“We place a high value on
efficiency, but more than that,
it shows that we insist on
having good reasons for the
things we do.”
What do you expect the impact of these changes to be?
The most immediate impact will be an improvement in the practical
workings of our department’s captives division and of numerous
industry practitioners from various professional disciplines. I should
point out that in addition to the 10 specific provisions highlighted
above, there are a lot of “nuts and bolts” clean-up features in this bill
which will help rationalise and streamline work.
With this new legislation, our captives statute has now been
comprehensively fine-tuned, brought up to date, and harmonised
with the enhanced policies and practices we have developed over
time with the benefit of almost two decades of varied and valuable
With this legislation South Carolina has made another unequivocal
statement of commitment to the captives industry—especially to the
captive owners and practitioners who have chosen to make South
Carolina their captive home and those considering doing so.
It signifies that we fully intend to be a leading player among onshore
captive insurance domiciles for a long time to come.
It also implicitly conveys our commitment to bring more of a private
sector mindset to our regulatory work than may be found in other
domiciles. Naturally, this means that we place a high value on
efficiency, but more than that, it shows that we insist on having good
reasons for the things we do.
We need to question everything and be prepared to justify the why and
how of everything we do. While I believe this to be true in organisational
life generally, it is especially necessary in a regulatory setting.
Jay Branum is the director of captives in the South Carolina Department
of Insurance. He can be contacted at: firstname.lastname@example.org
company are available for examination by the director”. The
new definition eliminates any requirement for the captive (via its
manager) to have a physical office within the state, which we had
found to be a deterrent to new business.
3. The definition of “pure” captive has been revised to provide that
pure captives are permitted to participate in risk pools and to take
credit for reinsurance recoverable from an approved risk pool.
4. The statutory distinction between paid-in capital and unencumbered
surplus has been eliminated, resulting in a set of single combined
capital-and-surplus statutory minimum requirements.
5. The minimum capitalisation for a sponsored captive has been
reduced to $250,000 total from $1,000,000 (capital and surplus
C&S combined), which was neither necessary nor commercially
realistic. Additionally, the new statutory wording clarifies that
premium taxes for sponsored companies with unincorporated cells
are aggregated at the sponsored entity level rather than applying at
the cell level, for simplicity and ease of tax reporting.
6. The deadline for annual statutory financial filings for non-risk retention
group (non-RRG) captives has been changed from March 1 to
“before July 1”—ie, June 30. The deadline for RRG filings remains
March 1. The change for non-RRGs should be very welcome news for
managers, accountants, and actuaries, who have always been pressed
to complete their respective workstreams under the former deadline.
7. A captive that is not an RRG or an industrial insured captive
“shall be examined three years following the date of licensure
and thereafter only at the discretion of the director”. This is a new
provision that replaces the former requirement that such captives
be examined at least every five years following the first examination
post-licensure. With respect to any category of captive, including
RRGs, the examination need not include a physical visit by the
director or his or her designee, but can be a “desk audit”.
This change should spare captives unnecessary expense and
spare managers work that arguably produces no value.
8. The categories of “captive reinsurance company” and “coastal
captive insurance company” have been eliminated, as any
company falling under the former definitions of either of those
types of captive can be licensed as a special purpose captive.
9. Approval of a loan from a captive to a captive’s parent or affiliate(s)
no longer requires a director’s order. The previous requirement for
a director’s order was an anomaly and has been eliminated.
10. The new wording clarifies that the first annual board meeting
must be held within the state of South Carolina within the calendar
year immediately succeeding the year of licensure and once every
calendar year thereafter. This gives owners of newly licensed
companies a break.
In addition to the above 10 changes, the new legislation contains
language that reinforces a fundamental principle that has been part
of our statute since its inception in 2000, namely, that no part of
the State’s Insurance Code (Title 38) and no regulations promulgated
thereunder apply to captives other than those contained or
specifically referenced in Chapter 90, which is the chapter expressly
and exclusively related to captives.
34 US Captive 2018 www.captiveinternational.com