Full Text of SB1286 100th General Assembly
SB1286sam001 100TH GENERAL ASSEMBLY | Sen. John G. Mulroe Filed: 4/4/2017
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| 1 | | AMENDMENT TO SENATE BILL 1286
| 2 | | AMENDMENT NO. ______. Amend Senate Bill 1286 by replacing | 3 | | everything after the enacting clause with the following:
| 4 | | "Section 5. The Illinois Insurance Code is amended by | 5 | | changing Sections 121-2.08, 123C-1, 123C-2, 123C-3, 123C-9, | 6 | | 123C-11, 123C-12, 123C-13, 123C-16, 123C-17, 123C-19, and 445 | 7 | | and by adding Sections 123C-23, 123C-24, 123C-25, 123C-26, | 8 | | 123C-27, and 123C-28 as follows:
| 9 | | (215 ILCS 5/121-2.08) (from Ch. 73, par. 733-2.08)
| 10 | | Sec. 121-2.08.
Transactions in this State involving | 11 | | contracts of
insurance independently procured directly from an | 12 | | unauthorized insurer by industrial insureds. | 13 | | (a) As used in this Section: | 14 | | "Exempt commercial purchaser" means exempt commercial | 15 | | purchaser as the term is defined in subsection (1) of Section | 16 | | 445 of this Code. |
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| 1 | | "Home state" means home state as the term is defined in | 2 | | subsection (1) of Section 445 of this Code. | 3 | | "Industrial insured" means an insured:
| 4 | | (i) that procures the insurance of any risk or risks of | 5 | | the kinds specified in Classes 2 and 3 of Section 4 of this | 6 | | Code by use of the services of a full-time employee who is | 7 | | a qualified risk manager or the services of a regularly and
| 8 | | continuously retained consultant who is a qualified risk | 9 | | manager;
| 10 | | (ii) that procures the insurance directly from an | 11 | | unauthorized insurer without the services of an | 12 | | intermediary insurance producer; and
| 13 | | (iii) that is an exempt commercial purchaser whose home | 14 | | state is Illinois.
| 15 | | "Insurance producer" means insurance producer as the term | 16 | | is defined in Section 500-10 of this Code. | 17 | | "Qualified risk manager" means qualified risk manager as | 18 | | the term is defined in subsection (1) of Section 445 of this | 19 | | Code. | 20 | | "Unauthorized insurer" means unauthorized insurer as the | 21 | | term is defined in subsection (1) of Section 445 of this Code. | 22 | | (b) For contracts of insurance effective January 1, 2015 or | 23 | | later, within 90 days after the effective date of each contract | 24 | | of insurance issued under this Section, the insured shall file | 25 | | a report with the Director by submitting the report to the | 26 | | Surplus Line Association of Illinois in writing or in a |
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| 1 | | computer readable format and provide information as designated | 2 | | by the Surplus Line Association of Illinois. The information in | 3 | | the report shall be substantially similar to that required for | 4 | | surplus line submissions as described in subsection (5) of | 5 | | Section 445 of this Code. Where applicable, the report shall | 6 | | satisfy, with respect to the subject insurance, the reporting | 7 | | requirement of Section 12 of the Fire Investigation Act. | 8 | | (c) For contracts of insurance effective January 1, 2015 or | 9 | | later, within 30 days after filing the report, the insured | 10 | | shall pay to the Director for the use and benefit of the State | 11 | | a sum equal to the gross premium of the contract of insurance | 12 | | multiplied by the surplus line tax rate, as described in | 13 | | paragraph (3) of subsection (a) of Section 445 of this Code, | 14 | | and shall pay the fire marshal tax that would otherwise be due | 15 | | annually in March for insurance subject to tax under Section 12 | 16 | | of the Fire Investigation Act. For contracts of insurance | 17 | | effective January 1, 2015 or later, within 30 days after filing | 18 | | the report, the insured shall pay to the Surplus Line | 19 | | Association of Illinois a countersigning fee that shall be | 20 | | assessed at the same rate charged to members pursuant to | 21 | | subsection (4) of Section 445.1 of this Code. | 22 | | (d) For contracts of insurance effective January 1, 2015 or | 23 | | later, the insured shall withhold the amount of the taxes and | 24 | | countersignature fee from the amount of premium charged by and | 25 | | otherwise payable to the insurer for the insurance. If the | 26 | | insured fails to withhold the tax and countersignature fee from |
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| 1 | | the premium, then the insured shall be liable for the amounts | 2 | | thereof and shall pay the amounts as prescribed in subsection | 3 | | (c) of this Section. | 4 | | (e) Contracts of insurance with an industrial insured that | 5 | | qualifies as a Safety-Net Hospital are not subject to | 6 | | subsections (b) through (d) of this Section. | 7 | | (Source: P.A. 98-978, eff. 1-1-15 .)
| 8 | | (215 ILCS 5/123C-1) (from Ch. 73, par. 735C-1)
| 9 | | (Section scheduled to be repealed on January 1, 2027)
| 10 | | Sec. 123C-1. Definitions. As used in this Article:
| 11 | | A. "Affiliate" or "Affiliated company" includes a parent | 12 | | entity that controls a captive insurance company and: | 13 | | (1) is an affiliate of another entity if the entity | 14 | | directly or indirectly, through one or more | 15 | | intermediaries, controls, is controlled by, or is under | 16 | | common control with the other entity. | 17 | | (2) is an affiliate of another entity if the entity is | 18 | | an affiliate of and is controlled by the other entity | 19 | | directly or indirectly through one or more intermediaries. | 20 | | A subsidiary or holding company of an entity is an affiliate of | 21 | | that entity. shall have
the meaning set forth in subsection (a) | 22 | | of Section 131.1 (and, for
purposes of such definition, the | 23 | | definitions of "control"
and "person", as set forth in | 24 | | subsections (b) and (e) of Section
131.1, respectively, shall | 25 | | be applicable).
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| 1 | | B. "Association" means any entity meeting the requirements
| 2 | | set forth in either of the following paragraphs (1), (2) or | 3 | | (3):
| 4 | | (1) any organized association of individuals, legal
| 5 | | representatives, corporations (whether for profit or
not | 6 | | for profit), partnerships, trusts, associations, units of | 7 | | government
or other organizations, or any combination of | 8 | | the foregoing,
that has been in continuous existence for at | 9 | | least one
year, the member organizations of which | 10 | | collectively:
| 11 | | (a) own, control, or hold with power to vote | 12 | | (directly
or indirectly) all of the outstanding voting | 13 | | securities
of an association captive insurance company | 14 | | incorporated
as a stock insurer; or
| 15 | | (b) have complete voting control (directly or | 16 | | indirectly)
over an association captive insurance | 17 | | company organized
as a mutual insurer;
| 18 | | (2) any organized association of individuals, legal
| 19 | | representatives, corporations (whether for profit or
not | 20 | | for profit), partnerships, trusts, associations, units of | 21 | | government
or other organizations, or any combination of | 22 | | the foregoing:
| 23 | | (a) whose member organizations are engaged in | 24 | | businesses
or activities similar or related with | 25 | | respect to the
liability of which such members are | 26 | | exposed by virtue
of any related, similar, or common |
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| 1 | | business, trade, product,
services, premises, or | 2 | | operations; and
| 3 | | (b) whose member organizations:
| 4 | | (i) directly or indirectly own or control, and
| 5 | | hold with power to vote, at least 80% of all of the
| 6 | | outstanding voting securities of an association | 7 | | captive
insurance company incorporated as a stock | 8 | | insurer; or
| 9 | | (ii) directly or indirectly have at least 80% | 10 | | of
the voting control over an association captive | 11 | | insurance
company organized as a mutual insurer; | 12 | | or
| 13 | | (3) any risk retention group, as defined in subsection | 14 | | (11) of Section
123B-2,
domiciled in this State and | 15 | | organized under this Article; however, beginning
6 months | 16 | | after the effective date of this amendatory Act of 1995, a | 17 | | risk
retention group shall no longer qualify as an | 18 | | association under this Article.
| 19 | | Provided, however, that with respect to each of
the | 20 | | associations described in paragraphs (1),
(2) and (3) above, no | 21 | | member organization may (i)
own, control, or hold with power to | 22 | | vote in excess of
25% of the voting securities of an | 23 | | association captive
insurance company incorporated as a stock | 24 | | insurer, or
(ii) have more than 25% of the voting control of an | 25 | | association
captive insurance company organized as a mutual | 26 | | insurer.
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| 1 | | C. "Association captive insurance company" means any
| 2 | | company that insures risks of (i) the member organizations
of | 3 | | an association, and (ii) their affiliated companies.
| 4 | | D. "Captive insurance company" means any pure captive
| 5 | | insurance company, association captive insurance company
or | 6 | | industrial insured captive insurance company organized
under | 7 | | the provisions of this Article.
| 8 | | E. "Director" means the Director of the Department of | 9 | | Insurance.
| 10 | | F. "Industrial insured" means an insured which (together
| 11 | | with its affiliates) at the time of its initial procurement
of | 12 | | insurance from an industrial insured captive insurance
| 13 | | company:
| 14 | | (1) has available to it advice with respect to the
| 15 | | purchase of insurance through the use of the services
of a | 16 | | full-time employee acting as an insurance manager
or buyer | 17 | | or the services of a regularly and continuously retained | 18 | | qualified
insurance consultant;
and
| 19 | | (2) pays aggregate annual premiums in excess of | 20 | | $100,000
for insurance on all risks except for life, | 21 | | accident
and health; and
| 22 | | (3) either (i) has at least 25 full-time employees,
or | 23 | | (ii) has gross assets in excess of $3,000,000, or
(iii) has | 24 | | annual gross revenues in excess of $5,000,000.
| 25 | | G. "Industrial insured captive insurance company"
means | 26 | | any company that insures risks of industrial insureds
that are |
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| 1 | | members of the industrial insured group, and
their affiliated | 2 | | companies.
| 3 | | H. "Industrial insured group" means any group of industrial
| 4 | | insureds that collectively:
| 5 | | (1) directly or indirectly (including ownership or | 6 | | control through a
company which is wholly owned by such | 7 | | group of industrial insureds) own or
control, and hold
with | 8 | | power to vote, all of the outstanding voting securities
of | 9 | | an industrial insured captive insurance company | 10 | | incorporated
as a stock insurer; or
| 11 | | (2) directly or indirectly (including control through | 12 | | a company which is
wholly owned by such group of industrial | 13 | | insureds) have complete voting control
over an industrial | 14 | | insured captive insurance company
organized as a mutual | 15 | | insurer;
provided, however, that no member organization | 16 | | may
(i) own, control, or hold with power to vote in excess
| 17 | | of 25% of the voting securities of an industrial insured
| 18 | | captive insurance company incorporated as a stock insurer,
| 19 | | or (ii) have more than 25% of the voting control of an
| 20 | | industrial insured captive insurance company organized
as | 21 | | a mutual insurer.
| 22 | | I. "Member organization" means any individual, legal
| 23 | | representative, corporation (whether for profit or not
for | 24 | | profit), partnership, association, unit of government, trust | 25 | | or other
organization that belongs to an association or an | 26 | | industrial
insured group.
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| 1 | | J. "Parent" means a corporation, partnership, individual | 2 | | or other legal entity
that directly or indirectly owns, | 3 | | controls, or holds
with power to vote more than 50% of the | 4 | | outstanding
voting securities of a company.
| 5 | | K. "Personal risk liability" means liability to other
| 6 | | persons for (i) damage because of injury to any person,
(ii) | 7 | | damage to property, or (iii) other loss or damage,
in each case | 8 | | resulting from any personal, familial, or household
| 9 | | responsibilities
or activities, but does not include legal | 10 | | liability
for damages (including costs of defense, legal costs
| 11 | | and fees, and other claims expenses) because of injuries
to | 12 | | other persons, damage to their property, or other
damage or | 13 | | loss to such other persons resulting from
or arising out of:
| 14 | | (i) any business (whether for profit or not for | 15 | | profit), trade,
product, services (including professional | 16 | | services),
premises, or operations; or
| 17 | | (ii) any activity of any state or local government,
or | 18 | | any agency or political subdivision thereof.
| 19 | | L. "Pure captive insurance company" means any company
that | 20 | | insures only risks of its parent or affiliated companies
or | 21 | | both.
| 22 | | M. "Unit of government" includes any state, regional or | 23 | | local
government, or any agency or political subdivision | 24 | | thereof, or any
district, authority, public educational | 25 | | institution or school district,
public corporation or other | 26 | | unit of government in this State or any similar
unit of |
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| 1 | | government in any other state.
| 2 | | N. "Control" means the power to direct, or cause the | 3 | | direction of, the management and policies of an entity, other | 4 | | than the power that results from an official position with or | 5 | | corporate office held in the entity. The power may be possessed | 6 | | directly or indirectly by any means, including through the | 7 | | ownership of voting securities or by contract, other than a | 8 | | commercial contract for goods or non-management services. | 9 | | O. "Qualified independent actuary" means a person that is | 10 | | either: | 11 | | (1) a member in good standing with the Casualty | 12 | | Actuarial Society; or | 13 | | (2) a member in good standing with the American Academy | 14 | | of Actuaries who has been approved as qualified for signing | 15 | | casualty loss reserve opinions by the Casualty Practice | 16 | | Council of the American Academy of Actuaries. | 17 | | P. "Controlled unaffiliated business" means an entity: | 18 | | (1) that is not an affiliate; | 19 | | (2) that has an existing contractual relationship with | 20 | | an affiliate under which the affiliate bears a potential | 21 | | financial loss; and | 22 | | (3) whose risks are managed by a captive insurance | 23 | | company under Section 123C-24 of this Code. | 24 | | Q. "Operational risk" means any potential financial loss of | 25 | | an affiliate, except for a loss arising from an insurance | 26 | | policy issued by a captive or insurance affiliate. |
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| 1 | | R. "Captive management company" means an entity providing | 2 | | administrative services to a captive insurance company. | 3 | | S. "Safety-Net Hospital" means an Illinois hospital that | 4 | | qualifies as a Safety-Net Hospital under Section 5-5e.1 of the | 5 | | Illinois Public Aid Code. | 6 | | (Source: P.A. 89-97, eff. 7-7-95; 90-794, eff. 8-14-98 .)
| 7 | | (215 ILCS 5/123C-2) (from Ch. 73, par. 735C-2)
| 8 | | (Section scheduled to be repealed on January 1, 2027)
| 9 | | Sec. 123C-2. Authority of captives; restrictions.
| 10 | | A. Except as provided by this Section, a captive insurance | 11 | | company may write any type of insurance, but may only insure | 12 | | the operational risks of the company's affiliates and risks of | 13 | | a controlled unaffiliated business. Any captive insurance | 14 | | company, when permitted by
its articles of association or | 15 | | charter, may apply to
the Director for a certificate of | 16 | | authority to transact
any and all insurance in classes 2 and 3 | 17 | | of Section 4
of this Code, except that:
| 18 | | (1) no pure captive insurance company may insure
any | 19 | | risks other than those of its parent and affiliated
| 20 | | companies;
| 21 | | (2) no association captive insurance company may
| 22 | | insure any risks other than those of the member | 23 | | organizations
of its association, and their affiliated | 24 | | companies;
| 25 | | (3) no industrial insured captive insurance company
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| 1 | | may insure any risks other than those of the members
of the | 2 | | industrial insured group, and their affiliated
companies; | 3 | | and
| 4 | | (4) no captive insurance company may provide:
| 5 | | (i) personal motor vehicle coverage or homeowner's
| 6 | | insurance coverage or any component thereof, or
| 7 | | (ii) personal coverage for personal risk | 8 | | liability, or
| 9 | | (iii) coverage for an employer's liability to its | 10 | | employees other than
legal liability under the federal | 11 | | Employers' Liability Act
(45 U.S.C. 51 et seq.), | 12 | | provided, however, this exclusion does not
preclude | 13 | | reinsurance of such employer's liability, or
| 14 | | (iv) accident and health insurance as provided in | 15 | | clause (a) of Class
2 of Section 4, provided, however, | 16 | | this exclusion does not preclude stop-loss
insurance | 17 | | or reinsurance of a single employer self-funded | 18 | | employee disability
benefit plan or an employee | 19 | | welfare plan as described in 29 U.S.C. 1001 et seq.
| 20 | | A-5. A captive insurance company may not issue: | 21 | | (1) life insurance; | 22 | | (2) annuities; | 23 | | (3) accident and health insurance for the company's | 24 | | parent and affiliates, except to insure employee benefits | 25 | | that are subject to the federal Employee Retirement Income | 26 | | Security Act of 1974; |
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| 1 | | (4) title insurance; | 2 | | (5) mortgage guaranty insurance; | 3 | | (6) financial guaranty insurance; | 4 | | (7) residential property insurance; | 5 | | (8) personal automobile insurance; or | 6 | | (9) workers' compensation insurance. | 7 | | A-10. A captive insurance company may not issue a type of | 8 | | insurance, including automobile liability insurance, that is | 9 | | required under the laws of this State or a political | 10 | | subdivision of this State as a prerequisite for obtaining a | 11 | | license or permit if the law requires that the liability | 12 | | insurance be issued by an insurer authorized to engage in the | 13 | | business of insurance in this State. | 14 | | A-15. A captive insurance company is authorized to issue a | 15 | | contractual reimbursement policy to: | 16 | | (1) an affiliated certified self-insurer authorized | 17 | | under the Workers' Compensation Act or a similar affiliated | 18 | | entity expressly authorized by analogous laws of another | 19 | | state; or | 20 | | (2) an affiliate that is insured by a workers' | 21 | | compensation insurance policy with a negotiated deductible | 22 | | endorsement. | 23 | | B. No captive insurance company shall do any insurance
| 24 | | business in this State unless:
| 25 | | (1) it first obtains from the Director a certificate
of | 26 | | authority authorizing it to do such insurance business
in |
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| 1 | | this State; and
| 2 | | (2) it appoints a resident registered agent to accept
| 3 | | service of process and to otherwise act on its behalf
in | 4 | | this State.
| 5 | | C. No captive insurance company shall adopt a name
that is | 6 | | the same as, deceptively similar to, or likely
to be confused | 7 | | with or mistaken for, any other existing
business name | 8 | | registered in this State.
| 9 | | D. Each captive insurance company, or the organizations
| 10 | | providing the principal administrative or management
services | 11 | | to such captive insurance company, shall maintain
a place of | 12 | | business in this State.
| 13 | | (Source: P.A. 91-357, eff. 7-29-99 .)
| 14 | | (215 ILCS 5/123C-3) (from Ch. 73, par. 735C-3)
| 15 | | (Section scheduled to be repealed on January 1, 2027)
| 16 | | Sec. 123C-3. Minimum capital and surplus . | 17 | | A. The Department may not issue a certificate of authority | 18 | | to a captive insurance company unless the company possesses and | 19 | | maintains unencumbered capital and surplus in an amount | 20 | | determined by the Director after considering: | 21 | | (1) the amount of premium written by the captive | 22 | | insurance company; | 23 | | (2) the characteristics of the assets held by the | 24 | | captive insurance company; | 25 | | (3) the terms of reinsurance arrangements entered into |
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| 1 | | by the captive insurance company; | 2 | | (4) the type of business covered in policies issued by | 3 | | the captive insurance company; | 4 | | (5) the underwriting practices and procedures of the | 5 | | captive insurance company; and | 6 | | (6) any other criteria that has an impact on the | 7 | | operations of the captive insurance company determined to | 8 | | be significant by the Director. No pure captive insurance | 9 | | company, association
captive insurance company | 10 | | incorporated as a stock insurer,
or industrial insured | 11 | | captive insurance company incorporated
as a stock insurer | 12 | | shall be issued a certificate of
authority unless it shall | 13 | | possess and thereafter maintain
unimpaired paid-in capital | 14 | | of not less than the minimum
capital requirement applicable | 15 | | to the class or classes
and clause or clauses of Section 4 | 16 | | describing the kind
or kinds of insurance which such | 17 | | captive insurance company
is authorized to write, as set | 18 | | forth in subsection (1) of Section 13.
| 19 | | B. The amount of capital and surplus determined by the | 20 | | Director under subsection A of this Section may not be less | 21 | | than $250,000 for a pure captive insurance company, $500,000 | 22 | | for an industrial insured captive insurance company, and | 23 | | $750,000 for an association captive insurance company. Such | 24 | | capital may be in the form of (1) all cash
or cash equivalents; | 25 | | or (2) cash or cash equivalents
representing at least 20% of | 26 | | the requisite capital,
together with an irrevocable letter of |
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| 1 | | credit for the
remainder of the requisite capital, which letter | 2 | | of
credit must (a) be approved by the Director, (b) be issued | 3 | | or
unconditionally confirmed by (i) a
bank chartered by this | 4 | | State, (ii) a member bank of the
Federal Reserve System or | 5 | | (iii) a United States office of a foreign
banking corporation | 6 | | that is: (A) licensed under the laws of the United
States or | 7 | | any state thereof, (B) regulated, supervised and examined by
| 8 | | United States federal or state authorities having regulatory | 9 | | authority over
banks and trust companies, and (C) designated by | 10 | | the Securities Valuation
Office of the National Association of | 11 | | Insurance Commissioners as meeting
its credit standards for | 12 | | issuing or confirming letters of credit or, in the
event that | 13 | | the Director elects to establish credit standards by rule, in
| 14 | | compliance with rules promulgated by the Director establishing | 15 | | reasonable
standards of safety and soundness substantially | 16 | | equivalent to those of the
Securities Valuation Office of the | 17 | | National Association of Insurance
Commissioners, and (c) | 18 | | satisfy the requirements of Section 123C-19; or (3)
cash or | 19 | | cash equivalents representing at least 33% of the requisite
| 20 | | capital, together with irrevocable contractual obligations of
| 21 | | the member organizations of the captive insurance
company for | 22 | | the payment of the remainder of the requisite
capital in no | 23 | | more than 3 equal installments in each of the
3 calendar years | 24 | | following the date of the grant of
the certificate of authority | 25 | | to the captive insurance
company, which irrevocable | 26 | | contractual obligations shall
by contract be subject to |
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| 1 | | acceleration (in a manner
acceptable to the Director) by the | 2 | | Company at the direction
of the Director and shall be secured | 3 | | by a letter of
credit or other form of guarantee or security | 4 | | acceptable
to the Director.
| 5 | | C. The capital and surplus required by subsection A of this | 6 | | Section must be in the form of: | 7 | | (1) United States currency; | 8 | | (2) an irrevocable letter of credit, in a form approved | 9 | | by the Director and not secured by a guarantee from an | 10 | | affiliate, naming the Director as beneficiary for the | 11 | | security of the captive insurance company's policyholders | 12 | | and issued by a bank approved by the Director; | 13 | | (3) bonds of this State; or | 14 | | (4) bonds or other evidences of indebtedness of the | 15 | | United States, the principal and interest of which are | 16 | | guaranteed by the United States. | 17 | | (Source: P.A. 86-632 .)
| 18 | | (215 ILCS 5/123C-9) (from Ch. 73, par. 735C-9)
| 19 | | (Section scheduled to be repealed on January 1, 2027)
| 20 | | Sec. 123C-9. Reports, statements and mandatory reserves.
| 21 | | A. Captive insurance companies shall not be required
to | 22 | | make any annual report except as provided in this
Article.
| 23 | | B. (1) On or before Prior to March 1 of each year, each | 24 | | captive
insurance company shall submit to the Director a report
| 25 | | of its financial condition, verified by oath of 2
of its |
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| 1 | | executive officers and including (i) a balance
sheet reporting | 2 | | assets, liabilities, capital and surplus,
(ii) a statement of | 3 | | gain or loss from operations, (iii)
a statement of changes in | 4 | | financial position, (iv) a
statement of changes in capital and | 5 | | surplus, and (v)
in the case of industrial insured captive | 6 | | insurance
companies, an analysis of loss reserve development,
| 7 | | information on risks ceded and assumed under reinsurance
| 8 | | agreements, on forms prescribed by the Director, and
a schedule | 9 | | of its invested assets on forms prescribed
by the Director , and | 10 | | (vi) a statement of actuarial opinion by a qualified | 11 | | independent actuary concerning the reasonableness of the | 12 | | captive insurance company's loss and loss adjustment expense | 13 | | reserves in such form and of such content as specified in the | 14 | | National Association of Insurance Commissioners Annual | 15 | | Statement Instructions: Property and Casualty .
| 16 | | (2) In addition, prior to March 1 of each year, each
| 17 | | association captive insurance company shall submit to
the | 18 | | Director such additional data or information, which
the | 19 | | Director may from time to time require, on a form
specified by | 20 | | the Director.
| 21 | | (3) On or before June 1 of each year, each captive | 22 | | insurance company shall submit to the Director a report of its | 23 | | financial condition at last year's end with an independent | 24 | | certified public accountant's opinion of the company's | 25 | | financial condition. Prior to June 1 of each year, each | 26 | | association and industrial
insured captive insurance
company |
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| 1 | | shall submit to the Director a report of its
financial | 2 | | condition, certified by a recognized firm
of independent public | 3 | | accountants acceptable to the
Director and including the items | 4 | | referred to in items
(i), (ii), (iii) and (iv) of paragraph (1) | 5 | | of this subsection B.
| 6 | | (4) Unless the Director permits otherwise, the reports
of | 7 | | financial condition referred to in paragraphs (1)
and (3) of | 8 | | this subsection B are to be prepared in accordance with the | 9 | | Accounting
Practices and Procedures Manual adopted by the | 10 | | National
Association of Insurance Commissioners. The Director
| 11 | | shall have authority to extend the time for filing any
report | 12 | | or statement by any company for reasons which
he considers good | 13 | | and sufficient.
| 14 | | C. In addition, any captive insurance company may be
| 15 | | required by the Director, when he considers such action
to be | 16 | | necessary and appropriate for the protection of
policyholders, | 17 | | creditors, shareholders or claimants,
to file, within 60 days | 18 | | after mailing to the company
of a notice that such is required, | 19 | | a supplemental summary
statement as of the last day of any | 20 | | calendar month occurring
during the 100 days next preceding the | 21 | | mailing of such
notice designated by him on forms prescribed | 22 | | and furnished
by the Director. No company shall be required to | 23 | | file
more than 4 supplemental summary statements during any
| 24 | | consecutive 12 month period.
| 25 | | D. Every captive insurance company shall, at all times,
| 26 | | maintain reserves in an amount estimated in the aggregate
to |
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| 1 | | provide for the payment of all losses and claims
incurred, | 2 | | whether reported or unreported, which are
unpaid and for which | 3 | | such company may be liable, and
to provide for the expenses of | 4 | | adjustment or settlement
of such losses and claims. The | 5 | | aggregate reserves shall
be reduced by reinsurance ceded which | 6 | | meets the requirements
of Section 123C-13.
For the purpose of | 7 | | such reserves, the company shall keep a complete and
itemized | 8 | | record showing all losses and claims on which it has received
| 9 | | notice, including all notices received by it of the occurrence | 10 | | of any event
which may result in a loss. Such record shall be | 11 | | opened in chronological
receipt order, with each notice of loss | 12 | | or claim identified by appropriate
number or coding.
| 13 | | E. Every captive insurance company shall maintain an
| 14 | | unearned premium reserve on all policies in force which
reserve | 15 | | shall be charged as a liability. The portions
of the gross | 16 | | premiums in force, after deducting reinsurance
qualifying | 17 | | under Section 123C-13, which shall be held
as a premium | 18 | | reserve, shall never be less in the aggregate
than the | 19 | | company's actual liability to all its insureds
for the return | 20 | | of gross unearned premiums. In the calculation
of the company's | 21 | | actual liability to all its insureds,
the reserve shall be | 22 | | computed pursuant to the method
commonly referred to as the | 23 | | monthly pro rata method;
provided, however, that the Director | 24 | | may require that
such reserve shall be equal to the unearned | 25 | | portions
of the gross premiums in force, after deducting | 26 | | reinsurance
qualifying under Section 123C-13, in which case the |
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| 1 | | reserve shall
be computed on each respective risk from the date | 2 | | of
the issuance of the policy.
| 3 | | E-5. A captive insurance company may make a written | 4 | | application to the Director for filing its annual report | 5 | | required under this Section on a fiscal year's end. If an | 6 | | alternative filing date is granted, the company shall file: | 7 | | (1) the annual report, including a statement of | 8 | | actuarial opinion by a qualified independent actuary | 9 | | concerning the reasonableness of the captive insurance | 10 | | company's loss and loss adjustment expense reserves in such | 11 | | form and of such content as specified in the National | 12 | | Association of Insurance Commissioners Annual Statement | 13 | | Instructions: Property and Casualty, no later than the 60th | 14 | | day after the date of the company's fiscal year's end; | 15 | | (2) the report of its financial condition at last | 16 | | year's end with an independent certified public | 17 | | accountant's opinion of the company's financial condition; | 18 | | and | 19 | | (3) its balance sheet, income statement, and statement | 20 | | of cash flows, verified by 2 of its executive officers, | 21 | | before March 1 of each year to provide sufficient detail to | 22 | | support a premium tax return. | 23 | | F. The reports required by this Section shall be prepared
| 24 | | and filed on a calendar year basis.
| 25 | | G. Notwithstanding the requirements of this Section,
a | 26 | | captive insurance company may prepare and issue financial
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| 1 | | statements prepared in accordance with generally accepted
| 2 | | accounting principles.
| 3 | | (Source: P.A. 85-131; 86-1155; 86-1156 .)
| 4 | | (215 ILCS 5/123C-11) (from Ch. 73, par. 735C-11)
| 5 | | (Section scheduled to be repealed on January 1, 2027)
| 6 | | Sec. 123C-11. Grounds and procedures for suspension
or | 7 | | revocation of certificate of authority. | 8 | | A. The certificate of authority of a captive insurance
| 9 | | company to do an insurance business in this State may
be | 10 | | suspended or revoked by the Director for any of the
following | 11 | | reasons:
| 12 | | (1) insolvency or impairment of required capital or | 13 | | surplus to policy holders ;
| 14 | | (2) failure to meet the requirements of Sections 123C-3 | 15 | | or
123C-4;
| 16 | | (3) refusal or failure to submit an annual report,
as | 17 | | required by Section 123C-9, or any other report or
| 18 | | statement required by law or by lawful order of the
| 19 | | Director;
| 20 | | (4) failure to comply with the provisions of its own
| 21 | | charter or bylaws (or, in the case of an industrial
insured | 22 | | captive, with the provisions of the investment
policy set | 23 | | forth in its plan of operation as approved
from time to | 24 | | time by the Director);
| 25 | | (5) failure to submit to examination or any legal
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| 1 | | obligation relative thereto, as required by Section | 2 | | 123C-10;
| 3 | | (6) refusal or failure to pay expenses , and charges , | 4 | | and taxes
as required by Sections 408 , 409 , 123C-10 , and | 5 | | 123C-17;
| 6 | | (7) use of methods that, although not otherwise | 7 | | specifically
prohibited by law, nevertheless render its | 8 | | operation
detrimental or its condition unsound with | 9 | | respect to
the public or to its policyholders; or
| 10 | | (8) failure otherwise to comply with the laws of this
| 11 | | State.
| 12 | | B. If the Director finds, upon examination, hearing,
or | 13 | | other evidence, that any captive insurance company
has | 14 | | committed any of the acts specified in subsection A,
he may | 15 | | suspend or revoke such certificate of authority
if he deems it | 16 | | in the best interest of the public and
the policyholders of | 17 | | such captive insurance company,
notwithstanding any other | 18 | | provision of this Article.
| 19 | | C. The provisions of Articles XIII and XIII 1/2 shall
apply | 20 | | to and govern the conservation, rehabilitation,
liquidation | 21 | | and dissolution of captive insurance companies.
| 22 | | (Source: P.A. 85-131 .)
| 23 | | (215 ILCS 5/123C-12) (from Ch. 73, par. 735C-12)
| 24 | | (Section scheduled to be repealed on January 1, 2027)
| 25 | | Sec. 123C-12. Legal investments. |
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| 1 | | A. The provisions of Article VIII and of Sections 131.2
and | 2 | | 131.3 shall apply to association captive insurance
companies.
| 3 | | B. No pure captive insurance company or industrial
insured | 4 | | captive insurance company shall be subject to
any restrictions | 5 | | on allowable investments whatever,
including those limitations | 6 | | contained in Articles VIII
and VIII 1/2; provided, however, | 7 | | that the Director
may prohibit or limit any investment or type | 8 | | of investment
that threatens the solvency or liquidity of any | 9 | | such
company; and provided further that an industrial insured
| 10 | | captive insurance company must adhere to the investment
policy | 11 | | set forth in its plan of operation as approved
from time to | 12 | | time by the Director.
| 13 | | C. A captive insurance company may make loans to its | 14 | | affiliates with the prior approval of the Director. Each loan | 15 | | must be evidenced by a note approved by the Director. A captive | 16 | | insurance company may not make a loan of the minimum capital | 17 | | and surplus funds required by this Article. | 18 | | D. The Director may prohibit or limit an investment that | 19 | | threatens the solvency or liquidity of a captive insurance | 20 | | company. | 21 | | (Source: P.A. 85-131 .)
| 22 | | (215 ILCS 5/123C-13) (from Ch. 73, par. 735C-13)
| 23 | | (Section scheduled to be repealed on January 1, 2027)
| 24 | | Sec. 123C-13. Reinsurance.
| 25 | | A. Any captive insurance company may provide reinsurance
on |
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| 1 | | risks ceded by any other insurer; provided, however,
that the | 2 | | risks so assumed are the same as the captive
insurance company | 3 | | could legally insure on a direct basis. | 4 | | The provisions of Section 174.1 shall not apply to
any | 5 | | captive insurance company providing reinsurance.
| 6 | | B. Subject to the provisions of Article XI, any captive
| 7 | | insurance company may cede, and may take credit for
in the | 8 | | establishment of reserves, all or any part of
its risks.
| 9 | | Furthermore, in addition to Section 173.1, any pure or | 10 | | industrial insured
captive insurance company may take credit, | 11 | | as either an
asset or a deduction from liability, for | 12 | | reinsurance so ceded to the extent:
| 13 | | (1) The reinsurer satisfies all of the following (a) | 14 | | through (g):
| 15 | | (a) the principal business of the reinsurer (other | 16 | | than investments
in subsidiaries and other investment | 17 | | activities) is to accept reinsurance from
captive | 18 | | insurance companies
organized under Article VIIC, of | 19 | | which the company accepting the
reinsurance directly | 20 | | or indirectly owns, controls, or holds with power to
| 21 | | vote more than 80% of the outstanding voting securities | 22 | | if organized as a
stock company or more than 80% of the | 23 | | voting control if organized as a
mutual company and to | 24 | | provide insurance related services;
| 25 | | (b) is licensed to transact insurance or | 26 | | reinsurance in its jurisdiction of domicile;
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| 1 | | (c) submits to this State's authority to examine | 2 | | its books and
records and agrees to pay the cost | 3 | | thereof;
| 4 | | (d) files annually with the Director a copy of its | 5 | | most recent
audited financial statements;
| 6 | | (e) maintains a surplus as regards policyholders | 7 | | in an amount that
is not less than $20,000,000;
| 8 | | (f) files with the Department the following:
| 9 | | (i) evidence of its submission to the | 10 | | jurisdiction of any court of competent
| 11 | | jurisdiction in any state of the United States and | 12 | | its agreement to comply with all
requirements | 13 | | necessary to give the court jurisdiction and to | 14 | | abide by
the final decision of the court or of any | 15 | | appellate court in the event of an appeal; and
| 16 | | (ii) an instrument designating the Director or | 17 | | a designated attorney as its
true and lawful | 18 | | attorney upon whom may be served any lawful process | 19 | | in any
action, suit, or proceeding instituted by or | 20 | | on behalf of the ceding company;
| 21 | | (g) has not been the subject of an order of the | 22 | | Director entered
after notice and hearing prohibiting | 23 | | the reinsurer from utilizing this
paragraph (1); or
| 24 | | (2) the taking of credit by the captive insurance | 25 | | company has
otherwise received the prior approval of the | 26 | | Director.
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| 1 | | C. A captive insurance company shall provide notice to the | 2 | | Director of a reinsurance agreement to which the company | 3 | | becomes a party not later than the 30th day after the date of | 4 | | the execution of the agreement. | 5 | | D. A captive insurance company shall provide notice of a | 6 | | termination of a previously filed reinsurance agreement to the | 7 | | Director not later than the 30th day after the date of | 8 | | termination. | 9 | | E. Notwithstanding Section 123C-15 of this Code, a captive | 10 | | insurance company, with the Director's approval, may accept | 11 | | risks from and cede risks to or take credit for reserves on | 12 | | risks ceded to: | 13 | | (1) a captive reinsurance pool composed only of other | 14 | | captive insurance companies holding a certificate of | 15 | | authority under this Article or a similar law of another | 16 | | jurisdiction; or | 17 | | (2) an affiliated captive insurance company holding a | 18 | | certificate of authority under this Article or a similar | 19 | | law of another jurisdiction. | 20 | | (Source: P.A. 87-108 .)
| 21 | | (215 ILCS 5/123C-16) (from Ch. 73, par. 735C-16)
| 22 | | (Section scheduled to be repealed on January 1, 2027)
| 23 | | Sec. 123C-16. Tax.
| 24 | | A. Every captive insurance company organized under
the | 25 | | provisions of this Article and doing business in
this State |
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| 1 | | shall, for the privilege of doing business
in this State, pay | 2 | | to the Director for the State treasury
the State tax imposed | 3 | | under Section 409 to the same
extent and in the same manner as | 4 | | a domestic insurance company using a tax form prescribed by the | 5 | | Director on or before March 15 of each year .
| 6 | | B. Domestic captive insurance companies shall be insurance | 7 | | companies
subject to the rules now provided for such companies | 8 | | under the Illinois
Income Tax Act.
| 9 | | C. A domestic captive insurance company that has engaged | 10 | | one or more
administrative or management service organizations | 11 | | in order to comply with
subsection D of Section 123C-2 shall be | 12 | | deemed to meet the requirements of
Section 409(4)(a) through | 13 | | (d) provided that the company and such
organizations when | 14 | | viewed collectively as a group:
| 15 | | (a) maintain a place of business in this State; and
| 16 | | (b) maintain in this State personnel knowledgeable of | 17 | | and responsible
for the company's operations, books, | 18 | | records, administration and annual
statement; and
| 19 | | (c) conduct in this State substantially all of the | 20 | | company's
underwriting, policy issuing and servicing | 21 | | operations relating to the
company's policyholders and | 22 | | certificate holders; and
| 23 | | (d) comply with the provisions of Section 133(2) with | 24 | | respect to such
domestic captive insurance company's | 25 | | books, records, documents, accounts,
vouchers and | 26 | | securities.
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| 1 | | D. Annually, 15% of the premium tax revenues collected | 2 | | pursuant to this Section shall be transferred to the Department | 3 | | for the regulation of captive insurance companies under this | 4 | | Article. | 5 | | (Source: P.A. 86-632; 86-634 .)
| 6 | | (215 ILCS 5/123C-17) (from Ch. 73, par. 735C-17)
| 7 | | (Section scheduled to be repealed on January 1, 2027)
| 8 | | Sec. 123C-17. Fees.
| 9 | | A. The Director shall charge, collect, and give proper
| 10 | | acquittances for the payment of the following fees and
charges | 11 | | with respect to a captive insurance company:
| 12 | | 1. For filing all documents submitted for the | 13 | | incorporation
or organization or certification of a | 14 | | captive insurance
company, $2,000 $7,000 .
| 15 | | 2. For filing requests for approval of changes in
the | 16 | | elements of a plan of operations, $200.
| 17 | | B. Except as otherwise provided in subsection A of this | 18 | | Section and in
Section 123C-10, the provisions of Section 408 | 19 | | shall
apply to captive insurance companies.
| 20 | | C. Any funds collected from captive insurance companies
| 21 | | pursuant to this Section shall be treated in the manner
| 22 | | provided in subsection (11) of Section 408.
| 23 | | (Source: P.A. 93-32, eff. 7-1-03 .)
| 24 | | (215 ILCS 5/123C-19) (from Ch. 73, par. 735C-19)
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| 1 | | (Section scheduled to be repealed on January 1, 2027)
| 2 | | Sec. 123C-19. Letters of credit. | 3 | | A. Any letter of credit used to meet the requirements
set | 4 | | forth in Sections 123C-3 and 123C-4:
| 5 | | (1) (blank); may not be used to provide more than 80% | 6 | | of the
amount required in Section 123C-3 and may not be | 7 | | used
to provide more than 80% of the amount required in | 8 | | Section
123C-4;
| 9 | | (2) may not be allowed to expire without the prior
| 10 | | written approval of the Director and shall provide for
30 | 11 | | days' advance written notice to the Director of the
| 12 | | proposed expiration of the letter of credit; and
| 13 | | (3) must be provided pursuant to arrangements,
| 14 | | acceptable to the Director, wherein all funds obtained
by | 15 | | the company under the letter of credit are free of
claims | 16 | | of any party which may arise on account of the
company's | 17 | | resort to the letter of credit.
| 18 | | B. If letters of credit are used to provide surplus
in | 19 | | excess of the amounts required in Section 123C-4:
| 20 | | (1) the aggregate amount of all such letters of credit
| 21 | | shall not exceed the policyholder surplus of the company;
| 22 | | (2) without the prior written approval of the Director,
| 23 | | no such letter of credit may be allowed to expire, in
any | 24 | | period of 12 consecutive months ending on the date
of such | 25 | | expiration, in an amount greater than the greater
of (a) | 26 | | 10% of the company's surplus as regards policyholders
as of |
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| 1 | | the 31st day of December next preceding, or (b)
the net | 2 | | income of the company for the 12 month period
ending the | 3 | | 31st 3lst day of December next preceding. For
purposes of | 4 | | this Section, net income includes net realized
capital | 5 | | gains in an amount not to exceed 20% of net
unrealized | 6 | | capital gains; and
| 7 | | (3) each such letter of credit shall provide for
30 | 8 | | days' advance written notice to the Director of the
| 9 | | proposed expiration of the letter of credit.
| 10 | | C. (Blank). The Director may require any company to draw | 11 | | upon
its letters of credit, in amounts determined by the
| 12 | | Director, if the Director determines that such action
is | 13 | | necessary for the protection of the interests of
policyholders.
| 14 | | D. (Blank). Any company including amounts supported by | 15 | | letters
of credit in its capital or surplus shall, prior to
the | 16 | | time any person becomes a policyholder, notify such
person of | 17 | | the amounts supported by letters of credit
and included in the | 18 | | company's capital or surplus.
| 19 | | (Source: P.A. 85-131 .)
| 20 | | (215 ILCS 5/123C-23 new) | 21 | | Sec. 123C-23. Approval of captive reinsurance pools. | 22 | | Before determining whether to approve a captive insurance | 23 | | company's participation in a captive reinsurance pool under | 24 | | Section 123C-13 of this Code, the Director may: | 25 | | (1) require the captive insurance company provide to |
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| 1 | | the Director evidence that the captive reinsurance pool: | 2 | | (a) is composed only of other captive insurance | 3 | | companies holding a certificate of authority under | 4 | | this Article or a similar law of another jurisdiction; | 5 | | and | 6 | | (b) will be able to meet the pool's financial | 7 | | obligations; and | 8 | | (2) impose any other limitation or requirement on the | 9 | | captive insurance company that is necessary and proper to | 10 | | provide adequate security for the captive insurance | 11 | | company. | 12 | | (215 ILCS 5/123C-24 new) | 13 | | Sec. 123C-24. Standards for risk management of controlled | 14 | | unaffiliated business. The Director may adopt rules | 15 | | establishing standards to ensure that an affiliated company is | 16 | | able to exercise control of the risk management function of any | 17 | | controlled unaffiliated business to be insured by the captive | 18 | | insurance company. | 19 | | (215 ILCS 5/123C-25 new) | 20 | | Sec. 123C-25. Captive managers. Before providing captive | 21 | | management services to a licensed captive insurance company, a | 22 | | captive management company shall register with the Director by | 23 | | providing the information required on a form adopted by the | 24 | | Director. |
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| 1 | | (215 ILCS 5/123C-26 new) | 2 | | Sec. 123C-26. Dividends. | 3 | | A. A captive insurance company shall notify the Director in | 4 | | writing when issuing policyholder dividends. | 5 | | B. A captive insurance company, with the Director's | 6 | | approval, may issue dividends or distributions to the holders | 7 | | of an equity interest in the captive insurance company. The | 8 | | Director shall adopt rules to implement this subsection B. | 9 | | (215 ILCS 5/123C-27 new) | 10 | | Sec. 123C-27. Rulemaking authority. The Director may adopt | 11 | | reasonable rules as necessary to implement the purposes and | 12 | | provisions of this Article. | 13 | | (215 ILCS 5/123C-28 new) | 14 | | Sec. 123C-28. Confidentiality. | 15 | | A. Any information filed by an applicant or captive | 16 | | insurance company under this Article is confidential and | 17 | | privileged for all purposes, including for purposes of the | 18 | | Freedom of Information Act, a response to a subpoena, or | 19 | | evidence in a civil action. Except as provided by subsections B | 20 | | and C of this Section, the information may not be disclosed | 21 | | without the prior written consent of the applicant or captive | 22 | | insurance company to which the information pertains. | 23 | | B. If the recipient of the information described by |
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| 1 | | subsection A of this Section has the legal authority to | 2 | | maintain the confidential or privileged status of the | 3 | | information and verifies that authority in writing, the | 4 | | Director or his or her designee may disclose the information to | 5 | | any of the following entities functioning in an official | 6 | | capacity: | 7 | | (1) a director of insurance or an insurance department | 8 | | of another state; | 9 | | (2) an authorized law enforcement official; | 10 | | (3) a State's Attorney of this State; | 11 | | (4) the Attorney General; | 12 | | (5) a grand jury; | 13 | | (6) the National Association of Insurance | 14 | | Commissioners if the captive insurance company is | 15 | | affiliated with an insurance company that is part of an | 16 | | insurance holding company system as described in Article | 17 | | VIII 1/2 of this Code; | 18 | | (7) another state or federal regulator if the applicant | 19 | | or captive insurance company to which the information | 20 | | relates operates in the entity's jurisdiction; | 21 | | (8) an international insurance regulator or analogous | 22 | | financial agency if the captive insurance company is | 23 | | affiliated with an insurance company that is part of an | 24 | | insurance holding company system as described in Article | 25 | | VIII 1/2 of this Code and the holding company system | 26 | | operates in the entity's jurisdiction; or |
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| 1 | | (9) members of a supervisory college described by | 2 | | Section 131.20c of this Code, if the captive insurance | 3 | | company is affiliated with an insurance company that is | 4 | | part of an insurance holding company system as described in | 5 | | Article VIII 1/2 of this Code. | 6 | | C. The Director may use information described by subsection | 7 | | A of this Section in the furtherance of a legal or regulatory | 8 | | action relating to the administration of this Code.
| 9 | | (215 ILCS 5/445) (from Ch. 73, par. 1057)
| 10 | | Sec. 445. Surplus line.
| 11 | | (1) Definitions. For the purposes of this Section:
| 12 | | "Affiliate" means, with respect to an insured, any entity | 13 | | that controls, is controlled by, or is under common control | 14 | | with the insured. For the purpose of this definition, an entity | 15 | | has control over another entity if: | 16 | | (A) the entity directly or indirectly or acting through | 17 | | one or more other persons owns, controls, or has the power | 18 | | to vote 25% or more of any class of voting securities of | 19 | | the other entity; or | 20 | | (B) the entity controls in any manner the election of a | 21 | | majority of the directors or trustees of the other entity. | 22 | | "Affiliated group" means any group of entities that are all | 23 | | affiliated. | 24 | | "Authorized insurer" means an insurer that holds a | 25 | | certificate of
authority
issued by the Director but, for the |
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| 1 | | purposes of this Section, does not
include a
domestic surplus | 2 | | line insurer as defined in Section 445a or any
residual market
| 3 | | mechanism. | 4 | | "Exempt commercial purchaser" means any person purchasing | 5 | | commercial insurance that, at the time of placement, meets the | 6 | | following requirements: | 7 | | (A) The person employs or retains a qualified risk | 8 | | manager to negotiate insurance coverage. | 9 | | (B) The person has paid aggregate nationwide | 10 | | commercial property and casualty insurance premiums in | 11 | | excess of $100,000 in the immediately preceding 12 months. | 12 | | (C) The person meets at least one of the following | 13 | | criteria: | 14 | | (I) The person possesses a net worth in excess of | 15 | | $20,000,000, as such amount is adjusted pursuant to the | 16 | | provision in this definition concerning percentage | 17 | | change. | 18 | | (II) The person generates annual revenues in | 19 | | excess of $50,000,000, as such amount is adjusted | 20 | | pursuant to the provision in this definition | 21 | | concerning percentage change. | 22 | | (III) The person employs more than 500 full-time or | 23 | | full-time equivalent employees per individual insured | 24 | | or is a member of an affiliated group employing more | 25 | | than 1,000 employees in the aggregate. | 26 | | (IV) The person is a not-for-profit organization |
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| 1 | | or public entity generating annual budgeted | 2 | | expenditures of at least $30,000,000, as such amount is | 3 | | adjusted pursuant to the provision in this definition | 4 | | concerning percentage change. | 5 | | (V) The person is a municipality with a population | 6 | | in excess of 50,000 persons. | 7 | | Effective on January 1, 2015 and each fifth January 1 | 8 | | occurring thereafter, the amounts in subitems (I), (II), and | 9 | | (IV) of item (C) of this definition shall be adjusted to | 10 | | reflect the percentage change for such 5-year period in the | 11 | | Consumer Price Index for All Urban Consumers published by the | 12 | | Bureau of Labor Statistics of the Department of Labor. | 13 | | "Home state" means the following: | 14 | | (A) With respect to an insured, except as provided in | 15 | | item (B) of this definition: | 16 | | (I) the state in which an insured maintains its | 17 | | principal place of business or, in the case of an | 18 | | individual, the individual's principal residence; or | 19 | | (II) if 100% of the insured risk is located out of | 20 | | the state referred to in subitem (I), the state to | 21 | | which the greatest percentage of the insured's taxable | 22 | | premium for that insurance contract is allocated. | 23 | | (B) If more than one insured from an affiliated group | 24 | | are named insureds on a single surplus line insurance | 25 | | contract, then "home state" means the home state, as | 26 | | determined pursuant to item (A) of this definition, of the |
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| 1 | | member of the affiliated group that has the largest | 2 | | percentage of premium attributed to it under such insurance | 3 | | contract. | 4 | | If more than one insured from a group that is not | 5 | | affiliated are named insureds on a single surplus line | 6 | | insurance contract, then: | 7 | | (I) if individual group members pay 100% of the | 8 | | premium for the insurance from their own funds, "home | 9 | | state" means the home state, as determined pursuant to | 10 | | item (A) of this definition, of each individual group | 11 | | member; each individual group member's coverage under | 12 | | the surplus line insurance contract shall be treated as | 13 | | a separate surplus line contract for the purposes of | 14 | | this Section; | 15 | | (II) otherwise, "home state" means the home state, | 16 | | as determined pursuant to item (A) of this definition, | 17 | | of the group. | 18 | | Nothing in this definition shall be construed to alter the | 19 | | terms of the surplus line insurance contract. | 20 | | "Multi-State risk" means a risk with insured exposures in | 21 | | more than one State. | 22 | | "NAIC" means the National Association of Insurance | 23 | | Commissioners or any successor entity. | 24 | | "Qualified risk manager" means, with respect to a | 25 | | policyholder of commercial insurance, a person who meets all of | 26 | | the following requirements: |
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| 1 | | (A) The person is an employee of, or third-party | 2 | | consultant retained by, the commercial policyholder. | 3 | | (B) The person provides skilled services in loss | 4 | | prevention, loss reduction, or risk and insurance coverage | 5 | | analysis, and purchase of insurance. | 6 | | (C) With regard to the person: | 7 | | (I) the person has: | 8 | | (a) a bachelor's degree or higher from an | 9 | | accredited college or university in risk | 10 | | management, business administration, finance, | 11 | | economics, or any other field determined by the | 12 | | Director or his designee to demonstrate minimum | 13 | | competence in risk management; and | 14 | | (b) the following: | 15 | | (i) three years of experience in risk | 16 | | financing, claims administration, loss | 17 | | prevention, risk and insurance analysis, or | 18 | | purchasing commercial lines of insurance; or | 19 | | (ii) alternatively has: | 20 | | (AA) a designation as a Chartered | 21 | | Property and Casualty Underwriter (in this | 22 | | subparagraph (ii) referred to as "CPCU") | 23 | | issued by the American Institute for | 24 | | CPCU/Insurance Institute of America; | 25 | | (BB) a designation as an Associate in | 26 | | Risk Management (ARM) issued by the |
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| 1 | | American Institute for CPCU/Insurance | 2 | | Institute of America; | 3 | | (CC) a designation as Certified Risk | 4 | | Manager (CRM) issued by the National | 5 | | Alliance for Insurance Education & | 6 | | Research; | 7 | | (DD) a designation as a RIMS Fellow | 8 | | (RF) issued by the Global Risk Management | 9 | | Institute; or | 10 | | (EE) any other designation, | 11 | | certification, or license determined by | 12 | | the Director or his designee to | 13 | | demonstrate minimum competency in risk | 14 | | management; | 15 | | (II) the person has: | 16 | | (a) at least 7 years of experience in risk | 17 | | financing, claims administration, loss prevention, | 18 | | risk and insurance coverage analysis, or | 19 | | purchasing commercial lines of insurance; and | 20 | | (b) has any one of the designations specified | 21 | | in subparagraph (ii) of paragraph (b); | 22 | | (III) the person has at least 10 years of | 23 | | experience in risk financing, claims administration, | 24 | | loss prevention, risk and insurance coverage analysis, | 25 | | or purchasing commercial lines of insurance; or | 26 | | (IV) the person has a graduate degree from an |
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| 1 | | accredited college or university in risk management, | 2 | | business administration, finance, economics, or any | 3 | | other field determined by the Director or his or her | 4 | | designee to demonstrate minimum competence in risk | 5 | | management. | 6 | | "Residual market mechanism" means an association, | 7 | | organization, or other
entity described in Article XXXIII of | 8 | | this Code or Section 7-501 of the
Illinois Vehicle Code or any | 9 | | similar association, organization, or other
entity. | 10 | | "State" means any state of the United States, the District | 11 | | of Columbia, the Commonwealth of Puerto Rico, Guam, the | 12 | | Northern Mariana Islands, the Virgin Islands, and American | 13 | | Samoa. | 14 | | "Surplus line insurance" means insurance on a risk: | 15 | | (A) of the kinds specified in Classes 2 and 3 of | 16 | | Section 4 of this Code; and | 17 | | (B) that is procured from an unauthorized insurer after | 18 | | the insurance producer representing the insured or the | 19 | | surplus line producer is unable, after diligent effort, to | 20 | | procure the insurance from authorized insurers; and | 21 | | (C) where Illinois is the home state of the insured, | 22 | | for policies effective, renewed or extended on July 21, | 23 | | 2011 or later and for multiyear policies upon the policy | 24 | | anniversary that falls on or after July 21, 2011; and | 25 | | (D) that is located in Illinois, for policies effective | 26 | | prior to July 21, 2011. |
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| 1 | | "Unauthorized insurer" means an insurer that does not hold | 2 | | a valid
certificate of authority issued by the Director but, | 3 | | for the purposes of this
Section, shall also include a domestic | 4 | | surplus line insurer as defined in
Section 445a.
| 5 | | (1.5) Procuring surplus line insurance; surplus line | 6 | | insurer requirements. | 7 | | (a) Insurance producers may procure surplus line | 8 | | insurance only if licensed
as a surplus line producer under | 9 | | this Section. | 10 | | (b) Licensed surplus line producers may procure | 11 | | surplus line
insurance from an unauthorized insurer | 12 | | domiciled in the United States only if the insurer:
| 13 | | (i) is permitted in its domiciliary jurisdiction | 14 | | to write the type of insurance involved; and | 15 | |
(ii) has, based upon information available to the | 16 | | surplus
line producer,
a policyholders surplus of not | 17 | | less than $15,000,000
determined in
accordance with | 18 | | the laws of its domiciliary jurisdiction;
and
| 19 | |
(iii) has standards of solvency and management | 20 | | that are adequate
for the protection of policyholders.
| 21 | |
Where an unauthorized insurer does not meet the
| 22 | | standards set forth
in (ii) and (iii) above, a surplus line | 23 | | producer may, if necessary, procure
insurance from that | 24 | | insurer only if prior written warning of
such fact or
| 25 | | condition is given to the insured by the insurance producer | 26 | | or surplus line
producer.
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| 1 | | (c) Licensed surplus line producers may procure | 2 | | surplus line insurance from an unauthorized insurer | 3 | | domiciled outside of the United States only if the insurer | 4 | | meets the standards for unauthorized insurers domiciled in | 5 | | the United States in paragraph (b) of this subsection (1.5) | 6 | | or is listed on the Quarterly Listing of Alien Insurers | 7 | | maintained by the International Insurers Department of the | 8 | | NAIC. The Director shall make the Quarterly Listing of | 9 | | Alien Insurers available to surplus line producers without | 10 | | charge. | 11 | | (d) Insurance producers shall not procure from an
| 12 | | unauthorized insurer an insurance policy: | 13 | | (i) that is designed to satisfy the
proof of | 14 | | financial responsibility and insurance requirements in | 15 | | any
Illinois law where the law requires that the proof | 16 | | of
insurance is issued by an authorized insurer or | 17 | | residual market
mechanism; | 18 | | (ii) that covers the risk of accidental injury to | 19 | | employees arising
out of and in the course of | 20 | | employment according to the provisions of the
Workers' | 21 | | Compensation Act; or | 22 | | (iii) that insures any Illinois personal lines | 23 | | risk, as defined in
subsection (a), (b), or (c) of | 24 | | Section 143.13 of this Code, that is eligible
for | 25 | | residual market mechanism coverage, unless the insured | 26 | | or prospective
insured requests limits of liability |
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| 1 | | greater than the limits provided by the
residual market | 2 | | mechanism. In the course of making a diligent effort to
| 3 | | procure insurance from authorized insurers, an | 4 | | insurance producer shall not be
required to submit a | 5 | | risk to a residual market mechanism when the risk is | 6 | | not
eligible for coverage or exceeds the limits | 7 | | available in the residual market
mechanism. | 8 | | Where there is an insurance policy issued by an
| 9 | | authorized insurer or residual market mechanism
insuring a | 10 | | risk described in item (i), (ii), or (iii)
above, nothing | 11 | | in this paragraph shall be construed
to prohibit a surplus | 12 | | line producer from procuring
from an unauthorized insurer a | 13 | | policy insuring the
risk on an excess or umbrella basis | 14 | | where the excess
or umbrella policy is written over one or | 15 | | more
underlying policies.
| 16 | | (e) Licensed surplus line producers may procure | 17 | | surplus line insurance from an unauthorized insurer for an | 18 | | exempt commercial purchaser without making the required | 19 | | diligent effort to procure the insurance from authorized | 20 | | insurers if: | 21 | | (i) the producer has disclosed to the exempt | 22 | | commercial purchaser that such insurance may or may not | 23 | | be available from authorized insurers that may provide | 24 | | greater protection with more regulatory oversight; and | 25 | | (ii) the exempt commercial purchaser has | 26 | | subsequently in writing requested the producer to |
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| 1 | | procure such insurance from an unauthorized insurer. | 2 | | (2) Surplus line producer; license. Any licensed producer | 3 | | who is a
resident of this State, or any nonresident who | 4 | | qualifies under Section
500-40, may be licensed as a surplus | 5 | | line producer upon payment of an annual license fee of $400.
| 6 | | A surplus line producer so licensed shall keep a separate
| 7 | | account of
the business transacted thereunder for 7 years from | 8 | | the policy effective date which shall be open at all times to | 9 | | the
inspection of the Director or his representative.
| 10 | | No later than July 21, 2012, the State of Illinois shall | 11 | | participate in the national insurance producer database of the | 12 | | NAIC, or any other equivalent uniform national database, for | 13 | | the licensure of surplus line producers and the renewal of such | 14 | | licenses.
| 15 | | (3) Taxes and reports.
| 16 | | (a) Surplus line tax and penalty for late payment. The | 17 | | surplus line tax rate for a surplus line insurance policy | 18 | | or contract is determined as follows: | 19 | | (i) 3% for policies or contracts with an effective | 20 | | date prior to July 1, 2003; | 21 | | (ii) 2.5% 3.5% for policies or contracts with an | 22 | | effective date of July 1, 2003 or later. | 23 | | A surplus line producer shall file with the Director on | 24 | | or
before
February 1 and August 1 of each year a report in | 25 | | the form prescribed by the
Director on all surplus line | 26 | | insurance procured from unauthorized insurers and |
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| 1 | | submitted to the Surplus Line Association of Illinois
| 2 | | during the preceding
6 month period ending December 31 or | 3 | | June 30
respectively, and on the filing of such report | 4 | | shall pay to the Director
for the use and benefit of the | 5 | | State a sum equal to the surplus line tax rate multiplied | 6 | | by the
gross
premiums less returned premiums upon all | 7 | | surplus line insurance submitted to the Surplus Line | 8 | | Association of Illinois during the preceding 6 months.
| 9 | | Any surplus line producer who fails to pay the full | 10 | | amount due under this
subsection is liable, in addition to | 11 | | the amount due, for such late fee,
penalty, and interest | 12 | | charges as are provided for under Section 412 of
this Code. | 13 | | The Director, through the
Attorney General, may
institute | 14 | | an action in the name of the People of the State of | 15 | | Illinois, in
any court of competent jurisdiction, for the | 16 | | recovery of the amount of such
taxes, late fees, interest, | 17 | | and penalties due, and prosecute the same to final | 18 | | judgment, and take
such steps as are necessary to collect | 19 | | the same.
| 20 | | (b) Fire Marshal Tax.
Each surplus line producer shall | 21 | | file with the Director on or before
March 31 of each year a | 22 | | report in the form prescribed by the Director on all
fire | 23 | | insurance procured from unauthorized insurers and | 24 | | submitted to the Surplus Line Association of Illinois | 25 | | subject to tax under
Section 12 of the Fire Investigation
| 26 | | Act
and shall pay to the Director the fire marshal tax |
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| 1 | | required thereunder.
| 2 | | (c) Taxes and fees charged to insured. The taxes | 3 | | imposed under this
subsection and the countersigning fees | 4 | | charged by the Surplus Line
Association of Illinois may be | 5 | | charged to and collected from surplus line
insureds.
| 6 | | (4) (Blank).
| 7 | | (5) Submission of documents to Surplus Line Association of | 8 | | Illinois.
A surplus line producer shall submit every insurance | 9 | | contract
issued
under his or her license to the Surplus Line | 10 | | Association of Illinois for
recording and countersignature. | 11 | | The submission and countersignature may be
effected through | 12 | | electronic means. The submission shall set
forth:
| 13 | | (a) the name of the insured;
| 14 | | (b) the description and location of the insured | 15 | | property or
risk;
| 16 | | (c) the amount insured;
| 17 | | (d) the gross premiums charged or returned;
| 18 | | (e) the name of the unauthorized insurer from whom | 19 | | coverage has been procured;
| 20 | | (f) the kind or kinds of insurance procured; and
| 21 | | (g) amount of premium subject to tax required by | 22 | | Section 12 of the Fire
Investigation Act.
| 23 | | Proposals, endorsements, and other documents which are
| 24 | | incidental to the insurance but which do not affect the premium
| 25 | | charged
are exempted from filing and countersignature.
| 26 | | The submission of insuring contracts
to the Surplus Line |
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| 1 | | Association of
Illinois constitutes a certification by the | 2 | | surplus line producer or by the
insurance producer who | 3 | | presented the risk to the surplus line producer for
placement | 4 | | as a surplus line risk that
after diligent effort the required | 5 | | insurance could not be procured from
authorized insurers and | 6 | | that
such procurement was otherwise in accordance with the | 7 | | surplus line law.
| 8 | | (6) Countersignature required. It shall be unlawful for an | 9 | | insurance
producer to deliver any unauthorized insurer
| 10 | | contract unless such
insurance contract is countersigned by the | 11 | | Surplus Line Association of
Illinois.
| 12 | | (7) Inspection of records. A surplus line producer shall
| 13 | | maintain
separate records of the business transacted under his | 14 | | or her license for 7 years from the policy effective date,
| 15 | | including complete copies of surplus line insurance contracts | 16 | | maintained on
paper or by electronic means, which
records shall | 17 | | be open at all times for inspection by the Director and by
the | 18 | | Surplus Line Association of Illinois.
| 19 | | (8) Violations and penalties. The Director may suspend or | 20 | | revoke or
refuse to renew a surplus line producer license for | 21 | | any violation of this Code.
In addition to or in lieu of | 22 | | suspension or revocation, the Director may
subject a surplus | 23 | | line producer
to a civil penalty of up to $2,000 for each cause | 24 | | for suspension
or
revocation. Such penalty is enforceable under | 25 | | subsection (5) of Section
403A of this Code.
| 26 | | (9) Director may declare insurer ineligible. If the
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| 1 | | Director determines
that the further assumption of risks might | 2 | | be hazardous to the
policyholders of an unauthorized insurer, | 3 | | the Director may
order the
Surplus Line Association of
Illinois | 4 | | not to countersign insurance contracts evidencing insurance in
| 5 | | such insurer and order surplus line producers to cease
| 6 | | procuring insurance
from such insurer.
| 7 | | (10) Service of process upon Director. Insurance contracts
| 8 | | delivered under this Section from unauthorized insurers, other | 9 | | than domestic
surplus line insurers as defined in Section 445a,
| 10 | | shall contain a
provision designating the
Director and his | 11 | | successors in office the true and lawful attorney of the
| 12 | | insurer upon whom may be served all lawful process in any
| 13 | | action, suit or
proceeding arising out of such insurance.
| 14 | | Service of process made upon the Director to be valid hereunder | 15 | | must state
the name of the insured, the name of the | 16 | | unauthorized insurer
and identify
the contract of insurance. | 17 | | The Director at his option is authorized to
forward a copy of | 18 | | the process to the Surplus Line Association of Illinois
for | 19 | | delivery to the unauthorized insurer or the Director may | 20 | | deliver the process to the
unauthorized insurer by other means | 21 | | which he considers to be
reasonably
prompt and certain.
| 22 | | (10.5) Insurance contracts delivered under this Section | 23 | | from unauthorized insurers, other than domestic surplus line | 24 | | insurers as defined in Section 445a, shall have stamped or | 25 | | imprinted on the first page thereof in not less than 12-pt. | 26 | | bold face type the following legend: "Notice to Policyholder: |
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| 1 | | This contract is issued, pursuant to Section 445 of the | 2 | | Illinois Insurance Code, by a company not authorized and | 3 | | licensed to transact business in Illinois and as such is not | 4 | | covered by the Illinois Insurance Guaranty Fund." Insurance | 5 | | contracts delivered under this Section from domestic surplus | 6 | | line insurers as defined in Section 445a shall have stamped or | 7 | | imprinted on the first page thereof in not less than 12-pt. | 8 | | bold face type the following legend: "Notice to Policyholder: | 9 | | This contract is issued by a domestic surplus line insurer, as | 10 | | defined in Section 445a of the Illinois Insurance Code, | 11 | | pursuant to Section 445, and as such is not covered by the | 12 | | Illinois Insurance Guaranty Fund."
| 13 | | (11) The Illinois Surplus Line law does not apply to | 14 | | insurance of
property and operations of railroads or aircraft | 15 | | engaged in interstate or
foreign commerce, insurance of | 16 | | vessels, crafts or hulls, cargoes, marine
builder's risks, | 17 | | marine protection and indemnity, or other risks including
| 18 | | strikes and war risks insured under ocean or wet marine forms | 19 | | of policies.
| 20 | | (12) Surplus line insurance procured under this Section, | 21 | | including
insurance procured from a domestic surplus line | 22 | | insurer, is not subject
to the provisions of the Illinois | 23 | | Insurance Code other than Sections 123,
123.1, 401, 401.1, 402, | 24 | | 403, 403A, 408, 412, 445, 445.1, 445.2, 445.3,
445.4, and all | 25 | | of the provisions of Article XXXI to the extent that the
| 26 | | provisions of Article XXXI are not inconsistent with the terms |
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| 1 | | of this Act.
| 2 | | (Source: P.A. 97-955, eff. 8-14-12; 98-978, eff. 1-1-15 .)
| 3 | | (215 ILCS 5/123C-4 rep.)
| 4 | | Section 10. The Illinois Insurance Code is amended by | 5 | | repealing Section 123C-4.".
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