South Carolina Code of Regulations › Chapter 69 - DEPARTMENT OF INSURANCE › Section 69-70 - Annual Audited Financial Reporting Regulation

Current through Register Vol. 48, No. 6, June 28, 2024
Section
		  1. Authority
This regulation is promulgated by the Director of Insurance
			 (Director) of the South Carolina Department of Insurance (Department) pursuant
			 to Sections
			 38-3-110,
			 38-13-80,
			 38-90-150
			 and
			 38-90-630
			 of the South Carolina Code of Laws.
Section 2. Purpose and Scope
A. The purpose of this regulation is to
		  improve the Department's surveillance of the financial condition of insurers,
		  as defined in Section 3, by requiring (1) an annual audit of financial
		  statements reporting the financial position and the results of operations of
		  insurers by independent certified public accountants, (2) Communication of
		  Internal Control Related Matters Noted in an Audit, and (3) Management's Report
		  of Internal Control over Financial Reporting.
B. Every insurer shall be subject to this
		  regulation. Insurers having direct premiums written in this state of less than
		  $1,000,000 in any calendar year and less than 1,000 policyholders or
		  certificate holders of direct written policies nationwide at the end of the
		  calendar year shall be exempt from this regulation for the year (unless the
		  Director makes a specific finding that compliance is necessary for the Director
		  to carry out statutory responsibilities) except that insurers having assumed
		  premiums pursuant to contracts and/or treaties of reinsurance of $1,000,000 or
		  more will not be so exempt. For purposes of this subsection, all premiums
		  written or assumed by a captive insurer shall be deemed to be written in this
		  state.
C. Foreign or alien insurers
		  filing the Audited Financial Report in another state, pursuant to that state's
		  requirement for filing of Audited Financial Reports, which has been found by
		  the Director to be substantially similar to the requirements herein, are exempt
		  from Sections 4 through 13 of this regulation if:
(1) A copy of the Audited Financial Report,
		  Communication of Internal Control Related Matters Noted in an Audit, and the
		  Accountant's Letter of Qualifications that are filed with the other state are
		  filed with the Director in accordance with the filing dates specified in
		  Sections 4, 11 and 12, respectively (Canadian insurers may submit accountants'
		  reports as filed with the Office of the Superintendent of Financial
		  Institutions, Canada).
(2) A copy
		  of any Notification of Adverse Financial Condition Report filed with the other
		  state is filed with the Director within the time specified in Section
		  10.
D. Foreign or alien
		  insurers required to file Management's Report of Internal Control over
		  Financial Reporting in another state are exempt from filing the Report in this
		  state provided the other state has substantially similar reporting requirements
		  and the Report is filed with the commissioner of the other state within the
		  time specified.
E. This regulation
		  shall not prohibit, preclude or in any way limit the Director from ordering or
		  conducting or performing examinations of insurers under the rules and
		  regulations of the Department and the practices and procedures of the
		  Department.
F.
(1) Except as otherwise provided in this
		  subsection, this regulation shall not apply to captive insurance companies
		  other than captive insurers as defined in Section 3(A)(5). In the case of a
		  conflict between a provision of Regulation
		  69-60
		  and a provision of this regulation, the latter controls.
(2) The Director may, by written notice,
		  require a captive insurance company that is not otherwise subject to this
		  regulation to comply with any provision or requirement of this regulation by
		  making a specific finding that compliance is necessary for the Director to
		  carry out statutory responsibilities. In arriving at this finding, the Director
		  may consider the captive insurance company's business plan, including the
		  nature of the risks insured, and other factors the Director considers
		  advisable. Such a notice may be issued at any time and from time to time for a
		  specified period or periods. Within thirty days from issuance of the notice,
		  the captive insurance company may request in writing a hearing, pursuant to
		  statute, on the requirement for compliance. The hearing shall be held in
		  accordance with South Carolina law pertaining to administrative hearing
		  procedures.
(3) Notwithstanding any
		  provision of this regulation to the contrary, a captive insurance company made
		  subject to this regulation by written notice pursuant to Section 2(F)(2) shall
		  file its Audited Financial Report on or before the date that is six months
		  following the last day of the captive insurance company's fiscal year end,
		  provided that the Director may require an earlier filing than such date with
		  ninety days advance notice to the captive insurance company. Extensions of the
		  filing date may be granted by the Director for thirty-day periods upon a
		  showing by the captive insurance company and its independent certified public
		  accountant of the reasons for requesting an extension and determination by the
		  Director of good cause for an extension. The request for extension must be
		  submitted in writing not less than ten days prior to the due date in sufficient
		  detail to permit the Director to make an informed decision with respect to the
		  requested extension. If an extension of the filing date is granted, a similar
		  extension of thirty days is granted to the filing of Management's Report of
		  Internal Control over Financial Reporting.
(4) Every captive insurance company required
		  to file an annual Audited Financial Report by written notice pursuant to
		  Section 2(F)(2) shall designate a group of individuals as constituting its
		  Audit Committee, as defined in Section 3(A)(3). The Audit Committee of an
		  entity that controls the captive insurance company may be deemed to be the
		  captive insurance company's Audit Committee for purposes of this regulation at
		  the election of the controlling person.