South Carolina Code 38-12-240. Investment pools; qualification requirements; pooling agreements
(1) obligations that are rated 1 or 2 by the SVO or have an equivalent of a SVO 1 or 2 rating, or in the absence of a 1 or 2 rating or equivalent rating the issuer has outstanding obligations with a SVO 1 or 2 or an equivalent rating by a nationally recognized statistical rating organization recognized by the SVO and have a remaining maturity of:
Terms Used In South Carolina Code 38-12-240
- 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
- Affiliate: means , in respect to a person, another person that, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with the person. See South Carolina Code 38-12-30
- Alien insurer: means an insurer incorporated or organized under the laws of a country other than the United States of America, its states, commonwealths, territories, or insular possessions. 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.
- Attorney-in-fact: A person who, acting as an agent, is given written authorization by another person to transact business for him (her) out of court.
- Business entity: means a sole proprietorship, corporation, limited liability company, association, general or limited partnership, joint stock company, joint venture, mutual fund, bank, trust, real estate investment trust, joint tenancy, or other similar form of business organization, whether organized for-profit or not-for-profit. See South Carolina Code 38-12-30
- directly: when used in connection with an obligation, means that the designated obligor is primarily liable on the instrument representing the obligation. 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
- Domestic insurer: means an insurer incorporated or organized under the laws of this State. See South Carolina Code 38-1-20
- Fair market value: The price at which an asset would change hands in a transaction between a willing, informed buyer and a willing, informed seller.
- 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
- Interest rate: The amount paid by a borrower to a lender in exchange for the use of the lender's money for a certain period of time. Interest is paid on loans or on debt instruments, such as notes or bonds, either at regular intervals or as part of a lump sum payment when the issue matures. Source: OCC
- Person: means an individual, a business entity, a multilateral development bank, or a government or quasi-governmental body, such as a political subdivision or a government sponsored enterprise. See South Carolina Code 38-12-30
- Qualified bank: means :
(a) a national bank, state-chartered bank, or trust company that is at all times capitalized adequately as determined by standards adopted by United States banking regulators and that is either regulated by state banking laws or is a member of the Federal Reserve System; or
(b) a bank or trust company incorporated or organized pursuant to the laws of a country other than the United States that is regulated as a bank or trust company by that country's government or an agency of it and that is at all times capitalized adequately as determined by the standards adopted by international banking authorities. See South Carolina Code 38-12-30 - Settlement: Parties to a lawsuit resolve their difference without having a trial. Settlements often involve the payment of compensation by one party in satisfaction of the other party's claims.
- State: means a state, territory, or possession of the United States of America, the District of Columbia, or the Commonwealth of Puerto Rico. See South Carolina Code 38-12-30
- Statute: A law passed by a legislature.
- SVO: means the Securities Valuation Office of the NAIC or any successor office established by the NAIC. See South Carolina Code 38-12-30
- Trustee: A person or institution holding and administering property in trust.
(a) three hundred ninety-seven days or less or a put which entitles the holder to receive the principal amount of the obligation that may be exercised through maturity at specified intervals not exceeding three hundred ninety-seven days; or
(b) three years or less and a floating interest rate that resets no less frequently than quarterly on the basis of a current short-term index, such as federal funds, prime rate, Treasury bills, London InterBank Offered Rate (LIBOR) or commercial paper, and is subject to no maximum limit, if the obligations do not have an interest rate that varies inversely to market interest rate changes;
(2) government money market mutual funds or class one money market mutual funds; or
(3) securities lending, repurchase transactions, and reverse repurchase transactions that meet all the requirements of § 38-12-280, except the quantitative limitations of § 38-12-280(4); or
(4) invest only in investments that an insurer may acquire pursuant to this chapter, if the insurer’s proportionate interest in the amount invested in these investments, when combined with the amounts of the investments made directly or indirectly through an investment affiliate or other insurer investment pool permitted pursuant to this item does not exceed the applicable limits of this chapter for those investments.
(B) For an investment in an investment pool to be qualified pursuant to this chapter, the investment pool may not:
(1) acquire securities issued, assumed, guaranteed, or insured by the insurer or an affiliate of the insurer;
(2) borrow or incur indebtedness for borrowed money, except for securities lending and reverse repurchase transactions that meet the requirements of § 38-12-280, except the quantitative limitations of § 38-12-280(4); or
(3) acquire an investment if as a result of and after giving effect to the transaction the aggregate value of securities then loaned or sold to, purchased from, or invested in any one business entity pursuant to this section exceed ten percent of the total assets of the investment pool.
(C) The limitations of § 38-12-220(A) do not apply to an investment by an insurer in an investment pool, except that an insurer may not acquire an investment in an investment pool pursuant to this section if as a result of and after giving effect to the investment the aggregate amount of investments then held by the insurer pursuant to this section:
(a) in all investment pools that invest in investments permitted pursuant to subsection (A)(4) exceeds twenty-five percent of its admitted assets; or
(b) in all investment pools exceeds thirty-five percent of its admitted assets.
(D) For an investment in an investment pool to be qualified pursuant to this chapter, the manager of the investment pool must:
(1) be organized under the laws of the United States or one of its states or the District of Columbia and designated as the pool manager in a pooling agreement;
(2) be the insurer, an affiliated insurer, or a business entity affiliated with the insurer, a qualified bank, a business entity registered under the Investment Advisors Act of 1940 (15 U.S.C. Sections 80a-1 et seq., as amended), or any other similar applicable state statute, or, in the case of a reciprocal insurer or interinsurance exchange, its attorney-in-fact, or in the case of a United States branch of an alien insurer, its United States manager or an affiliate or subsidiary of its United States manager;
(3) compile and maintain, or cause to be compiled and maintained, detailed accounting records including:
(a) the cash receipts and disbursements reflecting the proportionate investment of each participant in the investment pool;
(b) a complete description of all underlying assets of the investment pool including amount, interest rate, maturity date, if any, and other appropriate designations; and
(c) other records that allow third parties to verify the investment of each participant in the investment pool on a daily basis; and
(4) maintain the assets of the investment pool in one or more accounts, in the name of or on behalf of the investment pool either under a custody agreement or a trust agreement with a qualified bank or at the principal office of the pool manager. The applicable agreement must:
(a) state and recognize the claims and rights of each participant;
(b) acknowledge that the underlying assets of the investment pool are held for the sole benefit of each participant in proportion to the aggregate amount of its investments in the investment pool; and
(c) contain an agreement that the underlying assets of the investment pool must not be commingled with the general assets of the qualified bank or any other person.
(E) The pooling agreement for each investment pool must be in writing and must provide that:
(1) an insurer and its affiliated insurers or, in the case of an investment pool investing only in investments permitted under subsections (A)(1), (2), and (3) the insurer and its subsidiaries, affiliates, or any pension or profit sharing plan of the insurer, its subsidiaries and affiliates, or, in the case of a United States branch of an alien insurer, affiliates or subsidiaries of its United States manager, shall hold one hundred percent of the interests in the investment pool at all times;
(2) the underlying assets of the investment pool must not be commingled with the general assets of the pool manager or any other person;
(3) in proportion to the aggregate amount of the interest of each participant in the investment pool:
(a) each participant owns an undivided interest in the underlying assets or the investment pool; and
(b) the underlying assets of the investment pool are held for the sole benefit of each participant;
(4) a participant, or his trustee, receiver, conservator, or other successor-in-interest, if a participant is insolvent, bankrupt, or in receivership, may withdraw all or a portion of its investment from the investment pool pursuant to the terms of the pooling agreement;
(5) withdrawals may be made on demand without penalty or other assessment on any business day, but settlement of funds must occur within a reasonable and customary period after the date on which the withdrawal is made, not to exceed ten business days. Distributions pursuant to this item must be calculated in each case net of all fees and expenses of the investment pool then applicable. The pooling agreement must provide that the pool manager shall distribute to a participant, at the discretion of the pool manager:
(a) the then fair market value of the participant’s pro rata share of each underlying asset of the investment pool, in cash;
(b) a pro rata share of each underlying asset, in kind; or
(c) a pro rata share in each underlying asset, in a combination of cash and in-kind distributions; and
(6) the pool manager shall make the records of the investment pool available for inspection by the director.
(F) Except for the formation of an investment pool, transactions between a domestic insurer and an affiliated insurer investment pool are not subject to the requirements of § 38-21-250.