S 0547 General Bill, By McConnell, Ford, Rankin, Campsen, Cleary, Grooms, 
Elliott and Mescher

Similar(S 412)
 A BILL TO AMEND SECTION 38-75-730 OF THE CODE OF LAWS OF SOUTH CAROLINA,
 RELATING TO RESTRICTIONS ON CANCELLATION OF POLICIES AND RENEWALS, SO AS TO
 PROVIDE THAT AN INSURANCE COMPANY MUST NOT CANCEL AN INSURANCE POLICY, FAIL TO
 RENEW AN INSURANCE POLICY, OR INCREASE AN INSURANCE POLICY DEDUCTIBLE FOR AN
 INSURANCE POLICY THAT HAS BEEN IN EFFECT AND RENEWED FOR AT LEAST THREE YEARS
 EXCEPT UNDER CERTAIN CONDITIONS, THAT AN INSURER MUST NOT CANCEL OR FAIL TO
 RENEW A HOMEOWNER'S POLICY OF INSURANCE SOLELY BECAUSE THE HOMEOWNER DOES NOT
 MAINTAIN ADDITIONAL INSURANCE POLICIES WITH THE INSURER, AND THAT IF AN
 INSURANCE COMPANY CANCELS OR FAILS TO RENEW A POLICY DUE TO A SUBSTANTIAL
 CHANGE IN THE RISK ASSUMED BASED UPON CHANGES IN CLIMACTIC CONDITIONS, THOSE
 CHANGES MUST BE BASED ON STATISTICAL DATA APPROVED BY THE SOUTH CAROLINA
 COMMISSION ON HURRICANE LOSS PROJECTION METHODOLOGY AS BEING SPECIFICALLY
 APPLICABLE TO SOUTH CAROLINA; TO AMEND SECTION 38-75-740, RELATING TO
 RESTRICTIONS ON NONRENEWAL OF POLICIES, SO AS TO PROVIDE THAT NOTICE OF
 NONRENEWAL MUST BE AT LEAST ONE HUNDRED DAYS PRIOR TO THE EXPIRATION OF THE
 POLICY OR AT LEAST ONE HUNDRED DAYS WRITTEN NOTICE PRIOR TO THE EXPIRATION OF
 THE POLICY, OR WRITTEN NOTICE BY JUNE FIRST, WHICHEVER IS EARLIER, IF THE
 NONRENEWAL, CANCELLATION, OR TERMINATION IS EFFECTIVE BETWEEN JUNE FIRST AND
 NOVEMBER THIRTIETH AND TO CROSS REFERENCE SECTION 38-75-730; TO AMEND SECTION
 38-75-760, RELATING TO UNLAWFUL PRACTICES INVOLVING CANCELLATION, NONRENEWAL,
 OR RENEWAL OF POLICIES, SO AS TO PROVIDE THAT THE SECTION APPLIES TO
 INCREASING A POLICY DEDUCTIBLE; TO AMEND SECTION 38-75-1140, RELATING TO
 REQUIREMENTS FOR MODELING ORGANIZATIONS, SO AS TO DELETE THE REQUIREMENT OF
 THE DIRECTOR'S APPROVAL FOR A MODELING ORGANIZATION THAT PREPARES CATASTROPHE
 MODELS; AND BY ADDING SECTION 38-75-1141, SO AS TO PROVIDE FOR THE "SOUTH
 CAROLINA CATASTROPHE MODELING ACT."

   03/07/07  Senate Introduced and read first time SJ-12
   03/07/07  Senate Referred to Committee on Banking and Insurance SJ-12

TO AMEND SECTION 38-75-730 OF THE CODE OF LAWS OF SOUTH CAROLINA, RELATING TO RESTRICTIONS ON CANCELLATION OF POLICIES AND RENEWALS, SO AS TO PROVIDE THAT AN INSURANCE COMPANY MUST NOT CANCEL AN INSURANCE POLICY, FAIL TO RENEW AN INSURANCE POLICY, OR INCREASE AN INSURANCE POLICY DEDUCTIBLE FOR AN INSURANCE POLICY THAT HAS BEEN IN EFFECT AND RENEWED FOR AT LEAST THREE YEARS EXCEPT UNDER CERTAIN CONDITIONS, THAT AN INSURER MUST NOT CANCEL OR FAIL TO RENEW A HOMEOWNER'S POLICY OF INSURANCE SOLELY BECAUSE THE HOMEOWNER DOES NOT MAINTAIN ADDITIONAL INSURANCE POLICIES WITH THE INSURER, AND THAT IF AN INSURANCE COMPANY CANCELS OR FAILS TO RENEW A POLICY DUE TO A SUBSTANTIAL CHANGE IN THE RISK ASSUMED BASED UPON CHANGES IN CLIMACTIC CONDITIONS, THOSE CHANGES MUST BE BASED ON STATISTICAL DATA APPROVED BY THE SOUTH CAROLINA COMMISSION ON HURRICANE LOSS PROJECTION METHODOLOGY AS BEING SPECIFICALLY APPLICABLE TO SOUTH CAROLINA; TO AMEND SECTION 38-75-740, RELATING TO RESTRICTIONS ON NONRENEWAL OF POLICIES, SO AS TO PROVIDE THAT NOTICE OF NONRENEWAL MUST BE AT LEAST ONE HUNDRED DAYS PRIOR TO THE EXPIRATION OF THE POLICY OR AT LEAST ONE HUNDRED DAYS WRITTEN NOTICE PRIOR TO THE EXPIRATION OF THE POLICY, OR WRITTEN NOTICE BY JUNE FIRST, WHICHEVER IS EARLIER, IF THE NONRENEWAL, CANCELLATION, OR TERMINATION IS EFFECTIVE BETWEEN JUNE FIRST AND NOVEMBER THIRTIETH AND TO CROSS REFERENCE SECTION 38-75-730; TO AMEND SECTION 38-75-760, RELATING TO UNLAWFUL PRACTICES INVOLVING CANCELLATION, NONRENEWAL, OR RENEWAL OF POLICIES, SO AS TO PROVIDE THAT THE SECTION APPLIES TO INCREASING A POLICY DEDUCTIBLE; TO AMEND SECTION 38-75-1140, RELATING TO REQUIREMENTS FOR MODELING ORGANIZATIONS, SO AS TO DELETE THE REQUIREMENT OF THE DIRECTOR'S APPROVAL FOR A MODELING ORGANIZATION THAT PREPARES CATASTROPHE MODELS; AND BY ADDING SECTION 38-75-1141, SO AS TO PROVIDE FOR THE "SOUTH CAROLINA CATASTROPHE MODELING ACT."

Be it enacted by the General Assembly of the State of South Carolina:

SECTION    1.    Section 38-75-730 of the 1976 Code is amended to read:

"Section 38-75-730.    (a)    No insurance policy or renewal thereof may be cancelled by the insurer prior to the expiration of the term stated in the policy An insurance company must not cancel an insurance policy, fail to renew an insurance policy, or increase an insurance policy deductible for an insurance policy that has been in effect and renewed for at least three years, except for one of the following reasons:

(1)    nonpayment of premium;

(2)    material misrepresentation of fact which, if known to the company, would have caused the company not to issue the policy;

(3)    substantial change in the risk assumed, except to the extent that the insurer should reasonably have foreseen the change or contemplated the risk in writing the policy;

(4)    substantial breaches of contractual duties, conditions, or warranties;

(5)    payment of claims totaling more than fifty-percent of premiums paid by insured; or

(6)    loss of the insurer's reinsurance covering all or a significant portion of the particular policy insured, or where continuation of the policy would imperil the insurer's solvency or place that insurer in violation of the insurance laws of this State. Prior to cancellation for reasons permitted in this item (5) (6), the insurer shall notify the director or his designee, in writing, at least sixty days prior to such cancellation and the director or his designee shall, within thirty days of such notification, approve or disapprove such action.

(b)    Cancellation under item (1) of subsection (a) of this section is not effective unless written notice of cancellation has been delivered or mailed to the insured and the agent of record, if any, not less than ten days prior to the proposed effective date of cancellation. Cancellation under items (2) through (5) (6) of subsection (a) of this section is not effective unless written notice of cancellation has been delivered or mailed to the insured and the agent of record, if any, not less than thirty days prior to the proposed effective date of cancellation. The notice must be given or mailed to the insured and the agent at their addresses shown in the policy or, if not reflected therein, at their last known addresses. Any notice of cancellation shall state the precise reason for cancellation. Proof of mailing is sufficient proof of notice.

(c)    An insurer must not cancel or fail to renew a homeowner' s policy of insurance solely because the homeowner does not maintain additional insurance policies with the insurer.

(d)    Subsections (a) and (b) of this section do not apply to any insurance policy which has been in effect for less than ninety days and is not a renewal of a previously existing policy. The policy may be cancelled for any reason by furnishing to the insured at least thirty days' written notice of cancellation, except where the reason for cancellation is nonpayment of premium, in which case not less than ten days' written notice must be furnished.

(e)    For purposes of item (3) of subsection (a), substantial change in risk assumed, if based upon changes in climactic conditions, must be based on statistical data that are approved by the South Carolina Commission on Hurricane Loss Projection Methodology as being specifically applicable to South Carolina.

(f)    The provisions of this section shall not apply to an insurer if that insurer ceases writing insurance in this State or if that insurer increases policy deductibles for all policies of the same type in the State.

SECTION    2.    Section 38-75-740 of the 1976 Code is amended to read:

"Section 38-75-740.    (a)    No insurance policy may be nonrenewed by an insurer except in accordance with the provisions of this section, and any nonrenewal attempted which is not in compliance with this section is ineffective.

(b)    A policy written for a term of one year or less may be nonrenewed by the insurer at its expiration date by giving or mailing written notice of nonrenewal to the insured and the agent of record, if any, not less than thirty one hundred days prior to the expiration date of the policy; however, at least one hundred days written notice, or written notice by June first, whichever is earlier, must be given for any nonrenewal, cancellation, or termination that would be effective between June first and November thirtieth.

(c)    Subject to Section 38-75-730 and subsection (c) of Section 38-75-760, a policy written for a term of more than one year or for an indefinite term may be nonrenewed by the insurer at its anniversary date by giving or mailing written notice of nonrenewal to the insured and the agent of record, if any, not less than thirty one hundred days prior to the anniversary date of the policy; however, at least one hundred days written notice, or written notice by June first, whichever is earlier, must be given for any nonrenewal, cancellation, or termination that would be effective between June first and November thirtieth.

(d)    The notice required by this section must be given or mailed to the insured and the agent at their addresses shown in the policy or, if not reflected therein, at their last known addresses. Proof of mailing is sufficient proof of notice.

(e)    Any notice of nonrenewal shall state the precise reason for nonrenewal."

SECTION    3.    Section 38-75-760 of the 1976 Code is amended to read:

"Section 38-75-760.    (a)    It is unlawful for any insurer to cancel, nonrenew, or renew a policy of insurance or increase a policy deductible except in compliance with the requirements of this article.

(b)    Midterm cancellation of an entire block, line, or class of business is presumed to be unfair, inequitable, and contrary to the public interest and is unlawful.

(c)    If a policy has been issued for a term longer than one year and for additional premium consideration renewal of the policy or an annual premium has been guaranteed, it is unlawful for the insurer to refuse to renew the policy or to increase the annual premium during the term of that policy."

SECTION    1.    Section 38-75-1140 of the 1976 Code is amended to read:

"Section 38-75-1140.    (A)    In recognition of the use of natural hazard catastrophe computer models and other recently developed or improved actuarial methodologies for projecting natural hazard losses, the director or his designee may must make or cause to be made an evaluation of any natural hazard catastrophe model used in property rate filings in this State. Natural hazard catastrophe models are computer programs that estimate losses from potential natural hazard disasters, combining data on property exposures with information on natural hazards, such as storms or earthquakes, to generate estimates of potential losses.

(B)    If required to do so by the director, a A modeling organization that prepares catastrophe models used by insurers in rate filings in this State shall submit an initial report to the director or his designee consisting of but not limited to:

(1)    a statement of its qualification as a modeling organization;

(2)    an outline of the background and experience of the staff of the modeling organization engaged in the development and preparation of the catastrophe models used by insurers in rate filings; and

(3)    one or more statements describing and attesting to the validity of the model for use in predicting losses associated with natural hazard catastrophes in this State. A separate statement must be made by an individual possessing expertise appropriate to the hazard being modeled in fields such as meteorology, engineering, building codes, geology, and actuarial science as they apply to natural hazard catastrophes faced by this State.

(C)    The modeling organization shall submit a supplemental report to the director or his designee following any substantially material revision of the model if the revision is used by insurers in determining rates for this State. The supplemental report must specify the changes made to the catastrophe model and contain one or more statements by experts attesting to the continuing validity of the model for use in predicting losses associated with natural hazard catastrophes in this State.

(D)    If the director or his designee determines the expert statements provided to be insufficient, he may reject the report.

(E)    In conducting his evaluation of a model, the director or his designee may rely on the report of an official of another state who has made such an evaluation pursuant to the laws of that state.

(F)    Proprietary or trade secret information that is submitted in a report, or is obtained, developed, or compiled in the course of any evaluation must be kept confidential by the director."

SECTION    2.    The 1976 Code is amended by adding:

"Section 38-75-1141.    (A)    This section may be cited as the 'South Carolina Catastrophe Modeling Act'.

(B)    The General Assembly finds that:

(1)    reliable projections of hurricane losses are necessary in order to assure that rates for residential property insurance meet the statutory requirement that rates be neither excessive nor inadequate;

(2)    the ability to accurately project hurricane losses has been greatly enhanced in recent years through the use of computer modeling; and

(3)    expert evaluation of computer models and other recently developed or improved actuarial methodologies for projecting hurricane losses is needed in order to resolve conflicts among actuarial professionals and provide both immediate and continuing improvement in the sophistication of actuarial methods used to set rates charged to consumers.

(C)    The General Assembly declares that:

(1)    It is the public policy of this State to encourage the use of the most sophisticated actuarial methods to assure that consumers are charged lawful rates for residential property insurance coverage.

(2)    It is the General Assembly's intent to create the South Carolina Commission on Hurricane Loss Projection Methodology as a panel of experts to provide the most actuarially sophisticated guidelines and standards for projection of hurricane losses possible, given the current state of actuarial science.

(3)    It is the General Assembly's intent that such standards and guidelines be used by an insurer in a rate filing to ensure that the rates are not inadequate, excessive, or unfairly discriminatory, and that if the way an insurer applied such standards and guidelines was erroneous, it must be shown by a preponderance of the evidence.

(4)    It is the General Assembly's intent that such standards and guidelines be employed as soon as possible after the effective date of this section, and that they be subject to continuing review thereafter.

(D)(1)    There is created the South Carolina Commission on Hurricane Loss Projection Methodology, which is assigned to the State Budget and Control Board. For the purposes of this section, the term 'commission' means the South Carolina Commission on Hurricane Loss Projection Methodology. The commission shall be administratively housed within the State Budget and Control Board, but it shall independently exercise the powers and duties specified in this section.

(2)    The commission shall consist of the following eleven members:

(a)    the Consumer Advocate;

(b)    the senior employee of the State Budget and Control Board responsible for operations of the South Carolina Commission on Hurricane Loss Projection Methodology;

(c)    the Executive Director of the South Carolina Hurricane Underwriting Association;

(d)    the Director of the Division of Emergency Management;

(e)    the actuary consultant to the Consumer Advocate;

(f)    an employee of the Department of Insurance responsible for property insurance rate filings who is appointed by the Director of the Department of Insurance; and

(g)    five members appointed by the Governor with the advice and consent of the Senate and each having one of the following requirements:

(i)        an actuary who is employed full time by a property and casualty insurer which was responsible for at least one percent of the aggregate statewide direct written premium for homeowner's insurance in the calendar year preceding the member's appointment to the commission;

(ii)    an expert in insurance finance who is a full-time member of the faculty of the State University System and who has a background in actuarial science;

(iii)    an expert in statistics who is a full-time member of the faculty of the State University System and who has a background in insurance;

(iv)    an expert in computer system design who is a full-time member of the faculty of the State University System;

(v)    an expert in meteorology who is a full-time member of the faculty of the State University System and who specializes in hurricanes; or

(vi)    an expert in structural or wind engineering who is designated a Professional Engineer and who is familiar with South Carolina construction and building codes.

(h)    Members designated under items (a) through (e) shall serve on the commission as long as they maintain their respective offices. The member appointed by the director of the office under item (f) shall serve on the commission until the end of the term of office of the director who appointed him or her, unless removed earlier by the director for cause. Members appointed by the Governor under subitems (g)(i) through (g)(vi) shall serve on the commission until the end of the term of office of the Governor who appointed them, unless earlier removed by the Governor for cause. Vacancies on the commission must be filled in the same manner as the original appointment.

(E)    The State Budget and Control Board shall annually appoint one of the members of the commission to serve as chair.

(F)    Members of the commission shall serve without compensation but shall be reimbursed for per diem and travel expenses.

(G)    The State Budget and Control Board shall, as a cost of administration of the South Carolina Commission on Hurricane Loss Projection Methodology, provide for travel, expenses, and staff support for the commission and will assess the South Carolina Hurricane Association for the full cost of the commission in October of each year.

(H)    There shall be no liability on the part of, and no cause of action of any nature shall arise against, any member of the commission or any member of the State Budget and Control Board for any action taken in the performance of their duties under this section. In addition, the commission may, in writing, waive any potential cause of action for negligence of a consultant, contractor, or contract employee engaged to assist the commission.

(I)    The commission shall consider any actuarial methods, principles, standards, models, or output ranges that have the potential for improving the accuracy of or reliability of the hurricane loss projections used in residential property insurance rate filings. The commission shall, from time to time, adopt findings as to the accuracy or reliability of particular methods, principles, standards, models, or output ranges.

(J)    In establishing reimbursement premiums for the South Carolina Commission on Hurricane Loss Projection Methodology, the State Budget and Control Board must, to the extent feasible, employ actuarial methods, principles, standards, models, or output ranges found by the commission to be accurate or reliable.

(K)    With respect to a rate filing an insurer may employ actuarial methods, principles, standards, models, or output ranges found by the commission to be accurate or reliable to determine hurricane loss factors for use in a rate filing. These findings and factors are admissible and relevant in consideration of a rate filing by the department or in any arbitration or administrative or judicial review only if the department and the Consumer Advocate have access to all of the assumptions and factors that were used in developing the actuarial methods, principles, standards, models, or output ranges, and are not precluded from disclosing this information in a rate proceeding. In any rate hearing, the hearing officer or judge may determine whether the department and the Consumer Advocate were provided with access to all of the assumptions and factors that were used in developing the actuarial methods, principles, standards, models, or output ranges and determine their admissibility.

(L)    The commission shall adopt revisions to previously adopted actuarial methods, principles, standards, models, or output ranges at least annually.

(M)(1)    A trade secret that is used in designing and constructing a hurricane loss model and that is provided pursuant to this section by a private company to the commission, department, or Consumer Advocate is confidential and exempt from Freedom of Information Act requirements as provided in Section 30-4-40(a)(1).

(2)    That portion of a meeting of the commission or of a rate proceeding on an insurer's rate filing at which a trade secret made confidential and exempt by this paragraph is discussed is exempt from Freedom of Information Act requirements as provided in Section 30-4-40(a)(1)."

SECTION    1.    This act takes effect upon approval by the Governor.