other Requirements.

A. Description of Providers.

1. A health maintenance organization shall provide its subscribers with a list of the names and locations of all of its providers no later than the time of enrollment or the time the contract and evidence of coverage are issued and upon request thereafter. If a provider is no longer affiliated with a health maintenance organization, the health maintenance organization shall provide notice of such change to its affected subscribers and to the Department in a timely manner. Subject to the approval of the Commissioner, a health maintenance organization may provide its subscribers with a list of providers or provider groups for a segment of the service area. However, a list of all providers shall be made available to subscribers upon request.

2. Any list of providers shall contain a notice regarding the availability of the listed providers. Such notice shall be in not less than twelve point type and be placed in a prominent place on the list of providers. The notice shall contain the following language: Enrolling in [name of HMO] does not guarantee services by a particular provider on this list. If you wish to be sure of receiving care from specific providers listed, you should contact the health maintenance organization to be sure that the particular provider is accepting additional patients for [name of HMO]. Even if a particular provider is participating in [name of HMO] on the date you enroll, there is no guarantee that the provider will continue to participate during the entire term of your enrollment in [name of HMO].

B. Description of the Service Area.

1. A health maintenance organization shall provide its subscribers with a description of its service area no later than the time of enrollment or the time the contract and evidence of coverage is issued and upon request thereafter.

2. If the description of the service area is changed, the health maintenance organization shall provide at such time a new description of the service area to its affected subscribers and to the Department.

C. Copayments and Deductibles.

1. A health maintenance organization may require copayments or deductibles of enrollees as a condition for the receipt of specific health care services.

2. Copayments or deductibles for basic health care services shall be shown in the contract and evidence of coverage.

D. Complaint System.

1. A complaint system shall be established and maintained by a health maintenance organization to provide reasonable procedures for the prompt and effective resolution of written complaints.

2. The complaint system shall provide for written acknowledgement of complaints and complaints to be resolved or to have a final determination of the complaint by the health maintenance organization complaint system within a reasonable period of time, but not more than ninety (90) days from the date the complaint is registered. This period may be extended in the event of a delay in obtaining the documents or records necessary for the resolution of the complaint, or by the mutual written agreement of the health maintenance organization and the enrollee.

3. Pending the resolution of a written complaint filed by a subscriber or enrollee, coverage may not be terminated for any reason which is the subject of the written complaint, except where the health maintenance organization has, in good faith, made a reasonable effort to resolve the written complaint through its complaint system and coverage is being terminated as provided for in Subsection B of Section IV.

4. If enrollee complaints and grievances may be resolved through a specified arbitration agreement, the enrollee shall be advised in writing of his rights and duties under the agreement at the time the complaint is registered. Any such agreement must be accompanied by a statement setting forth in writing the terms and conditions of binding arbitration. Any health maintenance organization that makes such binding arbitration a condition of enrollment must fully disclose this requirement to its enrollees in the contract and evidence of coverage.

Section VII. Severability.

If any provision of this regulation or the application thereof to any person or circumstance is for any reason held to be invalid, the remainder of the regulation and the application of such provision to other persons or circumstances shall not be affected thereby.

Section VIII. Effective Date.

A. This regulation shall become effective ninety (90) days after final publication in the State Register.

B. All health maintenance organization contracts issued or renewed after this date must comply with its provisions.

69-23. Agents and Agency Licenses.

1. Licenses required for each agency: Section 38-43-30. Each agency, as defined in Section 38-43-30 of the 1976 Code, as amended, shall file an application for a license on a form provided by the Department. This applies to each corporation, partnership, association, or other business entity in which more than one person has an interest or which operates under a corporate or trade name. The requirement for an agency license does not apply to any agency owned by, and operated under the name of, an individual licensed agent, so long as no other person, firm or entity has any interest in, or affiliation with, the business of the individual agent or his agency.

No such agency shall be licensed under a name which is likely to lead a person of average intelligence to believe that the agency is an insurer, an agency of any government, or a club, fraternity, association or social or military organization, or which is otherwise deceptive or misleading. Foreign corporations, limited partnerships and any other entities required by law to be registered with the Secretary of State must be so registered before a license will be issued.

The agency is required to submit the application to the Insurance Department and to pay the required fee; however, each insurer is required to notify all its agencies of their responsibility to file an agency application and to pay the required fee. Only one agency license is required for each agency regardless of the number of insurers it represents, but all insurers then represented must be identified in the application. At any time that an agency has no stockholder, officer, director, member, employee or associate possessing a current, individual agent's license, the agency license shall be deemed terminated and shall be surrendered for cancellation not more than fifteen (15) days after the last person to hold such a license was terminated with the agency or was no longer so licensed.

2. License required for each Agent: Sections 38-43-10, 38-43-20. Only individual natural persons may be licensed as agents to represent an insurance company. An agent is allowed to hold only one license for a particular company at one time and such license shall encompass all of his duties on behalf of such company according to the following definitions of the TYPE licenses issued:

(a) Local Agent: An agent, sometimes called a Local Agent, is a person who is authorized by an insurer to represent it and to offer to the public insurance policies or contracts and attendant services that are performed incident to such policies or contracts. Every person who acts in the capacity of Agent or Local Agent, including each stockholder, officer, director, member, employee or associate of an Agency, performing any act of an agent as enumerated in Section 38-43-10, must be licensed for the particular kind of insurance business transacted by such person, and for each insurer represented. The holder of a license as Local Agent has authority to also perform the limited duties attributed to the holder of a Special Agent or Travel Accident Baggage license as defined below.

(b) General Agent: A General Agent is a person who, as a representative of an insurer or insurers, is clothed with authority to supervise agents and local agents and to exercise such management authority as is delegated to him by the principal. The financial records and business of a General Agent may, by agreement with the insurer, be transacted in the name of an agency licensed pursuant to Section 38-43-30, but the general agent's authority to supervise agents in behalf of the insurer shall be personal and performed by him pursuant to his license. A General Agent's license grants authority to the holder thereof to perform duties of a Local, Special (or State Agent), or Travel Accident Baggage agent for an insurer for which he is licensed without any other or further license. Every General Agent who transacts the business of insurance in this State shall be licensed as General Agent for each insurer for which he acts as such.

A General Agent may employ one or more Special Agents (or State Agents), as hereinafter defined, and each such Special Agent (or State Agent) must be licensed to represent every insurer represented by his employer unless satisfactory evidence is presented to the Insurance Department that such person performs no service duties for certain insurers and the Department, in writing, waives the license requirement in respect to those insurers.

(c) Special Agent (or State Agent): A Special Agent is a person employed by an insurer or general agent to travel in a designated territory dealing with agents or local agents to supervise and assist them in the proper discharge of their duties as agents. A nonresident may be licensed as a Special Agent. The license issued to a Special Agent grants no authority to the holder thereof to solicit from the public, countersign policies, or receive commissions.

(d) Travel Accident Baggage Agent: A Travel Accident Baggage agent is an agent of a common carrier who sells only transportation ticket policies of accident and health insurance or baggage insurance on personal effects.

3. Nonresident Agents: Sections 38-43-60 and 38-43-70. A nonresident cannot be licensed to do business as an agent in this State unless:

(a) There is a reciprocal agreement between the Chief Insurance Commissioner and the insurance regulatory authority of the nonresident agent's State of residence; and

(b) The nonresident meets the minimum statutory requirements of this State for the issuance of the relevant license including the written examination unless the applicant's State waives the examination requirement for South Carolina residents.

All business produced by the nonresident agent must be written through a licensed resident agent in view of the express provisions of Section 38-43-60. A licensed nonresident agent may solicit business in this State and share in the commissions on such business to the extent permitted by Section 38-43-70; however, in view of the provisions of Section 38-43-60, the insurer is not authorized to write such business unless it is written through one of its licensed, resident agents. In such event, each policy, except a life or accident and health policy, must be personally or mechanically countersigned on behalf of a licensed, resident agent.

4. Annual fees for licenses: Section 38-43-80. Agency, $20; Local Agent, $20; General Agent, $50; Special Agent (or State Agent), $50; Travel Accident Baggage Agent, $10.

5. Licenses issued for kinds of insurance: Section 38-5-30. Licenses for agents may be issued for the following kinds of business:

(a) Unlimited Lines of Authority

(1) Life

(2) Life and Variable Contracts

(3) Accident and Health

(4) Property

(5) Casualty

(6) Surety

(7) Marine (Ocean and Inland Marine)

(8) Title

(b) Limited Lines of Authority

(1) Industrial Fire (Only weekly or monthly premium on dwellings or contents or both)

(2) Credit Insurance (Includes Credit Life, except mortgage redemption contracts; Credit Accident and Health; Credit Property, other than Automobile Physical Damage or insurance covering real property; and Credit Unemployment, a form of casualty insurance). A credit insurance license only authorizes the agent to transact the lines of credit insurance for which his sponsoring company is qualified. All credit insurance agent licenses issued and outstanding on the effective date of this section are hereby extended to include all credit lines for which the sponsoring company is qualified.

(3) Crop Insurance

(4) Automobile Physical Damage

(5) Automobile Liability

(6) Mortgage Guaranty

(7) Travel Accident and Baggage

Provided, however, that any agent holding a license for the following unlimited lines of authority is also authorized to transact the limited lines of business as indicated below:

(i) A Life agent is authorized to transact Credit insurance;

(ii) An Accident and Health agent is authorized to transact Credit insurance;

(iii) A Property Agent is authorized to transact Crop, Credit insurance, Industrial Fire, and Automobile Physical Damage insurance;

(iv) A Casualty Agent is authorized to transact Automobile Liability Insurance (Automobile Basic Economic Loss, Automobile Medical Payments, Automobile Death Disability and similar Automobile Accident insurance), Mortgage Guaranty insurance, and Credit insurance.

6. Personal Qualifications Required of Applicants for License: Every person required by law to be licensed as an agent must possess the following minimum qualifications:

(a) Age--The applicant must be at least eighteen years of age.

(b) Sponsorship--The applicant must be sponsored by an insurer licensed in the State for the kinds of insurance for which the applicant seeks to be licensed. Every such sponsoring insurer is accountable for the accuracy and veracity of the certification of the applicant's reputation and trustworthiness as submitted by it in behalf of a new agent on the Agent Appointment form distributed by the Insurance Department for that purpose. Information obtained from Commercial reporting sources concerning the reputation of an applicant must be retained at least three (3) years by the sponsoring insurer and shall be made available to the Insurance Department upon request made by the Department.

(c) Occupational Status--Every applicant shall certify whether insurance sales and service is to be a full-time vocation, and, if not, shall provide in writing full particulars in respect to his expected other vocational or professional activities.

(d) Education or Training--S. C. Code Section 38-43-105 provides that no applicant may be licensed as a local or general agent unless, within two (2) years immediately preceding the date of licensing, the applicant has:

(1) successfully completed not less than forty (40) classroom hours of instruction, or its correspondence equivalent, approved by the Chief Insurance Commissioner; or

(2) had at least one (1) year of insurance underwriting or marketing experience as an employee of an agent or insurer, or their managers or general agents;

in the lines of insurance for which the applicant proposes to be licensed. Certification that the applicant has met one or the other of these tests must be made by an official of the organization sponsoring the course of instruction, or the employer, as the case may be. Such certification must be given on forms approved by the Commissioner.

Code Section 38-43-105 provides for approval of courses of instruction developed by insurers, recognized agent associations or insurer trade associations, and independent programs of instruction. The Commissioner will approve course materials covering two (2) areas of study. One area will cover life insurance, health insurance and annuities. The other area will cover property, casualty, surety and other lines of insurance. Courses of instruction filed for approval must cover all of the subject matter contained in topic outlines published from time to time by the Commissioner for each area. All course materials submitted must be accompanied by request for approval forms prescribed by the Commissioner.

Section 38-43-105 further authorizes the Commissioner to approve correspondence courses for such equivalency of classroom hours as he may assign. No correspondence course will be approved unless it is designed and structured to be the equivalent of forty (40) hours of classroom instruction. In addition, no correspondence course will be approved unless provision is made for supervision and monitoring of the student's progress and successful completion of the course. Correspondence course submissions must include details of how and by whom the course will be supervised, as well as copies of all workbooks, examinations and other materials which will be used to monitor progress and completion of the course. All supervision and monitoring of correspondence courses, including the grading of written work, must be performed by a qualified educational director or other qualified official of the organization sponsoring the course.

Once a course has been approved, credit will only be given for the course as it has been approved by the Commissioner. Any amendments to previously-approved course materials must be submitted to the Commissioner for approval prior to use. If the Commissioner finds that any sponsor is using unapproved amendments to previously-approved course materials, or has otherwise failed to comply with the law or this regulation, approval of the entire course will be withdrawn, and thereafter no credit for completion of the course will be given.

Every sponsor of an approved course must maintain a record on each student completing the course for a minimum of one (1) year following the student's completion of the course. Such records shall include, but not necessarily be limited to, attendance records for classroom hours of instruction and written work used in a correspondence course to monitor course completion. Such records must be made available for inspection by the Commissioner or his representatives on demand.

Persons applying for a license limited only to the following types of insurance or a combination thereof shall not be required to meet the education or training requirements of this section: (1) credit insurance; (2) crop; (3) automobile physical damage; (4) mortgage guaranty and/or mortgage redemption; (5) title; (6) travel accident and baggage; (7) federal crop insurance program.

(e) Citizenship--The applicant shall be a citizen of the United States or a properly registered alien residing in the United States.

(f) Successful Completion of Examination--Code Section 38-43-110 provides that the Chief Insurance Commissioner shall require an applicant for licensing as an agent to stand a written examination. So as to assure himself that applicants for an adjuster's license under Code Section 38-47-10 have sufficient knowledge of the insurance business, the Commissioner will also require those applicants to stand a written examination. The following classes of applicants shall not be required to stand a written examination prior to being issued a license:

(1) Applicant for travel accident baggage or special agents (State agents) license or for credit insurance license;

(2) Applicant holding a designation as Chartered Property and Casualty Underwriter (CPCU) or Chartered Life Underwriter (CLU) relevant to the kinds of insurance for which he seeks authority;

(3) Applicant holding a current, valid license to represent one or more insurers for the kinds of insurance for which he seeks authority as agent.

If an applicant not currently licensed was previously licensed in respect to the kinds of insurance for which he seeks a license within the immediately preceding twenty-four (24) months, and such license was not suspended or revoked, the Commissioner may waive the requirement of a written examination.

The written examination may be administered by the Commissioner, or the applicant may be required to stand a written examination administered by some other competent testing authority. In the event that the Commissioner enters into an arrangement with such other testing authority, all applicants shall stand the examination administered by that entity; provided, however, that the scope, content and subject matter of the examination administered by such entity shall at all times be subject to approval and/or modification by the Commissioner. It shall be the responsibility of the applicant to comply with all registration, fee and test procedure requirements of the designated testing authority, and all such requirements of the designated testing authority shall be subject to approval by the Commissioner. Any examination fees which may be charged by such testing authority shall be in addition to, and not in lieu of, the annual license fees required by Code Sections 38-43-80 and 38-47-30.

Any person may stand the written examination without first being appointed or sponsored by an insurance company; provided, however, that no license shall be issued until the applicant has been appointed and vouched for by a sponsoring company and has otherwise met all the requirements of law to become licensed as an agent or adjuster. Applicants scoring at least seventy (70) points on the examination will be issued a certificate to signify successful completion of the examination, which certificate shall be valid for ninety (90) days only. Upon submission of such certificate to the Department of Insurance, and upon the applicant's being appointed by an insurance company and otherwise meeting all requirements to become licensed, the appropriate license will be issued.

Applicants scoring less than seventy (70) points shall be deemed to have failed the examination. An applicant may stand the examination six (6) times during any twelve month period, upon complying with all applicable registration, fee and test procedure requirements. No temporary license issued pursuant to Section 38-43-100 shall be extended beyond its stated expiration date because of the failure of its holder to pass the written examination during the ninety (90) day term of such temporary license.

(g) Absence of criminal record--Under Code Section 38-43-50, an insurance company is required to investigate the "character and record" of a person whom the company wishes to appoint as its agent, and to vouch for the trustworthiness and qualifications of such person to act as an insurance agent. In determining whether an individual is eligible to be licensed as an insurance agent, the Commissioner must, among other things, consider whether the individual has been convicted of, or pleaded guilty or nolo contendere to, a crime involving moral turpitude. See, Code Section 38-43-130.

To satisfy the Commissioner that a person not holding a valid agent's license at the time of application is trustworthy and has not been convicted of a crime involving moral turpitude, the insurer appointing such applicant must, as part of its investigation into the applicant's character and record, obtain from the South Carolina State Law Enforcement Division (SLED) a copy of the applicant's criminal history record. Such copy of the applicant's criminal history record must be filed by the insurer with the Commissioner along with the applicant's application for a license on Form SCID 3507. Because the applicant's criminal history record must be obtained by the insurer as part of its statutorily-required background investigation, the costs of procuring such record shall be borne by the insurer and shall not be charged against or otherwise passed along to the applicant.

Similarly, the Commissioner must be satisfied that a person applying for an adjuster's license is of good moral character, has not violated any of the insurance laws of the State, and is a fit and proper person for a license. See, Code Section 38-47-10. So as to permit the Commissioner to make such a determination, every applicant for an adjuster's license must obtain a copy of his criminal history record from SLED and file it with Commissioner along with his application for a license.

The South Carolina State Law Enforcement Division may be contacted at the following address:

South Carolina State Law

Enforcement Division

4400 Broad River Road

Post Office Box 21398

Columbia, South Carolina 29221.

(h) Special requirements for variable contracts licensing--In order to be licensed to sell either variable life insurance or variable annuities, an applicant must meet the following requirements:

(1) The applicant must be appointed by an insurer for Life and Variable Contracts on such forms as may be prescribed or approved by the Chief Insurance Commissioner;

(2) The applicant must furnish evidence that he has passed a securities examination administered by the National Association of Securities Dealers (NASD), the Securities and Exchange Commission (SEC) or the Securities Commissioner of South Carolina;

(3) The applicant must furnish evidence that he has passed a variable contracts examination. The variable contracts examination may be waived if the applicant furnishes evidence that he has passed the NASD Series 6 or Series 7 examination, or any other examination which in the opinion of the Chief Insurance Commissioner sufficiently tests the applicant's knowledge of variable contracts."

7. Temporary Licenses: Temporary licenses shall be issued only pursuant to Section 38-43-100, subject to the following conditions:

(a) Need. The sponsoring insurer and the applicant for a temporary license must, in writing, demonstrate the need for issuance of a temporary license.

(b) License Period. A temporary license is valid only for a maximum period of ninety days. No person shall be eligible to receive a temporary license for the same kind of insurance for which he immediately previously possessed a temporary license, either for the same insurer or another insurer, unless he establishes that non-issuance of a permanent license during the time that he held the first temporary license was the result of circumstances beyond his control.

(c) When privilege of insurers to obtain temporary licenses for Agents to be withdrawn: The discretionary authority of the Commissioner to issue temporary licenses will not be exercised in respect to any insurer found to be abusing this provision of this Regulation as a means to defeat the obvious purpose and intent of Section 38-43-100 of the Code.

8. Duty to notify of address change. Every agent licensed by the Commissioner shall notify the Commissioner of any change in either his business or residence address within ten (10) days after such change has been made.

69-24. Workmen's Compensation--Dividends to Policyholders.

Section 1. Background and Purpose. It has come to the attention of the South Carolina Insurance Commission that some Workmen's Compensation insurers and agents may be using unfairly discriminatory and other misleading practices in connection with policyholder dividend plans. In order to aid the South Carolina Insurance Commission in its efforts to prevent such practices and enforce the insurance laws of this state pertaining to such unlawful practices, the following regulation is deemed necessary.

Section 2. Rules for Filing of Dividend Plans. Each insurer which intends to issue Workmen's Compensation policies on a participating basis in South Carolina shall file with the Chief Insurance Commissioner of South Carolina any dividend plan or plans already implemented or intended to be implemented by such insurer including any amendments thereto. Each such insurer shall also attach to every workmen's compensation policy an endorsement thereto reading as follows:

The insured shall participate in the earnings of the company, only in accordance with law and with a plan applicable to this policy which has been filed with the Chief Insurance Commissioner of South Carolina, provided the insured has complied with all the terms of this policy with respect to the payment of premium.

Neither dividends nor any factor in their calculation may be guaranteed. By purchasing this policy, the insured obtains no contractual right to a dividend. Dividends are declared in the sole discretion of the governing body of the insurer, in accordance with law. Any representations to the contrary are false.

In lieu of an endorsement, the same or substantially similar wording may be incorporated as condition 18 of the standard Workmen's Compensation policy.

Section 3. Compliance with Insurance Laws and Regulations. Any dividend plan or plans filed pursuant to this regulation may provide for a reasonable classification of risks for purposes of determining dividends, but may not provide for rebates of premium or unfair discrimination in favor of individuals between insureds of the same class and hazard, as described in Section 38-55-50. Specifically, any dividend plan which provides for higher rates of dividend and lower rates of commission, to risks with other characteristics affecting losses and expenses remaining the same, shall be deemed to be in violation of Section 38-55-50. Any dividend plan which provides that dividends may not be paid under a policy unless the policy is renewed in the same company shall be deemed to be in violation of Section 38-57-130.

This regulation in no way modifies or extends any of the sections dealing with unfair trade practices, Sections 38-57-20, et seq., and violations shall be treated pursuant to the procedures set forth in Sections 38-57-200 through 38-57-320 of the South Carolina Code of Laws of 1976, as amended.

Section 4. Effective Date. This regulation shall take effect 120 days after it is filed with the Secretary of State except that insurers may immediately upon the filing of the Regulation with the Secretary of State submit such dividend plans to the Chief Insurance Commissioner in accordance with this Regulation. (Based on Insurance Commission designation R11-76.)

69-25. Prohibition Against Decreases in Income Benefits From Group Disability Policies Due to Increases in Social Security Benefits.

Section 1. Purpose. The purpose of this Regulation is to prohibit insurers from including an offset of increased social security benefits in group disability income policies. While there may be justification from a rate standpoint for permitting integration of disability income benefits and social security benefits in determining the initial disability income payment to a disabled person, there is no justification for offsetting increases in social security benefits that occur after the disability commences. When Congress increases social security benefits to disabled persons it is to provide the disabled persons with additional income regardless of any other income or insurance benefits payable to such persons. Accordingly, to permit such an offset would nullify the purpose of the social security legislation and would result in an inequity which is contrary to the expectations of the disabled insured.

Section 2. Applicability. This Regulation shall apply to all group disability income policies delivered or issued for delivery in this State after the effective date hereof; and to existing group policies on the renewal anniversary date.

Section 3. Prohibition. No group disability income policy which integrates benefits with social security benefits shall provide that the amount of any disability benefit actually being paid to the disabled person shall be reduced by changes in the level of social security benefits resulting either from changes in the social security law or due to cost of living adjustments which become effective after the first day for which disability benefits become payable.

Section 4. Effective Date. This Regulation shall take effect 120 days after it has been filed with the Secretary of State.

69-26. Repealed by State Register Volume 26, Issue 6, Part 2, eff June 28, 2002.

69-27. Guaranty Act--Applicability.

Section 1. Purpose. The purpose of this regulation is to require that brokers fully and fairly disclose to all policyholders of insurers not licensed to do business in this State that the provisions of the South Carolina Insurance Guaranty Association Act, (Sections 38-31-30 et seq., Code of Laws of South Carolina, 1976, as amended) which protect policyholders in the event of a property and casualty company insolvency, do not apply to an unauthorized, unlicensed carrier.

Section 2. Requirement. Consistent with the above stated purpose, on or after the effective date of this regulation, no broker shall place or renew any insurance with any insurer not licensed in this State unless he shall write or stamp upon the face of each policy or evidence of renewal of an insurer not licensed in this State the words "The S. C. Guaranty Act does not apply to this policy."

Section 3. Alternative. Inasmuch as Section 38-45-110, South Carolina Code of Laws, similarly requires that the words "This Company Not Licensed to do business in this State" to be written or stamped upon the face of each policy of an insurer not licensed in this State, the two requirements may be filled conjunctively. To Wit: In fulfilling the requirements of Section 38-45-110 and this Regulation, the broker may write or stamp upon the face of each policy or evidence of renewal of an insurer not licensed in this State the words "This Company is Not Licensed to do Business in this State, and the S. C. Guaranty Act does Not Apply to This Policy." (Provisions based on Insurance Commission designation R11-76.)

69-30. Solicitation of Life Insurance.

This regulation requires that all persons selling or soliciting the sale of life insurance furnish to prospective purchasers certain basic information to enable these purchasers to accurately determine their insurance needs and to make comparisons of available policies.

A. Authority. This regulation is adopted and promulgated by the South Carolina Insurance Commission pursuant to Sections 38-3-60, 38-63-10, 38-65-10, 38-69-10, and Chapter 57 of the 1976 Code of Laws of South Carolina, as amended.

B. Purpose. The purpose of this regulation is to require that certain information be furnished to prospective purchasers of life insurance in order to prevent misrepresentation of policies by insurers or their agents and to enable the insurance purchaser to accurately determine his insurance needs and to make comparisons of available insurance policies.

C. Scope.

(1) Except as hereafter exempted, this regulation shall apply to any solicitation, negotiation or procurement of life insurance occurring within this state. This regulation shall apply to any issuer of life insurance contracts including fraternal benefit societies.

(2) Unless otherwise specifically included, this regulation shall not apply to:

(a) Annuities.

(b) Credit life insurance.

(c) Group life insurance.

(d) Life insurance policies issued in connection with pension and welfare plans as defined by and which are subject to the federal Employee Retirement Income Security Act of 1974 (ERISA).

(e) Variable life insurance under which the death benefits and cash values vary in accordance with unit values of investments held in a separate account.

D. Definitions. For the purposes of this regulation, the following definitions shall apply:

(1) Buyer's Guide. A Buyer's Guide is a document which contains, and is limited to, the language contained in the Appendix to this regulation or language approved by the Chief Insurance Commissioner.

(2) Cash Dividend. A Cash Dividend is the current illustrated dividend which can be applied toward payment of the gross premium.

(3) Equivalent Level Annual Dividend. The Equivalent Level Annual Dividend is calculated by applying the following steps:

(a) Accumulate the annual cash dividends at five percent interest compounded annually to the end of the tenth and twentieth policy years.

(b) Divide each accumulation of Step (a) by an interest factor that converts it into one equivalent level annual amount that, if paid at the beginning of each year, would accrue to the values in Step (a) over the respective periods stipulated in Step (a). If the period is ten years, the factor is 13.207 and if the period is twenty years, the factor is 34.719.

(c) Divide the results of Step (b) by the number of thousands of the Equivalent Level Death Benefit to arrive at the Equivalent Level Annual Dividend.

(4) Equivalent Level Death Benefit. The Equivalent Level Death Benefit of a policy or term life insurance rider is an amount calculated as follows:

(a) Accumulate the guaranteed amount payable upon death, regardless of the cause of death, at the beginning of each policy year for ten and twenty years at five percent interest compounded annually to the end of the tenth and twentieth policy years respectively.

(b) Divide each accumulation of Step (a) by an interest factor that converts it into one equivalent level annual amount that, if paid at the beginning of each year, would accrue to the value in Step (a) over the respective periods stipulated in Step (a). If the period is ten years, the factor is 13.207 and if the period is twenty years, the factor is 34.719.

(5) Generic Name. Generic Name means a short title which is descriptive of the premium and benefit patterns of a policy or a rider.

(6) Life Insurance Cost Indexes.

(a) Life Insurance Surrender Cost Index. The Life Insurance Surrender Cost Index is calculated by applying the following steps:

1. Determine the guaranteed cash surrender value, if any, available at the end of the tenth and twentieth policy years.

2. For participating policies, add the terminal dividend payable upon surrender, if any, to the accumulation of the annual Cash Dividends at five percent interest compounded annually to the end of the period selected and add this sum to the amount determined in Step 1.

3. Divide the result of Step 2. (Step 1. for guaranteed-cost policies) by an interest factor that converts it into an equivalent level annual amount that, if paid at the beginning of each year, would accrue to the value in Step 2. (Step 1. for guaranteed cost policies) over the respective periods stipulated in Step 1., if the period is ten years, the factor is 13.207 and if the period is twenty years, the factor is 34.719.

4. Determine the equivalent level premium by accumulating each annual premium payable for the basic policy or rider at five percent interest compounded annually to the end of the period stipulated in Step 1. and dividing the result by the respective factors stated in Step 3. (this amount is the annual premium payable for a level premium plan).

5. Subtract the result of Step 3. from Step 4.

6. Divide the result of Step 5. by the number of thousands of the Equivalent Level Death Benefit to arrive at the Life Insurance Surrender Cost Index.

(b) Life Insurance Net Payment Cost Index. The Life Insurance Net Payment Cost Index is calculated in the same manner as the comparable Life Insurance Cost Index except that the cash surrender value and any terminal dividend are set at zero.

(7) Policy Summary. For the purposes of this regulation, Policy Summary means a written statement describing the elements of the policy including but not limited to:

(a) A prominently placed title as follows: STATEMENT OF POLICY COST AND BENEFIT INFORMATION.

(b) The name and address of the insurance agent, or, if no agent is involved, a statement of the procedure to be followed in order to receive responses to inquiries regarding the Policy Summary.

(c) The full name and home office or administrative office address of the company in which the life insurance policy is to be or has been written.

(d) The Generic Name of the basic policy and each rider.

(e) The following amounts, where applicable, for the first five policy years and representative policy years thereafter sufficient to clearly illustrate the premium and benefit patterns, including, but not necessarily limited to, the years for which Life Insurance Cost Indexes are displayed and at least one age from sixty through sixty-five or maturity whichever is earlier:

1. The annual premium for the basic policy.

2. The annual premium for each optional rider.

3. Guaranteed amount payable upon death, at the beginning of the policy year regardless of the cause of death other than suicide, or other specifically enumerated exclusions, which is provided by the basic policy and each optional rider, with benefits provided under the basic policy and each rider shown separately.

4. Total guaranteed cash surrender values at the end of the year with values shown separately for the basic policy and each rider.

5. Cash Dividends payable at the end of the year with values shown separately for the basic policy and each rider. (Dividends need not be displayed beyond the twentieth policy year.)

6. Guaranteed endowment amounts payable under the policy which are not included under guaranteed cash surrender values above.

(f) The effective policy loan annual percentage interest rate, if the policy contains this provision, specifying whether this rate is applied in advance or in arrears. If the policy loan interest rate is variable, the Policy Summary includes the maximum annual percentage rate.

(g) Life Insurance Cost Indexes for ten and twenty years but in no case beyond the premium paying period. Separate indexes are displayed for the basic policy and for each optional term life insurance rider. Such indexes need not be included for optional riders which are limited to benefits such as accidental death benefits, disability waiver of premium, preliminary term life insurance coverage of less than 12 months and guaranteed insurability benefits nor for basic policies or optional riders covering more than one life.

(h) The Equivalent Level Annual Dividend, in the case of participating policies and participating optional term life insurance riders, under the same circumstances and for the same duration at which Life Insurance Cost Indexes are displayed.

(i) A Policy Summary which includes dividends shall also include a statement that dividends are based on the company's current dividend scale and are not guaranteed in addition to a statement in close proximity to the Equivalent Level Annual Dividend as follows: An explanation of the intended use of the Equivalent Level Annual Dividend is included in the Life Insurance Buyer's Guide.

(j) A statement in close proximity to the Life Insurance Cost Indexes as follows: An explanation of the intended use of these indexes is provided in the Life Insurance Buyer's Guide.

(k) The date on which the Policy Summary is prepared.

(l) The Policy Summary must consist of a separate document. All information required to be disclosed must be set out in such a manner as to not minimize or render any portion thereof obscure. Any amounts which remain level for two or more years of the policy may be represented by a single number if it is clearly indicated what amounts are applicable for each policy year. Amounts in item (e) of this section shall be listed in total, not on a per thousand nor per unit basis. If more than one insured is co