SB3382 96TH GENERAL ASSEMBLY

LRB096 20475 RPM 36130 b

96TH GENERAL ASSEMBLY
State of Illinois
2009 and 2010
SB3382

Introduced 2/10/2010, by Sen. Jeffrey M. Schoenberg

SYNOPSIS AS INTRODUCED:

215 ILCS 5/126.3

Amends the Illinois Insurance Code. Provides that no domestic insurer shall acquire any investment respecting a foreign jurisdiction, or any investment denominated in the currency of that foreign jurisdiction, if that jurisdiction is designated as a state sponsor of terrorism by the United States Secretary of State pursuant to the federal Export Administration Act, Arms Export Control Act, and Foreign Assistance Act.

A BILL FOR

AN ACT concerning insurance.

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 Section 126.3 as follows:

(215 ILCS 5/126.3)

Sec. 126.3. General investment qualifications.

A. Insurers may acquire, hold or invest in investments or engage in investment practices as set forth in this Article. Insurers may also acquire, hold or invest in investments not conforming to the requirements of this Article that are not otherwise prohibited by this Code. Investments not conforming to this Article shall not be admitted assets unless they are acquired under other authority of this Code.

B. Subject to subsection C of this Section, an insurer shall not acquire or hold an investment as an admitted asset unless at the time of acquisition it is:

(1) Eligible for the payment or accrual of interest or discount (whether in cash or other forms of income or securities), eligible to receive dividends or other distributions or is otherwise income producing; or

(2) Acquired under Section 126.15B, 126.15C, 126.16, 126.18, 126.20, 126.28C, 126.29, 126.31, or 126.32 or under the authority of Sections of the Code other than this Article.

C. An insurer may acquire or hold as admitted assets investments that do not otherwise qualify as provided in this Article if the insurer has not acquired them for the purpose of circumventing any limitations contained in this Article, if the insurer acquires the investments in the following circumstances and the insurer complies with the provisions of Sections 126.5 and 126.7 as to the investments:

(1) As payment on account of existing indebtedness or in connection with the refinancing, restructuring or workout of existing indebtedness, if taken to protect the insurer's interest in that investment;

(2) As realization on collateral for indebtedness;

(3) In connection with an otherwise qualified investment or investment practice, as interest on or a dividend or other distribution related to the investment or investment practice or in connection with the refinancing of the investment, in each case for no additional or only nominal consideration;

(4) Under a lawful and bona fide agreement of recapitalization or voluntary or involuntary reorganization in connection with an investment held by the insurer; or

(5) Under a bulk reinsurance, merger or consolidation transaction approved by the Director if the assets constitute admissible investments for the ceding, merged or consolidated companies.

D. An investment or portion of an investment acquired by an insurer under subsection C of this Section shall become a nonadmitted asset 3 years (or 5 years in the case of mortgage loans and real estate) from the date of its acquisition, unless within that period the investment has become a qualified investment under a Section of this Article other than subsection C of this Section, but an investment acquired under an agreement of bulk reinsurance, merger or consolidation may be qualified for a longer period if so provided in the plan for reinsurance, merger or consolidation as approved by the Director. Upon application by the insurer and a showing that the nonadmission of an asset held under subsection C of this Section would injure the interests of the insurer, the Director may extend the period for admissibility for an additional reasonable period of time.

E. Except as provided in subsections F and H of this Section, an investment shall qualify under this Article if, on the date the insurer committed to acquire the investment or on the date of its acquisition, it would have qualified under this Article. For the purposes of determining limitations contained in this Article, an insurer shall give appropriate recognition to any commitments to acquire investments.

F. (1) An investment held as an admitted asset by an insurer on the effective date of this amendatory Act of 1997 which qualified immediately prior to the effective date of this amendatory Act of 1997 shall remain qualified as an admitted asset under this Article.

(2) Each specific transaction constituting an investment practice of the type described in this Article immediately prior to the effective date of this amendatory Act of 1997 that was lawfully entered into by an insurer and was in effect on the effective date of this amendatory Act of 1997 shall continue to be permitted under this Article until its expiration or termination under its terms.

G. Unless otherwise specified, an investment limitation computed on the basis of an insurer's admitted assets or capital and surplus shall relate to the amount required to be shown on the statutory balance sheet of the insurer most recently required to be filed (annual or last quarter) with the Director. Solely for purposes of computing any limitation under this Article based upon admitted assets, the insurer shall deduct from the amount of its admitted assets the amount of the liability recorded on such statutory balance sheet for:

(1) The return of acceptable collateral received in a reverse repurchase transaction or a securities lending transaction;

(2) Cash received in a dollar roll transaction; and

(3) The amount reported as borrowed money in such statutory balance sheet to the extent not included in paragraphs (1) and (2) of this subsection.

H. An investment qualified, in whole or in part, for acquisition or holding as an admitted asset may be qualified or requalified at the time of acquisition or a later date, in whole or in part, under any other Section, if the relevant conditions contained in the other Section are satisfied at the time of qualification or requalification.

I. An insurer shall maintain documentation demonstrating that investments were acquired in accordance with this Article, and specifying the Section of this Article under which they were acquired.

J. An insurer shall not enter into an agreement to purchase securities in advance of their issuance for resale to the public as part of a distribution of the securities by the issuer or otherwise guarantee the distribution, except that an insurer may acquire privately placed securities with registration rights.

K. Notwithstanding the provisions of this Article, the Director, for good cause, may order an insurer to nonadmit, limit, dispose of, withdraw from or discontinue an investment or investment practice in accordance with Article XXIV. The authority of the Director under this subsection is in addition to any other authority of the Director.

L. No domestic insurer shall acquire any investment respecting a foreign jurisdiction, or any investment denominated in the currency of that foreign jurisdiction, if that jurisdiction is designated as a state sponsor of terrorism by the United States Secretary of State pursuant to section 6(j) of the Export Administration Act, section 40 of the Arms Export Control Act, and section 620A of the Foreign Assistance Act.

(Source: P.A. 90-418, eff. 8-15-97.)