State of Illinois
90th General Assembly
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[ Introduced ]

90_HB0627eng

      215 ILCS 5/531.03         from Ch. 73, par. 1065.80-3
          Amends the Illinois Life and  Health  Insurance  Guaranty
      Association Article of the Illinois Insurance Code.  Provides
      that  the  exclusion  from  coverage  for certain unallocated
      annuities does not apply  to  unallocated  annuities  validly
      issued before January 1, 1990.  Effective immediately.
                                                     LRB9002318JSgc
HB0627 Engrossed                               LRB9002318JSgc
 1        AN  ACT  to amend the Illinois Insurance Code by changing
 2    Section 531.03.
 3        Be it enacted by the People of  the  State  of  Illinois,
 4    represented in the General Assembly:
 5        Section  5.  The  Illinois  Insurance  Code is amended by
 6    changing Section 531.03 as follows:
 7        (215 ILCS 5/531.03) (from Ch. 73, par. 1065.80-3)
 8        Sec. 531.03.  Coverage and limitations.
 9        (1)  This Article shall provide coverage for the policies
10    and contracts specified in paragraph (2) of this Section:
11             (a)  to persons who, regardless of where they reside
12        (except for non-resident certificate holders under  group
13        policies  or contracts), are the beneficiaries, assignees
14        or payees  of  the  persons  covered  under  subparagraph
15        (1)(b), and
16             (b)  to  persons  who  are  owners of or certificate
17        holders under such policies or contracts; or, in the case
18        of unallocated annuity contracts, to the persons who  are
19        the contract holders, and who
20                  (i)  are residents of this State, or
21                  (ii)  are  not residents, but only under all of
22             the following conditions:
23                       (A)  the  insurers   which   issued   such
24                  policies  or  contracts  are  domiciled in this
25                  State;
26                       (B)  such insurers never held a license or
27                  certificate of authority in the states in which
28                  such persons reside;
29                       (C)  such states have associations similar
30                  to the association created by this Act; and
31                       (D)  such persons  are  not  eligible  for
HB0627 Engrossed            -2-                LRB9002318JSgc
 1                  coverage by such associations.
 2        (2)(a)  This   Article  shall  provide  coverage  to  the
 3    persons specified  in  paragraph  (l)  of  this  Section  for
 4    direct,  (i)  nongroup life, health, annuity and supplemental
 5    policies, or contracts, (ii) for  certificates  under  direct
 6    group  policies  or  contracts, (iii) for unallocated annuity
 7    contracts and (iv)  for  contracts  to  furnish  health  care
 8    services  and subscription certificates for medical or health
 9    care  services  issued  by  persons  licensed   to   transact
10    insurance business in this State under the Illinois Insurance
11    Code.  Annuity contracts and certificates under group annuity
12    contracts  include  but  are  not   limited   to   guaranteed
13    investment   contracts,   deposit  administration  contracts,
14    unallocated funding agreements, allocated funding agreements,
15    structured settlement agreements, lottery contracts  and  any
16    immediate or deferred annuity contracts.
17        (b)  This Article shall not provide coverage for:
18             (i)  that  portion  or  part  of  such  policies  or
19        contracts   under   which   the  risk  is  borne  by  the
20        policyholder; provided  however,  that  nothing  in  this
21        subparagraph  (i) shall make this Article inapplicable to
22        assessment  life  and  accident  and   health   insurance
23        policies or contracts; or
24             (ii)  any  such  policy  or contract or part thereof
25        assumed by the impaired  or  insolvent  insurer  under  a
26        contract of reinsurance, other than reinsurance for which
27        assumption certificates have been issued; or
28             (iii)  any  portion  of  a policy or contract to the
29        extent such portion represents an accrued value that  the
30        rate of interest on which it is accrued
31                  (A)  averaged  over  the  period  of four years
32             prior to the date on which the  Association  becomes
33             obligated  with  respect to such policy or contract,
34             exceeds a rate of interest determined by subtracting
HB0627 Engrossed            -3-                LRB9002318JSgc
 1             two percentage points from  Moody's  Corporate  Bond
 2             Yield  Average  averaged  for  that  same  four year
 3             period or for such lesser period if  the  policy  or
 4             contract  was issued less than four years before the
 5             Association became obligated; and
 6                  (B)  on  and  after  the  date  on  which   the
 7             Association  becomes  obligated with respect to such
 8             policy or contract, exceeds  the  rate  of  interest
 9             determined  by  subtracting  three percentage points
10             from Moody's Corporate Bond Yield  Average  as  most
11             recently available;
12             (iv)  any  unallocated annuity contract issued to an
13        employee benefit plan protected under the federal Pension
14        Benefit Guaranty Corporation, but  this  exclusion  shall
15        not  apply  to  any  unallocated annuity contract validly
16        issued prior to January 1, 1990; and
17             (v)  any portion of any unallocated annuity contract
18        which is not issued to or in connection with  a  specific
19        employee, union or association of natural persons benefit
20        plan or a government lottery.
21             (vi)  any burial society organized under Article XIX
22        of  this  Act,  any  fraternal  benefit society organized
23        under Article  XVII  of  this  Act,  any  mutual  benefit
24        association  organized  under  Article XVIII of this Act,
25        and any foreign fraternal benefit society licensed  under
26        Article VI of this Act; or
27             (vii)  any     health    maintenance    organization
28        established   pursuant   to   the   Health    Maintenance
29        Organization   Act   including   any  health  maintenance
30        organization business of a member insurer; or
31             (viii)  any   health   services   plan   corporation
32        established pursuant to  the  Voluntary  Health  Services
33        Plans Act; or
34             (ix)  any    vision    service    plan   corporation
HB0627 Engrossed            -4-                LRB9002318JSgc
 1        established pursuant to the Vision Service Plan Act; or
 2             (x)  any dental service plan corporation established
 3        pursuant to the Dental Service Plan Act; or
 4             (xi)  any stop-loss insurance, as defined in  clause
 5        (b) of Class 1 or clause (a) of Class 2 of Section 4, and
 6        further defined in subsection (d) of Section 352; or
 7             (xii)  that  portion  or  part  of  a  variable life
 8        insurance or variable annuity contract not guaranteed  by
 9        an insurer.
10        The  provisions  of  this amendatory Act of 1997 shall be
11    given retroactive effect  and  be  applied  to  all  affected
12    unallocated  annuity  contracts validly issued before January
13    1, 1990.   Such  retroactive  effect  is  declared  to  be  a
14    necessary  and appropriate measure to accomplish the remedial
15    purposes  of  this  Article,  and  in  the  absence  of  such
16    retroactive application,  numerous  Illinois  residents  will
17    lose  the  protections  and benefits that they had a right to
18    expect at the time the covered annuity contract was issued.
19        (3)  The benefits for which the  Association  may  become
20    liable shall in no event exceed the lesser of:
21             (a)  the   contractual  obligations  for  which  the
22        insurer is liable or would have been liable  if  it  were
23        not an impaired or insolvent insurer, or
24             (b)(i)  with  respect to any one life, regardless of
25        the number of policies or contracts:
26                  (A)  $300,000 in life insurance death benefits,
27             but not more than $100,000 in net cash surrender and
28             net cash withdrawal values for life insurance;
29                  (B)  $300,000  in  health  insurance  benefits,
30             including  any  net  cash  surrender  and  net  cash
31             withdrawal values;
32                  (C)  $100,000 in the present value  of  annuity
33             benefits,  including net cash surrender and net cash
34             withdrawal values;
HB0627 Engrossed            -5-                LRB9002318JSgc
 1             (ii)  with respect to each individual  participating
 2        in  a  governmental  retirement  plan  established  under
 3        Section  401,  403(b) or 457 of the U.S. Internal Revenue
 4        Code covered by an unallocated annuity  contract  or  the
 5        beneficiaries of each such individual if deceased, in the
 6        aggregate,  $100,000  in  present value annuity benefits,
 7        including net cash  surrender  and  net  cash  withdrawal
 8        values;  provided,  however,  that  in no event shall the
 9        Association be liable to expend more than $300,000 in the
10        aggregate  with  respect  to  any  one  individual  under
11        subparagraph (1) and this subparagraph:
12             (iii)  with  respect  to  any  one  contract  holder
13        covered by any unallocated annuity contract not  included
14        in   subparagraph   (3)(b)(ii)  of  this  Section  above,
15        $5,000,000 in benefits, irrespective  of  the  number  of
16        such contracts held by that contract holder.
17    (Source: P.A. 88-364.)
18        Section  99.  Effective date.  This Act takes effect upon
19    becoming law.

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