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(Statutory Authority: 1976 Code Sections 1-23-10 et seq., 1-23-110 et seq., 34-29-10 et seq., 34-31-10 et seq., 37-4-101 et seq., 38-1-20(34), 38-3-60, 38-3-110 et seq., 38-5-80, 38-9-180, 38-23-10 et seq., 38-33-10 et seq., 38-33-200, 38-38-550, 38-39-10 et seq., 38-43-10 to 38-43-80, 38-43-100, 38-43-106, 38-43-110, 38-45-50, 38-47-10 et seq., 38-47-40, 38-49-10 et seq., 38-50-90, 38-55-50, 38-57-20 et seq., 38-63-10, 38-65-10, 38-69-10, 38-71-730, 38-73-330, 38-73-730, 38-73-735, 38-73-760, 38-77-530, 38-78-110 1975 Act No. 306)

69-1. Adjustment of Claims Under Unusual Circumstances.

1. Licensed Adjusters in South Carolina are authorized to adjust claims for unlicensed companies under the following circumstances:

(a) Where the insured has an accident in South Carolina but is not a resident, being in a status of a transient.

(b) Where the insured is a new resident in the State and has an unexpired policy of an unlicensed company purchased before he moved into the State.

2. The law provides the conditions under which a Non-Resident Adjuster may be licensed. In the event of a catastrophe where there are insufficient Licensed Adjusters in South Carolina to handle claims expeditiously, Non-Resident Adjusters will be permitted to enter the State to handle the adjustments arising out of the catastrophe without being required to be licensed in South Carolina, provided that the Adjuster exhibits evidence of an Adjuster's License in his home state and remains in the State only for the period that is necessary to assist in the adjustments.

3. An unusual circumstance or catastrophe exists when, due to a specific, infrequent, and sudden natural or manmade disaster or phenomenon, there have arisen losses to property in South Carolina that are covered by insurance, and the losses are so numerous and severe that resolution of claims related to such covered property losses will not occur expeditiously without the authorization of emergency adjusters by the Department due to the magnitude of the catastrophic damage.

4. The Department will determine and announce when an emergency or catastrophe exists and also will determine and announce the expiration of the period of emergency or catastrophe.

69-2. Repealed by State Register Volume 30, Issue No. 3, eff March 24, 2006.

69-3. Definitions.

1. Except as may be otherwise set forth by the Statutes of this State, the following words and phrases, whenever and wherever they appear in matters under the cognizance of this Commission, shall have the meaning ascribed herein:

Accepting insurer--The Company that agrees to insure the risk.

Acquisition cost--That portion of premium, or part of a rate, representing the costs of securing lines of insurance.

Adjustor--A person who determines the extent of insured losses and assists in settling, or attempts to settle claims, usually representing the insurer.

Admitted assets--Those assets of an insurer which conform to the regulations of the South Carolina Insurance Commission.

Advisory organization--An organization that formulates policy and principles without the authority to apply them.

Affiliate--A corporation of which a majority of the capital stock is owned or controlled by any or all of the stockholders, directors or officers of another corporation, who also own or control a majority of the stock of such other corporation.

Agent--As defined in Section 38-43-10 of the S. C. Code of Laws, 1976.

Alien insurer--An insurer formed under the laws of a country other than the United States of America, its States, Commonwealths, Territories or insular possessions.

All risks--A term commonly used in insurance to denote the coverage of damage or loss of property from all hazards except depreciation, deterioration and wear and tear.

Ancillary state--Any state other than a domiciliary state.

Appraisal--Estimate of value made by qualified, impartial and disinterested persons, duly appointed for such purpose.

Articles--Articles of incorporation and all amendments thereto.

Assessment--An apportionment or call made on the entire membership of a mutual company or association for definite contributions or payment of money on account of losses sustained by particular members.

Assigned risk--The protection of a specific insurance risk that has been directed to a given insurer by qualified authority.

Assuming insurer--The company, party to a reinsurance transaction, which assumes insurance, annuity and endowment risks.

Authorized insurer--An insurer duly licensed to do business in this State.

Average rate--A composite unit measuring the various perils of more than a single subject of insurance and usually at separate locations, expressed in dollars and cents per $100.00 of protection.

Basic rate--The foundation unit expressed in monetary amounts to which fractional amounts are added to accurately develop the correct final rate for the insurance exposure.

Blanket coverage--Insurance which contemplates that the risk is shifting, fluctuating or varying, and which covers a class of property or persons rather than any particular thing or persons.

Board of directors--Synonymous with board of trustees, and means the body having power and responsibility for the management and control of a corporation, fraternal benefit association or other association, by whatever name called, and the advisory body having similar powers in reference to a reciprocal insurer or Lloyds underwriters.

Broker--As defined in Section 38-45-10, S. C. Code of Laws, 1976.

Brokerage--Any arrangement or agreement whereby any agent can be held to be the agent of the insured and not of the insurer, or whereby an agent is permitted to solicit or place any class of insurance other than those authorized to be issued in South Carolina by such agent's insurer.

Bureau--An organization designed to render specific services in regard to insurance.

Capital--The aggregate amount paid in on the shares of capital stock of a corporation issued and outstanding, and equal to the par or declared value of the stock issued.

Capital stock--The aggregate amount of the par or declared value of all shares of capital stock.

Ceding company--The Company, party to a reinsurance transaction, whose insurance, annuity and endowment risks or obligations are assumed.

Certificate of insurance--A memorandum copy, complete or abbreviated, of an insurance contract.

Charter--The basic instrument, by whatever name called, prescribing the powers, purposes and organization of a corporation.

Chief Insurance Commissioner--The chief officer of the Insurance Department, appointed by the Insurance Commission.

Co-insurance--A stipulation or requirement that the insured undertakes to be his own insurer to the extent that he fails to maintain insurance of a given percentage of the value of the property against loss or damage.

Commission--That part of the premium paid to the agent as compensation for his services.

Corporation--Except as otherwise indicated, "corporation" means a corporation formed or existing under the laws of this State.

Debit--A defined geographical area assigned to a particular agent, usually for the writing of industrial insurance.

Debit agent--One who collects weekly, bi-weekly or monthly premiums from a number of policyholders, generally small policies, in a designated territory, and generally industrial insurance.

Decreasing interest insurance--Same as decreasing balance insurance. Insurance written on a risk, generally in connection with a loan, wherein the coverage decreases commensurate with the decrease of obligation.

Department--The Insurance Department of this State; also, the Insurance Commission of this State.

Deputy--The first, or other deputy chief insurance commissioner of this State, so appointed by the Chief Insurance Commissioner.

Deviation--A departure, either in rate or coverage, from the prevailing standards.

Dividends--The excess of premiums collected, over costs of insurance, returned or credited to the policyholder.

Domestic insurer--An insurer formed under the laws of this State.

Domiciliary state--The State in which an insurer is incorporated or organized, or in the case of an insurer incorporated or organized in a foreign country, the State in which such insurer, having become authorized to do business in such State, has designated as its domiciliary State and/or State of entry into the United States.

Earned premium--That portion of the gross premium absorbed, at a given time, by costs of administration, risk, and profit.

Fire insurance and Allied lines--Insurance providing indemnity to the insured in case of loss or damage occasioned by fire and such other forms of property insurance as are undertaken by fire insurance companies in addition to marine and inland marine insurance.

Foreign domesticated insurer--A foreign insurer licensed to do business in this State.

Foreign insurer--An insurer, not an alien insurer, formed under laws other than the laws of this State.

Fraternal Benefit Association--As defined in Section 38-37-10, S. C. Code of Laws, 1976.

General Assets--All property, real, personal, or otherwise, not specifically mortgaged, pledged, deposited, or otherwise encumbered for the security or benefit of specified persons or a limited class or classes of persons and as to such specifically encumbered property the term includes such property or its proceeds in excess of the amount necessary to discharge the sum or sums secured thereby. Assets held in trust and assets held on deposit for the security or benefit of all policyholders, or all policyholders and creditors in the United States, shall be deemed general assets.

Gross Premium--The whole amount of the money consideration, given at fixed intervals during the lifetime of a policy of insurance, in exchange for the insurance set forth in the policy.

Group Insurance--A form of personal insurance which is issued to members of an organized body qualified, and not specifically prohibited, to be an insured, in which individual insurances are placed upon the persons of each member of that group, but in which the group acts as an entity in the payment of premiums, inception of the contract, and the like.

Holding company--Has the same meaning as parent corporation. (See "subsidiary".)

Incorporator--A person, natural or corporate, who signs the articles of incorporation.

Insurance--A contract whereby one undertakes to indemnify another or pay a specified amount upon determinable contingencies.

a. Accident Insurance--Insurance against loss or damage due to unexpected injury to the person insured and resulting in disability or death.

b. Casualty Insurance--Those forms of indemnity providing for payment for loss or damage, resulting from accidental or some unanticipated contingency, except fire and the elements.

c. Credit Insurance--An indemnity to merchants or traders against the insolvency of customers to whom they extend credit and under the Small Loan Act, various insurances on the lives, property and health of borrowers to the extent of the amount loaned and unrepaid.

d. Fidelity Insurance--Insurance against loss from the want of honesty, integrity or fidelity of employees or others in a position of trust.

e. Fire Insurance--A contract of indemnity against loss by fire and lightning.

f. Group Insurance--See specific heading.

g. Health Insurance--A contract of indemnity against expense and loss of time resulting from disease.

h. Industrial Insurance--A plan of insurance under which policies of insurance are issued in consideration of weekly, bi-weekly or monthly payments.

i. Inland Marine Insurance--A contract of indemnity against loss suffered in connection with inland land or water transportation or with communications equipment.

j. Liability Insurance--Insurance against loss or liability on account of bodily or property injury sustained by others.

k. Life Insurance--A contract whereby in consideration of the payment of premiums the insurer engages to pay a certain sum upon the death of the insured.

l. Marine Insurance--A contract of indemnity against loss from marine perils.

m. Reciprocal Insurance--See specific heading.

n. Surety Insurance--An insurance contract whereby one, for a consideration, agrees to indemnify another against losses arising from the want of integrity, fidelity or solvency of employees and persons holding positions of trust, or against insolvency of losses from nonpayments of notes and other evidence of indebtedness, or against other breaches of contract. As generally used, this insurance is synonymous with guaranty insurance.

Insurance rate--The mathematical figure per $100 of insurance which determines the premium.

Insurer--Any legal entity, engaged or attempting to engage in the business of making insurance or surety contracts.

Level insurance--Insurance in which the amount of insurance benefit does not decrease during its term.

License--A certificate of authority, issued by a qualified public agency, to act within prescribed limits.

Lien-endorsement coverage--An endorsement added to an automobile physical damage policy indemnifying a lending agency against loss resulting from prior existing liens.

Lodge--As set forth in Section 38-37-20, S. C. Code of Laws, 1976.

Member--One who holds a contract of insurance or is insured in an insurance company other than a stock corporation.

Minimum surplus--The minimum amount by which the admitted assets of an insurer, over and above the capital stock, must exceed its liabilities, in order to be licensed to do business in this State.

Multiple line insurance--A policy of insurance insuring more than one class of risk.

Net premium--That portion of the gross premium remaining after adjustments of debits, credits and dividends.

Non-Recording insurance--An insurance contract protecting a lender from loss occasioned by his failure to record a mortgage given as security for the loan made.

Officer--Any person charged with active management and control, in an executive capacity, of the affairs of a corporation.

Parent corporation--See "subsidiary".

Person--Any legal entity.

Policy--A contract of insurance.

Policyholder--Holder of a contract of insurance.

Preferred claim--Any claim with respect to which the law of a State or of the United States accords priority of payment from the general assets of the insurer.

Premium--Money or any other thing of value paid or given in consideration of a contract of insurance.

Premium reserves--A fund set aside for the payment of future benefits under a policy.

Reciprocal insurance exchange--A group or association of persons cooperating through an attorney-in-fact for the purpose of insuring themselves and each other.

Reinsurance--The assumption of a portion of the risk on a policy by another insurer.

Renewal license--A license which becomes effective immediately following the termination of a license previously issued and in force, and which differs from such previous license only in respect to the date of expiration.

Return premium--Return to the policyholder of the unearned portion of a premium upon cancellation, or adjustment in rate, of a policy.

Shareholder--A holder of record of shares of stock in a corporation.

Short rate--A penalty rate, using percentages slightly higher than would result from pro-rata calculations.

Single interest insurance--Insurance in which the benefit amount decreases during its term in accordance with predetermined scale.

Specific insurance--A contract of insurance which definitively describes the thing insured and the amount of insurance applying thereto.

Subsidiary--A corporation of which the majority of the capital stock is owned or controlled by another corporation, called the "parent corporation".

Surplus to policyholders--The excess of total admitted assets over the liabilities of an insurer which shall be the sum of all capital and surplus accounts minus any impairment thereof.

Unauthorized insurer--Any insurer not authorized to do business in this State.

Unearned premium--That portion of the gross premium, at a given time, that is unearned or unexhausted by the earned premium.

Unearned premium reserve--Funds, equal to the unearned premium, set aside for contingencies.

69-4. Life, Accident and Health Insurance--Reserve Tabulations.

Each and every domestic insurance company having life and/or accident and health insurance in force shall submit, with the annual statement required by this Department, a copy of the valuation tabulation used in the determination of its reported life and accident and health reserve. If the tabulation is a summarization, each company shall be prepared to support each and every phase of the summary by detailed cards, listings, or some form of acceptable running inventory. This detailed information shall be maintained until verification of the valuation has been made by a representative or representatives of this Department.

Each company shall take the necessary steps to acquire and maintain, in its home office, the necessary reserve tables for proper calculation of reserves on all contracts in force as of the applicable valuation date. If the insurance is of such a nature that no appropriate mortality or morbidity tables have been published, the company may use methods and approximations warranted by company experience and approved by the Chief Insurance Commissioner.

69-5. Policy Approvals.

On January 1, 1962, and thereafter, every industrial life insurance policy or contract submitted to this Department for approval by a domestic insurance company, must be accompanied by the appropriate net premium and terminal reserve, except in those instances where the applicable net premiums and terminal reserves have been published.

Every ordinary life policy or contract must be accompanied by the appropriate net premium, terminal and mean reserves, except in those instances when such premiums and reserves have been otherwise published.

If such premiums and reserves are not submitted because of publication, the name of the publication together with a statement that the company possesses and maintains a copy of the publication must be submitted in writing to this Department.

No approval of any industrial life policy or contract or any ordinary life policy or contract will be given except upon compliance with this Regulation.

69-5.1. Minimum Standards for the Readability of Commonly Purchased Insurance Policies.

This Regulation establishes minimum standards of readability applicable to all commonly purchased personal policies, contracts and certificates of insurance delivered or issued for delivery in this State.

A. Purpose: The purpose of this Regulation is to establish minimum standards of readability applicable to all commonly purchased personal policies, contracts and certificates of insurance delivered or issued for delivery in this State.

This Regulation is not intended to increase the risk assumed by insurance companies or other entities subject to this Act or to supersede their obligation to comply with the substance of other insurance legislation applicable to such forms of insurance policies. This Regulation is not intended to impede flexibility and innovation in the development of policy forms or content or to lead to the standardization of policy forms or content.

A policy is a legal document. Revision of the policy to make it more readable must not lead to its devaluation as a legal document. The policy must comply with all statutory and regulatory requirements.

B. Definitions--As used in this Regulation:

(1) "Commissioner" means the Chief Insurance Commissioner of this State.

(2) "Policy" or "Policy Forms" means any policy, certificate, rider, amendment, endorsement, contract, plan or agreement of personal insurance, and any renewal thereof including homeowners, dwelling fire, automobile, accident and health, life and all other forms of personal insurance delivered or issued for delivery in this State by any company subject to this Regulation; any certificate, contract or policy issued by a fraternal benefit society, and any certificate issued pursuant to a group insurance policy delivered or issued for delivery in this State. The Commissioner may add other policies as he deems advisable.

(3) "Company" or "Insurer" means any life and health, accident, property and casualty, title or marine insurance company, reciprocal, county mutuals, fraternal benefit society, nonprofit health services corporation, nonprofit hospital service corporation, nonprofit medical service corporation, prepaid health plan, dental care plan, vision care plan, pharmaceutical plan, health maintenance organization, and all similar type organizations.

C. Applicability:

(1) This Regulation shall apply to all policies delivered or issued for delivery in this State by any insurer on or after the date such forms must be approved under this Regulation, but nothing in this Regulation shall apply to:

(a) Any policy which is a security subject to Federal jurisdiction;

(b) Any group policy; however, this shall not exempt any certificate issued pursuant to a group policy delivered or issued for delivery in this State or mass marketed certificates subject to approval by this Department;

(c) Any group annuity contract which serves as a funding vehicle for pension, profit-sharing, or deferred compensation plans;

(d) Commercial, fleet vehicle and incidental personal coverages which are a part of a commercial policy;

(e) Any life, accident and health form used in connection with, as a conversion from, as an addition to, in exchange for or issued pursuant to a contractual provision for, a policy delivered or issued for delivery on a form approved or permitted to be issued prior to the date such forms must be approved under this Regulation;

(f) Renewal of a life or accident and health policy delivered or issued for delivery prior to the date such forms must be approved under this Regulation;

(g) Surety or Fidelity bonds.

D. Minimum Policy Readability Standards:

(1) In addition to any other requirements of law, no policy forms of personal insurance except as stated in Section C, shall be delivered or issued for delivery in this State on or after the dates such forms must be approved under this Regulation unless:

(a) The text achieves a minimum score of 40 on the Flesch Reading Ease Test or an equivalent score on any other comparable test as provided in subsection (3) of this Section;

(b) It is printed, except for specification pages, schedules and tables, in not less than ten point type, one point leaded;

DRAFTING NOTE: This subsection is not intended to include minor instructions concerning the preparation of an application which becomes part of the policy within the type size requirement (e. g., "Last Name," "RFD or Box Number.")

(c) The style, arrangement and overall appearance of the policy give no undue prominence to any portion of the text of the policy or to any endorsement or riders; and

(d) It contains a table of contents or an index of the principal sections of the policy, if the policy has more than 3,000 words or if the policy is printed on more than 3 pages.

(2) For the purposes of this Section, a Flesch Reading Ease Test Score shall be measured by the following method:

(a) For a policy containing 10,000 words or less of text, the entire policy shall be analyzed. For a policy containing more than 10,000 words, the readability of two 100 word samples per page may be analyzed instead of the entire form. The samples shall be separated by at least 20 printed lines.

(b) The number of words and sentences in the text shall be counted and the total number of words divided by the total number of sentences. The figure obtained shall be multiplied by a factor of 1.015.

(c) The total number of syllables shall be counted and divided by the total number of words. The figure obtained shall be multiplied by a factor of 84.6.

(d) The sum of the figures computed under (b) and (c) subtracted from 206.835 equals the Flesch Reading Ease Test Score for the policy form.

(e) For purposes of this Section, the following procedures shall be used:

(1) A contraction, hyphenated word, numbers and letters when separated by spaces shall be counted as one word;

(2) A unit of words ending with a period, semicolon, or colon, but excluding headings and captions shall be counted as a sentence;

(3) A syllable means a unit of spoken language consisting of one or more letters of a word as divided by an accepted dictionary. Where the dictionary shows two or more equally acceptable pronunciations of a word, the pronunciation containing fewer syllables may be used.

(f) The term "text" as used in this Section shall include all printed matter except the following:

(1) The name and address of the insurer; the name, number or title of the policy; the table of contents or index; captions and subcaptions; specification pages, schedules or tables;

(2) Any policy language which is drafted to conform to the requirements of any federal law, regulation or agency interpretation; any policy language required by any collectively bargained agreement; any medical terminology; any words which are defined in the policy; and any policy language required by law or regulation; provided, however, the insurer identifies the language or terminology excepted by this subsection and certifies, in writing that the language or terminology is entitled to be excepted by this subsection.

(3) Any other reading test may be approved by the Commissioner for use as an alternative to the Flesch Reading Ease Test if it is comparable in result to the Flesch Reading Ease Test.

DRAFTING NOTE: The Flesch Reading Ease Test (Rudolph Flesch, The Art of Readable Writing, 1949, as revised 1974) is the basic test set forth in this Regulation.

(4) Filings subject to this Section shall be accompanied by a certificate signed by an officer of the insurer or filing organization stating that it meets the minimum reading ease score on the test used or stating that the score is lower than the minimum required but should be approved in accordance with Section F of this Regulation. To confirm the accuracy of any certification, the Commissioner may require the submission of further information to verify the certification in question. If it is necessary to alter coverage, such change must be noted and explained upon submission for filing.

(5) At the option of the insurer, riders, endorsements, and other forms made a part of the policy may be scored as separate forms or as part of the policy with which they may be used.

E. Powers of the Commissioner: The Commissioner may approve a policy which does not meet the minimum Flesch Reading Ease Test Score required herein whenever, in his sole discretion, he finds such approval:

(1) will provide a more accurate reflection of the readability of a policy form;

(2) is warranted by the nature of a particular policy, or

(3) is warranted by certain policy language which is drafted to conform to the requirements of any State law, Regulation or Agency interpretation.

F. Approval of Forms: A policy meeting the requirements of Section (D)(1) shall be approvable notwithstanding the provisions of any other law which specify the content of policies, if the policy provides the policyholders and claimants protection not less favorable than they would be entitled to under such laws.

G. Effective Dates:

(1) Except as provided in Section C, no policy shall be delivered or issued for delivery in this State on or after two years next following final promulgation of this Regulation unless approved by the Commissioner or permitted to be issued under this Regulation. Any policy which has been approved or permitted to be issued prior to and which meets the standards set by this Regulation need not be refiled for approval, but may continue to be lawfully delivered or issued for delivery in this State upon the filing with the Commissioner of a list of such policies identified by form number, edition date, previous approval date accompanied by a certificate as to each such policy in the manner provided in Section D(4).

(2) In addition to the above requirements the effective date for all property and casualty policies shall be as follows:

(a) Renewal policies or continuous policies shall be reissued using forms in compliance with this Regulation on the first anniversary or billing date which occurs after a two year period following the final promulgation of this Regulation.

(b) The insurer shall provide, in the conversion to readable policies, generally and in overall effect, coverage which is substantially equal to or superior to that afforded by policies which they replace.

(c) If there are substantive differences in coverages, the insurer must explain in writing to the insured such differences.

(3) The Commissioner shall reserve the right to withdraw approval of all existing policies of commonly purchased insurance that do not comply with the provisions of this Regulation. The Commissioner may, in his sole discretion, extend the dates in Section G(1).

H. Penalties: Attention is directed to the penalties found in Section 5 of Act 550, "Any insurer who violates the provisions of this Act shall be deemed guilty of misdemeanor and upon conviction shall be fined not more than one thousand dollars for each offense and the Commissioner may revoke the license of any insurer who violates the provisions of this Act."

69-6. Brokers' Licenses.

1. No person shall be licensed as an insurance broker to represent citizens of this State for the placing of insurance unless such person, at the time the initial or renewal application is made for an insurance broker's license, possesses a valid, current insurance agent's license for that line of business for which the brokerage authority is intended to apply, and has been so licensed as such an insurance agent for not less than two (2) years.

2. Every broker's license issued shall be restricted to those lines of business for which specific application is made and must be supported by record of prior issuance of agent's license for such lines of business. The limits of authority of all broker's licenses shall be plainly set forth on the face of the license.

69-7. Minimum Reserve Standards for Individual and Group Accident and Health Insurance Contracts.

Section I. Introduction.

A. Scope.

1. These standards apply to all individual and group accident and health insurance coverages except credit insurance.

2. When an insurer determines that adequacy of its accident and health insurance reserves requires reserves in excess of the minimum standards specified herein, such increased reserves shall be held and shall be considered the minimum reserves for that insurer.

3. With respect to any block of contracts, or with respect to an insurer's accident and health business as a whole, a prospective gross premium valuation is the ultimate test of reserve adequacy as of a given valuation date. Such a gross premium valuation will take into account, for contracts in force, in a claims status, or in a continuation of benefits status on the valuation date, the present value as of the valuation date of all expected benefits unpaid, all expected expenses unpaid, and all unearned or expected premiums, adjusted for future premium increases reasonably expected to be put into effect.

4. Such a gross premium valuation is to be performed whenever a significant doubt exists as to reserve adequacy with respect to any major block of contracts, or with respect to the insurer's accident and health business as a whole. In the event inadequacy is found to exist, immediate loss recognition shall be made and the reserves restored to adequacy. Adequate reserves (inclusive of claim, premium, and contract reserves, if any) shall be held with respect to all contracts, regardless of whether contract reserves are required for such contracts under these standards.

5. Whenever minimum reserves, as defined in these standards, exceed reserve requirements as determined by a prospective gross premium valuation, such minimum reserves remain the minimum requirement under these standards.

B. Categories of Reserves.

1. The following sections set forth minimum standards for three categories of accident and health insurance reserves:

a. Section II. Claim Reserves.

b. Section III. Premium Reserves.

c. Section IV. Contract Reserves.

2. Adequacy of an insurer's accident and health insurance reserves is to be determined on the basis of all three categories combined. However, these standards emphasize the importance of determining appropriate reserves for each of the three categories separately.

C. Appendices.

1. These standards contain two appendices which are an integral part of the standards, and one additional "supplementary" appendix which is not part of the standards as such, but is included for explanatory and illustrative purposes only.

2. Appendix A. Specific minimum standards with respect to morbidity, mortality, and interest, which apply to claim reserves according to year of incurral and to contract reserves according to year of issue.

3. Appendix B. Glossary of Technical Terms Used.

4. Appendix C. (Supplementary) Waiver of Premium Reserves.

Section II. Claim Reserves.

A. General.

1. Claim reserves are required for all incurred but unpaid claims on all accident and health insurance policies.

2. Appropriate claim expense reserves are required with respect to the estimated expense of settlement of all incurred but unpaid claims.

3. All such reserves for prior valuation years are to be tested for adequacy and reasonableness along the lines of claim runoff schedules in accordance with the statutory financial statement including consideration of any residual unpaid liability.

B. Minimum Standards for Claim Reserves.

1. Disability Income.

a. Interest. The maximum interest rate for claim reserves is specified in Appendix A.

b. Morbidity. Minimum standards with respect to morbidity are those specified in Appendix A; except that, at the option of the insurer: (i) For claims with a duration from date of disablement of less than two years, reserves may be based on the insurer's experience, if such experience is considered credible, or upon other assumptions designed to place a sound value on the liabilities. (ii) For group disability income claims with a duration from the date of disablement of more than two years but less than five years, reserves may, with the approval of the Director of Insurance, be based upon the insurer's experience for which the insurer maintains underwriting and claim administration control. The request for such approval of a plan of modification to the reserve basis must include:

(I) An analysis of the credibility of the experience;

(II) A description of how all of the insurer's experience is proposed to be used in setting reserves;

(III) A description and quantification of the margins to be included;

(IV) A summary of the financial impact that the proposed plan of modification would have had on the insurer's last filed annual statement;

(V) A copy of the approval of the proposed plan of modification by the commissioner of the state of domicile; and

(VI) Any other information deemed necessary by the Director of Insurance.

DRAFTING NOTE: For experience to be considered credible for purposes of (ii), the company should be able to provide claim termination patterns over no more than six (6) years reflecting at least 5,000 claim terminations during the third through fifth claim durations on reasonably similar applicable policy forms.

For claim reserves to reflect "sound values" and/or reasonable margins, reserve tables based on credible experience should be adjusted regularly to maintain reasonable margins. Demonstrations may be required by the commissioner of the state of domicile based on published literature (e.g. Goldman, TSA XLII).

c. Duration of Disablement. For contracts with an elimination period, the duration of disablement should be measured as dating from the time that benefits would have begun to accrue had there been no elimination period.

2. All Other Benefits.

a. Interest. The maximum interest rate for claim reserves is specified in Appendix A.

b. Morbidity or Other Contingency. The reserve should be based on the insurer's experience, if such experience is considered credible, or upon other assumptions designed to place a sound value on the liabilities.

C. Claim Reserve Methods Generally.

1. Any generally accepted or reasonable actuarial method or combination of methods may be used to estimate all claim liabilities.

2. The methods used for estimating liabilities generally may be aggregate methods, or various reserve items may be separately valued. Approximations based on groupings and averages may also be employed. Adequacy of the claim reserves, however, shall be determined in the aggregate.

Section III. Premium Reserves.

A. General.

1. Unearned premium reserves are required for all contracts with respect to the period of coverage for which premiums, other than premiums paid in advance, have been paid beyond the date of valuation.

2. If premiums due and unpaid are carried as an asset, such premiums must be treated as premiums in force, subject to unearned premium reserve determination. The value of unpaid commissions, premium taxes, and the cost of collection associated with due and unpaid premiums must be carried as an offsetting liability.

3. The gross premiums paid in advance for a period of coverage commencing after the next premium due date which follows the date of valuation may be appropriately discounted to the valuation date and shall be held either as a separate liability or as an addition to the unearned premium reserve which would otherwise be required as a minimum.

B. Minimum Standards for Unearned Premium Reserves.

1. The minimum unearned premium reserve with respect to any contract is the pro rata unearned modal premium that applies to the premium period beyond the valuation date, with such premium determined on the basis of:

a. The valuation net modal premium on the contract reserve basis applying to the contract; or

b. The gross modal premium for the contract if no contract reserve applies.

2. However, in no event may the sum of the unearned premium and contract reserves for all contracts of the insurer subject to contract reserve requirements be less than the gross modal unearned premium reserve on all such contracts, as of the date of valuation. Such reserve shall never be less than the expected claims for the period beyond the valuation date represented by such unearned premium reserve to the extent not provided for elsewhere.

C. Premium Reserve Methods Generally.

1. The insurer may employ suitable approximations and estimates including, but not limited to groupings, averages, and aggregate estimation, in computing premium reserves.

2. Such approximations or estimates should be tested periodically to determine their continuing adequacy and reliability.

Section IV. Contract Reserves.

A. General.

1. Contract reserves are required, unless otherwise specified in Section IV.A.2. for:

a. all individual and group contracts with which level premiums are used; or

b. all individual and group contracts with respect to which, due to the gross premium pricing structure at issue, the value of the future benefits at any time exceeds the value of any appropriate future valuation net premiums at that time. The values specified in this subparagraph b. shall be determined on the basis specified in Section IV.B.

2. Contracts not requiring a contract reserve are:

a. contracts which cannot be continued after one year from issue; or

b. contracts already in force on the effective date of these standards for which no contract reserve was required under the immediately preceding standards.

3. The contract reserve is in addition to claim reserves and premium reserves.

4. The methods and procedures for contract reserves should be consistent with those for claim reserves for any contract, or else appropriate adjustment must be made when necessary to assure provision for the aggregate liability. The definition of the date of incurral must be the same in both determinations.

B. Minimum Standards for Contract Reserves--Basis.

1. Morbidity or Other Contingency.

a. Minimum standards with respect to morbidity are those set forth in Appendix A. Valuation net premiums used under each contract must have a structure consistent with the gross premium structure at issue of the contract as this relates to advancing age of insured, contract duration, and period for which gross premiums have been calculated.

b. Contracts for which tabular morbidity standards are not specified in Appendix A shall be valued using tables established for reserve purposes by a qualified actuary and acceptable to the Director of Insurance.

2. Interest. The maximum interest rate is specified in Appendix A.

3. Termination Rates.

a. Termination rates used in the computation of reserves shall be on the basis of a mortality table as specified in Appendix A. except as noted in the following paragraph.

b. Under contracts for which premium rates are not guaranteed, and where the effects of insurer underwriting are specifically used by policy duration in the valuation morbidity standard or for return of premium or other deferred cash benefits, total termination rates may be used at ages and durations where these exceed specified mortality table rates, but not in excess of the lesser of:

(1) Eighty percent of the total termination rate used in the calculation of the gross premiums, or

(2) Eight percent.

c. Where a morbidity standard specified in Appendix A is on an aggregate basis, such morbidity standard may be adjusted to reflect the effect of insurer underwriting by policy duration. The adjustments must be appropriate to the underwriting and be acceptable to the Director of Insurance.

4. Reserve Method.

a. For insurance except long-term care and return of premium or other deferred cash benefits, the minimum reserve is the reserve calculated on the two-year full preliminary term method; that is, under which the terminal reserve is zero at the first and also the second contract anniversary.

b. For long-term care insurance, the minimum reserve is the reserve calculated as follows:

(1) For individual policies and group certificates issued on or before December 31, 1997, reserves calculated on the two-year full preliminary term method.

(2) For individual policies and group certificates issued on or after January 1, 1998, reserves calculated on the one-year full preliminary term method.

c. For return of premium or other deferred cash benefits, the minimum reserve is the reserve calculated as follows:

(1) On the one year preliminary term method if such benefits are provided at any time before the twentieth anniversary.

(2) On the two year preliminary term method if such benefits are only provided on or after the twentieth anniversary.

d. The preliminary term method may be applied only in relation to the date of issue of a contract. Reserve adjustments introduced later as a result of rate increases, revisions in assumptions (e.g., projected inflation rates) or for other reasons, are to be applied immediately as of the effective date of adoption of the adjusted basis.

5. Negative Reserves. Negative reserves on any benefit may be offset against positive reserves for other benefits in the same contract, but the total contract reserve with respect to all benefits combined may not be less than zero.

C. Alternative Valuation Methods and Assumptions Generally.

1. Provided the contract reserve on all contracts to which an alternative method or basis is applied is not less in the aggregate than the amount determined according to the applicable standards specified above, an insurer may use any reasonable assumptions as to interest rates, termination and/or mortality rates, and rates of morbidity or other contingency.

2. Also, subject to the preceding condition, the insurer may employ methods stated above in determining a sound value of its liabilities under such contracts, including, but not limited to the following:

a. The net level premium method;

b. The one-year full preliminary term method;

c. Prospective valuation on the basis of actual gross premiums with reasonable allowance for future expenses;

d. The use of approximations such as those involving age groupings, groupings of several years of issue, average amounts of indemnity, grouping of similar contract forms;

e. The computation of the reserve for one contract benefit as a percentage of, or by other relation to, the aggregate contract reserves exclusive of the benefit or benefits so valued; and

f. The use of a composite annual claim cost for all or any combination of the benefits included in the contracts valued.

D. Tests for Adequacy and Reasonableness of Contract Reserves.

1. Annually, an appropriate review shall be made of the insurer's prospective contract liabilities on contracts valued by tabular reserves, to determine the continuing adequacy and reasonableness of the tabular reserves giving consideration to future gross premiums. The insurer shall make appropriate increments to such tabular reserves if such tests indicate that the basis of such reserves is no longer adequate; subject, however, to the minimum standards of Section IV.B.

2. In the event a company has a contract or a group of related similar contracts, for which future gross premiums will be restricted by contract, insurance department regulations, or for other reasons, such that the future gross premiums reduced by expenses for administration, commissions, and taxes will be insufficient to cover future claims, the company shall establish contract reserves for such shortfall in the aggregate.

Section V. Reinsurance.

Increases to, or credits against reserves carried, arising because of reinsurance assumed or reinsurance ceded, must be determined in a manner consistent with these minimum reserve standards and with all applicable provisions of the reinsurance contracts which affect the insurer's liabilities.

Section VI. Appendix A. Specific Standards for Morbidity, Interest and Mortality.

A. Morbidity.

1. Minimum morbidity standards for valuation of specified individual contract accident and health insurance benefits are as follows:

a. Disability Income Benefits Due to Accident or Sickness.

(1) Contract Reserves:

(a) Contracts issued on or after January 1, 1963, and prior to January 1, 1968: Conference Modification of Class III Disability Table.

(b) Contracts issued on or after January 1, 1968, and prior to January 1, 1990: The 1964 Commissioners Disability Table (64 CDT).

(c) Contracts issued on or after January 1, 1992: The 1985 Commissioners Individual Disability Tables A (85CIDA); or the 1985 Commissioners Individual Disability Tables B (85CIDB).

(1) Each insurer shall elect, with respect to all individual contracts issued in any one statement year, whether it will use Tables A or Tables B as the minimum standard.

(2) The insurer may, however, elect to use the other tables with respect to any subsequent statement year.

(d) Contracts issued during 1990 or 1991: Optional use of either the 1964 Table or the 1985 Tables.

(2) Claim Reserves: The minimum morbidity standard in effect for contract reserves on currently issued contracts, as of the date the claim is incurred.

b. Hospital Benefits, Surgical Benefits, and Maternity Benefits (Scheduled benefits or fixed time period benefits only).

(1) Contract Reserves:

(a) Contracts issued on or after January 1, 1963, and before January 1, 1990: The1956 Intercompany Hospital-Surgical Tables.

(b) Contracts issued on or after January 1, 1992: The 1974 Medical Expense Tables, Table A, Transactions of the Society of Actuaries, Volume XXX, page 63. Refer to the paper (in the same volume, page 9) to which this table is appended, including its discussions, for methods of adjustment for benefits not directly valued in Table A: "Development of the 1974 Medical Expense Benefits," Houghton and Wolf.

(c) Contracts issued during 1990 or 1991: Optional use of either the 1956 Tables or the 1974 Tables.

(2) Claim Reserves: No specific standard. See Section VI.A.1.e.

c. Cancer Expense Benefits (Scheduled benefits or fixed time period benefits only).

(1) Contract Reserves: Contracts issued on or after January 1, 1992: The 1985 NAIC Cancer Claim Cost Tables.

(2) Claim Reserves: No specific standard. See Section VI.A.1.e.

d. Accidental Death Benefits.

(1) Contract Reserves: Contracts issued on or after January 1, 1968: The 1959 Accidental Death Benefits Table.

(2) Claim Reserves: Actual amount incurred.

e. Other Individual Contract Benefits.

(1) Contract Reserves: For all other individual contract benefits, morbidity assumptions are to be determined as provided in the reserve standards.

(2) Claim Reserves: For all benefits other than disability, claim reserves are to be determined as provided in the standards.

2. Minimum morbidity standards for valuation of specified group contract accident and health insurance benefits are as follows:

a. Disability Income Benefits Due to Accident or Sickness.

(1) Contract Reserves:

(a) Contracts issued prior to January 1, 1992: The same basis, if any, as that employed by the insurer as of January 1, 1992;

(b) Contracts issued on or after January 1, 1992: The 1987 Commissioners Group Disability Income Table (87CGDT).

(2) Claim Reserves:

(a) For claims incurred on or after January 1, 1992: The 1987 Commissioners Group Disability Income Table (87CGDT);

(b) For claims incurred prior to January 1, 1992: Use of the 87CGDT is optional.

b. Other Group Contract Benefits.

(1) Contract Reserves: For all other group contract benefits, morbidity assumptions are to be determined as provided in the reserve standards.

(2) Claim Reserves: For all benefits other than disability, claim reserves are to be determined as provided in the standards.

B. Interest.

1. For contract reserves, the maximum interest rate is the maximum rate permitted by law in the valuation of whole life insurance issued on the same date as the accident and health insurance contract.

2. For claim reserves, on policies that require contract reserves, the maximum interest rate is the maximum rate permitted by law in the valuation of whole life insurance issued on the same date as the claim incurral date.

3. For claim reserves on policies not requiring contract reserves, the maximum interest rate is the maximum rate permitted by law in the valuation of single premium immediate annuities issued on the same date as the claim incurred date, reduced by one hundred basis points.

C. Mortality.

1. Except as provided in subsection 2, the mortality basis used shall be according to a table (but without use of selection factors) permitted by law for the valuation of whole life insurance issued on the same date as the accident and health insurance contract.

2. Other mortality tables adopted by the NAIC and promulgated by the Director of Insurance may be used in the calculation of the minimum reserves if appropriate for the type of benefits and if approved by the Director of Insurance. The request for such approval must include the proposed mortality table and the reason that the standard specified in Subsection 1 is inappropriate.

Section VII. Appendix B. Glossary of Technical Terms Used.

A. Annual-Claim Cost. The net annual cost per unit of benefit before the addition of expenses, including claim settlement expenses, and a margin for profit or contingencies. For example, the annual claim cost for a $100 monthly disability benefit, for a maximum disability benefit period of one year, with an elimination period of one week, with respect to a male at age 35, in a certain occupation might be $12, while the gross premium for this benefit might be $18. The additional $6 would cover expenses and profit or contingencies.

B. Claims Accrued. That portion of claims incurred on or prior to the valuation date which result in liability of the insurer for the payment of benefits for medical services which have been rendered on or prior to the valuation date, and for the payment of benefits for days of hospitalization and days of disability which have occurred on or prior to the valuation date, which the insurer has not paid as of the valuation date, but for which it is liable, and will have to pay after the valuation date. This liability is sometimes referred to as a liability for "accrued" benefits. A claim reserve, which represents an estimate of this accrued claim liability, must be established.

C. Claims Reported. When an insurer has been informed that a claim has been incurred, if the date reported is on or prior to the valuation date, the claim is considered as a reported claim for annual statement purposes.

D. Claims Unaccrued. That portion of claims incurred on or prior to the valuation date which result in liability of the insurer for the payment of benefits for medical services expected to be rendered after the valuation date, and for benefits expected to be payable for days of hospitalization and days of disability occurring after the valuation date. This liability is sometimes referred to as a liability for unaccrued benefits. A claim reserve, which represents an estimate of the unaccrued claim payments expected to be made (which may or may not be discounted with interest), must be established.

E. Claims Unreported. When an insurer has not been informed, on or before the valuation date, concerning a claim that has been incurred on or prior to the valuation date, the claim is considered as an unreported claim for annual statement purposes.

F. Date of Disablement. The earliest date the insured is considered as being disabled under the definition of disability in the contract, based on a doctor's evaluation or other evidence. Normally, this date will coincide with the start of any elimination period.

G. Elimination Period. A specified number of days, weeks, or months starting at the beginning of each period of loss, during which no benefits are payable.

H. Gross Premium. The amount of premium charged by the insurer. It includes the net premium (based on claim-cost) for the risk, together with any loading for expenses, profit, or contingencies.

I. Level Premium. A premium calculated to remain unchanged throughout either the lifetime of the policy, or for some shorter projected period of years. The premium need not be guaranteed, in which case, although it is calculated to remain level, it may be changed if any of the assumptions on which it is based are revised at a later time.

1. Generally, the annual claim costs are expected to increase each year and the insurer, instead of charging premiums that correspondingly increase each year, charges a premium calculated to remain level for a period of years or for the lifetime of the contract. In this case the benefit portion of the premium is more than needed to provide for the cost of benefits during the earlier years of the policy and less than the actual cost in the later years.

2. The building of a prospective contract reserve is a natural result of level premiums.

J. Long-Term Care Insurance. Any insurance policy or rider advertised, marketed, offered or designed to provide coverage for not less than twelve (12) consecutive months for each covered person on an expense incurred, indemnity, prepaid or other basis; for one or more necessary or medically necessary diagnostic, preventive, therapeutic, rehabilitative, maintenance or personal care services, provided in a setting other than an acute care unit of a hospital. Such term also includes a policy or rider which provides for payment of benefits based upon cognitive impairment or the loss of functional capacity. Long-term care insurance may be issued by insurers; fraternal benefit societies; nonprofit health, hospital, and medical service corporations; prepaid health plans; health maintenance organizations or any similar organization to the extent they are otherwise authorized to issue life or health insurance. Long-term care insurance shall not include any insurance policy which is offered primarily to provide basic Medicare supplement coverage, basic hospital expense coverage, basic medical-surgical expense coverage, hospital confinement indemnity coverage, major medical expense coverage, disability income or related asset-protection coverage, accident only coverage, specified disease or specified accident coverage, or limited benefit health coverage.

K. Modal Premium. This refers to the premium paid on a contract based on a premium term which could be annual, semi-annual, quarterly, monthly, or weekly. Thus, if the annual premium is $100 and if, instead, monthly premiums of $9 are paid, then the modal premium is $9.

L. Negative Reserve. Normally the terminal reserve is a positive value. However, if the values of the benefits are decreasing with advancing age or duration it could be a negative value, called a negative reserve.

M. Preliminary Term Reserve Method. Under this method of valuation, the valuation net premium for each year falling within the preliminary term period is exactly sufficient to cover the expected incurred claims of that year, so that the terminal reserves will be zero at the end of the year. As of the end of the preliminary term period, a new constant valuation net premium (or stream of changing valuation premiums) becomes applicable such that the present value of all such premiums is equal to the present value of all claims expected to be incurred following the end of the preliminary term period.

N. Present Value of Amounts Not Yet Due on Claims. The reserve for "claims unaccrued" (see definition), which may be discounted at interest.

O. Reserve. The term "reserve" is used to include all items of benefit liability, whether in the nature of incurred claim liability or in the nature of contract liability relating to future periods of coverage, and whether the liability is accrued or unaccrued.

1. An insurer under its contracts promises benefits which result in claims which have been incurred, that is, for which the insurer has become obligated to make payment, on or prior to the valuation date. On these claims, payments expected to be made after the valuation date for accrued and unaccrued benefits are liabilities of the insurer which should be provided for by establishing claim reserves; or

2. An insurer under its contracts promises benefits which result in claims which are expected to be incurred after the valuation date. Any present liability of the insurer for these future claims should be provided for by the establishment of contract reserves and unearned premium reserves.

P. Terminal Reserve. This is the reserve at the end of a contract year, and is defined as the present value of benefits expected to be incurred after that contract year minus the present value of future valuation net premiums.

Q. Unearned Premium Reserve. This reserve values that portion of the premium paid or due to the insurer which is applicable to the period of coverage extending beyond the valuation date. Thus if an annual premium of $120 was paid on November 1, $20 would be earned as of December 31 and the remaining $100 would be unearned. The unearned premium reserve could be on a gross basis as in this example, or on a valuation net premium basis.

R. Valuation Net Modal Premium. This is the modal fraction of the valuation net annual premium that corresponds to the gross modal premium in effect on any contract to which contract reserves apply. Thus, if the mode of payment in effect is quarterly, the valuation net modal premium is the quarterly equivalent of the valuation net annual premium.

Section VIII. Appendix C. Reserve for Waiver of Premium--(Supplementary explanatory material).

A. Waiver of premium reserves involve several special considerations. First, the disability valuation tables promulgated by the NAIC are based on exposures that include contracts on premium waiver as in-force contracts. Hence, contract reserves based on these tables are not reserves on "active lives" but rather reserves on contracts "in force." This is true for the 1964 CDT and for both the 1985 CIDA and CIDB tables.

B. Accordingly, tabular reserves using any of these tables should value reserves on the following basis:

1. Claim reserves should include reserves for premiums expected to be waived, valuing as a minimum the valuation net premium being waived.

2. Premium reserves should include contracts on premium waiver as in-force contracts, valuing as a minimum the unearned modal valuation net premium being waived.

3. Contract reserves should include recognition of the waiver of premium benefit in addition to other contract benefits provided for, valuing as a minimum the valuation net premium to be waived.

C. If an insurer is, instead, valuing reserves on what is truly an active life table, or if a specific valuation table is not being used but the insurer's gross premiums are calculated on a basis that includes in the projected exposure only those contracts for which premiums are being paid, then it may not be necessary to provide specifically for waiver of premium reserves. Any insurer using such a true "active life" basis should carefully consider, however, whether or not additional liability should be recognized on account of premiums waived during periods of disability or during claim continuation.

69-7.1. Repealed by State Register Volume 15, Issue No. 3, effective March 22, 1991.

69-8. Reserves for Mortgage Guaranty Insurance.

This Regulation shall apply to all insurers writing mortgage guaranty insurance in South Carolina. Mortgage guaranty insurance is defined for the purposes of this Regulation as the insurance of mortgage lenders against loss by reason of nonpayment of mortgage indebtedness by borrowers, and should not be confused with other kinds of insurance written incidental to mortgage loan transactions such as mortgage redemption life insurance, hazard insurance covering improvements to real property, and credit accident and health coverages.

1. Unearned premium reserves for mortgage guaranty insurance shall be computed in accordance with Sections 38-5-60, 38-9-170 and 38-9-180 which specify that such reserves are to be computed by the use of annual or more frequent pro rata fractions.

2. In addition to the unearned premium reserve, every mortgage guaranty insurer writing business in this State must establish and maintain a contingency reserve, computed as hereinafter described, for the further protection of such companies and their policyholders against the adverse effects of economic cycles and other causes of excessive loss experience. The contingency reserve shall be credited not less frequently than annually, as of the end of each calendar year, with an amount equal to fifty per cent of the premiums earned during the year, computed in accordance with Sections 38-5-60, 38-9-170 and 38-9-180. Each such amount credited to the contingency reserve shall be carried as a liability for fifteen years following the year for which the credit is established, unless used to pay mortgage guaranty losses as hereinafter provided.

3. If for any year the incurred losses and loss expenses for mortgage guaranty insurance shall exceed forty per cent of the premiums earned on such business, the contingency reserve may be charged with the amount of such excess if such charge is approved by the Chief Insurance Commissioner. Any such annual charges shall be treated so as to reduce or remove the amounts originally credited to said reserve on a first-in, first-out basis.

4. Annual statements reflecting mortgage guaranty insurance transactions by licensed insurers must be prepared in compliance with this Regulation to meet the requirements of Section 38-13-100.

69-9. Proxies, Consents and Authorizations of Domestic Insurers.

Effective Date: The following regulation shall be effective on and after April 1, 1966.

Section 1. Application of Regulation-- This regulation is applicable to all domestic insurers having one hundred or more stockholders; provided, however, that this regulation shall not apply to any insurer if ninety-five per cent or more of its stock is owned or controlled by a parent or an affiliated insurer and the remaining shares are held by less than five hundred stockholders. A domestic insurer which files with the Securities and Exchange Commission forms of proxies, consents and authorizations complying with the requirements of the Securities and Exchange Act of nineteen hundred thirty-four and the Securities and Exchange Acts Amendments of nineteen hundred sixty-four and Regulation X-14 of the Securities and Exchange Commission promulgated thereunder shall be exempt from the provisions of this regulation.

Section 2. Proxies, Consents and Authorizations-- any director, officer or employee of such insurer subject to Section 1 hereof, or any other person, shall solicit, or permit the use of his name to solicit, by mail or otherwise, any proxy, consent, or authorization in respect of any stock of such insurer in contravention of this regulation and Schedules A and B hereto annexed and hereby made a part of this regulation.

Section 3. Disclosure of Equivalent Information-- or authorizations in respect of a stock of a domestic insurer subject to Section 1 hereof are solicited by or on behalf of the management of such insurer from the holders of record of stock of such insurer in accordance with this regulation and the Schedules thereunder prior to any annual or other meeting, such insurer shall, in accordance with this regulation and/or such further regulations as the Commissioner may adopt, file with the Commissioner and transmit to all stockholders of record information substantially equivalent to the information which would be required to be transmitted if a solicitation were made.

Section 4. Definitions.

1. The definitions and instructions set out in Schedule SIS, as promulgated by the National Association of Insurance Commissioners, shall be applicable for purposes of this regulation.

2. The terms "solicit" and "solicitation" for purposes of this regulation shall include:

(a) any request for a proxy, whether or not accompanied by or included in a form of proxy; or

(b) any request to execute or not to execute, or to revoke, a proxy; or

(c) the furnishing of a proxy or other communication to stockholders under circumstances reasonably calculated to result in the procurement, withholding or revocation of a proxy.

3. The terms "solicit" and "solicitation" shall not include:

(a) any solicitation by a person in respect of stock of which he is the beneficial owner;

(b) action by a broker or other person in respect to stock carried in his name or in the name of his nominee in forwarding to the beneficial owner of such stock soliciting material received from the company, or impartially instructing such beneficial owner to forward a proxy to the person, if any, to whom the beneficial owner desires to give a proxy, or impartially requesting instructions from the beneficial owner with respect to the authority to be conferred by the proxy and stating that a proxy will be given if the instructions are received by a certain date;

(c) the furnishing of a form of proxy to a stockholder upon the unsolicited request of such stockholder, or the performance by any person of ministerial acts on behalf of a person soliciting a proxy.

Section 5. Information to Be Furnished to Stockholders.

1. No solicitation subject to this regulation shall be made unless each person solicited is concurrently furnished or has previously been furnished with a written proxy statement containing the information specified in Schedule A.

2. If the solicitation is made on behalf of the management of the insurer and relates to an annual meeting of stockholders at which directors are to be elected, each proxy statement furnished pursuant to Subsection 1 hereof shall be accompanied or preceded by an annual report (in preliminary or final form) to such stockholders containing such financial statements for the last fiscal year as are referred to in Schedule SIS under the heading "Financial Reporting to Stockholders." Subject to the foregoing requirements with respect to financial statements, the annual report to stockholders may be in any form deemed suitable by the management.

3. Two copies of each report sent to the stockholders pursuant to this Section shall be mailed to the Commissioner not later than the date on which such report is first sent or given to stockholders or the date on which preliminary copies of solicitation material are filed with the Commissioner pursuant to Subsection 1 of Section 7, whichever date is later.

Section 6. Requirements as to Proxy.

1. The form of proxy (a) shall indicate in bold face type whether or not the proxy is solicited on behalf of the management, (b) shall provide a specifically designated blank space for dating the proxy and (c) shall identify clearly and impartially each matter or group of related matters intended to be acted upon, whether proposed by the management or stockholders. No reference need be made to proposals as to which discretionary authority is conferred pursuant to Subsection 3 hereof.

2. Means shall be provided in the proxy for the person solicited to specify by ballot a choice between approval or disapproval of each matter or group of related matters referred to therein, other than elections to office. A proxy may confer discretionary authority with respect to matters as to which a choice is not so specified if the form of proxy states in bold face type how it is intended to vote the shares or authorization represented by the proxy in each such case.

3. A proxy may confer discretionary authority with respect to other matters which may come before the meeting, provided the persons on whose behalf the solicitation is made are not aware a reasonable time prior to the time the solicitation is made that any other matters are to be presented for action at the meeting and provided further that a specific statement to that effect is made in the proxy statement or in the form of proxy.

4. No proxy shall confer authority (a) to vote for the election of any person to any office for which a bona fide nominee is not named in the proxy statement, or (b) to vote at any annual meeting other than the next annual meeting (or any adjournment thereof) to be held after the date on which the proxy statement and form of proxy are first sent or given to stockholders.

5. The proxy statement or form of proxy shall provide, subject to reasonable, specified conditions, that the proxy will be voted and that where the person solicited specifies by means of ballot provided pursuant to Subsection 2 hereof a choice with respect to any matter to be acted upon, the vote will be in accordance with the specifications so made.

6. The information included in the proxy statement shall be clearly presented and the statements made shall be divided into groups according to subject matter, with appropriate headings. All printed proxy statements shall be clearly and legibly presented.

Section 7. Material Required to Be Filed.

1. Two preliminary copies of the proxy statement and form of proxy and other soliciting material to be furnished to stockholders concurrently therewith shall be filed with the Commissioner at least ten days prior to the date definitive copies of such material are first sent or given to stockholders, or such shorter period prior to that date as the Commissioner may authorize upon a showing of good cause therefor.

2. Two preliminary copies of any additional soliciting material relating to the same meeting or subject matter to be furnished to stockholders subsequent to the proxy statements shall be filed with the Commissioner at least two days (exclusive of Saturdays, Sundays or holidays) prior to the date copies of this material are first sent or given to stockholders or a shorter period prior to such date as the Commissioner may authorize upon a showing of good cause therefor.

3. Two definitive copies of the proxy statement, form of proxy and all other soliciting material, in the form in which this material is furnished to stockholders, shall be filed with, or mailed for filing to, the Commissioner not later than the date such material is first sent or given to the stockholders.

4. Where any proxy statement, form of proxy or other material filed pursuant to these rules is amended or revised, two of the copies shall be marked to clearly show such changes and shall be so filed with the Commissioner as herein provided.

5. Copies of replies to inquiries from stockholders requesting further information and copies of communications which do no more than request that forms of proxy theretofore solicited be signed and returned need not be filed pursuant to this Section.

6. Notwithstanding the provisions of Subsections 1 and 2 hereof and of Subsection 5 of Section 10, copies of soliciting material in the form of speeches, press releases and radio or television scripts may, but need not, be filed with the Commissioner prior to use or publication. Definitive copies, however, shall be filed with or mailed for filing to the Commissioner as required by Subsection 3 hereof not later than the date such material is used or published. The provisions of Subsections 1 and 2 hereof and Subsection 5 of Section 10 shall apply, however, to any reprints or reproductions of all or any part of such material.

Section 8. False or Misleading Statements--No solicitation subject to this regulation shall be made by means of any proxy statement, form of proxy, notice of meeting, or other communication, written or oral, containing any statement which at the time and in the light of the circumstances under which it is made, is false or misleading with respect to any material fact, or which omits to state any material fact necessary in order to make the statements therein not false or misleading or necessary to correct any statement in any earlier communication with respect to the solicitation of a proxy for the same meeting or subject matter which has become false or misleading.

Section 9. Prohibition of Certain Solicitations--No person making a solicitation which is subject to this regulation shall solicit any undated or postdated proxy or any proxy which provides that it shall be deemed to be dated as of any date subsequent to the date on which it is signed by the stockholder.

Section 10. Special Provisions Applicable to Election Contests.

1. Applicability--This Section shall apply to any solicitation subject to this regulation by any person or group for the purpose of opposing a solicitation subject to this regulation by any other person or group with respect to the election or removal of directors at any annual or special meeting of stockholders.

2. Participant or Participant in a Solicitation

(a) For purposes of this Section, the term "participant" and "participant in a solicitation" include: (i) the insurer; (ii) any director of the insurer, and any nominee for whose election as a director proxies are solicited; (iii) any other person, acting alone or with one or more other persons, committees or groups in organizing, directing or financing the solicitation.

(b) For the purpose of this Section, the terms "participant" and "participant in a solicitation" do not include: (i) a bank, broker, or dealer who, in the ordinary course of business, lends money or executes orders for the purchase or sale of stock and who is not otherwise a participant; (ii) any person or organization retained or employed by a participant to solicit stockholders or any person who merely transmits proxy soliciting material or performs ministerial or clerical duties; (iii) any person employed in the capacity of attorney, accountant, or advertising, public relations or financial adviser, and whose activities are limited to the performance of his duties in the course of such employment; (iv) any person regularly employed as an officer or employee of the insurer or any of its subsidiaries or affiliates who is not otherwise a participant; or (v) any officer or director of, or any person regularly employed by any other participant, if such officer, director, or employee is not otherwise a participant.

3. Filing of Information Required by Schedule B.

(a) No solicitation subject to this Section shall be made by any person other than the management of an insurer unless at least five business days prior thereto, or such shorter period as the Commissioner may authorize upon a showing of good cause therefor, there has been filed with the Commissioner, by or on behalf of each participant in such solicitation, a statement in duplicate containing the information specified by Schedule B and a copy of any material proposed to be distributed to stockholders in furtherance of such solicitation. Where preliminary copies of any materials are filed, distribution to stockholders should be deferred until the Commissioner's comments have been received and complied with, or until fifteen days have elapsed whichever shall first occur.

(b) Within five business days after a solicitation subject to this Section is made by the management of an insurer, or such longer period as the Commissioner may authorize upon a showing of good cause therefor, there shall be filed with the Commissioner by or on behalf of each participant in such solicitation, other than the insurer, and by or on behalf of each management nominee for director, a statement in duplicate containing the information specified by Schedule B.

(c) If any solicitation on behalf of management or any other person has been made, or if proxy material is ready for distribution, prior to a solicitation subject to this Section in opposition thereto, a statement in duplicate containing the information specified in Schedule B shall be filed with the Commissioner by or on behalf of each participant in such prior solicitation, other than the insurer, as soon as reasonably practicable after the commencement of the solicitation in opposition thereto.

(d) If, subsequent to the filing of the statements required by paragraphs (a), (b) and (c) of this Subsection, additional persons become participants in a solicitation subject to this rule, there shall be filed with the Commissioner, by or on behalf of each such person, a statement in duplicate containing the information specified by Schedule B, within three business days after such person becomes a participant, or such longer period as the Department may authorize upon a showing of good cause therefor.

(e) If any material change occurs in the facts reported in any statement filed by or on behalf of any participant, an appropriate amendment to such statement shall be filed promptly with the Commissioner.

(f) Each statement and amendment thereto filed pursuant to this paragraph shall be part of the public files of the Commissioner.

4. Solicitations Prior to Furnishing Required Written Proxy Statement-- Notwithstanding the provisions of Subsection 1 of Section 5, a solicitation subject to this Section may be made prior to furnishing stockholders a written proxy statement containing the information specified in Schedule A with respect to such solicitation, provided that:

(a) The statements required by Subsection 3 hereof are filed by or on behalf of each participant in such solicitation.

(b) No form of proxy is furnished to stockholders prior to the time the written proxy statement required by Subsection 1 of Section 5 is furnished to such persons; provided, however, that this paragraph (b) shall not apply where a proxy statement then meeting the requirements of Schedule A has been furnished to stockholders.

(c) At least the information specified in paragraphs (b) and (c) of the statements required by Subsection 3 hereof to be filed by each participant, or an appropriate summary thereof, are included in each communication sent or given to stockholders in connection with the solicitation.

(d) A written proxy statement containing the information specified in Schedule A with respect to a solicitation is sent or given stockholders at the earliest practicable date.

5. Solicitations Prior to Furnishing Required Written Proxy Statement--Filing Requirements--Two copies of any soliciting material proposed to be sent or given to stockholders prior to the furnishing of the written proxy statement required by Subsection 1 of Section 5 shall be filed with the Commissioner in preliminary form at least five business days prior to the date definitive copies of such material are first sent or given to such persons, or such shorter period as the Commissioner may authorize upon a showing of good cause therefor.

6. Application of This Section to Report--Notwithstanding the provisions of Subsections 2 and 3 of Section 5, two copies of any portion of the report referred to in Subsection 2 of Section 5 which comments upon or refers to any solicitation subject to this Section, or to any participant in any such solicitation, other than the solicitation by the management, shall be filed with the Commissioner in preliminary form at least five business days prior to the date copies of the report are first sent or given to stockholders.

Schedule A

Information Required in Proxy Statement

Item 1 Revocability of Proxy--State whether or not the person giving the proxy has the power to revoke it. If the right of revocation before the proxy is exercised is limited or is subject to compliance with any formal procedure, briefly describe such limitation or procedure.

Item 2 Dissenters' Right of Appraisal--Outline briefly the rights of appraisal or similar rights of dissenting stockholders with respect to any matter to be acted upon and indicate any statutory procedure required to be followed by such stockholders in order to perfect their rights. Where such rights may be exercised only within a limited time after the date of the adoption of a proposal, the filing of a charter amendment, or other similar act, state whether the person solicited will be notified of such date.

Item 3 Persons Making Solicitations Not Subject to Section 10

1. If the solicitation is made by the management of the insurer, so state. Give the name of any director of the insurer who has informed the management in writing that he intends to oppose any action intended to be taken by the management and indicate the action which he intends to oppose.

2. If the solicitation is made otherwise than by the management of the insurer, state the names and addresses of the persons by whom and on whose behalf it is made and the names and addresses of the persons by whom the cost of solicitation has been or will be borne, directly or indirectly.

3. If the solicitation is to be made by specially engaged employees or paid solicitors, state (a) the material features of any contract or arrangement for such solicitation and identify the parties, and (b) the cost or anticipated cost thereof.

Item 4 Interest of Certain Persons in Matters to Be Acted Upon--Describe briefly any substantial interest, direct or indirect, by stockholders or otherwise, of any director, nominee for election for director, officer, and, if the solicitation is made otherwise than on behalf of management, each person on whose behalf the solicitation is made, in any matter to be acted upon other than elections to office.

Item 5 Stocks and Principal Stockholders

1. State, as to each class of voting stock of the insurer entitled to be voted at the meeting, the number of shares outstanding and the number of votes to which each class is entitled.

2. Give the date as of which the record list of stockholders entitled to vote at the meeting will be determined. If the right to vote is not limited to stockholders of record on that date, indicate the conditions under which other stockholders may be entitled to vote.

3. If action is to be taken with respect to the election of directors and if the persons solicited have cumulative voting rights, make a statement that they have such rights and state briefly the conditions precedent to the exercise thereof.

Item 6 Nominees and Directors--If action is to be taken with respect to the election of directors, furnish the following information in tabular form to the extent practicable, with respect to each person nominated for election as a director and each other person whose term of office as a director will continue after the meeting:

1. Name each such person, state when his term of office or the term of office for which he is a nominee will expire, and all other positions and offices with the insurer presently held by him, and indicate which persons are nominees for election as directors at the meeting.

2. State his present principal occupation or employment and give the name and principal business of any corporation or other organization in which such employment is carried on. Furnish similar information as to all of his principal occupations or employments during the last five years, unless he is now a director and was elected to his present term of office by a vote of stockholders at a meeting for which proxies were solicited under this regulation.

3. If he is or has previously been a director of the insurer, state the period or periods during which he has served as such.

4. State, as of the most recent practicable date, the approximate amount of each class of stock of the insurer or any of its parents, subsidiaries or affiliates other than directors' qualifying shares, beneficially owned directly or indirectly by him. If he is not the beneficial owner of any such stocks, make a statement to that effect.

Item 7 Remuneration and Other Transactions With Management and Others--Furnish the information reported or required in Item 1 of Schedule SIS under the heading "Information Regarding Management and Directors" if action is to be taken with respect to (a) the election of directors, (b) any remuneration plan, contract or arrangement in which any director, nominee for election as a director, or officer of the insurer will participate, (c) any pension or retirement plan in which any such person will participate, or (d) the granting or extension to any such person of any options, warrants or rights to purchase any stocks, other than warrants or rights issued to stockholders, as such, on a pro-rata basis. If the solicitation is made on behalf of persons other than the management, information shall be furnished only as to Item 1A of the aforesaid heading of Schedule SIS.

Item 8 Bonus, Profit Sharing and Other Remuneration Plans--If action is to be taken with respect to any bonus, profit sharing, or other remuneration plan, of the insurer furnish the following information:

1. A brief description of the material features of the plan, each class of persons who will participate therein, the approximate number of persons in each such class, and the basis of such participation.

2. The amounts which would have been distributable under the plan during the last calendar year to (a) each person named in Item 7 of this schedule, (b) directors and officers as a group, and (c) all other employees as a group, if the plan had been in effect.

3. If the plan to be acted upon may be amended (other than by a vote of stockholders) in a manner which would materially increase the cost thereof to the insurer or to materially alter the allocation of the benefits as between the groups specified in paragraph 2 of this item, the nature of such amendments should be specified.

Item 9 Pension and Retirement Plans--If action is to be taken with respect to any pension or retirement plan of the insurer, furnish the following information:

1. A brief description of the material features of the plan, each class of persons who will participate therein, the approximate number of persons in each such class, and the basis of such participation.

2. State (a) the approximate total amount necessary to fund the plan with respect to past services, the period over which such amount is to be paid, and the estimated annual payments necessary to pay the total amount over such period; (b) the estimated annual payment to be made with respect to current services; and (c) the amount of such annual payments to be made for the benefit of (i) each person named in Item 7 of this schedule, (ii) directors and officers as a group, and (iii) employees as a group.

3. If the plan to be acted upon may be amended (other than by a vote of stockholders) in a manner which would materially increase the cost thereof to the insurer or to materially alter the allocation of the benefits as between the groups specified in sub-paragraph 2(c) of this item, the nature of such amendments should be specified.

Item 10 Options, Warrants, or Rights--If action is to be taken with respect to the granting or extension of any options, warrants or rights (all referred to herein as "warrants") to purchase stock of the insurer or any subsidiary or affiliate, other than warrants issued to all stockholders on a pro-rata basis, furnish the following information:

1. The title and amount of stock called for or to be called for, the prices, expiration dates and other material conditions upon which the warrants may be exercised, the consideration received or to be received by the insurer, subsidiary or affiliate for the granting or extension of the warrants and the market value of the stock called for or to be called for by the warrants, as of the latest practicable date.

2. If known, state separately the amount of stock called for or to be called for by warrants received or to be received by the following persons, naming each such person:

(a) each person named in Item 7 of this schedule, and

(b) each other person who will be entitled to acquire five per cent or more of the stock called for or to be called for by such warrants.

3. If known, state also the total amount of stock called for or to be called for by such warrants, received or to be received by all directors and officers of the company as a group and all employees, without naming them.

Item 11 Authorization or Issuance of Stock

1. If action is to be taken with respect to the authorization or issuance of any stock of the insurer, furnish the title, amount and description of the stock to be authorized or issued.

2. If the shares of stock are other than additional shares of common stock of a class outstanding, furnish a brief summary of the following, if applicable: dividend, voting, liquidation, preemptive, and conversion rights, redemption and sinking fund provisions, interest rate and date of maturity.

3. If the shares of stock to be authorized or issued are other than additional shares of common stock of a class outstanding, the Commissioner may require financial statements comparable to those contained in the annual report.

Item 12 Mergers, Consolidations, Acquisitions and Similar Matters

1. If action is to be taken with respect to a merger, consolidation, acquisition, or similar matter, furnish in brief outline the following information:

(a) The rights of appraisal or similar rights of dissenters with respect to any matters to be acted upon. Indicate any procedure required to be followed by dissenting stockholders in order to perfect such rights.

(b) The material features of the plan or agreement.

(c) The business done by the company to be acquired or whose assets are being acquired.

(d) If available, the high and low sales prices for each quarterly period within two years.

(e) The percentage of outstanding shares which must approve the transaction before it is consummated.

2. For each company involved in a merger, consolidation or acquisition, the following financial statements should be furnished:

(a) A comparative balance sheet as of the close of the last two fiscal years.

(b) A comparative statement of operating income and expenses for each of the last two fiscal years and, as a continuation of each statement, a statement of earning per share after related taxes and cash dividends paid per share.

(c) A pro forma combined balance sheet and income and expenses statement for the last fiscal year giving effect to the necessary adjustments with respect to the resulting company.

Item 13 Restatement of Accounts--If action is to be taken with respect to the restatement of any asset, capital, or surplus of the insurer, furnish the following information:

1. State the nature of the restatement and the date as of which it is to be effective.

2. Outline briefly the reasons for the restatement and for the selection of the particular effective date.

3. State the name and amount of each account affected by the restatement and the effect of the restatement thereon.

Item 14 Matters Not Required to Be Submitted--If action is to be taken with respect to any matter which is not required to be submitted to a vote of stockholders, state the nature of such matter, the reason for submitting it to a vote of stockholders and what action is intended to be taken by the management in the event of a negative vote on the matter by the stockholders.

Item 15 Amendment of Charter, By-Laws, or Other Documents--If action is to be taken with respect to any amendment of the insurer's charter, by-laws or other documents as to which information is not required above, state briefly the reasons for and general effect of such amendment and the vote needed for its approval.

Schedule B

Information to be Included in Statements Filed By or on Behalf of a Participant (Other Than the Insurer) in a Proxy Solicitation in an Election Contest

Item 1 Insurer--State the name and address of the insurer.

Item 2 Identity and Background

1. State the following:

(a) Your name and business address;

(b) Your present principal occupation or employment and the name, principal business and address of any corporation or other organization in which such employment is carried on.

2. State the following:

(a) Your residence address;

(b) Information as to all material occupations, positions, offices or employments during the last ten years, giving starting and ending dates of each and the name, principal business and address of any business corporation or other business organization in which each such occupation, position, office or employment was carried on.

3. State whether or not you are or have been a participant in any other proxy contest involving this company or other companies within the past ten years. If so, identify the principals, the subject matter and your relationship to the parties and the outcome.

4. State whether or not, during the past ten years, you have been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) and, if so, give dates, nature of conviction, name and location of court, and penalty imposed or other disposition of the case. A negative answer to this sub-item need not be included in the proxy statement or other proxy soliciting material.

Item 3 Interest in Stock of the Insurer

1. State the amount of each class of stock of the insurer which you own beneficially, directly or indirectly.

2. State the amount of each class of stock of the insurer which you own of record but not beneficially.

3. State with respect to the stock specified in 1 and 2 the amounts acquired within the past two years, the dates of acquisition and the amounts acquired on each date.

4. If any part of the purchase price or market value of any of the stock specified in paragraph 3 is represented by funds borrowed or otherwise obtained for the purpose of acquiring or holding such stock, so state and indicate the amount of the indebtedness as of the latest practicable date. If such funds were borrowed or obtained otherwise than pursuant to a margin account or bank loan in the regular course of business of a bank, broker or dealer, briefly describe the transaction and state the names of the parties.

5. State whether or not you are a party to any contracts, arrangements or understandings with any person with respect to any stock of the insurer, including but not limited to joint ventures, loan or option arrangements, puts or calls, guarantees against loss or guarantees of profits, division of losses or profits, or the giving or withholding of proxies. If so, name the persons with whom such contracts, arrangements, or understandings exist and give the details thereof.

6. State the amount of stock of the insurer owned beneficially, directly or indirectly, by each of your associates and the name and address of each such associate.

7. State the amount of each class of stock of any parent, subsidiary or affiliate of the insurer which you own beneficially, directly or indirectly.

Item 4 Further Matters

1. Describe the time and circumstances under which you became a participant in the solicitation and state the nature and extent of your activities or proposed activities as a participant.

2. Describe briefly, and where practicable state the approximate amount of, any material interest, direct or indirect, of yourself and of each of your associates in any material transactions since the beginning of the company's last fiscal year, or in any material proposed transactions, to which the company or any of its subsidiaries or affiliates was or is to be a party.

3. State whether or not you or any of your associates have any arrangement or understanding with any person

(a) with respect to any future employment by the insurer or its subsidiaries or affiliates; or

(b) with respect to any future transactions to which the insurer or any of its subsidiaries or affiliates will or may be a party.

If so, describe such arrangement or understanding and state the names of the parties thereto.

Item 5 Signature--The statement shall be dated and signed in the following manner:

I certify that the statements made in this statement are true, complete, and correct to the best of my knowledge and belief.

___________________________________ __________________________________________

Date Signature of participant or authorized

representative

69-10. Premium Service Companies.

1. Every premium service agreement which confers upon a premium service company authority to cause a policy of insurance covering lives, property or interests situate in South Carolina to be terminated shall be deemed made in South Carolina and such policy shall be so terminated only in accordance with the provisions of Chapter 39 of Title 38, Code of Laws of South Carolina, 1976, and the Regulations pursuant thereto.

2. The provisions of this Regulation do not apply to premiums financed under revolving charge account arrangements by a licensee which is a subsidiary of an insurer or group of affiliated insurers where maximum charges do not exceed 7% per annum on the amount actually financed. Such revolving charge account arrangements shall be submitted to the Commissioner for approval or disapproval by specific order for each such arrangement.

3. No licensee nor other person acting for or in behalf of the licensee shall retain the original policy in connection with any premium service agreement, and any such retention of the original contract shall be deemed cause for the revocation of, or refusal to renew, the license of such licensee.

4. Every application for a license or renewal of the license as a premium service company shall be made on the form prescribed by the Chief Insurance Commissioner which shall be completed and filed in accordance with the instructions of the Commissioner accompanied by all required supporting documents and the applicable fee.

5. In the case of an original application for a license, the application shall be signed by:

(a) The sole proprietor, if the applicant is a sole proprietor; or

(b) A general partner, if the applicant is a partnership;

(c) The chief executive officer and the secretary if the applicant is a corporation or other business entity whose ownership is manifested by shares. Such original application shall be accompanied by the certified resolution of the board of directors or similar governing body of the corporation or other entity.

6. In the case of the renewal of an existing license or a change in such license, reference may be made to the earlier application and only those sections of the application form where changes are necessary need be completed, provided the signators to the original application certify under the pains and penalties of perjury that no change has occurred which would require an answer differing from that contained in the original application.

7. Licenses hereunder are hereby declared personal and issued by reason of special confidence in the licensee so licensed. No license may be transferred, directly or indirectly, nor shall such license be used for, or in behalf of, any person, firm or corporation whatsoever other than the licensee. Any such transfer, attempted transfer or use shall be void and shall be deemed sufficient grounds for the revocation of, or refusal to renew, the license.

8. Every corporation, or similar business entity, partnership, or proprietor doing business under a name, other than his or its own, shall file, and keep on file, with the Commissioner, the names and addresses of officers, directors, partners and proprietors and shall designate therein the name and address of the person upon whom service of process may be made.

9. No foreign corporation or similar business entity shall be licensed as a premium service company unless it shall first become domesticated in South Carolina. Certification of such domestication by the Secretary of State of South Carolina shall accompany the application of each such foreign corporation or similar business entity.

10. Transfer or assignment to another, or a series of transfers or assignments within a 6 month period, of 10% or more of the premium service agreements of a licensee shall be deemed a bulk transfer or assignment. No licensee shall effect a bulk transfer or assignment of premium service agreements unless it shall first file the proposed agreement with, and secure the approval of, the Commissioner who shall grant such approval only if he is satisfied that such arrangements are just and equitable, that provision has been made for adequate notice to the insureds and insurers, that all funds due or payable to insureds and insurers have been paid or adequately secured, that the transferee or assignee has expressly assumed the obligations of the transferor or assignor arising out of such premium service agreements and/or that the transferor or assignor has provided indemnity or security with respect to such obligations.

11. Death of a proprietor shall terminate the license. Death or withdrawal of a partner shall suspend the license if the licensee is a partnership; provided, however, that if notice of such death or withdrawal is furnished to the Commissioner within 10 days of the event and the Commissioner is satisfied, by examination or otherwise, that the interests of insureds and insurers have been adequately protected, he may reinstate the suspended license.

Appointment of referee, receiver or trustee incident to bankruptcy or insolvency proceedings against the licensee shall suspend the license which may be reinstated only if the Commissioner finds that such proceedings have terminated and that the interests of insureds and insurers have been adequately protected.

12. The Commissioner shall be notified by registered or certified mail not later than 10 days after the event upon the occurrence of any of the following:

(a) When a partner dies or withdraws from a partnership which is a licensee, or when a new partner is admitted.

(b) When an officer, director or person owning or controlling 10% or more of the stock of a corporation or similar business entity, which is a licensee, ceases to be such, or, when a person becomes an officer, director or person owning or controlling 10% or more of the stock of such licensee.

(c) When any licensee, or any person who is a partner, officer, director or who owns 10% or more of the shares of the licensee is arrested, indicted or convicted with respect to any State or Federal offense involving moral turpitude other than a misdemeanor resulting from the operation of a motor vehicle.

(d) When a licensee suffers a revocation or suspension of license or is refused a license as a premium service company, premium finance company, insurance agency, or agent, in any other jurisdiction.

(e) When a voluntary or involuntary petition of bankruptcy or prayer for the appointment of a receiver or trustee is filed against the licensee or when the licensee enters into any assignment for the benefit of creditors or composition among creditors.

In the event of any of the foregoing, the Commissioner may conduct such examination and investigation as he deems necessary or appropriate for the protection of insureds and insurers, the expense of