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90_HB3230
SEE INDEX
Amends the Health Maintenance Organization Act to provide
that entities organized under that Act are subject to the
Risk-Based Capital Law. Amends the Illinois Insurance Code in
relation to the regulation of company finances. Revises the
definition of "qualified business entity" with respect to
lending arrangements by domestic captive companies.
Invalidates possessory liens held by an attorney as a basis
for withholding files or otherwise with respect to a company
in rehabilitation or liquidation. Provides for the existence
of domestic surplus lines insurers. Requires reports to the
Director regarding fire insurance procured only from
unauthorized insurers subject to tax under the Fire
Investigation Act. Amends the Dental Service Plan Act and
the Voluntary Health Services Plans Act to limit certain
contingent reserves to $1,500,000. Amends the Farm Mutual
Insurance Company Act of 1986 to authorize additional
investment opportunities. Effective immediately.
LRB9008394JSmgA
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1 AN ACT concerning financial management of insurers,
2 amending named Acts.
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 Sections 35A-5, 35A-10, 35A-20, 35A-30, 35A-35,
7 35A-55, 35A-60, 111, 121-2.08, 123C-1, 126.2, 143, 191, and
8 445 and adding Section 445a as follows:
9 (215 ILCS 5/35A-5)
10 Sec. 35A-5. Definitions. As used in this Article, the
11 terms listed in this Section have the meaning given herein.
12 "Adjusted RBC Report" means an RBC Report that has been
13 adjusted by the Director in accordance with subsection (e) of
14 Section 35A-10.
15 "Authorized control level RBC" means the number
16 determined under the risk-based capital formula in accordance
17 with the RBC Instructions.
18 "Company action level RBC" means the product of 2.0 and
19 the insurer's authorized control level RBC.
20 "Corrective Order" means an order issued by the Director
21 in accordance with Article XII 1/2 specifying corrective
22 actions that the Director determines are required.
23 "Domestic insurer" means any insurance company domiciled
24 in this State under Article II, Article III, Article III 1/2,
25 or Article IV.
26 "Foreign insurer" means any foreign or alien insurance
27 company licensed under Article VI that is not domiciled in
28 this State.
29 "Health organization" means an entity organized and
30 operating under the Health Maintenance Organization Act.
31 "Life, health, or life and health insurer" means an
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1 insurance company that has authority to transact the kinds of
2 insurance described in either or both clause (a) or clause
3 (b) of Class 1 of Section 4 or a licensed property and
4 casualty insurer writing only accident and health insurance.
5 "Mandatory control level RBC" means the product of 0.70
6 and the insurer's authorized control level RBC.
7 "NAIC" means the National Association of Insurance
8 Commissioners.
9 "Negative trend" means, with respect to a life, health,
10 or life and health insurer, a negative trend over a period of
11 time, as determined in accordance with the trend test
12 calculation included in the RBC Instructions.
13 "Property and casualty insurer" means an insurance
14 company that has authority to transact the kinds of insurance
15 in either or both Class 2 or Class 3 of Section 4 or a
16 licensed insurer writing only insurance authorized under
17 clause (c) of Class 1, but does not include monoline mortgage
18 guaranty insurers, financial guaranty insurers, and title
19 insurers.
20 "RBC" means risk-based capital.
21 "RBC Instructions" means the RBC Report including
22 risk-based capital instructions adopted by the NAIC as those
23 instructions may be amended by the NAIC from time to time in
24 accordance with the procedures adopted by the NAIC.
25 "RBC level" means an insurer's company action level RBC,
26 regulatory action level RBC, authorized control level RBC, or
27 mandatory control level RBC.
28 "RBC Plan" means a comprehensive financial plan
29 containing the elements specified in subsection (b) of
30 Section 35A-15.
31 "RBC Report" means the risk-based capital report required
32 under Section 35A-10.
33 "Receivership" means conservation, rehabilitation, or
34 liquidation under Article XIII.
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1 "Regulatory action level RBC" means the product of 1.5
2 and the insurer's authorized control level RBC.
3 "Revised RBC Plan" means an RBC Plan rejected by the
4 Director and revised by the insurer with or without the
5 Director's recommendations.
6 "Total adjusted capital" means the sum of (1) an
7 insurer's statutory capital and surplus and (2) any other
8 items that the RBC Instructions may provide.
9 (Source: P.A. 88-364; 89-97, eff. 7-7-95.)
10 (215 ILCS 5/35A-10)
11 Sec. 35A-10. RBC Reports.
12 (a) On or before each March 1 (the "filing date"), every
13 domestic insurer shall prepare and submit to the Director a
14 report of its RBC levels as of the end of the previous
15 calendar year in the form and containing the information
16 required by the RBC Instructions. Every domestic insurer
17 shall also file its RBC Report with the NAIC in accordance
18 with the RBC Instructions. In addition, if requested in
19 writing by the chief insurance regulatory official of any
20 state in which it is authorized to do business, every
21 domestic insurer shall file its RBC Report with that official
22 no later than the later of 15 days after the insurer receives
23 the written request or the filing date.
24 (b) A life, health, or life and health insurer's RBC
25 shall be determined under the formula set forth in the RBC
26 Instructions. The formula shall take into account (and may
27 adjust for the covariance between):
28 (1) the risk with respect to the insurer's assets;
29 (2) the risk of adverse insurance experience with
30 respect to the insurer's liabilities and obligations;
31 (3) the interest rate risk with respect to the
32 insurer's business; and
33 (4) all other business risks and other relevant
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1 risks set forth in the RBC Instructions.
2 These risks shall be determined in each case by applying the
3 factors in the manner set forth in the RBC Instructions.
4 (c) A property and casualty insurer's RBC shall be
5 determined in accordance with the formula set forth in the
6 RBC Instructions. The formula shall take into account (and
7 may adjust for the covariance between):
8 (1) asset risk;
9 (2) credit risk;
10 (3) underwriting risk; and
11 (4) all other business risks and other relevant
12 risks set forth in the RBC Instructions.
13 These risks shall be determined in each case by applying the
14 factors in the manner set forth in the RBC Instructions.
15 (d) A health organization's RBC shall be determined in
16 accordance with the formula set forth in the RBC
17 instructions. The formula shall take the following into
18 account (and may adjust for the covariance between):
19 (1) asset risk;
20 (2) credit risk;
21 (3) underwriting risk; and
22 (4) all other business risks and other relevant
23 risks set forth in the RBC Instructions.
24 These risks shall be determined in each case by applying the
25 factors in the manner set forth in the RBC Instructions.
26 (e) (d) An excess of capital over the amount produced by
27 the risk-based capital requirements contained in this Code
28 and the formulas, schedules, and instructions referenced in
29 this Code is desirable in the business of insurance.
30 Accordingly, insurers should seek to maintain capital above
31 the RBC levels required by this Code. Additional capital is
32 used and useful in the insurance business and helps to secure
33 an insurer against various risks inherent in, or affecting,
34 the business of insurance and not accounted for or only
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1 partially measured by the risk-based capital requirements
2 contained in this Code.
3 (f) (e) If a domestic insurer files an RBC Report that,
4 in the judgment of the Director, is inaccurate, the Director
5 shall adjust the RBC Report to correct the inaccuracy and
6 shall notify the insurer of the adjustment. The notice shall
7 contain a statement of the reason for the adjustment.
8 (Source: P.A. 88-364; 89-97, eff. 7-7-95.)
9 (215 ILCS 5/35A-20)
10 Sec. 35A-20. Regulatory action level event.
11 (a) A regulatory action level event means any of the
12 following events:
13 (1) The filing of an RBC Report by the insurer that
14 indicates that the insurer's total adjusted capital is
15 greater than or equal to its authorized control level
16 RBC, but less than its regulatory action level RBC.
17 (2) The notification by the Director to an insurer
18 of an Adjusted RBC Report that indicates the event
19 described in paragraph (1), provided the insurer does not
20 challenge the Adjusted RBC Report under Section 35A-35.
21 (3) The notification by the Director to the insurer
22 that the Director has, after a hearing, rejected the
23 insurer's challenge under Section 35A-35 to an Adjusted
24 RBC Report that indicates the event described in
25 paragraph (1).
26 (4) The failure of the insurer to file an RBC
27 Report by the filing date, unless the insurer has
28 provided an explanation for the failure that is
29 satisfactory to the Director and has cured the failure
30 within 10 days after the filing date.
31 (5) The failure of the insurer to submit an RBC
32 Plan to the Director within the time period set forth in
33 subsection (c) of Section 35A-15.
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1 (6) The notification by the Director to the insurer
2 that the insurer's RBC Plan or revised RBC Plan is, in
3 the judgment of the Director, unsatisfactory and that the
4 notification constitutes a regulatory action level event
5 with respect to the insurer, provided the insurer does
6 not challenge the determination under Section 35A-35.
7 (7) The notification by the Director to the insurer
8 that the Director has, after a hearing, rejected the
9 insurer's challenge under Section 35A-35 to the
10 determination made by the Director under paragraph (6).
11 (8) The notification by the Director to the insurer
12 that the insurer has failed to adhere to its RBC Plan or
13 Revised RBC Plan, but only if that failure has a
14 substantial adverse effect on the ability of the insurer
15 to eliminate the company action level event in accordance
16 with its RBC Plan or Revised RBC Plan and the Director
17 has so stated in the notification, provided the insurer
18 does not challenge the determination under Section
19 35A-35.
20 (9) The notification by the Director to the insurer
21 that the Director has, after a hearing, rejected the
22 insurer's challenge under Section 35A-35 to the
23 determination made by the Director under paragraph (8).
24 (b) In the event of a regulatory action level event, the
25 Director shall do all of the following:
26 (1) Require the insurer to prepare and submit an
27 RBC Plan or, if applicable, a Revised RBC Plan to the
28 Director within 45 days after the regulatory action level
29 event occurs or within 45 days after the Director
30 notifies the insurer that the Director has, after a
31 hearing, rejected its challenge under Section 35A-35 to
32 either an Adjusted RBC Report or a Revised RBC Plan.
33 However, if the insurer previously prepared and submitted
34 an RBC Plan or a Revised RBC Plan in accordance with any
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1 provision of this Article, the Director may determine
2 that the previously prepared RBC Plan or Revised RBC Plan
3 satisfies the requirement of this subsection (b)(1).
4 (2) Perform any examination or analysis of the
5 assets, liabilities, and operations of the insurer,
6 including a review of its RBC Plan or Revised RBC Plan,
7 that the Director deems necessary.
8 (3) After the examination or analysis, issue a
9 Corrective Order specifying the corrective actions the
10 Director determines are required.
11 (c) In determining corrective actions, the Director may
12 take into account any factors the Director deems relevant
13 based upon the examination or analysis of the assets,
14 liabilities, and operations of the insurer including, but not
15 limited to, the results of any sensitivity tests undertaken
16 under the RBC Instructions. The regulatory action level event
17 shall be deemed sufficient grounds for the Director to issue
18 a Corrective Order in accordance with Article XII 1/2. The
19 Director shall have rights, powers, and duties with respect
20 to the insurer that are set forth in Article XII 1/2 and the
21 insurer shall be entitled to the protections afforded
22 insurers under Article XII 1/2. The insurer shall submit the
23 RBC Plan to the Director within 45 days after the regulatory
24 action level event occurs or within 45 days after the
25 Director notifies the insurer that the Director has, after a
26 hearing, rejected its challenge under Section 35A-35 to
27 either an Adjusted RBC Report or a Revised RBC Plan.
28 (d) The Director may retain actuaries, investment
29 experts, and other consultants necessary to review an
30 insurer's RBC Plan or Revised RBC Plan, examine or analyze
31 the assets, liabilities, and operations of the insurer, and
32 formulate the Corrective Order with respect to the insurer.
33 The fees, costs, and expenses related to the actuaries,
34 investment experts, and other consultants shall be borne by
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1 the affected insurer or the party designated by the Director.
2 (Source: P.A. 88-364; 89-97, eff. 7-7-95.)
3 (215 ILCS 5/35A-30)
4 Sec. 35A-30. Mandatory control level event.
5 (a) A mandatory control level event means any of the
6 following events:
7 (1) The filing of an RBC Report that indicates that
8 the insurer's total adjusted capital is less than its
9 mandatory control level RBC.
10 (2) The notification by the Director to the insurer
11 of an Adjusted RBC Report that indicates the event
12 described in paragraph (1), provided the insurer does not
13 challenge the Adjusted RBC Report under Section 35A-35.
14 (3) The notification by the Director to the insurer
15 that the Director has, after a hearing, rejected the
16 insurer's challenge under Section 35A-35 to the Adjusted
17 RBC Report that indicates the event described in
18 paragraph (1).
19 (b) In the event of a mandatory control level event with
20 respect to a life, health, or life and health insurer, the
21 Director shall take actions necessary to place the insurer in
22 receivership under Article XIII. In that event, the
23 mandatory control level event shall be deemed sufficient
24 grounds for the Director to take action under Article XIII,
25 and the Director shall have the rights, powers, and duties
26 with respect to the insurer that are set forth in Article
27 XIII. If the Director takes action under this subsection
28 regarding an Adjusted RBC Report, the insurer shall be
29 entitled to the protections of Article XIII. If the Director
30 finds that there is a reasonable expectation that the
31 mandatory control level event may be eliminated within 90
32 days after it occurs, the Director may delay action for not
33 more than 90 days after the mandatory control level event.
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1 (c) In the case of a mandatory control level event with
2 respect to a property and casualty insurer, the Director
3 shall take the actions necessary to place the insurer in
4 receivership under Article XIII or, in the case of an insurer
5 that is writing no business and that is running-off its
6 existing business, may allow the insurer to continue its
7 run-off under the supervision of the Director. In either
8 case, the mandatory control level event is deemed sufficient
9 grounds for the Director to take action under Article XIII,
10 and the Director has the rights, powers, and duties with
11 respect to the insurer that are set forth in Article XIII.
12 If the Director takes action regarding an Adjusted RBC
13 Report, the insurer shall be entitled to the protections of
14 Article XIII. If the Director finds that there is a
15 reasonable expectation that the mandatory control level event
16 may be eliminated within 90 days after it occurs, the
17 Director may delay action for not more than 90 days after the
18 mandatory control level event.
19 (d) In the case of a mandatory control level event with
20 respect to a health organization, the Director shall take the
21 actions necessary to place the insurer in receivership under
22 Article XIII or, in the case of an insurer that is writing no
23 business and that is running-off its existing business, may
24 allow the insurer to continue its run-off under the
25 supervision of the Director. In either case, the mandatory
26 control level event is deemed sufficient grounds for the
27 Director to take action under Article XIII, and the Director
28 has the rights, powers, and duties with respect to the
29 insurer that are set forth in Article XIII. If the Director
30 takes action regarding an Adjusted RBC Report, the insurer
31 shall be entitled to the protections of Article XIII. If the
32 Director finds that there is a reasonable expectation that
33 the mandatory control level event may be eliminated within 90
34 days after it occurs, the Director may delay action for not
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1 more than 90 days after the mandatory control level event.
2 (Source: P.A. 88-364; 89-97, eff. 7-7-95.)
3 (215 ILCS 5/35A-35)
4 Sec. 35A-35. Hearings.
5 (a) An insurer has the right to an administrative
6 hearing with respect to any of the following:
7 (1) The notification by the Director to the insurer
8 of an Adjusted RBC Report.
9 (2) The notification by the Director to the insurer
10 that the insurer's RBC Plan or Revised RBC Plan is
11 unsatisfactory and that the notification constitutes a
12 regulatory action level event.
13 (3) The notification by the Director to the insurer
14 that the insurer has failed to adhere to its RBC Plan or
15 Revised RBC Plan and that the failure has a substantial
16 adverse effect on the ability of the insurer to eliminate
17 the company action level event in accordance with its RBC
18 Plan or Revised RBC Plan.
19 (4) The notification by the Director to the insurer
20 of a Corrective Order.
21 (b) At the administrative hearing, the insurer may
22 challenge any determination or action by the Director. The
23 insurer shall notify the Director of its request for a
24 hearing within 5 days after notification by the Director made
25 under subsection (a). Upon receipt of the insurer's request
26 for a hearing, the Director shall set a date for the hearing.
27 The hearing shall be held no fewer than 10 days and no more
28 than 30 days after the date of the insurer's request for the
29 hearing.
30 (Source: P.A. 88-364.)
31 (215 ILCS 5/35A-55)
32 Sec. 35A-55. Provisions of Article supplemental;
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1 exemptions.
2 (a) The provisions of this Article are supplemental to
3 the provisions of any other laws of this State and do not
4 preclude or limit other powers or duties of the Director
5 under any other laws.
6 (b) The Director may exempt from the application of this
7 Article any domestic property and casualty insurer that:
8 (1) writes direct business only in this State;
9 (2) writes direct annual premiums of $2,000,000 or
10 less; and
11 (3) assumes no reinsurance in excess of 5% of
12 direct premium written.
13 (c) The Director may exempt from the application of this
14 Article any company that is organized under Article IV of
15 this Code, that writes direct business only in this State,
16 and that assumes no reinsurance in excess of 5% of direct
17 written premiums.
18 (d) The Director may exempt from the application of this
19 Article any domestic health organization that:
20 (1) writes direct business only in this State and
21 writes direct annual premiums of $2,000,000 or less; or
22 (2) has operations that are so different from other
23 health organizations as to render the calculations from
24 the RBC formula inappropriate.
25 (e) (d) The Director may by rule impose upon any insurer
26 exempted from the application of this Article under
27 subsection (b), or (c), or (d) of this Section conditions to
28 the exemption that require maintenance of adequate capital.
29 These conditions shall not exceed the requirements of this
30 Article.
31 (Source: P.A. 88-364; 89-97, eff. 7-7-95.)
32 (215 ILCS 5/35A-60)
33 Sec. 35A-60. Phase-in of Article.
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1 (a) For RBC Reports filed with respect to the December
2 31, 1993 annual statement, instead of the provisions of
3 Sections 35A-15, 35A-20, 35A-25, and 35A-30, the following
4 provisions apply:
5 (1) In the event of a company action level event,
6 the Director shall take no action under this Article.
7 (2) In the event of a regulatory action level event
8 under paragraph (1), (2), or (3) of subsection (a) of
9 Section 35A-20, the Director shall take the actions
10 required under Section 35A-15.
11 (3) In the event of a regulatory action level event
12 under paragraph (4), (5), (6), (7), (8), or (9) of
13 subsection (a) of Section 35A-20 or an authorized control
14 level event, the Director shall take the actions required
15 under Section 35A-20.
16 (4) In the event of a mandatory control level
17 event, the Director shall take the actions required under
18 Section 35A-25.
19 (b) For RBC Reports required to be filed by property and
20 casualty insurers with respect to the December 31, 1995
21 annual statement, instead of the provisions of Section
22 35A-15, 35A-20, 35A-25, and 35A-30, the following provisions
23 apply:
24 (1) In the event of a company action level event
25 with respect to a domestic insurer, the Director shall
26 take no regulatory action under this Article.
27 (2) In the event of a an regulatory action level
28 event under paragraph (1), (2) or (3) of subsection (a)
29 of Section 35A-20, the Director shall take the actions
30 required under Section 35A-15.
31 (3) In the event of a an regulatory action level
32 event under paragraph (4), (5), (6), (7), (8), or (9) of
33 subsection (a) of Section 35A-20 or an authorized control
34 level event, the Director shall take the actions required
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1 under Section 35A-20.
2 (4) In the event of a mandatory control level
3 event, the Director shall take the actions required under
4 Section 35A-25.
5 (c) For RBC Reports required to be filed by health
6 organizations with respect to the December 31, 1998 annual
7 statement, instead of the provisions of Sections 35A-15,
8 35A-20, 35A-25, and 35A-30, the following provisions apply:
9 (1) In the event of a company action level event
10 with respect to a domestic insurer, the Director shall
11 take no regulatory action under this Article.
12 (2) In the event of a regulatory action level event
13 under paragraph (1), (2), or (3) of subsection (a) of
14 Section 35A-20, the Director shall take the actions
15 required under Section 35A-15.
16 (3) In the event of a regulatory action level event
17 under paragraph (4), (5), (6), (7), (8), or (9) of
18 subsection (a) of Section 35A-20 or an authorized control
19 level event, the Director shall take the actions required
20 under Section 35A-20.
21 (4) In the event of a mandatory control level
22 event, the Director shall take the actions required under
23 Section 35A-25.
24 (Source: P.A. 88-364; 89-97, eff. 7-7-95.)
25 (215 ILCS 5/111) (from Ch. 73, par. 723)
26 Sec. 111. Conditions of issuance of certificate of
27 authority.
28 (1) Before a certificate of authority to transact
29 business in this State is issued to a foreign or alien
30 company, such company shall satisfy the Director that:
31 (a) the company is duly organized under the laws of
32 the state or country under whose laws it professes to be
33 organized and authorized to do the business it is
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1 transacting or proposes to transact;
2 (b) its name is not the same as, or deceptively
3 similar to, the name of any domestic company, or of any
4 foreign or alien company authorized to transact business
5 in this State;
6 (c) if a company transacting business of the kind
7 or kinds enumerated in Class 1 of Section 4, it is not
8 engaging in practices in any state which if engaged in
9 this State, would constitute a violation of Section 237;
10 and it is not transacting any kinds of business other
11 than those enumerated in Class 1 of Section 4;
12 (d) if a stock company, it has a paid up capital
13 and surplus at least equal to the capital and original
14 surplus required by this Code for a domestic company
15 doing the same kind or kinds of business or, if a mutual
16 company or reciprocal, it has a surplus and provision for
17 contingent liability of policyholders, at least equal to
18 the original surplus and provision for contingent
19 liability of policyholders required for a similar
20 domestic company doing the same kind or kinds of
21 business, or, if a fraternal benefit society, it meets
22 the requirements prescribed in this Code for the
23 organization of a domestic company or society, or if a
24 Lloyds it meets the requirements of Article V;
25 (e) its funds are invested in accordance with the
26 laws of its domicile; and
27 (f) in the case of a stock company its minimum
28 capital and surplus and required reserves, or in the case
29 of a mutual company or a reciprocal proposing to issue
30 policies without contingent liability, its minimum
31 surplus and required reserves, or in the case of any
32 other company, all its funds, are invested in securities
33 or property which afford a degree of financial security
34 equal to that required for similar domestic companies,
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1 provided that this clause shall not be construed as
2 requiring the application of limitations relating either
3 to the kind or amount of securities prescribed by this
4 Code for the investments of domestic companies.
5 (2) In determining whether an alien company complies
6 with the provisions of subsection (1) of this section the
7 Director shall consider only business transacted in the
8 United States, only the assets described in Section 60j and
9 only liabilities in connection with its United States
10 business.
11 (3) Before a certificate of authority is issued to a
12 foreign or alien company, other than a Lloyds, it shall
13 deposit with the Director securities which are authorized
14 investments for similar domestic companies under Section
15 126.11A(1), 126.11A(2), 126.24A(1), or 126.24A(2) of the
16 amount, if any, required of a domestic company similarly
17 organized and doing the same kind or kinds of business; or in
18 lieu of such deposit such foreign or alien company shall
19 satisfy the Director that it has on deposit with an official
20 of a state of the United States or a depositary designated or
21 authorized for such purpose by such official, authorized by
22 the law of such state to accept such deposit, securities of
23 at least a like amount, for the benefit and security of all
24 creditors, policyholders and policy obligations of such
25 company in the United States.
26 (4) Before issuing a certificate of authority to a
27 foreign or alien company, the Director may cause an
28 examination to be made of the condition and affairs of such
29 company.
30 (Source: P.A. 90-418, eff. 8-15-97.)
31 (215 ILCS 5/121-2.08) (from Ch. 73, par. 733-2.08)
32 Sec. 121-2.08. Transactions in this State involving
33 contracts of insurance issued to one or more industrial
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1 insureds. For purposes of this Section "industrial insured"
2 is an insured:
3 (a) Which procures the insurance of any risk or risks
4 other than life and annuity contracts by use of the services
5 of a full time employee acting as an insurance manager or
6 buyer or the services of a regularly and continuously
7 retained qualified insurance consultant;
8 (b) Whose aggregate annual premiums for insurance on all
9 risks, except for life and accident and health insurance,
10 total at least $50,000; and
11 (c) Which has at least 25 full time employees.
12 (Source: P.A. 85-131.)
13 (215 ILCS 5/123C-1) (from Ch. 73, par. 735C-1)
14 Sec. 123C-1. Definitions. As used in this Article:
15 A. "Affiliate" or "Affiliated company" shall have the
16 meaning set forth in subsection (a) of Section 131.1 (and,
17 for purposes of such definition, the definitions of "control"
18 and "person", as set forth in subsections (b) and (e) of
19 Section 131.1, respectively, shall be applicable).
20 B. "Association" means any entity meeting the
21 requirements set forth in either of the following paragraphs
22 (1), (2) or (3):
23 (1) any organized association of individuals, legal
24 representatives, corporations (whether for profit or not
25 for profit), partnerships, trusts, associations, units of
26 government or other organizations, or any combination of
27 the foregoing, that has been in continuous existence for
28 at least one year, the member organizations of which
29 collectively:
30 (a) own, control, or hold with power to vote
31 (directly or indirectly) all of the outstanding
32 voting securities of an association captive
33 insurance company incorporated as a stock insurer;
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1 or
2 (b) have complete voting control (directly or
3 indirectly) over an association captive insurance
4 company organized as a mutual insurer;
5 (2) any organized association of individuals, legal
6 representatives, corporations (whether for profit or not
7 for profit), partnerships, trusts, associations, units of
8 government or other organizations, or any combination of
9 the foregoing:
10 (a) whose member organizations are engaged in
11 businesses or activities similar or related with
12 respect to the liability of which such members are
13 exposed by virtue of any related, similar, or common
14 business, trade, product, services, premises, or
15 operations; and
16 (b) whose member organizations:
17 (i) directly or indirectly own or
18 control, and hold with power to vote, at least
19 80% of all of the outstanding voting securities
20 of an association captive insurance company
21 incorporated as a stock insurer; or
22 (ii) directly or indirectly have at least
23 80% of the voting control over an association
24 captive insurance company organized as a mutual
25 insurer; or
26 (3) any risk retention group, as defined in
27 subsection (11) of Section 123B-2, domiciled in this
28 State and organized under this Article; however,
29 beginning 6 months after the effective date of this
30 amendatory Act of 1995, a risk retention group shall no
31 longer qualify as an association under this Article.
32 Provided, however, that with respect to each of the
33 associations described in paragraphs (1), (2) and (3) above,
34 no member organization may (i) own, control, or hold with
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1 power to vote in excess of 25% of the voting securities of an
2 association captive insurance company incorporated as a stock
3 insurer, or (ii) have more than 25% of the voting control of
4 an association captive insurance company organized as a
5 mutual insurer.
6 C. "Association captive insurance company" means any
7 company that insures risks of (i) the member organizations of
8 an association, and (ii) their affiliated companies.
9 D. "Captive insurance company" means any pure captive
10 insurance company, association captive insurance company or
11 industrial insured captive insurance company organized under
12 the provisions of this Article.
13 E. "Director" means the Director of the Department of
14 Insurance.
15 F. "Industrial insured" means an insured which (together
16 with its affiliates) at the time of its initial procurement
17 of insurance from an industrial insured captive insurance
18 company:
19 (1) has available to it advice with respect to the
20 purchase of insurance through the use of the services of
21 a full-time employee acting as an insurance manager or
22 buyer or the services of a qualified insurance
23 consultant; and
24 (2) pays aggregate annual premiums in excess of
25 $50,000 $35,000 for insurance on all risks except
26 for life, accident and health; and
27 (3) either (i) has at least 25 full-time employees,
28 or (ii) has gross assets in excess of $3,000,000, or
29 (iii) has annual gross revenues in excess of $5,000,000.
30 G. "Industrial insured captive insurance company" means
31 any company that insures risks of industrial insureds that
32 are members of the industrial insured group, and their
33 affiliated companies.
34 H. "Industrial insured group" means any group of
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1 industrial insureds that collectively:
2 (1) directly or indirectly (including ownership or
3 control through a company which is wholly owned by such
4 group of industrial insureds) own or control, and hold
5 with power to vote, all of the outstanding voting
6 securities of an industrial insured captive insurance
7 company incorporated as a stock insurer; or
8 (2) directly or indirectly (including control
9 through a company which is wholly owned by such group of
10 industrial insureds) have complete voting control over an
11 industrial insured captive insurance company organized as
12 a mutual insurer; provided, however, that no member
13 organization may (i) own, control, or hold with power to
14 vote in excess of 25% of the voting securities of an
15 industrial insured captive insurance company incorporated
16 as a stock insurer, or (ii) have more than 25% of the
17 voting control of an industrial insured captive insurance
18 company organized as a mutual insurer.
19 I. "Member organization" means any individual, legal
20 representative, corporation (whether for profit or not for
21 profit), partnership, association, unit of government, trust
22 or other organization that belongs to an association or an
23 industrial insured group.
24 J. "Parent" means a corporation, partnership, individual
25 or other legal entity that directly or indirectly owns,
26 controls, or holds with power to vote more than 50% of the
27 outstanding voting securities of a company.
28 K. "Personal risk liability" means liability to other
29 persons for (i) damage because of injury to any person, (ii)
30 damage to property, or (iii) other loss or damage, in each
31 case resulting from any personal, familial, or household
32 responsibilities or activities, but does not include legal
33 liability for damages (including costs of defense, legal
34 costs and fees, and other claims expenses) because of
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1 injuries to other persons, damage to their property, or other
2 damage or loss to such other persons resulting from or
3 arising out of:
4 (i) any business (whether for profit or not for
5 profit), trade, product, services (including professional
6 services), premises, or operations; or
7 (ii) any activity of any state or local government,
8 or any agency or political subdivision thereof.
9 L. "Pure captive insurance company" means any company
10 that insures only risks of its parent or affiliated companies
11 or both.
12 M. "Unit of government" includes any state, regional or
13 local government, or any agency or political subdivision
14 thereof, or any district, authority, public educational
15 institution or school district, public corporation or other
16 unit of government in this State or any similar unit of
17 government in any other state.
18 (Source: P.A. 89-97, eff. 7-7-95.)
19 (215 ILCS 5/126.2)
20 Sec. 126.2. Definitions. For purposes of this Article:
21 A. "Acceptable collateral" means:
22 (1) As to securities lending transactions, and for
23 the purpose of calculating counterparty exposure amount,
24 cash, cash equivalents, letters of credit, direct
25 obligations of, or securities that are fully guaranteed
26 as to principal and interest by, the government of the
27 United States or any agency of the United States, or by
28 the Federal National Mortgage Association or the Federal
29 Home Loan Mortgage Corporation, and as to lending foreign
30 securities, sovereign debt rated 1 by the SVO;
31 (2) As to repurchase transactions, cash, cash
32 equivalents and direct obligations of, or securities that
33 are fully guaranteed as to principal and interest by, the
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1 government of the United States or an agency of the
2 United States, or by the Federal National Mortgage
3 Association or the Federal Home Loan Mortgage
4 Corporation; and
5 (3) As to reverse repurchase transactions, cash and
6 cash equivalents.
7 B. "Acceptable private mortgage insurance" means
8 insurance written by a private insurer protecting a mortgage
9 lender against loss occasioned by a mortgage loan default and
10 issued by a licensed mortgage insurance company, with an SVO
11 1 designation or a rating issued by a nationally recognized
12 statistical rating organization equivalent to an SVO 1
13 designation, that covers losses to an 80% loan-to-value
14 ratio.
15 C. "Accident and health insurance" means protection
16 which provides payment of benefits for covered sickness or
17 accidental injury, excluding credit insurance, disability
18 insurance, accidental death and dismemberment insurance and
19 long-term care insurance.
20 D. "Accident and health insurer" means a licensed life
21 or health insurer or health service corporation whose
22 insurance premiums and required statutory reserves for
23 accident and health insurance constitute at least 95% of
24 total premium considerations or total statutory required
25 reserves, respectively.
26 E. "Admitted assets" means assets defined by Section 3.1
27 of this Code permitted to be reported as admitted assets on
28 the statutory financial statement of the insurer most
29 recently required to be filed with the Director, but
30 excluding assets of separate accounts, the investments of
31 which are not subject to the provisions of this Article
32 except to the extent that the provisions of Article XIV 1/2
33 so provide.
34 F. "Affiliate" means, as to any person, another person
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1 that, directly or indirectly through one or more
2 intermediaries, controls, is controlled by, or is under
3 common control with the person.
4 G. "Asset-backed security" means a security or other
5 instrument, excluding shares in a mutual fund, evidencing an
6 interest in, or the right to receive payments from, or
7 payable from distributions on, an asset, a pool of assets or
8 specifically divisible cash flows which are legally
9 transferred to a trust or another special purpose
10 bankruptcy-remote business entity, on the following
11 conditions:
12 (1) The trust or other business entity is
13 established solely for the purpose of acquiring specific
14 types of assets or rights to cash flows, issuing
15 securities and other instruments representing an interest
16 in or right to receive cash flows from those assets or
17 rights, and engaging in activities required to service
18 the assets or rights and any credit enhancement or
19 support features held by the trust or other business
20 entity; and
21 (2) The assets of the trust or other business
22 entity consist solely of interest bearing obligations or
23 other contractual obligations representing the right to
24 receive payment from the cash flows from the assets or
25 rights. However, the existence of credit enhancements,
26 such as letters of credit or guarantees, or support
27 features such as swap agreements, shall not cause a
28 security or other instrument to be ineligible as an
29 asset-backed security.
30 H. "Business entity" includes a sole proprietorship,
31 corporation, limited liability company, association,
32 partnership, joint stock company, joint venture, mutual fund,
33 trust, joint tenancy or other similar form of business
34 organization, whether organized for profit or not for profit.
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1 I. "Cap" means an agreement obligating the seller to
2 make payments to the buyer, with each payment based on the
3 amount by which a reference price or level or the performance
4 or value of one or more underlying interests exceeds a
5 predetermined number, sometimes called the strike rate or
6 strike price.
7 J. "Capital and surplus" means the sum of the capital
8 and surplus of the insurer required to be shown on the
9 statutory financial statement of the insurer most recently
10 required to be filed with the Director.
11 K. "Cash equivalents" means short-term, highly rated and
12 highly liquid investments or securities readily convertible
13 to known amounts of cash without penalty and so near maturity
14 that they present insignificant risk of change in value. Cash
15 equivalents include government money market mutual funds and
16 class one money market mutual funds. For purposes of this
17 definition:
18 (1) "Short-term" means investments with a remaining
19 term to maturity of 90 days or less; and
20 (2) "Highly rated" means an investment rated "P-1"
21 by Moody's Investors Service, Inc., or "A-1" by Standard
22 and Poor's division of The McGraw Hill Companies, Inc. or
23 its equivalent rating by a nationally recognized
24 statistical rating organization recognized by the SVO.
25 L. "Class one bond mutual fund" means a mutual fund that
26 at all times qualifies for investment using the bond class
27 one reserve factor under the Purposes and Procedures of the
28 Securities Valuation Office or any successor publication.
29 M. "Class one money market mutual fund" means a money
30 market mutual fund that at all times qualifies for investment
31 using the bond class one reserve factor under the Purposes
32 and Procedures of the Securities Valuation Office or any
33 successor publication.
34 N. "Code" means the Illinois Insurance Code.
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1 O. "Collar" means an agreement to receive payments as
2 the buyer of an option, cap or floor and to make payments as
3 the seller of a different option, cap or floor.
4 P. "Commercial mortgage loan" means a mortgage loan,
5 other than a residential mortgage loan.
6 Q. "Construction loan" means a loan of less than 3 years
7 in term, made for financing the cost of construction of a
8 building or other improvement to real estate, that is secured
9 by the real estate.
10 R. "Control" means the possession, directly or
11 indirectly, of the power to direct or cause the direction of
12 the management and policies of a person, whether through the
13 ownership of voting securities, by contract (other than a
14 commercial contract for goods or nonmanagement services), or
15 otherwise, unless the power is the result of an official
16 position with or corporate office held by the person. Control
17 shall be presumed to exist if a person, directly or
18 indirectly, owns, controls, holds with the power to vote or
19 holds proxies representing 10% or more of the voting
20 securities of another person. This presumption may be
21 rebutted by a showing that control does not exist in fact.
22 The Director may determine, after furnishing all interested
23 persons notice and an opportunity to be heard and making
24 specific findings of fact to support the determination, that
25 control exists in fact, notwithstanding the absence of a
26 presumption to that effect.
27 S. "Counterparty exposure amount" means:
28 (1) The amount of credit risk attributable to a
29 derivative instrument entered into with a business entity
30 other than through a qualified exchange, qualified
31 foreign exchange, or cleared through a qualified
32 clearinghouse ("over-the-counter derivative instrument").
33 The amount of credit risk equals:
34 (a) The market value of the over-the-counter
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1 derivative instrument if the liquidation of the
2 derivative instrument would result in a final cash
3 payment to the insurer; or
4 (b) Zero if the liquidation of the derivative
5 instrument would not result in a final cash payment
6 to the insurer.
7 (2) If over-the-counter derivative instruments are
8 entered into under a written master agreement which
9 provides for netting of payments owed by the respective
10 parties, and the domicile of the counterparty is either
11 within the United States or if not within the United
12 States, within a foreign jurisdiction listed in the
13 Purposes and Procedures of the Securities Valuation
14 Office as eligible for netting, the net amount of credit
15 risk shall be the greater of zero or the net sum of:
16 (a) The market value of the over-the-counter
17 derivative instruments entered into under the
18 agreement, the liquidation of which would result in
19 a final cash payment to the insurer; and
20 (b) The market value of the over-the-counter
21 derivative instruments entered into under the
22 agreement, the liquidation of which would result in
23 a final cash payment by the insurer to the business
24 entity.
25 (3) For open transactions, market value shall be
26 determined at the end of the most recent quarter of the
27 insurer's fiscal year and shall be reduced by the market
28 value of acceptable collateral held by the insurer or
29 placed in escrow by one or both parties.
30 T. "Covered" means that an insurer owns or can
31 immediately acquire, through the exercise of options,
32 warrants or conversion rights already owned, the underlying
33 interest in order to fulfill or secure its obligations under
34 a call option, cap or floor it has written, or has set aside,
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1 pursuant to a custodial or escrow agreement, cash or cash
2 equivalents with a market value equal to the amount required
3 to fulfill its obligations under a put option it has written,
4 in an income generation transaction.
5 U. "Credit tenant loan" means a mortgage loan which is
6 made primarily in reliance on the credit standing of a major
7 tenant, structured with an assignment of the rental payments
8 to the lender with real estate pledged as collateral in the
9 form of a first lien.
10 V. (1) "Derivative instrument" means an agreement,
11 option, instrument or a series or combination thereof:
12 (a) To make or take delivery of, or assume or
13 relinquish, a specified amount of one or more
14 underlying interests, or to make a cash settlement
15 in lieu thereof; or
16 (b) That has a price, performance, value or
17 cash flow based primarily upon the actual or
18 expected price, level, performance, value or cash
19 flow of one or more underlying interests.
20 (2) Derivative instruments include options,
21 warrants used in a hedging transaction and not attached
22 to another financial instrument, caps, floors, collars,
23 swaps, forwards, futures and any other agreements,
24 options or instruments substantially similar thereto or
25 any series or combination thereof and any agreements,
26 options or instruments permitted under rules adopted
27 under Section 126.8. Derivative instruments shall not
28 include an investment authorized by Sections 126.11
29 through 126.17, 126.19 and 126.24 through 126.30.
30 W. "Derivative transaction" means a transaction
31 involving the use of one or more derivative instruments.
32 X. "Direct" or "directly," when used in connection with
33 an obligation, means the designated obligor is primarily
34 liable on the instrument representing the obligation.
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1 Y. "Dollar roll transaction" means 2 simultaneous
2 transactions with settlement dates no more than 96 days
3 apart, so that in one transaction an insurer sells to a
4 business entity, and in the other transaction the insurer is
5 obligated to purchase from the same business entity,
6 substantially similar securities of the following types:
7 (1) Asset-backed securities issued, assumed or
8 guaranteed by the Government National Mortgage
9 Association, the Federal National Mortgage Association or
10 the Federal Home Loan Mortgage Corporation or their
11 respective successors; and
12 (2) Other asset-backed securities referred to in
13 Section 106 of Title I of the Secondary Mortgage Market
14 Enhancement Act of 1984 (15 U.S.C. 77r1), as amended.
15 Z. "Domestic jurisdiction" means the United States,
16 Canada, any state, any province of Canada or any political
17 subdivision of any of the foregoing.
18 AA. "Equity interest" means any of the following that
19 are not rated credit instruments: common stock; preferred
20 stock; trust certificate; equity investment in an investment
21 company other than a money market mutual fund or a class one
22 bond mutual fund; investment in a common trust fund of a bank
23 regulated by a federal or state agency; an ownership interest
24 in minerals, oil or gas, the rights to which have been
25 separated from the underlying fee interest in the real estate
26 where the minerals, oil or gas are located; instruments which
27 are mandatorily, or at the option of the issuer, convertible
28 to equity; limited partnership interests and those general
29 partnership interests authorized under Section 126.5(D);
30 member interests in limited liability companies; warrants or
31 other rights to acquire equity interests that are created by
32 the person that owns or would issue the equity to be
33 acquired; or instruments that would be rated credit
34 instruments except for the provisions of subsection RRR(2) of
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1 this Section.
2 BB. "Equivalent securities" means:
3 (1) In a securities lending transaction, securities
4 that are identical to the loaned securities in all
5 features including the amount of the loaned securities,
6 except as to certificate number if held in physical form,
7 but if any different security shall be exchanged for a
8 loaned security by recapitalization, merger,
9 consolidation or other corporate action, the different
10 security shall be deemed to be the loaned security;
11 (2) In a repurchase transaction, securities that
12 are identical to the purchased securities in all features
13 including the amount of the purchased securities, except
14 as to the certificate number if held in physical form; or
15 (3) In a reverse repurchase transaction, securities
16 that are identical to the sold securities in all features
17 including the amount of the sold securities, except as to
18 the certificate number if held in physical form.
19 CC. "Floor" means an agreement obligating the seller to
20 make payments to the buyer in which each payment is based on
21 the amount by which a predetermined number, sometimes called
22 the floor rate or price, exceeds a reference price, a level,
23 or the performance or value of one or more underlying
24 interests.
25 DD. "Foreign currency" means a currency other than that
26 of a domestic jurisdiction.
27 EE. (1) "Foreign investment" means an investment in a
28 foreign jurisdiction, or an investment in a person, real
29 estate or asset domiciled in a foreign jurisdiction, that
30 is substantially of the same type as those eligible for
31 investment under this Article, other than under Sections
32 126.17 and 126.30. An investment shall not be deemed to
33 be foreign if the issuing person, qualified primary
34 credit source or qualified guarantor is a domestic
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1 jurisdiction or a person domiciled in a domestic
2 jurisdiction, unless:
3 (a) The issuing person is a shell business
4 entity; and
5 (b) The investment is not assumed, accepted,
6 guaranteed, or insured or otherwise backed by a
7 domestic jurisdiction or a person, that is not a
8 shell business entity, domiciled in a domestic
9 jurisdiction.
10 (2) For purposes of this definition:
11 (a) "Shell business entity" means a business
12 entity having no economic substance, except as a
13 vehicle for owning interests in assets issued, owned
14 or previously owned by a person domiciled in a
15 foreign jurisdiction;
16 (b) "Qualified guarantor" means a guarantor
17 against which an insurer has a direct claim for full
18 and timely payment, evidenced by a contractual right
19 for which an enforcement action can be brought in a
20 domestic jurisdiction; and
21 (c) "Qualified primary credit source" means
22 the credit source to which an insurer looks for
23 payment as to an investment and against which an
24 insurer has a direct claim for full and timely
25 payment, evidenced by a contractual right for which
26 an enforcement action can be brought in a domestic
27 jurisdiction.
28 FF. "Foreign jurisdiction" means a jurisdiction other
29 than a domestic jurisdiction.
30 GG. "Forward" means an agreement (other than a future)
31 to make or take delivery of, or effect a cash settlement
32 based on the actual or expected price, level, performance or
33 value of, one or more underlying interests.
34 HH. "Future" means an agreement, traded on a qualified
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1 exchange or qualified foreign exchange, to make or take
2 delivery of, or effect a cash settlement based on the actual
3 or expected price, level, performance or value of, one or
4 more underlying interests and includes an insurance future.
5 II. "Government money market mutual fund" means a money
6 market mutual fund that at all times:
7 (1) Invests only in obligations issued, guaranteed,
8 or insured by the federal government of the United States
9 or collateralized repurchase agreements composed of these
10 obligations; and
11 (2) Qualifies for investment without a reserve
12 under the Purposes and Procedures of the Securities
13 Valuation Office or any successor publication.
14 JJ. "Government sponsored enterprise" means a:
15 (1) Governmental agency; or
16 (2) Corporation, limited liability company,
17 association, partnership, joint stock company, joint
18 venture, trust or other entity or instrumentality
19 organized under the laws of any domestic jurisdiction to
20 accomplish a public policy or other governmental purpose.
21 KK. "Guaranteed or insured," when used in connection
22 with an obligation acquired under this Article, means the
23 guarantor or insurer has agreed to:
24 (1) Perform or insure the obligation of the obligor
25 or purchase the obligation; or
26 (2) Be unconditionally obligated until the
27 obligation is repaid to maintain in the obligor a minimum
28 net worth, fixed charge coverage, stockholders' equity or
29 sufficient liquidity to enable the obligor to pay the
30 obligation in full.
31 LL. "Hedging transaction" means:
32 (1) A derivative transaction that is entered into
33 and maintained to reduce:
34 (a) the risk of a change in the value, yield,
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1 price, cash flow, or quantity of assets or
2 liabilities that the insurer has acquired or
3 incurred or anticipates acquiring or incurring; or
4 (b) the currency exchange rate risk or the
5 degree of exposure as to assets or liabilities that
6 the insurer has acquired or incurred or anticipates
7 acquiring or incurring; or
8 (2) Such other derivative transactions as may be
9 specified to constitute hedging transactions in rules
10 adopted pursuant to Section 126.8.
11 MM. "High grade investment" means a rated credit
12 instrument; rated 1, 2, P1, P2, PSF1 or PSF2 by the SVO.
13 NN. "Income" means, as to a security, interest, accrual
14 of discount, dividends or other distributions, such as
15 rights, tax or assessment credits, warrants and distributions
16 in kind.
17 OO. "Income generation transaction" means (1) a
18 derivative transaction involving the writing of covered call
19 options, covered put options, covered caps or covered floors
20 that is intended to generate income or enhance return, or (2)
21 such other derivative transactions as may be specified to
22 constitute income generation transactions in rules adopted
23 pursuant to Section 126.8.
24 PP. "Initial margin" means the amount of cash,
25 securities or other consideration initially required to be
26 deposited to establish a futures position.
27 QQ. "Insurance future" means a future relating to an
28 index or pool that is based on insurance-related items.
29 RR. "Insurance futures option" means an option on an
30 insurance future.
31 SS. "Investment company" means an investment company as
32 defined in Section 3(a) of the Investment Company Act of 1940
33 (15 U.S.C. 80a-1 et seq.), as amended, and a person
34 described in Section 3(c) of that Act.
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1 TT. "Investment company series" means an investment
2 portfolio of an investment company that is organized as a
3 series company and to which assets of the investment company
4 have been specifically allocated.
5 UU. "Investment practices" means transactions of the
6 types described in Section 126.16, 126.18, 126.29 or 126.31.
7 VV. "Investment subsidiary" means a subsidiary of an
8 insurer engaged or organized to engage exclusively in the
9 ownership and management of assets authorized as investments
10 for the insurer if such subsidiary agrees to limit its
11 investment in any asset so that its investments will not
12 cause the amount of the total investment of the insurer to
13 exceed any of the investment limitations or avoid any other
14 provisions of this Article applicable to the insurer. As used
15 in this subsection, the total investment of the insurer shall
16 include:
17 (1) Direct investment by the insurer in an asset;
18 and
19 (2) The insurer's proportionate share of an
20 investment in an asset by an investment subsidiary of the
21 insurer, which shall be calculated by multiplying the
22 amount of the subsidiary's investment by the percentage
23 of the insurer's ownership interest in the subsidiary.
24 WW. "Investment strategy" means the techniques and
25 methods used by an insurer to meet its investment objectives,
26 such as active bond portfolio management, passive bond
27 portfolio management, interest rate anticipation, growth
28 investing and value investing.
29 XX. "Letter of credit" means a clean, irrevocable and
30 unconditional letter of credit issued or confirmed by, and
31 payable and presentable at, a financial institution on the
32 list of financial institutions meeting the standards for
33 issuing letters of credit under the Purposes and Procedures
34 of the Securities Valuation Office or any successor
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1 publication. To constitute acceptable collateral for the
2 purposes of Sections 126.16 and 126.29, a letter of credit
3 must have an expiration date beyond the term of the subject
4 transaction.
5 YY. "Limited liability company" means a business
6 organization, excluding partnerships and ordinary business
7 corporations, organized or operating under the laws of the
8 United States or any state thereof that limits the personal
9 liability of investors to the equity investment of the
10 investor in the business entity.
11 ZZ. "Lower grade investment" means a rated credit
12 instrument rated 4, 5, 6, P4, P5, P6, PSF4, PSF5, or PSF6 by
13 the SVO.
14 AAA. "Market value" means:
15 (1) As to cash and letters of credit, the amounts
16 thereof; and
17 (2) As to a security as of any date, the price for
18 the security on that date obtained from a generally
19 recognized source or the most recent quotation from such
20 a source or, to the extent no generally recognized source
21 exists, the price for the security as determined in good
22 faith by the insurer, plus accrued but unpaid income
23 thereon to the extent not included in the price as of
24 that date.
25 BBB. "Medium grade investment" means a rated credit
26 instrument rated 3, P3, or PSF 3 by the SVO.
27 CCC. "Money market mutual fund" means a mutual fund that
28 meets the conditions of 17 Code of Federal Regulations Par.
29 270.2a-7, under the Investment Company Act of 1940 (15 U.S.C.
30 80a-1 et seq.), as amended or renumbered.
31 DDD. "Mortgage loan" means an obligation secured by a
32 mortgage, deed of trust, trust deed or other consensual lien
33 on real estate.
34 EEE. "Multilateral development bank" means an
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1 international development organization of which the United
2 States is a member.
3 FFF. "Mutual fund" means an investment company or, in
4 the case of an investment company that is organized as a
5 series company, an investment company series, that, in either
6 case, is registered with the United States Securities and
7 Exchange Commission under the Investment Company Act of 1940
8 (15 U.S.C. 80a-1 et seq.), as amended.
9 GGG. "NAIC" means the National Association of Insurance
10 Commissioners.
11 HHH. "Obligation" means a bond, note, debenture, trust
12 certificate including an equipment trust certificate,
13 production payment, negotiable bank certificate of deposit,
14 bankers' acceptance, credit tenant loan, loan secured by
15 financing net leases and other evidence of indebtedness for
16 the payment of money (or participations, certificates or
17 other evidences of an interest in any of the foregoing),
18 whether constituting a general obligation of the issuer or
19 payable only out of certain revenues or certain funds pledged
20 or otherwise dedicated for payment.
21 III. "Option" means an agreement giving the buyer the
22 right to buy or receive (a "call option"), sell or deliver (a
23 "put option"), enter into, extend or terminate or effect a
24 cash settlement based on the actual or expected price, level,
25 performance or value of one or more underlying interests and
26 includes an insurance futures option.
27 JJJ. "Person" means an individual, a business entity, a
28 multilateral development bank or a government or quasi
29 governmental body, such as a political subdivision or a
30 government sponsored enterprise.
31 KKK. "Potential exposure" means the amount determined in
32 accordance with the NAIC Annual Statement Instructions.
33 LLL. "Preferred stock" means preferred, preference or
34 guaranteed stock of a business entity authorized to issue the
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1 stock, that has a preference in liquidation over the common
2 stock of the business entity.
3 MMM. "Qualified bank" means:
4 (1) A national bank, state bank or trust company
5 that at all times is no less than adequately capitalized
6 as determined by standards adopted by United States
7 banking regulators and that either is regulated by state
8 banking laws or is a member of the Federal Reserve
9 System; or
10 (2) A bank or trust company incorporated or
11 organized under the laws of a country other than the
12 United States that is regulated as a bank or trust
13 company by that country's government or an agency thereof
14 and that at all times is no less than adequately
15 capitalized as determined by the standards adopted by
16 international banking authorities.
17 NNN. "Qualified business entity" means a business entity
18 that is:
19 (1) An issuer of obligations or preferred stock
20 that are rated 1 or 2 by the SVO or an issuer of
21 obligations, preferred stock or derivative instruments
22 that are rated the equivalent of 1 or 2 by the SVO or by
23 a nationally recognized statistical rating organization
24 recognized by the SVO; or
25 (2) A primary dealer in United States government
26 securities, recognized by the Federal Reserve Bank of New
27 York; or.
28 (3) With respect to securities lending arrangements
29 under Sections 126.16 and 126.29, an affiliate of an
30 entity that is a qualified business entity pursuant to
31 paragraph (1) or (2) of this Section, whose arrangement
32 with the insurer is guaranteed by the affiliated entity
33 that is a qualified business entity under paragraph (1)
34 or (2).
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1 OOO. "Qualified clearinghouse" means a clearinghouse
2 for, and subject to the rules of, a qualified exchange or a
3 qualified foreign exchange, which provides clearing services,
4 including acting as a counterparty to each of the parties to
5 a transaction such that the parties no longer have credit
6 risk as to each other.
7 PPP. "Qualified exchange" means:
8 (1) A securities exchange registered as a national
9 securities exchange, or a securities market regulated
10 under the Securities Exchange Act of 1934 (15 U.S.C. 78
11 et seq.), as amended;
12 (2) A board of trade or commodities exchange
13 designated as a contract market by the Commodity Futures
14 Trading Commission or any successor thereof;
15 (3) Private Offerings, Resales and Trading through
16 Automated Linkages (PORTAL);
17 (4) A designated offshore securities market as
18 defined in Securities Exchange Commission Regulation S,
19 17 C.F.R. Part 230, as amended; or
20 (5) A qualified foreign exchange.
21 QQQ. "Qualified foreign exchange" means a foreign
22 exchange, board of trade or contract market located outside
23 the United States, its territories or possessions:
24 (1) That has received regulatory comparability
25 relief under Commodity Futures Trading Commission (CFTC)
26 Rule 30.10 (as set forth in Appendix C to Part 30 of the
27 CFTC's Regulations, 17 C.F.R. Part 30);
28 (2) That is, or its members are, subject to the
29 jurisdiction of a foreign futures authority that has
30 received regulatory comparability relief under CFTC Rule
31 30.10 (as set forth in Appendix C to Part 30 of the
32 CFTC's Regulations, 17 C.F.R. Part 30) as to futures
33 transactions in the jurisdiction where the exchange,
34 board of trade or contract market is located; or
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1 (3) Upon which foreign stock index futures
2 contracts are listed that are the subject of no-action
3 relief issued by the CFTC's Office of General Counsel,
4 provided that an exchange, board of trade or contract
5 market that qualifies as a "qualified foreign exchange"
6 only under this subsection shall only be a "qualified
7 foreign exchange" as to foreign stock index futures
8 contracts that are the subject of no-action relief.
9 RRR. (1) "Rated credit instrument" means an obligation
10 or other instrument which gives its holder a contractual
11 right to receive cash or another rated credit instrument
12 from another entity, if the instrument:
13 (a) Is rated or required to be rated by the
14 SVO;
15 (b) In the case of an instrument with a
16 maturity of 397 days or less, is issued, guaranteed,
17 or insured by an entity that is rated by, or another
18 instrument of such entity is rated by, the SVO or by
19 a nationally recognized statistical rating
20 organization recognized by the SVO;
21 (c) In the case of an instrument with a
22 maturity of 90 days or less, the instrument has been
23 issued, assumed, accepted, guaranteed, or insured by
24 a qualified bank;
25 (d) Is a share of a class one bond mutual
26 fund; or
27 (e) Is a share of a money market mutual fund.
28 (2) However, "rated credit instrument" does not
29 mean:
30 (a) An instrument that is mandatorily, or at
31 the option of the issuer, convertible to an equity
32 interest; or
33 (b) A security that has a par value and whose
34 terms provide that the issuer's net obligation to
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1 repay all or part of the security's par value is
2 determined by reference to the performance of an
3 equity, a commodity, a foreign currency or an index
4 of equities, commodities, foreign currencies or
5 combinations thereof.
6 SSS. "Real estate" means:
7 (1) (a) Real property;
8 (b) Interests in real property, such as
9 leaseholds, minerals and oil and gas that have not
10 been separated from the underlying fee interest;
11 (c) Improvements and fixtures located on or in
12 real property; and
13 (d) The seller's equity in a contract
14 providing for a deed of real estate.
15 (2) As to a mortgage on a leasehold estate, real
16 estate shall include the leasehold estate only if it has
17 an unexpired term (including renewal options exercisable
18 at the option of the lessee) extending beyond the
19 scheduled maturity date of the obligation that is secured
20 by a mortgage on the leasehold estate by a period equal
21 to at least 20% of the original term of the obligation or
22 10 years, whichever is greater.
23 TTT. "Replication transaction" means a derivative
24 transaction that is intended to replicate the performance of
25 one or more assets that an insurer is authorized to acquire
26 under this Article. A derivative transaction that is entered
27 into as a hedging transaction shall not be considered a
28 replication transaction.
29 UUU. "Repurchase transaction" means a transaction in
30 which an insurer purchases securities from a business entity
31 that is obligated to repurchase the purchased securities or
32 equivalent securities from the insurer at a specified price,
33 either within a specified period of time or upon demand.
34 VVV. "Required liabilities" means total liabilities
-39- LRB9008394JSmgA
1 required to be reported on the statutory financial statement
2 of the insurer most recently required to be filed with the
3 Director.
4 WWW. "Residential mortgage loan" means a loan primarily
5 secured by a mortgage on real estate improved with a one to
6 four family residence.
7 XXX. "Reverse repurchase transaction" means a
8 transaction in which an insurer sells securities to a
9 business entity and is obligated to repurchase the sold
10 securities or equivalent securities from the business entity
11 at a specified price, either within a specified period of
12 time or upon demand.
13 YYY. "Secured location" means the contiguous real estate
14 owned by one person.
15 ZZZ. "Securities lending transaction" means a
16 transaction in which securities are loaned by an insurer to a
17 business entity that is obligated to return the loaned
18 securities or equivalent securities to the insurer, either
19 within a specified period of time or upon demand.
20 AAAA. "Series company" means an investment company that
21 is organized as a series company, as defined in Rule 18f-2(a)
22 adopted under the Investment Company Act of 1940 (15 U.S.C.
23 80a-1 et seq.), as amended.
24 BBBB. "Sinking fund stock" means preferred stock that:
25 (1) Is subject to a mandatory sinking fund or
26 similar arrangement that will provide for the redemption
27 (or open market purchase) of the entire issue over a
28 period not longer than 40 years from the date of
29 acquisition; and
30 (2) Provides for mandatory sinking fund
31 installments (or open market purchases) commencing not
32 more than 10.5 years from the date of issue, with the
33 sinking fund installments providing for the purchase or
34 redemption, on a cumulative basis commencing 10 years
-40- LRB9008394JSmgA
1 from the date of issue, of at least 2.5% per year of the
2 original number of shares of that issue of preferred
3 stock.
4 CCCC. "Special rated credit instrument" means a rated
5 credit instrument that is:
6 (1) An instrument that is structured so that, if it
7 is held until retired by or on behalf of the issuer, its
8 rate of return, based on its purchase cost and any cash
9 flow stream possible under the structure of the
10 transaction, may become negative due to reasons other
11 than the credit risk associated with the issuer of the
12 instrument; however, a rated credit instrument shall not
13 be a special rated credit instrument under this
14 subsection if it is:
15 (a) A share in a class one bond mutual fund;
16 (b) An instrument, other than an asset-backed
17 security, with payments of par value fixed as to
18 amount and timing, or callable but in any event
19 payable only at par or greater, and interest or
20 dividend cash flows that are based on either a fixed
21 or variable rate determined by reference to a
22 specified rate or index;
23 (c) An instrument, other than an asset-backed
24 security, that has a par value and is purchased at a
25 price no greater than 110% of par;
26 (d) An instrument, including an asset-backed
27 security, whose rate of return would become negative
28 only as a result of a prepayment due to casualty,
29 condemnation or economic obsolescence of collateral
30 or change of law;
31 (e) An asset-backed security that relies on
32 collateral that meets the requirements of
33 subparagraph (b) of this paragraph, the par value of
34 which collateral:
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1 (i) Is not permitted to be paid sooner
2 than one half of the remaining term to maturity
3 from the date of acquisition;
4 (ii) Is permitted to be paid prior to
5 maturity only at a premium sufficient to
6 provide a yield to maturity for the investment,
7 considering the amount prepaid and reinvestment
8 rates at the time of early repayment, at least
9 equal to the yield to maturity of the initial
10 investment; or
11 (iii) Is permitted to be paid prior to
12 maturity at a premium at least equal to the
13 yield of a treasury issue of comparable
14 remaining life; or
15 (f) An asset-backed security that relies on
16 cash flows from assets that are not prepayable at
17 any time at par, but is not otherwise governed by
18 subparagraph (e) of this paragraph, if the
19 asset-backed security has a par value reflecting
20 principal payments to be received if held until
21 retired by or on behalf of the issuer and is
22 purchased at a price no greater than 105% of such
23 par amount.
24 (2) An asset-backed security that:
25 (a) Relies on cash flows from assets that are
26 prepayable at par at any time;
27 (b) Does not make payments of par that are
28 fixed as to amount and timing; and
29 (c) Has a negative rate of return at the time
30 of acquisition if a prepayment threshold assumption
31 is used with such prepayment threshold assumption
32 defined as either:
33 (i) Two (2) times the prepayment
34 expectation reported by a recognized, publicly
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1 available source as being the median of
2 expectations contributed by broker dealers or
3 other entities, except insurers, engaged in the
4 business of selling or evaluating such
5 securities or assets. The prepayment
6 expectation used in this calculation shall be,
7 at the insurer's election, the prepayment
8 expectation for pass-through securities of the
9 Federal National Mortgage Association, the
10 Federal Home Loan Mortgage Corporation, the
11 Government National Mortgage Association, or
12 for other assets of the same type as the assets
13 that underlie the asset- backed security, in
14 either case with a gross weighted average
15 coupon comparable to the gross weighted average
16 coupon of the assets that underlie the
17 asset-backed security; or
18 (ii) Another prepayment threshold
19 assumption specified by the Director by rule
20 promulgated under Section 126.8.
21 (3) For purposes of subparagraph 2 of this
22 subsection, if the asset-backed security is purchased in
23 combination with one or more other asset-backed
24 securities that are supported by identical underlying
25 collateral, the insurer may calculate the rate of return
26 for these specific combined asset-backed securities in
27 combination. The insurer must maintain documentation
28 demonstrating that such securities were acquired and are
29 continuing to be held in combination.
30 DDDD. "State" means a state, territory or possession of
31 the United States of America, the District of Columbia or the
32 Commonwealth of Puerto Rico.
33 EEEE. "Substantially similar securities" means
34 securities that meet all criteria for substantially similar
-43- LRB9008394JSmgA
1 securities specified in the NAIC Accounting Practices and
2 Procedures Manual, as amended, and in an amount that
3 constitutes good delivery form as determined from time to
4 time by the PSA The Bond Market Trade Association.
5 FFFF. "Subsidiary" means, as to any person, an affiliate
6 controlled by such person, directly or indirectly through one
7 or more intermediaries.
8 GGGG. "SVO" means the Securities Valuation Office of the
9 NAIC or any successor office established by the NAIC.
10 HHHH. "Swap" means an agreement to exchange or to net
11 payments at one or more times based on the actual or expected
12 price, level, performance or value of one or more underlying
13 interests.
14 IIII. "Underlying interest" means the assets,
15 liabilities, other interests or a combination thereof
16 underlying a derivative instrument, such as any one or more
17 securities, currencies, rates, indices, commodities or
18 derivative instruments.
19 JJJJ. "Unrestricted surplus" means the amount by which
20 total admitted assets exceed 125% of the insurer's required
21 liabilities.
22 KKKK. "Warrant" means an instrument that gives the
23 holder the right to purchase an underlying financial
24 instrument at a given price and time or at a series of prices
25 and times outlined in the warrant agreement. Warrants may be
26 issued alone or in connection with the sale of other
27 securities, for example, as part of a merger or
28 recapitalization agreement, or to facilitate divestiture of
29 the securities of another business entity.
30 (Source: P.A. 90-418, eff. 8-15-97.)
31 (215 ILCS 5/143) (from Ch. 73, par. 755)
32 Sec. 143. Policy forms.
33 (1) Life, accident and health. No company transacting
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1 the kind or kinds of business enumerated in Classes 1 (a), 1
2 (b) and 2 (a) of Section 4 shall issue or deliver in this
3 State a policy or certificate of insurance or evidence of
4 coverage, attach an endorsement or rider thereto, incorporate
5 by reference bylaws or other matter therein or use an
6 application blank in this State until the form and content of
7 such policy, certificate, evidence of coverage, endorsement,
8 rider, bylaw or other matter incorporated by reference or
9 application blank has been filed with and approved by the
10 Director and the appropriate filing fee under Section 408 has
11 been paid, except that any such endorsement or rider that
12 unilaterally reduces benefits and is to be attached to a
13 policy subsequent to the date the policy is issued must be
14 filed with, reviewed, and formally approved by the Director
15 prior to the date it is attached to a policy issued or
16 delivered in this State. It shall be the duty of the
17 Director to withhold approval of any such policy,
18 certificate, endorsement, rider, bylaw or other matter
19 incorporated by reference or application blank filed with him
20 if it contains provisions which encourage misrepresentation
21 or are unjust, unfair, inequitable, ambiguous, misleading,
22 inconsistent, deceptive, contrary to law or to the public
23 policy of this State, or contains exceptions and conditions
24 that unreasonably or deceptively affect the risk purported to
25 be assumed in the general coverage of the policy. In all
26 cases the Director shall approve or disapprove any such form
27 within 60 days after submission unless the Director extends
28 by not more than an additional 30 days the period within
29 which he shall approve or disapprove any such form by giving
30 written notice to the insurer of such extension before
31 expiration of the initial 60 days period. The Director shall
32 withdraw his approval of a policy, certificate, evidence of
33 coverage, endorsement, rider, bylaw, or other matter
34 incorporated by reference or application blank if he
-45- LRB9008394JSmgA
1 subsequently determines that such policy, certificate,
2 evidence of coverage, endorsement, rider, bylaw, other
3 matter, or application blank is misrepresentative, unjust,
4 unfair, inequitable, ambiguous, misleading, inconsistent,
5 deceptive, contrary to law or public policy of this State, or
6 contains exceptions or conditions which unreasonably or
7 deceptively affect the risk purported to be assumed in the
8 general coverage of the policy or evidence of coverage.
9 If a previously approved policy, certificate, evidence of
10 coverage, endorsement, rider, bylaw or other matter
11 incorporated by reference or application blank is withdrawn
12 for use, the Director shall serve upon the company an order
13 of withdrawal of use, either personally or by mail, and if by
14 mail, such service shall be completed if such notice be
15 deposited in the post office, postage prepaid, addressed to
16 the company's last known address specified in the records of
17 the Department of Insurance. The order of withdrawal of use
18 shall take effect 30 days from the date of mailing but shall
19 be stayed if within the 30-day period a written request for
20 hearing is filed with the Director. Such hearing shall be
21 held at such time and place as designated in the order given
22 by the Director. The hearing may be held either in the City
23 of Springfield, the City of Chicago or in the county where
24 the principal business address of the company is located. The
25 action of the Director in disapproving or withdrawing such
26 form shall be subject to judicial review under the
27 Administrative Review Law.
28 This subsection shall not apply to riders or endorsements
29 issued or made at the request of the individual policyholder
30 relating to the manner of distribution of benefits or to the
31 reservation of rights and benefits under his life insurance
32 policy.
33 (2) Casualty, fire, and marine. The Director shall
34 require the filing of all policy forms issued or delivered by
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1 any company transacting the kind or kinds of business
2 enumerated in Classes 2 (except Class 2 (a)) and 3 of Section
3 4. In addition, he may require the filing of any generally
4 used riders, endorsements, certificates, application blanks,
5 and other matter incorporated by reference in any such policy
6 or contract of insurance along with the appropriate filing
7 fee under Section 408. Companies that are members of an
8 organization, bureau, or association may have the same filed
9 for them by the organization, bureau, or association. If the
10 Director shall find from an examination of any such policy
11 form, rider, endorsement, certificate, application blank, or
12 other matter incorporated by reference in any such policy so
13 filed that it (i) violates any provision of this Code, (ii)
14 contains inconsistent, ambiguous, or misleading clauses, or
15 (iii) contains exceptions and conditions that will
16 unreasonably or deceptively affect the risks that are
17 purported to be assumed by the policy, he shall order the
18 company or companies issuing these forms to discontinue their
19 use. Nothing in this subsection shall require a company
20 transacting the kind or kinds of business enumerated in
21 Classes 2 (except Class 2 (a)) and 3 of Section 4 to obtain
22 approval of these forms before they are issued nor in any way
23 affect the legality of any policy that has been issued and
24 found to be in conflict with this subsection, but such
25 policies shall be subject to the provisions of Section 442.
26 (3) This Section shall not apply (i) to surety contracts
27 or fidelity bonds, (ii) to policies issued to an industrial
28 insured as defined in Section 121-2.08 except for workers'
29 compensation policies, nor (iii) to riders or endorsements
30 prepared to meet special, unusual, peculiar, or extraordinary
31 conditions applying to an individual risk.
32 (Source: P.A. 87-1090; 88-313.)
33 (215 ILCS 5/191) (from Ch. 73, par. 803)
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1 Sec. 191. Title to property of company. The Director and
2 his successor and successors in office shall be vested by
3 operation of law with the title to all property, contracts,
4 and rights of action of the company as of the date of the
5 order directing rehabilitation or liquidation. The Director
6 is entitled to immediate possession and control of all
7 property, contracts, and rights of action of the company, and
8 is further authorized and directed to remove any and all
9 records and property of the company to the Director's
10 possession and control or to such other place as may be
11 convenient for the purposes of efficient and orderly
12 administration of the rehabilitation or liquidation. All
13 persons, companies, and entities shall immediately release
14 their possession and control of any and all property,
15 contracts, and rights of action of the company to the
16 Director including, but not limited to, bank accounts and
17 bank records, premium and related records, and claim,
18 underwriting, accounting, and litigation files. As of the
19 date of the order directing rehabilitation or liquidation, no
20 possessory liens held by any attorney, including common law
21 retaining liens, may be asserted or enforced against the
22 Director or the company as a basis for withholding files or
23 otherwise. Further, no attorney shall be granted secured
24 status, security, or payment for his or her claim against the
25 company in exchange for the release of files or the
26 extinguishment of any such lien. The entry of an order of
27 rehabilitation or liquidation creates an estate that
28 comprises all of the liabilities and assets of the company.
29 The filing or recording of such order in the office of the
30 recorder or the Registrar of Titles in any county of this
31 State shall impart the same notice that a deed, bill of sale
32 or other evidence of title duly filed for record by such
33 company would have imparted.
34 (Source: P.A. 89-206, eff. 7-21-95.)
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1 (215 ILCS 5/445) (from Ch. 73, par. 1057)
2 Sec. 445. Surplus line.
3 (1) Surplus line defined; surplus line insurer
4 unauthorized company requirements. Surplus line insurance is
5 insurance on an Illinois risk of the kinds specified in
6 Classes 2 and 3 of Section 4 of this Code procured from an
7 unauthorized company or a domestic surplus line insurer as
8 defined in Section 445a after the insurance producer
9 representing the insured or the surplus line producer is
10 unable, after diligent effort, to procure said insurance from
11 companies which are authorized to transact business in this
12 State other than domestic surplus line insurers as defined in
13 Section 445a.
14 Insurance producers may procure surplus line insurance
15 only if licensed as a surplus line producer under this
16 Section and may procure that insurance only from an
17 unauthorized company or from a domestic surplus line insurer
18 as defined in Section 445a:
19 (a) that based upon information available to the
20 surplus line producer has a policyholders surplus of not
21 less than $15,000,000 determined in accordance with
22 accounting rules that are applicable to authorized
23 companies; and
24 (b) that has standards of solvency and management
25 that are adequate for the protection of policyholders;
26 and
27 (c) where an unauthorized company does not meet the
28 standards set forth in (a) and (b) above, a surplus line
29 producer may, if necessary, procure insurance from that
30 company only if prior written warning of such fact or
31 condition is given to the insured by the insurance
32 producer or surplus line producer.
33 (2) Surplus line producer; license. Any licensed
34 producer who is a resident of this State may be licensed as a
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1 surplus line producer upon:
2 (a) passing a written examination. The examination
3 shall reasonably test the knowledge of the applicant
4 concerning the surplus line law and the responsibilities
5 assumed by a surplus line producer thereunder. The
6 examination provided for by this Section shall be
7 conducted under rules and regulations prescribed by the
8 Director. The Director may administer the examination or
9 may make arrangements, including contracting with an
10 outside testing service, for administering such
11 examinations. Any charges assessed by the Director or
12 the testing service for administering such examinations
13 shall be paid directly by the individual applicants.
14 Each applicant required to take an examination shall, at
15 the time of request for examination, enclose with the
16 application a non-refundable $10 application fee payable
17 to the Director plus an examination administration fee.
18 If the Director administers the examination, the
19 application fee and examination administration fee shall
20 be combined and made payable to the Director. If the
21 Director designates an outside testing service to
22 administer the examination, the applicant shall make a
23 separate examination administration fee remittance
24 payable to the designated testing service for the total
25 fees the testing service charges for each of the various
26 services being requested by the applicant. An applicant
27 who fails to appear for the examination as scheduled, or
28 appears but fails to pass, shall not be entitled to any
29 refund, and shall be required to submit a new request for
30 examination together with all the requisite fees before
31 being rescheduled for another examination at a later
32 date;
33 (b) payment of an annual license fee of $200; and
34 (c) procurement of the surety bond required in
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1 subsection (4) of this Section.
2 Each surplus line producer so licensed shall keep a
3 separate account of the business transacted thereunder which
4 shall be open at all times to the inspection of the Director
5 or his representative.
6 The examination requirement in (a) above shall not apply
7 to insurance producers who were licensed under the Illinois
8 surplus line law or individuals designated to act for a
9 partnership, association or corporation licensed under the
10 Illinois surplus line law on February 27, 1985.
11 (3) Taxes and reports.
12 (a) Surplus line tax and penalty for late payment.
13 Each surplus line producer shall file with the
14 Director on or before February 1 and August 1 of each
15 year a report in the form prescribed by the Director on
16 all surplus line insurance procured from unauthorized
17 insurers during the preceding 6 month period ending
18 December 31 or June 30 respectively, and on the filing of
19 such report shall pay to the Director for the use and
20 benefit of the State a sum equal to 3% of the gross
21 premiums less returned premiums upon all surplus line
22 insurance procured or cancelled during the preceding 6
23 months.
24 Any surplus line producer who fails to pay the full
25 amount due under this subsection is liable, in addition
26 to the amount due, for such penalty and interest charges
27 as are provided for under Section 412 of this Code. The
28 Director, through the Attorney General, may institute an
29 action in the name of the People of the State of
30 Illinois, in any court of competent jurisdiction, for the
31 recovery of the amount of such taxes and penalties due,
32 and prosecute the same to final judgment, and take such
33 steps as are necessary to collect the same.
34 (b) Fire Marshal Tax.
-51- LRB9008394JSmgA
1 Each surplus line producer shall file with the
2 Director on or before March 31 of each year a report in
3 the form prescribed by the Director on all fire insurance
4 procured from unauthorized insurers subject to tax under
5 Section 12 of the Fire Investigation Act and shall pay to
6 the Director the fire marshal tax required thereunder.
7 (c) Taxes and fees charged to insured. The taxes
8 imposed under this subsection and the countersigning fees
9 charged by the Surplus Line Association of Illinois may
10 be charged to and collected from surplus line insureds.
11 (4) Bond. Each surplus line producer, as a condition to
12 receiving a surplus line producer's license, shall execute
13 and deliver to the Director a surety bond to the People of
14 the State in the penal sum of $20,000, with a surety which is
15 authorized to transact business in this State, conditioned
16 that the surplus line producer will pay to the Director the
17 tax, interest and penalties levied under subsection (3) of
18 this Section.
19 (5) Submission of documents to Surplus Line Association
20 of Illinois. Each surplus line producer shall submit every
21 insurance contract issued under his or her license to the
22 Surplus Line Association of Illinois for recording and
23 countersignature. The insurance contracts submitted shall
24 set forth:
25 (a) the name of the insured;
26 (b) the description and location of the insured
27 property or risk;
28 (c) the amount insured;
29 (d) the gross premiums charged or returned;
30 (e) the name of the unauthorized insurer or
31 domestic surplus line insurer as defined in Section 445a
32 from whom coverage has been procured company;
33 (f) the kind or kinds of insurance procured; and
34 (g) amount of premium subject to tax required by
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1 Section 12 of the Fire Investigation Act.
2 Proposals, endorsements and other documents which
3 are incidental to the insurance but which does not affect
4 the premium charged are exempted from countersignature.
5 The submission of insuring contracts to the Surplus
6 Line Association of Illinois constitutes a certification
7 by the surplus line producer or by the insurance producer
8 who presented the risk to the surplus line producer for
9 placement as a surplus line risk that after diligent
10 effort the required insurance could not be procured from
11 companies which are authorized to transact business in
12 this State other than domestic surplus line insurers as
13 defined in Section 445a and that such procurement was
14 otherwise in accordance with the surplus line law.
15 (6) Countersignature required. It shall be unlawful for
16 an insurance producer to deliver any unauthorized company
17 insurance contract or domestic surplus line insurer contract
18 unless such insurance contract is countersigned by the
19 Surplus Line Association of Illinois.
20 (7) Inspection of records. Each surplus line producer
21 shall maintain separate records of the business transacted
22 under his or her license, which records shall be open at all
23 times for inspection by the Director and by the Surplus Line
24 Association of Illinois.
25 (8) Violations and penalties. The Director may suspend
26 or revoke or refuse to renew a surplus line producer license
27 for any violation of this Code. In addition to or in lieu of
28 suspension or revocation, the Director may subject a surplus
29 line producer to a civil penalty of up to $1,000 for each
30 cause for suspension or revocation. Such penalty is
31 enforceable under subsection (5) of Section 403A of this
32 Code.
33 (9) Director may declare insurer company ineligible. If
34 the Director determines that the further assumption of risks
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1 might be hazardous to the policyholders of an unauthorized
2 insurer company, the Director may order the Surplus Line
3 Association of Illinois not to countersign insurance
4 contracts evidencing insurance in such insurer company and
5 order surplus line producers to cease procuring insurance
6 from such insurer company.
7 (10) Service of process upon Director. All insurance
8 contracts delivered under this Section from unauthorized
9 insurers shall contain a provision designating the Director
10 and his successors in office the true and lawful attorney of
11 the insurer company upon whom may be served all lawful
12 process in any action, suit or proceeding arising out of such
13 insurance and further designate the surplus line producer or
14 other resident of this State an agent of the unauthorized
15 insurer company to which a copy of such process shall be
16 forwarded by the Director for delivery to the insurer
17 company. Service of process made upon the Director to be
18 valid hereunder must state the name of the insured, the name
19 of the unauthorized insurer company and identify the contract
20 of insurance. The Director at his option is authorized to
21 forward a copy of the process to the Surplus Line Association
22 of Illinois for delivery to the surplus line producer or
23 other designated resident of this State or the Director may
24 deliver the process to the unauthorized insurer company by
25 other means which he considers to be reasonably prompt and
26 certain.
27 (11) The Illinois Surplus Line law does not apply to
28 insurance of property and operations of railroads or aircraft
29 engaged in interstate or foreign commerce, insurance of
30 vessels, crafts or hulls, cargoes, marine builder's risks,
31 marine protection and indemnity, or other risks including
32 strikes and war risks insured under ocean or wet marine forms
33 of policies.
34 (12) Surplus line insurance procured under this Section,
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1 including insurance procured from a domestic surplus line
2 insurer, is not subject to the provisions of the Illinois
3 Insurance Code other than Sections 123, 123.1, 401, 401.1,
4 402, 403, 403A, 408, 412, 445, 445.1, 445.2, 445.3, 445.4,
5 and all of the provisions of Article XXXI to the extent that
6 the provisions of Article XXXI are not inconsistent with the
7 terms of this Act.
8 (Source: P.A. 88-627, eff. 9-9-94.)
9 (215 ILCS 5/445a new)
10 Sec. 445a. Domestic surplus line insurer.
11 (a) A domestic insurer possessing policyholder surplus
12 of at least $15,000,000 may pursuant to a resolution by its
13 board of directors, and with the written approval of the
14 Director, be designated as a "domestic surplus line insurer".
15 (b) A domestic surplus line insurer may only insure in
16 this State an Illinois risk procured from a surplus line
17 producer pursuant to Section 445 of this Code.
18 (c) A domestic surplus line insurer must agree not to
19 issue a policy designed to satisfy the financial
20 responsibility requirements of the Illinois Vehicle Code, the
21 Workers' Compensation Act, or the Workers' Occupational
22 Diseases Act. A domestic surplus line insurer is not subject
23 to the provisions of Articles XXXIII, XXXIII 1/2, XXXIV,
24 XXXVIIIA, Section 468, or Section 478.1 of this Code.
25 (215 ILCS 5/3.1 rep.)
26 Section 10. The Illinois Insurance Code is amended by
27 repealing Section 3.1.
28 Section 15. The Dental Service Plan Act is amended by
29 changing Section 35 as follows:
30 (215 ILCS 110/35) (from Ch. 32, par. 690.35)
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1 Sec. 35. (a) The funds of any dental service plan
2 corporation may be invested only in accordance with the
3 requirements provided by law for the investment of funds of
4 life insurance companies.
5 (b) As an allocation of net worth, each dental service
6 plan corporation shall maintain a special contingent reserve.
7 The special contingent reserve for a corporation that is
8 beginning operations shall be equal to 5% of its net earned
9 subscription revenue for dental care services through
10 December 31st of the year in which certified, but in no event
11 less that $100,000. In subsequent years, unless waived by
12 the Director, the corporation shall accumulate additions to
13 the contingent reserve in an amount which is equal to 2% of
14 its net earned subscription revenue for each calendar year.
15 For purposes of this section, net earned subscription revenue
16 means premium minus reinsurance expenses. Maintenance of the
17 contingent reserve requires that net worth equals or exceeds
18 the contingent reserve at any balance sheet date. The
19 special contingent reserve shall be provided in cash and
20 securities in combination and form acceptable to the
21 Director.
22 (c) Additional accumulations under Section 35(b) will no
23 longer be required at such time that the total special
24 contingent reserve required by Section 35(b) is equal to or
25 greater than 5% of the corporation's average annual net
26 earned subscription revenue for the corporation's preceding
27 two calendar years. Additional accumulations under subsection
28 (b) of this Section shall no longer be required at such time
29 that the total special contingent reserve required by
30 subsection (b) of this Section is equal to $1,500,000.
31 (d) A deficiency in meeting amounts required in
32 subsection (b) Section 6(b) or (c) of this Section will
33 require, upon notice from the Director, (1) filing of a plan
34 for correction of the deficiency, acceptable to the Director,
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1 within 20 days from receipt of notice, and (2) correction of
2 the deficiency within a reasonable time, not to exceed 60
3 days from receipt of notice unless an extension of time is
4 granted by the Director. Such a deficiency will be deemed an
5 impairment and failure to correct the deficiency in the
6 prescribed time shall be grounds for rehabilitation,
7 liquidation, conservation or dissolution pursuant to Section
8 38.
9 (Source: P.A. 84-209.)
10 Section 20. The Farm Mutual Insurance Company Act of
11 1986 is amended by changing Sections 4 and 12 as follows:
12 (215 ILCS 120/4) (from Ch. 73, par. 1254)
13 Sec. 4. Definition of Admitted Assets. Admitted assets
14 shall include those investments permitted under Section 12 of
15 this Act and in addition thereto, only the following:
16 (1) Cash funds held in the company's office and under
17 the company's control.
18 (2) Interest due and accrued on bonds, certificates of
19 deposit and other investments permitted by this Act that are
20 not in default.
21 (3) Dividends declared and unpaid on mutual funds,
22 common stock, and preferred stock, permitted by this Act.
23 (4) (3) Amounts recoverable from solvent insurance
24 companies licensed to do business in this State.
25 (5) (4) Tax refunds due from the United States or the
26 State of Illinois.
27 (6) (5) Premiums receivable on policies not over 90 days
28 past due. The due date of the premium shall be considered to
29 be the first day of the coverage period for which the premium
30 is payable.
31 (Source: P.A. 88-364.)
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1 (215 ILCS 120/12) (from Ch. 73, par. 1262)
2 Sec. 12. Investments. Without the prior approval of the
3 Director, the funds of any company operating under or
4 regulated by the provisions of this Act, shall be invested
5 only in the following:
6 (1) Direct obligations of the United States of
7 America, or obligations of agencies or instrumentalities
8 of the United States to the extent guaranteed or insured
9 as to the payment of principal and interest by the United
10 States of America;
11 (2) Bonds which are direct, general obligations of
12 the State of Illinois;
13 (3) Bonds which are direct, general obligations of
14 political subdivisions of the State of Illinois, subject
15 to the following conditions:
16 (a) Maximum of 5% of admitted assets in any
17 one political subdivision;
18 (b) Maximum of 30% 35% of admitted assets in
19 all political subdivisions in the aggregate;
20 (4) Bonds that are obligations of the Federal
21 National Mortgage Association subject to a maximum
22 investment of 10% of admitted assets in the aggregate;
23 (5) Bonds that are obligations of the Federal Home
24 Loan Mortgage Corporation subject to a maximum investment
25 of 10% of admitted assets in the aggregate;
26 (6) Mutual funds subject to the following
27 conditions:
28 (a) Maximum of 3% of policyholders' surplus in
29 any one balanced or growth mutual fund that invests
30 in common stock;
31 (b) Maximum of 5% of admitted assets in any
32 one bond or income mutual fund or any one
33 non-governmental money market mutual fund;
34 (c) Maximum of 10% of admitted assets in any
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1 one governmental money market mutual fund;
2 (d) Maximum of 25% of admitted assets in all
3 mutual funds in the aggregate;
4 (7) Common stock and preferred stock subject to the
5 following conditions:
6 (a) Common stock and preferred stock shall be
7 traded on the New York Stock Exchange or the
8 American Stock Exchange or listed on the National
9 Association of Securities Dealers Automated
10 Quotation (NASDAQ) system;
11 (b) Maximum of 3% of policyholders' surplus in
12 excess of $400,000 in any one common stock or
13 preferred stock issuer provided that the net
14 unearned premium reserve does not exceed
15 policyholders' surplus;
16 (8) Investments authorized under subdivision (a) of
17 item (6) and subdivision (a) of item (7) of this Section
18 shall not in the aggregate exceed 10% of policyholders'
19 surplus in excess of $400,000;
20 (9) (4) Funds on deposit in solvent banks and
21 savings and loan associations which are insured by
22 qualify for insurance with the Federal Deposit Insurance
23 Corporation; however, the uninsured portion of funds held
24 in any one such bank or association shall not exceed 5%
25 of the company's policyholders' surplus;
26 (5) Funds on deposit with savings and loan
27 associations, provided that all funds invested in such
28 associations are insured by the Federal Deposit Insurance
29 Corporation;
30 (10) (6) Real estate for home office building
31 purposes, provided that such investments are approved by
32 the Director of Insurance on the basis of a showing by
33 the company that the company has adequate assets
34 available for such investment and that the proposed
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1 acquisition does not exceed the reasonable normal value
2 of such property.
3 An investment that qualified under this Section at the
4 time it was acquired by the company shall continue to qualify
5 under this Section.
6 Investments permitted under this Section shall be
7 registered in the name of the company and under its direct
8 control or shall be held in a custodial account with a bank
9 or trust company that is qualified to administer trusts in
10 Illinois under the Corporate Fiduciary Act and that has an
11 office in Illinois. However, securities may be held in
12 street form and in the custody of a licensed dealer for a
13 period not to exceed 30 days.
14 Notwithstanding the provisions of this Act, the Director
15 may, after notice and hearing, order a company to limit or
16 withdraw from certain investments or discontinue certain
17 investments or investment practices to the extent the
18 Director finds those investments or investment practices
19 endanger the solvency of the company.
20 (Source: P.A. 88-364.)
21 Section 25. The Health Maintenance Organization Act is
22 amended by changing Section 5-3 as follows:
23 (215 ILCS 125/5-3) (from Ch. 111 1/2, par. 1411.2)
24 (Text of Section before amendment by P.A. 90-372)
25 Sec. 5-3. Insurance Code provisions.
26 (a) Health Maintenance Organizations shall be subject to
27 the provisions of Sections 133, 134, 137, 140, 141.1, 141.2,
28 141.3, 143, 143c, 147, 148, 149, 151, 152, 153, 154, 154.5,
29 154.6, 154.7, 154.8, 155.04, 355.2, 356m, 356v, 356t, 367i,
30 401, 401.1, 402, 403, 403A, 408, 408.2, and 412, paragraph
31 (c) of subsection (2) of Section 367, and Articles IIA, VIII
32 1/2, XII, XII 1/2, XIII, XIII 1/2, and XXVI of the Illinois
-60- LRB9008394JSmgA
1 Insurance Code.
2 (b) For purposes of the Illinois Insurance Code, except
3 for Articles XIII and XIII 1/2, Health Maintenance
4 Organizations in the following categories are deemed to be
5 "domestic companies":
6 (1) a corporation authorized under the Medical
7 Service Plan Act, the Dental Service Plan Act, the
8 Pharmaceutical Service Plan Act, or the Voluntary Health
9 Services Plans Plan Act, or the Nonprofit Health Care
10 Service Plan Act;
11 (2) a corporation organized under the laws of this
12 State; or
13 (3) a corporation organized under the laws of
14 another state, 30% or more of the enrollees of which are
15 residents of this State, except a corporation subject to
16 substantially the same requirements in its state of
17 organization as is a "domestic company" under Article
18 VIII 1/2 of the Illinois Insurance Code.
19 (c) In considering the merger, consolidation, or other
20 acquisition of control of a Health Maintenance Organization
21 pursuant to Article VIII 1/2 of the Illinois Insurance Code,
22 (1) the Director shall give primary consideration
23 to the continuation of benefits to enrollees and the
24 financial conditions of the acquired Health Maintenance
25 Organization after the merger, consolidation, or other
26 acquisition of control takes effect;
27 (2)(i) the criteria specified in subsection (1)(b)
28 of Section 131.8 of the Illinois Insurance Code shall not
29 apply and (ii) the Director, in making his determination
30 with respect to the merger, consolidation, or other
31 acquisition of control, need not take into account the
32 effect on competition of the merger, consolidation, or
33 other acquisition of control;
34 (3) the Director shall have the power to require
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1 the following information:
2 (A) certification by an independent actuary of
3 the adequacy of the reserves of the Health
4 Maintenance Organization sought to be acquired;
5 (B) pro forma financial statements reflecting
6 the combined balance sheets of the acquiring company
7 and the Health Maintenance Organization sought to be
8 acquired as of the end of the preceding year and as
9 of a date 90 days prior to the acquisition, as well
10 as pro forma financial statements reflecting
11 projected combined operation for a period of 2
12 years;
13 (C) a pro forma business plan detailing an
14 acquiring party's plans with respect to the
15 operation of the Health Maintenance Organization
16 sought to be acquired for a period of not less than
17 3 years; and
18 (D) such other information as the Director
19 shall require.
20 (d) The provisions of Article VIII 1/2 of the Illinois
21 Insurance Code and this Section 5-3 shall apply to the sale
22 by any health maintenance organization of greater than 10% of
23 its enrollee population (including without limitation the
24 health maintenance organization's right, title, and interest
25 in and to its health care certificates).
26 (e) In considering any management contract or service
27 agreement subject to Section 141.1 of the Illinois Insurance
28 Code, the Director (i) shall, in addition to the criteria
29 specified in Section 141.2 of the Illinois Insurance Code,
30 take into account the effect of the management contract or
31 service agreement on the continuation of benefits to
32 enrollees and the financial condition of the health
33 maintenance organization to be managed or serviced, and (ii)
34 need not take into account the effect of the management
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1 contract or service agreement on competition.
2 (f) Except for small employer groups as defined in the
3 Small Employer Rating, Renewability and Portability Health
4 Insurance Act and except for medicare supplement policies as
5 defined in Section 363 of the Illinois Insurance Code, a
6 Health Maintenance Organization may by contract agree with a
7 group or other enrollment unit to effect refunds or charge
8 additional premiums under the following terms and conditions:
9 (i) the amount of, and other terms and conditions
10 with respect to, the refund or additional premium are set
11 forth in the group or enrollment unit contract agreed in
12 advance of the period for which a refund is to be paid or
13 additional premium is to be charged (which period shall
14 not be less than one year); and
15 (ii) the amount of the refund or additional premium
16 shall not exceed 20% of the Health Maintenance
17 Organization's profitable or unprofitable experience with
18 respect to the group or other enrollment unit for the
19 period (and, for purposes of a refund or additional
20 premium, the profitable or unprofitable experience shall
21 be calculated taking into account a pro rata share of the
22 Health Maintenance Organization's administrative and
23 marketing expenses, but shall not include any refund to
24 be made or additional premium to be paid pursuant to this
25 subsection (f)). The Health Maintenance Organization and
26 the group or enrollment unit may agree that the
27 profitable or unprofitable experience may be calculated
28 taking into account the refund period and the immediately
29 preceding 2 plan years.
30 The Health Maintenance Organization shall include a
31 statement in the evidence of coverage issued to each enrollee
32 describing the possibility of a refund or additional premium,
33 and upon request of any group or enrollment unit, provide to
34 the group or enrollment unit a description of the method used
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1 to calculate (1) the Health Maintenance Organization's
2 profitable experience with respect to the group or enrollment
3 unit and the resulting refund to the group or enrollment unit
4 or (2) the Health Maintenance Organization's unprofitable
5 experience with respect to the group or enrollment unit and
6 the resulting additional premium to be paid by the group or
7 enrollment unit.
8 In no event shall the Illinois Health Maintenance
9 Organization Guaranty Association be liable to pay any
10 contractual obligation of an insolvent organization to pay
11 any refund authorized under this Section.
12 (Source: P.A. 89-90, eff. 6-30-95; 90-25, eff. 1-1-98;
13 90-177, eff. 7-23-97; revised 11-21-97.)
14 (Text of Section after amendment by P.A. 90-372)
15 Sec. 5-3. Insurance Code provisions.
16 (a) Health Maintenance Organizations shall be subject to
17 the provisions of Sections 133, 134, 137, 140, 141.1, 141.2,
18 141.3, 143, 143c, 147, 148, 149, 151, 152, 153, 154, 154.5,
19 154.6, 154.7, 154.8, 155.04, 355.2, 356m, 356v, 356t, 367i,
20 401, 401.1, 402, 403, 403A, 408, 408.2, and 412, paragraph
21 (c) of subsection (2) of Section 367, and Articles IIA, VIII
22 1/2, XII, XII 1/2, XIII, XIII 1/2, and XXVI of the Illinois
23 Insurance Code.
24 (b) For purposes of the Illinois Insurance Code, except
25 for Articles XIII and XIII 1/2, Health Maintenance
26 Organizations in the following categories are deemed to be
27 "domestic companies":
28 (1) a corporation authorized under the Medical
29 Service Plan Act, the Dental Service Plan Act or, the
30 Voluntary Health Services Plans Plan Act, or the
31 Nonprofit Health Care Service Plan Act;
32 (2) a corporation organized under the laws of this
33 State; or
34 (3) a corporation organized under the laws of
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1 another state, 30% or more of the enrollees of which are
2 residents of this State, except a corporation subject to
3 substantially the same requirements in its state of
4 organization as is a "domestic company" under Article
5 VIII 1/2 of the Illinois Insurance Code.
6 (c) In considering the merger, consolidation, or other
7 acquisition of control of a Health Maintenance Organization
8 pursuant to Article VIII 1/2 of the Illinois Insurance Code,
9 (1) the Director shall give primary consideration
10 to the continuation of benefits to enrollees and the
11 financial conditions of the acquired Health Maintenance
12 Organization after the merger, consolidation, or other
13 acquisition of control takes effect;
14 (2)(i) the criteria specified in subsection (1)(b)
15 of Section 131.8 of the Illinois Insurance Code shall not
16 apply and (ii) the Director, in making his determination
17 with respect to the merger, consolidation, or other
18 acquisition of control, need not take into account the
19 effect on competition of the merger, consolidation, or
20 other acquisition of control;
21 (3) the Director shall have the power to require
22 the following information:
23 (A) certification by an independent actuary of
24 the adequacy of the reserves of the Health
25 Maintenance Organization sought to be acquired;
26 (B) pro forma financial statements reflecting
27 the combined balance sheets of the acquiring company
28 and the Health Maintenance Organization sought to be
29 acquired as of the end of the preceding year and as
30 of a date 90 days prior to the acquisition, as well
31 as pro forma financial statements reflecting
32 projected combined operation for a period of 2
33 years;
34 (C) a pro forma business plan detailing an
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1 acquiring party's plans with respect to the
2 operation of the Health Maintenance Organization
3 sought to be acquired for a period of not less than
4 3 years; and
5 (D) such other information as the Director
6 shall require.
7 (d) The provisions of Article VIII 1/2 of the Illinois
8 Insurance Code and this Section 5-3 shall apply to the sale
9 by any health maintenance organization of greater than 10% of
10 its enrollee population (including without limitation the
11 health maintenance organization's right, title, and interest
12 in and to its health care certificates).
13 (e) In considering any management contract or service
14 agreement subject to Section 141.1 of the Illinois Insurance
15 Code, the Director (i) shall, in addition to the criteria
16 specified in Section 141.2 of the Illinois Insurance Code,
17 take into account the effect of the management contract or
18 service agreement on the continuation of benefits to
19 enrollees and the financial condition of the health
20 maintenance organization to be managed or serviced, and (ii)
21 need not take into account the effect of the management
22 contract or service agreement on competition.
23 (f) Except for small employer groups as defined in the
24 Small Employer Rating, Renewability and Portability Health
25 Insurance Act and except for medicare supplement policies as
26 defined in Section 363 of the Illinois Insurance Code, a
27 Health Maintenance Organization may by contract agree with a
28 group or other enrollment unit to effect refunds or charge
29 additional premiums under the following terms and conditions:
30 (i) the amount of, and other terms and conditions
31 with respect to, the refund or additional premium are set
32 forth in the group or enrollment unit contract agreed in
33 advance of the period for which a refund is to be paid or
34 additional premium is to be charged (which period shall
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1 not be less than one year); and
2 (ii) the amount of the refund or additional premium
3 shall not exceed 20% of the Health Maintenance
4 Organization's profitable or unprofitable experience with
5 respect to the group or other enrollment unit for the
6 period (and, for purposes of a refund or additional
7 premium, the profitable or unprofitable experience shall
8 be calculated taking into account a pro rata share of the
9 Health Maintenance Organization's administrative and
10 marketing expenses, but shall not include any refund to
11 be made or additional premium to be paid pursuant to this
12 subsection (f)). The Health Maintenance Organization and
13 the group or enrollment unit may agree that the
14 profitable or unprofitable experience may be calculated
15 taking into account the refund period and the immediately
16 preceding 2 plan years.
17 The Health Maintenance Organization shall include a
18 statement in the evidence of coverage issued to each enrollee
19 describing the possibility of a refund or additional premium,
20 and upon request of any group or enrollment unit, provide to
21 the group or enrollment unit a description of the method used
22 to calculate (1) the Health Maintenance Organization's
23 profitable experience with respect to the group or enrollment
24 unit and the resulting refund to the group or enrollment unit
25 or (2) the Health Maintenance Organization's unprofitable
26 experience with respect to the group or enrollment unit and
27 the resulting additional premium to be paid by the group or
28 enrollment unit.
29 In no event shall the Illinois Health Maintenance
30 Organization Guaranty Association be liable to pay any
31 contractual obligation of an insolvent organization to pay
32 any refund authorized under this Section.
33 (Source: P.A. 89-90, eff. 6-30-95; 90-25, eff. 1-1-98;
34 90-177, eff. 7-23-97; 90-372, eff. 7-1-98; revised 11-21-97.)
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1 Section 30. The Voluntary Health Services Plans Act is
2 amended by changing Section 20 as follows:
3 (215 ILCS 165/20) (from Ch. 32, par. 614)
4 Sec. 20. The funds of any health services plan
5 corporation shall be handled in accordance with the following
6 rules:
7 (a) All loans made to original capital of the
8 corporation may be repayable only out of earned surplus.
9 (b) The funds of the corporation may be invested in
10 accordance with the requirements provided by law for the
11 investment of funds of life insurance companies and may also
12 be invested in equipment of the corporation provided such
13 investment in equipment shall not exceed more than 30% of the
14 total admitted assets. The value of such equipment shall be
15 depreciated at a rate as rapidly as is provided under the
16 Internal Revenue Code.
17 (c) Every health services plan corporation, after its
18 first fiscal year of doing business, shall accumulate and
19 maintain a special contingent reserve over and above its
20 reserves and liabilities at the rate of 2% annually of its
21 subscription income net of reinsurance so long as the special
22 contingent reserve does not exceed 8% of its annual net
23 income for the preceding 12 month period. Additional
24 accumulations shall no longer be required at such time that
25 the total special contingent reserve is equal to $1,500,000.
26 (Source: P.A. 81-1203.)
27 Section 95. No acceleration or delay. Where this Act
28 makes changes in a statute that is represented in this Act by
29 text that is not yet or no longer in effect (for example, a
30 Section represented by multiple versions), the use of that
31 text does not accelerate or delay the taking effect of (i)
32 the changes made by this Act or (ii) provisions derived from
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1 any other Public Act.
2 Section 99. Effective date. This Act takes effect upon
3 becoming law.
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1 INDEX
2 Statutes amended in order of appearance
3 215 ILCS 5/35A-5
4 215 ILCS 5/35A-10
5 215 ILCS 5/35A-20
6 215 ILCS 5/35A-30
7 215 ILCS 5/35A-35
8 215 ILCS 5/35A-55
9 215 ILCS 5/35A-60
10 215 ILCS 5/111 from Ch. 73, par. 723
11 215 ILCS 5/121-2.08 from Ch. 73, par. 733-2.08
12 215 ILCS 5/123C-1 from Ch. 73, par. 735C-1
13 215 ILCS 5/126.2
14 215 ILCS 5/143 from Ch. 73, par. 755
15 215 ILCS 5/191 from Ch. 73, par. 803
16 215 ILCS 5/445 from Ch. 73, par. 1057
17 215 ILCS 5/445a new
18 215 ILCS 5/3.1 rep.
19 215 ILCS 110/35 from Ch. 32, par. 690.35
20 215 ILCS 120/4 from Ch. 73, par. 1254
21 215 ILCS 120/12 from Ch. 73, par. 1262
22 215 ILCS 125/5-3 from Ch. 111 1/2, par. 1411.2
23 215 ILCS 165/20 from Ch. 32, par. 614