215 ILCS 5/ Illinois Insurance Code.

(215 ILCS 5/196) (from Ch. 73, par. 808)

Sec. 196. Order of dissolution. If the company against whom the complaint for liquidation is filed is a corporation and the complaint prays for dissolution of such company, the court shall have jurisdiction either before or after final liquidation of the property, business and affairs of such company, after service of summons and complaint as above stated and a full hearing, to enter a judgment dissolving such company, and if an order of liquidation has been entered against a company, the court shall have jurisdiction, upon the petition of the Director, to enter an order dissolving the company. The court may likewise, regardless of whether an order of liquidation is sought or has been obtained, upon proper complaint or petition by the Director, order dissolution of a company where it has failed to qualify for a certificate of authority authorizing it to commence the transaction of its business, or where a company has no assets and no means for payment of liabilities.

(Source: P.A. 89-206, eff. 7-21-95.)

(215 ILCS 5/197) (from Ch. 73, par. 809)

Sec. 197. Rights, powers, and duties ancillary to domiciliary proceeding.

The rights, powers, and duties of the Director as conservator, rehabilitator, or liquidator, with reference to the assets of a foreign or alien company, whether authorized or unauthorized, shall be ancillary to the rights, powers and duties imposed upon any receiver or other person, if any, in charge of the property, business and affairs of such company in its domiciliary state or country.

(Source: P.A. 86-1154; 86-1156.)

(215 ILCS 5/198) (from Ch. 73, par. 810)

Sec. 198. Service of summons and return.

(1) Upon the filing of a complaint, summons shall forthwith issue, returnable in 3 days after its date, and a copy of the summons together with the complaint in any proceeding under this article shall be served upon the company named in such complaint by delivering the same to its president, vice president, secretary, treasurer, director, or to its managing agent, or if the company lack any of the aforesaid officers, or they cannot be found within the State, to the officer performing corresponding functions under another name; if it be a Lloyds, reciprocal or inter-insurance exchange, by delivering such summons and copy of the complaint to the duly designated attorney-in-fact.

(2) When it is satisfactorily proved by the report of an examiner of the department made in accordance with the provisions of this Code, or by affidavit if anyone familiar with the facts, that the officers, directors, trustees or managing agents or members of any company named in said complaint upon whom service is required to be made as above provided, have, or if a Lloyds, reciprocal or inter-insurance exchange be named in the complaint, that the duly designated attorney-in-fact, has, departed from the State or keep themselves or himself concealed therein, or if such of the persons residing in this State and upon whom service is required to be made as above provided have resigned from their offices, or that service cannot be made immediately by the exercise of reasonable diligence, such service may be had by the mailing of a copy of the complaint and summons to the last known address of the company, or by publication in such form and in such manner as the court shall order.

(Source: Laws 1959, p. 1422.)

(215 ILCS 5/199) (from Ch. 73, par. 811)

Sec. 199. Removal of proceedings to Sangamon or Cook county.

In the event an order is entered directing liquidation, rehabilitation or conservation, the Director may remove the property and assets of the company to the county of Sangamon or to the county of Cook. In the event of such removal or contemplated removal the court shall upon proper petition showing the necessity therefor, filed by the Director, order the clerk of the court wherein such proceeding was commenced to make a full transcript of the petition for removal and the order thereon and to transmit the same together with all papers theretofore filed in the cause, to the Clerk of the Circuit Court of the county of Sangamon or to the Clerk of the Circuit Court of the county of Cook, as the case may be, and the proceeding shall thereafter be conducted in the same manner as if it had been commenced in the county to which the cause is transferred.

(Source: Laws 1965, p. 3563.)

(215 ILCS 5/200) (from Ch. 73, par. 812)

Sec. 200. Examinations. The pendency of any proceeding under this Article shall in no way affect the power and authority of the Director to conduct any examination provided for in Sections 132 through 132.7, in connection with the business, conduct or affairs of the company sought to be liquidated, rehabilitated or conserved.

An annual audit of any business having assets of more than $500,000 which is under liquidation or rehabilitation pursuant to this Act shall be performed by an independent outside certified public accountant, who is currently engaged in the conduct of audits under the Illinois State Auditing Act. The cost of this audit shall be paid by the Director out of the assets of the business being liquidated or rehabilitated.

An annual audit of any special deputy appointed under Section 202 shall be conducted by an independent, outside certified public accountant performing the audits provided for in the preceding paragraph. The cost of this audit shall be allocated among the estates of the companies in conservation, rehabilitation, or liquidation on the basis of allocation methods established by the Director. The Illinois Auditor General may, at his option, participate in the audit of any special deputy.

Copies of all audits prepared under this Section shall be promptly provided after completion to the Governor, to the Illinois Auditor General, and to the majority and minority leaders of the Senate and the House of Representatives.

(Source: P.A. 89-97, eff. 7-7-95.)

(215 ILCS 5/201) (from Ch. 73, par. 813)

Sec. 201. Who may apply for appointment of receiver or liquidator.) No order or judgment enjoining, restraining or interfering with the prosecution of the business of any company, or for the appointment of a temporary or permanent receiver, rehabilitator or liquidator of a domestic company, or receiver or conservator of a foreign or alien company, shall be made or granted otherwise than upon the complaint of the Director represented by the Attorney General as provided in this article, except in an action by a judgment creditor or in proceedings supplementary thereto after notice that a final judgment has been entered and that the judgment creditor intends to file a complaint praying for any of the relief in this section mentioned, has been served upon the Director at least 30 days prior to the filing of such complaint by such judgment creditor.

(Source: P.A. 84-546.)

(215 ILCS 5/202) (from Ch. 73, par. 814)

Sec. 202. Appointment of special deputies; employees and professional advisors; contracts; qualified immunity.

(a) For the purpose of assisting the Director in the performance of the Director's duties under Articles VII, XIII, and XIII 1/2 of this Code, the Director has authority to appoint one or more special deputies as the Director's agent or agents, and clerks, assistants, attorneys, and other personnel as the Director may deem necessary and to delegate to each such person authority to assist the Director as the Director may consider appropriate. The compensation of each special deputy, clerk, assistant, attorney, and other designated personnel shall be fixed and paid by the Director. The Director shall also have the authority to retain and pay attorneys, actuaries, accountants, consultants, and such other persons as the Director may deem necessary and appropriate. The Director shall fix the rate of compensation of these attorneys, actuaries, accountants, consultants, and other persons subject to the approval of the court. The Director, however, has the authority to fix, without the approval of the court, the rate of compensation of attorneys, actuaries, accountants, consultants, and other persons that he considers necessary and appropriate if the Director determines that the projected expenditure for professional fees to each such person will not exceed $20,000 per company in any calendar year.

(b) The special deputies may enter into leases or contracts for the procurement of real or personal property, and on such terms and conditions as the Director may deem necessary or advisable for the purpose of performing the Director's duties under Articles VII, XIII, and XIII 1/2 of this Code. Any such lease or contract that requires an aggregate expenditure in excess of $150,000 shall be subject to the approval of the court before which is pending the delinquency proceeding of the estate of the company on whose behalf the lease or contract is entered into. In the event that the lease or contract is entered into on behalf of 2 or more companies, the delinquency proceedings of the 2 or more companies shall be consolidated for the sole purpose of obtaining approval of the lease or contract from the court before which is pending the delinquency proceeding of the estate of the company that, in the judgment of the Director at the time of application for approval, is to bear the largest portion of the amounts to be expended under the lease or contract under the allocation methods established by the Director under subsection (c)(1) of this Section.

(c) (1) The compensation of the persons appointed by the Director and the attorneys, actuaries, accountants, consultants, and other persons retained by the Director, the payments under the leases or contracts described in subsection (b) of this Section, and all other expenses of taking possession of the property and the administration of the company and its property shall be paid (i) out of the funds or assets of the company on whose behalf the compensation, payments, or expenses were incurred or (ii) in the event that the compensation, payments, or expenses were, in the judgment of the Director, incurred in behalf of 2 or more companies, out of the assets of those companies on the basis of allocation methods established by the Director.

(2) Notwithstanding the foregoing provisions of this subsection (c), the salary of the special deputies, together with the salaries or fees of those clerks, assistants, attorneys, actuaries, accountants, consultants, or other persons appointed or retained by the Director under this Section, and the other expenses of taking possession of the property and the administration of the company and its property, may be paid out of amounts appropriated to the Department of Insurance. Any amounts paid under this Section from appropriated funds shall be repaid to the State treasury from any available funds or assets of the company on whose behalf the expenses were incurred, subject to the approval of the court before which is pending the delinquency proceeding of the company.

(d) (1) For each calendar quarter or other period as the court may determine, the Director shall file with the court before which is pending the delinquency proceeding of each company in liquidation or rehabilitation a report for the period reflecting the company's (i) cash and invested assets held by the Director at the beginning of the period, (ii) cash receipts, (iii) cash disbursements for payments of salaries, compensation, professional fees, and all other expenses of administration of the company and its property, (iv) all other cash disbursements, and (v) cash and invested assets held by the Director at the end of the period; provided that the report need not be filed more than once for each calendar year if the cash and invested assets of the company are less than $250,000. For each such period, the Director shall file with the court a similar report for each company in conservation, except that this report shall reflect only those cash disbursements for payments of salaries, compensation, professional fees, and all other expenses of the administration of the company and its property.

(2) No party to the proceedings may object to any aspect of that report unless the basis of the party's objection is set forth in a motion filed with the court not later than 30 days after the filing of the report. In the event that objections to the report are filed, the Director shall have 15 days to file a response to the objections, and a hearing on the matter shall be held at the earliest possible date consistent with the schedule of the court. Any hearing on objections shall be limited solely to the specific objections raised in the original motion.

(e) (1) For purposes of this subsection (e):

"Receiver" means the Director in his or her capacity as the liquidator, rehabilitator, or conservator of a company in liquidation, rehabilitation, or conservation.

"Director as trustee" means the Director when appointed as trustee under this Article.

"Employees" means all present and former special deputies appointed by the Director and all persons that the Director or special deputies may appoint or employ or may have appointed or employed to assist in the liquidation, rehabilitation, or conservation of a company. "Employees" shall not include any attorneys, accountants, auditors, or other professional persons or firms (or their employees) who are retained as independent contractors by either the Director or by any special deputy appointed under this Section.

"Advisors" means all persons that the Director may appoint or may have appointed under Section 202.1.

(2) If a cause of action is commenced against the receiver, the Director as trustee, employees, or advisors, either personally or in their official capacity, alleging property damage, property loss, personal injury, or other civil liability arising out of any act, error, or omission of the receiver, the Director as trustee, employees, or advisors committed within the scope of their duties or employment involving a company in liquidation, rehabilitation, or conservation, the receiver, the Director as trustee, employees, or advisors shall be indemnified out of the assets of the company for all expenses, attorneys' fees, judgments, settlements, decrees, fines, penalties, or amounts paid in satisfaction of or incurred in the defense of the cause of action unless it is determined upon a final adjudication on the merits that the act, error, or omission of the receiver, the Director as trustee, employees, advisors, or the court giving rise to the claim was not within the scope of his or her duties or employment or was caused by intentional, wilful, or wanton misconduct. Any payments out of the assets of the company under this subsection (e) shall be subject to the prior approval of the court before which is pending the delinquency proceeding of the company.

The court shall be entitled to indemnification under Section 2 of the Representation and Indemnification of State Employees Act.

Attorneys' fees and expenses incurred in defending an action against the receiver, the Director as trustee, employees, or advisors for which indemnity is available under this part (2) may, upon the approval of the receiver and the court before which is pending the delinquency proceeding of the company, be paid from the assets of the company's estate in advance of the final disposition of the action upon receipt of an undertaking by or on behalf of the receiver, the Director as trustee, employees, or advisors to pay that amount, if it shall ultimately be determined upon a final adjudication on the merits that he or she is not entitled to be indemnified under this part (2).

Any indemnification, expense payments, and attorneys' fees from the company's assets for actions against the receiver, the Director as trustee, employees, or advisors under this part (2) shall be considered an administrative expense of the estate.

In the event of actual or threatened litigation against the receiver, the Director as trustee, employees, or advisors for which indemnity is available under this part (2), a reasonable amount of funds, which in the judgment of the Director may be needed to provide indemnity, may be segregated and reserved from the assets of the company as security for the payment of indemnity until all applicable statutes of limitations shall have run and all actual or threatened actions against the receiver, the Director as trustee, employees, or advisors have been completely and finally resolved.

(3) Nothing contained or implied in this subsection (e) shall operate, or be construed or applied, to deprive the Director, receiver, the Director as trustee, the company's estate, any employee, any advisor or the court of any defense, claim, or right of immunity heretofore available.

(Source: P.A. 88-297; 89-206, eff. 7-21-95.)

(215 ILCS 5/202.1) (from Ch. 73, par. 814.1)

Sec. 202.1. The Director may, with the approval of the court, appoint an Advisory Committee, consisting of policyholders, claimants, or other creditors, including Guaranty Funds and Guaranty Associations, should the Director deem it necessary to the proper performance of his responsibilities under this Article and Article XIII 1/2. The Committee shall serve at the pleasure of the Director and shall serve without compensation other than reimbursement for travel and per diem living expenses incurred in attending committee meetings. No other committees of any nature shall be appointed by the Director or the court in any proceeding conducted under this Article and Article XIII 1/2.

(Source: P.A. 86-1155; 86-1156.)

(215 ILCS 5/203) (from Ch. 73, par. 815)

Sec. 203. Exemption from filing fees.

The Director shall not be required to pay any fee to any public officer for filing, recording or in any manner authenticating any paper or instrument relating to any proceeding under this article, nor for services rendered by any public officer for serving any process; but such fees and costs may be taxed as costs against the defendant in the suit by order of the court and paid to such public officer.

(Source: Laws 1937, p. 696.)

(215 ILCS 5/204) (from Ch. 73, par. 816)

Sec. 204. Prohibited and voidable transfers and liens.

(a)(1) A preference is a transfer of any of the property of a company to or for the benefit of a creditor, for or on account of an antecedent debt, made or suffered by the company within 2 years before the filing of a complaint under this Article, the effect of which may be to enable the creditor to obtain a greater percentage of this debt than another creditor of the same class would receive.

(2) Any preference may be avoided by the Director as rehabilitator, liquidator, or conservator if:

(A) the company was insolvent at the time of the transfer; and

(B) the transfer was made within 4 months before the filing of the complaint; or the creditor receiving it was (i) an officer, or any employee or attorney or other person who was in fact in a position of comparable influence in the company to an officer whether or not that person held such a position, (ii) any shareholder holding, directly or indirectly, more than 5% of any class of any equity security issued by the company, or (iii) any other person, firm, corporation, association, or aggregation of individuals with whom the company did not deal at arm's length.

(3) Where the preference is voidable, the Director as rehabilitator, liquidator, or conservator may recover the property or, if it has been converted, its value from any person who has received or converted the property; except where a bona fide purchaser or lienor has given less than fair equivalent value, the purchaser or lienor shall have a lien upon the property to the extent of the consideration actually given. Where a preference by way of lien or security title is voidable, the court may on due notice order the lien or title to be preserved for the benefit of the estate, in which event the lien or title shall pass to the Director as rehabilitator or liquidator.

(b)(1) A transfer of property other than real property shall be deemed to be made or suffered when it becomes so far perfected that no subsequent lien obtainable by legal or equitable proceedings on a simple contract could become superior to the rights of the transferee.

(2) A transfer of real property shall be deemed to be made or suffered when it becomes so far perfected that no subsequent bona fide purchaser from the company could obtain rights superior to the rights of the transferee.

(3) A transfer that creates an equitable lien shall not be deemed to be perfected if there are available means by which a legal lien could be created.

(4) A transfer not perfected before the filing of a complaint shall be deemed to be made immediately before the filing of the complaint.

(5) The provisions of this subsection apply whether or not there are or were creditors who might have obtained liens or persons who might have become bona fide purchasers.

(c) For purposes of this Section:

(1) A lien obtainable by legal or equitable proceedings upon a simple contract is one arising in the ordinary course of the proceedings upon the entry or docketing of a judgment or decree, or upon attachment, garnishment, execution, or like process, whether before, upon, or after judgment or decree and whether before or upon levy. It does not include liens that, under applicable law, are given a special priority over other liens that are prior in time.

(2) A lien obtainable by legal or equitable proceedings could become superior to the rights of a transferee, or a purchaser could obtain rights superior to the rights of a transferee within the meaning of subsection (b) of this Section, if such consequences would follow only from the lien or purchase itself, or from the lien or purchase followed by any step wholly within the control of the respective lienholder or purchaser, with or without the aid of ministerial action by public officials. A lien could not, however, become superior and a purchase could not create superior rights for the purpose of subsection (b) of this Section through any acts subsequent to an obtaining of the lien or subsequent to a purchase that requires the agreement or concurrence of any third party or that requires any further judicial action or ruling.

(d) A transfer of property for or on account of a new and contemporaneous consideration which is deemed under subsection (b) of this Section to be made or suffered after the transfer because of delay in perfecting it does not thereby become a transfer for or on account of an antecedent debt if any acts required by the applicable law to be performed in order to perfect the transfer as against liens or bona fide purchasers' rights are performed within 21 days or any period expressly allowed by the law, whichever is less. A transfer to secure a future loan, if the loan is actually made, or a transfer that becomes security for a future loan, shall have the same effect as a transfer for or on account of a new and contemporaneous consideration.

(e) If any lien deemed voidable under part (2) of subsection (a) of this Section has been dissolved by the furnishing of a bond or other obligation, the surety on which has been indemnified directly or indirectly by the transfer of or the creation of a lien upon any property of a company before the filing of a complaint under this Article, the indemnifying transfer or lien shall also be deemed voidable.

(f) The property affected by any lien deemed voidable under subsections (a) and (e) of this Section shall be discharged from the lien, and that property and any of the indemnifying property transferred to or for the benefit of a surety shall pass to the Director as rehabilitator or liquidator, except that the court may, on due notice, order any such lien to be preserved for the benefit of the estate and the court may direct that such conveyance be executed as may be proper or adequate to evidence the title of the Director as rehabilitator or liquidator.

(g) The court shall have summary jurisdiction over any proceeding by the Director as rehabilitator, liquidator, or conservator to hear and determine the rights of any parties under this Section. Reasonable notice of any hearings in the proceeding shall be given to all parties in interest, including the obligee of a releasing bond or other life obligation. Where an order is entered for the recovery of indemnifying property in kind or for the avoidance of an indemnifying lien, the court, upon application of any party in interest, shall in the same proceeding ascertain the value of the property or lien, and if the value is less than the amount for which the property is indemnity or than the amount of the lien, the transferee or lienholder may elect to retain the property or lien upon payment of its value, as ascertained by the court, to the Director as rehabilitator, liquidator, or conservator, within such reasonable times as the court shall fix.

(h) The liability of the surety under the releasing bond or other similar obligation shall be discharged to the extent of the value of the indemnifying property recovered or the indemnifying lien nullified and avoided by the Director as rehabilitator, liquidator, or conservator. Where the property is retained under subsection (g) of this Section, the liability shall be discharged to the extent of the amount paid to the Director as rehabilitator, liquidator, or conservator.

(i) If a creditor has been preferred and thereafter in good faith gives the company further credit without security of any kind, for property which becomes a part of the company's estate, the amount of the new credit remaining unpaid at the time of the petition may be set off against the preference which would otherwise be recoverable from the creditor.

(j) If a company shall, directly or indirectly, within 4 months before the filing of a complaint under this Article, or at any time in contemplation of such a proceeding, pay money or transfer property to any attorney for services rendered or to be rendered, the transactions may be examined by the court on its own motion or shall be examined by the court on petition of the Director as rehabilitator, liquidator, or conservator and shall be held valid only to the extent of a reasonable amount to be determined by the court, and the excess may be recovered by the Director as rehabilitator, liquidator, or conservator for the benefit of the estate provided that where the attorney is in a position of influence in the company or an affiliate thereof payment of any money or the transfer of any property to the attorney for services rendered or to be rendered shall be governed by item (B) of part (2) of subsection (a) of this Section.

(k)(1) An officer, director, manager, employee, shareholder, member, subscriber, attorney, or other person acting on behalf of the company who knowingly participates in giving any preference when that officer, director, manager, employee, shareholder, member, subscriber, attorney, or other person has reasonable cause to believe the company is or is about to become insolvent at the time of the preference shall be personally liable to the Director as rehabilitator, liquidator, or conservator for the amount of the preference. There is a reasonable cause to so believe if the transfer was made within 4 months before the date of filing of the complaint.

(2) A person receiving any property from the company or the benefit thereof as a preference voidable under subsection (a) of this Section shall be personally liable therefor and shall be bound to account to the Director as rehabilitator, liquidator, or conservator.

(3) Nothing in this Section shall prejudice any other claim by the Director as rehabilitator, liquidator, or conservator against any person.

(l) For purposes of this Section, the company is presumed to have been insolvent on and during the 4 month period immediately preceding the date of the filing of the complaint.

(m) The Director as rehabilitator, liquidator, or conservator may not avoid a transfer under this Section to the extent that the transfer was:

(A) Intended by the company and the creditor to or for whose benefit the transfer was made to be a contemporaneous exchange for new value given to the company, and was in fact a substantially contemporaneous exchange; or

(B) In payment of a debt incurred by the company in the ordinary course of business or financial affairs of the company and the transferee; made in the ordinary course of business or financial affairs of the company and the transferee; and made according to ordinary business terms;

(C) In the case of a transfer by a company where the Director has determined that an event described in Section 35A-25 or 35A-30 has occurred, specifically approved by the Director in writing pursuant to this subsection, whether or not the company is in receivership under this Article. Upon approval by the Director, such a transfer cannot later be found to constitute a prohibited or voidable transfer based solely upon a deviation from the statutory payment priorities established by law for any subsequent receivership; or

(D) Of money or other property arising under or in connection with any Federal Home Loan Bank security agreement or any pledge, security, collateral or guarantee agreement, or any other similar arrangement or credit enhancement relating to a Federal Home Loan Bank security agreement.

(n) The Director as rehabilitator, liquidator, or conservator may avoid any transfer of or lien upon the property of a company that the estate of the company or a policyholder, creditor, member, or stockholder of the company may have avoided, and the Director as rehabilitator, liquidator, or conservator may recover and collect the property so transferred or its value from the person to whom it was transferred unless the property was transferred to a bona fide holder for value before the filing of the complaint. The Director as rehabilitator, liquidator, or conservator shall be deemed a creditor for purposes of pursuing claims under the Uniform Fraudulent Transfer Act.

(o) Notwithstanding any provision of this Article to the contrary, a Federal Home Loan Bank shall not be stayed, enjoined, or prohibited from exercising or enforcing any right or cause of action regarding collateral pledged under any security agreement or any pledge, security, collateral or guarantee agreement, or any other similar arrangement or credit enhancement relating to a Federal Home Loan Bank security agreement.

(Source: P.A. 100-89, eff. 8-11-17.)

(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, but not limited to, the following:

(i) The reasonable expenses of the Illinois Insurance Guaranty Fund, the Illinois Life and Health Insurance Guaranty Association, and the Illinois Health Maintenance Organization Guaranty Association and of any similar organization in any other state, including overhead, salaries, and other general administrative expenses allocable to the receivership (administrative and claims handling expenses and expenses in connection with arrangements for ongoing coverage), but excluding expenses incurred in the performance of duties under Section 547 or similar duties under the statute governing a similar organization in another state. For property and casualty insurance guaranty associations that guaranty certain obligations of any member company as defined by Section 534.5, expenses shall include, but not be limited to, loss adjustment expenses, which shall include adjusting and other expenses and defense and cost containment expenses. The expenses of such property and casualty guaranty associations, including the Illinois Insurance Guaranty Fund, shall be reimbursed as prescribed by Section 545, but shall be subordinate to all other costs and expenses of administration, including the expenses reimbursed pursuant to subparagraph (ii) of this paragraph (a).

(ii) The expenses expressly approved or ratified by the Director as liquidator or rehabilitator, including, but not limited to, the following:

(1) the actual and necessary costs of preserving or recovering the property of the insurer;

(2) reasonable compensation for all services rendered on behalf of the administrative supervisor or receiver;

(3) any necessary filing fees;

(4) the fees and mileage payable to witnesses;

(5) unsecured loans obtained by the receiver; and

(6) expenses approved by the conservator or rehabilitator of the insurer, if any, incurred in the course of the conservation or rehabilitation that are unpaid at the time of the entry of the order of liquidation.

Any unsecured loan falling under item (5) of subparagraph (ii) of this paragraph (a) shall have priority over all other costs and expenses of administration, unless the lender agrees otherwise. Absent agreement to the contrary, all other costs and expenses of administration shall be shared on a pro-rata basis, except for the expenses of property and casualty guaranty associations, which shall have a lower priority pursuant to subparagraph (i) of this paragraph (a).

(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, and insureds, under insurance policies, annuity contracts, and funding agreements, liability claims against insureds covered under insurance policies and insurance contracts issued by the company, claims of obligees (and, subject to the discretion of the receiver, completion contractors) under surety bonds and surety undertakings (not to include mortgage or financial guaranty, or other forms of insurance offering protection against investment risk), claims by principals under surety bonds and surety undertakings for wrongful dissipation of collateral by the insurer or its agents, and claims incurred during any extension of coverage provided under subsection (5) of Section 193, 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. For purposes of this Section, "funding agreement" means an agreement whereby an insurer authorized to write business under Class 1 of Section 4 of this Code may accept and accumulate funds and make one or more payments at future dates in amounts that are not based upon mortality or morbidity contingencies.

(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 fund certificate holders, guaranty capital shareholders, capital note holders, and surplus note holders.

(i) Proprietary claims of shareholders, members, or other owners.

Every claim under a written agreement, statute, or rule providing that the assets in a separate account are not chargeable with the liabilities arising out of any other business of the insurer shall be satisfied out of the funded assets in the separate account equal to, but not to exceed, the reserves maintained in the separate account under the separate account agreement, and to the extent, if any, the claim is not fully discharged thereby, the remainder of the claim shall be treated as a priority level (d) claim under paragraph (d) of this subsection to the extent that reserves have been established in the insurer's general account pursuant to statute, rule, or the separate account agreement.

For purposes of this provision, "separate account policies, contracts, or agreements" means any policies, contracts, or agreements that provide for separate accounts as contemplated by Section 245.21.

To the extent that any assets of an insurer, other than those assets properly allocated to and maintained in a separate account, have been used to fund or pay any expenses, taxes, or policyholder benefits that are attributable to a separate account policy, contract, or agreement that should have been paid by a separate account prior to the commencement of receivership proceedings, then upon the commencement of receivership proceedings, the separate accounts that benefited from this payment or funding shall first be used to repay or reimburse the company's general assets or account for any unreimbursed net sums due at the commencement of receivership proceedings prior to the application of the separate account assets to the satisfaction of liabilities or the corresponding separate account policies, contracts, and agreements.

To the extent, if any, reserves or assets maintained in the separate account are in excess of the amounts needed to satisfy claims under the separate account contracts, the excess shall be treated as part of the general assets of the insurer's estate.

(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 changes made in this Section by this amendatory Act of the 100th General Assembly apply to all liquidation, rehabilitation, or conservation proceedings that are pending on the effective date of this amendatory Act of the 100th General Assembly and to all future liquidation, rehabilitation, or conservation proceedings.

(4) The provisions of this Section are severable under Section 1.31 of the Statute on Statutes.

(Source: P.A. 100-410, eff. 8-25-17; 101-652, eff. 1-1-23.)

(215 ILCS 5/205.1)

Sec. 205.1. Policyholder collateral, deductible reimbursements, and other policyholder obligations.

(a) Any collateral held by, for the benefit of, or assigned to the insurer or the Director as rehabilitator or liquidator to secure the obligations of a policyholder under a deductible agreement shall not be considered an asset of the estate and shall be maintained and administered by the Director as rehabilitator or liquidator as provided in this Section and notwithstanding any other provision of law or contract to the contrary.

(b) If the collateral is being held by, for the benefit of, or assigned to the insurer or subsequently the Director as rehabilitator or liquidator to secure obligations under a deductible agreement with a policyholder, subject to the provisions of this Section, the collateral shall be used to secure the policyholder's obligation to fund or reimburse claims payment within the agreed deductible amount.

(c) If a claim that is subject to a deductible agreement and secured by collateral is not covered by any guaranty association or the Illinois Insurance Guaranty Fund and the policyholder is unwilling or unable to take over the handling and payment of the non-covered claims, the Director as rehabilitator or liquidator shall adjust and pay the non-covered claims utilizing the collateral but only to the extent the available collateral after allocation under subsection (d), is sufficient to pay all outstanding and anticipated claims. If the collateral is exhausted and the insured is not able to provide funds to pay the remaining claims within the deductible after all reasonable means of collection against the insured have been exhausted, the Director's obligation to pay such claims from the collateral as the rehabilitator or liquidator terminates, and the remaining claims shall be claims against the insurer's estate subject to complying with other provisions in this Article for the filing and allowance of such claims. When the liquidator determines that the collateral is insufficient to pay all additional and anticipated claims, the liquidator may file a plan for equitably allocating the collateral among claimants, subject to court approval.

(d) To the extent that the Director as rehabilitator or liquidator is holding collateral provided by a policyholder that was obtained to secure a deductible agreement and to secure other obligations of the policyholder to pay the insurer, directly or indirectly, amounts that become assets of the estate, such as reinsurance obligations under a captive reinsurance program or adjustable premium obligations under a retrospectively rated insurance policy where the premium due is subject to adjustment based upon actual loss experience, the Director as rehabilitator or liquidator shall equitably allocate the collateral among such obligations and administer the collateral allocated to the deductible agreement pursuant to this Section. With respect to the collateral allocated to obligations under the deductible agreement, if the collateral secured reimbursement obligations under more than one line of insurance, then the collateral shall be equitably allocated among the various lines based upon the estimated ultimate exposure within the deductible amount for each line. The Director as rehabilitator or liquidator shall inform the guaranty association or the Illinois Insurance Guaranty Fund that is or may be obligated for claims against the insurer of the method and details of all the foregoing allocations.

(e) Regardless of whether there is collateral, if the insurer has contractually agreed to allow the policyholder to fund its own claims within the deductible amount pursuant to a deductible agreement, either through the policyholder's own administration of its claims or through the policyholder providing funds directly to a third party administrator who administers the claims, the Director as rehabilitator or liquidator shall allow such funding arrangement to continue and, where applicable, will enforce such arrangements to the fullest extent possible. The funding of such claims by the policyholder within the deductible amount will act as a bar to any claim for such amount in the liquidation proceeding, including but not limited to any such claim by the policyholder or the third party claimant. The funding will extinguish both the obligation, if any, of any guaranty association or the Illinois Insurance Guaranty Fund to pay such claims within the deductible amount, as well as the obligations, if any, of the policyholder or third party administrator to reimburse the guaranty association or the Illinois Insurance Guaranty Fund. No charge of any kind shall be made by the Director as rehabilitator or liquidator against any guaranty association or the Illinois Insurance Guaranty Fund on the basis of the policyholder funding of claims payment made pursuant to the mechanism set forth in this subsection.

(f) If the insurer has not contractually agreed to allow the policyholder to fund its own claims within the deductible amount, to the extent a guaranty association or the Illinois Insurance Guaranty Fund is required by applicable state law to pay any claims for which the insurer would be or would have been entitled to reimbursement from the policyholder under the terms of the deductible agreement and to the extent the claims have not been paid by a policyholder or third party, the Director as rehabilitator or liquidator shall promptly bill the policyholder for such reimbursement and the policyholder will be obligated to pay such amount to the Director as rehabilitator or liquidator for the benefit of the guaranty association or the Illinois Insurance Guaranty Fund that paid such claims. Neither the insolvency of the insurer, nor its inability to perform any of its obligations under the deductible agreement, shall be a defense to the policyholder's reimbursement obligation under the deductible agreement. When the policyholder reimbursements are collected, the Director as rehabilitator or liquidator shall promptly reimburse the guaranty association or the Illinois Insurance Guaranty Fund for claims paid that were subject to the deductible. If the policyholder fails to pay the amounts due within 60 days after such bill for such reimbursements is due, the Director as rehabilitator or liquidator shall use the collateral to the extent necessary to reimburse the guaranty association or the Illinois Insurance Guaranty Fund, and, at the same time, may pursue other collections efforts against the policyholder. If more than one guaranty association or the Illinois Insurance Guaranty Fund has a claim against the same collateral and the available collateral (after allocation under subsection (d)), along with billing and collection efforts, are together insufficient to pay each guaranty association or the Illinois Insurance Guaranty Fund in full, then the Director as rehabilitator or liquidator will pro-rate payments to each guaranty association or the Illinois Insurance Guaranty Fund based upon the relationship the amount of claims each guaranty association or the Illinois Insurance Guaranty Fund has paid bears to the total of all claims paid by such guaranty association or the Illinois Insurance Guaranty Fund.

(g) Director's duties and powers as rehabilitator or liquidator.

(1) The Director as rehabilitator or liquidator is entitled to deduct from reimbursements owed to guaranty associations or the Illinois Insurance Guaranty Fund or collateral to be returned to a policyholder reasonable actual expenses incurred in fulfilling the responsibilities under this provision, not to exceed 3% of the collateral or the total deductible reimbursements actually collected by the Director as rehabilitator or liquidator.

(2) With respect to claim payments made by any guaranty association or the Illinois Insurance Guaranty Fund, the Director as rehabilitator or liquidator shall promptly provide the court, with a copy to the guaranty associations or the Illinois Insurance Guaranty Fund, with a complete report of the Director's deductible billing and collection activities as rehabilitator or liquidator including copies of the policyholder billings when rendered, the reimbursements collected, the available amounts and use of collateral for each policyholder, and any pro-ration of payments when it occurs. If the Director as rehabilitator or liquidator fails to make a good faith effort within 120 days of receipt of claims payment reports to collect reimbursements due from a policyholder under a deductible agreement based on claim payments made by one or more guaranty associations or the Illinois Insurance Guaranty Fund, then after such 120 day period such guaranty associations or the Illinois Insurance Guaranty Fund may pursue collection from the policyholders directly on the same basis as the Director as rehabilitator or liquidator, and with the same rights and remedies, and will report any amounts so collected from each policyholder to the Director as rehabilitator or liquidator. To the extent that guaranty associations or the Illinois Insurance Guaranty Fund pay claims within the deductible amount, but are not reimbursed by either the Director as rehabilitator, liquidator, or conservator under this Section or by policyholder payments from the guaranty associations' or the Illinois Insurance Guaranty Fund's own collection efforts, the guaranty association or the Illinois Insurance Guaranty Fund shall have a claim in the insolvent insurer's estate for such un-reimbursed claims payments.

(3) The Director as rehabilitator or liquidator shall periodically adjust the collateral being held as the claims subject to the deductible agreement are run-off, provided that adequate collateral is maintained to secure the entire estimated ultimate obligation of the policyholder plus a reasonable safety factor, and the Director as rehabilitator or liquidator shall not be required to adjust the collateral more than once a year. The guaranty associations or the Illinois Insurance Guaranty Fund shall be informed of all such collateral reviews, including but not limited to the basis for the adjustment. Once all claims covered by the collateral have been paid and the Director as rehabilitator or liquidator is satisfied that no new claims can be presented, the Director as rehabilitator or liquidator will release any remaining collateral to the policyholder.

(h) The Illinois Circuit Court having jurisdiction over the liquidation proceedings shall have jurisdiction to resolve disputes arising under this provision.

(i) Nothing in this Section is intended to limit or adversely affect any right the guaranty associations or the Illinois Insurance Guaranty Fund may have under applicable state law to obtain reimbursement from certain classes of policyholders for claims payments made by such guaranty associations or the Illinois Insurance Guaranty Fund under policies of the insolvent insurer, or for related expenses the guaranty associations or the Illinois Insurance Guaranty Fund incur.

(j) This Section applies to all receivership proceedings under Article XIII that either (1) commence on or after the effective date of this amendatory Act of the 93rd General Assembly or (2) are on file or open on the effective date of this amendatory Act of the 93rd General Assembly and in which an Order of Liquidation is entered on or after May 1, 2004. However, this Section applies to rehabilitation proceedings only to the extent that guaranty associations are required to pay claims and does not apply to receivership proceedings in which only an order of conservation has been entered.

(k) For purposes of this Section, a "deductible agreement" is any combination of one or more policies, endorsements, contracts, or security agreements, which provide for the policyholder to bear the risk of loss within a specified amount per claim or occurrence covered under a policy of insurance, and may be subject to the aggregate limit of policyholder reimbursement obligations. This Section shall not apply to first party claims, or to claims funded by a guaranty association or the Illinois Insurance Guaranty Fund in excess of the deductible unless subsection (e) above applies. The term "non-covered claim" shall mean a claim that is subject to a deductible agreement and is not covered by a guaranty association or the Illinois Insurance Guaranty Fund.

(Source: P.A. 93-1028, eff. 8-25-04; 94-248, eff. 7-19-05.)

(215 ILCS 5/206) (from Ch. 73, par. 818)

Sec. 206. Set-offs or counterclaims.

In all cases of mutual debts or mutual credits between the company and another person, such credits and debts shall be set off or counterclaimed and the balance only shall be allowed or paid, provided, however, that no set-off or counterclaim shall be allowed in favor of any person where

(a) the obligation of the company to such person was purchased by or transferred to such person with a view of its being used as a set-off or counterclaim, or

(b) the obligation of such person is to pay an assessment levied against the members or subscribers of any company which issued assessable policies, or to pay a balance upon a subscription to the shares of a stock company.

No set-off shall be allowed in favor of an insurance agent or broker against his account with the company, for the unearned portion of the premium on any cancelled policy, unless that policy was cancelled prior to the entry of the Order of Liquidation or Rehabilitation, and unless the unearned portion of the premium on that cancelled policy was refunded or credited to the assured or his representative prior to the entry of the Order of Liquidation or Rehabilitation.

(Source: Laws 1967, p. 789.)

(215 ILCS 5/206.1)

Sec. 206.1. Qualified financial contracts.

(a) Notwithstanding any other provision of this Article, including any other provision of this Article permitting the modification of contracts, or other law of a state, no person shall be stayed or prohibited from exercising:

(1) a contractual right to cause the termination, liquidation, acceleration, or close out of obligations under or in connection with any netting agreement or qualified financial contract with an insurer because of:

(A) the insolvency, financial condition, or default of the insurer at any time, provided that the right is enforceable under an applicable law other than this Code; or

(B) the commencement of a formal delinquency proceeding under this Code;

(2) any right under a pledge, security, collateral, reimbursement or guarantee agreement or arrangement, any other similar security agreement or arrangement, or other credit enhancement relating to one or more netting agreements or qualified financial contracts;

(3) subject to any provision of Section 206 of this Article, any right to set off or net out any termination value, payment amount, or other transfer obligation arising under or in connection with one or more qualified financial contracts where the counterparty or its guarantor is organized under the laws of the United States or a state or a foreign jurisdiction approved by the Securities Valuation Office of the National Association of Insurance Commissioners as eligible for netting; or

(4) if a counterparty to a master netting agreement or a qualified financial contract with an insurer subject to a proceeding under this Article terminates, liquidates, closes out or accelerates the agreement or contract, then damages shall be measured as of the date or dates of termination, liquidation, close out, or acceleration; the amount of a claim for damages shall be actual direct compensatory damages calculated in accordance with subsection (f) of this Section.

(b) Upon termination of a netting agreement or qualified financial contract, the net or settlement amount, if any, owed by a nondefaulting party to an insurer against which an application or petition has been filed under this Code shall be transferred to or on the order of the receiver for the insurer, even if the insurer is the defaulting party, notwithstanding any walkaway clause in the netting agreement or qualified financial contract.

For the purposes of this subsection (b), the term "walkaway clause" means a provision in a netting agreement or a qualified financial contract that, after calculation of a value of a party's position or an amount due to or from one of the parties in accordance with its terms upon termination, liquidation, or acceleration of the netting agreement or qualified financial contract, either does not create a payment obligation of a party or extinguishes a payment obligation of a party in whole or in part solely because of the party's status as a nondefaulting party. Any limited 2-way payment or first method provision in a netting agreement or qualified financial contract with an insurer that has defaulted shall be deemed to be a full 2-way payment or second method provision as against the defaulting insurer. Any such property or amount shall, except to the extent that it is subject to one or more secondary liens or encumbrances or rights of netting or setoff, be a general asset of the insurer.

(c) In making any transfer of a netting agreement or qualified financial contract of an insurer subject to a proceeding under this Code, the receiver shall either:

(1) transfer to one party (other than an insurer subject to a proceeding under this Article) all netting agreements and qualified financial contracts between a counterparty or any affiliate of the counterparty and the insurer that is the subject of the proceeding, including:

(A) all rights and obligations of each party under each netting agreement and qualified financial contract; and

(B) all property, including any guarantees or other credit enhancement, securing any claims of each party under each netting agreement and qualified financial contract; or

(2) transfer none of the netting agreements, qualified financial contracts, rights, obligations, or property referred to in paragraph (1) of this subsection (c) (with respect to the counterparty and any affiliate of the counterparty).

(d) If a receiver for an insurer makes a transfer of one or more netting agreements or qualified financial contracts, then the receiver shall use its best efforts to notify any person who is party to the netting agreements or qualified financial contracts of the transfer by 12:00 noon (the receiver's local time) on the business day following the transfer. For the purposes of this subsection (d), "business day" means a day other than a Saturday, Sunday, or any day on which either the New York Stock Exchange or the Federal Reserve Bank of New York is closed.

(e) Notwithstanding any other provision of this Article, a receiver may not avoid a transfer of money or other property arising under or in connection with a netting agreement or qualified financial contract (or any pledge, security, collateral, or guarantee agreement or any other similar security arrangement or credit support document relating to a netting agreement or qualified financial contract) that is made before the commencement of a formal delinquency proceeding under this Article.

(f) The following provisions shall apply concerning disaffirmance and repudiation:

(1) In exercising the rights of disaffirmance or repudiation of a receiver with respect to any netting agreement or qualified financial contract to which an insurer is a party, the receiver for the insurer shall either:

(A) disaffirm or repudiate all netting agreements and qualified financial contracts between a counterparty or any affiliate of the counterparty and the insurer that is the subject of the proceeding; or

(B) disaffirm or repudiate none of the netting agreements and qualified financial contracts referred to in subparagraph (A) (with respect to the person or any affiliate of the person).

(2) Notwithstanding any other provision of this Article, any claim of a counterparty against the estate arising from the receiver's disaffirmance or repudiation of a netting agreement or qualified financial contract that has not been previously affirmed in the liquidation or immediately preceding a conservation or rehabilitation case shall be determined and shall be allowed or disallowed as if the claim had arisen before the date of the filing of the petition for liquidation or, if a conservation or rehabilitation proceeding is converted to a liquidation proceeding, as if the claim had arisen before the date of the filing of the petition for conservation or rehabilitation. The amount of the claim shall be the actual direct compensatory damages determined as of the date of the disaffirmance or repudiation of the netting agreement or qualified financial contract. The term "actual direct compensatory damages" does not include punitive or exemplary damages, damages for lost profit or lost opportunity, or damages for pain and suffering, but does include normal and reasonable costs of cover or other reasonable measures of damages utilized in the derivatives, securities, or other market for the contract and agreement claims.

(g) The term "contractual right", as used in this Section, includes any right set forth in a rule or bylaw of a derivatives clearing organization, as defined in the Commodity Exchange Act; a multilateral clearing organization, as defined in the Federal Deposit Insurance Corporation Improvement Act of 1991; a national securities exchange; a national securities association; a securities clearing agency; a contract market designated under the Commodity Exchange Act; a derivatives transaction execution facility registered under the Commodity Exchange Act; or a board of trade, as defined in the Commodity Exchange Act or in a resolution of the governing board thereof and any right, whether or not evidenced in writing, arising under statutory or common law or under law merchant or by reason of normal business practice.

(h) The provisions of this Section shall not apply to persons who are affiliates of the insurer that is the subject of the proceeding.

(i) All rights of counterparties under this Article shall apply to netting agreements and qualified financial contracts entered into on behalf of the general account or separate accounts if the assets of each separate account are available only to counterparties to netting agreements and qualified financial contracts entered into on behalf of that separate account.

(Source: P.A. 96-1450, eff. 8-20-10.)

(215 ILCS 5/207.1) (from Ch. 73, par. 819.1)

Sec. 207.1. Contingent Liability Policies.

Upon the entry of an order of liquidation any provision in the policies of a company providing for a contingent liability of the policyholders shall become void.

(Source: P.A. 76-715.)

(215 ILCS 5/208) (from Ch. 73, par. 820)

Sec. 208. Time to file claims.

(1) When in a liquidation, rehabilitation, or conservation proceeding against an insurer under this Article an order has been entered for the filing of claims, all persons who may have claims against such insurer shall present the same to the Liquidator, Rehabilitator or Conservator, as the case may be, at a place specified in the notice for filing of claims within such time as may be fixed by order of the Court. The Director shall notify all persons who may have claims against such insurer as disclosed by its books and records, to present the same to him within the time as fixed. The last date for the filing of proof of claim shall be specified in the notice. Such notice shall be given in a manner determined by the Court. The Director shall also cause a notice specifying the last day for filing of claims to be published once a week for three consecutive weeks in a newspaper published in the county where such proceedings are pending and in such other newspapers as he may deem advisable.

(2) Proofs of claim on good cause shown may be filed after the date specified, but except as provided in subsection (3), no such claim shall share in the distribution of assets until all allowed claims proofs of which have been filed before said date, have been paid in full.

(3) The Director may deem proofs of claim filed after the date specified as timely filed when the claimant shows to the Director's reasonable satisfaction that (i) the claimant had no actual knowledge of the date before it had passed, (ii) a proof of claim was not sent to the claimant until after the date had passed, and (iii) the Director knew of the claimant's existence and correct address before the date had passed. Any such claim shall share in the distribution of assets under Section 205.

(Source: P.A. 88-297.)

(215 ILCS 5/209) (from Ch. 73, par. 821)

Sec. 209. Proof and allowance of claims.

(1) The following provisions shall apply concerning proof and allowance of claims:

(a) Proof of claim shall consist of a statement signed by the claimant or on behalf of the claimant that includes all of the following that are applicable:

(i) the particulars of the claim including the consideration given for it;

(ii) the identity and amount of the security on the claim;

(iii) the payments made on the debt, if any;

(iv) that the sum claimed is justly owing and that there is no setoff, counterclaim, or defense to the claim;

(v) any right of priority of payment or other specific right asserted by the claimant;

(vi) the name and address of the claimant and the attorney, if any, who represents the claimant; and

(vii) the claimant's social security or federal employer identification number.

(b) The Director may require that a prescribed form be used and may require that other information and documents be included.

(c) At any time the Director may require the claimant to present information or evidence supplementary to that required under paragraph (a) and may take testimony under oath, require production of affidavits or depositions, or otherwise obtain additional information or evidence.

(2) Whenever a claim is based upon a document, the document, unless lost or destroyed, shall be filed with the proof of claim. If the document is lost or destroyed, a statement of that fact and of the circumstances of the loss or destruction shall be included in the proof of claim. A claim may be allowed even if contingent or unliquidated as of the date fixed by the court pursuant to subsection (a) of Section 194 if it is filed in accordance with this subsection. Except as otherwise provided in subsection (7), a proof of claim required under this Section must identify a known loss or occurrence.

(3) Upon the liquidation, rehabilitation, or conservation of any company which has issued policies insuring the lives of persons, the Director shall, within a reasonable time, after the last day set for the filing of claims, make a list of the persons who have not filed proofs of claim with him and whose rights have not been reinsured, to whom it appears from the books of the company, there are owing amounts on such policies and he shall set opposite the name of each person such amount so owing to such person. The Director shall incur no personal liability by reason of any mistake in such list. Each person whose name shall appear upon said list shall be deemed to have duly filed prior to the last day set for filing of claims a proof of claim for the amount set opposite his name on said list.

(4)(a) When a Liquidation, Rehabilitation, or Conservation Order has been entered in a proceeding against an insurer under this Code, any insured under an insurance policy shall have the right to file a contingent claim. The Court at the time of the entry of the Order of Liquidation, Rehabilitation or Conservation shall fix the final date for the liquidation of insureds' contingent claims, but in no event shall said date be more than 3 years after the last day fixed for the filing of claims, provided, such date may be extended by the Court on petition of the Director should the Director determine that such extension will not delay distribution of assets under Section 210. Such a contingent claim shall be allowed if such claim is liquidated and the insured claimant presents evidence of payment of such claim to the Director on or before the last day fixed by the Court.

(b) When an insured has been unable to liquidate its claim under paragraph (a) of this subsection (4), the insured may have its claim allowed by estimation if (i) it may be reasonably inferred from the proof presented upon the claim that a claim exists under the policy; (ii) the insured has furnished suitable proof, unless the court for good cause shown shall otherwise direct, that no further valid claims against the insurer arising out of the cause of action other than those already presented can be made, and (iii) the total liability of the insurer to all claimants arising out of the same act shall be no greater than its total liability would be were it not in liquidation, rehabilitation, or conservation.

(5) The obligation of the insurer, if any, to defend or continue the defense of any claim or suit under a liability insurance policy shall terminate on the entry of the Order of Liquidation, Rehabilitation or Conservation, except during the appeal of an Order of Liquidation as provided by Section 190.1 or, unless upon the petition of the Director, the court directs otherwise. Insureds may include in contingent claims reasonable attorneys fees for services rendered subsequent to the date of Liquidation, Rehabilitation or Conservation in defense of claims or suits covered by the insured's policy provided such attorneys fees have actually been paid by the assured and evidence of payment presented in the manner required for insured's contingent claims.

(6) When a liquidation, rehabilitation, or conservation order has been entered in a proceeding against an insurer under this Code, any person who has a cause of action against an insured of the insurer under an insurance policy issued by the insurer shall have the right to file a claim in the proceeding, regardless of the fact that the claim may be contingent, and the claim may be allowed by estimation (a) if it may be reasonably, inferred from proof presented upon the claim that the claimant would be able to obtain a judgment upon the cause of action against the insured; and (b) if the person has furnished suitable proof, unless the court for good cause shown shall otherwise direct, that no further valid claims against the insurer arising out of the cause of action other than those already presented can be made, and (c) the total liability of the insurer to all claimants arising out of the same act shall be no greater than its total liability would be were it not in liquidation, rehabilitation, or conservation.

(7) Contingent or unliquidated general creditors' and ceding insurers' claims that are not made absolute and liquidated by the last day fixed by the court pursuant to subsection (4) may be determined and allowed by estimation. Any such estimate shall be based upon an actuarial evaluation made with reasonable actuarial certainty or upon another accepted method of valuing claims with reasonable certainty and, with respect to ceding insurers' claims, may include an estimate of incurred but not reported losses.

(7.5) (a) The estimation and allowance of the loss development on a known loss or occurrence shall trigger a reinsurer's obligation to pay pursuant to its reinsurance contract with the insolvent company, provided that the allowance is made in accordance with paragraph (b) of subsection (4) or subsection (6). The Director shall have the authority to exercise all available remedies on behalf of the insolvent company to marshal these reinsurance recoverables.

(b) That portion of any estimated and allowed contingent claim that is attributable to claims incurred but not reported to the insolvent company's reinsured shall not be billable to the insolvent company's reinsurers, except to the extent that (A) such claims develop into known losses or occurrences and become billable under paragraph (a) of this subsection or (B) the reinsurance contract specifically provides for the payment of such losses or reserves.

(c) Notwithstanding any other provision of this Code, the liquidator may negotiate a voluntary commutation and release of all obligations arising from reinsurance contracts or other agreements.

(8) No judgment against such an insured or an insurer taken after the date of the entry of the liquidation, rehabilitation, or conservation order shall be considered in the proceedings as evidence of liability, or of the amount of damages, and no judgment against an insured or an insurer taken by default, or by collusion prior to the entry of the liquidation order shall be considered as conclusive evidence in the proceeding either of the liability of such insured to such person upon such cause of action or of the amount of damages to which such person is therein entitled.

(9) The value of securities held by secured creditors shall be determined by converting the same into money according to the terms of the agreement pursuant to which such securities were delivered to such creditors, or by such creditors and the Director by agreement, or by the court, and the amount of such value shall be credited upon the claims of such secured creditors and their claims allowed only for the balance.

(10) Claims of creditors or policyholders who have received preferences voidable under Section 204 or to whom conveyances or transfers, assignments or incumbrances have been made or given which are void under Section 204, shall not be allowed unless such creditors or policyholders shall surrender such preferences, conveyances, transfers, assignments or incumbrances.

(11)(a) When the Director denies a claim or allows a claim for less than the amount requested by the claimant, written notice of the determination and of the right to object shall be given promptly to the claimant or the claimant's representative by first class mail at the address shown on the proof of claim. Within 60 days from the mailing of the notice, the claimant may file his written objections with the Director. If no such filing is made on a timely basis, the claimant may not further object to the determination.

(b) Whenever objections are filed with the Director and he does not alter his determination as a result of the objection and the claimant continues to object, the Director shall petition the court for a hearing as soon as practicable and give notice of the hearing by first class mail to the claimant or his representative and to any other persons known by the Director to be directly affected, not less than 10 days before the date of the hearing.

(12) The Director shall review all claims duly filed in the liquidation, rehabilitation, or conservation proceeding, unless otherwise directed by the court, and shall make such further investigation as he considers necessary. The Director may compound, compromise, or in any other manner negotiate the amount for which claims will be recommended to the court. Unresolved disputes shall be determined under subsection (11).

(13)(a) The Director shall present to the court reports of claims reviewed under subsection (12) with his recommendations as to each claim.

(b) The court may approve or disapprove any recommendations contained in the reports of claims filed by the Director, except that the Director's agreements with claimants shall be accepted as final by the court on claims settled for $10,000 or less.

(14) The changes made in this Section by this amendatory Act of 1993 apply to all liquidation, rehabilitation, or conservation proceedings that are pending on the effective date of this amendatory Act of 1993 and to all future liquidation, rehabilitation, or conservation proceedings, except that the changes made to the provisions of this Section by this amendatory Act of 1993 shall not apply to any company ordered into liquidation on or before January 1, 1982.

(15) The changes made in this Section by this amendatory Act of the 93rd General Assembly do not apply to any company ordered into liquidation on or before January 1, 2004.

(Source: P.A. 96-1450, eff. 8-20-10.)

(215 ILCS 5/210) (from Ch. 73, par. 822)

Sec. 210. Distribution of assets; priorities; unpaid dividends.

(1) Any time after the last day fixed for the filing of proofs of claims in the liquidation of a company, the court may, upon the application of the Director authorize him to declare out of the funds remaining in his hands, one or more dividends upon all claims allowed in accordance with the priorities established in Section 205.

(2) Where there has been no adjudication of insolvency, the Director shall pay all allowed claims in full in accordance with the priorities set forth in Section 205. The director shall not be chargeable for any assets so distributed to any claimant who has failed to file a proper proof of claim before such distribution has been made.

(3) When subsequent to an adjudication of insolvency, pursuant to Section 208, a surplus is found to exist after the payment in full of all allowed claims falling within the priorities set forth in paragraphs (a), (b), (c), (d), (e), (f) and (g) of subsection (1) of Section 205 and which have been duly filed prior to the last date fixed for the filing thereof, and after the setting aside of a reserve for all additional costs and expenses of the proceeding, the court shall set a new date for the filing of claims. After the expiration of the new date, all allowed claims filed on or before said new date together with all previously allowed claims falling within the priorities set forth in paragraphs (h) and (i) of subsection (1) of Section 205 shall be paid in accordance with the priorities set forth in Section 205.

(4) Dividends remaining unclaimed or unpaid in the hands of the Director for 6 months after the final order of distribution may be by him deposited in one or more savings and loan associations, State or national banks, trust companies or savings banks to the credit of the Director, whomsoever he may be, in trust for the person entitled thereto, but no such person shall be entitled to any interest upon such deposit. All such deposits shall be entitled to priority of payment in case of the insolvency or voluntary or involuntary liquidation of the depositary on an equality with any other priority given by the banking law. Any such funds together with interest, if any, paid or credited thereon, remaining and unclaimed in the hands of the Director in Trust after 2 years shall be presumed abandoned and reported and delivered to the State Treasurer and become subject to the provisions of the Revised Uniform Unclaimed Property Act.

(Source: P.A. 100-22, eff. 1-1-18.)

(215 ILCS 5/211.1)

Sec. 211.1. Termination of proceedings.

(a) When all assets justifying the expense of collection and distribution have been marshaled and distributed under this Code, the Director as liquidator shall petition the court to terminate the liquidation proceedings and to close the estate. The court may grant such other relief as may be appropriate, including a full discharge of all liability and responsibility of the liquidator, a reservation of assets for administrative expenses incurred in the closing of the estate, and the maintenance and destruction of records.

(b) Subject to the approval of the court, after the completion of all postclosure activities for which moneys were reserved, the Director is authorized to destroy company records and documents notwithstanding any other applicable statutes and any remaining reserved assets that are provided for in subsection (a) and that may not be practicably or economically distributed to claimants shall be deposited into a segregated account to be known as the Closed Estate Fund Trust Account. The Director may use moneys held in the account for paying the administrative expenses of companies subject to this Article that lack sufficient assets to allow the Director to perform his duties and obligations under this Article. An annual audit of the Closed Estate Fund Trust Account shall be performed in accordance with Section 200 of this Code regardless of its balance.

(c) The Director may petition the court to reopen the proceedings for good cause shown, including the marshaling of additional assets, and the court may enter such other orders as may be deemed appropriate.

(Source: P.A. 88-297; 89-206, eff. 7-21-95.)

(215 ILCS 5/212.1)

Sec. 212.1. Subpoena and document production. The court shall have jurisdiction, upon, or at any time after the filing of the complaint, upon the petition of the Director to subpoena witnesses and compel their attendance, administer oaths, examine any person under oath and compel any person to subscribe to his or her testimony after it has been correctly reduced to writing, and to require the production of any books, papers, records, or other documents.

(Source: P.A. 88-297.)

(215 ILCS 5/213.5)

Sec. 213.5. Severability. The provisions of this Article are severable under Section 1.31 of the Statute on Statutes.

(Source: P.A. 89-206, eff. 7-21-95.)

(215 ILCS 5/221) (from Ch. 73, par. 833)

Sec. 221. Continuation of existing proceedings. Every proceeding heretofore commenced under "An Act in relation to delinquent insurance companies, associations and societies," approved June 26, 1925, as from time to time amended, which is repealed by this Code shall be continued as if said Act had not been repealed, but assessments against members or subscribers of any company which has issued assessable policies or contracts of insurance may be made in accordance with Section 193.

(Source: P.A. 83-333.)

(215 ILCS 5/Art. XIII.5 heading) ARTICLE XIII 1/2. UNIFORM PROVISIONS FOR LIQUIDATION

(215 ILCS 5/221.1) (from Ch. 73, par. 833.1)

Sec. 221.1. Definitions.

For the purposes of Sections 221.1 to 221.10, both inclusive, the following terms have the following meanings;

(1) "Reciprocal State" means a state wherein:

(a) it is provided by law that the insurance supervisory or other administrative agency of the state shall conduct or wind up the affairs of delinquent companies under judicial supervision and shall be vested with title to all of the assets of any domestic company against which a delinquency proceeding has been commenced, and

(b) in substance and effect the provisions of Sections 221.1 to 221.10, both inclusive are in force.

(2) "Insurer" means any person, firm, corporation, association, or aggregation of persons doing or proposing to do an insurance business and subject to the insurance supervisory authority of, or to liquidation, rehabilitation, reorganization or conservation by, the commissioner of insurance or equivalent insurance supervisory official of the state.

(3) "Delinquency proceeding" means any proceeding commenced against an insurer for the purpose of liquidating, rehabilitating, reorganizing or conserving such insurer.

(4) "Domiciliary state" means the state in which an insurer is incorporated or organized or, in the case of an insurer incorporated or organized in a foreign country, the state in which such insurer, having become authorized to do business in such state has, at the commencement of delinquency proceedings the largest amount of its trusteed assets and deposits for the benefit of its policy holder or policy holders and creditors in the United States; and "domiciliary insurer" means an insurer in its domiciliary state.

(5) "Ancillary state" means any state other than a domiciliary state.

(6) "General Assets" means all property, real or personal, not specifically mortgaged, pledged, deposited as security or otherwise encumbered, and as to such specifically encumbered property the term includes all in excess of the amount necessary to discharge the sum or sums secured.

(7) "Preferred claim" means any claim with respect to which the law of a state or of the United States accords priority of payment from the general assets of the insurer.

(8) "Special deposit claim" means any claims secured generally by a deposit of a fund or property or bond which deposit has been made to secure the payment of all claims of a particular description or all claims of persons resident in a particular state. The term does not include claims which are secured by deposit for the benefit or protection of all claimants against the insurer in the United States.

(9) "Secured claim" means any claim secured individually by mortgage, trust, deed, pledge, deposit as security, escrow or otherwise. The term also includes claims which prior to the commencement of delinquency proceedings in the state of the insurer's domicile have become liens upon specific assets by reason of judicial process.

(10) "State" means any state or territory of the United States, and the District of Columbia.

(11) "Foreign country" means territory outside of any state, as defined.

(12) "Receiver" means receiver, liquidator, rehabilitator or conservator as the context may require.

In addition to and notwithstanding any other provisions of law, this Article shall apply to the administration by the Director of the affairs of delinquent domestic companies with respect to matters affecting or related to reciprocal states, and shall also apply to matters affecting or related to this State in the administration by the Director of the affairs of delinquent companies domiciled in reciprocal states and authorized to transact business in this State.

(Source: Laws 1941, vol. 1, p. 832.)

(215 ILCS 5/221.2) (from Ch. 73, par. 833.2)

Sec. 221.2. Ancillary delinquency proceedings.

After the commencement of delinquency proceedings in a reciprocal state against an insurer domiciliary in such state, a court of competent jurisdiction in this State shall on the petition of the Director of Insurance of this State appoint such Director of Insurance as ancillary receiver in this State of such insurer. The Director of Insurance shall file such petition (a) if he finds that there are sufficient assets of such insurer located in this State to justify the appointment of an ancillary receiver or (b) if 10 or more persons resident in a state having claims against such insurer file a petition or petitions in writing with the Director requesting the appointment of such ancillary receiver. As ancillary receiver the Director shall have the right to sue for and reduce to possession the assets of such insurer in this State, and, subject to the rights of the domiciliary receiver, he shall have the same powers and be subject to the same duties with respect to such assets, as are possessed by a receiver of a domiciliary insurer under the laws of this State. The domiciliary receiver of an insurer domiciled in a reciprocal state shall, except as to special deposits and security on secured claims pursuant to Section 221.7, be vested by operation of law with the title to all of the assets, property, contracts, agents' balances, and all of the books, accounts and other records of the insurer located in this State; and shall have the immediate right to recover balances due from resident agents and to obtain possession of any books and records of the insurer found in this State.

(Source: P.A. 89-206, eff. 7-21-95.)

(215 ILCS 5/221.3) (from Ch. 73, par. 833.3)

Sec. 221.3. Filing and proving of claims of non-residents against delinquent domiciliary insurers.

In any delinquency proceeding begun in this state against a domiciliary insurer of this state, claimants residing in a reciprocal ancillary state may file claims either with the ancillary receiver, if any, or with the domiciliary receiver. All such claims must be filed on or before the last date fixed for the filing of claims in the domiciliary delinquency proceedings.

In any such proceeding controverted claims belonging to claimants residing in ancillary states may either (a) be proved in this state as provided by law, or (b) if ancillary proceedings have been commenced in such ancillary state, may be proved in such ancillary proceedings. In the event a claimant elects to prove his claim in ancillary proceedings, and, if notice of the claim and opportunity to appear and be heard is afforded the domiciliary receiver of this state, such claim, when allowed by the court in the ancillary state, shall be accepted in this state as final and conclusive as to its amount, and shall also be accepted as final and conclusive as to its priority, if any, as against special deposits or other security located within the ancillary state.

(Source: Laws 1941, vol. 1, p. 832.)

(215 ILCS 5/221.4) (from Ch. 73, par. 833.4)

Sec. 221.4. Proof of claims of residents in connection with delinquency proceedings in other states.

If a delinquency proceeding is commenced in a reciprocal state against an insurer domiciliary in such state, claimants against such insurer who reside within this State may file claims either with the ancillary receiver, if any, appointed in this State or with the domiciliary receiver. All such claims must be filed on or before the last date fixed for the filing of claims in the domiciliary delinquency proceeding.

In any such proceeding controverted claims belonging to claimants residing in this State may either (a) be proved in the domiciliary state as provided by the law of such state, or (b) if ancillary proceedings have been commenced in this State, be proved in such ancillary proceedings. In the event that any such claimant elects to prove his claim in this State, he shall file his claim with the ancillary receiver in the manner provided by the law of this State for the proving of claims against domiciliary insurers, and he shall give, or cause to be given, at least 40 days prior to the date of hearing, notice to the receiver in the domiciliary state, either by mail or otherwise in writing that such claim is being made to such ancillary receiver and the nature and the amount thereof. The domiciliary receiver shall be entitled to appear or to be represented in any proceeding in this State involving the adjudication of the claim. The allowance of the claim by the courts of this State shall be final and conclusive both as to its amount and also as to its priority, if any, against special deposits or other security located within this State.

(Source: P.A. 89-206, eff. 7-21-95.)

(215 ILCS 5/221.5) (from Ch. 73, par. 833.5)

Sec. 221.5. Priority of preferred claims.

In any delinquency proceeding against a domiciliary insurer of this state, claims owing to residents of ancillary reciprocal states shall be deemed preferred claims if, and only if, like claims are preferred under the laws of this state. All such claims whether owing to residents or non-residents shall be given equal priority of payment from general assets. No law of an ancillary state providing for preferred claims against the general assets of insurers shall be recognized as against the assets of delinquent domiciliary insurers of this state regardless of where such assets may be located.

In any delinquency proceeding against an insurer domiciliary in a reciprocal state, claims owing to residents of this state shall be preferred if, and only if, like claims are preferred by the laws of such other state.

(Source: Laws 1941, vol. 1, p. 832.)

(215 ILCS 5/221.6) (from Ch. 73, par. 833.6)

Sec. 221.6. Priority of special deposit claims.

The owners of special deposit claims against an insurer for which a receiver has been appointed in a delinquency proceeding in this or any reciprocal state shall be given priority against their several special deposits in accordance with the provisions of the statutes requiring the creation and maintenance of such special deposits. If there be a deficiency in any such special deposit so that the claims secured thereby are not fully discharged therefrom, the claimants may share in the general assets, but such sharing shall be deferred until general creditors, and also claimants against other special deposits who have received a small percentage from their respective special deposits, have been paid percentages of their claims equal to the percentage paid from such special deposit, it being the purpose and intent of this provision to equalize to this extent the advantage gained by the security provided by such special deposits.

(Source: Laws 1941, vol. 1, p. 832.)

(215 ILCS 5/221.7) (from Ch. 73, par. 833.7)

Sec. 221.7. Priority of secured claims.

The owner of a secured claim against an insurer for which a receiver has been appointed in a delinquency proceeding in this or any reciprocal state may surrender his security and file his claim as a general creditor, or such secured claim may be discharged by resort to the security, in which case the deficiency, if any, shall be treated as a claim against the general assets of the insurer on the same basis as claims of unsecured creditors. If the amount of the deficiency has been adjudicated in ancillary proceedings as provided in this Article, that amount shall be conclusive; otherwise the amount of such deficiency shall be ascertained and determined in the delinquency proceeding in the domiciliary state of such insurer.

(Source: P.A. 89-206, eff. 7-21-95.)

(215 ILCS 5/221.8) (from Ch. 73, par. 833.8)

Sec. 221.8. Right of domiciliary receiver to residium of assets of insurers domiciled in ancillary states.

The ancillary receiver of assets in this State of insurers domiciliary in reciprocal states and subject to delinquency proceedings therein shall, as soon as practicable, arrange the liquidation or other disposition of special deposit claims and secured claims proved in the ancillary proceedings in this State, and all remaining assets, after payment of expenses he shall promptly transfer to the domiciliary receiver.

The domiciliary receiver of a reciprocal state may sue the ancillary receiver of this State in the courts of this State for the purpose of collecting or obtaining any assets of the insurer to which he or she may be entitled under the laws of this State, and, if no ancillary receiver be appointed in this State, such domiciliary receiver may collect or reduce to possession, in this State, and may sue in the courts of this State to obtain, any assets of such delinquent insurer located in this State, to which he or she may be entitled under the laws of this State.

(Source: P.A. 89-206, eff. 7-21-95.)

(215 ILCS 5/221.9) (from Ch. 73, par. 833.9)

Sec. 221.9. Attachment and garnishment of assets.

In the event of the commencement of delinquency proceedings in any reciprocal state no action or proceeding in the nature of an attachment, garnishment, execution or otherwise, shall be commenced in the courts of this state against such delinquent insurer or its assets.

(Source: Laws 1941, vol. 1, p. 832.)

(215 ILCS 5/221.10) (from Ch. 73, par. 833.10)

Sec. 221.10. Declaration of purpose.

The purpose of Sections 221.1 to 221.10, both inclusive is to promote uniformity in the liquidation, rehabilitation, reorganization or conservation of insurers doing business in more than one state. It is intended that Sections 221.1 to 221.10, both inclusive shall be liberally construed to the end that so far as possible the assets of such insurers shall be equally and uniformly conserved in all states, and that claimants against such insurers shall receive equal and uniform treatment irrespective of residence or the place of the acts or contracts upon which their claims are based. The provisions of Sections 221.1 to 221.10, both inclusive shall be effective only with respect to this state and other states in which (a) it is provided by law that only the Insurance Commissioner or equivalent supervisory official of the State shall be vested with title to the assets of, and shall wind up the affairs of, delinquent insurers under judicial supervision; and (b) in substance and effect the provisions of Sections 221.1 to 221.10, both inclusive, are in force. The provisions of Sections 221.1 to 221.10, both inclusive, insofar as applicable to any insurer incorporated or organized in a foreign country, shall apply only to the assets, liabilities and business of such insurer within the several states.

(Source: Laws 1941, vol. 1, p. 832.)

(215 ILCS 5/221.11) (from Ch. 73, par. 833.11)

Sec. 221.11. Proceedings governed by Civil Practice Law and Supreme Court Rules.) The rules of practice, the course and method of procedure in circuit courts as established by the Civil Practice Law and Supreme Court Rules and any amendments thereto are adopted for the purposes of this Article except where other procedures or rules are in this Article expressly provided. Appeals may be taken as in other civil cases.

(Source: P.A. 82-783.)

(215 ILCS 5/221.12) (from Ch. 73, par. 833.12)

Sec. 221.12. Sections 211, 212, 213, 214, 215, 216, 217, 218, 219 and 220, each inclusive, are repealed; provided, however, that every proceeding heretofore commenced under such sections shall be continued as though such sections had not been repealed.

(Source: Laws 1941, vol. 1, p. 832.)

(215 ILCS 5/221.13) (from Ch. 73, par. 833.13)

Sec. 221.13. Uniformity of interpretation.

Sections 221.1 to 221.12 each inclusive, of this Article shall be so interpreted and construed as to effectuate their general purpose to make uniform the law of those states that enact the Uniform Reciprocal Liquidation Act.

(Source: Laws 1941, vol. 1, p. 832.)

(215 ILCS 5/Art. XIV heading) ARTICLE XIV. LEGAL RESERVE LIFE INSURANCE

(215 ILCS 5/222) (from Ch. 73, par. 834)

Sec. 222. Scope of article.

This article shall apply to all stock and mutual legal reserve life companies, and to the extent provided in section 281 to assessment legal reserve life companies, authorized to transact in this State the kind or kinds of business described in Class 1 of section 4.

(Source: Laws 1937, p. 696.)

(215 ILCS 5/223) (from Ch. 73, par. 835)

Sec. 223. Director to value policies - Legal standard of valuation.

(1) For policies and contracts issued prior to the operative date of the Valuation Manual, the Director shall annually value, or cause to be valued, the reserve liabilities (hereinafter called reserves) for all outstanding life insurance policies and annuity and pure endowment contracts of every life insurance company doing business in this State, except that in the case of an alien company, such valuation shall be limited to its United States business. In calculating such reserves, he may use group methods and approximate averages for fractions of a year or otherwise. In lieu of the valuation of the reserves herein required of any foreign or alien company, he may accept any valuation made, or caused to be made, by the insurance supervisory official of any state or other jurisdiction when such valuation complies with the minimum standard provided in this Section.

The provisions set forth in this subsection (1) and in subsections (2), (3), (4), (5), (6), and (7) of this Section shall apply to all policies and contracts, as appropriate, subject to this Section issued prior to the operative date of the Valuation Manual. The provisions set forth in subsections (8) and (9) of this Section shall not apply to any such policies and contracts.

For policies and contracts issued on or after the operative date of the Valuation Manual, the Director shall annually value, or cause to be valued, the reserve liabilities (reserves) for all outstanding life insurance contracts, annuity and pure endowment contracts, accident and health contracts, and deposit-type contracts of every company issued on or after the operative date of the Valuation Manual. In lieu of the valuation of the reserves required of a foreign or alien company, the Director may accept a valuation made, or caused to be made, by the insurance supervisory official of any state or other jurisdiction when the valuation complies with the minimum standard provided in this Section.

The provisions set forth in subsections (8) and (9) of this Section shall apply to all policies and contracts issued on or after the operative date of the Valuation Manual.

Any such company which adopts at any time a standard of valuation producing greater aggregate reserves than those calculated according to the minimum standard provided under this Section may adopt a lower standard of valuation, with the approval of the Director, but not lower than the minimum herein provided, however, that, for the purposes of this subsection, the holding of additional reserves previously determined by the appointed actuary to be necessary to render the opinion required by subsection (1a) shall not be deemed to be the adoption of a higher standard of valuation. In the valuation of policies the Director shall give no consideration to, nor make any deduction because of, the existence or the possession by the company of

(a) policy liens created by any agreement given or assented to by any assured subsequent to July 1, 1937, for which liens such assured has not received cash or other consideration equal in value to the amount of such liens, or

(b) policy liens created by any agreement entered into in violation of Section 232 unless the agreement imposing or creating such liens has been approved by a Court in a proceeding under Article XIII, or in the case of a foreign or alien company has been approved by a court in a rehabilitation or liquidation proceeding or by the insurance official of its domiciliary state or country, in accordance with the laws thereof.

(1a) This subsection shall become operative at the end of the first full calendar year following the effective date of this amendatory Act of 1991.

(A) General.

(1) Prior to the operative date of the Valuation Manual, every life insurance company doing business in this State shall annually submit the opinion of a qualified actuary as to whether the reserves and related actuarial items held in support of the policies and contracts specified by the Director by regulation are computed appropriately, are based on assumptions that satisfy contractual provisions, are consistent with prior reported amounts and comply with applicable laws of this State. The Director by regulation shall define the specifics of this opinion and add any other items deemed to be necessary to its scope.

(2) The opinion shall be submitted with the annual statement reflecting the valuation of reserve liabilities for each year ending on or after December 31, 1992.

(3) The opinion shall apply to all business in force including individual and group health insurance plans, in form and substance acceptable to the Director as specified by regulation.

(4) The opinion shall be based on standards adopted from time to time by the Actuarial Standards Board and on additional standards as the Director may by regulation prescribe.

(5) In the case of an opinion required to be submitted by a foreign or alien company, the Director may accept the opinion filed by that company with the insurance supervisory official of another state if the Director determines that the opinion reasonably meets the requirements applicable to a company domiciled in this State.

(6) For the purpose of this Section, "qualified actuary" means a member in good standing of the American Academy of Actuaries who meets the requirements set forth in its regulations.

(7) Except in cases of fraud or willful misconduct, the qualified actuary shall not be liable for damages to any person (other than the insurance company and the Director) for any act, error, omission, decision or conduct with respect to the actuary's opinion.

(8) Disciplinary action by the Director against the company or the qualified actuary shall be defined in regulations by the Director.

(9) A memorandum, in form and substance acceptable to the Director as specified by regulation, shall be prepared to support each actuarial opinion.

(10) If the insurance company fails to provide a supporting memorandum at the request of the Director within a period specified by regulation or the Director determines that the supporting memorandum provided by the insurance company fails to meet the standards prescribed by the regulations or is otherwise unacceptable to the Director, the Director may engage a qualified actuary at the expense of the company to review the opinion and the basis for the opinion and prepare the supporting memorandum as is required by the Director.

(11) Any memorandum in support of the opinion, and any other material provided by the company to the Director in connection therewith, shall be kept confidential by the Director and shall not be made public and shall not be subject to subpoena, other than for the purpose of defending an action seeking damages from any person by reason of any action required by this Section or by regulations promulgated hereunder; provided, however, that the memorandum or other material may otherwise be released by the Director (a) with the written consent of the company or (b) to the American Academy of Actuaries upon request stating that the memorandum or other material is required for the purpose of professional disciplinary proceedings and setting forth procedures satisfactory to the Director for preserving the confidentiality of the memorandum or other material. Once any portion of the confidential memorandum is cited by the company in its marketing or is cited before any governmental agency other than a state insurance department or is released by the company to the news media, all portions of the confidential memorandum shall be no longer confidential.

(B) Actuarial analysis of reserves and assets supporting those reserves.

(1) Every life insurance company, except as exempted by or under regulation, shall also annually include in the opinion required by paragraph (A)(1) of this subsection (1a), an opinion of the same qualified actuary as to whether the reserves and related actuarial items held in support of the policies and contracts specified by the Director by regulation, when considered in light of the assets held by the company with respect to the reserves and related actuarial items including, but not limited to, the investment earnings on the assets and the considerations anticipated to be received and retained under the policies and contracts, make adequate provision for the company's obligations under the policies and contracts including, but not limited to, the benefits under and expenses associated with the policies and contracts.

(2) The Director may provide by regulation for a transition period for establishing any higher reserves which the qualified actuary may deem necessary in order to render the opinion required by this Section.

(1b) Actuarial Opinion of Reserves after the Operative Date of the Valuation Manual.

(A) General.

(1) Every company with outstanding life insurance contracts, accident and health insurance contracts, or deposit-type contracts in this State and subject to regulation by the Director shall annually submit the opinion of the appointed actuary as to whether the reserves and related actuarial items held in support of the policies and contracts are computed appropriately, are based on assumptions that satisfy contractual provisions, are consistent with prior reported amounts, and comply with applicable laws of this State. The Valuation Manual shall prescribe the specifics of this opinion, including any items deemed to be necessary to its scope.

(2) The opinion shall be submitted with the annual statement reflecting the valuation of such reserve liabilities for each year ending on or after the operative date of the Valuation Manual.

(3) The opinion shall apply to all policies and contracts subject to paragraph (B) of this subsection (1b), plus other actuarial liabilities as may be specified in the Valuation Manual.

(4) The opinion shall be based on standards adopted from time to time by the Actuarial Standards Board or its successor and on additional standards as may be prescribed in the Valuation Manual.

(5) In the case of an opinion required to be submitted by a foreign or alien company, the Director may accept the opinion filed by that company with the insurance supervisory official of another state if the Director determines that the opinion reasonably meets the requirements applicable to a company domiciled in this State.

(6) Except in cases of fraud or willful misconduct, the appointed actuary shall not be liable for damages to any person (other than the insurance company and the Director) for any act, error, omission, decision, or conduct with respect to the appointed actuary's opinion.

(7) Disciplinary action by the Director against the company or the appointed actuary shall be defined by the Director by rule.

(8) A memorandum, in a form and substance as specified in the Valuation Manual and acceptable to the Director, shall be prepared to support each actuarial opinion.

(9) If the insurance company fails to provide a supporting memorandum at the request of the Director within a period specified in the Valuation Manual or the Director determines that the supporting memorandum provided by the insurance company fails to meet the standards prescribed by the Valuation Manual or is otherwise unacceptable to the Director, the Director may engage a qualified actuary at the expense of the company to review the opinion and the basis for the opinion and prepare the supporting memorandum as is required by the Director.

(B) Every company with outstanding life insurance contracts, accident and health insurance contracts, or deposit-type contracts in this State and subject to regulation by the Director, except as exempted in the Valuation Manual, shall also annually include in the opinion required by subparagraph (1) of paragraph (A) of this subsection (1b), an opinion of the same appointed actuary as to whether the reserves and related actuarial items held in support of the policies and contracts specified in the Valuation Manual, when considered in light of the assets held by the company with respect to the reserves and related actuarial items, including, but not limited to, the investment earnings on the assets and the considerations anticipated to be received and retained under the policies and contracts, make adequate provision for the company's obligations under the policies and contracts, including, but not limited to, the benefits under and expenses associated with the policies and contracts.

(2) This subsection shall apply to only those policies and contracts issued prior to the operative date of Section 229.2 (the Standard Non-forfeiture Law).

(a) Except as otherwise in this Article provided, the legal minimum standard for valuation of contracts issued before January 1, 1908, shall be the Actuaries or Combined Experience Table of Mortality with interest at 4% per annum and for valuation of contracts issued on or after that date shall be the American Experience Table of Mortality with either Craig's or Buttolph's Extension for ages under 10 and with interest at 3 1/2% per annum. The legal minimum standard for the valuation of group insurance policies under which premium rates are not guaranteed for a period in excess of 5 years shall be the American Men Ultimate Table of Mortality with interest at 3 1/2% per annum. Any life company may, at its option, value its insurance contracts issued on or after January 1, 1938, in accordance with their terms on the basis of the American Men Ultimate Table of Mortality with interest not higher than 3 1/2% per annum.

(b) Policies issued prior to January 1, 1908, may continue to be valued according to a method producing reserves not less than those produced by the full preliminary term method. Policies issued on and after January 1, 1908, may be valued according to a method producing reserves not less than those produced by the modified preliminary term method hereinafter described in paragraph (c). Policies issued on and after January 1, 1938, may be valued either according to a method producing reserves not less than those produced by such modified preliminary term method or by the select and ultimate method on the basis that the rate of mortality during the first 5 years after the issuance of such contracts respectively shall be calculated according to the following percentages of rates shown by the American Experience Table of Mortality:

(i) first insurance year 50% thereof;

(ii) second insurance year 65% thereof;

(iii) third insurance year 75% thereof;

(iv) fourth insurance year 85% thereof;

(v) fifth insurance year 95% thereof.

(c) If the premium charged for the first policy year under a limited payment life preliminary term policy providing for the payment of all premiums thereon in less than 20 years from the date of the policy or under an endowment preliminary term policy, exceeds that charged for the first policy year under 20 payment life preliminary term policies of the same company, the reserve thereon at the end of any year, including the first, shall not be less than the reserve on a 20 payment life preliminary term policy issued in the same year at the same age, together with an amount which shall be equivalent to the accumulation of a net level premium sufficient to provide for a pure endowment at the end of the premium payment period, equal to the difference between the value at the end of such period of such a 20 payment life preliminary term policy and the full net level premium reserve at such time of such a limited payment life or endowment policy. The premium payment period is the period during which premiums are concurrently payable under such 20 payment life preliminary term policy and such limited payment life or endowment policy.

(d) The legal minimum standard for the valuations of annuities issued on and after January 1, 1938, shall be the American Annuitant's Table with interest not higher than 3 3/4% per annum, and all annuities issued before that date shall be valued on a basis not lower than that used for the annual statement of the year 1937; but annuities deferred 10 or more years and written in connection with life insurance shall be valued on the same basis as that used in computing the consideration or premiums therefor, or upon any higher standard at the option of the company.

(e) The Director may vary the standards of interest and mortality as to contracts issued in countries other than the United States and may vary standards of mortality in particular cases of invalid lives and other extra hazards.

(f) The legal minimum standard for valuation of waiver of premium disability benefits or waiver of premium and income disability benefits issued on and after January 1, 1938, shall be the Class (3) Disability Table (1926) modified to conform to the contractual waiting period, with interest at not more than 3 1/2% per annum; but in no event shall the values be less than those produced by the basis used in computing premiums for such benefits. The legal minimum standard for the valuation of such benefits issued prior to January 1, 1938, shall be such as to place an adequate value, as determined by sound insurance practices, on the liabilities thereunder and shall be such that the value of the benefits under each and every policy shall in no case be less than the value placed upon the future premiums.

(g) The legal minimum standard for the valuation of industrial policies issued on or after January 1, 1938, shall be the American Experience Table of Mortality or the Standard Industrial Mortality Table or the Substandard Industrial Mortality Table with interest at 3 1/2% per annum by the net level premium method, or in accordance with their terms by the modified preliminary term method hereinabove described.

(h) Reserves for all such policies and contracts may be calculated, at the option of the company, according to any standards which produce greater aggregate reserves for all such policies and contracts than the minimum reserves required by this subsection.

(3) This subsection shall apply to only those policies and contracts issued on or after January 1, 1948 or such earlier operative date of Section 229.2 (the Standard Non-forfeiture Law) as shall have been elected by the insurance company issuing such policies or contracts.

(a) Except as otherwise provided in subsections (4), (6), and (7), the minimum standard for the valuation of all such policies and contracts shall be the Commissioners Reserve valuation method defined in paragraphs (b) and (f) of this subsection and in subsection 5, 3 1/2% interest for such policies issued prior to September 8, 1977, 5 1/2% interest for single premium life insurance policies and 4 1/2% interest for all other such policies issued on or after September 8, 1977, and the following tables:

(i) The Commissioners 1941 Standard Ordinary Mortality Table for all Ordinary policies of life insurance issued on the standard basis, excluding any disability and accidental death benefits in such policies, for such policies issued prior to the operative date of subsection (4a) of Section 229.2 (Standard Non-forfeiture Law); and the Commissioners 1958 Standard Ordinary Mortality Table for such policies issued on or after such operative date but prior to the operative date of subsection (4c) of Section 229.2 provided that for any category of such policies issued on female risks all modified net premiums and present values referred to in this Section may, prior to September 8, 1977, be calculated according to an age not more than 3 years younger than the actual age of the insured and, after September 8, 1977, calculated according to an age not more than 6 years younger than the actual age of the insured; and for such policies issued on or after the operative date of subsection (4c) of Section 229.2, (i) the Commissioners 1980 Standard Ordinary Mortality Table, or (ii) at the election of the company for any one or more specified plans of life insurance, the Commissioners 1980 Standard Ordinary Mortality Table with Ten-Year Select Mortality Factors, or (iii) any ordinary mortality table adopted after 1980 by the NAIC and approved by regulations promulgated by the Director for use in determining the minimum standard of valuation for such policies.

(ii) For all Industrial Life Insurance policies issued on the standard basis, excluding any disability and accidental death benefits in such policies--the 1941 Standard Industrial Mortality Table for such policies issued prior to the operative date of subsection 4 (b) of Section 229.2 (Standard Non-forfeiture Law); and for such policies issued on or after such operative date the Commissioners 1961 Standard Industrial Mortality Table or any industrial mortality table adopted after 1980 by the NAIC and approved by regulations promulgated by the Director for use in determining the minimum standard of valuation for such policies.

(iii) For Individual Annuity and Pure Endowment contracts, excluding any disability and accidental death benefits in such policies--the 1937 Standard Annuity Mortality Table--or, at the option of the company, the Annuity Mortality Table for 1949, Ultimate, or any modification of either of these tables approved by the Director.

(iv) For Group Annuity and Pure Endowment contracts, excluding any disability and accidental death benefits in such policies--the Group Annuity Mortality Table for 1951, any modification of such table approved by the Director, or, at the option of the company, any of the tables or modifications of tables specified for Individual Annuity and Pure Endowment contracts.

(v) For Total and Permanent Disability Benefits in or supplementary to Ordinary policies or contracts for policies or contracts issued on or after January 1, 1966, the tables of Period 2 disablement rates and the 1930 to 1950 termination rates of the 1952 Disability Study of the Society of Actuaries, with due regard to the type of benefit, or any tables of disablement rates and termination rates adopted after 1980 by the NAIC and approved by regulations promulgated by the Director for use in determining the minimum standard of valuation for such policies; for policies or contracts issued on or after January 1, 1961, and prior to January 1, 1966, either such tables or, at the option of the company, the Class (3) Disability Table (1926); and for policies issued prior to January 1, 1961, the Class (3) Disability Table (1926). Any such table shall, for active lives, be combined with a mortality table permitted for calculating the reserves for life insurance policies.

(vi) For Accidental Death benefits in or supplementary to policies--for policies issued on or after January 1, 1966, the 1959 Accidental Death Benefits Table or any accidental death benefits table adopted after 1980 by the NAIC and approved by regulations promulgated by the Director for use in determining the minimum standard of valuation for such policies; for policies issued on or after January 1, 1961, and prior to January 1, 1966, any of such tables or, at the option of the company, the Inter-Company Double Indemnity Mortality Table; and for policies issued prior to January 1, 1961, the Inter-Company Double Indemnity Mortality Table. Either table shall be combined with a mortality table permitted for calculating the reserves for life insurance policies.

(vii) For Group Life Insurance, life insurance issued on the substandard basis and other special benefits--such tables as may be approved by the Director.

(b) Except as otherwise provided in paragraph (f) of subsection (3), subsection (5), and subsection (7) reserves according to the Commissioners reserve valuation method, for the life insurance and endowment benefits of policies providing for a uniform amount of insurance and requiring the payment of uniform premiums shall be the excess, if any, of the present value, at the date of valuation, of such future guaranteed benefits provided for by such policies, over the then present value of any future modified net premiums therefor. The modified net premiums for any such policy shall be such uniform percentage of the respective contract premiums for such benefits that the present value, at the date of issue of the policy, of all such modified net premiums shall be equal to the sum of the then present value of such benefits provided for by the policy and the excess of (A) over (B), as follows:

(A) A net level annual premium equal to the present value, at the date of issue, of such benefits provided for after the first policy year, divided by the present value, at the date of issue, of an annuity of one per annum payable on the first and each subsequent anniversary of such policy on which a premium falls due; provided, however, that such net level annual premium shall not exceed the net level annual premium on the 19 year premium whole life plan for insurance of the same amount at an age one year higher than the age at issue of such policy.

(B) A net one year term premium for such benefits provided for in the first policy year.

For any life insurance policy issued on or after January 1, 1987, for which the contract premium in the first policy year exceeds that of the second year with no comparable additional benefit being provided in that first year, which policy provides an endowment benefit or a cash surrender value or a combination thereof in an amount greater than such excess premium, the reserve according to the Commissioners reserve valuation method as of any policy anniversary occurring on or before the assumed ending date, defined herein as the first policy anniversary on which the sum of any endowment benefit and any cash surrender value then available is greater than such excess premium, shall, except as otherwise provided in paragraph (f) of subsection (3), be the greater of the reserve as of such policy anniversary calculated as described in the preceding part of this paragraph (b) and the reserve as of such policy anniversary calculated as described in the preceding part of this paragraph (b) with (i) the value defined in subpart A of the preceding part of this paragraph (b) being reduced by 15% of the amount of such excess first year premium, (ii) all present values of benefits and premiums being determined without reference to premiums or benefits provided for by the policy after the assumed ending date, (iii) the policy being assumed to mature on such date as an endowment, and (iv) the cash surrender value provided on such date being considered as an endowment benefit. In making the above comparison, the mortality and interest bases stated in paragraph (a) of subsection (3) and in subsection (6) shall be used.

Reserves according to the Commissioners reserve valuation method for (i) life insurance policies providing for a varying amount of insurance or requiring the payment of varying premiums, (ii) group annuity and pure endowment contracts purchased under a retirement plan or plan of deferred compensation, established or maintained by an employer (including a partnership or sole proprietorship) or by an employee organization, or by both, other than a plan providing individual retirement accounts or individual retirement annuities under Section 408 of the Internal Revenue Code, as now or hereafter amended, (iii) disability and accidental death benefits in all policies and contracts, and (iv) all other benefits, except life insurance and endowment benefits in life insurance policies and benefits provided by all other annuity and pure endowment contracts, shall be calculated by a method consistent with the principles of this paragraph (b), except that any extra premiums charged because of impairments or special hazards shall be disregarded in the determination of modified net premiums.

(c) In no event shall a company's aggregate reserves for all life insurance policies, excluding disability and accidental death benefits be less than the aggregate reserves calculated in accordance with the methods set forth in paragraphs (b), (f), and (g) of subsection (3) and in subsection (5) and the mortality table or tables and rate or rates of interest used in calculating non-forfeiture benefits for such policies.

(d) In no event shall the aggregate reserves for all policies, contracts, and benefits be less than the aggregate reserves determined by the appointed actuary to be necessary to render the opinion required by subsection (1a).

(e) Reserves for any category of policies, contracts or benefits as established by the Director, may be calculated, at the option of the company, according to any standards which produce greater aggregate reserves for such category than those calculated according to the minimum standard herein provided, but the rate or rates of interest used for policies and contracts, other than annuity and pure endowment contracts, shall not be higher than the corresponding rate or rates of interest used in calculating any nonforfeiture benefits provided for therein.

(f) If in any contract year the gross premium charged by any life insurance company on any policy or contract is less than the valuation net premium for the policy or contract calculated by the method used in calculating the reserve thereon but using the minimum valuation standards of mortality and rate of interest, the minimum reserve required for such policy or contract shall be the greater of either the reserve calculated according to the mortality table, rate of interest, and method actually used for such policy or contract, or the reserve calculated by the method actually used for such policy or contract but using the minimum standards of mortality and rate of interest and replacing the valuation net premium by the actual gross premium in each contract year for which the valuation net premium exceeds the actual gross premium. The minimum valuation standards of mortality and rate of interest referred to in this paragraph (f) are those standards stated in subsection (6) and paragraph (a) of subsection (3).

For any life insurance policy issued on or after January 1, 1987, for which the gross premium in the first policy year exceeds that of the second year with no comparable additional benefit provided in that first year, which policy provides an endowment benefit or a cash surrender value or a combination thereof in an amount greater than such excess premium, the foregoing provisions of this paragraph (f) shall be applied as if the method actually used in calculating the reserve for such policy were the method described in paragraph (b) of subsection (3), ignoring the second paragraph of said paragraph (b). The minimum reserve at each policy anniversary of such a policy shall be the greater of the minimum reserve calculated in accordance with paragraph (b) of subsection (3), including the second paragraph of said paragraph (b), and the minimum reserve calculated in accordance with this paragraph (f).

(g) In the case of any plan of life insurance which provides for future premium determination, the amounts of which are to be determined by the insurance company based on then estimates of future experience, or in the case of any plan of life insurance or annuity which is of such a nature that the minimum reserves cannot be determined by the methods described in paragraphs (b) and (f) of subsection (3) and subsection (5), the reserves which are held under any such plan shall:

(i) be appropriate in relation to the benefits and the pattern of premiums for that plan, and

(ii) be computed by a method which is consistent with the principles of this Standard Valuation Law, as determined by regulations promulgated by the Director.

(4) Except as provided in subsection (6), the minimum standard of valuation for individual annuity and pure endowment contracts issued on or after the operative date of this subsection, as defined herein, and for all annuities and pure endowments purchased on or after such operative date under group annuity and pure endowment contracts shall be the Commissioners Reserve valuation methods defined in paragraph (b) of subsection (3) and subsection (5) and the following tables and interest rates:

(a) For individual single premium immediate annuity contracts, excluding any disability and accidental death benefits in such contracts, the 1971 Individual Annuity Mortality Table, any individual annuity mortality table adopted after 1980 by the NAIC and approved by regulations promulgated by the Director for use in determining the minimum standard of valuation for such contracts, or any modification of those tables approved by the Director, and 7 1/2% interest.

(b) For individual and pure endowment contracts other than single premium annuity contracts, excluding any disability and accidental death benefits in such contracts, the 1971 Individual Annuity Mortality Table, any individual annuity mortality table adopted after 1980 by the NAIC and approved by regulations promulgated by the Director for use in determining the minimum standard of valuation for such contracts, or any modification of those tables approved by the Director, and 5 1/2% interest for single premium deferred annuity and pure endowment contracts and 4 1/2% interest for all other such individual annuity and pure endowment contracts.

(c) For all annuities and pure endowments purchased under group annuity and pure endowment contracts, excluding any disability and accidental death benefits purchased under such contracts, the 1971 Group Annuity Mortality Table, any group annuity mortality table adopted after 1980 by the NAIC and approved by regulations promulgated by the Director for use in determining the minimum standard of valuation for such annuities and pure endowments, or any modification of those tables approved by the Director, and 7 1/2% interest.

After September 8, 1977, any company may file with the Director a written notice of its election to comply with the provisions of this subsection after a specified date before January 1, 1979, which shall be the operative date of this subsection for such company; provided, a company may elect a different operative date for individual annuity and pure endowment contracts from that elected for group annuity and pure endowment contracts. If a company makes no election, the operative date of this subsection for such company shall be January 1, 1979.

(5) This subsection shall apply to all annuity and pure endowment contracts other than group annuity and pure endowment contracts purchased under a retirement plan or plan of deferred compensation, established or maintained by an employer (including a partnership or sole proprietorship) or by an employee organization, or by both, other than a plan providing individual retirement accounts or individual retirement annuities under Section 408 of the Internal Revenue Code, as now or hereafter amended.

Reserves according to the Commissioners annuity reserve method for benefits under annuity or pure endowment contracts, excluding any disability and accidental death benefits in such contracts, shall be the greatest of the respective excesses of the present values, at the date of valuation, of the future guaranteed benefits, including guaranteed nonforfeiture benefits, provided for by such contracts at the end of each respective contract year, over the present value, at the date of valuation, of any future valuation considerations derived from future gross considerations, required by the terms of such contract, that become payable prior to the end of such respective contract year. The future guaranteed benefits shall be determined by using the mortality table, if any, and the interest rate, or rates, specified in such contracts for determining guaranteed benefits. The valuation considerations are the portions of the respective gross considerations applied under the terms of such contracts to determine nonforfeiture values.

(6)(a) Applicability of this subsection. The interest rates used in determining the minimum standard for the valuation of

(A) all life insurance policies issued in a particular calendar year, on or after the operative date of subsection (4c) of Section 229.2 (Standard Nonforfeiture Law),

(B) all individual annuity and pure endowment contracts issued in a particular calendar year ending on or after December 31, 1983,

(C) all annuities and pure endowments purchased in a particular calendar year ending on or after December 31, 1983, under group annuity and pure endowment contracts, and

(D) the net increase in a particular calendar year ending after December 31, 1983, in amounts held under guaranteed interest contracts

shall be the calendar year statutory valuation interest rates, as defined in this subsection.

(b) Calendar Year Statutory Valuation Interest Rates.

(i) The calendar year statutory valuation interest rates shall be determined according to the following formulae, rounding "I" to the nearest .25%.

(A) For life insurance,

I = .03 + W (R1 - .03) + W/2 (R2 - .09).

(B) For single premium immediate annuities and annuity benefits involving life contingencies arising from other annuities with cash settlement options and from guaranteed interest contracts with cash settlement options,

I = .03 + W (R - .03) or with prior approval of the Director I = .03 + W (Rq - .03).

For the purposes of this subparagraph (i), "I" equals the calendar year statutory valuation interest rate, "R" is the reference interest rate defined in this subsection, "R1" is the lesser of R and .09, "R2" is the greater of R and .09, "Rq" is the quarterly reference interest rate defined in this subsection, and "W" is the weighting factor defined in this subsection.

(C) For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued on an issue year basis, except as stated in (B), the formula for life insurance stated in (A) applies to annuities and guaranteed interest contracts with guarantee durations in excess of 10 years, and the formula for single premium immediate annuities stated in (B) above applies to annuities and guaranteed interest contracts with guarantee durations of 10 years or less.

(D) For other annuities with no cash settlement options and for guaranteed interest contracts with no cash settlement options, the formula for single premium immediate annuities stated in (B) applies.

(E) For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued on a change in fund basis, the formula for single premium immediate annuities stated in (B) applies.

(ii) If the calendar year statutory valuation interest rate for any life insurance policy issued in any calendar year determined without reference to this subparagraph differs from the corresponding actual rate for similar policies issued in the immediately preceding calendar year by less than .5%, the calendar year statutory valuation interest rate for such life insurance policy shall be the corresponding actual rate for the immediately preceding calendar year. For purposes of applying this subparagraph, the calendar year statutory valuation interest rate for life insurance policies issued in a calendar year shall be determined for 1980, using the reference interest rate defined for 1979, and shall be determined for each subsequent calendar year regardless of when subsection (4c) of Section 229.2 (Standard Nonforfeiture Law) becomes operative.

(c) Weighting Factors.

(i) The weighting factors referred to in the formulae stated in paragraph (b) are given in the following tables.

(A) Weighting Factors for Life Insurance.

For life insurance, the guarantee duration is the maximum number of years the life insurance can remain in force on a basis guaranteed in the policy or under options to convert to plans of life insurance with premium rates or nonforfeiture values or both which are guaranteed in the original policy.

(B) The weighting factor for single premium immediate annuities and for annuity benefits involving life contingencies arising from other annuities with cash settlement options and guaranteed interest contracts with cash settlement options is .80.

(C) The weighting factors for other annuities and for guaranteed interest contracts, except as stated in (B) of this subparagraph (i), shall be as specified in tables (1), (2), and (3) of this subpart (C), according to the rules and definitions in (4), (5) and (6) of this subpart (C).

(1) For annuities and guaranteed interest contracts valued on an issue year basis.

(2) For annuities and guaranteed interest contracts valued on a change in fund basis, the factors shown in (1) for Plan Types A, B and C are increased by .15, .25 and .05, respectively.

(3) For annuities and guaranteed interest contracts valued on an issue year basis, other than those with no cash settlement options, which do not guarantee interest on considerations received more than one year after issue or purchase, and for annuities and guaranteed interest contracts valued on a change in fund basis which do not guarantee interest rates on considerations received more than 12 months beyond the valuation date, the factors shown in (1), or derived in (2), for Plan Types A, B and C are increased by .05.

(4) For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, the guarantee duration is the number of years for which the contract guarantees interest rates in excess of the calendar year statutory valuation interest rate for life insurance policies with guarantee durations in excess of 20 years. For other annuities with no cash settlement options, and for guaranteed interest contracts with no cash settlement options, the guarantee duration is the number of years from the date of issue or date of purchase to the date annuity benefits are scheduled to commence.

(5) The plan types used in the above tables are defined as follows.

Plan Type A is a plan under which the policyholder may not withdraw funds, or may withdraw funds at any time but only (a) with an adjustment to reflect changes in interest rates or asset values since receipt of the funds by the insurance company, (b) without such an adjustment but in installments over 5 years or more, or (c) as an immediate life annuity.

Plan Type B is a plan under which the policyholder may not withdraw funds before expiration of the interest rate guarantee, or may withdraw funds before such expiration but only (a) with an adjustment to reflect changes in interest rates or asset values since receipt of the funds by the insurance company, or (b) without such adjustment but in installments over 5 years or more. At the end of the interest rate guarantee, funds may be withdrawn without such adjustment in a single sum or installments over less than 5 years.

Plan Type C is a plan under which the policyholder may withdraw funds before expiration of the interest rate guarantee in a single sum or installments over less than 5 years either (a) without adjustment to reflect changes in interest rates or asset values since receipt of the funds by the insurance company, or (b) subject only to a fixed surrender charge stipulated in the contract as a percentage of the fund.

(6) A company may elect to value guaranteed interest contracts with cash settlement options and annuities with cash settlement options on either an issue year basis or on a change in fund basis. Guaranteed interest contracts with no cash settlement options and other annuities with no cash settlement options shall be valued on an issue year basis. As used in this Section, "issue year basis of valuation" refers to a valuation basis under which the interest rate used to determine the minimum valuation standard for the entire duration of the annuity or guaranteed interest contract is the calendar year valuation interest rate for the year of issue or year of purchase of the annuity or guaranteed interest contract. "Change in fund basis of valuation", as used in this Section, refers to a valuation basis under which the interest rate used to determine the minimum valuation standard applicable to each change in the fund held under the annuity or guaranteed interest contract is the calendar year valuation interest rate for the year of the change in the fund.

(d) Reference Interest Rate. The reference interest rate referred to in paragraph (b) of this subsection is defined as follows.

(A) For all life insurance, the reference interest rate is the lesser of the average over a period of 36 months, and the average over a period of 12 months, with both periods ending on June 30, or with prior approval of the Director ending on December 31, of the calendar year next preceding the year of issue, of Moody's Corporate Bond Yield Average - Monthly Average Corporates, as published by Moody's Investors Service, Inc.

(B) For single premium immediate annuities and for annuity benefits involving life contingencies arising from other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, the reference interest rate is the average over a period of 12 months, ending on June 30, or with prior approval of the Director ending on December 31, of the calendar year of issue or year of purchase, of Moody's Corporate Bond Yield Average - Monthly Average Corporates, as published by Moody's Investors Service, Inc.

(C) For annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued on a year of issue basis, except those described in (B), with guarantee durations in excess of 10 years, the reference interest rate is the lesser of the average over a period of 36 months and the average over a period of 12 months, ending on June 30, or with prior approval of the Director ending on December 31, of the calendar year of issue or purchase, of Moody's Corporate Bond Yield Average-Monthly Average Corporates, as published by Moody's Investors Service, Inc.

(D) For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued on a year of issue basis, except those described in (B), with guarantee durations of 10 years or less, the reference interest rate is the average over a period of 12 months, ending on June 30, or with prior approval of the Director ending on December 31, of the calendar year of issue or purchase, of Moody's Corporate Bond Yield Average-Monthly Average Corporates, as published by Moody's Investors Service, Inc.

(E) For annuities with no cash settlement options and for guaranteed interest contracts with no cash settlement options, the reference interest rate is the average over a period of 12 months, ending on June 30, or with prior approval of the Director ending on December 31, of the calendar year of issue or purchase, of Moody's Corporate Bond Yield Average-Monthly Average Corporates, as published by Moody's Investors Service, Inc.

(F) For annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued on a change in fund basis, except those described in (B), the reference interest rate is the average over a period of 12 months, ending on June 30, or with prior approval of the Director ending on December 31, of the calendar year of the change in the fund, of Moody's Corporate Bond Yield Average-Monthly Average Corporates, as published by Moody's Investors Service, Inc.

(G) For annuities valued by a formula based on Rq, the quarterly reference interest rate is, with the prior approval of the Director, the average within each of the 4 consecutive calendar year quarters ending on March 31, June 30, September 30 and December 31 of the calendar year of issue or year of purchase of Moody's Corporate Bond Yield Average-Monthly Average Corporates, as published by Moody's Investors Service, Inc.

(e) Alternative Method for Determining Reference Interest Rates. In the event that the Moody's Corporate Bond Yield Average-Monthly Average Corporates is no longer published by Moody's Investors Services, Inc., or in the event that the NAIC determines that Moody's Corporate Bond Yield Average-Monthly Average Corporates as published by Moody's Investors Service, Inc. is no longer appropriate for the determination of the reference interest rate, then an alternative method for determination of the reference interest rate, which is adopted by the NAIC and approved by regulations promulgated by the Director, may be substituted.

(7) Minimum Standards for Accident and Health (Disability, Accident and Sickness) Insurance Contracts. The Director shall promulgate a regulation containing the minimum standards applicable to the valuation of health (disability, sickness and accident) plans which are issued prior to the operative date of the Valuation Manual. For accident and health (disability, accident and sickness) insurance contracts issued on or after the operative date of the Valuation Manual, the standard prescribed in the Valuation Manual is the minimum standard of valuation required under subsection (1).

(8) Valuation Manual for Policies Issued On or After the Operative Date of the Valuation Manual.

(a) For policies issued on or after the operative date of the Valuation Manual, the standard prescribed in the Valuation Manual is the minimum standard of valuation required under subsection (1), except as provided under paragraphs (e) or (g) of this subsection (8).

(b) The operative date of the Valuation Manual is January 1 of the first calendar year following the first July 1 when all of the following have occurred:

(i) The Valuation Manual has been adopted by the NAIC by an affirmative vote of at least 42 members, or three-fourths of the members voting, whichever is greater.

(ii) The Standard Valuation Law, as amended by the NAIC in 2009, or legislation including substantially similar terms and provisions, has been enacted by states representing greater than 75% of the direct premiums written as reported in the following annual statements submitted for 2008: life, accident and health annual statements; health annual statements; or fraternal annual statements.

(iii) The Standard Valuation Law, as amended by the NAIC in 2009, or legislation including substantially similar terms and provisions, has been enacted by at least 42 of the following 55 jurisdictions: the 50 states of the United States, American Samoa, the American Virgin Islands, the District of Columbia, Guam, and Puerto Rico.

(c) Unless a change in the Valuation Manual specifies a later effective date, changes to the Valuation Manual shall be effective on January 1 following the date when the change to the Valuation Manual has been adopted by the NAIC by an affirmative vote representing:

(i) at least three-fourths of the members of the NAIC voting, but not less than a majority of the total membership; and

(ii) members of the NAIC representing jurisdictions totaling greater than 75% of the direct premiums written as reported in the following annual statements most recently available prior to the vote in subparagraph (i) of this paragraph (c): life, accident and health annual statements; health annual statements; or fraternal annual statements.

(d) The Valuation Manual must specify all of the following:

(i) Minimum valuation standards for and definitions of the policies or contracts subject to subsection (1). Such minimum valuation standards shall be:

(A) the Commissioners reserve valuation method for life insurance contracts, other than annuity contracts, subject to subsection (1);

(B) the Commissioners annuity reserve valuation method for annuity contracts subject to subsection (1); and

(C) minimum reserves for all other policies or contracts subject to subsection (1).

(ii) Which policies or contracts or types of policies or contracts are subject to the requirements of a principle-based valuation in paragraph (a) of subsection (9) and the minimum valuation standards consistent with those requirements.

(iii) For policies and contracts subject to a principle-based valuation under subsection (9):

(A) Requirements for the format of reports to the Director under subparagraph (iii) of paragraph (b) of subsection (9), and which shall include information necessary to determine if the valuation is appropriate and in compliance with this Section.

(B) Assumptions shall be prescribed for risks over which the company does not have significant control or influence.

(C) Procedures for corporate governance and oversight of the actuarial function, and a process for appropriate waiver or modification of such procedures.

(iv) For policies not subject to a principle-based valuation under subsection (9), the minimum valuation standard shall either:

(A) be consistent with the minimum standard of valuation prior to the operative date of the Valuation Manual; or

(B) develop reserves that quantify the benefits and guarantees and the funding associated with the contracts and their risks at a level of conservatism that reflects conditions that include unfavorable events that have a reasonable probability of occurring.

(v) Other requirements, including, but not limited to, those relating to reserve methods, models for measuring risk, generation of economic scenarios, assumptions, margins, use of company experience, risk measurement, disclosure, certifications, reports, actuarial opinions and memorandums, transition rules, and internal controls.

(vi) The data and form of the data required under subsection (10) of this Section, with whom the data must be submitted, and may specify other requirements, including data analyses and the reporting of analyses.

(e) In the absence of a specific valuation requirement or if a specific valuation requirement in the Valuation Manual is not, in the opinion of the Director, in compliance with this Section, then the company shall, with respect to such requirements, comply with minimum valuation standards prescribed by the Director by rule.

(f) The Director may engage a qualified actuary, at the expense of the company, to perform an actuarial examination of the company and opine on the appropriateness of any reserve assumption or method used by the company, or to review and opine on a company's compliance with any requirement set forth in this Section. The Director may rely upon the opinion regarding provisions contained within this Section of a qualified actuary engaged by the Director of another state, district, or territory of the United States. As used in this paragraph, "engage" includes employment and contracting.

(g) The Director may require a company to change any assumption or method that in the opinion of the Director is necessary in order to comply with the requirements of the Valuation Manual or this Section; and the company shall adjust the reserves as required by the Director. The Director may take other disciplinary action as permitted pursuant to law.

(9) Requirements of a Principle-Based Valuation.

(a) A company must establish reserves using a principle-based valuation that meets the following conditions for policies or contracts as specified in the Valuation Manual:

(i) Quantify the benefits and guarantees, and the funding, associated with the contracts and their risks at a level of conservatism that reflects conditions that include unfavorable events that have a reasonable probability of occurring during the lifetime of the contracts. For policies or contracts with significant tail risk, reflect conditions appropriately adverse to quantify the tail risk.

(ii) Incorporate assumptions, risk analysis methods, and financial models and management techniques that are consistent with, but not necessarily identical to, those utilized within the company's overall risk assessment process, while recognizing potential differences in financial reporting structures and any prescribed assumptions or methods.

(iii) Incorporate assumptions that are derived in one of the following manners:

(A) The assumption is prescribed in the Valuation Manual.

(B) For assumptions that are not prescribed, the assumptions shall:

(1) be established utilizing the company's available experience, to the extent it is relevant and statistically credible; or

(2) to the extent that company data is not available, relevant, or statistically credible, be established utilizing other relevant, statistically credible experience.

(iv) Provide margins for uncertainty, including adverse deviation and estimation error, such that the greater the uncertainty, the larger the margin and resulting reserve.

(b) A company using a principle-based valuation for one or more policies or contracts subject to this subsection as specified in the Valuation Manual shall:

(i) Establish procedures for corporate governance and oversight of the actuarial valuation function consistent with those described in the Valuation Manual.

(ii) Provide to the Director and the board of directors an annual certification of the effectiveness of the internal controls with respect to the principle-based valuation. Such controls shall be designed to ensure that all material risks inherent in the liabilities and associated assets subject to such valuation are included in the valuation, and that valuations are made in accordance with the Valuation Manual. The certification shall be based on the controls in place as of the end of the preceding calendar year.

(iii) Develop and file with the Director upon request a principle-based valuation report that complies with standards prescribed in the Valuation Manual.

(c) A principle-based valuation may include a prescribed formulaic reserve component.

(10) Experience Reporting for Policies In Force On or After the Operative Date of the Valuation Manual. A company shall submit mortality, morbidity, policyholder behavior, or expense experience and other data as prescribed in the Valuation Manual.

(11) Confidentiality.

(a) For the purposes of this subsection (11), "confidential information" means any of the following:

(i) A memorandum in support of an opinion submitted under subsection (1) of this Section and any other documents, materials, and other information, including, but not limited to, all working papers, and copies thereof, created, produced or obtained by or disclosed to the Director or any other person in connection with the memorandum.

(ii) All documents, materials, and other information, including, but not limited to, all working papers, and copies thereof, created, produced, or obtained by or disclosed to the Director or any other person in the course of an examination made under paragraph (f) of subsection (8) of this Section.

(iii) Any reports, documents, materials, and other information developed by a company in support of, or in connection with, an annual certification by the company under subparagraph (ii) of paragraph (b) of subsection (9) of this Section evaluating the effectiveness of the company's internal controls with respect to a principle-based valuation and any other documents, materials, and other information, including, but not limited to, all working papers, and copies thereof, created, produced, or obtained by or disclosed to the Director or any other person in connection with such reports, documents, materials, and other information.

(iv) Any principle-based valuation report developed under subparagraph (iii) of paragraph (b) of subsection (9) of this Section and any other documents, materials and other information, including, but not limited to, all working papers, and copies thereof, created, produced or obtained by or disclosed to the Director or any other person in connection with such report.

(v) Any documents, materials, data, and other information submitted by a company under subsection (10) of this Section (collectively, "experience data") and any other documents, materials, data, and other information, including, but not limited to, all working papers, and copies thereof, created or produced in connection with such experience data, in each case that include any potentially company-identifying or personally identifiable information, that is provided to or obtained by the Director (together with any experience data, the "experience materials") and any other documents, materials, data and other information, including, but not limited to, all working papers and copies thereof, created, produced, or obtained by or disclosed to the Director or any other person in connection with such experience materials.

(b) Privilege for and Confidentiality of Confidential Information.

(i) Except as provided in this subsection (11), a company's confidential information is confidential by law and privileged, and shall not be subject to the Freedom of Information Act, subpoena, or discovery or admissible as evidence in any private civil action; however, the Director is authorized to use the confidential information in the furtherance of any regulatory or legal action brought against the company as a part of the Director's official duties.

(ii) Neither the Director nor any person who received confidential information while acting under the authority of the Director shall be permitted or required to testify in any private civil action concerning any confidential information.

(iii) In order to assist in the performance of the Director's duties, the Director may share confidential information (A) with other state, federal, and international regulatory agencies and with the NAIC and its affiliates and subsidiaries and (B) in the case of confidential information specified in subparagraphs (i) and (iv) of paragraph (a) of subsection (11) only, with the Actuarial Board for Counseling and Discipline or its successor upon request stating that the confidential information is required for the purpose of professional disciplinary proceedings and with state, federal, and international law enforcement officials; in the case of (A) and (B), provided that such recipient agrees and has the legal authority to agree, to maintain the confidentiality and privileged status of such documents, materials, data, and other information in the same manner and to the same extent as required for the Director.

(iv) The Director may receive documents, materials, data, and other information, including otherwise confidential and privileged documents, materials, data, or information, from the NAIC and its affiliates and subsidiaries, from regulatory or law enforcement officials of other foreign or domestic jurisdictions, and from the Actuarial Board for Counseling and Discipline or its successor and shall maintain as confidential or privileged any document, material, data, or other information received with notice or the understanding that it is confidential or privileged under the laws of the jurisdiction that is the source of the document, material, or other information.

(v) The Director may enter into agreements governing the sharing and use of information consistent with paragraph (b) of this subsection (11).

(vi) No waiver of any applicable privilege or claim of confidentiality in the confidential information shall occur as a result of disclosure to the Director under this subsection (11) or as a result of sharing as authorized in subparagraph (iii) of paragraph (b) of this subsection (11).

(vii) A privilege established under the law of any state or jurisdiction that is substantially similar to the privilege established under paragraph (b) of this subsection (11) shall be available and enforced in any proceeding in and in any court of this State.

(viii) In this subsection (11), "regulatory agency", "law enforcement agency", and "NAIC" include, but are not limited to, their employees, agents, consultants, and contractors.

(c) Notwithstanding paragraph (b) of this subsection (11), any confidential information specified in subparagraphs (i) and (iv) of paragraph (a) of this subsection (11):

(i) may be subject to subpoena for the purpose of defending an action seeking damages from the appointed actuary submitting the related memorandum in support of an opinion submitted under subsection (1) of this Section or principle-based valuation report developed under subparagraph (iii) of paragraph (b) of subsection (9) of this Section by reason of an action required by this Section or by regulations promulgated under this Section;

(ii) may otherwise be released by the Director with the written consent of the company; and

(iii) once any portion of a memorandum in support of an opinion submitted under subsection (1) of this Section or a principle-based valuation report developed under subparagraph (iii) of paragraph (b) of subsection (9) of this Section is cited by the company in its marketing or is publicly volunteered to or before a governmental agency other than a state insurance department or is released by the company to the news media, all portions of such memorandum or report shall no longer be confidential.

(12) Exemptions.

(a) The Director may exempt specific product forms or product lines of a domestic company that is licensed and doing business only in Illinois from the requirements of subsection (8) of this Section, provided that:

(i) the Director has issued an exemption in writing to the company and has not subsequently revoked the exemption in writing; and

(ii) the company computes reserves using assumptions and methods used prior to the operative date of the Valuation Manual in addition to any requirements established by the Director and adopted by rule.

(b) For any company granted an exemption under this subsection, subsections (1), (2), (3), (4), (5), (6), and (7) shall be applicable. With respect to any company applying this exemption, any reference to subsection (8) found in subsections (1), (2), (3), (4), (5), (6), and (7) shall not be applicable.

(13) Definitions. For the purposes of this Section, the following definitions shall apply beginning on the operative date of the Valuation Manual:

"Accident and health insurance" means contracts that incorporate morbidity risk and provide protection against economic loss resulting from accident, sickness, or medical conditions and as may be specified in the Valuation Manual.

"Appointed actuary" means a qualified actuary who is appointed in accordance with the Valuation Manual to prepare the actuarial opinion required in paragraph (b) of subsection (1) of this Section.

"Company" means an entity that (a) has written, issued, or reinsured life insurance contracts, accident and health insurance contracts, or deposit-type contracts in this State and has at least one such policy in force or on claim or (b) has written, issued, or reinsured life insurance contracts, accident and health insurance contracts, or deposit-type contracts in any state and is required to hold a certificate of authority to write life insurance, accident and health insurance, or deposit-type contracts in this State.

"Deposit-type contract" means contracts that do not incorporate mortality or morbidity risks and as may be specified in the Valuation Manual.

"Life insurance" means contracts that incorporate mortality risk, including annuity and pure endowment contracts, and as may be specified in the Valuation Manual.

"NAIC" means the National Association of Insurance Commissioners.

"Policyholder behavior" means any action a policyholder, contract holder, or any other person with the right to elect options, such as a certificate holder, may take under a policy or contract subject to this Section including, but not limited to, lapse, withdrawal, transfer, deposit, premium payment, loan, annuitization, or benefit elections prescribed by the policy or contract, but excluding events of mortality or morbidity that result in benefits prescribed in their essential aspects by the terms of the policy or contract.

"Principle-based valuation" means a reserve valuation that uses one or more methods or one or more assumptions determined by the insurer and is required to comply with subsection (9) of this Section as specified in the Valuation Manual.

"Qualified actuary" means an individual who is qualified to sign the applicable statement of actuarial opinion in accordance with the American Academy of Actuaries qualification standards for actuaries signing such statements and who meets the requirements specified in the Valuation Manual.

"Tail risk" means a risk that occurs either where the frequency of low probability events is higher than expected under a normal probability distribution or where there are observed events of very significant size or magnitude.

"Valuation Manual" means the manual of valuation instructions adopted by the NAIC as specified in this Section or as subsequently amended.

(Source: P.A. 99-162, eff. 1-1-16.)

(215 ILCS 5/224) (from Ch. 73, par. 836)

Sec. 224. Standard provisions for life policies.

(1) After the first day of July, 1937, no policy of life insurance other than industrial, group or annuities and pure endowments with or without return of premiums or of premiums and interest, may be issued or delivered in this State, unless such policy contains in substance the following provisions:

(a) A provision that all premiums after the first shall be payable in advance either at the home office of the company or to an agent of the company, upon delivery of a receipt signed by one or more of the officers who shall be designated in the policy, when such receipt is requested by the policyholder.

(b) A provision that the insured is entitled to a grace period either of 30 days or of one month within which the payment of any premium after the first may be made, subject at the option of the company to an interest charge not in excess of 6% per annum for the number of days of grace elapsing before the payment of the premium, during which period of grace the policy shall continue in force, but in case the policy becomes a claim during the grace period before the overdue premium is paid, or the deferred premiums of the current policy year, if any, are paid, the amount of such premium or premiums with interest thereon may be deducted in any settlement under the policy.

(c) A provision that the policy, together with the application therefor, a copy of which shall be endorsed upon or attached to the policy and made a part thereof, shall constitute the entire contract between the parties and that after it has been in force during the lifetime of the insured a specified time, not later than 2 years from its date, it shall be incontestable except for nonpayment of premiums and except at the option of the company, with respect to provisions relative to benefits in the event of total and permanent disability, and provisions which grant additional insurance specifically against death by accident and except for violations of the conditions of the policy relating to naval or military service in time of war or for violation of an express condition, if any, relating to aviation, (except riding as a fare-paying passenger of a commercial air line flying on regularly scheduled routes between definitely established airports) in which case the liability of the company shall be fixed at a definitely determined amount not less than the full reserve for the policy and any dividend additions; provided that the application therefor need not be attached to or made a part of any policy containing a clause making the policy incontestable from date of issue.

(d) A provision that if it is found at any time before final settlement under the policy that the age of the insured (or the age of the beneficiary, if considered in determining the premium) has been misstated, the amount payable under the policy shall be such as the premium would have purchased at the correct age or ages, according to the company's published rate at date of issue.

(e) A provision that the policy shall participate annually in the surplus of the company beginning not later than the end of the third policy year; and any policy containing provision for annual participation beginning at the end of the first policy year, may also provide that each dividend be paid subject to the payment of the premiums for the next ensuing year; and the insured under any annual dividend policy shall have the right each year to have the dividend arising from such participation either paid in cash, or applied in reduction of premiums, or applied to the purchase of paid-up additional insurance, or be left to accumulate to the credit of the policy, with interest at such rate as may be determined from time to time by the company, but not less than a guaranteed minimum rate specified in the policy, and payable at the maturity of the policy, but withdrawable on any anniversary date, subject to such further provisions as the policy may provide regarding the application of dividends toward the payment of any premiums unpaid at the end of the grace period; and if the insured fails to notify the company in writing of his election within the period of grace allowed for the payment of premium, the policy shall further provide which of such options are effective.

(f) A provision that after the policy has been in force 3 full years the company at any time, while the policy is in force, will advance, on proper assignment or pledge of the policy and on the sole security thereof, at a specified maximum fixed or adjusted rate of interest in accordance with Section 229.5, a sum equal to, or at the option of the insured less than the amount required by Section 229.3 under the conditions specified thereby and with notification as required by Section 229.5; and that the company will deduct from such loan value any indebtedness not already deducted in determining such value and any unpaid balance of the premium for the current policy year, and may collect interest in advance on the loan to the end of the current policy year; and any policy may also provide that if the interest on the loan is not paid when due it shall be added to the existing loan and shall bear interest at the same rate. No condition other than as provided herein or in Sections 229.3 and 229.5 shall be exacted as a prerequisite to any such loan. This clause shall not apply to term insurance.

(g) A provision for nonforfeiture benefits and cash surrender values in accordance with the requirements of paragraph (1) of Section 229.1 or, Section 229.2.

(h) A table showing in figures the loan values and the options available under the policy each year, upon default in premium payments, during at least the first 20 years of the policy; the policy to contain a provision that the company will furnish upon request an extension of such table beyond the years shown in the policy.

(i) A provision that in event of default in premium payments the value of the policy is applied to the purchase of other insurance as provided in this Section, and if such insurance is in force and the original policy is not surrendered to the company and cancelled, the policy may be reinstated within 3 years from such default, upon evidence of insurability satisfactory to the company and payment of arrears of premiums and the payment or reinstatement of any other indebtedness to the company upon the policy, with interest on the premiums at a rate not exceeding 6% per annum payable annually and with interest on the indebtedness at a rate not exceeding the rate prescribed by Section 229.5.

(j) A provision that when a policy is a claim by the death of the insured settlement shall be made upon receipt of due proof of death and not later than 2 months after the receipt of such proof. The policy may require that due proof of the death of the insured shall consist of a certified copy of the death certificate of the insured, or other lawful evidence providing equivalent information, and proof of the claimant's interest in the proceeds.

(k) If the policy provides for payment of its proceeds in installments, a table showing the amount and period of such installments shall be included in the policy.

(l) Interest shall accrue on the proceeds payable because of the death of the insured, from date of death, at the rate of 10% annually on the total amount payable or the face amount if payments are to be made in installments until the total payment or first installment is paid, unless payment is made within 31 days from the latest of the following to occur:

(1) the date that due proof of death is received by the company;

(2) the date that the company receives sufficient information to determine its liability, the extent of the liability, and the appropriate payee legally entitled to the proceeds; or

(3) the date that legal impediments to payment of proceeds that depend on the action of parties other than the company are resolved and sufficient evidence of the same is provided to the company; legal impediments to payment include, but are not limited to, (A) the establishment of guardianships and conservatorships, (B) the appointment and qualification of trustees, executors, and administrators, and (C) the submission of information required to satisfy State and federal reporting requirements.

This provision need not appear in the policy, however, the company shall notify the beneficiary at the time of claim of this provision. The payment of interest shall apply to all policies now in force, as well as those written after the effective date of this amendment.

(m) Title on the face and on the back of the policy briefly describing its form.

(n) A provision, or a notice attached to the policy, to the effect that during a period of ten days from the date the policy is delivered to the policy owner, it may be surrendered to the insurer together with a written request for cancellation of the policy and in such event, the insurer will refund any premium paid therefor, including any policy fees or other charges. The Director may by rule exempt specific types of policies from the requirements of this subsection.

(2) In the case of the replacement of life insurance, as defined in the rule promulgated by the Director, the replacing insurer shall either (1) delay the issuance of its policy for not less than 20 days from the date it has transmitted a policy summary to the existing insurer, or (2) provide in a form titled "Notice Regarding Replacement of Life Insurance", as well as in its policy, or in a separate notice delivered with the policy, that the insured has the right to an unconditional refund of all premiums paid, and that such right may be exercised within a period of 20 days commencing from the date of delivery of such policy. Where option (2) is exercised, the replacing insurer shall also transmit a policy summary to the existing insurer within 3 working days after the date the replacement policy is issued.

(3) Any of the foregoing provisions or portions thereof not applicable to single premium or nonparticipating or term policies shall to that extent not be incorporated therein. This Section shall not apply to policies of reinsurance nor to policies issued or granted pursuant to the nonforfeiture provisions prescribed in subparagraph (g) of paragraph (1) of this Section.

(Source: P.A. 97-527, eff. 8-23-11.)

(215 ILCS 5/224.05)

Sec. 224.05. Military personnel in military service; no lapse of life insurance policy.

(a) Except as provided in subsection (b), this Section shall apply to any individual life insurance policy insuring the life of a resident of Illinois who is a member of any component of the U.S. Armed Forces or the National Guard of any state, the District of Columbia, a commonwealth, or a territory of the United States who has entered any full-time training or duty which the service member was ordered to report by the President, Governor of a state, commonwealth, or territory of the United States, or other appropriate military authority, if the life insurance policy meets both of the following conditions:

(1) The policy has been in force for at least 180 days.

(2) The policy has been brought within the "Servicemembers Civil Relief Act," 117 Stat. 2835 (2003), 50 U.S.C. App. 541 and following.

(b) This Section does not apply to any policy that was cancelled or that had lapsed for the nonpayment of premiums prior to the commencement of the insured's period of military service.

(c) An individual life insurance policy described in this Section shall not lapse or be forfeited for the nonpayment of premiums during the military service of a service member in excess of 29 consecutive days during the 2-year period subsequent to the end of the member's period of military service.

(d) In order to be eligible for the benefits granted to service members under this Section, a service member must provide the life insurance company with a copy of the orders calling the service member to military service and of any orders further extending the service member's period of service.

(e) This Section does not limit a life insurance company's enforcement of provisions in the insured's policy relating to naval or military service in time of war.

(f) A violation of this Section constitutes a civil rights violation under the Illinois Human Rights Act.

All proceeds from the collection of any civil penalty imposed under this subsection shall be deposited into the Illinois Military Family Relief Fund.

(Source: P.A. 97-913, eff. 1-1-13.)