This Regulation shall apply to all insurers writing mortgage
guaranty insurance in South Carolina. Mortgage guaranty insurance is defined
for the purposes of this Regulation as the insurance of mortgage lenders
against loss by reason of nonpayment of mortgage indebtedness by borrowers, and
should not be confused with other kinds of insurance written incidental to
mortgage loan transactions such as mortgage redemption life insurance, hazard
insurance covering improvements to real property, and credit accident and
health coverages.
1. Unearned premium
reserves for mortgage guaranty insurance shall be computed in accordance with
Sections
38-5-60,
38-9-170
and
38-9-180
which specify that such reserves are to be computed by the use of annual or
more frequent pro rata fractions.
2. In addition to the unearned premium
reserve, every mortgage guaranty insurer writing business in this State must
establish and maintain a contingency reserve, computed as hereinafter
described, for the further protection of such companies and their policyholders
against the adverse effects of economic cycles and other causes of excessive
loss experience. The contingency reserve shall be credited not less frequently
than annually, as of the end of each calendar year, with an amount equal to
fifty per cent of the premiums earned during the year, computed in accordance
with Sections
38-5-60,
38-9-170
and
38-9-180.
Each such amount credited to the contingency reserve shall be carried as a
liability for fifteen years following the year for which the credit is
established, unless used to pay mortgage guaranty losses as hereinafter
provided.
3. If for any year the
incurred losses and loss expenses for mortgage guaranty insurance shall exceed
forty per cent of the premiums earned on such business, the contingency reserve
may be charged with the amount of such excess if such charge is approved by the
Chief Insurance Commissioner. Any such annual charges shall be treated so as to
reduce or remove the amounts originally credited to said reserve on a first-in,
first-out basis.
4. Annual
statements reflecting mortgage guaranty insurance transactions by licensed
insurers must be prepared in compliance with this Regulation to meet the
requirements of Section
38-13-100.
