South Carolina Code of Regulations › Chapter 69 - DEPARTMENT OF INSURANCE › Section 69-60 - Captive Insurance Companies

Current through Register Vol. 48, No. 6, June 28, 2024
Section 1.
		  Purpose and Authority.
The purpose of this regulation is to set forth the financial and
			 reporting requirements which the director or his designee deems necessary for
			 the regulation of captive insurance companies, as authorized by the South
			 Carolina Code of Laws. Reference hereinunder to "company" shall mean captive
			 insurance company or companies, unless otherwise specified.
Section 2. Annual Reporting Requirements.
An association captive insurance company doing business in this
			 State shall annually submit to the director or his designee a report of its
			 financial condition, verified by oath of two of its executive officers. The
			 report shall be that required by S.C. Code Ann. Section
			 38-13-80.
A pure or industrial insured captive insurance company doing
			 business in this State shall annually submit to the director or his designee a
			 report of its financial condition, verified by oath of two of its executive
			 officers. The report shall be that prescribed by the director or his designee
			 as "Captive Annual Statement: Pure or Industrial Insured".
Section 3. Annual Audit.
All companies shall have an annual audit by an independent
			 certified public accountant, authorized by the director or his designee, and
			 shall file such audited financial report with the director or his designee on
			 or before June 30 for the year ending December 31 immediately preceding.
The annual audit report shall be considered part of the company's
			 annual report of financial condition except with respect to the date by which
			 it must be filed with the director or his designee.
The annual audit shall consist of the following:
(A) Opinion of Independent Certified Public
		  Accountant
Financial statements furnished pursuant to this section shall be
			 examined by independent certified public accountants in accordance with
			 generally accepted auditing standards as determined by the American Institute
			 of Certified Public Accountants.
The opinion of the independent certified public accountant shall
			 cover all years presented.
The opinion shall be addressed to the company on stationery of
			 the accountant showing the address of issuance, shall bear original manual
			 signatures and shall be dated.
(B) Report of Evaluation of Internal Controls
This report shall include an evaluation of the internal controls
			 of the company relating to the methods and procedures used in the securing of
			 assets and the reliability of the financial records, including but not limited
			 to, such controls as the system of authorization and approval and the
			 separation of duties.
The review shall be conducted in accordance with generally
			 accepted auditing standards and the report shall be filed with the director or
			 his designee.
(C)
		  Accountant's Letter
The accountant shall furnish the company, for inclusion in the
			 filing of the audited annual report, a letter stating:
(a) That he is independent with respect to
		  the company and conforms to the standards of his profession as contained in the
		  Code of Professional Ethics and pronouncements of the American Institute of
		  Certified Public Accountants and pronouncements of the Financial Accounting
		  Standards Board.
(b) The general
		  background and experience of the staff engaged in audit including the
		  experience in auditing captives or other insurance companies.
(c) That the accountant understands that the
		  audited annual report and his opinions thereon will be filed in compliance with
		  this regulation with the Department.
(d) That the accountant consents to the
		  requirements of Section
		  6 of this regulation and that the
		  accountant consents and agrees to make available for review by the director or
		  his designee, or his appointed agent, the work papers as defined in Section
		  6.
(e) That the accountant is properly licensed
		  by an appropriate state licensing authority and that he is a member in good
		  standing in the American Institute of Certified Public Accountants.
(D) Financial Statements
Statements required shall be as follows:
(a) Balance sheet,
(b) Statement of gain or loss from
		  operations,
(c) Statement of
		  changes in financial position,
(d)
		  Statement of changes in capital paid up, gross paid in and contributed surplus
		  and unassigned funds (surplus), and
(e) Notes to financial statements.
The notes to financial statements shall be those required by
			 generally accepted accounting principles, and shall include:
(1) A reconciliation of differences, if any,
		  between the audited financial report and the statement or form filed with the
		  director or his designee.
(2) A
		  summary of ownership and relationship of the company and all affiliated
		  corporations or companies insured by the captive.
(3) A narrative explanation of all material
		  transactions and balances with the company.
(E) Certification of Loss Reserves and Loss
		  Expense Reserves
The annual audit shall include an opinion as to the adequacy of
			 the company's loss reserves and loss expense reserves.
The individual who certifies as to the adequacy of reserves shall
			 be approved by the director or his designee and shall be a Fellow of the
			 Casualty Actuarial Society, a member in good standing of the American Academy
			 of Actuaries, or an individual who has demonstrated his competence in loss
			 reserve evaluation to the director or his designee.
Certification shall be in such form as the director or his
			 designee deems appropriate.