[ Search ] [ Legislation ] [ Bill Summary ]
[ Home ] [ Back ] [ Bottom ]
| [ Introduced ] | [ Enrolled ] | [ House Amendment 001 ] |
| [ House Amendment 002 ] | [ House Amendment 003 ] | [ House Amendment 004 ] |
| [ Senate Amendment 001 ] |
90_HB2226eng
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
HB2226 Engrossed 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, 59.1, 144.2, 162,
7 173, 173.1, 192, 205, 245.21, 245.23, 245.25, and 513a9 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;
HB2226 Engrossed -2- LRB9001538JSgc
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.
HB2226 Engrossed -3- LRB9001538JSgc
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
HB2226 Engrossed -4- LRB9001538JSgc
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
HB2226 Engrossed -5- LRB9001538JSgc
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
HB2226 Engrossed -6- LRB9001538JSgc
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
HB2226 Engrossed -7- LRB9001538JSgc
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
HB2226 Engrossed -8- LRB9001538JSgc
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
HB2226 Engrossed -9- LRB9001538JSgc
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
HB2226 Engrossed -10- LRB9001538JSgc
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 5/59.1)
7 Sec. 59.1. Conversion to stock company.
8 (1) Definitions. For the purposes of this Section, the
9 following terms shall have the meanings indicated:
10 (a) "Eligible member" is a member whose policy is
11 in force as of the date the mutual company's board of
12 directors adopts a plan of conversion. A person insured
13 under a group policy is not an eligible member, unless:
14 (i) the person is insured or covered under a
15 group life policy or group annuity contract under
16 which funds are accumulated and allocated to the
17 respective covered persons;
18 (ii) the person has the right to direct the
19 application of the funds so allocated;
20 (iii) the group policyholder makes no
21 contribution to the premiums or deposits for the
22 policy or contract; and
23 (iv) the mutual company has the names and
24 addresses of the persons covered under the group
25 life policy or group annuity contract.
26 A person whose policy is issued after the board of
27 directors adopts the plan but before the plan's effective
28 date is not an eligible member but shall have those
29 rights set forth in subsection (10) of this Section.
30 (b) "Converted stock company" is an Illinois
31 domiciled stock company that converted from an Illinois
32 domiciled mutual company under this Section.
33 (c) "Plan of conversion" or "plan" is a plan
HB2226 Engrossed -11- LRB9001538JSgc
1 adopted by an Illinois domestic mutual company's board of
2 directors under this Section to convert the mutual
3 company into an Illinois domiciled stock company.
4 (d) "Policy" includes an annuity contract.
5 (e) "Member" means a person who, on the records of
6 the mutual company and pursuant to its articles of
7 incorporation or bylaws, is deemed to be a holder of a
8 membership interest in the mutual company.
9 (2) Adoption of the plan of conversion by the board of
10 directors.
11 (a) A mutual company seeking to convert to a stock
12 company shall, by the affirmative vote of two-thirds of
13 its board of directors, adopt a plan of conversion
14 consistent with the requirements of subsection (6) of
15 this Section.
16 (b) At any time before approval of a plan by the
17 Director, the mutual company by the affirmative vote of
18 two-thirds of its board of directors, may amend or
19 withdraw the plan.
20 (3) Approval of the plan of conversion by the Director
21 of Insurance.
22 (a) Required findings. After adoption by the mutual
23 company's board of directors, the plan shall be submitted
24 to the Director for review and approval. The Director
25 shall approve the plan upon finding that:
26 (i) the provisions of this Section have been
27 complied with;
28 (ii) the plan will not prejudice the interests
29 of the members; and
30 (iii) the plan's method of allocating
31 subscription rights is fair and equitable.
32 (b) Documents to be filed.
33 (i) Prior to the members' approval of the
34 plan, a mutual company seeking the Director's
HB2226 Engrossed -12- LRB9001538JSgc
1 approval of a plan shall file the following
2 documents with the Director for review and approval:
3 (A) the plan of conversion, including the
4 independent evaluation of pro forma market
5 value required by item (f) of subsection (6) of
6 this Section;
7 (B) the form of notice required by item
8 (b) of subsection (4) of this Section for
9 eligible members of the meeting to vote on the
10 plan;
11 (C) any proxies to be solicited from
12 eligible members pursuant to subitem (ii) of
13 item (c) of subsection (4) of this Section;
14 (D) the form of notice required by item
15 (a) of subsection (10) of this Section for
16 persons whose policies are issued after
17 adoption of the plan but before its effective
18 date; and
19 (E) the proposed articles of
20 incorporation and bylaws of the converted stock
21 company.
22 Once filed, these documents shall be approved or
23 disapproved by the Director within a reasonable
24 time.
25 (ii) After the members have approved the plan,
26 the converted stock company shall file the following
27 documents with the Director:
28 (A) the minutes of the meeting of the
29 members at which the plan was voted upon; and
30 (B) the revised articles of incorporation
31 and bylaws of the converted stock company.
32 (c) Consultant. The Director may retain, at the
33 mutual company's expense, any qualified expert not
34 otherwise a part of the Director's staff to assist in
HB2226 Engrossed -13- LRB9001538JSgc
1 reviewing the plan and the independent evaluation of the
2 pro forma market value which is required by item (f) of
3 subsection (6) of this Section.
4 (4) Approval of the plan by the members.
5 (a) Members entitled to notice of and to vote on
6 the plan. All eligible members shall be given notice of
7 and an opportunity to vote upon the plan.
8 (b) Notice required. All eligible members shall be
9 given notice of the members' meeting to vote upon the
10 plan. A copy of the plan or a summary of the plan shall
11 accompany the notice. The notice shall be mailed to each
12 member's last known address, as shown on the mutual
13 company's records, within 45 days of the Director's
14 approval of the plan. The meeting to vote upon the plan
15 shall not be set for a date less than 60 days after the
16 date when the notice of the meeting is mailed by the
17 mutual company. If the meeting to vote upon the plan is
18 held coincident with the mutual company's annual meeting
19 of policyholders, only one combined notice of meeting is
20 required.
21 (c) Vote required for approval.
22 (i) After approval by the Director, the plan
23 shall be adopted upon receiving the affirmative vote
24 of at least two-thirds of the votes cast by eligible
25 members.
26 (ii) Members entitled to vote upon the
27 proposed plan may vote in person or by proxy. Any
28 proxies to be solicited from eligible members shall
29 be filed with and approved by the Director.
30 (iii) The number of votes each eligible member
31 may cast shall be determined by the mutual company's
32 bylaws. If the bylaws are silent, each eligible
33 member may cast one vote.
34 (5) Adoption of revised articles of incorporation.
HB2226 Engrossed -14- LRB9001538JSgc
1 Adoption of the revised articles of incorporation of the
2 converted stock company is necessary to implement the plan
3 and shall be governed by the applicable provisions of Section
4 57 of this Code. For a Class 1 mutual company, the members
5 may adopt the revised articles of incorporation at the same
6 meeting at which the members approve the plan. For a Class 2
7 or 3 mutual company, the revised articles of incorporation
8 may be adopted solely by the board of directors or trustees,
9 as provided in Section 57 of this Code.
10 (5.5) Prior to the completion of a plan of conversion
11 filed by a mutual company with the Director, no person shall
12 knowingly acquire, make any offer, or make any announcement
13 of an offer for any security issued or to be issued by the
14 converting mutual company in connection with its plan of
15 conversion or for any security issued or to be issued by any
16 other company authorized in item(c)(i) of subsection (6) of
17 this Section and organized for purposes of effecting the
18 conversion, except in compliance with the maximum purchase
19 limitations imposed by item (i) of subsection (6) of this
20 Section or the terms of the plan of conversion as approved by
21 the Director.
22 (6) Required provisions in a plan of conversion. The
23 following provisions shall be included in the plan:
24 (a) Reasons for conversion. The plan shall set
25 forth the reasons for the proposed conversion.
26 (b) Effect of conversion on existing policies.
27 (i) The plan shall provide that all policies
28 in force on the effective date of conversion shall
29 continue to remain in force under the terms of those
30 policies, except that any voting rights of the
31 policyholders provided for under the policies or
32 under this Code and any contingent liability policy
33 provisions of the type described in Section 55 of
34 this Code shall be extinguished on the effective
HB2226 Engrossed -15- LRB9001538JSgc
1 date of the conversion.
2 (ii) The plan shall further provide that
3 holders of participating policies in effect on the
4 date of conversion shall continue to have the right
5 to receive dividends as provided in the
6 participating policies, if any.
7 (iii) Except for a mutual company's
8 participating life policies, guaranteed renewable
9 accident and health policies, and non-cancelable
10 accident and health policies, the converted stock
11 company may issue the insured a nonparticipating
12 policy as a substitute for the participating policy
13 upon the renewal date of a participating policy.
14 (c) Subscription rights to eligible members.
15 (i) The plan shall provide that each eligible
16 member is to receive, without payment,
17 nontransferable subscription rights to purchase a
18 portion of the capital stock of the converted stock
19 company. As an alternative to subscription rights
20 in the converted stock company, the plan may provide
21 that each eligible member is to receive, without
22 payment, nontransferable subscription rights to
23 purchase a portion of the capital stock of: (A) a
24 corporation organized and owned by the mutual
25 company for the purpose of acquiring or purchasing
26 and holding all the stock of the converted stock
27 company; or (B) a stock insurance company owned by
28 the mutual company into which the mutual company
29 will be merged.
30 (ii) The subscription rights shall be
31 allocated in whole shares among the eligible members
32 using a fair and equitable formula. This formula
33 may but need not take into account how the different
34 classes of policies of the eligible members
HB2226 Engrossed -16- LRB9001538JSgc
1 contributed to the surplus of the mutual company.
2 (d) Oversubscription. The plan shall provide a fair
3 and equitable means for the allocation of shares of
4 capital stock in the event of an oversubscription to
5 shares by eligible members exercising subscription rights
6 received pursuant to item (c) of subsection (6) of this
7 Section.
8 (e) Undersubscription. The plan shall provide that
9 any shares of capital stock not subscribed to by eligible
10 members exercising subscription rights received under
11 item (c) of subsection (6) of this Section shall be sold
12 in a public offering through an underwriter. If the
13 number of shares of capital stock not subscribed by
14 eligible members is so small or the additional time or
15 expense required for a public offering of those shares
16 would be otherwise unwarranted under the circumstances in
17 number as to not warrant the expense of a public
18 offering, the plan of conversion may provide for the
19 purchase of the unsubscribed shares by a private
20 placement or other alternative method approved by the
21 Director that is fair and equitable to the eligible
22 members.
23 (f) Total price of stock. The plan shall set the
24 total price of the capital stock equal to the estimated
25 pro forma market value of the converted stock company
26 based upon an independent evaluation by a qualified
27 person. The pro forma market value may be the value that
28 is estimated to be necessary to attract full subscription
29 for the shares as indicated by the independent
30 evaluation.
31 (g) Purchase price of each share. The plan shall
32 set the purchase price of each share of capital stock
33 equal to any reasonable amount that will not inhibit the
34 purchase of shares by members. The purchase price of
HB2226 Engrossed -17- LRB9001538JSgc
1 each share shall be uniform for all purchasers except the
2 price may be modified by the Director by reason of his
3 consideration of a plan for the purchase of unsubscribed
4 stock pursuant to item (e) of subsection (6) of this
5 Section.
6 (h) Closed block of business for participating
7 life policies of a Class 1 mutual company.
8 (i) The plan shall provide that a Class 1
9 mutual company's participating life policies in
10 force on the effective date of the conversion shall
11 be operated by the converted stock company for
12 dividend purposes as a closed block of participating
13 business except that any or all classes of group
14 participating policies may be excluded from the
15 closed block.
16 (ii) The plan shall establish one or more
17 segregated accounts for the benefit of the closed
18 block of business and shall allocate to those
19 segregated accounts enough assets of the mutual
20 company so that the assets together with the revenue
21 from the closed block of business are sufficient to
22 support the closed block including, but not limited
23 to, the payment of claims, expenses, taxes, and any
24 dividends that are provided for under the terms of
25 the participating policies with appropriate
26 adjustments in the dividends for experience changes.
27 The plan shall be accompanied by an opinion of a
28 qualified actuary or an appointed actuary who meets
29 the standards set forth in the insurance laws or
30 regulations for the submission of actuarial opinions
31 as to the adequacy of reserves or assets. The
32 opinion shall relate to the adequacy of the assets
33 allocated to the segregated accounts in support of
34 the closed block of business. The actuarial opinion
HB2226 Engrossed -18- LRB9001538JSgc
1 shall be based on methods of analysis deemed
2 appropriate for those purposes by the Actuarial
3 Standards Board.
4 (iii) The amount of assets allocated to the
5 segregated accounts of the closed block shall be
6 based upon the mutual company's last annual
7 statement that is updated to the effective date of
8 the conversion.
9 (iv) The converted stock company shall keep a
10 separate accounting for the closed block and shall
11 make and include in the annual statement to be filed
12 with the Director each year a separate statement
13 showing the gains, losses, and expenses properly
14 attributable to the closed block.
15 (v) Periodically, upon the Director's
16 approval, those assets allocated to the closed block
17 as provided in subitem (ii) of item (h) of
18 subsection (6) of this Section that are in excess of
19 the amount of assets necessary to support the
20 remaining polices in the closed block shall revert
21 to the benefit of the converted stock company.
22 (vi) The Director may waive the requirement
23 for the establishment of a closed block of business
24 if the Director deems it to be in the best interests
25 of the participating policyholders of the mutual
26 insurer to do so.
27 (i) Limitations on acquisition of control. The plan
28 shall provide that any one person or group of persons
29 acting in concert may not acquire, through public
30 offering or subscription rights, more than 5% of the
31 capital stock of the converted stock company for a period
32 of 5 years from the effective date of the plan except
33 with the approval of the Director. This limitation does
34 not apply to any entity that is to purchase 100% of the
HB2226 Engrossed -19- LRB9001538JSgc
1 capital stock of the converted company as part of the
2 plan of conversion approved by the Director or to a
3 purchase of stock by a tax-qualified employee benefit
4 plan pursuant to subscription grants granted to that plan
5 as authorized under item (b) (c) of subsection (7) of
6 this Section and to a purchase of unsubscribed stock
7 pursuant to item (e) of subsection (6) of this Section.
8 (7) Optional provisions in a plan of conversion. The
9 following provisions may be included in the plan:
10 (a) Directors and officers subscription rights.
11 (i) The plan may provide that the directors
12 and officers of the mutual company shall receive,
13 without payment, nontransferable subscription rights
14 to purchase capital stock of the converted stock
15 company or the stock of another corporation that is
16 participating in the conversion plan as provided in
17 subitem (i) of item (c) of subsection (6) of this
18 Section. Those subscription rights shall be
19 allocated among the directors and officers by a fair
20 and equitable formula.
21 (ii) The total number of shares that may be
22 purchased under subitem (i) of item (a) of
23 subsection (7) of this Section may not exceed 35% of
24 the total number of shares to be issued in the case
25 of a mutual company with total assets of less than
26 $50 million or 25% of the total shares to be issued
27 in the case of a mutual company with total assets of
28 more than $500 million. For mutual companies with
29 total assets between $50 million and $500 million,
30 the total number of shares that may be purchased
31 shall be interpolated.
32 (iii) Stock purchased by a director or officer
33 under subitem (i) of item (a) of subsection (7) of
34 this Section may not be sold within one year
HB2226 Engrossed -20- LRB9001538JSgc
1 following the effective date of the conversion.
2 (iv) The plan may also provide that a director
3 or officer or person acting in concert with a
4 director or officer of the mutual company may not
5 acquire any capital stock of the converted stock
6 company for 3 years after the effective date of the
7 plan, except through a broker or dealer, without the
8 permission of the Director. That provision may not
9 apply to prohibit the directors and officers from
10 purchasing stock through subscription rights
11 received in the plan under subitem (i) of item (a)
12 of subsection (7) of this Section.
13 (b) Tax-qualified employee stock benefit plan. The
14 plan may allocate to a tax-qualified employee benefit
15 plan nontransferable subscription rights to purchase up
16 to 10% of the capital stock of the converted stock
17 company or the stock of another corporation that is
18 participating in the conversion plan as provided in
19 subitem (i) of item (c) of subsection (6) of this
20 Section. That employee benefit plan shall be entitled to
21 exercise its subscription rights regardless of the amount
22 of shares purchased by other persons.
23 (8) Alternative plan of conversion. The board of
24 directors may adopt a plan of conversion that does not rely
25 in whole or in part upon the issuance to members of
26 non-transferable subscription rights to purchase stock of the
27 converted stock company if the Director finds that the plan
28 does not prejudice the interests of the members, is fair and
29 equitable, and is based upon an independent appraisal of the
30 market value of the mutual company by a qualified person and
31 a fair and equitable allocation of any consideration to be
32 given eligible members. The Director may retain, at the
33 mutual company's expense, any qualified expert not otherwise
34 a part of the Director's staff to assist in reviewing whether
HB2226 Engrossed -21- LRB9001538JSgc
1 the plan may be approved by the Director.
2 (9) Effective date of the plan. A plan shall become
3 effective when the Director has approved the plan, the
4 members have approved the plan, and the revised articles of
5 incorporation have been adopted.
6 (10) Rights of members whose policies are issued after
7 adoption of the plan and before its effective date.
8 (a) Notice. All members whose policies are issued
9 after the proposed plan has been adopted by the board of
10 directors and before the effective date of the plan shall
11 be given written notice of the plan of conversion. The
12 notice shall specify the member's right to rescind that
13 policy as provided in item (b) of subsection (10) of this
14 Section within 45 days after the effective date of the
15 plan. A copy of the plan or a summary of the plan shall
16 accompany the notice. The form of the notice shall be
17 filed with and approved by the Director.
18 (b) Option to rescind. Any member entitled to
19 receive the notice described in item (a) of subsection
20 (10) of this Section shall be entitled to rescind his or
21 her policy and receive a full refund of any amounts paid
22 for the policy or contract within 10 days after the
23 receipt of the notice.
24 (11) Corporate existence.
25 (a) Upon the conversion of a mutual company to a
26 converted stock company according to the provisions of
27 this Section, the corporate existence of the mutual
28 company shall be continued in the converted stock
29 company. All the rights, franchises, and interests of
30 the mutual company in and to every type of property,
31 real, personal, and mixed, and things in action thereunto
32 belonging, is deemed transferred to and vested in the
33 converted stock company without any deed or transfer.
34 Simultaneously, the converted stock company is deemed to
HB2226 Engrossed -22- LRB9001538JSgc
1 have assumed all the obligations and liabilities of the
2 mutual company.
3 (b) The directors and officers of the mutual
4 company, unless otherwise specified in the plan of
5 conversion, shall serve as directors and officers of the
6 converted stock company until new directors and officers
7 of the converted stock company are duly elected pursuant
8 to the articles of incorporation and bylaws of the
9 converted stock company.
10 (12) Conflict of interest. No director, officer, agent,
11 or employee of the mutual company or any other person shall
12 receive any fee, commission, or other valuable consideration,
13 other than his or her usual regular salary and compensation,
14 for in any manner aiding, promoting, or assisting in the
15 conversion except as set forth in the plan approved by the
16 Director. This provision does not prohibit the payment of
17 reasonable fees and compensation to attorneys, accountants,
18 and actuaries for services performed in the independent
19 practice of their professions, even if the attorney,
20 accountant, or actuary is also a Director of the mutual
21 company.
22 (13) Costs and expenses. All the costs and expenses
23 connected with a plan of conversion shall be paid for or
24 reimbursed by the mutual company or the converted stock
25 company except where the plan provides either for a holding
26 company to acquire the stock of the converted stock company
27 or for the merger of the mutual company into a stock
28 insurance company as provided in subitem (i) of item (c) of
29 subsection (6) of this Section. In those cases, the acquiring
30 holding company or the stock insurance company shall pay for
31 or reimburse all the costs and expenses connected with the
32 plan.
33 (14) Failure to give notice. If the mutual company
34 complies substantially and in good faith with the notice
HB2226 Engrossed -23- LRB9001538JSgc
1 requirements of this Section, the mutual company's failure to
2 give any member or members any required notice does not
3 impair the validity of any action taken under this Section.
4 (15) Limitation of actions. Any action challenging the
5 validity of or arising out of acts taken or proposed to be
6 taken under this Section shall be commenced within 30 days
7 after the effective date of the plan.
8 (Source: P.A. 88-662, eff. 9-16-94.)
9 (215 ILCS 5/144.2) (from Ch. 73, par. 756.2)
10 Sec. 144.2. Notification of insurance accident and
11 health business.
12 (a) Upon notice by the Director, a company having direct
13 premium income for the kinds of business authorized in Class
14 1, clause (b), or Class 2, clause (a), of Section 4 must file
15 with the Director supplemental information regarding its
16 insurance accident and health business. The Director shall
17 by rule establish standards to determine the companies to be
18 given notice.
19 (b) The notice prescribed by this Section may require
20 the company to provide information concerning, but not
21 limited to, the following:
22 (1) adequacy of rates;
23 (2) marketing methodology and acquisition expenses;
24 (3) underwriting standards;
25 (4) recordkeeping and statistical systems;
26 (5) claim systems and claim reserving systems;
27 (6) reinsurance; and
28 (7) the general financial condition of the company.
29 (Source: P.A. 86-753; 86-1028; 87-1090.)
30 (215 ILCS 5/147.3 new)
31 Sec. 147.3. Issuance of capital notes by domestic
32 companies.
HB2226 Engrossed -24- LRB9001538JSgc
1 (a) A domestic company may at any time or from time to
2 time issue capital notes pursuant to this Section in an
3 aggregate principal amount not exceeding (1) 25% of its total
4 adjusted capital (including the aggregate principal amount of
5 outstanding capital notes and outstanding surplus notes or
6 guaranty fund certificates and guaranty capital shares) as of
7 the end of the immediately preceding calendar year less (2)
8 the aggregate principal amount of outstanding capital notes
9 and outstanding surplus notes or guaranty fund certificates
10 and guaranty capital shares; provided, however, that capital
11 notes shall not be issued for an aggregate principal amount
12 that would cause the aggregate principal amount for all of
13 the insurer's capital notes scheduled to mature in any
14 calendar year to exceed 5%, or the aggregate principal amount
15 of all of the insurer's capital notes scheduled to mature in
16 any 3 consecutive calendar years to exceed 12%, of the
17 insurer's total adjusted capital as of the end of the
18 calendar year immediately preceding the issuance of the
19 capital notes. The aggregate amount of capital notes and
20 surplus notes or guaranty fund certificates and guaranty
21 capital shares is at all times limited to 33 1/3% of total
22 adjusted capital. Any aggregate amount in excess of this
23 limit shall reduce the amount of capital notes included in
24 the insurer's total adjusted capital.
25 (b) No insurer shall issue capital notes pursuant to
26 this Section unless the form and terms thereof shall have
27 been approved by the Director. The term of any capital note
28 shall be no less than 5 years.
29 (c) An insurer with a capital note outstanding shall
30 file a report with the Director at the same time that the
31 insurer files its Annual Statement and at such other times as
32 the Director determines necessary. The Director may by rule
33 establish times for and the content of these reports.
34 (d) The insurer shall not pay or redeem the principal
HB2226 Engrossed -25- LRB9001538JSgc
1 amount of any capital notes, make any sinking fund payment,
2 or pay any interest on the notes, and the principal, payment,
3 and interest shall not become due or payable if, based on the
4 preceding year-end annual statement filed with the Director:
5 (1)(A) The insurer's total adjusted capital is less
6 than the insurer's company action level RBC or (B) the
7 insurer's total adjusted capital is less than the product
8 of 1.25 and its company action level RBC and there is a
9 negative trend, as determined in accordance with the
10 Article IIA of this Code; or
11 (2) the aggregate of all payments or redemptions
12 made during a calendar year would, if made immediately
13 prior to the preceding year-end, have caused (A) the
14 insurer's total adjusted capital to be less than the
15 insurer's company action level RBC or (B) the insurer's
16 total adjusted capital at such time to be less than the
17 product of 1.25 and its company action level RBC and
18 there is a negative trend, as determined in accordance
19 with Article IIA of this Code.
20 Notwithstanding items (1) and (2), upon request by the
21 insurer, the Director may approve, in whole or in part, any
22 payment or redemption on the capital notes if and at such
23 time or times as in his or her judgment the financial
24 condition of the insurer warrants. The amount of the
25 redemptions or payments of principal amounts of any capital
26 notes that cannot be made as the result of the provisions of
27 this subsection may accumulate at the rate of interest of the
28 capital notes.
29 (e) Capital notes issued pursuant to this Section:
30 (1) may provide (A) for interest payments at fixed
31 or adjustable rates, sinking fund payments, and payments
32 and redemptions of principal, in each case in accordance
33 with the terms of the capital note and without the prior
34 approval of the Director except to the extent that such
HB2226 Engrossed -26- LRB9001538JSgc
1 approval is required pursuant to this subsection or
2 subsection (d) of this Section, (B) that the capital
3 notes automatically become due and payable in the event
4 the insurer becomes subject to an order of
5 rehabilitation, liquidation, or conservation granted
6 pursuant to a proceeding under Article XIII of this Code,
7 and (C) for such other features as the Director
8 determines are appropriate for capital notes issued
9 according to this Section; and
10 (2) shall provide that if at the end of any
11 calendar year the total amount of the insurer's total
12 adjusted capital (including the aggregate principal
13 amount of outstanding capital notes and outstanding
14 surplus notes or guaranty fund certificates and guaranty
15 capital shares) is less than 3 times the aggregate
16 principal amount of capital notes outstanding and surplus
17 notes or guaranty fund certificates and guaranty capital
18 shares, the Director may notify the insurer that the
19 financial condition of the insurer does not warrant the
20 payment or redemption or sinking fund payment, in whole
21 or in part, on the capital notes. Such action by the
22 Director shall, without any action on the part of the
23 insurer or any other person, automatically defer payment
24 or redemption until such time as the Director finds that
25 the financial condition warrants payment or redemption.
26 The amount of redemptions or payments of principal
27 amounts of any capital notes so deferred may accumulate
28 at the rate of interest of the capital notes.
29 (f) The outstanding principal of a capital note issued
30 pursuant to this Section shall be considered part of the
31 insurer's total adjusted capital, but shall not be considered
32 part of the insurer's surplus; provided, however, (1) that,
33 in the case of any capital note maturing 15 years or less
34 from the year in which the capital note is issued, one-fifth
HB2226 Engrossed -27- LRB9001538JSgc
1 of the aggregate principal amount of the capital note shall
2 be subtracted from total adjusted capital in each year
3 starting with the fifth year immediately preceding the
4 calendar year in which the capital note is scheduled to
5 mature; and (2) that, in the case of any capital note
6 maturing more than 15 years from the year in which the
7 capital note is issued, one-tenth of the aggregate principal
8 amount of the capital note shall be subtracted from total
9 adjusted capital in each year starting with the tenth year
10 immediately preceding the calendar year in which the capital
11 note is scheduled to mature, and further provided that, in no
12 event shall the amount included in total adjusted capital for
13 any capital note exceed the principal amount, at issue, of
14 the outstanding capital note less the aggregate of all
15 sinking fund payments made on the capital note. The insurer
16 shall disclose the aggregate principal amount of capital
17 notes then outstanding as a liability on its financial
18 statements filed with the Director pursuant to this Code.
19 (g) As used in this Section, the terms "total adjusted
20 capital", "company action level RBC", and "authorized control
21 level RBC" shall have the meanings given those terms in
22 Article IIA of this Code.
23 (215 ILCS 5/162) (from Ch. 73, par. 774)
24 Sec. 162. Certificate of Merger or Consolidation or Plan
25 of Exchange and Certificate of Approval.)
26 (1) Upon the execution of an agreement of merger or
27 consolidation or plan of exchange, there shall be delivered
28 to the Director:
29 (a) two duplicate originals of the agreement or
30 plan;
31 (b) affidavits of officers of each of the companies
32 setting forth the facts necessary to show that all
33 requirements of law with respect to notices to persons
HB2226 Engrossed -28- LRB9001538JSgc
1 entitled to vote have been complied with;
2 (c) certificates of the secretaries or assistant
3 secretaries or corresponding officers of each of the
4 companies, in case of a merger or consolidation, or of
5 the company to be acquired in case of a plan of exchange,
6 certifying to the number of shares, if any, outstanding,
7 the number of shares voted for and against such agreement
8 or plan, and further in the case of a merger or
9 consolidation (1) the number of policyholders represented
10 at the meeting at which the agreement was considered, and
11 (2) the number of votes cast by policyholders for and
12 against such agreement or (3) in the case of a fraternal
13 benefit society, the number of delegates of the supreme
14 legislative or governing body, and the number of votes
15 cast by the delegates for and against the agreement;
16 (d) the certificates required by section 171;
17 (e) if the surviving or new company is a domestic
18 company and any foreign or alien company is a party to
19 the merger or consolidation and the laws of the state or
20 country under which such foreign or alien company is
21 incorporated require approval of the merger or
22 consolidation by an official of such state or country, a
23 certificate of approval of such official; and
24 (f) in case of consolidation where the new company
25 is a foreign or alien company, an instrument appointing
26 the Director and his or her successor or successors in
27 office, the attorney of such company for service of
28 process, containing the same provisions and having the
29 same effect as the instrument required of a foreign or
30 alien company in order to be admitted to transact
31 business in this State.
32 In addition, the Director shall be provided, in
33 substantially the same form, the information required under
34 Article VIII 1/2 of this Code.
HB2226 Engrossed -29- LRB9001538JSgc
1 (2) In case the surviving or new company is a domestic
2 company, if the Director finds that:
3 (a) the agreement of merger or consolidation is in
4 accordance with the provisions of this Article and not
5 inconsistent with the laws and the Constitutions of this
6 State and the United States;
7 (b) the surviving or new company has complied with
8 all applicable provisions of this Code; and
9 (c) no reasonable objection exists to such merger
10 or consolidation; and
11 (d) the standards established under Article
12 VIII 1/2 are satisfied;
13 he or she shall approve the agreement. The provisions of any
14 law with reference to age limits and medical examination
15 shall be inoperative in so far as agreements of merger or
16 consolidation are concerned. If the agreement of merger or
17 consolidation be approved by the Director, he or she shall
18 file the affidavits and certificates and one of the duplicate
19 originals of the agreement in his or her office, endorse upon
20 the other duplicate original his or her approval thereof, and
21 deliver it, together with a certificate of merger or
22 consolidation, as the case may be, to the surviving or new
23 company. In the case of a consolidation, the Director shall
24 also issue a certificate of authority to the new company.
25 (3) In case the surviving or new company is a foreign or
26 alien company, if the Director finds that:
27 (a) the agreement of merger or consolidation is in
28 accordance with the provisions of this Article and not
29 inconsistent with the laws and the Constitutions of this
30 State and the United States;
31 (b) the agreement of merger or consolidation
32 provides for the assumption by the new or surviving
33 company of all the liabilities and obligations of the
34 companies parties to the merger or consolidation and
HB2226 Engrossed -30- LRB9001538JSgc
1 otherwise affords proper protection for creditors and
2 policyholders and that such provisions are not
3 inconsistent with the laws of the state or country of
4 incorporation of such new or surviving company;
5 (c) the surviving or new company has complied with
6 all applicable provisions of this Code; and
7 (d) no reasonable objection exists to such merger
8 or consolidation; and
9 (e) the standards established under Article
10 VIII 1/2 are satisfied;
11 he or she shall approve the agreement. If the agreement be
12 approved by the Director, he or she shall file the affidavits
13 and certificates and one of the duplicate originals of the
14 agreement in his or her office, endorse upon the other
15 duplicate original his or her approval thereof, and deliver
16 it, together with a certificate of approval of the merger or
17 consolidation, as the case may be, to the surviving or new
18 company.
19 (4) In the case of a plan of exchange, if the Director
20 finds that the parties to the exchange have established that:
21 (a) the plan, if effective, will not tend adversely
22 to affect the financial stability or management of any
23 domestic company which is a party thereto or the general
24 capacity or intention to continue the safe and prudent
25 transaction of the insurance business of such domestic
26 company or companies;
27 (b) the interests of the policyholders and
28 shareholders of each domestic insurance company which is
29 a party to the plan are protected; and
30 (c) the competence, experience and integrity of
31 those persons who would control the operation of the
32 domestic company are such as to be in the best interests
33 of the policyholders of such company to permit such
34 exchange;
HB2226 Engrossed -31- LRB9001538JSgc
1 (d) the terms and conditions of the plan are fair
2 and reasonable; and
3 (e) the standards established under Article
4 VIII 1/2 are satisfied;
5 he or she shall approve the plan of exchange. If the plan of
6 exchange be approved by the Director, he or she shall file
7 the affidavits and certificates and one of the duplicate
8 originals of the plan of exchange in his or her office,
9 endorse upon the other duplicate original his or her approval
10 thereof, and deliver it, together with a certificate of
11 approval of the plan of exchange to the domestic company.
12 (5) If the Director refuses to approve the agreement of
13 merger or consolidation, or plan of exchange, notice of such
14 refusal, assigning the reasons therefor, shall be given in
15 writing by the Director to each of the companies party
16 thereto, within 60 days from the date of the delivery of such
17 agreements or plan to him or her, and he or she shall grant
18 any of such companies a hearing upon request. The hearing
19 shall be held within 30 days of the Director's receipt of
20 request for hearing. All persons to whom it is proposed to
21 issue securities in such agreements or exchange shall have a
22 right to appear. Within 30 days after the close of the
23 hearing the Director shall approve or disapprove or place
24 conditions precedent upon his or her approval of the merger
25 or consolidation or plan by issuing a written order stating
26 his or her determination and the reasons therefor therefore.
27 (Source: P.A. 82-498.)
28 (215 ILCS 5/173) (from Ch. 73, par. 785)
29 Sec. 173. Reinsurance authorized.
30 (a) Subject to the provisions of this Article, any
31 domestic company may, by a reinsurance agreement, accept any
32 part or all of any risks of the kind which it is authorized
33 to insure and it may cede all or any part of its risks to
HB2226 Engrossed -32- LRB9001538JSgc
1 another solvent company having the power to make such
2 reinsurance. It may take credit for the reserves on such
3 ceded risks to the extent reinsured subject to the exceptions
4 provided in Sections 173.1 through 173.5.
5 (b) The purpose of this Article is to protect the
6 interest of insureds, claimants, ceding insurers, assuming
7 insurers, and the public generally. The legislature hereby
8 declares its intent is to ensure adequate regulation of
9 insurers and reinsurers and adequate protection for those to
10 whom they owe obligations. In furtherance of that State
11 interest, the legislature hereby provides a mandate that upon
12 the insolvency of a non-U.S. insurer or reinsurer that
13 provides security to fund its U.S. obligations in accordance
14 with this Article, the assets representing the security shall
15 be maintained in the United States and claims shall be filed
16 and valued by the state insurance official with regulatory
17 oversight, and the assets shall be distributed in accordance
18 with the insurance laws of the state in which the trust is
19 domiciled that are applicable to the liquidation of domestic
20 U.S. insurance companies. The legislature declares that the
21 matters contained in this Article are fundamental to the
22 business of insurance in accordance with 15 U.S.C Sections
23 1011 through 1012.
24 (Source: Laws 1965, p. 1077.)
25 (215 ILCS 5/173.1) (from Ch. 73, par. 785.1)
26 Sec. 173.1. Credit allowed a domestic ceding insurer.
27 (1) Except as otherwise provided under Article VIII 1/2
28 of this Code and related provisions of the Illinois
29 Administrative Code, credit for reinsurance shall be allowed
30 a domestic ceding insurer as either an admitted asset or a
31 deduction from liability on account of reinsurance ceded only
32 when the reinsurer meets the requirements of subsection
33 (1)(A) or (B) or (C) or (D). Credit shall be allowed under
HB2226 Engrossed -33- LRB9001538JSgc
1 subsection (1)(A) or (B) only as respects cessions of those
2 kinds or classes of business in which the assuming insurer is
3 licensed or otherwise permitted to write or assume in its
4 state of domicile, or in the case of a U.S. branch of an
5 alien assuming insurer, in the state through which it is
6 entered and licensed to transact insurance or reinsurance.
7 Credit shall be allowed under subsection (1)(C) of this
8 Section only if meeting the applicable requirements of
9 subsection (1)(C), the requirements of subsection (1)(E) have
10 been satisfied must also be met.
11 (A) Credit shall be allowed when the reinsurance is
12 ceded to an assuming insurer that is authorized licensed
13 to transact insurance in this State to transact the types
14 of insurance ceded and has at least $5,000,000 in capital
15 and surplus.
16 (B) Credit shall be allowed when the reinsurance is
17 ceded to an assuming insurer that is accredited as a
18 reinsurer in this State. An accredited reinsurer is one
19 that:
20 (1) files with the Director evidence of its
21 submission to this State's jurisdiction;
22 (2) submits to this State's authority to
23 examine its books and records;
24 (3) is licensed to transact insurance or
25 reinsurance in at least one state, or in the case of
26 a U.S. branch of an alien assuming insurer is
27 entered through and licensed to transact insurance
28 or reinsurance in at least one state;
29 (4) files annually with the Director a copy of
30 its annual statement filed with the insurance
31 department of its state of domicile and a copy of
32 its most recent audited financial statement; and
33 (5) maintains a surplus as regards
34 policyholders in an amount that is not less than
HB2226 Engrossed -34- LRB9001538JSgc
1 $20,000,000 and whose accreditation has been
2 approved by the Director. No credit shall be
3 allowed a domestic ceding insurer, if the assuming
4 insurers' accreditation has been revoked by the
5 Director after notice and hearing.
6 (C)(1) Credit shall be allowed when the reinsurance
7 is ceded to an assuming insurer that maintains a
8 trust fund in a qualified United States financial
9 institution, as defined in subsection 3(B), for the
10 payment of the valid claims of its United States
11 policyholders and ceding insurers, their assigns and
12 successors in interest. The assuming insurer shall
13 report annually to the Director information
14 substantially the same as that required to be
15 reported on the NAIC annual and quarterly financial
16 statement form by authorized licensed insurers and
17 any other financial information that to enable the
18 Director deems necessary to determine the financial
19 condition of the assuming insurer and the
20 sufficiency of the trust fund. The assuming insurer
21 shall submit to examination of its books and records
22 by the Director and bear the expense of examination.
23 (2)(a) Credit for reinsurance shall not be
24 granted under this subsection unless the form of the
25 trust and any amendments to the trust have been
26 approved by:
27 (i) the regulatory official of the state
28 where the trust is domiciled; or
29 (ii) the regulatory official of another
30 state who, pursuant to the terms of the trust
31 instrument, has accepted principal regulatory
32 oversight of the trust.
33 (b) The form of the trust and any trust
34 amendments also shall be filed with the regulatory
HB2226 Engrossed -35- LRB9001538JSgc
1 official of every state in which the ceding insurer
2 beneficiaries of the trust are domiciled. The trust
3 instrument shall provide that contested claims shall
4 be valid and enforceable upon the final order of any
5 court of competent jurisdiction in the United
6 States. The trust shall vest legal title to its
7 assets in its trustees for the benefit of the
8 assuming insurer's United States policyholders and
9 ceding insurees and their assigns and successors in
10 interest. The trust and the assuming insurer shall
11 be subject to examination as determined by the
12 Director.
13 (c) The trust shall remain in effect for as
14 long as the assuming insurer has outstanding
15 obligations due under the reinsurance agreements
16 subject to the trust. No later than February 28 of
17 each year the trustee of the trust shall report to
18 the Director in writing the balance of the trust and
19 a list of the trust's investments at the preceding
20 year-end and shall certify the date of termination
21 of the trust, if so planned, or certify that the
22 trust will not expire prior to the next following
23 December 31.
24 (3) The following requirements apply to the
25 following categories of assuming insurer:
26 (a) The trust fund for a single assuming
27 insurer shall consist of funds in trust in an amount
28 not less than the assuming insurer's liabilities
29 attributable to reinsurance ceded by U.S. ceding
30 insurers In the case of a single assuming insurer,
31 the trust shall consist of a trusteed account
32 representing the assuming insurer's liabilities
33 attributable to business written in the United
34 States, and, in addition, the assuming insurer shall
HB2226 Engrossed -36- LRB9001538JSgc
1 maintain a trusteed surplus of not less than
2 $20,000,000.
3 (b)(i) In the case of a group including
4 incorporated and individual unincorporated
5 underwriters:
6 (I) for reinsurance ceded under
7 reinsurance agreements with an inception,
8 amendment, or renewal date on or after August
9 1, 1995, the trust shall consist of a trusteed
10 account in an amount not less than the group's
11 several liabilities attributable to business
12 ceded by U.S. domiciled ceding insurers to any
13 member of the group;
14 (II) for reinsurance ceded under
15 reinsurance agreements with an inception date
16 on or before July 31, 1995 and not amended or
17 renewed after that date, notwithstanding the
18 other provisions of this Act, the trust shall
19 consist of a trusteed account in an amount not
20 less than the group's several insurance and
21 reinsurance liabilities attributable to
22 business written in the United States; and
23 (III) in addition to these trusts, the
24 group shall maintain in trust a trusteed
25 surplus of which not less than $100,000,000
26 shall be held jointly for the benefit of the
27 U.S. domiciled ceding insurers of any member of
28 the group for all years of account., the trust
29 shall consist of a trusteed account
30 representing the group's liabilities
31 attributable to business written in the United
32 States, and, in addition, the group shall
33 maintain a trusteed surplus of which
34 $100,000,000 shall be held jointly for the
HB2226 Engrossed -37- LRB9001538JSgc
1 benefit of United States ceding insurers of any
2 member of the group;
3 (ii) The incorporated members of the group shall
4 not be engaged in any business other than underwriting as
5 a member of the group and shall be subject to the same
6 level of solvency regulation and control by the group's
7 domiciliary regulator as are the unincorporated members.;
8 (iii) Within 90 days after its financial statements
9 are due to be filed with the group's domiciliary
10 regulator, the group shall provide to the Director an
11 annual certification by the group's domiciliary regulator
12 of the solvency of each underwriter member, or if a
13 certification is unavailable, financial statements
14 prepared by independent public accountants of each
15 underwriter member of the group. and the group shall make
16 available to the Director an annual certification of the
17 solvency of each underwriter by the group's domiciliary
18 regulator and its independent public accountants.
19 (c)(2) In the case of a group of incorporated
20 insurers under common administration, the group
21 shall: that complies with the filing requirements
22 contained in the previous paragraph, that has
23 (i) have continuously transacted an insurance
24 business outside the United States for at least 3
25 years immediately before making application for
26 accreditation; and submits to this State's authority
27 to examine its books and records and bears the
28 expense of the examination, and that has
29 (ii) maintain aggregate policyholders' surplus
30 of not less than $10,000,000,000;,
31 (iii) maintain a trust the trust shall be in
32 an amount not less than equal to the group's several
33 liabilities attributable to business ceded by United
34 States domiciled ceding insurers to any member of
HB2226 Engrossed -38- LRB9001538JSgc
1 the group pursuant to reinsurance contracts issued
2 in the name of the group;,
3 (iv) in addition, plus the group shall
4 maintain a joint trusteed surplus of which not less
5 than $100,000,000 shall be held jointly for the
6 benefit of the United States ceding insurers of any
7 member of the group as additional security for these
8 liabilities; , and each member of the group shall
9 (v) within 90 days after its financial
10 statements are due to be filed with the group's
11 domiciliary regulator, make available to the
12 Director an annual certification of each underwriter
13 the member's solvency by the member's domiciliary
14 regulator and financial statements of each
15 underwriter member of the group prepared by its
16 independent public accountant.
17 (3) The trust shall be established in a form
18 approved by the Director. The trust instrument shall
19 provide that contested claims shall be valid and
20 enforceable upon the final order of any court of
21 competent jurisdiction in the United States. The
22 trust shall vest legal title to its assets in the
23 trustees of the trust for its United States
24 policyholders and ceding insurers, their assigns and
25 successors in interest. The trust and the assuming
26 insurer shall be subject to examination as
27 determined by the Director. The trust described
28 herein must remain in effect for as long as the
29 assuming insurer shall have outstanding obligations
30 due under the reinsurance agreements subject to the
31 trust.
32 (4) No later than February 28 of each year the
33 trustees of the trust shall report to the Director
34 in writing setting forth the balance of the trust
HB2226 Engrossed -39- LRB9001538JSgc
1 and listing the trust's investments at the preceding
2 year end and shall certify the date of termination
3 of the trust, if so planned, or certify that the
4 trust shall not expire prior to the next following
5 December 31.
6 (D) Credit shall be allowed when the reinsurance is
7 ceded to an assuming insurer not meeting the requirements
8 of subsection (1) (A), (B), or (C) but only with respect
9 to the insurance of risks located in jurisdictions where
10 that reinsurance is required by applicable law or
11 regulation of that jurisdiction.
12 (E) If the assuming insurer is not licensed to
13 transact insurance in this State or an accredited
14 reinsurer in this State, the credit permitted by
15 subsection (1)(C) shall not be allowed unless the
16 assuming insurer agrees in the reinsurance agreements:
17 (1) that in the event of the failure of the
18 assuming insurer to perform its obligations under
19 the terms of the reinsurance agreement, the assuming
20 insurer, at the request of the ceding insurer, shall
21 submit to the jurisdiction of any court of competent
22 jurisdiction in any state of the United States, will
23 comply with all requirements necessary to give the
24 court jurisdiction, and will abide by the final
25 decision of the court or of any appellate court in
26 the event of an appeal; and
27 (2) to designate the Director or a designated
28 attorney as its true and lawful attorney upon whom
29 may be served any lawful process in any action,
30 suit, or proceeding instituted by or on behalf of
31 the ceding company.
32 This provision is not intended to conflict with or
33 override the obligation of the parties to a reinsurance
34 agreement to arbitrate their disputes, if an obligation
HB2226 Engrossed -40- LRB9001538JSgc
1 to arbitrate is created in the agreement.
2 (F) If the assuming insurer does not meet the
3 requirements of subsection (1)(A) or (B), the credit
4 permitted by subsection (1)(C) shall not be allowed
5 unless the assuming insurer agrees in the trust
6 agreements to the following conditions:
7 (1) Notwithstanding any other provisions in
8 the trust instrument, if the trust fund is
9 inadequate because it contains an amount less than
10 the amount required by subsection (C)(3) of this
11 Section or if the grantor of the trust has been
12 declared insolvent or placed into receivership,
13 rehabilitation, liquidation, or similar proceedings
14 under the laws of its state or country of domicile,
15 the trustee shall comply with an order of the state
16 official with regulatory oversight over the trust or
17 with an order of a court of competent jurisdiction
18 directing the trustee to transfer to the state
19 official with regulatory oversight all of the assets
20 of the trust fund.
21 (2) The assets shall be distributed by and
22 claims shall be filed with and valued by the state
23 official with regulatory oversight in accordance
24 with the laws of the state in which the trust is
25 domiciled that are applicable to the liquidation of
26 domestic insurance companies.
27 (3) If the state official with regulatory
28 oversight determines that the assets of the trust
29 fund or any part thereof are not necessary to
30 satisfy the claims of the U.S. ceding insurers of
31 the grantor of the trust, the assets or part thereof
32 shall be returned by the state official with
33 regulatory oversight to the trustee for distribution
34 in accordance with the trust agreement.
HB2226 Engrossed -41- LRB9001538JSgc
1 (4) The grantor shall waive any rights
2 otherwise available to it under U.S. law that are
3 inconsistent with the provision.
4 (2) Credit A reduction from liability for the
5 reinsurance ceded by a domestic insurer to an assuming
6 insurer not meeting the requirements of subsection (1) shall
7 be allowed in an amount not exceeding the assets or
8 liabilities carried by the ceding insurer. The credit and
9 the reduction shall not exceed be in the amount of funds held
10 by or held in trust for on behalf of the ceding insurer,
11 including funds held in trust for the ceding insurer under a
12 reinsurance contract with the assuming insurer as security
13 for the payment of obligations thereunder, if the security is
14 held in the United States subject to withdrawal solely by,
15 and under the exclusive control of, the ceding insurer; or,
16 in the case of a trust, held in a qualified United States
17 financial institution, as defined in subsection (3)(B). This
18 security may be in the form of:
19 (A) Cash.
20 (B) Securities listed by the Securities Valuation
21 Office of the National Association of Insurance
22 Commissioners that conform to the requirements of Article
23 VIII of this Code that are not issued by an affiliate of
24 either the assuming or ceding company.
25 (C) Clean, irrevocable, unconditional, letters of
26 credit issued or confirmed by a qualified United States
27 financial institution, as defined in subsection (3)(A).
28 The letters of credit shall be effective issued or
29 confirmed no later than December 31 in respect of the
30 year for which filing is being made, and in the
31 possession of, or in trust for, the ceding company on or
32 before the filing due date of its annual statement, which
33 letters of credit shall be for an original term of not
34 less than one year. Letters of credit meeting applicable
HB2226 Engrossed -42- LRB9001538JSgc
1 standards of issuer acceptability as of the dates of
2 their issuance (or confirmation) shall, notwithstanding
3 the issuing (or confirming) institution's subsequent
4 failure to meet applicable standards of issuer
5 acceptability, continue to be acceptable as security
6 until their expiration, extension, renewal, modification,
7 or amendment, whichever first occurs.
8 (3)(A) For purposes of subsection 2(C), a "qualified
9 United States financial institution" means an institution
10 that:
11 (1) is organized or, in the case of a U.S.
12 office of a foreign banking organization, licensed
13 under the laws of the United States or any state
14 thereof;
15 (2) is regulated, supervised, and examined by
16 U.S. federal or state authorities having regulatory
17 authority over banks and trust companies;
18 (3) has been designated by either the Director
19 or the Securities Valuation Office of the National
20 Association of Insurance Commissioners as meeting
21 such its credit standards of financial condition and
22 standing as are considered necessary and appropriate
23 to regulate the quality of financial institutions
24 whose letters of credit will be acceptable to the
25 Director for issuing or confirming letter of credit;
26 and
27 (4) is not affiliated with the assuming
28 company.
29 (B) A "qualified United States financial
30 institution" means, for purposes of those provisions of
31 this law specifying those institutions that are eligible
32 to act as a fiduciary of a trust, an institution that:
33 (1) is organized or, in the case of the U.S.
34 branch or agency office of a foreign banking
HB2226 Engrossed -43- LRB9001538JSgc
1 organization, licensed under the laws of the United
2 States or any state thereof and has been granted
3 authority to operate with fiduciary powers;
4 (2) is regulated, supervised, and examined by
5 federal or state authorities having regulatory
6 authority over banks and trust companies; and
7 (3) is not affiliated with the assuming
8 company, however, if the subject of the reinsurance
9 contract is insurance written pursuant to Section
10 155.51 of this Code, the financial institution may
11 be affiliated with the assuming company with the
12 prior approval of the Director.
13 (Source: P.A. 87-108; 87-1090; 88-535.)
14 (215 ILCS 5/192) (from Ch. 73, par. 804)
15 Sec. 192. Duties of Director as rehabilitator;
16 termination.
17 (1) Upon the entry of an order directing rehabilitation,
18 the Director shall immediately proceed to conduct the
19 business of the company and take such steps towards removal
20 of the causes and conditions which have made such proceedings
21 necessary as may be expedient.
22 (2) The Director is authorized to deal with the property
23 and business of the company in his name as Director, or, if
24 the Court shall so order, in the name of the company. The
25 Director may, subject to the approval of the Court, sell or
26 otherwise dispose of the real and personal property, or any
27 part thereof, and sell or compromise all doubtful or
28 uncollectible debts or claims owing to the company in any
29 rehabilitation proceeding now pending or hereafter
30 instituted, except that whenever the value of any real or
31 personal property or the amount of any such debt owing to the
32 company does not exceed $25,000, the Director may sell,
33 dispose of, compromise, or compound the same upon such terms
HB2226 Engrossed -44- LRB9001538JSgc
1 as the Director deems to be in the best interest of the
2 company without obtaining approval of the court unless
3 otherwise directed by the court. The Director may solicit
4 contracts whereby a solvent company agrees to assume, in
5 whole or in part, or upon a modified basis, the liabilities
6 of a company in rehabilitation in a manner consistent with
7 subsection (4) of Section 193 of this Code.
8 (3) The Director may bring any action, claim, suit, or
9 proceeding against any director or officer of the company or
10 against any other person with respect to that person's
11 dealings with the company including, but not limited to,
12 prosecuting any action, claim, suit, or proceeding on behalf
13 of the creditors, members, policyholders, or shareholders of
14 the company. Nothing in this subsection shall be construed
15 to affect the standing of the Illinois Insurance Guaranty
16 Fund, the Illinois Life and Health Insurance Guaranty
17 Association, or the Illinois Health Maintenance Organization
18 Guaranty Association to sue or be sued under applicable law.
19 (4) (3) If at any time the Director finds that it is in
20 the best interests of policyholders, creditors and the
21 company to effect a plan of mutualization or rehabilitation,
22 the Director may submit such plan to the court for its
23 approval. Such plan, in addition to any other terms and
24 provisions as may by the Director be deemed necessary or
25 advisable, may include a provision imposing liens upon the
26 net equities of policyholders of the company, and in the case
27 of life companies, a provision imposing a moratorium upon the
28 loan or cash surrender values of the policies, for such
29 period and to such an extent as may be necessary. Notice of
30 the hearing upon any such plan shall be given in the manner
31 as may be fixed by the court and upon such hearing the court
32 may either approve or disapprove the plan or modify it in
33 such manner and to such extent as to the court shall seem
34 appropriate.
HB2226 Engrossed -45- LRB9001538JSgc
1 (5) (4) Where in such proceedings the Court has entered
2 an order for the filing of claims and it subsequently appears
3 that the total amount of all allowable claims exceed the
4 assets in the possession of the Rehabilitator, the Court may
5 upon the application of the Director authorize a distribution
6 of assets in accordance with the applicable provisions of
7 Section 210. The Director may at such time apply under this
8 Section for an order dissolving the company in accordance
9 with the applicable provisions of Section 196.
10 (6) (5) If at any time the Director finds that the
11 causes and conditions which made such proceeding necessary
12 have been removed he may petition the court for an order
13 terminating the conduct of the business by the Director and
14 permitting such company to resume possession of its property
15 and the conduct of its business and for a full discharge of
16 all liability and responsibility of the Director. No order
17 for the return to such company of its property and business
18 shall be granted unless the court after a full hearing
19 determines that the purposes of the proceeding have been
20 fully accomplished.
21 (Source: P.A. 89-206, eff. 7-21-95.)
22 (215 ILCS 5/205) (from Ch. 73, par. 817)
23 Sec. 205. Priority of distribution of general assets.
24 (1) The priorities of distribution of general assets
25 from the company's estate is to be as follows:
26 (a) The costs and expenses of administration,
27 including the expenses of the Illinois Insurance Guaranty
28 Fund, the Illinois Life and Health Insurance Guaranty
29 Association, the Illinois Health Maintenance Organization
30 Guaranty Association and of any similar organization in
31 any other state as prescribed in subsection (c) of
32 Section 545.
33 (b) Secured claims, including claims for taxes and
HB2226 Engrossed -46- LRB9001538JSgc
1 debts due the federal or any state or local government,
2 that are secured by liens perfected prior to the filing
3 of the complaint.
4 (c) Claims for wages actually owing to employees
5 for services rendered within 3 months prior to the date
6 of the filing of the complaint, not exceeding $1,000 to
7 each employee unless there are claims due the federal
8 government under paragraph (f), then the claims for wages
9 shall have a priority of distribution immediately
10 following that of federal claims under paragraph (f) and
11 immediately preceding claims of general creditors under
12 paragraph (g).
13 (d) Claims by policyholders, beneficiaries,
14 insureds and liability claims against insureds covered
15 under insurance policies and insurance contracts issued
16 by the company, and claims of the Illinois Insurance
17 Guaranty Fund, the Illinois Life and Health Insurance
18 Guaranty Association, the Illinois Health Maintenance
19 Organization Guaranty Association and any similar
20 organization in another state as prescribed in Section
21 545.
22 (e) Claims by policyholders, beneficiaries, and
23 insureds, the allowed values of which were determined by
24 estimation under paragraph (b) of subsection (4) of
25 Section 209.
26 (f) Any other claims due the federal government.
27 (g) All other claims of general creditors not
28 falling within any other priority under this Section
29 including claims for taxes and debts due any state or
30 local government which are not secured claims and claims
31 for attorneys' fees incurred by the company in contesting
32 its conservation, rehabilitation, or liquidation.
33 (h) Claims of guaranty guarantee fund certificate
34 holders, guaranty guarantee capital shareholders, capital
HB2226 Engrossed -47- LRB9001538JSgc
1 note holders, and surplus note holders.
2 (i) Proprietary claims of shareholders, members, or
3 other owners.
4 (2) Within 120 days after the issuance of an Order of
5 Liquidation with a finding of insolvency against a domestic
6 company, the Director shall make application to the court
7 requesting authority to disburse funds to the Illinois
8 Insurance Guaranty Fund, the Illinois Life and Health
9 Insurance Guaranty Association, the Illinois Health
10 Maintenance Organization Guaranty Association and similar
11 organizations in other states from time to time out of the
12 company's marshaled assets as funds become available in
13 amounts equal to disbursements made by the Illinois Insurance
14 Guaranty Fund, the Illinois Life and Health Insurance
15 Guaranty Association, the Illinois Health Maintenance
16 Organization Guaranty Association and similar organizations
17 in other states for covered claims obligations on the
18 presentation of evidence that such disbursements have been
19 made by the Illinois Insurance Guaranty Fund, the Illinois
20 Life and Health Insurance Guaranty Association, the Illinois
21 Health Maintenance Organization Guaranty Association and
22 similar organizations in other states.
23 The Director shall establish procedures for the ratable
24 allocation and distribution of disbursements to the Illinois
25 Insurance Guaranty Fund, the Illinois Life and Health
26 Insurance Guaranty Association, the Illinois Health
27 Maintenance Organization Guaranty Association and similar
28 organizations in other states. In determining the amounts
29 available for disbursement, the Director shall reserve
30 sufficient assets for the payment of the expenses of
31 administration described in paragraph (1) (a) of this
32 Section. All funds available for disbursement after the
33 establishment of the prescribed reserve shall be promptly
34 distributed. As a condition to receipt of funds in
HB2226 Engrossed -48- LRB9001538JSgc
1 reimbursement of covered claims obligations, the Director
2 shall secure from the Illinois Insurance Guaranty Fund, the
3 Illinois Life and Health Insurance Guaranty Association, the
4 Illinois Health Maintenance Organization Guaranty Association
5 and each similar organization in other states, an agreement
6 to return to the Director on demand funds previously received
7 as may be required to pay claims of secured creditors and
8 claims falling within the priorities established in
9 paragraphs (a), (b), (c), and (d) of subsection (1) of this
10 Section in accordance with such priorities.
11 (3) The provisions of this Section are severable under
12 Section 1.31 of the Statute on Statutes.
13 (Source: P.A. 88-297; 89-206, eff. 7-21-95.)
14 (215 ILCS 5/245.21) (from Ch. 73, par. 857.21)
15 Sec. 245.21. Establishment of separate accounts by
16 domestic companies organized to do a life, annuity, or
17 accident and health insurance business. A domestic life
18 company, including for the purposes of this Article all
19 domestic fraternal benefit beneficiary associations,
20 societies or companies which operate on a legal reserve
21 basis, may, for authorized classes of insurance, establish
22 one or more separate accounts, and may allocate thereto
23 amounts (including without limitation proceeds applied under
24 optional modes of settlement or under dividend options) to
25 provide for life, annuity, or accident and health insurance
26 or annuities (and benefits incidental thereto), payable in
27 fixed or variable amounts or both, subject to the following:
28 (1) The income, gains and losses, realized or
29 unrealized, from assets allocated to a separate account must
30 be credited to or charged against the account, without regard
31 to other income, gains or losses of the company.
32 (2) Except as may be provided with respect to reserves
33 for guaranteed benefits and funds referred to in paragraph
HB2226 Engrossed -49- LRB9001538JSgc
1 (3) of this Section (i) amounts allocated to any separate
2 account and accumulations thereon may be invested and
3 reinvested without regard to any requirements or limitations
4 of Sections 125a through 125.24a of this Code and (ii) the
5 investments in any separate account or accounts may not be
6 taken into account in applying the investment limitations
7 otherwise applicable to the investments of the company.
8 (3) Except with the approval of the Director and under
9 the conditions as to investments and other matters as the
10 Director he may prescribe, that must recognize the guaranteed
11 nature of the benefits provided, reserves for (i) benefits
12 guaranteed as to dollar amount and duration and (ii) funds
13 guaranteed as to principal amount or stated rate of interest
14 may not be maintained in a separate account.
15 (4) Unless otherwise approved by the Director, assets
16 allocated to a separate account must be valued at their
17 market value on the date of valuation, or if there is no
18 readily available market, then as provided in the contract or
19 the rules or other written agreement applicable to the
20 separate account. Unless otherwise approved by the Director,
21 the portion, if any, of the assets of the separate account
22 equal to the company's reserve liability with regard to the
23 guaranteed benefits and funds referred to in paragraph (3) of
24 this Section must be valued in accordance with the rules
25 otherwise applicable to the company's assets.
26 (5) Amounts allocated to a separate account under this
27 Article are owned by the company, and the company may not be,
28 nor hold itself out to be, a trustee with respect to those
29 amounts. The assets of any separate account equal to the
30 reserves and other contract liabilities with respect to the
31 account may not be charged with liabilities arising out of
32 any other business the company may conduct.
33 (6) No sale, exchange or other transfer of assets may be
34 made by a company between any of its separate accounts or
HB2226 Engrossed -50- LRB9001538JSgc
1 between any other investment account and one or more of its
2 separate accounts unless, in case of a transfer into a
3 separate account, the transfer is made solely to establish
4 the account or to support the operation of the contracts with
5 respect to the separate account to which the transfer is
6 made, and unless the transfer, whether into or from a
7 separate account, is made (i) by a transfer of cash, or (ii)
8 by a transfer of securities having a readily determinable
9 market value, if the transfer of securities is approved by
10 the Director. The Director may approve other transfers among
11 those accounts if, in his or her opinion, the transfers would
12 not be inequitable.
13 (7) To the extent a company considers it necessary to
14 comply with any applicable federal or state laws, the
15 company, with respect to any separate account, including
16 without limitation any separate account which is a management
17 investment company or a unit investment trust, may provide
18 for persons having an interest therein appropriate voting and
19 other rights and special procedures for the conduct of the
20 business of the account, including without limitation special
21 rights and procedures relating to investment policy,
22 investment advisory services, selection of independent public
23 accountants, and the selection of a committee, the members of
24 which need not be otherwise affiliated with the company, to
25 manage the business of the account.
26 (Source: P.A. 86-1154; 86-1156.)
27 (215 ILCS 5/245.23) (from Ch. 73, par. 857.23)
28 Sec. 245.23. No company may deliver or issue for delivery
29 within this State variable contracts unless it is authorized
30 licensed or organized to do a life, annuity, or accident and
31 health insurance or annuity business in this State, and the
32 Director is satisfied that its condition or method of
33 operation in connection with the issuance of such contracts
HB2226 Engrossed -51- LRB9001538JSgc
1 will not render its operation hazardous to the public or its
2 policyholders in this State. In this connection, the Director
3 may consider among other things:
4 (a) The history and financial condition of the company;
5 (b) The character, responsibility and fitness of the
6 officers and directors of the company; and
7 (c) The law and regulation under which the company is
8 authorized in its state of domicile to issue variable
9 contracts. If the company is a subsidiary of an authorized
10 admitted life insurance company, or affiliated with such a
11 company through common management or ownership, it may be
12 deemed by the Director to have met the requirements of this
13 Section if either it or the parent or the affiliated company
14 meets the requirements of this Section.
15 (Source: P.A. 77-1572.)
16 (215 ILCS 5/245.25) (from Ch. 73, par. 857.25)
17 Sec. 245.25.
18 Except for subparagraphs (1) (a), (1) (f), (1) (g) and
19 (3) of Section 226 of the Illinois Insurance Code, in the
20 case of a variable annuity contract and subparagraphs (1)
21 (b), (1) (f), (1) (g), (1) (h), (1) (i), and (1) (k) of
22 Section 224, subparagraph (1) (c) of Section 225, and
23 subparagraph (h) of Section 231 in the case of a variable
24 life insurance policy, except for Sections 357.4, 357.5, and
25 367e in the case of a variable health insurance policy, and
26 except as otherwise provided in this Article, all pertinent
27 provisions of the Illinois Insurance Code which are
28 appropriate to those contracts apply to separate accounts and
29 contracts relating thereto. Any individual variable life
30 insurance contract, delivered or issued for delivery in this
31 State, must contain grace, reinstatement and non-forfeiture
32 provisions appropriate to such a contract. Any individual
33 variable annuity contract, delivered or issued for delivery
HB2226 Engrossed -52- LRB9001538JSgc
1 in this State, must contain grace and reinstatement
2 provisions appropriate to such a contract. Any group variable
3 life insurance contract, delivered or issued for delivery in
4 this State, must contain a grace provision appropriate to
5 such a contract. A group variable health insurance contract
6 delivered or issued for delivery in this State must contain a
7 continuation of group coverage provision appropriate to the
8 contract. The reserve liability for variable contracts must
9 be established in accordance with actuarial procedures that
10 recognize the variable nature of the benefits provided and
11 any mortality guarantees.
12 (Source: P.A. 78-255.)
13 (215 ILCS 5/513a9) (from Ch. 73, par. 1065.60a9)
14 Sec. 513a9. Premium finance agreement.
15 (a) A premium finance agreement must be dated and signed
16 by or on behalf of the named insured, and the printed portion
17 shall be in at least 8-point type. The following items must
18 be set forth on the first page of the accepted finance
19 agreement:
20 (1) the total amount of the premiums;
21 (2) the amount of the down payment;
22 (3) the principal balance (the difference between
23 items (1) and (2));
24 (4) the amount of the finance charges expressed in
25 dollars and as an annual percentage rate;
26 (5) the balance payable by the insured (sum of
27 items (3) and (4));
28 (6) the number of installments, the due dates
29 thereof, and the amount of each installment expressed in
30 dollars; and
31 (7) the policy numbers or binder numbers.
32 (b) The premium finance company is required to furnish
33 full and complete disclosure of the terms and conditions of
HB2226 Engrossed -53- LRB9001538JSgc
1 the premium finance agreement including, but not limited to,
2 the specific insurance coverages financed to the named
3 insured no later than the date that the first premium payment
4 notice is sent to the insured.
5 (c) As to policies written primarily for personal,
6 family, or household use, the premium finance company must:
7 (1) deliver or mail the premium check or checks in
8 the amount of the principal balance directly to the
9 insurer or insurers unless the insurer or insurers have
10 given written authority to the premium finance company to
11 deliver the checks to the producer;
12 (2) issue the premium check or checks payable to
13 the insurer, insurers, or, if the insurer gives written
14 authority to the premium finance company, to the
15 producer; and
16 (3) properly identify the premium check or checks
17 by policy number or binder number when the premium is
18 paid to the insurer or insurers.
19 (d) As to all other policies the premium finance company
20 may:
21 (1) deliver or mail the premium check or checks in
22 the amount of the principal balance directly to the
23 producer; and
24 (2) issue the premium check or checks payable to
25 the producer.
26 (e) A premium finance company that pays the financed
27 premium to the producer pursuant to subsection (d)
28 establishes the producer as the agent of the premium finance
29 company for payment of the premium and for receipt of any
30 return premium.
31 (Source: P.A. 89-265, eff. 1-1-96.)
32 (215 ILCS 5/245.61 rep.)
33 (215 ILCS 5/245.62 rep.)
HB2226 Engrossed -54- LRB9001538JSgc
1 Section 10. The Illinois Insurance Code is amended by
2 repealing Sections 245.61 and 245.62.
3 Section 15. The Producer Controlled Insurer Act is
4 amended by changing Sections 5.20 and 5.25 as follows:
5 (215 ILCS 107/5.20)
6 Sec. 5.20. Controlled insurer. "Controlled insurer"
7 means a licensed insurer that is controlled directly or
8 indirectly by a producer or by an individual or entity that
9 also directly or indirectly controls a producer.
10 (Source: P.A. 87-1090.)
11 (215 ILCS 107/5.25)
12 Sec. 5.25. Controlling producer. "Controlling producer"
13 means a producer that directly or indirectly controls an
14 insurer or an individual or entity that directly or
15 indirectly controls both an insurer and a producer.
16 (Source: P.A. 87-1090.)
17 Section 20. The Religious and Charitable Risk Pooling
18 Trust Act is amended by changing Section 25.1 as follows:
19 (215 ILCS 150/25.1) (from Ch. 148, par. 225.1)
20 Sec. 25.1. (a) Any trust fund organized under this Act
21 may reorganize itself as a mutual insurance company or a
22 reciprocal in accordance with the provisions of this Section,
23 provided that it has both (1) a net fund balance (surplus),
24 reported on a basis consistent with that prescribed in
25 Section 136 of the Illinois Insurance Code of (a) not less
26 than that required of a newly organized mutual insurance
27 company under Section 43 of the Illinois Insurance Code and
28 authorized to write like lines of business, if the trust fund
29 is reorganizing into a mutual insurance company, or (b) not
HB2226 Engrossed -55- LRB9001538JSgc
1 less than that required of a newly organized reciprocal under
2 Section 66 of the Illinois Insurance Code and Authorized to
3 write like lines of business, if the trust fund is
4 reorganizing into a reciprocal, and (2) an operating history
5 of not less than 3 5 consecutive years after organizational
6 approval of the trust fund by the Director of Insurance,
7 during which period such trust fund shall have continuously
8 provided non-assessable benefits or indemnification contracts
9 to its beneficiaries. A trust fund reorganized as a mutual
10 insurance company shall, after reorganization and
11 notwithstanding any contrary provision of the Illinois
12 Insurance Code, have the powers of a mutual insurance company
13 organized under Article III of the Illinois Insurance Code
14 together with continuing powers and authority granted trust
15 funds pursuant to Section 6 of this Act. A trust fund
16 reorganized as a reciprocal shall, after reorganization and
17 notwithstanding any contrary provision of the Illinois
18 Insurance Code, have the power of a reciprocal organized
19 under Article IV of the Illinois Insurance Code together with
20 continuing powers and authority granted trust funds pursuant
21 to Section 6 of this Act. In addition, surplus amounts
22 attributable to contribution certificates meeting the
23 requirements of Section 14.1 of this Act and issued by a
24 trust fund prior to reorganization as either a mutual
25 insurance company or a reciprocal or by the successor mutual
26 insurance company or reciprocal within a period of 5 years
27 following reorganization, may be reported as surplus on the
28 successor insurance company's or reciprocal's financial
29 statements in a manner consistent with and subject to the
30 terms of Section 14.1 of this Act. After expiration of such
31 5 year period, the provisions of Section 56 of the Illinois
32 Insurance Code shall be applicable to a reorganized mutual
33 insurance company or reciprocal, with regard to the
34 accumulation of a guarantee fund. Except as provided in this
HB2226 Engrossed -56- LRB9001538JSgc
1 subsection (a), this Act shall not be applicable to a
2 reorganized mutual insurance company or reciprocal, and the
3 mutual insurance company or reciprocal shall be subject to
4 all otherwise applicable provisions of the Illinois Insurance
5 Code.
6 (b) The Trustees of any trust fund seeking to reorganize
7 as a mutual insurance company shall adopt articles of
8 incorporation and by-laws as shall be necessary to make the
9 same conform to articles of incorporation and by-laws of a
10 mutual insurance company, as provided under Article III of
11 the Illinois Insurance Code. Duplicate originals of such
12 articles and by-laws shall be delivered to the Director of
13 Insurance, together with the financial statements, as
14 required under subsection (d). The Director shall approve
15 the articles and by-laws after a finding that they are
16 consistent with the requirements applicable to companies
17 organized under Article III of the Illinois Insurance Code,
18 relating to domestic mutual companies, except as otherwise
19 provided herein. Upon approval by the Director and the
20 recordation of a certified copy of the articles of
21 incorporation in the office of the recorder in the county
22 where the principal office of the company is located, such
23 company shall be subject to and entitled to the benefits of
24 Article III of the Illinois Insurance Code.
25 (c) (i) The trustees of any trust fund seeking to
26 reorganize as a reciprocal shall, by resolution, approve a
27 plan of reorganization setting forth (1) a proposed
28 declaration of organization, as provided under Article IV of
29 the Illinois Insurance Code; (2) a form of power of attorney
30 designating a person, as defined in Section 2 of the Illinois
31 Insurance Code, to act as attorney in fact on behalf of the
32 beneficiaries of the trust fund in exchanging contracts of
33 insurance after reorganization of the trust fund as a
34 reciprocal, which form shall be consistent with the
HB2226 Engrossed -57- LRB9001538JSgc
1 provisions of Article IV; (3) the terms and conditions of the
2 proposed reorganization and the mode of carrying the same
3 into effect; and (4) the manner and basis of assuming the
4 assets and liabilities of the trust fund, including the
5 benefit schedule theretofore issued by the trust fund,
6 whether or not then in force. Duplicate originals of the plan
7 of reorganization, as adopted by the trustees, shall be
8 submitted to the Director of Insurance, together with such
9 other documents as are necessary to satisfy the requirements
10 of Article IV and the financial statements, as required under
11 subsection (d) below. The Director shall approve the plan and
12 the other documents upon finding each consistent with the
13 requirements applicable to reciprocals organized under
14 Article IV relating to domestic reciprocals, except as
15 otherwise provided herein.
16 (ii) Within 60 days after approval by the Director, the
17 plan of reorganization and other documents, as approved by
18 the Director, shall then be submitted by the trustees for
19 approval by the beneficiaries of the trust fund at a
20 regularly scheduled or special meeting of beneficiaries.
21 Written or printed notice shall be given not less than 20
22 days before each such meeting, either personally or by mail,
23 to each beneficiary of the trust fund. If mailed, such notice
24 is deemed to be delivered when deposited in the United States
25 mail, with postage prepaid, addressed to the beneficiary at
26 his address as it appears on the records of the trust fund.
27 Such notice shall state the place, day, hour and purpose of
28 the meeting. A copy of the plan of reorganization shall be
29 enclosed with such notice. Approval by beneficiaries shall
30 require (1) the affirmative vote of 2/3 of all beneficiaries
31 of the trust fund covered under benefit schedules in force at
32 the date of the notice, voting in person or by proxy at the
33 meeting, and (2) the execution by the beneficiaries voting in
34 favor of the plan of the power of attorney proposed as a part
HB2226 Engrossed -58- LRB9001538JSgc
1 of the plan. Each beneficiary entitled to vote shall have one
2 vote regardless of the number of benefit schedules that may
3 have been issued or contributions paid therefor.
4 (iii) Within 10 days after approval by the
5 beneficiaries, the trust fund, acting by and through its
6 designated officers, shall certify to the Director such
7 approval, appending to such certification a true and correct
8 copy of the plan, as approved, the declaration of
9 organization executed by the attorney-in-fact, and the form
10 of the power of attorney, as executed, together with a list
11 of the beneficiaries so approving and executing the power of
12 attorney. The Director shall thereafter issue to the
13 attorney-in-fact a certificate of authority, as provided in
14 Section 73 of the Illinois Insurance Code, but only after the
15 termination by the trust fund of all benefit schedules issued
16 to beneficiaries who have declined to execute the power of
17 attorney, which termination may be accomplished by the
18 expiry, nonrenewal or cancellation of benefit schedules. Upon
19 such termination, the trust fund, acting by and through its
20 designated officers, shall so certify to the Director, and
21 the date of such certification shall constitute the effective
22 date of reorganization of the trust fund, being the date on
23 which the reciprocal shall become the successor in interest
24 to the trust fund and thenceforth be responsible and liable
25 for all of the liabilities and obligations of the trust fund
26 in accordance with the approved plan of reorganization, and
27 the benefit schedules issued by the trust fund which then
28 remain outstanding shall be deemed to have been issued by the
29 reciprocal. All of the property, real, personal and mixed,
30 and all other choses in action and all and every other
31 interest of the trust fund upon the effective date of
32 reorganization shall be deemed transferred to and vested in
33 the reciprocal without further act or deed. The reciprocal
34 shall thereupon be subject to and entitled to the benefits of
HB2226 Engrossed -59- LRB9001538JSgc
1 Article IV of the Illinois Insurance Code and the trust fund
2 shall thereafter cease to exist.
3 (d) The Trustees of any such trust fund shall deliver to
4 the Director of Insurance a statement of financial condition
5 as of a date not more than 6 months prior to said date of
6 delivery, prepared in accordance with Section 136 of the
7 Illinois Insurance Code and certified by an independent
8 public accountant as correctly stating the financial
9 condition of such trust fund in accordance with the standards
10 of said Section 136. The Director shall review such
11 statement of financial condition and may, in his discretion,
12 conduct an examination of such trust fund to determine its
13 financial condition. Any such examination shall be commenced
14 within 60 days after the date of delivery to the Director of
15 such statement of financial condition.
16 (e) In the case of a trust fund reorganizing into a
17 mutual insurance company, provided that (i) such statement of
18 financial condition shall reflect, and the Director is
19 satisfied from the examination, if conducted, that a net fund
20 balance (surplus) in an amount at least equal at the time of
21 reorganization to that required of a newly organized company
22 subject to Section 43 of the Illinois Insurance Code and
23 writing like lines of business and (ii) the articles of
24 incorporation and by-laws, as required by subsection (b),
25 shall comply with the requirements of Article III of the
26 Illinois Insurance Code, the Director of Insurance shall
27 approve the reorganization and articles and by-laws within 60
28 days after receipt thereof, or within 60 days after the
29 completion of any examination conducted by the Director,
30 whichever date shall last occur, and shall issue a
31 certificate of authority, as provided under Section 51 of the
32 Illinois Insurance Code within 10 days after the receipt of
33 evidence of recordation of the articles and by-laws.
34 (f) In the case of a trust fund reorganizing into a
HB2226 Engrossed -60- LRB9001538JSgc
1 reciprocal, provided that (i) the statement of financial
2 condition shall reflect, and the Director is satisfied from
3 the examination, if conducted, that a net fund balance
4 (surplus) in an amount at least equal at the time of
5 reorganization to that required of a newly organized
6 reciprocal subject to Section 66 of the Illinois Insurance
7 Code and writing like lines of business and (ii) the
8 declaration of organization and other documents, as required
9 by subsection (c), shall comply with the requirements of
10 Article IV of the Illinois Insurance Code, the Director of
11 Insurance shall approve the reorganization and declaration
12 within 60 days after receipt thereof, or within 60 days after
13 the completion of any examination conducted by the Director,
14 whichever date shall last occur, and shall issue a
15 certificate of authority, as provided under Section 73 of the
16 Illinois Insurance Code within 10 days after the deposit with
17 the Director by the reorganizing reciprocal of cash or
18 securities as required by Section 74 of the Illinois
19 Insurance Code.
20 (Source: P.A. 86-847.)
21 Section 99. Effective date. This Act takes effect upon
22 becoming law.
HB2226 Engrossed -61- LRB9001538JSgc
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