A BILL TO AMEND THE SOUTH CAROLINA CODE OF LAWS BY AMENDING SECTION 38-1-20, RELATING TO INSURANCE LAW DEFINITIONS, SO AS TO DEFINE THE TERM "CONTINGENT DEFERRED ANNUITY"; BY AMENDING SECTION 38-69-220, RELATING TO EXCEPTIONS FROM OPERATION OF THE STANDARD NONFORFEITURE LAW FOR INDIVIDUAL DEFERRED ANNUITIES, SO AS TO ADD AN EXCEPTION FOR CERTAIN PROVISIONS OF THE STANDARD NONFORFEITURE LAW FOR INDIVIDUAL DEFERRED ANNUITIES, AND TO PROVIDE THE DEPARTMENT OF INSURANCE MAY PROMULGATE REGULATIONS FOR NONFORFEITURE BENEFITS FOR CONTINGENT DEFERRED ANNUITIES IN THE DISCRETION OF THE DIRECTOR OF THE DEPARTMENT IN CERTAIN CIRCUMSTANCES; AND BY AMENDING SECTION 38-44-20, RELATING TO DEFINITIONS IN THE MANAGING GENERAL AGENTS ACT, SO AS TO MAKE A CONFORMING CHANGE.
H5094 amends South Carolina insurance law to add a new defined term, “contingent deferred annuity,” to the state’s general insurance definitions. The bill describes this product as an annuity contract under which a life insurer’s obligation to make lifetime periodic payments begins when designated investments, not owned or held by the insurer, are depleted to a contractually defined amount because of withdrawals, market performance, fees, or other charges.
The bill also revises the state’s standard nonforfeiture law for individual deferred annuities so that contingent deferred annuities are exempt from the usual nonforfeiture provisions in Sections 38-69-230 through 38-69-280. Even with that exemption, the Department of Insurance would be authorized to adopt regulations governing nonforfeiture benefits for contingent deferred annuities if the director determines those rules would be equitable to contract holders, appropriate to the risks insured, and consistent with the general purpose of the law. A conforming amendment is also made to the Managing General Agents Act to update a cross-reference tied to the new definition.
In practical terms, the bill updates South Carolina’s insurance code to recognize and regulate a newer annuity product tied to investment depletion and lifetime income protection. It would affect life insurers, annuity issuers, insurance producers, and the Department of Insurance by clarifying how these contracts are categorized and by giving the department discretion to create product-specific rules rather than applying the existing deferred annuity nonforfeiture framework unchanged.
The general sentiment reflected in the available record is neutral and technical, with no committee transcript or recorded votes indicating strong support or opposition. The bill appears to be a targeted insurance modernization measure rather than a broad policy change, and its language suggests an effort to align state law with emerging annuity products and regulatory needs.
There is little explicit contention in the available materials, but the main policy issue is the balance between regulatory flexibility and consumer protection. The bill exempts contingent deferred annuities from the standard nonforfeiture rules while allowing the Department of Insurance to regulate them by rule, which could raise questions about whether the director’s discretion is sufficient to protect contract holders and how closely these products should be treated like traditional deferred annuities.
The bill would amend Title 38 of the South Carolina Code by adding a statutory definition of contingent deferred annuity, creating a specific exemption for those contracts from the standard nonforfeiture provisions applicable to individual deferred annuities, and authorizing the Department of Insurance to promulgate regulations for nonforfeiture benefits in this product category. It also makes a conforming change to the Managing General Agents Act to reflect the updated insurance-law definition structure. The primary affected parties are life insurers, annuity purchasers, insurance producers, and the Department of Insurance.
The available record suggests a generally neutral, technical, and policy-specific reception. There are no recorded votes or committee transcripts showing debate, amendment fights, or partisan division, and the bill’s caption and text indicate a focused insurance-law update rather than a controversial measure. The overall tone appears to be one of administrative clarification and regulatory modernization.
The main potential point of contention is the bill’s treatment of contingent deferred annuities outside the ordinary nonforfeiture rules that apply to deferred annuities. Supporters would likely view the exemption and regulatory authority as necessary to accommodate a specialized product, while critics could worry that removing the default statutory protections may weaken consumer safeguards unless the Department of Insurance adopts strong regulations. Another possible issue is the breadth of discretion given to the director to determine when regulations are appropriate and what protections are equitable.