Public Act 90-0794 of the 90th General Assembly

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Public Act 90-0794

SB1728 Enrolled                                LRB9011450JSmg

    AN ACT concerning the regulation  of  insurers,  amending
named Acts.

    Be  it  enacted  by  the People of the State of Illinois,
represented in the General Assembly:

    Section 5.  The Illinois Insurance  Code  is  amended  by
changing  Sections  35A-5,  35A-20, 35A-35, 86, 98, 102, 103,
107.06a, 107.26, 111, 121-2.08, 123C-1, 126.2, 143, 144,  and
445 and adding Section 445a as follows:

    (215 ILCS 5/35A-5)
    Sec.  35A-5.  Definitions.   As used in this Article, the
terms listed in this Section have the meaning given herein.
    "Adjusted RBC Report" means an RBC Report that  has  been
adjusted by the Director in accordance with subsection (e) of
Section 35A-10.
    "Authorized   control   level   RBC"   means  the  number
determined under the risk-based capital formula in accordance
with the RBC Instructions.
    "Company action level RBC" means the product of  2.0  and
the insurer's authorized control level RBC.
    "Corrective  Order" means an order issued by the Director
in accordance with  Article  XII  1/2  specifying  corrective
actions that the Director determines are required.
    "Domestic  insurer" means any insurance company domiciled
in this State under Article II, Article III, Article III 1/2,
or Article IV.
    "Foreign insurer" means any foreign  or  alien  insurance
company  licensed  under  Article VI that is not domiciled in
this State.
    "Life, health, or  life  and  health  insurer"  means  an
insurance company that has authority to transact the kinds of
insurance  described  in  either or both clause (a) or clause
(b) of Class 1 of  Section  4  or  a  licensed  property  and
casualty insurer writing only accident and health insurance.
    "Mandatory  control  level RBC" means the product of 0.70
and the insurer's authorized control level RBC.
    "NAIC"  means  the  National  Association  of   Insurance
Commissioners.
    "Negative  trend"  means, with respect to a life, health,
or life and health insurer, a negative trend over a period of
time,  as  determined  in  accordance  with  the  trend  test
calculation included in the RBC Instructions.
    "Property  and  casualty  insurer"  means  an   insurance
company that has authority to transact the kinds of insurance
in  either  or  both  Class  2  or  Class 3 of Section 4 or a
licensed insurer  writing  only  insurance  authorized  under
clause (c) of Class 1, but does not include monoline mortgage
guaranty  insurers,  financial  guaranty  insurers, and title
insurers.
    "RBC" means risk-based capital.
    "RBC  Instructions"  means  the  RBC   Report   including
risk-based  capital instructions adopted by the NAIC as those
instructions may be amended by the NAIC from time to time  in
accordance with the procedures adopted by the NAIC.
    "RBC  level" means an insurer's company action level RBC,
regulatory action level RBC, authorized control level RBC, or
mandatory control level RBC.
    "RBC  Plan"  means   a   comprehensive   financial   plan
containing  the  elements  specified  in  subsection  (b)  of
Section 35A-15.
    "RBC Report" means the risk-based capital report required
under Section 35A-10.
    "Receivership"  means  conservation,  rehabilitation,  or
liquidation under Article XIII.
    "Regulatory  action  level  RBC" means the product of 1.5
and the insurer's authorized control level RBC.
    "Revised RBC Plan" means an  RBC  Plan  rejected  by  the
Director  and  revised  by  the  insurer  with or without the
Director's recommendations.
    "Total  adjusted  capital"  means  the  sum  of  (1)   an
insurer's  statutory  capital  and  surplus and (2) any other
items that the RBC Instructions may provide.
(Source: P.A. 88-364; 89-97, eff. 7-7-95.)

    (215 ILCS 5/35A-20)
    Sec. 35A-20.  Regulatory action level event.
    (a)  A regulatory action level event  means  any  of  the
following events:
         (1)  The filing of an RBC Report by the insurer that
    indicates  that  the  insurer's total adjusted capital is
    greater than or equal to  its  authorized  control  level
    RBC, but less than its regulatory action level RBC.
         (2)  The  notification by the Director to an insurer
    of an  Adjusted  RBC  Report  that  indicates  the  event
    described in paragraph (1), provided the insurer does not
    challenge the Adjusted RBC Report under Section 35A-35.
         (3)  The notification by the Director to the insurer
    that  the  Director  has,  after  a hearing, rejected the
    insurer's challenge under Section 35A-35 to  an  Adjusted
    RBC   Report   that  indicates  the  event  described  in
    paragraph (1).
         (4)  The failure of  the  insurer  to  file  an  RBC
    Report  by  the  filing  date,  unless  the  insurer  has
    provided   an   explanation   for  the  failure  that  is
    satisfactory to the Director and has  cured  the  failure
    within 10 days after the filing date.
         (5)  The  failure  of  the  insurer to submit an RBC
    Plan to the Director within the time period set forth  in
    subsection (c) of Section 35A-15.
         (6)  The notification by the Director to the insurer
    that  the  insurer's  RBC Plan or revised RBC Plan is, in
    the judgment of the Director, unsatisfactory and that the
    notification constitutes a regulatory action level  event
    with  respect  to  the insurer, provided the insurer does
    not challenge the determination under Section 35A-35.
         (7)  The notification by the Director to the insurer
    that the Director has,  after  a  hearing,  rejected  the
    insurer's   challenge   under   Section   35A-35  to  the
    determination made by the Director under paragraph (6).
         (8)  The notification by the Director to the insurer
    that the insurer has failed to adhere to its RBC Plan  or
    Revised  RBC  Plan,  but  only  if  that  failure  has  a
    substantial  adverse effect on the ability of the insurer
    to eliminate the company action level event in accordance
    with its RBC Plan or Revised RBC Plan  and  the  Director
    has  so  stated in the notification, provided the insurer
    does  not  challenge  the  determination  under   Section
    35A-35.
         (9)  The notification by the Director to the insurer
    that  the  Director  has,  after  a hearing, rejected the
    insurer's  challenge  under   Section   35A-35   to   the
    determination made by the Director under paragraph (8).
    (b)  In the event of a regulatory action level event, the
Director shall do all of the following:
         (1)  Require  the  insurer  to prepare and submit an
    RBC Plan or, if applicable, a Revised  RBC  Plan  to  the
    Director within 45 days after the regulatory action level
    event  occurs  or  within  45  days  after  the  Director
    notifies  the  insurer  that  the  Director  has, after a
    hearing, rejected its challenge under Section  35A-35  to
    either  an  Adjusted  RBC  Report  or a Revised RBC Plan.
    However, if the insurer previously prepared and submitted
    an RBC Plan or a Revised RBC Plan in accordance with  any
    provision  of  this  Article,  the Director may determine
    that the previously prepared RBC Plan or Revised RBC Plan
    satisfies the requirement of this subsection (b)(1).
         (2)  Perform any  examination  or  analysis  of  the
    assets,  liabilities,  and  operations  of  the  insurer,
    including  a  review of its RBC Plan or Revised RBC Plan,
    that the Director deems necessary.
         (3)  After the  examination  or  analysis,  issue  a
    Corrective  Order  specifying  the corrective actions the
    Director determines are required.
    (c)  In determining corrective actions, the Director  may
take  into  account  any  factors the Director deems relevant
based  upon  the  examination  or  analysis  of  the  assets,
liabilities, and operations of the insurer including, but not
limited to, the results of any sensitivity  tests  undertaken
under the RBC Instructions. The regulatory action level event
shall  be deemed sufficient grounds for the Director to issue
a Corrective Order in accordance with Article XII  1/2.   The
Director  shall  have rights, powers, and duties with respect
to the insurer that are set forth in Article XII 1/2 and  the
insurer   shall  be  entitled  to  the  protections  afforded
insurers under Article XII 1/2. The insurer shall submit  the
RBC  Plan to the Director within 45 days after the regulatory
action level  event  occurs  or  within  45  days  after  the
Director  notifies the insurer that the Director has, after a
hearing, rejected  its  challenge  under  Section  35A-35  to
either an Adjusted RBC Report or a Revised RBC Plan.
    (d)  The   Director   may  retain  actuaries,  investment
experts,  and  other  consultants  necessary  to  review   an
insurer's  RBC  Plan  or Revised RBC Plan, examine or analyze
the assets, liabilities, and operations of the  insurer,  and
formulate  the  Corrective Order with respect to the insurer.
The fees, costs,  and  expenses  related  to  the  actuaries,
investment  experts,  and other consultants shall be borne by
the affected insurer or the party designated by the Director.
(Source: P.A. 88-364; 89-97, eff. 7-7-95.)

    (215 ILCS 5/35A-35)
    Sec. 35A-35.  Hearings.
    (a)  An  insurer  has  the  right  to  an  administrative
hearing with respect to any of the following:
         (1)  The notification by the Director to the insurer
    of an Adjusted RBC Report.
         (2)  The notification by the Director to the insurer
    that the insurer's  RBC  Plan  or  Revised  RBC  Plan  is
    unsatisfactory  and  that  the notification constitutes a
    regulatory action level event.
         (3)  The notification by the Director to the insurer
    that the insurer has failed to adhere to its RBC Plan  or
    Revised  RBC  Plan and that the failure has a substantial
    adverse effect on the ability of the insurer to eliminate
    the company action level event in accordance with its RBC
    Plan or Revised RBC Plan.
         (4)  The notification by the Director to the insurer
    of a Corrective Order.
    (b)  At  the  administrative  hearing,  the  insurer  may
challenge any determination or action by the  Director.   The
insurer  shall  notify  the  Director  of  its  request for a
hearing within 5 days after notification by the Director made
under subsection (a).  Upon receipt of the insurer's  request
for a hearing, the Director shall set a date for the hearing.
The  hearing  shall be held no fewer than 10 days and no more
than 30 days after the date of the insurer's request for  the
hearing.
(Source: P.A. 88-364.)

    (215 ILCS 5/86) (from Ch. 73, par. 698)
    Sec. 86. Scope of Article.
    (1)  This   Article   applies  to  all  groups  including
incorporated  and  individual   unincorporated   underwriters
transacting  an  insurance  business in this State through an
attorney-in-fact under the name Lloyds or under a Lloyds plan
of  operation.    Groups  that  meet  the   requirements   of
subsection  (3) are referred to in this Code as "Lloyds", and
incorporated and individual unincorporated  underwriters  are
referred to as "underwriters".
    (2)  As  used  in  this  Code  "Domestic  Lloyds" means a
Lloyds having its home office in this State; "Foreign Lloyds"
means a Lloyds having its home office in  any  state  of  the
United States other than this State; and "Alien Lloyds" means
a  Lloyds  having  its  home  office  or  principal  place of
business in any country other than the United States.
    (3)  A domestic Lloyds must: (i) be established  pursuant
to  a statute or written charter; (ii) provide for governance
by a board of directors or similar body; and (iii)  establish
and  monitor  standards  of  solvency of its underwriters.  A
foreign or alien Lloyds must be subject  to  requirements  of
its state or country of domicile.  Those requirements must be
substantially  similar  to those required of domestic Lloyds.
Domestic, foreign, and alien Lloyd's shall not be subject  to
Section 144 of this Code.
(Source: P.A. 88-535.)

    (215 ILCS 5/98) (from Ch. 73, par. 710)
    Sec. 98. Verified statement Maximum single risk.
    (1)  The net maximum amount of insurance to be assumed by
an  underwriter of a domestic Lloyds upon any single risk for
each kind of insurance shall not exceed ten per centum of the
value of the cash and securities deposited in trust  by  such
underwriter  plus  the  share  of  admitted assets other than
underwriters' deposits  of  such  Lloyds  belonging  to  such
underwriter  less  the  share  of liabilities and reserves of
such Lloyds allocable to such underwriter, but  in  no  event
shall  it  exceed  ten per centum of the value of the cash or
securities deposited in trust by such underwriter.
    (2)  Whenever  the  Director  shall   so   require,   the
attorney-in-fact  of  a  domestic  Lloyds shall file with the
Director a verified statement setting forth
         (a)  the names and addresses  of  all  underwriters;
    and
         (b)  a   description  of  the  cash  and  securities
    deposited in trust by each underwriter.;
         (c)  the maximum amount of insurance assumed by each
    underwriter  upon  any  single  risk  for  each  kind  of
    insurance; and
         (d)  That the maximum amount of insurance assumed or
    made upon any single risk for each kind of  insurance  by
    any  underwriter does not exceed the limitation set forth
    in subsection (1) of this section.
(Source: P.A. 88-535.)

    (215 ILCS 5/102) (from Ch. 73, par. 714)
    Sec. 102. Restrictions upon foreign Lloyds.
    (1)  Each foreign Lloyds authorized to transact  business
in this State shall
    (a)  maintain cash and securities, including the deposits
of  its  underwriters,  of  a  character  conformable  to the
requirements of  Article  VIII  of  this  Code  for  domestic
companies,  at  least  equal  at  all  times  to  the minimum
admitted assets required  by  this  Article  for  a  domestic
Lloyds doing the same kind or kinds of business.
    (b)  file  with the Director an authenticated copy of its
power of attorney and an  authenticated  copy  of  the  trust
agreement  or  other  agreement  under which deposits made by
underwriters are held;
    (c)  notify the Director forthwith of  any  amendment  to
its  power  of attorney, deposit agreement or other documents
underlying its organization, by filing with the  Director  an
authenticated copy of such document as amended;
    (d)  notify  the  Director forthwith of any change in its
name or change of attorney-in-fact or change  of  address  of
its attorney-in-fact.
    (2)  A  foreign Lloyds shall not establish branches under
other or different names or titles.
    (3)  Each such foreign Lloyds shall  be  subject  to  all
limitation  of  risk  provisions imposed by this Article upon
domestic Lloyds.
    (3)(4)  There shall be filed with  the  Director  by  the
attorney-in-fact of such foreign Lloyds at the time of filing
the  annual  statement,  or  more  often  if  required by the
Director, a statement verified by the appropriate official of
such Lloyds, setting forth
    (a)  the names and addresses of all underwriters of  such
Lloyds; and
    (b)  a  description  of the cash and securities deposited
in trust by each underwriter.;
    (c)  the maximum amount  of  insurance  assumed  by  each
underwriter  upon any single risk for each kind of insurance;
and
    (d)  that the maximum amount of  insurance  assumed  upon
any single risk for each kind of insurance by any underwriter
does  not  exceed the limitation provided in this article for
individual underwriters of a domestic Lloyds.
(Source: Laws 1959, p. 1431.)

    (215 ILCS 5/103) (from Ch. 73, par. 715)
    Sec. 103. Alien Lloyds.
    (1)  Each alien Lloyds authorized to transact business in
this State shall
    (a)  maintain in this State or any  other  state  of  the
United  States  in  which  they  are  authorized  to transact
business, cash or securities of a  character  conformable  to
the  requirements  of  Article VIII of this Code for domestic
companies at least equal at  all  times  to  the  minimum  of
admitted  assets  required  by  this  Article  for a domestic
Lloyds doing the same kind or kinds of business;
    (b)  make deposits  of  underwriters  in  this  State  in
accordance   with  the  requirements  imposed  upon  domestic
Lloyds;
    (c)  file with the Director an authenticated copy of  its
power  of  attorney  and  an  authenticated copy of the trust
agreement or other agreement under  which  deposits  made  by
underwriters in this State are held;
    (d)  notify  the  Director  forthwith of any amendment to
its power of attorney, deposit agreement or  other  documents
by  filing  with  the  Director an authenticated copy of such
document as amended; and
    (e)  notify the Director forthwith of any change  in  its
name  or  change  of attorney-in-fact or change of address of
its attorney-in-fact.
    (2)  An alien Lloyds shall not establish  branches  under
other or different names or titles.
    (3)  Each  such  alien  Lloyds  shall  be  subject to all
limitation of risk provisions imposed by  this  Article  upon
domestic Lloyds.
    (3)(4)  There  shall  be  filed  with the Director by the
attorney-in-fact for such Lloyds, who or  which  shall  be  a
resident  person or corporation of this State, at the time of
filing the annual statement, or more often if required by the
Director, a verified statement setting forth
    (a)  the names and addresses of all underwriters of  such
Lloyds; and
    (b)  a  description  of the cash and securities deposited
in trust by each underwriter.;
    (c)  the maximum amount  of  insurance  assumed  by  each
underwriter  upon any single risk for each kind of insurance;
and
    (d)  that the maximum amount of  insurance  assumed  upon
any   single   risk   for  each  kind  of  insurance  by  any
underwriters  does  not  exceed  10%  of  such  underwriter's
deposit.
    (4)(5)  Additional underwriters may join and be  included
in   any   such   Lloyds   subject  to  such  conditions  and
requirements as may from time to  time  be  imposed  by  such
Lloyds  and  upon  meeting  the requirements of this section,
such additional underwriters who  may  so  join  such  Lloyds
shall  be bound by the documents on file with the Director in
the same manner as though they had  personally  executed  the
same and shall have the same rights, powers and duties as all
other  underwriters  of  such  Lloyds.  The  attorney-in-fact
authorized   by  the  underwriters  to  act  for  them  shall
thereafter  be  the  attorney-in-fact  for  such   additional
underwriters  to the extent of the power of attorney or other
document  or  authorization  by  such  underwriters  to   the
attorney-in-fact.
(Source: Laws 1959, p. 1431.)

    (215 ILCS 5/107.06a) (from Ch. 73, par. 719.06a)
    Sec.  107.06a.   Organization  under  Illinois  Insurance
Code.
    (a)  After  December  31,  1997,  a  syndicate or limited
syndicate,  except  for  a  limited  syndicate  formed  as  a
partnership, may only be organized pursuant to Sections 7, 8,
10, 11, 12, 14, 14.1 (other than subsection (d) thereof),  15
(other  than subsection (d) thereof), 18, 19, 20, 21, 22, 23,
25, 27.1, 28, 28.1, 28.2, 29, 30, 31, 32, 32.1, 33, and  35.1
and  Article  X  of  this Code, to carry on the business of a
syndicate, or limited syndicate under Article V-1/2  of  this
Code;  provided  that  such syndicate or limited syndicate is

admitted to the Illinois Insurance Exchange.
    (b)  After December  31,  1997,  syndicates  and  limited
syndicates are subject to the following:
         (1)  Articles  I,  IIA,  VIII, VIII 1/2, X, XI, XII,
    XII 1/2, XIII, XIII 1/2, XXIV, XXV (Sections 408 and  412
    only), and XXVIII (except for Sections 445, 445.1, 445.2,
    445.3, 445.4, and 445.5) of this Code;
         (2)  Subsections  (2)  and (3) of Section 155.04 and
    Sections  13,  132.1  through  140,  141a,  144,  155.01,
    155.03, 378, 379.1, 393.1, 395, and 396 of this Code;
         (3)  the Reinsurance Intermediary Act; and
         (4)  the Producer Controlled Insurer Act.
    (c)  No other provision of this Insurance Code  shall  be
applicable  to any such syndicate or limited syndicate except
as provided in this Article V-1/2.
(Source: P.A. 89-97, eff. 7-7-95; 90-499, eff. 8-19-97.)

    (215 ILCS 5/107.26) (from Ch. 73, par. 719.26)
    Sec.  107.26.   Illinois  Insurance  Exchange   Immediate
Access Security Association.
    (a)  There  is  created  a  non-profit  corporation which
shall be known as the Illinois Insurance  Exchange  Immediate
Access  Security  Association and which shall be incorporated
under  the  General  Not  for  Profit  Corporation  Act.  All
syndicates shall be members of the Association as a condition
of their authority to transact business on the Exchange.  The
Association  shall be exempt from payment of all fees and all
taxes levied by this State or any of its subdivisions.
    (b)  In  the  event  of  the  entry  of   an   Order   of
Rehabilitation,   Conservation,   or  Liquidation  against  a
syndicate pursuant to Section 107.08, the  Association  shall
establish  a  claims  date, which shall be not later than one
year after the date of such Order, by which time all  persons
having  claims  arising  out  of insurance obligations of the
syndicate must file their claim  with  the  Association.  The
Association  shall give notice to all policyholders and other
persons who may have a claim against the syndicate  as  shown
by  the  syndicate's  records.  Such notice shall include the
date of  the  Order,  the  claims  date  established  by  the
Association  and  the  procedure  and form for filing a claim
with the Association. Within 60 days after the  claims  date,
The  Association  shall  determine  the syndicate's insurance
obligations liability based on all claims filed on or  before
the  claims  date.  The Association shall then pay all claims
for which an insurance obligation a liability exists from the
assets of the syndicate's  trust  or  custodial  account  and
certificates  of  guaranty.   In  the  event those assets are
insufficient to pay all claims in full, the Association shall
make payment  pursuant  to  a  plan  approved  by  the  court
entering   the  Order  of  Rehabilitation,  Conservation,  or
Liquidation. The Rehabilitator,  Conservator,  or  Liquidator
shall be bound by any settlement made by the Association. Any
person  not  receiving  full reimbursement for his claim from
the Association shall have a claim against the  assets  being
administered by the Rehabilitator, Conservator, or Liquidator
for  the remaining amounts. In settling claims and subject to
limitations in this Section, the Association shall  have  the
same  rights  and duties of the insolvent syndicate as if the
syndicate had not become insolvent.
    (c)  The Association may delegate to such other person or
entity as it deems appropriate the performance  of  any  duty
imposed on it by this Section.
(Source:  P.A.  89-97,  eff.  7-7-95;  89-206,  eff. 7-21-95;
89-626, eff. 8-9-96.)

    (215 ILCS 5/111) (from Ch. 73, par. 723)
    Sec. 111.   Conditions  of  issuance  of  certificate  of
authority.
    (1)  Before   a  certificate  of  authority  to  transact
business in this State  is  issued  to  a  foreign  or  alien
company, such company shall satisfy the Director that:
         (a)  the company is duly organized under the laws of
    the  state or country under whose laws it professes to be
    organized  and  authorized  to  do  the  business  it  is
    transacting or proposes to transact;
         (b)  its name is not the  same  as,  or  deceptively
    similar  to,  the name of any domestic company, or of any
    foreign or alien company authorized to transact  business
    in this State;
         (c)  if  a  company transacting business of the kind
    or kinds enumerated in Class 1 of Section 4,  it  is  not
    engaging  in  practices  in any state which if engaged in
    this State, would constitute a violation of Section  237;
    and  it  is  not  transacting any kinds of business other
    than those enumerated in Class 1 of Section 4;
         (d)  if a stock company, it has a  paid  up  capital
    and  surplus  at  least equal to the capital and original
    surplus required by this  Code  for  a  domestic  company
    doing  the same kind or kinds of business or, if a mutual
    company or reciprocal, it has a surplus and provision for
    contingent liability of policyholders, at least equal  to
    the   original   surplus  and  provision  for  contingent
    liability  of  policyholders  required  for   a   similar
    domestic   company  doing  the  same  kind  or  kinds  of
    business, or, if a fraternal benefit  society,  it  meets
    the   requirements   prescribed  in  this  Code  for  the
    organization of a domestic company or society,  or  if  a
    Lloyds it meets the requirements of Article V;
         (e)  its  funds  are invested in accordance with the
    laws of its domicile; and
         (f)  in the case of  a  stock  company  its  minimum
    capital and surplus and required reserves, or in the case
    of  a  mutual  company or a reciprocal proposing to issue
    policies  without  contingent  liability,   its   minimum
    surplus  and  required  reserves,  or  in the case of any
    other company, all its funds, are invested in  securities
    or  property  which afford a degree of financial security
    equal to that required for  similar  domestic  companies,
    provided  that  this  clause  shall  not  be construed as
    requiring the application of limitations relating  either
    to  the  kind  or amount of securities prescribed by this
    Code for the investments of domestic companies.
    (2)  In determining whether  an  alien  company  complies
with  the  provisions  of  subsection (1) of this section the
Director shall  consider  only  business  transacted  in  the
United  States,  only the assets described in Section 60j and
only  liabilities  in  connection  with  its  United   States
business.
    (3)  Before  a  certificate  of  authority is issued to a
foreign or alien company,  other  than  a  Lloyds,  it  shall
deposit  with  the  Director  securities which are authorized
investments for  similar  domestic  companies  under  Section
126.11A(1),  126.11A(2),  126.24A(1),  or  126.24A(2)  of the
amount, if any, required  of  a  domestic  company  similarly
organized and doing the same kind or kinds of business; or in
lieu  of  such  deposit  such  foreign or alien company shall
satisfy the Director that it has on deposit with an  official
of a state of the United States or a depositary designated or
authorized  for  such purpose by such official, authorized by
the law of such state to accept such deposit,  securities  of
at  least  a like amount, for the benefit and security of all
creditors,  policyholders  and  policy  obligations  of  such
company in the United States.
    (4)  Before issuing  a  certificate  of  authority  to  a
foreign   or   alien  company,  the  Director  may  cause  an
examination to be made of the condition and affairs  of  such
company.
(Source: P.A. 90-418, eff. 8-15-97.)

    (215 ILCS 5/121-2.08) (from Ch. 73, par. 733-2.08)
    Sec.  121-2.08.   Transactions  in  this  State involving
contracts of insurance  issued  to  one  or  more  industrial
insureds.  For  purposes of this Section "industrial insured"
is an insured:
    (a)  which procures the insurance of any  risk  or  risks
other  than life and annuity contracts by use of the services
of a full time employee acting as  an  insurance  manager  or
buyer  or  the  services  of  a  regularly  and  continuously
retained qualified insurance consultant;
    (b)  whose aggregate annual premiums for insurance on all
risks,  except  for  life  and accident and health insurance,
total at least $100,000 $50,000; and
    (c)  which  either  (i)  has  at  least  25   full   time
employees,  (ii) has gross assets in excess of $3,000,000, or
(iii) has annual gross revenues in excess of $5,000,000.
(Source: P.A. 85-131.)

    (215 ILCS 5/123C-1) (from Ch. 73, par. 735C-1)
    Sec. 123C-1.  Definitions. As used in this Article:
    A.  "Affiliate" or "Affiliated company"  shall  have  the
meaning  set  forth  in subsection (a) of Section 131.1 (and,
for purposes of such definition, the definitions of "control"
and "person", as set forth in  subsections  (b)  and  (e)  of
Section 131.1, respectively, shall be applicable).
    B.    "Association"   means   any   entity   meeting  the
requirements set forth in either of the following  paragraphs
(1), (2) or (3):
         (1)  any organized association of individuals, legal
    representatives,  corporations (whether for profit or not
    for profit), partnerships, trusts, associations, units of
    government or other organizations, or any combination  of
    the  foregoing, that has been in continuous existence for
    at least one year,  the  member  organizations  of  which
    collectively:
              (a)  own,  control,  or hold with power to vote
         (directly or  indirectly)  all  of  the  outstanding
         voting   securities   of   an   association  captive
         insurance company incorporated as a  stock  insurer;
         or
              (b)  have  complete voting control (directly or
         indirectly) over an  association  captive  insurance
         company organized as a mutual insurer;
         (2)  any organized association of individuals, legal
    representatives,  corporations (whether for profit or not
    for profit), partnerships, trusts, associations, units of
    government or other organizations, or any combination  of
    the foregoing:
              (a)  whose  member organizations are engaged in
         businesses or activities  similar  or  related  with
         respect  to  the liability of which such members are
         exposed by virtue of any related, similar, or common
         business, trade,  product,  services,  premises,  or
         operations; and
              (b)  whose member organizations:
                   (i)  directly   or   indirectly   own   or
              control,  and hold with power to vote, at least
              80% of all of the outstanding voting securities
              of an  association  captive  insurance  company
              incorporated as a stock insurer; or
                   (ii)  directly or indirectly have at least
              80%  of  the voting control over an association
              captive insurance company organized as a mutual
              insurer; or
         (3)  any  risk  retention  group,  as   defined   in
    subsection  (11)  of  Section  123B-2,  domiciled in this
    State  and  organized  under   this   Article;   however,
    beginning  6  months  after  the  effective  date of this
    amendatory Act of 1995, a risk retention group  shall  no
    longer qualify as an association under this Article.
    Provided,  however,  that  with  respect  to  each of the
associations described in paragraphs (1), (2) and (3)  above,
no  member  organization  may  (i) own, control, or hold with
power to vote in excess of 25% of the voting securities of an
association captive insurance company incorporated as a stock
insurer, or (ii) have more than 25% of the voting control  of
an  association  captive  insurance  company  organized  as a
mutual insurer.
    C.  "Association captive  insurance  company"  means  any
company that insures risks of (i) the member organizations of
an association, and (ii) their affiliated companies.
    D.  "Captive  insurance  company"  means any pure captive
insurance company, association captive insurance  company  or
industrial  insured captive insurance company organized under
the provisions of this Article.
    E.  "Director" means the Director of  the  Department  of
Insurance.
    F.  "Industrial insured" means an insured which (together
with  its  affiliates) at the time of its initial procurement
of insurance from an  industrial  insured  captive  insurance
company:
         (1)  has  available to it advice with respect to the
    purchase of insurance through the use of the services  of
    a  full-time  employee  acting as an insurance manager or
    buyer or the services of  a  regularly  and  continuously
    retained qualified insurance consultant; and
         (2)  pays  aggregate  annual  premiums  in excess of
         $100,000 $35,000 for insurance on all  risks  except
         for life, accident and health; and
         (3)  either (i) has at least 25 full-time employees,
    or  (ii)  has  gross  assets  in excess of $3,000,000, or
    (iii) has annual gross revenues in excess of $5,000,000.
    G.  "Industrial insured captive insurance company"  means
any  company  that  insures risks of industrial insureds that
are members  of  the  industrial  insured  group,  and  their
affiliated companies.
    H.  "Industrial   insured   group"  means  any  group  of
industrial insureds that collectively:
         (1)  directly or indirectly (including ownership  or
    control  through  a company which is wholly owned by such
    group of industrial insureds) own or  control,  and  hold
    with  power  to  vote,  all  of  the  outstanding  voting
    securities  of  an  industrial  insured captive insurance
    company incorporated as a stock insurer; or
         (2)  directly  or  indirectly   (including   control
    through  a company which is wholly owned by such group of
    industrial insureds) have complete voting control over an
    industrial insured captive insurance company organized as
    a mutual  insurer;  provided,  however,  that  no  member
    organization  may (i) own, control, or hold with power to
    vote in excess of 25% of  the  voting  securities  of  an
    industrial insured captive insurance company incorporated
    as  a  stock  insurer,  or (ii) have more than 25% of the
    voting control of an industrial insured captive insurance
    company organized as a mutual insurer.
    I.  "Member organization"  means  any  individual,  legal
representative,  corporation  (whether  for profit or not for
profit), partnership, association, unit of government,  trust
or  other  organization  that belongs to an association or an
industrial insured group.
    J.  "Parent" means a corporation, partnership, individual
or other legal  entity  that  directly  or  indirectly  owns,
controls,  or  holds  with power to vote more than 50% of the
outstanding voting securities of a company.
    K.  "Personal risk liability" means  liability  to  other
persons  for (i) damage because of injury to any person, (ii)
damage to property, or (iii) other loss or  damage,  in  each
case  resulting  from  any  personal,  familial, or household
responsibilities or activities, but does  not  include  legal
liability  for  damages  (including  costs  of defense, legal
costs  and  fees,  and  other  claims  expenses)  because  of
injuries to other persons, damage to their property, or other
damage or loss  to  such  other  persons  resulting  from  or
arising out of:
         (i)  any  business  (whether  for  profit or not for
    profit), trade, product, services (including professional
    services), premises, or operations; or
         (ii)  any activity of any state or local government,
    or any agency or political subdivision thereof.
    L.  "Pure captive insurance company"  means  any  company
that insures only risks of its parent or affiliated companies
or both.
    M.  "Unit  of government" includes any state, regional or
local government, or  any  agency  or  political  subdivision
thereof,  or  any  district,  authority,  public  educational
institution  or  school district, public corporation or other
unit of government in this  State  or  any  similar  unit  of
government in any other state.
(Source: P.A. 89-97, eff. 7-7-95.)

    (215 ILCS 5/126.2)
    Sec. 126.2.  Definitions. For purposes of this Article:
    A.  "Acceptable collateral" means:
         (1)  As  to securities lending transactions, and for
    the purpose of calculating counterparty exposure  amount,
    cash,   cash   equivalents,  letters  of  credit,  direct
    obligations of, or securities that are  fully  guaranteed
    as  to  principal  and interest by, the government of the
    United States or any agency of the United States,  or  by
    the  Federal National Mortgage Association or the Federal
    Home Loan Mortgage Corporation, and as to lending foreign
    securities, sovereign debt rated 1 by the SVO;
         (2)  As  to  repurchase  transactions,  cash,   cash
    equivalents and direct obligations of, or securities that
    are fully guaranteed as to principal and interest by, the
    government  of  the  United  States  or  an agency of the
    United  States,  or  by  the  Federal  National  Mortgage
    Association   or   the   Federal   Home   Loan   Mortgage
    Corporation; and
         (3)  As to reverse repurchase transactions, cash and
    cash equivalents.
    B.  "Acceptable   private   mortgage   insurance"   means
insurance written by a private insurer protecting a  mortgage
lender against loss occasioned by a mortgage loan default and
issued  by a licensed mortgage insurance company, with an SVO
1 designation or a rating issued by a  nationally  recognized
statistical  rating  organization  equivalent  to  an  SVO  1
designation,  that  covers  losses  to  an  80% loan-to-value
ratio.
    C.  "Accident  and  health  insurance"  means  protection
which provides payment of benefits for  covered  sickness  or
accidental  injury,  excluding  credit  insurance, disability
insurance, accidental death and dismemberment  insurance  and
long-term care insurance.
    D.  "Accident  and  health insurer" means a licensed life
or  health  insurer  or  health  service  corporation   whose
insurance   premiums  and  required  statutory  reserves  for
accident and health insurance  constitute  at  least  95%  of
total  premium  considerations  or  total  statutory required
reserves, respectively.
    E.  "Admitted assets" means assets defined by Section 3.1
of this Code permitted to be reported as admitted  assets  on
the   statutory  financial  statement  of  the  insurer  most
recently  required  to  be  filed  with  the  Director,   but
excluding  assets  of  separate  accounts, the investments of
which are not subject  to  the  provisions  of  this  Article
except  to  the extent that the provisions of Article XIV 1/2
so provide.
    F.  "Affiliate" means, as to any person,  another  person
that,   directly   or   indirectly   through   one   or  more
intermediaries, controls,  is  controlled  by,  or  is  under
common control with the person.
    G.  "Asset-backed  security"  means  a  security or other
instrument, excluding shares in a mutual fund, evidencing  an
interest  in,  or  the  right  to  receive  payments from, or
payable from distributions on, an asset, a pool of assets  or
specifically   divisible   cash   flows   which  are  legally
transferred  to  a   trust   or   another   special   purpose
bankruptcy-remote   business   entity,   on   the   following
conditions:
         (1)  The   trust   or   other   business  entity  is
    established solely for the purpose of acquiring  specific
    types   of  assets  or  rights  to  cash  flows,  issuing
    securities and other instruments representing an interest
    in or right to receive cash flows from  those  assets  or
    rights,  and  engaging  in activities required to service
    the assets  or  rights  and  any  credit  enhancement  or
    support  features  held  by  the  trust or other business
    entity; and
         (2)  The assets  of  the  trust  or  other  business
    entity  consist solely of interest bearing obligations or
    other contractual obligations representing the  right  to
    receive  payment  from  the cash flows from the assets or
    rights. However, the existence  of  credit  enhancements,
    such  as  letters  of  credit  or  guarantees, or support
    features such as  swap  agreements,  shall  not  cause  a
    security  or  other  instrument  to  be  ineligible as an
    asset-backed security.
    H.  "Business entity"  includes  a  sole  proprietorship,
corporation,    limited   liability   company,   association,
partnership, joint stock company, joint venture, mutual fund,
trust, joint  tenancy  or  other  similar  form  of  business
organization, whether organized for profit or not for profit.
    I.  "Cap"  means  an  agreement  obligating the seller to
make payments to the buyer, with each payment  based  on  the
amount by which a reference price or level or the performance
or  value  of  one  or  more  underlying  interests exceeds a
predetermined number, sometimes called  the  strike  rate  or
strike price.
    J.  "Capital  and  surplus"  means the sum of the capital
and surplus of the  insurer  required  to  be  shown  on  the
statutory  financial  statement  of the insurer most recently
required to be filed with the Director.
    K.  "Cash equivalents" means short-term, highly rated and
highly liquid investments or securities  readily  convertible
to known amounts of cash without penalty and so near maturity
that they present insignificant risk of change in value. Cash
equivalents  include government money market mutual funds and
class one money market mutual funds.  For  purposes  of  this
definition:
         (1)  "Short-term" means investments with a remaining
    term to maturity of 90 days or less; and
         (2)  "Highly  rated" means an investment rated "P-1"
    by Moody's Investors Service, Inc., or "A-1" by  Standard
    and Poor's division of The McGraw Hill Companies, Inc. or
    its   equivalent   rating   by  a  nationally  recognized
    statistical rating organization recognized by the SVO.
    L.  "Class one bond mutual fund" means a mutual fund that
at all times qualifies for investment using  the  bond  class
one  reserve  factor under the Purposes and Procedures of the
Securities Valuation Office or any successor publication.
    M.  "Class one money market mutual fund"  means  a  money
market mutual fund that at all times qualifies for investment
using  the  bond  class one reserve factor under the Purposes
and Procedures of the  Securities  Valuation  Office  or  any
successor publication.
    N.  "Code" means the Illinois Insurance Code.
    O.  "Collar"  means  an  agreement to receive payments as
the buyer of an option, cap or floor and to make payments  as
the seller of a different option, cap or floor.
    P.  "Commercial  mortgage  loan"  means  a mortgage loan,
other than a residential mortgage loan.
    Q.  "Construction loan" means a loan of less than 3 years
in term, made for financing the cost  of  construction  of  a
building or other improvement to real estate, that is secured
by the real estate.
    R.  "Control"   means   the   possession,   directly   or
indirectly,  of the power to direct or cause the direction of
the management and policies of a person, whether through  the
ownership  of  voting  securities,  by contract (other than a
commercial contract for goods or nonmanagement services),  or
otherwise,  unless  the  power  is  the result of an official
position with or corporate office held by the person. Control
shall  be  presumed  to  exist  if  a  person,  directly   or
indirectly,  owns,  controls, holds with the power to vote or
holds  proxies  representing  10%  or  more  of  the   voting
securities   of  another  person.  This  presumption  may  be
rebutted by a showing that control does not  exist  in  fact.
The  Director  may determine, after furnishing all interested
persons notice and an opportunity  to  be  heard  and  making
specific  findings of fact to support the determination, that
control exists in fact,  notwithstanding  the  absence  of  a
presumption to that effect.
    S.  "Counterparty exposure amount" means:
         (1)  The  amount  of  credit  risk attributable to a
    derivative instrument entered into with a business entity
    other  than  through  a  qualified  exchange,   qualified
    foreign   exchange,   or   cleared  through  a  qualified
    clearinghouse ("over-the-counter derivative instrument").
    The amount of credit risk equals:
              (a)  The market value of  the  over-the-counter
         derivative  instrument  if  the  liquidation  of the
         derivative instrument would result in a  final  cash
         payment to the insurer; or
              (b)  Zero  if the liquidation of the derivative
         instrument would not result in a final cash  payment
         to the insurer.
         (2)  If  over-the-counter derivative instruments are
    entered into  under  a  written  master  agreement  which
    provides  for  netting of payments owed by the respective
    parties, and the domicile of the counterparty  is  either
    within  the  United  States  or  if not within the United
    States, within  a  foreign  jurisdiction  listed  in  the
    Purposes  and  Procedures  of  the  Securities  Valuation
    Office  as eligible for netting, the net amount of credit
    risk shall be the greater of zero or the net sum of:
              (a)  The market value of  the  over-the-counter
         derivative   instruments   entered  into  under  the
         agreement, the liquidation of which would result  in
         a final cash payment to the insurer; and
              (b)  The  market  value of the over-the-counter
         derivative  instruments  entered  into   under   the
         agreement,  the liquidation of which would result in
         a final cash payment by the insurer to the  business
         entity.
         (3)  For  open  transactions,  market value shall be
    determined at the end of the most recent quarter  of  the
    insurer's  fiscal year and shall be reduced by the market
    value of acceptable collateral held  by  the  insurer  or
    placed in escrow by one or both parties.
    T.  "Covered"   means   that   an  insurer  owns  or  can
immediately  acquire,  through  the  exercise   of   options,
warrants  or  conversion rights already owned, the underlying
interest in order to fulfill or secure its obligations  under
a call option, cap or floor it has written, or has set aside,
pursuant  to  a  custodial  or escrow agreement, cash or cash
equivalents with a market value equal to the amount  required
to fulfill its obligations under a put option it has written,
in an income generation transaction.
    U.  "Credit  tenant  loan" means a mortgage loan which is
made primarily in reliance on the credit standing of a  major
tenant,  structured with an assignment of the rental payments
to the lender with real estate pledged as collateral  in  the
form of a first lien.
    V. (1)  "Derivative   instrument"   means  an  agreement,
    option, instrument or a series or combination thereof:
              (a)  To make or take delivery of, or assume  or
         relinquish,  a  specified  amount  of  one  or  more
         underlying  interests,  or to make a cash settlement
         in lieu thereof; or
              (b)  That has a price,  performance,  value  or
         cash   flow  based  primarily  upon  the  actual  or
         expected price, level, performance,  value  or  cash
         flow of one or more underlying interests.
         (2)  Derivative    instruments    include   options,
    warrants used in a hedging transaction and  not  attached
    to  another  financial instrument, caps, floors, collars,
    swaps,  forwards,  futures  and  any  other   agreements,
    options  or  instruments substantially similar thereto or
    any series or combination  thereof  and  any  agreements,
    options  or  instruments  permitted  under  rules adopted
    under Section 126.8.  Derivative  instruments  shall  not
    include  an  investment  authorized  by  Sections  126.11
    through 126.17, 126.19 and 126.24 through 126.30.
    W.  "Derivative    transaction"   means   a   transaction
involving the use of one or more derivative instruments.
    X.  "Direct" or "directly," when used in connection  with
an  obligation,  means  the  designated  obligor is primarily
liable on the instrument representing the obligation.
    Y.  "Dollar  roll  transaction"  means   2   simultaneous
transactions  with  settlement  dates  no  more  than 96 days
apart, so that in one  transaction  an  insurer  sells  to  a
business  entity, and in the other transaction the insurer is
obligated  to  purchase  from  the  same   business   entity,
substantially similar securities of the following types:
         (1)  Asset-backed   securities  issued,  assumed  or
    guaranteed   by   the   Government   National    Mortgage
    Association, the Federal National Mortgage Association or
    the  Federal  Home  Loan  Mortgage  Corporation  or their
    respective successors; and
         (2)  Other asset-backed securities  referred  to  in
    Section  106  of Title I of the Secondary Mortgage Market
    Enhancement Act of 1984 (15 U.S.C.  77r1), as amended.
    Z.  "Domestic  jurisdiction"  means  the  United  States,
Canada, any state, any province of Canada  or  any  political
subdivision of any of the foregoing.
    AA.  "Equity  interest"  means  any of the following that
are not rated credit  instruments:  common  stock;  preferred
stock;  trust certificate; equity investment in an investment
company other than a money market mutual fund or a class  one
bond mutual fund; investment in a common trust fund of a bank
regulated by a federal or state agency; an ownership interest
in  minerals,  oil  or  gas,  the  rights  to which have been
separated from the underlying fee interest in the real estate
where the minerals, oil or gas are located; instruments which
are mandatorily, or at the option of the issuer,  convertible
to  equity;  limited  partnership interests and those general
partnership  interests  authorized  under  Section  126.5(D);
member interests in limited liability companies; warrants  or
other  rights to acquire equity interests that are created by
the person  that  owns  or  would  issue  the  equity  to  be
acquired;   or   instruments   that  would  be  rated  credit
instruments except for the provisions of subsection RRR(2) of
this Section.
    BB.  "Equivalent securities" means:
         (1)  In a securities lending transaction, securities
    that are  identical  to  the  loaned  securities  in  all
    features  including  the amount of the loaned securities,
    except as to certificate number if held in physical form,
    but if any different security shall be  exchanged  for  a
    loaned     security    by    recapitalization,    merger,
    consolidation or other corporate  action,  the  different
    security shall be deemed to be the loaned security;
         (2)  In  a  repurchase  transaction, securities that
    are identical to the purchased securities in all features
    including the amount of the purchased securities,  except
    as to the certificate number if held in physical form; or
         (3)  In a reverse repurchase transaction, securities
    that are identical to the sold securities in all features
    including the amount of the sold securities, except as to
    the certificate number if held in physical form.
    CC.  "Floor"  means an agreement obligating the seller to
make payments to the buyer in which each payment is based  on
the  amount by which a predetermined number, sometimes called
the floor rate or price, exceeds a reference price, a  level,
or  the  performance  or  value  of  one  or  more underlying
interests.
    DD.  "Foreign currency" means a currency other than  that
of a domestic jurisdiction.
    EE.  (1)  "Foreign  investment"  means an investment in a
    foreign jurisdiction, or an investment in a person,  real
    estate or asset domiciled in a foreign jurisdiction, that
    is  substantially  of the same type as those eligible for
    investment under this Article, other than under  Sections
    126.17  and 126.30.  An investment shall not be deemed to
    be foreign  if  the  issuing  person,  qualified  primary
    credit  source  or  qualified  guarantor  is  a  domestic
    jurisdiction   or   a  person  domiciled  in  a  domestic
    jurisdiction, unless:
              (a)  The issuing person  is  a  shell  business
         entity; and
              (b)  The  investment  is not assumed, accepted,
         guaranteed, or insured  or  otherwise  backed  by  a
         domestic  jurisdiction  or  a  person, that is not a
         shell  business  entity,  domiciled  in  a  domestic
         jurisdiction.
         (2)  For purposes of this definition:
              (a)  "Shell business entity" means  a  business
         entity  having  no  economic  substance, except as a
         vehicle for owning interests in assets issued, owned
         or previously owned  by  a  person  domiciled  in  a
         foreign jurisdiction;
              (b)  "Qualified  guarantor"  means  a guarantor
         against which an insurer has a direct claim for full
         and timely payment, evidenced by a contractual right
         for which an enforcement action can be brought in  a
         domestic jurisdiction; and
              (c)  "Qualified  primary  credit  source" means
         the credit source to  which  an  insurer  looks  for
         payment  as  to  an  investment and against which an
         insurer has a  direct  claim  for  full  and  timely
         payment,  evidenced by a contractual right for which
         an enforcement action can be brought in  a  domestic
         jurisdiction.
    FF.  "Foreign  jurisdiction"  means  a jurisdiction other
than a domestic jurisdiction.
    GG.  "Forward" means an agreement (other than  a  future)
to  make  or  take  delivery  of, or effect a cash settlement
based on the actual or expected price, level, performance  or
value of, one or more underlying interests.
    HH.  "Future"  means  an agreement, traded on a qualified
exchange or qualified  foreign  exchange,  to  make  or  take
delivery  of, or effect a cash settlement based on the actual
or expected price, level, performance or  value  of,  one  or
more underlying interests and includes an insurance future.
    II.  "Government  money market mutual fund" means a money
market mutual fund that at all times:
         (1)  Invests only in obligations issued, guaranteed,
    or insured by the federal government of the United States
    or collateralized repurchase agreements composed of these
    obligations; and
         (2)  Qualifies  for  investment  without  a  reserve
    under the  Purposes  and  Procedures  of  the  Securities
    Valuation Office or any successor publication.
    JJ.  "Government sponsored enterprise" means a:
         (1)  Governmental agency; or
         (2)  Corporation,    limited    liability   company,
    association,  partnership,  joint  stock  company,  joint
    venture,  trust  or  other  entity   or   instrumentality
    organized  under the laws of any domestic jurisdiction to
    accomplish a public policy or other governmental purpose.
    KK.  "Guaranteed or insured,"  when  used  in  connection
with  an  obligation  acquired  under this Article, means the
guarantor or insurer has agreed to:
         (1)  Perform or insure the obligation of the obligor
    or purchase the obligation; or
         (2)  Be   unconditionally   obligated   until    the
    obligation is repaid to maintain in the obligor a minimum
    net worth, fixed charge coverage, stockholders' equity or
    sufficient  liquidity  to  enable  the obligor to pay the
    obligation in full.
    LL.  "Hedging transaction" means:
         (1)  A derivative transaction that is  entered  into
    and maintained to reduce:
              (a)  the  risk of a change in the value, yield,
         price,  cash  flow,  or  quantity   of   assets   or
         liabilities   that   the  insurer  has  acquired  or
         incurred or anticipates acquiring or incurring; or
              (b)  the currency exchange  rate  risk  or  the
         degree  of exposure as to assets or liabilities that
         the insurer has acquired or incurred or  anticipates
         acquiring  or incurring; or
         (2)  Such  other  derivative  transactions as may be
    specified to constitute  hedging  transactions  in  rules
    adopted pursuant to Section 126.8.
    MM.  "High   grade   investment"  means  a  rated  credit
instrument; rated 1, 2, P1, P2, PSF1 or PSF2 by the SVO.
    NN.  "Income" means, as to a security, interest,  accrual
of  discount,  dividends  or  other  distributions,  such  as
rights, tax or assessment credits, warrants and distributions
in kind.
    OO.  "Income   generation   transaction"   means   (1)  a
derivative transaction involving the writing of covered  call
options,  covered put options, covered caps or covered floors
that is intended to generate income or enhance return, or (2)
such other derivative transactions as  may  be  specified  to
constitute  income  generation  transactions in rules adopted
pursuant to Section 126.8.
    PP.  "Initial  margin"  means   the   amount   of   cash,
securities  or  other  consideration initially required to be
deposited to establish a futures position.
    QQ.  "Insurance future" means a  future  relating  to  an
index or pool that is based on insurance-related items.
    RR.  "Insurance  futures  option"  means  an option on an
insurance future.
    SS.  "Investment company" means an investment company  as
defined in Section 3(a) of the Investment Company Act of 1940
(15  U.S.C.   80a-1  et  seq.),  as  amended,  and  a  person
described in Section 3(c) of that Act.
    TT.  "Investment  company  series"  means  an  investment
portfolio  of  an  investment  company that is organized as a
series company and to which assets of the investment  company
have been specifically allocated.
    UU.  "Investment  practices"  means  transactions  of the
types described in Section 126.16, 126.18, 126.29 or 126.31.
    VV.  "Investment subsidiary" means  a  subsidiary  of  an
insurer  engaged  or  organized  to engage exclusively in the
ownership and management of assets authorized as  investments
for  the  insurer  if  such  subsidiary  agrees  to limit its
investment in any asset so  that  its  investments  will  not
cause  the  amount  of the total investment of the insurer to
exceed any of the investment limitations or avoid  any  other
provisions of this Article applicable to the insurer. As used
in this subsection, the total investment of the insurer shall
include:
         (1)  Direct  investment  by the insurer in an asset;
    and
         (2)  The  insurer's  proportionate   share   of   an
    investment in an asset by an investment subsidiary of the
    insurer,  which  shall  be  calculated by multiplying the
    amount of the subsidiary's investment by  the  percentage
    of the insurer's ownership interest in the subsidiary.
    WW.  "Investment   strategy"  means  the  techniques  and
methods used by an insurer to meet its investment objectives,
such  as  active  bond  portfolio  management,  passive  bond
portfolio  management,  interest  rate  anticipation,  growth
investing and value investing.
    XX.  "Letter of credit" means a  clean,  irrevocable  and
unconditional  letter  of  credit issued or confirmed by, and
payable and presentable at, a financial  institution  on  the
list  of  financial  institutions  meeting  the standards for
issuing letters of credit under the Purposes  and  Procedures
of   the   Securities   Valuation  Office  or  any  successor
publication. To  constitute  acceptable  collateral  for  the
purposes  of  Sections  126.16 and 126.29, a letter of credit
must have an expiration date beyond the term of  the  subject
transaction.
    YY.  "Limited   liability   company"   means  a  business
organization, excluding partnerships  and  ordinary  business
corporations,  organized  or  operating under the laws of the
United States or any state thereof that limits  the  personal
liability  of  investors  to  the  equity  investment  of the
investor in the business entity.
    ZZ.  "Lower  grade  investment"  means  a  rated   credit
instrument  rated 4, 5, 6, P4, P5, P6, PSF4, PSF5, or PSF6 by
the SVO.
    AAA.  "Market value" means:
         (1)  As to cash and letters of credit,  the  amounts
    thereof; and
         (2)  As  to a security as of any date, the price for
    the security on  that  date  obtained  from  a  generally
    recognized  source or the most recent quotation from such
    a source or, to the extent no generally recognized source
    exists, the price for the security as determined in  good
    faith  by  the  insurer,  plus  accrued but unpaid income
    thereon to the extent not included in  the  price  as  of
    that date.
    BBB.  "Medium  grade  investment"  means  a  rated credit
instrument rated 3, P3, or PSF 3 by the SVO.
    CCC.  "Money market mutual fund" means a mutual fund that
meets the conditions of 17 Code of Federal  Regulations  Par.
270.2a-7, under the Investment Company Act of 1940 (15 U.S.C.
80a-1 et seq.), as amended or renumbered.
    DDD.  "Mortgage  loan"  means  an obligation secured by a
mortgage, deed of trust, trust deed or other consensual  lien
on real estate.
    EEE.  "Multilateral    development    bank"    means   an
international development organization of  which  the  United
States is a member.
    FFF.  "Mutual  fund"  means  an investment company or, in
the case of an investment company  that  is  organized  as  a
series company, an investment company series, that, in either
case,  is  registered  with  the United States Securities and
Exchange Commission under the Investment Company Act of  1940
(15 U.S.C. 80a-1 et seq.), as amended.
    GGG.  "NAIC"  means the National Association of Insurance
Commissioners.
    HHH.  "Obligation" means a bond, note,  debenture,  trust
certificate   including   an   equipment  trust  certificate,
production payment, negotiable bank certificate  of  deposit,
bankers'  acceptance,  credit  tenant  loan,  loan secured by
financing net leases and other evidence of  indebtedness  for
the  payment  of  money  (or  participations, certificates or
other evidences of an interest  in  any  of  the  foregoing),
whether  constituting  a  general obligation of the issuer or
payable only out of certain revenues or certain funds pledged
or otherwise dedicated for payment.
    III.  "Option" means an agreement giving  the  buyer  the
right to buy or receive (a "call option"), sell or deliver (a
"put  option"),  enter  into, extend or terminate or effect a
cash settlement based on the actual or expected price, level,
performance or value of one or more underlying interests  and
includes an insurance futures option.
    JJJ.  "Person"  means an individual, a business entity, a
multilateral  development  bank  or  a  government  or  quasi
governmental body, such  as  a  political  subdivision  or  a
government sponsored enterprise.
    KKK.  "Potential exposure" means the amount determined in
accordance with the NAIC Annual Statement Instructions.
    LLL.  "Preferred  stock"  means  preferred, preference or
guaranteed stock of a business entity authorized to issue the
stock, that has a preference in liquidation over  the  common
stock of the business entity.
    MMM.  "Qualified bank" means:
         (1)  A  national  bank,  state bank or trust company
    that at all times is no less than adequately  capitalized
    as  determined  by  standards  adopted  by  United States
    banking regulators and that either is regulated by  state
    banking  laws  or  is  a  member  of  the Federal Reserve
    System; or
         (2)  A  bank  or  trust  company   incorporated   or
    organized  under  the  laws  of  a country other than the
    United States that  is  regulated  as  a  bank  or  trust
    company by that country's government or an agency thereof
    and  that  at  all  times  is  no  less  than  adequately
    capitalized  as  determined  by  the standards adopted by
    international banking authorities.
    NNN.  "Qualified business entity" means a business entity
that is:
         (1)  An issuer of  obligations  or  preferred  stock
    that  are  rated  1  or  2  by  the  SVO  or an issuer of
    obligations, preferred stock  or  derivative  instruments
    that  are rated the equivalent of 1 or 2 by the SVO or by
    a nationally recognized statistical  rating  organization
    recognized by the SVO; or
         (2)  A  primary  dealer  in United States government
    securities, recognized by the Federal Reserve Bank of New
    York; or.
         (3)  With respect to securities lending arrangements
    under Sections 126.16 and  126.29,  an  affiliate  of  an
    entity  that  is  a qualified business entity pursuant to
    paragraph (1)  or  (2)  of  this  subsection  NNN,  whose
    arrangement   with  the  insurer  is  guaranteed  by  the
    affiliated entity that is  a  qualified  business  entity
    under paragraph (1) or (2).
    OOO.  "Qualified  clearinghouse"  means  a  clearinghouse
for,  and  subject to the rules of, a qualified exchange or a
qualified foreign exchange, which provides clearing services,
including acting as a counterparty to each of the parties  to
a  transaction  such  that  the parties no longer have credit
risk as to each other.
    PPP.  "Qualified exchange" means:
         (1)  A securities exchange registered as a  national
    securities  exchange,  or  a  securities market regulated
    under the Securities Exchange Act of 1934 (15 U.S.C.   78
    et seq.), as amended;
         (2)  A   board  of  trade  or  commodities  exchange
    designated as a contract market by the Commodity  Futures
    Trading Commission or any successor thereof;
         (3)  Private  Offerings, Resales and Trading through
    Automated Linkages (PORTAL);
         (4)  A  designated  offshore  securities  market  as
    defined in Securities Exchange Commission  Regulation  S,
    17 C.F.R. Part 230, as amended; or
         (5)  A qualified foreign exchange.
    QQQ.  "Qualified   foreign   exchange"  means  a  foreign
exchange, board of trade or contract market  located  outside
the United States, its territories or possessions:
         (1)  That   has  received  regulatory  comparability
    relief under Commodity Futures Trading Commission  (CFTC)
    Rule  30.10 (as set forth in Appendix C to Part 30 of the
    CFTC's Regulations, 17 C.F.R. Part 30);
         (2)  That is, or its members  are,  subject  to  the
    jurisdiction  of  a  foreign  futures  authority that has
    received regulatory comparability relief under CFTC  Rule
    30.10  (as  set  forth  in  Appendix  C to Part 30 of the
    CFTC's Regulations, 17 C.F.R.  Part  30)  as  to  futures
    transactions  in  the  jurisdiction  where  the exchange,
    board of trade or contract market is located; or
         (3)  Upon  which   foreign   stock   index   futures
    contracts  are  listed  that are the subject of no-action
    relief issued by the CFTC's Office  of  General  Counsel,
    provided  that  an  exchange,  board of trade or contract
    market that qualifies as a "qualified  foreign  exchange"
    only  under  this  subsection  shall only be a "qualified
    foreign exchange"  as  to  foreign  stock  index  futures
    contracts that are the subject of no-action relief.
    RRR.  (1)  "Rated  credit instrument" means an obligation
    or other instrument which gives its holder a  contractual
    right  to receive cash or another rated credit instrument
    from another entity, if the instrument:
              (a)  Is rated or required to be  rated  by  the
         SVO;
              (b)  In  the  case  of  an  instrument  with  a
         maturity of 397 days or less, is issued, guaranteed,
         or insured by an entity that is rated by, or another
         instrument of such entity is rated by, the SVO or by
         a    nationally    recognized   statistical   rating
         organization recognized by the SVO;
              (c)  In  the  case  of  an  instrument  with  a
         maturity of 90 days or less, the instrument has been
         issued, assumed, accepted, guaranteed, or insured by
         a qualified bank;
              (d)  Is a share of  a  class  one  bond  mutual
         fund; or
              (e)  Is a share of a money market mutual fund.
         (2)  However,  "rated  credit  instrument"  does not
    mean:
              (a)  An instrument that is mandatorily,  or  at
         the  option  of the issuer, convertible to an equity
         interest; or
              (b)  A security that has a par value and  whose
         terms  provide  that  the issuer's net obligation to
         repay all or part of the  security's  par  value  is
         determined  by  reference  to  the performance of an
         equity, a commodity, a foreign currency or an  index
         of  equities,  commodities,  foreign  currencies  or
         combinations thereof.
    SSS.  "Real estate" means:
         (1)  (a)  Real property;
              (b)  Interests   in   real  property,  such  as
         leaseholds, minerals and oil and gas that  have  not
         been separated from the underlying fee interest;
              (c)  Improvements and fixtures located on or in
         real property; and
              (d)  The   seller's   equity   in   a  contract
         providing for a deed of real estate.
         (2)  As to a mortgage on a  leasehold  estate,  real
    estate  shall include the leasehold estate only if it has
    an unexpired term (including renewal options  exercisable
    at  the  option  of  the  lessee)  extending  beyond  the
    scheduled maturity date of the obligation that is secured
    by  a  mortgage on the leasehold estate by a period equal
    to at least 20% of the original term of the obligation or
    10 years, whichever is greater.
    TTT.  "Replication  transaction"   means   a   derivative
transaction  that is intended to replicate the performance of
one or more assets that an insurer is authorized  to  acquire
under  this Article. A derivative transaction that is entered
into as a hedging  transaction  shall  not  be  considered  a
replication transaction.
    UUU.  "Repurchase  transaction"  means  a  transaction in
which an insurer purchases securities from a business  entity
that  is  obligated to repurchase the purchased securities or
equivalent securities from the insurer at a specified  price,
either within a specified period of time or upon demand.
    VVV.  "Required   liabilities"  means  total  liabilities
required to be reported on the statutory financial  statement
of  the  insurer  most recently required to be filed with the
Director.
    WWW.  "Residential mortgage loan" means a loan  primarily
secured  by  a mortgage on real estate improved with a one to
four family residence.
    XXX.  "Reverse   repurchase    transaction"    means    a
transaction  in  which  an  insurer  sells  securities  to  a
business  entity  and  is  obligated  to  repurchase the sold
securities or equivalent securities from the business  entity
at  a  specified  price,  either within a specified period of
time or upon demand.
    YYY.  "Secured location" means the contiguous real estate
owned by one person.
    ZZZ.  "Securities   lending    transaction"    means    a
transaction in which securities are loaned by an insurer to a
business  entity  that  is  obligated  to  return  the loaned
securities or equivalent securities to  the  insurer,  either
within a specified period of time or upon demand.
    AAAA.  "Series  company" means an investment company that
is organized as a series company, as defined in Rule 18f-2(a)
adopted under the Investment Company Act of 1940  (15  U.S.C.
80a-1 et seq.), as amended.
    BBBB.  "Sinking fund stock" means preferred stock that:
         (1)  Is  subject  to  a  mandatory  sinking  fund or
    similar arrangement that will provide for the  redemption
    (or  open  market  purchase)  of  the entire issue over a
    period  not  longer  than  40  years  from  the  date  of
    acquisition; and
         (2)  Provides    for    mandatory    sinking    fund
    installments (or open market  purchases)  commencing  not
    more  than  10.5  years  from the date of issue, with the
    sinking fund installments providing for the  purchase  or
    redemption,  on  a  cumulative  basis commencing 10 years
    from the date of issue, of at least 2.5% per year of  the
    original  number  of  shares  of  that issue of preferred
    stock.
    CCCC.  "Special rated credit instrument"  means  a  rated
credit instrument that is:
         (1)  An instrument that is structured so that, if it
    is  held until retired by or on behalf of the issuer, its
    rate of return, based on its purchase cost and  any  cash
    flow   stream   possible   under  the  structure  of  the
    transaction, may become negative  due  to  reasons  other
    than  the  credit  risk associated with the issuer of the
    instrument; however, a rated credit instrument shall  not
    be   a   special   rated  credit  instrument  under  this
    subsection if it is:
              (a)  A share in a class one bond mutual fund;
              (b)  An instrument, other than an  asset-backed
         security,  with  payments  of  par value fixed as to
         amount and timing, or  callable  but  in  any  event
         payable  only  at  par  or  greater, and interest or
         dividend cash flows that are based on either a fixed
         or  variable  rate  determined  by  reference  to  a
         specified rate or index;
              (c)  An instrument, other than an  asset-backed
         security, that has a par value and is purchased at a
         price no greater than 110% of par;
              (d)  An  instrument,  including an asset-backed
         security, whose rate of return would become negative
         only as a result of a prepayment  due  to  casualty,
         condemnation  or economic obsolescence of collateral
         or change of law;
              (e)  An asset-backed security  that  relies  on
         collateral    that   meets   the   requirements   of
         subparagraph (b) of this paragraph, the par value of
         which collateral:
                   (i)  Is not permitted to  be  paid  sooner
              than one half of the remaining term to maturity
              from the date of acquisition;
                   (ii)  Is  permitted  to  be  paid prior to
              maturity  only  at  a  premium  sufficient   to
              provide a yield to maturity for the investment,
              considering the amount prepaid and reinvestment
              rates  at the time of early repayment, at least
              equal to the yield to maturity of  the  initial
              investment; or
                   (iii)  Is  permitted  to  be paid prior to
              maturity at a premium at  least  equal  to  the
              yield   of   a  treasury  issue  of  comparable
              remaining life; or
              (f)  An asset-backed security  that  relies  on
         cash  flows  from  assets that are not prepayable at
         any time at par, but is not  otherwise  governed  by
         subparagraph   (e)   of   this   paragraph,  if  the
         asset-backed security has  a  par  value  reflecting
         principal  payments  to  be  received  if held until
         retired by  or  on  behalf  of  the  issuer  and  is
         purchased  at  a  price no greater than 105% of such
         par amount.
         (2)  An asset-backed security that:
              (a)  Relies on cash flows from assets that  are
         prepayable at par at any time;
              (b)  Does  not  make  payments  of par that are
         fixed as to amount and timing; and
              (c)  Has a negative rate of return at the  time
         of  acquisition if a prepayment threshold assumption
         is used with such  prepayment  threshold  assumption
         defined as either:
                   (i)  Two    (2)   times   the   prepayment
              expectation reported by a recognized,  publicly
              available   source   as  being  the  median  of
              expectations contributed by broker  dealers  or
              other entities, except insurers, engaged in the
              business   of   selling   or   evaluating  such
              securities   or    assets.    The    prepayment
              expectation  used in this calculation shall be,
              at  the  insurer's  election,  the   prepayment
              expectation  for pass-through securities of the
              Federal  National  Mortgage  Association,   the
              Federal  Home  Loan  Mortgage  Corporation, the
              Government National  Mortgage  Association,  or
              for other assets of the same type as the assets
              that  underlie  the  asset- backed security, in
              either  case  with  a  gross  weighted  average
              coupon comparable to the gross weighted average
              coupon  of  the  assets   that   underlie   the
              asset-backed security; or
                   (ii)  Another     prepayment     threshold
              assumption  specified  by  the Director by rule
              promulgated under Section 126.8.
         (3)  For  purposes  of  subparagraph   2   of   this
    subsection,  if the asset-backed security is purchased in
    combination  with  one   or   more   other   asset-backed
    securities  that  are  supported  by identical underlying
    collateral, the insurer may calculate the rate of  return
    for  these  specific  combined asset-backed securities in
    combination.  The  insurer  must  maintain  documentation
    demonstrating that such securities were acquired and  are
    continuing to be held in combination.
    DDDD.  "State"  means a state, territory or possession of
the United States of America, the District of Columbia or the
Commonwealth of Puerto Rico.
    EEEE.  "Substantially    similar    securities"     means
securities  that  meet all criteria for substantially similar
securities specified in the  NAIC  Accounting  Practices  and
Procedures   Manual,  as  amended,  and  in  an  amount  that
constitutes good delivery form as  determined  from  time  to
time by the PSA The Bond Market Trade Association.
    FFFF.  "Subsidiary" means, as to any person, an affiliate
controlled by such person, directly or indirectly through one
or more intermediaries.
    GGGG.  "SVO" means the Securities Valuation Office of the
NAIC or any successor office established by the NAIC.
    HHHH.  "Swap"  means  an  agreement to exchange or to net
payments at one or more times based on the actual or expected
price, level, performance or value of one or more  underlying
interests.
    IIII.  "Underlying    interest"    means    the   assets,
liabilities,  other  interests  or  a   combination   thereof
underlying  a  derivative instrument, such as any one or more
securities,  currencies,  rates,  indices,   commodities   or
derivative instruments.
    JJJJ.  "Unrestricted  surplus"  means the amount by which
total admitted assets exceed 125% of the  insurer's  required
liabilities.
    KKKK.  "Warrant"  means  an  instrument  that  gives  the
holder   the   right  to  purchase  an  underlying  financial
instrument at a given price and time or at a series of prices
and times outlined in the warrant agreement. Warrants may  be
issued  alone  or  in  connection  with  the  sale  of  other
securities,   for   example,   as   part   of   a  merger  or
recapitalization agreement, or to facilitate  divestiture  of
the securities of another business entity.
(Source: P.A. 90-418, eff. 8-15-97.)

    (215 ILCS 5/143) (from Ch. 73, par. 755)
    Sec. 143.  Policy forms.
    (1)  Life,  accident  and  health. No company transacting
the kind or kinds of business enumerated in Classes 1 (a),  1
(b)  and  2  (a)  of Section 4 shall issue or deliver in this
State a policy or certificate of  insurance  or  evidence  of
coverage, attach an endorsement or rider thereto, incorporate
by  reference  bylaws  or  other  matter  therein  or  use an
application blank in this State until the form and content of
such policy, certificate, evidence of coverage,  endorsement,
rider,  bylaw  or  other  matter incorporated by reference or
application blank has been filed with  and  approved  by  the
Director and the appropriate filing fee under Section 408 has
been  paid,  except  that  any such endorsement or rider that
unilaterally reduces benefits and is  to  be  attached  to  a
policy  subsequent  to  the date the policy is issued must be
filed with, reviewed, and formally approved by  the  Director
prior  to  the  date  it  is  attached  to a policy issued or
delivered in this  State.   It  shall  be  the  duty  of  the
Director   to   withhold   approval   of   any  such  policy,
certificate,  endorsement,  rider,  bylaw  or  other   matter
incorporated by reference or application blank filed with him
if  it  contains provisions which encourage misrepresentation
or are unjust, unfair,  inequitable,  ambiguous,  misleading,
inconsistent,  deceptive,  contrary  to  law or to the public
policy of this State, or contains exceptions  and  conditions
that unreasonably or deceptively affect the risk purported to
be  assumed  in  the  general coverage of the policy.  In all
cases the Director shall approve or disapprove any such  form
within  60  days after submission unless the Director extends
by not more than an additional  30  days  the  period  within
which  he shall approve or disapprove any such form by giving
written notice  to  the  insurer  of  such  extension  before
expiration  of the initial 60 days period. The Director shall
withdraw his approval of a policy, certificate,  evidence  of
coverage,   endorsement,   rider,   bylaw,  or  other  matter
incorporated  by  reference  or  application  blank   if   he
subsequently   determines   that  such  policy,  certificate,
evidence  of  coverage,  endorsement,  rider,  bylaw,   other
matter,  or  application  blank is misrepresentative, unjust,
unfair,  inequitable,  ambiguous,  misleading,  inconsistent,
deceptive, contrary to law or public policy of this State, or
contains  exceptions  or  conditions  which  unreasonably  or
deceptively affect the risk purported to be  assumed  in  the
general coverage of the policy or evidence of coverage.
    If a previously approved policy, certificate, evidence of
coverage,   endorsement,   rider,   bylaw   or  other  matter
incorporated by reference or application blank  is  withdrawn
for  use,  the Director shall serve upon the company an order
of withdrawal of use, either personally or by mail, and if by
mail, such service shall  be  completed  if  such  notice  be
deposited  in  the post office, postage prepaid, addressed to
the company's last known address specified in the records  of
the  Department of Insurance.  The order of withdrawal of use
shall take effect 30 days from the date of mailing but  shall
be  stayed  if within the 30-day period a written request for
hearing is filed with the Director.  Such  hearing  shall  be
held  at such time and place as designated in the order given
by the Director.  The hearing may be held either in the  City
of  Springfield,  the  City of Chicago or in the county where
the principal business address of the company is located. The
action of the Director in disapproving  or  withdrawing  such
form   shall   be   subject  to  judicial  review  under  the
Administrative Review Law.
    This subsection shall not apply to riders or endorsements
issued or made at the request of the individual  policyholder
relating  to the manner of distribution of benefits or to the
reservation of rights and benefits under his  life  insurance
policy.
    (2)  Casualty,  fire,  and  marine.   The  Director shall
require the filing of all policy forms issued or delivered by
any  company  transacting  the  kind  or  kinds  of  business
enumerated in Classes 2 (except Class 2 (a)) and 3 of Section
4. In addition, he may require the filing  of  any  generally
used  riders, endorsements, certificates, application blanks,
and other matter incorporated by reference in any such policy
or contract of insurance along with  the  appropriate  filing
fee  under  Section  408.  Companies  that  are members of an
organization, bureau, or association may have the same  filed
for them by the organization, bureau, or association.  If the
Director  shall  find  from an examination of any such policy
form, rider, endorsement, certificate, application blank,  or
other  matter incorporated by reference in any such policy so
filed that it (i) violates any provision of this  Code,  (ii)
contains  inconsistent,  ambiguous, or misleading clauses, or
(iii)  contains   exceptions   and   conditions   that   will
unreasonably   or  deceptively  affect  the  risks  that  are
purported to be assumed by the policy,  he  shall  order  the
company or companies issuing these forms to discontinue their
use.   Nothing  in  this  subsection  shall require a company
transacting the kind  or  kinds  of  business  enumerated  in
Classes  2  (except Class 2 (a)) and 3 of Section 4 to obtain
approval of these forms before they are issued nor in any way
affect the legality of any policy that has  been  issued  and
found  to  be  in  conflict  with  this  subsection, but such
policies shall be subject to the provisions of Section 442.
    (3)  This Section shall not apply (i) to surety contracts
or fidelity bonds, (ii) to policies issued to  an  industrial
insured  as  defined  in Section 121-2.08 except for workers'
compensation policies, nor (iii) to  riders  or  endorsements
prepared to meet special, unusual, peculiar, or extraordinary
conditions applying to an individual risk.
(Source: P.A. 87-1090; 88-313.)

    (215 ILCS 5/144) (from Ch. 73, par. 756)
    Sec. 144. Limitation of risk.
    (1)  No company authorized to transact any of the kind of
business enumerated in Classes 2 and 3 of Section 4  in  this
State may expose itself to any loss on any one risk or hazard
to  an  amount exceeding 10% of its admitted assets in excess
of its liabilities excluding, in the case of a stock company,
its capital stock liability. No portion of any such  risk  or
hazard  which has been reinsured in a domestic or an approved
foreign or alien company, in accordance with this Code, shall
be included in determining the limitation of risk  prescribed
herein.
    (2)  Any   company   transacting  the  kind  of  business
enumerated in clause (g) of Class 2 of Section 4  may  expose
itself to a risk or hazard in excess of the amount prescribed
in subsection (1) if it is protected in excess of that amount
by the following:
         (a)  The  co-suretyship  of such a company similarly
    authorized; or
         (b)  By deposit with it in pledge or  conveyance  to
    it in trust for its protection of property; or
         (c)  By  conveyance  or mortgage for its protection;
    or
         (d)  In case a suretyship  obligation  was  made  on
    behalf or on account of a fiduciary holding property in a
    trust  capacity,  by  deposit  or  other disposition of a
    portion of the property so held in trust that  no  future
    sale,  mortgage,  pledge or other disposition can be made
    thereof without the consent of such company except  by  a
    judgment or order of a court of competent jurisdiction.
    (3)  A  company  designated  in  subsection  (2) may also
execute transportation or warehouse bonds for  United  States
Internal  Revenue  taxes  to  an  amount  equal to 50% of its
capital and surplus.  When  the  penalty  of  the  suretyship
obligation exceeds the amount of a judgment described therein
as  appealed  from and thereby secured, or exceeds the amount
of the subject matter in controversy or of the estate in  the
custody  of the fiduciary for the performance of whose duties
it is conditioned, the bond may be  executed  if  the  actual
amount  of  the judgment or the subject matter in controversy
or estate not subject to supervision or control of the surety
is not in excess of such limitation. When the penalty of  the
suretyship  obligation  executed  for  the  performance  of a
contract exceeds the contract  price,  the  latter  shall  be
taken  as  the  basis for estimating the limit of risk within
the meaning of this Section.
    (4)  Whenever the ratio of the annual premium  volume  in
proportion   to  the  policyholder  surplus  of  any  company
transacting the kinds of business authorized in Class  2  and
Class  3  of  Section 4 when reviewed in conjunction with the
kinds and nature of risks insured, the financial condition of
the company and its ownership including but  not  limited  to
the   liquidity   of   assets,  relationship  of  surplus  to
liabilities  and  adequacy  of  outstanding  loss   reserves,
creates a condition such that the further assumption of risks
might be hazardous to policyholders, creditors or the general
public,  then the Director may order such company to take one
or more of the following steps:
         (a)  to reduce the loss exposure by reinsurance;
         (b)  to reduce the  volume  of  new  business  being
    accepted;
         (c)  to  suspend  the  writing of new business for a
    period not to exceed 3 months;
         (d)  to increase and maintain the company's  surplus
    by a contribution to surplus which will raise the surplus
    for  such  a  period of time and by such an amount as the
    Director may deem necessary and essential; or
         (e)  to reduce general or  acquisition  expenses  by
    specified methods.
         (f)  (Blank).
    (5)  The  provisions  of  this  Section  do  not apply to
domestic, foreign, and alien Lloyds.
    The company may, within 10 days after receipt of an Order
of the Director under this Section, request that the Director
hold a hearing to determine whether the Order of the Director
should be modified in any way. A request for a hearing  by  a
company  under  this  Section stays any Order of the Director
entered under this Section until such time  as  the  Director
has entered an Order pursuant to the hearing.
(Source: P.A. 89-97, eff. 7-7-95.)

    (215 ILCS 5/445) (from Ch. 73, par. 1057)
    Sec. 445.  Surplus line.
    (1)  Surplus   line   defined;   surplus   line   insurer
unauthorized company requirements.  Surplus line insurance is
insurance  on  an  Illinois  risk  of  the kinds specified in
Classes 2 and 3 of Section 4 of this Code  procured  from  an
unauthorized  company  or  a domestic surplus line insurer as
defined  in  Section  445a  after  the   insurance   producer
representing  the  insured  or  the  surplus line producer is
unable, after diligent effort, to procure said insurance from
companies which are authorized to transact business  in  this
State other than domestic surplus line insurers as defined in
Section 445a.
    Insurance  producers  may  procure surplus line insurance
only if licensed  as  a  surplus  line  producer  under  this
Section   and   may  procure  that  insurance  only  from  an
unauthorized company or from a domestic surplus line  insurer
as defined in Section 445a:
         (a)  that  based  upon  information available to the
    surplus line producer has a policyholders surplus of  not
    less  than  $15,000,000  determined  in  accordance  with
    accounting   rules  that  are  applicable  to  authorized
    companies; and
         (b)  that has standards of solvency  and  management
    that  are  adequate  for the protection of policyholders;
    and
         (c)  where an unauthorized company does not meet the
    standards set forth in (a) and (b) above, a surplus  line
    producer  may,  if necessary, procure insurance from that
    company only if prior written warning  of  such  fact  or
    condition  is  given  to  the  insured  by  the insurance
    producer or surplus line producer.
    (2)  Surplus  line  producer;  license.    Any   licensed
producer who is a resident of this State may be licensed as a
surplus line producer upon:
         (a)  passing a written examination.  The examination
    shall  reasonably  test  the  knowledge  of the applicant
    concerning the surplus line law and the  responsibilities
    assumed  by  a  surplus  line  producer  thereunder.  The
    examination  provided  for  by  this  Section  shall   be
    conducted  under  rules and regulations prescribed by the
    Director.  The Director may administer the examination or
    may make  arrangements,  including  contracting  with  an
    outside   testing   service,   for   administering   such
    examinations.   Any  charges  assessed by the Director or
    the testing service for administering  such  examinations
    shall  be  paid  directly  by  the individual applicants.
    Each applicant required to take an examination shall,  at
    the  time  of  request  for examination, enclose with the
    application a non-refundable $10 application fee  payable
    to  the  Director plus an examination administration fee.
    If  the  Director  administers   the   examination,   the
    application  fee and examination administration fee shall
    be combined and made payable to  the  Director.   If  the
    Director   designates   an  outside  testing  service  to
    administer the examination, the applicant  shall  make  a
    separate   examination   administration   fee  remittance
    payable to the designated testing service for  the  total
    fees  the testing service charges for each of the various
    services being requested by the applicant.  An  applicant
    who  fails to appear for the examination as scheduled, or
    appears but fails to pass, shall not be entitled  to  any
    refund, and shall be required to submit a new request for
    examination  together  with all the requisite fees before
    being rescheduled for  another  examination  at  a  later
    date;
         (b)  payment of an annual license fee of $200; and
         (c)  procurement  of  the  surety  bond  required in
    subsection (4) of this Section.
    Each surplus line  producer  so  licensed  shall  keep  a
separate  account of the business transacted thereunder which
shall be open at all times to the inspection of the  Director
or his representative.
    The  examination requirement in (a) above shall not apply
to insurance producers who were licensed under  the  Illinois
surplus  line  law  or  individuals  designated  to act for a
partnership, association or corporation  licensed  under  the
Illinois surplus line law on February 27, 1985.
    (3)  Taxes and reports.
         (a)  Surplus line tax and penalty for late payment.
         Each  surplus  line  producer  shall  file  with the
    Director on or before February 1 and  August  1  of  each
    year  a  report in the form prescribed by the Director on
    all surplus line  insurance  procured  from  unauthorized
    insurers  during  the  preceding  6  month  period ending
    December 31 or June 30 respectively, and on the filing of
    such report shall pay to the Director  for  the  use  and
    benefit  of  the  State  a  sum  equal to 3% of the gross
    premiums less returned premiums  upon  all  surplus  line
    insurance  procured  or  cancelled during the preceding 6
    months.
         Any surplus line producer who fails to pay the  full
    amount  due  under this subsection is liable, in addition
    to the amount due, for such penalty and interest  charges
    as  are provided for under Section 412 of this Code.  The
    Director, through the Attorney General, may institute  an
    action  in  the  name  of  the  People  of  the  State of
    Illinois, in any court of competent jurisdiction, for the
    recovery of the amount of such taxes and  penalties  due,
    and  prosecute  the same to final judgment, and take such
    steps as are necessary to collect the same.
         (b)  Fire Marshal Tax.
         Each surplus  line  producer  shall  file  with  the
    Director  on  or before March 31 of each year a report in
    the form prescribed by the Director on all fire insurance
    procured from unauthorized insurers subject to tax  under
    Section 12 of the Fire Investigation Act and shall pay to
    the Director the fire marshal tax required thereunder.
         (c)  Taxes  and  fees charged to insured.  The taxes
    imposed under this subsection and the countersigning fees
    charged by the Surplus Line Association of  Illinois  may
    be charged to and collected from surplus line insureds.
    (4)  Bond.  Each surplus line producer, as a condition to
receiving  a  surplus  line producer's license, shall execute
and deliver to the Director a surety bond to  the  People  of
the State in the penal sum of $20,000, with a surety which is
authorized  to  transact  business in this State, conditioned
that the surplus line producer will pay to the  Director  the
tax,  interest  and  penalties levied under subsection (3) of
this Section.
    (5)  Submission of documents to Surplus Line  Association
of  Illinois.   Each surplus line producer shall submit every
insurance contract issued under his or  her  license  to  the
Surplus  Line  Association  of  Illinois  for  recording  and
countersignature.   The  insurance  contracts submitted shall
set forth:
         (a)  the name of the insured;
         (b)  the description and  location  of  the  insured
    property or risk;
         (c)  the amount insured;
         (d)  the gross premiums charged or returned;
         (e)  the   name   of  the  unauthorized  insurer  or
    domestic surplus line insurer as defined in Section  445a
    from whom coverage has been procured company;
         (f)  the kind or kinds of insurance procured; and
         (g)  amount  of  premium  subject to tax required by
    Section 12 of the Fire Investigation Act.
         Proposals, endorsements and  other  documents  which
    are incidental to the insurance but which does not affect
    the premium charged are exempted from countersignature.
         The  submission of insuring contracts to the Surplus
    Line Association of Illinois constitutes a  certification
    by the surplus line producer or by the insurance producer
    who  presented  the risk to the surplus line producer for
    placement as a surplus  line  risk  that  after  diligent
    effort  the required insurance could not be procured from
    companies which are authorized to  transact  business  in
    this  State  other than domestic surplus line insurers as
    defined in Section 445a and  that  such  procurement  was
    otherwise in accordance with the surplus line law.
    (6)  Countersignature required.  It shall be unlawful for
an  insurance  producer  to  deliver any unauthorized company
insurance contract or domestic surplus line insurer  contract
unless  such  insurance  contract  is  countersigned  by  the
Surplus Line Association of Illinois.
    (7)  Inspection  of  records.  Each surplus line producer
shall maintain separate records of  the  business  transacted
under  his or her license, which records shall be open at all
times for inspection by the Director and by the Surplus  Line
Association of Illinois.
    (8)  Violations  and penalties.  The Director may suspend
or revoke or refuse to renew a surplus line producer  license
for  any violation of this Code. In addition to or in lieu of
suspension or revocation, the Director may subject a  surplus
line  producer  to  a  civil penalty of up to $1,000 for each
cause  for  suspension  or  revocation.   Such   penalty   is
enforceable  under  subsection  (5)  of  Section 403A of this
Code.
    (9)  Director may declare insurer company ineligible.  If
the Director determines that the further assumption of  risks
might  be  hazardous  to the policyholders of an unauthorized
insurer company, the Director  may  order  the  Surplus  Line
Association   of   Illinois   not  to  countersign  insurance
contracts evidencing insurance in such  insurer  company  and
order  surplus  line  producers  to cease procuring insurance
from such insurer company.
    (10)  Service of process upon  Director.   All  insurance
contracts  delivered  under  this  Section  from unauthorized
insurers shall contain a provision designating  the  Director
and  his successors in office the true and lawful attorney of
the insurer company  upon  whom  may  be  served  all  lawful
process in any action, suit or proceeding arising out of such
insurance  and further designate the surplus line producer or
other resident of this State an  agent  of  the  unauthorized
insurer  company  to  which  a  copy of such process shall be
forwarded  by  the  Director  for  delivery  to  the  insurer
company.  Service of process made upon  the  Director  to  be
valid  hereunder must state the name of the insured, the name
of the unauthorized insurer company and identify the contract
of insurance.  The Director at his option  is  authorized  to
forward a copy of the process to the Surplus Line Association
of  Illinois  for  delivery  to  the surplus line producer or
other designated resident of this State or the  Director  may
deliver  the  process  to the unauthorized insurer company by
other means which he considers to be  reasonably  prompt  and
certain.
    (11)  The  Illinois  Surplus  Line  law does not apply to
insurance of property and operations of railroads or aircraft
engaged in  interstate  or  foreign  commerce,  insurance  of
vessels,  crafts  or  hulls, cargoes, marine builder's risks,
marine protection and indemnity,  or  other  risks  including
strikes and war risks insured under ocean or wet marine forms
of policies.
    (12)  Surplus line insurance procured under this Section,
including  insurance  procured  from  a domestic surplus line
insurer, is not subject to the  provisions  of  the  Illinois
Insurance  Code  other  than Sections 123, 123.1, 401, 401.1,
402, 403, 403A, 408, 412, 445, 445.1,  445.2,  445.3,  445.4,
and  all of the provisions of Article XXXI to the extent that
the provisions of Article XXXI are not inconsistent with  the
terms of this Act.
(Source: P.A. 88-627, eff. 9-9-94.)

    (215 ILCS 5/445a new)
    Sec. 445a.  Domestic surplus line insurer.
    (a)  A  domestic  insurer possessing policyholder surplus
of at least $15,000,000 may pursuant to a resolution  by  its
board  of  directors,  and  with  the written approval of the
Director, be designated as a "domestic surplus line insurer".
    (b)  A domestic surplus line insurer may only  insure  in
this  State  an  Illinois  risk  procured from a surplus line
producer pursuant to Section 445 of this Code.
    (c)  A domestic surplus line insurer must  agree  not  to
issue   a   policy   designed   to   satisfy   the  financial
responsibility requirements of the Illinois Vehicle Code, the
Workers'  Compensation  Act,  or  the  Workers'  Occupational
Diseases Act.  A domestic surplus line insurer is not subject
to the provisions of  Articles  XXXIII,  XXXIII  1/2,  XXXIV,
XXXVIIIA, Section 468, or Section 478.1 of this Code.

    Section  10.  The  Dental  Service Plan Act is amended by
changing Section 35 as follows:

    (215 ILCS 110/35) (from Ch. 32, par. 690.35)
    Sec. 35. Investments; reserves; deficiencies.
    (a)  The funds of any dental service plan corporation may
be invested only in accordance with the requirements provided
by  law  for  the  investment  of  funds  of  life  insurance
companies.
    (b)  As an allocation of net worth, each  dental  service
plan corporation shall maintain a special contingent reserve.
The  special  contingent  reserve  for  a corporation that is
beginning operations shall be equal to 5% of its  net  earned
subscription   revenue   for  dental  care  services  through
December 31st of the year in which it is certified, but in no
event less than that $100,000.  In subsequent  years,  unless
waived  by  the  Director,  the  corporation shall accumulate
additions to the contingent reserve in  an  amount  which  is
equal  to  2% of its net earned subscription revenue for each
calendar year.  For purposes of  this  Section,  "net  earned
subscription   revenue"   means   premium  minus  reinsurance
expenses.  Maintenance of  the  contingent  reserve  requires
that  net  worth  equals or exceeds the contingent reserve at
any balance sheet date.  The special contingent reserve shall
be provided in cash and securities in  combination  and  form
acceptable to the Director.
    (c)  Additional accumulations under Section 35(b) will no
longer  be  required when at such time that the total special
contingent reserve required by Section 35(b) is equal  to  or
greater  than  5%  of  the  corporation's  average annual net
earned subscription revenue for the corporation's preceding 2
two  calendar  years.      Additional   accumulations   under
subsection  (b)  of  this Section shall no longer be required
when  the  total  special  contingent  reserve  required   by
subsection (b) of this Section is equal to $1,500,000.
    (d)  A   deficiency   in   meeting  amounts  required  in
subsection (b) Section 6(b)  or  (c)  of  this  Section  will
require,  upon notice from the Director, (1) filing of a plan
for correction of the deficiency, acceptable to the Director,
within 20 days from receipt of notice, and (2) correction  of
the  deficiency  within  a  reasonable time, not to exceed 60
days from receipt of notice unless an extension  of  time  is
granted by the Director.  Such a deficiency will be deemed an
impairment,  and  failure  to  correct  the deficiency in the
prescribed  time  shall  be   grounds   for   rehabilitation,
liquidation, conservation, or dissolution pursuant to Section
38.
(Source: P.A. 84-209; revised 2-25-98.)

    Section  15.  The Employee Leasing Company Act is amended
by changing Sections 10, 15, 20,  25,  30,  40,  and  50  and
adding Section 56 as follows:

    (215 ILCS 113/10)
    Sec. 10.  Applicability.  This Act applies to all lessors
and  insurers  conducting  business  in  this  State  and  to
policies  issued,  renewed,  or delivered after the effective
date of this amendatory Act of 1998.
(Source: P.A. 90-499, eff. 1-1-98.)

    (215 ILCS 113/15)
    Sec. 15. Definitions. In this Act:
    "Department" means the Illinois Department of Insurance.
    "Employee leasing arrangement"  means  a  contractual  an
arrangement,   including   long-term  temporary  arrangements
whereby  a  lessor  obligates  itself  to  perform  specified
employer responsibilities as to  leased  employees  including
the   securing   of  workers'  compensation  insurance.   For
purposes of this Act, "employee leasing arrangement" does not
include  "temporary  help  arrangement".  under  contract  or
otherwise, whereby one business or other entity leases all or
a majority number  of  its  workers  from  another  business.
Employee  leasing  arrangements  include, but are not limited
to, full service  employee  leasing  arrangements,  long-term
temporary   arrangements,  and  any  other  arrangement  that
involves the allocation of employment responsibilities  among
2  or  more  entities.   For  purposes of this Act, "employee
leasing arrangement" does not include arrangements to provide
temporary help service.  "Temporary  help  service"  means  a
service  whereby  an organization hires its own employees and
assigns them to clients for a finite time period  to  support
or  supplement  the  client's  work  force  in  special  work
situations   such   as  employee  absences,  temporary  skill
shortages, and seasonal workloads.
    "Leased employee" or "worker" means a  person  performing
services for a lessee under an employee leasing arrangement.
    "Lessee" or "client company" means an entity that obtains
any all or part of its work force from another entity through
an  employee leasing arrangement or that employs the services
of an entity through an employee leasing arrangement.
    "Lessor" or "employee leasing company"  means  an  entity
that  leases  any  of its workers grants a written lease to a
lessee through an employee leasing arrangement.
    "Long-term temporary arrangement"  means  an  arrangement
where  one company leases all or a majority number of workers
employees from one company are leased to another for a period
in excess of 6 months or  consecutive  periods  equal  to  or
greater than one year.
    "Premium  subject  to  dispute"  means  the  insured  has
provided  a  written  notice of dispute of the premium to the
insurer or service  carrier,  has  initiated  any  applicable
proceeding  for resolving these disputes as prescribed by law
or rating organization  rule,  or  has  initiated  litigation
regarding   the  premium  dispute.   The  insured  must  have
detailed the  specific  areas  of  dispute  and  provided  an
estimate  of  the premium the insured believes to be correct.
The insured must have paid  any  undisputed  portion  of  the
bill.
    "Residual  market  mechanism"  means  the residual market
mechanism as defined in Section 468 of the Illinois Insurance
Code.
    "Temporary help arrangement" means a service  whereby  an
organization  hires  its  own  employees  and assigns them to
clients for a finite time period to support or supplement the
client's work force in special work situations such  as,  but
not limited to, employee absences, temporary skill shortages,
seasonal workloads, and special assignments and projects.
(Source: P.A. 90-499, eff. 1-1-98.)

    (215 ILCS 113/20)
    Sec. 20.  Registration.
    (a)  A lessor shall register with the Department prior to
becoming  a  qualified self-insured for workers' compensation
or becoming eligible to be issued a workers' compensation and

employers' liability insurance policy.  An  employee  leasing
company  may  not  engage  in  business in this State without
first  registering  with  the  Department.    A  corporation,
partnership, sole proprietorship, or  other  business  entity
that  provides  staff, personnel, or employees to be employed
in this  State  to  other  businesses  pursuant  to  a  lease
arrangement  or  agreement shall, before becoming eligible to
be issued any  policy  of  workers'  compensation  insurance,
register with the Department.  The registration shall:
         (1)  identify the name of the lessor;
         (2)  identify  the address of the principal place of
    business of the lessor and the address of each office  it
    maintains within this State;
         (3)  include   the  lessor's  taxpayer  or  employer
    identification number;
         (4)  include a list  by  jurisdiction  of  each  and
    every  name  that  the  lessor  has operated under in the
    preceding 5 years including  any  alternative  names  and
    names  of  predecessors and, if known, successor business
    entities;
         (5)  include a list of the officers and directors of
    the  lessor  and  employee   leasing   company   or   its
    predecessors,  successors, or alter egos in the preceding
    5 years; and
         (6)  include a $500 fee  for  the  registration  and
    each annual renewal thereafter.
    Amounts  received as registration fees shall be deposited
into the Insurance Producer Administration Fund. list of each
and every cancellation or nonrenewal of workers' compensation
insurance  that  has  been  issued  to  the  lessor  or   any
predecessor in the preceding 5 years.  The list shall include
the  policy  or  certificate number, name of insurer or other
provider of coverage, date of cancellation,  and  reason  for
cancellation.    If   coverage  has  not  been  cancelled  or
nonrenewed, the registration shall include a sworn  affidavit
signed by the chief executive officer of the lessor attesting
to that fact.
    Each employee leasing company registrant shall pay to the
Department  upon  initial registration, and upon each renewal
annually thereafter, a registration fee of $500.
    Each employee leasing company shall  maintain  accounting
and  employment  records  relating  to  all  employee leasing
activities for a minimum of 3 calendar years.
    (b)  (Blank)  Any  lessor  of  employees  whose  workers'
compensation insurance has been terminated within the past  5
years  in  any  jurisdiction  due  to a determination that an
employee leasing arrangement  was  being  utilized  to  avoid
premium  otherwise  payable by lessees shall be ineligible to
register with the Department  or  to  remain  registered,  if
previously registered.
    (c)  Lessors   registering  Persons  filing  registration
statements  pursuant  to  this  Section  shall   notify   the
Department   within   30  days  as  to  any  changes  in  any
information provided pursuant to this Section.
    (d)  The  Department  shall  maintain  a  list  of  those
lessors of employees who are satisfactorily  registered  with
the Department.
    (e)  The  Department  may  prescribe  any  forms that are
necessary to promote the  efficient  administration  of  this
Section.
    (f)  Any  lessor  of employees that was doing business in
this State prior to enactment of this Act shall register with
the Department within 60 days of the effective date  of  this
Act.
(Source: P.A. 90-499, eff. 1-1-98.)

    (215 ILCS 113/25)
    Sec. 25.  Record keeping and reporting requirement.
    (a)  A  lessor  shall  maintain accounting and employment
records relating to all employee leasing arrangements  for  a
minimum  of  4  calendar  years.  A lessor shall maintain the
address of each office it maintains in  this  State,  at  its
principal place of business.
    (b)  A  lessor shall maintain sufficient information in a
manner consistent with a licensed rating organization's  data
submission  requirements  to  permit  the rating organization
licensed under Section 459 of the Illinois Insurance Code  to
calculate an experience modification factor for the lessee.
    (c)  Upon  written  request  of  a  lessee with an annual
payroll attributed to it in excess of  $200,000,  the  lessor
shall  provide the lessee's experience modification factor to
the lessee within 30 days of the request.
    (d)  Upon request of a  lessee  with  an  annual  payroll
attributed  to  it  of  less  than $200,000, the lessor shall
provide the loss information required  to  be  maintained  by
this Section to the lessee within 30 days of the request.
    (e)  Nothing  in  this  Section shall preclude a licensed
rating   organization   from   calculating   the   experience
modification factor for  each  lessee  nor  an  insurer  from
maintaining  and  furnishing  on  behalf  of the lessor, such
information as required  by  this  Section.  A  lessor  shall
maintain  and furnish once every 12 months or in the event of
a termination of the employee leasing arrangement  sufficient
information to the insurer, who shall submit such information
to  permit  the  calculation  of  an  experience modification
factor by a rating organization licensed under Section 459 of
the  Illinois  Insurance  Code   for   each   lessee.    This
information  shall be submitted in a manner consistent with a
licensed rating organization's data  submission  requirements
and shall include but not be limited to the following:
         (1)  the  lessee's corporate name, or operating name
    if not a corporation, and address;
         (2)  the    lessee's    taxpayer     or     employer
    identification number;
         (3)  the lessee's risk identification number;
         (4)  a  listing  of  all leased employees associated
    with each lessee, the applicable classification code, and
    payroll; and
         (5)  claims information grouped by  lessee  and  any
    other  information necessary to permit the calculation of
    an experience modification factor for each lessee.
    (f) (b)  In  the  event  that   a   lessee's   experience
modification   factor   exceeds   the   lessor's   experience
modification  factor  by 50% at the inception of the employee
leasing arrangement,  the  lessee's  experience  modification
factor  shall  be  utilized to calculate the premium or costs
charged to the lessee for workers' compensation coverage  for
a  period of 2 years.  Thereafter, the premium charged by the
insurer insurance company for inclusion of a lessee  under  a
lessor's  policy  may  be  calculated  on  the  basis  of the
lessor's experience modification factor.
(Source: P.A. 90-499, eff. 1-1-98.)

    (215 ILCS 113/30)
    Sec.  30.  Responsibility   for   policy   issuance   and
continuance.
    (a)  When a workers' compensation policy written to cover
leased  employees  is  issued  to the lessor employee leasing
company as the named insured, the lessee client company shall
be identified thereon by the  attachment  of  an  appropriate
endorsement  indicating that the policy provides coverage for
leased  employees  in  accordance  with  Illinois  law.   The
endorsement shall, at a minimum, provide for the following:
         (1)  Coverage under the endorsement policy shall  be
    limited  to  the  named insured's employees leased to the
    lessees.

         (2)  The experience of the employees leased  to  the
    particular  lessee  shall be separately maintained by the
    lessor as provided in Section 25.
         (3)  Cancellation of the policy shall not affect the
    rights  and  obligations  of  the  named  insured  as  an
    employee  leasing  company  with  respect  to  any  other
    workers' compensation  and  employers'  liability  policy
    issued to the named insured.
    (b)  (Blank).  The  insurer  of  the  lessor may take all
reasonable steps to ascertain exposure under the  policy  and
collect   the   appropriate  premium  through  the  following
procedures:
         (1)  complete   description    of    the    lessor's
    operations;
         (2)  periodic  reporting  of  the  covered  lessee's
    payroll,  classifications, experience rating modification
    factors, and jurisdictions with exposure.  This reporting
    must be supplemented by a submission of Internal  Revenue
    Service  Form  941  or its equivalent to the carrier on a
    quarterly basis;
         (3)  physical  inspection  of  the  client   company
    premises;
         (4)  audit of the lessor's operations; and
         (5)  any  other reasonable measures to determine the
    appropriate premium.
    (c)  The lessor shall notify the insurer  or  a  licensed
rating  organization  30  days prior to the effective date of
termination or immediately upon notification of  cancellation
by  the  lessor  of  an employee leasing arrangement with the
lessee in order to allow  sufficient  time  to  calculate  an
experience modification factor for the lessee.
    (d)  The  insurer  lessor shall provide proof of workers'
compensation insurance to the lessor and to  each  applicable
lessee  within  30  days  of  the  coverage being effected or
changed effective date.  Notice of any coverage changes shall
be provided to the lessor and to each lessee within  30  days
of the effective date of the change.
    (e)  Calculation  of a lessor's or lessee's premium shall
be done in accordance with the insurer's Nothing in this  Act
shall  limit  an  insurer  from  utilizing  schedule credits,
debits,  or  other  rating  manual  plans  filed   with   the
Department for calculation of a lessor's or lessee's premium.
(Source: P.A. 90-499, eff. 1-1-98.)

    (215 ILCS 113/40)
    Sec.  40.   Insurer  or  service  carrier audit. Insurers
shall audit  policies  issued  through  the  residual  market
pursuant  to  Section  30  of  this Act within 90 days of the
policy  effective  date  and  may  conduct  quarterly  audits
thereafter.  Insurers may audit policies issued  through  the
voluntary  market within 90 days of the policy effective date
and shall conduct audits during the normal course of business
thereafter.  The purpose of the audit will  be  to  determine
whether all classifications, experience modification factors,
and   estimated   payroll   utilized   with  respect  to  the
development  of  the  premium  charged  to  the  lessor   are
appropriate.
(Source: P.A. 90-499, eff. 1-1-98.)

    (215 ILCS 113/50)
    Sec.  50.   Grounds  for  removal  of eligibility; order;
hearing; review.
    (a)  Any  registration  issued  under  this  Act  may  be
revoked or an application for registration may be  denied  if
the Director finds that the lessor or applicant:
         (1)  has  willfully  violated  any provision of this
    Act or any rule promulgated by the Director;
         (2)  has intentionally made a material  misstatement
    in the application for a registration;
         (3)  has   obtained   or   attempted   to  obtain  a
    registration through misrepresentation or fraud;
         (4)  has misappropriated or converted to his own, or
    improperly withheld, money  required  to  be  held  in  a
    fiduciary capacity;
         (5)  has  used  fraudulent,  coercive,  or dishonest
    practices,    or    has    demonstrated     incompetence,
    untrustworthiness, or financial irresponsibility;
         (6)  has been, within the past 3 years, convicted of
    a  felony, unless the person demonstrates to the Director
    sufficient rehabilitation to warrant the public trust;
         (7)  has failed to appear without  reasonable  cause
    or  excuse  in  response to a subpoena lawfully issued by
    the Director;
         (8)  has had its registration or  license  suspended
    or  revoked or its application denied in any other state,
    district, territory, or province; Any registration issued
    under this Act may  be  revoked  or  an  application  for
    registration  may  be  denied, if the Director finds that
    the lessor or applicant;
         (1)  has willfully violated any provision of the Act
    or any rule or regulation promulgated by the Director;
    (b) (a)  When the Director  of  Insurance  has  cause  to
believe  that  grounds for the refusal, denial, or revocation
removal of a registration registrant's eligibility under this
Section exists, the Director he or she shall issue  an  order
to  the  lessor  employee leasing company stating the grounds
upon which the refusal,  denial,  or  revocation  removal  is
based.   The  order  shall  be  sent  to  the lessor employee
leasing company by certified or registered mail.  The  lessor
employee  leasing company may in writing request a hearing in
writing within 30 days of the mailing receipt of  the  order.
If  no  written request is received by the Director made, the
order shall be final upon the expiration of the 30 days.
    (c) (b)  If the lessor employee leasing company  requests
a  hearing pursuant to this Section, the Director shall issue
a written notice of  hearing  sent  to  the  lessor  employee
leasing  company  by certified or registered mail stating the
following:
         (1)  a specified time for the hearing, which may not
    be less than 20 days nor more  than  30  days  after  the
    mailing receipt of the notice of hearing; and
         (2)  a  specific place for the hearing, which may be
    either in the city of Springfield or Chicago  or  in  the
    county  where  the  lessor's  employee  leasing company's
    principal place of business is located.
    (d) (c)  After the hearing, or upon the  failure  of  the
lessor employee leasing company to appear at the hearing, the
Director  of  Insurance  shall  take such action as is deemed
advisable on written findings that shall  be  served  on  the
lessor  employee leasing company.  The action of the Director
of  Insurance  shall  be  subject  to  review  under  and  in
accordance with the Administrative Review Law.
(Source: P.A. 90-499, eff. 1-1-98.)

    (215 ILCS 113/56 new)
    Sec. 56.  Rulemaking authority.  The Director shall  have
the authority to promulgate rules to enforce this Act.

    (215 ILCS 113/35 rep.)
    (215 ILCS 113/55 rep.)
    Section  20.  The Employee Leasing Company Act is amended
by repealing Sections 35 and 55.

    Section 25.  The Farm Mutual  Insurance  Company  Act  of
1986 is amended by changing Sections 4 and 12 as follows:
    (215 ILCS 120/4) (from Ch. 73, par. 1254)
    Sec.  4.  Definition of Admitted Assets.  Admitted assets
shall include those investments permitted under Section 12 of
this Act and in addition thereto, only the following:
    (1)  Cash funds held in the company's  office  and  under
the company's control.
    (2)  Interest  due  and accrued on bonds, certificates of
deposit and other investments permitted by this Act that  are
not in default.
    (3)  Dividends  declared  and  unpaid  on  mutual  funds,
common stock, and preferred stock, permitted by this Act.
    (4) (3)  Amounts   recoverable   from  solvent  insurance
companies licensed to do business in this State.
    (5) (4)  Tax refunds due from the United  States  or  the
State of Illinois.
    (6) (5)  Premiums receivable on policies not over 90 days
past due.  The due date of the premium shall be considered to
be the first day of the coverage period for which the premium
is payable.
(Source: P.A. 88-364.)

    (215 ILCS 120/12) (from Ch. 73, par. 1262)
    Sec.  12.  Investments. Without the prior approval of the
Director,  the  funds  of  any  company  operating  under  or
regulated by the provisions of this Act,  shall  be  invested
only in the following:
         (1)  Direct  obligations  of  the  United  States of
    America, or obligations of agencies or  instrumentalities
    of  the United States to the extent guaranteed or insured
    as to the payment of principal and interest by the United
    States of America;
         (2)  Bonds which are direct, general obligations  of
    the State of Illinois;
         (3)  Bonds  which are direct, general obligations of
    political subdivisions of the State of Illinois,  subject
    to the following conditions:
              (a)  Maximum  of  5%  of admitted assets in any
         one political subdivision;
              (b)  Maximum of 30% 35% of admitted  assets  in
         all political subdivisions in the aggregate;
         (4)  Bonds  that  are  obligations  of  the  Federal
    National   Mortgage  Association  subject  to  a  maximum
    investment of 10% of admitted assets in the aggregate;
         (5)  Bonds that are obligations of the Federal  Home
    Loan Mortgage Corporation subject to a maximum investment
    of 10% of admitted assets in the aggregate;
         (6)  Mutual   funds   subject   to   the   following
    conditions:
              (a)  Maximum of 3% of policyholders' surplus in
         any  one balanced or growth mutual fund that invests
         in common stock;
              (b)  Maximum of 5% of admitted  assets  in  any
         one   bond   or   income  mutual  fund  or  any  one
         non-governmental money market mutual fund;
              (c)  Maximum of 10% of admitted assets  in  any
         one governmental money market mutual fund;
              (d)  Maximum  of  25% of admitted assets in all
              mutual funds in the aggregate;
         (7)  Common stock and preferred stock subject to the
    following conditions:
              (a)  Common stock and preferred stock shall  be
         traded  on  the  New  York  Stock  Exchange  or  the
         American  Stock  Exchange  or listed on the National
         Association   of   Securities   Dealers    Automated
         Quotation (NASDAQ) system;
              (b)  Maximum of 3% of policyholders' surplus in
         excess  of  $400,000  in  any  one  common  stock or
         preferred  stock  issuer  provided  that   the   net
         unearned    premium    reserve   does   not   exceed
         policyholders' surplus;
         (8)  Investments authorized under subdivision (a) of
    item (6) and subdivision (a) of item (7) of this  Section
    shall  not  in the aggregate exceed 10% of policyholders'
    surplus;
         (9) (4)  Funds  on  deposit  in  solvent  banks  and
    savings  and  loan  associations  which  are  insured  by
    qualify for insurance with the Federal Deposit  Insurance
    Corporation; however, the uninsured portion of funds held
    in  any  one such bank or association shall not exceed 5%
    of the company's policyholders' surplus;
         (5)  Funds  on  deposit  with   savings   and   loan
    associations,  provided  that  all funds invested in such
    associations are insured by the Federal Deposit Insurance
    Corporation;
         (10) (6)  Real  estate  for  home  office   building
    purposes,  provided that such investments are approved by
    the Director of Insurance on the basis of  a  showing  by
    the   company   that  the  company  has  adequate  assets
    available for  such  investment  and  that  the  proposed
    acquisition  does  not exceed the reasonable normal value
    of such property.
    An investment that qualified under this  Section  at  the
time it was acquired by the company shall continue to qualify
under this Section.
    Investments   permitted   under  this  Section  shall  be
registered in the name of the company and  under  its  direct
control  or  shall be held in a custodial account with a bank
or trust company that is qualified to  administer  trusts  in
Illinois  under  the  Corporate Fiduciary Act and that has an
office in Illinois.   However,  securities  may  be  held  in
street  form  and  in  the custody of a licensed dealer for a
period not to exceed 30 days.
    Notwithstanding the provisions of this Act, the  Director
may,  after  notice  and hearing, order a company to limit or
withdraw from  certain  investments  or  discontinue  certain
investments   or  investment  practices  to  the  extent  the
Director finds  those  investments  or  investment  practices
endanger the solvency of the company.
(Source: P.A. 88-364.)

    Section  30.  The  Voluntary Health Services Plans Act is
amended by changing Section 20 as follows:

    (215 ILCS 165/20) (from Ch. 32, par. 614)
    Sec.  20.  The  funds  of  any   health   services   plan
corporation shall be handled in accordance with the following
rules:
    (a)  All   loans   made   to   original  capital  of  the
corporation may be repayable only out of earned surplus.
    (b)  The funds of the  corporation  may  be  invested  in
accordance  with  the  requirements  provided  by law for the
investment of funds of life insurance companies and may  also
be  invested  in  equipment  of the corporation provided such
investment in equipment shall not exceed more than 30% of the
total admitted assets. The value of such equipment  shall  be
depreciated  at  a  rate  as rapidly as is provided under the
Internal Revenue Code.
    (c)  Every health services plan  corporation,  after  its
first  fiscal  year  of  doing business, shall accumulate and
maintain a special contingent  reserve  over  and  above  its
reserves  and  liabilities  at the rate of 2% annually of its
subscription income net of reinsurance so long as the special
contingent reserve does not  exceed  8%  of  its  annual  net
income   for   the  preceding  12  month  period.  Additional
accumulations shall no longer be required at such  time  that
the total special contingent reserve is equal to $1,500,000.
(Source: P.A. 81-1203.)

    Section  99.  Effective date.  This Act takes effect upon
becoming law except that Section 25 takes effect  January  1,
1999.

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