South Carolina Code 38-12-40. Insurer acquisitions, holdings or investments
(B) Subject to subsection (C), an insurer may not acquire or hold an investment as an admitted asset unless at the time of acquisition it is:
Terms Used In South Carolina Code 38-12-40
- Acceptable collateral: means :
(a) cash, cash equivalents, letters of credit, or direct obligations of, or securities that are fully guaranteed as to principal and interest by the government of the United States, an agency of the United States, the Federal National Mortgage Association, or the Federal Home Loan Mortgage Corporation in respect to securities lending transactions, repurchase transactions, and reverse repurchase transactions and for the purpose of calculating counterparty exposure amount; and
(b) sovereign debt rated 1 by the SVO or an equivalent rating by a nationally recognized statistical rating organization recognized by the SVO as to foreign securities lending transactions. See South Carolina Code 38-12-30 - Admitted asset: means an asset that is identified specifically as an admitted asset within the NAIC accounting manual or is not identified specifically as a nonadmitted asset within the NAIC accounting manual, excluding assets of separate accounts because the investments and investment practices of separate accounts are not subject to the provisions of this chapter. See South Carolina Code 38-12-30
- Admitted assets: means assets of an insurer considered admitted on the most recent statutory financial statement of the insurer filed with the department pursuant to § 38-13-80. See South Carolina Code 38-1-20
- Assets: (1) The property comprising the estate of a deceased person, or (2) the property in a trust account.
- Capital and surplus: means the sum of the capital and surplus of the insurer required to be shown on the statutory financial statement of the insurer filed most recently with the director. See South Carolina Code 38-12-30
- Director: means the person who is appointed by the Governor upon the advice and consent of the Senate and who is responsible for the operation and management of the department. See South Carolina Code 38-1-20
- Dollar roll transaction: means two simultaneous transactions with different settlement dates no more than ninety-six days apart, so that in the transaction with the earlier settlement date an insurer sells to a counterparty, and in the other transaction the insurer is obligated to purchase from the same counterparty, substantially similar securities of the following types:
(a) asset-backed securities issued, assumed, or guaranteed by the Government National Mortgage Association, the Federal National Mortgage Association, or the Federal Home Loan Mortgage Corporation, or their respective successors; and
(b) other asset-backed securities referred to in Section 106 of Title I of the Secondary Mortgage Market Enhancement Act of 1984 (15 U. See South Carolina Code 38-12-30 - Insurer: includes a corporation, fraternal organization, burial association, other association, partnership, society, order, individual, or aggregation of individuals engaging or proposing or attempting to engage as principals in any kind of insurance or surety business, including the exchanging of reciprocal or interinsurance contracts between individuals, partnerships, and corporations. See South Carolina Code 38-1-20
- Investment practices: means transactions of the types described in Sections 38-12-280, 38-12-300, 38-12-490, and 38-12-510. See South Carolina Code 38-12-30
- Mortgage: The written agreement pledging property to a creditor as collateral for a loan.
- real estate: includes the leasehold estate only if it has an unexpired term, including renewal options exercisable at the option of the lessee, extending beyond the scheduled maturity date of the obligation that is secured by a mortgage on the leasehold estate by a period equal to at least twenty percent of the original term of the obligation or ten years, whichever is greater. See South Carolina Code 38-12-30
- Repurchase transaction: means a transaction in which an insurer purchases securities from a counterparty that is obligated to repurchase the purchased securities or equivalent securities from the insurer at a specified price, within a specified period of time or upon demand. See South Carolina Code 38-12-30
- Securities lending transaction: means a transaction in which securities are loaned by an insurer or its custodian bank or agent to a qualified bank or a qualified business entity or a bank or a business entity whose obligations with respect to the transaction are guaranteed by a qualified bank or a qualified business entity that is obligated to return the loaned securities or equivalent securities to the insurer, its custodian bank, or agent, within a specified period of time or upon demand. See South Carolina Code 38-12-30
(1) eligible for the payment or accrual of interest or discount, whether in cash, securities, or other forms of income, or eligible to receive dividends or other distributions, or is otherwise income producing; or
(2) acquired pursuant to Sections 38-12-270(C), 38-12-280, 38-12-300, 38-12-320, 38-12-480(C), 38-12-490, 38-12-510, 38-12-520, or other sections of this title.
(C) An insurer may acquire or hold as admitted assets investments that otherwise do not qualify as provided in this chapter if the insurer has not acquired them for the purpose of circumventing a limitation contained in this chapter, if the insurer complies with the provisions of §§ 38-12-60 and 38-12-80 as to the investments and the insurer acquires the investments:
(1) as payment on account of existing indebtedness or in connection with the refinancing, restructuring, or workout of existing indebtedness, if taken to protect the insurer’s interest in that investment;
(2) as realization on collateral for an obligation;
(3) in connection with an otherwise qualified investment or investment practice, as interest on or a dividend or other distribution related to the investment or investment practice, or in connection with the refinancing of the investment, in each case for no additional or only nominal consideration;
(4) under a lawful and bona fide agreement of recapitalization or voluntary or involuntary reorganization in connection with an investment held by the insurer; or
(5) under a bulk reinsurance, merger, or consolidation transaction approved by the director if the assets constitute admissible investments for the ceding, merged, or consolidated companies.
(D) An investment or portion of an investment acquired by an insurer pursuant to subsection (C) becomes a nonadmitted asset three years, or five years in the case of mortgage loans and real estate, from the date of its acquisition, unless within that period the investment has become a qualified investment pursuant to a provision of this chapter other than subsection (C). An investment acquired pursuant to an agreement of bulk reinsurance, merger, or consolidation may be qualified for a longer period if provided in the plan for reinsurance, merger, or consolidation as approved by the director. The director may extend the period for admissibility for an additional reasonable period, upon application by the insurer and a showing that the nonadmission of an asset held pursuant to subsection (C) would injure materially the interests of the insurer.
(E) Except as otherwise provided in subsections (F) and (H), an investment qualifies pursuant to this chapter if, on the date the insurer committed to acquire the investment or on the date of its acquisition, it would have qualified pursuant to this chapter. For purposes of determining its compliance with the limitations contained in this chapter, an insurer shall give appropriate recognition to any commitments to acquire investments.
(F)(1) An investment held as an admitted asset by an insurer on the effective date of this chapter which qualified as an admitted asset immediately before the effective date of this chapter remains qualified as an admitted asset pursuant to this chapter.
(2) Each specific transaction constituting an investment practice of the type described in this chapter that lawfully was entered into by an insurer and was in effect on the effective date of this chapter continues to be permitted by this chapter until its expiration or termination under its terms.
(G) Unless otherwise specified, an investment limitation computed on the basis of the admitted assets or capital and surplus of an insurer must relate to the amount required to be shown on the statutory balance sheet most recently required to be filed by the insurer with the director. For purposes of determining its compliance with any limitation pursuant to this chapter based upon admitted assets, the insurer shall deduct from the amount of its admitted assets the amount of the liability recorded on the statutory balance sheet for:
(1) the return of acceptable collateral received in a reverse repurchase transaction or a securities lending transaction;
(2) cash received in a dollar roll transaction; and
(3) the amount reported as borrowed money in the most recently filed financial statement to the extent not included in items (1) and (2).
(H) An investment qualified, in whole or in part, for acquisition or holding as an admitted asset may be qualified or requalified at the time of acquisition or a later date, in whole or in part, pursuant to another section, if the relevant conditions contained in the other section are satisfied at the time of qualification or requalification.
(I) An insurer shall maintain documentation demonstrating that the insurer acquired investments and engaged in investment practices in accordance with this chapter, and specifying the section of this chapter pursuant to which the insurer acquired the investments or engaged in the investment practices.
(J) An insurer may not enter into an agreement to purchase securities in advance of their issuance for resale to the public as part of a distribution of the securities by the issuer or otherwise guarantee the distribution, except that an insurer may acquire privately placed securities with registration rights.
(K) Notwithstanding the provisions of this chapter, the director, for good cause, may require an insurer to nonadmit, limit, dispose of, withdraw from, or discontinue an investment or investment practice. The authority of the director under this subsection is in addition to any other authority of the director.