(A) A captive insurance company, when permitted by its articles of incorporation, articles of organization, operating agreement, or charter, may apply to the director for a license to provide any and all insurance, except workers’ compensation insurance written on a direct basis, authorized by this title; however:

(1) a pure captive insurance company may not insure any risks other than those of its parent, affiliated companies, controlled unaffiliated business, risks assumed from a risk pool for the purpose of risk sharing, or a combination of them;

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Terms Used In South Carolina Code 38-90-20

  • Alien captive insurance company: means an insurance company formed to write insurance business for its parents and affiliates and licensed pursuant to the laws of an alien jurisdiction which imposes statutory or regulatory standards in a form acceptable to the director on companies transacting the business of insurance in such jurisdiction. See South Carolina Code 38-90-10
  • Assets: (1) The property comprising the estate of a deceased person, or (2) the property in a trust account.
  • Association: means a legal association of individuals, corporations, limited liability companies, partnerships, political subdivisions, or associations:

    (a) the member organizations of which collectively, or which does itself:

    (i) own, control, or hold with power to vote all of the outstanding voting securities of an association captive insurance company incorporated as a stock insurer or organized as a limited liability company; or

    (ii) have complete voting control over an association captive insurance company organized as a mutual insurer; or

    (b) the member organizations of which collectively constitute all of the subscribers of an association captive insurance company formed as a reciprocal insurer. See South Carolina Code 38-90-10
  • 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.
  • Branch captive insurance company: means an alien captive insurance company licensed by the director to transact the business of insurance in this State through a business unit with a principal place of business in this State. See South Carolina Code 38-90-10
  • Branch operations: means any business operations of a branch captive insurance company in this State. See South Carolina Code 38-90-10
  • Captive insurance company: means a pure captive insurance company, association captive insurance company, sponsored captive insurance company, special purpose captive insurance company, risk retention group, or industrial insured captive insurance company formed or licensed under this chapter. See South Carolina Code 38-90-10
  • Controlled unaffiliated business: means a person that:

    (a) is not an affiliate of a parent company; and

    (b) has an existing contractual relationship pursuant to which a parent or affiliated company exercises control of the risk management function of the person. See South Carolina Code 38-90-10
  • Corporation: A legal entity owned by the holders of shares of stock that have been issued, and that can own, receive, and transfer property, and carry on business in its own name.
  • Department: means the South Carolina Department of Insurance. See South Carolina Code 38-90-10
  • Director: means the Director of the South Carolina Department of Insurance or the director's designee. See South Carolina Code 38-90-10
  • Equitable: Pertaining to civil suits in "equity" rather than in "law." In English legal history, the courts of "law" could order the payment of damages and could afford no other remedy. See damages. A separate court of "equity" could order someone to do something or to cease to do something. See, e.g., injunction. In American jurisprudence, the federal courts have both legal and equitable power, but the distinction is still an important one. For example, a trial by jury is normally available in "law" cases but not in "equity" cases. Source: U.S. Courts
  • Evidence: Information presented in testimony or in documents that is used to persuade the fact finder (judge or jury) to decide the case for one side or the other.
  • Industrial insured: means an insured as defined in § 38-25-150(8). See South Carolina Code 38-90-10
  • Industrial insured group: means a group that meets either of the following criteria:

    (a) a group of industrial insureds that collectively:

    (i) own, control, or hold with power to vote all of the outstanding voting securities of an industrial insured captive insurance company incorporated as a stock insurer or limited liability company; or

    (ii) have complete voting control over an industrial insured captive insurance company incorporated as a mutual insurer; or

    (b) a risk retention group. See South Carolina Code 38-90-10
  • 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
  • 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.
  • License: means a document issued by the state's director or his designee authorizing a person to act as an insurance producer for the lines of authority specified in the document. See South Carolina Code 38-1-20
  • Litigation: A case, controversy, or lawsuit. Participants (plaintiffs and defendants) in lawsuits are called litigants.
  • Oath: A promise to tell the truth.
  • Parent: means any corporation, limited liability company, partnership, or individual that directly or indirectly owns, controls, or holds with power to vote more than fifty percent of the outstanding voting interests of a captive insurance company. See South Carolina Code 38-90-10
  • Person: means an individual, corporation, partnership, association, joint stock company, trust, unincorporated organization, or any similar entity or combination thereof. See South Carolina Code 38-90-10
  • Policy: means a contract of insurance. See South Carolina Code 38-1-20
  • Power of attorney: A written instrument which authorizes one person to act as another's agent or attorney. The power of attorney may be for a definite, specific act, or it may be general in nature. The terms of the written power of attorney may specify when it will expire. If not, the power of attorney usually expires when the person granting it dies. Source: OCC
  • Principal place of business: means the physical location in the State of South Carolina where the complete books and records of the captive company are available for examination by the director. See South Carolina Code 38-90-10
  • Protected cell: means an identified pool of assets and liabilities of a sponsored captive insurance company for one or more participants that is segregated and insulated from the remainder of the sponsored captive insurance company's assets and liabilities as set forth in this chapter. See South Carolina Code 38-90-10
  • Service of process: The service of writs or summonses to the appropriate party.
  • Special purpose captive insurance company: means a captive insurance company that is formed or licensed under this chapter that does not meet the definition of any other type of captive insurance company defined in this section. See South Carolina Code 38-90-10
  • Sponsored captive insurance company: means a captive insurance company:

    (a) in which the minimum capital and surplus required by applicable law is provided by one or more sponsors;

    (b) that is formed or licensed under this chapter;

    (c) that segregates liability through one or more protected cells; and

    (d) that insures the risks of participants through participant contracts. See South Carolina Code 38-90-10

(2) an association captive insurance company may not insure any risks other than those of the member organizations of its association and their affiliated companies;

(3) an industrial insured captive insurance company may not insure any risks other than those of the industrial insureds that comprise the industrial insured group and their affiliated companies;

(4) a special purpose captive insurance company may provide insurance or reinsurance, or both, for risks as approved by the director;

(5) a captive insurance company may not provide personal motor vehicle or homeowner’s insurance coverage written on a direct basis;

(6) a captive insurance company may not accept or cede reinsurance except as provided in § 38-90-110.

(B) To conduct insurance business in this State a captive insurance company shall:

(1) obtain from the director a license authorizing it to conduct insurance business in this State;

(2) beginning the year immediately following the issuance of its license, annually hold at least one board of director’s meeting, or in the case of a reciprocal insurer, a subscriber’s advisory committee meeting, or in the case of a limited liability company a meeting of the managing board, at which a majority of the directors are physically present in this State;

(3) maintain its principal place of business in this State, or in the case of a branch captive insurance company, maintain the principal place of business for its branch operations in this State; and

(4) appoint a resident registered agent to accept service of process and to otherwise act on its behalf in this State. In the case of a captive insurance company:

(a) formed as a corporation, a nonprofit corporation, or a limited liability company, whenever the registered agent cannot with reasonable diligence be found at the registered office of the captive insurance company, the director must be an agent of the captive insurance company upon whom any process, notice, or demand may be served;

(b) formed as a reciprocal insurer, whenever the registered agent cannot with reasonable diligence be found at the registered office of the captive insurance company, the director must be an agent of the captive insurance company upon whom any process, notice, or demand may be served.

(C)(1) Before receiving a license, a captive insurance company:

(a) formed as a corporation or a nonprofit corporation, shall file with the director a certified copy of its articles of incorporation and bylaws, a statement under oath of its president and secretary showing its financial condition, and any other statements or documents required by the director;

(b) formed as a limited liability company, shall file with the director a certified copy of its articles of organization and operating agreement, a statement under oath by its managers showing its financial condition, and any other statements or documents required by the director;

(c) formed as a reciprocal shall:

(i) file with the director a certified copy of the power of attorney of its attorney-in-fact, a certified copy of its subscribers’ agreement, a statement under oath of its attorney-in-fact showing its financial condition, and any other statements or documents required by the director; and

(ii) submit to the director for approval a description of the coverages, deductibles, coverage limits, and rates and any other information the director may reasonably require. If there is a subsequent material change in an item in the description, the reciprocal captive insurance company shall submit to the director for approval an appropriate revision and may not offer any additional kinds of insurance until a revision of the description is approved by the director. The reciprocal captive insurance company shall inform the director of any material change in rates within thirty days of the adoption of the change.

(2) In addition to the information required by item (1), an applicant captive insurance company shall file with the director evidence of:

(a) the amount and liquidity of its assets relative to the risks to be assumed;

(b) the adequacy of the expertise, experience, and character of the person or persons who will manage it;

(c) the overall soundness of its plan of operation;

(d) the adequacy of the loss prevention programs of its parent, member organizations, or industrial insureds as applicable; and

(e) such other factors considered relevant by the director in ascertaining whether the proposed captive insurance company will be able to meet its policy obligations.

(3) In addition to the information required by items (1) and (2) an applicant sponsored captive insurance company shall file with the director:

(a) a business plan demonstrating how the applicant will account for the loss and expense experience of each protected cell at a level of detail found to be sufficient by the director, and how it will report the experience to the director;

(b) all contracts or sample contracts between the sponsored captive insurance company and any participants; and

(c) a statement that expenses will be allocated to each protected cell in an equitable manner.

(4) Information submitted pursuant to this section is confidential as provided in § 38-90-35 except that information is discoverable by a party in a civil action or contested case to which the captive insurance company that submitted the information is a party, upon a specific finding by the court that:

(a) the captive is a necessary party to the action and not joined only for the purposes of evading the confidentiality provisions of this chapter;

(b) the information sought is relevant, material to, and necessary for the prosecution or defense of the claim asserted in litigation; and

(c) the information sought is not available through another source.

(D)(1) A captive insurance company shall pay to the department a nonrefundable fee of two hundred dollars for processing its application for license. In addition, the director may retain legal, financial, and examination services from outside the department to examine and investigate the application, the reasonable cost of which may be charged against the applicant in an amount that is determined to be appropriate by the director given the nature, scale, and complexity of the application being investigated.

(2) § 38-13-60 applies to examinations, investigations, and processing conducted pursuant to the authority of this section.

(3) In addition, a captive insurance company shall pay a license fee for the year of registration of three hundred dollars and an annual renewal fee of five hundred dollars.

(4) The department may charge a fifteen-dollar fee for any document requiring certification of authenticity or the signature of the director.

(E) If the director is satisfied that the documents and statements filed by the captive insurance company comply with the provisions of this chapter, the director may grant a license authorizing the company to do insurance business in this State until March first at which time the license may be renewed.

(F) A foreign or alien captive insurance company, upon approval of the director, may become a domestic captive insurance company by complying with all of the requirements of law relative to the organization and licensing of a domestic captive insurance company of the same or equivalent type in this State and by filing with the Secretary of State its articles of association, charter, or other organizational document, together with appropriate amendments to them adopted in accordance with the laws of this State bringing those articles of association, charter, or other organizational document into compliance with the laws of this State. After this is accomplished, the captive insurance company is entitled to the necessary or appropriate certificates and licenses to continue transacting business in this State and is subject to the authority and jurisdiction of this State. In connection with this redomestication, the director may waive any requirements for public hearings. It is not necessary for a company redomesticating into this State to merge, consolidate, transfer assets, or otherwise engage in any other reorganization, other than as specified in this section.

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