(A)(1) In connection with mortgage loans, an insurer:

(a) may acquire obligations secured by mortgages on real estate situated within a domestic jurisdiction, subject to the limitations of § 38-12-430, either directly or indirectly through:

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Terms Used In South Carolina Code 38-12-480

  • Accident and health insurance: means protection that provides payment of benefits for covered sickness or accidental injury, excluding credit insurance, disability insurance, accidental death and dismemberment insurance, and long-term care insurance. 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
  • 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
  • Amortization: Paying off a loan by regular installments.
  • Assets: (1) The property comprising the estate of a deceased person, or (2) the property in a trust account.
  • 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 jurisdiction: means the United States, Canada, or a state, province, or political subdivision of them. See South Carolina Code 38-12-30
  • Escrow: Money given to a third party to be held for payment until certain conditions are met.
  • 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.
  • insurance: includes annuities. See South Carolina Code 38-1-20
  • 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
  • Investment affiliate: means a subsidiary of an insurer or a direct or indirect subsidiary of the insurer's parent company (parent) that is engaged or organized to engage exclusively in the ownership and management of assets authorized as investments for the insurer, if the affiliate agrees to limit its investment in any asset so that its investments will not cause the amount of the total investment of the insurer to exceed the investment limitations or avoid other provisions of this chapter applicable to the insurer. See South Carolina Code 38-12-30
  • Jurisdiction: (1) The legal authority of a court to hear and decide a case. Concurrent jurisdiction exists when two courts have simultaneous responsibility for the same case. (2) The geographic area over which the court has authority to decide cases.
  • Lease: A contract transferring the use of property or occupancy of land, space, structures, or equipment in consideration of a payment (e.g., rent). Source: OCC
  • Lien: A claim against real or personal property in satisfaction of a debt.
  • Limited liability company: means a business organization, excluding partnerships and ordinary business corporations, organized or operating pursuant to the laws of the United States or a state of the United States that limits the personal liability of investors to the equity investment of the investor in the business entity. See South Carolina Code 38-12-30
  • Market value: means :

    (a) the amount of cash or a letter of credit; or

    (b) the price of a security or derivative instrument on any date obtained from a generally recognized source or the most recent quotation from the source or, to the extent no generally recognized source exists, the price for the security or derivative instrument as determined pursuant to the terms of the instrument or in good faith by the parties to a transaction, plus accrued but unpaid income on the security or derivative instrument to the extent that income is not included in the price as of the date that market value is determined. See South Carolina Code 38-12-30
  • Mortgage: The written agreement pledging property to a creditor as collateral for a loan.
  • Mortgage loan: A loan made by a lender to a borrower for the financing of real property. Source: OCC
  • Mortgage loan: means an obligation secured by a mortgage, deed of trust, trust deed, or other consensual lien on real estate. See South Carolina Code 38-12-30
  • NAIC: means the National Association of Insurance Commissioners. See South Carolina Code 38-12-30
  • Obligation: An order placed, contract awarded, service received, or similar transaction during a given period that will require payments during the same or a future period.
  • Obligation: means a bond, note, debenture, trust certificate including an equipment trust certificate, production payment, negotiable bank certificate of deposit, bankers' acceptance, asset-backed security, credit tenant loan, loan secured by financing a net lease or net leases, and other evidence of indebtedness for the payment of money, or participations, certificates, or other evidences of an interest in any of them, whether constituting a general obligation of the issuer or payable only out of certain revenues or certain funds pledged or otherwise dedicated for payment. See South Carolina Code 38-12-30
  • Partnership: A voluntary contract between two or more persons to pool some or all of their assets into a business, with the agreement that there will be a proportional sharing of profits and losses.
  • Premium: means payment given in consideration of a contract of insurance. See South Carolina Code 38-1-20
  • 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
  • Recourse: An arrangement in which a bank retains, in form or in substance, any credit risk directly or indirectly associated with an asset it has sold (in accordance with generally accepted accounting principles) that exceeds a pro rata share of the bank's claim on the asset. If a bank has no claim on an asset it has sold, then the retention of any credit risk is recourse. Source: FDIC
  • Secured location: means the contiguous real estate owned by one person. See South Carolina Code 38-12-30
  • SVO: means the Securities Valuation Office of the NAIC or any successor office established by the NAIC. See South Carolina Code 38-12-30

(i) limited partnership interests and general partnership interests not otherwise prohibited by § 38-12-60(A)(4);

(ii) joint ventures;

(iii) stock of an investment affiliate;

(iv) membership interests in a limited liability company;

(v) trust certificates; or

(vi) other similar instruments; and

(b) may not acquire a mortgage loan secured by other than a first lien pursuant to this item unless the insurer is the holder of the first lien. The obligations held by the insurer and obligations with an equal lien priority, at the time of acquisition of the obligation, may not exceed:

(i) ninety percent of the fair market value of the real estate, if the mortgage loan is secured by a purchase money mortgage or like security received by the insurer upon disposition of the real estate;

(ii) eighty percent of the fair market value of the real estate, if the mortgage loan requires immediate scheduled payment in periodic installments of principal and interest over an amortization period of thirty years or less, and periodic payments are required at least annually. Each periodic payment must be sufficient to ensure that at all times the outstanding principal balance of the mortgage loan is not greater than the outstanding principal balance that would be outstanding pursuant to a mortgage loan with the same original principal balance and the same interest rate and requiring equal payments of principal and interest with the same frequency over the same amortization period. Mortgage loans that otherwise are permitted pursuant to this subsection may provide for a payment of the principal balance before the end of the period of amortization of the loan. For residential mortgage loans, the eighty percent limitation may be increased to ninety-seven percent if acceptable private mortgage insurance has been obtained; or

(iii) seventy-five percent of the fair market value of the real estate for mortgage loans that do not meet the requirements of subsubitem (i) or (ii).

(2) For purposes of item (1), the amount of an obligation required to be included in the calculation of the loan-to-value ratio may be reduced to the extent the obligation is insured by the Federal Housing Administration or guaranteed by the Administrator of Veterans Affairs, or their successors.

(3)(a) Subject to the limitations of § 38-12-430, an insurer may acquire obligations secured by a second mortgage on real estate situated within a domestic jurisdiction, in addition to that which is authorized under item (1), either directly or indirectly through:

(i) limited partnership interests and general partnership interests not otherwise prohibited by § 38-12-60(A)(4);

(ii) joint ventures;

(iii) stock of an investment affiliate;

(iv) membership interests in a limited liability company;

(v) trust certificates; or

(vi) other similar instruments.

(b) The obligation held by the insurer must be the sole second lien priority obligation and, at the time of acquisition of the obligation, may not exceed seventy percent of the amount by which the fair market value of the real estate exceeds the amount outstanding under the first mortgage.

(4) A mortgage loan that is held by an insurer pursuant to § 38-12-40(F) or acquired pursuant to this section and is restructured in a manner that meets the requirements of a restructured mortgage loan in accordance with the NAIC accounting manual continues to qualify as a mortgage loan pursuant to this chapter.

(5) Subject to the limitations of § 38-12-430, a credit lease transaction that does not qualify for investment pursuant to § 38-12-440 is exempt from the provisions of item (1) if:

(a) the loan amortizes over the initial fixed lease term in an amount at least sufficient so that the loan balance at the end of the lease term does not exceed the original appraised value of the real estate;

(b) the lease payments cover or exceed the total debt service over the life of the loan;

(c) a tenant or its affiliated entity whose rated credit instruments have a SVO 1 or 2 designation or a comparable rating from a nationally recognized statistical rating organization recognized by the SVO has a full faith and credit obligation to make the lease payments;

(d) the insurer holds or is the beneficial holder of a first lien mortgage on the real estate;

(e) the expenses of the real estate are passed through to the tenant, excluding exterior, structural, parking, and heating, ventilation, and air conditioning replacement expenses, unless annual escrow contributions, from cash flows derived from the lease payments, cover the expense shortfall; and

(f) there is a perfected assignment of the rents due pursuant to the lease to or for the benefit of the insurer.

(B)(1) Subject to the limitations of § 38-12-430, an insurer may acquire, manage, and dispose of real estate situated in a domestic jurisdiction, either directly or indirectly, through:

(a) limited partnership interests and general partnership interests not otherwise prohibited by § 38-12-60(A)(4);

(b) joint ventures;

(c) stock of an investment affiliate;

(d) membership interests in a limited liability company;

(e) trust certificates; or

(f) other similar instruments.

(2) The real estate must be income producing or intended for improvement or development for investment purposes under an existing program, in which case the real estate is considered to be income producing. The real estate may be subject to mortgages, liens, or other encumbrances, the amount of which must be deducted from the amount of the investment of the insurer in the real estate to the extent that the obligations secured by the mortgages, liens, or encumbrances are without recourse to the insurer for purposes of determining compliance with items (2) and (3) of subsection (D).

(C) An insurer may acquire, manage, and dispose of real estate for the convenient accommodation of the business operations, including home office, branch office, and field office operations of the insurer or its affiliates.

(1) Real estate acquired pursuant to this subsection may include excess space for rent to others, if the excess space when valued at its fair market value, would otherwise be a permitted investment pursuant to subsection (B) and is so qualified by the insurer.

(2) The real estate acquired pursuant to this subsection may be subject to one or more mortgages, liens, or other encumbrances, the amount of which must be deducted from the amount of the investment of the insurer in the real estate to the extent that the obligations secured by the mortgages, liens, or encumbrances are without recourse to the insurer for purposes of determining compliance with subsection (D)(4).

(3) For purposes of this subsection, business operations do not include that portion of real estate used for the direct provision of health care services for its insureds, other than employees of the insurer and its affiliates and their families, by an insurer whose insurance premiums and required statutory reserves for accident and health insurance are at least ninety-five percent of total premium consideration or total statutory required reserves, respectively. An insurer may acquire real estate used for these purposes pursuant to subsection (B).

(D) An insurer may not acquire:

(1) an investment pursuant to subsection (A) if as a result of and after giving effect to the investment the aggregate amount of all investments then held by the insurer pursuant to subsection (A) exceeds:

(a) one percent of its admitted assets in mortgage loans covering any one secured location;

(b) one quarter of one percent of its admitted assets in construction loans covering any one secured location; or

(c) one percent of its admitted assets in construction loans in the aggregate;

(2) an investment pursuant to subsection (B) if as a result of and after giving effect to the investment and any outstanding guarantees made by the insurer in connection with the investment the aggregate amount of investments then held by the insurer pursuant to subsection (B), plus the guarantees then outstanding, exceeds:

(a) one percent of its admitted assets in any one parcel or group of contiguous parcels of real estate, except that this limitation does not apply to that portion of real estate used for the direct provision of health care services by an insurer whose insurance premiums and required statutory reserves for accident and health insurance are at least ninety-five percent of total premium consideration or total statutory required reserves, respectively, such as hospitals, medical clinics, medical professional buildings, or other health facilities used for the purpose of providing health services; or

(b) the lesser of ten percent of its admitted assets or forty percent of its surplus as regards policyholders in the aggregate, except that for an insurer whose insurance premiums and required statutory reserves for accident and health insurance are at least ninety-five percent of total premium consideration or total statutory required reserves, respectively, this limitation must be increased to fifteen percent of its admitted assets in the aggregate;

(3) an investment pursuant to subsection (A) or (B) if as a result of and after giving effect to the investment and any guarantees made by the insurer in connection with the investment the aggregate amount of all investments then held by the insurer pursuant to subsections (A) and (B), plus the guarantees then outstanding, exceeds twenty-five percent of its admitted assets; or

(4) real estate pursuant to subsection (C) if as a result of and after giving effect to the acquisition the aggregate amount of real estate then held by the insurer pursuant to subsection (C) exceeds ten percent of its admitted assets. Additional amounts of real estate may be acquired, with the permission of the director, pursuant to subsection (C). The limitations of § 38-12-430 do not apply to an insurer’s acquisition of real estate pursuant to subsection (C).

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