Current Status Introducing Body:Senate Bill Number:975 Primary Sponsor:Saleeby Committee Number:02 Type of Legislation:GB Subject:Reinsurance agreements, provisions Residing Body:Senate Current Committee:Banking and Insurance Computer Document Number:BBM/10798JM.94 Introduced Date:19940111 Last History Body:Senate Last History Date:19940111 Last History Type:Introduced, read first time, referred to Committee Scope of Legislation:Statewide All Sponsors:Saleeby Land McConnell Courtney Rankin Type of Legislation:General Bill
Bill Body Date Action Description CMN Leg Involved
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975 Senate 19940111 Introduced, read first time, 02
referred to Committee
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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.