(A)(1) The director may not issue a license to a captive insurance company unless the company possesses and maintains free and unimpaired paid-in capital, surplus, or unrestricted net assets for a nonprofit corporation, or a combination thereof of:

(a) in the case of a pure captive insurance company, not less than two hundred and fifty thousand dollars;

Terms Used In South Carolina Code 38-90-40

  • 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
  • Branch business: means any insurance business transacted by a branch captive insurance company in this State. See South Carolina Code 38-90-10
  • 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
  • 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.
  • Director: means the Director of the South Carolina Department of Insurance or the director's designee. See South Carolina Code 38-90-10
  • 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.
  • Federal Reserve System: The central bank of the United States. The Fed, as it is commonly called, regulates the U.S. monetary and financial system. The Federal Reserve System is composed of a central governmental agency in Washington, D.C. (the Board of Governors) and twelve regional Federal Reserve Banks in major cities throughout the United States. Source: OCC
  • Industrial insured: means an insured as defined in § 38-25-150(8). 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
  • Liabilities: The aggregate of all debts and other legal obligations of a particular person or legal entity.
  • 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
  • Policy: means a contract of insurance. See South Carolina Code 38-1-20
  • 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
  • Risk retention group: means a captive insurance company formed under the Liability Risk Retention Act of 1986, 15 U. See South Carolina Code 38-90-10
  • 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
  • Trust account: A general term that covers all types of accounts in a trust department, such as estates, guardianships, and agencies. Source: OCC

(b) in the case of an association captive insurance company incorporated as a stock insurer, mutual insurer, or organized as a limited liability company, not less than seven hundred and fifty thousand dollars;

(c) in the case of an industrial insured captive insurance company or risk retention group, not less than five hundred thousand dollars;

(d) in the case of a sponsored captive insurance company, not less than two hundred fifty thousand dollars;

(e) in the case of a special purpose captive insurance company that is not a risk retention group, an amount determined by the director after giving due consideration to the company’s business plan, feasibility study, and pro formas, including the nature, scale, and complexity of the risks to be insured.

(2) The director may prescribe additional capital and surplus requirements based upon the type, volume, and nature of insurance business to be transacted.

(3) The free and unimpaired paid-in capital, surplus, or combination thereof required by this section must be in the form of cash, securities approved by the director, a clean irrevocable letter of credit issued by a bank approved by the director, or other form approved by the director.

(B) For purposes of subsection (A), the director may issue a license expressly conditioned upon the captive insurance company providing to the director satisfactory evidence of possession of the minimum required free and unimpaired paid-in capital, surplus, or combination thereof. Until this evidence is provided, the captive insurance company may not issue any policy, assume any liability, or otherwise provide coverage. The director summarily may revoke the conditional license without legal recourse by the company if satisfactory evidence of the required capital, surplus, or combination thereof is not provided within a maximum period of time, not to exceed one year, to be established by the director at the time the conditional license is issued.

(C) In the case of a branch captive insurance company, as security for the payment of liabilities attributable to branch operations, the director shall require that a trust account, funded by an irrevocable letter of credit or other acceptable asset, be established and maintained in the United States for the benefit of United States policyholders and United States ceding insurers under insurance policies issued or reinsurance contracts issued or assumed, by the branch captive insurance company through its branch operations. The amount of the security may be no less than the reserves on these insurance policies or reinsurance contracts, including reserves for losses, allocated loss adjustment expenses, incurred but not reported losses and unearned premiums with regard to business written through branch operations; however, the director may permit a branch captive insurance company that is required to post security for loss reserves on branch business by its reinsurer or front company to reduce the funds in the trust account required by this section by the same amount so long as the security remains posted with the reinsurer or front company. If the form of security selected is a letter of credit, the letter of credit must be established by, or issued or confirmed by, a bank chartered in this State or a member bank of the Federal Reserve System.

(D) A captive insurance company may not pay a dividend out of, or other distribution with respect to, capital or surplus, in excess of the limitations set forth in § 38-21-250 through § 38-21-270, without the approval of the director. Approval of an ongoing plan for the payment of dividends or other distributions must be conditioned upon the retention, at the time of each payment, of capital or surplus in excess of amounts specified by, or determined in accordance with formulas approved by, the director.

(E) An irrevocable letter of credit, which is issued by a financial institution other than a bank chartered by this State or a member bank of the Federal Reserve System, must be in a form as prescribed by the director.

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