[ Home ] [ ILCS ] [ Search ] [ Bottom ]
[ Other General Assemblies ]
Public Act 92-0074
SB865 Enrolled LRB9201059JSpcA
AN ACT concerning insurance.
Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
Section 5. The Illinois Insurance Code is amended by
changing Sections 107.06a, 107.07, 107.15, 179A-5, 179A-10,
179A-15, 179A-20, 179A-25, 179A-30, and 179A-35 as follows:
(215 ILCS 5/107.06a) (from Ch. 73, par. 719.06a)
Sec. 107.06a. Organization under Illinois Insurance
Code.
(a) After December 31, 1997, a syndicate or limited
syndicate, except for a limited syndicate formed as a
partnership or a special purpose limited syndicate, may only
be organized pursuant to Sections 7, 8, 10, 11, 12, 14, 14.1
(other than subsection (d) thereof), 15 (other than
subsection (d) thereof), 18, 19, 20, 21, 22, 23, 25, 27.1,
28, 28.1, 28.2, 29, 30, 31, 32, 32.1, 33, and 35.1 and
Article X of this Code, to carry on the business of a
syndicate, or limited syndicate under Article V-1/2 of this
Code; provided that such syndicate or limited syndicate is
admitted to the Exchange.
(b) After December 31, 1997, syndicates and limited
syndicates are subject to the following:
(1) Articles I, IIA, VIII, VIII 1/2, X, XI, XI 1/2,
XII, XII 1/2, XIII, XIII 1/2, XXIV, XXV (Sections 408 and
412 only), and XXVIII (except for Sections 445, 445.1,
445.2, 445.3, 445.4, and 445.5) of this Code;
(2) Subsections (2) and (3) of Section 155.04 and
Sections 13, 132.1 through 140, 141a, 144, 155.01,
155.03, 378, 379.1, 393.1, 395, and 396 of this Code;
(3) the Reinsurance Intermediary Act; and
(4) the Producer Controlled Insurer Act.
(c) No other provision of this Insurance Code shall be
applicable to any such syndicate or limited syndicate except
as provided in this Article V-1/2.
(Source: P.A. 90-499, eff. 8-19-97; 90-794, eff. 8-14-98;
91-278, eff. 7-23-99.)
(215 ILCS 5/107.07) (from Ch. 73, par. 719.07)
Sec. 107.07. Admission. Capitalization:
Syndicate - at least $2,000,000.
Subscriber - at least $30,000.
Special Purpose Limited Syndicate - at least $5,000.
Fees: (a) Exchange brokers. An annual fee shall be paid
to the Exchange by any person who presents risks to the
Exchange. The annual fee established by the Exchange shall
not exceed $5,000.
(b) The Exchange may establish annual fees for the
admission of syndicates, limited syndicates, and subscribers.
Standards: The Exchange may establish additional
standards for the admission of subscribers and Exchange
brokers.
Assessments: The Exchange may make assessments of
subscribers or syndicates for the expenses of operating the
Exchange.
(Source: P.A. 90-499, eff. 1-1-98.)
(215 ILCS 5/107.15) (from Ch. 73, par. 719.15)
Sec. 107.15. Definitions. Persons: A person is an
individual, partnership, association, corporation or limited
partnership.
Syndicate: A syndicate is a subscriber, group of
subscribers, limited syndicate or group of limited syndicates
which meets the minimum capital requirement of Section
107.07.
Limited Syndicate: A limited syndicate is a corporation
or partnership formed by subscribers for the purpose of
joining with syndicates, other subscribers, or limited
syndicates to form syndicates or to participate with
syndicates in the insurance or reinsurance of risks.
Subscriber: A subscriber is a person who has made a
deposit of money pursuant to Section 107.07 permitting that
person to participate as a subscriber in a syndicate or
limited syndicate.
Special Purpose Limited Syndicate: A special purpose
limited syndicate is any entity formed for the purposes of
participation in the securitization of reinsurance risks in
accordance with rules adopted pursuant to Section 107.15b.
Exchange Broker: A person licensed as an insurance broker
in the State of Illinois or as a reinsurance intermediary who
is admitted to the Exchange to present applications for
insurance.
Present Applications for Insurance: Means to make an
application to a syndicate for an insurance policy.
Reinsurance: Means reinsuring insurance.
Minimum Subscription: The subscription capital required
for admission as a subscriber to the Exchange. Subscribers
shall at all times maintain the minimum capitalization
required by this Article.
(Source: P.A. 89-206, eff. 7-21-95.)
(215 ILCS 5/179A-5)
Sec. 179A-5. Purpose. This Article is adopted to
provide a basis for the creation of protected cells by a
domestic insurer as one means of accessing alternative
sources of capital and achieving the benefits of insurance
securitization. Investors in fully funded insurance
securitization transactions provide funds that are available
to pay the insurer's insurance obligations or to repay the
investors or both. The creation of protected cells is
intended to be a means to achieve more efficiencies in
conducting insurance securitizations. Insurance
securitization has been developed as a means of accessing
alternative sources of capital and diversifying credit risk
in order to enhance an insurance company's ability to both
assume risk and stabilize underwriting results.
Under the terms of the typical debt instrument underlying
an insurance securitization transaction, prepaid principal is
repaid to the investor on a specified maturity date with
interest, unless a trigger event occurs. The insurance
securitization proceeds secure both the protected cell
company's insurance obligations proceeds of the debt
instrument both collateralize the insurance company's
obligations under specified contracts of insurance if a
trigger event occurs, as well as the protected cell insurance
company's obligation to repay the insurance securitization
investors debt instrument if a trigger event does not occur.
Traditionally, Insurance securitization transactions have
been performed through alien companies in order to utilize
efficiencies available to alien companies that are not
currently available to domestic companies. This Article is
adopted in order to create more efficiency in conducting
insurance securitization, to allow domestic companies easier
access to alternative sources of capital, and to promote
the benefits of insurance securitization generally.
(Source: P.A. 91-278, eff. 7-23-99.)
(215 ILCS 5/179A-10)
Sec. 179A-10. Definitions.
"Domestic company" means an insurance company domiciled
in the State of Illinois.
"Fully funded" means that, with respect to any exposure
attributed to a protected cell, the market value of the
protected cell assets, on the date on which the insurance
securitization is effected, equals or exceeds the maximum
possible exposure attributable to the protected cell with
respect to those exposures.
"General account" means the assets and liabilities of a
protected cell company other than protected cell assets and
protected cell liabilities.
"Indemnity trigger" means a transaction term by in which
relief of the issuer's obligation to repay investors is
triggered by its incurring suffering a specified level of
losses under its policies of insurance or reinsurance
contracts.
"Insurance securitization" means the entering into of
debt instruments supported in full by cash or readily
marketable securities with investors by a domestic company
where repayment of principal or interest, or both, to
investors pursuant to the transaction terms is contingent
upon the occurrence or nonoccurrence of an event with respect
to which the domestic company is exposed to loss under
policies or contracts of insurance or reinsurance it has
issued.
"Market value" has the meaning given that term in Article
VIII of this Code (Investments of Domestic Companies).
"Non-indemnity trigger" means a transaction term by which
relief of the issuer's obligation to repay investors is
triggered solely by some event or condition other than the
individual protected cell company incurring a specified level
of losses under its insurance or reinsurance contracts.
"Protected cell" means an identified pool of assets and
liabilities of a domestic company segregated and insulated by
means of this Article from the remainder of the company's
assets and liabilities.
"Protected cell account" means a specifically identified
bank or custodial account established by a protected cell
company for the purpose of legally segregating the protected
cell assets of one protected cell from the protected cell
assets of other protected cells and from the assets of the
protected cell company's general account.
"Protected cell assets" means all assets, contract
rights, and general intangibles identified with and
attributable to a specific protected cell of a protected cell
company, including assets physically segregated in a
protected cell account.
"Protected cell company" means a domestic company that
has one or more protected cells.
"Protected cell company insurance securitization" means
the issuance of debt instruments, the proceeds from which
support the exposures attributed to the protected cell, by a
protected cell company where repayment of principal or
interest, or both, to investors pursuant to the transaction
terms is contingent upon the occurrence or nonoccurrence of
an event with respect to which the protected cell company is
exposed to loss under insurance or reinsurance contracts it
has issued.
"Protected cell liabilities" means all liabilities and
other obligations identified with and attributable to a
specific protected cell of a protected cell company.
Protected cell liabilities include liabilities representing
the insurance obligations of the protected cell as well as
obligations of the protected cell arising out of any
insurance securitization transactions of the protected cell.
"Protected cell company" means a domestic company which
has one or more protected cells.
(Source: P.A. 91-278, eff. 7-23-99.)
(215 ILCS 5/179A-15)
Sec. 179A-15. Establishment of protected cells.
(a) A domestic company may, with the prior written
approval by the Director of a plan of operation submitted by
the domestic company with respect to each protected cell,
establish one or more protected cells in connection with an
insurance securitization. Upon the written approval by the
Director of the plan of operation, which shall include, but
not be limited to, the specific business and investment
guidelines objectives of the protected cell, the protected
cell company may, in accordance with the approved plan of
operation, attribute to the protected cell amounts both
reflective of insurance obligations with respect to its
insurance business and obligations relating to the insurance
securitization and assets to fund those obligations. A
protected cell shall have its own distinct name or
designation, which shall include the words "protected cell".
The protected cell company shall transfer all assets
attributable to a protected cell to one or more separately
established and identified protected cell accounts bearing
the name or designation of that protected cell. Protected
cell assets shall be held in the protected cell accounts for
the purpose of satisfying the obligations of that protected
cell.
(b) All sales, exchanges, transfers, or other
attributions of assets and liabilities between a protected
cell and the general account shall be in accordance with the
plan of operation approved by the Director. or shall be
otherwise approved by the Director. Unless otherwise
approved by the Director, no sale, exchange, transfer, or No
other attribution of assets or liabilities may be made by a
protected cell company between the protected cell company's
general account and one or more of its protected cells.
unless, in the case of an attribution to a protected cell,
the attribution is made solely to establish the protected
cell or, in the case of an attribution from a protected cell
to the company's general account, the attribution is made
solely to support the company's insurance obligations that
are the subject of the business of the protected cell. Any
sale, exchange, transfer, or other Any attribution of assets
and liabilities between the general account and a protected
cell or from investors in the form of principal on a debt
instrument issued by a protected cell company shall be in
cash or in readily marketable securities with established
market values unless otherwise approved in advance in
writing by the Director.
(c) The creation of a protected cell does not create, in
respect of that protected cell, a legal person separate from
the protected cell company. Amounts attributed to a protected
cell under this Article, including assets transferred to a
protected cell account, are owned by the protected cell
company and the protected cell company may not be, nor hold
itself out to be, a trustee with respect to those protected
cell assets of that protected cell account. Notwithstanding
the foregoing, the company may allow for a security interest
to attach to protected cell assets or a protected cell
account when in favor of a creditor of the protected cell and
otherwise allowed under applicable law.
(d) This Article shall not be construed to prohibit the
protected cell company from contracting with or arranging for
an investment advisor, commodity trading advisor, or other
third party to manage the protected cell assets of a
protected cell, provided that all remuneration, expenses, and
other compensation of the third party advisor or manager are
payable from the protected cell assets of that protected cell
and not from the protected cell assets of other protected
cells or the assets of the protected cell company's general
account.
(e) A domestic company that is a protected cell company
shall establish such administrative and accounting procedures
as are necessary to properly identify the one or more
protected cells of the protected cell company and the
protected cell assets and protected cell liabilities
attributable to the protected cells thereto. It shall be the
duty of the directors of a protected cell company to:
(1)(i) keep protected cell assets and protected
cell liabilities separate and separately identifiable
from the assets and liabilities of the protected cell
company's general account; and
(2)(ii) keep protected cell assets and protected
cell liabilities attributable to one protected cell
separate and separately identifiable from protected cell
assets and protected cell liabilities attributable to
other protected cells.
If this Section is violated Notwithstanding the
foregoing, the remedy of tracing shall be applicable to
protected cell assets when commingled with protected cell
assets of other protected cells or the assets of the
protected cell company's general account. The remedy of
tracing shall not be construed as an exclusive remedy.
(f) The protected cell Unless otherwise approved by the
Director, the company shall, when establishing a protected
cell, attribute to the protected cell assets with a value at
least equal to the reserves and other insurance liabilities
attributed to that protected cell.
(Source: P.A. 91-278, eff. 7-23-99.)
(215 ILCS 5/179A-20)
Sec. 179A-20. Use and operation of protected cells.
(a) The protected cell assets of any protected cell may
not be charged with liabilities arising out of any other
business the protected cell company may conduct. All
contracts or other documentation reflecting protected cell
liabilities the obligations of a protected cell to the
general account shall clearly indicate that only the assets
of the protected cell assets are available for the
satisfaction of those obligations of the protected cell
liabilities.
(b) The income, gains, and losses, realized or
unrealized, from protected cell assets and protected cell
liabilities must be credited to or charged against the
protected cell without regard to other income, gains, or
losses of the protected cell company, including income,
gains, or losses of other protected cells. Amounts
attributed to a protected cell and accumulations thereon may
be invested and reinvested without regard to any requirements
or limitations of Article VIII of this Code (Investments of
Domestic Companies), and the investments in a protected cell
or cells may not be taken into account in applying the
investment limitations otherwise applicable to the
investments of the protected cell company.
(c) Unless otherwise approved by the Director, Assets
attributed to a protected cell 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 documentation applicable to the
protected cell.
(d) A protected cell company shall, in respect of any of
its protected cells, engage in fully funded
indemnity-triggered insurance securitization to support in
full the protected cell exposures liabilities attributable to
that protected cell. A protected cell company An insurance
securitization that is not indemnity-triggered may qualify as
an insurance securitization under the terms of this Article
only after the Director adopts rules addressing the methods
of:(i) funding of the portion of the risk that is not
indemnity based, (ii) accounting, and disclosure, (iii)
risk-based capital treatment, and (iv) assessing risk
associated with such securitizations and does not support in
full the protected cell obligations of a protected cell shall
be prohibited absent specific permission by the Director in
accordance with the authority granted under Section 179A-40
and the guidance of the National Association of Insurance
Commissioners, as such guidance is developed. A protected
cell company An insurance securitization transaction that is
not fully funded, whether indemnity triggered or
non-indemnity triggered indemnity-triggered or not
indemnity-triggered, is prohibited. Protected cell assets
may be used to A protected cell may pay interest or other
consideration on any outstanding debt or other obligation
attributable to that protected cell, and nothing in this
subsection shall be construed or interpreted to prevent a
protected cell company from entering into a swap agreement or
other transaction for the account of the protected cell that
has the effect of guaranteeing such interest or other
consideration.
(e) In all cases in which a protected cell company
engages in an insurance securitizations securitization, the
contracts or other documentation financial instrument
effecting such transaction shall contain provisions
identifying the protected cell to which the transaction will
be attributed. In addition, the contracts or other
documentation financial instrument shall clearly disclose
that the assets of that protected cell, and only those
assets, are available to pay the obligations of that
protected cell. Notwithstanding the foregoing, and subject to
the provisions of this Article and any other applicable law
or rule, the failure to include such language in the
contracts or other documentation financial instrument shall
not be used as the sole basis by creditors, reinsurers, or
other claimants to circumvent the provisions of this Article.
(f) A protected cell company may attribute to a
protected cell account only the insurance obligations
relating to the protected cell company's general account. A
protected cell may not issue insurance or reinsurance
contracts directly to policyholders or reinsureds or have any
obligation to the policyholders or reinsureds of the
protected cell company's general account.
(g)(f) At the cessation of business of a protected cell,
the protected cell company shall voluntarily close out wind
up the protected cell account in accordance with a plan
approved by the Director.
(Source: P.A. 91-278, eff. 7-23-99.)
(215 ILCS 5/179A-25)
Sec. 179A-25. Reach of creditors and other claimants.
(a) Protected cell assets are shall only be available
only to the creditors of the protected cell company who are
creditors in respect of that protected cell and shall thereby
be entitled, in conformity with the provisions of this
Article, to have recourse to the protected cell assets
attributable to that protected cell., Protected cell assets
and shall be absolutely protected from the creditors of the
protected cell company who are not creditors in respect of
that protected cell and who, accordingly, are shall not be
entitled to have recourse to the protected cell assets
attributable to that protected cell. Creditors with respect
to of a protected cell shall not be entitled to have
recourse against the protected cell assets of other protected
cells or the assets of the protected cell company's general
account.
Protected cell assets are available only to creditors of
a protected cell company after all protected cell liabilities
have been extinguished or otherwise provided for in
accordance with the plan of operation relating to that
protected cell.
(b) When an obligation of a protected cell company to a
person arises from a transaction, or is otherwise imposed, in
respect of a protected cell:
(1) that obligation of the protected cell company
shall extend only to the protected cell assets
attributable to that protected cell, and the person
shall, in respect of that obligation, be entitled to have
recourse only to the protected cell assets attributable
to that protected cell; and
(2) that obligation of the protected cell company
shall not extend to the protected cell assets of any
other protected cell or the assets of the company's
general account, and that person shall not, in respect of
that obligation, be entitled to have recourse to the
protected cell assets of any other protected cell or the
assets of the company's general account.
(c) When an obligation of a protected cell company
relates solely to the general account, the obligation of the
protected cell company shall extend only to, and that
creditor shall, in respect of that obligation, be entitled to
have recourse only to, the assets of the protected cell
company's general account.
(d) A protected cell shall only be authorized to assume
an insurance obligation directly from the company's general
account, and under no circumstances shall a protected cell be
authorized to issue insurance or reinsurance policies or
contracts directly to policyholders or reinsureds or have any
obligation to the policyholders of the company's general
account. The activities, assets, and obligations relating to
of a protected cell are not subject to the provisions of
Article XXXIII1/2 (Illinois Life and Health Guaranty
Association Law) or Article XXXIV (Illinois Insurance
Guaranty Fund), and neither a protected cell nor a protected
cell company protected cells shall not be assessed by or
otherwise be required to contribute to any guaranty fund or
guaranty association in this State with respect to the
activities, assets, or obligations of a protected cell.
Nothing in this subsection shall affect the activities or
obligations of a company's general account.
(e) In no event shall the establishment of one or more
protected cells alone constitute or be deemed to be a
fraudulent conveyance, an intent by the protected cell
company to defraud creditors, or the carrying out of business
by the protected cell company for any other fraudulent
purpose.
(Source: P.A. 91-278, eff. 7-23-99.)
(215 ILCS 5/179A-30)
Sec. 179A-30. Rehabilitation and liquidation of
protected cell companies.
(a) Notwithstanding any contrary provision in this Code,
the rules promulgated under this Code, or any other
applicable law or rule, upon any order of rehabilitation,
conservation, or liquidation of a domestic company that is a
protected cell company, the receiver shall be bound to deal
with the protected cell company's assets and liabilities,
including protected cell assets and protected cell
liabilities, in accordance with the requirements set forth in
this Article.
(b) With respect to amounts recoverable under a
protected cell company any insurance securitization entered
into or outstanding in any protected cell of a protected cell
company, the amount recoverable by the receiver shall not be
reduced or diminished as a result of the entry of an order of
rehabilitation, conservation, or liquidation with respect to
the protected cell company notwithstanding any provisions to
the contrary in the contracts or other documentation
financial instrument governing the protected cell company
such insurance securitization.
(Source: P.A. 91-278, eff. 7-23-99.)
(215 ILCS 5/179A-35)
Sec. 179A-35. No transaction of an insurance business.
A protected cell insurance securitization shall not No
insurance securitization effected under the provisions of
this Article shall be deemed to be an insurance or
reinsurance contract. An policy or contract of insurance and
no investor in a protected cell company insurance
securitization transaction shall not, by sole means of such
investment, be deemed to be transacting an insurance business
in this State. The underwriters or selling agents (and their
partners, directors, officers, members, managers, employees,
agents, representatives, and advisors) involved in a
protected cell company insurance securitization shall not be
deemed to be conducting an insurance or reinsurance agency,
brokerage, intermediary, advisory, or consulting business by
virtue of their activities in connection therewith required
to be licensed as an insurance company in the State of
Illinois.
(Source: P.A. 91-278, eff. 7-23-99.)
Section 99. Effective date. This Act takes effect upon
becoming law.
Passed in the General Assembly April 19, 2001.
Approved July 12, 2001.
Effective July 12, 2001.
[ Top ]