S 975 Session 110 (1993-1994)
S 0975 General Bill, By Saleeby, Courtney, Land, McConnell and Rankin
Similar(H 4492)
A Bill to amend the Code of Laws of South Carolina, 1976, by adding Sections
38-13-400, 38-13-410, and 38-13-420 so as to require every insurer domiciled
in South Carolina to file a report with the Director of the Department of
Insurance or his designee disclosing material acquisitions and dispositions of
assets or material nonrenewals, cancellations, or revisions of ceded
reinsurance agreements except under certain circumstances, and enact related
and incidental provisions of law, including further exceptions to reporting;
and to amend the 1976 Code by adding Section 38-5-180 so as to provide that no
insurer may operate from a location within South Carolina unless it is
licensed as an insurer under Section 38-5-10, permitted to operate as an
approved reinsurer under Section 38-5-60, or qualified to operate as an
eligible surplus lines insurer under Section 38-45-90.
01/11/94 Senate Introduced and read first time SJ-54
01/11/94 Senate Referred to Committee on Banking and Insurance SJ-54
A BILL
TO AMEND THE CODE OF LAWS OF SOUTH CAROLINA, 1976,
BY ADDING SECTIONS 38-13-400, 38-13-410, AND 38-13-420 SO
AS TO REQUIRE EVERY INSURER DOMICILED IN SOUTH
CAROLINA TO FILE A REPORT WITH THE DIRECTOR OF THE
DEPARTMENT OF INSURANCE OR HIS DESIGNEE DISCLOSING
MATERIAL ACQUISITIONS AND DISPOSITIONS OF ASSETS OR
MATERIAL NONRENEWALS, CANCELLATIONS, OR REVISIONS
OF CEDED REINSURANCE AGREEMENTS EXCEPT UNDER
CERTAIN CIRCUMSTANCES, AND ENACT RELATED AND
INCIDENTAL PROVISIONS OF LAW, INCLUDING FURTHER
EXCEPTIONS TO REPORTING; AND TO AMEND THE 1976 CODE
BY ADDING SECTION 38-5-180 SO AS TO PROVIDE THAT NO
INSURER MAY OPERATE FROM A LOCATION WITHIN SOUTH
CAROLINA UNLESS IT IS LICENSED AS AN INSURER UNDER
SECTION 38-5-10, PERMITTED TO OPERATE AS AN APPROVED
REINSURER UNDER SECTION 38-5-60, OR QUALIFIED TO
OPERATE AS AN ELIGIBLE SURPLUS LINES INSURER UNDER
SECTION 38-45-90.
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. Chapter 13, Title 38 of the 1976 Code, as last amended
by Section 537 of Act 181 of 1993, is further amended by adding:
"Section 38-13-400. (A) Effective January 1, 1995, every
insurer domiciled in this State shall file a report with the director or his
designee disclosing material acquisitions and dispositions of assets or
material nonrenewals, cancellations, or revisions of ceded reinsurance
agreements, unless such acquisitions and dispositions of assets or
material nonrenewals, cancellations, or revisions of ceded reinsurance
agreements have been submitted to the director or his designee for
review, approval, or information purposes pursuant to other provisions
of the insurance laws, regulations, or other requirements.
(B) The report required in subsection (A) is due within fifteen days
after the end of the calendar month in which any of the foregoing
transactions occur.
(C) One complete copy of the report, including any exhibits or other
attachments filed as part thereof, must be filed with:
(1) the director or his designee; and
(2) the National Association of Insurance Commissioners.
(D) All reports obtained by or disclosed to the director or his
designee pursuant to this section or Sections 38-13-410 or 38-13-420
must be given confidential treatment and are not subject to subpoena and
shall not be made public by the director or his designee, 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 director or his designee,
after giving the insurer which would be affected thereby notice and an
opportunity to be heard, determines that the interest of policyholders,
shareholders, or the public will be served by the publication thereof, in
which event the director or his designee may publish all or any part
thereof in such manner as the director or his designee considers
appropriate.
Section 38-13-410. (A) No acquisitions or dispositions of assets
need be reported pursuant to Section 38-13-400 if the acquisitions or
dispositions are not material. For purposes of this section and Sections
38-13-400 and 38-13-420, a material acquisition (or the aggregate of any
series of related acquisitions during any thirty-day period) is one that is
nonrecurring and not in the ordinary course of business and involves
more than five percent of the reporting insurer's total admitted assets as
reported in its most recent annual statement filed with the insurance
department of the insurer's state of domicile.
(B) (1) Asset acquisitions subject to this section and Sections
38-13-400 and 38-13-420 include every purchase, lease, exchange,
merger, consolidation, succession, or other acquisition other than the
construction or development of real property by or for the reporting
insurer or the acquisition of materials for such purpose.
(2) Asset dispositions subject to this section and Sections
38-13-400 and 38-13-420 include every sale, lease, exchange, merger,
consolidation, mortgage, hypothecation, assignment (whether for the
benefit of creditors or otherwise), abandonment, destruction, or other
disposition.
(C) (1) The following information must be disclosed in any report
of a material acquisition or disposition of assets:
(a) date of the transaction;
(b) manner of acquisition or disposition;
(c) description of the assets involved;
(d) nature and amount of the consideration given or received;
(e) purpose of, or reason for, the transaction;
(f) manner by which the amount of consideration was
determined;
(g) gain or loss recognized or realized as a result of the
transaction; and
(h) names of the persons from whom the assets were acquired
or to whom they were disposed.
(2) Insurers shall report material acquisitions and dispositions on
a nonconsolidated basis unless the insurer is part of a consolidated group
of insurers which utilizes a pooling arrangement or one hundred percent
reinsurance agreement that affects the solvency and integrity of the
insurer's reserves and such insurer ceded substantially all of its direct
and assumed business to the pool. An insurer is considered to have
ceded substantially all of its direct and assumed business to a pool if the
insurer has less than one million dollars total direct plus assumed written
premiums during a calendar year that are not subject to a pooling
arrangement and the net income of the business not subject to the
pooling arrangement represents less than five percent of the insurer's
capital and surplus.
Section 38-13-420. (A) No nonrenewals, cancellations, or revisions
of ceded reinsurance agreements need be reported pursuant to Section
38-13-400 if the nonrenewals, cancellations, or revisions are not
material. For purposes of this section and Sections 38-13-400 and
38-13-410, a material nonrenewal, cancellation, or revision is one that
affects, for property and casualty business, including accident and health
business when written as such, more than fifty percent of an insurer's
ceded written premium, or, for life, annuity, and accident and health
business, more than fifty percent of the total reserve credit taken for
business ceded, on an annualized basis as indicated in the insurer's most
recently filed annual statement; provided, however, that no filing is
required if the insurer's ceded written premium or the total reserve credit
taken for business ceded represents, on an annualized basis, less than ten
percent of direct plus assumed written premium or ten percent of the
statutory reserve requirement before any cession, respectively.
(B) Subject to the criteria outline in subsection (A) of this section,
a report must be filed without regard to which party has initiated the
nonrenewal, cancellation, or revision of ceded reinsurance whenever one
or more of the following conditions exist:
(1) the entire cession has been canceled, nonrenewed, or revised
and ceded indemnity and loss adjustment expense reserves after any
nonrenewal, cancellation, or revision represent less than fifty percent of
the comparable reserves that would have been ceded had the
nonrenewal, cancellation, or revision not occurred;
(2) an authorized or accredited reinsurer has been replaced on an
existing cession by an unauthorized reinsurer; or
(3) collateral requirements previously established for
unauthorized reinsurers have been reduced; e.g., the requirement to
collateralize incurred but not reported (IBNR) claim reserves has been
waived with respect to one or more unauthorized reinsurers newly
participating in an existing cession.
Subject to the materiality criteria outlined in subsection (A) of this
section, for purposes of items (2) and (3), a report must be filed if the
result of the revision affects more than ten percent of the cession.
(C) (1) The following information must be disclosed in any report
of a material nonrenewal, cancellation, or revision of ceded reinsurance
agreements:
(a) effective date of the nonrenewal, cancellation, or revision;
(b) the description of the transaction with an identification of
the initiator of the transaction;
(c) purpose of, or reason, for, the transaction; and
(d) if applicable, the identity of the replacement reinsurers.
(2) Insurers are required to report all material nonrenewals,
cancellations, or revisions of ceded reinsurance agreements on a
nonconsolidated basis unless the insurer is part of a consolidated group
of insurers which utilizes a pooling arrangement or one hundred percent
reinsurance agreement that affects the solvency and integrity of the
insurer's reserves and the insurer ceded substantially all of its direct and
assumed business to the pool. An insurer is deemed to have ceded
substantially all of its direct and assumed business to a pool if the insurer
has less than one million dollars total direct plus assumed written
premiums during a calendar year that are not subject to a pooling
arrangement and the net income of the business not subject to the
pooling arrangement represents less than five percent of the insurer's
capital and surplus."
SECTION 2. The 1976 Code is amended by adding:
"Section 38-5-180. No insurer may operate from a location
within South Carolina unless it is licensed as an insurer as provided in
Section 38-5-10, or permitted to operate as an approved reinsurer as
provided in Section 38-5-60, or qualified to operate as an eligible
surplus lines insurer as provided in Section 38-45-90."
SECTION 3. Except as otherwise specifically provided in this act, this
act takes effect upon approval by the Governor except that, until July 1,
1995, the words "director or his designee" in Section
38-13-400 of the 1976 Code, as contained in Section 1, must be
construed to mean the Chief Insurance Commissioner of South Carolina.
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