South Carolina Code 38-12-520. Exceptions to investment restrictions; assets from dividends and distributions; mergers and consolidations; protection of previous investments; time for determining qualification
(1) its unrestricted surplus; or
Terms Used In South Carolina Code 38-12-520
- 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.
- 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
- 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
- Casualty insurance: means each insurance against legal liability of the insured for bodily injury to or death of another person, including workers' compensation insurance, and for damages to or loss or destruction of the property of another person; medical payments insurance when written in conjunction with insurance covering liability for the deaths or bodily injuries of another person; guaranteeing the fidelity of a person holding a position of public or private trust; loss of or damage to property caused by burglary, theft, larceny, robbery, fraud, or unlawful taking or secretion of property owned by or entrusted to the insured; loss of or damage to property of the insured resulting from the explosion of or damage to a fired or unfired boiler or other pressure vessel, engine, turbine, compressor, pump, wheel, or an apparatus generating, transmitting, or using electric power, and machinery or equipment connected with any of them; loss resulting from nonpayment of debts owed to merchants or another person extending credit. See South Carolina Code 38-1-20
- 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 - insurance: includes annuities. See South Carolina Code 38-1-20
- Insurance company: means an "insurer". 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
- 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
- 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
- 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
- Reverse repurchase transaction: means a transaction in which an insurer sells securities 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 and the insurer is obligated to repurchase the sold securities or equivalent securities from the bank or business entity 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
- Unrestricted surplus: means the amount by which total admitted assets exceed one hundred twenty-five percent of the insurer's required liabilities. See South Carolina Code 38-12-30
(2) ten percent of its admitted assets or fifty percent of its surplus as regards policyholders, whichever is less.
(B) An insurer may not acquire an investment or engage in an investment practice pursuant to this subsection if as a result of and after giving effect to the transaction the aggregate amount of all investments then held by the insurer under this subsection in any one person exceed five percent of its admitted assets.
(C) If any investment made or transaction entered into pursuant to any other section of this chapter exceeds the limits specified in that section, the excess portion of the investment or transaction is considered to be an investment or transaction pursuant to this section. Any loan, investment, or transaction originally made pursuant to this section which subsequently, if it were then being made, would qualify as an authorized investment or transaction pursuant to another subsection of this section or another section of this chapter shall thereafter be considered an authorized investment or transaction pursuant to that subsection or section.
(D) This chapter does not prohibit the acquisition by an insurer of additional obligations, securities, or other assets if received as a dividend or as a distribution of assets, nor does this chapter apply to securities, obligations, or other assets accepted incident to the workout, adjustment, restructuring, or similar realization of an investment or transaction when the insurer’s board of directors or a committee appointed by the board of directors considers it to be in the best interests of the insurer, if the investment or transaction had been authorized previously. This chapter does not apply to assets acquired pursuant to a lawful agreement of bulk reinsurance if the assets constituted legal and authorized investments for the ceding company. No obligation, security, or other asset acquired as authorized by this subsection is required to be qualified pursuant to any other subsection of this section or other section of this chapter, provided that all assets acquired pursuant to this subsection are subject to the applicable accounting and valuation requirements contained in this chapter.
(E) Subject to the provisions of subsection (F), if a domestic property and casualty insurance company, pursuant to a merger or consolidation, acquires an investment or transaction that was an authorized investment or transaction of the company that was merged or consolidated with the domestic property and casualty insurance company but that does not qualify as an authorized investment or transaction pursuant to this chapter at the time the merger or consolidation occurs, regardless of whether or not the investment or transaction would be authorized pursuant to subsection (A) or (B), then the investment or transaction is considered an authorized investment or transaction pursuant to this subsection and is not required to be applied toward the limitations contained in subsection (A) or (B), for a period of five years after the date on which the merger or consolidation occurs. After that period it shall no longer be an authorized investment or transaction pursuant to this subsection, unless within the five-year period:
(1) the investment or transaction qualifies as an authorized investment or transaction pursuant to another subsection of this section or another section of this chapter including without limitation, subsections (A) and (B), if the domestic property and casualty insurance company so elects; or
(2) the director authorizes the investment or transaction in the plan of merger or consolidation approved by the director; or
(3) upon request of the insurer, the director authorizes an extension of the five-year time period; or
(4) the director approves the investment or transaction pursuant to this subsection.
The aggregate amount of a domestic insurance company’s investments and transactions pursuant to this subsection, excluding investments and transactions authorized pursuant to items (1), (2), and (4), may not exceed twenty-five percent of the domestic insurance company’s capital and surplus after giving effect to such merger or consolidation.
(F) If a domestic insurance company, pursuant to a merger or consolidation, acquires a mortgage loan, or a participation in a mortgage loan, that would have been authorized pursuant to § 38-12-480, and pursuant to subsection (C) of this section as to the portion that exceeded seventy-five percent of the value of the property, at the time the company that was merged or consolidated with the domestic insurance company invested in the mortgage loan or participation in the mortgage loan, then such mortgage loan or participation in the mortgage loan is authorized pursuant to § 38-12-480, and pursuant to subsection (C) of this section as to the portion that exceeded seventy-five percent of the value of the property.
(G) The director has full discretion in selecting a method for calculating values of investments and transactions that an insurer acquires through a merger or consolidation, provided that the method is consistent with any applicable provisions of this chapter and any applicable valuation method that the NAIC is currently using at the time with respect to investments and transactions. If there is a conflict between a provision of this chapter and the NAIC valuation method being used, the provision of this chapter controls.
(H) The qualification or disqualification of an investment pursuant to one subsection of this section or one section of this chapter does not prevent its qualification in whole or in part pursuant to another provision of this chapter. An investment authorized by more than one provision of this chapter is authorized pursuant to the provision the insurer elects. An investment or transaction qualified pursuant to any provision of this chapter at the time it was acquired or entered into by the insurer shall continue to be qualified pursuant to that provision. An investment or transaction may be transferred in whole or in part at the election of the insurer to the authority of any provision of this chapter pursuant to which it then qualifies, whether or not it originally qualified pursuant to that provision.
(I) Notwithstanding the provisions of the other subsections of this section or other sections of this chapter, an insurer may acquire an investment in or enter into a transaction with a business entity in which the insurer already holds one or more investments or with which the insurer has entered into one or more transactions if the investment is acquired or the transaction is entered into in order to protect an investment or transaction previously made in or with the business entity, provided that the aggregate amount of investments and transactions so acquired and entered into may not exceed five percent of the insurer’s capital and surplus.
(J)(1) The percentage authorizations and limitations contained in any provision of this chapter apply only at the time of the original acquisition of an investment or at the time a transaction is entered into and are not applicable to the insurer or the investment or transaction after that time except as provided in subsection (H). Once any investment or transaction is qualified pursuant to any provision of this chapter, it shall remain qualified notwithstanding any refinancing, restructuring, or modification of the investment or transaction, provided that the insurer does not engage in the refinancing, restructuring, or modification of the investment or transaction for the purposes of circumventing the requirements or limitations of this chapter.
(2) The director has full discretion to value investments and transactions that an insurer holds at the time of an examination of the insurer using a method of calculating the values that the director selects in his discretion, provided that the method must be consistent with any applicable provisions of this chapter and any applicable valuation method that the NAIC is using at the time with respect to investments and transactions. If there is a conflict between such a provision of this chapter and an applicable NAIC valuation method that the NAIC is using at the time, the provision of this chapter controls.
(3) Notwithstanding items (1) and (2), if the director determines that the continued operation of an insurer may be hazardous to its policyholders, its creditors, or the general public, the director may issue an order consistent with applicable statutes requiring the insurer to limit or withdraw from certain investments or transactions or discontinue certain practices as to investments or transactions to the extent the director considers necessary.