Public Act 098-0157
 
SB1729 EnrolledLRB098 09834 RPM 39990 b

    AN ACT concerning regulation.
 
    Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
 
    Section 5. The Illinois Insurance Code is amended by
changing Sections 35A-5, 35A-10, 35A-15, 35A-30, and 35A-60 as
follows:
 
    (215 ILCS 5/35A-5)
    Sec. 35A-5. Definitions. As used in this Article, the terms
listed in this Section have the meaning given herein.
    "Adjusted RBC Report" means an RBC Report that has been
adjusted by the Director in accordance with subsection (f) of
Section 35A-10.
    "Authorized control level RBC" means the number determined
under the risk-based capital formula in accordance with the RBC
Instructions.
    "Company action level RBC" means the product of 2.0 and the
insurer's authorized control level RBC.
    "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.
    "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
Article, except this shall include only those health
maintenance organizations that are "domestic companies" in
accordance with Section 5-3 of the Health Maintenance
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.
    "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.
    "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.
    "Life, health, or life and health insurer" means an
insurance company that has authority to transact the kinds of
insurance described in either or both clause (a) or clause (b)
of Class 1 of Section 4 or a licensed property and casualty
insurer writing only accident and health insurance.
    "Mandatory control level RBC" means the product of 0.70 and
the insurer's authorized control level RBC.
    "NAIC" means the National Association of Insurance
Commissioners.
    "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.
    "Property and casualty insurer" means an insurance company
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.
    "RBC" means risk-based capital.
    "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.
    "RBC level" means an insurer's company action level RBC,
regulatory action level RBC, authorized control level RBC, or
mandatory control level RBC.
    "RBC Plan" means a comprehensive financial plan containing
the elements specified in subsection (b) of Section 35A-15.
    "RBC Report" means the risk-based capital report required
under Section 35A-10.
    "Receivership" means conservation, rehabilitation, or
liquidation under Article XIII.
    "Regulatory action level RBC" means the product of 1.5 and
the insurer's authorized control level RBC.
    "Revised RBC Plan" means an RBC Plan rejected by the
Director and revised by the insurer with or without the
Director's recommendations.
    "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.
(Source: P.A. 90-794, eff. 8-14-98; 91-549, eff. 8-14-99.)
 
    (215 ILCS 5/35A-10)
    Sec. 35A-10. RBC Reports.
    (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
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
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.
    (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):
        (1) the risk with respect to the insurer's assets;
        (2) the risk of adverse insurance experience with
    respect to the insurer's liabilities and obligations;
        (3) the interest rate risk with respect to the
    insurer's business; and
        (4) all other business risks and other relevant risks
    set forth in the RBC Instructions.
These risks shall be determined in each case by applying the
factors in the manner set forth in the RBC Instructions.
    (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):
        (1) asset risk;
        (2) credit risk;
        (3) underwriting risk; and
        (4) all other business risks and other relevant risks
    set forth in the RBC Instructions.
These risks shall be determined in each case by applying the
factors in the manner set forth in the RBC Instructions.
    (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):
        (1) asset risk;
        (2) credit risk;
        (3) underwriting risk; and
        (4) all other business risks and other relevant risks
    set forth in the RBC Instructions.
These risks shall be determined in each case by applying the
factors in the manner set forth in the RBC Instructions.
    (e) An excess of capital over the amount produced by the
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
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.
    (f) If a domestic insurer files an RBC Report that, in the
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
a statement of the reason for the adjustment.
(Source: P.A. 91-549, eff. 8-14-99.)
 
    (215 ILCS 5/35A-15)
    Sec. 35A-15. Company action level event.
    (a) A company action level event means any of the following
events:
        (1) The filing of an RBC Report by an insurer that
    indicates that:
            (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;
            (B) the insurer, if a life, health, or life and
        health insurer or a fraternal benefit society, 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 2.5 and has
        a negative trend; or
            (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.
        (2) The notification by the Director to the insurer of
    an Adjusted RBC Report that indicates an event described in
    paragraph (1), provided the insurer does not challenge the
    Adjusted RBC Report under Section 35A-35.
        (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).
    (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:
        (1) Identifies the conditions that contribute to the
    company action level event.
        (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.
        (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,
    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.
        (4) Identifies the key assumptions affecting the
    insurer's projections and the sensitivity of the
    projections to the assumptions.
        (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.
    (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.
    (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
in the judgment of the Director. Upon notification from the
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
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.
    (e) In the event the Director notifies an insurer that its
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.
    (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
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.
(Source: P.A. 97-955, eff. 8-14-12.)
 
    (215 ILCS 5/35A-30)
    Sec. 35A-30. Mandatory control level event.
    (a) A mandatory control level event means any of the
following events:
        (1) The filing of an RBC Report that indicates that the
    insurer's total adjusted capital is less than its mandatory
    control level RBC.
        (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.
        (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).
    (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
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.
    (c) In the case of a mandatory control level event with
respect to a property and casualty insurer, the Director shall
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
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 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.
    (d) In the case of a mandatory control level event with
respect to a health organization, the Director shall 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 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
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.
(Source: P.A. 91-549, eff. 8-14-99.)
 
    (215 ILCS 5/35A-60)
    Sec. 35A-60. Phase-in of Article.
    (a) For RBC Reports filed with respect to the December 31,
1993 annual statement, instead of the provisions of Sections
35A-15, 35A-20, 35A-25, and 35A-30, the following provisions
apply:
        (1) In the event of a company action level event, the
    Director shall take no action under this Article.
        (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.
        (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.
        (4) In the event of a mandatory control level event,
    the Director shall take the actions required under Section
    35A-25.
    (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:
        (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.
        (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.
        (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.
        (4) In the event of a mandatory control level event,
    the Director shall take the actions required under Section
    35A-25.
    (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:
        (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.
        (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.
        (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.
        (4) In the event of a mandatory control level event,
    the Director shall take the actions required under Section
    35A-25.
    This subsection does not apply to a health organization
that provides or arranges for a health care plan under which
enrollees may access health care services from contracted
providers without a referral from their primary care physician.
    Nothing in this subsection shall preclude or limit other
powers or duties of the Director under any other laws.
    (d) For RBC Reports required to be filed by fraternal
benefit societies with respect to the December 31, 2013 annual
statement and the December 31, 2014 annual statement, instead
of the provisions of Sections 35A-15, 35A-20, 35A-25, and
35A-30, the following provisions apply:
        (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.
        (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.
        (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.
        (4) In the event of a mandatory control level event,
    the Director shall take the actions required under Section
    35A-25.
    Nothing in this subsection shall preclude or limit other
powers or duties of the Director under any other laws.
(Source: P.A. 91-549, eff. 8-14-99.)
 
    Section 99. Effective date. This Act takes effect upon
becoming law.