September 18, 2026

A-Cap strikes back with lawsuit accusing SC regulators sloppy process, leaking secrets

A pair of Advantage Capital Partners-owned insurance companies filed a stinging rebuke against South Carolina regulators Thursday afternoon, accusing the office of violating its due process, First Amendment rights and leaking vital company secrets.

The lawsuit came two days after Director Michael Wise of the South Carolina Department of Insurance filed a 56-page petition seeking to take control of insurers Atlantic Coast Life Insurance Co. and Southern Atlantic Re Inc.

In its own 32-page lawsuit, the A-Cap insurers accuse Wise of a prolonged and failed campaign to punish the companies and ask the Fifth Judicial Circuit in Richland County for an immediate and permanent injunction.

“The Petition does not identify a single policyholder claim Atlantic Coast failed to pay, a single surrender it failed to honor, or a single obligation it missed,” the lawsuit states.

Wise seeks possession, control and title to the insurers’ assets and authority to displace existing management. His petition alleges the companies’ financial condition is hazardous and cites concerns involving capital, investments, reinsurance and liquidity.

The insurers’ lawsuit says the rehabilitation petition itself is not the basis for their damages claims.

Instead, the companies challenge the Department of Insurance’s prior supervision of the insurers, its handling of adjusted risk-based capital reports, the continuation of a financial examination and the publication of regulatory information.

Previous regulatory battles

The companies’ lawsuit say Wise failed three times to bring the insurers to heel. Plaintiffs point to a February 2025 ruling by Chief Administrative Law Judge Ralph King Anderson III as the first major defeat for regulators.

After an evidentiary hearing, Anderson ruled that the department’s December 2024 action placing the companies under continued supervision was “unsupported by the facts and contrary to the law,” according to the lawsuit.

The court rejected the department’s contention that the companies had reached a mandatory-control-level RBC event and found that Atlantic Coast had positive cash flow and had not experienced difficulty paying policyholders or creditors, the lawsuit says.

Anderson also found that the department’s decision to make regulatory actions public had harmed the companies and policyholders. The ruling said the publicity tarnished the companies’ market credibility, contributed to employee losses and damaged distribution relationships, according to the lawsuit.

“Judge Anderson ultimately concluded that the evidence relied upon by the Director was ‘unreliable, unsupported, and contrary to the law,’” plaintiffs said.

The court also found that the publicity prompted policyholders to seek the return of premiums and resulted in “direct harm to the public,” the companies said.

Wise’s office sought reconsideration and appealed the decision before ultimately withdrawing its appeal, according to the lawsuit. The South Carolina Court of Appeals issued a remittitur in September 2025, leaving Anderson’s ruling intact.

Who’s RBC is right?

A separate proceeding also challenged the department’s adjusted RBC calculations.

Wise designated retired South Carolina Supreme Court Justice Kaye Hearn to hear the companies’ challenge. After a February 2025 hearing, Hearn rejected the department’s central argument involving the state’s then-existing 3% limitation on investments in a single person.

Hearn concluded that the statute did not allow the department to treat affiliated companies as a single entity, according to the lawsuit.

Plaintiffs also noted that she rejected the department’s exclusion of certain reinsurance reserve credits.

The insurer’s specifically highlight and italicize Hearn’s finding in the lawsuit: “Atlantic Coast and SAR are paying their obligations as they come due, and the Department has conceded that it has identified no risk that the Companies might default on their policyholder obligations.”

Wise rejected Hearn’s recommendation after the legislature amended the Investment of Insurers Act in May 2025 to expressly include affiliates and subsidiaries within the single-person investment limitation.

In March 2026, however, Anderson reversed Wise and vacated the adjusted RBC report, finding that Wise had effectively applied the 2025 amendment retroactively to financial information from 2023, the lawsuit said.

The department did not appeal that decision.

Examination remains unfinished

The insurers also challenge the regulators’ continuing financial examination.

The lawsuit says that South Carolina joined a Utah Insurance Department examination of Atlantic Coast and Southern Atlantic Re in January 2024. A revised examination warrant was issued in August 2025.

The insurers say they have cooperated with the examination for 13 months but that the department has not issued a final examination report, given them an opportunity to rebut findings or entered an order that they could appeal.

The insurers “have received no report to rebut, no findings to contest, and no order to appeal,” the lawsuit stated. While regulators say they have “multiple areas of concern,” the insurers claim they are in the dark.

“Those conclusions have never been verified, disclosed to the Companies, or tested,” the lawsuit said. “They are not findings under the Insurance Code.”

The lawsuit also raises questions about the role of outside counsel in the examination. Attorneys identified as members of the examination team later appeared as counsel for the department in the rehabilitation proceeding and that, on information and belief, they had access to the companies’ confidential examination materials, the plaintiffs claim.

Fight over public disclosure

A central claim in the lawsuit concerns the department’s decision to make information public when it filed the rehabilitation petition.

The companies allege the petition disclosed confidential Insurance Regulatory Information System results, information concerning an RBC plan and South Carolina’s own adjusted RBC calculations.

South Carolina law protects certain IRIS financial-analysis ratios and examination information from disclosure, while separate provisions protect RBC reports and related information, according to the lawsuit.

The companies say Wise was aware of the potential consequences of making adverse financial information public because of the earlier litigation. Wise testified during 2025 proceedings that he wanted to “stem the bleeding” by preventing the companies from writing additional business.

Plaintiffs argue that public allegations of financial weakness can trigger policyholder surrenders and accelerate liquidity demands, potentially creating the very financial pressure regulators are attempting to prevent.

The insurers accuse Wise of knowingly taking that risk despite the earlier court findings.

“Director Wise thus chose the very course of conduct that he knew could trigger policyholder fear and liquidity pressure,” the lawsuit alleged.

Companies cite audit

The insurers also point to an unqualified audit opinion issued June 1, 2026, saying an independent auditor reviewed their financial statements and records. The audit, along with the prior court rulings, undercuts the department’s portrayal of the companies as financially distressed, plaintiffs said.

The department’s rehabilitation petition, however, presents a substantially different assessment, citing financial and investment concerns and arguing that the companies’ condition is hazardous.

The lawsuit accuses Wise of jumping the gun with no notice or communication to the insurers.

“The Department did not first identify the information it believed was missing, permit the Companies to provide it, or complete the examination that the Petition itself acknowledges remains unfinished,” plaintiffs say. “Instead, the Department made the allegations public first and proposed to continue investigating afterward.”

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