S.C. Code Ann. § 38-90-485 – Effect of creation of protected cell; naming; management of assets

(A)
1. (1) The creation of a protected cell does not create, with respect to that protected cell, a legal person separate from the SPFC.
2. (2) Notwithstanding the provision of item (1), a protected cell must have its own distinct name or designation that includes the words "protected cell". The SPFC shall transfer all assets attributable to the protected cell to one or more separately established and identified protected cell accounts bearing the name or designation of that protected cell.
3. (3) Although it is not a separate legal person, the property of a SPFC in a protected cell is subject to orders of a court by name as it would have been if the protected cell were a separate legal person.
4. (4) The property of a SPFC in a protected cell must be served in its own name with process in all civil actions or proceedings involving or relating to the activities of that protected cell or a breach by the SPFC of a duty to the protected cell or to a counterparty to a transaction linked or attributed to it by serving the SPFC in the manner described in Section 15-9-270.
5. (5) A protected cell exists only at the pleasure of the SPFC. At the cessation of business of a protected cell in accordance with the plan approved by the director, the SPFC voluntarily shall close out the protected cell account.
(B) Nothing in this section may be construed to prohibit a SPFC from contracting with, or arranging for, an investment advisor, commodity trading advisor, or other third party to manage the assets of a protected cell, if all remuneration, expenses, and other compensation of the third party advisor or manager are payable from the assets of that protected cell and not from the assets of other protected cells or the assets of the SPFC's general account, unless approved by the director.
(C) Creditors with respect to a protected cell are not entitled to have recourse against the protected cell assets of other protected cells or the assets of the SPFC's general account. If an obligation of a SPFC relates only to the general account, the obligation of the SPFC extends only to that creditor, with respect to that obligation, and is entitled to have recourse only to the assets of the SPFC's general account.
(D) The assets of the protected cell may not be used to pay expenses or claims other than those attributable to the protected cell. Protected cell assets are available only to the SPFC contract counterparty and other creditors of the SPFC that are creditors only with respect to that protected cell and, accordingly, are entitled, in conformity with this article, to have recourse to the protected cell assets attributable to that protected cell and absolutely are protected from the creditors of the SPFC that are not creditors with respect to that protected cell and who, accordingly, are not entitled to have recourse to the protected cell assets attributable to that protected cell. If an obligation of a SPFC to a person or counterparty arises from a SPFC contract or related insurance securitization transaction, or is otherwise incurred, with respect to a protected cell:
1. (1) that obligation of the SPFC extends only to the protected cell assets attributable to that protected cell, and the person or counterparty, with respect to that obligation, is entitled to have recourse only to the protected cell assets attributable to that protected cell; and
2. (2) that obligation of the SPFC does not extend to the protected cell assets of another protected cell or the assets of the SPFC's general account, and that person, with respect to that obligation, is not entitled to have recourse to the protected cell assets of another protected cell or the assets of the SPFC's general account. The SPFC's capitalization held separate and apart from the capitalization of its protected cell or cells as required by Section 38-90-480(D) must be available at all times to pay expenses of or claims against the SPFC and may not be used to pay expenses or claims attributable to any protected cell.
(E) Notwithstanding another provision of law, a SPFC may allow for a security interest in accordance with applicable law to attach to protected cell assets or a protected cell account when in favor of a creditor of the protected cell or to facilitate the insurance securitization, including, without limitation, the issuance of the SPFC contract, to the extent those protected cell assets are not required at all times to support the risk, but without otherwise affecting the discharge of liabilities under the SPFC contract, or as otherwise approved by the director.
(F) A SPFC shall establish administrative and accounting procedures necessary to properly identify the one or more protected cells of the SPFC and the protected cell assets and protected cell liabilities to each protected cell. The directors of a SPFC shall keep protected cell assets and protected cell liabilities:
1. (1) separate and separately identifiable from the assets and liabilities of the SPFC's general account; and
2. (2) attributable to one protected cell separate and separately identifiable from protected cell assets and protected cell liabilities attributable to other protected cells.
(G) All contracts or other documentation reflecting protected cell liabilities clearly must indicate that only the protected cell assets are available for the satisfaction of those protected cell liabilities. In all SPFC insurance securitizations involving a protected cell, the contracts or other documentation effecting the transaction must contain provisions identifying the protected cell to which the transaction is attributed. In addition, the contracts or other documentation clearly must disclose that the assets of that protected cell, and only those assets, are available to pay the obligations of that protected cell. Notwithstanding the provisions of this subsection and subject to the provisions of this article and another applicable law or regulation, the failure to include this language in the contracts or other documentation may not be used as the sole basis by creditors, insureds or reinsureds, insurers or reinsurers, or other claimants to circumvent the provisions of this section.
(H) A SPFC with protected cells annually shall file with the department accounting statements and financial reports required by this article which, among other things, must:
1. (1) detail the financial experience of each protected cell and the SPFC separately; and
2. (2) provide the combined financial experience of the SPFC and all protected cells.
(I) A SPFC with protected cells shall notify the director in writing within ten business days of a protected cell becoming insolvent.