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1 | AN ACT concerning regulation.
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2 | Be it enacted by the People of the State of Illinois,
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3 | represented in the General Assembly:
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4 | Section 5. The Illinois Insurance Code is amended by | ||||||
5 | changing Sections 35B-25, 131.1, 131.5, 131.14b, 131.15, | ||||||
6 | 131.22, and 173.1 and by adding Section 131.22a as follows: | ||||||
7 | (215 ILCS 5/35B-25) | ||||||
8 | Sec. 35B-25. Plan of division approval. | ||||||
9 | (a) A division shall not become effective until it is | ||||||
10 | approved by the Director after reasonable notice and a public | ||||||
11 | hearing, if the notice and hearing are deemed by the Director | ||||||
12 | to be in the public interest. The Director shall hold a public | ||||||
13 | hearing if one is requested by the dividing company. A hearing | ||||||
14 | conducted under this Section shall be conducted in accordance | ||||||
15 | with Article 10 of the Illinois Administrative Procedure Act. | ||||||
16 | (b) The Director shall approve a plan of division unless | ||||||
17 | the Director finds that: | ||||||
18 | (1) the interest of any class of policyholder or | ||||||
19 | shareholder of the dividing company will not be properly | ||||||
20 | protected; | ||||||
21 | (2) each new company created by the proposed division, | ||||||
22 | except a new company that is a nonsurviving party to a | ||||||
23 | merger pursuant to subsection (b) of Section 156, would be |
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1 | ineligible to receive a license to do insurance business | ||||||
2 | in this State pursuant to Section 5; | ||||||
3 | (2.5) each new company created by the proposed | ||||||
4 | division, except a new company that is a nonsurviving | ||||||
5 | party to a merger pursuant to subsection (b) of Section | ||||||
6 | 156, that will be a member insurer of the Illinois Life and | ||||||
7 | Health Insurance Guaranty Association and that will have | ||||||
8 | policy liabilities allocated to it will not be licensed to | ||||||
9 | do insurance business in each state where such policies | ||||||
10 | were written by the dividing company; | ||||||
11 | (3) the proposed division violates a provision of the | ||||||
12 | Uniform Fraudulent Transfer Act; | ||||||
13 | (4) the division is being made for purposes of | ||||||
14 | hindering, delaying, or defrauding any policyholders or | ||||||
15 | other creditors of the dividing company; | ||||||
16 | (5) one or more resulting companies will not be | ||||||
17 | solvent upon the consummation of the division; or | ||||||
18 | (6) the remaining assets of one or more resulting | ||||||
19 | companies will be, upon consummation of a division, | ||||||
20 | unreasonably small in relation to the business and | ||||||
21 | transactions in which the resulting company was engaged or | ||||||
22 | is about to engage. | ||||||
23 | (c) In determining whether the standards set forth in | ||||||
24 | paragraph (3) of subsection (b) have been satisfied, the | ||||||
25 | Director shall only apply the Uniform Fraudulent Transfer Act | ||||||
26 | to a dividing company in its capacity as a resulting company |
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1 | and shall not apply the Uniform Fraudulent Transfer Act to any | ||||||
2 | dividing company that is not proposed to survive the division. | ||||||
3 | (d) In determining whether the standards set forth in | ||||||
4 | paragraphs (3), (4), (5), and (6) of subsection (b) have been | ||||||
5 | satisfied, the Director may consider all proposed assets of | ||||||
6 | the resulting company, including, without limitation, | ||||||
7 | reinsurance agreements, parental guarantees, support or keep | ||||||
8 | well agreements, or capital maintenance or contingent capital | ||||||
9 | agreements, in each case, regardless of whether the same would | ||||||
10 | qualify as an admitted asset as defined in Section 3.1. | ||||||
11 | (e) In determining whether the standards set forth in | ||||||
12 | paragraph (3) of subsection (b) have been satisfied, with | ||||||
13 | respect to each resulting company, the Director shall, in | ||||||
14 | applying the Uniform Fraudulent Transfer Act, treat: | ||||||
15 | (1) the resulting company as a debtor; | ||||||
16 | (2) liabilities allocated to the resulting company as | ||||||
17 | obligations incurred by a debtor; | ||||||
18 | (3) the resulting company as not having received | ||||||
19 | reasonably equivalent value in exchange for incurring the | ||||||
20 | obligations; and | ||||||
21 | (4) assets allocated to the resulting company as | ||||||
22 | remaining property. | ||||||
23 | (f) All information, documents, materials, and copies | ||||||
24 | thereof submitted to, obtained by, or disclosed to the | ||||||
25 | Director in connection with a plan of division or in | ||||||
26 | contemplation thereof, including any information, documents, |
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1 | materials, or copies provided by or on behalf of a domestic | ||||||
2 | stock company in advance of its adoption or submission of a | ||||||
3 | plan of division, shall be confidential and shall be subject | ||||||
4 | to the same protection and treatment in accordance with | ||||||
5 | Section 131.22 131.14d as documents and reports disclosed to | ||||||
6 | or filed with the Director pursuant to subsection (a) of | ||||||
7 | Section 131.14b until such time, if any, as a notice of the | ||||||
8 | hearing contemplated by subsection (a) is issued. | ||||||
9 | (g) From and after the issuance of a notice of the hearing | ||||||
10 | contemplated by subsection (a), all business, financial, and | ||||||
11 | actuarial information that the domestic stock company requests | ||||||
12 | confidential treatment, other than the plan of division, shall | ||||||
13 | continue to be confidential and shall not be available for | ||||||
14 | public inspection and shall be subject to the same protection | ||||||
15 | and treatment in accordance with Section 131.22 131.14d as | ||||||
16 | documents and reports disclosed to or filed with the Director | ||||||
17 | pursuant to subsection (a) of Section 131.14b. | ||||||
18 | (h) All expenses incurred by the Director in connection | ||||||
19 | with proceedings under this Section, including expenses for | ||||||
20 | the services of any attorneys, actuaries, accountants, and | ||||||
21 | other experts as may be reasonably necessary to assist the | ||||||
22 | Director in reviewing the proposed division, shall be paid by | ||||||
23 | the dividing company filing the plan of division. A dividing | ||||||
24 | company may allocate expenses described in this subsection in | ||||||
25 | a plan of division in the same manner as any other liability. | ||||||
26 | (i) If the Director approves a plan of division, the |
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1 | Director shall issue an order that shall be accompanied by | ||||||
2 | findings of fact and conclusions of law. | ||||||
3 | (j) The conditions in this Section for freeing one or more | ||||||
4 | of the resulting companies from the liabilities of the | ||||||
5 | dividing company and for allocating some or all of the | ||||||
6 | liabilities of the dividing company shall be conclusively | ||||||
7 | deemed to have been satisfied if the plan of division has been | ||||||
8 | approved by the Director in a final order that is not subject | ||||||
9 | to further appeal.
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10 | (Source: P.A. 100-1118, eff. 11-27-18; 101-549, eff. 1-1-20 .)
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11 | (215 ILCS 5/131.1) (from Ch. 73, par. 743.1)
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12 | Sec. 131.1. Definitions. As used in this Article, the | ||||||
13 | following terms have the respective
meanings set forth in this | ||||||
14 | Section unless the context requires otherwise:
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15 | (a) An "affiliate" of, or person "affiliated" with, a | ||||||
16 | specific person,
is a person that directly, or indirectly | ||||||
17 | through one or more
intermediaries, controls, or is controlled | ||||||
18 | by, or is under common control
with, the person specified.
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19 | (a-5) "Acquiring party" means such person by whom or on | ||||||
20 | whose behalf the merger or other acquisition of control | ||||||
21 | referred to in Section 131.4 is to be affected and any person | ||||||
22 | that controls such person or persons. | ||||||
23 | (a-10) "Associated person" means, with respect to an | ||||||
24 | acquiring party, (1) any beneficial owner of shares of the | ||||||
25 | company to be acquired, owned, directly or indirectly, of |
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1 | record or beneficially by the acquiring party, (2) any | ||||||
2 | affiliate of the acquiring party or beneficial owner, and (3) | ||||||
3 | any other person acting in concert, directly or indirectly, | ||||||
4 | pursuant to any agreement, arrangement, or understanding, | ||||||
5 | whether written or oral, with the acquiring party or | ||||||
6 | beneficial owner, or any of their respective affiliates, in | ||||||
7 | connection with the merger, consolidation, or other | ||||||
8 | acquisition of control referred to in Section 131.4 of this | ||||||
9 | Code. | ||||||
10 | (a-15) "Company" has the same meaning as "company" as | ||||||
11 | defined in Section 2 of this Code, except that it does not | ||||||
12 | include agencies, authorities, or instrumentalities of the | ||||||
13 | United States, its possessions and territories, the | ||||||
14 | Commonwealth of Puerto Rico, the District of Columbia, or a | ||||||
15 | state or political subdivision of a state. | ||||||
16 | (b) "Control" (including the terms "controlling", | ||||||
17 | "controlled by" and
"under common control with") means the | ||||||
18 | possession, direct or indirect, of
the power to direct or | ||||||
19 | cause the direction of the management and policies
of a | ||||||
20 | person, whether through the ownership of voting securities, | ||||||
21 | the holding
of shareholders' or policyholders' proxies by
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22 | contract other than a commercial contract for goods or | ||||||
23 | non-management
services, or otherwise, unless the power is | ||||||
24 | solely the result of an
official position with or corporate | ||||||
25 | office held by the person. Control is presumed
to exist if any | ||||||
26 | person, directly or indirectly, owns, controls, holds with
the |
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1 | power to vote, or holds shareholders' proxies representing 10% | ||||||
2 | or
more of the voting securities of any other person, or holds | ||||||
3 | or controls
sufficient policyholders' proxies to elect the | ||||||
4 | majority of the board of
directors of the domestic company. | ||||||
5 | This presumption may be rebutted by a
showing made in the | ||||||
6 | manner as the Director may provide by rule. The Director
may | ||||||
7 | determine, after
furnishing all persons in interest notice and | ||||||
8 | opportunity to be heard and
making specific findings of fact | ||||||
9 | to support such determination, that
control exists in fact, | ||||||
10 | notwithstanding the absence of a presumption to
that effect.
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11 | (b-5) "Enterprise risk" means any activity, circumstance, | ||||||
12 | event, or series of events involving one or more affiliates of | ||||||
13 | a company that, if not remedied promptly, is likely to have a | ||||||
14 | material adverse effect upon the financial condition or | ||||||
15 | liquidity of the company or its insurance holding company | ||||||
16 | system as a whole, including, but not limited to, anything | ||||||
17 | that would cause the company's risk-based capital to fall into | ||||||
18 | company action level as set forth in Article IIA of this Code | ||||||
19 | or would cause the company to be in
hazardous financial | ||||||
20 | condition as set forth in Article XII 1/2 of this Code. | ||||||
21 | (b-10) "Exchange Act" means the Securities Exchange Act of | ||||||
22 | 1934, as amended, together with the rules and regulations | ||||||
23 | promulgated thereunder. | ||||||
24 | (b-12) "Group capital calculation instructions" means the | ||||||
25 | group capital calculation instructions as adopted by the NAIC | ||||||
26 | and as amended by the NAIC from time to time in accordance with |
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1 | the procedures adopted by the NAIC. | ||||||
2 | (c) "Insurance holding company system" means two or more | ||||||
3 | affiliated
persons, one or more of which is an insurance | ||||||
4 | company as defined in
paragraph (e) of Section 2 of this Code.
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5 | (d) (Blank).
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6 | (d-2) "NAIC Liquidity Stress Test Framework" is a separate | ||||||
7 | NAIC publication which includes a history of the NAIC's | ||||||
8 | development of regulatory liquidity stress testing, the scope | ||||||
9 | criteria applicable for a specific data year, and the | ||||||
10 | liquidity stress test instructions, and reporting templates | ||||||
11 | for a specific data year, such scope criteria, instructions, | ||||||
12 | and reporting template being as adopted by the NAIC and as | ||||||
13 | amended by the NAIC from time to time in accordance with the | ||||||
14 | procedures adopted by the NAIC. | ||||||
15 | (d-5) "Non-operating holding company" is a general | ||||||
16 | business corporation functioning solely for the purpose of | ||||||
17 | forming, owning, acquiring, and managing subsidiary business | ||||||
18 | entities and having no other business operations not related | ||||||
19 | thereto. | ||||||
20 | (d-10) "Own", "owned," or "owning" means shares (1) with | ||||||
21 | respect to which a person
has title or to which a person's | ||||||
22 | nominee, custodian, or other agent has title and which such
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23 | nominee, custodian, or other agent is holding on behalf of the | ||||||
24 | person or (2) with respect to
which a person (A) has purchased | ||||||
25 | or has entered into an unconditional contract, binding on both
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26 | parties, to purchase the shares, but has not yet received the |
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1 | shares, (B) owns a security
convertible into or exchangeable | ||||||
2 | for the shares and has tendered the security for conversion or
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3 | exchange, (C) has an option to purchase or acquire, or rights | ||||||
4 | or warrants to subscribe to, the shares and has exercised such | ||||||
5 | option, rights, or warrants, or (D) holds a securities futures | ||||||
6 | contract
to purchase the shares and has received notice that | ||||||
7 | the position will be physically settled and is
irrevocably | ||||||
8 | bound to receive the underlying shares. To the extent that any
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9 | affiliates of the stockholder or beneficial owner are acting | ||||||
10 | in concert with the stockholder or
beneficial owner, the | ||||||
11 | determination of shares owned may include the effect of | ||||||
12 | aggregating the
shares owned by the affiliate or affiliates. | ||||||
13 | Whether shares constitute shares owned shall
be decided by the | ||||||
14 | Director in his or her reasonable determination. | ||||||
15 | (e) "Person" means an individual, a corporation, a limited | ||||||
16 | liability company, a partnership, an
association, a joint | ||||||
17 | stock company, a trust, an unincorporated
organization, any | ||||||
18 | similar entity or any combination of the foregoing acting
in | ||||||
19 | concert, but does not include any securities broker performing | ||||||
20 | no more
than the usual and customary broker's function or | ||||||
21 | joint venture
partnership exclusively engaged in owning, | ||||||
22 | managing, leasing or developing
real or tangible personal | ||||||
23 | property other than capital stock.
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24 | (e-5) "Policyholders' proxies" are proxies that give the | ||||||
25 | holder the right to vote for the election of the directors and | ||||||
26 | other corporate actions not in the day to day operations of the |
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1 | company. | ||||||
2 | (f) (Blank).
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3 | (f-5) "Scope criteria", as detailed in the NAIC Liquidity | ||||||
4 | Stress Test Framework, are the designated exposure bases along | ||||||
5 | with minimum magnitudes thereof for the specified data year, | ||||||
6 | used to establish a preliminary list of insurers considered | ||||||
7 | scoped into the NAIC Liquidity Stress Test Framework for that | ||||||
8 | data year. | ||||||
9 | (g) "Subsidiary" of a specified person is an affiliate | ||||||
10 | controlled by
such person directly, or indirectly through one | ||||||
11 | or more intermediaries.
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12 | (h) "Voting Security" is a security which gives to the | ||||||
13 | holder thereof
the right to vote for the election of directors | ||||||
14 | and includes any security
convertible into or evidencing a | ||||||
15 | right to acquire a voting security.
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16 | (i) (Blank).
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17 | (j) (Blank).
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18 | (k) (Blank).
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19 | (Source: P.A. 98-609, eff. 1-1-14.)
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20 | (215 ILCS 5/131.5) (from Ch. 73, par. 743.5)
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21 | Sec. 131.5. Statement; contents. In order to seek the | ||||||
22 | approval of the
Director pursuant to Section 131.8, the | ||||||
23 | applicant must file a statement
with the Director under oath | ||||||
24 | or affirmation which contains as a minimum the
following | ||||||
25 | information:
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1 | (1) The name and address of each acquiring party, and
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2 | (a) if such person is an individual, his principal | ||||||
3 | occupation and all
offices and positions held during | ||||||
4 | the past 5 years, and any conviction of
crimes, other | ||||||
5 | than minor traffic violations, during the past 10 | ||||||
6 | years;
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7 | (b) if such person is not an individual, a report | ||||||
8 | of the nature of
its business operations during the | ||||||
9 | past 5 years or for such lesser period
as the person | ||||||
10 | and any predecessors thereof has been in existence; an
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11 | informative description of the business intended to be | ||||||
12 | conducted by the
person and the person's subsidiaries; | ||||||
13 | and a list of all individuals who are
or who have been | ||||||
14 | selected to become directors or executive officers of | ||||||
15 | the
person, or who perform or will perform functions | ||||||
16 | appropriate to such
positions. The list must include | ||||||
17 | for each individual the information
required by | ||||||
18 | subsection (1)(a).
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19 | (2) The source, nature and amount of the consideration | ||||||
20 | used or to be
used in effecting the merger, consolidation | ||||||
21 | or other acquisition of
control, a description of any | ||||||
22 | transaction wherein funds were or are to be
obtained for | ||||||
23 | any such purpose, including any pledge of the company's | ||||||
24 | own
securities or the securities of any of its | ||||||
25 | subsidiaries or affiliates,
and the identity of persons | ||||||
26 | furnishing such
consideration. However, where a source of |
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1 | such consideration is a loan made
in the lender's ordinary | ||||||
2 | course of business, the identity of the lender
must remain | ||||||
3 | confidential, if the person filing the statement so | ||||||
4 | requests.
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5 | (3) Financial information as to the earnings and | ||||||
6 | financial condition of
each acquiring party for the | ||||||
7 | preceding 5 fiscal years of each acquiring party
(or for | ||||||
8 | such lesser period as the acquiring party and any | ||||||
9 | predecessors thereof
have been in existence) audited by an | ||||||
10 | independent
certified public accountant in accordance with | ||||||
11 | generally accepted auditing
standards and similar | ||||||
12 | unaudited information as of a date not earlier than 90 | ||||||
13 | days prior to the filing
of the statement.
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14 | (4) Any plans or proposals which each acquiring party | ||||||
15 | may have to
liquidate such company, to sell its assets or | ||||||
16 | merge or consolidate it with
any person, or to make any | ||||||
17 | other material change in its business or
corporate | ||||||
18 | structure or management.
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19 | (5) The number of shares of any security referred to | ||||||
20 | in Section 131.4
which each acquiring party proposes to | ||||||
21 | acquire, the terms of the offer,
request, invitation, | ||||||
22 | agreement, or acquisition referred to in Section
131.4, | ||||||
23 | and a statement as to the method by which the fairness of | ||||||
24 | the proposal was arrived.
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25 | (6) The amount of each class of any security referred | ||||||
26 | to in Section
131.4 which is beneficially owned or |
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1 | concerning which there is a right to
acquire beneficial | ||||||
2 | ownership by each acquiring party.
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3 | (7) A full description of any existing contracts, | ||||||
4 | arrangements or
understandings with respect to any | ||||||
5 | security referred to in Section 131.4 in
which any | ||||||
6 | acquiring party is involved, including but not limited to
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7 | transfer of any of the securities, joint ventures, loan or | ||||||
8 | option
arrangements, puts or calls, guarantees of loans, | ||||||
9 | guarantees against loss
or guarantees of profits, division | ||||||
10 | of losses or profits, or the giving or
withholding of | ||||||
11 | proxies. The description must identify the persons with | ||||||
12 | whom
such contracts, arrangements or understandings have | ||||||
13 | been entered into.
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14 | (8) A description of the acquisition of any security
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15 | or policyholders' proxy referred to in Section
131.4 | ||||||
16 | during the 12 calendar months preceding the filing of the | ||||||
17 | statement,
by any acquiring party, including the dates of | ||||||
18 | acquisition, names of the
acquiring parties, and | ||||||
19 | consideration paid or agreed to be paid therefor.
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20 | (9) A description of any recommendations to acquire | ||||||
21 | any security
referred to in Section 131.4 made during the | ||||||
22 | 12 calendar months preceding
the filing of the statement, | ||||||
23 | by any acquiring party, or by anyone based
upon interviews | ||||||
24 | or at the suggestion of such acquiring party.
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25 | (10) Copies of all tender offers for, requests or | ||||||
26 | invitations for
tenders of, exchange offers for, and |
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1 | agreements to acquire or exchange any
securities referred | ||||||
2 | to in Section 131.4, and (if distributed) of additional
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3 | soliciting material relating thereto.
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4 | (11) The terms of any agreement, contract or | ||||||
5 | understanding made with, or proposed to be made with, any
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6 | broker-dealer as to solicitation of securities referred to | ||||||
7 | in Section 131.4
for tender, and the amount of any fees, | ||||||
8 | commissions or other compensation
to be paid to | ||||||
9 | broker-dealers with regard thereto.
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10 | (12) Beginning July 1, 2014, an agreement by the | ||||||
11 | person required to file the statement referred to in this | ||||||
12 | Section 131.5 that the person will provide the annual | ||||||
13 | report specified in subsection (a) of Section 131.14b for | ||||||
14 | so long as control exists. | ||||||
15 | (13) Beginning July 1, 2014, an acknowledgement by the | ||||||
16 | person required to file the statement referred to in this | ||||||
17 | Section 131.5 that the person and all subsidiaries within | ||||||
18 | its control in the insurance holding company system shall | ||||||
19 | provide information to the Director upon request as | ||||||
20 | necessary to evaluate enterprise risk to the company. | ||||||
21 | (14) Any additional information as the Director may by | ||||||
22 | rule or
regulation prescribe as necessary or appropriate | ||||||
23 | for the protection of
policyholders or in the public | ||||||
24 | interest.
| ||||||
25 | (15) With respect to each acquiring party, the | ||||||
26 | following information: |
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1 | (A) the name and address of all associated persons | ||||||
2 | and a detailed description of every agreement, | ||||||
3 | arrangement, and understanding between the acquiring | ||||||
4 | party and all associated persons in connection with | ||||||
5 | the merger, consolidation, or other acquisition of | ||||||
6 | control; | ||||||
7 | (B) the class or series and number of shares of | ||||||
8 | securities of the company that are directly or | ||||||
9 | indirectly owned beneficially and of record by the | ||||||
10 | acquiring party or the associated persons or both; and | ||||||
11 | (C) a detailed description of each proxy, | ||||||
12 | contract, arrangement, understanding, or relationship | ||||||
13 | pursuant to which the acquiring party or the | ||||||
14 | associated persons, or both, have a right to vote, or | ||||||
15 | cause or direct the vote of, any securities of the | ||||||
16 | company. | ||||||
17 | (Source: P.A. 98-609, eff. 1-1-14.)
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18 | (215 ILCS 5/131.14b) | ||||||
19 | Sec. 131.14b. Enterprise risk filings filing . | ||||||
20 | (a) Annual enterprise risk report. The ultimate | ||||||
21 | controlling person of every company subject to registration | ||||||
22 | shall also file an annual enterprise risk report. The report | ||||||
23 | shall, to the best of the ultimate controlling person's | ||||||
24 | knowledge and belief, identify the material risks within the | ||||||
25 | insurance holding company system that could pose enterprise |
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1 | risk to the company. The report shall be filed with the lead | ||||||
2 | state commissioner of the insurance holding company system as | ||||||
3 | determined by the procedures within the Financial Analysis | ||||||
4 | Handbook adopted by the National Association of Insurance | ||||||
5 | Commissioners.
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6 | (b) Group capital calculation. Except as provided in this | ||||||
7 | subsection, the ultimate controlling person of every insurer | ||||||
8 | subject to registration shall concurrently file with the | ||||||
9 | registration an annual group capital calculation as directed | ||||||
10 | by the lead state commissioner. The report shall be completed | ||||||
11 | in accordance with the NAIC Group Capital Calculation | ||||||
12 | Instructions, which may permit the lead state commissioner to | ||||||
13 | allow a controlling person who is not the ultimate controlling | ||||||
14 | person to file the group capital calculation. The report shall | ||||||
15 | be filed with the lead state commissioner of the insurance | ||||||
16 | holding company system as determined by the commissioner in | ||||||
17 | accordance with the procedures within the Financial Analysis | ||||||
18 | Handbook adopted by the NAIC. Insurance holding company | ||||||
19 | systems described in the following are exempt from filing the | ||||||
20 | group capital calculation: | ||||||
21 | (1) an insurance holding company system that has only | ||||||
22 | one insurer within its holding company structure, that | ||||||
23 | only writes business and is only licensed in Illinois, and | ||||||
24 | that assumes no business from any other insurer; | ||||||
25 | (2) an insurance holding company system that is | ||||||
26 | required to perform a group capital calculation specified |
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1 | by the United States Federal Reserve Board; the lead state | ||||||
2 | commissioner shall request the calculation from the | ||||||
3 | Federal Reserve Board under the terms of information | ||||||
4 | sharing agreements in effect; if the Federal Reserve Board | ||||||
5 | cannot share the calculation with the lead state | ||||||
6 | commissioner, the insurance holding company system is not | ||||||
7 | exempt from the group capital calculation filing; | ||||||
8 | (3) an insurance holding company system whose non-U.S. | ||||||
9 | group-wide supervisor is located within a reciprocal | ||||||
10 | jurisdiction as described in paragraph (C-10) of | ||||||
11 | subsection (1) of Section 173.1 that recognizes the U.S. | ||||||
12 | state regulatory approach to group supervision and group | ||||||
13 | capital; and | ||||||
14 | (4) an insurance holding company system: | ||||||
15 | (i) that provides information to the lead state | ||||||
16 | that meets the requirements for accreditation under | ||||||
17 | the NAIC financial standards and accreditation | ||||||
18 | program, either directly or indirectly through the | ||||||
19 | group-wide supervisor, who has determined such | ||||||
20 | information is satisfactory to allow the lead state to | ||||||
21 | comply with the NAIC group supervision approach, as | ||||||
22 | detailed in the NAIC Financial Analysis Handbook; and | ||||||
23 | (ii) whose non-U.S. group-wide supervisor that is | ||||||
24 | not in a reciprocal jurisdiction recognizes and | ||||||
25 | accepts, as specified by the commissioner in | ||||||
26 | regulation, the group capital calculation as the |
| |||||||
| |||||||
1 | world-wide group capital assessment for U.S. insurance | ||||||
2 | groups who operate in that jurisdiction. | ||||||
3 | (5) Notwithstanding the provisions of paragraphs (3) | ||||||
4 | and (4) of this subsection, a lead state commissioner | ||||||
5 | shall require the group capital calculation for U.S. | ||||||
6 | operations of any non-U.S. based insurance holding company | ||||||
7 | system where, after any necessary consultation with other | ||||||
8 | supervisors or officials, it is deemed appropriate by the | ||||||
9 | lead state commissioner for prudential oversight and | ||||||
10 | solvency monitoring purposes or for ensuring the | ||||||
11 | competitiveness of the insurance marketplace. | ||||||
12 | (6) Notwithstanding the exemptions from filing the | ||||||
13 | group capital calculation stated in paragraphs (1) through | ||||||
14 | (4) of this subsection, the lead state commissioner has | ||||||
15 | the discretion to exempt the ultimate controlling person | ||||||
16 | from filing the annual group capital calculation or to | ||||||
17 | accept a limited group capital filing or report in | ||||||
18 | accordance with criteria as specified by the Director in | ||||||
19 | regulation. | ||||||
20 | (c) Liquidity stress test. The ultimate controlling person | ||||||
21 | of every insurer subject to registration and also scoped into | ||||||
22 | the NAIC Liquidity Stress Test Framework shall file the | ||||||
23 | results of a specific year's liquidity stress test. The filing | ||||||
24 | shall be made to the lead state insurance commissioner of the | ||||||
25 | insurance holding company system as determined by the | ||||||
26 | procedures within the Financial Analysis Handbook adopted by |
| |||||||
| |||||||
1 | the National Association of Insurance Commissioners: | ||||||
2 | (1) The NAIC Liquidity Stress Test Framework includes | ||||||
3 | scope criteria applicable to a specific data year. These | ||||||
4 | scope criteria are reviewed at least annually by the NAIC | ||||||
5 | Financial Stability Task Force or its successor. Any | ||||||
6 | change to the NAIC Liquidity Stress Test Framework or to | ||||||
7 | the data year for which the scope criteria are to be | ||||||
8 | measured shall be effective on January 1 of the year | ||||||
9 | following the calendar year when such changes are adopted. | ||||||
10 | Insurers meeting at least one threshold of the scope | ||||||
11 | criteria are considered scoped into the NAIC Liquidity | ||||||
12 | Stress Test Framework for the specified data year unless | ||||||
13 | the lead state insurance commissioner, in consultation | ||||||
14 | with the NAIC Financial Stability Task Force or its | ||||||
15 | successor, determines the insurer should not be scoped | ||||||
16 | into the Framework for that data year. Similarly, insurers | ||||||
17 | that do not trigger at least one threshold of the scope | ||||||
18 | criteria are considered scoped out of the NAIC Liquidity | ||||||
19 | Stress Test Framework for the specified data year, unless | ||||||
20 | the lead state insurance commissioner, in consultation | ||||||
21 | with the NAIC Financial Stability Task Force or its | ||||||
22 | successor, determines the insurer should be scoped into | ||||||
23 | the Framework for that data year. | ||||||
24 | The lead state insurance commissioner, in consultation | ||||||
25 | with the Financial Stability Task Force or its successor, | ||||||
26 | shall assess the regulator's wish to avoid having insurers |
| |||||||
| |||||||
1 | scoped in and out of the NAIC Liquidity Stress Test | ||||||
2 | Framework on a frequent basis as part of the determination | ||||||
3 | for an insurer. | ||||||
4 | (2) The performance of, and filing of the results | ||||||
5 | from, a specific year's liquidity stress test shall comply | ||||||
6 | with the NAIC Liquidity Stress Test Framework's | ||||||
7 | instructions and reporting templates for that year and any | ||||||
8 | lead state insurance commissioner determinations, in | ||||||
9 | conjunction with the NAIC Financial Stability Task Force | ||||||
10 | or its successor, provided within the Framework. | ||||||
11 | (Source: P.A. 98-609, eff. 7-1-14 .)
| ||||||
12 | (215 ILCS 5/131.15) (from Ch. 73, par. 743.15)
| ||||||
13 | Sec. 131.15.
No information need be disclosed on the | ||||||
14 | registration statement filed
under Section 131.14 if the | ||||||
15 | information is not material for the purposes of
Sections | ||||||
16 | 131.13 through 131.19. Unless the Director by rule, regulation | ||||||
17 | or
order provides otherwise, sales, purchases, exchanges, | ||||||
18 | loans or extensions
of credit, investments, or guarantees | ||||||
19 | involving one-half of one
percent or less of a
company's | ||||||
20 | admitted assets as of the 31st day of December next preceding,
| ||||||
21 | are not deemed material for purposes of Sections 131.13 | ||||||
22 | through 131.19. The description of materiality provided in | ||||||
23 | this Section shall not apply for purposes of subsections (b) | ||||||
24 | and (c) of Section 131.14b.
| ||||||
25 | (Source: P.A. 84-805.)
|
| |||||||
| |||||||
1 | (215 ILCS 5/131.22) (from Ch. 73, par. 743.22)
| ||||||
2 | Sec. 131.22. Confidential treatment. | ||||||
3 | (a) Documents, materials, or other information in the | ||||||
4 | possession or control of the Department that are obtained by | ||||||
5 | or disclosed to the Director or any other person in the course | ||||||
6 | of an examination or investigation made pursuant to this | ||||||
7 | Article and all information reported or provided to the | ||||||
8 | Department pursuant to paragraphs (12) and (13) of Section | ||||||
9 | 131.5 and Sections 131.13 through 131.21 are recognized by | ||||||
10 | this State as being proprietary and to contain trade secrets, | ||||||
11 | and this Article shall be confidential by law and privileged, | ||||||
12 | shall not be subject to the Illinois Freedom of Information | ||||||
13 | Act, shall not be subject to subpoena, and shall not be subject | ||||||
14 | to discovery or admissible in evidence in any private civil | ||||||
15 | action. However, the Director is authorized to use the | ||||||
16 | documents, materials, or other information in the furtherance | ||||||
17 | of any regulatory or legal action brought as a part of the | ||||||
18 | Director's official duties. The Director shall not otherwise | ||||||
19 | make the documents, materials, or other information public | ||||||
20 | without the prior written consent of the company to which it | ||||||
21 | pertains unless the Director, after giving the company and its | ||||||
22 | affiliates who would be affected thereby prior written notice | ||||||
23 | and an opportunity to be heard, determines that the interest | ||||||
24 | of policyholders, shareholders, or the public shall be served | ||||||
25 | by the publication thereof, in which event the Director may |
| |||||||
| |||||||
1 | publish all or any part in such manner as may be deemed | ||||||
2 | appropriate. | ||||||
3 | (b) Neither the Director nor any person who received | ||||||
4 | documents, materials, or other information while acting under | ||||||
5 | the authority of the Director or with whom such documents, | ||||||
6 | materials, or other information are shared pursuant to this | ||||||
7 | Article shall be permitted or required to testify in any | ||||||
8 | private civil action concerning any confidential documents, | ||||||
9 | materials, or information subject to subsection (a) of this | ||||||
10 | Section. | ||||||
11 | (c) In order to assist in the performance of the | ||||||
12 | Director's duties, the Director: | ||||||
13 | (1) may share documents, materials, or other | ||||||
14 | information, including the confidential and privileged | ||||||
15 | documents, materials, or information subject to subsection | ||||||
16 | (a) of this Section , including proprietary and trade | ||||||
17 | secret documents and materials , with other state, federal, | ||||||
18 | and international regulatory agencies, with the NAIC and | ||||||
19 | its affiliates and subsidiaries, and with state, federal, | ||||||
20 | and international law enforcement authorities, including | ||||||
21 | members of any supervisory college allowed by this | ||||||
22 | Article, provided that the recipient agrees in writing to | ||||||
23 | maintain the confidentiality and privileged status of the | ||||||
24 | document, material, or other information, and has verified | ||||||
25 | in writing the legal authority to maintain | ||||||
26 | confidentiality; |
| |||||||
| |||||||
1 | (1.5) notwithstanding paragraph (1) of this subsection | ||||||
2 | (c), may only share confidential and privileged documents, | ||||||
3 | material, or information reported pursuant to subsection | ||||||
4 | (a) of Section 131.14b with commissioners of states having | ||||||
5 | statutes or regulations substantially similar to | ||||||
6 | subsection (a) of this Section and who have agreed in | ||||||
7 | writing not to disclose such information; | ||||||
8 | (2) may receive documents, materials, or information, | ||||||
9 | including otherwise confidential and privileged documents, | ||||||
10 | materials, or information , including proprietary and trade | ||||||
11 | secret information, from the NAIC and its affiliates and | ||||||
12 | subsidiaries and from regulatory and law enforcement | ||||||
13 | officials of other foreign or domestic jurisdictions, and | ||||||
14 | shall maintain as confidential or privileged any document, | ||||||
15 | material, or information received with notice or the | ||||||
16 | understanding that it is confidential or privileged under | ||||||
17 | the laws of the jurisdiction that is the source of the | ||||||
18 | document, material, or information; any such documents,
| ||||||
19 | materials, or information, while in the Director's | ||||||
20 | possession, shall not be subject to the
Illinois Freedom | ||||||
21 | of Information Act and shall not be subject to subpoena; | ||||||
22 | and | ||||||
23 | (3) (blank). | ||||||
24 | (c-5) Written shall enter into written agreements with the | ||||||
25 | NAIC governing sharing and use of information provided | ||||||
26 | pursuant to this Article consistent with this subsection (c) |
| |||||||
| |||||||
1 | that shall :
| ||||||
2 | (1) (i)
specify procedures and protocols regarding the | ||||||
3 | confidentiality and security of information shared with | ||||||
4 | the NAIC and its affiliates and subsidiaries pursuant to | ||||||
5 | this Article, including procedures and protocols for | ||||||
6 | sharing by the NAIC with other state, federal, or | ||||||
7 | international regulators ; the agreement shall provide that | ||||||
8 | the recipient agrees in writing to maintain the | ||||||
9 | confidentiality and privileged status of the documents, | ||||||
10 | materials, or other information and has verified in | ||||||
11 | writing the legal authority to maintain such | ||||||
12 | confidentiality ;
| ||||||
13 | (2) (ii)
specify that ownership of information shared | ||||||
14 | with the NAIC and its affiliates and subsidiaries pursuant | ||||||
15 | to this Article remains with the Director and the NAIC's | ||||||
16 | use of the information is subject to the direction of the | ||||||
17 | Director;
| ||||||
18 | (3) (iii)
require prompt notice to be given to a | ||||||
19 | company whose confidential information in the possession | ||||||
20 | of the NAIC pursuant to this Article is subject to a | ||||||
21 | request or subpoena to the NAIC for disclosure or | ||||||
22 | production; and
| ||||||
23 | (4) (iv)
require the NAIC and its affiliates and | ||||||
24 | subsidiaries to consent to intervention by a company in | ||||||
25 | any judicial or administrative action in which the NAIC | ||||||
26 | and its affiliates and subsidiaries may be required to |
| |||||||
| |||||||
1 | disclose confidential information about the company shared | ||||||
2 | with the NAIC and its affiliates and subsidiaries pursuant | ||||||
3 | to this Article ; and . | ||||||
4 | (5) excluding documents, material, or information | ||||||
5 | reported pursuant to subsection (c) of Section 131.14b, | ||||||
6 | prohibit the NAIC or third-party consultant from storing | ||||||
7 | the information shared pursuant to this Code in a | ||||||
8 | permanent database after the underlying analysis is | ||||||
9 | completed. | ||||||
10 | (d) The sharing of documents, materials, or information by | ||||||
11 | the Director pursuant to this Article shall not constitute a | ||||||
12 | delegation of regulatory authority or rulemaking, and the | ||||||
13 | Director is solely responsible for the administration, | ||||||
14 | execution, and enforcement of the provisions of this Article. | ||||||
15 | (e) No waiver of any applicable privilege or claim of | ||||||
16 | confidentiality in the documents, materials, or information | ||||||
17 | shall occur as a result of disclosure to the Director under | ||||||
18 | this Section or as a result of sharing as authorized in | ||||||
19 | subsection (c) of this Section. | ||||||
20 | (f) Documents, materials, or other information in the | ||||||
21 | possession or control of the NAIC pursuant to this Article | ||||||
22 | shall be confidential by law and privileged, shall not be | ||||||
23 | subject to the Illinois Freedom of Information Act, shall not | ||||||
24 | be subject to subpoena, and shall not be subject to discovery | ||||||
25 | or admissible in evidence in any private civil action.
| ||||||
26 | (Source: P.A. 98-609, eff. 1-1-14.)
|
| |||||||
| |||||||
1 | (215 ILCS 5/131.22a new) | ||||||
2 | Sec. 131.22a. Restrictions on insurer publishing. The | ||||||
3 | group capital calculation and resulting group capital ratio | ||||||
4 | required under subsection (b) of Section 131.14b and the | ||||||
5 | liquidity stress test along with its results and supporting | ||||||
6 | disclosures required under subsection (c) of Section 131.14b | ||||||
7 | are regulatory tools for assessing group risks and capital | ||||||
8 | adequacy and group liquidity risks, respectively, and are not | ||||||
9 | intended as a means to rank insurers or insurance holding | ||||||
10 | company systems generally. Therefore, except as otherwise may | ||||||
11 | be required under the provisions of this Code, the making, | ||||||
12 | publishing, disseminating, circulating, or placing before the | ||||||
13 | public, or causing directly or indirectly to be made, | ||||||
14 | published, disseminated, circulated, or placed before the | ||||||
15 | public in a newspaper, magazine, or other publication, or in | ||||||
16 | the form of a notice, circular, pamphlet, letter, or poster, | ||||||
17 | or over any radio or television station or any electronic | ||||||
18 | means of communication available to the public, or in any | ||||||
19 | other way as an advertisement, announcement, or statement | ||||||
20 | containing a representation or statement with regard to the | ||||||
21 | group capital calculation, group capital ratio, the liquidity | ||||||
22 | stress test results, or supporting disclosures for the | ||||||
23 | liquidity stress test of any insurer or any insurer group, or | ||||||
24 | of any component derived in the calculation by any insurer, | ||||||
25 | broker, or other person engaged in any manner in the insurance |
| |||||||
| |||||||
1 | business would be misleading and is therefore prohibited; | ||||||
2 | however, if any materially false statement with respect to the | ||||||
3 | group capital calculation, resulting group capital ratio, an | ||||||
4 | inappropriate comparison of any amount to an insurer's or | ||||||
5 | insurance group's group capital calculation or resulting group | ||||||
6 | capital ratio, liquidity stress test result, supporting | ||||||
7 | disclosures for the liquidity stress test, or an inappropriate | ||||||
8 | comparison of any amount to an insurer's or insurance group's | ||||||
9 | liquidity stress test result or supporting disclosures is | ||||||
10 | published in any written publication and the insurer is able | ||||||
11 | to demonstrate to the Director with substantial proof the | ||||||
12 | falsity of such statement or the inappropriateness, as the | ||||||
13 | case may be, then the insurer may publish announcements in a | ||||||
14 | written publication if the sole purpose of the announcement is | ||||||
15 | to rebut the materially false statement.
| ||||||
16 | (215 ILCS 5/173.1) (from Ch. 73, par. 785.1)
| ||||||
17 | Sec. 173.1. Credit allowed a domestic ceding insurer.
| ||||||
18 | (1) Except as otherwise provided under Article VIII 1/2 of | ||||||
19 | this Code and
related provisions of the Illinois | ||||||
20 | Administrative Code, credit for
reinsurance shall be allowed a | ||||||
21 | domestic ceding insurer as
either an admitted asset or a | ||||||
22 | deduction from liability on account of
reinsurance ceded only | ||||||
23 | when the reinsurer meets the requirements of paragraph (A) ,
or | ||||||
24 | (B) , or (B-5) , or (C) , or (C-5) , (C-10), or (D) of this | ||||||
25 | subsection (1).
Credit shall be allowed under paragraph (A), |
| |||||||
| |||||||
1 | (B), or (B-5) of this subsection (1) only as respects
cessions | ||||||
2 | of those kinds or classes of business in which the assuming | ||||||
3 | insurer is
licensed or otherwise permitted to write or assume | ||||||
4 | in its state of domicile, or
in the case of a U.S. branch of an | ||||||
5 | alien assuming insurer, in the state through
which it is | ||||||
6 | entered and licensed to transact insurance or reinsurance. | ||||||
7 | Credit
shall be allowed under paragraph (B-5) or (C) of this | ||||||
8 | subsection (1) only
if the applicable requirements of | ||||||
9 | paragraph (E) of this subsection (1)
have been
satisfied.
| ||||||
10 | (A) Credit shall be allowed when the reinsurance is | ||||||
11 | ceded to an assuming
insurer that is authorized in this | ||||||
12 | State
to transact the types of insurance ceded and has at | ||||||
13 | least $5,000,000 in
capital and surplus.
| ||||||
14 | (B) Credit shall be allowed when the reinsurance is | ||||||
15 | ceded to an assuming
insurer that is accredited as a | ||||||
16 | reinsurer in this State. An accredited
reinsurer is one | ||||||
17 | that:
| ||||||
18 | (1) files with the Director evidence of its | ||||||
19 | submission to this State's
jurisdiction;
| ||||||
20 | (2) submits to this State's authority to examine | ||||||
21 | its books and records;
| ||||||
22 | (3) is licensed to transact insurance or | ||||||
23 | reinsurance in at least one
state, or in the case of a | ||||||
24 | U.S. branch of an alien assuming insurer is
entered | ||||||
25 | through and licensed to transact insurance or | ||||||
26 | reinsurance in at
least one state;
|
| |||||||
| |||||||
1 | (4) files annually with the Director a copy of its | ||||||
2 | annual statement
filed with the insurance department | ||||||
3 | of its state of domicile and a copy of
its most recent | ||||||
4 | audited financial statement; and
| ||||||
5 | (5) maintains a surplus as regards policyholders | ||||||
6 | in an amount that is
not less than $20,000,000 and | ||||||
7 | whose accreditation has been approved by the
Director.
| ||||||
8 | (B-5)(1) Credit shall be allowed when the reinsurance | ||||||
9 | is ceded to an assuming insurer that is domiciled in, or in | ||||||
10 | the case of a U.S. branch of an alien assuming
insurer is | ||||||
11 | entered through, a state that employs standards regarding | ||||||
12 | credit for reinsurance substantially similar to those | ||||||
13 | applicable under this Code and the assuming insurer or | ||||||
14 | U.S. branch of an alien assuming insurer: | ||||||
15 | (a) maintains a surplus as regards policyholders | ||||||
16 | in an amount not less than $20,000,000; and | ||||||
17 | (b) submits to the authority of this State to | ||||||
18 | examine its books and records. | ||||||
19 | (2) The requirement of item (a) of subparagraph (1) of | ||||||
20 | paragraph (B-5) of this subsection (1) does not apply to | ||||||
21 | reinsurance ceded and assumed pursuant to pooling | ||||||
22 | arrangements among insurers in the same holding company | ||||||
23 | system. | ||||||
24 |
(C)(1) Credit shall be allowed when the reinsurance | ||||||
25 | is ceded to
an assuming insurer that maintains a trust | ||||||
26 | fund in a qualified United
States financial institution, |
| |||||||
| |||||||
1 | as defined in paragraph (B) of subsection (3) of this | ||||||
2 | Section, for the
payment of the valid claims of its United | ||||||
3 | States policyholders and ceding
insurers, their assigns | ||||||
4 | and successors in interest. The assuming insurer
shall | ||||||
5 | report to the Director information substantially the same | ||||||
6 | as
that required to be reported on the NAIC annual and | ||||||
7 | quarterly financial
statement by authorized
insurers and | ||||||
8 | any other financial information that the
Director deems | ||||||
9 | necessary to determine the financial condition of the
| ||||||
10 | assuming insurer and the sufficiency of the trust
fund. | ||||||
11 | The assuming insurer shall provide or make the information | ||||||
12 | available to the ceding insurer. The assuming insurer may | ||||||
13 | decline to release trade secrets or commercially sensitive | ||||||
14 | information that would qualify as exempt from disclosure | ||||||
15 | under the Freedom of Information Act. The Director shall | ||||||
16 | also make the information publicly available, subject only | ||||||
17 | to such reasonable objections as might be raised to a | ||||||
18 | request pursuant to the Freedom of Information Act, as | ||||||
19 | determined by the Director. The assuming insurer shall | ||||||
20 | submit to examination of its books and records by
the | ||||||
21 | Director and bear the expense of examination.
| ||||||
22 | (2)(a) Credit for reinsurance shall not be granted | ||||||
23 | under this subsection
unless the form of the trust and any | ||||||
24 | amendments to the trust have been approved
by:
| ||||||
25 | (i) the regulatory official of the state where the | ||||||
26 | trust is domiciled;
or
|
| |||||||
| |||||||
1 | (ii) the regulatory official of another state who, | ||||||
2 | pursuant to the
terms of the trust instrument, has | ||||||
3 | accepted principal regulatory oversight of
the trust.
| ||||||
4 | (b) The form of the trust and any trust amendments | ||||||
5 | also shall be filed
with the regulatory official of every | ||||||
6 | state in which the ceding insurer
beneficiaries of the | ||||||
7 | trust are domiciled. The trust instrument shall provide
| ||||||
8 | that contested claims shall be valid and enforceable upon | ||||||
9 | the final order of
any court of competent jurisdiction in | ||||||
10 | the United States. The trust shall vest
legal title to its | ||||||
11 | assets in its trustees for the benefit of the assuming
| ||||||
12 | insurer's United States policyholders and ceding insurees | ||||||
13 | and their assigns
and
successors in interest. The trust | ||||||
14 | and the assuming insurer shall be subject to
examination | ||||||
15 | as determined by the Director.
| ||||||
16 | (c) The trust shall remain in effect for as long as the | ||||||
17 | assuming insurer
has outstanding obligations due under the | ||||||
18 | reinsurance agreements subject to the
trust. No later than | ||||||
19 | February 28 of each year the trustee of the trust shall
| ||||||
20 | report to the
Director in writing the balance of the trust | ||||||
21 | and a list of the trust's
investments at the preceding | ||||||
22 | year-end and shall certify the date of termination
of
the | ||||||
23 | trust, if so planned, or certify that the trust will not | ||||||
24 | expire prior to
the next following December 31. | ||||||
25 | No later than February 28 of each year, the assuming | ||||||
26 | insurer's chief executive officer or chief financial |
| |||||||
| |||||||
1 | officer shall certify to the Director that the trust fund | ||||||
2 | contains funds in an amount not less than the assuming | ||||||
3 | insurer's liabilities (as reported to the assuming insurer | ||||||
4 | by its cedent) attributable to reinsurance ceded by U.S. | ||||||
5 | ceding insurers, and in addition, a trusteed surplus of no | ||||||
6 | less than $20,000,000. In the event that item (a-5) of | ||||||
7 | subparagraph (3) of this paragraph (C) applies to the | ||||||
8 | trust, the assuming insurer's chief executive officer or | ||||||
9 | chief financial officer shall then certify to the Director | ||||||
10 | that the trust fund contains funds in an amount not less | ||||||
11 | than the assuming insurer's liabilities (as reported to | ||||||
12 | the assuming insurer by its cedent) attributable to | ||||||
13 | reinsurance ceded by U.S. ceding insurers and, in | ||||||
14 | addition, a reduced trusteed surplus of not less than the | ||||||
15 | amount that has been authorized by the regulatory | ||||||
16 | authority having principal regulatory oversight of the | ||||||
17 | trust. | ||||||
18 | (d) No later than February 28 of each year, an | ||||||
19 | assuming insurer that maintains a trust fund in accordance | ||||||
20 | with this paragraph (C) shall provide or make available, | ||||||
21 | if requested by a beneficiary under the trust fund, the | ||||||
22 | following information to the assuming insurer's U.S. | ||||||
23 | ceding insurers or their assigns and successors in | ||||||
24 | interest: | ||||||
25 | (i) a copy of the form of the trust agreement and | ||||||
26 | any trust amendments to the trust agreement pertaining |
| |||||||
| |||||||
1 | to the trust fund; | ||||||
2 | (ii) a copy of the annual and quarterly financial | ||||||
3 | information, and its most recent audited financial | ||||||
4 | statement provided to the Director by the assuming | ||||||
5 | insurer, including any exhibits and schedules thereto; | ||||||
6 | (iii) any financial information provided to the | ||||||
7 | Director by the assuming insurer that the Director has | ||||||
8 | deemed necessary to determine the financial condition | ||||||
9 | of the assuming insurer and the sufficiency of the | ||||||
10 | trust fund; | ||||||
11 | (iv) a copy of any annual and quarterly financial | ||||||
12 | information provided to the Director by the trustee of | ||||||
13 | the trust fund maintained by the assuming insurer, | ||||||
14 | including any exhibits and schedules thereto; | ||||||
15 | (v) a copy of the information required to be | ||||||
16 | reported by the trustee of the trust to the Director | ||||||
17 | under the provisions of this paragraph (C); and | ||||||
18 | (vi) a written certification that the trust fund | ||||||
19 | consists of funds in trust in an amount not less than | ||||||
20 | the assuming insurer's liabilities attributable to | ||||||
21 | reinsurance liabilities (as reported to the assuming | ||||||
22 | insurer by its cedent) attributable to reinsurance | ||||||
23 | ceded by U.S. ceding insurers and, in addition, a | ||||||
24 | trusteed surplus of not less than $20,000,000.
| ||||||
25 | (3) The following requirements apply to the following | ||||||
26 | categories of
assuming insurer:
|
| |||||||
| |||||||
1 | (a) The trust fund for a single assuming insurer | ||||||
2 | shall consist of
funds
in trust in an amount not less | ||||||
3 | than the assuming insurer's liabilities
attributable | ||||||
4 | to reinsurance ceded by U.S. ceding insurers, and
in
| ||||||
5 | addition, the assuming insurer shall maintain a | ||||||
6 | trusteed surplus of not
less than $20,000,000, except | ||||||
7 | as provided in item (a-5) of this subparagraph (3). | ||||||
8 | (a-5) At any time after the assuming insurer has | ||||||
9 | permanently discontinued underwriting new business | ||||||
10 | secured by the trust for at least 3 full years, the | ||||||
11 | Director with principal regulatory oversight of the | ||||||
12 | trust may authorize a reduction in the required | ||||||
13 | trusteed surplus, but only after a finding, based on | ||||||
14 | an assessment of the risk, that the new required | ||||||
15 | surplus level is adequate for the protection of U.S. | ||||||
16 | ceding insurers, policyholders, and claimants in light | ||||||
17 | of reasonably foreseeable adverse loss development. | ||||||
18 | The risk
assessment may involve an actuarial review, | ||||||
19 | including an independent analysis of reserves and cash | ||||||
20 | flows, and shall consider all material risk factors, | ||||||
21 | including, when applicable, the lines of business | ||||||
22 | involved, the stability of the incurred loss | ||||||
23 | estimates, and the effect of the surplus requirements | ||||||
24 | on the assuming insurer's liquidity or solvency. The | ||||||
25 | minimum required trusteed surplus may not be reduced | ||||||
26 | to an amount less than 30% of the assuming insurer's |
| |||||||
| |||||||
1 | liabilities attributable to reinsurance ceded by U.S. | ||||||
2 | ceding
insurers covered by the trust.
| ||||||
3 | (b)(i) In the case of a group including | ||||||
4 | incorporated and
individual unincorporated
| ||||||
5 | underwriters:
| ||||||
6 | (I) for reinsurance ceded under reinsurance | ||||||
7 | agreements with an
inception, amendment, or | ||||||
8 | renewal date on or after January 1, 1993, the | ||||||
9 | trust
shall consist of a trusteed account in an | ||||||
10 | amount not less than the respective underwriters'
| ||||||
11 | several liabilities attributable to business ceded | ||||||
12 | by U.S. domiciled ceding
insurers to any member of | ||||||
13 | the group;
| ||||||
14 | (II) for reinsurance ceded under reinsurance | ||||||
15 | agreements with an
inception date on or before | ||||||
16 | December 31, 1992 and not amended or renewed after
| ||||||
17 | that date, notwithstanding the other provisions of | ||||||
18 | this Act, the trust shall
consist of a trusteed | ||||||
19 | account in an amount not less than the group's | ||||||
20 | several
insurance and reinsurance liabilities | ||||||
21 | attributable to business written in the
United | ||||||
22 | States; and
| ||||||
23 | (III) in addition to these trusts, the group | ||||||
24 | shall maintain in trust
a
trusteed surplus of | ||||||
25 | which not less than $100,000,000 shall be held | ||||||
26 | jointly for
the benefit of the U.S. domiciled |
| |||||||
| |||||||
1 | ceding insurers of any member of the group
for all | ||||||
2 | years of account.
| ||||||
3 | (ii) The incorporated members of the
group shall | ||||||
4 | not be engaged in any business other than underwriting | ||||||
5 | as a member
of the group and shall be subject to the | ||||||
6 | same level of solvency regulation and
control by the | ||||||
7 | group's domiciliary regulator as are the | ||||||
8 | unincorporated
members.
| ||||||
9 | (iii) Within 90 days after its financial | ||||||
10 | statements are due to be
filed
with the group's | ||||||
11 | domiciliary regulator, the group shall provide to the | ||||||
12 | Director
an annual certification by the group's | ||||||
13 | domiciliary regulator of the solvency of
each | ||||||
14 | underwriter member, or if a certification is | ||||||
15 | unavailable, financial
statements prepared by | ||||||
16 | independent public accountants of each underwriter
| ||||||
17 | member of the group.
| ||||||
18 | (c) In the case of a group of incorporated | ||||||
19 | insurers under
common
administration, the group shall:
| ||||||
20 | (i) have continuously transacted an insurance | ||||||
21 | business
outside the United States for at least 3 | ||||||
22 | years immediately before making
application for | ||||||
23 | accreditation;
| ||||||
24 | (ii) maintain aggregate policyholders' surplus | ||||||
25 | of
not less than $10,000,000,000;
| ||||||
26 | (iii) maintain a trust in an amount not
less |
| |||||||
| |||||||
1 | than
the group's
several liabilities attributable | ||||||
2 | to business ceded by United States
domiciled | ||||||
3 | ceding
insurers to any member of the group | ||||||
4 | pursuant to reinsurance contracts issued in
the | ||||||
5 | name of the group;
| ||||||
6 | (iv) in addition, maintain a joint trusteed
| ||||||
7 | surplus
of which not less than $100,000,000 shall | ||||||
8 | be held jointly for the benefit
of the United
| ||||||
9 | States ceding insurers of any member of the group | ||||||
10 | as additional security for
these liabilities; and
| ||||||
11 | (v) within 90 days after its financial | ||||||
12 | statements are due to be
filed
with the group's | ||||||
13 | domiciliary regulator,
make available to the | ||||||
14 | Director an annual certification of each | ||||||
15 | underwriter
member's
solvency by the member's | ||||||
16 | domiciliary regulator and financial statements of
| ||||||
17 | each
underwriter member of the group prepared by | ||||||
18 | its independent public
accountant.
| ||||||
19 | (C-5) Credit shall be allowed when the reinsurance is | ||||||
20 | ceded to an assuming insurer that has been certified by | ||||||
21 | the Director as a reinsurer in this State and secures its | ||||||
22 | obligations in accordance with the requirements of this | ||||||
23 | paragraph (C-5). | ||||||
24 | (1) In order to be eligible for certification, the | ||||||
25 | assuming insurer shall meet the following | ||||||
26 | requirements: |
| |||||||
| |||||||
1 | (a) the assuming insurer must be domiciled and | ||||||
2 | licensed to transact insurance or reinsurance in a | ||||||
3 | qualified jurisdiction, as determined by the | ||||||
4 | Director pursuant to subparagraph (3) of this | ||||||
5 | paragraph (C-5); | ||||||
6 | (b) the assuming insurer must maintain minimum | ||||||
7 | capital and surplus, or its equivalent, in an | ||||||
8 | amount not less than $250,000,000 or such greater | ||||||
9 | amount as determined by the Director pursuant to | ||||||
10 | regulation; this requirement may also be satisfied | ||||||
11 | by an association, including incorporated and | ||||||
12 | individual unincorporated underwriters, having | ||||||
13 | minimum capital and surplus equivalents (net of | ||||||
14 | liabilities) of at least $250,000,000 and a | ||||||
15 | central fund containing a balance of at least | ||||||
16 | $250,000,000; | ||||||
17 | (c) the assuming insurer must maintain | ||||||
18 | financial strength ratings from 2 or more rating | ||||||
19 | agencies deemed acceptable by the Director; these | ||||||
20 | ratings shall be based on interactive | ||||||
21 | communication between the rating agency and the | ||||||
22 | assuming insurer and shall not be based solely on | ||||||
23 | publicly available information; each certified | ||||||
24 | reinsurer shall be rated on a legal entity basis, | ||||||
25 | with due consideration being given to the group | ||||||
26 | rating where appropriate, except that an |
| |||||||
| |||||||
1 | association, including incorporated and individual | ||||||
2 | unincorporated underwriters, that has been | ||||||
3 | approved to do business as a single certified | ||||||
4 | reinsurer may be evaluated on the basis of its | ||||||
5 | group rating; these financial strength ratings | ||||||
6 | shall be one factor used by the Director in | ||||||
7 | determining the rating that is assigned to the | ||||||
8 | assuming insurer; acceptable rating agencies | ||||||
9 | include the following: | ||||||
10 | (i) Standard & Poor's; | ||||||
11 | (ii) Moody's Investors Service; | ||||||
12 | (iii) Fitch Ratings; | ||||||
13 | (iv) A.M. Best Company; or | ||||||
14 | (v) any other nationally recognized | ||||||
15 | statistical rating organization; | ||||||
16 | (d) the assuming insurer must agree to submit | ||||||
17 | to the jurisdiction of this State, appoint the | ||||||
18 | Director as its agent for service of process in | ||||||
19 | this State, and agree to provide security for 100% | ||||||
20 | of the assuming insurer's liabilities attributable | ||||||
21 | to reinsurance ceded by U.S. ceding insurers if it | ||||||
22 | resists enforcement of a final U.S. judgment; and | ||||||
23 | (e) the assuming insurer must agree to meet | ||||||
24 | applicable information filing requirements as | ||||||
25 | determined by the Director, both with respect to | ||||||
26 | an initial application for certification and on an |
| |||||||
| |||||||
1 | ongoing basis. | ||||||
2 | (2) An association, including incorporated and | ||||||
3 | individual unincorporated underwriters, may be a | ||||||
4 | certified reinsurer. In order to be eligible for | ||||||
5 | certification, in addition to satisfying the | ||||||
6 | requirements of subparagraph (1) of this paragraph | ||||||
7 | (C-5): | ||||||
8 | (a) the association shall satisfy its minimum | ||||||
9 | capital and surplus requirements through the | ||||||
10 | capital and surplus equivalents (net of | ||||||
11 | liabilities) of the association and its members, | ||||||
12 | which shall include a joint central fund that may | ||||||
13 | be applied to any unsatisfied obligation of the | ||||||
14 | association or any of its members, in the amounts | ||||||
15 | specified in item (b) of subparagraph (1) of this | ||||||
16 | paragraph (C-5); | ||||||
17 | (b) the incorporated members of the | ||||||
18 | association shall not be engaged in any business | ||||||
19 | other than underwriting as a member of the | ||||||
20 | association and shall be subject to the same level | ||||||
21 | of regulation and solvency control by the | ||||||
22 | association's domiciliary regulator as are the | ||||||
23 | unincorporated members; and | ||||||
24 | (c) within 90 days after its financial | ||||||
25 | statements are due to be filed with the | ||||||
26 | association's domiciliary regulator, the |
| |||||||
| |||||||
1 | association shall provide to the Director an | ||||||
2 | annual certification by the association's | ||||||
3 | domiciliary regulator of the solvency of each | ||||||
4 | underwriter member; or if a certification is | ||||||
5 | unavailable, financial statements, prepared by | ||||||
6 | independent public accountants, of each | ||||||
7 | underwriter member of the association. | ||||||
8 | (3) The Director shall create and publish a list | ||||||
9 | of qualified jurisdictions, under which an assuming | ||||||
10 | insurer licensed and domiciled in such jurisdiction
is | ||||||
11 | eligible to be considered for certification by the | ||||||
12 | Director as a certified reinsurer. | ||||||
13 | (a) In order to determine whether the | ||||||
14 | domiciliary jurisdiction of a non-U.S. assuming | ||||||
15 | insurer is eligible to be recognized as a | ||||||
16 | qualified jurisdiction, the Director shall | ||||||
17 | evaluate the appropriateness and effectiveness of | ||||||
18 | the reinsurance supervisory system of the | ||||||
19 | jurisdiction, both initially and on an ongoing | ||||||
20 | basis, and consider the rights, benefits, and | ||||||
21 | extent of reciprocal recognition afforded by
the | ||||||
22 | non-U.S. jurisdiction to reinsurers licensed and | ||||||
23 | domiciled in the U.S. A qualified jurisdiction | ||||||
24 | must agree in writing to share information and | ||||||
25 | cooperate with the Director with respect to all | ||||||
26 | certified reinsurers domiciled within that |
| |||||||
| |||||||
1 | jurisdiction. A jurisdiction may not be recognized | ||||||
2 | as a qualified jurisdiction if the Director has | ||||||
3 | determined that the jurisdiction does not | ||||||
4 | adequately and promptly enforce final U.S. | ||||||
5 | judgments and arbitration awards. The costs and | ||||||
6 | expenses associated with the Director's review and | ||||||
7 | evaluation of the domiciliary jurisdictions of | ||||||
8 | non-U.S. assuming insurers shall be borne by the | ||||||
9 | certified reinsurer or reinsurers domiciled in | ||||||
10 | such jurisdiction. | ||||||
11 | (b) Additional factors to be considered in | ||||||
12 | determining whether to recognize a qualified | ||||||
13 | jurisdiction include, but are not limited to, the | ||||||
14 | following: | ||||||
15 | (i) the framework under which the assuming | ||||||
16 | insurer is regulated; | ||||||
17 | (ii) the structure and authority of the | ||||||
18 | domiciliary regulator with regard to solvency | ||||||
19 | regulation requirements and financial | ||||||
20 | surveillance; | ||||||
21 | (iii) the substance of financial and | ||||||
22 | operating standards for assuming insurers in | ||||||
23 | the domiciliary jurisdiction; | ||||||
24 | (iv) the form and substance of financial | ||||||
25 | reports required to be filed or made publicly | ||||||
26 | available by reinsurers in the domiciliary |
| |||||||
| |||||||
1 | jurisdiction and the accounting principles | ||||||
2 | used; | ||||||
3 | (v) the domiciliary regulator's | ||||||
4 | willingness to cooperate with U.S. regulators | ||||||
5 | in general and the Director in particular; | ||||||
6 | (vi) the history of performance by | ||||||
7 | assuming insurers in the domiciliary | ||||||
8 | jurisdiction; | ||||||
9 | (vii) any documented evidence of | ||||||
10 | substantial problems with the enforcement of | ||||||
11 | final U.S. judgments in the domiciliary | ||||||
12 | jurisdiction; and | ||||||
13 | (viii) any relevant international | ||||||
14 | standards or guidance with respect to mutual | ||||||
15 | recognition of reinsurance supervision adopted | ||||||
16 | by the International Association of Insurance | ||||||
17 | Supervisors or its successor organization. | ||||||
18 | (c) If, upon conducting an evaluation under | ||||||
19 | this paragraph with respect to the reinsurance | ||||||
20 | supervisory system of any non-U.S. assuming | ||||||
21 | insurer, the Director determines that the | ||||||
22 | jurisdiction qualifies to be recognized as a | ||||||
23 | qualified jurisdiction, the Director shall publish | ||||||
24 | notice and evidence of such recognition in an | ||||||
25 | appropriate manner. The Director may establish a | ||||||
26 | procedure to withdraw recognition of those |
| |||||||
| |||||||
1 | jurisdictions that are no longer qualified. | ||||||
2 | (d) The Director shall consider the list of | ||||||
3 | qualified jurisdictions through the NAIC committee | ||||||
4 | process in determining qualified jurisdictions. If | ||||||
5 | the Director approves a jurisdiction as qualified | ||||||
6 | that does not appear on the list of qualified | ||||||
7 | jurisdictions, then the Director shall provide | ||||||
8 | thoroughly documented justification in accordance | ||||||
9 | with criteria to be developed under regulations. | ||||||
10 | (e) U.S. jurisdictions that meet the | ||||||
11 | requirement for accreditation under the NAIC | ||||||
12 | financial standards and accreditation program | ||||||
13 | shall be recognized as qualified jurisdictions. | ||||||
14 | (f) If a certified reinsurer's domiciliary | ||||||
15 | jurisdiction ceases to be a qualified | ||||||
16 | jurisdiction, then the Director may suspend the | ||||||
17 | reinsurer's certification indefinitely, in lieu of | ||||||
18 | revocation. | ||||||
19 | (4) If an applicant for certification has been | ||||||
20 | certified as a reinsurer in an NAIC accredited | ||||||
21 | jurisdiction, then the Director may defer to that | ||||||
22 | jurisdiction's certification and to the rating | ||||||
23 | assigned by that jurisdiction if the assuming insurer | ||||||
24 | submits a properly executed Form CR-1 and such | ||||||
25 | additional information as the Director requires. Such | ||||||
26 | assuming insurer shall be considered to be a certified |
| |||||||
| |||||||
1 | reinsurer in this State but only upon the Director's | ||||||
2 | assignment of an Illinois rating, which shall be made | ||||||
3 | based on the requirements of subparagraph (5) of this | ||||||
4 | paragraph (C-5). The following shall apply: | ||||||
5 | (a) Any change in the certified reinsurer's | ||||||
6 | status or rating in the other jurisdiction shall | ||||||
7 | apply automatically in Illinois as of the date it | ||||||
8 | takes effect in the other jurisdiction. The | ||||||
9 | certified reinsurer shall notify the Director of | ||||||
10 | any change in its status or rating within 10 days | ||||||
11 | after receiving notice of the change. | ||||||
12 | (b) The Director may withdraw recognition of | ||||||
13 | the other jurisdiction's rating at any time and | ||||||
14 | assign a new rating in accordance with | ||||||
15 | subparagraph (5) of this paragraph (C-5). | ||||||
16 | (c) The Director may withdraw recognition of | ||||||
17 | the other jurisdiction's certification at any time | ||||||
18 | with written notice to the certified reinsurer. | ||||||
19 | Unless the Director suspends or revokes the | ||||||
20 | certified reinsurer's certification in accordance | ||||||
21 | with item (c) of subparagraph (9) of this | ||||||
22 | paragraph (C-5), the certified reinsurer's | ||||||
23 | certification shall remain in good standing in | ||||||
24 | Illinois for a period of 3 months, which shall be | ||||||
25 | extended if additional time is necessary to | ||||||
26 | consider the assuming insurer's application for |
| |||||||
| |||||||
1 | certification in Illinois. | ||||||
2 | (5) The Director shall assign a rating to each | ||||||
3 | certified reinsurer pursuant to rules adopted by the | ||||||
4 | Department. Factors that shall be considered as part | ||||||
5 | of the evaluation process include the following: | ||||||
6 | (a) The certified reinsurer's financial | ||||||
7 | strength rating from an acceptable rating agency. | ||||||
8 | Financial strength ratings shall be classified | ||||||
9 | according to the following ratings categories: | ||||||
10 | (i) Ratings Category "Secure - 1" | ||||||
11 | corresponds to the highest level of rating | ||||||
12 | given by a rating agency, including, but not | ||||||
13 | limited to, A.M. Best Company rating A++; | ||||||
14 | Standard & Poor's rating AAA; Moody's | ||||||
15 | Investors Service rating Aaa; and Fitch | ||||||
16 | Ratings rating AAA. | ||||||
17 | (ii) Ratings Category "Secure - 2" | ||||||
18 | corresponds to the second-highest level of | ||||||
19 | rating or group of ratings given by a rating | ||||||
20 | agency, including, but not limited to, A.M. | ||||||
21 | Best Company rating A+;
Standard & Poor's | ||||||
22 | rating AA+, AA, or AA-; Moody's Investors | ||||||
23 | Service ratings Aa1, Aa2, or Aa3; and Fitch | ||||||
24 | Ratings ratings AA+, AA, or AA-. | ||||||
25 | (iii) Ratings Category "Secure - 3" | ||||||
26 | corresponds to the third-highest level of |
| |||||||
| |||||||
1 | rating or group of ratings given by a rating | ||||||
2 | agency, including, but not limited to, A.M. | ||||||
3 | Best Company rating A; Standard & Poor's | ||||||
4 | ratings A+ or A; Moody's Investors Service | ||||||
5 | ratings A1 or A2; and Fitch Ratings ratings A+ | ||||||
6 | or A. | ||||||
7 | (iv) Ratings Category "Secure - 4" | ||||||
8 | corresponds to the fourth-highest level of | ||||||
9 | rating or group of ratings given by a rating | ||||||
10 | agency, including, but not limited to, A.M. | ||||||
11 | Best Company rating A-; Standard & Poor's | ||||||
12 | rating A-; Moody's Investors Service rating | ||||||
13 | A3; and Fitch Ratings rating A-. | ||||||
14 | (v) Ratings Category "Secure - 5" | ||||||
15 | corresponds to the fifth-highest level of | ||||||
16 | rating or group of ratings given by a rating | ||||||
17 | agency, including, but not limited to, A.M. | ||||||
18 | Best Company ratings B++ or B+; Standard & | ||||||
19 | Poor's ratings BBB+, BBB, or BBB-; Moody's | ||||||
20 | Investors Service ratings Baa1, Baa2, or Baa3; | ||||||
21 | and Fitch Ratings ratings BBB+, BBB, or BBB-. | ||||||
22 | (vi) Ratings Category "Vulnerable - 6" | ||||||
23 | corresponds to a level of rating given by a | ||||||
24 | rating agency, other than those described in | ||||||
25 | subitems (i) through (v) of this item (a), | ||||||
26 | including, but not limited to, A.M. Best |
| |||||||
| |||||||
1 | Company rating B, B-, C++, C+, C, C-, D, E, or | ||||||
2 | F; Standard & Poor's ratings BB+, BB, BB-, B+, | ||||||
3 | B, B-, CCC, CC, C, D, or R; Moody's Investors | ||||||
4 | Service ratings Ba1, Ba2, Ba3, B1, B2, B3, | ||||||
5 | Caa, Ca, or C; and Fitch Ratings ratings BB+, | ||||||
6 | BB, BB-, B+, B, B-, CCC+, CCC, CCC-, or D. | ||||||
7 | A failure to obtain or
maintain at least 2 | ||||||
8 | financial strength
ratings
from acceptable rating | ||||||
9 | agencies shall result
in loss of eligibility for | ||||||
10 | certification. | ||||||
11 | (b) The business practices of the certified | ||||||
12 | reinsurer in dealing with its ceding insurers, | ||||||
13 | including its record of compliance with | ||||||
14 | reinsurance contractual terms and obligations. | ||||||
15 | (c) For certified reinsurers domiciled in the | ||||||
16 | U.S., a review of the most recent applicable NAIC | ||||||
17 | Annual Statement Blank, either Schedule F (for | ||||||
18 | property and casualty reinsurers) or Schedule S | ||||||
19 | (for life and health reinsurers). | ||||||
20 | (d) For certified reinsurers not domiciled in | ||||||
21 | the U.S., a review annually of Form CR-F (for | ||||||
22 | property and casualty reinsurers) or Form CR-S | ||||||
23 | (for life and health reinsurers). | ||||||
24 | (e) The reputation of the certified reinsurer | ||||||
25 | for prompt payment of claims under reinsurance | ||||||
26 | agreements, based on an analysis of ceding |
| |||||||
| |||||||
1 | insurers' Schedule F reporting of overdue | ||||||
2 | reinsurance recoverables, including the proportion | ||||||
3 | of obligations that are more than 90 days past due | ||||||
4 | or are in dispute, with specific attention given | ||||||
5 | to obligations payable to companies that are in | ||||||
6 | administrative supervision or receivership. | ||||||
7 | (f) Regulatory actions against the certified | ||||||
8 | reinsurer. | ||||||
9 | (g) The report of the independent auditor on | ||||||
10 | the financial statements of the insurance | ||||||
11 | enterprise, on the basis described in item (h) of | ||||||
12 | this subparagraph (5). | ||||||
13 | (h) For certified reinsurers not domiciled in | ||||||
14 | the U.S., audited financial statements (audited | ||||||
15 | Generally Accepted Accounting Principles (U.S. | ||||||
16 | GAAP) basis statement if available, audited | ||||||
17 | International Financial Reporting Standards (IFRS) | ||||||
18 | basis statements are allowed but must include an | ||||||
19 | audited footnote reconciling equity and net income | ||||||
20 | to U.S. GAAP basis or, with the permission of the | ||||||
21 | Director, audited IFRS basis statements with | ||||||
22 | reconciliation to U.S. GAAP basis certified by an | ||||||
23 | officer of the company), regulatory filings, and | ||||||
24 | actuarial opinion (as filed with the non-U.S. | ||||||
25 | jurisdiction supervisor). Upon the initial | ||||||
26 | application for certification, the Director shall |
| |||||||
| |||||||
1 | consider the audited financial statements filed | ||||||
2 | with its non-U.S. jurisdiction supervisor for the | ||||||
3 | 3 years immediately preceding the date of the | ||||||
4 | initial application for certification. | ||||||
5 | (i) The liquidation priority of obligations to | ||||||
6 | a ceding insurer in the certified reinsurer's | ||||||
7 | domiciliary jurisdiction in the context of an | ||||||
8 | insolvency proceeding. | ||||||
9 | (j) A certified reinsurer's participation in | ||||||
10 | any solvent scheme of arrangement, or similar | ||||||
11 | procedure, that involves U.S. ceding insurers. The | ||||||
12 | Director shall receive prior notice from a | ||||||
13 | certified reinsurer that proposes participation by | ||||||
14 | the certified reinsurer in a solvent scheme of | ||||||
15 | arrangement. | ||||||
16 | The maximum rating that a certified reinsurer may
| ||||||
17 | be assigned shall correspond to its financial
strength | ||||||
18 | rating, which shall be determined
according to | ||||||
19 | subitems (i) through (vi) of item
(a) of this | ||||||
20 | subparagraph (5). The Director shall use the lowest | ||||||
21 | financial
strength rating received from an acceptable | ||||||
22 | rating
agency in establishing the maximum rating of a
| ||||||
23 | certified reinsurer. | ||||||
24 | (6) Based on the analysis conducted under item (e) | ||||||
25 | of subparagraph (5) of this paragraph (C-5) of a | ||||||
26 | certified reinsurer's reputation for prompt payment of |
| |||||||
| |||||||
1 | claims, the Director may make appropriate adjustments | ||||||
2 | in the security the certified reinsurer is required to | ||||||
3 | post to protect its liabilities to U.S. ceding | ||||||
4 | insurers, provided that the Director shall, at a | ||||||
5 | minimum, increase the security the certified reinsurer | ||||||
6 | is required to post by one rating level under item (a) | ||||||
7 | of subparagraph (8) of this paragraph (C-5) if the | ||||||
8 | Director finds that: | ||||||
9 | (a) more than 15% of the certified reinsurer's | ||||||
10 | ceding insurance clients have overdue reinsurance | ||||||
11 | recoverables on paid losses of 90 days or more | ||||||
12 | that are not in dispute and that exceed $100,000 | ||||||
13 | for each cedent; or | ||||||
14 | (b) the aggregate amount of reinsurance | ||||||
15 | recoverables on paid losses that are not in | ||||||
16 | dispute that are overdue by 90 days or more | ||||||
17 | exceeds $50,000,000. | ||||||
18 | (7) The Director shall post notice on the | ||||||
19 | Department's website promptly upon receipt of any | ||||||
20 | application for certification, including instructions | ||||||
21 | on how members of the public may respond to the | ||||||
22 | application. The Director may not take final action on | ||||||
23 | the application until at least 30 days after posting | ||||||
24 | the notice required by this subparagraph. The Director | ||||||
25 | shall publish a list of all certified reinsurers and | ||||||
26 | their ratings. |
| |||||||
| |||||||
1 | (8) A certified reinsurer shall secure obligations | ||||||
2 | assumed from U.S. ceding insurers under this | ||||||
3 | subsection (1) at a level consistent with its rating. | ||||||
4 | (a) The amount of security required in order | ||||||
5 | for full credit to be allowed shall correspond | ||||||
6 | with the applicable ratings category: | ||||||
7 | Secure - 1: 0%. | ||||||
8 | Secure - 2: 10%. | ||||||
9 | Secure - 3: 20%. | ||||||
10 | Secure - 4: 50%. | ||||||
11 | Secure - 5: 75%. | ||||||
12 | Vulnerable - 6: 100%. | ||||||
13 | (b) Nothing in this subparagraph (8) shall | ||||||
14 | prohibit the parties to a reinsurance agreement | ||||||
15 | from agreeing to provisions establishing security | ||||||
16 | requirements that exceed the minimum security | ||||||
17 | requirements established for certified reinsurers | ||||||
18 | under this Section. | ||||||
19 | (c) In order for a domestic ceding insurer to | ||||||
20 | qualify for full financial statement credit for | ||||||
21 | reinsurance ceded to a certified reinsurer, the | ||||||
22 | certified reinsurer shall maintain security in a | ||||||
23 | form acceptable to the Director and consistent | ||||||
24 | with the provisions of subsection (2) of this | ||||||
25 | Section, or in a multibeneficiary trust in | ||||||
26 | accordance with paragraph (C) of this
subsection |
| |||||||
| |||||||
1 | (1), except as otherwise provided in this | ||||||
2 | subparagraph (8). | ||||||
3 | (d) If a certified reinsurer maintains a trust | ||||||
4 | to fully secure its obligations subject to | ||||||
5 | paragraph (C) of this subsection (1), and chooses | ||||||
6 | to secure its obligations incurred as a certified | ||||||
7 | reinsurer in the form of a multibeneficiary trust, | ||||||
8 | then the certified reinsurer shall maintain | ||||||
9 | separate trust accounts for its obligations | ||||||
10 | incurred under reinsurance
agreements issued or | ||||||
11 | renewed as a certified reinsurer with reduced | ||||||
12 | security as permitted by this subsection or | ||||||
13 | comparable laws of other U.S. jurisdictions and | ||||||
14 | for its obligations subject to paragraph (C) of | ||||||
15 | this subsection (1). It shall be a condition to | ||||||
16 | the grant of certification under this paragraph | ||||||
17 | (C-5) that the certified reinsurer shall have | ||||||
18 | bound itself, by the language of the trust and | ||||||
19 | agreement with the
Director with principal | ||||||
20 | regulatory oversight of each such trust account, | ||||||
21 | to fund, upon termination of any such trust | ||||||
22 | account, out of the remaining surplus of such | ||||||
23 | trust any deficiency of any other such trust | ||||||
24 | account. The certified reinsurer shall also | ||||||
25 | provide or make available, if requested by a | ||||||
26 | beneficiary under a trust, all the information |
| |||||||
| |||||||
1 | that is required to be provided under the | ||||||
2 | requirements of item (d) of subparagraph (2) of | ||||||
3 | paragraph (C) of this subsection (1) to the | ||||||
4 | certified reinsurer's U.S. ceding insurers or | ||||||
5 | their assigns and successors in interest. The | ||||||
6 | assuming insurer may decline to release trade | ||||||
7 | secrets or commercially sensitive information that | ||||||
8 | would qualify as exempt from disclosure under the | ||||||
9 | Freedom of Information Act. | ||||||
10 | (e) The minimum trusteed surplus requirements | ||||||
11 | provided in paragraph (C) of this subsection (1) | ||||||
12 | are not applicable with respect to a | ||||||
13 | multibeneficiary trust maintained by a certified | ||||||
14 | reinsurer for the purpose of securing obligations | ||||||
15 | incurred under this subsection, except that such | ||||||
16 | trust shall maintain a minimum trusteed surplus of | ||||||
17 | $10,000,000. | ||||||
18 | (f) With respect to obligations incurred by a | ||||||
19 | certified reinsurer under this subsection (1), if | ||||||
20 | the security is insufficient, then the Director | ||||||
21 | may reduce the allowable credit by an amount | ||||||
22 | proportionate to the deficiency and may impose | ||||||
23 | further reductions in allowable credit upon | ||||||
24 | finding that there is a material risk that the | ||||||
25 | certified reinsurer's obligations will not be paid | ||||||
26 | in full when due. |
| |||||||
| |||||||
1 | (9)(a) In the case of a downgrade by a rating | ||||||
2 | agency or other disqualifying circumstance, the | ||||||
3 | Director shall by written notice assign a new rating | ||||||
4 | to the certified reinsurer in accordance with the | ||||||
5 | requirements of subparagraph (5) of this paragraph | ||||||
6 | (C-5). | ||||||
7 | (b) If the rating of a certified reinsurer is | ||||||
8 | upgraded by the Director, then the certified reinsurer | ||||||
9 | may meet the security requirements applicable to its | ||||||
10 | new rating on a prospective basis, but the Director | ||||||
11 | shall require the certified reinsurer to post security | ||||||
12 | under the previously applicable security requirements | ||||||
13 | as to all contracts in force on or before the effective | ||||||
14 | date of the upgraded rating. If the rating of a | ||||||
15 | certified reinsurer is downgraded by the Director, | ||||||
16 | then the Director shall require the certified | ||||||
17 | reinsurer to meet the security requirements applicable | ||||||
18 | to its new rating for all business it has assumed as a | ||||||
19 | certified reinsurer. | ||||||
20 | (c) The Director may suspend, revoke, or otherwise | ||||||
21 | modify a certified reinsurer's certification at any | ||||||
22 | time if the certified reinsurer fails to meet its | ||||||
23 | obligations or security requirements under this | ||||||
24 | Section or if other financial or operating results of | ||||||
25 | the certified reinsurer, or documented significant | ||||||
26 | delays in payment by the certified reinsurer, lead the |
| |||||||
| |||||||
1 | Director to reconsider the certified reinsurer's | ||||||
2 | ability or willingness to meet its contractual | ||||||
3 | obligations. In seeking to suspend, revoke, or | ||||||
4 | otherwise modify a certified reinsurer's | ||||||
5 | certification, the Director shall follow the | ||||||
6 | procedures provided in paragraph (G) of this | ||||||
7 | subsection (1). | ||||||
8 | (d) For purposes of this subsection (1), a | ||||||
9 | certified reinsurer whose certification has been | ||||||
10 | terminated for any reason shall be treated as a | ||||||
11 | certified reinsurer required to secure 100% of its | ||||||
12 | obligations. | ||||||
13 | (i) As used in this item (d), the term | ||||||
14 | "terminated" refers to revocation, suspension, | ||||||
15 | voluntary surrender and inactive status. | ||||||
16 | (ii) If the Director continues to assign a | ||||||
17 | higher rating as permitted by other provisions of | ||||||
18 | this Section, then this requirement does not apply | ||||||
19 | to a certified reinsurer in inactive status or to | ||||||
20 | a reinsurer whose certification has been | ||||||
21 | suspended. | ||||||
22 | (e) Upon revocation of the certification of a | ||||||
23 | certified reinsurer by the Director, the assuming | ||||||
24 | insurer shall be required to post security in | ||||||
25 | accordance with subsection (2) of this Section in | ||||||
26 | order for the ceding insurer to continue to take |
| |||||||
| |||||||
1 | credit for reinsurance ceded to the assuming insurer. | ||||||
2 | If funds continue to be held in trust, then the | ||||||
3 | Director may allow additional credit equal to the | ||||||
4 | ceding insurer's pro rata share of the funds, | ||||||
5 | discounted to reflect the risk of uncollectibility and | ||||||
6 | anticipated expenses of trust administration. | ||||||
7 | (f) Notwithstanding the change of a certified | ||||||
8 | reinsurer's rating or revocation of its certification, | ||||||
9 | a domestic insurer that has ceded reinsurance to that | ||||||
10 | certified reinsurer may not be denied credit for | ||||||
11 | reinsurance for a period of 3 months for all | ||||||
12 | reinsurance ceded to that certified reinsurer, unless | ||||||
13 | the reinsurance is found by the Director to be at high | ||||||
14 | risk of uncollectibility. | ||||||
15 | (10) A certified reinsurer that ceases to assume | ||||||
16 | new business in this State may request to maintain its | ||||||
17 | certification in inactive status in order to continue | ||||||
18 | to qualify for a reduction in security for its | ||||||
19 | in-force business. An inactive certified reinsurer | ||||||
20 | shall continue to comply with all applicable | ||||||
21 | requirements of this subsection (1), and the Director | ||||||
22 | shall assign a rating that takes into account, if | ||||||
23 | relevant, the reasons why the reinsurer is not | ||||||
24 | assuming new business. | ||||||
25 | (11) Credit for reinsurance under this paragraph | ||||||
26 | (C-5)
shall apply only to reinsurance contracts |
| |||||||
| |||||||
1 | entered
into or renewed on or after the effective date | ||||||
2 | of
the certification of the assuming insurer. | ||||||
3 | (12) The Director shall comply with all reporting | ||||||
4 | and notification requirements that may be established | ||||||
5 | by the NAIC with respect to certified reinsurers and | ||||||
6 | qualified jurisdictions. | ||||||
7 | (C-10)(1) Credit shall be allowed when the reinsurance | ||||||
8 | is ceded to an assuming insurer meeting each of the | ||||||
9 | conditions set forth in this subparagraph. | ||||||
10 | (a) The assuming insurer must have its head office | ||||||
11 | in or be domiciled in, as applicable, and be licensed | ||||||
12 | in a reciprocal jurisdiction. As used in this | ||||||
13 | paragraph (C-10), "reciprocal jurisdiction" means a | ||||||
14 | jurisdiction that meets one of the following: | ||||||
15 | (i) a non-U.S. jurisdiction that is subject to | ||||||
16 | an in-force covered agreement with the United | ||||||
17 | States, each within its legal authority, or, in | ||||||
18 | the case of a covered agreement between the United | ||||||
19 | States and European Union, is a member state of | ||||||
20 | the European Union; as used in this subitem, | ||||||
21 | "covered agreement" means an agreement entered | ||||||
22 | into pursuant to the Dodd-Frank Wall Street Reform | ||||||
23 | and Consumer Protection Act (31 U.S.C. 313 and | ||||||
24 | 314) that is currently in effect or in a period of | ||||||
25 | provisional application and addresses the | ||||||
26 | elimination, under specified conditions, of |
| |||||||
| |||||||
1 | collateral requirements as a condition for | ||||||
2 | entering into any reinsurance agreement with a | ||||||
3 | ceding insurer domiciled in this State or for | ||||||
4 | allowing the ceding insurer to recognize credit | ||||||
5 | for reinsurance; | ||||||
6 | (ii) a U.S. jurisdiction that meets the | ||||||
7 | requirements for accreditation under the NAIC | ||||||
8 | financial standards and accreditation program; or | ||||||
9 | (iii) a qualified jurisdiction, as determined | ||||||
10 | by the Director pursuant to subparagraph (3) of | ||||||
11 | paragraph (C-5) of subsection (1) of this Section, | ||||||
12 | that is not otherwise described in subitem (i) or | ||||||
13 | (ii) of this item and that meets certain | ||||||
14 | additional requirements, consistent with the terms | ||||||
15 | and conditions of in-force covered agreements, as | ||||||
16 | specified by the Department by rule. | ||||||
17 | (b) The assuming insurer must have and maintain, | ||||||
18 | on an ongoing basis, minimum capital and surplus, or | ||||||
19 | its equivalent, calculated according to the | ||||||
20 | methodology of its domiciliary jurisdiction, in an | ||||||
21 | amount to be set forth by rule. If the assuming insurer | ||||||
22 | is an association, including incorporated and | ||||||
23 | individual unincorporated underwriters, it must have | ||||||
24 | and maintain, on an ongoing basis, minimum capital and | ||||||
25 | surplus equivalents (net of liabilities) calculated | ||||||
26 | according to the methodology applicable in its |
| |||||||
| |||||||
1 | domiciliary jurisdiction and a central fund containing | ||||||
2 | a balance in amounts to be set forth by rule. | ||||||
3 | (c) The assuming insurer must have and maintain, | ||||||
4 | on an ongoing basis, a minimum solvency or capital | ||||||
5 | ratio, as applicable, that will be set forth by rule. | ||||||
6 | If the assuming insurer is an association, including | ||||||
7 | incorporated and individual unincorporated | ||||||
8 | underwriters, it must have and maintain, on an ongoing | ||||||
9 | basis, a minimum solvency or capital ratio in the | ||||||
10 | reciprocal jurisdiction where the assuming insurer has | ||||||
11 | its head office or is domiciled, as applicable, and is | ||||||
12 | also licensed. | ||||||
13 | (d) The assuming insurer must provide adequate | ||||||
14 | assurance to the Director, in a form specified by the | ||||||
15 | Department by rule, as follows: | ||||||
16 | (i) the assuming insurer must provide prompt | ||||||
17 | written notice and explanation to the Director if | ||||||
18 | it falls below the minimum requirements set forth | ||||||
19 | in items (b) or (c) of this subparagraph or if any | ||||||
20 | regulatory action is taken against it for serious | ||||||
21 | noncompliance with applicable law; | ||||||
22 | (ii) the assuming insurer must consent in | ||||||
23 | writing to the jurisdiction of the courts of this | ||||||
24 | State and to the appointment of the Director as | ||||||
25 | agent for service of process; the Director may | ||||||
26 | require that consent for service of process be |
| |||||||
| |||||||
1 | provided to the Director and included in each | ||||||
2 | reinsurance agreement; nothing in this subitem | ||||||
3 | (ii) shall limit or in any way alter the capacity | ||||||
4 | of parties to a reinsurance agreement to agree to | ||||||
5 | alternative dispute resolution mechanisms, except | ||||||
6 | to the extent such agreements are unenforceable | ||||||
7 | under applicable insolvency or delinquency laws; | ||||||
8 | (iii) the assuming insurer must consent in | ||||||
9 | writing to pay all final judgments obtained by a | ||||||
10 | ceding insurer or its legal successor, whenever | ||||||
11 | enforcement is sought, that have been declared | ||||||
12 | enforceable in the jurisdiction where the judgment | ||||||
13 | was obtained; | ||||||
14 | (iv) each reinsurance agreement must include a | ||||||
15 | provision requiring the assuming insurer to | ||||||
16 | provide security in an amount equal to 100% of the | ||||||
17 | assuming insurer's liabilities attributable to | ||||||
18 | reinsurance ceded pursuant to that agreement if | ||||||
19 | the assuming insurer resists enforcement of a | ||||||
20 | final judgment that is enforceable under the law | ||||||
21 | of the jurisdiction in which it was obtained or a | ||||||
22 | properly enforceable arbitration award, whether | ||||||
23 | obtained by the ceding insurer or by its legal | ||||||
24 | successor on behalf of its resolution estate; and | ||||||
25 | (v) the assuming insurer must confirm that it | ||||||
26 | is not presently participating in any solvent |
| |||||||
| |||||||
1 | scheme of arrangement which involves this State's | ||||||
2 | ceding insurers and agree to notify the ceding | ||||||
3 | insurer and the Director and to provide security | ||||||
4 | in an amount equal to 100% of the assuming | ||||||
5 | insurer's liabilities to the ceding insurer if the | ||||||
6 | assuming insurer enters into such a solvent scheme | ||||||
7 | of arrangement; the security shall be in a form | ||||||
8 | consistent with the provisions of paragraph (C-5) | ||||||
9 | of subsection (1) and subsection (2) and as | ||||||
10 | specified by the Department by rule. | ||||||
11 | (e) If requested by the Director, the assuming | ||||||
12 | insurer or its legal successor must provide, on behalf | ||||||
13 | of itself and any legal predecessors, certain | ||||||
14 | documentation to the Director, as specified by the | ||||||
15 | Department by rule. | ||||||
16 | (f) The assuming insurer must maintain a practice | ||||||
17 | of prompt payment of claims under reinsurance | ||||||
18 | agreements pursuant to criteria set forth by rule. | ||||||
19 | (g) The assuming insurer's supervisory authority | ||||||
20 | must confirm to the Director on an annual basis, as of | ||||||
21 | the preceding December 31 or at the annual date | ||||||
22 | otherwise statutorily reported to the reciprocal | ||||||
23 | jurisdiction, that the assuming insurer complied with | ||||||
24 | the requirements set forth in items (b) and (c) of this | ||||||
25 | subparagraph. | ||||||
26 | (h) Nothing in this subparagraph precludes an |
| |||||||
| |||||||
1 | assuming insurer from providing the Director with | ||||||
2 | information on a voluntary basis. | ||||||
3 | (2) The Director shall timely create and publish a | ||||||
4 | list of reciprocal jurisdictions. | ||||||
5 | (a) The Director's list shall include any | ||||||
6 | reciprocal jurisdiction as defined under subitems (i) | ||||||
7 | and (ii) of item (a) of subparagraph (1) of this | ||||||
8 | paragraph, and shall consider any other reciprocal | ||||||
9 | jurisdiction included on the list of reciprocal | ||||||
10 | jurisdictions published through the NAIC committee | ||||||
11 | process. The Director may approve a jurisdiction that | ||||||
12 | does not appear on the NAIC list of reciprocal | ||||||
13 | jurisdictions in accordance with criteria to be | ||||||
14 | developed by rules adopted by the Department. | ||||||
15 | (b) The Director may remove a jurisdiction from | ||||||
16 | the list of reciprocal jurisdictions upon a | ||||||
17 | determination that the jurisdiction no longer meets | ||||||
18 | the requirements of a reciprocal jurisdiction in | ||||||
19 | accordance with a process set forth in rules adopted | ||||||
20 | by the Department, except that the Director shall not | ||||||
21 | remove from the list a reciprocal jurisdiction as | ||||||
22 | defined under subitems (i) and (ii) of item (a) of | ||||||
23 | subparagraph (1) of this paragraph. If otherwise | ||||||
24 | allowed pursuant to this Section, credit for | ||||||
25 | reinsurance ceded to an assuming insurer that has its | ||||||
26 | home office or is domiciled in that jurisdiction shall |
| |||||||
| |||||||
1 | be allowed upon removal of a reciprocal jurisdiction | ||||||
2 | from this list. | ||||||
3 | (3) The Director shall timely create and publish a | ||||||
4 | list of assuming insurers that have satisfied the | ||||||
5 | conditions set forth in this paragraph and to which | ||||||
6 | cessions shall be granted credit in accordance with this | ||||||
7 | paragraph. The Director may add an assuming insurer to the | ||||||
8 | list if a NAIC-accredited jurisdiction has added the | ||||||
9 | assuming insurer to a list of assuming insurers or if, | ||||||
10 | upon initial eligibility, the assuming insurer submits the | ||||||
11 | information to the Director as required under item (d) of | ||||||
12 | subparagraph (1) of this paragraph and complies with any | ||||||
13 | additional requirements that the Department may impose by | ||||||
14 | rule except to the extent that they conflict with an | ||||||
15 | applicable covered agreement. | ||||||
16 | (4) If the Director determines that an assuming | ||||||
17 | insurer no longer meets one or more of the requirements | ||||||
18 | under this paragraph, the Director may revoke or suspend | ||||||
19 | the eligibility of the assuming insurer for recognition | ||||||
20 | under this paragraph in accordance with procedures set | ||||||
21 | forth by rule. | ||||||
22 | (a) While an assuming insurer's eligibility is | ||||||
23 | suspended, no reinsurance agreement issued, amended, | ||||||
24 | or renewed after the effective date of the suspension | ||||||
25 | qualifies for credit except to the extent that the | ||||||
26 | assuming insurer's obligations under the contract are |
| |||||||
| |||||||
1 | secured in accordance with subsection (2). | ||||||
2 | (b) If an assuming insurer's eligibility is | ||||||
3 | revoked, no credit for reinsurance may be granted | ||||||
4 | after the effective date of the revocation with | ||||||
5 | respect to any reinsurance agreements entered into by | ||||||
6 | the assuming insurer, including reinsurance agreements | ||||||
7 | entered into before the date of revocation, except to | ||||||
8 | the extent that the assuming insurer's obligations | ||||||
9 | under the contract are secured in a form acceptable to | ||||||
10 | the Director and consistent with the provisions of | ||||||
11 | subsection (2). | ||||||
12 | (5) If subject to a legal process of rehabilitation, | ||||||
13 | liquidation, or conservation, as applicable, the ceding | ||||||
14 | insurer or its representative may seek and, if determined | ||||||
15 | appropriate by the court in which the proceedings are | ||||||
16 | pending, may obtain an order requiring that the assuming | ||||||
17 | insurer post security for all outstanding ceded | ||||||
18 | liabilities. | ||||||
19 | (6) Nothing in this paragraph shall limit or in any | ||||||
20 | way alter the capacity of parties to a reinsurance | ||||||
21 | agreement to agree on requirements for security or other | ||||||
22 | terms in that reinsurance agreement except as expressly | ||||||
23 | prohibited by this Section or other applicable law or | ||||||
24 | regulation. | ||||||
25 | (7) Credit may be taken under this paragraph only for | ||||||
26 | reinsurance agreements entered into, amended, or renewed |
| |||||||
| |||||||
1 | on or after the effective date of this amendatory Act of | ||||||
2 | the 102nd General Assembly and only with respect to losses | ||||||
3 | incurred and reserves reported on or after the later of: | ||||||
4 | (i) the date on which the assuming insurer has met | ||||||
5 | all eligibility requirements pursuant to subparagraph | ||||||
6 | (1) of this paragraph; and | ||||||
7 | (ii) the effective date of the new reinsurance | ||||||
8 | agreement, amendment, or renewal. | ||||||
9 | This subparagraph does not alter or impair a ceding | ||||||
10 | insurer's right to take credit for reinsurance, to the | ||||||
11 | extent that credit is not available under this paragraph, | ||||||
12 | as long as the reinsurance qualifies for credit under any | ||||||
13 | other applicable provision of this Section. | ||||||
14 | (8) Nothing in this paragraph shall authorize an | ||||||
15 | assuming insurer to withdraw or reduce the security | ||||||
16 | provided under any reinsurance agreement except as | ||||||
17 | permitted by the terms of the agreement. | ||||||
18 | (9) Nothing in this paragraph shall limit or in any | ||||||
19 | way alter the capacity of parties to any reinsurance | ||||||
20 | agreement to renegotiate the agreement.
| ||||||
21 | (D) Credit shall be allowed when the reinsurance is | ||||||
22 | ceded to an assuming
insurer not meeting the requirements | ||||||
23 | of paragraph (A), (B), (B-5), or (C) , (C-5), or (C-10) of | ||||||
24 | this subsection (1)
but only with respect to the insurance | ||||||
25 | of risks located in jurisdictions
where that reinsurance | ||||||
26 | is required by applicable law or regulation of that
|
| |||||||
| |||||||
1 | jurisdiction.
| ||||||
2 | (E) If the assuming insurer is not licensed to | ||||||
3 | transact insurance in
this State or an accredited or | ||||||
4 | certified reinsurer in this State, the credit permitted
by | ||||||
5 | paragraphs (B-5) and (C) of this subsection (1) shall not | ||||||
6 | be allowed unless the assuming insurer
agrees in the | ||||||
7 | reinsurance agreements:
| ||||||
8 | (1) that in the event of the failure of the | ||||||
9 | assuming insurer to perform
its obligations under the | ||||||
10 | terms of the reinsurance agreement, the assuming
| ||||||
11 | insurer, at the request of the ceding insurer, shall | ||||||
12 | submit to the
jurisdiction of any court of competent | ||||||
13 | jurisdiction in any state of the
United States, will | ||||||
14 | comply with all requirements necessary to give the
| ||||||
15 | court jurisdiction, and will abide by the final | ||||||
16 | decision of the court or of
any appellate court in the | ||||||
17 | event of an appeal; and
| ||||||
18 | (2) to designate the Director or a designated | ||||||
19 | attorney as its true and
lawful attorney upon whom may | ||||||
20 | be served any lawful process in any action,
suit, or | ||||||
21 | proceeding instituted by or on behalf of the ceding | ||||||
22 | company.
| ||||||
23 | This provision is not intended to conflict with or | ||||||
24 | override the
obligation of the parties to a reinsurance | ||||||
25 | agreement to arbitrate their
disputes, if an obligation to | ||||||
26 | arbitrate is created in the agreement.
|
| |||||||
| |||||||
1 | (F) If the assuming insurer does not meet the | ||||||
2 | requirements of paragraph (A) , or (B) , (B-5), or (C-10) of | ||||||
3 | this
subsection (1), the credit permitted by paragraph (C) | ||||||
4 | or (C-5) of this subsection (1) shall not
be allowed | ||||||
5 | unless the assuming insurer agrees in the trust agreements | ||||||
6 | to the
following conditions:
| ||||||
7 | (1) Notwithstanding any other provisions in the | ||||||
8 | trust instrument, if the
trust fund is inadequate | ||||||
9 | because it contains an amount less than the amount
| ||||||
10 | required by subparagraph (3) of paragraph (C) of this | ||||||
11 | subsection (1) or if the grantor of the trust
has been | ||||||
12 | declared insolvent or placed into receivership, | ||||||
13 | rehabilitation,
liquidation, or similar proceedings | ||||||
14 | under the laws of its state or country of
domicile, the | ||||||
15 | trustee shall comply with an order of the state | ||||||
16 | official with
regulatory oversight over the trust or | ||||||
17 | with an order of a court of competent
jurisdiction | ||||||
18 | directing the trustee to transfer to the state | ||||||
19 | official with
regulatory oversight all of the assets | ||||||
20 | of the trust fund.
| ||||||
21 | (2) The assets shall be distributed by and claims | ||||||
22 | shall be filed with
and valued by the state official | ||||||
23 | with regulatory oversight in accordance with
the laws | ||||||
24 | of the state in which the trust is domiciled that are | ||||||
25 | applicable to
the liquidation of domestic insurance | ||||||
26 | companies.
|
| |||||||
| |||||||
1 | (3) If the state official with regulatory | ||||||
2 | oversight determines that the
assets of the trust fund | ||||||
3 | or any part thereof
are not necessary to satisfy the | ||||||
4 | claims of the U.S. ceding insurers of the
grantor of | ||||||
5 | the trust, the assets or part thereof shall be | ||||||
6 | returned by the state
official with regulatory | ||||||
7 | oversight to the trustee for distribution in
| ||||||
8 | accordance with the trust agreement.
| ||||||
9 | (4) The grantor shall waive any rights otherwise | ||||||
10 | available to it under
U.S. law that are inconsistent | ||||||
11 | with the provision.
| ||||||
12 | (G) If an accredited or certified reinsurer ceases to | ||||||
13 | meet the requirements for accreditation or certification, | ||||||
14 | then the Director may suspend or revoke the reinsurer's | ||||||
15 | accreditation or certification. | ||||||
16 | (1) The Director must give the reinsurer notice | ||||||
17 | and opportunity for hearing. The suspension or | ||||||
18 | revocation may not take effect until after the | ||||||
19 | Director's order on hearing, unless: | ||||||
20 | (a) the reinsurer waives its right to hearing; | ||||||
21 | (b) the Director's order is based on | ||||||
22 | regulatory action by the reinsurer's domiciliary | ||||||
23 | jurisdiction or the voluntary surrender or | ||||||
24 | termination of the reinsurer's eligibility to | ||||||
25 | transact insurance or reinsurance business in its | ||||||
26 | domiciliary jurisdiction or in the primary |
| |||||||
| |||||||
1 | certifying state of the reinsurer under | ||||||
2 | subparagraph (4) of paragraph (C-5) of this | ||||||
3 | subsection (1); or | ||||||
4 | (c) the Director finds that an emergency | ||||||
5 | requires immediate action and a court of competent | ||||||
6 | jurisdiction has not stayed the Director's action. | ||||||
7 | (2) While a reinsurer's accreditation or | ||||||
8 | certification is suspended, no reinsurance
contract | ||||||
9 | issued or renewed after the effective date of the | ||||||
10 | suspension qualifies for credit except to the extent | ||||||
11 | that the reinsurer's obligations under the contract | ||||||
12 | are secured in accordance with subsection (2) of this | ||||||
13 | Section. If a reinsurer's accreditation or | ||||||
14 | certification is revoked, no credit for reinsurance | ||||||
15 | may be granted after the effective date of the | ||||||
16 | revocation, except to the extent that the reinsurer's | ||||||
17 | obligations under the contract are secured in | ||||||
18 | accordance with subsection (2) of this Section. | ||||||
19 | (H) The following provisions shall apply concerning | ||||||
20 | concentration of risk: | ||||||
21 | (1) A ceding insurer shall take steps to manage | ||||||
22 | its reinsurance recoverable proportionate to its own | ||||||
23 | book of business. A domestic ceding insurer shall | ||||||
24 | notify the Director within 30 days after reinsurance | ||||||
25 | recoverables from any single assuming insurer, or | ||||||
26 | group of affiliated assuming insurers, exceeds 50% of |
| |||||||
| |||||||
1 | the domestic ceding insurer's last reported surplus to | ||||||
2 | policyholders, or after it is determined that | ||||||
3 | reinsurance recoverables from any single assuming | ||||||
4 | insurer, or group of affiliated assuming insurers, is | ||||||
5 | likely to exceed this limit. The notification shall | ||||||
6 | demonstrate that the exposure is safely managed by the | ||||||
7 | domestic ceding insurer. | ||||||
8 | (2) A ceding insurer shall take steps to diversify | ||||||
9 | its reinsurance program. A domestic ceding insurer | ||||||
10 | shall notify the Director within 30 days after ceding | ||||||
11 | to any single assuming insurer, or group of affiliated | ||||||
12 | assuming insurers, more than 20% of the ceding | ||||||
13 | insurer's gross written premium in the prior calendar | ||||||
14 | year, or after it has determined that the reinsurance | ||||||
15 | ceded to any single assuming insurer, or group of | ||||||
16 | affiliated assuming insurers, is likely to exceed this | ||||||
17 | limit. The notification shall demonstrate that the | ||||||
18 | exposure is safely managed by the domestic ceding | ||||||
19 | insurer. | ||||||
20 | (2) Credit for the reinsurance ceded by a
domestic
insurer | ||||||
21 | to an assuming insurer not meeting the requirements of | ||||||
22 | subsection
(1) of this Section shall be allowed in an amount | ||||||
23 | not exceeding the assets or liabilities
carried by
the ceding | ||||||
24 | insurer. The credit shall not exceed the amount of funds held
| ||||||
25 | by or held in trust for the ceding insurer under a reinsurance | ||||||
26 | contract with the assuming insurer
as security for the payment |
| |||||||
| |||||||
1 | of obligations thereunder, if the security is
held in the | ||||||
2 | United States subject to withdrawal solely by, and under the
| ||||||
3 | exclusive control of, the ceding insurer; or, in the case of a | ||||||
4 | trust, held
in a qualified United States financial | ||||||
5 | institution, as defined in paragraph (B) of
subsection (3) of | ||||||
6 | this Section. This security may be in the form of:
| ||||||
7 | (A) Cash.
| ||||||
8 | (B) Securities listed by the Securities Valuation | ||||||
9 | Office of the National
Association of Insurance | ||||||
10 | Commissioners, including those deemed exempt from filing | ||||||
11 | as defined by the Purposes and Procedures Manual of the | ||||||
12 | Securities Valuation Office that conform to the | ||||||
13 | requirements
of Article VIII of this Code that are not | ||||||
14 | issued by an affiliate of either
the assuming or ceding | ||||||
15 | company.
| ||||||
16 | (C) Clean, irrevocable, unconditional, letters of | ||||||
17 | credit issued or
confirmed by a qualified United States | ||||||
18 | financial institution, as defined in paragraph (A) of
| ||||||
19 | subsection (3) of this Section. The letters of credit | ||||||
20 | shall be effective no
later than December 31 of the year | ||||||
21 | for which filing is being
made, and in the possession of, | ||||||
22 | or in trust for, the ceding company on or
before the filing | ||||||
23 | date of its annual statement. Letters of credit meeting
| ||||||
24 | applicable standards of issuer acceptability as of the | ||||||
25 | dates of their
issuance (or confirmation) shall, | ||||||
26 | notwithstanding the issuing (or
confirming) institution's |
| |||||||
| |||||||
1 | subsequent failure to meet applicable standards
of issuer | ||||||
2 | acceptability, continue to be acceptable as security until | ||||||
3 | their
expiration, extension, renewal, modification, or | ||||||
4 | amendment, whichever first
occurs. | ||||||
5 | (D) Any other form of security acceptable to the | ||||||
6 | Director.
| ||||||
7 | (3)(A) For purposes of paragraph (C) of subsection (2) of | ||||||
8 | this Section, a "qualified United States
financial | ||||||
9 | institution" means an institution that:
| ||||||
10 | (1) is organized or, in the case of a U.S. office of a | ||||||
11 | foreign
banking organization, licensed under the laws of | ||||||
12 | the United States or
any state thereof;
| ||||||
13 | (2) is regulated, supervised, and examined by U.S. | ||||||
14 | federal or state
authorities having regulatory authority | ||||||
15 | over banks and trust companies;
| ||||||
16 | (3) has been designated by either the Director or the | ||||||
17 | Securities
Valuation Office of the
National Association of | ||||||
18 | Insurance Commissioners as meeting such
standards of | ||||||
19 | financial condition and standing as are considered | ||||||
20 | necessary and
appropriate to regulate the quality of | ||||||
21 | financial institutions whose letters of
credit will be | ||||||
22 | acceptable to the Director; and
| ||||||
23 | (4) is not affiliated with the assuming company.
| ||||||
24 | (B) A "qualified United States financial institution" | ||||||
25 | means, for
purposes of those provisions of this law specifying | ||||||
26 | those institutions that
are eligible to act as a fiduciary of a |
| |||||||
| |||||||
1 | trust, an institution that:
| ||||||
2 | (1) is organized or, in the case of the U.S. branch or | ||||||
3 | agency office of
a foreign banking organization, licensed | ||||||
4 | under the laws of the United States or
any state thereof | ||||||
5 | and has been granted authority to operate with fiduciary
| ||||||
6 | powers;
| ||||||
7 | (2) is regulated, supervised, and examined by federal | ||||||
8 | or state
authorities having regulatory authority over | ||||||
9 | banks and trust companies; and
| ||||||
10 | (3) is not affiliated with the assuming company, | ||||||
11 | however, if the
subject of the reinsurance contract is | ||||||
12 | insurance written pursuant to
Section 155.51 of this Code, | ||||||
13 | the financial institution may be affiliated
with the | ||||||
14 | assuming company with the prior approval of the Director. | ||||||
15 | (C) Except as set forth in subparagraph (11) of paragraph | ||||||
16 | (C-5) of subsection (1) of this Section as to cessions by | ||||||
17 | certified reinsurers, this amendatory Act of the 100th General | ||||||
18 | Assembly shall apply to all cessions after the effective date | ||||||
19 | of this amendatory Act of the 100th General Assembly under | ||||||
20 | reinsurance agreements that have an inception, anniversary, or | ||||||
21 | renewal date not less than 6 months after the effective date of | ||||||
22 | this amendatory Act of the 100th General Assembly.
| ||||||
23 | (D) The Department shall adopt rules implementing the | ||||||
24 | provisions of this Article. | ||||||
25 | (Source: P.A. 100-1118, eff. 11-27-18.)
| ||||||
26 | Section 99. Effective date. This Act takes effect December |
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1 | 31, 2022.
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