South Carolina Department of Insurance 2022 Legislative Proposals

South Carolina Private Flood Insurance Act

Section 38‑101‑20. Definitions. 

For the purposes of this section:

       (1)   ‘Flood’ means:

           (a)   a general and temporary condition of partial or complete inundation of two or more acres of normally dry land area or of two or more properties, at least  one of which is the policyholder’s property, from:

              (i)    overflow of inland or tidal waters;

              (ii)  unusual and rapid accumulation or runoff of surface waters from any source; or

              (iii) mudflow; or

           (b)   collapse or subsidence of land along the shore of a lake or similar body of water as a result of erosion or undermining caused by waves or currents of water exceeding anticipated cyclical levels that result in a flood as defined in this section.

       (2)   ‘Mudflow’ means a river of liquid and flowing mud on the surfaces of normally dry land areas, as when earth is carried by a current of water. Other earth movements, such as landslide, slope failure, or a saturated soil mass moving by liquidity down a slope, are not mudflows.

       (3)   ‘Private flood insurance’ means personal lines or commercial lines flood insurance policies or endorsements providing coverage for the named peril of flood issued directly by insurers.

Section 38‑101‑30. Issuance of policies.

An insurer may issue an insurance policy, contract, or endorsement providing commercial lines or personal lines coverage for the named peril of flood or excess coverage for the named peril of flood on any structure and on the contents of commercial or personal property contained therein or to insure against indirect losses from the named peril of flood subject to the requirements of this chapter. Any reference to policy in this chapter also includes endorsements that provide private flood insurance coverage. 

Section 38‑101‑40. Private flood insurance policies; deductibles and policy limits. 

(A)  Private flood insurance policies issued pursuant to this chapter include:

       (1)   ‘Standard flood insurance’, which means a private flood insurance policy which covers only losses from the named peril of flood at least equivalent, when taken as a whole, to that provided under a standard flood insurance policy under the National Flood Insurance Program (NFIP) including deductibles, exclusions, and other terms and conditions offered by the insurer. The policy form also must include:

              (a)   information about the availability of flood insurance coverage under the NFIP;

              (b)   a mortgage interest clause substantially similar to the clause contained in a standard flood insurance policy under the NFIP; 

              (c)   a provision requiring an insured to file suit no later than one year after the date of a written denial of all or part of a claim under the policy; and

              (d)   cancellation provisions that are as restrictive as the provisions contained in a standard flood insurance policy under the NFIP.

       (2)   ‘Nonstandard flood insurance’, which may, but is not required to, provide coverage designed to supplement a flood policy obtained from the NFIP or from an insurer issuing standard flood insurance pursuant to this section. This includes any other policy issued for the coverage of flood that does not meet the definition of a standard flood insurance policy as defined above. Nonstandard flood insurance also includes policies that have a broader definition of flood than that provided for in Section 38‑101‑20(1) and discretionary acceptance private flood insurance as provided for in 12 C.F.R. Part 208.25.

(B)  Flood insurance deductibles and policy limits must be prominently noted on the policy declarations page or face page of the policy at issuance and renewal in at least ten‑point font.    

Section 38‑101‑110. Certification of policy that equals or exceeds flood coverage offered by NFIP; misrepresentation. 

(A)  An admitted insurer offering flood insurance may certify that a policy, contract, or endorsement provides coverage for the named peril of flood which equals or exceeds the flood coverage offered by the NFIP. To be eligible for certification, the policy, contract, or endorsement must contain a provision stating that it meets the private flood insurance requirements specified in 42 U.S.C. Section 4012a(b) and may not contain provisions that, when taken as a whole, are not in compliance with 42 U.S.C. Section 4012a(b).

(B)  The admitted insurer or its agent may reference or include a certification pursuant to subsection (A) in advertising or communications with an agent, a lending institution, an insured, or a potential insured only for a policy, contract, or endorsement that is certified pursuant to this section. The admitted insurer may include a statement that notifies an insured of the certification on the declarations page or other policy documentation related to flood coverage certified pursuant to this section.

 (C)  An insurer or agency who knowingly:

           (1)   misrepresents that a flood policy, contract, or endorsement is certified pursuant to this chapter; or

           (2)   misrepresents the scope of the coverage of the flood insurance policy, contract, or endorsement commits an unfair or deceptive act pursuant to Section 38‑57‑10, et seq. and is subject to the penalties set forth in this chapter.

Section 38‑101‑120. Written notice of cancellation or nonrenewal; requirements. 

(A)  The insurer shall give written notice ten days before cancellation due to nonpayment of premium or forty‑five days before cancellation for a reason other than nonpayment of premium or nonrenewal of private flood insurance coverage to:

            (1)   the insured; and

            (2)   the federally supervised institution that made the designated loan secured by the property covered by the private flood insurance, or the servicer acting on its behalf, if any.

(B)  The notice must:

            (1)   be filed with the director or his designee subject to the ‘use and file’ requirements as set forth in Section 38‑101‑60;

            (2)   state the date no less than ten days before cancellation due to nonpayment of premium or forty‑five days for any cancellation for a reason other than nonpayment of premium or nonrenewal; and

            (3)   inform the insured of its right to request a review by the South Carolina Department of Insurance.

(C)   (1)  An insurer may cancel or refuse to issue or renew a private flood insurance policy, except for the reasons set forth below:

              (a)   age;

              (b)   sex;

              (c)   race;

              (d)   color;

              (e)   creed;

              (f)   national origin;

              (g)   ancestry;

              (h)   marital status;

              (i)     income level; or

              (j)     lawful occupation, including the military service of the person seeking the coverage.

           (2)   Nothing in this section prohibits an insurer from limiting the issuance of private flood insurance policies covered in this chapter only to persons engaging in or who have engaged in a particular profession or occupation, or who are members of a particular religious sect.

           (3)   Nothing in this section prohibits an insurer from refusing to issue private flood insurance policies due to the exposure of flood.

           (4)   Notwithstanding the provisions of item (1), an insurer only may cancel a standard flood insurance policy in accordance with 42 U.S.C. Section 4012a(b).

Accreditation

Section 38-13-80.  Annual Statement as to business standing and financial condition.  

(A) Every insurer annually shall file annually with the department by March first and quarterly as required by this title, in the form and detail the director or his designee prescribes, a statement showing the business standing and financial condition of the insurer on December thirty-first of the preceding year. The filing must be submitted in an electronic format acceptable to the National Association of Insurance Commissioners or in the form and detail the director or his designee prescribes. except that Upon timely written request by the chief managing agent or officer setting forth reasons why the statement cannot be filed within the time provided, the director or his designee may grant in writing an extension of filing time for not more than thirty days. This statement must conform substantially to the form of statement adopted by the National Association of Insurance Commissioners. Unless the director or his designee provides otherwise, the annual statement is to be prepared in accordance with the annual statement instructions and the Accounting Practices and Procedures Manual adopted by the National Association of Insurance Commissioners. The annual statement must be verified by at least two of its principal officers, at least one of whom prepared or supervised the preparation of the annual statement. 

Section 38-13-85. Annual statement to be filed with the National Association of Insurance Commissioners; immunity from liability for disseminating information; confidentiality of information. 

Every insurer who is authorized to write insurance in this State shall file annually with the National Association of Insurance Commissioners by March first a copy of its annual statement convention blank and any quarterly statements required by this title along with any additional filings prescribed by the director or his designee for the preceding year in an electronic format acceptable to the National Association of Insurance Commissioners. The information filed with the National Association of Insurance Commissioners must be in the same format and scope as that required by the director or his designee and must include the signed jurat page and the actuarial certification. Any amendments and addenda to the annual statement filing subsequently filed with the director or his designee also must be filed with the National Association of Insurance Commissioners in an electronic format acceptable to the NAIC. Foreign insurers domiciled in a state which has a law substantially similar to this subsection are considered in compliance with this subsection.

Section 38-9-210. Reduction from liability for reinsurance; security.

(2) securities listed by the Securities Valuation Office of the National Association of Insurance Commissioners, including those deemed exempt from filing as defined by the Purposes and Procedures Manual of the Securities Valuation Office NAIC Investment Analysis Office and qualifying as admitted assets as defined in Section 38-13-80; 

Section 38-9-180. Standard Valuation Law

(S)(1) A company that has less than three hundred million dollars of ordinary life premium and that is licensed and doing business in this State and that is subject to the requirements of subsections (N) and (O), may hold reserves based on the mortality tables and interest rates defined by the valuation manual for net premium reserves as defined by the valuation manual and using the methodology defined in subsections (G), (I), (J), (K), and (L) as they apply to ordinary life insurance in lieu of the reserves required by subsections (N) and (O), provided that:

(a) if the company is a member of a group of life insurers, the group has combined ordinary life premiums of less than six hundred million dollars;

(b) the company reported total adjusted capital of at least four hundred and fifty percent of authorized control level risk-based capital in the risk-based capital report for the prior calendar year;

(c) the appointed actuary has provided an unqualified opinion on the reserves in accordance with subsection (D) for the prior calendar year; and

(d) the company has provided a certification by a qualified actuary that any universal life policy with a secondary guarantee issued after the operative date of the valuation manual meets the definition of a nonmaterial secondary guarantee universal life product as defined in the valuation manual.

(2) For purposes of item (1), ordinary life premiums are measured as direct premium plus reinsurance assumed from an unaffiliated company, as reported in the prior calendar year annual statement.

(3) A domestic company meeting the requirement of items (1) and (2) may file a statement prior to July first with the director or his designee certifying that these conditions are met for the current calendar year based on premiums and other values from the prior calendar year financial statements. The director or his designee may reject the statement before September first and require a company to comply with the valuation manual requirements for life insurance reserves.

Rate and Rule Filings by Rating Organizations

SECTION 38-73-240. Rate filings where line declared competitive; Consumer Advocate review of certain filings.

(C) An insurer may file its rates by either filing its final rates or by filing a multiplier and, if applicable, an expense-constant adjustment to be applied to prospective loss costs that have been filed by an advisory rating organization on behalf of the insurer as permitted by this chapter.

Section 38-73-910. Application of section and exceptions; notice of hearing as a prerequisite to granting rate increases for certain types of insurance. 

(A) This section applies to all types of property and casualty insurance coverage except as set forth in this section. Overall rate level increases or decreases for all property and casualty insurance coverages except for property insurance filings governed by Sections 38-73-220 and 38-73-260 and automobile insurance filings governed by Section 38-73-905 are subject to prior approval as set forth in this section. All rate, rule and form filings, including loss cost filings and other supplementary filings, submitted by a rating organization are subject to the prior approval of this Department. Every filing must state the proposed effective date and must indicate the type of coverage to which it applies. The director shall approve or disapprove these filings in accordance with the applicable provisions of this chapter.