Public Act 098-0157
 
SB1729 EnrolledLRB098 09834 RPM 39990 b


  
    AN ACT concerning regulation.
  
 
    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-10, 35A-15, 35A-30, and 35A-60 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 (f) 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
or a health organization as defined by this 
Article, except this shall
include only those health 
maintenance organizations that are "domestic
companies" in 
accordance with Section 5-3 of the Health Maintenance

Organization Act and only those limited health service 
organizations that are
"domestic companies" in accordance with 
Section 4003 of the Limited Health
Service Organization Act.

    "Fraternal benefit society" means any insurance company 
licensed under Article XVII of this Code. 
    "Foreign insurer" means any foreign or alien insurance  
company licensed
under Article VI
that is not domiciled in this 
State
and any health maintenance organization that is not a 
"domestic company" in
accordance with Section 5-3 of the Health 
Maintenance Organization Act and any
limited health service 
organization that is not a "domestic company" in
accordance 
with Section 4003 of the Limited Health Service Organization 
Act.

    "Health organization" means an entity operating under a 
certificate of
authority issued pursuant to the
Health 
Maintenance Organization Act, the Dental Service Plan Act, the 
Limited
Health Service Organization Act, or the Voluntary 
Health Services Plans Act,
unless the entity is otherwise 
defined as a "life, health, or life and health
insurer" 
pursuant to this Act.

    "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 or a fraternal benefit society, a 
negative trend over a period of time, as determined
in 
accordance with the trend test calculation included in the Life 
or Fraternal 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. 90-794, eff. 8-14-98; 91-549, eff. 8-14-99.)

 



    (215 ILCS 5/35A-10)



    Sec. 35A-10. RBC Reports. 

    (a) On or before each March 1 (the "filing date"), every 
domestic
insurer
shall prepare and submit to the Director a 
report of its RBC levels as of the
end of the previous calendar 
year in the form and containing the information
required by the 
RBC Instructions.  Every domestic insurer shall also file its

RBC Report with the NAIC in accordance with the RBC 
Instructions.  In addition,
if requested in writing by the chief 
insurance regulatory official of any state
in which it
is 
authorized to do business, every domestic insurer shall file 
its RBC Report
with that official no later than the later of 15 
days after the insurer
receives the written request
or the 
filing date.

    (b) A life, health, or life and health insurer's or 
fraternal benefit society's RBC shall be
determined under the 
formula set
forth in the RBC Instructions.  The formula shall 
take into account (and may
adjust for the covariance between):


        (1) the risk with respect to the insurer's assets;


        (2) the risk of adverse insurance experience with 
    respect to the insurer's
liabilities and obligations;


        (3) the interest rate risk with respect to the 
    insurer's business; and


        (4) all other business risks and other relevant risks 
    set forth in the RBC
Instructions.

These risks shall be determined in each case by applying
the 
factors in the
manner set forth in the RBC Instructions.

    (c) A property and casualty insurer's RBC shall be 
determined in
accordance
with the formula set forth in the RBC 
Instructions.  The formula shall take
into account (and may 
adjust for the covariance between):


        (1) asset risk;


        (2) credit risk;


        (3) underwriting risk; and


        (4) all other business risks and other relevant risks 
    set
forth in the RBC Instructions.

These risks shall be determined in each case by applying the 
factors in the
manner
set forth in the RBC Instructions.

    (d) A health organization's RBC shall be determined in 
accordance with the
formula set forth in the RBC Instructions.  
The formula shall take the
following into account (and may 
adjust for the covariance between):


        (1) asset risk;


        (2) credit risk;


        (3) underwriting risk; and


        (4) all other business risks and other relevant risks 
    set forth in the RBC
Instructions.

These risks shall be determined in each case by applying the 
factors in the
manner set forth in the RBC Instructions.

    (e) An excess of capital over the amount produced by the

risk-based
capital requirements contained in this Code and the 
formulas, schedules, and
instructions referenced in this Code 
is desirable in the business of insurance.
Accordingly, 
insurers should seek to maintain capital above the RBC levels

required by this Code.  Additional capital is used and useful in 
the insurance
business and helps to secure an insurer against 
various risks inherent in, or
affecting, the business of 
insurance and not accounted for or only partially
measured by 
the risk-based capital requirements contained in this Code.

    (f) If a domestic insurer files an RBC Report that, in the

judgment of the
Director, is inaccurate, the Director shall 
adjust the RBC Report to correct
the inaccuracy and shall 
notify the insurer of the adjustment.  The notice
shall contain 
a statement of the reason for the adjustment.

(Source: P.A. 91-549, eff. 8-14-99.)

 



    (215 ILCS 5/35A-15)



    Sec. 35A-15. Company action level event. 

    (a) A company action level event means any of the following 
events:


        (1) The filing of an RBC Report by an insurer that 
    indicates that:


            (A) the insurer's total adjusted capital is 
        greater than or equal to its
regulatory action level 
        RBC, but less than its company action level RBC;


            (B) the insurer, if a life, health, or life and 
        health insurer or a fraternal benefit society, has

        total adjusted capital that is greater than or equal
to 
        its company action level RBC, but less than the product 
        of its authorized
control level RBC and 3.0 2.5 and has 
        a negative trend; or

            (C) the insurer, if a property and casualty 
        insurer, has total adjusted capital that is greater 
        than or equal
to its company action level RBC, but less 
        than the product of its authorized
control level RBC 
        and 3.0 and triggers the trend test determined in 
        accordance with the trend test calculation included in 
        the property and casualty RBC Instructions. 

        (2) The notification by the Director to the insurer of 
    an Adjusted RBC
Report that indicates an 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).

    (b) In the event of a company action level event, the 
insurer shall prepare
and submit to the Director an RBC Plan 
that does
all of the following:


        (1) Identifies the conditions that contribute to the

    company action level event.


        (2) Contains proposed corrective actions that the 
    insurer intends to
take and that are expected to result in 
    the elimination of the company action
level event.
A health 
    organization is not prohibited from
proposing recognition 
    of a parental guarantee or a letter of credit to
eliminate 
    the company action level event; however the Director shall, 
    at his
discretion, determine whether or the extent to which 
    the proposed parental
guarantee or letter of credit is an 
    acceptable part of a satisfactory RBC Plan
or Revised RBC 
    Plan. 


        (3) Provides projections of the insurer's financial 
    results in the current
year and at least the 4 succeeding 
    years, both in the absence of proposed
corrective actions 
    and giving effect to the proposed corrective actions,

    including projections of statutory operating income, net 
    income, capital, and
surplus.  The projections for both new 
    and renewal business may include
separate projections for 
    each major line of business and separately identify
each 
    significant income, expense, and benefit component.


        (4) Identifies the key assumptions affecting the 
    insurer's projections
and the sensitivity of the 
    projections to the assumptions.


        (5) Identifies the quality of, and problems associated 
    with, the insurer's
business including, but not limited to, 
    its assets, anticipated business growth
and associated 
    surplus strain, extraordinary exposure to risk, mix of 
    business,
and use of reinsurance, if any, in each case.

    (c) The insurer shall submit the RBC Plan to the Director  
within 45 days
after the company 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 an
Adjusted RBC Report.

    (d) Within 60 days after an insurer submits an RBC Plan to 
the
Director, the Director shall notify the insurer whether the 
RBC Plan shall be
implemented or is, in the judgment of the 
Director, unsatisfactory.  If the
Director determines the RBC 
Plan is unsatisfactory,
the notification to the insurer shall 
set forth the reasons for the
determination
and may set forth 
proposed revisions that will render the RBC Plan satisfactory

in the judgment of the Director.  Upon notification from the 
Director, the
insurer shall prepare a Revised RBC Plan, which 
may incorporate by reference
any revisions proposed by the 
Director.  The insurer shall submit the Revised
RBC Plan to the 
Director within 45 days after the Director notifies the insurer

that the RBC Plan is unsatisfactory 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 the 
determination that the RBC Plan is
unsatisfactory.

    (e) In the event the Director notifies an insurer that its

RBC Plan or Revised RBC Plan is unsatisfactory, the Director 
may, at
the Director's discretion and subject to the insurer's 
right to a hearing under
Section 35A-35, specify in the 
notification that the notification constitutes a
regulatory 
action level event.

    (f) Every domestic insurer that files an RBC Plan or 
Revised RBC Plan with
the Director shall file a copy of the RBC 
Plan or Revised RBC Plan with the
chief insurance regulatory 
official in any state in which the insurer is
authorized to do 
business if that state has a law substantially similar to the

confidentiality provisions in subsection (a) of Section 35A-50 
and if that
official requests in writing a copy of the plan.  
The insurer shall file a copy
of the
RBC Plan or Revised RBC 
Plan in that state no later than the later of
15 days after 
receiving the written request for the copy or
the date on which 
the RBC Plan or Revised RBC Plan is filed under
subsection (c) 
or (d) of this Section.

(Source: P.A. 97-955, eff. 8-14-12.)

 



    (215 ILCS 5/35A-30)



    Sec. 35A-30. Mandatory control level event. 

    (a) A mandatory control level event means any of the 
following events:


        (1) The filing of an RBC Report that indicates that the 
    insurer's total
adjusted capital is less than its mandatory 
    control level RBC.


        (2) The notification by the Director to the 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 the
Adjusted 
    RBC Report that indicates the event described in paragraph 
    (1).

    (b) In the
event of a mandatory control level event with 
respect to a life, health, or
life and health insurer or a 
fraternal benefit society, the Director shall take
actions 
necessary to place the insurer in
receivership under
Article 
XIII.  In that event, the mandatory control level event shall be 
deemed
sufficient grounds for the Director to take action under 
Article XIII, and the
Director shall have the rights, powers, 
and duties with respect to the insurer
that
are set forth in 
Article XIII.  If the Director takes
action
under this 
subsection regarding an Adjusted RBC Report, the insurer shall 
be
entitled to the protections
of Article XIII.
If the Director 
finds that there is a
reasonable expectation that the mandatory 
control level event may be eliminated
within 90 days after it 
occurs, the Director may delay action for not more
than 90 days 
after the mandatory control level event.

    (c) In the case of a mandatory control level event with 
respect to a
property and casualty insurer, the Director shall

take the actions necessary to place the insurer in receivership 
under Article
XIII or, in the case of an insurer that is 
writing no business and that is
running-off its existing 
business, may allow the insurer to continue its
run-off under 
the supervision of the Director.  In either case, the mandatory

control level event is deemed sufficient grounds for the 
Director to take
action under Article XIII, and the Director 
has the rights, powers, and
duties with respect to the insurer 
that are set forth in Article XIII.  If the
Director takes 
action regarding an Adjusted RBC Report, the insurer shall be

entitled to the protections of Article XIII. If the Director 
finds that there
is a reasonable expectation that
the mandatory 
control level event may be eliminated within 90 days after it

occurs, the Director may delay action for not more than 90 days 
after the
mandatory control level event.

    (d) In the case of a mandatory control level event with 
respect to a
health organization, the Director shall take the 
actions necessary to place the
insurer in receivership under 
Article XIII or, in the case of an insurer that
is writing no 
business and that is running-off its existing business, may 
allow
the insurer to
continue its run-off under the supervision 
of the Director.  In either case,
the mandatory control level 
event is deemed sufficient grounds for the Director
to take 
action under Article XIII, and the Director has the rights, 
powers, and
duties with respect to the insurer that are set 
forth in Article XIII.  If the
Director takes action regarding 
an Adjusted RBC Report, the insurer shall be
entitled to the 
protections of Article XIII.  If the Director finds that there

is a reasonable expectation that the mandatory control level 
event may be
eliminated within 90 days after it occurs, the 
Director may delay action for
not more than 90 days after the 
mandatory control level event.

(Source: P.A. 91-549, eff. 8-14-99.)

 



    (215 ILCS 5/35A-60)



    Sec. 35A-60. Phase-in of Article. 

    (a) For RBC Reports filed
with
respect to
the December 31, 
1993 annual statement, instead of the provisions of Sections

35A-15, 35A-20, 35A-25, and 35A-30,
the following provisions 
apply:


        (1) In the event of a company action level event, the 
    Director shall take
no
action under this Article.


        (2) In the event of a regulatory action level event 
    under paragraph (1),
(2), or (3) of subsection (a) of 
    Section 35A-20, the Director shall take the
actions 
    required under Section 35A-15.


        (3) In the event of a regulatory action level event 
    under paragraph (4),
(5), (6), (7), (8), or (9) of 
    subsection (a) of Section 35A-20 or an
authorized control 
    level event, the Director shall take the actions
required 
    under Section 35A-20.


        (4) In the event of a mandatory control level event, 
    the Director shall
take
the actions required under Section 
    35A-25.

    (b) For RBC Reports required to be filed by property and 
casualty
insurers with respect to the December 31, 1995 annual 
statement, instead of the
provisions of Section 35A-15, 35A-20, 
35A-25, and 35A-30,
the following provisions apply:


        (1) In the event of a company action level event with 
    respect to a
domestic insurer, the Director shall take no 
    regulatory action under this
Article.


        (2) In the event of
a regulatory action level event 
    under paragraph
(1), (2) or (3) of subsection (a) of 
    Section 35A-20, the Director shall
take the actions 
    required under
Section 35A-15.


        (3) In the event of
a regulatory action level event 
    under paragraph
(4), (5), (6), (7), (8), or (9) of 
    subsection (a) of Section 35A-20 or
an authorized control 
    level event, the
Director shall take the actions required 
    under Section 35A-20.


        (4) In the event of a mandatory control level event,

    the Director shall take the actions required under Section 
    35A-25.

    (c) For RBC Reports required to be filed by health 
organizations with
respect to the December 31, 1999 annual 
statement and the December 31, 2000
annual statement, instead 
of the provisions of
Sections 35A-15, 35A-20, 35A-25, and 
35A-30, the following provisions apply:


        (1) In the event of a company action level event with 
    respect to a
domestic
insurer, the Director shall take no 
    regulatory action under this Article.


        (2) In the event of a regulatory action level event 
    under paragraph (1),
(2), or (3) of subsection (a) of 
    Section 35A-20, the Director shall take the
actions 
    required under Section 35A-15.


        (3) In the event of a regulatory action level event 
    under paragraph (4),
(5), (6), (7), (8), or (9) of 
    subsection (a) of Section 35A-20 or an authorized
control 
    level event, the Director shall take the actions required 
    under Section
35A-20.


        (4) In the event of a mandatory control level event, 
    the Director shall
take the actions required under Section 
    35A-25.

    This subsection does not apply to a health organization 
that provides or
arranges for a health care plan under which 
enrollees may access health care
services from contracted 
providers without a referral from their primary care
physician.

    Nothing in this subsection shall preclude or limit other 
powers or duties of
the Director under any other laws.

    (d) For RBC Reports required to be filed by fraternal 
benefit societies with respect to the December 31, 2013 annual

statement and the December 31, 2014 annual statement, instead

of the provisions of Sections 35A-15, 35A-20, 35A-25, and

35A-30, the following provisions apply:
        (1) In the event of a company action level event with

    respect to a domestic insurer, the Director shall take no

    regulatory action under this Article.
        (2) In the event of a regulatory action level event

    under paragraph (1), (2), or (3) of subsection (a) of

    Section 35A-20, the Director shall take the actions

    required under Section 35A-15.
        (3) In the event of a regulatory action level event

    under paragraph (4), (5), (6), (7), (8), or (9) of

    subsection (a) of Section 35A-20 or an authorized control

    level event, the Director shall take the actions required

    under Section 35A-20.
        (4) In the event of a mandatory control level event,

    the Director shall take the actions required under Section

    35A-25.
    Nothing in this subsection shall preclude or limit other 
powers or duties of
the Director under any other laws. 
(Source: P.A. 91-549, eff. 8-14-99.)

 
 
    Section 99. Effective date. This Act takes effect upon 
becoming law.