Section 904.7  Definitions

 

"Code" means the Illinois Insurance Code [215 ILCS 5].

 

"Company" means any domestic company as defined in Section 2(f) of the Code, any health maintenance organization as defined in Section 1-2(9) of the Health Maintenance Organization Act [215 ILCS 125] that is formed under the laws of this State, any limited health service organization as defined in Section 1002 of the Limited Health Service Organization Act [215 ILCS 130] that is formed under the laws of this State, any dental service plan corporation as defined in Section 3 of the Dental Service Plan Act [215 ILCS 110], and any health services plan corporation as defined in Section 2(a) of the Voluntary Health Services Plans Act [215 ILCS 165].

 

"Security" has the meaning ascribed in Section 2.1 of the Illinois Securities Law of 1953 [815 ILCS 5].

 

(Source:  Added at 43 Ill. Reg. 1388, effective January 11, 2019)

 

Section 904.10  Registration of Securities

 

All securities, whether negotiable or not, belonging to or in the possession, custody or control of any company shall be registered, issued to, and carried in the name of the company except:

 

a)         Securities pledged or hypothecated with the company as security for indebtedness or obligations to the company;

 

b)         Securities deposited by or with the company as collateral on fidelity or surety bonds written for or by the company;

 

c)         Securities that are only issued to the bearer in bearer form, i.e., securities that cannot be issued in registered form;

 

d)         Securities in "custodial" accounts maintained with a bank or trust company licensed by the United States or any state and regularly examined by the licensing authority, provided that "custodial" accounts shall be the undivided responsibility of the depository and provided further that the "custodial" account shall be established conformably with, and conducted in compliance with, Section 904.20;

 

e)         Securities in street form and in the custody of a registered dealer in securities, for a period not exceeding 30 days, provided that the registered dealer in securities shall not be an officer, director, agent or employee of the owner of the securities and provided further that accounts with the dealer shall be established conformably with, and conducted in compliance with, Section 904.20;

 

f)         Securities deposited with any state insurance department or similar authority pursuant to any requirement for that deposit if the deposit may be made in "bearer" securities.

 

AGENCY NOTE:  Illinois will not accept "bearer" securities as a part of a company's deposit.

 

(Source:  Amended at 43 Ill. Reg. 1388, effective January 11, 2019)

 

Section 904.20  Custody, Care and Disposition of Securities

 

a)         Transfer, sale, assignment or disposition of any security belonging to any company, other than upon the surrender of the security for payment at maturity or under an option of the maker of the security to repay the security, shall be authorized or ratified by the Board of Directors, or by a committee of the Board charged with the duty of supervising investments and loans.

 

b)         Any instrument for the assignment, sale, transfer or disposition of any securities, and all checks or other orders for disbursement of funds of the company in connection with the purchase of any securities, shall:

 

1)         require the signature of at least two officers or employees who shall have been so authorized by the Board of Directors, or by a committee of the Board charged with the duty of supervising investments and loans; or

 

2)         be executed pursuant to policies, procedures and controls the company has put in place for the authorization of transactions and appropriate segregation of duties relative to these types of transactions. The policies, procedures and controls must be approved by the Board of Directors of the company and a copy must be kept on file and made available for review by the Department in an examination. These policies, procedures and controls must require the company to:

 

A)        segregate duties among individuals related to authorization, recording and reconciling of the transactions so that no individual performs more than one of these duties; and

 

B)        maintain written documentation of:

 

i)          the individuals, by name or job title, who have authority to

approve the transactions covered in this Section; and

 

ii)         the limits or ranges of each individual's authorization to approve the transactions.

 

c)         Access to any and all vaults or other repositories on the premises of any company containing securities of the company and access to any safe deposit boxes containing the securities shall be limited to officers and employees designated by the Board of Directors.  This designation shall require that at least two of the persons so designated shall be present at the time of entry and during the access to the vault, repository or safe deposit box.

 

(Source:  Amended at 43 Ill. Reg. 1388, effective January 11, 2019)

 

Section 904.30  Signature of Checks – Facsimile Signatures

 

a)         A company shall have policies, procedures and controls in place regarding disbursements of checks.  As part of the policies, procedures and controls, the company must:

 

1)         Prepare a list of authorized signers by name or job classification, with approved limits of authority for each authorized signer; and

 

2)         Set minimum thresholds for which dual signatures are required.

 

b)         These policies, procedures and controls must be approved by the Board of Directors of the company and a copy must be kept on file and available for review by the Department examiners.  Verification of compliance with subsection (a) and this subsection (b) must be documented by the company's outside independent certified public accountants or the internal audit staff of the company, provided the staff report directly to an audit committee appointed by the Board.  This compliance review must be performed annually.

                                                             

 

c)         Facsimile or electronic signatures may be affixed to checks or drafts if that procedure has been authorized by the Board of Directors and adequate controls over the use of the signatures have been established.  Control procedures shall be reduced to writing and shall provide for written approval of the disbursement of funds by officers or employees other than those affixing facsimile or electronic signatures, for supervision and policing of the machines or appliances used for affixing  signatures, and for the recording of checks and drafts to which the signatures have been affixed.  Written control procedures shall be kept on file and available for review by examiners.

 

(Source:  Amended at 36 Ill. Reg. 18670, effective December 17, 2012)

 

Section 904.40  Bank Balance Verification

 

Verification of bank account balances and reconciliation of bank account statements shall be made by an officer or employee not empowered or authorized to approve payment of drafts or to make withdrawals from or charges against the accounts.

 

(Source:  Amended at 30 Ill. Reg. 337, effective December 29, 2005)

 

Section 904.50  Bond Requirements

 

a)         All companies shall procure and maintain in force surety bonds on employees, officers or positions outlined in this Part and in accordance with an amount not less than the minimum amount shown as guidance provided in the National Association of Insurance Commissioners (NAIC) Financial Condition Examiners Handbook 2018 Edition (1100 Walnut St., Ste. 1500, Kansas City MO 64016-2277) at Exhibit R, entitled "Suggested Minimum Amounts of Fidelity Insurance" (no later editions or amendments).  All surety bonds shall be written on a form that provides coverage on a discovery basis.  All such bonds shall contain a provision that no cancellation or termination of the bond, whether by or at the request of the insured or by the underwriter, shall take effect prior to the expiration of 90 days after written notice of cancellation or termination has been filed with the Department unless an earlier date of cancellation or termination is approved by the Department.

 

b)         Surety bonds required by this Section shall include all employees, officers or positions for the following perils, which may be covered under separate policies:

 

1)         Dishonesty of employees and officers;

 

2)         Robbery, burglary, larceny, theft, false pretense, holdup, misplacement, mysterious disappearance, and damage or destruction while property is in any bank or any recognized place of safe deposit, or in transit; and

 

3)         Forgery or alteration.

 

c)         Surety bonds for any company shall not be procured by the company from affiliated and/or subsidiary companies substantially under the same management and control as the company being bonded.

 

(Source:  Amended at 42 Ill. Reg. 20101, effective October 29, 2018)