South Carolina’s insurance regulator has halted A-Cap insurers from issuing new policies as of Dec. 31, 2024, citing consumer protection and funding compliance concerns. This represents the second state to issue such an order in December 2024.
The South Carolina Department of Insurance (SCDOI) issued an order on Dec. 20, 2024, banning Advantage Capital (A-Cap) insurers from issuing new policies as of Dec. 31, 2024.
“We are publishing these orders today as part of our ongoing efforts to protect the consumers of South Carolina,” Michael Wise, director of the SCDOI, said in a press release. “We will continue to work with our fellow state regulators to ensure companies conducting insurance business are adequately funded in compliance with the law.”
The Utah Case
This order follows a similar move by Utah regulators in Dec. 2024. State insurance commissioner Jonathan T. Pike issued an emergency order banning annuity specialist A-Cap from writing insurance policies in the state as of Dec. 31, 2024, as Annuity.org previously reported.
Utah’s regulators cited hazardous financial conditions, which presents “an immediate and significant danger to the public health, safety, or welfare, and that immediate action is necessary and in the public interest,” according to the Dec. 2, 2024 order.
The Utah order affects three A-Cap subsidiaries:
- Sentinel Security Life
- Haymarket
- Jazz Reinsurance
Some red flags include the company’s declining financial health, A-Cap’s “engagement in high-risk investments,” and the fact that “the companies’ investment portfolios included a disproportionately large number of high-risk investments,” according to the order.
“Based on the verified petition and emergency order issued by the Commissioner, the Department has the burden to prove that Sentinel is in a hazardous financial condition,” an A-Cap spokesperson told Annuity.org, adding that SSL vigorously disputes the department’s claims and is aggressively defending against these allegations.
According to the spokesperson, a trial is scheduled for March 2025, so a final ruling on the department’s “false assertions” has not been issued.
“However, absent an official ruling, we have decided to suspend new business at SSL for the time being. We remain actively engaged in a process to bring this disagreement over the valuation of certain aspects of A-CAP’s holdings to a successful conclusion,” the spokesperson added.
South Carolina’s Regulators’ Order
As for the most recent South Carolina regulators’ order, it argues that “the financial condition, management, and operation [of A-Cap’s subsidiaries] are such as to render the continuation of their business hazardous to the public and their policyholders.” Those subsidiaries are Atlantic Coast Life Insurance Company (ACL) and Southern Atlantic Re (SAR). The order also notes that these companies have failed to comply with insurance laws.
One of the South Carolina department’s findings—and a big red flag—is that $200.18 million of ACL’s investments and $460.34 million of SAR’s investments are “non-admitted assets,” according to a previous April order that placed the company under supervision.
Another issue is that the regulators found that the insurers “exhibit negative surplus.”
Regulatory Oversight
Insurance—and annuities, which are lumped into the life insurance arena—are regulated at the state level. As such, it is the state’s responsibility to monitor the financial strength and claims-paying ability of every licensed entity, said Nick Lamparelli, managing partner of Insurance Nerds and co-founder and CEO of The Insurance Advocacy Forum of Florida.
“So, it is not uncommon for insurers to fall out of grace with the solvency requirements of a state,” said Lamparelli. He added that, in this particular case, ACL does not seem to meet the minimum risk-based capital (RBC) thresholds.
Indeed, in November, South Carolina regulators said that the companies’ RBCs reflect a “mandatory control level.”
Ensuring Integrity
The National Association of Insurance Commissioners explains that state regulators must make sure that insurers can meet their financial commitments to policyholders.
“Because of this, the state will intervene to make sure its condition does not get worse, that current policyholders are treated fairly, and claims get paid until a resolution is made as to whether ACL can remain in business,” said Lamparelli.
He added that this would probably require a capital infusion or other remedy to ensure the company’s capital base is adequate to continue operations. In addition, according to Lamparelli, while these cases are typically rare, they are not unusual.
For instance, he noted that this often occurs in property and casualty insurers exposed to catastrophic perils in certain states such as California and Florida.
“Florida has had several insurers declared insolvent, forcing the state to intervene and take over those businesses,” he said. “Making sure policyholders get what’s promised to them is the ultimate responsibility for those regulators, and they take that very seriously.”
Implications for 2025
While such cases might undermine the credibility of life insurers, Fitch Ratings recently issued a report noting that it expects them “to maintain strong capitalization” in 2025.
“Life insurers’ profitability will likely remain stable next year even as credit losses, while still benign, are expected to rise modestly,” Jamie Tucker, senior director and North American life insurance sector head, said in a press release. “Balance sheet strength for life insurers also figures to remain intact against a mix of sector headwinds and tailwinds.”
Editor Norah Layne contributed to this article.
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