Public Act 90-0381 of the 90th General Assembly
Public Act 90-0381
HB2226 Enrolled LRB9001538JSgc
AN ACT relating to insurance company finances, amending
named Acts.
Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
Section 5. The Illinois Insurance Code is amended by
changing Sections 14.1, 32, 33, 34, 56, 59.1, 144.2, 162,
173, 173.1, 192, 205, 245.21, 245.23, 245.25, and 513a9 and
adding Section 147.3 as follows:
(215 ILCS 5/14.1) (from Ch. 73, par. 626.1)
Sec. 14.1. Articles of incorporation. The articles shall
set forth:
(a) the corporate name;
(b) the location of its principal office;
(c) the period of duration, which may be perpetual;
(d) the class or classes of insurance business as
provided in Section 4, in which it proposes to engage and the
kinds of insurance in each class it proposes to write;
(e) The number of its directors, or that the number of
directors shall be not less than the minimum nor more than
the maximum stated in Section 10, the terms of office; and
the manner of electing the directors;
(f) the amount of its authorized capital, the number of
authorized common and non-voting preferred shares, the par
value of each share, and the number of the common and
non-voting preferred shares to be issued and sold in
accordance with this Article to provide at least the minimum
paid-up capital and paid-in surplus as set forth in Section
13 of this Article as now and hereafter amended;
(g) the terms and conditions on which preferred shares
may be converted to common shares, if any shares are issued
with the right of conversion;
(h) (g) such other provisions not inconsistent with law
as may be deemed by the incorporators to be necessary or
advisable.
(Source: P.A. 83-796.)
(215 ILCS 5/32) (from Ch. 73, par. 644)
Sec. 32. Increase in capital.
(1) Any company subject to this Article may increase its
paid-up capital either by issuing additional shares not to
exceed the number of authorized shares as set forth in its
Articles or by increasing the par value of its shares. No
company shall issue additional shares nor increase the par
value of its shares without first procuring from the Director
a permit so to do, which permit shall expire one year from
its date. If the proposed increase in capital is part of a
series of transactions that includes subsequent transactions
that will be subject to Article VIII 1/2, the company shall
provide the Director all of the information called for in
Article VIII 1/2 prior to the Director's issuance of a
permit. The Director may decline to issue a permit if the
Director is not satisfied that the proposed series of
transactions satisfies the standards established in Article
VIII 1/2.
The Director, upon compliance by the company with the
applicable provisions of this Code, and such reasonable
regulations relating to the offering, issuance, subscription
or sale of or for shares as may be promulgated by the
Director to the end that no inequity, fraud or deceit may be
worked or tend to be worked upon prospective subscribers to,
recipients or purchasers of shares or present holders
thereof, shall issue a permit to the company to issue
additional shares upon receipt of a copy of a resolution by
the Board of Directors authorizing the issuance of such
shares.
If preferred shares having a right of conversion to
common shares are to be issued, the terms and conditions on
which the shares may be converted shall be provided to the
Director before a permit may be issued pursuant to this
Section.
In the case of shares to be issued for sale, the permit
shall authorize the company to solicit subscriptions to such
shares on a form of subscription agreement which shall have
been submitted to and approved by the Director.
All of the provisions of this Code relative to the
filing, terms and effect of subscription agreements, payment
for shares, the limitations of expenses, filing of bonds
except that no bonds shall be required when a company issues
stock to its sole shareholder, deposit of proceeds of shares,
return of funds in the event the payment for all of the
additional shares is not completed, and qualification or
registration shall apply to the same extent and effect as if
the additional shares were shares representing the original
capital of a company being organized under this Article,
except that no organization bond with regard to costs
incurred in connection with liquidation or dissolution shall
be required, and if the subscription agreement provides for
payment in installments, such installments shall not extend
beyond one year from date of the permit of the Director.
If shares are to be issued as a stock dividend, or if the
par value of shares is to be increased, the permit shall
authorize the company to pay for such additional shares or
increase in par value by transferring the requisite amount of
surplus to paid-up capital provided, however, no transfer of
such surplus shall be made which will reduce the remaining
surplus to less than the surplus required by Section 13. In
the case of an increase in par value, the company may require
each shareholder to surrender his or her certificate and to
accept in lieu thereof a new certificate conforming to such
increase in par value.
No more than one permit of the types under this Section
may be outstanding in the name of any company at any time.
(2) When the Director is notified that the additional
shares proposed to be issued have, or that the increase in
par value has, been fully paid, and that all of the
requirements of the permit have been satisfied, he or she
shall make an examination of the company and if he or she
finds that the provisions of this Section have been complied
with, he or she shall issue a certificate of paid-up capital
to that effect which shall be filed with the recorder of the
county in which the principal office of the company is
located within 15 days from the date of said certificate.
Upon the issuance of such certificate, the company may
withdraw the proceeds of the sale, if any, of its shares and
the bond, conditioned upon the full and complete accounting
by the company for the proceeds of any such sale of shares,
shall terminate or the cash deposited with the Director in
lieu of such bond shall be returned.
(3) If the Director finds that any company has failed to
comply with, or has violated any provision of the Code or any
regulation promulgated under subsection (1), he or she may,
in addition to and notwithstanding any other procedure,
remedy or penalty provided under the laws of this State,
after notice and hearing, revoke the permit issued to it
under subsection (1).
(Source: P.A. 86-753.)
(215 ILCS 5/33) (from Ch. 73, par. 645)
Sec. 33. Decrease of capital.
(1) When articles of amendment providing for a decrease
of capital or a decrease in the par value of shares, or both,
become effective, each issued share of the company shall
thereupon be changed into and be a fractional part of a
share, or a share having a reduced par value, or both, as
provided by such amendment, and the holders of shares issued
before the amendment shall thereupon cease to be holders of
such shares and shall be and become holders of the shares
authorized by the amendment upon the basis specified in the
amendment, whether or not certificates representing the
shares authorized by the amendment are then issued and
delivered. The company may require each shareholder to
surrender his or her certificate and accept in lieu thereof a
new certificate conforming to such decrease.
(2) No distribution of the assets of the company shall
be made to the shareholders upon any decrease of capital
which shall reduce its surplus to less than the surplus
required by this Code for the kind or kinds of business
authorized to be transacted by the company.
(3) If the proposed articles of amendment providing for
a decrease of capital or a decrease in the par value of
shares, or both, is part of a series of transactions that
includes subsequent transactions that will be subject to
Article VIII 1/2, the company shall provide the Director all
of the information called for in Article VIII 1/2 prior to
the Director's approval. The Director may decline to approve
if the Director is not satisfied that the proposed series of
transactions satisfies the standards established in Article
VIII 1/2.
(Source: P.A. 86-753.)
(215 ILCS 5/34) (from Ch. 73, par. 646)
Sec. 34. Procedure when insufficient assets possessed by
company.
(1) Whenever the Director finds that the admitted assets
of any company subject to the provisions of this Article are
less than its capital, minimum required surplus and all
liabilities, he or she must give written notice to the
company of the amount of the impairment and require that the
impairment be removed within such period, which must be not
less than 30 nor more than 90 days from the date of the
notice, as he or she may designate. Unless otherwise allowed
by the Director, the company must discontinue the issuance of
new and renewal policies while the impairment exists.
(2) Upon the receipt of the notice from the Director,
the board of directors of the company must cause the
impairment to be removed and call upon its shareholders
ratably for the necessary amount to remove the impairment,
or, by proper action, reduce its capital to meet the
impairment providing the reduced capital is not less than the
minimum requirements fixed by this Code or by other means
remove the impairment. If the impairment is not removed
within the period of time designated, the Director may order
the board of directors to call upon its shareholders ratably.
If In case a shareholder of the company refuses or neglects
shall refuse or neglect to pay the amount so called for after
notice, given, personally or by mail, by a date stated in the
notice not less than 15 days from the date of such notice,
the Director may order the board of directors to declare may,
by resolution, declare the shares of such person cancelled,
and in lieu thereof may issue new certificates for shares and
dispose of the same at the best price obtainable not less
than par. If the amount received for such new certificates
for shares exceeds the amount required to be paid by such
shareholder, the excess must be paid to the shareholder so
refusing to pay his or her ratable share of the impairment.
Nothing contained in this subsection may be construed to
impose any liability on any shareholder as a result of any
call, enforceable in any manner other than through a sale of
his or her shares as provided in this subsection.
(3) If the impairment is not removed within the period
specified in the Director's notice, the company shall be
deemed insolvent and the Director shall proceed against the
company in accordance with Article XIII.
(4) If while the impairment exists any officer or
director of the company knowingly renews, issues or delivers
or causes to be renewed, issued or delivered any policy,
contract or certificate of insurance unless allowed by the
Director, and the fact of such impairment is known to the
officer or director of the company, such officer or director
shall be guilty of a business offense and may be fined not
less than $200 and not more than $5,000 for each offense.
(5) Nothing in this Section prohibits, while such
impairment exists, any such officer, director, trustee, agent
or employee from issuing or renewing a policy of insurance
when an insured or owner exercises an option granted to him
or her under an existing policy to obtain new, renewed or
converted insurance coverage.
(Source: P.A. 82-498.)
(215 ILCS 5/56) (from Ch. 73, par. 668)
Sec. 56. Accumulation of guaranty fund or guaranty
capital. Any company subject to the provisions of this
article, may provide for a surplus either by accumulating a
guaranty fund or a guaranty capital as follows:
(a) Guaranty Fund. It may accumulate a guaranty fund by
borrowing money at an interest rate either (1) at a fixed
rate not exceeding the corporate base rate as reported by the
largest bank (measured by assets) with its head office
located in Chicago, Illinois, in effect on the first business
day of the month in which the loan document is executed, plus
3% per annum or (2) at a variable rate equal to the corporate
base rate determined on the first business day of each month
during the term of the loan plus 2% per annum. In no event
shall the variable interest rate for any month exceed the
initial rate for the loan or advance by more than 10% per
annum. The insurer shall elect at the time of execution of
the loan or advance agreement whether the interest rate is to
be fixed or floating for the term of the agreement. An
agreement issued after the insurer has received its
Certificate of Authority shall first be approved by
resolution of the Board of Directors and not exceeding seven
per centum per annum under agreements approved by the
Director. The agreement which shall provide that such loan
and the interest thereon shall be repaid only out of the
surplus of such company in excess of the greater of the
original or minimum surplus required of such company by
Section 43. Such excess of surplus shall be calculated upon
the fair market value of the assets of the company, and such
guaranty loan fund shall constitute and be enforcible as a
liability of the company only as against such excess of
surplus. Any unpaid balance of such guaranty fund loan shall
be reported in the annual statement to be filed with the
Director. Repayment of principal or payment of interest may
be made only with the approval of the Director when he or she
is satisfied that the financial condition of the company
warrants that action, but approval may not be withheld if the
company shall have and submit satisfactory evidence of
surplus of not less than the amount stipulated in the
repayment of principal or interest payment clause of the
agreement and no repayment of said fund shall be made unless
the Director shall have been notified by the company at least
thirty days in advance of such proposed repayment.
(b) Guaranty Capital. It may in addition to any advances
provided for herein, establish and maintain a guaranty
capital divided into shares having a par value of not more
than $100 one hundred dollars nor less than $5 five dollars
each. The guaranty capital shall be applied to the payment of
losses only when the company has exhausted its assets in
excess of unearned premium reserve and other liabilities; and
when thus impaired the directors may make good the whole or
any part of it by assessment on its policyholders as provided
for in Section 60. Said guaranty capital may, by vote of the
board of directors of the company and the written consent of
the Director be reduced or retired by any amount, provided
that the net surplus of the company together with the
remaining guaranty capital shall equal or exceed the amount
of surplus required by Section 43, and due notice of such
proposed action on the part of the company shall be published
in a newspaper of general circulation, approved by the
Director, not less than once each week for at least 4 four
consecutive weeks before such action is taken. No company
with a guaranty capital, which has ceased to do business,
shall divide any part of its assets or guaranty capital among
its shareholders unless it has paid or it has otherwise been
released from its policy obligations. The holders of the
shares of such guaranty capital shall be entitled to interest
either (1) at a fixed rate not exceeding the corporate base
rate as reported by the largest bank (measured by assets)
with its head office located in Chicago, Illinois, in effect
on the first business day of the month in which the loan
document is executed, plus 3% per annum or (2) at a variable
rate equal to the corporate base rate determined on the first
business day of each month during the term of the loan plus
2% per annum. In no event shall the variable interest rate
for any month exceed the initial rate for the loan or advance
by more than 10% per annum. The insurer shall elect at the
time of issuance of the shares whether the interest rate is
to be fixed or floating for the term of the agreement. Such
interest shall be not exceeding seven per centum per annum,
payable from the surplus in excess of the surplus required of
the company by Section 43. In the event of dissolution and
liquidation of such a company after the retirement of all
outstanding obligations of the company, the holders of such
shares of guaranty capital shall be entitled to a
preferential right in the assets of such company equal to the
par value of their share of such guaranty capital before any
distribution to members.
(Source: P.A. 86-753.)
(215 ILCS 5/59.1)
Sec. 59.1. Conversion to stock company.
(1) Definitions. For the purposes of this Section, the
following terms shall have the meanings indicated:
(a) "Eligible member" is a member whose policy is
in force as of the date the mutual company's board of
directors adopts a plan of conversion. A person insured
under a group policy is not an eligible member, unless:
(i) the person is insured or covered under a
group life policy or group annuity contract under
which funds are accumulated and allocated to the
respective covered persons;
(ii) the person has the right to direct the
application of the funds so allocated;
(iii) the group policyholder makes no
contribution to the premiums or deposits for the
policy or contract; and
(iv) the mutual company has the names and
addresses of the persons covered under the group
life policy or group annuity contract.
A person whose policy is issued after the board of
directors adopts the plan but before the plan's effective
date is not an eligible member but shall have those
rights set forth in subsection (10) of this Section.
(b) "Converted stock company" is an Illinois
domiciled stock company that converted from an Illinois
domiciled mutual company under this Section.
(c) "Plan of conversion" or "plan" is a plan
adopted by an Illinois domestic mutual company's board of
directors under this Section to convert the mutual
company into an Illinois domiciled stock company.
(d) "Policy" includes an annuity contract.
(e) "Member" means a person who, on the records of
the mutual company and pursuant to its articles of
incorporation or bylaws, is deemed to be a holder of a
membership interest in the mutual company.
(2) Adoption of the plan of conversion by the board of
directors.
(a) A mutual company seeking to convert to a stock
company shall, by the affirmative vote of two-thirds of
its board of directors, adopt a plan of conversion
consistent with the requirements of subsection (6) of
this Section.
(b) At any time before approval of a plan by the
Director, the mutual company by the affirmative vote of
two-thirds of its board of directors, may amend or
withdraw the plan.
(3) Approval of the plan of conversion by the Director
of Insurance.
(a) Required findings. After adoption by the mutual
company's board of directors, the plan shall be submitted
to the Director for review and approval. The Director
shall approve the plan upon finding that:
(i) the provisions of this Section have been
complied with;
(ii) the plan will not prejudice the interests
of the members; and
(iii) the plan's method of allocating
subscription rights is fair and equitable.
(b) Documents to be filed.
(i) Prior to the members' approval of the
plan, a mutual company seeking the Director's
approval of a plan shall file the following
documents with the Director for review and approval:
(A) the plan of conversion, including the
independent evaluation of pro forma market
value required by item (f) of subsection (6) of
this Section;
(B) the form of notice required by item
(b) of subsection (4) of this Section for
eligible members of the meeting to vote on the
plan;
(C) any proxies to be solicited from
eligible members pursuant to subitem (ii) of
item (c) of subsection (4) of this Section;
(D) the form of notice required by item
(a) of subsection (10) of this Section for
persons whose policies are issued after
adoption of the plan but before its effective
date; and
(E) the proposed articles of
incorporation and bylaws of the converted stock
company.
Once filed, these documents shall be approved or
disapproved by the Director within a reasonable
time.
(ii) After the members have approved the plan,
the converted stock company shall file the following
documents with the Director:
(A) the minutes of the meeting of the
members at which the plan was voted upon; and
(B) the revised articles of incorporation
and bylaws of the converted stock company.
(c) Consultant. The Director may retain, at the
mutual company's expense, any qualified expert not
otherwise a part of the Director's staff to assist in
reviewing the plan and the independent evaluation of the
pro forma market value which is required by item (f) of
subsection (6) of this Section.
(4) Approval of the plan by the members.
(a) Members entitled to notice of and to vote on
the plan. All eligible members shall be given notice of
and an opportunity to vote upon the plan.
(b) Notice required. All eligible members shall be
given notice of the members' meeting to vote upon the
plan. A copy of the plan or a summary of the plan shall
accompany the notice. The notice shall be mailed to each
member's last known address, as shown on the mutual
company's records, within 45 days of the Director's
approval of the plan. The meeting to vote upon the plan
shall not be set for a date less than 60 days after the
date when the notice of the meeting is mailed by the
mutual company. If the meeting to vote upon the plan is
held coincident with the mutual company's annual meeting
of policyholders, only one combined notice of meeting is
required.
(c) Vote required for approval.
(i) After approval by the Director, the plan
shall be adopted upon receiving the affirmative vote
of at least two-thirds of the votes cast by eligible
members.
(ii) Members entitled to vote upon the
proposed plan may vote in person or by proxy. Any
proxies to be solicited from eligible members shall
be filed with and approved by the Director.
(iii) The number of votes each eligible member
may cast shall be determined by the mutual company's
bylaws. If the bylaws are silent, each eligible
member may cast one vote.
(5) Adoption of revised articles of incorporation.
Adoption of the revised articles of incorporation of the
converted stock company is necessary to implement the plan
and shall be governed by the applicable provisions of Section
57 of this Code. For a Class 1 mutual company, the members
may adopt the revised articles of incorporation at the same
meeting at which the members approve the plan. For a Class 2
or 3 mutual company, the revised articles of incorporation
may be adopted solely by the board of directors or trustees,
as provided in Section 57 of this Code.
(5.5) Prior to the completion of a plan of conversion
filed by a mutual company with the Director, no person shall
knowingly acquire, make any offer, or make any announcement
of an offer for any security issued or to be issued by the
converting mutual company in connection with its plan of
conversion or for any security issued or to be issued by any
other company authorized in item(c)(i) of subsection (6) of
this Section and organized for purposes of effecting the
conversion, except in compliance with the maximum purchase
limitations imposed by item (i) of subsection (6) of this
Section or the terms of the plan of conversion as approved by
the Director.
(6) Required provisions in a plan of conversion. The
following provisions shall be included in the plan:
(a) Reasons for conversion. The plan shall set
forth the reasons for the proposed conversion.
(b) Effect of conversion on existing policies.
(i) The plan shall provide that all policies
in force on the effective date of conversion shall
continue to remain in force under the terms of those
policies, except that any voting rights of the
policyholders provided for under the policies or
under this Code and any contingent liability policy
provisions of the type described in Section 55 of
this Code shall be extinguished on the effective
date of the conversion.
(ii) The plan shall further provide that
holders of participating policies in effect on the
date of conversion shall continue to have the right
to receive dividends as provided in the
participating policies, if any.
(iii) Except for a mutual company's
participating life policies, guaranteed renewable
accident and health policies, and non-cancelable
accident and health policies, the converted stock
company may issue the insured a nonparticipating
policy as a substitute for the participating policy
upon the renewal date of a participating policy.
(c) Subscription rights to eligible members.
(i) The plan shall provide that each eligible
member is to receive, without payment,
nontransferable subscription rights to purchase a
portion of the capital stock of the converted stock
company. As an alternative to subscription rights
in the converted stock company, the plan may provide
that each eligible member is to receive, without
payment, nontransferable subscription rights to
purchase a portion of the capital stock of: (A) a
corporation organized and owned by the mutual
company for the purpose of acquiring or purchasing
and holding all the stock of the converted stock
company; or (B) a stock insurance company owned by
the mutual company into which the mutual company
will be merged.
(ii) The subscription rights shall be
allocated in whole shares among the eligible members
using a fair and equitable formula. This formula
may but need not take into account how the different
classes of policies of the eligible members
contributed to the surplus of the mutual company.
(d) Oversubscription. The plan shall provide a fair
and equitable means for the allocation of shares of
capital stock in the event of an oversubscription to
shares by eligible members exercising subscription rights
received pursuant to item (c) of subsection (6) of this
Section.
(e) Undersubscription. The plan shall provide that
any shares of capital stock not subscribed to by eligible
members exercising subscription rights received under
item (c) of subsection (6) of this Section shall be sold
in a public offering through an underwriter. If the
number of shares of capital stock not subscribed by
eligible members is so small or the additional time or
expense required for a public offering of those shares
would be otherwise unwarranted under the circumstances in
number as to not warrant the expense of a public
offering, the plan of conversion may provide for the
purchase of the unsubscribed shares by a private
placement or other alternative method approved by the
Director that is fair and equitable to the eligible
members.
(f) Total price of stock. The plan shall set the
total price of the capital stock equal to the estimated
pro forma market value of the converted stock company
based upon an independent evaluation by a qualified
person. The pro forma market value may be the value that
is estimated to be necessary to attract full subscription
for the shares as indicated by the independent
evaluation.
(g) Purchase price of each share. The plan shall
set the purchase price of each share of capital stock
equal to any reasonable amount that will not inhibit the
purchase of shares by members. The purchase price of
each share shall be uniform for all purchasers except the
price may be modified by the Director by reason of his
consideration of a plan for the purchase of unsubscribed
stock pursuant to item (e) of subsection (6) of this
Section.
(h) Closed block of business for participating
life policies of a Class 1 mutual company.
(i) The plan shall provide that a Class 1
mutual company's participating life policies in
force on the effective date of the conversion shall
be operated by the converted stock company for
dividend purposes as a closed block of participating
business except that any or all classes of group
participating policies may be excluded from the
closed block.
(ii) The plan shall establish one or more
segregated accounts for the benefit of the closed
block of business and shall allocate to those
segregated accounts enough assets of the mutual
company so that the assets together with the revenue
from the closed block of business are sufficient to
support the closed block including, but not limited
to, the payment of claims, expenses, taxes, and any
dividends that are provided for under the terms of
the participating policies with appropriate
adjustments in the dividends for experience changes.
The plan shall be accompanied by an opinion of a
qualified actuary or an appointed actuary who meets
the standards set forth in the insurance laws or
regulations for the submission of actuarial opinions
as to the adequacy of reserves or assets. The
opinion shall relate to the adequacy of the assets
allocated to the segregated accounts in support of
the closed block of business. The actuarial opinion
shall be based on methods of analysis deemed
appropriate for those purposes by the Actuarial
Standards Board.
(iii) The amount of assets allocated to the
segregated accounts of the closed block shall be
based upon the mutual company's last annual
statement that is updated to the effective date of
the conversion.
(iv) The converted stock company shall keep a
separate accounting for the closed block and shall
make and include in the annual statement to be filed
with the Director each year a separate statement
showing the gains, losses, and expenses properly
attributable to the closed block.
(v) Periodically, upon the Director's
approval, those assets allocated to the closed block
as provided in subitem (ii) of item (h) of
subsection (6) of this Section that are in excess of
the amount of assets necessary to support the
remaining polices in the closed block shall revert
to the benefit of the converted stock company.
(vi) The Director may waive the requirement
for the establishment of a closed block of business
if the Director deems it to be in the best interests
of the participating policyholders of the mutual
insurer to do so.
(i) Limitations on acquisition of control. The plan
shall provide that any one person or group of persons
acting in concert may not acquire, through public
offering or subscription rights, more than 5% of the
capital stock of the converted stock company for a period
of 5 years from the effective date of the plan except
with the approval of the Director. This limitation does
not apply to any entity that is to purchase 100% of the
capital stock of the converted company as part of the
plan of conversion approved by the Director or to a
purchase of stock by a tax-qualified employee benefit
plan pursuant to subscription grants granted to that plan
as authorized under item (b) (c) of subsection (7) of
this Section and to a purchase of unsubscribed stock
pursuant to item (e) of subsection (6) of this Section.
(7) Optional provisions in a plan of conversion. The
following provisions may be included in the plan:
(a) Directors and officers subscription rights.
(i) The plan may provide that the directors
and officers of the mutual company shall receive,
without payment, nontransferable subscription rights
to purchase capital stock of the converted stock
company or the stock of another corporation that is
participating in the conversion plan as provided in
subitem (i) of item (c) of subsection (6) of this
Section. Those subscription rights shall be
allocated among the directors and officers by a fair
and equitable formula.
(ii) The total number of shares that may be
purchased under subitem (i) of item (a) of
subsection (7) of this Section may not exceed 35% of
the total number of shares to be issued in the case
of a mutual company with total assets of less than
$50 million or 25% of the total shares to be issued
in the case of a mutual company with total assets of
more than $500 million. For mutual companies with
total assets between $50 million and $500 million,
the total number of shares that may be purchased
shall be interpolated.
(iii) Stock purchased by a director or officer
under subitem (i) of item (a) of subsection (7) of
this Section may not be sold within one year
following the effective date of the conversion.
(iv) The plan may also provide that a director
or officer or person acting in concert with a
director or officer of the mutual company may not
acquire any capital stock of the converted stock
company for 3 years after the effective date of the
plan, except through a broker or dealer, without the
permission of the Director. That provision may not
apply to prohibit the directors and officers from
purchasing stock through subscription rights
received in the plan under subitem (i) of item (a)
of subsection (7) of this Section.
(b) Tax-qualified employee stock benefit plan. The
plan may allocate to a tax-qualified employee benefit
plan nontransferable subscription rights to purchase up
to 10% of the capital stock of the converted stock
company or the stock of another corporation that is
participating in the conversion plan as provided in
subitem (i) of item (c) of subsection (6) of this
Section. That employee benefit plan shall be entitled to
exercise its subscription rights regardless of the amount
of shares purchased by other persons.
(8) Alternative plan of conversion. The board of
directors may adopt a plan of conversion that does not rely
in whole or in part upon the issuance to members of
non-transferable subscription rights to purchase stock of the
converted stock company if the Director finds that the plan
does not prejudice the interests of the members, is fair and
equitable, and is based upon an independent appraisal of the
market value of the mutual company by a qualified person and
a fair and equitable allocation of any consideration to be
given eligible members. The Director may retain, at the
mutual company's expense, any qualified expert not otherwise
a part of the Director's staff to assist in reviewing whether
the plan may be approved by the Director.
(9) Effective date of the plan. A plan shall become
effective when the Director has approved the plan, the
members have approved the plan, and the revised articles of
incorporation have been adopted.
(10) Rights of members whose policies are issued after
adoption of the plan and before its effective date.
(a) Notice. All members whose policies are issued
after the proposed plan has been adopted by the board of
directors and before the effective date of the plan shall
be given written notice of the plan of conversion. The
notice shall specify the member's right to rescind that
policy as provided in item (b) of subsection (10) of this
Section within 45 days after the effective date of the
plan. A copy of the plan or a summary of the plan shall
accompany the notice. The form of the notice shall be
filed with and approved by the Director.
(b) Option to rescind. Any member entitled to
receive the notice described in item (a) of subsection
(10) of this Section shall be entitled to rescind his or
her policy and receive a full refund of any amounts paid
for the policy or contract within 10 days after the
receipt of the notice.
(11) Corporate existence.
(a) Upon the conversion of a mutual company to a
converted stock company according to the provisions of
this Section, the corporate existence of the mutual
company shall be continued in the converted stock
company. All the rights, franchises, and interests of
the mutual company in and to every type of property,
real, personal, and mixed, and things in action thereunto
belonging, is deemed transferred to and vested in the
converted stock company without any deed or transfer.
Simultaneously, the converted stock company is deemed to
have assumed all the obligations and liabilities of the
mutual company.
(b) The directors and officers of the mutual
company, unless otherwise specified in the plan of
conversion, shall serve as directors and officers of the
converted stock company until new directors and officers
of the converted stock company are duly elected pursuant
to the articles of incorporation and bylaws of the
converted stock company.
(12) Conflict of interest. No director, officer, agent,
or employee of the mutual company or any other person shall
receive any fee, commission, or other valuable consideration,
other than his or her usual regular salary and compensation,
for in any manner aiding, promoting, or assisting in the
conversion except as set forth in the plan approved by the
Director. This provision does not prohibit the payment of
reasonable fees and compensation to attorneys, accountants,
and actuaries for services performed in the independent
practice of their professions, even if the attorney,
accountant, or actuary is also a Director of the mutual
company.
(13) Costs and expenses. All the costs and expenses
connected with a plan of conversion shall be paid for or
reimbursed by the mutual company or the converted stock
company except where the plan provides either for a holding
company to acquire the stock of the converted stock company
or for the merger of the mutual company into a stock
insurance company as provided in subitem (i) of item (c) of
subsection (6) of this Section. In those cases, the acquiring
holding company or the stock insurance company shall pay for
or reimburse all the costs and expenses connected with the
plan.
(14) Failure to give notice. If the mutual company
complies substantially and in good faith with the notice
requirements of this Section, the mutual company's failure to
give any member or members any required notice does not
impair the validity of any action taken under this Section.
(15) Limitation of actions. Any action challenging the
validity of or arising out of acts taken or proposed to be
taken under this Section shall be commenced within 30 days
after the effective date of the plan.
(Source: P.A. 88-662, eff. 9-16-94.)
(215 ILCS 5/144.2) (from Ch. 73, par. 756.2)
Sec. 144.2. Notification of insurance accident and
health business.
(a) Upon notice by the Director, a company having direct
premium income for the kinds of business authorized in Class
1, clause (b), or Class 2, clause (a), of Section 4 must file
with the Director supplemental information regarding its
insurance accident and health business. The Director shall
by rule establish standards to determine the companies to be
given notice.
(b) The notice prescribed by this Section may require
the company to provide information concerning, but not
limited to, the following:
(1) adequacy of rates;
(2) marketing methodology and acquisition expenses;
(3) underwriting standards;
(4) recordkeeping and statistical systems;
(5) claim systems and claim reserving systems;
(6) reinsurance; and
(7) the general financial condition of the company.
(Source: P.A. 86-753; 86-1028; 87-1090.)
(215 ILCS 5/147.3 new)
Sec. 147.3. Issuance of capital notes by domestic
companies.
(a) A domestic company may at any time or from time to
time issue capital notes pursuant to this Section in an
aggregate principal amount not exceeding (1) 25% of its total
adjusted capital (including the aggregate principal amount of
outstanding capital notes and outstanding surplus notes or
guaranty fund certificates and guaranty capital shares) as of
the end of the immediately preceding calendar year less (2)
the aggregate principal amount of outstanding capital notes
and outstanding surplus notes or guaranty fund certificates
and guaranty capital shares; provided, however, that capital
notes shall not be issued for an aggregate principal amount
that would cause the aggregate principal amount for all of
the insurer's capital notes scheduled to mature in any
calendar year to exceed 5%, or the aggregate principal amount
of all of the insurer's capital notes scheduled to mature in
any 3 consecutive calendar years to exceed 12%, of the
insurer's total adjusted capital as of the end of the
calendar year immediately preceding the issuance of the
capital notes. The aggregate amount of capital notes and
surplus notes or guaranty fund certificates and guaranty
capital shares is at all times limited to 33 1/3% of total
adjusted capital. Any aggregate amount in excess of this
limit shall reduce the amount of capital notes included in
the insurer's total adjusted capital.
(b) No insurer shall issue capital notes pursuant to
this Section unless the form and terms thereof shall have
been approved by the Director. The term of any capital note
shall be no less than 5 years.
(c) An insurer with a capital note outstanding shall
file a report with the Director at the same time that the
insurer files its Annual Statement and at such other times as
the Director determines necessary. The Director may by rule
establish times for and the content of these reports.
(d) The insurer shall not pay or redeem the principal
amount of any capital notes, make any sinking fund payment,
or pay any interest on the notes, and the principal, payment,
and interest shall not become due or payable if, based on the
preceding year-end annual statement filed with the Director:
(1)(A) The insurer's total adjusted capital is less
than the insurer's company action level RBC or (B) the
insurer's total adjusted capital is less than the product
of 1.25 and its company action level RBC and there is a
negative trend, as determined in accordance with the
Article IIA of this Code; or
(2) the aggregate of all payments or redemptions
made during a calendar year would, if made immediately
prior to the preceding year-end, have caused (A) the
insurer's total adjusted capital to be less than the
insurer's company action level RBC or (B) the insurer's
total adjusted capital at such time to be less than the
product of 1.25 and its company action level RBC and
there is a negative trend, as determined in accordance
with Article IIA of this Code.
Notwithstanding items (1) and (2), upon request by the
insurer, the Director may approve, in whole or in part, any
payment or redemption on the capital notes if and at such
time or times as in his or her judgment the financial
condition of the insurer warrants. The amount of the
redemptions or payments of principal amounts of any capital
notes that cannot be made as the result of the provisions of
this subsection may accumulate at the rate of interest of the
capital notes.
(e) Capital notes issued pursuant to this Section:
(1) may provide (A) for interest payments at fixed
or adjustable rates, sinking fund payments, and payments
and redemptions of principal, in each case in accordance
with the terms of the capital note and without the prior
approval of the Director except to the extent that such
approval is required pursuant to this subsection or
subsection (d) of this Section, (B) that the capital
notes automatically become due and payable in the event
the insurer becomes subject to an order of
rehabilitation, liquidation, or conservation granted
pursuant to a proceeding under Article XIII of this Code,
and (C) for such other features as the Director
determines are appropriate for capital notes issued
according to this Section; and
(2) shall provide that if at the end of any
calendar year the total amount of the insurer's total
adjusted capital (including the aggregate principal
amount of outstanding capital notes and outstanding
surplus notes or guaranty fund certificates and guaranty
capital shares) is less than 3 times the aggregate
principal amount of capital notes outstanding and surplus
notes or guaranty fund certificates and guaranty capital
shares, the Director may notify the insurer that the
financial condition of the insurer does not warrant the
payment or redemption or sinking fund payment, in whole
or in part, on the capital notes. Such action by the
Director shall, without any action on the part of the
insurer or any other person, automatically defer payment
or redemption until such time as the Director finds that
the financial condition warrants payment or redemption.
The amount of redemptions or payments of principal
amounts of any capital notes so deferred may accumulate
at the rate of interest of the capital notes.
(f) The outstanding principal of a capital note issued
pursuant to this Section shall be considered part of the
insurer's total adjusted capital, but shall not be considered
part of the insurer's surplus; provided, however, (1) that,
in the case of any capital note maturing 15 years or less
from the year in which the capital note is issued, one-fifth
of the aggregate principal amount of the capital note shall
be subtracted from total adjusted capital in each year
starting with the fifth year immediately preceding the
calendar year in which the capital note is scheduled to
mature; and (2) that, in the case of any capital note
maturing more than 15 years from the year in which the
capital note is issued, one-tenth of the aggregate principal
amount of the capital note shall be subtracted from total
adjusted capital in each year starting with the tenth year
immediately preceding the calendar year in which the capital
note is scheduled to mature, and further provided that, in no
event shall the amount included in total adjusted capital for
any capital note exceed the principal amount, at issue, of
the outstanding capital note less the aggregate of all
sinking fund payments made on the capital note. The insurer
shall disclose the aggregate principal amount of capital
notes then outstanding as a liability on its financial
statements filed with the Director pursuant to this Code.
(g) As used in this Section, the terms "total adjusted
capital", "company action level RBC", and "authorized control
level RBC" shall have the meanings given those terms in
Article IIA of this Code.
(215 ILCS 5/162) (from Ch. 73, par. 774)
Sec. 162. Certificate of Merger or Consolidation or Plan
of Exchange and Certificate of Approval.)
(1) Upon the execution of an agreement of merger or
consolidation or plan of exchange, there shall be delivered
to the Director:
(a) two duplicate originals of the agreement or
plan;
(b) affidavits of officers of each of the companies
setting forth the facts necessary to show that all
requirements of law with respect to notices to persons
entitled to vote have been complied with;
(c) certificates of the secretaries or assistant
secretaries or corresponding officers of each of the
companies, in case of a merger or consolidation, or of
the company to be acquired in case of a plan of exchange,
certifying to the number of shares, if any, outstanding,
the number of shares voted for and against such agreement
or plan, and further in the case of a merger or
consolidation (1) the number of policyholders represented
at the meeting at which the agreement was considered, and
(2) the number of votes cast by policyholders for and
against such agreement or (3) in the case of a fraternal
benefit society, the number of delegates of the supreme
legislative or governing body, and the number of votes
cast by the delegates for and against the agreement;
(d) the certificates required by section 171;
(e) if the surviving or new company is a domestic
company and any foreign or alien company is a party to
the merger or consolidation and the laws of the state or
country under which such foreign or alien company is
incorporated require approval of the merger or
consolidation by an official of such state or country, a
certificate of approval of such official; and
(f) in case of consolidation where the new company
is a foreign or alien company, an instrument appointing
the Director and his or her successor or successors in
office, the attorney of such company for service of
process, containing the same provisions and having the
same effect as the instrument required of a foreign or
alien company in order to be admitted to transact
business in this State.
In addition, the Director shall be provided, in
substantially the same form, the information required under
Article VIII 1/2 of this Code.
(2) In case the surviving or new company is a domestic
company, if the Director finds that:
(a) the agreement of merger or consolidation is in
accordance with the provisions of this Article and not
inconsistent with the laws and the Constitutions of this
State and the United States;
(b) the surviving or new company has complied with
all applicable provisions of this Code; and
(c) no reasonable objection exists to such merger
or consolidation; and
(d) the standards established under Article
VIII 1/2 are satisfied;
he or she shall approve the agreement. The provisions of any
law with reference to age limits and medical examination
shall be inoperative in so far as agreements of merger or
consolidation are concerned. If the agreement of merger or
consolidation be approved by the Director, he or she shall
file the affidavits and certificates and one of the duplicate
originals of the agreement in his or her office, endorse upon
the other duplicate original his or her approval thereof, and
deliver it, together with a certificate of merger or
consolidation, as the case may be, to the surviving or new
company. In the case of a consolidation, the Director shall
also issue a certificate of authority to the new company.
(3) In case the surviving or new company is a foreign or
alien company, if the Director finds that:
(a) the agreement of merger or consolidation is in
accordance with the provisions of this Article and not
inconsistent with the laws and the Constitutions of this
State and the United States;
(b) the agreement of merger or consolidation
provides for the assumption by the new or surviving
company of all the liabilities and obligations of the
companies parties to the merger or consolidation and
otherwise affords proper protection for creditors and
policyholders and that such provisions are not
inconsistent with the laws of the state or country of
incorporation of such new or surviving company;
(c) the surviving or new company has complied with
all applicable provisions of this Code; and
(d) no reasonable objection exists to such merger
or consolidation; and
(e) the standards established under Article
VIII 1/2 are satisfied;
he or she shall approve the agreement. If the agreement be
approved by the Director, he or she shall file the affidavits
and certificates and one of the duplicate originals of the
agreement in his or her office, endorse upon the other
duplicate original his or her approval thereof, and deliver
it, together with a certificate of approval of the merger or
consolidation, as the case may be, to the surviving or new
company.
(4) In the case of a plan of exchange, if the Director
finds that the parties to the exchange have established that:
(a) the plan, if effective, will not tend adversely
to affect the financial stability or management of any
domestic company which is a party thereto or the general
capacity or intention to continue the safe and prudent
transaction of the insurance business of such domestic
company or companies;
(b) the interests of the policyholders and
shareholders of each domestic insurance company which is
a party to the plan are protected; and
(c) the competence, experience and integrity of
those persons who would control the operation of the
domestic company are such as to be in the best interests
of the policyholders of such company to permit such
exchange;
(d) the terms and conditions of the plan are fair
and reasonable; and
(e) the standards established under Article
VIII 1/2 are satisfied;
he or she shall approve the plan of exchange. If the plan of
exchange be approved by the Director, he or she shall file
the affidavits and certificates and one of the duplicate
originals of the plan of exchange in his or her office,
endorse upon the other duplicate original his or her approval
thereof, and deliver it, together with a certificate of
approval of the plan of exchange to the domestic company.
(5) If the Director refuses to approve the agreement of
merger or consolidation, or plan of exchange, notice of such
refusal, assigning the reasons therefor, shall be given in
writing by the Director to each of the companies party
thereto, within 60 days from the date of the delivery of such
agreements or plan to him or her, and he or she shall grant
any of such companies a hearing upon request. The hearing
shall be held within 30 days of the Director's receipt of
request for hearing. All persons to whom it is proposed to
issue securities in such agreements or exchange shall have a
right to appear. Within 30 days after the close of the
hearing the Director shall approve or disapprove or place
conditions precedent upon his or her approval of the merger
or consolidation or plan by issuing a written order stating
his or her determination and the reasons therefor therefore.
(Source: P.A. 82-498.)
(215 ILCS 5/173) (from Ch. 73, par. 785)
Sec. 173. Reinsurance authorized.
(a) Subject to the provisions of this Article, any
domestic company may, by a reinsurance agreement, accept any
part or all of any risks of the kind which it is authorized
to insure and it may cede all or any part of its risks to
another solvent company having the power to make such
reinsurance. It may take credit for the reserves on such
ceded risks to the extent reinsured subject to the exceptions
provided in Sections 173.1 through 173.5.
(b) The purpose of this Article is to protect the
interest of insureds, claimants, ceding insurers, assuming
insurers, and the public generally. The legislature hereby
declares its intent is to ensure adequate regulation of
insurers and reinsurers and adequate protection for those to
whom they owe obligations. In furtherance of that State
interest, the legislature hereby provides a mandate that upon
the insolvency of a non-U.S. insurer or reinsurer that
provides security to fund its U.S. obligations in accordance
with this Article, the assets representing the security shall
be maintained in the United States and claims shall be filed
and valued by the state insurance official with regulatory
oversight, and the assets shall be distributed in accordance
with the insurance laws of the state in which the trust is
domiciled that are applicable to the liquidation of domestic
U.S. insurance companies. The legislature declares that the
matters contained in this Article are fundamental to the
business of insurance in accordance with 15 U.S.C Sections
1011 through 1012.
(Source: Laws 1965, p. 1077.)
(215 ILCS 5/173.1) (from Ch. 73, par. 785.1)
Sec. 173.1. Credit allowed a domestic ceding insurer.
(1) Except as otherwise provided under Article VIII 1/2
of this Code and related provisions of the Illinois
Administrative Code, credit for reinsurance shall be allowed
a domestic ceding insurer as either an admitted asset or a
deduction from liability on account of reinsurance ceded only
when the reinsurer meets the requirements of subsection
(1)(A) or (B) or (C) or (D). Credit shall be allowed under
subsection (1)(A) or (B) only as respects cessions of those
kinds or classes of business in which the assuming insurer is
licensed or otherwise permitted to write or assume in its
state of domicile, or in the case of a U.S. branch of an
alien assuming insurer, in the state through which it is
entered and licensed to transact insurance or reinsurance.
Credit shall be allowed under subsection (1)(C) of this
Section only if meeting the applicable requirements of
subsection (1)(C), the requirements of subsection (1)(E) have
been satisfied must also be met.
(A) Credit shall be allowed when the reinsurance is
ceded to an assuming insurer that is authorized licensed
to transact insurance in this State to transact the types
of insurance ceded and has at least $5,000,000 in capital
and surplus.
(B) Credit shall be allowed when the reinsurance is
ceded to an assuming insurer that is accredited as a
reinsurer in this State. An accredited reinsurer is one
that:
(1) files with the Director evidence of its
submission to this State's jurisdiction;
(2) submits to this State's authority to
examine its books and records;
(3) is licensed to transact insurance or
reinsurance in at least one state, or in the case of
a U.S. branch of an alien assuming insurer is
entered through and licensed to transact insurance
or reinsurance in at least one state;
(4) files annually with the Director a copy of
its annual statement filed with the insurance
department of its state of domicile and a copy of
its most recent audited financial statement; and
(5) maintains a surplus as regards
policyholders in an amount that is not less than
$20,000,000 and whose accreditation has been
approved by the Director. No credit shall be
allowed a domestic ceding insurer, if the assuming
insurers' accreditation has been revoked by the
Director after notice and hearing.
(C)(1) Credit shall be allowed when the reinsurance
is ceded to an assuming insurer that maintains a
trust fund in a qualified United States financial
institution, as defined in subsection 3(B), for the
payment of the valid claims of its United States
policyholders and ceding insurers, their assigns and
successors in interest. The assuming insurer shall
report annually to the Director information
substantially the same as that required to be
reported on the NAIC annual and quarterly financial
statement form by authorized licensed insurers and
any other financial information that to enable the
Director deems necessary to determine the financial
condition of the assuming insurer and the
sufficiency of the trust fund. The assuming insurer
shall submit to examination of its books and records
by the Director and bear the expense of examination.
(2)(a) Credit for reinsurance shall not be
granted under this subsection unless the form of the
trust and any amendments to the trust have been
approved by:
(i) the regulatory official of the state
where the trust is domiciled; or
(ii) the regulatory official of another
state who, pursuant to the terms of the trust
instrument, has accepted principal regulatory
oversight of the trust.
(b) The form of the trust and any trust
amendments also shall be filed with the regulatory
official of every state in which the ceding insurer
beneficiaries of the trust are domiciled. The trust
instrument shall provide that contested claims shall
be valid and enforceable upon the final order of any
court of competent jurisdiction in the United
States. The trust shall vest legal title to its
assets in its trustees for the benefit of the
assuming insurer's United States policyholders and
ceding insurees and their assigns and successors in
interest. The trust and the assuming insurer shall
be subject to examination as determined by the
Director.
(c) The trust shall remain in effect for as
long as the assuming insurer has outstanding
obligations due under the reinsurance agreements
subject to the trust. No later than February 28 of
each year the trustee of the trust shall report to
the Director in writing the balance of the trust and
a list of the trust's investments at the preceding
year-end and shall certify the date of termination
of the trust, if so planned, or certify that the
trust will not expire prior to the next following
December 31.
(3) The following requirements apply to the
following categories of assuming insurer:
(a) The trust fund for a single assuming
insurer shall consist of funds in trust in an amount
not less than the assuming insurer's liabilities
attributable to reinsurance ceded by U.S. ceding
insurers In the case of a single assuming insurer,
the trust shall consist of a trusteed account
representing the assuming insurer's liabilities
attributable to business written in the United
States, and, in addition, the assuming insurer shall
maintain a trusteed surplus of not less than
$20,000,000.
(b)(i) In the case of a group including
incorporated and individual unincorporated
underwriters:
(I) for reinsurance ceded under
reinsurance agreements with an inception,
amendment, or renewal date on or after August
1, 1995, the trust shall consist of a trusteed
account in an amount not less than the group's
several liabilities attributable to business
ceded by U.S. domiciled ceding insurers to any
member of the group;
(II) for reinsurance ceded under
reinsurance agreements with an inception date
on or before July 31, 1995 and not amended or
renewed after that date, notwithstanding the
other provisions of this Act, the trust shall
consist of a trusteed account in an amount not
less than the group's several insurance and
reinsurance liabilities attributable to
business written in the United States; and
(III) in addition to these trusts, the
group shall maintain in trust a trusteed
surplus of which not less than $100,000,000
shall be held jointly for the benefit of the
U.S. domiciled ceding insurers of any member of
the group for all years of account., the trust
shall consist of a trusteed account
representing the group's liabilities
attributable to business written in the United
States, and, in addition, the group shall
maintain a trusteed surplus of which
$100,000,000 shall be held jointly for the
benefit of United States ceding insurers of any
member of the group;
(ii) The incorporated members of the group shall
not be engaged in any business other than underwriting as
a member of the group and shall be subject to the same
level of solvency regulation and control by the group's
domiciliary regulator as are the unincorporated members.;
(iii) Within 90 days after its financial statements
are due to be filed with the group's domiciliary
regulator, the group shall provide to the Director an
annual certification by the group's domiciliary regulator
of the solvency of each underwriter member, or if a
certification is unavailable, financial statements
prepared by independent public accountants of each
underwriter member of the group. and the group shall make
available to the Director an annual certification of the
solvency of each underwriter by the group's domiciliary
regulator and its independent public accountants.
(c)(2) In the case of a group of incorporated
insurers under common administration, the group
shall: that complies with the filing requirements
contained in the previous paragraph, that has
(i) have continuously transacted an insurance
business outside the United States for at least 3
years immediately before making application for
accreditation; and submits to this State's authority
to examine its books and records and bears the
expense of the examination, and that has
(ii) maintain aggregate policyholders' surplus
of not less than $10,000,000,000;,
(iii) maintain a trust the trust shall be in
an amount not less than equal to the group's several
liabilities attributable to business ceded by United
States domiciled ceding insurers to any member of
the group pursuant to reinsurance contracts issued
in the name of the group;,
(iv) in addition, plus the group shall
maintain a joint trusteed surplus of which not less
than $100,000,000 shall be held jointly for the
benefit of the United States ceding insurers of any
member of the group as additional security for these
liabilities; , and each member of the group shall
(v) within 90 days after its financial
statements are due to be filed with the group's
domiciliary regulator, make available to the
Director an annual certification of each underwriter
the member's solvency by the member's domiciliary
regulator and financial statements of each
underwriter member of the group prepared by its
independent public accountant.
(3) The trust shall be established in a form
approved by the Director. The trust instrument shall
provide that contested claims shall be valid and
enforceable upon the final order of any court of
competent jurisdiction in the United States. The
trust shall vest legal title to its assets in the
trustees of the trust for its United States
policyholders and ceding insurers, their assigns and
successors in interest. The trust and the assuming
insurer shall be subject to examination as
determined by the Director. The trust described
herein must remain in effect for as long as the
assuming insurer shall have outstanding obligations
due under the reinsurance agreements subject to the
trust.
(4) No later than February 28 of each year the
trustees of the trust shall report to the Director
in writing setting forth the balance of the trust
and listing the trust's investments at the preceding
year end and shall certify the date of termination
of the trust, if so planned, or certify that the
trust shall not expire prior to the next following
December 31.
(D) Credit shall be allowed when the reinsurance is
ceded to an assuming insurer not meeting the requirements
of subsection (1) (A), (B), or (C) but only with respect
to the insurance of risks located in jurisdictions where
that reinsurance is required by applicable law or
regulation of that jurisdiction.
(E) If the assuming insurer is not licensed to
transact insurance in this State or an accredited
reinsurer in this State, the credit permitted by
subsection (1)(C) shall not be allowed unless the
assuming insurer agrees in the reinsurance agreements:
(1) that in the event of the failure of the
assuming insurer to perform its obligations under
the terms of the reinsurance agreement, the assuming
insurer, at the request of the ceding insurer, shall
submit to the jurisdiction of any court of competent
jurisdiction in any state of the United States, will
comply with all requirements necessary to give the
court jurisdiction, and will abide by the final
decision of the court or of any appellate court in
the event of an appeal; and
(2) to designate the Director or a designated
attorney as its true and lawful attorney upon whom
may be served any lawful process in any action,
suit, or proceeding instituted by or on behalf of
the ceding company.
This provision is not intended to conflict with or
override the obligation of the parties to a reinsurance
agreement to arbitrate their disputes, if an obligation
to arbitrate is created in the agreement.
(F) If the assuming insurer does not meet the
requirements of subsection (1)(A) or (B), the credit
permitted by subsection (1)(C) shall not be allowed
unless the assuming insurer agrees in the trust
agreements to the following conditions:
(1) Notwithstanding any other provisions in
the trust instrument, if the trust fund is
inadequate because it contains an amount less than
the amount required by subsection (C)(3) of this
Section or if the grantor of the trust has been
declared insolvent or placed into receivership,
rehabilitation, liquidation, or similar proceedings
under the laws of its state or country of domicile,
the trustee shall comply with an order of the state
official with regulatory oversight over the trust or
with an order of a court of competent jurisdiction
directing the trustee to transfer to the state
official with regulatory oversight all of the assets
of the trust fund.
(2) The assets shall be distributed by and
claims shall be filed with and valued by the state
official with regulatory oversight in accordance
with the laws of the state in which the trust is
domiciled that are applicable to the liquidation of
domestic insurance companies.
(3) If the state official with regulatory
oversight determines that the assets of the trust
fund or any part thereof are not necessary to
satisfy the claims of the U.S. ceding insurers of
the grantor of the trust, the assets or part thereof
shall be returned by the state official with
regulatory oversight to the trustee for distribution
in accordance with the trust agreement.
(4) The grantor shall waive any rights
otherwise available to it under U.S. law that are
inconsistent with the provision.
(2) Credit A reduction from liability for the
reinsurance ceded by a domestic insurer to an assuming
insurer not meeting the requirements of subsection (1) shall
be allowed in an amount not exceeding the assets or
liabilities carried by the ceding insurer. The credit and
the reduction shall not exceed be in the amount of funds held
by or held in trust for on behalf of the ceding insurer,
including funds held in trust for the ceding insurer under a
reinsurance contract with the assuming insurer as security
for the payment of obligations thereunder, if the security is
held in the United States subject to withdrawal solely by,
and under the exclusive control of, the ceding insurer; or,
in the case of a trust, held in a qualified United States
financial institution, as defined in subsection (3)(B). This
security may be in the form of:
(A) Cash.
(B) Securities listed by the Securities Valuation
Office of the National Association of Insurance
Commissioners that conform to the requirements of Article
VIII of this Code that are not issued by an affiliate of
either the assuming or ceding company.
(C) Clean, irrevocable, unconditional, letters of
credit issued or confirmed by a qualified United States
financial institution, as defined in subsection (3)(A).
The letters of credit shall be effective issued or
confirmed no later than December 31 in respect of the
year for which filing is being made, and in the
possession of, or in trust for, the ceding company on or
before the filing due date of its annual statement, which
letters of credit shall be for an original term of not
less than one year. Letters of credit meeting applicable
standards of issuer acceptability as of the dates of
their issuance (or confirmation) shall, notwithstanding
the issuing (or confirming) institution's subsequent
failure to meet applicable standards of issuer
acceptability, continue to be acceptable as security
until their expiration, extension, renewal, modification,
or amendment, whichever first occurs.
(3)(A) For purposes of subsection 2(C), a "qualified
United States financial institution" means an institution
that:
(1) is organized or, in the case of a U.S.
office of a foreign banking organization, licensed
under the laws of the United States or any state
thereof;
(2) is regulated, supervised, and examined by
U.S. federal or state authorities having regulatory
authority over banks and trust companies;
(3) has been designated by either the Director
or the Securities Valuation Office of the National
Association of Insurance Commissioners as meeting
such its credit standards of financial condition and
standing as are considered necessary and appropriate
to regulate the quality of financial institutions
whose letters of credit will be acceptable to the
Director for issuing or confirming letter of credit;
and
(4) is not affiliated with the assuming
company.
(B) A "qualified United States financial
institution" means, for purposes of those provisions of
this law specifying those institutions that are eligible
to act as a fiduciary of a trust, an institution that:
(1) is organized or, in the case of the U.S.
branch or agency office of a foreign banking
organization, licensed under the laws of the United
States or any state thereof and has been granted
authority to operate with fiduciary powers;
(2) is regulated, supervised, and examined by
federal or state authorities having regulatory
authority over banks and trust companies; and
(3) is not affiliated with the assuming
company, however, if the subject of the reinsurance
contract is insurance written pursuant to Section
155.51 of this Code, the financial institution may
be affiliated with the assuming company with the
prior approval of the Director.
(Source: P.A. 87-108; 87-1090; 88-535.)
(215 ILCS 5/192) (from Ch. 73, par. 804)
Sec. 192. Duties of Director as rehabilitator;
termination.
(1) Upon the entry of an order directing rehabilitation,
the Director shall immediately proceed to conduct the
business of the company and take such steps towards removal
of the causes and conditions which have made such proceedings
necessary as may be expedient.
(2) The Director is authorized to deal with the property
and business of the company in his name as Director, or, if
the Court shall so order, in the name of the company. The
Director may, subject to the approval of the Court, sell or
otherwise dispose of the real and personal property, or any
part thereof, and sell or compromise all doubtful or
uncollectible debts or claims owing to the company in any
rehabilitation proceeding now pending or hereafter
instituted, except that whenever the value of any real or
personal property or the amount of any such debt owing to the
company does not exceed $25,000, the Director may sell,
dispose of, compromise, or compound the same upon such terms
as the Director deems to be in the best interest of the
company without obtaining approval of the court unless
otherwise directed by the court. The Director may solicit
contracts whereby a solvent company agrees to assume, in
whole or in part, or upon a modified basis, the liabilities
of a company in rehabilitation in a manner consistent with
subsection (4) of Section 193 of this Code.
(3) The Director may bring any action, claim, suit, or
proceeding against any director or officer of the company or
against any other person with respect to that person's
dealings with the company including, but not limited to,
prosecuting any action, claim, suit, or proceeding on behalf
of the creditors, members, policyholders, or shareholders of
the company. Nothing in this subsection shall be construed
to affect the standing of the Illinois Insurance Guaranty
Fund, the Illinois Life and Health Insurance Guaranty
Association, or the Illinois Health Maintenance Organization
Guaranty Association to sue or be sued under applicable law.
(4) (3) If at any time the Director finds that it is in
the best interests of policyholders, creditors and the
company to effect a plan of mutualization or rehabilitation,
the Director may submit such plan to the court for its
approval. Such plan, in addition to any other terms and
provisions as may by the Director be deemed necessary or
advisable, may include a provision imposing liens upon the
net equities of policyholders of the company, and in the case
of life companies, a provision imposing a moratorium upon the
loan or cash surrender values of the policies, for such
period and to such an extent as may be necessary. Notice of
the hearing upon any such plan shall be given in the manner
as may be fixed by the court and upon such hearing the court
may either approve or disapprove the plan or modify it in
such manner and to such extent as to the court shall seem
appropriate.
(5) (4) Where in such proceedings the Court has entered
an order for the filing of claims and it subsequently appears
that the total amount of all allowable claims exceed the
assets in the possession of the Rehabilitator, the Court may
upon the application of the Director authorize a distribution
of assets in accordance with the applicable provisions of
Section 210. The Director may at such time apply under this
Section for an order dissolving the company in accordance
with the applicable provisions of Section 196.
(6) (5) If at any time the Director finds that the
causes and conditions which made such proceeding necessary
have been removed he may petition the court for an order
terminating the conduct of the business by the Director and
permitting such company to resume possession of its property
and the conduct of its business and for a full discharge of
all liability and responsibility of the Director. No order
for the return to such company of its property and business
shall be granted unless the court after a full hearing
determines that the purposes of the proceeding have been
fully accomplished.
(Source: P.A. 89-206, eff. 7-21-95.)
(215 ILCS 5/205) (from Ch. 73, par. 817)
Sec. 205. Priority of distribution of general assets.
(1) The priorities of distribution of general assets
from the company's estate is to be as follows:
(a) The costs and expenses of administration,
including the expenses of the Illinois Insurance Guaranty
Fund, the Illinois Life and Health Insurance Guaranty
Association, the Illinois Health Maintenance Organization
Guaranty Association and of any similar organization in
any other state as prescribed in subsection (c) of
Section 545.
(b) Secured claims, including claims for taxes and
debts due the federal or any state or local government,
that are secured by liens perfected prior to the filing
of the complaint.
(c) Claims for wages actually owing to employees
for services rendered within 3 months prior to the date
of the filing of the complaint, not exceeding $1,000 to
each employee unless there are claims due the federal
government under paragraph (f), then the claims for wages
shall have a priority of distribution immediately
following that of federal claims under paragraph (f) and
immediately preceding claims of general creditors under
paragraph (g).
(d) Claims by policyholders, beneficiaries,
insureds and liability claims against insureds covered
under insurance policies and insurance contracts issued
by the company, and claims of the Illinois Insurance
Guaranty Fund, the Illinois Life and Health Insurance
Guaranty Association, the Illinois Health Maintenance
Organization Guaranty Association and any similar
organization in another state as prescribed in Section
545.
(e) Claims by policyholders, beneficiaries, and
insureds, the allowed values of which were determined by
estimation under paragraph (b) of subsection (4) of
Section 209.
(f) Any other claims due the federal government.
(g) All other claims of general creditors not
falling within any other priority under this Section
including claims for taxes and debts due any state or
local government which are not secured claims and claims
for attorneys' fees incurred by the company in contesting
its conservation, rehabilitation, or liquidation.
(h) Claims of guaranty guarantee fund certificate
holders, guaranty guarantee capital shareholders, capital
note holders, and surplus note holders.
(i) Proprietary claims of shareholders, members, or
other owners.
(2) Within 120 days after the issuance of an Order of
Liquidation with a finding of insolvency against a domestic
company, the Director shall make application to the court
requesting authority to disburse funds to the Illinois
Insurance Guaranty Fund, the Illinois Life and Health
Insurance Guaranty Association, the Illinois Health
Maintenance Organization Guaranty Association and similar
organizations in other states from time to time out of the
company's marshaled assets as funds become available in
amounts equal to disbursements made by the Illinois Insurance
Guaranty Fund, the Illinois Life and Health Insurance
Guaranty Association, the Illinois Health Maintenance
Organization Guaranty Association and similar organizations
in other states for covered claims obligations on the
presentation of evidence that such disbursements have been
made by the Illinois Insurance Guaranty Fund, the Illinois
Life and Health Insurance Guaranty Association, the Illinois
Health Maintenance Organization Guaranty Association and
similar organizations in other states.
The Director shall establish procedures for the ratable
allocation and distribution of disbursements to the Illinois
Insurance Guaranty Fund, the Illinois Life and Health
Insurance Guaranty Association, the Illinois Health
Maintenance Organization Guaranty Association and similar
organizations in other states. In determining the amounts
available for disbursement, the Director shall reserve
sufficient assets for the payment of the expenses of
administration described in paragraph (1) (a) of this
Section. All funds available for disbursement after the
establishment of the prescribed reserve shall be promptly
distributed. As a condition to receipt of funds in
reimbursement of covered claims obligations, the Director
shall secure from the Illinois Insurance Guaranty Fund, the
Illinois Life and Health Insurance Guaranty Association, the
Illinois Health Maintenance Organization Guaranty Association
and each similar organization in other states, an agreement
to return to the Director on demand funds previously received
as may be required to pay claims of secured creditors and
claims falling within the priorities established in
paragraphs (a), (b), (c), and (d) of subsection (1) of this
Section in accordance with such priorities.
(3) The provisions of this Section are severable under
Section 1.31 of the Statute on Statutes.
(Source: P.A. 88-297; 89-206, eff. 7-21-95.)
(215 ILCS 5/245.21) (from Ch. 73, par. 857.21)
Sec. 245.21. Establishment of separate accounts by
domestic companies organized to do a life, annuity, or
accident and health insurance business. A domestic life
company, including for the purposes of this Article all
domestic fraternal benefit beneficiary associations,
societies or companies which operate on a legal reserve
basis, may, for authorized classes of insurance, establish
one or more separate accounts, and may allocate thereto
amounts (including without limitation proceeds applied under
optional modes of settlement or under dividend options) to
provide for life, annuity, or accident and health insurance
or annuities (and benefits incidental thereto), payable in
fixed or variable amounts or both, subject to the following:
(1) The income, gains and losses, realized or
unrealized, from assets allocated to a separate account must
be credited to or charged against the account, without regard
to other income, gains or losses of the company.
(2) Except as may be provided with respect to reserves
for guaranteed benefits and funds referred to in paragraph
(3) of this Section (i) amounts allocated to any separate
account and accumulations thereon may be invested and
reinvested without regard to any requirements or limitations
of Sections 125a through 125.24a of this Code and (ii) the
investments in any separate account or accounts may not be
taken into account in applying the investment limitations
otherwise applicable to the investments of the company.
(3) Except with the approval of the Director and under
the conditions as to investments and other matters as the
Director he may prescribe, that must recognize the guaranteed
nature of the benefits provided, reserves for (i) benefits
guaranteed as to dollar amount and duration and (ii) funds
guaranteed as to principal amount or stated rate of interest
may not be maintained in a separate account.
(4) Unless otherwise approved by the Director, assets
allocated to a separate account must be valued at their
market value on the date of valuation, or if there is no
readily available market, then as provided in the contract or
the rules or other written agreement applicable to the
separate account. Unless otherwise approved by the Director,
the portion, if any, of the assets of the separate account
equal to the company's reserve liability with regard to the
guaranteed benefits and funds referred to in paragraph (3) of
this Section must be valued in accordance with the rules
otherwise applicable to the company's assets.
(5) Amounts allocated to a separate account under this
Article are owned by the company, and the company may not be,
nor hold itself out to be, a trustee with respect to those
amounts. The assets of any separate account equal to the
reserves and other contract liabilities with respect to the
account may not be charged with liabilities arising out of
any other business the company may conduct.
(6) No sale, exchange or other transfer of assets may be
made by a company between any of its separate accounts or
between any other investment account and one or more of its
separate accounts unless, in case of a transfer into a
separate account, the transfer is made solely to establish
the account or to support the operation of the contracts with
respect to the separate account to which the transfer is
made, and unless the transfer, whether into or from a
separate account, is made (i) by a transfer of cash, or (ii)
by a transfer of securities having a readily determinable
market value, if the transfer of securities is approved by
the Director. The Director may approve other transfers among
those accounts if, in his or her opinion, the transfers would
not be inequitable.
(7) To the extent a company considers it necessary to
comply with any applicable federal or state laws, the
company, with respect to any separate account, including
without limitation any separate account which is a management
investment company or a unit investment trust, may provide
for persons having an interest therein appropriate voting and
other rights and special procedures for the conduct of the
business of the account, including without limitation special
rights and procedures relating to investment policy,
investment advisory services, selection of independent public
accountants, and the selection of a committee, the members of
which need not be otherwise affiliated with the company, to
manage the business of the account.
(Source: P.A. 86-1154; 86-1156.)
(215 ILCS 5/245.23) (from Ch. 73, par. 857.23)
Sec. 245.23. No company may deliver or issue for delivery
within this State variable contracts unless it is authorized
licensed or organized to do a life, annuity, or accident and
health insurance or annuity business in this State, and the
Director is satisfied that its condition or method of
operation in connection with the issuance of such contracts
will not render its operation hazardous to the public or its
policyholders in this State. In this connection, the Director
may consider among other things:
(a) The history and financial condition of the company;
(b) The character, responsibility and fitness of the
officers and directors of the company; and
(c) The law and regulation under which the company is
authorized in its state of domicile to issue variable
contracts. If the company is a subsidiary of an authorized
admitted life insurance company, or affiliated with such a
company through common management or ownership, it may be
deemed by the Director to have met the requirements of this
Section if either it or the parent or the affiliated company
meets the requirements of this Section.
(Source: P.A. 77-1572.)
(215 ILCS 5/245.25) (from Ch. 73, par. 857.25)
Sec. 245.25.
Except for subparagraphs (1) (a), (1) (f), (1) (g) and
(3) of Section 226 of the Illinois Insurance Code, in the
case of a variable annuity contract and subparagraphs (1)
(b), (1) (f), (1) (g), (1) (h), (1) (i), and (1) (k) of
Section 224, subparagraph (1) (c) of Section 225, and
subparagraph (h) of Section 231 in the case of a variable
life insurance policy, except for Sections 357.4, 357.5, and
367e in the case of a variable health insurance policy, and
except as otherwise provided in this Article, all pertinent
provisions of the Illinois Insurance Code which are
appropriate to those contracts apply to separate accounts and
contracts relating thereto. Any individual variable life
insurance contract, delivered or issued for delivery in this
State, must contain grace, reinstatement and non-forfeiture
provisions appropriate to such a contract. Any individual
variable annuity contract, delivered or issued for delivery
in this State, must contain grace and reinstatement
provisions appropriate to such a contract. Any group variable
life insurance contract, delivered or issued for delivery in
this State, must contain a grace provision appropriate to
such a contract. A group variable health insurance contract
delivered or issued for delivery in this State must contain a
continuation of group coverage provision appropriate to the
contract. The reserve liability for variable contracts must
be established in accordance with actuarial procedures that
recognize the variable nature of the benefits provided and
any mortality guarantees.
(Source: P.A. 78-255.)
(215 ILCS 5/513a9) (from Ch. 73, par. 1065.60a9)
Sec. 513a9. Premium finance agreement.
(a) A premium finance agreement must be dated and signed
by or on behalf of the named insured, and the printed portion
shall be in at least 8-point type. The following items must
be set forth on the first page of the accepted finance
agreement:
(1) the total amount of the premiums;
(2) the amount of the down payment;
(3) the principal balance (the difference between
items (1) and (2));
(4) the amount of the finance charges expressed in
dollars and as an annual percentage rate;
(5) the balance payable by the insured (sum of
items (3) and (4));
(6) the number of installments, the due dates
thereof, and the amount of each installment expressed in
dollars; and
(7) the policy numbers or binder numbers.
(b) The premium finance company is required to furnish
full and complete disclosure of the terms and conditions of
the premium finance agreement including, but not limited to,
the specific insurance coverages financed to the named
insured no later than the date that the first premium payment
notice is sent to the insured.
(c) As to policies written primarily for personal,
family, or household use, the premium finance company must:
(1) deliver or mail the premium check or checks in
the amount of the principal balance directly to the
insurer or insurers unless the insurer or insurers have
given written authority to the premium finance company to
deliver the checks to the producer;
(2) issue the premium check or checks payable to
the insurer, insurers, or, if the insurer gives written
authority to the premium finance company, to the
producer; and
(3) properly identify the premium check or checks
by policy number or binder number when the premium is
paid to the insurer or insurers.
(d) As to all other policies the premium finance company
may:
(1) deliver or mail the premium check or checks in
the amount of the principal balance directly to the
producer; and
(2) issue the premium check or checks payable to
the producer.
(e) A premium finance company that pays the financed
premium to the producer pursuant to subsection (d)
establishes the producer as the agent of the premium finance
company for payment of the premium and for receipt of any
return premium.
(Source: P.A. 89-265, eff. 1-1-96.)
(215 ILCS 5/245.61 rep.)
(215 ILCS 5/245.62 rep.)
Section 10. The Illinois Insurance Code is amended by
repealing Sections 245.61 and 245.62.
Section 20. The Religious and Charitable Risk Pooling
Trust Act is amended by changing Section 25.1 as follows:
(215 ILCS 150/25.1) (from Ch. 148, par. 225.1)
Sec. 25.1. (a) Any trust fund organized under this Act
may reorganize itself as a mutual insurance company or a
reciprocal in accordance with the provisions of this Section,
provided that it has both (1) a net fund balance (surplus),
reported on a basis consistent with that prescribed in
Section 136 of the Illinois Insurance Code of (a) not less
than that required of a newly organized mutual insurance
company under Section 43 of the Illinois Insurance Code and
authorized to write like lines of business, if the trust fund
is reorganizing into a mutual insurance company, or (b) not
less than that required of a newly organized reciprocal under
Section 66 of the Illinois Insurance Code and Authorized to
write like lines of business, if the trust fund is
reorganizing into a reciprocal, and (2) an operating history
of not less than 3 5 consecutive years after organizational
approval of the trust fund by the Director of Insurance,
during which period such trust fund shall have continuously
provided non-assessable benefits or indemnification contracts
to its beneficiaries. A trust fund reorganized as a mutual
insurance company shall, after reorganization and
notwithstanding any contrary provision of the Illinois
Insurance Code, have the powers of a mutual insurance company
organized under Article III of the Illinois Insurance Code
together with continuing powers and authority granted trust
funds pursuant to Section 6 of this Act. A trust fund
reorganized as a reciprocal shall, after reorganization and
notwithstanding any contrary provision of the Illinois
Insurance Code, have the power of a reciprocal organized
under Article IV of the Illinois Insurance Code together with
continuing powers and authority granted trust funds pursuant
to Section 6 of this Act. In addition, surplus amounts
attributable to contribution certificates meeting the
requirements of Section 14.1 of this Act and issued by a
trust fund prior to reorganization as either a mutual
insurance company or a reciprocal or by the successor mutual
insurance company or reciprocal within a period of 5 years
following reorganization, may be reported as surplus on the
successor insurance company's or reciprocal's financial
statements in a manner consistent with and subject to the
terms of Section 14.1 of this Act. After expiration of such
5 year period, the provisions of Section 56 of the Illinois
Insurance Code shall be applicable to a reorganized mutual
insurance company or reciprocal, with regard to the
accumulation of a guarantee fund. Except as provided in this
subsection (a), this Act shall not be applicable to a
reorganized mutual insurance company or reciprocal, and the
mutual insurance company or reciprocal shall be subject to
all otherwise applicable provisions of the Illinois Insurance
Code.
(b) The Trustees of any trust fund seeking to reorganize
as a mutual insurance company shall adopt articles of
incorporation and by-laws as shall be necessary to make the
same conform to articles of incorporation and by-laws of a
mutual insurance company, as provided under Article III of
the Illinois Insurance Code. Duplicate originals of such
articles and by-laws shall be delivered to the Director of
Insurance, together with the financial statements, as
required under subsection (d). The Director shall approve
the articles and by-laws after a finding that they are
consistent with the requirements applicable to companies
organized under Article III of the Illinois Insurance Code,
relating to domestic mutual companies, except as otherwise
provided herein. Upon approval by the Director and the
recordation of a certified copy of the articles of
incorporation in the office of the recorder in the county
where the principal office of the company is located, such
company shall be subject to and entitled to the benefits of
Article III of the Illinois Insurance Code.
(c) (i) The trustees of any trust fund seeking to
reorganize as a reciprocal shall, by resolution, approve a
plan of reorganization setting forth (1) a proposed
declaration of organization, as provided under Article IV of
the Illinois Insurance Code; (2) a form of power of attorney
designating a person, as defined in Section 2 of the Illinois
Insurance Code, to act as attorney in fact on behalf of the
beneficiaries of the trust fund in exchanging contracts of
insurance after reorganization of the trust fund as a
reciprocal, which form shall be consistent with the
provisions of Article IV; (3) the terms and conditions of the
proposed reorganization and the mode of carrying the same
into effect; and (4) the manner and basis of assuming the
assets and liabilities of the trust fund, including the
benefit schedule theretofore issued by the trust fund,
whether or not then in force. Duplicate originals of the plan
of reorganization, as adopted by the trustees, shall be
submitted to the Director of Insurance, together with such
other documents as are necessary to satisfy the requirements
of Article IV and the financial statements, as required under
subsection (d) below. The Director shall approve the plan and
the other documents upon finding each consistent with the
requirements applicable to reciprocals organized under
Article IV relating to domestic reciprocals, except as
otherwise provided herein.
(ii) Within 60 days after approval by the Director, the
plan of reorganization and other documents, as approved by
the Director, shall then be submitted by the trustees for
approval by the beneficiaries of the trust fund at a
regularly scheduled or special meeting of beneficiaries.
Written or printed notice shall be given not less than 20
days before each such meeting, either personally or by mail,
to each beneficiary of the trust fund. If mailed, such notice
is deemed to be delivered when deposited in the United States
mail, with postage prepaid, addressed to the beneficiary at
his address as it appears on the records of the trust fund.
Such notice shall state the place, day, hour and purpose of
the meeting. A copy of the plan of reorganization shall be
enclosed with such notice. Approval by beneficiaries shall
require (1) the affirmative vote of 2/3 of all beneficiaries
of the trust fund covered under benefit schedules in force at
the date of the notice, voting in person or by proxy at the
meeting, and (2) the execution by the beneficiaries voting in
favor of the plan of the power of attorney proposed as a part
of the plan. Each beneficiary entitled to vote shall have one
vote regardless of the number of benefit schedules that may
have been issued or contributions paid therefor.
(iii) Within 10 days after approval by the
beneficiaries, the trust fund, acting by and through its
designated officers, shall certify to the Director such
approval, appending to such certification a true and correct
copy of the plan, as approved, the declaration of
organization executed by the attorney-in-fact, and the form
of the power of attorney, as executed, together with a list
of the beneficiaries so approving and executing the power of
attorney. The Director shall thereafter issue to the
attorney-in-fact a certificate of authority, as provided in
Section 73 of the Illinois Insurance Code, but only after the
termination by the trust fund of all benefit schedules issued
to beneficiaries who have declined to execute the power of
attorney, which termination may be accomplished by the
expiry, nonrenewal or cancellation of benefit schedules. Upon
such termination, the trust fund, acting by and through its
designated officers, shall so certify to the Director, and
the date of such certification shall constitute the effective
date of reorganization of the trust fund, being the date on
which the reciprocal shall become the successor in interest
to the trust fund and thenceforth be responsible and liable
for all of the liabilities and obligations of the trust fund
in accordance with the approved plan of reorganization, and
the benefit schedules issued by the trust fund which then
remain outstanding shall be deemed to have been issued by the
reciprocal. All of the property, real, personal and mixed,
and all other choses in action and all and every other
interest of the trust fund upon the effective date of
reorganization shall be deemed transferred to and vested in
the reciprocal without further act or deed. The reciprocal
shall thereupon be subject to and entitled to the benefits of
Article IV of the Illinois Insurance Code and the trust fund
shall thereafter cease to exist.
(d) The Trustees of any such trust fund shall deliver to
the Director of Insurance a statement of financial condition
as of a date not more than 6 months prior to said date of
delivery, prepared in accordance with Section 136 of the
Illinois Insurance Code and certified by an independent
public accountant as correctly stating the financial
condition of such trust fund in accordance with the standards
of said Section 136. The Director shall review such
statement of financial condition and may, in his discretion,
conduct an examination of such trust fund to determine its
financial condition. Any such examination shall be commenced
within 60 days after the date of delivery to the Director of
such statement of financial condition.
(e) In the case of a trust fund reorganizing into a
mutual insurance company, provided that (i) such statement of
financial condition shall reflect, and the Director is
satisfied from the examination, if conducted, that a net fund
balance (surplus) in an amount at least equal at the time of
reorganization to that required of a newly organized company
subject to Section 43 of the Illinois Insurance Code and
writing like lines of business and (ii) the articles of
incorporation and by-laws, as required by subsection (b),
shall comply with the requirements of Article III of the
Illinois Insurance Code, the Director of Insurance shall
approve the reorganization and articles and by-laws within 60
days after receipt thereof, or within 60 days after the
completion of any examination conducted by the Director,
whichever date shall last occur, and shall issue a
certificate of authority, as provided under Section 51 of the
Illinois Insurance Code within 10 days after the receipt of
evidence of recordation of the articles and by-laws.
(f) In the case of a trust fund reorganizing into a
reciprocal, provided that (i) the statement of financial
condition shall reflect, and the Director is satisfied from
the examination, if conducted, that a net fund balance
(surplus) in an amount at least equal at the time of
reorganization to that required of a newly organized
reciprocal subject to Section 66 of the Illinois Insurance
Code and writing like lines of business and (ii) the
declaration of organization and other documents, as required
by subsection (c), shall comply with the requirements of
Article IV of the Illinois Insurance Code, the Director of
Insurance shall approve the reorganization and declaration
within 60 days after receipt thereof, or within 60 days after
the completion of any examination conducted by the Director,
whichever date shall last occur, and shall issue a
certificate of authority, as provided under Section 73 of the
Illinois Insurance Code within 10 days after the deposit with
the Director by the reorganizing reciprocal of cash or
securities as required by Section 74 of the Illinois
Insurance Code.
(Source: P.A. 86-847.)
Section 99. Effective date. This Act takes effect upon
becoming law.
INDEX
Statutes amended in order of appearance
215 ILCS 5/14.1 from Ch. 73, par. 626.1
215 ILCS 5/32 from Ch. 73, par. 644
215 ILCS 5/33 from Ch. 73, par. 645
215 ILCS 5/34 from Ch. 73, par. 646
215 ILCS 5/56 from Ch. 73, par. 668
215 ILCS 5/122-1 from Ch. 73, par. 734-1
215 ILCS 5/144.2 from Ch. 73, par. 756.2
215 ILCS 5/147.3 new
215 ILCS 5/162 from Ch. 73, par. 774
215 ILCS 5/173 from Ch. 73, par. 785
215 ILCS 5/173.1 from Ch. 73, par. 785.1
215 ILCS 5/174 from Ch. 73, par. 786
215 ILCS 5/192 from Ch. 73, par. 804
215 ILCS 5/205 from Ch. 73, par. 817
215 ILCS 5/245.21 from Ch. 73, par. 857.21
215 ILCS 5/245.23 from Ch. 73, par. 857.23
215 ILCS 5/245.25 from Ch. 73, par. 857.25
215 ILCS 5/245.61 rep.
215 ILCS 5/245.62 rep.
215 ILCS 107/5.20
215 ILCS 107/5.25