For purposes of this chapter, in determining whether an insurer‘s surplus as regards policyholders is reasonable in relation to the insurer’s outstanding liabilities and adequate to its financial needs, the following factors, among others, are considered:

(1) the size of the insurer as measured by its assets, capital and surplus, reserves, premium writings, insurance in force, and other appropriate criteria;

Terms Used In South Carolina Code 38-21-260

  • Assets: (1) The property comprising the estate of a deceased person, or (2) the property in a trust account.
  • director: means the Director of the South Carolina Department of Insurance or his designee. See South Carolina Code 38-21-10
  • 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
  • Liabilities: The aggregate of all debts and other legal obligations of a particular person or legal entity.
  • Premium: means payment given in consideration of a contract of insurance. See South Carolina Code 38-1-20

(2) the extent to which the insurer’s business is diversified among the several lines of insurance;

(3) the number and size of risks insured in each line of business;

(4) the extent of the geographical dispersion of the insured risks;

(5) the nature and extent of the reinsurance program;

(6) the quality, diversification, and liquidity of the investment portfolio;

(7) the recent past and projected future trend in the size of the insurer’s investment portfolio;

(8) the surplus as regards policyholders maintained by other comparable insurers;

(9) the adequacy of the reserves;

(10) the source of the insurer’s earnings and the extent to which the reported earnings include extraordinary items, such as surplus relief reinsurance transactions and reserve destrengthening; and

(11) The quality and liquidity of investments in affiliates.

The director or his designee may treat any such investment as a disallowed asset for purposes of determining the adequacy of surplus as regards policyholders whenever in his judgment the investment so warrants.

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