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90_HB2226
SEE INDEX
Amends the Illinois Insurance Code. Provides that if
proposed increases or decreases in capital include subsequent
transactions subject to the Insurance Holding Company Systems
Article, all information required under that Article must be
provided to the Director of Insurance when seeking permission
to increase or decrease capital. Requires Director approval
of conversion terms of convertible preferred shares.
Authorizes fixed or floating rates of interest for guaranty
fund borrowing. Provides for liability for producers and
third party administrators in connection with unauthorized
insurers. Sets forth requirements for issuance of capital
notes. Provides restrictions concerning credit allowed for
domestic ceding insurers. Authorizes the Director of
Insurance to bring civil actions as rehabilitator against an
insurance company and related parties. Amends the Producer
Controlled Insurer Act to expand the scope of the definitions
of "controlled insurer" and "controlling producer". Effective
immediately.
LRB9001538JSgc
LRB9001538JSgc
1 AN ACT relating to insurance company finances, amending
2 named Acts.
3 Be it enacted by the People of the State of Illinois,
4 represented in the General Assembly:
5 Section 5. The Illinois Insurance Code is amended by
6 changing Sections 14.1, 32, 33, 34, 56, 122-1, 144.2, 162,
7 173, 173.1, 174, 192, 205, 245.21, 245.23, and 245.25 and
8 adding Section 147.3 as follows:
9 (215 ILCS 5/14.1) (from Ch. 73, par. 626.1)
10 Sec. 14.1. Articles of incorporation. The articles shall
11 set forth:
12 (a) the corporate name;
13 (b) the location of its principal office;
14 (c) the period of duration, which may be perpetual;
15 (d) the class or classes of insurance business as
16 provided in Section 4, in which it proposes to engage and the
17 kinds of insurance in each class it proposes to write;
18 (e) The number of its directors, or that the number of
19 directors shall be not less than the minimum nor more than
20 the maximum stated in Section 10, the terms of office; and
21 the manner of electing the directors;
22 (f) the amount of its authorized capital, the number of
23 authorized common and non-voting preferred shares, the par
24 value of each share, and the number of the common and
25 non-voting preferred shares to be issued and sold in
26 accordance with this Article to provide at least the minimum
27 paid-up capital and paid-in surplus as set forth in Section
28 13 of this Article as now and hereafter amended;
29 (g) the terms and conditions on which preferred shares
30 may be converted to common shares, if any shares are issued
31 with the right of conversion;
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1 (h) (g) such other provisions not inconsistent with law
2 as may be deemed by the incorporators to be necessary or
3 advisable.
4 (Source: P.A. 83-796.)
5 (215 ILCS 5/32) (from Ch. 73, par. 644)
6 Sec. 32. Increase in capital.
7 (1) Any company subject to this Article may increase its
8 paid-up capital either by issuing additional shares not to
9 exceed the number of authorized shares as set forth in its
10 Articles or by increasing the par value of its shares. No
11 company shall issue additional shares nor increase the par
12 value of its shares without first procuring from the Director
13 a permit so to do, which permit shall expire one year from
14 its date. If the proposed increase in capital is part of a
15 series of transactions that includes subsequent transactions
16 that will be subject to Article VIII 1/2, the company shall
17 provide the Director all of the information called for in
18 Article VIII 1/2 prior to the Director's issuance of a
19 permit. The Director may decline to issue a permit if the
20 Director is not satisfied that the proposed series of
21 transactions satisfies the standards established in Article
22 VIII 1/2.
23 The Director, upon compliance by the company with the
24 applicable provisions of this Code, and such reasonable
25 regulations relating to the offering, issuance, subscription
26 or sale of or for shares as may be promulgated by the
27 Director to the end that no inequity, fraud or deceit may be
28 worked or tend to be worked upon prospective subscribers to,
29 recipients or purchasers of shares or present holders
30 thereof, shall issue a permit to the company to issue
31 additional shares upon receipt of a copy of a resolution by
32 the Board of Directors authorizing the issuance of such
33 shares.
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1 If preferred shares having a right of conversion to
2 common shares are to be issued, the terms and conditions on
3 which the shares may be converted shall be provided to the
4 Director before a permit may be issued pursuant to this
5 Section.
6 In the case of shares to be issued for sale, the permit
7 shall authorize the company to solicit subscriptions to such
8 shares on a form of subscription agreement which shall have
9 been submitted to and approved by the Director.
10 All of the provisions of this Code relative to the
11 filing, terms and effect of subscription agreements, payment
12 for shares, the limitations of expenses, filing of bonds
13 except that no bonds shall be required when a company issues
14 stock to its sole shareholder, deposit of proceeds of shares,
15 return of funds in the event the payment for all of the
16 additional shares is not completed, and qualification or
17 registration shall apply to the same extent and effect as if
18 the additional shares were shares representing the original
19 capital of a company being organized under this Article,
20 except that no organization bond with regard to costs
21 incurred in connection with liquidation or dissolution shall
22 be required, and if the subscription agreement provides for
23 payment in installments, such installments shall not extend
24 beyond one year from date of the permit of the Director.
25 If shares are to be issued as a stock dividend, or if the
26 par value of shares is to be increased, the permit shall
27 authorize the company to pay for such additional shares or
28 increase in par value by transferring the requisite amount of
29 surplus to paid-up capital provided, however, no transfer of
30 such surplus shall be made which will reduce the remaining
31 surplus to less than the surplus required by Section 13. In
32 the case of an increase in par value, the company may require
33 each shareholder to surrender his or her certificate and to
34 accept in lieu thereof a new certificate conforming to such
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1 increase in par value.
2 No more than one permit of the types under this Section
3 may be outstanding in the name of any company at any time.
4 (2) When the Director is notified that the additional
5 shares proposed to be issued have, or that the increase in
6 par value has, been fully paid, and that all of the
7 requirements of the permit have been satisfied, he or she
8 shall make an examination of the company and if he or she
9 finds that the provisions of this Section have been complied
10 with, he or she shall issue a certificate of paid-up capital
11 to that effect which shall be filed with the recorder of the
12 county in which the principal office of the company is
13 located within 15 days from the date of said certificate.
14 Upon the issuance of such certificate, the company may
15 withdraw the proceeds of the sale, if any, of its shares and
16 the bond, conditioned upon the full and complete accounting
17 by the company for the proceeds of any such sale of shares,
18 shall terminate or the cash deposited with the Director in
19 lieu of such bond shall be returned.
20 (3) If the Director finds that any company has failed to
21 comply with, or has violated any provision of the Code or any
22 regulation promulgated under subsection (1), he or she may,
23 in addition to and notwithstanding any other procedure,
24 remedy or penalty provided under the laws of this State,
25 after notice and hearing, revoke the permit issued to it
26 under subsection (1).
27 (Source: P.A. 86-753.)
28 (215 ILCS 5/33) (from Ch. 73, par. 645)
29 Sec. 33. Decrease of capital.
30 (1) When articles of amendment providing for a decrease
31 of capital or a decrease in the par value of shares, or both,
32 become effective, each issued share of the company shall
33 thereupon be changed into and be a fractional part of a
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1 share, or a share having a reduced par value, or both, as
2 provided by such amendment, and the holders of shares issued
3 before the amendment shall thereupon cease to be holders of
4 such shares and shall be and become holders of the shares
5 authorized by the amendment upon the basis specified in the
6 amendment, whether or not certificates representing the
7 shares authorized by the amendment are then issued and
8 delivered. The company may require each shareholder to
9 surrender his or her certificate and accept in lieu thereof a
10 new certificate conforming to such decrease.
11 (2) No distribution of the assets of the company shall
12 be made to the shareholders upon any decrease of capital
13 which shall reduce its surplus to less than the surplus
14 required by this Code for the kind or kinds of business
15 authorized to be transacted by the company.
16 (3) If the proposed articles of amendment providing for
17 a decrease of capital or a decrease in the par value of
18 shares, or both, is part of a series of transactions that
19 includes subsequent transactions that will be subject to
20 Article VIII 1/2, the company shall provide the Director all
21 of the information called for in Article VIII 1/2 prior to
22 the Director's approval. The Director may decline to approve
23 if the Director is not satisfied that the proposed series of
24 transactions satisfies the standards established in Article
25 VIII 1/2.
26 (Source: P.A. 86-753.)
27 (215 ILCS 5/34) (from Ch. 73, par. 646)
28 Sec. 34. Procedure when insufficient assets possessed by
29 company.
30 (1) Whenever the Director finds that the admitted assets
31 of any company subject to the provisions of this Article are
32 less than its capital, minimum required surplus and all
33 liabilities, he or she must give written notice to the
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1 company of the amount of the impairment and require that the
2 impairment be removed within such period, which must be not
3 less than 30 nor more than 90 days from the date of the
4 notice, as he or she may designate. Unless otherwise allowed
5 by the Director, the company must discontinue the issuance of
6 new and renewal policies while the impairment exists.
7 (2) Upon the receipt of the notice from the Director,
8 the board of directors of the company must cause the
9 impairment to be removed and call upon its shareholders
10 ratably for the necessary amount to remove the impairment,
11 or, by proper action, reduce its capital to meet the
12 impairment providing the reduced capital is not less than the
13 minimum requirements fixed by this Code or by other means
14 remove the impairment. If the impairment is not removed
15 within the period of time designated, the Director may order
16 the board of directors to call upon its shareholders ratably.
17 If In case a shareholder of the company refuses or neglects
18 shall refuse or neglect to pay the amount so called for after
19 notice, given, personally or by mail, by a date stated in the
20 notice not less than 15 days from the date of such notice,
21 the Director may order the board of directors to declare may,
22 by resolution, declare the shares of such person cancelled,
23 and in lieu thereof may issue new certificates for shares and
24 dispose of the same at the best price obtainable not less
25 than par. If the amount received for such new certificates
26 for shares exceeds the amount required to be paid by such
27 shareholder, the excess must be paid to the shareholder so
28 refusing to pay his or her ratable share of the impairment.
29 Nothing contained in this subsection may be construed to
30 impose any liability on any shareholder as a result of any
31 call, enforceable in any manner other than through a sale of
32 his or her shares as provided in this subsection.
33 (3) If the impairment is not removed within the period
34 specified in the Director's notice, the company shall be
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1 deemed insolvent and the Director shall proceed against the
2 company in accordance with Article XIII.
3 (4) If while the impairment exists any officer or
4 director of the company knowingly renews, issues or delivers
5 or causes to be renewed, issued or delivered any policy,
6 contract or certificate of insurance unless allowed by the
7 Director, and the fact of such impairment is known to the
8 officer or director of the company, such officer or director
9 shall be guilty of a business offense and may be fined not
10 less than $200 and not more than $5,000 for each offense.
11 (5) Nothing in this Section prohibits, while such
12 impairment exists, any such officer, director, trustee, agent
13 or employee from issuing or renewing a policy of insurance
14 when an insured or owner exercises an option granted to him
15 or her under an existing policy to obtain new, renewed or
16 converted insurance coverage.
17 (Source: P.A. 82-498.)
18 (215 ILCS 5/56) (from Ch. 73, par. 668)
19 Sec. 56. Accumulation of guaranty fund or guaranty
20 capital. Any company subject to the provisions of this
21 article, may provide for a surplus either by accumulating a
22 guaranty fund or a guaranty capital as follows:
23 (a) Guaranty Fund. It may accumulate a guaranty fund by
24 borrowing money at an interest rate either (1) at a fixed
25 rate not exceeding the corporate base rate as reported by the
26 largest bank (measured by assets) with its head office
27 located in Chicago, Illinois, in effect on the first business
28 day of the month in which the loan document is executed, plus
29 3% per annum or (2) at a variable rate equal to the corporate
30 base rate determined on the first business day of each month
31 during the term of the loan plus 2% per annum. In no event
32 shall the variable interest rate for any month exceed the
33 initial rate for the loan or advance by more than 10% per
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1 annum. The insurer shall elect at the time of execution of
2 the loan or advance agreement whether the interest rate is to
3 be fixed or floating for the term of the agreement. An
4 agreement issued after the insurer has received its
5 Certificate of Authority shall first be approved by
6 resolution of the Board of Directors and not exceeding seven
7 per centum per annum under agreements approved by the
8 Director. The agreement which shall provide that such loan
9 and the interest thereon shall be repaid only out of the
10 surplus of such company in excess of the greater of the
11 original or minimum surplus required of such company by
12 Section 43. Such excess of surplus shall be calculated upon
13 the fair market value of the assets of the company, and such
14 guaranty loan fund shall constitute and be enforcible as a
15 liability of the company only as against such excess of
16 surplus. Any unpaid balance of such guaranty fund loan shall
17 be reported in the annual statement to be filed with the
18 Director. Repayment of principal or payment of interest may
19 be made only with the approval of the Director when he or she
20 is satisfied that the financial condition of the company
21 warrants that action, but approval may not be withheld if the
22 company shall have and submit satisfactory evidence of
23 surplus of not less than the amount stipulated in the
24 repayment of principal or interest payment clause of the
25 agreement and no repayment of said fund shall be made unless
26 the Director shall have been notified by the company at least
27 thirty days in advance of such proposed repayment.
28 (b) Guaranty Capital. It may in addition to any advances
29 provided for herein, establish and maintain a guaranty
30 capital divided into shares having a par value of not more
31 than $100 one hundred dollars nor less than $5 five dollars
32 each. The guaranty capital shall be applied to the payment of
33 losses only when the company has exhausted its assets in
34 excess of unearned premium reserve and other liabilities; and
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1 when thus impaired the directors may make good the whole or
2 any part of it by assessment on its policyholders as provided
3 for in Section 60. Said guaranty capital may, by vote of the
4 board of directors of the company and the written consent of
5 the Director be reduced or retired by any amount, provided
6 that the net surplus of the company together with the
7 remaining guaranty capital shall equal or exceed the amount
8 of surplus required by Section 43, and due notice of such
9 proposed action on the part of the company shall be published
10 in a newspaper of general circulation, approved by the
11 Director, not less than once each week for at least 4 four
12 consecutive weeks before such action is taken. No company
13 with a guaranty capital, which has ceased to do business,
14 shall divide any part of its assets or guaranty capital among
15 its shareholders unless it has paid or it has otherwise been
16 released from its policy obligations. The holders of the
17 shares of such guaranty capital shall be entitled to interest
18 either (1) at a fixed rate not exceeding the corporate base
19 rate as reported by the largest bank (measured by assets)
20 with its head office located in Chicago, Illinois, in effect
21 on the first business day of the month in which the loan
22 document is executed, plus 3% per annum or (2) at a variable
23 rate equal to the corporate base rate determined on the first
24 business day of each month during the term of the loan plus
25 2% per annum. In no event shall the variable interest rate
26 for any month exceed the initial rate for the loan or advance
27 by more than 10% per annum. The insurer shall elect at the
28 time of issuance of the shares whether the interest rate is
29 to be fixed or floating for the term of the agreement. Such
30 interest shall be not exceeding seven per centum per annum,
31 payable from the surplus in excess of the surplus required of
32 the company by Section 43. In the event of dissolution and
33 liquidation of such a company after the retirement of all
34 outstanding obligations of the company, the holders of such
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1 shares of guaranty capital shall be entitled to a
2 preferential right in the assets of such company equal to the
3 par value of their share of such guaranty capital before any
4 distribution to members.
5 (Source: P.A. 86-753.)
6 (215 ILCS 5/122-1) (from Ch. 73, par. 734-1)
7 Sec. 122-1. The authority and jurisdiction of Insurance
8 Department.
9 (1) Notwithstanding any other provision of law, and
10 except as provided herein, any person or other entity which
11 provides coverage in this State for medical, surgical,
12 chiropractic, physical therapy, speech pathology, audiology,
13 professional mental health, dental, hospital, ophthalmologic
14 or optometric expenses, whether such coverage is by
15 direct-payment, reimbursement, or otherwise, shall be
16 presumed to be subject to the jurisdiction of the Department
17 unless the person or other entity shows that while providing
18 such coverage it is subject to the jurisdiction of another
19 agency of this state, any subdivision of this state, or the
20 Federal Government, or is a plan of self-insurance or other
21 employee welfare benefit program of an individual employer or
22 labor union established or maintained under or pursuant to a
23 collective bargaining agreement or other arrangement which
24 provides for health care services solely for its employees or
25 members and their dependents.
26 (2) The Director may, by rule, require any producer or
27 third party administrator licensed under the provisions of
28 this Code or operating in a capacity of a producer or third
29 party administrator without a license to submit information
30 to the Director prior to assisting in the transaction of
31 insurance by a multiple employer arrangement, collectively
32 bargained arrangement, or employee leasing arrangement. The
33 information required shall be used by the Director to
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1 determine whether the multiple employer arrangement,
2 collectively bargained arrangement, or employee leasing
3 arrangement is an unauthorized insurance arrangement. In the
4 event that an arrangement that is deemed an unauthorized
5 insurer fails to pay a covered claim or loss in this State
6 within the provisions of its contract, a producer or third
7 party administrator licensed under the provisions of this
8 Code or operating in the capacity of a producer or third
9 party administrator without a license who violates this rule
10 with respect to the arrangement shall be liable to the
11 insured for the full amount of the claim or loss in a manner
12 provided by the provisions of the insuring contract.
13 Compliance with this Section, however, does not diminish
14 liability otherwise established under Section 121-4.
15 (Source: P.A. 86-753.)
16 (215 ILCS 5/144.2) (from Ch. 73, par. 756.2)
17 Sec. 144.2. Notification of insurance accident and
18 health business.
19 (a) Upon notice by the Director, a company having direct
20 premium income for the kinds of business authorized in Class
21 1, clause (b), or Class 2, clause (a), of Section 4 must file
22 with the Director supplemental information regarding its
23 insurance accident and health business. The Director shall
24 by rule establish standards to determine the companies to be
25 given notice.
26 (b) The notice prescribed by this Section may require
27 the company to provide information concerning, but not
28 limited to, the following:
29 (1) adequacy of rates;
30 (2) marketing methodology and acquisition expenses;
31 (3) underwriting standards;
32 (4) recordkeeping and statistical systems;
33 (5) claim systems and claim reserving systems;
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1 (6) reinsurance; and
2 (7) the general financial condition of the company.
3 (Source: P.A. 86-753; 86-1028; 87-1090.)
4 (215 ILCS 5/147.3 new)
5 Sec. 147.3. Issuance of capital notes by domestic
6 companies.
7 (a) A domestic company may at any time or from time to
8 time issue capital notes pursuant to this Section in an
9 aggregate principal amount not exceeding (1) 25% of its total
10 adjusted capital (including the aggregate principal amount of
11 outstanding capital notes and outstanding surplus notes or
12 guaranty fund certificates and guaranty capital shares) as of
13 the end of the immediately preceding calendar year less (2)
14 the aggregate principal amount of outstanding capital notes
15 and outstanding surplus notes or guaranty fund certificates
16 and guaranty capital shares; provided, however, that capital
17 notes shall not be issued for an aggregate principal amount
18 that would cause the aggregate principal amount for all of
19 the insurer's capital notes scheduled to mature in any
20 calendar year to exceed 5%, or the aggregate principal amount
21 of all of the insurer's capital notes scheduled to mature in
22 any 3 consecutive calendar years to exceed 12%, of the
23 insurer's total adjusted capital as of the end of the
24 calendar year immediately preceding the issuance of the
25 capital notes. The aggregate amount of capital notes and
26 surplus notes or guaranty fund certificates and guaranty
27 capital shares is at all times limited to 33 1/3% of total
28 adjusted capital. Any aggregate amount in excess of this
29 limit shall reduce the amount of capital notes included in
30 the insurer's total adjusted capital.
31 (b) No insurer shall issue capital notes pursuant to
32 this Section unless the form and terms thereof shall have
33 been approved by the Director. The term of any capital note
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1 shall be no less than 5 years.
2 (c) An insurer with a capital note outstanding shall
3 file a report with the Director at the same time that the
4 insurer files its Annual Statement and at such other times as
5 the Director determines necessary. The Director may by rule
6 establish times for and the content of these reports.
7 (d) The insurer shall not pay or redeem the principal
8 amount of any capital notes, make any sinking fund payment,
9 or pay any interest on the notes, and the principal, payment,
10 and interest shall not become due or payable if, based on the
11 preceding year-end annual statement filed with the Director:
12 (1)(A) The insurer's total adjusted capital is less
13 than the insurer's company action level RBC or (B) the
14 insurer's total adjusted capital is less than the product
15 of 1.25 and its company action level RBC and there is a
16 negative trend, as determined in accordance with the
17 Article IIA of this Code; or
18 (2) the aggregate of all payments or redemptions
19 made during a calendar year would, if made immediately
20 prior to the preceding year-end, have caused (A) the
21 insurer's total adjusted capital to be less than the
22 insurer's company action level RBC or (B) the insurer's
23 total adjusted capital at such time to be less than the
24 product of 1.25 and its company action level RBC and
25 there is a negative trend, as determined in accordance
26 with Article IIA of this Code.
27 Notwithstanding items (1) and (2), upon request by the
28 insurer, the Director may approve, in whole or in part, any
29 payment or redemption on the capital notes if and at such
30 time or times as in his or her judgment the financial
31 condition of the insurer warrants. The amount of the
32 redemptions or payments of principal amounts of any capital
33 notes that cannot be made as the result of the provisions of
34 this subsection may accumulate at the rate of interest of the
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1 capital notes.
2 (e) Capital notes issued pursuant to this Section:
3 (1) may provide (A) for interest payments at fixed
4 or adjustable rates, sinking fund payments, and payments
5 and redemptions of principal, in each case in accordance
6 with the terms of the capital note and without the prior
7 approval of the Director except to the extent that such
8 approval is required pursuant to this subsection or
9 subsection (d) of this Section, (B) that the capital
10 notes automatically become due and payable in the event
11 the insurer becomes subject to an order of
12 rehabilitation, liquidation, or conservation granted
13 pursuant to a proceeding under Article XIII of this Code,
14 and (C) for such other features as the Director
15 determines are appropriate for capital notes issued
16 according to this Section; and
17 (2) shall provide that if at the end of any
18 calendar year the total amount of the insurer's total
19 adjusted capital (including the aggregate principal
20 amount of outstanding capital notes and outstanding
21 surplus notes or guaranty fund certificates and guaranty
22 capital shares) is less than 3 times the aggregate
23 principal amount of outstanding capital notes outstanding
24 and surplus notes or guaranty fund certificates and
25 guaranty capital shares, the Director may notify the
26 insurer that the financial condition of the insurer does
27 not warrant the payment or redemption or sinking fund
28 payment, in whole or in part, on the capital notes. Such
29 action by the Director shall, without any action on the
30 part of the insurer or any other person, automatically
31 defer payment or redemption until such time as the
32 Director finds that the financial condition warrants
33 payment or redemption. The amount of redemptions or
34 payments of principal amounts of any capital notes so
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1 deferred may accumulate at the rate of interest of the
2 capital notes.
3 (f) The outstanding principal of a capital note issued
4 pursuant to this Section shall be considered part of the
5 insurer's total adjusted capital, but shall not be considered
6 part of the insurer's surplus; provided, however, (1) that,
7 in the case of any capital note maturing 15 years or less
8 from the year in which the capital note is issued, one-fifth
9 of the aggregate principal amount of the capital note shall
10 be subtracted from total adjusted capital in each year
11 starting with the fifth year immediately preceding the
12 calendar year in which the capital note is scheduled to
13 mature; and (2) that, in the case of any capital note
14 maturing more than 15 years from the year in which the
15 capital note issued, one-tenth of the aggregate principal
16 amount of the capital note shall be subtracted from total
17 adjusted capital in each year starting with the tenth year
18 immediately preceding the calendar year in which the capital
19 note is scheduled to mature, and further provided that, in no
20 event shall the amount included in total adjusted capital for
21 any capital note exceed the principal amount, at issue, of
22 the outstanding capital note less the aggregate of all
23 sinking fund payments made on the capital note. The insurer
24 shall disclose the aggregate principal amount of capital
25 notes then outstanding as a liability on its financial
26 statements filed with the Director pursuant to this Code.
27 (g) As used in this Section, the terms "total adjusted
28 capital", "company action level RBC", and "authorized control
29 level RBC" shall have the meanings given those terms in
30 Article IIA of this Code.
31 (215 ILCS 5/162) (from Ch. 73, par. 774)
32 Sec. 162. Certificate of Merger or Consolidation or Plan
33 of Exchange and Certificate of Approval.)
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1 (1) Upon the execution of an agreement of merger or
2 consolidation or plan of exchange, there shall be delivered
3 to the Director:
4 (a) two duplicate originals of the agreement or
5 plan;
6 (b) affidavits of officers of each of the companies
7 setting forth the facts necessary to show that all
8 requirements of law with respect to notices to persons
9 entitled to vote have been complied with;
10 (c) certificates of the secretaries or assistant
11 secretaries or corresponding officers of each of the
12 companies, in case of a merger or consolidation, or of
13 the company to be acquired in case of a plan of exchange,
14 certifying to the number of shares, if any, outstanding,
15 the number of shares voted for and against such agreement
16 or plan, and further in the case of a merger or
17 consolidation (1) the number of policyholders represented
18 at the meeting at which the agreement was considered, and
19 (2) the number of votes cast by policyholders for and
20 against such agreement or (3) in the case of a fraternal
21 benefit society, the number of delegates of the supreme
22 legislative or governing body, and the number of votes
23 cast by the delegates for and against the agreement;
24 (d) the certificates required by section 171;
25 (e) if the surviving or new company is a domestic
26 company and any foreign or alien company is a party to
27 the merger or consolidation and the laws of the state or
28 country under which such foreign or alien company is
29 incorporated require approval of the merger or
30 consolidation by an official of such state or country, a
31 certificate of approval of such official; and
32 (f) in case of consolidation where the new company
33 is a foreign or alien company, an instrument appointing
34 the Director and his or her successor or successors in
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1 office, the attorney of such company for service of
2 process, containing the same provisions and having the
3 same effect as the instrument required of a foreign or
4 alien company in order to be admitted to transact
5 business in this State.
6 In addition, the Director shall be provided, in
7 substantially the same form, the information required under
8 Article VIII 1/2 of this Code.
9 (2) In case the surviving or new company is a domestic
10 company, if the Director finds that:
11 (a) the agreement of merger or consolidation is in
12 accordance with the provisions of this Article and not
13 inconsistent with the laws and the Constitutions of this
14 State and the United States;
15 (b) the surviving or new company has complied with
16 all applicable provisions of this Code; and
17 (c) no reasonable objection exists to such merger
18 or consolidation; and
19 (d) the standards established under Article
20 VIII 1/2 are satisfied;
21 he or she shall approve the agreement. The provisions of any
22 law with reference to age limits and medical examination
23 shall be inoperative in so far as agreements of merger or
24 consolidation are concerned. If the agreement of merger or
25 consolidation be approved by the Director, he or she shall
26 file the affidavits and certificates and one of the duplicate
27 originals of the agreement in his or her office, endorse upon
28 the other duplicate original his or her approval thereof, and
29 deliver it, together with a certificate of merger or
30 consolidation, as the case may be, to the surviving or new
31 company. In the case of a consolidation, the Director shall
32 also issue a certificate of authority to the new company.
33 (3) In case the surviving or new company is a foreign or
34 alien company, if the Director finds that:
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1 (a) the agreement of merger or consolidation is in
2 accordance with the provisions of this Article and not
3 inconsistent with the laws and the Constitutions of this
4 State and the United States;
5 (b) the agreement of merger or consolidation
6 provides for the assumption by the new or surviving
7 company of all the liabilities and obligations of the
8 companies parties to the merger or consolidation and
9 otherwise affords proper protection for creditors and
10 policyholders and that such provisions are not
11 inconsistent with the laws of the state or country of
12 incorporation of such new or surviving company;
13 (c) the surviving or new company has complied with
14 all applicable provisions of this Code; and
15 (d) no reasonable objection exists to such merger
16 or consolidation; and
17 (e) the standards established under Article
18 VIII 1/2 are satisfied;
19 he or she shall approve the agreement. If the agreement be
20 approved by the Director, he or she shall file the affidavits
21 and certificates and one of the duplicate originals of the
22 agreement in his or her office, endorse upon the other
23 duplicate original his or her approval thereof, and deliver
24 it, together with a certificate of approval of the merger or
25 consolidation, as the case may be, to the surviving or new
26 company.
27 (4) In the case of a plan of exchange, if the Director
28 finds that the parties to the exchange have established that:
29 (a) the plan, if effective, will not tend adversely
30 to affect the financial stability or management of any
31 domestic company which is a party thereto or the general
32 capacity or intention to continue the safe and prudent
33 transaction of the insurance business of such domestic
34 company or companies;
-19- LRB9001538JSgc
1 (b) the interests of the policyholders and
2 shareholders of each domestic insurance company which is
3 a party to the plan are protected; and
4 (c) the competence, experience and integrity of
5 those persons who would control the operation of the
6 domestic company are such as to be in the best interests
7 of the policyholders of such company to permit such
8 exchange;
9 (d) the terms and conditions of the plan are fair
10 and reasonable; and
11 (e) the standards established under Article
12 VIII 1/2 are satisfied;
13 he or she shall approve the plan of exchange. If the plan of
14 exchange be approved by the Director, he or she shall file
15 the affidavits and certificates and one of the duplicate
16 originals of the plan of exchange in his or her office,
17 endorse upon the other duplicate original his or her approval
18 thereof, and deliver it, together with a certificate of
19 approval of the plan of exchange to the domestic company.
20 (5) If the Director refuses to approve the agreement of
21 merger or consolidation, or plan of exchange, notice of such
22 refusal, assigning the reasons therefor, shall be given in
23 writing by the Director to each of the companies party
24 thereto, within 60 days from the date of the delivery of such
25 agreements or plan to him or her, and he or she shall grant
26 any of such companies a hearing upon request. The hearing
27 shall be held within 30 days of the Director's receipt of
28 request for hearing. All persons to whom it is proposed to
29 issue securities in such agreements or exchange shall have a
30 right to appear. Within 30 days after the close of the
31 hearing the Director shall approve or disapprove or place
32 conditions precedent upon his or her approval of the merger
33 or consolidation or plan by issuing a written order stating
34 his or her determination and the reasons therefor therefore.
-20- LRB9001538JSgc
1 (Source: P.A. 82-498.)
2 (215 ILCS 5/173) (from Ch. 73, par. 785)
3 Sec. 173. Reinsurance authorized.
4 (a) Subject to the provisions of this Article, any
5 domestic company may, by a reinsurance agreement, accept any
6 part or all of any risks of the kind which it is authorized
7 to insure and it may cede all or any part of its risks to
8 another solvent company having the power to make such
9 reinsurance. It may take credit for the reserves on such
10 ceded risks to the extent reinsured subject to the exceptions
11 provided in Sections 173.1 through 173.5.
12 (b) The purpose of this Article is to protect the
13 interest of insureds, claimants, ceding insurers, assuming
14 insurers, and the public generally. The legislature hereby
15 declares its intent is to ensure adequate regulation of
16 insurers and reinsurers and adequate protection for those to
17 whom they owe obligations. In furtherance of that State
18 interest, the legislature hereby provides a mandate that upon
19 the insolvency of a non-U.S. insurer or reinsurer that
20 provides security to fund its U.S. obligations in accordance
21 with this Article, the assets representing the security shall
22 be maintained in the United States and claims shall be filed
23 and valued by the state insurance official with regulatory
24 oversight, and the assets shall be distributed in accordance
25 with the insurance laws of the state in which the trust is
26 domiciled that are applicable to the liquidation of domestic
27 U.S. insurance companies. The legislature declares that the
28 matters contained in this Article are fundamental to the
29 business of insurance in accordance with 15 U.S.C Sections
30 1011 through 1012.
31 (Source: Laws 1965, p. 1077.)
32 (215 ILCS 5/173.1) (from Ch. 73, par. 785.1)
-21- LRB9001538JSgc
1 Sec. 173.1. Credit allowed a domestic ceding insurer.
2 (1) Except as otherwise provided under Article VIII 1/2
3 of this Code and related provisions of the Illinois
4 Administrative Code, credit for reinsurance shall be allowed
5 a domestic ceding insurer as either an admitted asset or a
6 deduction from liability on account of reinsurance ceded only
7 when the reinsurer meets the requirements of subsection
8 (1)(A) or (B) or (C) or (D). Credit shall be allowed under
9 subsection (1)(A) or (B) only as respects cessions of those
10 kinds or classes of business in which the assuming insurer is
11 licensed or otherwise permitted to write or assume in its
12 state of domicile, or in the case of a U.S. branch of an
13 alien assuming insurer, in the state through which it is
14 entered and licensed to transact insurance or reinsurance.
15 Credit shall be allowed under subsection (1)(C) of this
16 Section only if meeting the applicable requirements of
17 subsection (1)(C), the requirements of subsection (1)(E) have
18 been satisfied must also be met.
19 (A) Credit shall be allowed when the reinsurance is
20 ceded to an assuming insurer that is authorized licensed
21 to transact insurance in this State to transact the types
22 of insurance ceded.
23 (B) Credit shall be allowed when the reinsurance is
24 ceded to an assuming insurer that is accredited as a
25 reinsurer in this State. An accredited reinsurer is one
26 that:
27 (1) files with the Director evidence of its
28 submission to this State's jurisdiction;
29 (2) submits to this State's authority to
30 examine its books and records;
31 (3) is licensed to transact insurance or
32 reinsurance in at least one state, or in the case of
33 a U.S. branch of an alien assuming insurer is
34 entered through and licensed to transact insurance
-22- LRB9001538JSgc
1 or reinsurance in at least one state;
2 (4) files annually with the Director a copy of
3 its annual statement filed with the insurance
4 department of its state of domicile and a copy of
5 its most recent audited financial statement; and
6 (5) maintains a surplus as regards
7 policyholders in an amount that is not less than
8 $20,000,000 and whose accreditation has been
9 approved by the Director. No credit shall be
10 allowed a domestic ceding insurer, if the assuming
11 insurers' accreditation has been revoked by the
12 Director after notice and hearing.
13 (C)(1) Credit shall be allowed when the reinsurance
14 is ceded to an assuming insurer that maintains a
15 trust fund in a qualified United States financial
16 institution, as defined in subsection 3(B), for the
17 payment of the valid claims of its United States
18 policyholders and ceding insurers, their assigns and
19 successors in interest. The assuming insurer shall
20 report annually to the Director information
21 substantially the same as that required to be
22 reported on the NAIC annual and quarterly financial
23 statement form by authorized licensed insurers and
24 any other financial information that to enable the
25 Director deems necessary to determine the financial
26 condition of the assuming insurer and the
27 sufficiency of the trust fund. The assuming insurer
28 shall submit to examination of its books and records
29 by the Director and bear the expense of examination.
30 (2)(a) Credit for reinsurance shall not be
31 granted under this subsection unless the form of the
32 trust and any amendments to the trust have been
33 approved by:
34 (i) the regulatory official of the state
-23- LRB9001538JSgc
1 where the trust is domiciled; or
2 (ii) the regulatory official of another
3 state who, pursuant to the terms of the trust
4 instrument, has accepted principal regulatory
5 oversight of the trust.
6 (b) The form of the trust and any trust
7 amendments also shall be filed with the regulatory
8 official of every state in which the ceding insurer
9 beneficiaries of the trust are domiciled. The trust
10 instrument shall provide that contested claims shall
11 be valid and enforceable upon the final order of any
12 court of competent jurisdiction in the United
13 States. The trust shall vest legal title to its
14 assets in its trustees for the benefit of the
15 assuming insurer's United States policyholders and
16 ceding insurees and their assigns and successors in
17 interest. The trust and the assuming insurer shall
18 be subject to examination as determined by the
19 Director.
20 (c) The trust shall remain in effect for as
21 long as the assuming insurer has outstanding
22 obligations due under the reinsurance agreements
23 subject to the trust. No later than February 28 of
24 each year the trustee of the trust shall report to
25 the Director in writing the balance of the trust and
26 a list of the trust's investments at the preceding
27 year-end and shall certify the date of termination
28 of the trust, if so planned, or certify that the
29 trust will not expire prior to the next following
30 December 31.
31 (3) The following requirements apply to the
32 following categories of assuming insurer:
33 (a) The trust fund for a single assuming
34 insurer shall consist of funds in trust in an amount
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1 not less than the assuming insurer's liabilities
2 attributable to reinsurance ceded by U.S. ceding
3 insurers In the case of a single assuming insurer,
4 the trust shall consist of a trusteed account
5 representing the assuming insurer's liabilities
6 attributable to business written in the United
7 States, and, in addition, the assuming insurer shall
8 maintain a trusteed surplus of not less than
9 $20,000,000.
10 (b)(i) In the case of a group including
11 incorporated and individual unincorporated
12 underwriters:
13 (I) for reinsurance ceded under
14 reinsurance agreements with an inception,
15 amendment, or renewal date on or after August
16 1, 1995, the trust shall consist of a trusteed
17 account in an amount not less than the group's
18 several liabilities attributable to business
19 ceded by U.S. domiciled ceding insurers to any
20 member of the group;
21 (II) for reinsurance ceded under
22 reinsurance agreements with an inception date
23 on or before July 31, 1995 and not amended or
24 renewed after that date, notwithstanding the
25 other provisions of this Act, the trust shall
26 consist of a trusteed account in an amount not
27 less than the group's several insurance and
28 reinsurance liabilities attributable to
29 business written in the United States; and
30 (III) in addition to these trusts, the
31 group shall maintain in trust a trusteed
32 surplus of which not less than $100,000,000
33 shall be held jointly for the benefit of the
34 U.S. domiciled ceding insurers of any member of
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1 the group for all years of account., the trust
2 shall consist of a trusteed account
3 representing the group's liabilities
4 attributable to business written in the United
5 States, and, in addition, the group shall
6 maintain a trusteed surplus of which
7 $100,000,000 shall be held jointly for the
8 benefit of United States ceding insurers of any
9 member of the group;
10 (ii) The incorporated members of the group shall
11 not be engaged in any business other than underwriting as
12 a member of the group and shall be subject to the same
13 level of solvency regulation and control by the group's
14 domiciliary regulator as are the unincorporated members.;
15 (iii) Within 90 days after its financial statements
16 are due to be filed with the group's domiciliary
17 regulator, the group shall provide to the Director an
18 annual certification by the group's domiciliary regulator
19 of the solvency of each underwriter member, or if a
20 certification is unavailable, financial statements
21 prepared by independent public accountants of each
22 underwriter member of the group. and the group shall make
23 available to the Director an annual certification of the
24 solvency of each underwriter by the group's domiciliary
25 regulator and its independent public accountants.
26 (c)(2) In the case of a group of incorporated
27 insurers under common administration, the group
28 shall: that complies with the filing requirements
29 contained in the previous paragraph, that has
30 (i) have continuously transacted an insurance
31 business outside the United States for at least 3
32 years immediately before making application for
33 accreditation; and submits to this State's authority
34 to examine its books and records and bears the
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1 expense of the examination, and that has
2 (ii) maintain aggregate policyholders' surplus
3 of not less than $10,000,000,000;,
4 (iii) maintain a trust the trust shall be in
5 an amount not less than equal to the group's several
6 liabilities attributable to business ceded by United
7 States domiciled ceding insurers to any member of
8 the group pursuant to reinsurance contracts issued
9 in the name of the group;,
10 (iv) in addition, plus the group shall
11 maintain a joint trusteed surplus of which not less
12 than $100,000,000 shall be held jointly for the
13 benefit of the United States ceding insurers of any
14 member of the group as additional security for these
15 liabilities; , and each member of the group shall
16 (v) within 90 days after its financial
17 statements are due to be filed with the group's
18 domiciliary regulator, make available to the
19 Director an annual certification of each underwriter
20 the member's solvency by the member's domiciliary
21 regulator and financial statements of each
22 underwriter member of the group prepared by its
23 independent public accountant.
24 (3) The trust shall be established in a form
25 approved by the Director. The trust instrument shall
26 provide that contested claims shall be valid and
27 enforceable upon the final order of any court of
28 competent jurisdiction in the United States. The
29 trust shall vest legal title to its assets in the
30 trustees of the trust for its United States
31 policyholders and ceding insurers, their assigns and
32 successors in interest. The trust and the assuming
33 insurer shall be subject to examination as
34 determined by the Director. The trust described
-27- LRB9001538JSgc
1 herein must remain in effect for as long as the
2 assuming insurer shall have outstanding obligations
3 due under the reinsurance agreements subject to the
4 trust.
5 (4) No later than February 28 of each year the
6 trustees of the trust shall report to the Director
7 in writing setting forth the balance of the trust
8 and listing the trust's investments at the preceding
9 year end and shall certify the date of termination
10 of the trust, if so planned, or certify that the
11 trust shall not expire prior to the next following
12 December 31.
13 (D) Credit shall be allowed when the reinsurance is
14 ceded to an assuming insurer not meeting the requirements
15 of subsection (1) (A), (B), or (C) but only with respect
16 to the insurance of risks located in jurisdictions where
17 that reinsurance is required by applicable law or
18 regulation of that jurisdiction.
19 (E) If the assuming insurer is not licensed to
20 transact insurance in this State or an accredited
21 reinsurer in this State, the credit permitted by
22 subsection (1)(C) shall not be allowed unless the
23 assuming insurer agrees in the reinsurance agreements:
24 (1) that in the event of the failure of the
25 assuming insurer to perform its obligations under
26 the terms of the reinsurance agreement, the assuming
27 insurer, at the request of the ceding insurer, shall
28 submit to the jurisdiction of any court of competent
29 jurisdiction in any state of the United States, will
30 comply with all requirements necessary to give the
31 court jurisdiction, and will abide by the final
32 decision of the court or of any appellate court in
33 the event of an appeal; and
34 (2) to designate the Director or a designated
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1 attorney as its true and lawful attorney upon whom
2 may be served any lawful process in any action,
3 suit, or proceeding instituted by or on behalf of
4 the ceding company.
5 This provision is not intended to conflict with or
6 override the obligation of the parties to a reinsurance
7 agreement to arbitrate their disputes, if an obligation
8 to arbitrate is created in the agreement.
9 (F) If the assuming insurer does not meet the
10 requirements of subsection (1)(A) or (B), the credit
11 permitted by subsection (1)(C) shall not be allowed
12 unless the assuming insurer agrees in the trust
13 agreements to the following conditions:
14 (1) Notwithstanding any other provisions in
15 the trust instrument, if the trust fund is
16 inadequate because it contains an amount less than
17 the amount required by subsection (C)(3) of this
18 Section or if the grantor of the trust has been
19 declared insolvent or placed into receivership,
20 rehabilitation, liquidation, or similar proceedings
21 under the laws of its state or country of domicile,
22 the trustee shall comply with an order of the state
23 official with regulatory oversight over the trust or
24 with an order of a court of competent jurisdiction
25 directing the trustee to transfer to the state
26 official with regulatory oversight all of the assets
27 of the trust fund.
28 (2) The assets shall be distributed by and
29 claims shall be filed with and valued by the state
30 official with regulatory oversight in accordance
31 with the laws of the state in which the trust is
32 domiciled that are applicable to the liquidation of
33 domestic insurance companies.
34 (3) If the state official with regulatory
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1 oversight determines that the assets of the trust
2 fund or any part thereof are not necessary to
3 satisfy the claims of the U.S. ceding insurers of
4 the grantor of the trust, the assets or part thereof
5 shall be returned by the state official with
6 regulatory oversight to the trustee for distribution
7 in accordance with the trust agreement.
8 (4) The grantor shall waive any rights
9 otherwise available to it under U.S. law that are
10 inconsistent with the provision.
11 (2) Credit A reduction from liability for the
12 reinsurance ceded by a domestic insurer to an assuming
13 insurer not meeting the requirements of subsection (1) shall
14 be allowed in an amount not exceeding the assets or
15 liabilities carried by the ceding insurer. The credit and
16 the reduction shall not exceed be in the amount of funds held
17 by or held in trust for on behalf of the ceding insurer,
18 including funds held in trust for the ceding insurer under a
19 reinsurance contract with the assuming insurer as security
20 for the payment of obligations thereunder, if the security is
21 held in the United States subject to withdrawal solely by,
22 and under the exclusive control of, the ceding insurer; or,
23 in the case of a trust, held in a qualified United States
24 financial institution, as defined in subsection (3)(B). This
25 security may be in the form of:
26 (A) Cash.
27 (B) Securities listed by the Securities Valuation
28 Office of the National Association of Insurance
29 Commissioners that conform to the requirements of Article
30 VIII of this Code that are not issued by an affiliate of
31 either the assuming or ceding company.
32 (C) Clean, irrevocable, unconditional, letters of
33 credit issued or confirmed by a qualified United States
34 financial institution, as defined in subsection (3)(A).
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1 The letters of credit shall be effective issued or
2 confirmed no later than December 31 in respect of the
3 year for which filing is being made, and in the
4 possession of, or in trust for, the ceding company on or
5 before the filing due date of its annual statement, which
6 letters of credit shall be for an original term of not
7 less than one year. Letters of credit meeting applicable
8 standards of issuer acceptability as of the dates of
9 their issuance (or confirmation) shall, notwithstanding
10 the issuing (or confirming) institution's subsequent
11 failure to meet applicable standards of issuer
12 acceptability, continue to be acceptable as security
13 until their expiration, extension, renewal, modification,
14 or amendment, whichever first occurs.
15 (3)(A) For purposes of subsection 2(C), a "qualified
16 United States financial institution" means an institution
17 that:
18 (1) is organized or, in the case of a U.S.
19 office of a foreign banking organization, licensed
20 under the laws of the United States or any state
21 thereof;
22 (2) is regulated, supervised, and examined by
23 U.S. federal or state authorities having regulatory
24 authority over banks and trust companies;
25 (3) has been designated by either the Director
26 or the Securities Valuation Office of the National
27 Association of Insurance Commissioners as meeting
28 such its credit standards of financial condition and
29 standing as are considered necessary and appropriate
30 to regulate the quality of financial institutions
31 whose letters of credit will be acceptable to the
32 Director for issuing or confirming letter of credit;
33 and
34 (4) is not affiliated with the assuming
-31- LRB9001538JSgc
1 company.
2 (B) A "qualified United States financial
3 institution" means, for purposes of those provisions of
4 this law specifying those institutions that are eligible
5 to act as a fiduciary of a trust, an institution that:
6 (1) is organized or, in the case of the U.S.
7 branch or agency office of a foreign banking
8 organization, licensed under the laws of the United
9 States or any state thereof and has been granted
10 authority to operate with fiduciary powers;
11 (2) is regulated, supervised, and examined by
12 federal or state authorities having regulatory
13 authority over banks and trust companies; and
14 (3) is not affiliated with the assuming
15 company, however, if the subject of the reinsurance
16 contract is insurance written pursuant to Section
17 155.51 of this Code, the financial institution may
18 be affiliated with the assuming company with the
19 prior approval of the Director.
20 (Source: P.A. 87-108; 87-1090; 88-535.)
21 (215 ILCS 5/174) (from Ch. 73, par. 786)
22 Sec. 174. Kinds of agreements requiring approval.
23 (1) The following kinds of reinsurance agreements shall
24 not be entered into by any domestic insurer company unless
25 such agreements are approved in writing by the Director:
26 (a) Agreements of reinsurance whereby an insurer of any
27 such company transacting the kind or kinds of business
28 enumerated in Class 1 and Class 2(a) of Section 4, or as a
29 Fraternal Benefit Society under Article XVII, a Mutual
30 Benefit Association under Article XVIII, a Burial Society
31 under Article XIX or an Assessment Accident and Assessment
32 Accident and Health Company under Article XXI, cedes
33 previously issued and outstanding risks to any company, or
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1 cedes any risks to a company not authorized to transact
2 business in this State, or assumes any outstanding risks on
3 which the aggregate reserves and claim liabilities exceed 20%
4 percent of the aggregate reserves and claim liabilities of
5 the assuming company, as reported in the preceding annual
6 statement, for the business of either life or accident and
7 health insurance.
8 (b) Any agreement or Agreements of reinsurance whereby
9 an insurer any company transacting the kind or kinds of
10 business enumerated in either Class 2 or Class 3 of Section
11 4, except Class 2(a), cedes to any company or companies at
12 one time, or during a period of 6 six consecutive months more
13 than 20% twenty per centum of the ceding company's total
14 amount of its previously retained unearned premium reserve
15 liability.
16 (c) Any agreement or Agreements of reinsurance whereby
17 an insurer any company transacting the kind or kinds of
18 business enumerated in either Class 2 or 3 of Section 4,
19 except Class 2(a), cedes premium of an amount that exceeds
20 20% of the ceding company's direct and assumed written
21 premium any outstanding risks to a stock company with less
22 than $2,000,000 in capital and surplus or to a mutual or
23 reciprocal company with less than $2,000,000 in surplus.
24 (d) Agreements of reinsurance whereby an insurer
25 transacting the kind of business enumerated in either Class 2
26 or 3 of Section 4, except Class 2(a), cedes risk on a
27 nonproportional basis and the reinsurer pays the ceding
28 insurer a commission.
29 (e) Agreements of reinsurance whereby an insurer
30 transacting the kind or kinds of business enumerated in
31 either Class 2 or 3 of Section 4, except Class 2(a), cedes
32 risks to a reinsurer in exchange for a commission that is
33 based on the profitability of the business ceded.
34 (f) Agreements of reinsurance whereby an insurer
-33- LRB9001538JSgc
1 transacting the kind or kinds of business enumerated in
2 either Class 2 or 3 of Section 4, except Class 2(a), cedes
3 risks to a reinsurer and the agreement is related to another
4 financial transaction. This shall include all agreements
5 which provide restitution for a cash contribution or capital
6 investment received by the ceding company or any company
7 affiliated with the ceding company.
8 (g) Agreements of reinsurance whereby an insurer
9 transacting the kind or kinds of business enumerated in
10 either Class 2 or 3 of Section 4, except Class 2(a), cedes
11 more than 20% of the total of its loss reserves and loss
12 adjustment expenses. This shall include contracts classified
13 as retroactive according to the National Association of
14 Insurance Commissioners' Accounting Practices and Procedures
15 Manual.
16 (2) An agreement which is not disapproved by the
17 Director within 30 thirty days after its submission shall be
18 deemed approved.
19 (Source: P.A. 82-626.)
20 (215 ILCS 5/192) (from Ch. 73, par. 804)
21 Sec. 192. Duties of Director as rehabilitator;
22 termination.
23 (1) Upon the entry of an order directing rehabilitation,
24 the Director shall immediately proceed to conduct the
25 business of the company and take such steps towards removal
26 of the causes and conditions which have made such proceedings
27 necessary as may be expedient.
28 (2) The Director is authorized to deal with the property
29 and business of the company in his name as Director, or, if
30 the Court shall so order, in the name of the company. The
31 Director may, subject to the approval of the Court, sell or
32 otherwise dispose of the real and personal property, or any
33 part thereof, and sell or compromise all doubtful or
-34- LRB9001538JSgc
1 uncollectible debts or claims owing to the company in any
2 rehabilitation proceeding now pending or hereafter
3 instituted, except that whenever the value of any real or
4 personal property or the amount of any such debt owing to the
5 company does not exceed $25,000, the Director may sell,
6 dispose of, compromise, or compound the same upon such terms
7 as the Director deems to be in the best interest of the
8 company without obtaining approval of the court unless
9 otherwise directed by the court. The Director may solicit
10 contracts whereby a solvent company agrees to assume, in
11 whole or in part, or upon a modified basis, the liabilities
12 of a company in rehabilitation in a manner consistent with
13 subsection (4) of Section 193 of this Code.
14 (3) The Director may bring any action, claim, suit, or
15 proceeding against any director or officer of the company or
16 against any other person with respect to that person's
17 dealings with the company including, but not limited to,
18 prosecuting any action, claim, suit, or proceeding on behalf
19 of the creditors, members, policyholders, or shareholders of
20 the company. Nothing in this subsection shall be construed
21 to affect the standing of the Illinois Insurance Guaranty
22 Fund, the Illinois Life and Health Insurance Guaranty
23 Association, or the Illinois Health Maintenance Organization
24 Guaranty Association to sue or be sued under applicable law.
25 (4) (3) If at any time the Director finds that it is in
26 the best interests of policyholders, creditors and the
27 company to effect a plan of mutualization or rehabilitation,
28 the Director may submit such plan to the court for its
29 approval. Such plan, in addition to any other terms and
30 provisions as may by the Director be deemed necessary or
31 advisable, may include a provision imposing liens upon the
32 net equities of policyholders of the company, and in the case
33 of life companies, a provision imposing a moratorium upon the
34 loan or cash surrender values of the policies, for such
-35- LRB9001538JSgc
1 period and to such an extent as may be necessary. Notice of
2 the hearing upon any such plan shall be given in the manner
3 as may be fixed by the court and upon such hearing the court
4 may either approve or disapprove the plan or modify it in
5 such manner and to such extent as to the court shall seem
6 appropriate.
7 (5) (4) Where in such proceedings the Court has entered
8 an order for the filing of claims and it subsequently appears
9 that the total amount of all allowable claims exceed the
10 assets in the possession of the Rehabilitator, the Court may
11 upon the application of the Director authorize a distribution
12 of assets in accordance with the applicable provisions of
13 Section 210. The Director may at such time apply under this
14 Section for an order dissolving the company in accordance
15 with the applicable provisions of Section 196.
16 (6) (5) If at any time the Director finds that the
17 causes and conditions which made such proceeding necessary
18 have been removed he may petition the court for an order
19 terminating the conduct of the business by the Director and
20 permitting such company to resume possession of its property
21 and the conduct of its business and for a full discharge of
22 all liability and responsibility of the Director. No order
23 for the return to such company of its property and business
24 shall be granted unless the court after a full hearing
25 determines that the purposes of the proceeding have been
26 fully accomplished.
27 (Source: P.A. 89-206, eff. 7-21-95.)
28 (215 ILCS 5/205) (from Ch. 73, par. 817)
29 Sec. 205. Priority of distribution of general assets.
30 (1) The priorities of distribution of general assets
31 from the company's estate is to be as follows:
32 (a) The costs and expenses of administration,
33 including the expenses of the Illinois Insurance Guaranty
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1 Fund, the Illinois Life and Health Insurance Guaranty
2 Association, the Illinois Health Maintenance Organization
3 Guaranty Association and of any similar organization in
4 any other state as prescribed in subsection (c) of
5 Section 545.
6 (b) Secured claims, including claims for taxes and
7 debts due the federal or any state or local government,
8 that are secured by liens perfected prior to the filing
9 of the complaint.
10 (c) Claims for wages actually owing to employees
11 for services rendered within 3 months prior to the date
12 of the filing of the complaint, not exceeding $1,000 to
13 each employee unless there are claims due the federal
14 government under paragraph (f), then the claims for wages
15 shall have a priority of distribution immediately
16 following that of federal claims under paragraph (f) and
17 immediately preceding claims of general creditors under
18 paragraph (g).
19 (d) Claims by policyholders, beneficiaries,
20 insureds and liability claims against insureds covered
21 under insurance policies and insurance contracts issued
22 by the company, and claims of the Illinois Insurance
23 Guaranty Fund, the Illinois Life and Health Insurance
24 Guaranty Association, the Illinois Health Maintenance
25 Organization Guaranty Association and any similar
26 organization in another state as prescribed in Section
27 545.
28 (e) Claims by policyholders, beneficiaries, and
29 insureds, the allowed values of which were determined by
30 estimation under paragraph (b) of subsection (4) of
31 Section 209.
32 (f) Any other claims due the federal government.
33 (g) All other claims of general creditors not
34 falling within any other priority under this Section
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1 including claims for taxes and debts due any state or
2 local government which are not secured claims and claims
3 for attorneys' fees incurred by the company in contesting
4 its conservation, rehabilitation, or liquidation.
5 (h) Claims of guaranty guarantee fund certificate
6 holders, guaranty guarantee capital shareholders, capital
7 note holders, and surplus note holders.
8 (i) Proprietary claims of shareholders, members, or
9 other owners.
10 (2) Within 120 days after the issuance of an Order of
11 Liquidation with a finding of insolvency against a domestic
12 company, the Director shall make application to the court
13 requesting authority to disburse funds to the Illinois
14 Insurance Guaranty Fund, the Illinois Life and Health
15 Insurance Guaranty Association, the Illinois Health
16 Maintenance Organization Guaranty Association and similar
17 organizations in other states from time to time out of the
18 company's marshaled assets as funds become available in
19 amounts equal to disbursements made by the Illinois Insurance
20 Guaranty Fund, the Illinois Life and Health Insurance
21 Guaranty Association, the Illinois Health Maintenance
22 Organization Guaranty Association and similar organizations
23 in other states for covered claims obligations on the
24 presentation of evidence that such disbursements have been
25 made by the Illinois Insurance Guaranty Fund, the Illinois
26 Life and Health Insurance Guaranty Association, the Illinois
27 Health Maintenance Organization Guaranty Association and
28 similar organizations in other states.
29 The Director shall establish procedures for the ratable
30 allocation and distribution of disbursements to the Illinois
31 Insurance Guaranty Fund, the Illinois Life and Health
32 Insurance Guaranty Association, the Illinois Health
33 Maintenance Organization Guaranty Association and similar
34 organizations in other states. In determining the amounts
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1 available for disbursement, the Director shall reserve
2 sufficient assets for the payment of the expenses of
3 administration described in paragraph (1) (a) of this
4 Section. All funds available for disbursement after the
5 establishment of the prescribed reserve shall be promptly
6 distributed. As a condition to receipt of funds in
7 reimbursement of covered claims obligations, the Director
8 shall secure from the Illinois Insurance Guaranty Fund, the
9 Illinois Life and Health Insurance Guaranty Association, the
10 Illinois Health Maintenance Organization Guaranty Association
11 and each similar organization in other states, an agreement
12 to return to the Director on demand funds previously received
13 as may be required to pay claims of secured creditors and
14 claims falling within the priorities established in
15 paragraphs (a), (b), (c), and (d) of subsection (1) of this
16 Section in accordance with such priorities.
17 (3) The provisions of this Section are severable under
18 Section 1.31 of the Statute on Statutes.
19 (Source: P.A. 88-297; 89-206, eff. 7-21-95.)
20 (215 ILCS 5/245.21) (from Ch. 73, par. 857.21)
21 Sec. 245.21. Establishment of separate accounts by
22 domestic companies organized to do a life, annuity, or
23 accident and health insurance business. A domestic life
24 company, including for the purposes of this Article all
25 domestic fraternal benefit beneficiary associations,
26 societies or companies which operate on a legal reserve
27 basis, may, for authorized classes of insurance, establish
28 one or more separate accounts, and may allocate thereto
29 amounts (including without limitation proceeds applied under
30 optional modes of settlement or under dividend options) to
31 provide for life, annuity, or accident and health insurance
32 or annuities (and benefits incidental thereto), payable in
33 fixed or variable amounts or both, subject to the following:
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1 (1) The income, gains and losses, realized or
2 unrealized, from assets allocated to a separate account must
3 be credited to or charged against the account, without regard
4 to other income, gains or losses of the company.
5 (2) Except as may be provided with respect to reserves
6 for guaranteed benefits and funds referred to in paragraph
7 (3) of this Section (i) amounts allocated to any separate
8 account and accumulations thereon may be invested and
9 reinvested without regard to any requirements or limitations
10 of Sections 125a through 125.24a of this Code and (ii) the
11 investments in any separate account or accounts may not be
12 taken into account in applying the investment limitations
13 otherwise applicable to the investments of the company.
14 (3) Except with the approval of the Director and under
15 the conditions as to investments and other matters as the
16 Director he may prescribe, that must recognize the guaranteed
17 nature of the benefits provided, reserves for (i) benefits
18 guaranteed as to dollar amount and duration and (ii) funds
19 guaranteed as to principal amount or stated rate of interest
20 may not be maintained in a separate account.
21 (4) Unless otherwise approved by the Director, assets
22 allocated to a separate account must be valued at their
23 market value on the date of valuation, or if there is no
24 readily available market, then as provided in the contract or
25 the rules or other written agreement applicable to the
26 separate account. Unless otherwise approved by the Director,
27 the portion, if any, of the assets of the separate account
28 equal to the company's reserve liability with regard to the
29 guaranteed benefits and funds referred to in paragraph (3) of
30 this Section must be valued in accordance with the rules
31 otherwise applicable to the company's assets.
32 (5) Amounts allocated to a separate account under this
33 Article are owned by the company, and the company may not be,
34 nor hold itself out to be, a trustee with respect to those
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1 amounts. The assets of any separate account equal to the
2 reserves and other contract liabilities with respect to the
3 account may not be charged with liabilities arising out of
4 any other business the company may conduct.
5 (6) No sale, exchange or other transfer of assets may be
6 made by a company between any of its separate accounts or
7 between any other investment account and one or more of its
8 separate accounts unless, in case of a transfer into a
9 separate account, the transfer is made solely to establish
10 the account or to support the operation of the contracts with
11 respect to the separate account to which the transfer is
12 made, and unless the transfer, whether into or from a
13 separate account, is made (i) by a transfer of cash, or (ii)
14 by a transfer of securities having a readily determinable
15 market value, if the transfer of securities is approved by
16 the Director. The Director may approve other transfers among
17 those accounts if, in his or her opinion, the transfers would
18 not be inequitable.
19 (7) To the extent a company considers it necessary to
20 comply with any applicable federal or state laws, the
21 company, with respect to any separate account, including
22 without limitation any separate account which is a management
23 investment company or a unit investment trust, may provide
24 for persons having an interest therein appropriate voting and
25 other rights and special procedures for the conduct of the
26 business of the account, including without limitation special
27 rights and procedures relating to investment policy,
28 investment advisory services, selection of independent public
29 accountants, and the selection of a committee, the members of
30 which need not be otherwise affiliated with the company, to
31 manage the business of the account.
32 (Source: P.A. 86-1154; 86-1156.)
33 (215 ILCS 5/245.23) (from Ch. 73, par. 857.23)
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1 Sec. 245.23. No company may deliver or issue for delivery
2 within this State variable contracts unless it is authorized
3 licensed or organized to do a life, annuity, or accident and
4 health insurance or annuity business in this State, and the
5 Director is satisfied that its condition or method of
6 operation in connection with the issuance of such contracts
7 will not render its operation hazardous to the public or its
8 policyholders in this State. In this connection, the Director
9 may consider among other things:
10 (a) The history and financial condition of the company;
11 (b) The character, responsibility and fitness of the
12 officers and directors of the company; and
13 (c) The law and regulation under which the company is
14 authorized in its state of domicile to issue variable
15 contracts. If the company is a subsidiary of an authorized
16 admitted life insurance company, or affiliated with such a
17 company through common management or ownership, it may be
18 deemed by the Director to have met the requirements of this
19 Section if either it or the parent or the affiliated company
20 meets the requirements of this Section.
21 (Source: P.A. 77-1572.)
22 (215 ILCS 5/245.25) (from Ch. 73, par. 857.25)
23 Sec. 245.25.
24 Except for subparagraphs (1) (a), (1) (f), (1) (g) and
25 (3) of Section 226 of the Illinois Insurance Code, in the
26 case of a variable annuity contract and subparagraphs (1)
27 (b), (1) (f), (1) (g), (1) (h), (1) (i), and (1) (k) of
28 Section 224, subparagraph (1) (c) of Section 225, and
29 subparagraph (h) of Section 231 in the case of a variable
30 life insurance policy, except for Sections 357.4, 357.5, and
31 367e in the case of a variable health insurance policy, and
32 except as otherwise provided in this Article, all pertinent
33 provisions of the Illinois Insurance Code which are
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1 appropriate to those contracts apply to separate accounts and
2 contracts relating thereto. Any individual variable life
3 insurance contract, delivered or issued for delivery in this
4 State, must contain grace, reinstatement and non-forfeiture
5 provisions appropriate to such a contract. Any individual
6 variable annuity contract, delivered or issued for delivery
7 in this State, must contain grace and reinstatement
8 provisions appropriate to such a contract. Any group variable
9 life insurance contract, delivered or issued for delivery in
10 this State, must contain a grace provision appropriate to
11 such a contract. A group variable health insurance contract
12 delivered or issued for delivery in this State must contain a
13 continuation of group coverage provision appropriate to the
14 contract. The reserve liability for variable contracts must
15 be established in accordance with actuarial procedures that
16 recognize the variable nature of the benefits provided and
17 any mortality guarantees.
18 (Source: P.A. 78-255.)
19 (215 ILCS 5/245.61 rep.)
20 (215 ILCS 5/245.62 rep.)
21 Section 10. The Illinois Insurance Code is amended by
22 repealing Sections 245.61 and 245.62.
23 Section 15. The Producer Controlled Insurer Act is
24 amended by changing Sections 5.20 and 5.25 as follows:
25 (215 ILCS 107/5.20)
26 Sec. 5.20. Controlled insurer. "Controlled insurer"
27 means a licensed insurer that is controlled directly or
28 indirectly by a producer or by an individual or entity that
29 also directly or indirectly controls a producer.
30 (Source: P.A. 87-1090.)
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1 (215 ILCS 107/5.25)
2 Sec. 5.25. Controlling producer. "Controlling producer"
3 means a producer that directly or indirectly controls an
4 insurer or an individual or entity that directly or
5 indirectly controls both an insurer and a producer..
6 (Source: P.A. 87-1090.)
7 Section 99. Effective date. This Act takes effect upon
8 becoming law.
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1 INDEX
2 Statutes amended in order of appearance
3 215 ILCS 5/14.1 from Ch. 73, par. 626.1
4 215 ILCS 5/32 from Ch. 73, par. 644
5 215 ILCS 5/33 from Ch. 73, par. 645
6 215 ILCS 5/34 from Ch. 73, par. 646
7 215 ILCS 5/56 from Ch. 73, par. 668
8 215 ILCS 5/122-1 from Ch. 73, par. 734-1
9 215 ILCS 5/144.2 from Ch. 73, par. 756.2
10 215 ILCS 5/147.3 new
11 215 ILCS 5/162 from Ch. 73, par. 774
12 215 ILCS 5/173 from Ch. 73, par. 785
13 215 ILCS 5/173.1 from Ch. 73, par. 785.1
14 215 ILCS 5/174 from Ch. 73, par. 786
15 215 ILCS 5/192 from Ch. 73, par. 804
16 215 ILCS 5/205 from Ch. 73, par. 817
17 215 ILCS 5/245.21 from Ch. 73, par. 857.21
18 215 ILCS 5/245.23 from Ch. 73, par. 857.23
19 215 ILCS 5/245.25 from Ch. 73, par. 857.25
20 215 ILCS 5/245.61 rep.
21 215 ILCS 5/245.62 rep.
22 215 ILCS 107/5.20
23 215 ILCS 107/5.25