For purposes of this article:
(1) "Administrative Law Court" means that agency and court of record created pursuant to the provisions of Section 1-23-500.
(2) "Affiliated company" means a company in the same corporate system as a parent, by virtue of common ownership, control, operation, or management.
(3) "Contested case" means a proceeding in which the legal rights, duties, obligations, or privileges of a party are required by law to be determined by the Administrative Law Court after an opportunity for hearing.
(4) "Control" including the terms "controlling", " controlled by", and "under common control with" means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract other than a commercial contract for goods or nonmanagement services, or otherwise, unless the power is the result of an official position with or corporate office held by the person. Control must be presumed to exist if a person, directly or indirectly, owns, controls, holds with the power to vote, or holds proxies representing ten percent or more of the voting securities of another person. This presumption may be rebutted by a showing that control does not exist. Notwithstanding other provisions of this item, for purposes of this article, the fact that a SPFC exclusively provides reinsurance to a ceding insurer under a SPFC contract is not by itself sufficient grounds for a finding that the SPFC and ceding insurer are under common control.
(5) "Counterparty" means a SPFC's parent or affiliated company, as ceding insurer to the SPFC contract, or subject to the prior approval of the director, a nonaffiliated company.
(6) "Director" means the Director of the South Carolina Department of Insurance or the director's designee.
(7) "Department" means the South Carolina Department of Insurance.
(8) "Fair value" means:
(a) as to cash, the amount of it; and
(b) as to an asset other than cash:
(i) the amount at which that asset could be bought or sold in a current transaction between arms-length, willing parties;
(ii) the quoted mid-market price for the asset in active markets must be used if available; and
(iii) if quoted mid-market prices are not available, a value determined using the best information available considering values of similar assets and other valuation methods, such as present value of future cash flows, historical value of the same or similar assets, or comparison to values of other asset classes, the value of which have been historically related to the subject asset.
(9) "Insolvency" or "insolvent" means that the SPFC or one or more of its protected cells is unable to pay its obligations when they are due, unless those obligations are the subject of a bona fide dispute, or the director previously has established by order other criteria for determining the solvency of the SPFC or one or more of its protected cells. In which case the SPFC is insolvent if it fails to meet that criteria.
(10) "Insurance securitization" means a package of related risk transfer instruments, capital market offerings, and facilitating administrative agreements by which proceeds are obtained by a SPFC directly or indirectly through the issuance of securities, which complies with applicable securities law, and which proceeds are held in trust pursuant to the provisions of this article to secure the obligations of the SPFC under one or more SPFC contracts with a counterparty, where investment risk to the holders of these securities is contingent upon the obligations of the SPFC to the counterparty under the SPFC contract in accordance with the transaction terms.
(11) "Management" means the board of directors, managing board, or other individual or individuals vested with overall responsibility for the management of the affairs of the SPFC, including the election and appointment of officers or other of those agents to act on behalf of the SPFC.
(12) "Organizational document" means the SPFC's Articles of Incorporation, Articles of Organization, Bylaws, Operating Agreement, or other foundational documents that establish the SPFC as a legal entity or prescribes its existence.
(13) "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 securities of a SPFC.
(14) "Permitted investments" means those investments that meet the qualifications pursuant to Section 38-90-530.
(15) "Protected cell" means a separate account established and maintained by a SPFC for one SPFC contract and the accompanying insurance securitization with a counterparty as further provided for in Chapter 10 of this title.
(16) "Qualified United States financial institution" means, for purposes of meeting the requirements of a trustee as specified in Section 38-90-530, a financial institution that is eligible to act as a fiduciary of a trust, and is:
(a) organized or, in the case of a United States branch or agency office of a foreign banking organization, is licensed under the laws of the United States or any state of the United States; and
(b) regulated, supervised, and examined by federal or state authorities having regulatory authority over banks and trust companies.
(17) "Securities" means those different types of debt obligations, equity, surplus certificates, surplus notes, funding agreements, derivatives, and other legal forms of financial instruments.
(18) "Securities Commissioner" means the Attorney General of the State of South Carolina as provided in Title 35.
(19) "SPFC" or "Special Purpose Financial Captive" means a captive insurance company which has received a certificate of authority from the director for the limited purposes provided for in this article.
(20) "SPFC contract" means a contract between the SPFC and the counterparty pursuant to which the SPFC agrees to provide insurance or reinsurance protection to the counterparty for risks associated with the counterparty's insurance or reinsurance business.
(21) "SPFC securities" means the securities issued by a SPFC.
(22) "Surplus note" means an unsecured subordinated debt obligation deemed to be a surplus certificate as described in Section 38-13-110(4) and otherwise possessing characteristics consistent with paragraph 3 of the Statement of Statutory Accounting Principals No. 41, as amended, National Association of Insurance Commissioners (NAIC).
(23) "Third party" means a person unrelated to an SPFC or its counterparty, or both, that has been aggrieved by a decision of a director regarding that SPFC or its activities.
HISTORY: 2004 Act No. 291, Section 28, eff July 29, 2004; 2006 Act No. 332, Section 20, eff June 1, 2006.