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Public Act 098-0157 |
SB1729 Enrolled | LRB098 09834 RPM 39990 b |
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AN ACT concerning regulation.
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Be it enacted by the People of the State of Illinois,
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represented in the General Assembly:
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Section 5. The Illinois Insurance Code is amended by |
changing Sections 35A-5, 35A-10, 35A-15, 35A-30, and 35A-60 as |
follows:
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(215 ILCS 5/35A-5)
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Sec. 35A-5. Definitions. As used in this Article, the terms |
listed in
this Section have the meaning given herein.
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"Adjusted RBC Report" means an RBC Report that has been |
adjusted by the
Director in accordance with subsection (f) of |
Section 35A-10.
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"Authorized control level RBC" means the number determined |
under the
risk-based capital formula in accordance with the RBC |
Instructions.
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"Company action level RBC" means the product of 2.0 and the |
insurer's
authorized control level RBC.
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"Corrective Order" means an order issued by the Director in |
accordance with
Article XII 1/2 specifying
corrective actions |
that the Director determines are required.
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"Domestic insurer" means any insurance company domiciled |
in this State
under Article II, Article III, Article III 1/2, |
or Article IV
or a health organization as defined by this |
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Article, except this shall
include only those health |
maintenance organizations that are "domestic
companies" in |
accordance with Section 5-3 of the Health Maintenance
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Organization Act and only those limited health service |
organizations that are
"domestic companies" in accordance with |
Section 4003 of the Limited Health
Service Organization Act.
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"Fraternal benefit society" means any insurance company |
licensed under Article XVII of this Code. |
"Foreign insurer" means any foreign or alien insurance |
company licensed
under Article VI
that is not domiciled in this |
State
and any health maintenance organization that is not a |
"domestic company" in
accordance with Section 5-3 of the Health |
Maintenance Organization Act and any
limited health service |
organization that is not a "domestic company" in
accordance |
with Section 4003 of the Limited Health Service Organization |
Act.
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"Health organization" means an entity operating under a |
certificate of
authority issued pursuant to the
Health |
Maintenance Organization Act, the Dental Service Plan Act, the |
Limited
Health Service Organization Act, or the Voluntary |
Health Services Plans Act,
unless the entity is otherwise |
defined as a "life, health, or life and health
insurer" |
pursuant to this Act.
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"Life, health, or life and health insurer" means an |
insurance company
that has authority to transact the kinds of
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insurance described in either or both clause (a) or clause (b) |
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of Class 1 of
Section 4 or a licensed property and casualty |
insurer writing only accident and
health insurance.
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"Mandatory control level RBC" means the product of 0.70 and |
the insurer's
authorized control level RBC.
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"NAIC" means the National Association of Insurance |
Commissioners.
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"Negative trend" means, with respect to a life, health, or |
life and
health
insurer or a fraternal benefit society , a |
negative trend over a period of time, as determined
in |
accordance with the trend test calculation included in the Life |
or Fraternal RBC Instructions.
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"Property and casualty insurer" means an insurance company
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that has authority to transact the kinds of insurance in
either |
or both Class 2 or Class 3 of Section 4 or a licensed insurer |
writing
only insurance authorized under clause (c) of
Class 1, |
but does not include monoline
mortgage guaranty insurers, |
financial guaranty insurers, and title insurers.
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"RBC" means risk-based capital.
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"RBC Instructions" means the RBC Report including |
risk-based capital
instructions adopted by the NAIC as those |
instructions may be amended by the
NAIC from time to time in |
accordance with the procedures adopted by the NAIC.
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"RBC level" means an insurer's company action level RBC, |
regulatory action
level RBC, authorized control level RBC, or |
mandatory control level RBC.
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"RBC Plan" means a comprehensive financial plan containing |
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the elements
specified in subsection (b) of Section 35A-15.
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"RBC Report" means the risk-based capital report required |
under Section
35A-10.
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"Receivership" means conservation, rehabilitation, or |
liquidation under
Article XIII.
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"Regulatory action level RBC" means the product of 1.5 and |
the insurer's
authorized control level RBC.
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"Revised RBC Plan" means an RBC Plan rejected by the |
Director and revised by
the insurer with or without the |
Director's recommendations.
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"Total adjusted capital" means the sum of (1) an insurer's |
statutory capital
and surplus and (2) any other items that the |
RBC Instructions may provide.
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(Source: P.A. 90-794, eff. 8-14-98; 91-549, eff. 8-14-99.)
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(215 ILCS 5/35A-10)
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Sec. 35A-10. RBC Reports.
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(a) On or before each March 1 (the "filing date"), every |
domestic
insurer
shall prepare and submit to the Director a |
report of its RBC levels as of the
end of the previous calendar |
year in the form and containing the information
required by the |
RBC Instructions. Every domestic insurer shall also file its
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RBC Report with the NAIC in accordance with the RBC |
Instructions. In addition,
if requested in writing by the chief |
insurance regulatory official of any state
in which it
is |
authorized to do business, every domestic insurer shall file |
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its RBC Report
with that official no later than the later of 15 |
days after the insurer
receives the written request
or the |
filing date.
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(b) A life, health, or life and health insurer's or |
fraternal benefit society's RBC shall be
determined under the |
formula set
forth in the RBC Instructions. The formula shall |
take into account (and may
adjust for the covariance between):
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(1) the risk with respect to the insurer's assets;
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(2) the risk of adverse insurance experience with |
respect to the insurer's
liabilities and obligations;
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(3) the interest rate risk with respect to the |
insurer's business; and
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(4) all other business risks and other relevant risks |
set forth in the RBC
Instructions.
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These risks shall be determined in each case by applying
the |
factors in the
manner set forth in the RBC Instructions.
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(c) A property and casualty insurer's RBC shall be |
determined in
accordance
with the formula set forth in the RBC |
Instructions. The formula shall take
into account (and may |
adjust for the covariance between):
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(1) asset risk;
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(2) credit risk;
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(3) underwriting risk; and
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(4) all other business risks and other relevant risks |
set
forth in the RBC Instructions.
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These risks shall be determined in each case by applying the |
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factors in the
manner
set forth in the RBC Instructions.
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(d) A health organization's RBC shall be determined in |
accordance with the
formula set forth in the RBC Instructions. |
The formula shall take the
following into account (and may |
adjust for the covariance between):
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(1) asset risk;
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(2) credit risk;
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(3) underwriting risk; and
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(4) all other business risks and other relevant risks |
set forth in the RBC
Instructions.
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These risks shall be determined in each case by applying the |
factors in the
manner set forth in the RBC Instructions.
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(e) An excess of capital over the amount produced by the
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risk-based
capital requirements contained in this Code and the |
formulas, schedules, and
instructions referenced in this Code |
is desirable in the business of insurance.
Accordingly, |
insurers should seek to maintain capital above the RBC levels
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required by this Code. Additional capital is used and useful in |
the insurance
business and helps to secure an insurer against |
various risks inherent in, or
affecting, the business of |
insurance and not accounted for or only partially
measured by |
the risk-based capital requirements contained in this Code.
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(f) If a domestic insurer files an RBC Report that, in the
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judgment of the
Director, is inaccurate, the Director shall |
adjust the RBC Report to correct
the inaccuracy and shall |
notify the insurer of the adjustment. The notice
shall contain |
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a statement of the reason for the adjustment.
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(Source: P.A. 91-549, eff. 8-14-99 .)
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(215 ILCS 5/35A-15)
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Sec. 35A-15. Company action level event.
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(a) A company action level event means any of the following |
events:
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(1) The filing of an RBC Report by an insurer that |
indicates that:
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(A) the insurer's total adjusted capital is |
greater than or equal to its
regulatory action level |
RBC, but less than its company action level RBC;
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(B) the insurer, if a life, health, or life and |
health insurer or a fraternal benefit society , has
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total adjusted capital that is greater than or equal
to |
its company action level RBC, but less than the product |
of its authorized
control level RBC and 3.0 2.5 and has |
a negative trend; or
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(C) the insurer, if a property and casualty |
insurer, has total adjusted capital that is greater |
than or equal
to its company action level RBC, but less |
than the product of its authorized
control level RBC |
and 3.0 and triggers the trend test determined in |
accordance with the trend test calculation included in |
the property and casualty RBC Instructions.
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(2) The notification by the Director to the insurer of |
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an Adjusted RBC
Report that indicates an event described in
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paragraph (1),
provided the insurer does not challenge the |
Adjusted RBC Report under Section
35A-35.
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(3) The notification by the Director to the insurer |
that the Director has,
after a hearing, rejected the |
insurer's challenge under Section 35A-35 to an
Adjusted RBC |
Report that indicates the event described in paragraph (1).
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(b) In the event of a company action level event, the |
insurer shall prepare
and submit to the Director an RBC Plan |
that does
all of the following:
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(1) Identifies the conditions that contribute to the
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company action level event.
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(2) Contains proposed corrective actions that the |
insurer intends to
take and that are expected to result in |
the elimination of the company action
level event.
A health |
organization is not prohibited from
proposing recognition |
of a parental guarantee or a letter of credit to
eliminate |
the company action level event; however the Director shall, |
at his
discretion, determine whether or the extent to which |
the proposed parental
guarantee or letter of credit is an |
acceptable part of a satisfactory RBC Plan
or Revised RBC |
Plan.
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(3) Provides projections of the insurer's financial |
results in the current
year and at least the 4 succeeding |
years, both in the absence of proposed
corrective actions |
and giving effect to the proposed corrective actions,
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including projections of statutory operating income, net |
income, capital, and
surplus. The projections for both new |
and renewal business may include
separate projections for |
each major line of business and separately identify
each |
significant income, expense, and benefit component.
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(4) Identifies the key assumptions affecting the |
insurer's projections
and the sensitivity of the |
projections to the assumptions.
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(5) Identifies the quality of, and problems associated |
with, the insurer's
business including, but not limited to, |
its assets, anticipated business growth
and associated |
surplus strain, extraordinary exposure to risk, mix of |
business,
and use of reinsurance, if any, in each case.
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(c) The insurer shall submit the RBC Plan to the Director |
within 45 days
after the company action
level event occurs or |
within 45 days after the Director notifies the insurer
that the |
Director has, after a hearing, rejected its
challenge under |
Section 35A-35 to an
Adjusted RBC Report.
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(d) Within 60 days after an insurer submits an RBC Plan to |
the
Director, the Director shall notify the insurer whether the |
RBC Plan shall be
implemented or is, in the judgment of the |
Director, unsatisfactory. If the
Director determines the RBC |
Plan is unsatisfactory,
the notification to the insurer shall |
set forth the reasons for the
determination
and may set forth |
proposed revisions that will render the RBC Plan satisfactory
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in the judgment of the Director. Upon notification from the |
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Director, the
insurer shall prepare a Revised RBC Plan, which |
may incorporate by reference
any revisions proposed by the |
Director. The insurer shall submit the Revised
RBC Plan to the |
Director within 45 days after the Director notifies the insurer
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that the RBC Plan is unsatisfactory or within 45 days after the |
Director
notifies the insurer that the Director has, after a |
hearing, rejected its
challenge under Section 35A-35 to the |
determination that the RBC Plan is
unsatisfactory.
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(e) In the event the Director notifies an insurer that its
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RBC Plan or Revised RBC Plan is unsatisfactory, the Director |
may, at
the Director's discretion and subject to the insurer's |
right to a hearing under
Section 35A-35, specify in the |
notification that the notification constitutes a
regulatory |
action level event.
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(f) Every domestic insurer that files an RBC Plan or |
Revised RBC Plan with
the Director shall file a copy of the RBC |
Plan or Revised RBC Plan with the
chief insurance regulatory |
official in any state in which the insurer is
authorized to do |
business if that state has a law substantially similar to the
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confidentiality provisions in subsection (a) of Section 35A-50 |
and if that
official requests in writing a copy of the plan. |
The insurer shall file a copy
of the
RBC Plan or Revised RBC |
Plan in that state no later than the later of
15 days after |
receiving the written request for the copy or
the date on which |
the RBC Plan or Revised RBC Plan is filed under
subsection (c) |
or (d) of this Section.
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(Source: P.A. 97-955, eff. 8-14-12.)
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(215 ILCS 5/35A-30)
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Sec. 35A-30. Mandatory control level event.
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(a) A mandatory control level event means any of the |
following events:
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(1) The filing of an RBC Report that indicates that the |
insurer's total
adjusted capital is less than its mandatory |
control level RBC.
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(2) The notification by the Director to the insurer of |
an Adjusted RBC
Report that indicates the event described |
in paragraph (1), provided the
insurer does not challenge |
the Adjusted RBC Report under Section 35A-35.
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(3) The notification by the Director to the insurer |
that the Director has,
after a hearing, rejected the |
insurer's challenge under Section 35A-35 to the
Adjusted |
RBC Report that indicates the event described in paragraph |
(1).
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(b) In the
event of a mandatory control level event with |
respect to a life, health, or
life and health insurer or a |
fraternal benefit society , the Director shall take
actions |
necessary to place the insurer in
receivership under
Article |
XIII. In that event, the mandatory control level event shall be |
deemed
sufficient grounds for the Director to take action under |
Article XIII, and the
Director shall have the rights, powers, |
and duties with respect to the insurer
that
are set forth in |
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Article XIII. If the Director takes
action
under this |
subsection regarding an Adjusted RBC Report, the insurer shall |
be
entitled to the protections
of Article XIII.
If the Director |
finds that there is a
reasonable expectation that the mandatory |
control level event may be eliminated
within 90 days after it |
occurs, the Director may delay action for not more
than 90 days |
after the mandatory control level event.
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(c) In the case of a mandatory control level event with |
respect to a
property and casualty insurer, the Director shall
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take the actions necessary to place the insurer in receivership |
under Article
XIII or, in the case of an insurer that is |
writing no business and that is
running-off its existing |
business, may allow the insurer to continue its
run-off under |
the supervision of the Director. In either case, the mandatory
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control level event is deemed sufficient grounds for the |
Director to take
action under Article XIII, and the Director |
has the rights, powers, and
duties with respect to the insurer |
that are set forth in Article XIII. If the
Director takes |
action regarding an Adjusted RBC Report, the insurer shall be
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entitled to the protections of Article XIII. If the Director |
finds that there
is a reasonable expectation that
the mandatory |
control level event may be eliminated within 90 days after it
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occurs, the Director may delay action for not more than 90 days |
after the
mandatory control level event.
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(d) In the case of a mandatory control level event with |
respect to a
health organization, the Director shall take the |
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actions necessary to place the
insurer in receivership under |
Article XIII or, in the case of an insurer that
is writing no |
business and that is running-off its existing business, may |
allow
the insurer to
continue its run-off under the supervision |
of the Director. In either case,
the mandatory control level |
event is deemed sufficient grounds for the Director
to take |
action under Article XIII, and the Director has the rights, |
powers, and
duties with respect to the insurer that are set |
forth in Article XIII. If the
Director takes action regarding |
an Adjusted RBC Report, the insurer shall be
entitled to the |
protections of Article XIII. If the Director finds that there
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is a reasonable expectation that the mandatory control level |
event may be
eliminated within 90 days after it occurs, the |
Director may delay action for
not more than 90 days after the |
mandatory control level event.
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(Source: P.A. 91-549, eff. 8-14-99.)
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(215 ILCS 5/35A-60)
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Sec. 35A-60. Phase-in of Article.
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(a) For RBC Reports filed
with
respect to
the December 31, |
1993 annual statement, instead of the provisions of Sections
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35A-15, 35A-20, 35A-25, and 35A-30,
the following provisions |
apply:
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(1) In the event of a company action level event, the |
Director shall take
no
action under this Article.
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(2) In the event of a regulatory action level event |
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under paragraph (1),
(2), or (3) of subsection (a) of |
Section 35A-20, the Director shall take the
actions |
required under Section 35A-15.
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(3) In the event of a regulatory action level event |
under paragraph (4),
(5), (6), (7), (8), or (9) of |
subsection (a) of Section 35A-20 or an
authorized control |
level event, the Director shall take the actions
required |
under Section 35A-20.
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(4) In the event of a mandatory control level event, |
the Director shall
take
the actions required under Section |
35A-25.
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(b) For RBC Reports required to be filed by property and |
casualty
insurers with respect to the December 31, 1995 annual |
statement, instead of the
provisions of Section 35A-15, 35A-20, |
35A-25, and 35A-30,
the following provisions apply:
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(1) In the event of a company action level event with |
respect to a
domestic insurer, the Director shall take no |
regulatory action under this
Article.
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(2) In the event of
a regulatory action level event |
under paragraph
(1), (2) or (3) of subsection (a) of |
Section 35A-20, the Director shall
take the actions |
required under
Section 35A-15.
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(3) In the event of
a regulatory action level event |
under paragraph
(4), (5), (6), (7), (8), or (9) of |
subsection (a) of Section 35A-20 or
an authorized control |
level event, the
Director shall take the actions required |
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under Section 35A-20.
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(4) In the event of a mandatory control level event,
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the Director shall take the actions required under Section |
35A-25.
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(c) For RBC Reports required to be filed by health |
organizations with
respect to the December 31, 1999 annual |
statement and the December 31, 2000
annual statement, instead |
of the provisions of
Sections 35A-15, 35A-20, 35A-25, and |
35A-30, the following provisions apply:
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(1) In the event of a company action level event with |
respect to a
domestic
insurer, the Director shall take no |
regulatory action under this Article.
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(2) In the event of a regulatory action level event |
under paragraph (1),
(2), or (3) of subsection (a) of |
Section 35A-20, the Director shall take the
actions |
required under Section 35A-15.
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(3) In the event of a regulatory action level event |
under paragraph (4),
(5), (6), (7), (8), or (9) of |
subsection (a) of Section 35A-20 or an authorized
control |
level event, the Director shall take the actions required |
under Section
35A-20.
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(4) In the event of a mandatory control level event, |
the Director shall
take the actions required under Section |
35A-25.
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This subsection does not apply to a health organization |
that provides or
arranges for a health care plan under which |
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enrollees may access health care
services from contracted |
providers without a referral from their primary care
physician.
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Nothing in this subsection shall preclude or limit other |
powers or duties of
the Director under any other laws.
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(d) For RBC Reports required to be filed by fraternal |
benefit societies with respect to the December 31, 2013 annual
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statement and the December 31, 2014 annual statement, instead
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of the provisions of Sections 35A-15, 35A-20, 35A-25, and
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35A-30, the following provisions apply: |
(1) In the event of a company action level event with
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respect to a domestic insurer, the Director shall take no
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regulatory action under this Article. |
(2) In the event of a regulatory action level event
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under paragraph (1), (2), or (3) of subsection (a) of
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Section 35A-20, the Director shall take the actions
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required under Section 35A-15. |
(3) In the event of a regulatory action level event
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under paragraph (4), (5), (6), (7), (8), or (9) of
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subsection (a) of Section 35A-20 or an authorized control
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level event, the Director shall take the actions required
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under Section 35A-20. |
(4) In the event of a mandatory control level event,
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the Director shall take the actions required under Section
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35A-25. |
Nothing in this subsection shall preclude or limit other |
powers or duties of
the Director under any other laws. |