Bulletin 2025-04 All Insurers Licensed to Transact Business with the State of South Carolina

South Carolina Department of Insurance Capitol Center 1201 Main Street, Suite 1000 Columbia, South Carolina 29201 _________________________ Mailing Address: P.O. Box 100105, Columbia, S.C. 29202-3105 Telephone: (803) 737-6160 HENRY MCMASTER Governor MICHAEL WISE Director BULLETIN NUMBER 2025-04 TO: All Insurers Licensed to Transact Business within the State of South Carolina FROM: Michael Wise Director SUBJECT: 2025 Amendments to Chapters 12 and 21of Title 38 DATE: June 27, 2025 I. AMENDMENTS TO CHAPTERS 12 AND 21 OF TITLE 38 OF THE CODE OF LAWS OF SOUTH CAROLINA In the most recent legislative session, the General Assembly amended the South Carolina Insurance Holding Company Regulatory Act (Chapter 21 of Title 38) and the South Carolina Investments of Insurers Act (Chapter 12 of Title 38). The changes are set forth in S.C. Act No. 17 of 2025 (“Act”), a copy of which may be accessed online at: https://www.scstatehouse.gov/sess126_2025-2026/bills/220.htm. The sections below summarize certain key elements of the Act. This bulletin is not a comprehensive recitation of all details and provisions of the Act. All insurers should review the full Act carefully to ensure compliance with all of its provisions. A. Amendments to the Insurance Holding Company Regulatory Act The Insurance Holding Company Regulatory Act has been amended to enhance the Department’s ability to assess the enterprise risk to insurers within a holding company system. The amendments implement a group capital calculation and a liquidity stress test for macroprudential supervision (i.e., supervision of systemic risk). See S.C. Code Ann. § 38-21-225. The calculation is intended to provide additional analytical information for use in assessing group risks and capital adequacy to complement the current holding company analysis in the U.S. It includes information on potential risks to policyholders emanating from outside the insurance companies, as well as the location and sources of capital within the group. The calculation will help state insurance regulators perform an assessment of capital when combined with other information obtained by state insurance regulators, including: group organizational information provided on Schedule Y, enterprise risk information on Form F, and internal risk self-assessment information in Own Risk and Solvency Assessment (ORSA) filings (where applicable). Risk Retention Groups are subject to the group capital calculation requirements but not the liquidity stress test. The Act sets out standards for transactions within a holding company system. S.C. Code Ann. § 38-21- 250(A). Certain transactions involving a domestic insurer and any person in its insurance holding company system, including amendments or modifications, require advance notification to the Department. S.C. Code Ann. § 38-21-250(B). The Act also amends the Insurance Holding Company Regulatory Act by adding provisions to: define certain terms; specify the authority of insurers to invest in subsidiaries’ securities; amend certain disclosure obligations and procedures in connection with mergers and acquisitions; and describe the confidentiality of certain information. Please see the Act’s text for the specifics of these provisions. B. Amendments to the South Carolina Investments of Insurers Act With respect to the South Carolina Investments of Insurers Act, the Act amends the definition of “person” at S.C. Code Ann. § 38-12-30(64) to make clear that, for the purposes of the single issuer limitation, the term “person” includes the “affiliates and subsidiaries” of that person. Additionally, amended S.C. Code Ann. § 38-12-220(A)(1) and (2) limit life and health insurers to acquiring no more than five percent of their admitted assets in investments “issued, assumed, accepted, insured, or guaranteed by a single person, including its affiliates and subsidiaries.” (Emphasis added.) The five percent limitation does not apply to the aggregate amounts insured by a single financial guaranty insurer with the highest generic rating issued by a nationally recognized statistical rating organization. A similar amendment to S.C. Code Ann. § 38-12-430(A)(1) clarifies the application of the existing five percent single issuer limitation on investments by property and casualty, financial guaranty and mortgage guaranty insurers. The limitation applies to all kinds of investments “issued, assumed, accepted, insured, or guaranteed by a single person, including its affiliates and subsidiaries.”1 (Emphasis added.) Investments that previously have been deemed qualified will remain so 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 the Act. S.C. Code. Ann. §§ 38-12-40(E), 38-12- 320(K)(1). However, the Director maintains his full regulatory authority pursuant to South Carolina law. For example, 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 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. S.C. Code. Ann. § 38-12-320(K)(3). Also, the Director, for good cause, may require an insurer to non-admit, limit, dispose of, withdraw from, or discontinue an investment or investment practice. S.C. Code Ann. § 38-12-40(K). The amendments are effective as of May 8, 2025. Accordingly, the new provisions apply to all financial statements due on August 15, 2025, and thereafter. Insurers are expected to report investments consistently with the language of these provisions.2 1 S.C. Code Ann. § 38-12-430(A)(2) is unchanged. Thus, the five percent limitation does not apply to the aggregate amounts invested by a single financial guaranty insurer with the highest generic rating issued by a nationally recognized statistical rating organization. 2 Captive insurance managers are reminded that, pursuant to S.C. Code Ann. § 38-90-100(A), the investment requirements contained in the Chapter 12 of Title 38 of the South Carolina Code of Laws also apply to certain captive insurance companies, including risk retention groups. II. QUESTIONS Questions regarding this bulletin should be submitted via email to financialanalysis@doi.sc.gov and include the company name and primary point of contact (with phone number and email address) for follow up.