97TH GENERAL ASSEMBLY
State of Illinois
2011 and 2012
HB4443

 

Introduced 1/30/2012, by Rep. Frank J. Mautino

 

SYNOPSIS AS INTRODUCED:
 
215 ILCS 5/245.21  from Ch. 73, par. 857.21
215 ILCS 5/531.03  from Ch. 73, par. 1065.80-3
215 ILCS 5/531.05  from Ch. 73, par. 1065.80-5
215 ILCS 5/531.07  from Ch. 73, par. 1065.80-7
215 ILCS 5/531.08  from Ch. 73, par. 1065.80-8
215 ILCS 5/531.09  from Ch. 73, par. 1065.80-9
215 ILCS 5/531.14  from Ch. 73, par. 1065.80-14
215 ILCS 125/6-14  from Ch. 111 1/2, par. 1418.14

    Amends the Illinois Insurance Code in the Article concerning the Illinois Life and Health Insurance Guaranty Association. In provisions related to separate accounts, provides that the assets of any separate account equal to the reserves and other contract liabilities with respect to the account may not be charged with liabilities arising out of any other business the company may conduct, except with approval of the Director under conditions as to investments and other matters as the Director may prescribe. Further amends the Illinois Insurance Code in the Article concerning the Illinois Life and Health Insurance Guaranty Association. Changes the organization of provisions concerning coverage and limitations and powers and duties of the Association. Makes changes in the provisions concerning definitions; the Board of Directors of the Association; assessments; and miscellaneous provisions. Amends the Health Maintenance Organization Act. Provides that no distribution to stockholders, if any, of an impaired or insolvent organization may be made until and unless the total amount of valid claims of the Association for funds expended in carrying out its powers and duties, with interest, (rather than merely the funds expended) with respect to such organization have been fully recovered by the Association.


LRB097 16285 RPM 61439 b

 

 

A BILL FOR

 

HB4443LRB097 16285 RPM 61439 b

1    AN ACT concerning insurance.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 5. The Illinois Insurance Code is amended by
5changing Sections 245.21, 531.03, 531.05, 531.07, 531.08,
6531.09, and 531.14 as follows:
 
7    (215 ILCS 5/245.21)  (from Ch. 73, par. 857.21)
8    Sec. 245.21. Establishment of separate accounts by
9domestic companies organized to do a life, annuity, or accident
10and health insurance business. A domestic company, including
11for the purposes of this Article all domestic fraternal benefit
12societies, may, for authorized classes of insurance, establish
13one or more separate accounts, and may allocate thereto amounts
14(including without limitation proceeds applied under optional
15modes of settlement or under dividend options) to provide for
16life, annuity, or accident and health insurance (and benefits
17incidental thereto), payable in fixed or variable amounts or
18both, subject to the following:
19    (1) The income, gains and losses, realized or unrealized,
20from assets allocated to a separate account must be credited to
21or charged against the account, without regard to other income,
22gains or losses of the company.
23    (2) Except as may be provided with respect to reserves for

 

 

HB4443- 2 -LRB097 16285 RPM 61439 b

1guaranteed benefits and funds referred to in paragraph (3) of
2this Section (i) amounts allocated to any separate account and
3accumulations thereon may be invested and reinvested without
4regard to any requirements or limitations of Part 2 or Part 3
5of Article VIII of this Code and (ii) the investments in any
6separate account or accounts may not be taken into account in
7applying the investment limitations otherwise applicable to
8the investments of the company.
9    (3) Except with the approval of the Director and under the
10conditions as to investments and other matters as the Director
11may prescribe, that must recognize the guaranteed nature of the
12benefits provided, reserves for (i) benefits guaranteed as to
13dollar amount and duration and (ii) funds guaranteed as to
14principal amount or stated rate of interest may not be
15maintained in a separate account.
16    (4) Unless otherwise approved by the Director, assets
17allocated to a separate account must be valued at their market
18value on the date of valuation, or if there is no readily
19available market, then as provided in the contract or the rules
20or other written agreement applicable to the separate account.
21Unless otherwise approved by the Director, the portion, if any,
22of the assets of the separate account equal to the company's
23reserve liability with regard to the guaranteed benefits and
24funds referred to in paragraph (3) of this Section must be
25valued in accordance with the rules otherwise applicable to the
26company's assets.

 

 

HB4443- 3 -LRB097 16285 RPM 61439 b

1    (5) Amounts allocated to a separate account under this
2Article are owned by the company, and the company may not be,
3nor hold itself out to be, a trustee with respect to those
4amounts. The assets of any separate account equal to the
5reserves and other contract liabilities with respect to the
6account may not be charged with liabilities arising out of any
7other business the company may conduct, except with approval of
8the Director under conditions as to investments and other
9matters as the Director may prescribe.
10    (6) No sale, exchange or other transfer of assets may be
11made by a company between any of its separate accounts or
12between any other investment account and one or more of its
13separate accounts unless, in case of a transfer into a separate
14account, the transfer is made solely to establish the account
15or to support the operation of the contracts with respect to
16the separate account to which the transfer is made, and unless
17the transfer, whether into or from a separate account, is made
18(i) by a transfer of cash, or (ii) by a transfer of securities
19having a readily determinable market value, if the transfer of
20securities is approved by the Director. The Director may
21approve other transfers among those accounts if, in his or her
22opinion, the transfers would not be inequitable.
23    (7) To the extent a company considers it necessary to
24comply with any applicable federal or state laws, the company,
25with respect to any separate account, including without
26limitation any separate account which is a management

 

 

HB4443- 4 -LRB097 16285 RPM 61439 b

1investment company or a unit investment trust, may provide for
2persons having an interest therein appropriate voting and other
3rights and special procedures for the conduct of the business
4of the account, including without limitation special rights and
5procedures relating to investment policy, investment advisory
6services, selection of independent public accountants, and the
7selection of a committee, the members of which need not be
8otherwise affiliated with the company, to manage the business
9of the account.
10(Source: P.A. 90-381, eff. 8-14-97; 90-418, eff. 8-15-97;
1190-655, eff. 7-30-98.)
 
12    (215 ILCS 5/531.03)  (from Ch. 73, par. 1065.80-3)
13    Sec. 531.03. Coverage and limitations.
14    (1) This Article shall provide coverage for the policies
15and contracts specified in paragraph (2) of this Section:
16        (a) to persons who, regardless of where they reside
17    (except for non-resident certificate holders under group
18    policies or contracts), are the beneficiaries, assignees
19    or payees of the persons covered under subparagraph (1)(b),
20    and
21        (b) to persons who are owners of or certificate holders
22    under the policies or contracts (other than unallocated
23    annuity contracts and structured settlement annuities) and
24    in each case who:
25            (i) are residents; or

 

 

HB4443- 5 -LRB097 16285 RPM 61439 b

1            (ii) are not residents, but only under all of the
2        following conditions:
3                (A) the insurer that issued the policies or
4            contracts is domiciled in this State;
5                (B) the states in which the persons reside have
6            associations similar to the Association created by
7            this Article;
8                (C) the persons are not eligible for coverage
9            by an association in any other state due to the
10            fact that the insurer was not licensed in that
11            state at the time specified in that state's
12            guaranty association law.
13        (c) For unallocated annuity contracts specified in
14    subsection (2), paragraphs (a) and (b) of this subsection
15    (1) shall not apply and this Article shall (except as
16    provided in paragraphs (e) and (f) of this subsection)
17    provide coverage to:
18            (i) persons who are the owners of the unallocated
19        annuity contracts if the contracts are issued to or in
20        connection with a specific benefit plan whose plan
21        sponsor has its principal place of business in this
22        State; and
23            (ii) persons who are owners of unallocated annuity
24        contracts issued to or in connection with government
25        lotteries if the owners are residents.
26        (d) For structured settlement annuities specified in

 

 

HB4443- 6 -LRB097 16285 RPM 61439 b

1    subsection (2), paragraphs (a) and (b) of this subsection
2    (1) shall not apply and this Article shall (except as
3    provided in paragraphs (e) and (f) of this subsection)
4    provide coverage to a person who is a payee under a
5    structured settlement annuity (or beneficiary of a payee if
6    the payee is deceased), if the payee:
7            (i) is a resident, regardless of where the contract
8        owner resides; or
9            (ii) is not a resident, but only under both of the
10        following conditions:
11                (A) with regard to residency:
12                    (I) the contract owner of the structured
13                settlement annuity is a resident; or
14                    (II) the contract owner of the structured
15                settlement annuity is not a resident but the
16                insurer that issued the structured settlement
17                annuity is domiciled in this State and the
18                state in which the contract owner resides has
19                an association similar to the Association
20                created by this Article; and
21                (B) neither the payee or beneficiary nor the
22            contract owner is eligible for coverage by the
23            association of the state in which the payee or
24            contract owner resides.
25        (e) This Article shall not provide coverage to:
26            (i) a person who is a payee or beneficiary of a

 

 

HB4443- 7 -LRB097 16285 RPM 61439 b

1        contract owner resident of this State if the payee or
2        beneficiary is afforded any coverage by the
3        association of another state; or
4            (ii) a person covered under paragraph (c) of this
5        subsection (1), if any coverage is provided by the
6        association of another state to that person.
7        (f) This Article is intended to provide coverage to a
8    person who is a resident of this State and, in special
9    circumstances, to a nonresident. In order to avoid
10    duplicate coverage, if a person who would otherwise receive
11    coverage under this Article is provided coverage under the
12    laws of any other state, then the person shall not be
13    provided coverage under this Article. In determining the
14    application of the provisions of this paragraph in
15    situations where a person could be covered by the
16    association of more than one state, whether as an owner,
17    payee, beneficiary, or assignee, this Article shall be
18    construed in conjunction with other state laws to result in
19    coverage by only one association.
20    (2)(a) This Article shall provide coverage to the persons
21specified in paragraph (l) of this Section for direct, (i)
22nongroup life, health, annuity and supplemental policies, or
23contracts, (ii) for certificates under direct group policies or
24contracts, (iii) for unallocated annuity contracts and (iv) for
25contracts to furnish health care services and subscription
26certificates for medical or health care services issued by

 

 

HB4443- 8 -LRB097 16285 RPM 61439 b

1persons licensed to transact insurance business in this State
2under the Illinois Insurance Code. Annuity contracts and
3certificates under group annuity contracts include but are not
4limited to guaranteed investment contracts, deposit
5administration contracts, unallocated funding agreements,
6allocated funding agreements, structured settlement
7agreements, lottery contracts and any immediate or deferred
8annuity contracts.
9    (b) This Article shall not provide coverage for:
10        (i) that portion of a policy or contract not guaranteed
11    by the insurer, or under which the risk is borne by the
12    policy or contract owner;
13        (ii) any such policy or contract or part thereof
14    assumed by the impaired or insolvent insurer under a
15    contract of reinsurance, other than reinsurance for which
16    assumption certificates have been issued;
17        (iii) any portion of a policy or contract to the extent
18    that the rate of interest on which it is based or the
19    interest rate, crediting rate, or similar factor is
20    determined by use of an index or other external reference
21    stated in the policy or contract employed in calculating
22    returns or changes in value:
23            (A) averaged over the period of 4 years prior to
24        the date on which the member insurer becomes an
25        impaired or insolvent insurer under this Article,
26        whichever is earlier, exceeds the rate of interest

 

 

HB4443- 9 -LRB097 16285 RPM 61439 b

1        determined by subtracting 2 percentage points from
2        Moody's Corporate Bond Yield Average averaged for that
3        same 4-year period or for such lesser period if the
4        policy or contract was issued less than 4 years before
5        the member insurer becomes an impaired or insolvent
6        insurer under this Article, whichever is earlier; and
7            (B) on and after the date on which the member
8        insurer becomes an impaired or insolvent insurer under
9        this Article, whichever is earlier, exceeds the rate of
10        interest determined by subtracting 3 percentage points
11        from Moody's Corporate Bond Yield Average as most
12        recently available;
13        (iv) any unallocated annuity contract issued to or in
14    connection with a benefit plan protected under the federal
15    Pension Benefit Guaranty Corporation, regardless of
16    whether the federal Pension Benefit Guaranty Corporation
17    has yet become liable to make any payments with respect to
18    the benefit plan;
19        (v) any portion of any unallocated annuity contract
20    which is not issued to or in connection with a specific
21    employee, union or association of natural persons benefit
22    plan or a government lottery;
23        (vi) an obligation that does not arise under the
24    express written terms of the policy or contract issued by
25    the insurer to the contract owner or policy owner,
26    including without limitation:

 

 

HB4443- 10 -LRB097 16285 RPM 61439 b

1            (A) a claim based on marketing materials;
2            (B) a claim based on side letters, riders, or other
3        documents that were issued by the insurer without
4        meeting applicable policy form filing or approval
5        requirements;
6            (C) a misrepresentation of or regarding policy
7        benefits;
8            (D) an extra-contractual claim; or
9            (E) a claim for penalties or consequential or
10        incidental damages;
11        (vii) any stop-loss insurance, as defined in clause (b)
12    of Class 1 or clause (a) of Class 2 of Section 4, and
13    further defined in subsection (d) of Section 352;
14        (viii) any policy or contract providing any hospital,
15    medical, prescription drug, or other health care benefits
16    pursuant to Part C or Part D of Subchapter XVIII, Chapter 7
17    of Title 42 of the United States Code (commonly known as
18    Medicare Part C & D) or any regulations issued pursuant
19    thereto;
20        (ix) any portion of a policy or contract to the extent
21    that the assessments required by Section 531.09 of this
22    Code with respect to the policy or contract are preempted
23    or otherwise not permitted by federal or State law;
24        (x) any portion of a policy or contract issued to a
25    plan or program of an employer, association, or other
26    person to provide life, health, or annuity benefits to its

 

 

HB4443- 11 -LRB097 16285 RPM 61439 b

1    employees, members, or others to the extent that the plan
2    or program is self-funded or uninsured, including, but not
3    limited to, benefits payable by an employer, association,
4    or other person under:
5            (A) a multiple employer welfare arrangement as
6        defined in 29 U.S.C. Section 1002 29 U.S.C. Section
7        1144;
8            (B) a minimum premium group insurance plan;
9            (C) a stop-loss group insurance plan; or
10            (D) an administrative services only contract;
11        (xi) any portion of a policy or contract to the extent
12    that it provides for:
13            (A) dividends or experience rating credits;
14            (B) voting rights; or
15            (C) payment of any fees or allowances to any
16        person, including the policy or contract owner, in
17        connection with the service to or administration of the
18        policy or contract;
19        (xii) any policy or contract issued in this State by a
20    member insurer at a time when it was not licensed or did
21    not have a certificate of authority to issue the policy or
22    contract in this State;
23        (xiii) any contractual agreement that establishes the
24    member insurer's obligations to provide a book value
25    accounting guaranty for defined contribution benefit plan
26    participants by reference to a portfolio of assets that is

 

 

HB4443- 12 -LRB097 16285 RPM 61439 b

1    owned by the benefit plan or its trustee, which in each
2    case is not an affiliate of the member insurer;
3        (xiv) any portion of a policy or contract to the extent
4    that it provides for interest or other changes in value to
5    be determined by the use of an index or other external
6    reference stated in the policy or contract, but which have
7    not been credited to the policy or contract, or as to which
8    the policy or contract owner's rights are subject to
9    forfeiture, as of the date the member insurer becomes an
10    impaired or insolvent insurer under this Code, whichever is
11    earlier. If a policy's or contract's interest or changes in
12    value are credited less frequently than annually, then for
13    purposes of determining the values that have been credited
14    and are not subject to forfeiture under this Section, the
15    interest or change in value determined by using the
16    procedures defined in the policy or contract will be
17    credited as if the contractual date of crediting interest
18    or changing values was the date of impairment or
19    insolvency, whichever is earlier, and will not be subject
20    to forfeiture; or
21        (xv) that portion or part of a variable life insurance
22    or variable annuity contract not guaranteed by an insurer.
23    (3) The benefits for which the Association may become
24liable shall in no event exceed the lesser of:
25        (a) the contractual obligations for which the insurer
26    is liable or would have been liable if it were not an

 

 

HB4443- 13 -LRB097 16285 RPM 61439 b

1    impaired or insolvent insurer, or
2        (b)(i) with respect to any one life, regardless of the
3    number of policies or contracts:
4            (A) $300,000 in life insurance death benefits, but
5        not more than $100,000 in net cash surrender and net
6        cash withdrawal values for life insurance;
7            (B) in health insurance benefits:
8                (I) $100,000 for coverages not defined as
9            disability insurance or basic hospital, medical,
10            and surgical insurance or major medical insurance
11            or long-term care insurance, including any net
12            cash surrender and net cash withdrawal values;
13                (II) $300,000 for disability insurance and
14            $300,000 for long-term care insurance as defined
15            in Section 351A-1 of this Code; and
16                (III) $500,000 for basic hospital medical and
17            surgical insurance or major medical insurance;
18            (C) $250,000 in the present value of annuity
19        benefits, including net cash surrender and net cash
20        withdrawal values;
21        (ii) with respect to each individual participating in a
22    governmental retirement benefit plan established under
23    Sections 401, 403(b), or 457 of the U.S. Internal Revenue
24    Code covered by an unallocated annuity contract or the
25    beneficiaries of each such individual if deceased, in the
26    aggregate, $250,000 in present value annuity benefits,

 

 

HB4443- 14 -LRB097 16285 RPM 61439 b

1    including net cash surrender and net cash withdrawal
2    values;
3        (iii) with respect to each payee of a structured
4    settlement annuity or beneficiary or beneficiaries of the
5    payee if deceased, $250,000 in present value annuity
6    benefits, in the aggregate, including net cash surrender
7    and net cash withdrawal values, if any; or
8        (iv) with respect to either (1) one contract owner
9    provided coverage under subparagraph (ii) of paragraph (c)
10    of subsection (1) of this Section or (2) one plan sponsor
11    whose plans own directly or in trust one or more
12    unallocated annuity contracts not included in subparagraph
13    (ii) of paragraph (b) of this subsection, $5,000,000 in
14    benefits, irrespective of the number of contracts with
15    respect to the contract owner or plan sponsor. However, in
16    the case where one or more unallocated annuity contracts
17    are covered contracts under this Article and are owned by a
18    trust or other entity for the benefit of 2 or more plan
19    sponsors, coverage shall be afforded by the Association if
20    the largest interest in the trust or entity owning the
21    contract or contracts is held by a plan sponsor whose
22    principal place of business is in this State. In no event
23    shall the Association be obligated to cover more than
24    $5,000,000 in benefits with respect to all these
25    unallocated contracts.
26    (3.1) Notwithstanding the provisions of subsection (3), in

 

 

HB4443- 15 -LRB097 16285 RPM 61439 b

1In no event shall the Association be obligated to cover more
2than (1) an aggregate of $300,000 in benefits with respect to
3any one life under subparagraphs (i), (ii), and (iii) of this
4paragraph (b) of subsection (3) except with respect to benefits
5for basic hospital, medical, and surgical insurance and major
6medical insurance under item (B) of subparagraph (i) of this
7paragraph (b) of subsection (3), in which case the aggregate
8liability of the Association shall not exceed $500,000 with
9respect to any one individual or (2) with respect to one owner
10of multiple nongroup policies of life insurance, whether the
11policy owner is an individual, firm, corporation, or other
12person and whether the persons insured are officers, managers,
13employees, or other persons, $5,000,000 in benefits,
14regardless of the number of policies and contracts held by the
15owner.
16    (3.2) The limitations set forth in subsections (3) and
17(3.1) this subsection are limitations on the benefits for which
18the Association is obligated before taking into account either
19its subrogation and assignment rights or the extent to which
20those benefits could be provided out of the assets of the
21impaired or insolvent insurer attributable to covered
22policies. The costs of the Association's obligations under this
23Article may be met by the use of assets attributable to covered
24policies or reimbursed to the Association pursuant to its
25subrogation and assignment rights.
26    (4) In performing its obligations to provide coverage under

 

 

HB4443- 16 -LRB097 16285 RPM 61439 b

1Section 531.08 of this Code, the Association shall not be
2required to guarantee, assume, reinsure, or perform or cause to
3be guaranteed, assumed, reinsured, or performed the
4contractual obligations of the insolvent or impaired insurer
5under a covered policy or contract that do not materially
6affect the economic values or economic benefits of the covered
7policy or contract.
8(Source: P.A. 96-1450, eff. 8-20-10.)
 
9    (215 ILCS 5/531.05)  (from Ch. 73, par. 1065.80-5)
10    Sec. 531.05. Definitions. As used in this Act:
11    "Account" means either of the 2 3 accounts created under
12Section 531.06.
13    "Association" means the Illinois Life and Health Insurance
14Guaranty Association created under Section 531.06.
15    "Authorized assessment" or the term "authorized" when used
16in the context of assessments means a resolution by the Board
17of Directors has been passed whereby an assessment shall be
18called immediately or in the future from member insurers for a
19specified amount. An assessment is authorized when the
20resolution is passed.
21    "Benefit plan" means a specific employee, union, or
22association of natural persons benefit plan.
23    "Called assessment" or the term "called" when used in the
24context of assessments means that a notice has been issued by
25the Association to member insurers requiring that an authorized

 

 

HB4443- 17 -LRB097 16285 RPM 61439 b

1assessment be paid within the time frame set forth within the
2notice. An authorized assessment becomes a called assessment
3when notice is mailed by the Association to member insurers.
4    "Director" means the Director of Insurance of this State.
5    "Contractual obligation" means any obligation under a
6policy or contract or certificate under a group policy or
7contract, or portion thereof for which coverage is provided
8under Section 531.03.
9    "Covered person" means any person who is entitled to the
10protection of the Association as described in Section 531.02.
11    "Covered policy" means any policy or contract within the
12scope of this Article under Section 531.03.
13    "Extra-contractual claims" shall include, for example,
14claims relating to bad faith in the payment of claims, punitive
15or exemplary damages, or attorneys' fees and costs.
16    "Impaired insurer" means (A) a member insurer which, after
17the effective date of this amendatory Act of the 96th General
18Assembly, is not an insolvent insurer, and is placed under an
19order of rehabilitation or conservation by a court of competent
20jurisdiction or (B) a member insurer deemed by the Director
21after the effective date of this amendatory Act of the 96th
22General Assembly to be potentially unable to fulfill its
23contractual obligations and not an insolvent insurer.
24    "Insolvent insurer" means a member insurer that, after the
25effective date of this amendatory Act of the 96th General
26Assembly, is placed under a final order of liquidation by a

 

 

HB4443- 18 -LRB097 16285 RPM 61439 b

1court of competent jurisdiction with a finding of insolvency.
2    "Member insurer" means an insurer licensed or holding a
3certificate of authority to transact in this State any kind of
4insurance for which coverage is provided under Section 531.03
5of this Code and includes an insurer whose license or
6certificate of authority in this State may have been suspended,
7revoked, not renewed, or voluntarily withdrawn or whose
8certificate of authority may have been suspended pursuant to
9Section 119 of this Code, but does not include:
10        (1) a hospital or medical service organization,
11    whether profit or nonprofit;
12        (2) a health maintenance organization;
13        (3) any burial society organized under Article XIX of
14    this Code, any fraternal benefit society organized under
15    Article XVII of this Code, any mutual benefit association
16    organized under Article XVIII of this Code, and any foreign
17    fraternal benefit society licensed under Article VI of this
18    Code or a fraternal benefit society;
19        (4) a mandatory State pooling plan;
20        (5) a mutual assessment company or other person that
21    operates on an assessment basis;
22        (6) an insurance exchange;
23        (7) an organization that is permitted to issue
24    charitable gift annuities pursuant to Section 121-2.10 of
25    this Code;
26        (8) any health services plan corporation established

 

 

HB4443- 19 -LRB097 16285 RPM 61439 b

1    pursuant to the Voluntary Health Services Plans Act;
2        (9) any dental service plan corporation established
3    pursuant to the Dental Service Plan Act; or
4        (10) an entity similar to any of the above.
5    "Moody's Corporate Bond Yield Average" means the Monthly
6Average Corporates as published by Moody's Investors Service,
7Inc., or any successor thereto.
8    "Owner" of a policy or contract and "policy owner" and
9"contract owner" mean the person who is identified as the legal
10owner under the terms of the policy or contract or who is
11otherwise vested with legal title to the policy or contract
12through a valid assignment completed in accordance with the
13terms of the policy or contract and properly recorded as the
14owner on the books of the insurer. The terms owner, contract
15owner, and policy owner do not include persons with a mere
16beneficial interest in a policy or contract.
17    "Person" means an individual, corporation, limited
18liability company, partnership, association, governmental body
19or entity, or voluntary organization.
20    "Plan sponsor" means:
21        (1) the employer in the case of a benefit plan
22    established or maintained by a single employer;
23        (2) the employee organization in the case of a benefit
24    plan established or maintained by an employee
25    organization; or
26        (3) in a case of a benefit plan established or

 

 

HB4443- 20 -LRB097 16285 RPM 61439 b

1    maintained by 2 or more employers or jointly by one or more
2    employers and one or more employee organizations, the
3    association, committee, joint board of trustees, or other
4    similar group of representatives of the parties who
5    establish or maintain the benefit plan.
6    "Premiums" mean amounts or considerations, by whatever
7name called, received on covered policies or contracts less
8returned premiums, considerations, and deposits and less
9dividends and experience credits.
10    "Premiums" does not include:
11        (A) amounts or considerations received for policies or
12    contracts or for the portions of policies or contracts for
13    which coverage is not provided under Section 531.03 of this
14    Code except that assessable premium shall not be reduced on
15    account of the provisions of subparagraph (iii) of
16    paragraph (b) of subsection (2) (a) of Section 531.03 of
17    this Code relating to interest limitations and the
18    provisions of paragraph (b) of subsection (3), subsection
19    (3.1), or subsection (3.2) of Section 531.03 relating to
20    limitations with respect to one individual, one
21    participant, and one contract owner;
22        (B) premiums in excess of $5,000,000 on an unallocated
23    annuity contract not issued under a governmental
24    retirement benefit plan (or its trustee) established under
25    Section 401, 403(b) or 457 of the United States Internal
26    Revenue Code; or

 

 

HB4443- 21 -LRB097 16285 RPM 61439 b

1        (C) with respect to multiple nongroup policies of life
2    insurance owned by one owner, whether the policy owner is
3    an individual, firm, corporation, or other person, and
4    whether the persons insured are officers, managers,
5    employees, or other persons, premiums in excess of
6    $5,000,000 with respect to these policies or contracts,
7    regardless of the number of policies or contracts held by
8    the owner.
9    "Principal place of business" of a plan sponsor or a person
10other than a natural person means the single state in which the
11natural persons who establish policy for the direction,
12control, and coordination of the operations of the entity as a
13whole primarily exercise that function, determined by the
14Association in its reasonable judgment by considering the
15following factors:
16        (A) the state in which the primary executive and
17    administrative headquarters of the entity is located;
18        (B) the state in which the principal office of the
19    chief executive officer of the entity is located;
20        (C) the state in which the board of directors (or
21    similar governing person or persons) of the entity conducts
22    the majority of its meetings;
23        (D) the state in which the executive or management
24    committee of the board of directors (or similar governing
25    person or persons) of the entity conducts the majority of
26    its meetings;

 

 

HB4443- 22 -LRB097 16285 RPM 61439 b

1        (E) the state from which the management of the overall
2    operations of the entity is directed; and
3        (F) in the case of a benefit plan sponsored by
4    affiliated companies comprising a consolidated
5    corporation, the state in which the holding company or
6    controlling affiliate has its principal place of business
7    as determined using the above factors.
8    However, in the case of a plan sponsor, if more than 50% of
9the participants in the benefit plan are employed in a single
10state, that state shall be deemed to be the principal place of
11business of the plan sponsor.
12    The principal place of business of a plan sponsor of a
13benefit plan described in paragraph (3) of the definition of
14"plan sponsor" this Section shall be deemed to be the principal
15place of business of the association, committee, joint board of
16trustees, or other similar group of representatives of the
17parties who establish or maintain the benefit plan that, in
18lieu of a specific or clear designation of a principal place of
19business, shall be deemed to be the principal place of business
20of the employer or employee organization that has the largest
21investment in the benefit plan in question.
22    "Receivership court" means the court in the insolvent or
23impaired insurer's state having jurisdiction over the
24conservation, rehabilitation, or liquidation of the insurer.
25    "Resident" means a person to whom a contractual obligation
26is owed and who resides in this State on the date of entry of a

 

 

HB4443- 23 -LRB097 16285 RPM 61439 b

1court order that determines a member insurer to be an impaired
2insurer or a court order that determines a member insurer to be
3an insolvent insurer. A person may be a resident of only one
4state, which in the case of a person other than a natural
5person shall be its principal place of business. Citizens of
6the United States that are either (i) residents of foreign
7countries or (ii) residents of United States possessions,
8territories, or protectorates that do not have an association
9similar to the Association created by this Article, shall be
10deemed residents of the state of domicile of the insurer that
11issued the policies or contracts.
12    "Structured settlement annuity" means an annuity purchased
13in order to fund periodic payments for a plaintiff or other
14claimant in payment for or with respect to personal injury
15suffered by the plaintiff or other claimant.
16    "State" means a state, the District of Columbia, Puerto
17Rico, and a United States possession, territory, or
18protectorate.
19    "Supplemental contract" means a written agreement entered
20into for the distribution of proceeds under a life, health, or
21annuity policy or a life, health, or annuity contract.
22    "Unallocated annuity contract" means any annuity contract
23or group annuity certificate which is not issued to and owned
24by an individual, except to the extent of any annuity benefits
25guaranteed to an individual by an insurer under such contract
26or certificate.

 

 

HB4443- 24 -LRB097 16285 RPM 61439 b

1(Source: P.A. 96-1450, eff. 8-20-10.)
 
2    (215 ILCS 5/531.07)  (from Ch. 73, par. 1065.80-7)
3    Sec. 531.07. Board of Directors.) The board of directors
4of the Association consists of not less than 7 nor more than 11
5members serving terms as established in the plan of operation.
6The insurer members insurers of the board are to be selected by
7member insurers subject to the approval of the Director. In
8addition, 2 persons who must be public representatives may be
9appointed by the Director to the board of directors. A public
10representative may not be an officer, director, or employee of
11an insurance company or any person engaged in the business of
12insurance. Vacancies on the board must be filled for the
13remaining period of the term in the manner described in the
14plan of operation.
15    In approving selections or in appointing members to the
16board, the Director must consider, whether all member insurers
17are fairly represented.
18    Members of the board may be reimbursed from the assets of
19the Association for expenses incurred by them as members of the
20board of directors but members of the board may not otherwise
21be compensated by the Association for their services.
22(Source: P.A. 96-1450, eff. 8-20-10.)
 
23    (215 ILCS 5/531.08)  (from Ch. 73, par. 1065.80-8)
24    Sec. 531.08. Powers and duties of the Association.

 

 

HB4443- 25 -LRB097 16285 RPM 61439 b

1    (a) In addition to the powers and duties enumerated in
2other Sections of this Article:
3        (1) If a member insurer is an impaired insurer, then
4    the Association may, in its discretion and subject to any
5    conditions imposed by the Association that do not impair
6    the contractual obligations of the impaired insurer and
7    that are approved by the Director:
8            (a) (A) guarantee, assume, or reinsure or cause to
9        be guaranteed, assumed, or reinsured, any or all of the
10        policies or contracts of the impaired insurer; or
11            (b) (B) provide such money, pledges, loans, notes,
12        guarantees, or other means as are proper to effectuate
13        paragraph (a) (A) and assure payment of the contractual
14        obligations of the impaired insurer pending action
15        under paragraph (a) (A).
16        (2) If a member insurer is an insolvent insurer, then
17    the Association shall, in its discretion, either:
18            (a) (A) guaranty, assume, or reinsure or cause to
19        be guaranteed, assumed, or reinsured the policies or
20        contracts of the insolvent insurer or assure payment of
21        the contractual obligations of the insolvent insurer
22        and provide money, pledges, loans, notes, guarantees,
23        or other means reasonably necessary to discharge the
24        Association's duties; or
25            (b) (B) provide benefits and coverages in
26        accordance with the following provisions:

 

 

HB4443- 26 -LRB097 16285 RPM 61439 b

1                (i) with respect to life and health insurance
2            policies and annuities, ensure payment of benefits
3            for premiums identical to the premiums and
4            benefits (except for terms of conversion and
5            renewability) that would have been payable under
6            the policies or contracts of the insolvent insurer
7            for claims incurred:
8                    (A) (a) with respect to group policies and
9                contracts, not later than the earlier of the
10                next renewal date under those policies or
11                contracts or 45 days, but in no event less than
12                30 days, after the date on which the
13                Association becomes obligated with respect to
14                the policies and contracts;
15                    (B) (b) with respect to nongroup policies,
16                contracts, and annuities not later than the
17                earlier of the next renewal date (if any) under
18                the policies or contracts or one year, but in
19                no event less than 30 days, from the date on
20                which the Association becomes obligated with
21                respect to the policies or contracts;
22                (ii) make diligent efforts to provide all
23            known insureds or annuitants (for nongroup
24            policies and contracts), or group policy owners
25            with respect to group policies and contracts, 30
26            days notice of the termination (pursuant to

 

 

HB4443- 27 -LRB097 16285 RPM 61439 b

1            subparagraph (i) of this paragraph (b) (B)) of the
2            benefits provided;
3                (iii) with respect to nongroup life and health
4            insurance policies and annuities covered by the
5            Association, make available to each known insured
6            or annuitant, or owner if other than the insured or
7            annuitant, and with respect to an individual
8            formerly insured or formerly an annuitant under a
9            group policy who is not eligible for replacement
10            group coverage, make available substitute coverage
11            on an individual basis in accordance with the
12            provisions of paragraph (iv) (3), if the insureds
13            or annuitants had a right under law or the
14            terminated policy or annuity to convert coverage
15            to individual coverage or to continue an
16            individual policy or annuity in force until a
17            specified age or for a specified time, during which
18            the insurer had no right unilaterally to make
19            changes in any provision of the policy or annuity
20            or had a right only to make changes in premium by
21            class.
22                 (iv) (b) In providing the substitute coverage
23            required under subparagraph (iii), of paragraph
24            (B) of item (2) of subsection (a) of this Section,
25            the Association may offer either to reissue the
26            terminated coverage or to issue an alternative

 

 

HB4443- 28 -LRB097 16285 RPM 61439 b

1            policy.
2                 Alternative or reissued policies shall be
3            offered without requiring evidence of
4            insurability, and shall not provide for any
5            waiting period or exclusion that would not have
6            applied under the terminated policy.
7                 The Association may reinsure any alternative
8            or reissued policy.
9                 Alternative policies adopted by the
10            Association shall be subject to the approval of the
11            Director. The Association may adopt alternative
12            policies of various types for future insurance
13            without regard to any particular impairment or
14            insolvency.
15                 (v) Alternative policies shall contain at
16            least the minimum statutory provisions required in
17            this State and provide benefits that shall not be
18            unreasonable in relation to the premium charged.
19            The Association shall set the premium in
20            accordance with a table of rates which it shall
21            adopt. The premium shall reflect the amount of
22            insurance to be provided and the age and class of
23            risk of each insured, but shall not reflect any
24            changes in the health of the insured after the
25            original policy was last underwritten.
26                 Any alternative policy issued by the

 

 

HB4443- 29 -LRB097 16285 RPM 61439 b

1            Association shall provide coverage of a type
2            similar to that of the policy issued by the
3            impaired or insolvent insurer, as determined by
4            the Association.
5                 (vi) (c) If the Association elects to reissue
6            terminated coverage at a premium rate different
7            from that charged under the terminated policy, the
8            premium shall be set by the Association in
9            accordance with the amount of insurance provided
10            and the age and class of risk, subject to approval
11            of the Director or by a court of competent
12            jurisdiction.
13                 (vii) (d) The Association's obligations with
14            respect to coverage under any policy of the
15            impaired or insolvent insurer or under any
16            reissued or alternative policy shall cease on the
17            date such coverage or policy is replaced by another
18            similar policy by the policyholder, the insured,
19            or the Association.
20                 (viii) (e) When proceeding under this Section
21            with respect to any policy or contract carrying
22            guaranteed minimum interest rates, the Association
23            shall assure the payment or crediting of a rate of
24            interest consistent with subparagraph
25            (2)(b)(iii)(B) of Section 531.03.
26         (3) (f) Nonpayment of premiums thirty-one days after

 

 

HB4443- 30 -LRB097 16285 RPM 61439 b

1    the date required under the terms of any guaranteed,
2    assumed, alternative or reissued policy or contract or
3    substitute coverage shall terminate the Association's
4    obligations under such policy or coverage under this Act
5    with respect to such policy or coverage, except with
6    respect to any claims incurred or any net cash surrender
7    value which may be due in accordance with the provisions of
8    this Act.
9         (4) (g) Premiums due for coverage after entry of an
10    order of liquidation of an insolvent insurer shall belong
11    to and be payable at the direction of the Association, and
12    the Association shall be liable for unearned premiums due
13    to policy or contract owners arising after the entry of
14    such order.
15        (5) (h) In carrying out its duties under paragraph (2)
16    of subsection (a) of this Section, the Association may:
17            (a) (1) subject to approval by a court in this
18        State, impose permanent policy or contract liens in
19        connection with a guarantee, assumption, or
20        reinsurance agreement if the Association finds that
21        the amounts which can be assessed under this Article
22        are less than the amounts needed to assure full and
23        prompt performance of the Association's duties under
24        this Article or that the economic or financial
25        conditions as they affect member insurers are
26        sufficiently adverse to render the imposition of such

 

 

HB4443- 31 -LRB097 16285 RPM 61439 b

1        permanent policy or contract liens to be in the public
2        interest; or
3            (b) (2) subject to approval by a court in this
4        State, impose temporary moratoriums or liens on
5        payments of cash values and policy loans or any other
6        right to withdraw funds held in conjunction with
7        policies or contracts in addition to any contractual
8        provisions for deferral of cash or policy loan value.
9        In addition, in the event of a temporary moratorium or
10        moratorium charge imposed by the receivership court on
11        payment of cash values or policy loans or on any other
12        right to withdraw funds held in conjunction with
13        policies or contracts, out of the assets of the
14        impaired or insolvent insurer, the Association may
15        defer the payment of cash values, policy loans, or
16        other rights by the Association for the period of the
17        moratorium or moratorium charge imposed by the
18        receivership court, except for claims covered by the
19        Association to be paid in accordance with a hardship
20        procedure established by the liquidator or
21        rehabilitator and approved by the receivership court.
22         (6) (i) There shall be no liability on the part of and
23    no cause of action shall arise against the Association or
24    against any transferee from the Association in connection
25    with the transfer by reinsurance or otherwise of all or any
26    part of an impaired or insolvent insurer's business by

 

 

HB4443- 32 -LRB097 16285 RPM 61439 b

1    reason of any action taken or any failure to take any
2    action by the impaired or insolvent insurer at any time.
3         (7) (j) If the Association fails to act within a
4    reasonable period of time as provided in subsection (2) of
5    this Section with respect to an insolvent insurer, the
6    Director shall have the powers and duties of the
7    Association under this Act with regard to such insolvent
8    insurers.
9         (8) (k) The Association or its designated
10    representatives may render assistance and advice to the
11    Director, upon his request, concerning rehabilitation,
12    payment of claims, continuations of coverage, or the
13    performance of other contractual obligations of any
14    impaired or insolvent insurer.
15         (9) (l) The Association shall have standing to appear
16    or intervene before a court or agency in this State with
17    jurisdiction over an impaired or insolvent insurer
18    concerning which the Association is or may become obligated
19    under this Article or with jurisdiction over any person or
20    property against which the Association may have rights
21    through subrogation or otherwise. Standing shall extend to
22    all matters germane to the powers and duties of the
23    Association, including, but not limited to, proposals for
24    reinsuring, modifying, or guaranteeing the policies or
25    contracts of the impaired or insolvent insurer and the
26    determination of the policies or contracts and contractual

 

 

HB4443- 33 -LRB097 16285 RPM 61439 b

1    obligations. The Association shall also have the right to
2    appear or intervene before a court or agency in another
3    state with jurisdiction over an impaired or insolvent
4    insurer for which the Association is or may become
5    obligated or with jurisdiction over any person or property
6    against whom the Association may have rights through
7    subrogation or otherwise.
8         (10)(a) (m)(1) A person receiving benefits under this
9    Article shall be deemed to have assigned the rights under
10    and any causes of action against any person for losses
11    arising under, resulting from, or otherwise relating to the
12    covered policy or contract to the Association to the extent
13    of the benefits received because of this Article, whether
14    the benefits are payments of or on account of contractual
15    obligations, continuation of coverage, or provision of
16    substitute or alternative coverages. The Association may
17    require an assignment to it of such rights and cause of
18    action by any payee, policy, or contract owner,
19    beneficiary, insured, or annuitant as a condition
20    precedent to the receipt of any right or benefits conferred
21    by this Article upon the person.
22         (b) (2) The subrogation rights of the Association
23    under this subsection have the same priority against the
24    assets of the impaired or insolvent insurer as that
25    possessed by the person entitled to receive benefits under
26    this Article.

 

 

HB4443- 34 -LRB097 16285 RPM 61439 b

1        (c) (3) In addition to paragraphs (a) (1) and (b) (2),
2    the Association shall have all common law rights of
3    subrogation and any other equitable or legal remedy that
4    would have been available to the impaired or insolvent
5    insurer or owner, beneficiary, or payee of a policy or
6    contract with respect to the policy or contracts, including
7    without limitation, in the case of a structured settlement
8    annuity, any rights of the owner, beneficiary, or payee of
9    the annuity to the extent of benefits received pursuant to
10    this Article, against a person originally or by succession
11    responsible for the losses arising from the personal injury
12    relating to the annuity or payment therefor, excepting any
13    such person responsible solely by reason of serving as an
14    assignee in respect of a qualified assignment under
15    Internal Revenue Code Section 130.
16        (d) (4) If the preceding provisions of this subsection
17    (10) (l) are invalid or ineffective with respect to any
18    person or claim for any reason, then the amount payable by
19    the Association with respect to the related covered
20    obligations shall be reduced by the amount realized by any
21    other person with respect to the person or claim that is
22    attributable to the policies, or portion thereof, covered
23    by the Association.
24        (e) (5) If the Association has provided benefits with
25    respect to a covered obligation and a person recovers
26    amounts as to which the Association has rights as described

 

 

HB4443- 35 -LRB097 16285 RPM 61439 b

1    in the preceding paragraphs of this subsection (10), then
2    the person shall pay to the Association the portion of the
3    recovery attributable to the policies, or portion thereof,
4    covered by the Association.
5         (11) (n) The Association may:
6             (a) (1) Enter into such contracts as are necessary
7        or proper to carry out the provisions and purposes of
8        this Article.
9             (b) (2) Sue or be sued, including taking any legal
10        actions necessary or proper for recovery of any unpaid
11        assessments under Section 531.09. The Association
12        shall not be liable for punitive or exemplary damages.
13             (c) (3) Borrow money to effect the purposes of
14        this Article. Any notes or other evidence of
15        indebtedness of the Association not in default are
16        legal investments for domestic insurers and may be
17        carried as admitted assets.
18             (d) (4) Employ or retain such persons as are
19        necessary to handle the financial transactions of the
20        Association, and to perform such other functions as
21        become necessary or proper under this Article.
22             (e) (5) Negotiate and contract with any
23        liquidator, rehabilitator, conservator, or ancillary
24        receiver to carry out the powers and duties of the
25        Association.
26             (f) (6) Take such legal action as may be necessary

 

 

HB4443- 36 -LRB097 16285 RPM 61439 b

1        to avoid payment of improper claims.
2             (g) (7) Exercise, for the purposes of this Article
3        and to the extent approved by the Director, the powers
4        of a domestic life or health insurer, but in no case
5        may the Association issue insurance policies or
6        annuity contracts other than those issued to perform
7        the contractual obligations of the impaired or
8        insolvent insurer.
9             (h) (8) Exercise all the rights of the Director
10        under Section 193(4) of this Code with respect to
11        covered policies after the association becomes
12        obligated by statute.
13            (i) (9) Request information from a person seeking
14        coverage from the Association in order to aid the
15        Association in determining its obligations under this
16        Article with respect to the person, and the person
17        shall promptly comply with the request.
18            (j) (10) Take other necessary or appropriate
19        action to discharge its duties and obligations under
20        this Article or to exercise its powers under this
21        Article.
22         (12) (o) With respect to covered policies for which
23    the Association becomes obligated after an entry of an
24    order of liquidation or rehabilitation, the Association
25    may elect to succeed to the rights of the insolvent insurer
26    arising after the date of the order of liquidation or

 

 

HB4443- 37 -LRB097 16285 RPM 61439 b

1    rehabilitation under any contract of reinsurance to which
2    the insolvent insurer was a party, to the extent that such
3    contract provides coverage for losses occurring after the
4    date of the order of liquidation or rehabilitation. As a
5    condition to making this election, the Association must pay
6    all unpaid premiums due under the contract for coverage
7    relating to periods before and after the date of the order
8    of liquidation or rehabilitation.
9        (13) (p) A deposit in this State, held pursuant to law
10    or required by the Director for the benefit of creditors,
11    including policy owners, not turned over to the domiciliary
12    liquidator upon the entry of a final order of liquidation
13    or order approving a rehabilitation plan of an insurer
14    domiciled in this State or in a reciprocal state, pursuant
15    to Article XIII 1/2 of this Code, shall be promptly paid to
16    the Association. The Association shall be entitled to
17    retain a portion of any amount so paid to it equal to the
18    percentage determined by dividing the aggregate amount of
19    policy owners' claims related to that insolvency for which
20    the Association has provided statutory benefits by the
21    aggregate amount of all policy owners' claims in this State
22    related to that insolvency and shall remit to the
23    domiciliary receiver the amount so paid to the Association
24    less the amount retained pursuant to this subsection (13).
25    Any amount so paid to the Association and retained by it
26    shall be treated as a distribution of estate assets

 

 

HB4443- 38 -LRB097 16285 RPM 61439 b

1    pursuant to applicable State receivership law dealing with
2    early access disbursements.
3        (14) (q) The Board of Directors of the Association
4    shall have discretion and may exercise reasonable business
5    judgment to determine the means by which the Association is
6    to provide the benefits of this Article in an economical
7    and efficient manner.
8        (15) (r) Where the Association has arranged or offered
9    to provide the benefits of this Article to a covered person
10    under a plan or arrangement that fulfills the Association's
11    obligations under this Article, the person shall not be
12    entitled to benefits from the Association in addition to or
13    other than those provided under the plan or arrangement.
14        (16) (s) Venue in a suit against the Association
15    arising under the Article shall be in Cook County. The
16    Association shall not be required to give any appeal bond
17    in an appeal that relates to a cause of action arising
18    under this Article.
19        (17) (t) The Association may join an organization of
20    one or more other State associations of similar purposes to
21    further the purposes and administer the powers and duties
22    of the Association.
23        (18) (u) In carrying out its duties in connection with
24    guaranteeing, assuming, or reinsuring policies or
25    contracts under subsections (1) or (2), the Association
26    may, subject to approval of the receivership court, issue

 

 

HB4443- 39 -LRB097 16285 RPM 61439 b

1    substitute coverage for a policy or contract that provides
2    an interest rate, crediting rate, or similar factor
3    determined by use of an index or other external reference
4    stated in the policy or contract employed in calculating
5    returns or changes in value by issuing an alternative
6    policy or contract in accordance with the following
7    provisions:
8            (a) (1) in lieu of the index or other external
9        reference provided for in the original policy or
10        contract, the alternative policy or contract provides
11        for (i) a fixed interest rate, or (ii) payment of
12        dividends with minimum guarantees, or (iii) a
13        different method for calculating interest or changes
14        in value;
15            (b) (2) there is no requirement for evidence of
16        insurability, waiting period, or other exclusion that
17        would not have applied under the replaced policy or
18        contract; and
19            (c) (3) the alternative policy or contract is
20        substantially similar to the replaced policy or
21        contract in all other material terms.
22(Source: P.A. 96-1450, eff. 8-20-10; 97-333, eff. 8-12-11.)
 
23    (215 ILCS 5/531.09)  (from Ch. 73, par. 1065.80-9)
24    Sec. 531.09. Assessments.
25    (1) For the purpose of providing the funds necessary to

 

 

HB4443- 40 -LRB097 16285 RPM 61439 b

1carry out the powers and duties of the Association, the board
2of directors shall assess the member insurers, separately for
3each account, at such times and for such amounts as the board
4finds necessary. Assessments shall be due not less than 30 days
5after written notice to the member insurers and shall accrue
6interest from the due date at such adjusted rate as is
7established under Section 6621 of Chapter 26 of the United
8States Code and such interest shall be compounded daily.
9    (2) There shall be 2 classes of assessments, as follows:
10        (a) Class A assessments shall be made for the purpose
11    of meeting administrative costs and other general expenses
12    and examinations conducted under the authority of the
13    Director under subsection (5) of Section 531.12.
14        (b) Class B assessments shall be made to the extent
15    necessary to carry out the powers and duties of the
16    Association under Section 531.08 with regard to an impaired
17    or insolvent domestic insurer or insolvent foreign or alien
18    insurers.
19    (3)(a) The amount of any Class A assessment shall be
20determined at the discretion of the board of directors and such
21assessments shall be authorized and called on a non-pro rata
22basis. The amount of any Class B assessment shall be allocated
23for assessment purposes among the accounts and subaccounts
24pursuant to an allocation formula which may be based on the
25premiums or reserves of the impaired or insolvent insurer or
26any other standard deemed by the board in its sole discretion

 

 

HB4443- 41 -LRB097 16285 RPM 61439 b

1as being fair and reasonable under the circumstances.
2    (b) Class B assessments against member insurers for each
3account and subaccount shall be in the proportion that the
4premiums received on business in this State by each assessed
5member insurer on policies or contracts covered by each account
6or subaccount for the three most recent calendar years for
7which information is available preceding the year in which the
8insurer became impaired or insolvent, as the case may be, bears
9to such premiums received on business in this State for such
10calendar years by all assessed member insurers.
11    (c) Assessments for funds to meet the requirements of the
12Association with respect to an impaired or insolvent insurer
13shall not be made until necessary to implement the purposes of
14this Article. Classification of assessments under subsection
15(2) and computations of assessments under this subsection shall
16be made with a reasonable degree of accuracy, recognizing that
17exact determinations may not always be possible.
18    (4) The Association may abate or defer, in whole or in
19part, the assessment of a member insurer if, in the opinion of
20the board, payment of the assessment would endanger the ability
21of the member insurer to fulfill its contractual obligations.
22In the event an assessment against a member insurer is abated
23or deferred in whole or in part the amount by which the
24assessment is abated or deferred may be assessed against the
25other member insurers in a manner consistent with the basis for
26assessments set forth in this Section. Once the conditions that

 

 

HB4443- 42 -LRB097 16285 RPM 61439 b

1caused a deferral have been removed or rectified, the member
2insurer shall pay all assessments that were deferred pursuant
3to a repayment plan approved by the Association.
4    (5) (a) (i) Subject to the provisions of subparagraph (ii)
5of this paragraph, the total of all assessments authorized by
6the Association with respect to a member insurer for each
7subaccount of the life insurance and annuity account and for
8the health account shall not in one calendar year exceed 2% of
9that member insurer's average annual premiums received in this
10State on the policies and contracts covered by the subaccount
11or account during the 3 calendar years preceding the year in
12which the insurer became an impaired or insolvent insurer.
13    (ii) If 2 or more assessments are authorized in one
14calendar year with respect to insurers that become impaired or
15insolvent in different calendar years, the average annual
16premiums for purposes of the aggregate assessment percentage
17limitation referenced in subparagraph (a) of this paragraph
18shall be equal and limited to the higher of the 3-year average
19annual premiums for the applicable subaccount or account as
20calculated pursuant to this Section.
21    (iii) If the maximum assessment, together with the other
22assets of the Association in an account, does not provide in
23one year in either account an amount sufficient to carry out
24the responsibilities of the Association, the necessary
25additional funds shall be assessed as soon thereafter as
26permitted by this Article.

 

 

HB4443- 43 -LRB097 16285 RPM 61439 b

1    (b) The board may provide in the plan of operation a method
2of allocating funds among claims, whether relating to one or
3more impaired or insolvent insurers, when the maximum
4assessment will be insufficient to cover anticipated claims.
5    (c) If the maximum assessment for a subaccount of the life
6insurance and annuity account in one year does not provide an
7amount sufficient to carry out the responsibilities of the
8Association, then pursuant to paragraph (b) of subsection (3),
9the board shall assess the other subaccounts of the life and
10annuity account for the necessary additional amount, subject to
11the maximum stated in paragraph (a) of this subsection.
12    (6) The board may, by an equitable method as established in
13the plan of operation, refund to member insurers, in proportion
14to the contribution of each insurer to that account, the amount
15by which the assets of the account exceed the amount the board
16finds is necessary to carry out during the coming year the
17obligations of the Association with regard to that account,
18including assets accruing from net realized gains and income
19from investments. A reasonable amount may be retained in any
20account to provide funds for the continuing expenses of the
21Association and for future losses.
22    (7) An assessment is deemed to occur on the date upon which
23the board votes such assessment. The board may defer calling
24the payment of the assessment or may call for payment in one or
25more installments.
26    (8) It is proper for any member insurer, in determining its

 

 

HB4443- 44 -LRB097 16285 RPM 61439 b

1premium rates and policyowner dividends as to any kind of
2insurance within the scope of this Article, to consider the
3amount reasonably necessary to meet its assessment obligations
4under this Article.
5    (9) The Association must issue to each insurer paying a
6Class B assessment under this Article a certificate of
7contribution, in a form acceptable to the Director, for the
8amount of the assessment so paid. All outstanding certificates
9are of equal dignity and priority without reference to amounts
10or dates of issue. A certificate of contribution may be shown
11by the insurer in its financial statement as an asset in such
12form and for such amount, if any, and period of time as the
13Director may approve, provided the insurer shall in any event
14at its option have the right to show a certificate of
15contribution as an admitted asset at percentages of the
16original face amount for calendar years as follows:
17    100% for the calendar year after the year of issuance;
18    80% for the second calendar year after the year of
19issuance;
20    60% for the third calendar year after the year of issuance;
21    40% for the fourth calendar year after the year of
22issuance;
23    20% for the fifth calendar year after the year of issuance.
24    (10) The Association may request information of member
25insurers in order to aid in the exercise of its power under
26this Section and member insurers shall promptly comply with a

 

 

HB4443- 45 -LRB097 16285 RPM 61439 b

1request.
2(Source: P.A. 95-86, eff. 9-25-07 (changed from 1-1-08 by P.A.
395-632); 96-1450, eff. 8-20-10.)
 
4    (215 ILCS 5/531.14)  (from Ch. 73, par. 1065.80-14)
5    Sec. 531.14. Miscellaneous Provisions.
6    (1) Nothing in this Article may be construed to reduce the
7liability for unpaid assessments of the insured of an impaired
8or insolvent insurer operating under a plan with assessment
9liability.
10    (2) Records must be kept of all negotiations and meetings
11in which the Association or its representatives are involved to
12discuss the activities of the Association in carrying out its
13powers and duties under Section 531.08. Records of such
14negotiations or meetings may be made public only upon the
15termination of a liquidation, rehabilitation, or conservation
16proceeding involving the impaired or insolvent insurer, upon
17the termination of the impairment or insolvency of the insurer,
18or upon the order of a court of competent jurisdiction. Nothing
19in this paragraph (2) limits the duty of the Association to
20render a report of its activities under Section 531.15.
21    (3) For the purpose of carrying out its obligations under
22this Article, the Association is deemed to be a creditor of the
23impaired or insolvent insurer to the extent of assets
24attributable to covered policies reduced by any amounts to
25which the Association is entitled as subrogee (under paragraph

 

 

HB4443- 46 -LRB097 16285 RPM 61439 b

1(10) (8) of Section 531.08). All assets of the impaired or
2insolvent insurer attributable to covered policies must be used
3to continue all covered policies and pay all contractual
4obligations of the impaired insurer as required by this
5Article. "Assets attributable to covered policies", as used in
6this paragraph (3), is that proportion of the assets which the
7reserves that should have been established for such policies
8bear to the reserve that should have been established for all
9policies of insurance written by the impaired or insolvent
10insurer.
11    (4) (a) Prior to the termination of any liquidation,
12rehabilitation, or conservation proceeding, the court may take
13into consideration the contributions of the respective
14parties, including the Association, the shareholders and
15policyowners of the impaired or insolvent insurer, and any
16other party with a bona fide interest, in making an equitable
17distribution of the ownership rights of such impaired or
18insolvent insurer. In such a determination, consideration must
19be given to the welfare of the policyholders of the continuing
20or successor insurer.
21    (b) No distribution to stockholders, if any, of an impaired
22or insolvent insurer may be made until and unless the total
23amount of valid claims of the Association for funds expended,
24with interest, in carrying out its powers and duties under
25Section 531.08, with respect to such insurer have been fully
26recovered by the Association.

 

 

HB4443- 47 -LRB097 16285 RPM 61439 b

1    (5) (a) If an order for liquidation or rehabilitation of an
2insurer domiciled in this State has been entered, the receiver
3appointed under such order has a right to recover on behalf of
4the insurer, from any affiliate that controlled it, the amount
5of distributions, other than stock dividends paid by the
6insurer on its capital stock, made at any time during the 5
7years preceding the petition for liquidation or rehabilitation
8subject to the limitations of paragraphs (b) to (d).
9    (b) No such dividend is recoverable if the insurer shows
10that when paid the distribution was lawful and reasonable, and
11that the insurer did not know and could not reasonably have
12known that the distribution might adversely affect the ability
13of the insurer to fulfill its contractual obligations.
14    (c) Any person who as an affiliate that controlled the
15insurer at the time the distributions were paid is liable up to
16the amount of distributions he received. Any person who was an
17affiliate that controlled the insurer at the time the
18distributions were declared, is liable up to the amount of
19distributions he would have received if they had been paid
20immediately. If 2 persons are liable with respect to the same
21distributions, they are jointly and severally liable.
22    (d) The maximum amount recoverable under subsection (5) of
23this Section is the amount needed in excess of all other
24available assets of the insolvent insurer to pay the
25contractual obligations of the insolvent insurer.
26    (e) If any person liable under paragraph (c) of subsection

 

 

HB4443- 48 -LRB097 16285 RPM 61439 b

1(5) of this Section is insolvent, all its affiliates that
2controlled it at the time the dividend was paid are jointly and
3severally liable for any resulting deficiency in the amount
4recovered from the insolvent affiliate.
5    (6) As a creditor of the impaired or insolvent insurer as
6established in subsection (3) of this Section and consistent
7with subsection (2) of Section 205 of this Code, the
8Association and other similar associations shall be entitled to
9receive a disbursement of assets out of the marshaled assets,
10from time to time as the assets become available to reimburse
11it, as a credit against contractual obligations under this
12Article. If the liquidator has not, within 120 days after a
13final determination of insolvency of an insurer by the
14receivership court, made an application to the court for the
15approval of a proposal to disburse assets out of marshaled
16assets to guaranty associations having obligations because of
17the insolvency, then the Association shall be entitled to make
18application to the receivership court for approval of its own
19proposal to disburse these assets.
20(Source: P.A. 96-1450, eff. 8-20-10.)
 
21    Section 10. The Health Maintenance Organization Act is
22amended by changing Section 6-14 as follows:
 
23    (215 ILCS 125/6-14)  (from Ch. 111 1/2, par. 1418.14)
24    Sec. 6-14. Miscellaneous Provisions. (1) Records must be

 

 

HB4443- 49 -LRB097 16285 RPM 61439 b

1kept of all negotiations and meetings in which the Association
2or its representatives are involved to discuss the activities
3of the Association in carrying out its powers and duties under
4Section 6-8. Records of such negotiations or meetings may be
5made public only upon the termination of a liquidation,
6rehabilitation, or conservation proceeding involving the
7impaired or insolvent organization, upon the termination of the
8impairment or insolvency of the organization, or upon the order
9of a court of competent jurisdiction. Nothing in this
10subsection (1) limits the duty of the Association to submit a
11report of its activities under Section 6-15.
12    (2) For the purpose of carrying out its obligations under
13this Article, the Association is deemed to be a creditor of the
14impaired or insolvent organization to the extent of assets
15attributable to covered health care plan certificates reduced
16by any amounts to which the Association is entitled as subrogee
17(under subsection (7) of Section 6-8). All assets of the
18impaired or insolvent organization attributable to covered
19health care plan certificates must be used to continue all
20covered health care plan certificates and pay all contractual
21obligations of the impaired organization as required by this
22Article. "Assets attributable to covered health care plan
23certificates", as used in this subsection (2), is that
24proportion of the assets which the reserves that should have
25been established for such health care plan certificates bear to
26the reserve that should have been established for all health

 

 

HB4443- 50 -LRB097 16285 RPM 61439 b

1care plan certificates of the impaired or insolvent
2organization.
3    (3) (a) Prior to the termination of any liquidation,
4rehabilitation, or conservation proceeding, the court may take
5into consideration the contributions of the respective
6parties, including the Association, the shareholders of the
7impaired or insolvent organization, and any other party with a
8bona fide interest, in making an equitable distribution of the
9ownership rights of such impaired or insolvent organization. In
10such a determination, consideration must be given to the
11welfare of the enrollees of the continuing or successor
12organization.
13    (b) No distribution to stockholders, if any, of an impaired
14or insolvent organization may be made until and unless the
15total amount of valid claims of the Association for funds
16expended in carrying out its powers and duties under Section
176-8, with interest, with respect to such organization have been
18fully recovered by the Association.
19    (4) (a) If an order for liquidation or rehabilitation of an
20organization domiciled in this State has been entered, the
21receiver appointed under such order has a right to recover on
22behalf of the organization, from any affiliate that controlled
23it, the amount of distributions, other than stock dividends
24paid by the organization on its capital stock, made at any time
25during the 5 years preceding the petition for liquidation or
26rehabilitation subject to the limitations of paragraphs (b) to

 

 

HB4443- 51 -LRB097 16285 RPM 61439 b

1(d).
2    (b) No such distribution is recoverable if the organization
3shows that when paid the distribution was lawful and
4reasonable, and that the organization did not know and could
5not reasonably have known that the distribution might adversely
6affect the ability of the organization to fulfill its
7contractual obligations.
8    (c) Any person who was an affiliate that controlled the
9organization at the time the distributions were paid is liable
10up to the amount of distributions he received. Any person who
11was an affiliate that controlled the organization at the time
12the distributions were declared, is liable up to the amount of
13distributions he would have received if they had been paid
14immediately. If 2 persons are liable with respect to the same
15distributions, they are jointly and severally liable.
16    (d) The maximum amount recoverable under subsection (4) of
17this Section is the amount needed in excess of all other
18available assets of the insolvent organization to pay the
19contractual obligations of the insolvent organization.
20    (e) If any person liable under paragraph (c) of subsection
21(4) of this Section is insolvent, all its affiliates that
22controlled it at the time the distribution was paid are jointly
23and severally liable for any resulting deficiency in the amount
24recovered from the insolvent affiliate.
25(Source: P.A. 86-620.)