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S. 1270
STATUS INFORMATION
General Bill
Sponsors: Senator Thomas
Document Path: l:\council\bills\dka\3855dw08.doc
Introduced in the Senate on April 9, 2008
Currently residing in the Senate Committee on Banking and Insurance
Summary: Captive insurance company
HISTORY OF LEGISLATIVE ACTIONS
Date Body Action Description with journal page number
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4/9/2008 Senate Introduced and read first time SJ-4
4/9/2008 Senate Referred to Committee on Banking and Insurance SJ-4
View the latest legislative information at the LPITS web site
VERSIONS OF THIS BILL
TO AMEND SECTIONS 38-90-40 AND 38-90-50, BOTH AS AMENDED, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO THE CAPITALIZATION REQUIREMENTS AND FREE SURPLUS REQUIREMENT OF A CAPTIVE INSURANCE COMPANY, SO AS TO DELETE THE REQUIREMENT OF BEING NO MORE THAN TEN CELLS FOR A SPONSORED CAPTIVE INSURANCE COMPANY; TO AMEND SECTION 38-90-60, AS AMENDED, RELATING TO THE INCORPORATION OPTIONS AND REQUIREMENTS OF A PURE CAPTIVE INSURANCE COMPANY, SO AS TO DELETE CERTAIN REQUIREMENTS OF A COMPANY FORMED AS A CORPORATION AS A LIMITED LIABILITY COMPANY OR AS A RECIPROCAL INSURER; TO AMEND SECTION 38-90-70, AS AMENDED, RELATING TO REPORTS REQUIRED TO BE SUBMITTED TO THE DIRECTOR OF INSURANCE BY A CAPTIVE INSURANCE COMPANY, SO AS TO GIVE AUTHORITY TO THE DIRECTOR TO WAIVE OR GRANT AN EXTENSION TO THE FILING REQUIREMENT; TO AMEND SECTION 38-90-80, AS AMENDED, RELATING TO INSPECTIONS AND EXAMINATIONS OF CAPTIVE INSURANCE COMPANIES BY THE DIRECTOR, SO AS TO INCREASE FROM THREE TO FIVE YEARS THE TIME FOR THE INSPECTION AND EXAMINATION OF THESE COMPANIES AND DELETE THE AUTHORIZATION OF THE DIRECTOR TO ENLARGE THE THREE-YEAR PERIOD TO FIVE YEARS IF THE COMPANY IS SUBJECT TO A COMPREHENSIVE ANNUAL AUDIT; TO AMEND SECTION 38-90-90, RELATING TO THE SUSPENSION OR REVOCATION OF THE LICENSE OF A CAPTIVE INSURANCE COMPANY, SO AS TO AUTHORIZE THE DIRECTOR TO IMPOSE A FINE INSTEAD OF SUSPENDING OR REVOKING A LICENSE; TO AMEND SECTION 38-90-130, RELATING TO THE PARTICIPATION OF A CAPTIVE INSURANCE COMPANY IN A PLAN, POOL, ASSOCIATION OF GUARANTY OR INSOLVENCY FUND, SO AS TO EXEMPT PARTICIPATION IN A POOL FOR THE PURPOSES OF COMMERCIAL RISK SHARING IS NOT PROHIBITED UNDER THE PROVISIONS OF THIS SECTION; TO AMEND SECTION 38-90-175, AS AMENDED, RELATING TO THE CREATION OF THE "CAPTIVE INSURANCE REGULATORY AND SUPERVISION FUND", SO AS TO PROVIDE THAT THE TRANSFER OF FUNDS FROM THE CAPTIVE INSURANCE REGULATORY AND SUPERVISION FUND MUST BE PURSUANT TO A REPORT PROVIDED TO THE TREASURER SPECIFYING THE PERCENTAGE OF TAXES TO BE TRANSFERRED NOT TO EXCEED FIFTY PERCENT; TO AMEND SECTION 38-90-180, AS AMENDED, RELATING TO THE APPLICABILITY OF CERTAIN PROVISIONS TO CAPTIVE INSURANCE COMPANIES, SO AS TO SPECIFY THAT THE PROVISION IN CHAPTERS 26 AND 27 OF TITLE 38 APPLY; AND TO AMEND SECTION 38-90-440, AS AMENDED, RELATING TO THE AUTHORITY OF A SPECIAL PURPOSE FINANCIAL CAPTIVE (SPFC) TO APPLY FOR A LICENSE TO CONDUCT BUSINESS, SO AS TO CHANGE THE MANNER IN WHICH A NONREFUNDABLE FEE IS ASSESSED FOR PROCESSING THE SPFC'S APPLICATION FOR A LICENSE WHICH IS A MINIMUM OF TWELVE THOUSAND DOLLARS.
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. Section 38-90-40(A)(1)(d) of the 1976 Code, as last amended by Act 291 of 2004, is further amended to read:
"(d) in the case of a sponsored captive insurance company, not less than five hundred thousand dollars; however, if the sponsored captive insurance company does not assume any risk, and the risks insured by the protected cells are homogeneous and there are no more than ten cells, the director may reduce this amount to an amount not less than one hundred fifty thousand dollars;"
SECTION 2. Section 38-90-50(A)(1)(f) of the 1976 Code, as last amended by Act 332 of 2006, is further amended to read:
"(f) in the case of a sponsored captive insurance company, not less than five hundred thousand dollars; however, if the sponsored captive insurance company does not assume any risk, and the risks insured by the protected cells are homogeneous and there are no more than ten cells, the director may reduce this amount to an amount not less than one hundred fifty thousand dollars; and"
SECTION 3. Section 38-90-60 of the 1976 Code, as last amended by Act 291 of 2004, is further amended to read:
"Section 38-90-60. (A) A pure captive insurance company or a sponsored captive insurance company may be:
(1) incorporated as a stock insurer with its capital divided into shares and held by the stockholders;
(2) incorporated as a public benefit, mutual benefit, or religious nonprofit corporation with members in accordance with the South Carolina Nonprofit Corporation Act of 1994; or
(3) organized as a limited liability company with its capital divided into capital accounts and held by its members.
(B) An association captive insurance company or an industrial insured captive insurance company may be:
(1) incorporated as a stock insurer with its capital divided into shares and held by the stockholders;
(2) organized as a limited liability company with its capital divided into capital accounts and held by its members;
(3) incorporated as a mutual insurer without capital stock, the governing body of which is elected by the member organizations of its association; or
(4) organized as a reciprocal insurer in accordance with Chapter 17.
(C) A captive insurance company may not have fewer than three incorporators or organizers of whom not fewer than two must be residents of this State.
(D) In the case of a captive insurance company formed as a corporation, a nonprofit corporation, or a limited liability company, before the articles of incorporation or articles of organization are transmitted to the Secretary of State, the incorporators or organizers shall petition the director to issue a certificate setting forth a finding that the establishment and maintenance of the proposed entity will promote the general good of the State. In arriving at this finding the director shall consider:
(1) the character, reputation, financial standing, and purposes of the incorporators or organizers;
(2) the character, reputation, financial responsibility, insurance experience, and business qualifications of the officers and directors or managers; and
(3) other aspects as the director considers advisable.
(E) The articles of incorporation or articles of organization, the certificate issued pursuant to subsection (D), and the organization fees required by Section 33-1-220, 33-31-122, or 33-44-1204, as applicable, must be transmitted to the Secretary of State, who shall record both the articles of incorporation or articles of organization and the certificate.
(F) In the case of a captive insurance company formed as a reciprocal insurer, the organizers shall petition the director to issue a certificate setting forth the director's finding that the establishment and maintenance of the proposed association will promote the general good of the State. In arriving at this finding the director shall consider:
(1) the character, reputation, financial standing, and purposes of the incorporators or organizers;
(2) the character, reputation, financial responsibility, insurance experience, and business qualifications of the officers and directors or managers; and
(3) other aspects the director considers advisable.
(G) In the case of a captive insurance company licensed as a branch captive insurance company, the alien captive insurance company shall petition the director to issue a certificate setting forth the director's finding that, after considering the character, reputation, financial responsibility, insurance experience, and business qualifications of the officers and directors or managers of the alien captive insurance company, the licensing and maintenance of the branch operations will promote the general good of the State. The alien captive insurance company may register to do business in this State after the director's certificate has been issued.
(H) The capital stock or membership interests of a captive insurance company incorporated as a stock insurer or limited liability company must be issued at not less than par value.
(I) In the case of a captive insurance company formed as a corporation or a nonprofit corporation, at least one of the members of the board of directors of a captive insurance company incorporated in this State must be a resident of this State.
(J) In the case of a captive insurance company formed as a limited liability company, at least one of the managers of the captive insurance company must be a resident of this State.
(K) In the case of a captive insurance company formed as a reciprocal insurer, at least one of the members of the subscribers' advisory committee must be a resident of this State.
(L) A captive insurance company formed as a corporation, a nonprofit corporation, or a limited liability company, pursuant to the provisions of this chapter has the privileges and is subject to the provisions of the general corporation law, including the South Carolina Nonprofit Corporation Act of 1994 for nonprofit corporations and the South Carolina Uniform Limited Liability Company Act of 1996 for limited liability companies, as applicable, as well as the applicable provisions contained in this chapter. If a conflict occurs between a provision of the general corporation law, including the South Carolina Nonprofit Corporation Act of 1994 for nonprofit corporations and the South Carolina Uniform Limited Liability Company Act of 1996 for limited liability companies, as applicable, and a provision of this chapter, the latter controls. The provisions of this title pertaining to mergers, consolidations, conversions, mutualizations, and redomestications apply in determining the procedures to be followed by a captive insurance company in carrying out any of the transactions described in those provisions, except the director may waive or modify the requirements for public notice and hearing in accordance with regulations which the director may promulgate addressing categories of transactions. If a notice of public hearing is required, but no one requests a hearing, the director may cancel the hearing.
(M)(J) A captive insurance company formed as a reciprocal insurer pursuant to the provisions of this chapter has the privileges and is subject to Chapter 17 in addition to the applicable provisions of this chapter. If a conflict occurs between the provisions of Chapter 17 and the provisions of this chapter, the latter controls. To the extent a reciprocal insurer is made subject to other provisions of this title pursuant to Chapter 17, the provisions are not applicable to a reciprocal insurer formed pursuant to the provisions of this chapter unless the provisions are expressly made applicable to a captive insurance company pursuant to the provisions of this chapter.
(N)(K) The articles of incorporation or bylaws of a captive insurance company may authorize a quorum of a board of directors to consist of no fewer than one-third of the fixed or prescribed number of directors as provided for in Section 33-8-240(b). In the case of a limited liability company, the articles of organization or operating agreement of a captive insurance company may authorize a quorum to consist of no fewer than one-third of the managers required by the articles of organization or the operating agreement."
SECTION 4. Section 38-90-70(A) of the 1976 Code is amended to read:
"(A) A captive insurance company may not be required to make an annual report except as provided in this chapter. The director may waive or grant an extension to the requirement to file an annual report."
SECTION 5. Section 38-90-80(A) of the 1976 Code is amended to read:
"(A) At least once in three five years, and whenever the director determines it to be prudent necessary, the director personally, or by a competent person appointed by the director his designee, shall visit each captive insurance company and thoroughly inspect and examine its affairs to ascertain its financial condition, its ability to fulfill its obligations, and whether it has complied with this chapter. The director upon application, in his discretion, may enlarge the three-year period to five years, if a captive insurance company is subject to a comprehensive annual audit during that period of a scope satisfactory to the director by independent auditors approved by the director. The expenses and charges of the examination must be paid to the State by the company or companies examined and the department shall issue its warrants for the proper charges incurred in all examinations."
SECTION 6. Section 38-90-90 of the 1976 Code is amended by adding a subsection to read:
"(C) Instead of suspending or revoking the license of a captive insurance company, the director or his designee may impose fines as provided for in Section 38-2-10."
SECTION 7. Section 38-90-130 of the 1976 Code is amended to read:
"Section 38-90-130. A captive insurance company, including a captive insurance company organized as a reciprocal insurer under this chapter, may not join or contribute financially to a plan, pool, association, or guaranty or insolvency fund in this State, and a captive insurance company, or its insured or its parent or any affiliated company or any member organization of its association, or in the case of a captive insurance company organized as a reciprocal insurer, a subscriber of the company, may not receive a benefit from a plan, pool, association, or guaranty or insolvency fund for claims arising out of the operations of such captive insurance company. Participation in a pool for the purposes of commercial risk sharing is not prohibited under the provisions of this section."
SECTION 8. Section 38-90-175(A) of the 1976 Code, as last amended by Act 332 of 2006, is further amended to read:
"(A) There is created a fund to be known as the 'Captive Insurance Regulatory and Supervision Fund' for the purpose of providing the financial means for the director to administer Chapter 87 and Chapter 90 of this title and for reasonable expenses incurred in promoting the captive insurance industry in the State. The transfer of twenty funds is pursuant to a report provided to the treasurer specifying the percentage of taxes to be transferred. This report must be submitted by February first of each year. The amount may be up to but not in excess of fifty percent of the taxes collected by the department pursuant to Chapter 90 of this title, and all fees and assessments received by the department pursuant to the administration of this chapter must be credited to this fund. All fees received by the department from reinsurers who assume risk only from captive insurance companies, must be deposited into the Captive Insurance Regulatory and Supervision Fund. All fines and administrative penalties must be deposited directly into the general fund."
SECTION 9. Section 38-90-180(A) of the 1976 Code, as last amended by Act 291 of 2004, is further amended to read:
"(A) Except as otherwise provided in this section, the terms and conditions set forth provided for in Chapters 26 and 27 of this title pertaining to insurance reorganizations, receiverships, and injunctions apply in full to captive insurance companies formed or licensed under this chapter."
SECTION 10. Section 38-90-440(G)(1) of the 1976 Code, as last amended by Act 332 of 2006, is further amended to read:
"(1) a nonrefundable fee of two hundred dollars for processing its application for license. In addition, the director may retain legal, financial, and examination services from outside the department to examine and investigate the application, the reasonable cost of which may be charged against the applicant, or the director may use internal resources to examine and investigate the application for a fee of twelve thousand dollars, half of which is based upon an hourly rate for the services performed or the usual and customary fee charged by the financial services industry for similar work subject to a minimum of twelve thousand dollars payable upon filing of the application and the remainder upon licensure, or both;"
SECTION 11. This act takes effect upon approval by the Governor.
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