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Current Status Bill Number:View additional legislative information at the LPITS web site.982 Ratification Number:264 Act Number:228 Type of Legislation:General Bill GB Introducing Body:Senate Introduced Date:20020206 Primary Sponsor:Thomas All Sponsors:Thomas Drafted Document Number:l:\council\bills\skb\18183zcw02.doc Date Bill Passed both Bodies:20020417 Governor's Action:S Date of Governor's Action:20020501 Subject:Insurance industry, various revisions History Body Date Action Description Com Leg Involved ______ ________ ______________________________________ _______ ____________ ------ 20020514 Act No. A228 ------ 20020501 Signed by Governor ------ 20020425 Ratified R264 House 20020417 Read third time, enrolled for ratification House 20020416 Read second time House 20020410 Committee report: Favorable 26 HLCI House 20020221 Introduced, read first time, 26 HLCI referred to Committee Senate 20020220 Read third time, sent to House Senate 20020219 Read second time, notice of general amendments ------ 20020219 Scrivener's error corrected Senate 20020214 Committee report: Favorable 02 SBI Senate 20020206 Introduced, read first time, 02 SBI referred to Committee Versions of This Bill Revised on February 14, 2002 - Word format Revised on February 19, 2002 - Word format Revised on April 10, 2002 - Word format
(A228, R264, S982)
AN ACT TO AMEND SECTION 34-29-160, AS AMENDED, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO THE CONSUMER FINANCE LAW AND INSURANCE ON SECURITY AND BORROWER, SO AS TO MAKE A TECHNICAL CORRECTION; TO AMEND SECTION 38-5-30, AS AMENDED, RELATING TO THE KINDS OF INSURANCE FOR WHICH INSURERS MAY BE LICENSED, SO AS TO EXCLUDE TITLE INSURANCE FROM BEING CONSIDERED MULTIPLE LINES INSURANCE; TO AMEND SECTIONS 38-21-170 AND 38-21-270, BOTH AS AMENDED, RELATING TO DIVIDENDS AND DISTRIBUTIONS, SO AS TO MODIFY THE PRESENT RESTRICTIONS BY DELETING THE EARNED SURPLUS REQUIREMENT; TO AMEND SECTION 38-27-50, AS AMENDED, RELATING TO DEFINITIONS, SO AS TO INCLUDE SPECIAL PURPOSE REINSURANCE VEHICLES WITHIN THE DEFINITION OF "PERSON"; TO AMEND SECTION 38-33-280, AS AMENDED, RELATING TO THE ACQUISITION OR EXCHANGE OF SECURITIES OF A HMO, SO AS TO MAKE HMO'S SUBJECT TO THE INSURANCE HOLDING COMPANY REGULATORY ACT; TO AMEND SECTION 38-44-50, AS AMENDED, RELATING TO THE EXAMINATION AND REVIEW OF MGA BY INSURER, SO AS TO MAKE A TECHNICAL CORRECTION; TO AMEND SECTION 38-45-110, AS AMENDED, RELATING TO THE WARNING STAMPED ON POLICIES OF ELIGIBLE SURPLUS LINES INSURERS, SO AS TO CLARIFY THE LANGUAGE CONTAINED THEREIN; TO AMEND SECTION 38-71-760, AS AMENDED, RELATING TO THE STANDARDS FOR GROUP ACCIDENT AND HEALTH INSURANCE COVERAGE, SO AS TO CLARIFY CERTAIN MATTERS REGARDING THE EXTENSION OF LIABILITY; TO AMEND SECTION 38-71-880, RELATING TO MEDICAL AND SURGICAL BENEFITS AND MENTAL HEALTH BENEFITS, SO AS TO EXTEND PROVISIONS IN ORDER TO AVOID PREEMPTION; TO AMEND SECTION 38-90-10, AS AMENDED, RELATING TO DEFINITIONS, SO AS TO MAKE A TECHNICAL CORRECTION AS WELL AS MAKE THE LANGUAGE MORE CONSISTENT WITH THAT USED THROUGHOUT CHAPTER 90, TITLE 38; TO AMEND SECTION 38-90-20, RELATING TO THE LICENSING OF CAPTIVE INSURANCE COMPANIES, SO AS TO CLARIFY THE APPLICABILITY OF SECTION 38-5-170 TO CAPTIVE INSURANCE COMPANIES; TO AMEND SECTION 38-90-70, AS AMENDED, RELATING TO THE REPORTING REQUIREMENTS OF CAPTIVE INSURANCE COMPANIES SO AS TO CLARIFY THE CONTENTS OF THESE REPORTS; TO AMEND SECTION 38-90-100, AS AMENDED, RELATING TO THE APPLICABILITY OF INVESTMENT REQUIREMENTS, SO AS TO MAKE A TECHNICAL CORRECTION; TO AMEND SECTION 38-91-10, RELATING TO THE JOINT UNDERWRITING ASSOCIATION, SO AS TO EXTEND THE PERIOD THAT CHAPTER 91, TITLE 38 REMAINS IN FORCE AND EFFECT.
Be it enacted by the General Assembly of the State of South Carolina:
Conditions, premiums, and charges of insurance on security
SECTION 1. Section 34-29-160 of the 1976 Code, as last amended by Act 66 of 1999, is further amended to read:
"Section 34-29-160. Subject to the conditions provided in this section and notwithstanding any other provisions of this chapter, reasonable insurance may be sold to and required of the borrower for insuring personal property securing a loan and for insuring the life and earning capacity of not more than two parties obligated on the loan other than accommodation parties.
Property insurance shall be in an amount not to exceed the reasonable value of the property insured and for the customary term approximating the term of the loan contract. It shall be optional with the borrower to obtain such insurance in an amount greater than the amount of the loan or for a longer term.
Life insurance must be in an amount not to exceed the approximate amount of the debt and for a term not exceeding the approximate term of the loan contract. For purposes of credit coverage, the 'approximate amount of the debt' is defined as follows: (1) the periodic installment payment multiplied by the number of scheduled periodic installment payments for a loan with a term of sixty months or less; (2) the amount necessary to liquidate the remaining debt in a single lump-sum payment, excluding all unearned interest and other unearned finance charges, plus six monthly installment payments for a loan with a term in excess of sixty months. Accident and health insurance and unemployment insurance, or both, must provide periodic benefits which may not exceed an amount which approximately equals the amount of each periodic installment payment to be made under the loan contract. However, when a loan is discharged or a new policy or policies of insurance are issued, the life, property, or accident and health insurance or all three on the prior obligation must be canceled and the unearned portion of the insurance premium or premiums, or identifiable charge, must be refunded to the borrower. However, the method of refunding the premiums on the policies must be pursuant to the Rule of 78 or the Sum of the Digits Method, except that no refund under three dollars must be made. The insurance company shall calculate its reserves on the policies in the same manner or, in the case of credit life insurance, in accordance with a mortality table and interest assumption used for ordinary life policies. Notwithstanding this requirement, if the property insurance policy or policies cover the insurable interest of the borrower as well as the lender, the policy or policies may be continued in force at the request of the borrower.
This section does not require a creditor to grant a refund or credit of a life insurance premium to the debtor if any refund or credit due to the debtor under this section is less than three dollars. If the coverage provides accident and health benefits, the policy or certificate shall contain a provision that, if the insured obligor is disabled, as defined in the policy, for a period of more than three days, benefits shall commence as of the first day of disability, provided that accident and health insurance shall not be allowed on loans with a cash advance of less than one hundred dollars. Disability shall not be defined more restrictively than the inability of the insured to engage in his own occupation during the first year of disability or for the length of the benefit period if less than one year. After the first year of disability, disability shall not be defined more restrictively than the inability of the insured to engage in the substantial duties of any gainful occupation for substantially equivalent remuneration to the insured's own occupation. Substantially equivalent remuneration means not less than seventy-five percent of the insured's base wage, exclusive of overtime and bonus, as of the date disability commences.
All insurance sold or provided pursuant to this section shall bear a reasonable and bona fide relation to the existing hazard or risk of loss and shall be written by an agent or agency licensed in this State in an insurance company authorized to conduct such business in this State. A licensee shall not require the purchasing of insurance from the licensee or any employee, affiliate, or associate of the licensee, as a condition precedent to the making of a loan and shall not decline existing insurance where such insurance is provided by an insurance company authorized to conduct such business in this State.
The licensee shall within thirty days after the loan is made, deliver to the borrower, or if more than one, to one of them, a policy or certificate of insurance covering any insurance procured by or through the licensee or any employee, affiliate, or associate of the licensee, which shall set forth the amount of any premium or identifiable charge which the borrower has paid or is obligated to pay, the amount of insurance, the term of insurance, and a complete description of the risks insured. Such policy or certificate may contain a mortgage clause or other appropriate provisions to protect the insurable interest of the licensee.
Notwithstanding any other provision of this chapter, any gain or advantages in the form of commission, dividend, identifiable charge, or otherwise, to the licensee or to any employee, affiliate, or associate of the licensee from such insurance or its sale shall not be deemed to be additional or further interest or charge in connection with such a loan.
Any accident and health or property insurance sold in conjunction with this chapter must be written on forms and at rates approved by the South Carolina Department of Insurance, provided that a minimum charge of three dollars may be made, pursuant to reasonable regulations adopted by it and having as their purpose the establishment and maintenance of premium rates which are reasonably commensurate with the coverage afforded and which are adequate, not excessive, and not unfairly discriminatory giving due consideration to past or prospective loss experience within or without this State, to dividends, savings, or unabsorbed premium deposits allowed or returned by insurers to borrowers, to reasonable expense allowances necessary to achieve proper risk distribution and spread, and to all other relevant factors within or without this State. These regulations may include reasonable classification systems or programs based upon identifiable and measurable variations in the hazards or expense requirements and may include statistical plans, systems, or programs, which the insurers may be required to adopt, for the purpose of providing that statistical information and data as may be necessary or reasonably appropriate to the determination of premium rates or rate levels. The premium rates and rate levels must 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 not less than fifty percent, and rates producing a lesser loss ratio are considered excessive.
Until January 1, 2001, credit life insurance premiums for each one hundred dollars of indebtedness are considered reasonable and may be charged if they are not greater than the amounts given in the following table times the number of years, or fraction of a year, that the indebtedness covered by insurance is scheduled to continue, subject to a minimum charge of three dollars:
Decreasing Balance Level Balance
Individual $ .65 $1.30
Joint Insurance $1.08 $2.16
Effective January 1, 2001, credit life insurance premiums for each one hundred dollars of indebtedness are considered reasonable and may be charged if they are not greater than the amounts given in the following table times the number of years, or fraction of a year, that the indebtedness covered by insurance is scheduled to continue:
Decreasing Balance Level Balance
Individual $ .57 $1.14
Joint Insurance $ .95 $1.89
Effective January 1, 2003, credit life insurance premiums for each one hundred dollars of indebtedness are considered reasonable and may be charged if they are not greater than the amounts given in the following table times the number of years, or fraction of a year, that the indebtedness covered by insurance is scheduled to continue:
Decreasing Balance Level Balance
Individual $ .55 $1.10
Joint Insurance $ .91 $1.83"
Title insurance excluded from being considered multiple lines insurance
SECTION 2. Section 38-5-30 of the 1976 Code, as last amended by Act 181 of 1993, is further amended to read:
"Section 38-5-30. The director or his designee may license insurers, subject to other requirements of existing insurance laws, to transact the following kinds of insurance in this State:
(a) life insurance and annuities.
(b) accident and health insurance.
(c) property insurance.
(d) casualty insurance.
(e) surety insurance.
(f) marine insurance.
(g) title insurance.
(h) multiple lines insurance, meaning any two or more of the kinds of insurance listed in items (b), (c), (d), (e), and (f) of this section.
Each license issued is for an indefinite term unless revoked or suspended."
Earned surplus requirement deleted
SECTION 3. Section 38-21-170 of the 1976 Code, as last amended by Act 181 of 1993, is further amended to read:
"Section 38-21-170. (A) Subject to Section 38-21-270, each registered insurer shall report to the department 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. The department shall promptly consider this report as information, and such considerations shall include the factors as set forth in Section 38-21-260. If an insurer's surplus as regards policyholders is determined by the department not to be reasonable in relation to the insurer's outstanding liabilities and adequate to its financial needs, the department shall have the authority, within the ten-day period prior to payment thereof, to limit the amount of such dividends or distributions.
(B) No dividend or other distribution may be declared or paid at any time when the surplus of the insurer is less than the surplus required by law for the kinds of business authorized to be transacted by such insurer, nor when the payment of a dividend or other distribution would reduce its surplus to less than such amount.
(C) Except in the case of share dividends, surplus for determining whether dividends or other distributions may be declared shall not include surplus arising from unrealized appreciation in value, or revaluation of assets, or from unrealized profits upon investments.
(D) No dividend or other distribution may be declared or paid contrary to any restriction contained in the insurer's articles of incorporation.
(E) Notwithstanding any other provision of law, the insurer may declare, conditional upon the department's approval, a dividend or other distribution to shareholders from surplus, and such declaration confers no rights until the department:
(1) has approved the payment of the dividend or distribution; or
(2) has not disapproved the payment within fifteen days after receiving notice of the declaration."
Notice and approval of extraordinary dividends or distributions required
SECTION 4. Section 38-21-270 of the 1976 Code, as last amended by Act 181 of 1993, is further amended to read:
"Section 38-21-270. (A) No domestic insurer may pay an extraordinary dividend or make another extraordinary distribution to its shareholders until the director or his designee:
(1) has approved the payment, or
(2) has not disapproved the payment within fifteen days after receiving notice of the declaration.
(B)(1) For purposes of this section, an extraordinary dividend or distribution includes a 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 the lesser of:
(a) ten percent of the insurer's surplus as regards policyholders as shown in the insurer's most recent annual statement, or
(b) the net gain from operations for life insurers, or the net income, for nonlife insurers, not including net realized capital gains or losses as shown in the insurer's most recent annual statement.
(2) It does not include pro rata distributions of a class of the insurer's own securities.
(C) An insurer may declare an extraordinary dividend or distribution which is conditional upon the approval of the director or his designee. The declaration confers no rights upon shareholders until the director or his designee:
(1) has approved the payment of the dividend or distribution, or
(2) has not disapproved the payment within fifteen days after receiving notice of the declaration."
"Person" defined to include special purpose reinsurance vehicles
SECTION 5. Section 38-27-50(12) of the 1976 Code, as last amended by Act 155 of 1987, is further amended to read:
"(12) 'Person' means natural persons, corporations, partnerships, trusts, associations, societies, orders, special purpose reinsurance vehicles, or any other organizations or entities."
Applicable to health maintenance organizations
SECTION 6. Section 38-33-280 of the 1976 Code, as last amended by Act 181 of 1993, is further amended to read:
"Section 38-33-280. (A) No person may make a tender for or a request or invitation for tenders of, or enter into an agreement to exchange securities for or acquire in the open market or otherwise, any voting security of a health maintenance organization or enter into any other agreement if, after the consummation thereof, that person would, directly or indirectly, or by conversion or by exercise of any right to acquire, be in control of the health maintenance organization, and no person may enter into an agreement to merge or consolidate with or otherwise to acquire control of a health maintenance organization, unless, at the time any offer, request, or invitation is made or any agreement is entered into, or prior to the acquisition of the securities if no offer or agreement is involved, the person has filed with the department and has sent to the health maintenance organization, information required by Section 38-21-70 and the offer, request, invitation, agreement, or acquisition has been approved by the director or his designee. Approval by the director or his designee is governed by Section 38-21-90.
(B) The provisions of Section 38-21-250 shall apply to health maintenance organizations."
Certain appointment restrictions inapplicable
SECTION 7. Section 38-44-50(G) of the 1976 Code, as amended by Act 181 of 1993, is further amended to read:
"(G) An insurer may not appoint to its board of directors an officer, a director, an employee, an agent, or a broker or a controlling shareholder of its MGA's. This subsection does not apply to relationships governed by the Insurance Holding Company Regulatory Act or, if applicable, Section 38-21-95."
Clarification of warning
SECTION 8. Section 38-45-110 of the 1976 Code, as last amended by Act 312 of 2000, is further amended to read:
"Section 38-45-110. The broker shall write or stamp upon the face of each policy and application of an eligible surplus lines insurer the words, 'This company has been approved by the director or his designee of the South Carolina Department of Insurance to write business in this State as an eligible surplus lines insurer, but it is not afforded guaranty fund protection'."
Clarification of matters regarding extension of liability
SECTION 9. Section 38-71-760 of the 1976 Code, as last amended by Act 131 of 1991, is further amended to read:
"Section 38-71-760. (a) This section applies to a group accident, group health, or group accident and health insurance or health maintenance organization policy or certificate that is delivered, issued for delivery, or renewed in this State which provides hospital, surgical, or major medical expense insurance, or any combination of these coverages, on an expense incurred basis. It specifically includes a certificate issued under a policy that was issued to a trust located out of the State but which includes participating units located in the State. Renewal of these policies or certificates is presumed to occur on the anniversary date of the date that coverage was first effective unless another renewal date is specifically stated in the certificate.
(b) If a policy or contract subject to this article provides for automatic discontinuance of the policy or contract after a premium or subscription charge has remained unpaid through the grace period allowed for the payment, the carrier is liable for valid claims for covered losses incurred prior to the end of the grace period.
(c) If the actions of the carrier after the end of the grace period indicate that it considers the policy or contract as continuing in force beyond the end of the grace period such as by continuing to recognize claims subsequently incurred, the carrier is liable for valid claims for losses beginning on or before the effective date of the written notice of discontinuance to the policyholder or other entity responsible for making payments or submitting subscription charges to the carrier. The effective date of discontinuance may not be prior to midnight at the end of the third scheduled work day after the date upon which the notice is delivered.
(d) In addition to the notice required under Section 38-71-870 or Section 38-71-675, any notice of discontinuance by the carrier shall include a request to the group policyholder or other entity involved to notify certificate holders covered under the policy or subscriber contract of the date when the group policy or contract will discontinue and advise that, unless otherwise provided in the policy or contract, the carrier is not liable for claims for losses incurred after such date. The notice also shall advise, when the plan involves certificate holder contributions, that, if the policyholder or other entity continues to collect contributions for the coverage beyond the date of discontinuance, the policyholder or other entity may be held solely liable for the benefits for which the contributions are collected.
(e) The carrier shall prepare and furnish to the policyholder or other entity at the same time an appropriate sample notice form to be distributed to the certificate holders concerned indicating the effective date of the discontinuance and urge the certificate holders to refer to their certificates or contracts in order to determine what rights are available to them as a result of the discontinuance.
(f) Every group policy, contract, or certificate issued subject to this article or under which the level of benefits is modified or amended shall provide a reasonable provision for extension of benefits in the event of total disability at the date of discontinuance of the group policy, contract, or certificate as required by the following subsections.
(g) In the case of a group life plan which contains a disability benefit extension of any type such as premium waiver extension, extended death benefit in the event of total disability, or payment of income for a specified period during total disability, the discontinuance of the group policy, contract, or certificate does not operate to terminate the extension.
(h) In the case of a group plan providing benefits for loss of time from work or specific indemnity during hospital confinement, discontinuance of the group policy, contract, or certificate during a disability has no effect on benefits payable for that disability or confinement.
(i) In the case of hospital or medical expense coverages other than dental expense, a reasonable extension of benefits or accrued liability provision is required. The provision is considered reasonable if it provides an extension of at least twelve months under major medical and comprehensive medical type coverages and under other types of hospital or medical expense coverages provides either an extension of at least ninety days or an accrued liability for expenses incurred during a period of disability or during a period of at least ninety days starting with a specific event which occurred while coverage was in force such as an accident.
(j) Any applicable extension of benefits or accrued liability must be described in any policy, contract, or certificate involved. The benefits payable during any period of extension or accrued liability are subject to the policy's, contract's, or certificate's regular benefit limits such as benefits ceasing at exhaustion of a benefit period or of maximum benefits. For hospital or medical expense coverages, the benefit payments are limited to payments applicable to the disabling condition only. However, the carrier may not charge any premium during any period of extension.
(k) A replacement carrier is considered to be a succeeding carrier within the meaning of this section if the effective date of the coverage provided by it is sixty-two days or less after the date of termination of coverage of the prior carrier.
(l) This subsection applies to the prior carrier.
(1) The prior carrier remains liable only to the extent of its accrued liabilities and extensions of benefits. The position of the prior carrier is the same whether the group policyholder or other entity secures replacement coverage from a new carrier, self-insures, or foregoes the provision of coverage.
(2) For health insurance coverage as defined in Section 38-71-840, in all situations except the prior carrier's withdrawal from the large group market, the small group market or both markets in this State, the liability of the prior carrier for extension of benefits terminates at the earliest of the following:
(A) The date the individual has full coverage for the disabling condition under a group health plan with similar benefits and that plan makes reasonable provision for continuity of care for the disabling condition.
(B) The date the individual is no longer totally disabled.
(C) The date the extension period required in subparagraph (i) expires.
(D) The date of exhaustion of a benefit period of the payment of maximum benefits as provided for in subparagraph (j).
(m) This subsection applies to all groups.
(1) Each person who is eligible for coverage in accordance with the succeeding carrier's plan of benefits with respect to classes eligible and actively at work and nonconfinement rules must be covered by the succeeding carrier's plan of benefits. For health insurance coverage as defined in Section 38-71-840, nonconfinement rules are not permitted and absence from work due to any health status-related factor must be treated as being actively at work.
(2) Each person not covered under the succeeding carrier's plan of benefits in accordance with item (1) of this subsection (m) nevertheless must be covered by the succeeding carrier in accordance with the following rules if the individual was validly covered, including benefit extension, under the prior plan on the date of discontinuance and if the individual is a member of the class of individuals eligible for coverage under the succeeding carrier's plan. Any reference in the following rules to an individual who was or was not totally disabled is a reference to the individual's status immediately prior to the date the succeeding carrier's coverage becomes effective.
(A) The minimum level of benefits to be provided by the succeeding carrier must be the applicable level of benefits of the succeeding carrier's plan reduced by any benefits payable by the prior plan.
(B) Coverage must be provided by the succeeding carrier until at least the earliest of the following dates:
( i) The date the individual becomes eligible under the succeeding carrier's plan as described in item (1) of this subsection (m).
(ii) For each type of coverage, the date the individual's coverage would terminate in accordance with the succeeding carrier's plan provisions applicable to individual termination of coverage, such as at termination of employment or ceasing to be an eligible dependent, as the case may be.
(iii) In the case of an individual who was totally disabled, and in the case of a type of coverage for which subsections (f) through (j) of this section require an extension of benefits or accrued liability, the end of any period of extension or accrued liability which is required of the prior carrier by those subsections or, if the prior carrier's policy or contract is not subject to those subsections, would have been required of that carrier had its policy or contract been subject to those subsections at the time the prior plan was discontinued and replaced by the succeeding carrier's plan.
(3) For health insurance coverage as defined in Section 38-71-840, in the case of an individual who was totally disabled at the time the prior plan was discontinued and replaced by a group health plan with similar benefits, and in the case in which subsection (1) of this section requires an extension of benefits or accrued liability, the minimum level of benefits to be provided by the succeeding carrier must be the applicable level of benefits of the succeeding carrier's plan. This benefit may be reduced by any benefits paid by the prior plan.
(4) In the case of a preexisting conditions limitation included in the succeeding carrier's plan, the level of benefits applicable to preexisting conditions of persons becoming covered by the succeeding carrier's plan in accordance with this subsection (m) during the period of time this limitation applies under the new plan must be the lesser of:
(A) the benefits of the new plan determined without application of the preexisting conditions limitation; and
(B) the benefits of the prior plan.
(5) The succeeding carrier, in applying any deductibles, coinsurance amounts applicable to the out-of-pocket maximums or waiting periods in its plan, shall give credit for the satisfaction or partial satisfaction of the same or similar provisions under a prior plan providing similar benefits. In the case of deductible provisions or coinsurance amounts applicable to the out-of-pocket maximums, the credit must apply for the same or overlapping benefit periods and must be given for expenses actually incurred and applied against the deductible provisions or to the out-of-pocket maximums of the prior carrier's plan during the ninety days preceding the effective date of the succeeding carrier's plan but only to the extent these expenses are recognized under the terms of the succeeding carrier's plan and are subject to similar deductible or coinsurance provisions.
(6) In any situation where a determination of the prior carrier's benefit is required by the succeeding carrier, at the succeeding carrier's request the prior carrier shall furnish a statement of the benefits available or pertinent information sufficient to permit verification of the benefit determination or the determination itself by the succeeding carrier. For the purposes of this section, benefits of the prior plan are determined in accordance with all of the definitions, conditions, and covered expense provisions of the prior plan rather than those of the succeeding plan. The benefit determination must be made as if coverage had not been replaced by the succeeding carrier."
Applicability extended
SECTION 10. Section 38-71-880(F) of the 1976 Code, as added by Act 5 of 1997, is amended to read:
"(F) This section shall not apply to benefits for services furnished on or after December 31, 2002."
Citation corrected
SECTION 11. A. Section 38-90-10(18)(b) of the 1976 Code, as last amended by Act 58 of 2001, is further amended to read:
"(b) a group which is created under the Liability Risk Retention Act of 1986 15 U.S.C. Section 3901, et seq., as amended, as a corporation or other limited liability association taxable as a stock insurance company or a mutual insurer under this title."
B. Section 38-90-10(24) of the 1976 Code, as last amended by Act 58 of 2001, is further amended to read:
"(24) 'Pure captive insurance company' means a company that insures risks of its parent, affiliated companies, controlled unaffiliated business, or a combination thereof."
Applicability of captive insurance companies
SECTION 12. Section 38-90-20 of the 1976 Code, as added by Act 331 of 2000, is amended by adding:
"(F) The terms and conditions set forth in Section 38-5-170 apply in full to captive insurance companies licensed under this chapter."
Contents of the "Captive Annual Statement: Pure or Industrial Insured"
SECTION 13. Section 38-90-70(C)(2) of the 1976 Code, as added by Act 331 of 2000, is amended to read:
"(2) in order to provide sufficient detail to support the premium tax return, the pure captive insurance company shall file before March 1 of each year for each calendar year-end, pages 1 through 7 of the 'Captive Annual Statement: Pure or Industrial Insured', verified by oath of two of its executive officers."
Applicability of investment requirements
SECTION 14. Section 38-90-100(A) of the 1976 Code, as amended by Act 58 of 2001, is further amended to read:
"(A) An association captive insurance company and an industrial insured captive insurance company insuring the risks of an industrial insured group shall comply with the investment requirements contained in this title. Notwithstanding any other provision of this title, the director may approve the use of alternative reliable methods of valuation and rating."
Applicability extended
SECTION 15. Section 38-91-10(B) of the 1976 Code, as added by Act 154 of 1997, is amended to read:
"(B) The provisions of this chapter, with the exception of Sections 38-91-30, 38-91-110, 38-91-130, 38-91-310, 38-91-320, 38-91-330, and 38-91-420 which shall expire on February 28, 2008, must cease to be of any force or effect after February 28, 2003. In other words, the joint underwriting association cannot accept any business after February 28, 2003. However, any policy currently issued by or written through the joint underwriting association, pursuant to this chapter, on February 28, 2003, shall continue to be a valid contract of insurance until the end of the policy period unless canceled by the insurer or insured. Furthermore, until February 28, 2008, the Director of the Department of Insurance may promulgate regulations which he deems necessary to implement this transition including, but not limited to, the termination of the joint underwriting association and its wind-up period."
Time effective
SECTION 16. Sections 1 through 8 and 10 through 15 of this act take effect upon approval by the Governor. Section 9 of this act takes effect ninety days after approval by the Governor.
Ratified the 25th day of April, 2002.
Approved the 1st day of May, 2002.
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