South Carolina Property Study Guide

South Carolina’s property law is shaped by one fact of geography and one act of legislation: a hurricane coast, and the 2004 rate modernization that replaced prior approval with a flex band. Nearly every distinctive answer on this part of the exam traces back to one or the other. And there is one counterintuitive fact that catches almost everyone — so let’s start there.

There is no FAIR Plan in South Carolina

Most states operate a FAIR Plan: a statewide residual market that writes basic property coverage for risks the standard market declines. South Carolina does not have one.

What South Carolina has instead is the South Carolina Wind and Hail Underwriting Association — the “Wind Pool” — and it is a narrower thing in one dimension and a broader thing in another.

Narrower: it writes wind and hail coverage only, and only in the statutorily defined coastal area. It is not a general property residual market. An inland homeowner in Greenville who cannot find coverage has no residual mechanism to fall back on; that risk goes to surplus lines.

Broader: §38-75-330(A) establishes it as a residual market mechanism providing wind and hail insurance for “residential and commercial property.” It is not a homeowners-only pool, which is where most candidates guess wrong.

§38-75-320 states the purpose plainly — “to assure an adequate market for wind and hail insurance in the coastal areas.” Participation is mandatory: the association comprises the private insurers authorized to write property insurance in the state, and membership is a condition of continued authority to do business here.

The coastal area is defined county by county in §38-75-310, and it touches five counties: all of Beaufort and Colleton east of the west bank of the intracoastal waterway; designated areas of Georgetown between the Harrell Siau Bridge and the Horry County line east of a line paralleling U.S. Highway 17, plus Cedar, North and South Islands; all of Horry east of U.S. 17 or Bypass 17, whichever lies farther west; and in Charleston, the barrier islands — Edisto, Edingsville Beach, Kiawah, Botany Bay, Folly, Seabrook, Morris — plus the areas north of the City of Charleston east of the west bank of the intracoastal waterway, and specified portions of James, John’s and Wadmalaw Islands.

Rate regulation — the 7% flex band

Before 2004, South Carolina property rates ran on prior approval. The Personal Lines Modernization Act of that year rebuilt the system around a flex band, and §38-73-220 is the section to know.

§38-73-220(A): overall average rate-level increases or decreases of 7% above or below the insurer’s rates then in effect may take effect without prior approval, on a file-and-use basis, for fire, allied lines and homeowners insurance. The statute adds a clarification the exam likes: the 7% cap does not apply on an individual insured basis. It is an average across the book, not a ceiling on any one policyholder’s increase.

§38-73-220(B): no more than two rate increases within that limitation may be implemented in any twelve-month period, and the second one is subject to prior approval.

§38-73-220(C): a flex-band filing may become effective not less than 30 days after the date of the filing with the Director. If the Director finds it noncompliant he issues a written order; an order issued more than thirty days after receipt operates prospectively only.

Auto carries its own parallel flex-band section at §38-73-905, with the same 7%.

Credit information

South Carolina’s provision here is narrower than most candidates assume. §38-73-325 (fire and allied lines) and §38-73-425 (casualty and surety) carry identical language: the absence of credit information may be used for underwriting only if the insurer presents information satisfactory to the Director that the absence is related to the risk.

Read what that governs: the no-hit, thin-file applicant. It is not a general ban on credit-based insurance scores. A question that asks whether South Carolina prohibits credit scoring outright is asking you to over-read the statute.

Surplus lines — a separate license with a separate exam

South Carolina calls it an insurance broker license, and §38-45-20 sets four requirements: you must already be licensed as a resident property and casualty producer for the same lines; you must pass the South Carolina broker licensing examination; you pay a $200 biennial license fee, earned fully when received and not refundable; and you file a $10,000 bond with the Department, or a certificate of deposit in that amount. Premium taxes are remitted quarterly.

The diligent-effort rule is §38-45-90(A): the Director may approve nonadmitted insurers as eligible surplus lines insurers to write risks that “one or more insurers licensed in this State … have declined to write.” Note the count. South Carolina requires one or more declinations — not the three that some states impose and that circulates in study material as though it were universal. The broker must also “exercise due care in the placing of insurance.”

There is one exception. Under §38-45-90(B), a broker is not required to search with due diligence when placing coverage for an exempt commercial purchaser, provided the broker has disclosed that the coverage may be available in the admitted market with greater regulatory oversight, and the purchaser has requested the nonadmitted placement in writing.

Premium taxes and the municipal fire fee

South Carolina taxes fire insurance more than once, and §38-7-160 contains a genuine oddity. Municipalities may charge fire insurers up to 2% of premiums collected within their limits — rising to 5% in cities exceeding 50,000 inhabitants — while surplus lines insurance may not be taxed by municipalities on a percentage-of-premiums basis at all. On top of that, §38-7-30 adds 1% of gross fire premium receipts for inspection and investigation expenses, and §38-7-40 a further 1% on fire premiums written in the preceding year.