S*1181 Session 106 (1985-1986)
S*1181(Rat #0470, Act #0426 of 1986) General Bill, By
Senate Banking and Insurance
Similar(S 982)
A Bill to amend Sections 38-29-10, 38-29-30, 38-29-50, 38-29-60, 38-29-70,
38-29-90, 38-29-110, 38-29-140, 38-29-150, 38-29-170, 38-29-190, 38-29-220,
38-29-240, 38-29-250, 38-29-260, 38-29-270, 38-29-280, 38-29-330, 38-29-340,
and 38-29-350, Code of Laws of South Carolina, 1976, relating to the Insurance
Holding Company Regulatory Act, so as to delete the reference to securities
broker in the definition of "person"; permit a domestic insurer to invest in
the securities of a subsidiary in an amount not to exceed ten percent instead
of five percent of the insurer's assets and to exclude investments in domestic
or foreign insurance subsidiaries in calculating the amount of the investment;
to determine compliance with provisions authorizing investments of a domestic
insurer in a subsidiary by calculating the investment limitations as though
the investment had been made; to provide standards for reporting transactions
within a holding company system; and to provide a penalty for an insurer,
director, or officer of an insurance holding company who violates this
Chapter; to amend the Code by adding Sections 38-29-155 and 38-29-165 so as to
provide that the registration statement of an insurer with an insurance
holding company shall indicate changes in a prior statement and report
dividend distribution to shareholders; and to repeal Section 38-29-100
relating to the requirement that an insurer mail all materials and notices to
the insurer's shareholders.
03/25/86 Senate Introduced, read first time, placed on calendar
without reference SJ-1159
04/03/86 Senate Read second time SJ-1446
04/09/86 Senate Read third time and sent to House SJ-1538
04/10/86 House Introduced and read first time HJ-2310
04/10/86 House Referred to Committee on Labor, Commerce and
Industry HJ-2311
04/23/86 House Committee report: Favorable with amendment Labor,
Commerce and Industry HJ-2525
04/30/86 House Amended HJ-2724
04/30/86 House Read second time HJ-2725
05/01/86 House Read third time HJ-2771
05/01/86 House Returned HJ-2771
05/08/86 Senate Concurred in House amendment and enrolled SJ-2519
05/21/86 Ratified R 470
05/22/86 Signed By Governor
05/22/86 Effective date 10/01/86
05/22/86 Act No. 426
06/09/86 Copies available
(A426, R470, S1181)
AN ACT TO AMEND SECTIONS 38-29-10, 38-29-30, 38-29-50, 38-29-60, 38-29-70,
38-29-90, 38-29-110, 38-29-140, 38-29-150, 38-29-170, 38-29-190, 38-29-220,
38-29-240, 38-29-250, 38-29-260, 38-29-270, 38-29-280, 38-29-330, 38-29-340, AND
38-29-350, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO THE INSURANCE
HOLDING COMPANY REGULATORY ACT, SO AS TO DELETE THE REFERENCE TO SECURITIES
BROKER IN THE DEFINITION OF "PERSON"; PERMIT A DOMESTIC INSURER TO
INVEST IN THE SECURITIES OF A SUBSIDIARY IN AN AMOUNT NOT TO EXCEED TEN PERCENT
INSTEAD OF FIVE PERCENT OF THE INSURER'S ASSETS AND TO EXCLUDE INVESTMENTS IN
DOMESTIC OR FOREIGN INSURANCE SUBSIDIARIES IN CALCULATING THE AMOUNT OF THE
INVESTMENT; TO DETERMINE COMPLIANCE WITH PROVISIONS AUTHORIZING INVESTMENTS OF
A DOMESTIC INSURER IN A SUBSIDIARY BY CALCULATING THE INVESTMENT LIMITATIONS AS
THOUGH THE INVESTMENT HAD BEEN MADE; TO PROVIDE STANDARDS FOR REPORTING
TRANSACTIONS WITHIN A HOLDING COMPANY SYSTEM; AND TO PROVIDE A PENALTY FOR AN
INSURER, DIRECTOR, OR OFFICER OF AN INSURANCE HOLDING COMPANY WHO VIOLATES THIS
CHAPTER; TO AMEND THE 1976 CODE BY ADDING SECTIONS 38-29-155 AND 38-29-165 SO AS
TO PROVIDE THAT THE REGISTRATION STATEMENT OF AN INSURER WITH AN INSURANCE
HOLDING COMPANY SHALL INDICATE CHANGES IN A PRIOR STATEMENT AND REPORT DIVIDEND
DISTRIBUTION TO SHAREHOLDERS; AND TO REPEAL SECTION 38-29-100 RELATING TO THE
REQUIREMENT THAT AN INSURER MAIL ALL MATERIALS AND NOTICES TO THE INSURER'S
SHAREHOLDERS.
Be it enacted by the General Assembly of the State of South Carolina:
Definition
SECTION 1. Item (f) of Section 38-29-10 of the 1976 Code is amended to read:
"(f) A 'person' means an individual, a corporation, a partnership, an
association, a joint stock company, a trust, an unincorporated organization, any
similar entity, or any combination of the foregoing acting in concert."
Insurers may invest in securities of
subsidiaries
SECTION 2. Section 38-29-30 of the 1976 Code is amended to read:
"Section 38-29-30. In addition to investments in common stock, preferred
stock, debt obligations, and other securities permitted under all other sections
of this title, a domestic insurer may also:
(1) invest, in common stock, preferred stock, debt obligations, and other
securities of one or more subsidiaries, amounts which do not exceed the lesser
of ten percent of the insurer's assets or fifty percent of the insurer's surplus
as regards policyholders if, after such investments, the insurer's surplus as
regards policyholders will be reasonable in relation to the insurer's outstanding
liabilities and adequate to its financial needs. In calculating the amount of the
investments, investments in domestic or foreign insurance subsidiaries must be
excluded, and there must be included:
(a) total net monies or other consideration expended and obligations assumed
in the acquisition or formation of a subsidiary, including all organizational
expenses and contributions to capital and surplus of the subsidiary whether or
not represented by the purchase of capital stock or issuance of other securities,
and
(b) all amounts expended in acquiring additional common stock, preferred
stock, debt obligations, and other securities and all contributions to the
capital or surplus of a subsidiary subsequent to its acquisition or formation;
(2) invest any amount in common stock, preferred stock, debt obligations, and
other securities of one or more subsidiaries engaged or organized to engage
exclusively in the ownership and management of assets authorized as investments
for the insurer if each subsidiary agrees to limit its investments in any asset
so that the investments will not cause the amount of the total investment of the
insurer to exceed any of the investment limitations specified in item (1) or in
the investment laws and regulations of this State applicable to the insurer. For
the purpose of this item, 'the total investment of the insurer' includes:
(a) any direct investment by the insurer in an asset, and
(b) the insurer's proportionate share of any investment in an asset by any
subsidiary of the insurer, which must be calculated by multiplying the amount of
the subsidiary's investment by the percentage of the ownership of the subsidiary;
(3) with the approval of the Commissioner, invest any greater amount in common
stock, preferred stock, debt obligations, or other securities of one or more
subsidiaries if after such investment the insurer's surplus as regards
policyholders will be reasonable in relation to the insurer's outstanding
liabilities and adequate to its financial needs."
Further
SECTION 3. Section 38-29-50 of the 1976 Code is amended to read:
"Section 38-29-50. Whether any investment pursuant to Section 38-29-30
meets the applicable requirements thereof is to be determined before the
investment is made by calculating the applicable investment limitations as though
the investment had already been made, taking into account the then outstanding
principal balance on all previous investments in debt obligations, and the value
of all previous investments in equity securities as of the day they were made,
net of any return of capital invested, not including dividends.
If an insurer ceases to control a subsidiary, it must dispose of any investment
therein made pursuant to Section 38-29-30 within three years from the time of the
cessation of control or within such further time as the Commissioner may
prescribe unless, at any time after the investment has been made, the investment
has met the requirements for investment under any other section of this title,
and the insurer has notified the Commissioner thereof."
Person seeking to acquire control of insurer;
statement required
SECTION 4. Section 38-29-60 of the 1976 Code is amended to read:
"Section 38-29-60. No person other than the issuer shall make a tender
offer for or a request or invitation for tenders of, or enter into any agreement
to exchange securities for, seek to acquire or acquire, in the open market or
otherwise, any voting security of a domestic insurer if, after the consumation
thereof, such person would, directly or indirectly, or by conversion or by
exercise of any right to acquire, be in control of such insurer, and no person
shall enter into an agreement to merge with or otherwise to acquire control of
a domestic insurer unless, at the time any such offer, request, or invitation is
made or any such agreement is entered into, or prior to the acquisition of such
securities if no offer or agreement is involved, such person has filed with the
Commissioner a statement containing the information required by this section and
such offer, request, invitation, agreement, or acquisition has been approved by
the Commissioner in the manner hereinafter prescribed.
For purposes of this section, a domestic insurer includes any other person
controlling a domestic insurer unless the person as determined by the
Commissioner is either directly or through its affiliates primarily engaged in
business other than the business of insurance. As used in this section, 'person'
does not include any securities broker holding, in the usual and customary
brokers' function, less than twenty percent of the voting securities of an
insurance company or of any person which controls an insurance company."
Statement of acquisition, amendment
procedure
SECTION 5. The last paragraph of Section 38-29-70 of the 1976 Code is amended
to read:
"If any material change occurs in the facts set forth in the statement
filed with the Commissioner and sent to the insurer pursuant to this section, an
amendment setting forth the change, together with copies of all documents and
other material relevant to the change, must be filed with the Commissioner and
sent to the insurer within two business days after the person learns of the
change. "
Further
SECTION 5A. Subsection (12) of Section 38-29-70 of the 1976 Code is amended to
read:
"(12) Such additional information as the Commissioner may by rule or
regulation prescribe as necessary or appropriate for the protection of
policyholders of the insurer or in the public interest."
Approval of merger by Commissioner
SECTION 6. Section 38-29-90 of the 1976 Code is amended to read:
"Section 38-29-90. (1) The Commissioner shall approve any merger or other
acquisition of control referred to in Section 38-29-60 unless, after a public
hearing thereon, he finds that:
(i) After the change of control, the domestic insurer referred to in Section
38-29-60 is not able to satisfy the requirements for the issuance of a license
to write the line of insurance for which it is presently licensed;
(ii) The effect of the merger or other acquisition of control would
substantially lessen competition in insurance in this State or tend to create a
monopoly therein;
(iii) The financial condition of any acquiring party is such as might
jeopardize the financial stability of the insurer, or prejudice the interest of
its policyholders;
(iv) The plans or proposals which the acquiring party has to liquidate the
insurer, sell its assets or consolidate or merge it with any person, or to make
any other material change in its business or corporate structure or management,
are unfair and unreasonable to policyholders of the insurer and not in the public
interest;
(v) The competence, experience, and integrity of those persons who would
control the operation of the insurer are such that it is not in the interest of
policyholders of the insurer and of the public to permit the merger or other
acquisition of control;
(vi) The acquisition is likely to be hazardous or prejudicial to the
insurance buying public.
(2) The public hearing referred to in subsection (1) must be held within thirty
days after the statement required by Section 38-29-60 is filed, and at least
twenty days' notice must be given by the Commissioner to the person filing the
statement, to the insurer, and to any other persons designated by the
Commissioner. The Commissioner shall make a determination within thirty days
after the conclusion of the hearing. At the hearing, the person filing the
statement, the insurer, any person to whom notice of hearing was sent, and any
other person whose interest is affected thereby has the right to present
evidence, examine and cross-examine witnesses, and offer oral and written
arguments and in connection therewith is entitled to conduct discovery
proceedings in the same manner as is presently allowed in the circuit court of
this State. All discovery proceedings must be concluded not later than three days
prior to the commencement of the public hearing.
(3) The Commissioner may retain at the acquiring person's expense any
attorneys, actuaries, accountants, and other experts not otherwise a part of the
Commissioner's staff as may be reasonably necessary to assist the Commissioner
in reviewing the proposed acquisition of control."
Exception to merger or acquisition
transactions
SECTION 7. Section 38-29-110 of the 1976 Code is amended to read:
"Section 38-29-110. The provisions of Sections 38-29-60 through 38-29-130
do not apply to:
(1) any transaction which is subject to the provisions of Sections 38-15-10
through 38-15-70 dealing with the merger or consolidation of two or more
insurers.
(2) any offer, request, invitation, agreement, or acquisition which the
Commissioner by order exempts therefrom as (a) not having been made or entered
into for the purpose and not having the effect of changing or influencing the
control of a domestic insurer, or (b) as otherwise not comprehended within the
purposes of Sections 38-29-60 through 38-29-130."
Registration of members of insurance
holding company
SECTION 8. Section 38-29-140 of the 1976 Code is amended to read:
"Section 38-29-140. Every insurer authorized to do business in this State
which is a member of an insurance holding company system must register with the
Commissioner, except a foreign insurer subject to registration requirements and
standards adopted by statute or regulation in the jurisdiction of its domicile
which are substantially similar to those contained in this chapter. The insurer
shall file a copy of the registration statement and summary of its registration
statement as required by Sections 38-29-150 and 38-29-155 with the National
Association of Insurance Commissioners.
The insurer shall also file a copy of the summary of its registration as
required by Section 38-29-155 in each state in which that insurer is authorized
to do business if requested by the Commissioner of that state. Any insurer which
is subject to registration under this chapter shall register within fifteen days
after it becomes subject to registration, and annually thereafter by March first
of each year for the previous calendar year, unless the Commissioner for good
cause shown extends the time for registration, and then within the extended time.
The Commissioner may require any authorized insurer which is a member of a
holding company system which is not subject to registration under this section
to furnish a copy of the registration statement or other information filed by the
insurance company with the insurance regulatory authority of its domiciliary
jurisdiction."
Registraton statement
SECTION 9. Section 38-29-150 of the 1976 Code is amended to read:
"Section 38-29-150. Every insurer subject to registration shall file the
registration statement on a form prescribed by the National Association of
Insurance Commissioners, which shall contain the following current information:
(1) the capital structure, general financial condition, ownership, and
management of the insurer and any person controlling the insurer;
(2) the identity and relationship of every member of the insurance holding
company system;
(3) the following agreements in force, and transactions currently outstanding
or which have occurred during the last calendar year between such insurer and its
affiliates:
(i) loans, other investments, or purchases, sales, or exchanges of securities
of the affiliates by the insurer or of the insurer by its affiliates;
(ii) purchases, sales, or exchanges of assets;
(iii) transactions not in the ordinary course of business;
(iv) guarantees or undertakings for the benefit of an affiliate which result
in an actual contingent exposure of the insurer's assets to liability, other than
insurance contracts entered into in the ordinary course of the insurer's
business;
(v) all management agreements, service contracts, and all cost-sharing
arrangements;
(vi) reinsurance agreements;
(vii) dividends and other distributions to shareholders; and
(viii) consolidated tax allocation agreements.
(4) other matters concerning transactions between registered insurers and any
affiliates as may be included in any registration forms adopted or approved by
the Commissioner."
Further
SECTION 10. Chapter 29 of Title 38 of the 1976 Code is amended by adding:
"Section 38-29-155. All registration statements shall contain a summary
outlining all items in the current registration statement representing changes
from the prior registration statement."
Reports of dividends and distributions
to shareholders
SECTION 11. Chapter 29 of Title 38 of the 1976 Code is amended by adding:
"Section 38-29-165. Subject to Section 38-29-260, each registered insurer
shall report to the Commissioner all dividends and other distributions to
shareholders within fifteen business days following the declaration
thereof."
Insurance holding company to report
to insurer
SECTION 12. Section 38-29-170 of the 1976 Code is amended to read:
"Section 38-29-170. Any persons within an insurance holding company
system subject to registration are required to provide complete and accurate
information to an insurer, where such information is reasonably necessary to
enable the insurer to comply with the provisions of this chapter."
Insurers file registration statement
SECTION 13. Section 38-29-190 of the 1976 Code is amended to read:
"Section 38-29-190. The Commissioner may require or allow two or more
affiliated insurers subject to registration hereunder to file a consolidated
registration statement."
Registration statement
SECTION 14. Section 38-29-220 of the 1976 Code is amended to read:
"Section 38-29-220. The failure to file a registration statement or any
summary of such registration statement as required by this chapter within the
time specified for filing constitutes a violation of these sections."
Holding company system transactions,
standards
SECTION 15. Section 38-29-240 of the 1976 Code is amended to read:
"Section 38-29-240. (1) Transactions within a holding company system to
which an insurer subject to registration is a party are subject to the following
standards:
(i) The terms must be fair and reasonable;
(ii) Charges or fees for services performed must be reasonable;
(iii) Expenses incurred and payment received must be allocated to the
insurer in conformity with customary insurance accounting practices consistently
applied;
(iv) The books, accounts, and records of each party to all transactions must
be so maintained as to clearly and accurately disclose the nature and details of
the transactions including such accounting information as is necessary to support
the reasonableness of the charges or fees to the respective parties; and
(v) The insurer's surplus as regards policyholders following any dividends
or distributions to shareholder affiliates must be reasonable in relation to the
insurer's outstanding liabilities and adequate to its financial needs.
(2) The following transactions involving a domestic insurer and any person in
its holding company system must not be entered into unless the insurer has
notified the Commissioner in writing of its intention to enter into the
transaction at least thirty days prior thereto, or such shorter period as the
Commissioner may permit, and the Commissioner has not disapproved it within such
period:
(i) sales, purchases, exchanges, loans, or extensions of credit, guarantees,
or investments if the transactions are equal to or exceed:
(a) with respect to nonlife insurers, the lesser of three percent of the
insurer's admitted assets or twenty-five percent of surplus as regards
policyholders;
(b) with respect to life insurers, three percent of the insurer's admitted
assets, each as of the thirty-first day of December next preceding;
(ii) loans or extensions of credit to any person who is not an affiliate,
where the insurer makes the loans or extensions of credit with the agreement or
understanding that the proceeds of the transactions, in whole or in substantial
part, are to be used to make loans or extensions of credit to, to purchase assets
of, or to make investments in, any affiliate of the insurer making the loans or
extensions of credit provided such transactions are equal to or exceed:
(a) with respect to nonlife insurers, the lesser of three percent of the
insurer's admitted assets or twenty-five percent of surplus as regards
policyholders;
(b) with respect to life insurers, three percent of the insurer's admitted
assets, each as of the thirty-first day of December next preceding;
(iii) reinsurance agreements or modifications thereto in which the
reinsurance premium or a change in the insurer's liabilities equals or exceeds
five percent of the insurer's surplus as regards policyholders, as of the
thirty-first day of December next preceding, including those agreements which may
require as consideration the transfer of assets from an insurer to a
nonaffiliate, if an agreement or understanding exists between the insurer and
nonaffiliate that any portion of such assets will be transferred to one or more
affiliates of the insurer;
(iv) all management agreements, serve contracts, and all cost-sharing
arrangements; and
(v) any material transactions, specified by regulation, which the
Commissioner determines may adversely affect the interests of the insurer's
policyholders.
Nothing herein authorizes or permits any transactions which, in the case of an
insurer, not a member of the same holding company system, would be otherwise
contrary to law.
(3) A domestic insurer may not enter into transactions, which are part of a
plan or series of like transactions with persons within the holding company
system, if the purpose of those separate transactions is to avoid the statutory
threshold amount and thus avoid the review that would occur otherwise. If the
Commissioner determines that such separate transactions were entered into over
any twelve-month period for such purpose, he may exercise his authority under
Section 38-29-330.
(4) The Commissioner, in reviewing transactions pursuant to subsection (2),
shall consider whether the transactions comply with the standards set forth in
subsection (1) and whether they may adversely affect the interests of
policyholders.
(5) The Commissioner must be notified within thirty days of any investment of
the domestic insurer in any one corporation if the total investment in the
corporation by the insurance holding company system exceeds ten percent of the
corporation's voting securities."
Determining adequacy of insurer's surplus
SECTION 16. Section 38-29-250 of the 1976 Code is amended to read:
"Section 38-29-250. For purposes of this chapter, in determining whether
an insurer's surplus as regards policyholders is reasonable in relation to the
insurer's outstanding liabilities and adequate to its financial needs, the
following factors, among others, are considered:
(1) the size of the insurer as measured by its assets, capital and surplus,
reserves, premium writings, insurance in force, and other appropriate criteria;
(2) the extent to which the insurer's business is diversified among the several
lines of insurance;
(3) the number and size of risks insured in each line of business;
(4) the extent of the geographical dispersion of the insurer's insured risks;
(5) the nature and extent of the insurer's reinsurance program;
(6) the quality, diversification, and liquidity of the insurer's investment
portfolio;
(7) the recent past and projected future trend in the size of the insurer's
investment portfolio;
(8) the surplus as regards policyholders maintained by other comparable
insurers;
(9) the adequacy of the insurer's reserves; and
(10) the quality and liquidity of investments in affiliates. The Commissioner
may treat any such investment as a disallowed asset for purposes of determining
the adequacy of surplus as regards policyholders whenever in his judgment such
investment so warrants."
Extraordinary dividends or distributions
SECTION 17. Section 38-29-260 of the 1976 Code is amended to read:
"Section 38-29-260. No domestic insurer shall pay any extraordinary
dividend or make any other extraordinary distribution to its shareholders until
(i) thirty days after the Commissioner has received notice of the declaration
thereof and has not within such period disapproved such payment, or (ii) the
Commissioner has approved the payment within the thirty-day period.
For purposes of this section, an extraordinary dividend or distribution
includes any dividend or distribution of cash or other property, whose fair
market value together with that of other dividends or distributions made within
the preceding twelve months exceeds (i) ten percent of such insurer's surplus as
regards policyholders as of the thirty-first day of December next preceding, or
(ii) the net gain from operations of such insurer, if the insurer is a life
insurer, or the net income, if the insurer is not a life insurer, not including
realized capital gains, for the twelve-month period ending the thirty-first day
of December next preceding, but shall not include pro rata distributions of any
class of the insurer's own securities. In determining whether a dividend or
distribution is extraordinary, an insurer may carry forward income from the
previous two calendar years that has not already been paid out as dividends.
An insurer may declare an extraordinary dividend or distribution which is
conditional upon the Commissioner's approval. The declaration shall confer no
rights upon shareholders until (i) the Commissioner has approved the payment of
the dividend or distribution or (ii) the Commissioner has not disapproved the
payment within the thirty-day period referred to above."
Commissioner may compel production
of records, etc.
SECTION 18. Section 38-29-270 of the 1976 Code is amended to read:
"Section 38-29-270. (a) In addition to all powers prescribed in this
title relating to examinations or investigations, the Commissioner has the power
to order any insurer registered under Sections 38-29-140 through 38-29-230 to
produce records, books, or other information papers in the possession of the
insurer or its affiliates as considered necessary to ascertain the financial
condition or legality of conduct of the insurer. If the insurer fails to comply
with the order, the Commissioner has, in addition to the powers prescribed in
Section 38-29-330, the power to examine the affiliates to obtain the information.
(b) The Commissioner may retain at the registered insurer's expense such
attorneys, actuaries, accountants, and other experts not otherwise a part of the
Commissioner's staff as considered reasonably necessary to assist in the conduct
of the examination under subsection (a). Any persons so retained must be under
the direction and control of the Commissioner and shall act in a purely advisory
capacity.
(c) Each registered insurer producing for examination records, books, and
papers pursuant to subsection (a) is liable for and must pay the expense of the
examination in accordance with Sections 38-5-1220 and 38-5-1240."
Records, etc., confidential
SECTION 19. Section 38-29-280 of the 1976 Code is amended to read:
"Section 38-29-280. All information, documents, and copies thereof
obtained by or disclosed to the Commissioner or any other person in the course
of an examination or investigation made pursuant to Section 38-29-270 and all
information reported pursuant to Sections 38-29-140 through 38-29-230 must be
given confidential treatment and is not subject to subpoena and must not be made
public by the Commissioner, the National Association of Insurance Commissioners,
or any other person, except to insurance departments of other states, without the
prior written consent of the insurer to which it pertains unless the
Commissioner, after giving the insurer and its affiliates who would be affected
thereby, notice and opportunity to be heard, determines that the interests of
policyholders, shareholders, or the public will be served by the publication
thereof, in which event he may publish all or any part thereof in such manner as
he considers appropriate."
Penalties
SECTION 20. Section 38-29-330 of the 1976 Code is amended to read:
"Section 38-29-330. (a) Any insurer failing, without just cause, to file
any registration statement or summary thereof as required in this chapter is
required, after notice and hearing, to pay a penalty of one thousand dollars for
each day's delay, to be recovered by the Commissioner and the penalty so
recovered must be paid into the general fund of the State. The maximum penalty
under this section is thirty thousand dollars. The Commissioner may reduce the
penalty if the insurer demonstrates to the Commissioner that the imposition of
the penalty would constitute a financial hardship to the insurer.
(b) Every director or officer of an insurance holding company system who
knowingly violates, participates in, or assents to, or who knowingly permits any
of the officers or agents of the insurer to engage in transactions or make
investments which have not been properly reported or submitted pursuant to this
chapter or which violate this chapter, shall pay, in their individual capacity,
a civil forfeiture of not more than ten thousand dollars per violation, after
notice and hearing before the Commissioner. In determining the amount of the
civil forfeiture, the Commissioner shall take into account the appropriateness
of the forfeiture with respect to the gravity of the violation, the history of
previous violations, and other matters as justice may require.
(c) Whenever it appears to the Commissioner that any insurer subject to this
chapter or any director, officer, employee, or agent thereof has engaged in any
transaction or entered into a contract which is subject to Sections 38-29-240
through 38-29-260 and which would not have been approved had such approval been
requested, the Commissioner may order the insurer to cease and desist immediately
any further activity under that transaction or contract. After notice and
hearing the Commissioner may also order the insurer to void any such contracts
and restore the status quo if such action is in the best interest of the
policyholders, creditors, or the public.
(d) Whenever it appears to the Commissioner that any insurer or any director,
officer, employee, or agent thereof has committed a wilful violation of this
chapter, the Commissioner may, in addition to other powers prescribed in this
section, cause criminal proceedings to be instituted in the circuit court for the
county in which the principal office of the insurer is located or if such insurer
has no such office in the State, then in the circuit court for Richland County
against such insurer or the responsible director, officer, employee, or agent
thereof. Any insurer which wilfully violates the provisions of this chapter may
be fined not more than fifty thousand dollars. Any individual who wilfully
violates this chapter is guilty of a misdemeanor and shall be fined not to exceed
ten thousand dollars or be imprisoned for a term not to exceed two years, or
both.
(e) Any officer, director, or employee of an insurance holding company system
who wilfully and knowingly subscribes to or makes or causes to be made any false
statements or false reports or false filings with the intent to deceive the
Commissioner in the performance of his duties under this chapter is guilty of a
misdemeanor and, upon conviction, shall be imprisoned for not more than two years
or fined ten thousand dollars or both. Any fines imposed must be paid by the
officer, director, or employee in his individual capacity.
(f) Whenever it appears to the Commissioner that any insurer has committed a
violation of this chapter, or that any person has committed a violation of this
chapter which makes continued operation of the insurer contrary to the interests
of policyholders or the public, the Commissioner may, after giving notice and an
opportunity to be heard, determine to suspend, revoke, or refuse to renew such
insurer's license or authority to do business in this State for such period as
he finds is required for the protection of policyholders or the public. Any such
determination must be accompanied by specific findings of fact and conclusions
of law."
Commissioner may take possession of
property and conduct business of insurer
SECTION 21. Section 38-29-340 of the 1976 Code is amended to read:
"Section 38-29-340. Whenever it appears to the Commissioner that any
person has committed a violation of this chapter which so impairs the financial
condition of a domestic insurer as to threaten insolvency or make the further
transaction of business by it hazardous to its policyholders, creditors, or the
public, then the Commissioner may proceed as provided in Section 38-5-1810, et
seq. to take possession of the property of such domestic insurer and to conduct
the business thereof."
Receiver for liquidation or rehabilitation
of domestic insurer
SECTION 22. Section 38-29-350 of the 1976 Code is amended to read:
"Section 38-29-350. (a) If an order for liquidation or rehabilitation of
a domestic insurer has been entered, the receiver appointed under the order has
a right to recover on behalf of the insurer (i) from any parent corporation or
holding company or person or affiliate who otherwise controlled the insurer, the
amount of distributions (other than distributions of shares of the same class of
stock) paid by the insurer on its capital stock, or (ii) any payment in the form
of a bonus, termination settlement, or extraordinary lump sum salary adjustment
made by the insurer or its subsidiary to a director, officer, or employee, where
the distribution or payment pursuant to (i) or (ii) is made at any time during
the one year preceding the petition for liquidation, conservation, or
rehabilitation, as the case may be, subject to the limitations of subsections
(b), (c), and (d).
(b) No such distribution may be recoverable if the parent or affiliate shows
that when paid the distribution was lawful and reasonable and that the insurer
did not know and could not reasonably have known that the distribution might
adversely affect the ability of the insurer to fulfill its contractual
obligations.
(c) Any person who was a parent corporation or holding company or a person who
otherwise controlled the insurer or affiliate at the time the distributions were
paid is liable up to the amount of distributions or payments under subsection
(a). Any person who otherwise controlled the insurer at the time the
distributions were declared is liable up to the amount of distributions he would
have received if they had been paid immediately. If two or more persons are
liable with respect to the same distributions, they are jointly and severally
liable.
(d) The maximum amount recoverable under this section is the amount needed in
excess of all other available assets of the impaired or insolvent insurer to pay
the contractual obligations of the impaired or insolvent insurer and to reimburse
any guaranty funds.
(e) To the extent that any person liable under subsection (c) is insolvent or
otherwise fails to pay claims due from it pursuant to such subsection, its parent
corporation or holding company or person who otherwise controlled it at the time
the distribution was paid is jointly and severally liable for any resulting
deficiency in the amount recovered from the parent corporation or holding company
or person who otherwise controlled it."
Repeal
SECTION 23. Section 38-29-100 of the 1976 Code is repealed.
Time effective
SECTION 24. This act shall take effect October 1, 1986. |