Full Text of SB2589 099th General Assembly
SB2589enr 99TH GENERAL ASSEMBLY |
| | SB2589 Enrolled | | LRB099 18821 MLM 43206 b |
|
| 1 | | AN ACT concerning regulation.
| 2 | | Be it enacted by the People of the State of Illinois,
| 3 | | represented in the General Assembly:
| 4 | | Section 5. The Illinois Insurance Code is amended by | 5 | | changing Sections 123B-2, 123B-3, 123B-4, and 123B-7 as | 6 | | follows:
| 7 | | (215 ILCS 5/123B-2) (from Ch. 73, par. 735B-2)
| 8 | | (Section scheduled to be repealed on January 1, 2017)
| 9 | | Sec. 123B-2. Definitions. As used in this Article:
| 10 | | (1) "Director" means the Director of the Department of | 11 | | Insurance.
| 12 | | (2) "Completed operations liability" means liability
| 13 | | arising out of the installation,
maintenance, or repair of any | 14 | | product at a site
which is not owned or controlled by:
| 15 | | (a) any person who performs that work; or
| 16 | | (b) any person who hires an independent contractor
to | 17 | | perform that work; but shall include liability for
| 18 | | activities which are completed or abandoned before the
date | 19 | | of the occurrence giving rise to the liability.
| 20 | | (3) "Domicile", for purposes of determining the state
in | 21 | | which a purchasing group is domiciled, means:
| 22 | | (a) for a corporation, the state in which the | 23 | | purchasing
group is incorporated; and
|
| | | SB2589 Enrolled | - 2 - | LRB099 18821 MLM 43206 b |
|
| 1 | | (b) for an unincorporated entity, the state of its
| 2 | | principal place of business.
| 3 | | (4) "Hazardous financial condition" means that, based
on | 4 | | its present or reasonably anticipated financial condition,
a | 5 | | risk retention group, although not yet financially
impaired or | 6 | | insolvent, is unlikely to be able:
| 7 | | (a) to meet obligations to policyholders with respect
| 8 | | to known claims and reasonably anticipated claims; or
| 9 | | (b) to pay other obligations in the normal course
of | 10 | | business.
| 11 | | (5) "Insurance" means primary insurance, excess insurance,
| 12 | | reinsurance, surplus lines insurance, and any other
| 13 | | arrangement for shifting and distributing risk which
is | 14 | | determined to be insurance under the laws of Illinois.
| 15 | | (6) "Liability" means:
| 16 | | (a) legal liability for damages (including
costs of | 17 | | defense, legal
costs and fees, and other claims expenses) | 18 | | because
of injuries to other persons, damage to their | 19 | | property,
or other damage or loss to such other persons | 20 | | resulting
from or arising out of:
| 21 | | (i) any business (whether for profit or not for | 22 | | profit),
trade, product, services (including | 23 | | professional services),
premises, or operations; or
| 24 | | (ii) any activity of any state or local government,
| 25 | | or any agency or political subdivision thereof; but
| 26 | | (b) does not include personal risk liability and
an |
| | | SB2589 Enrolled | - 3 - | LRB099 18821 MLM 43206 b |
|
| 1 | | employer's liability with respect to its employees
other | 2 | | than legal liability under the Federal Employers'
| 3 | | Liability Act (45 U.S.C. 51 et seq.).
| 4 | | (7) "Personal risk liability" means liability for
damage | 5 | | because of injury to any person, damage to property,
or other | 6 | | loss or damage resulting from any personal,
familial, or | 7 | | household responsibilities or activities,
rather than from | 8 | | responsibilities or activities referred
to in paragraph (a) of | 9 | | subsection (6) of this Section;
| 10 | | (8) "Plan of operation or a feasibility study" means
an | 11 | | analysis which presents the expected activities and
results of | 12 | | a risk retention group including, at a minimum:
| 13 | | (a) information sufficient to verify that its members
| 14 | | are engaged in businesses or activities similar or related
| 15 | | with respect to the liability to which such members
are | 16 | | exposed by virtue of any related, similar, or common
| 17 | | business, trade, product, services, premises or | 18 | | operations;
| 19 | | (b) for each state in which it intends to operate,
the | 20 | | coverages, deductibles,
coverage limits, rates, and rating | 21 | | classification
systems for each line of insurance the group | 22 | | intends
to offer;
| 23 | | (c) historical and expected loss experience of the
| 24 | | proposed members and national experience of similar
| 25 | | exposures to the extent this experience is reasonably
| 26 | | available;
|
| | | SB2589 Enrolled | - 4 - | LRB099 18821 MLM 43206 b |
|
| 1 | | (d) pro forma financial statements and projections;
| 2 | | (e) appropriate opinions by a qualified, independent
| 3 | | casualty actuary, including a determination of minimum
| 4 | | premium or participation levels required to commence
| 5 | | operations and to prevent a hazardous financial condition;
| 6 | | (f) identification of management, underwriting and
| 7 | | claims procedures, marketing methods, managerial oversight
| 8 | | methods, investment policies and reinsurance agreements; | 9 | | and
| 10 | | (f-5) identification of each state in which the risk | 11 | | retention group has obtained, or sought to obtain, a | 12 | | charter and license and a description of its status in each | 13 | | such state; and | 14 | | (g) such other matters as may be prescribed by the
| 15 | | commissioner of the state in which the group is chartered
| 16 | | for liability insurance companies authorized by the
| 17 | | insurance laws of such state.
| 18 | | (9) "Product liability" means liability for damages
| 19 | | because of any personal injury, death, emotional harm,
| 20 | | consequential economic damage, or property damage (including
| 21 | | damages resulting from the loss of use of property)
arising out | 22 | | of the manufacture, design, importation,
distribution, | 23 | | packaging, labeling, lease, or sale of
a product, but does not | 24 | | include the liability of any
person for those damages if the | 25 | | product involved was
in the possession of such a person when | 26 | | the incident
giving rise to the claim occurred.
|
| | | SB2589 Enrolled | - 5 - | LRB099 18821 MLM 43206 b |
|
| 1 | | (10) "Purchasing group" means any group which:
| 2 | | (a) has as one of its purposes the purchase of | 3 | | liability
insurance on a group basis;
| 4 | | (b) purchases such insurance only for its group
members | 5 | | and only to cover their similar or related liability
| 6 | | exposure, as described in paragraph (c) of this subsection | 7 | | (10);
| 8 | | (c) is composed of members whose businesses or | 9 | | activities
are similar or related with respect to the | 10 | | liability
to which members are exposed by virtue of any | 11 | | related,
similar, or common business, trade, product, | 12 | | services,
premises, or operations; and
| 13 | | (d) is domiciled in any State.
| 14 | | (11) "Risk retention group" means any corporation
or other | 15 | | limited liability association:
| 16 | | (a) whose primary activity consists of assuming
and | 17 | | spreading all, or any portion, of the liability
exposure of | 18 | | its group members;
| 19 | | (b) which is organized for the primary purpose of
| 20 | | conducting the activity described under paragraph (a) of | 21 | | this subsection (11);
| 22 | | (c) which:
| 23 | | (i) is organized and licensed as a liability | 24 | | insurance
company and authorized to engage in the | 25 | | business of
insurance under the laws of any state; or
| 26 | | (ii) before January 1, 1985 was organized or |
| | | SB2589 Enrolled | - 6 - | LRB099 18821 MLM 43206 b |
|
| 1 | | licensed
and authorized to engage in the business of | 2 | | insurance
under the laws of Bermuda or the Cayman | 3 | | Islands and,
before such date, had certified to the | 4 | | insurance commissioner
of at least one state that it | 5 | | satisfied the capitalization requirements
of such | 6 | | state, except that any such group shall be considered
| 7 | | to be a risk retention group only if it has been | 8 | | engaged
in business continuously since such date and | 9 | | only for
the purposes of continuing to provide | 10 | | insurance to cover
product liability or completed | 11 | | operations liability
(as such terms were defined in the | 12 | | Product Liability
Risk Retention Act of 1981 before the | 13 | | date of the enactment
of the Risk Retention Act of | 14 | | 1986);
| 15 | | (d) which does not exclude any person from membership
| 16 | | in the group solely to provide for members of such a
group | 17 | | a competitive advantage over such a person;
| 18 | | (e) which:
| 19 | | (i) has as its owners (directly or indirectly)
only | 20 | | persons who comprise the membership of the risk
| 21 | | retention group and who are provided insurance by such
| 22 | | group; or
| 23 | | (ii) has as its sole owner (directly or indirectly)
| 24 | | an organization which:
| 25 | | (I) has as its members only persons who | 26 | | comprise the
membership of the risk retention |
| | | SB2589 Enrolled | - 7 - | LRB099 18821 MLM 43206 b |
|
| 1 | | group; and
| 2 | | (II) has as its owners only persons who | 3 | | comprise the
membership of the risk retention | 4 | | group and who are provided
insurance by such group;
| 5 | | (f) whose members are engaged in businesses or | 6 | | activities
similar or related with respect to the liability | 7 | | of
which such members are exposed by virtue of any related, | 8 | | similar,
or common business, trade, product, services, | 9 | | premises,
or operations;
| 10 | | (g) whose activities do not include the provision
of | 11 | | insurance other than:
| 12 | | (i) liability insurance for assuming and spreading
| 13 | | all or any portion of the liability of its group | 14 | | members;
and
| 15 | | (ii) reinsurance with respect to the liability
of | 16 | | any other risk retention group (or any members of
such | 17 | | other group) which is engaged in businesses or
| 18 | | activities so that such group or member meets the | 19 | | requirement
described in paragraph (f) of this | 20 | | subsection (11) for membership in the
risk retention | 21 | | group which provides such reinsurance;
and
| 22 | | (h) the name of which includes the phrase "Risk
| 23 | | Retention Group".
| 24 | | (12) "State" means any state of the United States
or the | 25 | | District of Columbia.
| 26 | | (13) "NAIC" means the National Association of Insurance |
| | | SB2589 Enrolled | - 8 - | LRB099 18821 MLM 43206 b |
|
| 1 | | Commissioners. | 2 | | (Source: P.A. 85-131 .)
| 3 | | (215 ILCS 5/123B-3) (from Ch. 73, par. 735B-3)
| 4 | | (Section scheduled to be repealed on January 1, 2017)
| 5 | | Sec. 123B-3. Risk retention groups organized in this State.
| 6 | | A. A risk retention group shall either:
| 7 | | (1) pursuant to the provisions of Articles II or III, | 8 | | be organized to
write only liability insurance and, except | 9 | | as provided elsewhere in this
Article, must comply with all | 10 | | of the laws, rules, regulations and requirements
| 11 | | applicable to such insurers organized in this State and | 12 | | with Section 123B-4 of
this Article to the extent such | 13 | | requirements are not a limitation on laws,
rules, | 14 | | regulations or requirements of this State; or
| 15 | | (2) pursuant to the provisions of Article VIIC, be | 16 | | organized to write only
liability insurance as a captive | 17 | | insurance company and, except as provided
elsewhere in this | 18 | | Article, must comply with all of the laws, rules, | 19 | | regulations
and requirements applicable to such insurers | 20 | | organized in this State and with
Section 123B-4 of this | 21 | | Article to the extent such requirements are not a
| 22 | | limitation on laws, rules, regulations or requirements of | 23 | | this State.
| 24 | | Except that, as of the effective date of this amendatory | 25 | | Act of 1995, a new
risk retention group must qualify under |
| | | SB2589 Enrolled | - 9 - | LRB099 18821 MLM 43206 b |
|
| 1 | | paragraph (1) of this subsection , and
any risk retention group | 2 | | presently organized in accordance with paragraph (2)
of this | 3 | | subsection shall amend its articles of incorporation and comply | 4 | | with
paragraph (1) of this subsection within 6 months of the | 5 | | effective date of this
amendatory Act of 1995 or cease | 6 | | operating under this Article .
| 7 | | B. Before it may offer insurance in any state, each risk | 8 | | retention group
shall also submit for approval to the Director | 9 | | a plan of operation or a
feasibility study and revisions of | 10 | | such plan or study if the group intends to
offer any additional | 11 | | lines of liability insurance. In the event of any
subsequent | 12 | | material change in any item of its plan or study, such risk
| 13 | | retention group shall submit an appropriate revision to the | 14 | | Director within 10
days of any such change for approval by the | 15 | | Director. The group shall not
offer any additional kinds of | 16 | | liability insurance, in this State or in any
other state, until | 17 | | a revision of such plan or study is approved by the
Director.
| 18 | | C. At the time of filing its application for organization, | 19 | | the risk
retention group shall provide to the Director in | 20 | | summary form the following
information: the identity of the | 21 | | initial members of the group, the identity of
those individuals | 22 | | who organized the group or who will provide administrative
| 23 | | services or otherwise influence or control the activities of | 24 | | the group, the
amount and nature of initial capitalization, the | 25 | | coverages to be afforded, and
the states in which the group | 26 | | intends to operate. Upon receipt of this information, the |
| | | SB2589 Enrolled | - 10 - | LRB099 18821 MLM 43206 b |
|
| 1 | | Director shall forward the information to the NAIC. Providing | 2 | | notification to the NAIC is in addition to and shall not be | 3 | | sufficient to satisfy the requirements of Section 123B-4 of | 4 | | this Code or any other provisions of this Article.
| 5 | | D. The name under which a risk retention group may be | 6 | | organized and
licensed shall include the phrase "Risk Retention | 7 | | Group".
| 8 | | E. Notwithstanding any other provision to the contrary, all | 9 | | risk
retention groups chartered in this State shall file an | 10 | | annual statement with
the Department and NAIC the National | 11 | | Association of Insurance Commissioners (NAIC) .
The annual | 12 | | statement shall be in a form prescribed by the Director. The
| 13 | | statement may be required to be in diskette form. The statement | 14 | | shall be
completed in accordance with the annual statement | 15 | | instructions and the NAIC
Accounting Practices and Procedures | 16 | | Manual.
| 17 | | F. As used in this subsection F: | 18 | | "Board of directors" means the governing body of the risk | 19 | | retention group elected by shareholders or members to establish | 20 | | policy, elect or appoint officers and committees, and make | 21 | | other governing decisions. | 22 | | "Director" means a natural person designated in the | 23 | | articles of the risk retention group, or designated, elected, | 24 | | or appointed by any other manner, name, or title, to act as a | 25 | | director. | 26 | | "Material relationship" means a relationship of a person |
| | | SB2589 Enrolled | - 11 - | LRB099 18821 MLM 43206 b |
|
| 1 | | with the risk retention group that includes, but is not limited | 2 | | to: | 3 | | (a) The receipt in any one 12-month period of | 4 | | compensation or payment of any other item of value by the | 5 | | person, a member of the person's immediate family, or any | 6 | | business with which the person is affiliated from the risk | 7 | | retention group or a consultant or services provider to the | 8 | | risk retention group is greater than or equal to 5% of the | 9 | | risk retention group's gross written premium for the | 10 | | 12-month period or 2% of its surplus, whichever is greater, | 11 | | as measured at the end of any fiscal quarter falling in a | 12 | | 12-month period. The person or immediate family member of | 13 | | that person is not independent until one year after his or | 14 | | her compensation from the risk retention group falls below | 15 | | the threshold. | 16 | | (b) A relationship with the auditor as follows: a | 17 | | director or an immediate family member of a director who is | 18 | | affiliated with or employed in a professional capacity by a | 19 | | present or former internal or external auditor of the risk | 20 | | retention group is not independent until one year after the | 21 | | end of the affiliation, employment, or auditing | 22 | | relationship. | 23 | | (c) A relationship with a related entity as follows: a | 24 | | director or an immediate family member of a director who is | 25 | | employed as an executive officer of another company where | 26 | | any of the risk retention group's present executives serve |
| | | SB2589 Enrolled | - 12 - | LRB099 18821 MLM 43206 b |
|
| 1 | | on that other company's board of directors is not | 2 | | independent until one year after the end of the service or | 3 | | the employment relationship. | 4 | | Within one year after the effective date of this amendatory | 5 | | Act of the 99th General Assembly, existing risk retention | 6 | | groups shall be in compliance with the following governance | 7 | | standards and new risk retention groups shall be in compliance | 8 | | with the standards at the time of licensure: | 9 | | (1) The board of directors of the risk retention group | 10 | | shall have a majority of independent directors. If the risk | 11 | | retention group is a reciprocal, then the attorney-in-fact | 12 | | shall adhere to the same standards regarding independence | 13 | | of operations and governance as imposed on the risk | 14 | | retention group's board of directors or subscribers | 15 | | advisory committee under these standards and, to the extent | 16 | | permissible under State law, service providers of a | 17 | | reciprocal risk retention group shall contract with the | 18 | | risk retention group and not the attorney-in-fact. | 19 | | No director qualifies as independent unless the board | 20 | | of directors affirmatively determines that the director | 21 | | has no material relationship with the risk retention group. | 22 | | Each risk retention group shall disclose these | 23 | | determinations to the Department at least annually and the | 24 | | Director may approve or refute the board's determination. | 25 | | For this purpose, any person that is a direct or indirect | 26 | | owner of or subscriber in the risk retention group (or is |
| | | SB2589 Enrolled | - 13 - | LRB099 18821 MLM 43206 b |
|
| 1 | | an officer, director, or employee of an owner and insured, | 2 | | unless some other position of the officer, director, or | 3 | | employee constitutes a material relationship), as | 4 | | contemplated by 15 U.S.C. 3901(a)(4)(E)(ii), shall be | 5 | | deemed independent. | 6 | | A material relationship shall not be deemed to exist by | 7 | | reason that a majority of the membership of the related | 8 | | entity's board of directors is the same as the membership | 9 | | of the board of directors of the risk retention group | 10 | | unless the director decides otherwise. | 11 | | (2) The term of any material service provider contract | 12 | | with the risk retention group shall not exceed 5 years. Any | 13 | | contract, or its renewal, shall require the approval of the | 14 | | majority of the risk retention group's independent | 15 | | directors. The risk retention group's board of directors | 16 | | shall have the right to terminate any service provider, | 17 | | audit, or actuarial contracts at any time for cause after | 18 | | providing adequate notice as defined in the contract. The | 19 | | service provider contract is deemed material if the amount | 20 | | to be paid for the contract is greater than or equal to 5% | 21 | | of the risk retention group's annual gross written premium | 22 | | or 2% of its surplus, whichever is greater. | 23 | | No service provider in a material relationship with the | 24 | | risk retention group shall enter into a contract with the | 25 | | risk retention group unless the risk retention group has | 26 | | notified the Director of Insurance in writing of its |
| | | SB2589 Enrolled | - 14 - | LRB099 18821 MLM 43206 b |
|
| 1 | | intention to enter into a transaction at least 30 days | 2 | | prior thereto and the Director of Insurance has not | 3 | | disapproved it within that period. | 4 | | For the purposes of this paragraph (2), "service | 5 | | providers" includes captive managers, auditors, | 6 | | accountants, actuaries, investment advisors, lawyers, | 7 | | managing general underwriters, and other parties | 8 | | responsible for underwriting, determination of rates, | 9 | | collection of premium, adjusting and settling claims or | 10 | | preparation of financial statements. | 11 | | "Lawyers" does not include defense counsel retained by | 12 | | the risk retention group to defend claims, unless the | 13 | | amount of fees paid to the lawyers meet the definition of a | 14 | | material relationship. | 15 | | (3) The risk retention group's board of directors shall | 16 | | adopt a written policy in the plan of operation as approved | 17 | | by the board that requires the board to: | 18 | | (a) ensure that all owner-insureds of the risk | 19 | | retention group receive evidence of ownership | 20 | | interest; | 21 | | (b) develop a set of governance standards | 22 | | applicable to the risk retention group; | 23 | | (c) oversee the evaluation of the risk retention | 24 | | group's management, including, but not limited to, the | 25 | | performance of the captive manager, managing general | 26 | | underwriter, or other party or parties responsible for |
| | | SB2589 Enrolled | - 15 - | LRB099 18821 MLM 43206 b |
|
| 1 | | underwriting, determination of rates, collection of | 2 | | premium, adjusting or settling claims or the | 3 | | preparation of financial statements; | 4 | | (d) review and approve the amount to be paid for | 5 | | all material service providers; and | 6 | | (e) review and approve at least annually: | 7 | | (i) the risk retention group's goals and | 8 | | objectives relevant to the compensation of | 9 | | officers and service providers; | 10 | | (ii) the officers' and service providers' | 11 | | performance in light of those goals and | 12 | | objectives; and | 13 | | (iii) the continued engagement of the officers | 14 | | and material service providers. | 15 | | (4) The risk retention group shall have an audit | 16 | | committee composed of at least 3 independent board members | 17 | | as defined in this subsection F. A non-independent board | 18 | | member may participate in the activities of the audit | 19 | | committee, if invited by the members, but cannot be a | 20 | | member of the committee. | 21 | | The audit committee shall have a written charter that | 22 | | defines the committee's purpose, which at a minimum must be | 23 | | to: | 24 | | (a) assist board oversight of: (I) the integrity of | 25 | | the financial statements, (II) the compliance with | 26 | | legal and regulatory requirements, and (III) the |
| | | SB2589 Enrolled | - 16 - | LRB099 18821 MLM 43206 b |
|
| 1 | | qualifications, independence, and performance of the | 2 | | independent auditor and actuary; | 3 | | (b) discuss the annual audited financial | 4 | | statements and quarterly financial statements with | 5 | | management; | 6 | | (c) discuss the annual audited financial | 7 | | statements with its independent auditor and, if | 8 | | advisable, discuss its quarterly financial statements | 9 | | with its independent auditor; | 10 | | (d) discuss policies with respect to risk | 11 | | assessment and risk management; | 12 | | (e) meet separately and periodically, either | 13 | | directly or through a designated representative of the | 14 | | committee, with management and independent auditors; | 15 | | (f) review with the independent auditor any audit | 16 | | problems or difficulties and management's response; | 17 | | (g) set clear hiring policies of the risk retention | 18 | | group as to the hiring of employees or former employees | 19 | | of the independent auditor; | 20 | | (h) require the external auditor to rotate the lead | 21 | | or coordinating audit partner having primary | 22 | | responsibility for the risk retention group's audit as | 23 | | well as the audit partner responsible for reviewing | 24 | | that audit so that neither individual performs audit | 25 | | services for more than 5 consecutive fiscal years; and | 26 | | (i) report regularly to the board of directors. |
| | | SB2589 Enrolled | - 17 - | LRB099 18821 MLM 43206 b |
|
| 1 | | The Department may waive the requirement to establish | 2 | | an audit committee composed of independent board members if | 3 | | the risk retention group is able to demonstrate to the | 4 | | Department that it is impracticable to do so and the risk | 5 | | retention group's board of directors itself is otherwise | 6 | | able to accomplish the purposes of an audit committee as | 7 | | described in this paragraph (4). | 8 | | (5) The board of directors shall adopt and disclose | 9 | | governance standards, either through electronic or other | 10 | | means, and provide information to members and insureds upon | 11 | | request, including, but not limited to: | 12 | | (a) a process by which the directors are elected by | 13 | | the owner or insureds; | 14 | | (b) director qualification standards; | 15 | | (c) director responsibilities; | 16 | | (d) director access to management and, as | 17 | | necessary and appropriate, independent advisors; | 18 | | (e) director compensation; | 19 | | (f) director orientation and continuing education; | 20 | | (g) the policies and procedures that are followed | 21 | | for management succession; and | 22 | | (h) the policies and procedures that are followed | 23 | | for annual performance evaluation of the board. | 24 | | (6) The board of directors shall adopt and disclose a | 25 | | code of business conduct and ethics for directors, | 26 | | officers, and employees and promptly disclose to the board |
| | | SB2589 Enrolled | - 18 - | LRB099 18821 MLM 43206 b |
|
| 1 | | of directors any waivers of the code for directors or | 2 | | executive officers. The code of business conduct and ethics | 3 | | shall include, but is not limited to, the following topics: | 4 | | (a) conflicts of interest; | 5 | | (b) matters covered under the corporate | 6 | | opportunities doctrine under the state of domicile; | 7 | | (c) confidentiality; | 8 | | (d) fair dealing; | 9 | | (e) protection and proper use of risk retention | 10 | | group assets; | 11 | | (f) compliance with all applicable laws, rules, | 12 | | and regulations; and | 13 | | (g) the required reporting of any illegal or | 14 | | unethical behavior that affects the operation of the | 15 | | risk retention group. | 16 | | (7) The captive manager, president, or chief executive | 17 | | officer of the risk retention group shall promptly notify | 18 | | the Department in writing if he or she becomes aware of any | 19 | | material non-compliance with any of these governance | 20 | | standards. | 21 | | (Source: P.A. 89-97, eff. 7-7-95 .)
| 22 | | (215 ILCS 5/123B-4) (from Ch. 73, par. 735B-4)
| 23 | | (Section scheduled to be repealed on January 1, 2017)
| 24 | | Sec. 123B-4. Risk retention groups not organized in this | 25 | | State. Any risk retention group organized and licensed in a |
| | | SB2589 Enrolled | - 19 - | LRB099 18821 MLM 43206 b |
|
| 1 | | state other than this
State and seeking to do business as a | 2 | | risk retention group in this State shall
comply with the laws | 3 | | of this State as follows:
| 4 | | A. Notice of operations and designation of the Director as | 5 | | agent.
| 6 | | Before offering insurance in this State, a risk retention | 7 | | group shall submit
to the Director on a form prescribed by the | 8 | | NAIC approved by the Director :
| 9 | | (1) a statement identifying the state or states in | 10 | | which the risk
retention group is organized and licensed as | 11 | | a liability insurance company, its
date of organization, | 12 | | its principal place of business, and such other
| 13 | | information, including information on its membership, as | 14 | | the Director may
require to verify that the risk retention | 15 | | group is qualified under subsection
(11) of Section 123B-2 | 16 | | of this Article;
| 17 | | (2) a copy of its plan of operations or a feasibility | 18 | | study and revisions
of such plan or study submitted to its | 19 | | state of domicile; provided, however,
that the provision | 20 | | relating to the submission of a plan of operation or a
| 21 | | feasibility study shall not apply with respect to any line | 22 | | or classification of
liability insurance which (a) was | 23 | | defined in the Product Liability Risk
Retention Act of 1981 | 24 | | before October 27, 1986, and (b) was offered before such
| 25 | | date by any risk retention group which had been organized | 26 | | and operating for not
less than 3 years before such date; |
| | | SB2589 Enrolled | - 20 - | LRB099 18821 MLM 43206 b |
|
| 1 | | and
| 2 | | (3) a statement of registration which designates the | 3 | | Director as its agent
for the purpose of receiving service | 4 | | of legal documents or process, together
with a filing fee | 5 | | of $200 payable to the Director.
| 6 | | A risk retention group shall submit a copy of any material | 7 | | revision to its plan of operation or feasibility study required | 8 | | by subsection B of Section 123B-3 of this Code within 30 days | 9 | | after the date of the approval of the revision by the Director | 10 | | or, if no such approval is required, within 30 days after | 11 | | filing. | 12 | | B. Financial condition. Any risk retention group doing | 13 | | business in this
State shall submit to the Director:
| 14 | | (1) a copy of the group's financial statement submitted | 15 | | to the state in
which the risk retention group is organized | 16 | | and licensed, which shall be
certified by an independent | 17 | | public accountant and contain a statement of
opinion on | 18 | | loss and loss adjustment expense reserves made by a member | 19 | | of the
American Academy of Actuaries or a qualified loss | 20 | | reserve specialist (under
criteria established by the NAIC | 21 | | National Association of Insurance Commissioners );
| 22 | | (2) a copy of each examination of the risk retention | 23 | | group as certified by
the public official conducting the | 24 | | examination;
| 25 | | (3) upon request by the Director, a copy of any | 26 | | information or document pertaining to any outside audit |
| | | SB2589 Enrolled | - 21 - | LRB099 18821 MLM 43206 b |
|
| 1 | | performed with
respect to the risk retention group; and
| 2 | | (4) such information as may be required to verify its | 3 | | continuing
qualification as a risk retention group under | 4 | | subsection (11) of Section
123B-2.
| 5 | | C. Taxation.
| 6 | | (1) Each risk retention group shall be liable for the | 7 | | payment of premium
taxes and taxes on premiums of direct | 8 | | business for risks resident or located
within this State, | 9 | | and shall report to the Director the net premiums written
| 10 | | for risks resident or located within this State. Such risk | 11 | | retention group
shall be subject to taxation, and any | 12 | | applicable fines and penalties related
thereto, on the same | 13 | | basis as a foreign admitted
insurer.
| 14 | | (2) To the extent licensed insurance producers are | 15 | | utilized pursuant to
Section 123B-11, they shall report to | 16 | | the Director the premiums for direct
business for risks | 17 | | resident or located within this State which such licensees
| 18 | | have placed with or on behalf of a risk retention group not | 19 | | organized in this
State.
| 20 | | (3) To the extent that licensed insurance producers are | 21 | | utilized pursuant
to Section 123B-11, each such producer | 22 | | shall keep a complete and separate
record of all policies | 23 | | procured from each such risk retention group, which
record | 24 | | shall be open to examination by the Director, as provided | 25 | | in Section
506.1 of this Code. These records shall, for | 26 | | each policy and each kind of
insurance provided thereunder, |
| | | SB2589 Enrolled | - 22 - | LRB099 18821 MLM 43206 b |
|
| 1 | | include the following:
| 2 | | (a) the limit of the liability;
| 3 | | (b) the time period covered;
| 4 | | (c) the effective date;
| 5 | | (d) the name of the risk retention group which | 6 | | issued
the policy;
| 7 | | (e) the gross premium charged; and
| 8 | | (f) the amount of return premiums, if any.
| 9 | | D. Compliance With unfair claims practices provisions. Any | 10 | | risk retention
group, its agents and representatives shall be | 11 | | subject to the unfair claims
practices provisions of Sections | 12 | | 154.5 through 154.8 of this Code.
| 13 | | E. Deceptive, false, or fraudulent practices. Any risk | 14 | | retention group
shall comply with the laws of this State | 15 | | regarding deceptive, false, or
fraudulent acts or practices. | 16 | | However, if the Director seeks an injunction
regarding such | 17 | | conduct, the injunction must be obtained from a court of
| 18 | | competent jurisdiction.
| 19 | | F. Examination regarding financial condition. Any risk | 20 | | retention group must
submit to an examination by the Director | 21 | | to determine its financial condition
if the commissioner of | 22 | | insurance of the jurisdiction in which the group is
organized | 23 | | and licensed has not initiated an examination or does not | 24 | | initiate an
examination within 60 days after a request by the | 25 | | Director. Any such
examination shall be coordinated to avoid | 26 | | unjustified repetition and conducted
in an expeditious manner |
| | | SB2589 Enrolled | - 23 - | LRB099 18821 MLM 43206 b |
|
| 1 | | and in accordance with the NAIC's National Association of
| 2 | | Insurance Commissioners' Examiner Handbook.
| 3 | | G. Notice to purchasers. Every application form for | 4 | | insurance from a
risk retention group and the front page and | 5 | | declaration page of every policy
issued by a risk retention | 6 | | group shall contain in 10 point type the following
notice:
| 7 | | "NOTICE
| 8 | | This policy is issued by your risk retention group. Your | 9 | | risk retention group
is not subject to all of the insurance | 10 | | laws and regulations of your state.
State insurance insolvency | 11 | | guaranty fund protection is not available for your
risk | 12 | | retention group".
| 13 | | H. Prohibited acts regarding solicitation or sale. The | 14 | | following acts by a
risk retention group are hereby prohibited:
| 15 | | (1) the solicitation or sale of insurance by a risk | 16 | | retention group to any
person who is not eligible for | 17 | | membership in such group; and
| 18 | | (2) the solicitation or sale of insurance by, or | 19 | | operation of, a risk
retention group that is in a hazardous | 20 | | financial condition or is financially
impaired.
| 21 | | I. Prohibition on ownership by an insurance company. No | 22 | | risk retention
group shall be allowed to do business in this | 23 | | State if an insurance company is
directly or indirectly a | 24 | | member or owner of such risk retention group, other
than in the | 25 | | case of a risk retention group all of whose members are | 26 | | insurance
companies.
|
| | | SB2589 Enrolled | - 24 - | LRB099 18821 MLM 43206 b |
|
| 1 | | J. Prohibited coverage. No risk retention group may offer | 2 | | insurance policy
coverage prohibited by Articles IX or XI of | 3 | | this Code or declared unlawful by
the Illinois Supreme Court; | 4 | | provided however, a risk retention group
organized and licensed | 5 | | in a state other than this State that selects the law of
this | 6 | | State to govern the validity, construction, or enforceability | 7 | | of policies
issued by it is permitted to provide coverage under | 8 | | policies issued by it for
penalties in the nature of | 9 | | compensatory damages including, without limitation,
punitive | 10 | | damages and the multiplied portion of multiple damages, so long | 11 | | as
coverage of those penalties is not prohibited by the law of | 12 | | the state under
which the risk retention group is organized.
| 13 | | K. Delinquency proceedings. A risk retention group not | 14 | | organized in this
State and doing business in this State shall | 15 | | comply with a lawful order issued
in a voluntary dissolution | 16 | | proceeding or in a conservation, rehabilitation,
liquidation, | 17 | | or other delinquency proceeding commenced by the Director or by
| 18 | | another state insurance commissioner if there has been a | 19 | | finding of financial
impairment after an examination under | 20 | | subsection F of Section 123B-4 of this
Article.
| 21 | | L. Compliance with injunctive relief. A risk retention | 22 | | group shall comply
with an injunctive order issued in another | 23 | | state by a court of competent
jurisdiction or by a United | 24 | | States District Court based on a finding of
financial | 25 | | impairment or hazardous financial condition.
| 26 | | M. Penalties. A risk retention group that violates any |
| | | SB2589 Enrolled | - 25 - | LRB099 18821 MLM 43206 b |
|
| 1 | | provision of this
Article will be subject to fines and | 2 | | penalties applicable to licensed insurers
generally, including | 3 | | revocation of its license or the right to do business in
this | 4 | | State, or both.
| 5 | | N. (Blank). Operations prior to August 3, 1987.
In addition | 6 | | to complying with the requirements of this Section, any risk
| 7 | | retention group operating in this State prior to August 3, | 8 | | 1987, shall within
30 days after such effective date comply | 9 | | with the provisions of subsection A of
this Section.
| 10 | | (Source: P.A. 93-32, eff. 7-1-03 .)
| 11 | | (215 ILCS 5/123B-7) (from Ch. 73, par. 735B-7)
| 12 | | (Section scheduled to be repealed on January 1, 2017)
| 13 | | Sec. 123B-7. Purchasing Groups - Exemption from Certain | 14 | | Laws Relating to
the Group Purchase of Insurance.
Any | 15 | | purchasing group meeting the criteria established
under the | 16 | | provisions of the federal Liability Risk Retention
Act of 1986 | 17 | | shall be exempt from any law of this State prohibiting
relating | 18 | | to the creation of risk purchasing of groups for the purchase
| 19 | | of insurance ; , any countersignature requirements as provided
| 20 | | in this Code ; , and any prohibition of group purchasing or any
| 21 | | law that would discriminate against a purchasing group
or its | 22 | | members , prohibit a purchasing group from obtaining insurance | 23 | | on a group basis or because the group has not been in existence | 24 | | for a minimum period of time or because any member has not | 25 | | belonged to the group for a minimum period of time, require |
| | | SB2589 Enrolled | - 26 - | LRB099 18821 MLM 43206 b |
|
| 1 | | that a purchasing group must have a minimum number of members, | 2 | | common ownership or affiliation, or certain legal form, or | 3 | | require that a certain percentage of a purchasing group must | 4 | | obtain insurance on a group basis . In addition, an insurer | 5 | | shall be exempt
from any law of this State which prohibits | 6 | | providing,
or offering to provide, to a purchasing group or its
| 7 | | members advantages based on their loss and expense experience
| 8 | | not afforded to other persons with respect to rates,
policy | 9 | | forms, coverages or other matters. A purchasing
group shall be | 10 | | subject to all other applicable laws
of this State.
| 11 | | (Source: P.A. 85-131 .)
|
|