[ Search ] [ Legislation ] [ Bill Summary ]
[ Home ] [ Back ] [ Bottom ]
| [ Introduced ] | [ Engrossed ] | [ House Amendment 001 ] |
90_SB1728enr
215 ILCS 5/86 from Ch. 73, par. 698
215 ILCS 5/98 from Ch. 73, par. 710
215 ILCS 5/102 from Ch. 73, par. 714
215 ILCS 5/103 from Ch. 73, par. 715
215 ILCS 5/144 from Ch. 73, par. 756
Amends the Illinois Insurance Code. Removes the limit on
the amount of insurance a Lloyds may underwrite with respect
to any single risk. Effective immediately.
LRB9011450JSmg
SB1728 Enrolled LRB9011450JSmg
1 AN ACT concerning the regulation of insurers, amending
2 named Acts.
3 Be it enacted by the People of the State of Illinois,
4 represented in the General Assembly:
5 Section 5. The Illinois Insurance Code is amended by
6 changing Sections 35A-5, 35A-20, 35A-35, 86, 98, 102, 103,
7 107.06a, 107.26, 111, 121-2.08, 123C-1, 126.2, 143, 144, and
8 445 and adding Section 445a as follows:
9 (215 ILCS 5/35A-5)
10 Sec. 35A-5. Definitions. As used in this Article, the
11 terms listed in this Section have the meaning given herein.
12 "Adjusted RBC Report" means an RBC Report that has been
13 adjusted by the Director in accordance with subsection (e) of
14 Section 35A-10.
15 "Authorized control level RBC" means the number
16 determined under the risk-based capital formula in accordance
17 with the RBC Instructions.
18 "Company action level RBC" means the product of 2.0 and
19 the insurer's authorized control level RBC.
20 "Corrective Order" means an order issued by the Director
21 in accordance with Article XII 1/2 specifying corrective
22 actions that the Director determines are required.
23 "Domestic insurer" means any insurance company domiciled
24 in this State under Article II, Article III, Article III 1/2,
25 or Article IV.
26 "Foreign insurer" means any foreign or alien insurance
27 company licensed under Article VI that is not domiciled in
28 this State.
29 "Life, health, or life and health insurer" means an
30 insurance company that has authority to transact the kinds of
31 insurance described in either or both clause (a) or clause
SB1728 Enrolled -2- LRB9011450JSmg
1 (b) of Class 1 of Section 4 or a licensed property and
2 casualty insurer writing only accident and health insurance.
3 "Mandatory control level RBC" means the product of 0.70
4 and the insurer's authorized control level RBC.
5 "NAIC" means the National Association of Insurance
6 Commissioners.
7 "Negative trend" means, with respect to a life, health,
8 or life and health insurer, a negative trend over a period of
9 time, as determined in accordance with the trend test
10 calculation included in the RBC Instructions.
11 "Property and casualty insurer" means an insurance
12 company that has authority to transact the kinds of insurance
13 in either or both Class 2 or Class 3 of Section 4 or a
14 licensed insurer writing only insurance authorized under
15 clause (c) of Class 1, but does not include monoline mortgage
16 guaranty insurers, financial guaranty insurers, and title
17 insurers.
18 "RBC" means risk-based capital.
19 "RBC Instructions" means the RBC Report including
20 risk-based capital instructions adopted by the NAIC as those
21 instructions may be amended by the NAIC from time to time in
22 accordance with the procedures adopted by the NAIC.
23 "RBC level" means an insurer's company action level RBC,
24 regulatory action level RBC, authorized control level RBC, or
25 mandatory control level RBC.
26 "RBC Plan" means a comprehensive financial plan
27 containing the elements specified in subsection (b) of
28 Section 35A-15.
29 "RBC Report" means the risk-based capital report required
30 under Section 35A-10.
31 "Receivership" means conservation, rehabilitation, or
32 liquidation under Article XIII.
33 "Regulatory action level RBC" means the product of 1.5
34 and the insurer's authorized control level RBC.
SB1728 Enrolled -3- LRB9011450JSmg
1 "Revised RBC Plan" means an RBC Plan rejected by the
2 Director and revised by the insurer with or without the
3 Director's recommendations.
4 "Total adjusted capital" means the sum of (1) an
5 insurer's statutory capital and surplus and (2) any other
6 items that the RBC Instructions may provide.
7 (Source: P.A. 88-364; 89-97, eff. 7-7-95.)
8 (215 ILCS 5/35A-20)
9 Sec. 35A-20. Regulatory action level event.
10 (a) A regulatory action level event means any of the
11 following events:
12 (1) The filing of an RBC Report by the insurer that
13 indicates that the insurer's total adjusted capital is
14 greater than or equal to its authorized control level
15 RBC, but less than its regulatory action level RBC.
16 (2) The notification by the Director to an insurer
17 of an Adjusted RBC Report that indicates the event
18 described in paragraph (1), provided the insurer does not
19 challenge the Adjusted RBC Report under Section 35A-35.
20 (3) The notification by the Director to the insurer
21 that the Director has, after a hearing, rejected the
22 insurer's challenge under Section 35A-35 to an Adjusted
23 RBC Report that indicates the event described in
24 paragraph (1).
25 (4) The failure of the insurer to file an RBC
26 Report by the filing date, unless the insurer has
27 provided an explanation for the failure that is
28 satisfactory to the Director and has cured the failure
29 within 10 days after the filing date.
30 (5) The failure of the insurer to submit an RBC
31 Plan to the Director within the time period set forth in
32 subsection (c) of Section 35A-15.
33 (6) The notification by the Director to the insurer
SB1728 Enrolled -4- LRB9011450JSmg
1 that the insurer's RBC Plan or revised RBC Plan is, in
2 the judgment of the Director, unsatisfactory and that the
3 notification constitutes a regulatory action level event
4 with respect to the insurer, provided the insurer does
5 not challenge the determination under Section 35A-35.
6 (7) The notification by the Director to the insurer
7 that the Director has, after a hearing, rejected the
8 insurer's challenge under Section 35A-35 to the
9 determination made by the Director under paragraph (6).
10 (8) The notification by the Director to the insurer
11 that the insurer has failed to adhere to its RBC Plan or
12 Revised RBC Plan, but only if that failure has a
13 substantial adverse effect on the ability of the insurer
14 to eliminate the company action level event in accordance
15 with its RBC Plan or Revised RBC Plan and the Director
16 has so stated in the notification, provided the insurer
17 does not challenge the determination under Section
18 35A-35.
19 (9) The notification by the Director to the insurer
20 that the Director has, after a hearing, rejected the
21 insurer's challenge under Section 35A-35 to the
22 determination made by the Director under paragraph (8).
23 (b) In the event of a regulatory action level event, the
24 Director shall do all of the following:
25 (1) Require the insurer to prepare and submit an
26 RBC Plan or, if applicable, a Revised RBC Plan to the
27 Director within 45 days after the regulatory action level
28 event occurs or within 45 days after the Director
29 notifies the insurer that the Director has, after a
30 hearing, rejected its challenge under Section 35A-35 to
31 either an Adjusted RBC Report or a Revised RBC Plan.
32 However, if the insurer previously prepared and submitted
33 an RBC Plan or a Revised RBC Plan in accordance with any
34 provision of this Article, the Director may determine
SB1728 Enrolled -5- LRB9011450JSmg
1 that the previously prepared RBC Plan or Revised RBC Plan
2 satisfies the requirement of this subsection (b)(1).
3 (2) Perform any examination or analysis of the
4 assets, liabilities, and operations of the insurer,
5 including a review of its RBC Plan or Revised RBC Plan,
6 that the Director deems necessary.
7 (3) After the examination or analysis, issue a
8 Corrective Order specifying the corrective actions the
9 Director determines are required.
10 (c) In determining corrective actions, the Director may
11 take into account any factors the Director deems relevant
12 based upon the examination or analysis of the assets,
13 liabilities, and operations of the insurer including, but not
14 limited to, the results of any sensitivity tests undertaken
15 under the RBC Instructions. The regulatory action level event
16 shall be deemed sufficient grounds for the Director to issue
17 a Corrective Order in accordance with Article XII 1/2. The
18 Director shall have rights, powers, and duties with respect
19 to the insurer that are set forth in Article XII 1/2 and the
20 insurer shall be entitled to the protections afforded
21 insurers under Article XII 1/2. The insurer shall submit the
22 RBC Plan to the Director within 45 days after the regulatory
23 action level event occurs or within 45 days after the
24 Director notifies the insurer that the Director has, after a
25 hearing, rejected its challenge under Section 35A-35 to
26 either an Adjusted RBC Report or a Revised RBC Plan.
27 (d) The Director may retain actuaries, investment
28 experts, and other consultants necessary to review an
29 insurer's RBC Plan or Revised RBC Plan, examine or analyze
30 the assets, liabilities, and operations of the insurer, and
31 formulate the Corrective Order with respect to the insurer.
32 The fees, costs, and expenses related to the actuaries,
33 investment experts, and other consultants shall be borne by
34 the affected insurer or the party designated by the Director.
SB1728 Enrolled -6- LRB9011450JSmg
1 (Source: P.A. 88-364; 89-97, eff. 7-7-95.)
2 (215 ILCS 5/35A-35)
3 Sec. 35A-35. Hearings.
4 (a) An insurer has the right to an administrative
5 hearing with respect to any of the following:
6 (1) The notification by the Director to the insurer
7 of an Adjusted RBC Report.
8 (2) The notification by the Director to the insurer
9 that the insurer's RBC Plan or Revised RBC Plan is
10 unsatisfactory and that the notification constitutes a
11 regulatory action level event.
12 (3) The notification by the Director to the insurer
13 that the insurer has failed to adhere to its RBC Plan or
14 Revised RBC Plan and that the failure has a substantial
15 adverse effect on the ability of the insurer to eliminate
16 the company action level event in accordance with its RBC
17 Plan or Revised RBC Plan.
18 (4) The notification by the Director to the insurer
19 of a Corrective Order.
20 (b) At the administrative hearing, the insurer may
21 challenge any determination or action by the Director. The
22 insurer shall notify the Director of its request for a
23 hearing within 5 days after notification by the Director made
24 under subsection (a). Upon receipt of the insurer's request
25 for a hearing, the Director shall set a date for the hearing.
26 The hearing shall be held no fewer than 10 days and no more
27 than 30 days after the date of the insurer's request for the
28 hearing.
29 (Source: P.A. 88-364.)
30 (215 ILCS 5/86) (from Ch. 73, par. 698)
31 Sec. 86. Scope of Article.
32 (1) This Article applies to all groups including
SB1728 Enrolled -7- LRB9011450JSmg
1 incorporated and individual unincorporated underwriters
2 transacting an insurance business in this State through an
3 attorney-in-fact under the name Lloyds or under a Lloyds plan
4 of operation. Groups that meet the requirements of
5 subsection (3) are referred to in this Code as "Lloyds", and
6 incorporated and individual unincorporated underwriters are
7 referred to as "underwriters".
8 (2) As used in this Code "Domestic Lloyds" means a
9 Lloyds having its home office in this State; "Foreign Lloyds"
10 means a Lloyds having its home office in any state of the
11 United States other than this State; and "Alien Lloyds" means
12 a Lloyds having its home office or principal place of
13 business in any country other than the United States.
14 (3) A domestic Lloyds must: (i) be established pursuant
15 to a statute or written charter; (ii) provide for governance
16 by a board of directors or similar body; and (iii) establish
17 and monitor standards of solvency of its underwriters. A
18 foreign or alien Lloyds must be subject to requirements of
19 its state or country of domicile. Those requirements must be
20 substantially similar to those required of domestic Lloyds.
21 Domestic, foreign, and alien Lloyd's shall not be subject to
22 Section 144 of this Code.
23 (Source: P.A. 88-535.)
24 (215 ILCS 5/98) (from Ch. 73, par. 710)
25 Sec. 98. Verified statement Maximum single risk.
26 (1) The net maximum amount of insurance to be assumed by
27 an underwriter of a domestic Lloyds upon any single risk for
28 each kind of insurance shall not exceed ten per centum of the
29 value of the cash and securities deposited in trust by such
30 underwriter plus the share of admitted assets other than
31 underwriters' deposits of such Lloyds belonging to such
32 underwriter less the share of liabilities and reserves of
33 such Lloyds allocable to such underwriter, but in no event
SB1728 Enrolled -8- LRB9011450JSmg
1 shall it exceed ten per centum of the value of the cash or
2 securities deposited in trust by such underwriter.
3 (2) Whenever the Director shall so require, the
4 attorney-in-fact of a domestic Lloyds shall file with the
5 Director a verified statement setting forth
6 (a) the names and addresses of all underwriters;
7 and
8 (b) a description of the cash and securities
9 deposited in trust by each underwriter.;
10 (c) the maximum amount of insurance assumed by each
11 underwriter upon any single risk for each kind of
12 insurance; and
13 (d) That the maximum amount of insurance assumed or
14 made upon any single risk for each kind of insurance by
15 any underwriter does not exceed the limitation set forth
16 in subsection (1) of this section.
17 (Source: P.A. 88-535.)
18 (215 ILCS 5/102) (from Ch. 73, par. 714)
19 Sec. 102. Restrictions upon foreign Lloyds.
20 (1) Each foreign Lloyds authorized to transact business
21 in this State shall
22 (a) maintain cash and securities, including the deposits
23 of its underwriters, of a character conformable to the
24 requirements of Article VIII of this Code for domestic
25 companies, at least equal at all times to the minimum
26 admitted assets required by this Article for a domestic
27 Lloyds doing the same kind or kinds of business.
28 (b) file with the Director an authenticated copy of its
29 power of attorney and an authenticated copy of the trust
30 agreement or other agreement under which deposits made by
31 underwriters are held;
32 (c) notify the Director forthwith of any amendment to
33 its power of attorney, deposit agreement or other documents
SB1728 Enrolled -9- LRB9011450JSmg
1 underlying its organization, by filing with the Director an
2 authenticated copy of such document as amended;
3 (d) notify the Director forthwith of any change in its
4 name or change of attorney-in-fact or change of address of
5 its attorney-in-fact.
6 (2) A foreign Lloyds shall not establish branches under
7 other or different names or titles.
8 (3) Each such foreign Lloyds shall be subject to all
9 limitation of risk provisions imposed by this Article upon
10 domestic Lloyds.
11 (3)(4) There shall be filed with the Director by the
12 attorney-in-fact of such foreign Lloyds at the time of filing
13 the annual statement, or more often if required by the
14 Director, a statement verified by the appropriate official of
15 such Lloyds, setting forth
16 (a) the names and addresses of all underwriters of such
17 Lloyds; and
18 (b) a description of the cash and securities deposited
19 in trust by each underwriter.;
20 (c) the maximum amount of insurance assumed by each
21 underwriter upon any single risk for each kind of insurance;
22 and
23 (d) that the maximum amount of insurance assumed upon
24 any single risk for each kind of insurance by any underwriter
25 does not exceed the limitation provided in this article for
26 individual underwriters of a domestic Lloyds.
27 (Source: Laws 1959, p. 1431.)
28 (215 ILCS 5/103) (from Ch. 73, par. 715)
29 Sec. 103. Alien Lloyds.
30 (1) Each alien Lloyds authorized to transact business in
31 this State shall
32 (a) maintain in this State or any other state of the
33 United States in which they are authorized to transact
SB1728 Enrolled -10- LRB9011450JSmg
1 business, cash or securities of a character conformable to
2 the requirements of Article VIII of this Code for domestic
3 companies at least equal at all times to the minimum of
4 admitted assets required by this Article for a domestic
5 Lloyds doing the same kind or kinds of business;
6 (b) make deposits of underwriters in this State in
7 accordance with the requirements imposed upon domestic
8 Lloyds;
9 (c) file with the Director an authenticated copy of its
10 power of attorney and an authenticated copy of the trust
11 agreement or other agreement under which deposits made by
12 underwriters in this State are held;
13 (d) notify the Director forthwith of any amendment to
14 its power of attorney, deposit agreement or other documents
15 by filing with the Director an authenticated copy of such
16 document as amended; and
17 (e) notify the Director forthwith of any change in its
18 name or change of attorney-in-fact or change of address of
19 its attorney-in-fact.
20 (2) An alien Lloyds shall not establish branches under
21 other or different names or titles.
22 (3) Each such alien Lloyds shall be subject to all
23 limitation of risk provisions imposed by this Article upon
24 domestic Lloyds.
25 (3)(4) There shall be filed with the Director by the
26 attorney-in-fact for such Lloyds, who or which shall be a
27 resident person or corporation of this State, at the time of
28 filing the annual statement, or more often if required by the
29 Director, a verified statement setting forth
30 (a) the names and addresses of all underwriters of such
31 Lloyds; and
32 (b) a description of the cash and securities deposited
33 in trust by each underwriter.;
34 (c) the maximum amount of insurance assumed by each
SB1728 Enrolled -11- LRB9011450JSmg
1 underwriter upon any single risk for each kind of insurance;
2 and
3 (d) that the maximum amount of insurance assumed upon
4 any single risk for each kind of insurance by any
5 underwriters does not exceed 10% of such underwriter's
6 deposit.
7 (4)(5) Additional underwriters may join and be included
8 in any such Lloyds subject to such conditions and
9 requirements as may from time to time be imposed by such
10 Lloyds and upon meeting the requirements of this section,
11 such additional underwriters who may so join such Lloyds
12 shall be bound by the documents on file with the Director in
13 the same manner as though they had personally executed the
14 same and shall have the same rights, powers and duties as all
15 other underwriters of such Lloyds. The attorney-in-fact
16 authorized by the underwriters to act for them shall
17 thereafter be the attorney-in-fact for such additional
18 underwriters to the extent of the power of attorney or other
19 document or authorization by such underwriters to the
20 attorney-in-fact.
21 (Source: Laws 1959, p. 1431.)
22 (215 ILCS 5/107.06a) (from Ch. 73, par. 719.06a)
23 Sec. 107.06a. Organization under Illinois Insurance
24 Code.
25 (a) After December 31, 1997, a syndicate or limited
26 syndicate, except for a limited syndicate formed as a
27 partnership, may only be organized pursuant to Sections 7, 8,
28 10, 11, 12, 14, 14.1 (other than subsection (d) thereof), 15
29 (other than subsection (d) thereof), 18, 19, 20, 21, 22, 23,
30 25, 27.1, 28, 28.1, 28.2, 29, 30, 31, 32, 32.1, 33, and 35.1
31 and Article X of this Code, to carry on the business of a
32 syndicate, or limited syndicate under Article V-1/2 of this
33 Code; provided that such syndicate or limited syndicate is
SB1728 Enrolled -12- LRB9011450JSmg
1 admitted to the Illinois Insurance Exchange.
2 (b) After December 31, 1997, syndicates and limited
3 syndicates are subject to the following:
4 (1) Articles I, IIA, VIII, VIII 1/2, X, XI, XII,
5 XII 1/2, XIII, XIII 1/2, XXIV, XXV (Sections 408 and 412
6 only), and XXVIII (except for Sections 445, 445.1, 445.2,
7 445.3, 445.4, and 445.5) of this Code;
8 (2) Subsections (2) and (3) of Section 155.04 and
9 Sections 13, 132.1 through 140, 141a, 144, 155.01,
10 155.03, 378, 379.1, 393.1, 395, and 396 of this Code;
11 (3) the Reinsurance Intermediary Act; and
12 (4) the Producer Controlled Insurer Act.
13 (c) No other provision of this Insurance Code shall be
14 applicable to any such syndicate or limited syndicate except
15 as provided in this Article V-1/2.
16 (Source: P.A. 89-97, eff. 7-7-95; 90-499, eff. 8-19-97.)
17 (215 ILCS 5/107.26) (from Ch. 73, par. 719.26)
18 Sec. 107.26. Illinois Insurance Exchange Immediate
19 Access Security Association.
20 (a) There is created a non-profit corporation which
21 shall be known as the Illinois Insurance Exchange Immediate
22 Access Security Association and which shall be incorporated
23 under the General Not for Profit Corporation Act. All
24 syndicates shall be members of the Association as a condition
25 of their authority to transact business on the Exchange. The
26 Association shall be exempt from payment of all fees and all
27 taxes levied by this State or any of its subdivisions.
28 (b) In the event of the entry of an Order of
29 Rehabilitation, Conservation, or Liquidation against a
30 syndicate pursuant to Section 107.08, the Association shall
31 establish a claims date, which shall be not later than one
32 year after the date of such Order, by which time all persons
33 having claims arising out of insurance obligations of the
SB1728 Enrolled -13- LRB9011450JSmg
1 syndicate must file their claim with the Association. The
2 Association shall give notice to all policyholders and other
3 persons who may have a claim against the syndicate as shown
4 by the syndicate's records. Such notice shall include the
5 date of the Order, the claims date established by the
6 Association and the procedure and form for filing a claim
7 with the Association. Within 60 days after the claims date,
8 The Association shall determine the syndicate's insurance
9 obligations liability based on all claims filed on or before
10 the claims date. The Association shall then pay all claims
11 for which an insurance obligation a liability exists from the
12 assets of the syndicate's trust or custodial account and
13 certificates of guaranty. In the event those assets are
14 insufficient to pay all claims in full, the Association shall
15 make payment pursuant to a plan approved by the court
16 entering the Order of Rehabilitation, Conservation, or
17 Liquidation. The Rehabilitator, Conservator, or Liquidator
18 shall be bound by any settlement made by the Association. Any
19 person not receiving full reimbursement for his claim from
20 the Association shall have a claim against the assets being
21 administered by the Rehabilitator, Conservator, or Liquidator
22 for the remaining amounts. In settling claims and subject to
23 limitations in this Section, the Association shall have the
24 same rights and duties of the insolvent syndicate as if the
25 syndicate had not become insolvent.
26 (c) The Association may delegate to such other person or
27 entity as it deems appropriate the performance of any duty
28 imposed on it by this Section.
29 (Source: P.A. 89-97, eff. 7-7-95; 89-206, eff. 7-21-95;
30 89-626, eff. 8-9-96.)
31 (215 ILCS 5/111) (from Ch. 73, par. 723)
32 Sec. 111. Conditions of issuance of certificate of
33 authority.
SB1728 Enrolled -14- LRB9011450JSmg
1 (1) Before a certificate of authority to transact
2 business in this State is issued to a foreign or alien
3 company, such company shall satisfy the Director that:
4 (a) the company is duly organized under the laws of
5 the state or country under whose laws it professes to be
6 organized and authorized to do the business it is
7 transacting or proposes to transact;
8 (b) its name is not the same as, or deceptively
9 similar to, the name of any domestic company, or of any
10 foreign or alien company authorized to transact business
11 in this State;
12 (c) if a company transacting business of the kind
13 or kinds enumerated in Class 1 of Section 4, it is not
14 engaging in practices in any state which if engaged in
15 this State, would constitute a violation of Section 237;
16 and it is not transacting any kinds of business other
17 than those enumerated in Class 1 of Section 4;
18 (d) if a stock company, it has a paid up capital
19 and surplus at least equal to the capital and original
20 surplus required by this Code for a domestic company
21 doing the same kind or kinds of business or, if a mutual
22 company or reciprocal, it has a surplus and provision for
23 contingent liability of policyholders, at least equal to
24 the original surplus and provision for contingent
25 liability of policyholders required for a similar
26 domestic company doing the same kind or kinds of
27 business, or, if a fraternal benefit society, it meets
28 the requirements prescribed in this Code for the
29 organization of a domestic company or society, or if a
30 Lloyds it meets the requirements of Article V;
31 (e) its funds are invested in accordance with the
32 laws of its domicile; and
33 (f) in the case of a stock company its minimum
34 capital and surplus and required reserves, or in the case
SB1728 Enrolled -15- LRB9011450JSmg
1 of a mutual company or a reciprocal proposing to issue
2 policies without contingent liability, its minimum
3 surplus and required reserves, or in the case of any
4 other company, all its funds, are invested in securities
5 or property which afford a degree of financial security
6 equal to that required for similar domestic companies,
7 provided that this clause shall not be construed as
8 requiring the application of limitations relating either
9 to the kind or amount of securities prescribed by this
10 Code for the investments of domestic companies.
11 (2) In determining whether an alien company complies
12 with the provisions of subsection (1) of this section the
13 Director shall consider only business transacted in the
14 United States, only the assets described in Section 60j and
15 only liabilities in connection with its United States
16 business.
17 (3) Before a certificate of authority is issued to a
18 foreign or alien company, other than a Lloyds, it shall
19 deposit with the Director securities which are authorized
20 investments for similar domestic companies under Section
21 126.11A(1), 126.11A(2), 126.24A(1), or 126.24A(2) of the
22 amount, if any, required of a domestic company similarly
23 organized and doing the same kind or kinds of business; or in
24 lieu of such deposit such foreign or alien company shall
25 satisfy the Director that it has on deposit with an official
26 of a state of the United States or a depositary designated or
27 authorized for such purpose by such official, authorized by
28 the law of such state to accept such deposit, securities of
29 at least a like amount, for the benefit and security of all
30 creditors, policyholders and policy obligations of such
31 company in the United States.
32 (4) Before issuing a certificate of authority to a
33 foreign or alien company, the Director may cause an
34 examination to be made of the condition and affairs of such
SB1728 Enrolled -16- LRB9011450JSmg
1 company.
2 (Source: P.A. 90-418, eff. 8-15-97.)
3 (215 ILCS 5/121-2.08) (from Ch. 73, par. 733-2.08)
4 Sec. 121-2.08. Transactions in this State involving
5 contracts of insurance issued to one or more industrial
6 insureds. For purposes of this Section "industrial insured"
7 is an insured:
8 (a) which procures the insurance of any risk or risks
9 other than life and annuity contracts by use of the services
10 of a full time employee acting as an insurance manager or
11 buyer or the services of a regularly and continuously
12 retained qualified insurance consultant;
13 (b) whose aggregate annual premiums for insurance on all
14 risks, except for life and accident and health insurance,
15 total at least $100,000 $50,000; and
16 (c) which either (i) has at least 25 full time
17 employees, (ii) has gross assets in excess of $3,000,000, or
18 (iii) has annual gross revenues in excess of $5,000,000.
19 (Source: P.A. 85-131.)
20 (215 ILCS 5/123C-1) (from Ch. 73, par. 735C-1)
21 Sec. 123C-1. Definitions. As used in this Article:
22 A. "Affiliate" or "Affiliated company" shall have the
23 meaning set forth in subsection (a) of Section 131.1 (and,
24 for purposes of such definition, the definitions of "control"
25 and "person", as set forth in subsections (b) and (e) of
26 Section 131.1, respectively, shall be applicable).
27 B. "Association" means any entity meeting the
28 requirements set forth in either of the following paragraphs
29 (1), (2) or (3):
30 (1) any organized association of individuals, legal
31 representatives, corporations (whether for profit or not
32 for profit), partnerships, trusts, associations, units of
SB1728 Enrolled -17- LRB9011450JSmg
1 government or other organizations, or any combination of
2 the foregoing, that has been in continuous existence for
3 at least one year, the member organizations of which
4 collectively:
5 (a) own, control, or hold with power to vote
6 (directly or indirectly) all of the outstanding
7 voting securities of an association captive
8 insurance company incorporated as a stock insurer;
9 or
10 (b) have complete voting control (directly or
11 indirectly) over an association captive insurance
12 company organized as a mutual insurer;
13 (2) any organized association of individuals, legal
14 representatives, corporations (whether for profit or not
15 for profit), partnerships, trusts, associations, units of
16 government or other organizations, or any combination of
17 the foregoing:
18 (a) whose member organizations are engaged in
19 businesses or activities similar or related with
20 respect to the liability of which such members are
21 exposed by virtue of any related, similar, or common
22 business, trade, product, services, premises, or
23 operations; and
24 (b) whose member organizations:
25 (i) directly or indirectly own or
26 control, and hold with power to vote, at least
27 80% of all of the outstanding voting securities
28 of an association captive insurance company
29 incorporated as a stock insurer; or
30 (ii) directly or indirectly have at least
31 80% of the voting control over an association
32 captive insurance company organized as a mutual
33 insurer; or
34 (3) any risk retention group, as defined in
SB1728 Enrolled -18- LRB9011450JSmg
1 subsection (11) of Section 123B-2, domiciled in this
2 State and organized under this Article; however,
3 beginning 6 months after the effective date of this
4 amendatory Act of 1995, a risk retention group shall no
5 longer qualify as an association under this Article.
6 Provided, however, that with respect to each of the
7 associations described in paragraphs (1), (2) and (3) above,
8 no member organization may (i) own, control, or hold with
9 power to vote in excess of 25% of the voting securities of an
10 association captive insurance company incorporated as a stock
11 insurer, or (ii) have more than 25% of the voting control of
12 an association captive insurance company organized as a
13 mutual insurer.
14 C. "Association captive insurance company" means any
15 company that insures risks of (i) the member organizations of
16 an association, and (ii) their affiliated companies.
17 D. "Captive insurance company" means any pure captive
18 insurance company, association captive insurance company or
19 industrial insured captive insurance company organized under
20 the provisions of this Article.
21 E. "Director" means the Director of the Department of
22 Insurance.
23 F. "Industrial insured" means an insured which (together
24 with its affiliates) at the time of its initial procurement
25 of insurance from an industrial insured captive insurance
26 company:
27 (1) has available to it advice with respect to the
28 purchase of insurance through the use of the services of
29 a full-time employee acting as an insurance manager or
30 buyer or the services of a regularly and continuously
31 retained qualified insurance consultant; and
32 (2) pays aggregate annual premiums in excess of
33 $100,000 $35,000 for insurance on all risks except
34 for life, accident and health; and
SB1728 Enrolled -19- LRB9011450JSmg
1 (3) either (i) has at least 25 full-time employees,
2 or (ii) has gross assets in excess of $3,000,000, or
3 (iii) has annual gross revenues in excess of $5,000,000.
4 G. "Industrial insured captive insurance company" means
5 any company that insures risks of industrial insureds that
6 are members of the industrial insured group, and their
7 affiliated companies.
8 H. "Industrial insured group" means any group of
9 industrial insureds that collectively:
10 (1) directly or indirectly (including ownership or
11 control through a company which is wholly owned by such
12 group of industrial insureds) own or control, and hold
13 with power to vote, all of the outstanding voting
14 securities of an industrial insured captive insurance
15 company incorporated as a stock insurer; or
16 (2) directly or indirectly (including control
17 through a company which is wholly owned by such group of
18 industrial insureds) have complete voting control over an
19 industrial insured captive insurance company organized as
20 a mutual insurer; provided, however, that no member
21 organization may (i) own, control, or hold with power to
22 vote in excess of 25% of the voting securities of an
23 industrial insured captive insurance company incorporated
24 as a stock insurer, or (ii) have more than 25% of the
25 voting control of an industrial insured captive insurance
26 company organized as a mutual insurer.
27 I. "Member organization" means any individual, legal
28 representative, corporation (whether for profit or not for
29 profit), partnership, association, unit of government, trust
30 or other organization that belongs to an association or an
31 industrial insured group.
32 J. "Parent" means a corporation, partnership, individual
33 or other legal entity that directly or indirectly owns,
34 controls, or holds with power to vote more than 50% of the
SB1728 Enrolled -20- LRB9011450JSmg
1 outstanding voting securities of a company.
2 K. "Personal risk liability" means liability to other
3 persons for (i) damage because of injury to any person, (ii)
4 damage to property, or (iii) other loss or damage, in each
5 case resulting from any personal, familial, or household
6 responsibilities or activities, but does not include legal
7 liability for damages (including costs of defense, legal
8 costs and fees, and other claims expenses) because of
9 injuries to other persons, damage to their property, or other
10 damage or loss to such other persons resulting from or
11 arising out of:
12 (i) any business (whether for profit or not for
13 profit), trade, product, services (including professional
14 services), premises, or operations; or
15 (ii) any activity of any state or local government,
16 or any agency or political subdivision thereof.
17 L. "Pure captive insurance company" means any company
18 that insures only risks of its parent or affiliated companies
19 or both.
20 M. "Unit of government" includes any state, regional or
21 local government, or any agency or political subdivision
22 thereof, or any district, authority, public educational
23 institution or school district, public corporation or other
24 unit of government in this State or any similar unit of
25 government in any other state.
26 (Source: P.A. 89-97, eff. 7-7-95.)
27 (215 ILCS 5/126.2)
28 Sec. 126.2. Definitions. For purposes of this Article:
29 A. "Acceptable collateral" means:
30 (1) As to securities lending transactions, and for
31 the purpose of calculating counterparty exposure amount,
32 cash, cash equivalents, letters of credit, direct
33 obligations of, or securities that are fully guaranteed
SB1728 Enrolled -21- LRB9011450JSmg
1 as to principal and interest by, the government of the
2 United States or any agency of the United States, or by
3 the Federal National Mortgage Association or the Federal
4 Home Loan Mortgage Corporation, and as to lending foreign
5 securities, sovereign debt rated 1 by the SVO;
6 (2) As to repurchase transactions, cash, cash
7 equivalents and direct obligations of, or securities that
8 are fully guaranteed as to principal and interest by, the
9 government of the United States or an agency of the
10 United States, or by the Federal National Mortgage
11 Association or the Federal Home Loan Mortgage
12 Corporation; and
13 (3) As to reverse repurchase transactions, cash and
14 cash equivalents.
15 B. "Acceptable private mortgage insurance" means
16 insurance written by a private insurer protecting a mortgage
17 lender against loss occasioned by a mortgage loan default and
18 issued by a licensed mortgage insurance company, with an SVO
19 1 designation or a rating issued by a nationally recognized
20 statistical rating organization equivalent to an SVO 1
21 designation, that covers losses to an 80% loan-to-value
22 ratio.
23 C. "Accident and health insurance" means protection
24 which provides payment of benefits for covered sickness or
25 accidental injury, excluding credit insurance, disability
26 insurance, accidental death and dismemberment insurance and
27 long-term care insurance.
28 D. "Accident and health insurer" means a licensed life
29 or health insurer or health service corporation whose
30 insurance premiums and required statutory reserves for
31 accident and health insurance constitute at least 95% of
32 total premium considerations or total statutory required
33 reserves, respectively.
34 E. "Admitted assets" means assets defined by Section 3.1
SB1728 Enrolled -22- LRB9011450JSmg
1 of this Code permitted to be reported as admitted assets on
2 the statutory financial statement of the insurer most
3 recently required to be filed with the Director, but
4 excluding assets of separate accounts, the investments of
5 which are not subject to the provisions of this Article
6 except to the extent that the provisions of Article XIV 1/2
7 so provide.
8 F. "Affiliate" means, as to any person, another person
9 that, directly or indirectly through one or more
10 intermediaries, controls, is controlled by, or is under
11 common control with the person.
12 G. "Asset-backed security" means a security or other
13 instrument, excluding shares in a mutual fund, evidencing an
14 interest in, or the right to receive payments from, or
15 payable from distributions on, an asset, a pool of assets or
16 specifically divisible cash flows which are legally
17 transferred to a trust or another special purpose
18 bankruptcy-remote business entity, on the following
19 conditions:
20 (1) The trust or other business entity is
21 established solely for the purpose of acquiring specific
22 types of assets or rights to cash flows, issuing
23 securities and other instruments representing an interest
24 in or right to receive cash flows from those assets or
25 rights, and engaging in activities required to service
26 the assets or rights and any credit enhancement or
27 support features held by the trust or other business
28 entity; and
29 (2) The assets of the trust or other business
30 entity consist solely of interest bearing obligations or
31 other contractual obligations representing the right to
32 receive payment from the cash flows from the assets or
33 rights. However, the existence of credit enhancements,
34 such as letters of credit or guarantees, or support
SB1728 Enrolled -23- LRB9011450JSmg
1 features such as swap agreements, shall not cause a
2 security or other instrument to be ineligible as an
3 asset-backed security.
4 H. "Business entity" includes a sole proprietorship,
5 corporation, limited liability company, association,
6 partnership, joint stock company, joint venture, mutual fund,
7 trust, joint tenancy or other similar form of business
8 organization, whether organized for profit or not for profit.
9 I. "Cap" means an agreement obligating the seller to
10 make payments to the buyer, with each payment based on the
11 amount by which a reference price or level or the performance
12 or value of one or more underlying interests exceeds a
13 predetermined number, sometimes called the strike rate or
14 strike price.
15 J. "Capital and surplus" means the sum of the capital
16 and surplus of the insurer required to be shown on the
17 statutory financial statement of the insurer most recently
18 required to be filed with the Director.
19 K. "Cash equivalents" means short-term, highly rated and
20 highly liquid investments or securities readily convertible
21 to known amounts of cash without penalty and so near maturity
22 that they present insignificant risk of change in value. Cash
23 equivalents include government money market mutual funds and
24 class one money market mutual funds. For purposes of this
25 definition:
26 (1) "Short-term" means investments with a remaining
27 term to maturity of 90 days or less; and
28 (2) "Highly rated" means an investment rated "P-1"
29 by Moody's Investors Service, Inc., or "A-1" by Standard
30 and Poor's division of The McGraw Hill Companies, Inc. or
31 its equivalent rating by a nationally recognized
32 statistical rating organization recognized by the SVO.
33 L. "Class one bond mutual fund" means a mutual fund that
34 at all times qualifies for investment using the bond class
SB1728 Enrolled -24- LRB9011450JSmg
1 one reserve factor under the Purposes and Procedures of the
2 Securities Valuation Office or any successor publication.
3 M. "Class one money market mutual fund" means a money
4 market mutual fund that at all times qualifies for investment
5 using the bond class one reserve factor under the Purposes
6 and Procedures of the Securities Valuation Office or any
7 successor publication.
8 N. "Code" means the Illinois Insurance Code.
9 O. "Collar" means an agreement to receive payments as
10 the buyer of an option, cap or floor and to make payments as
11 the seller of a different option, cap or floor.
12 P. "Commercial mortgage loan" means a mortgage loan,
13 other than a residential mortgage loan.
14 Q. "Construction loan" means a loan of less than 3 years
15 in term, made for financing the cost of construction of a
16 building or other improvement to real estate, that is secured
17 by the real estate.
18 R. "Control" means the possession, directly or
19 indirectly, of the power to direct or cause the direction of
20 the management and policies of a person, whether through the
21 ownership of voting securities, by contract (other than a
22 commercial contract for goods or nonmanagement services), or
23 otherwise, unless the power is the result of an official
24 position with or corporate office held by the person. Control
25 shall be presumed to exist if a person, directly or
26 indirectly, owns, controls, holds with the power to vote or
27 holds proxies representing 10% or more of the voting
28 securities of another person. This presumption may be
29 rebutted by a showing that control does not exist in fact.
30 The Director may determine, after furnishing all interested
31 persons notice and an opportunity to be heard and making
32 specific findings of fact to support the determination, that
33 control exists in fact, notwithstanding the absence of a
34 presumption to that effect.
SB1728 Enrolled -25- LRB9011450JSmg
1 S. "Counterparty exposure amount" means:
2 (1) The amount of credit risk attributable to a
3 derivative instrument entered into with a business entity
4 other than through a qualified exchange, qualified
5 foreign exchange, or cleared through a qualified
6 clearinghouse ("over-the-counter derivative instrument").
7 The amount of credit risk equals:
8 (a) The market value of the over-the-counter
9 derivative instrument if the liquidation of the
10 derivative instrument would result in a final cash
11 payment to the insurer; or
12 (b) Zero if the liquidation of the derivative
13 instrument would not result in a final cash payment
14 to the insurer.
15 (2) If over-the-counter derivative instruments are
16 entered into under a written master agreement which
17 provides for netting of payments owed by the respective
18 parties, and the domicile of the counterparty is either
19 within the United States or if not within the United
20 States, within a foreign jurisdiction listed in the
21 Purposes and Procedures of the Securities Valuation
22 Office as eligible for netting, the net amount of credit
23 risk shall be the greater of zero or the net sum of:
24 (a) The market value of the over-the-counter
25 derivative instruments entered into under the
26 agreement, the liquidation of which would result in
27 a final cash payment to the insurer; and
28 (b) The market value of the over-the-counter
29 derivative instruments entered into under the
30 agreement, the liquidation of which would result in
31 a final cash payment by the insurer to the business
32 entity.
33 (3) For open transactions, market value shall be
34 determined at the end of the most recent quarter of the
SB1728 Enrolled -26- LRB9011450JSmg
1 insurer's fiscal year and shall be reduced by the market
2 value of acceptable collateral held by the insurer or
3 placed in escrow by one or both parties.
4 T. "Covered" means that an insurer owns or can
5 immediately acquire, through the exercise of options,
6 warrants or conversion rights already owned, the underlying
7 interest in order to fulfill or secure its obligations under
8 a call option, cap or floor it has written, or has set aside,
9 pursuant to a custodial or escrow agreement, cash or cash
10 equivalents with a market value equal to the amount required
11 to fulfill its obligations under a put option it has written,
12 in an income generation transaction.
13 U. "Credit tenant loan" means a mortgage loan which is
14 made primarily in reliance on the credit standing of a major
15 tenant, structured with an assignment of the rental payments
16 to the lender with real estate pledged as collateral in the
17 form of a first lien.
18 V. (1) "Derivative instrument" means an agreement,
19 option, instrument or a series or combination thereof:
20 (a) To make or take delivery of, or assume or
21 relinquish, a specified amount of one or more
22 underlying interests, or to make a cash settlement
23 in lieu thereof; or
24 (b) That has a price, performance, value or
25 cash flow based primarily upon the actual or
26 expected price, level, performance, value or cash
27 flow of one or more underlying interests.
28 (2) Derivative instruments include options,
29 warrants used in a hedging transaction and not attached
30 to another financial instrument, caps, floors, collars,
31 swaps, forwards, futures and any other agreements,
32 options or instruments substantially similar thereto or
33 any series or combination thereof and any agreements,
34 options or instruments permitted under rules adopted
SB1728 Enrolled -27- LRB9011450JSmg
1 under Section 126.8. Derivative instruments shall not
2 include an investment authorized by Sections 126.11
3 through 126.17, 126.19 and 126.24 through 126.30.
4 W. "Derivative transaction" means a transaction
5 involving the use of one or more derivative instruments.
6 X. "Direct" or "directly," when used in connection with
7 an obligation, means the designated obligor is primarily
8 liable on the instrument representing the obligation.
9 Y. "Dollar roll transaction" means 2 simultaneous
10 transactions with settlement dates no more than 96 days
11 apart, so that in one transaction an insurer sells to a
12 business entity, and in the other transaction the insurer is
13 obligated to purchase from the same business entity,
14 substantially similar securities of the following types:
15 (1) Asset-backed securities issued, assumed or
16 guaranteed by the Government National Mortgage
17 Association, the Federal National Mortgage Association or
18 the Federal Home Loan Mortgage Corporation or their
19 respective successors; and
20 (2) Other asset-backed securities referred to in
21 Section 106 of Title I of the Secondary Mortgage Market
22 Enhancement Act of 1984 (15 U.S.C. 77r1), as amended.
23 Z. "Domestic jurisdiction" means the United States,
24 Canada, any state, any province of Canada or any political
25 subdivision of any of the foregoing.
26 AA. "Equity interest" means any of the following that
27 are not rated credit instruments: common stock; preferred
28 stock; trust certificate; equity investment in an investment
29 company other than a money market mutual fund or a class one
30 bond mutual fund; investment in a common trust fund of a bank
31 regulated by a federal or state agency; an ownership interest
32 in minerals, oil or gas, the rights to which have been
33 separated from the underlying fee interest in the real estate
34 where the minerals, oil or gas are located; instruments which
SB1728 Enrolled -28- LRB9011450JSmg
1 are mandatorily, or at the option of the issuer, convertible
2 to equity; limited partnership interests and those general
3 partnership interests authorized under Section 126.5(D);
4 member interests in limited liability companies; warrants or
5 other rights to acquire equity interests that are created by
6 the person that owns or would issue the equity to be
7 acquired; or instruments that would be rated credit
8 instruments except for the provisions of subsection RRR(2) of
9 this Section.
10 BB. "Equivalent securities" means:
11 (1) In a securities lending transaction, securities
12 that are identical to the loaned securities in all
13 features including the amount of the loaned securities,
14 except as to certificate number if held in physical form,
15 but if any different security shall be exchanged for a
16 loaned security by recapitalization, merger,
17 consolidation or other corporate action, the different
18 security shall be deemed to be the loaned security;
19 (2) In a repurchase transaction, securities that
20 are identical to the purchased securities in all features
21 including the amount of the purchased securities, except
22 as to the certificate number if held in physical form; or
23 (3) In a reverse repurchase transaction, securities
24 that are identical to the sold securities in all features
25 including the amount of the sold securities, except as to
26 the certificate number if held in physical form.
27 CC. "Floor" means an agreement obligating the seller to
28 make payments to the buyer in which each payment is based on
29 the amount by which a predetermined number, sometimes called
30 the floor rate or price, exceeds a reference price, a level,
31 or the performance or value of one or more underlying
32 interests.
33 DD. "Foreign currency" means a currency other than that
34 of a domestic jurisdiction.
SB1728 Enrolled -29- LRB9011450JSmg
1 EE. (1) "Foreign investment" means an investment in a
2 foreign jurisdiction, or an investment in a person, real
3 estate or asset domiciled in a foreign jurisdiction, that
4 is substantially of the same type as those eligible for
5 investment under this Article, other than under Sections
6 126.17 and 126.30. An investment shall not be deemed to
7 be foreign if the issuing person, qualified primary
8 credit source or qualified guarantor is a domestic
9 jurisdiction or a person domiciled in a domestic
10 jurisdiction, unless:
11 (a) The issuing person is a shell business
12 entity; and
13 (b) The investment is not assumed, accepted,
14 guaranteed, or insured or otherwise backed by a
15 domestic jurisdiction or a person, that is not a
16 shell business entity, domiciled in a domestic
17 jurisdiction.
18 (2) For purposes of this definition:
19 (a) "Shell business entity" means a business
20 entity having no economic substance, except as a
21 vehicle for owning interests in assets issued, owned
22 or previously owned by a person domiciled in a
23 foreign jurisdiction;
24 (b) "Qualified guarantor" means a guarantor
25 against which an insurer has a direct claim for full
26 and timely payment, evidenced by a contractual right
27 for which an enforcement action can be brought in a
28 domestic jurisdiction; and
29 (c) "Qualified primary credit source" means
30 the credit source to which an insurer looks for
31 payment as to an investment and against which an
32 insurer has a direct claim for full and timely
33 payment, evidenced by a contractual right for which
34 an enforcement action can be brought in a domestic
SB1728 Enrolled -30- LRB9011450JSmg
1 jurisdiction.
2 FF. "Foreign jurisdiction" means a jurisdiction other
3 than a domestic jurisdiction.
4 GG. "Forward" means an agreement (other than a future)
5 to make or take delivery of, or effect a cash settlement
6 based on the actual or expected price, level, performance or
7 value of, one or more underlying interests.
8 HH. "Future" means an agreement, traded on a qualified
9 exchange or qualified foreign exchange, to make or take
10 delivery of, or effect a cash settlement based on the actual
11 or expected price, level, performance or value of, one or
12 more underlying interests and includes an insurance future.
13 II. "Government money market mutual fund" means a money
14 market mutual fund that at all times:
15 (1) Invests only in obligations issued, guaranteed,
16 or insured by the federal government of the United States
17 or collateralized repurchase agreements composed of these
18 obligations; and
19 (2) Qualifies for investment without a reserve
20 under the Purposes and Procedures of the Securities
21 Valuation Office or any successor publication.
22 JJ. "Government sponsored enterprise" means a:
23 (1) Governmental agency; or
24 (2) Corporation, limited liability company,
25 association, partnership, joint stock company, joint
26 venture, trust or other entity or instrumentality
27 organized under the laws of any domestic jurisdiction to
28 accomplish a public policy or other governmental purpose.
29 KK. "Guaranteed or insured," when used in connection
30 with an obligation acquired under this Article, means the
31 guarantor or insurer has agreed to:
32 (1) Perform or insure the obligation of the obligor
33 or purchase the obligation; or
34 (2) Be unconditionally obligated until the
SB1728 Enrolled -31- LRB9011450JSmg
1 obligation is repaid to maintain in the obligor a minimum
2 net worth, fixed charge coverage, stockholders' equity or
3 sufficient liquidity to enable the obligor to pay the
4 obligation in full.
5 LL. "Hedging transaction" means:
6 (1) A derivative transaction that is entered into
7 and maintained to reduce:
8 (a) the risk of a change in the value, yield,
9 price, cash flow, or quantity of assets or
10 liabilities that the insurer has acquired or
11 incurred or anticipates acquiring or incurring; or
12 (b) the currency exchange rate risk or the
13 degree of exposure as to assets or liabilities that
14 the insurer has acquired or incurred or anticipates
15 acquiring or incurring; or
16 (2) Such other derivative transactions as may be
17 specified to constitute hedging transactions in rules
18 adopted pursuant to Section 126.8.
19 MM. "High grade investment" means a rated credit
20 instrument; rated 1, 2, P1, P2, PSF1 or PSF2 by the SVO.
21 NN. "Income" means, as to a security, interest, accrual
22 of discount, dividends or other distributions, such as
23 rights, tax or assessment credits, warrants and distributions
24 in kind.
25 OO. "Income generation transaction" means (1) a
26 derivative transaction involving the writing of covered call
27 options, covered put options, covered caps or covered floors
28 that is intended to generate income or enhance return, or (2)
29 such other derivative transactions as may be specified to
30 constitute income generation transactions in rules adopted
31 pursuant to Section 126.8.
32 PP. "Initial margin" means the amount of cash,
33 securities or other consideration initially required to be
34 deposited to establish a futures position.
SB1728 Enrolled -32- LRB9011450JSmg
1 QQ. "Insurance future" means a future relating to an
2 index or pool that is based on insurance-related items.
3 RR. "Insurance futures option" means an option on an
4 insurance future.
5 SS. "Investment company" means an investment company as
6 defined in Section 3(a) of the Investment Company Act of 1940
7 (15 U.S.C. 80a-1 et seq.), as amended, and a person
8 described in Section 3(c) of that Act.
9 TT. "Investment company series" means an investment
10 portfolio of an investment company that is organized as a
11 series company and to which assets of the investment company
12 have been specifically allocated.
13 UU. "Investment practices" means transactions of the
14 types described in Section 126.16, 126.18, 126.29 or 126.31.
15 VV. "Investment subsidiary" means a subsidiary of an
16 insurer engaged or organized to engage exclusively in the
17 ownership and management of assets authorized as investments
18 for the insurer if such subsidiary agrees to limit its
19 investment in any asset so that its investments will not
20 cause the amount of the total investment of the insurer to
21 exceed any of the investment limitations or avoid any other
22 provisions of this Article applicable to the insurer. As used
23 in this subsection, the total investment of the insurer shall
24 include:
25 (1) Direct investment by the insurer in an asset;
26 and
27 (2) The insurer's proportionate share of an
28 investment in an asset by an investment subsidiary of the
29 insurer, which shall be calculated by multiplying the
30 amount of the subsidiary's investment by the percentage
31 of the insurer's ownership interest in the subsidiary.
32 WW. "Investment strategy" means the techniques and
33 methods used by an insurer to meet its investment objectives,
34 such as active bond portfolio management, passive bond
SB1728 Enrolled -33- LRB9011450JSmg
1 portfolio management, interest rate anticipation, growth
2 investing and value investing.
3 XX. "Letter of credit" means a clean, irrevocable and
4 unconditional letter of credit issued or confirmed by, and
5 payable and presentable at, a financial institution on the
6 list of financial institutions meeting the standards for
7 issuing letters of credit under the Purposes and Procedures
8 of the Securities Valuation Office or any successor
9 publication. To constitute acceptable collateral for the
10 purposes of Sections 126.16 and 126.29, a letter of credit
11 must have an expiration date beyond the term of the subject
12 transaction.
13 YY. "Limited liability company" means a business
14 organization, excluding partnerships and ordinary business
15 corporations, organized or operating under the laws of the
16 United States or any state thereof that limits the personal
17 liability of investors to the equity investment of the
18 investor in the business entity.
19 ZZ. "Lower grade investment" means a rated credit
20 instrument rated 4, 5, 6, P4, P5, P6, PSF4, PSF5, or PSF6 by
21 the SVO.
22 AAA. "Market value" means:
23 (1) As to cash and letters of credit, the amounts
24 thereof; and
25 (2) As to a security as of any date, the price for
26 the security on that date obtained from a generally
27 recognized source or the most recent quotation from such
28 a source or, to the extent no generally recognized source
29 exists, the price for the security as determined in good
30 faith by the insurer, plus accrued but unpaid income
31 thereon to the extent not included in the price as of
32 that date.
33 BBB. "Medium grade investment" means a rated credit
34 instrument rated 3, P3, or PSF 3 by the SVO.
SB1728 Enrolled -34- LRB9011450JSmg
1 CCC. "Money market mutual fund" means a mutual fund that
2 meets the conditions of 17 Code of Federal Regulations Par.
3 270.2a-7, under the Investment Company Act of 1940 (15 U.S.C.
4 80a-1 et seq.), as amended or renumbered.
5 DDD. "Mortgage loan" means an obligation secured by a
6 mortgage, deed of trust, trust deed or other consensual lien
7 on real estate.
8 EEE. "Multilateral development bank" means an
9 international development organization of which the United
10 States is a member.
11 FFF. "Mutual fund" means an investment company or, in
12 the case of an investment company that is organized as a
13 series company, an investment company series, that, in either
14 case, is registered with the United States Securities and
15 Exchange Commission under the Investment Company Act of 1940
16 (15 U.S.C. 80a-1 et seq.), as amended.
17 GGG. "NAIC" means the National Association of Insurance
18 Commissioners.
19 HHH. "Obligation" means a bond, note, debenture, trust
20 certificate including an equipment trust certificate,
21 production payment, negotiable bank certificate of deposit,
22 bankers' acceptance, credit tenant loan, loan secured by
23 financing net leases and other evidence of indebtedness for
24 the payment of money (or participations, certificates or
25 other evidences of an interest in any of the foregoing),
26 whether constituting a general obligation of the issuer or
27 payable only out of certain revenues or certain funds pledged
28 or otherwise dedicated for payment.
29 III. "Option" means an agreement giving the buyer the
30 right to buy or receive (a "call option"), sell or deliver (a
31 "put option"), enter into, extend or terminate or effect a
32 cash settlement based on the actual or expected price, level,
33 performance or value of one or more underlying interests and
34 includes an insurance futures option.
SB1728 Enrolled -35- LRB9011450JSmg
1 JJJ. "Person" means an individual, a business entity, a
2 multilateral development bank or a government or quasi
3 governmental body, such as a political subdivision or a
4 government sponsored enterprise.
5 KKK. "Potential exposure" means the amount determined in
6 accordance with the NAIC Annual Statement Instructions.
7 LLL. "Preferred stock" means preferred, preference or
8 guaranteed stock of a business entity authorized to issue the
9 stock, that has a preference in liquidation over the common
10 stock of the business entity.
11 MMM. "Qualified bank" means:
12 (1) A national bank, state bank or trust company
13 that at all times is no less than adequately capitalized
14 as determined by standards adopted by United States
15 banking regulators and that either is regulated by state
16 banking laws or is a member of the Federal Reserve
17 System; or
18 (2) A bank or trust company incorporated or
19 organized under the laws of a country other than the
20 United States that is regulated as a bank or trust
21 company by that country's government or an agency thereof
22 and that at all times is no less than adequately
23 capitalized as determined by the standards adopted by
24 international banking authorities.
25 NNN. "Qualified business entity" means a business entity
26 that is:
27 (1) An issuer of obligations or preferred stock
28 that are rated 1 or 2 by the SVO or an issuer of
29 obligations, preferred stock or derivative instruments
30 that are rated the equivalent of 1 or 2 by the SVO or by
31 a nationally recognized statistical rating organization
32 recognized by the SVO; or
33 (2) A primary dealer in United States government
34 securities, recognized by the Federal Reserve Bank of New
SB1728 Enrolled -36- LRB9011450JSmg
1 York; or.
2 (3) With respect to securities lending arrangements
3 under Sections 126.16 and 126.29, an affiliate of an
4 entity that is a qualified business entity pursuant to
5 paragraph (1) or (2) of this subsection NNN, whose
6 arrangement with the insurer is guaranteed by the
7 affiliated entity that is a qualified business entity
8 under paragraph (1) or (2).
9 OOO. "Qualified clearinghouse" means a clearinghouse
10 for, and subject to the rules of, a qualified exchange or a
11 qualified foreign exchange, which provides clearing services,
12 including acting as a counterparty to each of the parties to
13 a transaction such that the parties no longer have credit
14 risk as to each other.
15 PPP. "Qualified exchange" means:
16 (1) A securities exchange registered as a national
17 securities exchange, or a securities market regulated
18 under the Securities Exchange Act of 1934 (15 U.S.C. 78
19 et seq.), as amended;
20 (2) A board of trade or commodities exchange
21 designated as a contract market by the Commodity Futures
22 Trading Commission or any successor thereof;
23 (3) Private Offerings, Resales and Trading through
24 Automated Linkages (PORTAL);
25 (4) A designated offshore securities market as
26 defined in Securities Exchange Commission Regulation S,
27 17 C.F.R. Part 230, as amended; or
28 (5) A qualified foreign exchange.
29 QQQ. "Qualified foreign exchange" means a foreign
30 exchange, board of trade or contract market located outside
31 the United States, its territories or possessions:
32 (1) That has received regulatory comparability
33 relief under Commodity Futures Trading Commission (CFTC)
34 Rule 30.10 (as set forth in Appendix C to Part 30 of the
SB1728 Enrolled -37- LRB9011450JSmg
1 CFTC's Regulations, 17 C.F.R. Part 30);
2 (2) That is, or its members are, subject to the
3 jurisdiction of a foreign futures authority that has
4 received regulatory comparability relief under CFTC Rule
5 30.10 (as set forth in Appendix C to Part 30 of the
6 CFTC's Regulations, 17 C.F.R. Part 30) as to futures
7 transactions in the jurisdiction where the exchange,
8 board of trade or contract market is located; or
9 (3) Upon which foreign stock index futures
10 contracts are listed that are the subject of no-action
11 relief issued by the CFTC's Office of General Counsel,
12 provided that an exchange, board of trade or contract
13 market that qualifies as a "qualified foreign exchange"
14 only under this subsection shall only be a "qualified
15 foreign exchange" as to foreign stock index futures
16 contracts that are the subject of no-action relief.
17 RRR. (1) "Rated credit instrument" means an obligation
18 or other instrument which gives its holder a contractual
19 right to receive cash or another rated credit instrument
20 from another entity, if the instrument:
21 (a) Is rated or required to be rated by the
22 SVO;
23 (b) In the case of an instrument with a
24 maturity of 397 days or less, is issued, guaranteed,
25 or insured by an entity that is rated by, or another
26 instrument of such entity is rated by, the SVO or by
27 a nationally recognized statistical rating
28 organization recognized by the SVO;
29 (c) In the case of an instrument with a
30 maturity of 90 days or less, the instrument has been
31 issued, assumed, accepted, guaranteed, or insured by
32 a qualified bank;
33 (d) Is a share of a class one bond mutual
34 fund; or
SB1728 Enrolled -38- LRB9011450JSmg
1 (e) Is a share of a money market mutual fund.
2 (2) However, "rated credit instrument" does not
3 mean:
4 (a) An instrument that is mandatorily, or at
5 the option of the issuer, convertible to an equity
6 interest; or
7 (b) A security that has a par value and whose
8 terms provide that the issuer's net obligation to
9 repay all or part of the security's par value is
10 determined by reference to the performance of an
11 equity, a commodity, a foreign currency or an index
12 of equities, commodities, foreign currencies or
13 combinations thereof.
14 SSS. "Real estate" means:
15 (1) (a) Real property;
16 (b) Interests in real property, such as
17 leaseholds, minerals and oil and gas that have not
18 been separated from the underlying fee interest;
19 (c) Improvements and fixtures located on or in
20 real property; and
21 (d) The seller's equity in a contract
22 providing for a deed of real estate.
23 (2) As to a mortgage on a leasehold estate, real
24 estate shall include the leasehold estate only if it has
25 an unexpired term (including renewal options exercisable
26 at the option of the lessee) extending beyond the
27 scheduled maturity date of the obligation that is secured
28 by a mortgage on the leasehold estate by a period equal
29 to at least 20% of the original term of the obligation or
30 10 years, whichever is greater.
31 TTT. "Replication transaction" means a derivative
32 transaction that is intended to replicate the performance of
33 one or more assets that an insurer is authorized to acquire
34 under this Article. A derivative transaction that is entered
SB1728 Enrolled -39- LRB9011450JSmg
1 into as a hedging transaction shall not be considered a
2 replication transaction.
3 UUU. "Repurchase transaction" means a transaction in
4 which an insurer purchases securities from a business entity
5 that is obligated to repurchase the purchased securities or
6 equivalent securities from the insurer at a specified price,
7 either within a specified period of time or upon demand.
8 VVV. "Required liabilities" means total liabilities
9 required to be reported on the statutory financial statement
10 of the insurer most recently required to be filed with the
11 Director.
12 WWW. "Residential mortgage loan" means a loan primarily
13 secured by a mortgage on real estate improved with a one to
14 four family residence.
15 XXX. "Reverse repurchase transaction" means a
16 transaction in which an insurer sells securities to a
17 business entity and is obligated to repurchase the sold
18 securities or equivalent securities from the business entity
19 at a specified price, either within a specified period of
20 time or upon demand.
21 YYY. "Secured location" means the contiguous real estate
22 owned by one person.
23 ZZZ. "Securities lending transaction" means a
24 transaction in which securities are loaned by an insurer to a
25 business entity that is obligated to return the loaned
26 securities or equivalent securities to the insurer, either
27 within a specified period of time or upon demand.
28 AAAA. "Series company" means an investment company that
29 is organized as a series company, as defined in Rule 18f-2(a)
30 adopted under the Investment Company Act of 1940 (15 U.S.C.
31 80a-1 et seq.), as amended.
32 BBBB. "Sinking fund stock" means preferred stock that:
33 (1) Is subject to a mandatory sinking fund or
34 similar arrangement that will provide for the redemption
SB1728 Enrolled -40- LRB9011450JSmg
1 (or open market purchase) of the entire issue over a
2 period not longer than 40 years from the date of
3 acquisition; and
4 (2) Provides for mandatory sinking fund
5 installments (or open market purchases) commencing not
6 more than 10.5 years from the date of issue, with the
7 sinking fund installments providing for the purchase or
8 redemption, on a cumulative basis commencing 10 years
9 from the date of issue, of at least 2.5% per year of the
10 original number of shares of that issue of preferred
11 stock.
12 CCCC. "Special rated credit instrument" means a rated
13 credit instrument that is:
14 (1) An instrument that is structured so that, if it
15 is held until retired by or on behalf of the issuer, its
16 rate of return, based on its purchase cost and any cash
17 flow stream possible under the structure of the
18 transaction, may become negative due to reasons other
19 than the credit risk associated with the issuer of the
20 instrument; however, a rated credit instrument shall not
21 be a special rated credit instrument under this
22 subsection if it is:
23 (a) A share in a class one bond mutual fund;
24 (b) An instrument, other than an asset-backed
25 security, with payments of par value fixed as to
26 amount and timing, or callable but in any event
27 payable only at par or greater, and interest or
28 dividend cash flows that are based on either a fixed
29 or variable rate determined by reference to a
30 specified rate or index;
31 (c) An instrument, other than an asset-backed
32 security, that has a par value and is purchased at a
33 price no greater than 110% of par;
34 (d) An instrument, including an asset-backed
SB1728 Enrolled -41- LRB9011450JSmg
1 security, whose rate of return would become negative
2 only as a result of a prepayment due to casualty,
3 condemnation or economic obsolescence of collateral
4 or change of law;
5 (e) An asset-backed security that relies on
6 collateral that meets the requirements of
7 subparagraph (b) of this paragraph, the par value of
8 which collateral:
9 (i) Is not permitted to be paid sooner
10 than one half of the remaining term to maturity
11 from the date of acquisition;
12 (ii) Is permitted to be paid prior to
13 maturity only at a premium sufficient to
14 provide a yield to maturity for the investment,
15 considering the amount prepaid and reinvestment
16 rates at the time of early repayment, at least
17 equal to the yield to maturity of the initial
18 investment; or
19 (iii) Is permitted to be paid prior to
20 maturity at a premium at least equal to the
21 yield of a treasury issue of comparable
22 remaining life; or
23 (f) An asset-backed security that relies on
24 cash flows from assets that are not prepayable at
25 any time at par, but is not otherwise governed by
26 subparagraph (e) of this paragraph, if the
27 asset-backed security has a par value reflecting
28 principal payments to be received if held until
29 retired by or on behalf of the issuer and is
30 purchased at a price no greater than 105% of such
31 par amount.
32 (2) An asset-backed security that:
33 (a) Relies on cash flows from assets that are
34 prepayable at par at any time;
SB1728 Enrolled -42- LRB9011450JSmg
1 (b) Does not make payments of par that are
2 fixed as to amount and timing; and
3 (c) Has a negative rate of return at the time
4 of acquisition if a prepayment threshold assumption
5 is used with such prepayment threshold assumption
6 defined as either:
7 (i) Two (2) times the prepayment
8 expectation reported by a recognized, publicly
9 available source as being the median of
10 expectations contributed by broker dealers or
11 other entities, except insurers, engaged in the
12 business of selling or evaluating such
13 securities or assets. The prepayment
14 expectation used in this calculation shall be,
15 at the insurer's election, the prepayment
16 expectation for pass-through securities of the
17 Federal National Mortgage Association, the
18 Federal Home Loan Mortgage Corporation, the
19 Government National Mortgage Association, or
20 for other assets of the same type as the assets
21 that underlie the asset- backed security, in
22 either case with a gross weighted average
23 coupon comparable to the gross weighted average
24 coupon of the assets that underlie the
25 asset-backed security; or
26 (ii) Another prepayment threshold
27 assumption specified by the Director by rule
28 promulgated under Section 126.8.
29 (3) For purposes of subparagraph 2 of this
30 subsection, if the asset-backed security is purchased in
31 combination with one or more other asset-backed
32 securities that are supported by identical underlying
33 collateral, the insurer may calculate the rate of return
34 for these specific combined asset-backed securities in
SB1728 Enrolled -43- LRB9011450JSmg
1 combination. The insurer must maintain documentation
2 demonstrating that such securities were acquired and are
3 continuing to be held in combination.
4 DDDD. "State" means a state, territory or possession of
5 the United States of America, the District of Columbia or the
6 Commonwealth of Puerto Rico.
7 EEEE. "Substantially similar securities" means
8 securities that meet all criteria for substantially similar
9 securities specified in the NAIC Accounting Practices and
10 Procedures Manual, as amended, and in an amount that
11 constitutes good delivery form as determined from time to
12 time by the PSA The Bond Market Trade Association.
13 FFFF. "Subsidiary" means, as to any person, an affiliate
14 controlled by such person, directly or indirectly through one
15 or more intermediaries.
16 GGGG. "SVO" means the Securities Valuation Office of the
17 NAIC or any successor office established by the NAIC.
18 HHHH. "Swap" means an agreement to exchange or to net
19 payments at one or more times based on the actual or expected
20 price, level, performance or value of one or more underlying
21 interests.
22 IIII. "Underlying interest" means the assets,
23 liabilities, other interests or a combination thereof
24 underlying a derivative instrument, such as any one or more
25 securities, currencies, rates, indices, commodities or
26 derivative instruments.
27 JJJJ. "Unrestricted surplus" means the amount by which
28 total admitted assets exceed 125% of the insurer's required
29 liabilities.
30 KKKK. "Warrant" means an instrument that gives the
31 holder the right to purchase an underlying financial
32 instrument at a given price and time or at a series of prices
33 and times outlined in the warrant agreement. Warrants may be
34 issued alone or in connection with the sale of other
SB1728 Enrolled -44- LRB9011450JSmg
1 securities, for example, as part of a merger or
2 recapitalization agreement, or to facilitate divestiture of
3 the securities of another business entity.
4 (Source: P.A. 90-418, eff. 8-15-97.)
5 (215 ILCS 5/143) (from Ch. 73, par. 755)
6 Sec. 143. Policy forms.
7 (1) Life, accident and health. No company transacting
8 the kind or kinds of business enumerated in Classes 1 (a), 1
9 (b) and 2 (a) of Section 4 shall issue or deliver in this
10 State a policy or certificate of insurance or evidence of
11 coverage, attach an endorsement or rider thereto, incorporate
12 by reference bylaws or other matter therein or use an
13 application blank in this State until the form and content of
14 such policy, certificate, evidence of coverage, endorsement,
15 rider, bylaw or other matter incorporated by reference or
16 application blank has been filed with and approved by the
17 Director and the appropriate filing fee under Section 408 has
18 been paid, except that any such endorsement or rider that
19 unilaterally reduces benefits and is to be attached to a
20 policy subsequent to the date the policy is issued must be
21 filed with, reviewed, and formally approved by the Director
22 prior to the date it is attached to a policy issued or
23 delivered in this State. It shall be the duty of the
24 Director to withhold approval of any such policy,
25 certificate, endorsement, rider, bylaw or other matter
26 incorporated by reference or application blank filed with him
27 if it contains provisions which encourage misrepresentation
28 or are unjust, unfair, inequitable, ambiguous, misleading,
29 inconsistent, deceptive, contrary to law or to the public
30 policy of this State, or contains exceptions and conditions
31 that unreasonably or deceptively affect the risk purported to
32 be assumed in the general coverage of the policy. In all
33 cases the Director shall approve or disapprove any such form
SB1728 Enrolled -45- LRB9011450JSmg
1 within 60 days after submission unless the Director extends
2 by not more than an additional 30 days the period within
3 which he shall approve or disapprove any such form by giving
4 written notice to the insurer of such extension before
5 expiration of the initial 60 days period. The Director shall
6 withdraw his approval of a policy, certificate, evidence of
7 coverage, endorsement, rider, bylaw, or other matter
8 incorporated by reference or application blank if he
9 subsequently determines that such policy, certificate,
10 evidence of coverage, endorsement, rider, bylaw, other
11 matter, or application blank is misrepresentative, unjust,
12 unfair, inequitable, ambiguous, misleading, inconsistent,
13 deceptive, contrary to law or public policy of this State, or
14 contains exceptions or conditions which unreasonably or
15 deceptively affect the risk purported to be assumed in the
16 general coverage of the policy or evidence of coverage.
17 If a previously approved policy, certificate, evidence of
18 coverage, endorsement, rider, bylaw or other matter
19 incorporated by reference or application blank is withdrawn
20 for use, the Director shall serve upon the company an order
21 of withdrawal of use, either personally or by mail, and if by
22 mail, such service shall be completed if such notice be
23 deposited in the post office, postage prepaid, addressed to
24 the company's last known address specified in the records of
25 the Department of Insurance. The order of withdrawal of use
26 shall take effect 30 days from the date of mailing but shall
27 be stayed if within the 30-day period a written request for
28 hearing is filed with the Director. Such hearing shall be
29 held at such time and place as designated in the order given
30 by the Director. The hearing may be held either in the City
31 of Springfield, the City of Chicago or in the county where
32 the principal business address of the company is located. The
33 action of the Director in disapproving or withdrawing such
34 form shall be subject to judicial review under the
SB1728 Enrolled -46- LRB9011450JSmg
1 Administrative Review Law.
2 This subsection shall not apply to riders or endorsements
3 issued or made at the request of the individual policyholder
4 relating to the manner of distribution of benefits or to the
5 reservation of rights and benefits under his life insurance
6 policy.
7 (2) Casualty, fire, and marine. The Director shall
8 require the filing of all policy forms issued or delivered by
9 any company transacting the kind or kinds of business
10 enumerated in Classes 2 (except Class 2 (a)) and 3 of Section
11 4. In addition, he may require the filing of any generally
12 used riders, endorsements, certificates, application blanks,
13 and other matter incorporated by reference in any such policy
14 or contract of insurance along with the appropriate filing
15 fee under Section 408. Companies that are members of an
16 organization, bureau, or association may have the same filed
17 for them by the organization, bureau, or association. If the
18 Director shall find from an examination of any such policy
19 form, rider, endorsement, certificate, application blank, or
20 other matter incorporated by reference in any such policy so
21 filed that it (i) violates any provision of this Code, (ii)
22 contains inconsistent, ambiguous, or misleading clauses, or
23 (iii) contains exceptions and conditions that will
24 unreasonably or deceptively affect the risks that are
25 purported to be assumed by the policy, he shall order the
26 company or companies issuing these forms to discontinue their
27 use. Nothing in this subsection shall require a company
28 transacting the kind or kinds of business enumerated in
29 Classes 2 (except Class 2 (a)) and 3 of Section 4 to obtain
30 approval of these forms before they are issued nor in any way
31 affect the legality of any policy that has been issued and
32 found to be in conflict with this subsection, but such
33 policies shall be subject to the provisions of Section 442.
34 (3) This Section shall not apply (i) to surety contracts
SB1728 Enrolled -47- LRB9011450JSmg
1 or fidelity bonds, (ii) to policies issued to an industrial
2 insured as defined in Section 121-2.08 except for workers'
3 compensation policies, nor (iii) to riders or endorsements
4 prepared to meet special, unusual, peculiar, or extraordinary
5 conditions applying to an individual risk.
6 (Source: P.A. 87-1090; 88-313.)
7 (215 ILCS 5/144) (from Ch. 73, par. 756)
8 Sec. 144. Limitation of risk.
9 (1) No company authorized to transact any of the kind of
10 business enumerated in Classes 2 and 3 of Section 4 in this
11 State may expose itself to any loss on any one risk or hazard
12 to an amount exceeding 10% of its admitted assets in excess
13 of its liabilities excluding, in the case of a stock company,
14 its capital stock liability. No portion of any such risk or
15 hazard which has been reinsured in a domestic or an approved
16 foreign or alien company, in accordance with this Code, shall
17 be included in determining the limitation of risk prescribed
18 herein.
19 (2) Any company transacting the kind of business
20 enumerated in clause (g) of Class 2 of Section 4 may expose
21 itself to a risk or hazard in excess of the amount prescribed
22 in subsection (1) if it is protected in excess of that amount
23 by the following:
24 (a) The co-suretyship of such a company similarly
25 authorized; or
26 (b) By deposit with it in pledge or conveyance to
27 it in trust for its protection of property; or
28 (c) By conveyance or mortgage for its protection;
29 or
30 (d) In case a suretyship obligation was made on
31 behalf or on account of a fiduciary holding property in a
32 trust capacity, by deposit or other disposition of a
33 portion of the property so held in trust that no future
SB1728 Enrolled -48- LRB9011450JSmg
1 sale, mortgage, pledge or other disposition can be made
2 thereof without the consent of such company except by a
3 judgment or order of a court of competent jurisdiction.
4 (3) A company designated in subsection (2) may also
5 execute transportation or warehouse bonds for United States
6 Internal Revenue taxes to an amount equal to 50% of its
7 capital and surplus. When the penalty of the suretyship
8 obligation exceeds the amount of a judgment described therein
9 as appealed from and thereby secured, or exceeds the amount
10 of the subject matter in controversy or of the estate in the
11 custody of the fiduciary for the performance of whose duties
12 it is conditioned, the bond may be executed if the actual
13 amount of the judgment or the subject matter in controversy
14 or estate not subject to supervision or control of the surety
15 is not in excess of such limitation. When the penalty of the
16 suretyship obligation executed for the performance of a
17 contract exceeds the contract price, the latter shall be
18 taken as the basis for estimating the limit of risk within
19 the meaning of this Section.
20 (4) Whenever the ratio of the annual premium volume in
21 proportion to the policyholder surplus of any company
22 transacting the kinds of business authorized in Class 2 and
23 Class 3 of Section 4 when reviewed in conjunction with the
24 kinds and nature of risks insured, the financial condition of
25 the company and its ownership including but not limited to
26 the liquidity of assets, relationship of surplus to
27 liabilities and adequacy of outstanding loss reserves,
28 creates a condition such that the further assumption of risks
29 might be hazardous to policyholders, creditors or the general
30 public, then the Director may order such company to take one
31 or more of the following steps:
32 (a) to reduce the loss exposure by reinsurance;
33 (b) to reduce the volume of new business being
34 accepted;
SB1728 Enrolled -49- LRB9011450JSmg
1 (c) to suspend the writing of new business for a
2 period not to exceed 3 months;
3 (d) to increase and maintain the company's surplus
4 by a contribution to surplus which will raise the surplus
5 for such a period of time and by such an amount as the
6 Director may deem necessary and essential; or
7 (e) to reduce general or acquisition expenses by
8 specified methods.
9 (f) (Blank).
10 (5) The provisions of this Section do not apply to
11 domestic, foreign, and alien Lloyds.
12 The company may, within 10 days after receipt of an Order
13 of the Director under this Section, request that the Director
14 hold a hearing to determine whether the Order of the Director
15 should be modified in any way. A request for a hearing by a
16 company under this Section stays any Order of the Director
17 entered under this Section until such time as the Director
18 has entered an Order pursuant to the hearing.
19 (Source: P.A. 89-97, eff. 7-7-95.)
20 (215 ILCS 5/445) (from Ch. 73, par. 1057)
21 Sec. 445. Surplus line.
22 (1) Surplus line defined; surplus line insurer
23 unauthorized company requirements. Surplus line insurance is
24 insurance on an Illinois risk of the kinds specified in
25 Classes 2 and 3 of Section 4 of this Code procured from an
26 unauthorized company or a domestic surplus line insurer as
27 defined in Section 445a after the insurance producer
28 representing the insured or the surplus line producer is
29 unable, after diligent effort, to procure said insurance from
30 companies which are authorized to transact business in this
31 State other than domestic surplus line insurers as defined in
32 Section 445a.
33 Insurance producers may procure surplus line insurance
SB1728 Enrolled -50- LRB9011450JSmg
1 only if licensed as a surplus line producer under this
2 Section and may procure that insurance only from an
3 unauthorized company or from a domestic surplus line insurer
4 as defined in Section 445a:
5 (a) that based upon information available to the
6 surplus line producer has a policyholders surplus of not
7 less than $15,000,000 determined in accordance with
8 accounting rules that are applicable to authorized
9 companies; and
10 (b) that has standards of solvency and management
11 that are adequate for the protection of policyholders;
12 and
13 (c) where an unauthorized company does not meet the
14 standards set forth in (a) and (b) above, a surplus line
15 producer may, if necessary, procure insurance from that
16 company only if prior written warning of such fact or
17 condition is given to the insured by the insurance
18 producer or surplus line producer.
19 (2) Surplus line producer; license. Any licensed
20 producer who is a resident of this State may be licensed as a
21 surplus line producer upon:
22 (a) passing a written examination. The examination
23 shall reasonably test the knowledge of the applicant
24 concerning the surplus line law and the responsibilities
25 assumed by a surplus line producer thereunder. The
26 examination provided for by this Section shall be
27 conducted under rules and regulations prescribed by the
28 Director. The Director may administer the examination or
29 may make arrangements, including contracting with an
30 outside testing service, for administering such
31 examinations. Any charges assessed by the Director or
32 the testing service for administering such examinations
33 shall be paid directly by the individual applicants.
34 Each applicant required to take an examination shall, at
SB1728 Enrolled -51- LRB9011450JSmg
1 the time of request for examination, enclose with the
2 application a non-refundable $10 application fee payable
3 to the Director plus an examination administration fee.
4 If the Director administers the examination, the
5 application fee and examination administration fee shall
6 be combined and made payable to the Director. If the
7 Director designates an outside testing service to
8 administer the examination, the applicant shall make a
9 separate examination administration fee remittance
10 payable to the designated testing service for the total
11 fees the testing service charges for each of the various
12 services being requested by the applicant. An applicant
13 who fails to appear for the examination as scheduled, or
14 appears but fails to pass, shall not be entitled to any
15 refund, and shall be required to submit a new request for
16 examination together with all the requisite fees before
17 being rescheduled for another examination at a later
18 date;
19 (b) payment of an annual license fee of $200; and
20 (c) procurement of the surety bond required in
21 subsection (4) of this Section.
22 Each surplus line producer so licensed shall keep a
23 separate account of the business transacted thereunder which
24 shall be open at all times to the inspection of the Director
25 or his representative.
26 The examination requirement in (a) above shall not apply
27 to insurance producers who were licensed under the Illinois
28 surplus line law or individuals designated to act for a
29 partnership, association or corporation licensed under the
30 Illinois surplus line law on February 27, 1985.
31 (3) Taxes and reports.
32 (a) Surplus line tax and penalty for late payment.
33 Each surplus line producer shall file with the
34 Director on or before February 1 and August 1 of each
SB1728 Enrolled -52- LRB9011450JSmg
1 year a report in the form prescribed by the Director on
2 all surplus line insurance procured from unauthorized
3 insurers during the preceding 6 month period ending
4 December 31 or June 30 respectively, and on the filing of
5 such report shall pay to the Director for the use and
6 benefit of the State a sum equal to 3% of the gross
7 premiums less returned premiums upon all surplus line
8 insurance procured or cancelled during the preceding 6
9 months.
10 Any surplus line producer who fails to pay the full
11 amount due under this subsection is liable, in addition
12 to the amount due, for such penalty and interest charges
13 as are provided for under Section 412 of this Code. The
14 Director, through the Attorney General, may institute an
15 action in the name of the People of the State of
16 Illinois, in any court of competent jurisdiction, for the
17 recovery of the amount of such taxes and penalties due,
18 and prosecute the same to final judgment, and take such
19 steps as are necessary to collect the same.
20 (b) Fire Marshal Tax.
21 Each surplus line producer shall file with the
22 Director on or before March 31 of each year a report in
23 the form prescribed by the Director on all fire insurance
24 procured from unauthorized insurers subject to tax under
25 Section 12 of the Fire Investigation Act and shall pay to
26 the Director the fire marshal tax required thereunder.
27 (c) Taxes and fees charged to insured. The taxes
28 imposed under this subsection and the countersigning fees
29 charged by the Surplus Line Association of Illinois may
30 be charged to and collected from surplus line insureds.
31 (4) Bond. Each surplus line producer, as a condition to
32 receiving a surplus line producer's license, shall execute
33 and deliver to the Director a surety bond to the People of
34 the State in the penal sum of $20,000, with a surety which is
SB1728 Enrolled -53- LRB9011450JSmg
1 authorized to transact business in this State, conditioned
2 that the surplus line producer will pay to the Director the
3 tax, interest and penalties levied under subsection (3) of
4 this Section.
5 (5) Submission of documents to Surplus Line Association
6 of Illinois. Each surplus line producer shall submit every
7 insurance contract issued under his or her license to the
8 Surplus Line Association of Illinois for recording and
9 countersignature. The insurance contracts submitted shall
10 set forth:
11 (a) the name of the insured;
12 (b) the description and location of the insured
13 property or risk;
14 (c) the amount insured;
15 (d) the gross premiums charged or returned;
16 (e) the name of the unauthorized insurer or
17 domestic surplus line insurer as defined in Section 445a
18 from whom coverage has been procured company;
19 (f) the kind or kinds of insurance procured; and
20 (g) amount of premium subject to tax required by
21 Section 12 of the Fire Investigation Act.
22 Proposals, endorsements and other documents which
23 are incidental to the insurance but which does not affect
24 the premium charged are exempted from countersignature.
25 The submission of insuring contracts to the Surplus
26 Line Association of Illinois constitutes a certification
27 by the surplus line producer or by the insurance producer
28 who presented the risk to the surplus line producer for
29 placement as a surplus line risk that after diligent
30 effort the required insurance could not be procured from
31 companies which are authorized to transact business in
32 this State other than domestic surplus line insurers as
33 defined in Section 445a and that such procurement was
34 otherwise in accordance with the surplus line law.
SB1728 Enrolled -54- LRB9011450JSmg
1 (6) Countersignature required. It shall be unlawful for
2 an insurance producer to deliver any unauthorized company
3 insurance contract or domestic surplus line insurer contract
4 unless such insurance contract is countersigned by the
5 Surplus Line Association of Illinois.
6 (7) Inspection of records. Each surplus line producer
7 shall maintain separate records of the business transacted
8 under his or her license, which records shall be open at all
9 times for inspection by the Director and by the Surplus Line
10 Association of Illinois.
11 (8) Violations and penalties. The Director may suspend
12 or revoke or refuse to renew a surplus line producer license
13 for any violation of this Code. In addition to or in lieu of
14 suspension or revocation, the Director may subject a surplus
15 line producer to a civil penalty of up to $1,000 for each
16 cause for suspension or revocation. Such penalty is
17 enforceable under subsection (5) of Section 403A of this
18 Code.
19 (9) Director may declare insurer company ineligible. If
20 the Director determines that the further assumption of risks
21 might be hazardous to the policyholders of an unauthorized
22 insurer company, the Director may order the Surplus Line
23 Association of Illinois not to countersign insurance
24 contracts evidencing insurance in such insurer company and
25 order surplus line producers to cease procuring insurance
26 from such insurer company.
27 (10) Service of process upon Director. All insurance
28 contracts delivered under this Section from unauthorized
29 insurers shall contain a provision designating the Director
30 and his successors in office the true and lawful attorney of
31 the insurer company upon whom may be served all lawful
32 process in any action, suit or proceeding arising out of such
33 insurance and further designate the surplus line producer or
34 other resident of this State an agent of the unauthorized
SB1728 Enrolled -55- LRB9011450JSmg
1 insurer company to which a copy of such process shall be
2 forwarded by the Director for delivery to the insurer
3 company. Service of process made upon the Director to be
4 valid hereunder must state the name of the insured, the name
5 of the unauthorized insurer company and identify the contract
6 of insurance. The Director at his option is authorized to
7 forward a copy of the process to the Surplus Line Association
8 of Illinois for delivery to the surplus line producer or
9 other designated resident of this State or the Director may
10 deliver the process to the unauthorized insurer company by
11 other means which he considers to be reasonably prompt and
12 certain.
13 (11) The Illinois Surplus Line law does not apply to
14 insurance of property and operations of railroads or aircraft
15 engaged in interstate or foreign commerce, insurance of
16 vessels, crafts or hulls, cargoes, marine builder's risks,
17 marine protection and indemnity, or other risks including
18 strikes and war risks insured under ocean or wet marine forms
19 of policies.
20 (12) Surplus line insurance procured under this Section,
21 including insurance procured from a domestic surplus line
22 insurer, is not subject to the provisions of the Illinois
23 Insurance Code other than Sections 123, 123.1, 401, 401.1,
24 402, 403, 403A, 408, 412, 445, 445.1, 445.2, 445.3, 445.4,
25 and all of the provisions of Article XXXI to the extent that
26 the provisions of Article XXXI are not inconsistent with the
27 terms of this Act.
28 (Source: P.A. 88-627, eff. 9-9-94.)
29 (215 ILCS 5/445a new)
30 Sec. 445a. Domestic surplus line insurer.
31 (a) A domestic insurer possessing policyholder surplus
32 of at least $15,000,000 may pursuant to a resolution by its
33 board of directors, and with the written approval of the
SB1728 Enrolled -56- LRB9011450JSmg
1 Director, be designated as a "domestic surplus line insurer".
2 (b) A domestic surplus line insurer may only insure in
3 this State an Illinois risk procured from a surplus line
4 producer pursuant to Section 445 of this Code.
5 (c) A domestic surplus line insurer must agree not to
6 issue a policy designed to satisfy the financial
7 responsibility requirements of the Illinois Vehicle Code, the
8 Workers' Compensation Act, or the Workers' Occupational
9 Diseases Act. A domestic surplus line insurer is not subject
10 to the provisions of Articles XXXIII, XXXIII 1/2, XXXIV,
11 XXXVIIIA, Section 468, or Section 478.1 of this Code.
12 Section 10. The Dental Service Plan Act is amended by
13 changing Section 35 as follows:
14 (215 ILCS 110/35) (from Ch. 32, par. 690.35)
15 Sec. 35. Investments; reserves; deficiencies.
16 (a) The funds of any dental service plan corporation may
17 be invested only in accordance with the requirements provided
18 by law for the investment of funds of life insurance
19 companies.
20 (b) As an allocation of net worth, each dental service
21 plan corporation shall maintain a special contingent reserve.
22 The special contingent reserve for a corporation that is
23 beginning operations shall be equal to 5% of its net earned
24 subscription revenue for dental care services through
25 December 31st of the year in which it is certified, but in no
26 event less than that $100,000. In subsequent years, unless
27 waived by the Director, the corporation shall accumulate
28 additions to the contingent reserve in an amount which is
29 equal to 2% of its net earned subscription revenue for each
30 calendar year. For purposes of this Section, "net earned
31 subscription revenue" means premium minus reinsurance
32 expenses. Maintenance of the contingent reserve requires
SB1728 Enrolled -57- LRB9011450JSmg
1 that net worth equals or exceeds the contingent reserve at
2 any balance sheet date. The special contingent reserve shall
3 be provided in cash and securities in combination and form
4 acceptable to the Director.
5 (c) Additional accumulations under Section 35(b) will no
6 longer be required when at such time that the total special
7 contingent reserve required by Section 35(b) is equal to or
8 greater than 5% of the corporation's average annual net
9 earned subscription revenue for the corporation's preceding 2
10 two calendar years. Additional accumulations under
11 subsection (b) of this Section shall no longer be required
12 when the total special contingent reserve required by
13 subsection (b) of this Section is equal to $1,500,000.
14 (d) A deficiency in meeting amounts required in
15 subsection (b) Section 6(b) or (c) of this Section will
16 require, upon notice from the Director, (1) filing of a plan
17 for correction of the deficiency, acceptable to the Director,
18 within 20 days from receipt of notice, and (2) correction of
19 the deficiency within a reasonable time, not to exceed 60
20 days from receipt of notice unless an extension of time is
21 granted by the Director. Such a deficiency will be deemed an
22 impairment, and failure to correct the deficiency in the
23 prescribed time shall be grounds for rehabilitation,
24 liquidation, conservation, or dissolution pursuant to Section
25 38.
26 (Source: P.A. 84-209; revised 2-25-98.)
27 Section 15. The Employee Leasing Company Act is amended
28 by changing Sections 10, 15, 20, 25, 30, 40, and 50 and
29 adding Section 56 as follows:
30 (215 ILCS 113/10)
31 Sec. 10. Applicability. This Act applies to all lessors
32 and insurers conducting business in this State and to
SB1728 Enrolled -58- LRB9011450JSmg
1 policies issued, renewed, or delivered after the effective
2 date of this amendatory Act of 1998.
3 (Source: P.A. 90-499, eff. 1-1-98.)
4 (215 ILCS 113/15)
5 Sec. 15. Definitions. In this Act:
6 "Department" means the Illinois Department of Insurance.
7 "Employee leasing arrangement" means a contractual an
8 arrangement, including long-term temporary arrangements
9 whereby a lessor obligates itself to perform specified
10 employer responsibilities as to leased employees including
11 the securing of workers' compensation insurance. For
12 purposes of this Act, "employee leasing arrangement" does not
13 include "temporary help arrangement". under contract or
14 otherwise, whereby one business or other entity leases all or
15 a majority number of its workers from another business.
16 Employee leasing arrangements include, but are not limited
17 to, full service employee leasing arrangements, long-term
18 temporary arrangements, and any other arrangement that
19 involves the allocation of employment responsibilities among
20 2 or more entities. For purposes of this Act, "employee
21 leasing arrangement" does not include arrangements to provide
22 temporary help service. "Temporary help service" means a
23 service whereby an organization hires its own employees and
24 assigns them to clients for a finite time period to support
25 or supplement the client's work force in special work
26 situations such as employee absences, temporary skill
27 shortages, and seasonal workloads.
28 "Leased employee" or "worker" means a person performing
29 services for a lessee under an employee leasing arrangement.
30 "Lessee" or "client company" means an entity that obtains
31 any all or part of its work force from another entity through
32 an employee leasing arrangement or that employs the services
33 of an entity through an employee leasing arrangement.
SB1728 Enrolled -59- LRB9011450JSmg
1 "Lessor" or "employee leasing company" means an entity
2 that leases any of its workers grants a written lease to a
3 lessee through an employee leasing arrangement.
4 "Long-term temporary arrangement" means an arrangement
5 where one company leases all or a majority number of workers
6 employees from one company are leased to another for a period
7 in excess of 6 months or consecutive periods equal to or
8 greater than one year.
9 "Premium subject to dispute" means the insured has
10 provided a written notice of dispute of the premium to the
11 insurer or service carrier, has initiated any applicable
12 proceeding for resolving these disputes as prescribed by law
13 or rating organization rule, or has initiated litigation
14 regarding the premium dispute. The insured must have
15 detailed the specific areas of dispute and provided an
16 estimate of the premium the insured believes to be correct.
17 The insured must have paid any undisputed portion of the
18 bill.
19 "Residual market mechanism" means the residual market
20 mechanism as defined in Section 468 of the Illinois Insurance
21 Code.
22 "Temporary help arrangement" means a service whereby an
23 organization hires its own employees and assigns them to
24 clients for a finite time period to support or supplement the
25 client's work force in special work situations such as, but
26 not limited to, employee absences, temporary skill shortages,
27 seasonal workloads, and special assignments and projects.
28 (Source: P.A. 90-499, eff. 1-1-98.)
29 (215 ILCS 113/20)
30 Sec. 20. Registration.
31 (a) A lessor shall register with the Department prior to
32 becoming a qualified self-insured for workers' compensation
33 or becoming eligible to be issued a workers' compensation and
SB1728 Enrolled -60- LRB9011450JSmg
1 employers' liability insurance policy. An employee leasing
2 company may not engage in business in this State without
3 first registering with the Department. A corporation,
4 partnership, sole proprietorship, or other business entity
5 that provides staff, personnel, or employees to be employed
6 in this State to other businesses pursuant to a lease
7 arrangement or agreement shall, before becoming eligible to
8 be issued any policy of workers' compensation insurance,
9 register with the Department. The registration shall:
10 (1) identify the name of the lessor;
11 (2) identify the address of the principal place of
12 business of the lessor and the address of each office it
13 maintains within this State;
14 (3) include the lessor's taxpayer or employer
15 identification number;
16 (4) include a list by jurisdiction of each and
17 every name that the lessor has operated under in the
18 preceding 5 years including any alternative names and
19 names of predecessors and, if known, successor business
20 entities;
21 (5) include a list of the officers and directors of
22 the lessor and employee leasing company or its
23 predecessors, successors, or alter egos in the preceding
24 5 years; and
25 (6) include a $500 fee for the registration and
26 each annual renewal thereafter.
27 Amounts received as registration fees shall be deposited
28 into the Insurance Producer Administration Fund. list of each
29 and every cancellation or nonrenewal of workers' compensation
30 insurance that has been issued to the lessor or any
31 predecessor in the preceding 5 years. The list shall include
32 the policy or certificate number, name of insurer or other
33 provider of coverage, date of cancellation, and reason for
34 cancellation. If coverage has not been cancelled or
SB1728 Enrolled -61- LRB9011450JSmg
1 nonrenewed, the registration shall include a sworn affidavit
2 signed by the chief executive officer of the lessor attesting
3 to that fact.
4 Each employee leasing company registrant shall pay to the
5 Department upon initial registration, and upon each renewal
6 annually thereafter, a registration fee of $500.
7 Each employee leasing company shall maintain accounting
8 and employment records relating to all employee leasing
9 activities for a minimum of 3 calendar years.
10 (b) (Blank) Any lessor of employees whose workers'
11 compensation insurance has been terminated within the past 5
12 years in any jurisdiction due to a determination that an
13 employee leasing arrangement was being utilized to avoid
14 premium otherwise payable by lessees shall be ineligible to
15 register with the Department or to remain registered, if
16 previously registered.
17 (c) Lessors registering Persons filing registration
18 statements pursuant to this Section shall notify the
19 Department within 30 days as to any changes in any
20 information provided pursuant to this Section.
21 (d) The Department shall maintain a list of those
22 lessors of employees who are satisfactorily registered with
23 the Department.
24 (e) The Department may prescribe any forms that are
25 necessary to promote the efficient administration of this
26 Section.
27 (f) Any lessor of employees that was doing business in
28 this State prior to enactment of this Act shall register with
29 the Department within 60 days of the effective date of this
30 Act.
31 (Source: P.A. 90-499, eff. 1-1-98.)
32 (215 ILCS 113/25)
33 Sec. 25. Record keeping and reporting requirement.
SB1728 Enrolled -62- LRB9011450JSmg
1 (a) A lessor shall maintain accounting and employment
2 records relating to all employee leasing arrangements for a
3 minimum of 4 calendar years. A lessor shall maintain the
4 address of each office it maintains in this State, at its
5 principal place of business.
6 (b) A lessor shall maintain sufficient information in a
7 manner consistent with a licensed rating organization's data
8 submission requirements to permit the rating organization
9 licensed under Section 459 of the Illinois Insurance Code to
10 calculate an experience modification factor for the lessee.
11 (c) Upon written request of a lessee with an annual
12 payroll attributed to it in excess of $200,000, the lessor
13 shall provide the lessee's experience modification factor to
14 the lessee within 30 days of the request.
15 (d) Upon request of a lessee with an annual payroll
16 attributed to it of less than $200,000, the lessor shall
17 provide the loss information required to be maintained by
18 this Section to the lessee within 30 days of the request.
19 (e) Nothing in this Section shall preclude a licensed
20 rating organization from calculating the experience
21 modification factor for each lessee nor an insurer from
22 maintaining and furnishing on behalf of the lessor, such
23 information as required by this Section. A lessor shall
24 maintain and furnish once every 12 months or in the event of
25 a termination of the employee leasing arrangement sufficient
26 information to the insurer, who shall submit such information
27 to permit the calculation of an experience modification
28 factor by a rating organization licensed under Section 459 of
29 the Illinois Insurance Code for each lessee. This
30 information shall be submitted in a manner consistent with a
31 licensed rating organization's data submission requirements
32 and shall include but not be limited to the following:
33 (1) the lessee's corporate name, or operating name
34 if not a corporation, and address;
SB1728 Enrolled -63- LRB9011450JSmg
1 (2) the lessee's taxpayer or employer
2 identification number;
3 (3) the lessee's risk identification number;
4 (4) a listing of all leased employees associated
5 with each lessee, the applicable classification code, and
6 payroll; and
7 (5) claims information grouped by lessee and any
8 other information necessary to permit the calculation of
9 an experience modification factor for each lessee.
10 (f) (b) In the event that a lessee's experience
11 modification factor exceeds the lessor's experience
12 modification factor by 50% at the inception of the employee
13 leasing arrangement, the lessee's experience modification
14 factor shall be utilized to calculate the premium or costs
15 charged to the lessee for workers' compensation coverage for
16 a period of 2 years. Thereafter, the premium charged by the
17 insurer insurance company for inclusion of a lessee under a
18 lessor's policy may be calculated on the basis of the
19 lessor's experience modification factor.
20 (Source: P.A. 90-499, eff. 1-1-98.)
21 (215 ILCS 113/30)
22 Sec. 30. Responsibility for policy issuance and
23 continuance.
24 (a) When a workers' compensation policy written to cover
25 leased employees is issued to the lessor employee leasing
26 company as the named insured, the lessee client company shall
27 be identified thereon by the attachment of an appropriate
28 endorsement indicating that the policy provides coverage for
29 leased employees in accordance with Illinois law. The
30 endorsement shall, at a minimum, provide for the following:
31 (1) Coverage under the endorsement policy shall be
32 limited to the named insured's employees leased to the
33 lessees.
SB1728 Enrolled -64- LRB9011450JSmg
1 (2) The experience of the employees leased to the
2 particular lessee shall be separately maintained by the
3 lessor as provided in Section 25.
4 (3) Cancellation of the policy shall not affect the
5 rights and obligations of the named insured as an
6 employee leasing company with respect to any other
7 workers' compensation and employers' liability policy
8 issued to the named insured.
9 (b) (Blank). The insurer of the lessor may take all
10 reasonable steps to ascertain exposure under the policy and
11 collect the appropriate premium through the following
12 procedures:
13 (1) complete description of the lessor's
14 operations;
15 (2) periodic reporting of the covered lessee's
16 payroll, classifications, experience rating modification
17 factors, and jurisdictions with exposure. This reporting
18 must be supplemented by a submission of Internal Revenue
19 Service Form 941 or its equivalent to the carrier on a
20 quarterly basis;
21 (3) physical inspection of the client company
22 premises;
23 (4) audit of the lessor's operations; and
24 (5) any other reasonable measures to determine the
25 appropriate premium.
26 (c) The lessor shall notify the insurer or a licensed
27 rating organization 30 days prior to the effective date of
28 termination or immediately upon notification of cancellation
29 by the lessor of an employee leasing arrangement with the
30 lessee in order to allow sufficient time to calculate an
31 experience modification factor for the lessee.
32 (d) The insurer lessor shall provide proof of workers'
33 compensation insurance to the lessor and to each applicable
34 lessee within 30 days of the coverage being effected or
SB1728 Enrolled -65- LRB9011450JSmg
1 changed effective date. Notice of any coverage changes shall
2 be provided to the lessor and to each lessee within 30 days
3 of the effective date of the change.
4 (e) Calculation of a lessor's or lessee's premium shall
5 be done in accordance with the insurer's Nothing in this Act
6 shall limit an insurer from utilizing schedule credits,
7 debits, or other rating manual plans filed with the
8 Department for calculation of a lessor's or lessee's premium.
9 (Source: P.A. 90-499, eff. 1-1-98.)
10 (215 ILCS 113/40)
11 Sec. 40. Insurer or service carrier audit. Insurers
12 shall audit policies issued through the residual market
13 pursuant to Section 30 of this Act within 90 days of the
14 policy effective date and may conduct quarterly audits
15 thereafter. Insurers may audit policies issued through the
16 voluntary market within 90 days of the policy effective date
17 and shall conduct audits during the normal course of business
18 thereafter. The purpose of the audit will be to determine
19 whether all classifications, experience modification factors,
20 and estimated payroll utilized with respect to the
21 development of the premium charged to the lessor are
22 appropriate.
23 (Source: P.A. 90-499, eff. 1-1-98.)
24 (215 ILCS 113/50)
25 Sec. 50. Grounds for removal of eligibility; order;
26 hearing; review.
27 (a) Any registration issued under this Act may be
28 revoked or an application for registration may be denied if
29 the Director finds that the lessor or applicant:
30 (1) has willfully violated any provision of this
31 Act or any rule promulgated by the Director;
32 (2) has intentionally made a material misstatement
SB1728 Enrolled -66- LRB9011450JSmg
1 in the application for a registration;
2 (3) has obtained or attempted to obtain a
3 registration through misrepresentation or fraud;
4 (4) has misappropriated or converted to his own, or
5 improperly withheld, money required to be held in a
6 fiduciary capacity;
7 (5) has used fraudulent, coercive, or dishonest
8 practices, or has demonstrated incompetence,
9 untrustworthiness, or financial irresponsibility;
10 (6) has been, within the past 3 years, convicted of
11 a felony, unless the person demonstrates to the Director
12 sufficient rehabilitation to warrant the public trust;
13 (7) has failed to appear without reasonable cause
14 or excuse in response to a subpoena lawfully issued by
15 the Director;
16 (8) has had its registration or license suspended
17 or revoked or its application denied in any other state,
18 district, territory, or province; Any registration issued
19 under this Act may be revoked or an application for
20 registration may be denied, if the Director finds that
21 the lessor or applicant;
22 (1) has willfully violated any provision of the Act
23 or any rule or regulation promulgated by the Director;
24 (b) (a) When the Director of Insurance has cause to
25 believe that grounds for the refusal, denial, or revocation
26 removal of a registration registrant's eligibility under this
27 Section exists, the Director he or she shall issue an order
28 to the lessor employee leasing company stating the grounds
29 upon which the refusal, denial, or revocation removal is
30 based. The order shall be sent to the lessor employee
31 leasing company by certified or registered mail. The lessor
32 employee leasing company may in writing request a hearing in
33 writing within 30 days of the mailing receipt of the order.
34 If no written request is received by the Director made, the
SB1728 Enrolled -67- LRB9011450JSmg
1 order shall be final upon the expiration of the 30 days.
2 (c) (b) If the lessor employee leasing company requests
3 a hearing pursuant to this Section, the Director shall issue
4 a written notice of hearing sent to the lessor employee
5 leasing company by certified or registered mail stating the
6 following:
7 (1) a specified time for the hearing, which may not
8 be less than 20 days nor more than 30 days after the
9 mailing receipt of the notice of hearing; and
10 (2) a specific place for the hearing, which may be
11 either in the city of Springfield or Chicago or in the
12 county where the lessor's employee leasing company's
13 principal place of business is located.
14 (d) (c) After the hearing, or upon the failure of the
15 lessor employee leasing company to appear at the hearing, the
16 Director of Insurance shall take such action as is deemed
17 advisable on written findings that shall be served on the
18 lessor employee leasing company. The action of the Director
19 of Insurance shall be subject to review under and in
20 accordance with the Administrative Review Law.
21 (Source: P.A. 90-499, eff. 1-1-98.)
22 (215 ILCS 113/56 new)
23 Sec. 56. Rulemaking authority. The Director shall have
24 the authority to promulgate rules to enforce this Act.
25 (215 ILCS 113/35 rep.)
26 (215 ILCS 113/55 rep.)
27 Section 20. The Employee Leasing Company Act is amended
28 by repealing Sections 35 and 55.
29 Section 25. The Farm Mutual Insurance Company Act of
30 1986 is amended by changing Sections 4 and 12 as follows:
SB1728 Enrolled -68- LRB9011450JSmg
1 (215 ILCS 120/4) (from Ch. 73, par. 1254)
2 Sec. 4. Definition of Admitted Assets. Admitted assets
3 shall include those investments permitted under Section 12 of
4 this Act and in addition thereto, only the following:
5 (1) Cash funds held in the company's office and under
6 the company's control.
7 (2) Interest due and accrued on bonds, certificates of
8 deposit and other investments permitted by this Act that are
9 not in default.
10 (3) Dividends declared and unpaid on mutual funds,
11 common stock, and preferred stock, permitted by this Act.
12 (4) (3) Amounts recoverable from solvent insurance
13 companies licensed to do business in this State.
14 (5) (4) Tax refunds due from the United States or the
15 State of Illinois.
16 (6) (5) Premiums receivable on policies not over 90 days
17 past due. The due date of the premium shall be considered to
18 be the first day of the coverage period for which the premium
19 is payable.
20 (Source: P.A. 88-364.)
21 (215 ILCS 120/12) (from Ch. 73, par. 1262)
22 Sec. 12. Investments. Without the prior approval of the
23 Director, the funds of any company operating under or
24 regulated by the provisions of this Act, shall be invested
25 only in the following:
26 (1) Direct obligations of the United States of
27 America, or obligations of agencies or instrumentalities
28 of the United States to the extent guaranteed or insured
29 as to the payment of principal and interest by the United
30 States of America;
31 (2) Bonds which are direct, general obligations of
32 the State of Illinois;
33 (3) Bonds which are direct, general obligations of
SB1728 Enrolled -69- LRB9011450JSmg
1 political subdivisions of the State of Illinois, subject
2 to the following conditions:
3 (a) Maximum of 5% of admitted assets in any
4 one political subdivision;
5 (b) Maximum of 30% 35% of admitted assets in
6 all political subdivisions in the aggregate;
7 (4) Bonds that are obligations of the Federal
8 National Mortgage Association subject to a maximum
9 investment of 10% of admitted assets in the aggregate;
10 (5) Bonds that are obligations of the Federal Home
11 Loan Mortgage Corporation subject to a maximum investment
12 of 10% of admitted assets in the aggregate;
13 (6) Mutual funds subject to the following
14 conditions:
15 (a) Maximum of 3% of policyholders' surplus in
16 any one balanced or growth mutual fund that invests
17 in common stock;
18 (b) Maximum of 5% of admitted assets in any
19 one bond or income mutual fund or any one
20 non-governmental money market mutual fund;
21 (c) Maximum of 10% of admitted assets in any
22 one governmental money market mutual fund;
23 (d) Maximum of 25% of admitted assets in all
24 mutual funds in the aggregate;
25 (7) Common stock and preferred stock subject to the
26 following conditions:
27 (a) Common stock and preferred stock shall be
28 traded on the New York Stock Exchange or the
29 American Stock Exchange or listed on the National
30 Association of Securities Dealers Automated
31 Quotation (NASDAQ) system;
32 (b) Maximum of 3% of policyholders' surplus in
33 excess of $400,000 in any one common stock or
34 preferred stock issuer provided that the net
SB1728 Enrolled -70- LRB9011450JSmg
1 unearned premium reserve does not exceed
2 policyholders' surplus;
3 (8) Investments authorized under subdivision (a) of
4 item (6) and subdivision (a) of item (7) of this Section
5 shall not in the aggregate exceed 10% of policyholders'
6 surplus;
7 (9) (4) Funds on deposit in solvent banks and
8 savings and loan associations which are insured by
9 qualify for insurance with the Federal Deposit Insurance
10 Corporation; however, the uninsured portion of funds held
11 in any one such bank or association shall not exceed 5%
12 of the company's policyholders' surplus;
13 (5) Funds on deposit with savings and loan
14 associations, provided that all funds invested in such
15 associations are insured by the Federal Deposit Insurance
16 Corporation;
17 (10) (6) Real estate for home office building
18 purposes, provided that such investments are approved by
19 the Director of Insurance on the basis of a showing by
20 the company that the company has adequate assets
21 available for such investment and that the proposed
22 acquisition does not exceed the reasonable normal value
23 of such property.
24 An investment that qualified under this Section at the
25 time it was acquired by the company shall continue to qualify
26 under this Section.
27 Investments permitted under this Section shall be
28 registered in the name of the company and under its direct
29 control or shall be held in a custodial account with a bank
30 or trust company that is qualified to administer trusts in
31 Illinois under the Corporate Fiduciary Act and that has an
32 office in Illinois. However, securities may be held in
33 street form and in the custody of a licensed dealer for a
34 period not to exceed 30 days.
SB1728 Enrolled -71- LRB9011450JSmg
1 Notwithstanding the provisions of this Act, the Director
2 may, after notice and hearing, order a company to limit or
3 withdraw from certain investments or discontinue certain
4 investments or investment practices to the extent the
5 Director finds those investments or investment practices
6 endanger the solvency of the company.
7 (Source: P.A. 88-364.)
8 Section 30. The Voluntary Health Services Plans Act is
9 amended by changing Section 20 as follows:
10 (215 ILCS 165/20) (from Ch. 32, par. 614)
11 Sec. 20. The funds of any health services plan
12 corporation shall be handled in accordance with the following
13 rules:
14 (a) All loans made to original capital of the
15 corporation may be repayable only out of earned surplus.
16 (b) The funds of the corporation may be invested in
17 accordance with the requirements provided by law for the
18 investment of funds of life insurance companies and may also
19 be invested in equipment of the corporation provided such
20 investment in equipment shall not exceed more than 30% of the
21 total admitted assets. The value of such equipment shall be
22 depreciated at a rate as rapidly as is provided under the
23 Internal Revenue Code.
24 (c) Every health services plan corporation, after its
25 first fiscal year of doing business, shall accumulate and
26 maintain a special contingent reserve over and above its
27 reserves and liabilities at the rate of 2% annually of its
28 subscription income net of reinsurance so long as the special
29 contingent reserve does not exceed 8% of its annual net
30 income for the preceding 12 month period. Additional
31 accumulations shall no longer be required at such time that
32 the total special contingent reserve is equal to $1,500,000.
SB1728 Enrolled -72- LRB9011450JSmg
1 (Source: P.A. 81-1203.)
2 Section 99. Effective date. This Act takes effect upon
3 becoming law except that Section 25 takes effect January 1,
4 1999.