Section 301.10  Authority

This Part is promulgated by the Director of the Department of Insurance (Director) under Section 401(a) of the Illinois Insurance Code which empowers the Director to make reasonable rules and regulations as may be necessary for making effective the insurance laws of this State.  It is the purpose of this Part to implement Section 56 of the Illinois Insurance Code.

(Source:  Amended at 29 Ill. Reg. 14935, effective September 20, 2005)

Section 301.20  Application and Effective Date

This Part applies to all companies organized under Article III of the Illinois Insurance Code and is applicable to any and all debts other than shown as a legal liability of the company.  It shall become effective on October 1, 1971.

(Source:  Amended at 29 Ill. Reg. 14935, effective September 20, 2005)

Section 301.30  Approval of Certificate Form by Director

Guaranty Fund or Guaranty Capital certificates issued pursuant to Section 56 of the Illinois Insurance Code [215 ILCS 5/56] shall be submitted, in duplicate, for the approval of the Illinois Director of Insurance (Director) prior to being issued by the company. The certificate must state that, all payments of principal and/or interest must be approved by the Director; and that the obligation of the company under such certificate may not be offset or be subject to recoupment with respect to any liability or obligation owed to the company; and that no agreement or interest securing such certificate, whether existing on the date of such certificate or subsequently entered into, applies to the obligation under such certificate.

(Source:  Amended at 23 Ill. Reg. 3699, effective March 10, 1999)

Section 301.40  Execution of Agreement

After submission of the documents specified in Section 301.30 and approval by the Director, the proposed agreement may be executed by the company.

Section 301.50  Consideration

The consideration tendered to the company in exchange for the agreement shall be lawful money.

Section 301.60  Reporting and Accounting of Indebtedness

a)         The Director shall be notified immediately, in writing, upon the execution of any such certificate, as to the amount thereof and to whom payable.

b)         The company shall furnish a copy of the deposit slip evidencing that the funds derived from the execution of such certificate have been deposited to the company's account.

c)         All outstanding guaranty funds or guaranty capital and interest accrued thereon shall be reported separately in the Annual Statement on Page 3 and in any other financial statements of the company as special surplus funds.

d)         The issuance and repayment of the guaranty fund or guaranty capital, as well as the payment of the interest thereon, shall be reflected as direct debits or credits to the Capital and Surplus Account of the company's financial statement.

e)         The interest expense incurred on the guaranty fund or guaranty capital during the current period shall be reflected as a deduction from income on the Statement of Income/Summary of Operations of the company's financial statement.

(Source:  Amended at 23 Ill. Reg. 3699, effective March 10, 1999)

Section 301.70  Retirement of Guaranty Fund and Guaranty Capital and Payment of Interest

A company may only retire guaranty funds and guaranty capital and make payment of interest on any indebtedness as provided under Section 56 of the Illinois Insurance Code [215 ILCS 5/56].  No payment shall be authorized by the Director unless:

a)         The company's surplus as regards policyholders is reasonable in relation to its outstanding liabilities and adequate for its financial needs (the determination of the reasonableness and adequacy of surplus shall include consideration of the following factors:  premium volume as referenced in Sections 144 and 244.1 of the Illinois Insurance Code (Code) [215 ILCS 5/144 and 244.1]; lines of business and additional authority as referenced in Sections 4, 11, 39, and 245.23 of the Code [215 ILCS 5/4, 11, 39, 245.23] and Section 2-1 of the Health Maintenance Organization Act [215 ILCS 125/2-1]; reserves, company size and operational history as referenced in Section 113 of the Code [215 ILCS 5/113]), and

b)         Such payment will not reduce the company's surplus as regards policyholders to less than that currently required under Section 43 of the Illinois Insurance Code [215 ILCS 5/43], and

c)         Such payment is consistent with the terms of the certificate approved pursuant to Section 301.30 of this Part.

(Source:  Amended at 29 Ill. Reg. 14935, effective September 20, 2005)