Bulletin 2012-08 Nonadmitted and Reinsurance Reform Act NRRA

South Carolina

NIKKI R. HALEY

Governor

Department of Insurance

Capitol Center

1201 Main Street, Suite 1000

Columbia, South Carolina 29201

Mailing Address:

P.O. Box 100105, Columbia, S.C. 29202-3105

Telephone: (803) 737-6160

BULLETIN NUMBER 2012-08

TO:

All Eligible Surplus Lines Insurers and Brokers Transacting Business in the State

of South Carolina

FROM:

Gw~ndol~ ,~~"!t}!J:ffijJ,f~lA_u ~

Actmg Dlr~"""r""""'- /70

SUBJECT:

Nonadmitted and Reinsurance Refonn Act (NRRA) Provisions ofthe Dodd-Frank

Act

DATE:

October 24,2012

I.

PURPOSE

The purpose of this Bulletin is to outline national regulatory changes that have affected the

placement of nonadmitted insurance in the state of South Carolina. In 2010, the United States

Congress enacted the Dodd-Frank Act which proposes refonns to the financial services industry

and also included changes to the surplus lines market via the Nonadmitted and Reinsurance

Refonn Act. The Non-admitted and Reinsurance Refonn Act of 2010 ("NRRA"), 15 U.S.C. §

8201 et seq., provides that only an insured's "home state" may require the payment of premium

tax for non-admitted insurance. Moreover, the NRRA subjects the placement of non-admitted

insurance solely to the statutory and regulatory requirements of the insured's home state, and

provides that only the insured's home state may require a surplus lines broker to be licensed to

sell, solicit or negotiate nonadmitted insurance with respect to such insured. Accordingly, broker

premium tax payments may only be made to the home state ofthe insured.

The NRRA became effective on July 21,2011.

II.

OVERVIEW of the NRRA

The NRRA has important ramifications for surplus lines broker premium tax payments and

reporting and was enacted to promote unifonnity in broker licensing, tax filing and reporting

procedures 2012 S.C. Act No. 283 (R.325, S

h insured. Accordingly, broker

premium tax payments may only be made to the home state ofthe insured.

The NRRA became effective on July 21,2011.

II.

OVERVIEW of the NRRA

The NRRA has important ramifications for surplus lines broker premium tax payments and

reporting and was enacted to promote unifonnity in broker licensing, tax filing and reporting

procedures 2012 S.C. Act No. 283 (R.325, S. 1419) amends Chapter 45 of the South Carolina

Insurance Laws to implement certain definitional, premium tax and reporting changes required

by the provisions of NRRA. Other NRRA changes will be addressed via future South Carolina

confonning legislation and bu11etins.

This bulletin only addresses broker premium tax and

reporting issues.

A.

SCOPE OF THE NRRA

The NRRA states that "the placement of nonadmitted insurance is subject to the statutory and

regulatory requirements solely of the insured's home state" and that the NRRA "may not be

construed to preempt any State law, rule, or regulation that restricts the placement of workers'

compensation insurance or excess insurance for self-funded workers' compensation plans with a

nonadmitted insurer." 15 U.S.C. § 8202. The NRRA does not expand the scope of the kinds of

insurance that an insurer may write in the nonadmitted insurance market and each state continues

to determine which kinds of insurance an insurer may write in that state. Although the NRRA

preempts certain state laws with respect to nonadmitted insurance, it does not have an effect on

insurance offered by insurers licensed or authorized in this state (i.e., licensed or admitted

insurers).

B.

DEFINITION OF INSURED'S HOME STATE FOR PURPOSES OF A

PARTICULAR PLACEMENT

South Carolina is the insured's home state ifthe insured maintains its principal place of business

in the state; or, in the case of an individual, the individual's principal residence is in the state

effect on

insurance offered by insurers licensed or authorized in this state (i.e., licensed or admitted

insurers).

B.

DEFINITION OF INSURED'S HOME STATE FOR PURPOSES OF A

PARTICULAR PLACEMENT

South Carolina is the insured's home state ifthe insured maintains its principal place of business

in the state; or, in the case of an individual, the individual's principal residence is in the state. If

South Carolina is considered the insured's home state, only South Carolina requirements

regarding the placement of such business will apply. When South Carolina is the home state,

100% of the premium taxes for policies written by insurers not licensed in this state is due in

accordance with the requirements §§ 38-45-20 and 38-45-30.

III. 2012 S.C. Act No. 283

The amendments to Title 38, Chapter 45 by 2012 S.C. Act 283 include, but are not limited to: 1)

amending Chapter 45 to implement the definitions from the NRRA; 2) authorizing the director or

his designee to enter into an agreement for the allocation of taxes; and 3) establishing a blended

tax rate of 6% for the collection of broker premium taxes. A copy of the Act is attached and

incorporated into this bulletin by reference. The Act has a January 1, 2012 retroactive effective

date to simplify the process for calculating and reporting broker premium taxes.

The blended rate of 6% is not a new tax. Rather, it combines the current state broker tax rate of

4% with the existing municipal tax rate of 2% for a single 6% rate. The Act further states that a

municipality may not impose any additional license fee or tax based upon a percentage of the

premIum.

Prior to the 2012 amendments to Chapter 45, brokers in South Carolina paid broker premium

taxes based upon 4% of premiums collected to the State of South Carolina and a municipal

license fee (based upon 2% of the premium taxes collected) to local municipalities

. The Act further states that a

municipality may not impose any additional license fee or tax based upon a percentage of the

premIum.

Prior to the 2012 amendments to Chapter 45, brokers in South Carolina paid broker premium

taxes based upon 4% of premiums collected to the State of South Carolina and a municipal

license fee (based upon 2% of the premium taxes collected) to local municipalities. Surplus lines

brokers reported policy information and paid premium taxes via the Online Surplus Lines

Premium Tax Application to the South Carolina Department of Insurance. Separate reports were

filed with the Municipal Association of South Carolina on behalf of the local municipalities. The

amendments to Chapter 45 simplify the premium tax payment and reporting process for brokers

transacting business in this state.

Brokers are required to pay the blended tax rate of 6% to the state via the online surplus lines tax

application and file any required reports on the business transacted with the South Carolina

Department of fusurance. Brokers will not have to submit tax forms to the Municipal

Association of South Carolina or file forms with mUltiple places or pay taxes to multiple

locations. All forms and taxes must be submitted to the South Carolina Department of fusurance

for processing.

IV.

COLLECTION OF THE BLENDED TAX RATE

Brokers are required to pay the blended tax rate of 6% on premiums for all policies of insurers

not licensed in this State. During the payment period for the fourth quarter of 2012, which is

January 1, 2013 through January 31, 2013, brokers will pay the 4% portion of the blended tax

rate for all business reported during the fourth quarter. Brokers will also pay the 2% portion of

the blended tax rate for ALL business reported for calendar year 2012 to the Department of

fusurance via the online surplus lines premium tax application. As 2012 S.C. Act No

urth quarter of 2012, which is

January 1, 2013 through January 31, 2013, brokers will pay the 4% portion of the blended tax

rate for all business reported during the fourth quarter. Brokers will also pay the 2% portion of

the blended tax rate for ALL business reported for calendar year 2012 to the Department of

fusurance via the online surplus lines premium tax application. As 2012 S.C. Act No. 283 is

effective retroactive to January 1, 2012, this separate procedure is required to collect the 2%

portion of the blended tax rate which has not been reported to the Department of fusurance.

Additional information pertaining to the fourth quarter reporting will be sent at a later date.

2012 S.C. Act No. 283 requires the South Carolina Department of fusurance to collect the 6%

blended tax rate and deposit all revenue collected into a special fund, separate and distinct from

the general fund. The municipal portion of funds in this special earmarked fund will be paid to

the designated municipal agent with a full accounting provided by the Department of fusurance,

including, but not limited to, the name and address of the broker, the amount of the broker's

premium tax collected from each broker, and information as to the location of the risk covered

by the insurance.

Beginning, January 1, 2013, and thereafter, brokers will pay the blended tax rate of6% quarterly

on all submissions and endorsements reported to the Department of fusurance via the online

surplus lines premium tax application.

VI.

QUESTIONS

Questions or concerns regarding this bulletin should be directed to the attention of:

Sharon B. Waddell, MBA

Tax Manager

South Carolina Department offusurance

1201 Main Street, Suite 1000

Columbia, South Carolina 29201

Telephone: (803) 737-4910

E-mail: swaddell@doi.sc.gov

Bulletins are the method by which the Director of Insurance formally communicates with persons and entities regulated by the

Department

erns regarding this bulletin should be directed to the attention of:

Sharon B. Waddell, MBA

Tax Manager

South Carolina Department offusurance

1201 Main Street, Suite 1000

Columbia, South Carolina 29201

Telephone: (803) 737-4910

E-mail: swaddell@doi.sc.gov

Bulletins are the method by which the Director of Insurance formally communicates with persons and entities regulated by the

Department. Bulletins are departmental interpretations of South Carolina insurance laws and regulations and provide guidance

on the Department's enforcement approach. Bulletins do not provide legal advice. Readers should consult applicable statutes

and regulations or contaCt an attorney for legal advice or for additional information on the impact of that legislation, on their

specific situation.

South Carolina General Assembly

119th Session, 2011-2012

Download This Bill in Microsoft Word format

A283, R325, S1419

STATUSINFO~TION

General Bill

Sponsors: Senators Thomas, Ford and Hayes

Document Path: 1:\council\bills\nbd\12317dgI2.docx

Introduced in the Senate on AprillO, 2012

Introduced in the House on Apri124, 2012

Last Amended on May 31, 2012

Passed by the General Assembly on June 28, 2012

Governor's Action: June 29,2012, Signed

Summary: Insurance brokers and surplus lines insurance

HISTORY OF LEGISLATIVE ACTIONS

Date

Body

Action Description with journal page number

4/10/2012

Senate

Introduced and read first time (SenatecTournal-page 12)

4/10/2012

Senate Referred to Committee on Banking and Insurance

(Senate Journal-page 12)

4/12/2012

Senate

Committee report: Favorable Banking and Insurance

(Senate Journal-page 7)

4/17/2012

Scrivener's error corrected

4/18/2012

Senate

Read second time

4/18/2012

Senate Roll call Ayes-42

4/19/2012

Senate

(Senate Journal-page 20)

4/24/2012

House

Introduced and read first time (House Journal-page 20)

4/24/2012

House

Referred to Committee on Labor, Commerce and Industry

(House Journal-page 20)

5/17/2012

House

Committee report: Favorable with amen

age 7)

4/17/2012

Scrivener's error corrected

4/18/2012

Senate

Read second time

4/18/2012

Senate Roll call Ayes-42

4/19/2012

Senate

(Senate Journal-page 20)

4/24/2012

House

Introduced and read first time (House Journal-page 20)

4/24/2012

House

Referred to Committee on Labor, Commerce and Industry

(House Journal-page 20)

5/17/2012

House

Committee report: Favorable with amendment Labor,

Commerce and Industry

5/23/2012

House

Debate adjou'rned until Thur.,

(House Journal-page 30)

5/24/2012

House

Requests for debate-Rep(s) .

Sandifer, White,

Agnew, JR Smith, Whitmire, Gambrell, RL Brown,

Brantley, Forrester, Toole,

, Pitts, GR Smith

(House Journal-page 118)

5/30/2012

House

Debate adjourned until Thur., 05-31-12

Read third time and sent to House

5/31/2012

House

5/31/2012

House

5/31/2012

House

6/5/2012

House

Read third time and returned to Senate with amendments

6/28/2012

Senate

Concurred in House amendment and enrolled

6/28/2012

6/28/2012

Senate

Ratified R 325

6/29/2012

Signed

Governor

7/17/2012

Effective date 01/01/12

7/17/2012

Act No. 283

View the latest legislative information at the LPITS web site

VERSIONS OF TmS BILL

4/10/2012

4/12/2012

4/17/2012

5/1712012

5/3112012

(Text matches printed bills. Document has been reformatted to meet World Wide Web

specifications. )

(A283,R325,S1419)

AN ACT TO AMEND CHAPTER 45, TITLE 38, CODE OF LAWS OF SOUTH

CAROLINA, 1976, RELATING TO INSURANCE BROKERS AND SURPLUS LINES

INSURANCE, SO AS TO DEFINE TERMS, TO PROVIDE THAT THE REVENUE

COLLECTED FROM THE BROKER'S PREMIUM TAX RATE MUST BE CREDITED

TO A SPECIAL EARMARKED FUND, TO PROVIDE THE MANNER IN WmCH THE

FUND MAYBE USED AND DISBURSED, TO AUTHORIZE THE DIRECTOR OF THE

DEPARTMENT OF INSURANCE TO CONDUCT EXAMINATIONS OF BROKER

RECORDS, TO ALLOW THE DEPARTMENT OF INSURANCE TO PROMULGATE

REGULATIONS NECESSARY TO IMPLEMENT THE CHAPTER, TO PROVIDE THE

MANNER IN WmCH THE NONADMITTED AND REINSURANCE REFORM ACT OF

2010 MAY BE IMPLEMENTED; AND TO AMEN

L EARMARKED FUND, TO PROVIDE THE MANNER IN WmCH THE

FUND MAYBE USED AND DISBURSED, TO AUTHORIZE THE DIRECTOR OF THE

DEPARTMENT OF INSURANCE TO CONDUCT EXAMINATIONS OF BROKER

RECORDS, TO ALLOW THE DEPARTMENT OF INSURANCE TO PROMULGATE

REGULATIONS NECESSARY TO IMPLEMENT THE CHAPTER, TO PROVIDE THE

MANNER IN WmCH THE NONADMITTED AND REINSURANCE REFORM ACT OF

2010 MAY BE IMPLEMENTED; AND TO AMEND SECTION 38-7-160, RELATING TO

MUNICIPAL LICENSE FEES AND TAXES, SO AS TO DISALLOW A MUNICIPALITY

FROM CHARGING AN ADDITIONAL LICENSE FEE OR TAX BASED UPON A

PERCENTAGE OF PREMIUMS FOR PURPOSES OF SURPLUS LINES INSURANCE.

Be it enacted by the General Assembly of the State of South Carolina:

Definitions, revenue from broker's premium tax credited to special earmarked fund,

expenditure of such fund, examination of broker records, regulations, Implementation of

Nonadmitted and Reinsurance Reform Act of 2010

SECTION

1.

Chapter 45, Title 38 ofthe 1976 Code is amended to read:

"CHAPTER 45

Insurance Brokers and Surplus Lines Insurance

Section 38-45-10.

As used in this chapter:

(1)

'Admitted insurer' means an insurer licensed to engage in the business of insurance in this

State.

(2)

'Affiliate' means, with respect to an insured, any entity that controls, is controlled by, or is

under common control with the insured.

(3)

'Affiliated group' means any group of entities that are all affiliated.

(4)

'Control' means:

(a)

the entity directly or indirectly or acting through one or more other persons owns, controls,

or has the power to vote twenty-five percent or more of any class ofvoting securities ofthe other

entity; or

(b)

the entity controls in any manner the election of a majority ofthe directors or trustees ofthe

other entity.

(5)

'Exempt commercial purchaser' means any person purchasing commercial insurance that, at

the time ofplacement, meets the following requirements:

(a)

the person employs or retains a qualified risk manager to negotiate insurance coverage;

ing securities ofthe other

entity; or

(b)

the entity controls in any manner the election of a majority ofthe directors or trustees ofthe

other entity.

(5)

'Exempt commercial purchaser' means any person purchasing commercial insurance that, at

the time ofplacement, meets the following requirements:

(a)

the person employs or retains a qualified risk manager to negotiate insurance coverage;

(b)

the person has paid aggregate nationwide commercial property and casualty insurance

premiums in excess ofone hundred thousand dollars in the immediately preceding twelve

months; and

(c)(i)

the person meets at least one ofthe following criteria:

(A)

the person possesses a net worth in excess of twenty million dollars, as that amount is

adjusted pursuant to sub-subitem (ii);

(B)

the person generates annual revenues in excess of fifty million dollars, as that amount is

adjusted pursuant to sub-subitem (ii);

(C)

the person employs more than five hundred full-time or full-time equivalent employees per

individual insured or is a member ofan affiliated group employing more than one thousand

employees in the aggregate;

(D)

the person is a not-for-profit organization or public entity generating annual budgeted

expenditures of at least thirty million dollars as that amount is adjusted pursuant to sub-subitem

(ii); or

(E)

the person is a municipality with a population in excess of fifty thousand persons.

(ii)

Effective on the January 1, 2017, and each fifth January first thereafter, the amounts in sub­

sub items (i)(A), (B), and (D) of sub item (c) shall be adjusted to reflect the percentage change for

the five-year period in the Consumer Price Index for All Urban Consumers published by the

Bureau ofLabor Statistics ofthe Department ofLabor.

(6)(a)

'Home state', with respect to an insured, means:

Effective on the January 1, 2017, and each fifth January first thereafter, the amounts in sub­

sub items (i)(A), (B), and (D) of sub item (c) shall be adjusted to reflect the percentage change for

the five-year period in the Consumer Price Index for All Urban Consumers published by the

Bureau ofLabor Statistics ofthe Department ofLabor.

(6)(a)

'Home state', with respect to an insured, means:

(i)

the state in which an insured maintains its principal place ofbusiness or, in the case ofan

individual, the individual's principal residence; or

(ii)

if one hundred percent of the insured risk is located out of the state referred to in sub­

subitem (i), the state to which the greatest percentage of the insured's taxable premium for that

insurance contract is allocated.

(b) Notwithstanding the provisions of sub item (a), ifmore than one insured from an affiliated

group are named insureds on a single surplus lines insurance contract, the term 'home state'

means the home state, as determined pursuant to sub item (a), of the member of the affiliated

group that has the largest percentage ofpremium attributed to it under the insurance contract.

(7)

'Independently procured insurance' means insurance procured directly by an insured from a

surplus lines insurer.

(8)(a)

'Insurance broker' means a property and casualty insurance producer licensed by the

director or his designee who:

(i)

sells, solicits, or negotiates insurance on behalf ofan insured;

(ii)

takes or transmits other than for himself an application for insurance or a policy of

insurance to or from an insured;

(iii)

advertises or otherwise gives notice that he receives or transmits a surplus lines application

or policies;

(iv) receives or delivers a policy of surplus lines insurance for an insured on behalf ofa surplus

lines insurer;

(v) receives, collects, or transmits a premium of surplus lines insurance; or

(vi) performs another act in the making of a surplus lines insurance contract for or with an

insured.

es or otherwise gives notice that he receives or transmits a surplus lines application

or policies;

(iv) receives or delivers a policy of surplus lines insurance for an insured on behalf ofa surplus

lines insurer;

(v) receives, collects, or transmits a premium of surplus lines insurance; or

(vi) performs another act in the making of a surplus lines insurance contract for or with an

insured.

(b)

However, an insurance broker's license is not required of a broker's office employee acting

within the confinesofthe broker's office, under the direction and supervision ofthe licensed

broker and within the scope ofthe broker's license, in the acceptance ofrequest for insurance and

payment ofpremiums and the performance ofclerical, stenographic, and similar office duties.

(c) An insurance broker may place that insurance either with an eligible surplus lines insurer or

with a licensed insurance producer appointed by an insurance carrier licensed in this State.

(9) 'Municipal agent' means the Municipal Association ofSouth Carolina or other designated

agent ofthe municipality for the purpose set forth in this chapter.

(10)

'Surplus lines insurance' means any property and casualty insurance permitted to be placed

directly or through a surplus lines broker with a surplus lines insurer eligible to accept the

insurance as defined in Section 38-1-20(56).

(11)

'Surplus lines insurer' means an insurer not licensed to engage in the business of insurance

in this State, but does not include a risk retention group, as that term is defined in Section 2(a)(4)

ofthe Liability Risk Retention Act of 1986 (15 U.S.C. 3901(a)(4».

through a surplus lines broker with a surplus lines insurer eligible to accept the

insurance as defined in Section 38-1-20(56).

(11)

'Surplus lines insurer' means an insurer not licensed to engage in the business of insurance

in this State, but does not include a risk retention group, as that term is defined in Section 2(a)(4)

ofthe Liability Risk Retention Act of 1986 (15 U.S.C. 3901(a)(4».

(12) 'Premium tax' means, with respect to surplus lines or independently procured insurance

coverage, any tax, fee, assessment, or other charge imposed by a governmental entity directly or

indirectly based on any payment made as consideration for an insurance contract, including

premium deposits, assessments, registration fees, and any other compensation given in

consideration for a contract ofinsurance.

(13)

'Broker's premium tax rate' means a blended tax rate of six percent. The rate is comprised

ofa four percent state broker's premium tax and a two percent municipal broker's premium tax.

(14) 'Qualified risk manager' means, with respect to a policyholder ofcommercial insurance, a

person who meets aU ofthe following requirements:

(a) the person is an employee of, or third-party consultant retained by, the commercial

policyholder;

(b) the person provides skilled services in loss prevention, loss reduction, or risk and insurance

coverage analysis; and purchase of insurance; and

(c)(i)(A) the person has a bachelor's degree or higher from an accredited college or university

in risk management, business administration, finance, economics, or any other field determined

by the director or other state regulatory official or entity to demonstrate minimum competence in

risk management; and

(B) has three years ofexperience in risk financing, claims administration, loss prevention, risk

and insurance analysis, or purchasing commercial lines ofinsurance; or

(aa) has a designation as a Chartered Property and Casualty Underwriter (CPCU) issued by the

American Institute for CPCU/lnsurance Institute ofAmerica;

ficial or entity to demonstrate minimum competence in

risk management; and

(B) has three years ofexperience in risk financing, claims administration, loss prevention, risk

and insurance analysis, or purchasing commercial lines ofinsurance; or

(aa) has a designation as a Chartered Property and Casualty Underwriter (CPCU) issued by the

American Institute for CPCU/lnsurance Institute ofAmerica;

(bb) has a designation as an Associate in Risk Management (ARM) issued by the American

Institute for CPCU/Insurance Institute ofAmerica;

(cc) has a designation as Certified Risk Manager (CRM) issued by the National Alliance for

Insurance Education & Research;

(dd) has a designation as a RIMS Fellow (RF) issued by the Global Risk Management Institute;

or

(ee)

any other designation, certification, or license determined by the director or other state

insurance regulatory official or entity to demonstrate minimum competency in risk management;

(ii)(A) has at least seven years of experience in risk financing, claims administration, loss

prevention, risk and insurance coverage analysis, or purchasing commercia11ines ofinsurance;

and

(B)

has anyone ofthe designations specified in subitems (c)(i)(B)(aa) through (c)(i)(B)(ee);

(iii)

has at least ten years ofexperience in risk financing, claims administration, loss

prevention, risk and insurance coverage analysis, or purchasing commercia1lines of insurance; or

(iv) has a graduate degree from an accredited college or university in risk management,

business administration, finance, economics, or any other field determined by the director or

other state regulatory official or entity to demonstrate minimum competence in risk management.

administration, loss

prevention, risk and insurance coverage analysis, or purchasing commercia1lines of insurance; or

(iv) has a graduate degree from an accredited college or university in risk management,

business administration, finance, economics, or any other field determined by the director or

other state regulatory official or entity to demonstrate minimum competence in risk management.

(15)

'State' includes any state ofthe United States, the District of Columbia, the

Commonwealth ofPuerto Rico, Guam, the Northern Mariana Islands, the Virgin Islands, and

American Samoa.

Section 38-45-20.

A resident property and casualty-licensed insurance producer may be

licensed as an insurance broker by the director or his designee ifthe following requirements are

met:

(1)

licensure ofthe resident as an insurance producer for the same lines ofinsurance for which

he proposes to apply as a broker ofthis State;

(2)

successfully passed the South Carolina broker licensing examination;

(3)

payment of a biennia1license fee oftwo hundred dollars which is earned fully when

received, not refundable;

(4)

filing ofa bond with the department in a form approved by the Attorney General in favor of

South Carolina often thousand dollars executed by a corporate surety licensed to transact surety

insurance in this State and personally countersigned by a licensed resident agent ofthe surety.

The bond must be conditioned to pay a person insured or seeking insurance through the broker

who sustains loss as a result of:

(a) the broker's violation ofor failure to comply with an insurance law or regulation of this

State;

(b) the broker's failure to transmit properly a payment received by him, cash or credit, for

transmission to an insurer or an insured; or

sident agent ofthe surety.

The bond must be conditioned to pay a person insured or seeking insurance through the broker

who sustains loss as a result of:

(a) the broker's violation ofor failure to comply with an insurance law or regulation of this

State;

(b) the broker's failure to transmit properly a payment received by him, cash or credit, for

transmission to an insurer or an insured; or

(c)

an act of fraud committed by the broker in connection with an insurance transaction.

Instead of a bond, the broker may file with the department certificates ofdeposit often thousand

dollars ofbuilding and loan associations or federal savings and loan associations located within

the State in which deposits are guaranteed by the Federal Savings and Loan Insurance

Corporation, not to exceed the amount of insurance, or ofbanks located within the State in which

deposits are guaranteed by the Federal Deposit Insurance Corporation, not to exceed the amount

of insurance. An aggrieved person may institute an action in the county of his residence against

the broker or his surety, or both, to recover on the bond or against the broker to recover from the

certificates of deposit, and a copy ofthe summons and complaint in the action must be served on

the director, who is not required to be made a party to the action;

(5)

payment to the department, within thirty days after March thirty-first, June thirtieth,

September thirtieth, and December thirty-first each year, of the broker's premium tax rate upon

premiums for policies ofinsurers not licensed in this State. In computing total premiums, return

premiums on risks and dividends paid or credited to policyholders are excluded. The credit must

be refunded to the policyholder.

Section 38-45-30.A nonresident may be licensed as an insurance broker by the director or his

designee ifthe following requirements are met:

(1)

filing an application on a form prescribed by the director or his designee;

s State. In computing total premiums, return

premiums on risks and dividends paid or credited to policyholders are excluded. The credit must

be refunded to the policyholder.

Section 38-45-30.A nonresident may be licensed as an insurance broker by the director or his

designee ifthe following requirements are met:

(1)

filing an application on a form prescribed by the director or his designee;

(2)

filing an affidavit stating he will not during the period ofthe license place, directly or

indirectly, insurance on a risk located in this State except through licensed producers of insurers

licensed to do business in this State;

(3)

filing an affidavit stating he is a licensed broker in another state;

(4)

paying a biennial license fee oftwo hundred dollars fully earned when received, not

refundable;

(5)

an aggrieved person may institute an action in the county of his residence against the broker

to recover damages. A copy of the summons and complaint in the action must be served on the

director, who is not required to be made a party to the action;

(6) paying the department, within thirty days after March thirty-first, June thirtieth, September

thirtieth, and December thirty-first each year, the broker's premium tax rate upon premiums for

policies ofinsurers not licensed in this State. In computing total premiums, return premiums on

risks and dividends paid or credited to policyholders are excluded. The credit must be refunded

to the policyholder.

the department, within thirty days after March thirty-first, June thirtieth, September

thirtieth, and December thirty-first each year, the broker's premium tax rate upon premiums for

policies ofinsurers not licensed in this State. In computing total premiums, return premiums on

risks and dividends paid or credited to policyholders are excluded. The credit must be refunded

to the policyholder.

Section 38-45-35.

When an individual applies for an insurance broker's license, he shall supply

the department his business and residence address. The broker shall notify the department within

thirty days of any change in these addresses.

Section 38-45-40.

The director or his designee may enter into reciprocal agreements with the

insurance commissioners of other states in regard to licensing of nonresident brokers if in his

judgment the arrangements or agreements are in the best interest of the State and if the applicant

for the license meets the minimum statutory requirements of this State for the issuance of a

broker's license. However, the director or his designee may not enter into or continue any

reciprocal agreement unless the other state is as liberal as this State in licensing nonresident

brokers.

Section 38-45-50.

Each license issued is for an indefinite term unless revoked or suspended. If

the biennial license fee of a broker is not paid at the time and in the manner the department

provides by regulation, the license must be canceled. If the license is to be reinstated, an original

application must be filed and a reinstatement fee equal to the biennial license fee unpaid must be

paid in addition to the regular biennial license fee.

Section 38-45-55.

The revenue collected from the broker's premium tax rate imposed pursuant

to the provisions of Sections 38-45-20(5), 38-45-30(6), and 38-45-190, must be credited to a

special earmarked fund, distinct from the general fund, and expended only for the purposes

provided in this chapter.

Section 38-45-60

e fee unpaid must be

paid in addition to the regular biennial license fee.

Section 38-45-55.

The revenue collected from the broker's premium tax rate imposed pursuant

to the provisions of Sections 38-45-20(5), 38-45-30(6), and 38-45-190, must be credited to a

special earmarked fund, distinct from the general fund, and expended only for the purposes

provided in this chapter.

Section 38-45-60.

(A) As soon after December thirty-first of each year as may be convenient,

the director or his designee shall render an accounting to the State Treasurer of the state portion

of the broker's premium tax rate payment collected showing the counties in which the risk

covered by the insurance is located and shall furnish a duplicate of the accounting to the

Comptroller General. The Comptroller General shall draw his warrant on the State Treasurer for

one-fourth of the state's portion of the broker's premium tax rate payment collected by the

department on property insurance, payable to the county treasurer of the county in which the

property is located. The county treasurer shall distribute the broker's premium tax collected on

property insurance in accordance with the requirements of Sections 23-9-360 and 23-9-470 and

Sections 38-7-70 and 38-7-80.

(B)

As soon as practical after December thirty-first, but no later than July first of each year, the

department shall distribute from the special earmarked fund, distinct from the general fund, the

municipal portion of the broker's premium tax rate payment collected for the prior tax year in

accordance with the requirements of Sections 38-45-20(5) and 38-45-30(6). This amount must be

paid to the municipal agent with a full accounting, provided by the department, including, but not

limited to, the name and address of the broker, and amount of the broker's premium tax rate

payment collected from each broker, and showing the counties in which the risk covered by the

insurance is located

ordance with the requirements of Sections 38-45-20(5) and 38-45-30(6). This amount must be

paid to the municipal agent with a full accounting, provided by the department, including, but not

limited to, the name and address of the broker, and amount of the broker's premium tax rate

payment collected from each broker, and showing the counties in which the risk covered by the

insurance is located. The municipal agent shall distribute the funds annually to each municipality

with which it contracts based on the data submitted by the department.

Section 38-45-70. A broker's license entitles the holder to solicit insurance in any county of

this State. However, municipalities may impose license fees in accordance with this title.

i

Section 38-45-80.

All brokers doing any kind of insurance business in this State shall make and

keep a full and correct record of the business done by them, showing the number, date, term,

amount insured, premiums, and the person to whom issued ofevery policy or certificate of

renewal. The information from these records must be furnished to the director or his designee on

demand and the original books or records are open to the inspection ofthe director or his

designee on demand. These records must be kept for a minimum of five years. The director or

his designee also may conduct examinations ofbroker records. Examinations must be conducted

in accordance with the requirements of Chapter 13 of this title. The broker is responsible for the

costs of any examination.

Section 38-45-90.

At the request of a licensed resident broker, the director or his designee may

approve certain nonadmitted insurers as eligible surplus lines insurers to write business on risks

located in this State that one or more insurers licensed in this State to write that line ofbusiness

in this State have declined to write

The broker is responsible for the

costs of any examination.

Section 38-45-90.

At the request of a licensed resident broker, the director or his designee may

approve certain nonadmitted insurers as eligible surplus lines insurers to write business on risks

located in this State that one or more insurers licensed in this State to write that line ofbusiness

in this State have declined to write. The director or his designee may require the broker to

submit, on behalfofthe insurer, documents necessary to satisfy him that the insurer is licensed in

his home state, that it is solvent, and that its operation is not hazardous to the policyholders. The

director or his designee may require the broker or the insurer to file additional documents at any

time to maintain the insurer's status as an eligible surplus lines insurer. The director or his

designee may withdraw his approval at any time the insurer fails to meet any of the

requirements. While the insurer maintains his status as an eligible surplus lines insurer, a duly

licensed broker, under the terms of this chapter, may place business with the insurer. An

insurance broker shall exercise due care in the placing ofinsurance. Each broker transacting

business in the State during a calendar year shall file annually with the department within thirty

days after December thirty-first a detailed report ofthis business. The report must be in the form

the director or his designee prescribes. The broker's books, papers, and accounts must be open at

all times to the inspection of the director or his designee.

Section 38-45-100.

A licensed insurance broker may divide commissions with producers or

brokers in other states or with a producer licensed in this State for an insurer doing the particular

class ofinsurance desired to be placed through the broker.

Section 38-45-110

escribes. The broker's books, papers, and accounts must be open at

all times to the inspection of the director or his designee.

Section 38-45-100.

A licensed insurance broker may divide commissions with producers or

brokers in other states or with a producer licensed in this State for an insurer doing the particular

class ofinsurance desired to be placed through the broker.

Section 38-45-110.

The broker shall write or stamp upon the face of each policy and

application of an eligible surplus lines insurer the words, 'This company has been approved by

the director or his designee of the South Carolina Department ofInsurance to write business in

this State as an eligible surplus lines insurer, but it is not afforded guaranty fund protection'.

Section 38-45-120.

Every insurance broker who sells an insurance policy written or issued by

an insurer not licensed to do business in this State is personally liable for the limits of the

coverage provided for in the policy if the broker fails to comply with the provisions ofthis title

relating to policies issued by insurers not licensed to do business in this State.

Section 38-45-130.

All losses occurring under policies placed through an insurance broker may

be adjusted by a licensed producer or adjuster in this State. All inspections of property and

endorsements on policies may be made by a licensed broker or any other licensed insurance

producer in this State authorized to do so.

o policies issued by insurers not licensed to do business in this State.

Section 38-45-130.

All losses occurring under policies placed through an insurance broker may

be adjusted by a licensed producer or adjuster in this State. All inspections of property and

endorsements on policies may be made by a licensed broker or any other licensed insurance

producer in this State authorized to do so.

Section 38-45-140.

When the director or his designee detennines after investigation that a

broker has violated this title, he may, upon ten days' notice, impose the penalties provided in

Section 38-2-10.

Section 38-45-150.

Any person violating this chapter is guilty of a misdemeanor. Each risk

written in violation ofthis chapter is considered a separate offense.

Section 38-45-160. No policy fee may be charged by a broker unless it is a reasonable fee, it is

made part ofthe contract, and the broker's premium tax rate is paid upon the policy fee. Iffor

any reason the director or his designee disapproves the placement or the insurer ultimately

refuses to write the risk, the broker shall immediately refund the full policy fee to the

policyholder.

Section 38-45-170.

Before the director or his designee approves a nonadmitted insurer as an

eligible surplus lines insurer, the insurer shall appoint in writing the director and his successors

in office to be its true and lawful attorney upon whom all legal process in any action or

proceeding against it must be served and in this writing shall agree that any lawful process

against it which is served upon this attorney is ofthe same legal force and validity as if served

upon the insurer and that the authority continues in force so long as any liability remains

outstanding in the State. Copies ofthe appointment, certified by the director, are sufficient

evidence ofthe appointment and must be admitted in evidence with the same force and effect as

the original might be admitted

hich is served upon this attorney is ofthe same legal force and validity as if served

upon the insurer and that the authority continues in force so long as any liability remains

outstanding in the State. Copies ofthe appointment, certified by the director, are sufficient

evidence ofthe appointment and must be admitted in evidence with the same force and effect as

the original might be admitted.

Section 38-45-180.The department may promulgate regulations and prescribe fonns and

procedures necessary to implement this chapter.

Section 38-45-190.(A) For the purposes ofcarrying out the Nonadmitted and Reinsurance

Refonn Act of2010, the director or his designee may enter into an agreement with a single state

to facilitate the collection, allocation, and disbursement ofpremium taxes attributable to the

placement ofsurplus lines insurance, provide for unifonn methods ofallocation and reporting

among surplus lines insurance risk classifications, and share infonnation among states relating to

surplus lines insurance premium taxes. The General Assembly may approve, modifY, or rescind

any such agreement.

(B) The director or his designee is authorized to participate in a clearing house established

through a multi state agreement approved by the General Assembly for the purpose ofcollecting

and disbursing to reciprocal states any funds collected pursuant to subsection (A) applicable to

properties, risks, or exposures located or to be perfonned outside ofthis State. To the extent that

other states where portions ofthe properties, risks, or exposures reside have failed to enter into

an agreement or reciprocal allocation procedure with this State, the net premium tax collected

shall be retained by this State.

Section 38-45-195.

Nothing in this chapter precludes the director or his designee from

collecting one hundred percent of the taxes due under this chapter for all risks placed in the

surplus lines market."

erties, risks, or exposures reside have failed to enter into

an agreement or reciprocal allocation procedure with this State, the net premium tax collected

shall be retained by this State.

Section 38-45-195.

Nothing in this chapter precludes the director or his designee from

collecting one hundred percent of the taxes due under this chapter for all risks placed in the

surplus lines market."

Prohibition of additional license fee for surplus lines insurance

SECTION 2.

Section 38-7-160 ofthe 1976 Code is amended to read:

"Section 38-7-160.

This title may not be construed as preventing any municipality from

levying and collecting license fees or taxes in accordance with its ordinances. However, for

surplus lines insurance no municipality may charge an additional license fee or tax based upon a

percentage of premiums. A municipality may not charge a license fee to fire insurers or their

agents licensed by the director or his designee in any other manner than on a percentage of the

premiums collected in the municipality or realized from risks located within the limits of the

municipality, or both, the license fee not to exceed two percent of the premiums collected in the

municipality and realized from risks located in the municipality, except in cities of fifty thousand

inhabitants or more, where not exceeding five percent may be charged. Preference must be given

hereunder to the municipality wherein the insured property is located, and, if a license is levied

against the insuring company on such basis, that company may not be subject to a similar license

from a municipality wherein it may collect the premium for such transaction."

Severability clause

SECTION 3

abitants or more, where not exceeding five percent may be charged. Preference must be given

hereunder to the municipality wherein the insured property is located, and, if a license is levied

against the insuring company on such basis, that company may not be subject to a similar license

from a municipality wherein it may collect the premium for such transaction."

Severability clause

SECTION 3.

If any section, subsection, paragraph, subparagraph, sentence, clause, phrase, or

word of this act is for any reason held to be unconstitutional or invalid, such holding shall not

affect the constitutionality or validity of the remaining portions of this act, the General Assembly

hereby declaring that it would have passed this act, and each and every section, subsection,

paragraph, subparagraph, sentence, clause, phrase, and word thereof, irrespective of the fact that

anyone or more other sections, subsections, paragraphs, subparagraphs, sentences, clauses,

phrases, or words hereof may be declared to be unconstitutional, invalid, or otherwise

ineffective.

Time effective

SECTION 4.

This act takes effect January 1, 2012.

Ratified the 28th day ofJune, 2012.

Approved the 29th day ofJune, 2012.

This web page was last updated on October 1, 2012 at 8:50 AM