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91_SB1701enr SB1701 Enrolled LRB9112329JSpc 1 AN ACT concerning insurance exchanges. 2 Be it enacted by the People of the State of Illinois, 3 represented in the General Assembly: 4 Section 5. The Illinois Insurance Code is amended by 5 changing Sections 107.02, 107.15a, 107.15b, 107.17, 107.21, 6 107.26, and 107.29 as follows: 7 (215 ILCS 5/107.02) (from Ch. 73, par. 719.02) 8 Sec. 107.02. Incorporation. 9 (a) There is hereby authorizedcreatedan exchange for 10 the reinsurance and insurance of risks. An exchange formed 11 pursuant to this Article shall be a privately owned 12 organization separate and distinct from the State. Within 60 13 days after this Act becomes law, the Director of Insurance 14 shall appoint an interim Board of Directors to adopt 15 temporary by-laws, hire employees, and take such other steps 16 as are authorized or necessary to establish the Exchange. 17 When subscriptions totalling $4,000,000 have been received 18 pursuant to Section 107.07, the Board of Directors shall 19 apply to the Director for a Certificate of Authority. The 20 Director shall approve such Certificate within 30 days unless 21 he determines that the requirements of this Article have not 22 been met and specifies his objections in writing. Within 30 23 days after receiving proof from the Exchange that the 24 objections have been met, the Director shall approve the 25 application of the Exchange. 26 (b) After the effective date of this amendatory Act of 27 1997, the Director may organize, in accordance with 28 subsection (a), an additional exchange for the reinsurance 29 and insurance of risks. The additional exchange shall comply 30 with the provisions of this Article. 31 (Source: P.A. 90-499, eff. 8-19-97.) SB1701 Enrolled -2- LRB9112329JSpc 1 (215 ILCS 5/107.15a) (from Ch. 73, par. 719.15a) 2 Sec. 107.15a. Duties and powers of trustees. The Board 3 of Trustees shall have such power as may be necessary for the 4 management and operations of the Exchange and the 5 Association. Such powers shall include but not be limited 6 to: 7 (a) establishment of the qualifications, 8 requirements, limitations and obligations for syndicates, 9 limited syndicates, subscribers, and Exchange brokers; 10 (b) denying access to the Exchange to applicants 11 which do not meet such qualifications, requirements, and 12 obligations; 13 (c) imposing penalties on syndicates, limited 14 syndicates, subscribers and Exchange brokers for 15 violations of the regulations of the Exchange or orders 16 of the Board; 17 (d) assessing fees annually on syndicates, limited 18 syndicates, subscribers and Exchange brokers, and making 19 assessments on syndicates, limited syndicates and 20 subscribers for the expenses of the Exchange; 21 (e) suspending, in whole or in part, access to the 22 Exchange or expelling syndicates, limited syndicates, 23 subscribers or Exchange brokers who do not continue to 24 meet the qualifications, requirements, and obligations 25 established by the Board, who fail or refuse to pay 26 penalties, fees, or assessments when due, or whose 27 continued operation the Board determines would be 28 injurious to the best interests of the Exchange, 29 policyholders, claimants, or creditors; 30 (f) obtaining immediate access for the benefit of 31 the Immediate Access Security Association to the 32 following assets of the impaired or insolvent syndicate: 33 (i) the full amount held in its security trust 34 or custodial account; and SB1701 Enrolled -3- LRB9112329JSpc 1 (ii) the assets of its subscribers under their 2 certificates of guaranty;.3 (g) organizing a guaranty mechanism or fund for the 4 protection of policyholders. 5 (Source: P.A. 91-77, eff. 7-9-99.) 6 (215 ILCS 5/107.15b) 7 Sec. 107.15b. Board rulemaking authority. 8 (a) The Board has the authority to adopt such rules as 9 it deems necessary to carry out its duties under this Article 10 and to maintain a well-regulated marketplace. A syndicate, 11 limited syndicate, subscriber, or exchange broker, as a 12 condition of its authority to transact business through the 13 Exchange, shall comply with this Article, all existing rules 14 of the Exchange, and all rules or modifications of existing 15 rules adopted by the Board and not disapproved by the 16 Director, including, but not limited to, rules extending 17 requirements and obligations with effect after the 18 suspension, expulsion, or voluntary withdrawal of the 19 syndicate, limited syndicate, subscriber, or exchange broker 20 from access to the Exchange. 21 (b) A rule or modification to an existing rule adopted 22 by the Board after the effective date of this amendatory Act 23 of 1997 shall be filed with the Director not less than 30 24 days before the proposed effective date of the rule or 25 modification. The Director, upon written order, may 26 disapprove the rule or modification, in whole or in part, 27 upon a finding that the rule or modification would cause the 28 exchange to be operated in a manner that would be hazardous 29 to the public or its policyholders. 30 (c) An order by the Director disapproving a rule or 31 modification shall be deemed to be a final administrative 32 decision and shall be subject to judicial review pursuant to 33 the provisions of the Administrative Review Law. SB1701 Enrolled -4- LRB9112329JSpc 1 (d) Neither the Board nor the Exchange is an agency of 2 the State for purposes of the Illinois Administrative 3 Procedure Act or otherwise. 4 (Source: P.A. 90-499, eff. 1-1-98.) 5 (215 ILCS 5/107.17) (from Ch. 73, par. 719.17) 6 Sec. 107.17. Governance. The business and affairs of 7 the Exchange shall be managed by an Executive Committee with 8 the advice and consent of the Board of Trustees. 9 There shall be 2 classes of trustees: Subscriber 10 trustees and public trustees. Both public trustees and 11 subscriber trustees shall be elected by a majority vote of 12 the subscribers. In addition, the public trustees shall be 13 approved by the Director. 14 The trustees shall be 13 in number. There shall be at 15 least 5 public trustees who shall be individual persons who 16 are not insurers, subscribers, exchange brokers, or employees 17 of insurers, subscribers, exchange brokers, syndicates, or 18 affiliates thereof. 19 The Executive Committee shall be composed of 3 public 20 trustees elected by the Board. Members of the Executive 21 Committee shall serve for a term of 3 years, except that of 22 the initial members of the Executive Committee, one member 23 shall serve for a term of one year, one member shall serve 24 for a term of 2 years, and one member shall serve for a term 25 of 3 years. The terms of the initial members of the 26 Executive Committee shall be determined by lot. 27 All decisions of the Executive Committee, except those of 28 a ministerial nature that may be delegated by the Board, 29 shall be subject to the approval of the Board. All action of 30 the Executive Committee shall be approved unless disapproved 31 on a recorded vote by 9 members of the Board. 32 (Source: P.A. 89-206, eff. 7-21-95; 89-669, eff. 1-1-97; 33 90-499, eff. 1-1-98.) SB1701 Enrolled -5- LRB9112329JSpc 1 (215 ILCS 5/107.21) (from Ch. 73, par. 719.21) 2 Sec. 107.21. Central Processing Facility. Establishment: 3 The Exchange shall establish a facility for centralized 4 record keeping, data collection, and statistical compilation 5 of all insurance and reinsurance transactions involving a 6 subscriber. 7 Scope: Except with respect to reinsurance contracts 8 where the risks are transferred from a syndicate to a limited 9 syndicate and security for the exposure is held in a fully 10 funded trust account, all monies due on contracts of 11 insurance and reinsurance issued by syndicates shall be 12 payable to the Exchange and disbursed directly to the 13 Facility for recording and distribution. All other 14 transactions of business on the Exchange shall be reported 15 concurrently to the Facility unless exempted by the Board. 16 Management: The management and operation of the Facility 17 shall be conducted pursuant to rules adopted by the Board. 18 The facility shall keep full and accurate accounts and 19 records of receipts and disbursements of the funds being 20 processed by the Facility and maintain accounting records of 21 all transactions of each subscriber, syndicate, and limited 22 syndicate. Monthly reports stating the receipts and 23 disbursements of the Facility shall be made to the Board. 24 The Board may also require any other report that it deems 25 necessary. 26 (Source: P.A. 81-1047.) 27 (215 ILCS 5/107.26) (from Ch. 73, par. 719.26) 28 Sec. 107.26. Immediate Access Security Association. 29 (a) There is authorizedcreateda non-profit corporation 30 which shall be known as the Immediate Access Security 31 Association,andwhich shall be established as a privately 32 owned organization incorporated under the General Not for 33 Profit Corporation Act separate and distinct from the State SB1701 Enrolled -6- LRB9112329JSpc 1 and not a part of the State government. All syndicates shall 2 be members of the Association as a condition of their 3 authority to transact business on the Exchange. The 4 Association shall be exempt from payment of all fees and all 5 taxes levied by this State or any of its subdivisions. 6 (b) In the event of the entry of an Order of 7 Rehabilitation, Conservation, or Liquidation against a 8 syndicate pursuant to Section 107.08, the Association shall 9 establish a claims date, which shall be not later than one 10 year after the date of such Order, by which time all persons 11 having claims arising out of insurance obligations of the 12 syndicate must file their claim with the Association. The 13 Association shall give notice to all policyholders and other 14 persons who may have a claim against the syndicate as shown 15 by the syndicate's records. Such notice shall include the 16 date of the Order, the claims date established by the 17 Association and the procedure and form for filing a claim 18 with the Association. The Association shall determine the 19 syndicate's insurance obligations based on all claims filed 20 on or before the claims date. The Association shall then pay 21 all claims for which an insurance obligation exists from the 22 assets of the syndicate's trust or custodial account and 23 certificates of guaranty. In the event those assets are 24 insufficient to pay all claims in full, the Association shall 25 make payment pursuant to a plan approved by the court 26 entering the Order of Rehabilitation, Conservation, or 27 Liquidation. The Rehabilitator, Conservator, or Liquidator 28 shall be bound by any settlement made by the Association. Any 29 person not receiving full reimbursement for his claim from 30 the Association shall have a claim against the assets being 31 administered by the Rehabilitator, Conservator, or Liquidator 32 for the remaining amounts. In settling claims and subject to 33 limitations in this Section, the Association shall have the 34 same rights and duties of the insolvent syndicate as if the SB1701 Enrolled -7- LRB9112329JSpc 1 syndicate had not become insolvent. 2 (c) The Association may delegate to such other person or 3 entity as it deems appropriate the performance of any duty 4 imposed on it by this Section. 5 (Source: P.A. 89-97, eff. 7-7-95; 89-206, eff. 7-21-95; 6 89-626, eff. 8-9-96; 90-794, eff. 8-14-98.) 7 (215 ILCS 5/107.29) 8 Sec. 107.29. Exchange operations runoff. 9 (a) The Board may adopt a plan of operation for the 10 orderly runoff of the operations of the exchange. The plan 11 of operation shall provide that all funds, legal rights, 12 title to property, and causes of action of the Exchange 13 including, but not limited to, all assessments, subscription 14 payments, proceeds, investments, premium fees, surcharge 15 receipts, and funds maintained under Sections 107.26 and 16 107.27 and the rules or regulations of the Exchange 17 implementing those Sections or any other provision of this 18 Article, shall be accounted for and paid over to the Director 19 as receiver of any delinquent syndicate in receivership after 20 settlement of all claims against the exchange. 21 (1) In the event that 2 or more syndicates are then 22 in receivership, the amount paid over to each estate 23 shall be proportional to the relative size of the surplus 24 deficiency of each. 25 (2) Any excess remaining after the payment of any 26 and all claims against such receivership estates shall be 27 transferred, in equal shares, to the domestic companies 28 which result from the reorganization, merger, or 29 consolidation of former syndicates of theIllinois30InsuranceExchange. 31 (b) For purposes of this Section, "syndicate" means a 32 syndicate or a limited syndicate. 33 (Source: P.A. 90-499, eff. 8-19-97; 91-77, eff. 7-9-99.) SB1701 Enrolled -8- LRB9112329JSpc 1 Section 99. Effective date. This Act takes effect upon 2 becoming law.