Full Text of SB1286 100th General Assembly
SB1286sam003 100TH GENERAL ASSEMBLY | Sen. John G. Mulroe Filed: 4/19/2017
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| 1 | | AMENDMENT TO SENATE BILL 1286
| 2 | | AMENDMENT NO. ______. Amend Senate Bill 1286, AS AMENDED, | 3 | | by replacing everything after the enacting clause with the | 4 | | following:
| 5 | | "Section 5. The Illinois Insurance Code is amended by | 6 | | changing Sections 121-2.08, 123C-1, 123C-2, 123C-3, 123C-9, | 7 | | 123C-11, 123C-12, 123C-13, 123C-16, 123C-17, and 123C-19 and by | 8 | | adding Sections 123C-23, 123C-24, 123C-25, 123C-26, 123C-27, | 9 | | and 123C-28 as follows:
| 10 | | (215 ILCS 5/121-2.08) (from Ch. 73, par. 733-2.08)
| 11 | | Sec. 121-2.08.
Transactions in this State involving | 12 | | contracts of
insurance independently procured directly from an | 13 | | unauthorized insurer by industrial insureds. | 14 | | (a) As used in this Section: | 15 | | "Exempt commercial purchaser" means exempt commercial | 16 | | purchaser as the term is defined in subsection (1) of Section |
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| 1 | | 445 of this Code. | 2 | | "Home state" means home state as the term is defined in | 3 | | subsection (1) of Section 445 of this Code. | 4 | | "Industrial insured" means an insured:
| 5 | | (i) that procures the insurance of any risk or risks of | 6 | | the kinds specified in Classes 2 and 3 of Section 4 of this | 7 | | Code by use of the services of a full-time employee who is | 8 | | a qualified risk manager or the services of a regularly and
| 9 | | continuously retained consultant who is a qualified risk | 10 | | manager;
| 11 | | (ii) that procures the insurance directly from an | 12 | | unauthorized insurer without the services of an | 13 | | intermediary insurance producer; and
| 14 | | (iii) that is an exempt commercial purchaser whose home | 15 | | state is Illinois.
| 16 | | "Insurance producer" means insurance producer as the term | 17 | | is defined in Section 500-10 of this Code. | 18 | | "Qualified risk manager" means qualified risk manager as | 19 | | the term is defined in subsection (1) of Section 445 of this | 20 | | Code. | 21 | | "Unauthorized insurer" means unauthorized insurer as the | 22 | | term is defined in subsection (1) of Section 445 of this Code. | 23 | | (b) For contracts of insurance effective January 1, 2015 or | 24 | | later, within 90 days after the effective date of each contract | 25 | | of insurance issued under this Section, the insured shall file | 26 | | a report with the Director by submitting the report to the |
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| 1 | | Surplus Line Association of Illinois in writing or in a | 2 | | computer readable format and provide information as designated | 3 | | by the Surplus Line Association of Illinois. The information in | 4 | | the report shall be substantially similar to that required for | 5 | | surplus line submissions as described in subsection (5) of | 6 | | Section 445 of this Code. Where applicable, the report shall | 7 | | satisfy, with respect to the subject insurance, the reporting | 8 | | requirement of Section 12 of the Fire Investigation Act. | 9 | | (c) For contracts of insurance effective January 1, 2015 | 10 | | through December 31, 2017 or later , within 30 days after filing | 11 | | the report, the insured shall pay to the Director for the use | 12 | | and benefit of the State a sum equal to the gross premium of | 13 | | the contract of insurance multiplied by the surplus line tax | 14 | | rate, as described in paragraph (3) of subsection (a) of | 15 | | Section 445 of this Code, and shall pay the fire marshal tax | 16 | | that would otherwise be due annually in March for insurance | 17 | | subject to tax under Section 12 of the Fire Investigation Act. | 18 | | For contracts of insurance effective January 1, 2018 or later, | 19 | | within 30 days after filing the report, the insured shall pay | 20 | | to the Director for the use and benefit of the State a sum | 21 | | equal to 0.5% of the gross premium of the contract of | 22 | | insurance, and shall pay the fire marshal tax that would | 23 | | otherwise be due annually in March for insurance subject to tax | 24 | | under Section 12 of the Fire Investigation Act. For contracts | 25 | | of insurance effective January 1, 2015 or later, within 30 days | 26 | | after filing the report, the insured shall pay to the Surplus |
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| 1 | | Line Association of Illinois a countersigning fee that shall be | 2 | | assessed at the same rate charged to members pursuant to | 3 | | subsection (4) of Section 445.1 of this Code. | 4 | | (d) For contracts of insurance effective January 1, 2015 or | 5 | | later, the insured shall withhold the amount of the taxes and | 6 | | countersignature fee from the amount of premium charged by and | 7 | | otherwise payable to the insurer for the insurance. If the | 8 | | insured fails to withhold the tax and countersignature fee from | 9 | | the premium, then the insured shall be liable for the amounts | 10 | | thereof and shall pay the amounts as prescribed in subsection | 11 | | (c) of this Section. | 12 | | (e) Contracts of insurance with an industrial insured that | 13 | | qualifies as a Safety-Net Hospital are not subject to | 14 | | subsections (b) through (d) of this Section. | 15 | | (Source: P.A. 98-978, eff. 1-1-15 .)
| 16 | | (215 ILCS 5/123C-1) (from Ch. 73, par. 735C-1)
| 17 | | (Section scheduled to be repealed on January 1, 2027)
| 18 | | Sec. 123C-1. Definitions. As used in this Article:
| 19 | | A. "Affiliate" or "Affiliated company" includes a parent | 20 | | entity that controls a captive insurance company and: | 21 | | (1) is an affiliate of another entity if the entity | 22 | | directly or indirectly, through one or more | 23 | | intermediaries, controls, is controlled by, or is under | 24 | | common control with the other entity. | 25 | | (2) is an affiliate of another entity if the entity is |
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| 1 | | an affiliate of and is controlled by the other entity | 2 | | directly or indirectly through one or more intermediaries. | 3 | | A subsidiary or holding company of an entity is an affiliate of | 4 | | that entity. shall have
the meaning set forth in subsection (a) | 5 | | of Section 131.1 (and, for
purposes of such definition, the | 6 | | definitions of "control"
and "person", as set forth in | 7 | | subsections (b) and (e) of Section
131.1, respectively, shall | 8 | | be applicable).
| 9 | | B. "Association" means any entity meeting the requirements
| 10 | | set forth in either of the following paragraphs (1), (2) or | 11 | | (3):
| 12 | | (1) any organized association of individuals, legal
| 13 | | representatives, corporations (whether for profit or
not | 14 | | for profit), partnerships, trusts, associations, units of | 15 | | government
or other organizations, or any combination of | 16 | | the foregoing,
that has been in continuous existence for at | 17 | | least one
year, the member organizations of which | 18 | | collectively:
| 19 | | (a) own, control, or hold with power to vote | 20 | | (directly
or indirectly) all of the outstanding voting | 21 | | securities
of an association captive insurance company | 22 | | incorporated
as a stock insurer; or
| 23 | | (b) have complete voting control (directly or | 24 | | indirectly)
over an association captive insurance | 25 | | company organized
as a mutual insurer;
| 26 | | (2) any organized association of individuals, legal
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| 1 | | representatives, corporations (whether for profit or
not | 2 | | for profit), partnerships, trusts, associations, units of | 3 | | government
or other organizations, or any combination of | 4 | | the foregoing:
| 5 | | (a) whose member organizations are engaged in | 6 | | businesses
or activities similar or related with | 7 | | respect to the
liability of which such members are | 8 | | exposed by virtue
of any related, similar, or common | 9 | | business, trade, product,
services, premises, or | 10 | | operations; and
| 11 | | (b) whose member organizations:
| 12 | | (i) directly or indirectly own or control, and
| 13 | | hold with power to vote, at least 80% of all of the
| 14 | | outstanding voting securities of an association | 15 | | captive
insurance company incorporated as a stock | 16 | | insurer; or
| 17 | | (ii) directly or indirectly have at least 80% | 18 | | of
the voting control over an association captive | 19 | | insurance
company organized as a mutual insurer; | 20 | | or
| 21 | | (3) any risk retention group, as defined in subsection | 22 | | (11) of Section
123B-2,
domiciled in this State and | 23 | | organized under this Article; however, beginning
6 months | 24 | | after the effective date of this amendatory Act of 1995, a | 25 | | risk
retention group shall no longer qualify as an | 26 | | association under this Article.
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| 1 | | Provided, however, that with respect to each of
the | 2 | | associations described in paragraphs (1),
(2) and (3) above, no | 3 | | member organization may (i)
own, control, or hold with power to | 4 | | vote in excess of
25% of the voting securities of an | 5 | | association captive
insurance company incorporated as a stock | 6 | | insurer, or
(ii) have more than 25% of the voting control of an | 7 | | association
captive insurance company organized as a mutual | 8 | | insurer.
| 9 | | C. "Association captive insurance company" means any
| 10 | | company that insures risks of (i) the member organizations
of | 11 | | an association, and (ii) their affiliated companies.
| 12 | | D. "Captive insurance company" means any pure captive
| 13 | | insurance company, association captive insurance company
or | 14 | | industrial insured captive insurance company organized
under | 15 | | the provisions of this Article.
| 16 | | E. "Director" means the Director of the Department of | 17 | | Insurance.
| 18 | | F. "Industrial insured" means an insured which (together
| 19 | | with its affiliates) at the time of its initial procurement
of | 20 | | insurance from an industrial insured captive insurance
| 21 | | company:
| 22 | | (1) has available to it advice with respect to the
| 23 | | purchase of insurance through the use of the services
of a | 24 | | full-time employee acting as an insurance manager
or buyer | 25 | | or the services of a regularly and continuously retained | 26 | | qualified
insurance consultant;
and
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| 1 | | (2) pays aggregate annual premiums in excess of | 2 | | $100,000
for insurance on all risks except for life, | 3 | | accident
and health; and
| 4 | | (3) either (i) has at least 25 full-time employees,
or | 5 | | (ii) has gross assets in excess of $3,000,000, or
(iii) has | 6 | | annual gross revenues in excess of $5,000,000.
| 7 | | G. "Industrial insured captive insurance company"
means | 8 | | any company that insures risks of industrial insureds
that are | 9 | | members of the industrial insured group, and
their affiliated | 10 | | companies.
| 11 | | H. "Industrial insured group" means any group of industrial
| 12 | | insureds that collectively:
| 13 | | (1) directly or indirectly (including ownership or | 14 | | control through a
company which is wholly owned by such | 15 | | group of industrial insureds) own or
control, and hold
with | 16 | | power to vote, all of the outstanding voting securities
of | 17 | | an industrial insured captive insurance company | 18 | | incorporated
as a stock insurer; or
| 19 | | (2) directly or indirectly (including control through | 20 | | a company which is
wholly owned by such group of industrial | 21 | | insureds) have complete voting control
over an industrial | 22 | | insured captive insurance company
organized as a mutual | 23 | | insurer;
provided, however, that no member organization | 24 | | may
(i) own, control, or hold with power to vote in excess
| 25 | | of 25% of the voting securities of an industrial insured
| 26 | | captive insurance company incorporated as a stock insurer,
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| 1 | | or (ii) have more than 25% of the voting control of an
| 2 | | industrial insured captive insurance company organized
as | 3 | | a mutual insurer.
| 4 | | I. "Member organization" means any individual, legal
| 5 | | representative, corporation (whether for profit or not
for | 6 | | profit), partnership, association, unit of government, trust | 7 | | or other
organization that belongs to an association or an | 8 | | industrial
insured group.
| 9 | | J. "Parent" means a corporation, partnership, individual | 10 | | or other legal entity
that directly or indirectly owns, | 11 | | controls, or holds
with power to vote more than 50% of the | 12 | | outstanding
voting securities of a company.
| 13 | | K. "Personal risk liability" means liability to other
| 14 | | persons for (i) damage because of injury to any person,
(ii) | 15 | | damage to property, or (iii) other loss or damage,
in each case | 16 | | resulting from any personal, familial, or household
| 17 | | responsibilities
or activities, but does not include legal | 18 | | liability
for damages (including costs of defense, legal costs
| 19 | | and fees, and other claims expenses) because of injuries
to | 20 | | other persons, damage to their property, or other
damage or | 21 | | loss to such other persons resulting from
or arising out of:
| 22 | | (i) any business (whether for profit or not for | 23 | | profit), trade,
product, services (including professional | 24 | | services),
premises, or operations; or
| 25 | | (ii) any activity of any state or local government,
or | 26 | | any agency or political subdivision thereof.
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| 1 | | L. "Pure captive insurance company" means any company
that | 2 | | insures only risks of its parent or affiliated companies
or | 3 | | both.
| 4 | | M. "Unit of government" includes any state, regional or | 5 | | local
government, or any agency or political subdivision | 6 | | thereof, or any
district, authority, public educational | 7 | | institution or school district,
public corporation or other | 8 | | unit of government in this State or any similar
unit of | 9 | | government in any other state.
| 10 | | N. "Control" means the power to direct, or cause the | 11 | | direction of, the management and policies of an entity, other | 12 | | than the power that results from an official position with or | 13 | | corporate office held in the entity. The power may be possessed | 14 | | directly or indirectly by any means, including through the | 15 | | ownership of voting securities or by contract, other than a | 16 | | commercial contract for goods or non-management services. | 17 | | O. "Qualified independent actuary" means a person that is | 18 | | either: | 19 | | (1) a member in good standing with the Casualty | 20 | | Actuarial Society; or | 21 | | (2) a member in good standing with the American Academy | 22 | | of Actuaries who has been approved as qualified for signing | 23 | | casualty loss reserve opinions by the Casualty Practice | 24 | | Council of the American Academy of Actuaries. | 25 | | P. "Controlled unaffiliated business" means an entity: | 26 | | (1) that is not an affiliate; |
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| 1 | | (2) that has an existing contractual relationship with | 2 | | an affiliate under which the affiliate bears a potential | 3 | | financial loss; and | 4 | | (3) whose risks are managed by a captive insurance | 5 | | company under Section 123C-24 of this Code. | 6 | | Q. "Operational risk" means any potential financial loss of | 7 | | an affiliate, except for a loss arising from an insurance | 8 | | policy issued by a captive or insurance affiliate. | 9 | | R. "Captive management company" means an entity providing | 10 | | administrative services to a captive insurance company. | 11 | | S. "Safety-Net Hospital" means an Illinois hospital that | 12 | | qualifies as a Safety-Net Hospital under Section 5-5e.1 of the | 13 | | Illinois Public Aid Code. | 14 | | (Source: P.A. 89-97, eff. 7-7-95; 90-794, eff. 8-14-98 .)
| 15 | | (215 ILCS 5/123C-2) (from Ch. 73, par. 735C-2)
| 16 | | (Section scheduled to be repealed on January 1, 2027)
| 17 | | Sec. 123C-2. Authority of captives; restrictions.
| 18 | | A. Except as provided by this Section, a captive insurance | 19 | | company may write any type of insurance, but may only insure | 20 | | the operational risks of the company's affiliates and risks of | 21 | | a controlled unaffiliated business. Any captive insurance | 22 | | company, when permitted by
its articles of association or | 23 | | charter, may apply to
the Director for a certificate of | 24 | | authority to transact
any and all insurance in classes 2 and 3 | 25 | | of Section 4
of this Code, except that:
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| 1 | | (1) no pure captive insurance company may insure
any | 2 | | risks other than those of its parent and affiliated
| 3 | | companies;
| 4 | | (2) no association captive insurance company may
| 5 | | insure any risks other than those of the member | 6 | | organizations
of its association, and their affiliated | 7 | | companies;
| 8 | | (3) no industrial insured captive insurance company
| 9 | | may insure any risks other than those of the members
of the | 10 | | industrial insured group, and their affiliated
companies; | 11 | | and
| 12 | | (4) no captive insurance company may provide:
| 13 | | (i) personal motor vehicle coverage or homeowner's
| 14 | | insurance coverage or any component thereof, or
| 15 | | (ii) personal coverage for personal risk | 16 | | liability, or
| 17 | | (iii) coverage for an employer's liability to its | 18 | | employees other than
legal liability under the federal | 19 | | Employers' Liability Act
(45 U.S.C. 51 et seq.), | 20 | | provided, however, this exclusion does not
preclude | 21 | | reinsurance of such employer's liability, or
| 22 | | (iv) accident and health insurance as provided in | 23 | | clause (a) of Class
2 of Section 4, provided, however, | 24 | | this exclusion does not preclude stop-loss
insurance | 25 | | or reinsurance of a single employer self-funded | 26 | | employee disability
benefit plan or an employee |
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| 1 | | welfare plan as described in 29 U.S.C. 1001 et seq.
| 2 | | A-5. A captive insurance company may not issue: | 3 | | (1) life insurance; | 4 | | (2) annuities; | 5 | | (3) accident and health insurance for the company's | 6 | | parent and affiliates, except to insure employee benefits | 7 | | that are subject to the federal Employee Retirement Income | 8 | | Security Act of 1974; | 9 | | (4) title insurance; | 10 | | (5) mortgage guaranty insurance; | 11 | | (6) financial guaranty insurance; | 12 | | (7) residential property insurance; | 13 | | (8) personal automobile insurance; or | 14 | | (9) workers' compensation insurance. | 15 | | A-10. A captive insurance company may not issue a type of | 16 | | insurance, including automobile liability insurance, that is | 17 | | required under the laws of this State or a political | 18 | | subdivision of this State as a prerequisite for obtaining a | 19 | | license or permit if the law requires that the liability | 20 | | insurance be issued by an insurer authorized to engage in the | 21 | | business of insurance in this State. | 22 | | A-15. A captive insurance company is authorized to issue a | 23 | | contractual reimbursement policy to: | 24 | | (1) an affiliated certified self-insurer authorized | 25 | | under the Workers' Compensation Act or a similar affiliated | 26 | | entity expressly authorized by analogous laws of another |
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| 1 | | state; or | 2 | | (2) an affiliate that is insured by a workers' | 3 | | compensation insurance policy with a negotiated deductible | 4 | | endorsement. | 5 | | B. No captive insurance company shall do any insurance
| 6 | | business in this State unless:
| 7 | | (1) it first obtains from the Director a certificate
of | 8 | | authority authorizing it to do such insurance business
in | 9 | | this State; and
| 10 | | (2) it appoints a resident registered agent to accept
| 11 | | service of process and to otherwise act on its behalf
in | 12 | | this State.
| 13 | | C. No captive insurance company shall adopt a name
that is | 14 | | the same as, deceptively similar to, or likely
to be confused | 15 | | with or mistaken for, any other existing
business name | 16 | | registered in this State.
| 17 | | D. Each captive insurance company, or the organizations
| 18 | | providing the principal administrative or management
services | 19 | | to such captive insurance company, shall maintain
a place of | 20 | | business in this State.
| 21 | | (Source: P.A. 91-357, eff. 7-29-99 .)
| 22 | | (215 ILCS 5/123C-3) (from Ch. 73, par. 735C-3)
| 23 | | (Section scheduled to be repealed on January 1, 2027)
| 24 | | Sec. 123C-3. Minimum capital and surplus . | 25 | | A. The Department may not issue a certificate of authority |
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| 1 | | to a captive insurance company unless the company possesses and | 2 | | maintains unencumbered capital and surplus in an amount | 3 | | determined by the Director after considering: | 4 | | (1) the amount of premium written by the captive | 5 | | insurance company; | 6 | | (2) the characteristics of the assets held by the | 7 | | captive insurance company; | 8 | | (3) the terms of reinsurance arrangements entered into | 9 | | by the captive insurance company; | 10 | | (4) the type of business covered in policies issued by | 11 | | the captive insurance company; | 12 | | (5) the underwriting practices and procedures of the | 13 | | captive insurance company; and | 14 | | (6) any other criteria that has an impact on the | 15 | | operations of the captive insurance company determined to | 16 | | be significant by the Director. No pure captive insurance | 17 | | company, association
captive insurance company | 18 | | incorporated as a stock insurer,
or industrial insured | 19 | | captive insurance company incorporated
as a stock insurer | 20 | | shall be issued a certificate of
authority unless it shall | 21 | | possess and thereafter maintain
unimpaired paid-in capital | 22 | | of not less than the minimum
capital requirement applicable | 23 | | to the class or classes
and clause or clauses of Section 4 | 24 | | describing the kind
or kinds of insurance which such | 25 | | captive insurance company
is authorized to write, as set | 26 | | forth in subsection (1) of Section 13.
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| 1 | | B. The amount of capital and surplus determined by the | 2 | | Director under subsection A of this Section may not be less | 3 | | than $250,000 for a pure captive insurance company, $500,000 | 4 | | for an industrial insured captive insurance company, and | 5 | | $750,000 for an association captive insurance company. Such | 6 | | capital may be in the form of (1) all cash
or cash equivalents; | 7 | | or (2) cash or cash equivalents
representing at least 20% of | 8 | | the requisite capital,
together with an irrevocable letter of | 9 | | credit for the
remainder of the requisite capital, which letter | 10 | | of
credit must (a) be approved by the Director, (b) be issued | 11 | | or
unconditionally confirmed by (i) a
bank chartered by this | 12 | | State, (ii) a member bank of the
Federal Reserve System or | 13 | | (iii) a United States office of a foreign
banking corporation | 14 | | that is: (A) licensed under the laws of the United
States or | 15 | | any state thereof, (B) regulated, supervised and examined by
| 16 | | United States federal or state authorities having regulatory | 17 | | authority over
banks and trust companies, and (C) designated by | 18 | | the Securities Valuation
Office of the National Association of | 19 | | Insurance Commissioners as meeting
its credit standards for | 20 | | issuing or confirming letters of credit or, in the
event that | 21 | | the Director elects to establish credit standards by rule, in
| 22 | | compliance with rules promulgated by the Director establishing | 23 | | reasonable
standards of safety and soundness substantially | 24 | | equivalent to those of the
Securities Valuation Office of the | 25 | | National Association of Insurance
Commissioners, and (c) | 26 | | satisfy the requirements of Section 123C-19; or (3)
cash or |
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| 1 | | cash equivalents representing at least 33% of the requisite
| 2 | | capital, together with irrevocable contractual obligations of
| 3 | | the member organizations of the captive insurance
company for | 4 | | the payment of the remainder of the requisite
capital in no | 5 | | more than 3 equal installments in each of the
3 calendar years | 6 | | following the date of the grant of
the certificate of authority | 7 | | to the captive insurance
company, which irrevocable | 8 | | contractual obligations shall
by contract be subject to | 9 | | acceleration (in a manner
acceptable to the Director) by the | 10 | | Company at the direction
of the Director and shall be secured | 11 | | by a letter of
credit or other form of guarantee or security | 12 | | acceptable
to the Director.
| 13 | | C. The capital and surplus required by subsection A of this | 14 | | Section must be in the form of: | 15 | | (1) United States currency; | 16 | | (2) an irrevocable letter of credit, in a form approved | 17 | | by the Director and not secured by a guarantee from an | 18 | | affiliate, naming the Director as beneficiary for the | 19 | | security of the captive insurance company's policyholders | 20 | | and issued by a bank approved by the Director; | 21 | | (3) bonds of this State; or | 22 | | (4) bonds or other evidences of indebtedness of the | 23 | | United States, the principal and interest of which are | 24 | | guaranteed by the United States. | 25 | | (Source: P.A. 86-632 .)
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| 1 | | (215 ILCS 5/123C-9) (from Ch. 73, par. 735C-9)
| 2 | | (Section scheduled to be repealed on January 1, 2027)
| 3 | | Sec. 123C-9. Reports, statements and mandatory reserves.
| 4 | | A. Captive insurance companies shall not be required
to | 5 | | make any annual report except as provided in this
Article.
| 6 | | B. (1) On or before Prior to March 1 of each year, each | 7 | | captive
insurance company shall submit to the Director a report
| 8 | | of its financial condition, verified by oath of 2
of its | 9 | | executive officers and including (i) a balance
sheet reporting | 10 | | assets, liabilities, capital and surplus,
(ii) a statement of | 11 | | gain or loss from operations, (iii)
a statement of changes in | 12 | | financial position, (iv) a
statement of changes in capital and | 13 | | surplus, and (v)
in the case of industrial insured captive | 14 | | insurance
companies, an analysis of loss reserve development,
| 15 | | information on risks ceded and assumed under reinsurance
| 16 | | agreements, on forms prescribed by the Director, and
a schedule | 17 | | of its invested assets on forms prescribed
by the Director , and | 18 | | (vi) a statement of actuarial opinion by a qualified | 19 | | independent actuary concerning the reasonableness of the | 20 | | captive insurance company's loss and loss adjustment expense | 21 | | reserves in such form and of such content as specified in the | 22 | | National Association of Insurance Commissioners Annual | 23 | | Statement Instructions: Property and Casualty .
| 24 | | (2) In addition, prior to March 1 of each year, each
| 25 | | association captive insurance company shall submit to
the | 26 | | Director such additional data or information, which
the |
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| 1 | | Director may from time to time require, on a form
specified by | 2 | | the Director.
| 3 | | (3) On or before June 1 of each year, each captive | 4 | | insurance company shall submit to the Director a report of its | 5 | | financial condition at last year's end with an independent | 6 | | certified public accountant's opinion of the company's | 7 | | financial condition. Prior to June 1 of each year, each | 8 | | association and industrial
insured captive insurance
company | 9 | | shall submit to the Director a report of its
financial | 10 | | condition, certified by a recognized firm
of independent public | 11 | | accountants acceptable to the
Director and including the items | 12 | | referred to in items
(i), (ii), (iii) and (iv) of paragraph (1) | 13 | | of this subsection B.
| 14 | | (4) Unless the Director permits otherwise, the reports
of | 15 | | financial condition referred to in paragraphs (1)
and (3) of | 16 | | this subsection B are to be prepared in accordance with the | 17 | | Accounting
Practices and Procedures Manual adopted by the | 18 | | National
Association of Insurance Commissioners. The Director
| 19 | | shall have authority to extend the time for filing any
report | 20 | | or statement by any company for reasons which
he considers good | 21 | | and sufficient.
| 22 | | C. In addition, any captive insurance company may be
| 23 | | required by the Director, when he considers such action
to be | 24 | | necessary and appropriate for the protection of
policyholders, | 25 | | creditors, shareholders or claimants,
to file, within 60 days | 26 | | after mailing to the company
of a notice that such is required, |
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| 1 | | a supplemental summary
statement as of the last day of any | 2 | | calendar month occurring
during the 100 days next preceding the | 3 | | mailing of such
notice designated by him on forms prescribed | 4 | | and furnished
by the Director. No company shall be required to | 5 | | file
more than 4 supplemental summary statements during any
| 6 | | consecutive 12 month period.
| 7 | | D. Every captive insurance company shall, at all times,
| 8 | | maintain reserves in an amount estimated in the aggregate
to | 9 | | provide for the payment of all losses and claims
incurred, | 10 | | whether reported or unreported, which are
unpaid and for which | 11 | | such company may be liable, and
to provide for the expenses of | 12 | | adjustment or settlement
of such losses and claims. The | 13 | | aggregate reserves shall
be reduced by reinsurance ceded which | 14 | | meets the requirements
of Section 123C-13.
For the purpose of | 15 | | such reserves, the company shall keep a complete and
itemized | 16 | | record showing all losses and claims on which it has received
| 17 | | notice, including all notices received by it of the occurrence | 18 | | of any event
which may result in a loss. Such record shall be | 19 | | opened in chronological
receipt order, with each notice of loss | 20 | | or claim identified by appropriate
number or coding.
| 21 | | E. Every captive insurance company shall maintain an
| 22 | | unearned premium reserve on all policies in force which
reserve | 23 | | shall be charged as a liability. The portions
of the gross | 24 | | premiums in force, after deducting reinsurance
qualifying | 25 | | under Section 123C-13, which shall be held
as a premium | 26 | | reserve, shall never be less in the aggregate
than the |
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| 1 | | company's actual liability to all its insureds
for the return | 2 | | of gross unearned premiums. In the calculation
of the company's | 3 | | actual liability to all its insureds,
the reserve shall be | 4 | | computed pursuant to the method
commonly referred to as the | 5 | | monthly pro rata method;
provided, however, that the Director | 6 | | may require that
such reserve shall be equal to the unearned | 7 | | portions
of the gross premiums in force, after deducting | 8 | | reinsurance
qualifying under Section 123C-13, in which case the | 9 | | reserve shall
be computed on each respective risk from the date | 10 | | of
the issuance of the policy.
| 11 | | E-5. A captive insurance company may make a written | 12 | | application to the Director for filing its annual report | 13 | | required under this Section on a fiscal year's end. If an | 14 | | alternative filing date is granted, the company shall file: | 15 | | (1) the annual report, including a statement of | 16 | | actuarial opinion by a qualified independent actuary | 17 | | concerning the reasonableness of the captive insurance | 18 | | company's loss and loss adjustment expense reserves in such | 19 | | form and of such content as specified in the National | 20 | | Association of Insurance Commissioners Annual Statement | 21 | | Instructions: Property and Casualty, no later than the 60th | 22 | | day after the date of the company's fiscal year's end; | 23 | | (2) the report of its financial condition at last | 24 | | year's end with an independent certified public | 25 | | accountant's opinion of the company's financial condition; | 26 | | and |
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| 1 | | (3) its balance sheet, income statement, and statement | 2 | | of cash flows, verified by 2 of its executive officers, | 3 | | before March 1 of each year to provide sufficient detail to | 4 | | support a premium tax return. | 5 | | F. The reports required by this Section shall be prepared
| 6 | | and filed on a calendar year basis.
| 7 | | G. Notwithstanding the requirements of this Section,
a | 8 | | captive insurance company may prepare and issue financial
| 9 | | statements prepared in accordance with generally accepted
| 10 | | accounting principles.
| 11 | | (Source: P.A. 85-131; 86-1155; 86-1156 .)
| 12 | | (215 ILCS 5/123C-11) (from Ch. 73, par. 735C-11)
| 13 | | (Section scheduled to be repealed on January 1, 2027)
| 14 | | Sec. 123C-11. Grounds and procedures for suspension
or | 15 | | revocation of certificate of authority. | 16 | | A. The certificate of authority of a captive insurance
| 17 | | company to do an insurance business in this State may
be | 18 | | suspended or revoked by the Director for any of the
following | 19 | | reasons:
| 20 | | (1) insolvency or impairment of required capital or | 21 | | surplus to policy holders ;
| 22 | | (2) failure to meet the requirements of Sections 123C-3 | 23 | | or
123C-4;
| 24 | | (3) refusal or failure to submit an annual report,
as | 25 | | required by Section 123C-9, or any other report or
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| 1 | | statement required by law or by lawful order of the
| 2 | | Director;
| 3 | | (4) failure to comply with the provisions of its own
| 4 | | charter or bylaws (or, in the case of an industrial
insured | 5 | | captive, with the provisions of the investment
policy set | 6 | | forth in its plan of operation as approved
from time to | 7 | | time by the Director);
| 8 | | (5) failure to submit to examination or any legal
| 9 | | obligation relative thereto, as required by Section | 10 | | 123C-10;
| 11 | | (6) refusal or failure to pay expenses , and charges , | 12 | | and taxes
as required by Sections 408 , 409 , 123C-10 , and | 13 | | 123C-17;
| 14 | | (7) use of methods that, although not otherwise | 15 | | specifically
prohibited by law, nevertheless render its | 16 | | operation
detrimental or its condition unsound with | 17 | | respect to
the public or to its policyholders; or
| 18 | | (8) failure otherwise to comply with the laws of this
| 19 | | State.
| 20 | | B. If the Director finds, upon examination, hearing,
or | 21 | | other evidence, that any captive insurance company
has | 22 | | committed any of the acts specified in subsection A,
he may | 23 | | suspend or revoke such certificate of authority
if he deems it | 24 | | in the best interest of the public and
the policyholders of | 25 | | such captive insurance company,
notwithstanding any other | 26 | | provision of this Article.
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| 1 | | C. The provisions of Articles XIII and XIII 1/2 shall
apply | 2 | | to and govern the conservation, rehabilitation,
liquidation | 3 | | and dissolution of captive insurance companies.
| 4 | | (Source: P.A. 85-131 .)
| 5 | | (215 ILCS 5/123C-12) (from Ch. 73, par. 735C-12)
| 6 | | (Section scheduled to be repealed on January 1, 2027)
| 7 | | Sec. 123C-12. Legal investments. | 8 | | A. The provisions of Article VIII and of Sections 131.2
and | 9 | | 131.3 shall apply to association captive insurance
companies.
| 10 | | B. No pure captive insurance company or industrial
insured | 11 | | captive insurance company shall be subject to
any restrictions | 12 | | on allowable investments whatever,
including those limitations | 13 | | contained in Articles VIII
and VIII 1/2; provided, however, | 14 | | that the Director
may prohibit or limit any investment or type | 15 | | of investment
that threatens the solvency or liquidity of any | 16 | | such
company; and provided further that an industrial insured
| 17 | | captive insurance company must adhere to the investment
policy | 18 | | set forth in its plan of operation as approved
from time to | 19 | | time by the Director.
| 20 | | C. A captive insurance company may make loans to its | 21 | | affiliates with the prior approval of the Director. Each loan | 22 | | must be evidenced by a note approved by the Director. A captive | 23 | | insurance company may not make a loan of the minimum capital | 24 | | and surplus funds required by this Article. | 25 | | D. The Director may prohibit or limit an investment that |
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| 1 | | threatens the solvency or liquidity of a captive insurance | 2 | | company. | 3 | | (Source: P.A. 85-131 .)
| 4 | | (215 ILCS 5/123C-13) (from Ch. 73, par. 735C-13)
| 5 | | (Section scheduled to be repealed on January 1, 2027)
| 6 | | Sec. 123C-13. Reinsurance.
| 7 | | A. Any captive insurance company may provide reinsurance
on | 8 | | risks ceded by any other insurer; provided, however,
that the | 9 | | risks so assumed are the same as the captive
insurance company | 10 | | could legally insure on a direct basis. | 11 | | The provisions of Section 174.1 shall not apply to
any | 12 | | captive insurance company providing reinsurance.
| 13 | | B. Subject to the provisions of Article XI, any captive
| 14 | | insurance company may cede, and may take credit for
in the | 15 | | establishment of reserves, all or any part of
its risks.
| 16 | | Furthermore, in addition to Section 173.1, any pure or | 17 | | industrial insured
captive insurance company may take credit, | 18 | | as either an
asset or a deduction from liability, for | 19 | | reinsurance so ceded to the extent:
| 20 | | (1) The reinsurer satisfies all of the following (a) | 21 | | through (g):
| 22 | | (a) the principal business of the reinsurer (other | 23 | | than investments
in subsidiaries and other investment | 24 | | activities) is to accept reinsurance from
captive | 25 | | insurance companies
organized under Article VIIC, of |
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| 1 | | which the company accepting the
reinsurance directly | 2 | | or indirectly owns, controls, or holds with power to
| 3 | | vote more than 80% of the outstanding voting securities | 4 | | if organized as a
stock company or more than 80% of the | 5 | | voting control if organized as a
mutual company and to | 6 | | provide insurance related services;
| 7 | | (b) is licensed to transact insurance or | 8 | | reinsurance in its jurisdiction of domicile;
| 9 | | (c) submits to this State's authority to examine | 10 | | its books and
records and agrees to pay the cost | 11 | | thereof;
| 12 | | (d) files annually with the Director a copy of its | 13 | | most recent
audited financial statements;
| 14 | | (e) maintains a surplus as regards policyholders | 15 | | in an amount that
is not less than $20,000,000;
| 16 | | (f) files with the Department the following:
| 17 | | (i) evidence of its submission to the | 18 | | jurisdiction of any court of competent
| 19 | | jurisdiction in any state of the United States and | 20 | | its agreement to comply with all
requirements | 21 | | necessary to give the court jurisdiction and to | 22 | | abide by
the final decision of the court or of any | 23 | | appellate court in the event of an appeal; and
| 24 | | (ii) an instrument designating the Director or | 25 | | a designated attorney as its
true and lawful | 26 | | attorney upon whom may be served any lawful process |
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| 1 | | in any
action, suit, or proceeding instituted by or | 2 | | on behalf of the ceding company;
| 3 | | (g) has not been the subject of an order of the | 4 | | Director entered
after notice and hearing prohibiting | 5 | | the reinsurer from utilizing this
paragraph (1); or
| 6 | | (2) the taking of credit by the captive insurance | 7 | | company has
otherwise received the prior approval of the | 8 | | Director.
| 9 | | C. A captive insurance company shall provide notice to the | 10 | | Director of a reinsurance agreement to which the company | 11 | | becomes a party not later than the 30th day after the date of | 12 | | the execution of the agreement. | 13 | | D. A captive insurance company shall provide notice of a | 14 | | termination of a previously filed reinsurance agreement to the | 15 | | Director not later than the 30th day after the date of | 16 | | termination. | 17 | | E. Notwithstanding Section 123C-15 of this Code, a captive | 18 | | insurance company, with the Director's approval, may accept | 19 | | risks from and cede risks to or take credit for reserves on | 20 | | risks ceded to: | 21 | | (1) a captive reinsurance pool composed only of other | 22 | | captive insurance companies holding a certificate of | 23 | | authority under this Article or a similar law of another | 24 | | jurisdiction; or | 25 | | (2) an affiliated captive insurance company holding a | 26 | | certificate of authority under this Article or a similar |
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| 1 | | law of another jurisdiction. | 2 | | (Source: P.A. 87-108 .)
| 3 | | (215 ILCS 5/123C-16) (from Ch. 73, par. 735C-16)
| 4 | | (Section scheduled to be repealed on January 1, 2027)
| 5 | | Sec. 123C-16. Tax.
| 6 | | A. Every captive insurance company organized under
the | 7 | | provisions of this Article and doing business in
this State | 8 | | shall, for the privilege of doing business
in this State, pay | 9 | | to the Director for the State treasury
the State tax imposed | 10 | | under Section 409 to the same
extent and in the same manner as | 11 | | a domestic insurance company using a tax form prescribed by the | 12 | | Director on or before March 15 of each year .
| 13 | | B. Domestic captive insurance companies shall be insurance | 14 | | companies
subject to the rules now provided for such companies | 15 | | under the Illinois
Income Tax Act.
| 16 | | C. A domestic captive insurance company that has engaged | 17 | | one or more
administrative or management service organizations | 18 | | in order to comply with
subsection D of Section 123C-2 shall be | 19 | | deemed to meet the requirements of
Section 409(4)(a) through | 20 | | (d) provided that the company and such
organizations when | 21 | | viewed collectively as a group:
| 22 | | (a) maintain a place of business in this State; and
| 23 | | (b) maintain in this State personnel knowledgeable of | 24 | | and responsible
for the company's operations, books, | 25 | | records, administration and annual
statement; and
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| 1 | | (c) conduct in this State substantially all of the | 2 | | company's
underwriting, policy issuing and servicing | 3 | | operations relating to the
company's policyholders and | 4 | | certificate holders; and
| 5 | | (d) comply with the provisions of Section 133(2) with | 6 | | respect to such
domestic captive insurance company's | 7 | | books, records, documents, accounts,
vouchers and | 8 | | securities.
| 9 | | (Source: P.A. 86-632; 86-634 .)
| 10 | | (215 ILCS 5/123C-17) (from Ch. 73, par. 735C-17)
| 11 | | (Section scheduled to be repealed on January 1, 2027)
| 12 | | Sec. 123C-17. Fees.
| 13 | | A. The Director shall charge, collect, and give proper
| 14 | | acquittances for the payment of the following fees and
charges | 15 | | with respect to a captive insurance company:
| 16 | | 1. For filing all documents submitted for the | 17 | | incorporation
or organization or certification of a | 18 | | captive insurance
company, $2,000 $7,000 .
| 19 | | 2. For filing requests for approval of changes in
the | 20 | | elements of a plan of operations, $200.
| 21 | | B. Except as otherwise provided in subsection A of this | 22 | | Section and in
Section 123C-10, the provisions of Section 408 | 23 | | shall
apply to captive insurance companies.
| 24 | | C. Any funds collected from captive insurance companies
| 25 | | pursuant to this Section shall be treated in the manner
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| 1 | | provided in subsection (11) of Section 408.
| 2 | | (Source: P.A. 93-32, eff. 7-1-03 .)
| 3 | | (215 ILCS 5/123C-19) (from Ch. 73, par. 735C-19)
| 4 | | (Section scheduled to be repealed on January 1, 2027)
| 5 | | Sec. 123C-19. Letters of credit. | 6 | | A. Any letter of credit used to meet the requirements
set | 7 | | forth in Sections 123C-3 and 123C-4:
| 8 | | (1) (blank); may not be used to provide more than 80% | 9 | | of the
amount required in Section 123C-3 and may not be | 10 | | used
to provide more than 80% of the amount required in | 11 | | Section
123C-4;
| 12 | | (2) may not be allowed to expire without the prior
| 13 | | written approval of the Director and shall provide for
30 | 14 | | days' advance written notice to the Director of the
| 15 | | proposed expiration of the letter of credit; and
| 16 | | (3) must be provided pursuant to arrangements,
| 17 | | acceptable to the Director, wherein all funds obtained
by | 18 | | the company under the letter of credit are free of
claims | 19 | | of any party which may arise on account of the
company's | 20 | | resort to the letter of credit.
| 21 | | B. If letters of credit are used to provide surplus
in | 22 | | excess of the amounts required in Section 123C-4:
| 23 | | (1) the aggregate amount of all such letters of credit
| 24 | | shall not exceed the policyholder surplus of the company;
| 25 | | (2) without the prior written approval of the Director,
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| 1 | | no such letter of credit may be allowed to expire, in
any | 2 | | period of 12 consecutive months ending on the date
of such | 3 | | expiration, in an amount greater than the greater
of (a) | 4 | | 10% of the company's surplus as regards policyholders
as of | 5 | | the 31st day of December next preceding, or (b)
the net | 6 | | income of the company for the 12 month period
ending the | 7 | | 31st 3lst day of December next preceding. For
purposes of | 8 | | this Section, net income includes net realized
capital | 9 | | gains in an amount not to exceed 20% of net
unrealized | 10 | | capital gains; and
| 11 | | (3) each such letter of credit shall provide for
30 | 12 | | days' advance written notice to the Director of the
| 13 | | proposed expiration of the letter of credit.
| 14 | | C. (Blank). The Director may require any company to draw | 15 | | upon
its letters of credit, in amounts determined by the
| 16 | | Director, if the Director determines that such action
is | 17 | | necessary for the protection of the interests of
policyholders.
| 18 | | D. (Blank). Any company including amounts supported by | 19 | | letters
of credit in its capital or surplus shall, prior to
the | 20 | | time any person becomes a policyholder, notify such
person of | 21 | | the amounts supported by letters of credit
and included in the | 22 | | company's capital or surplus.
| 23 | | (Source: P.A. 85-131 .)
| 24 | | (215 ILCS 5/123C-23 new) | 25 | | Sec. 123C-23. Approval of captive reinsurance pools. |
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| 1 | | Before determining whether to approve a captive insurance | 2 | | company's participation in a captive reinsurance pool under | 3 | | Section 123C-13 of this Code, the Director may: | 4 | | (1) require the captive insurance company provide to | 5 | | the Director evidence that the captive reinsurance pool: | 6 | | (a) is composed only of other captive insurance | 7 | | companies holding a certificate of authority under | 8 | | this Article or a similar law of another jurisdiction; | 9 | | and | 10 | | (b) will be able to meet the pool's financial | 11 | | obligations; and | 12 | | (2) impose any other limitation or requirement on the | 13 | | captive insurance company that is necessary and proper to | 14 | | provide adequate security for the captive insurance | 15 | | company. | 16 | | (215 ILCS 5/123C-24 new) | 17 | | Sec. 123C-24. Standards for risk management of controlled | 18 | | unaffiliated business. The Director may adopt rules | 19 | | establishing standards to ensure that an affiliated company is | 20 | | able to exercise control of the risk management function of any | 21 | | controlled unaffiliated business to be insured by the captive | 22 | | insurance company. | 23 | | (215 ILCS 5/123C-25 new) | 24 | | Sec. 123C-25. Captive managers. Before providing captive |
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| 1 | | management services to a licensed captive insurance company, a | 2 | | captive management company shall register with the Director by | 3 | | providing the information required on a form adopted by the | 4 | | Director. | 5 | | (215 ILCS 5/123C-26 new) | 6 | | Sec. 123C-26. Dividends. | 7 | | A. A captive insurance company shall notify the Director in | 8 | | writing when issuing policyholder dividends. | 9 | | B. A captive insurance company, with the Director's | 10 | | approval, may issue dividends or distributions to the holders | 11 | | of an equity interest in the captive insurance company. The | 12 | | Director shall adopt rules to implement this subsection B. | 13 | | (215 ILCS 5/123C-27 new) | 14 | | Sec. 123C-27. Rulemaking authority. The Director may adopt | 15 | | reasonable rules as necessary to implement the purposes and | 16 | | provisions of this Article. | 17 | | (215 ILCS 5/123C-28 new) | 18 | | Sec. 123C-28. Confidentiality. | 19 | | A. Any information filed by an applicant or captive | 20 | | insurance company under this Article is confidential and | 21 | | privileged for all purposes, including for purposes of the | 22 | | Freedom of Information Act, a response to a subpoena, or | 23 | | evidence in a civil action. Except as provided by subsections B |
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| 1 | | and C of this Section, the information may not be disclosed | 2 | | without the prior written consent of the applicant or captive | 3 | | insurance company to which the information pertains. | 4 | | B. If the recipient of the information described by | 5 | | subsection A of this Section has the legal authority to | 6 | | maintain the confidential or privileged status of the | 7 | | information and verifies that authority in writing, the | 8 | | Director or his or her designee may disclose the information to | 9 | | any of the following entities functioning in an official | 10 | | capacity: | 11 | | (1) a director of insurance or an insurance department | 12 | | of another state; | 13 | | (2) an authorized law enforcement official; | 14 | | (3) a State's Attorney of this State; | 15 | | (4) the Attorney General; | 16 | | (5) a grand jury; | 17 | | (6) the National Association of Insurance | 18 | | Commissioners if the captive insurance company is | 19 | | affiliated with an insurance company that is part of an | 20 | | insurance holding company system as described in Article | 21 | | VIII 1/2 of this Code; | 22 | | (7) another state or federal regulator if the applicant | 23 | | or captive insurance company to which the information | 24 | | relates operates in the entity's jurisdiction; | 25 | | (8) an international insurance regulator or analogous | 26 | | financial agency if the captive insurance company is |
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| 1 | | affiliated with an insurance company that is part of an | 2 | | insurance holding company system as described in Article | 3 | | VIII 1/2 of this Code and the holding company system | 4 | | operates in the entity's jurisdiction; or | 5 | | (9) members of a supervisory college described by | 6 | | Section 131.20c of this Code, if the captive insurance | 7 | | company is affiliated with an insurance company that is | 8 | | part of an insurance holding company system as described in | 9 | | Article VIII 1/2 of this Code. | 10 | | C. The Director may use information described by subsection | 11 | | A of this Section in the furtherance of a legal or regulatory | 12 | | action relating to the administration of this Code.
| 13 | | (215 ILCS 5/123C-4 rep.)
| 14 | | Section 10. The Illinois Insurance Code is amended by | 15 | | repealing Section 123C-4.".
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