Bill 593

                    Current Status

Introducing Body:               Senate
Bill Number:                    593
Primary Sponsor:                Committee (02)
Committee Number:               26
Type of Legislation:            GB
Subject:                        Insurance certificates of
                                authority
Residing Body:                  House
Current Committee:              Labor, Commerce and Industry
Companion Bill Number:          400 3241
Computer Document Number:       NO5/7192.BD
Introduced Date:                Feb 05, 1991
Last History Body:              House
Last History Date:              Feb 12, 1991
Last History Type:              Introduced, read first time,
                                referred to Committee
Scope of Legislation:           Statewide
Sponsor Committee:              Banking and Insurance
Sponsor Committee Number:       02
Type of Legislation:            General Bill

 Bill  Body    Date          Action Description              CMN
 ----  ------  ------------  ------------------------------  ---
 593   House   Feb 12, 1991  Introduced, read first time,    26
                             referred to Committee
 593   Senate  Feb 08, 1991  Read third time, sent to House
 593   Senate  Feb 07, 1991  Read second time, unanimous
                             consent for third reading on
                             Friday, February 8
 593   Senate  Feb 05, 1991  Placed on Calendar without
                             reference
 593   Senate  Feb 05, 1991  Introduced, read first time

Indicates Matter Stricken
Indicates New Matter

INTRODUCED

February 5, 1991

S. 593

S. Printed 2/6/91--S.

Read the first time February 5, 1991.

A BILL

TO AMEND SECTION 38-5-120, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO THE REVOCATION AND SUSPENSION OF INSURANCE CERTIFICATES OF AUTHORITY, SO AS TO PROVIDE STANDARDS FOR DETERMINING HAZARDOUS INSURANCE PROCEEDINGS AND TO AUTHORIZE THE CHIEF INSURANCE COMMISSIONER TO TAKE ACTION WHEN AN INSURER IS IN AN UNSOUND OR A HAZARDOUS CONDITION.

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

SECTION 1. Section 38-5-120 of the 1976 Code is amended to read:

"Section 38-5-120. If the (A) The commissioner shall revoke or suspend certificates of authority granted to an insurer and its officers and agents if he is of the opinion upon examination or other evidence that one or more of the following exist:

(a) an (1) The insurer is in an unsound condition, or.

(b) an (2) The insurer has failed to comply not complied with the law or with the provisions of its charter, or.

(c) the (3) The insurer's condition is such as to render renders its proceedings hazardous to the public or its policyholders, or. For the purpose of the application of this item, one or more of the following standards may be considered by the commissioner in determining whether the continued operation of an insurer transacting insurance business in this State is hazardous to the public or its policyholders:

(a) adverse findings reported in financial condition and market conduct examination reports;

(b) the National Association of Insurance Commissioners Insurance Regulatory Information System and its related reports;

(c) the ratios of commission expense, general insurance expense, policy benefits, and reserve increases as to annual premium and net investment income which could lead to an impairment of capital and surplus;

(d) whether the insurer's asset portfolio when viewed in light of current economic conditions is not of sufficient value, liquidity, or diversity to assure the company's ability to meet its outstanding obligations as they mature;

(e) whether the ability of an assuming reinsurer to perform and the insurer's reinsurance program provides sufficient protection for the company's remaining surplus after taking into account the insurer's cash flow and the classes of business written as well as the financial condition of the assuming reinsurer;

(f) whether the insurer's operating loss in the last twelve months or a shorter time including, but not limited to, net capital gain or loss, change in non-admitted assets, and cash dividends paid to shareholders, is greater than fifty percent of the insurer's remaining surplus as regards policyholders in excess of the minimum required;

(g) whether an affiliate, a subsidiary, or a reinsurer is insolvent, threatened with insolvency, or delinquent in payment of its monetary or other obligations;

(h) contingent liabilities, pledges or guaranties which individually or collectively involve a total amount which in the opinion of the commissioner may affect the solvency of the insurer;

(i) whether a `controlling person' of an insurer is delinquent in the transmitting to or payment of net premiums to the insurer;

(j) the age and collectibility of receivables;

(k) whether the management of an insurer, including officers, directors, or other persons who directly or indirectly controls the operation of the insurer, fails to possess and demonstrate the competence, fitness, and reputation necessary to serve the insurer in that position;

(l) whether management of an insurer has failed to respond to inquiries relative to the condition of the insurer or has furnished false and misleading information concerning an inquiry;

(m) whether management of an insurer has filed a false or misleading sworn financial statement, released a false or misleading financial statement to lending institutions or to the general public, made a false or misleading entry, or omitted an entry of a material amount in the books of the insurer;

(n) whether the insurer has grown so rapidly and to an extent that it lacks adequate financial and administrative capacity to meet its obligations in a timely manner;

(o) whether the company has experienced or will experience in the foreseeable future cash flow or liquidity problems.

(d) the (4) The true value of the insurer's assets, if it is a life insurer, is less than its liabilities, exclusive of its capital, or.

(e) the (5) The officers or agents of an insurer refuse to submit to examination or to perform any a legal obligation relative to an examination, or.

(f) an (6) The insurer has failed to comply not complied with a lawful order of the commissioner, the Commissioner shall revoke or suspend all certificates of authority granted to the insurer, its officers, or agents and shall cause notice thereof to be.

(B) Notice of revocation and suspension must be published in a newspaper of general circulation in this State. No new business may be done thereafter by the insurer or its agents in this State while the default or disability continues nor until its authority to transact business is restored by the commissioner.

(C) Notwithstanding the provisions of subsection (A)(6), if the commissioner determines that an insurer is in an unsound condition or in a hazardous condition provided in subsection (A)(1) and (3), he may issue an order requiring the insurer to:

(1) reduce the total amount of present and potential liability for policy benefits by reinsurance;

(2) reduce, suspend, or limit the volume of business being accepted or renewed;

(3) reduce general insurance and commission expenses by specified methods;

(4) increase the insurer's capital and surplus;

(5) suspend or limit the declaration and payment of dividends by an insurer to its stockholders or to its policyholders;

(6) file reports in a form acceptable to the commissioner concerning the market value of an insurer's assets;

(7) limit or withdraw from certain investments or discontinue certain investment practices to the extent the commissioner considers necessary;

(8) document the adequacy of premium rates in relation to the risks insured;

(9) file, in addition to regular annual statements, interim financial reports on the form adopted by the National Association of Insurance Commissioners or on a format approved by the commissioner;

(10) disregard credit or an amount receivable resulting from transactions with a reinsurer which is insolvent, impaired, or otherwise subject to a delinquency proceeding;

(11) make appropriate adjustments to asset values attributable to investments in or transactions with parents, subsidiaries, or affiliates;

(12) refuse to recognize the stated value of accounts receivable if the ability to collect receivables is highly speculative in view of the age of the account or the financial condition of the debtor;

(13) increase the insurer's liability in an amount equal to a contingent liability, pledge, or guarantee not otherwise included if there is a substantial risk that the insurer will be called upon to meet the obligation undertaken within the next twelve months; or

(14) take other action he considers appropriate."

SECTION 2. This act takes effect upon approval by the Governor.