SB2877 EngrossedLRB097 16448 RPM 61612 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 131.1, 131.2, 131.3, 131.4, 131.5, 131.6,
6131.8, 131.8a, 131.11, 131.12, 131.12a, 131.13, 131.14,
7131.16, 131.17, 131.18, 131.19, 131.20, 131.20a, 131.20b,
8131.21, 131.22, 131.23, 131.24, 131.26, 132.27, and 356z.12 and
9by adding Sections 131.14a, 131.14b, 131.14c, 131.20c, 131.29,
10and 131.30 as follows:
 
11    (215 ILCS 5/131.1)  (from Ch. 73, par. 743.1)
12    Sec. 131.1. Definitions. As used in this Article, the
13following terms have the respective meanings set forth in this
14Section unless the context requires otherwise:
15    (a) An "affiliate" of, or person "affiliated" with, a
16specific person, is a person that directly, or indirectly
17through one or more intermediaries, controls, or is controlled
18by, or is under common control with, the person specified.
19    (a-5) "Acquiring party" means such person by whom or on
20whose behalf the merger or other acquisition of control
21referred to in Section 131.4 is to be affected and any person
22that controls such person or persons.
23    (a-10) "Company" has the same meaning as "company" as

 

 

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1defined in Section 2 of this Code, except that it does not
2include agencies, authorities, or instrumentalities of the
3United States, its possessions and territories, the
4Commonwealth of Puerto Rico, the District of Columbia, or a
5state or political subdivision of a state.
6    (b) "Control" (including the terms "controlling",
7"controlled by" and "under common control with") means the
8possession, direct or indirect, of the power to direct or cause
9the direction of the management and policies of a person,
10whether through the ownership of voting securities, the holding
11of policyholders' proxies by contract other than a commercial
12contract for goods or non-management services, or otherwise,
13unless the power is solely the result of an official position
14with or corporate office held by the person. Control is
15presumed to exist if any person, directly or indirectly, owns,
16controls, holds with the power to vote, or holds shareholders'
17proxies representing 10% or more of the voting securities of
18any other person, or holds or controls sufficient
19policyholders' proxies to elect the majority of the board of
20directors of the domestic company. This presumption may be
21rebutted by a showing made in the manner as the Director may
22provide by rule. The Director may determine, after furnishing
23all persons in interest notice and opportunity to be heard and
24making specific findings of fact to support such determination,
25that control exists in fact, notwithstanding the absence of a
26presumption to that effect.

 

 

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1    (b-5) "Enterprise risk" means any activity, circumstance,
2event, or series of events involving one or more affiliates of
3a company that, if not remedied promptly, is likely to have a
4material adverse effect upon the financial condition or
5liquidity of the company or its insurance holding company
6system as a whole, including, but not limited to, anything that
7would cause the company's risk-based capital to fall into
8company action level as set forth in Article IIA of this Code
9or would cause the company to be in hazardous financial
10condition as set forth in Article XII 1/2 of this Code.
11    (c) "Insurance holding company system" means two or more
12affiliated persons, one or more of which is an insurance
13company as defined in paragraph (e) of Section 2 of this Code.
14    (d) (Blank). "Company" has the same meaning as "Company" as
15defined in Section 2 of this Code, except that it does not
16include agencies, authorities or instrumentalities of the
17United States, its possessions and territories, the
18Commonwealth of Puerto Rico, the District of Columbia or a
19State or political subdivision of a State.
20    (d-5) "Non-operating holding company" is a general
21business corporation functioning solely for the purpose of
22forming, owning, acquiring, and managing subsidiary business
23entities and having no other business operations not related
24thereto.
25    (e) "Person" means an individual, a corporation, a limited
26liability company, a partnership, an association, a joint stock

 

 

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1company, a trust, an unincorporated organization, any similar
2entity or any combination of the foregoing acting in concert,
3but does not include any securities broker performing no more
4than the usual and customary broker's function or joint venture
5partnership exclusively engaged in owning, managing, leasing
6or developing real or tangible personal property other than
7capital stock.
8    (e-5) "Policyholders' proxies" are proxies that give the
9holder the right to vote for the election of the directors and
10other corporate actions not in the day to day operations of the
11company.
12    (f) (Blank). "Securityholder" of a specified person is one
13who owns any security of such person, including common stock,
14preferred stock, debt obligations, and any other security
15convertible into or evidencing the right to acquire any of the
16foregoing.
17    (g) "Subsidiary" of a specified person is an affiliate
18controlled by such person directly, or indirectly through one
19or more intermediaries.
20    (h) "Voting Security" is a security which gives to the
21holder thereof the right to vote for the election of directors
22and includes any security convertible into or evidencing a
23right to acquire a voting security.
24    (i) (Blank). "Acquiring Party" means such person by whom or
25on whose behalf the merger or other acquisition of control
26referred to in Section 131.4 is to be affected and any person

 

 

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1that controls such person or persons.
2    (j) (Blank). "Policyholders' Proxies" are proxies which
3give the holder the right to vote for the election of the
4directors and other corporate actions not in the day-to-day
5operations of the company.
6    (k) (Blank). "Non-operating Holding Company" is a general
7business corporation functioning solely for the purpose of
8forming, owning, acquiring and managing subsidiary business
9entities and having no other business operations not related
10thereto.
11(Source: P.A. 84-805.)
 
12    (215 ILCS 5/131.2)  (from Ch. 73, par. 743.2)
13    Sec. 131.2. Subsidiaries. A domestic company, either by
14itself or in cooperation with one or more persons, may organize
15or acquire one or more subsidiaries. The subsidiaries may
16conduct any kind of business or businesses and their authority
17to do so shall not be limited by reason of the fact that they
18are subsidiaries of a domestic company. In addition to
19investments in common stock, preferred stock, debt obligations
20and other securities of subsidiaries permitted under all other
21sections of this Code, a domestic company, other than a company
22subject to Articles XVIII or XIX, may also:
23        (a) invest, in common stock, preferred stock, debt
24    obligations, and other securities of one or more
25    subsidiaries, amounts which do not exceed the lesser of 10%

 

 

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1    of the company's assets or 50% of the company's surplus as
2    regards policyholders, but after such investments the
3    company's surplus as regards policyholders must be
4    reasonable in relation to the company's outstanding
5    liabilities and adequate to its financial needs. In
6    calculating the amount of such investments, there must be
7    included (i) total net monies or other consideration
8    expended and obligations assumed in the acquisition or
9    formation of a subsidiary, including all organizational
10    expenses and contributions to capital and surplus of the
11    subsidiary whether or not represented by the purchase of
12    capital stock or issuance of other securities, and (ii) all
13    amounts expended in acquiring additional common stock,
14    preferred stock, debt obligations, and other securities,
15    and all contributions to the capital or surplus of a
16    subsidiary subsequent to its acquisition or formation;
17        (b) invest any amount in common stock, preferred stock,
18    debt obligations and other securities of one or more direct
19    subsidiaries acting only as a non-operating holding
20    company or engaged or organized exclusively for the
21    ownership and management of assets authorized as
22    investments for the company, provided that each subsidiary
23    agrees to limit its investments in any asset so that such
24    investments will not cause the amount of the total
25    investment of the company to exceed the amount the company
26    could have invested in such asset. For the purpose of this

 

 

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1    clause, "the total investment of the company" will include
2    (i) any direct investment by the company in an asset and
3    (ii) the company's proportionate share of any investment in
4    such asset by any direct subsidiary of the company, which
5    must be calculated by multiplying the amount of the
6    subsidiary's investment by the percentage of the company's
7    ownership of such subsidiary;
8        (c) invest in common stock of one or more insurance
9    corporation subsidiaries any amount by which the investing
10    company's capital and surplus exceeds the minimum capital
11    and surplus required of a new company under Section 13 to
12    qualify for a certificate of authority to write the kind or
13    kinds of insurance which the company is authorized to
14    write, if the company is a stock company, and if the
15    company is other than a stock company, the company may
16    invest the amount by which the company's surplus exceeds
17    the minimum surplus required of a new company under Section
18    43 or 66 to qualify for a certificate of authority to write
19    the kind or kinds of insurance which the company is
20    authorized to write;
21        (d) with the approval of the Director, invest any
22    greater amount in common stock, preferred stock, debt
23    obligations, or other securities of one or more
24    subsidiaries, but after such investment the company's
25    surplus as regards policyholders must be reasonable in
26    relation to the company's outstanding liabilities and

 

 

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1    adequate to its financial needs.
2(Source: P.A. 85-1186.)
 
3    (215 ILCS 5/131.3)  (from Ch. 73, par. 743.3)
4    Sec. 131.3. (1) Investments in common stock, preferred
5stock, debt obligations or other securities of subsidiaries
6made under Section 131.2 of this Article are subject to
7Sections 126.3, 126.4, 126.5, 126.6, 126.7, and 133 of this
8Code but are not subject to any other of the otherwise
9applicable restrictions or prohibitions contained in this Code
10applicable to such investments of a domestic company subject to
11this Code.
12    (2) If a company ceases to control a subsidiary, it must
13dispose of any investment therein made under this section
14within 3 years from the time of the cessation of control or
15within such further time as the Director may prescribe, unless
16at any time after the investment is made, the investment meets
17the requirements for investment under any other section of this
18Code, and the company has notified the Director thereof.
19    (3) Whether any investment made pursuant to this Section
20meets the applicable requirements of this Section is to be
21determined before the investment is made by calculating the
22applicable investment limitations as though the investment had
23already been made, taking into account the then outstanding
24principal balance on all previous investments in debt
25obligations, and the value of all previous investments in

 

 

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1equity securities as of the day they were made, net of any
2return of capital invested, not including dividends.
3(Source: P.A. 90-418, eff. 8-15-97.)
 
4    (215 ILCS 5/131.4)  (from Ch. 73, par. 743.4)
5    Sec. 131.4. Acquisition of control of or merger with
6domestic company.
7    (a) No person other than the issuer may make a tender for
8or a request or invitation for tenders of, or enter into an
9agreement to exchange securities for, seek to acquire, or
10acquire in the open market, or otherwise, any voting security
11of a domestic company or acquire policyholders' proxies of a
12domestic company for consideration if, after the consummation
13thereof, that person would, directly or indirectly, (or by
14conversion or by exercise of any right to acquire) be in
15control of the company, and no person may enter into an
16agreement to merge or consolidate with or otherwise to acquire
17control of a domestic company, unless the offer, request,
18invitation, or agreement is conditioned on receiving the
19approval of the Director based on Section 131.8 of this Article
20and no such acquisition of control or a merger with a domestic
21company may be consummated unless the person has filed with the
22Director and has sent to the company a statement containing the
23information required by Section 131.5 and the Director has
24approved the transaction or granted an exemption. For purposes
25of this Section a domestic company includes any other person

 

 

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1which controls a domestic company or holds or controls
2sufficient policyholders' proxies to elect the majority of the
3board of directors of the domestic company. Prior to the
4acquisition, the Director may conclude that a statement need
5not be filed by the acquiring party if the acquiring party
6demonstrates to the satisfaction of the Director that:
7        (1) such transaction will not result in the change of
8    control of the domestic company; or
9        (2) (blank); the person which is subject to the
10    acquisition has assets in excess of $1,000,000 and
11    shareholders of record of 500 or more and its insurance
12    business either directly or through its affiliates is an
13    insignificant portion of its total business; or
14        (3) the acquisition of, or attempt to acquire control
15    of, such other person is subject to requirements in the
16    jurisdiction of its domicile which are substantially
17    similar to those contained in this Section and Sections
18    131.5 through 131.11 131.12; or
19        (4) the control of the policyholders' proxies is being
20    acquired solely by virtue of the holders official office
21    and not as the result of any agreement or for any
22    consideration.
23        The purpose of this Section is to afford to the
24    Director the opportunity to review acquisitions in order to
25    determine whether or not the acquisition would be adverse
26    to the interests of the existing and future policyholders

 

 

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1    of the company.
2    (b) For purposes of this Section, any controlling person of
3a domestic company seeking to divest its controlling interest
4in the domestic company in any manner shall file with the
5Director, with a copy to the company, confidential notice of
6its proposed divestiture at least 30 days prior to the
7cessation of control. The Director shall determine those
8instances in which the party or parties seeking to divest or to
9acquire a controlling interest in a company shall be required
10to file for and obtain approval of the transaction. The
11information shall remain confidential until the conclusion of
12the transaction unless the Director, in his or her discretion,
13determines that confidential treatment shall interfere with
14enforcement of this Section. If the statement referred to in
15subsection (a) of this Section is otherwise filed, this
16subsection (b) shall not apply.
17    (c) For purposes of this Section, a domestic company shall
18include any person controlling a domestic company unless the
19person, as determined by the Director, is either directly or
20through its affiliates primarily engaged in business other than
21the business of insurance. For the purposes of this Section,
22"person" shall not include any securities broker holding, in
23the usual and customary broker's function, less than 20% of the
24voting securities of an insurance company or of any person that
25controls an insurance company.
26(Source: P.A. 86-784.)
 

 

 

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1    (215 ILCS 5/131.5)  (from Ch. 73, par. 743.5)
2    Sec. 131.5. Statement; contents Statement-Contents. In
3order to seek the approval of the Director pursuant to Section
4131.8, the applicant must file a statement with the Director
5under oath or affirmation which contains as a minimum the
6following information:
7    (1) The name and address of each acquiring party, and
8    (a) if such person is an individual, his principal
9occupation and all offices and positions held during the past 5
10years, and any conviction of crimes, other than minor traffic
11violations, during the past 10 years;
12    (b) if such person is not an individual, a report of the
13nature of its business operations during the past 5 years or
14for such lesser period as the person and any predecessors
15thereof has been in existence; an informative description of
16the business intended to be conducted by the person and the
17person's subsidiaries; and a list of all individuals who are or
18who have been selected to become directors or executive
19officers of the person, or who perform or will perform
20functions appropriate to such positions. The list must include
21for each individual the information required by subsection
22(1)(a).
23    (2) The source, nature and amount of the consideration used
24or to be used in effecting the merger, consolidation or other
25acquisition of control, a description of any transaction

 

 

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1wherein funds were or are to be obtained for any such purpose,
2including any pledge of the company's own securities or the
3securities of any of its subsidiaries or affiliates, and the
4identity of persons furnishing such consideration. However,
5where a source of such consideration is a loan made in the
6lender's ordinary course of business, the identity of the
7lender must remain confidential, if the person filing the
8statement so requests.
9    (3) Financial information as to the earnings and financial
10condition of each acquiring party for the preceding 5 fiscal
11years of each acquiring party (or for such lesser period as the
12acquiring party and any predecessors thereof have been in
13existence) audited by an independent certified public
14accountant in accordance with generally accepted auditing
15standards and similar unaudited information for the second and
16third preceding fiscal years and as of a date not earlier than
1790 days prior to the filing of the statement. If an acquiring
18party is an insurer which has been actively engaged in the
19business of insurance for 10 years, the financial information
20need not be audited, provided it is based on the annual
21statements of such acquiring person filed with the insurance
22department of the person's domiciliary state and is in
23accordance with the requirement of insurance or other
24accounting principles prescribed or permitted under the laws
25and regulations of such state.
26    (a) When an applicant is controlled by an individual,

 

 

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1financial information for that individual will not be required
2if the applicant is currently subject to the registration and
3reporting requirements of Section 12(g) of the Securities
4Exchange Act of 1934 or is an insurer which has been actively
5engaged in the business of insurance for a period in excess of
610 years;
7    (b) When an individual as an acquiring party must file
8financial information under this paragraph such information
9need not be delivered to the company. However, such information
10shall be available if the Director holds a hearing pursuant to
11Section 131.8.
12    (4) Any plans or proposals which each acquiring party may
13have to liquidate such company, to sell its assets or merge or
14consolidate it with any person, or to make any other material
15change in its business or corporate structure or management.
16    (5) The number of shares of any security referred to in
17Section 131.4 which each acquiring party proposes to acquire,
18and the terms of the offer, request, invitation, agreement, or
19acquisition referred to in Section 131.4, and a statement as to
20the method by which the fairness of the proposal was arrived.
21    (6) The amount of each class of any security referred to in
22Section 131.4 which is beneficially owned or concerning which
23there is a right to acquire beneficial ownership by each
24acquiring party.
25    (7) A full description of any existing contracts,
26arrangements or understandings with respect to any security

 

 

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1referred to in Section 131.4 in which any acquiring party is
2involved, including but not limited to transfer of any of the
3securities, joint ventures, loan or option arrangements, puts
4or calls, guarantees of loans, guarantees against loss or
5guarantees of profits, division of losses or profits, or the
6giving or withholding of proxies. The description must identify
7the persons with whom such contracts, arrangements or
8understandings have been entered into.
9    (8) A description of the acquisition of any security or
10policyholders' proxy referred to in Section 131.4 during the 12
11calendar months preceding the filing of the statement, by any
12acquiring party, including the dates of acquisition, names of
13the acquiring parties acquirors, and consideration paid or
14agreed to be paid therefor.
15    (9) A description of any recommendations to acquire any
16security referred to in Section 131.4 made during the 12
17calendar months preceding the filing of the statement, by any
18acquiring party, or by anyone based upon interviews or at the
19suggestion of such acquiring party.
20    (10) Copies of all tender offers for, requests or
21invitations for tenders of, exchange offers for, and agreements
22to acquire or exchange any securities referred to in Section
23131.4, and (if distributed) of additional soliciting material
24relating thereto.
25    (11) The terms of any agreement, contract or understanding
26made with, or proposed to be made with, any broker-dealer as to

 

 

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1solicitation of securities referred to in Section 131.4 for
2tender, and the amount of any fees, commissions or other
3compensation to be paid to broker-dealers with regard thereto.
4    (12) Beginning July 1, 2013, an agreement by the person
5required to file the statement referred to in this Section
6131.5 that the person will provide the annual report specified
7in Section 131.14b for so long as control exists.
8    (13) Beginning July 1, 2013, an acknowledgement by the
9person required to file the statement referred to in this
10Section 131.5 that the person and all subsidiaries within its
11control in the insurance holding company system shall provide
12information to the Director upon request as necessary to
13evaluate enterprise risk to the company.
14    (14) Any additional information as the Director may by rule
15or regulation prescribe as necessary or appropriate for the
16protection of policyholders or in the public interest.
17(Source: P.A. 84-805.)
 
18    (215 ILCS 5/131.6)  (from Ch. 73, par. 743.6)
19    Sec. 131.6. (1) If the person required to file the
20statement referred to in Section 131.5 is a partnership,
21limited partnership, syndicate or other group, the Director may
22require that the information be given with respect to each
23partner of such partnership or limited partnership, each member
24of such syndicate or group, and each person who controls such
25partner or member. If any partner, member or person is a

 

 

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1corporation or the person required to file the statement
2referred to in Section 131.5 is a corporation, the Director may
3require that the information be given with respect to the
4corporation, each officer and director of the corporation, and
5each person who is directly or indirectly the beneficial owner
6of more than 10% of the outstanding voting securities of the
7corporation.
8    (2) If any material change occurs in the facts set forth in
9the statement filed with the Director and sent to the company
10under Section 131.5 131.9, an amendment setting forth the
11change, together with copies of all documents and other
12material relevant to the change, must be filed with the
13Director and sent to the company within 2 business days after
14the person learns of the change.
15(Source: P.A. 84-805.)
 
16    (215 ILCS 5/131.8)  (from Ch. 73, par. 743.8)
17    Sec. 131.8. (1) After the statement required by Section
18131.5 has been filed, the Director shall approve must
19disapprove any merger, consolidation or other acquisition of
20control referred to in Section 131.4 unless the acquiring party
21demonstrates to the Director finds that:
22        (a) after the After change of control, the domestic
23    company referred to in Section 131.4 would not be able to
24    satisfy the requirements for the issuance of a license to
25    write the line or lines of insurance for which it is

 

 

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1    presently licensed;
2        (b) the effect of the merger, consolidation or other
3    acquisition of control would be not substantially to lessen
4    competition in insurance in this State or not tend to
5    create a monopoly therein. In applying the competitive
6    standard in this paragraph:
7            (i) the informational requirements of subsection
8        (3)(a) and the standards of subsection (4)(b) of
9        Section 131.12a shall apply,
10            (ii) the merger or other acquisition shall not be
11        disapproved if the Director finds acquiring party
12        demonstrates that any of the situations meeting the
13        criteria provided by subsection (4)(c) of Section
14        131.12a exist, and
15            (iii) the Director may condition the approval of
16        the merger or other acquisition on the removal of the
17        basis of disapproval within a specified period of time;
18        (c) the financial condition of any acquiring party is
19    such as might to not jeopardize the financial stability of
20    the domestic company or not jeopardize the interests of its
21    policyholders;
22        (d) the plans or proposals which the acquiring party
23    has to liquidate the domestic company, sell its assets or
24    consolidate or merge it with any person, or to make any
25    other material change in its business or corporate
26    structure or management, are unfair fair and unreasonable

 

 

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1    reasonable to policyholders of such company and not in the
2    public interest; or
3        (e) the competence, experience and integrity of those
4    persons who would not control the operation of the domestic
5    company are such that it would be in the best interests of
6    policyholders of such company and of the insurance buying
7    public to permit the merger, consolidation or other
8    acquisition of control.
9    (2) The Director may hold a public hearing on any merger,
10consolidation or other acquisition of control referred to in
11Section 131.4 if the Director determines that the statement
12filed as required by Section 131.5 does not demonstrate
13compliance with the standards referred to in subsection (1), of
14this Section, or if he determines that such acquisition of
15control is likely to be hazardous or prejudicial to the will
16adversely affect policyholders or the insurance buying public.
17    (3) The public hearing referred to in subsection (2) must
18be held within 60 days after the statement required by Section
19131.5 is filed, and at least 20 days' notice thereof must be
20given by the Director to the person filing the statement and to
21the domestic company. Not less than 7 12 days' notice of such
22hearing must be given by the person filing the statement to
23such other persons as may be designated by the Director and by
24the company to its shareholders securityholders. The Director
25must make a determination within 60 30 days after the
26conclusion of the hearing. At the hearing, the person filing

 

 

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1the statement, the domestic company, any person to whom notice
2of the hearing was sent, and any other person whose interests
3may be affected thereby has the right to present evidence,
4examine and cross-examine witnesses, and offer oral and written
5arguments and in connection therewith is entitled to conduct
6discovery proceedings in the same manner as is presently
7allowed in the Circuit Courts of this State. All discovery
8proceedings must be concluded not later than 3 days prior to
9the commencement of the public hearing.
10    (4) If the proposed acquisition of control will require the
11approval of more than one state insurance commissioner, the
12public hearing referred to in subsection (2) of this Section
13may be held on a consolidated basis upon request of the person
14filing the statement referred to in Section 131.5 of this Code.
15Such person shall file the statement referred to in Section
16131.5 of this Code with the National Association of Insurance
17Commissioners (NAIC) within 5 days after making the request for
18a public hearing. A commissioner may opt out of a consolidated
19hearing and shall provide notice to the applicant of the opt
20out within 10 days after the receipt of the statement referred
21to in Section 131.5 of this Code. A hearing conducted on a
22consolidated basis shall be public and shall be held within the
23United States before the commissioners of the states in which
24the companies are domiciled. Such commissioners shall hear and
25receive evidence. A commissioner may attend such hearing in
26person or by telecommunication.

 

 

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1    (5) In connection with a change of control of a domestic
2company, any determination by the Director that the person
3acquiring control of the company shall be required to maintain
4or restore the capital of the company to the level required by
5the laws and regulations of this State shall be made not later
6than 60 days after the date of notification of the change in
7control.
8(Source: P.A. 84-805.)
 
9    (215 ILCS 5/131.8a)  (from Ch. 73, par. 743.8a)
10    Sec. 131.8a. The Director may retain at the applicant's
11expense any attorneys, actuaries, accountants and other
12experts not otherwise a part of the Director's staff as may be
13reasonably necessary to assist in reviewing the conduct of
14financial or character examinations in conjunction with an
15acquisition proposed under Section 131.4. The applicant shall
16deposit with the Director cash, bonds or securities, acceptable
17to the Director, in a reasonable amount not to exceed $100,000,
18for purpose of securing the payment of any expert's cost.
19(Source: P.A. 86-753.)
 
20    (215 ILCS 5/131.11)  (from Ch. 73, par. 743.11)
21    Sec. 131.11. The following are violations of Sections 131.4
22through 131.12:
23    (1) the failure to file any statement, amendment, or other
24material required to be filed under Sections 131.4 or 131.5; or

 

 

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1    (2) the effectuation or any attempt to effectuate an
2acquisition of control of, divestiture of, or merger or
3consolidation with, a domestic company unless the Director has
4given his approval thereto.
5(Source: P.A. 77-673.)
 
6    (215 ILCS 5/131.12)  (from Ch. 73, par. 743.12)
7    Sec. 131.12. The courts of this State are hereby vested
8with jurisdiction over every person not resident, domiciled, or
9authorized to do business in this State who files a statement
10with the Director under Section 131.4, and over all actions
11involving such person arising out of violations of Sections
12131.4, 131.5, 131.6, 131.9 or 131.11, and each such person is
13deemed to have performed acts equivalent to and constituting an
14appointment by such a person of the Director to be his true and
15lawful attorney upon whom may be served all lawful process in
16any action, suit or proceeding arising out of violations of
17Sections 131.4, 131.5, 131.6, 131.9 or 131.11. Copies of all
18such lawful process must be served on the Director and
19transmitted by registered or certified mail by the Director to
20such person at his last known address.
21(Source: P.A. 77-673.)
 
22    (215 ILCS 5/131.12a)  (from Ch. 73, par. 743.12a)
23    Sec. 131.12a. Acquisitions involving companies insurers
24not otherwise covered.

 

 

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1    (1) Definitions. The following definitions shall apply for
2the purposes of this Section only:
3    (a) "Acquisition" means any agreement, arrangement or
4activity the consummation of which results in a person
5acquiring directly or indirectly the control of another person
6or control of the insurance in force of another person, and
7includes but is not limited to the acquisition of voting
8securities, the acquisition of assets, the transaction of bulk
9reinsurance and the act of merging or consolidating.
10    (b) An "involved company insurer" includes a company an
11insurer which either acquires or is acquired, is affiliated
12with an acquirer or acquired or is the result of a merger.
 
13    (2) Scope.
14    (a) Except as exempted in paragraph (b) of this subsection
15(2), this Section applies to any acquisition in which there is
16a change in control of a company an insurer authorized to do
17business in this State.
18    (b) This Section shall not apply to the following:
19        (i) an acquisition subject to approval or disapproval
20    by the Director pursuant to Section 131.8;
21        (ii) a purchase of securities solely for investment
22    purposes so long as such securities are not used by voting
23    or otherwise to cause or attempt to cause the substantial
24    lessening of competition in any insurance market in this
25    State. If a purchase of securities results in a presumption

 

 

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1    of control under subsection (b) of Section 131.1, it is not
2    solely for investment purposes unless the commissioner of
3    the company's insurer's state of domicile accepts a
4    disclaimer of control or affirmatively finds that control
5    does not exist and such disclaimer action or affirmative
6    finding is communicated by the domiciliary commissioner to
7    the Director of this State;
8        (iii) the acquisition of a person by another person
9    when both persons are neither directly nor through
10    affiliates primarily engaged in the business of insurance,
11    if pre-acquisition notification is filed with the Director
12    in accordance with subsection (3)(a) of this Section, 30
13    days prior to the proposed effective date of the
14    acquisition. However, such pre-acquisition notification is
15    not required for exclusion from this Section if the
16    acquisition would otherwise be excluded from this Section
17    by any other subparagraph of subsection (2)(b);
18        (iv) the acquisition of already affiliated persons;
19        (v) an acquisition if, as an immediate result of the
20    acquisition,
21            (A) in no market would the combined market share of
22        the involved companies insurers exceed 5% of the total
23        market,
24            (B) there would be no increase in any market share,
25        or
26            (C) in no market would the combined market share of

 

 

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1        the involved companies insurers exceed 12% of the total
2        market, and the market share increase by more than 2%
3        of the total market.
4        For the purpose of this subparagraph (b)(v), "market"
5    means direct written insurance premium in this State for a
6    line of business as contained in the annual statement
7    required to be filed by companies insurers licensed to do
8    business in this State;
9        (vi) an acquisition for which a pre-acquisition
10    notification would be required pursuant to this Section due
11    solely to the resulting effect on the ocean marine
12    insurance line of business;
13        (vii) an acquisition of a company an insurer whose
14    domiciliary commissioner affirmatively finds that such
15    company insurer is in failing condition; there is a lack of
16    feasible alternative to improving such condition; the
17    public benefits of improving such company's insurer's
18    condition through the acquisition exceed the public
19    benefits that would arise from not lessening competition;
20    and such findings are communicated by the domiciliary
21    commissioner to the Director of this State.
 
22    (3) Pre-acquisition Notification; Waiting Period. An
23acquisition covered by subsection (2) may be subject to an
24order pursuant to subsection (5) unless the acquiring person
25files a pre-acquisition notification and the waiting period has

 

 

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1expired. The acquired person may file a pre-acquisition
2notification. The Director shall give confidential treatment
3to information submitted under this subsection in the same
4manner as provided in Section 131.22 of this Article.
5    (a) The pre-acquisition notification shall be in such form
6and contain such information as prescribed by the Director,
7which shall conform substantially to the form of notification
8adopted by the National Association of Insurance Commissioners
9relating to those markets which, under subsection (b)(v) of
10Section (2), cause the acquisition not to be exempted from the
11provisions of this Section. The Director may require such
12additional material and information as he deems necessary to
13determine whether the proposed acquisition, if consummated,
14would violate the competitive standard of subsection (4). The
15required information may include an opinion of an economist as
16to the competitive impact of the acquisition in this State
17accompanied by a summary of the education and experience of
18such person indicating his or her ability to render an informed
19opinion.
20    (b) The waiting period required shall begin on the date of
21the receipt by the Director of a pre-acquisition notification
22and shall end on the earlier of the 30th day after the date of
23such receipt, or termination of the waiting period by the
24Director. Prior to the end of the waiting period, the Director
25on a one time basis may require the submission of additional
26needed information relevant to the proposed acquisition, in

 

 

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1which event the waiting period shall end on the earlier of the
230th day after the receipt of such additional information by
3the Director or termination of the waiting period by the
4Director.
 
5    (4) Competitive Standard.
6    (a) The Director may enter an order under subsection (5)(a)
7with respect to an acquisition if there is substantial evidence
8that the effect of the acquisition may be substantially to
9lessen competition in any line of insurance in this State or
10tend to create a monopoly therein or if the company insurer
11fails to file adequate information in compliance with
12subsection (3).
13    (b) In determining whether a proposed acquisition would
14violate the competitive standard of paragraph (a) of this
15subsection the Director shall consider the following:
16        (i) any acquisition covered under subsection (2)
17    involving 2 or more companies insurers competing in the
18    same market is prima facie evidence of violation of the
19    competitive standards:
20            (A) if the market is highly concentrated and the
21        involved companies insurers possess the following
22        shares of the market:
23          Company Insurer A     Company Insurer B
24                  4%                    4% or more
25                 10%                    2% or more

 

 

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1                 15%                    1% or more
2            (B) if the market is not highly concentrated and
3        the involved companies insurers possess the following
4        shares of the market:
5          Company Insurer A     Company Insurer B
6                  5%                    5% or more
7                 10%                    4% or more
8                 15%                    3% or more
9                 19%                    1% or more
10        A highly concentrated market is one in which the share
11    of the 4 largest companies insurers is 75% or more of the
12    market. Percentages not shown in the tables are to be
13    interpolated proportionately to the percentages that are
14    shown. If more than 2 companies insurers are involved,
15    exceeding the total of the 2 columns in the table is prima
16    facie evidence of violation of the competitive standard in
17    paragraph (a) of this subsection. For the purpose of this
18    subparagraph, the company insurer with the largest share of
19    the market shall be deemed to be Company Insurer A.
20        (ii) There is a significant trend toward increased
21    concentration when the aggregate market share of any
22    grouping of the largest companies insurers in the market
23    from the 2 largest to the 8 largest has increased by 7% or
24    more of the market over a period of time extending from any
25    base year 5-10 years prior to the acquisition up to the
26    time of the acquisition. Any acquisition covered under

 

 

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1    subsection (2) involving 2 or more companies insurers
2    competing in the same market is prima facie evidence of
3    violation of the competitive standard in paragraph (a) of
4    this subsection if:
5            (A) there is a significant trend toward increased
6        concentration in the market,
7            (B) one of the companies insurers involved is one
8        of the companies insurers in a grouping of such large
9        companies insurers showing the requisite increase in
10        the market share, and
11            (C) another involved company's insurer's market is
12        2% or more.
13        (iii) For the purpose of subsection (4)(b):
14            (A) The term "company" "insurer" includes any
15        company or group of companies under common management,
16        ownership or control.
17            (B) The term "market" means the relevant product
18        and geographic markets. In determining the relevant
19        product and geographical markets, the Director shall
20        give due consideration to, among other things, the
21        definitions or guidelines, if any, promulgated by the
22        National Association of Insurance Commissioners and to
23        information, if any, submitted by parties to the
24        acquisition. In the absence of sufficient information
25        to the contrary, the relevant product market is assumed
26        to be the direct written insurance premium for a line

 

 

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1        of business with such line being that used in the
2        annual statement required to be filed by companies
3        insurers doing business in this State and the relevant
4        geographical market is assumed to be this State.
5            (C) The burden of showing prima facie evidence of
6        violation of the competitive standard rests upon the
7        Director.
8        (iv) Even though an acquisition is not prima facie
9    violative of the competitive standard under subparagraph
10    (b)(i) and (b)(ii) of this subsection the Director may
11    establish the requisite anticompetitive effect based upon
12    other substantial evidence. Even though an acquisition is
13    prima facie violative of the competitive standard under
14    subparagraphs (b)(i) and (b)(ii) of this subsection (4), a
15    party may establish the absence of the requisite
16    anticompetitive effect based upon other substantial
17    evidence. Relevant factors in making a determination under
18    this paragraph include, but are not limited to, the
19    following: market shares, volatility of ranking of market
20    leaders, number of competitors, concentration, trend of
21    concentration in the industry, and ease of entry and exit
22    into the market.
23    (c) An order may not be entered under subsection (5)(a) if:
24        (i) the acquisition will yield substantial economies
25    of scale or economies in resource utilization that cannot
26    be feasibly achieved in any other way, and the public

 

 

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1    benefits which would arise from such economies exceed the
2    public benefits which would arise from not lessening
3    competition; or
4        (ii) the acquisition will substantially increase the
5    availability of insurance, and the public benefits of such
6    increase exceed the public benefits which would arise from
7    not lessening competition.
 
8    (5) Orders and Penalties:
9        (a)(i) If an acquisition violates the standard of this
10    Section, the Director may enter an order
11            (A) requiring an involved company insurer to cease
12        and desist from doing business in this State with
13        respect to the line or lines of insurance involved in
14        the violation, or
15            (B) denying the application of an acquired or
16        acquiring company insurer for a license to do business
17        in this State.
18        (ii) Such an order shall not be entered unless there is
19    a hearing, notice of such hearing is issued prior to the
20    end of the waiting period and not less than 15 days prior
21    to the end of the waiting period and not less than 15 days
22    prior to the hearing, and the hearing is concluded and the
23    order is issued no later than 60 days after the end of the
24    waiting period. Every order shall be accompanied by a
25    written decision of the Director setting forth his findings

 

 

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1    of fact and conclusions of law.
2        (iii) (Blank). An order entered under this paragraph
3    shall not become final earlier than 30 days after it is
4    issued, during which time the involved insurer may submit a
5    plan to remedy the anticompetitive impact of the
6    acquisition within a reasonable time. Based upon such plan
7    or other information, the Director shall specify, if any,
8    the conditions under and the time period during which the
9    aspects of the acquisition causing a violation of the
10    standards of this Section would be remedied and the order
11    vacated or modified.
12        (iv) An order pursuant to this paragraph shall not
13    apply if the acquisition is not consummated.
14    (b) Any person who violates a cease and desist order of the
15Director under paragraph (a) and while such order is in effect
16may after notice and hearing and upon order of the Director be
17subject at the discretion of the Director to any one or more of
18the following:
19        (i) a monetary penalty of not more than $10,000 for
20    every day of violation or
21        (ii) suspension or revocation of such person's license
22    or both.
23    (c) Any company insurer or other person who fails to make
24any filing required by this Section and who also fails to
25demonstrate a good faith effort to comply with any such filing
26requirement shall be subject to a civil penalty of not more

 

 

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1than $50,000.
 
2    (6) Inapplicable Provisions. Subsections (2) and (3) of
3Section 131.23 and Section 131.25 do not apply to acquisitions
4covered under subsection (2).
5(Source: P.A. 92-16, eff. 6-28-01.)
 
6    (215 ILCS 5/131.13)  (from Ch. 73, par. 743.13)
7    Sec. 131.13. Registration of companies. Every company
8which is authorized to do business in this State and which is a
9member of an insurance holding company system must register
10with the Director, except a foreign or alien company subject to
11registration requirements and standards adopted by statute or
12regulation in the jurisdiction of its domicile which are
13substantially similar to those contained in this section and
14Sections 131.14 through 131.20a 131.19. Any company which is
15subject to registration under this section must register within
1660 days after the effective date of this Article or 15 days
17after it becomes subject to registration, whichever is later,
18unless the Director for good cause shown extends the time for
19registration, and then within such extended time. The Director
20may require any authorized company which is a member of a
21holding company system which is not subject to registration
22under this section to furnish a copy of the registration
23statement or other information filed by such company with the
24insurance regulatory authority of its domiciliary

 

 

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1jurisdiction.
2    If upon review of the information filed pursuant to this
3Section and the information included in the annual statement
4filed pursuant to Section 136, the Director determines there is
5a potential for adverse economic impact due to substantial
6ownership of companies authorized to do business in this State
7by persons who are not citizens or residents of the United
8States or entities which are not organized or created under the
9laws of any state or territory of the United States, he shall
10report such determination along with any legislative
11recommendations to the General Assembly.
12(Source: P.A. 84-805.)
 
13    (215 ILCS 5/131.14)  (from Ch. 73, par. 743.14)
14    Sec. 131.14. Every company subject to registration must
15file a registration statement on a in the form and in a format
16prescribed designated by the Director, which shall contain the
17following contains current information about:
18    (1) the capital structure, general financial condition,
19ownership and management of the company and any person
20controlling the company;
21    (2) the identity and relationship of every member of the
22insurance holding company system;
23    (3) the following agreements in force, relationships
24subsisting, and transactions currently outstanding or that
25have occurred during the last calendar year between such

 

 

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1company and its affiliates:
2    (a) loans, other investments, or purchases, sales or
3exchanges of or securities of the affiliates by the company or
4of the company by its affiliates;
5    (b) purchases, sales, or exchanges of assets;
6    (c) transactions not in the ordinary course of business;
7    (d) guarantees or undertakings for the benefit of an
8affiliate which result in an actual contingent exposure of the
9company's assets to liability, other than insurance contracts
10entered into in the ordinary course of the company's business;
11    (e) all management agreements, and service contracts, and
12all cost-sharing arrangements, other than cost allocation
13arrangements based upon generally accepted accounting
14principles; and
15    (f) reinsurance agreements;
16    (f-5) dividends and other distributions to shareholders;
17    (g) any pledge of the company's own securities, securities
18of any subsidiary or controlling affiliate, to secure a loan
19made to any member of the insurance holding company system; and
20    (h) consolidated tax allocation agreements; .
21    (4) (blank); other matters concerning transactions between
22registered companies and any affiliates as may be included from
23time to time in any registration forms adopted or approved by
24the Director.
25    (5) financial statements of or within an insurance holding
26company system, including all affiliates, if requested by the

 

 

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1Director; financial statements may include, but are not limited
2to, annual audited financial statements filed with the U.S.
3Securities and Exchange Commission (SEC) pursuant to the
4Securities Act of 1933, as amended, or the Securities Exchange
5Act of 1934, as amended; a company required to file financial
6statements pursuant to this paragraph (5) may satisfy the
7request by providing the Director with the most recently filed
8parent corporation financial statements that have been filed
9with the SEC;
10    (6) statements that the company's board of directors
11oversees corporate governance and internal controls and that
12the company's officers or senior management have approved and
13implemented and continue to maintain and monitor corporate
14governance and internal control procedures; and
15    (7) other matters concerning transactions between
16registered companies and any affiliates as may be included from
17time to time in any registration forms adopted or approved by
18the Director.
19(Source: P.A. 84-805.)
 
20    (215 ILCS 5/131.14a new)
21    Sec. 131.14a. Summary filing. Every company subject to
22registration must file a summary outlining all items in the
23current registration statement representing changes from the
24prior registration statement.
 

 

 

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1    (215 ILCS 5/131.14b new)
2    Sec. 131.14b. Enterprise risk filing. The ultimate
3controlling person of every company subject to registration
4shall also file an annual enterprise risk report. The report
5shall, to the best of the ultimate controlling person's
6knowledge and belief, identify the material risks within the
7insurance holding company system that could pose enterprise
8risk to the company. The report shall be filed with the lead
9state commissioner of the insurance holding company system as
10determined by the procedures within the Financial Analysis
11Handbook adopted by the National Association of Insurance
12Commissioners.
 
13    (215 ILCS 5/131.14c new)
14    Sec. 131.14c. Violations. The failure to file a
15registration statement or any summary of the registration
16statement or enterprise risk filing required by this Article
17within the time specified for filing shall be a violation of
18this Article.
 
19    (215 ILCS 5/131.16)  (from Ch. 73, par. 743.16)
20    Sec. 131.16. Reporting material changes or additions;
21penalty for late registration statement.
22    (1) Each registered company must keep current the
23information required to be included in its registration
24statement by reporting all material changes or additions on

 

 

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1amendment forms designated by the Director within 15 days after
2the end of the month in which it learns of each change or
3addition, or within a longer time thereafter as the Director
4may establish. Any transaction which has been submitted to the
5Director pursuant to Section 131.20a need not be reported to
6the Director under this subsection; except each registered
7company must report all dividends and other distributions to
8shareholders within 15 5 business days following the
9declaration and no less than 10 business days prior to payment
10thereof.
11    (2) On or before May 1 each year, each company subject to
12registration under this Article shall file a statement in a
13format as designated by the Director. This statement shall
14include information previously included in an amendment under
15subsection (1) of this Section, transactions and agreements
16submitted under Section 131.20a, and any other material
17transactions which are required to be reported.
18    (2.5) Any person within an insurance holding company system
19subject to registration shall be required to provide complete
20and accurate information to a company where the information is
21reasonably necessary to enable the company to comply with the
22provisions of this Article.
23    (3) Any company failing, without just cause, to file any
24registration statement, any summary of changes to a
25registration statement, or any Enterprise Risk Filing or any
26person within an insurance holding company system who fails to

 

 

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1provide complete and accurate information to a company as
2required in this Code shall be required, after notice and
3hearing, to pay a penalty of up to $1,000 for each day's delay,
4to be recovered by the Director of Insurance of the State of
5Illinois and the penalty so recovered shall be paid into the
6General Revenue Fund of the State of Illinois. The maximum
7penalty under this section is $50,000. The Director may reduce
8the penalty if the company demonstrates to the Director that
9the imposition of the penalty would constitute a financial
10hardship to the company.
11(Source: P.A. 88-364.)
 
12    (215 ILCS 5/131.17)  (from Ch. 73, par. 743.17)
13    Sec. 131.17. (1) The Director must terminate the
14registration of any company which demonstrates that it no
15longer is a member of an insurance holding company system.
16    (2) The Director may require or allow 2 or more affiliated
17companies subject to registration to file a consolidated
18registration statement. Two or more affiliated companies
19subject to registration hereunder may file a consolidated
20registration statement or consolidated reports amending their
21consolidated registration statement or their individual
22registration statements unless the Director requires a
23separate registration statement or report from each registered
24company.
25    (3) A company which is authorized to do business in this

 

 

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1State and which is part of an insurance holding company system
2may register on behalf of any affiliated company which is
3required to register under Section 131.13 and to file all
4information and material required to be filed under this
5Article unless the Director requires a separate registration by
6the affiliated company.
7(Source: P.A. 77-673.)
 
8    (215 ILCS 5/131.18)  (from Ch. 73, par. 743.18)
9    Sec. 131.18. Sections 131.13 through 131.19 do not apply to
10any company, information, or transaction if and to the extent
11that the Director by rule, regulation, or order may exempt the
12same from Sections 131.13 through 131.19.
13    Any requirement for the furnishing of financial statements
14of the insurance holding company system, or any member thereof,
15as part of or in connection with the registration statement
16filed under Section 131.14 shall not apply to any company which
17submits and maintains in effect in lieu thereof a guarantee or
18a bond acceptable to the Director in an amount equal to the
19capital and surplus of the company as shown on its most recent
20audited financial statements, payable to the Director for the
21benefit of the creditors, policyholders and stockholders of the
22company as their interests may appear. Such guarantee, if
23issued by a national bank, and such a bond, if issued by a
24licensed insurance company which is not a member of the
25insurance holding company system, in each case having capital

 

 

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1and surplus in excess of $25,000,000, shall be deemed
2acceptable.
3(Source: P.A. 77-673.)
 
4    (215 ILCS 5/131.19)  (from Ch. 73, par. 743.19)
5    Sec. 131.19. Disclaimer of affiliation. Any person may file
6with the Director a disclaimer of affiliation with any
7authorized company or a disclaimer may be filed by the a
8company or any member of an insurance holding company system.
9The disclaimer shall must fully disclose all material
10relationships and bases basis for affiliation between the
11person and the company as well as the basis for disclaiming the
12affiliation. A disclaimer of affiliation shall be deemed to
13have been granted unless the Director, within 30 days following
14receipt of a complete disclaimer, notifies the filing party
15that the disclaimer is disallowed. In the event of
16disallowance, the disclaiming party may request an
17administrative hearing, which shall be granted. The
18disclaiming party shall be relieved of its duty to register
19under this Section if approval of the disclaimer has been
20granted by the Director or if the disclaimer is deemed to have
21been approved. After a disclaimer is filed, the company is
22relieved of any duty to register or report under Section 131.13
23which may arise out of the company's relationship with the
24person unless and until the Director disallows the disclaimer.
25The Director may disallow such a disclaimer only after

 

 

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1furnishing all parties in interest with notice and opportunity
2to be heard and after making specific findings of fact to
3support the disallowance.
4(Source: P.A. 84-805.)
 
5    (215 ILCS 5/131.20)  (from Ch. 73, par. 743.20)
6    Sec. 131.20. Standards for transactions with affiliates;
7adequacy of surplus.
8    (1) Transactions Material transactions with their
9affiliates by companies subject to registration are subject to
10the following standards:
11        (a) the terms are fair and reasonable;
12        (a-5) agreements for cost sharing services and
13    management shall include such provisions as required by
14    rules and regulations issued by the Director;
15        (b) charges or fees for services performed are
16    reasonable;
17        (c) expenses incurred and payment received must be
18    allocated to the company insurer in conformity with
19    customary insurance accounting practices consistently
20    applied;
21        (d) the books, accounts, and records of each party must
22    be so maintained as to clearly and accurately disclose the
23    precise nature and details of the transactions, including
24    accounting information necessary to support the
25    reasonableness of the charges or fees to the respective

 

 

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1    parties; and
2        (e) the company's surplus as regards policyholders
3    following any transactions with affiliates or dividends or
4    distributions to securityholders or affiliates must be
5    reasonable in relation to the company's outstanding
6    liabilities and adequate to meet its financial needs.
7    (2) For purposes of this Article, in determining whether a
8company's surplus as regards policyholders is reasonable in
9relation to the company's outstanding liabilities and adequate
10to meet its needs, the following factors, among others, may be
11considered:
12        (a) the size of the company as measured by its assets,
13    capital and surplus, reserves, premium writings, insurance
14    in force and other appropriate criteria;
15        (b) the extent to which the company's business is
16    diversified among the several lines of insurance;
17        (c) the number and size of risks insured in each line
18    of business;
19        (d) the extent of the geographical dispersion of the
20    company's insured risks;
21        (e) the nature and extent of the company's reinsurance
22    program;
23        (f) the quality, diversification, and liquidity of the
24    company's investment portfolio;
25        (g) the recent past and projected future trend in the
26    size of the company's investment portfolio surplus as

 

 

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1    regards policyholders;
2        (h) the surplus as regards policyholders maintained by
3    companies comparable to the registrant in respect of the
4    factors enumerated in this paragraph;
5        (i) the adequacy of the company's reserves;
6        (j) the quality of the company's earnings and the
7    extent to which the reported earnings include
8    extraordinary items; and
9        (k) the quality and liquidity of investments in
10    affiliates subsidiaries made under Section 131.2 or 131.3.
11    The Director may discount any such investment or treat any
12    such investment as a non-admitted asset for purposes of
13    determining the adequacy of surplus as regards
14    policyholders whenever the investment so warrants.
15(Source: P.A. 88-364.)
 
16    (215 ILCS 5/131.20a)  (from Ch. 73, par. 743.20a)
17    Sec. 131.20a. Prior notification of transactions;
18dividends and distributions.
19    (1) (a) The following transactions involving between a
20domestic company and any person in its insurance holding
21company system, including amendments or modifications of
22affiliate agreements previously filed pursuant to this
23Section, which are subject to any materiality standards
24contained in this Section, may not be entered into unless the
25company has notified the Director in writing of its intention

 

 

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1to enter into such transaction at least 30 days prior thereto,
2or such shorter period as the Director may permit, and the
3Director has not disapproved it within such period. The notice
4for amendments or modifications shall include the reasons for
5the change and the financial impact on the domestic company.
6Informal notice shall be reported, within 30 days after a
7termination of a previously filed agreement, to the Director
8for determination of the type of filing required, if any:
9        (i) Sales, purchases, exchanges of assets, loans or
10    extensions of credit, guarantees, investments, or any
11    other transaction, except dividends, (A) that involves the
12    transfer of assets from or liabilities to a company (A)
13    equal to or exceeding the lesser of 3% of the company's
14    admitted assets or 25% of its surplus as regards
15    policyholders as of the 31st day of December next preceding
16    or (B) that is proposed when the domestic company is not
17    eligible to declare and pay a dividend or other
18    distribution pursuant to the provisions of Section 27.
19        (ii) Loans or extensions of credit to any person that
20    is not an affiliate (A) that involve the lesser of 3% of
21    the company's admitted assets or 25% of the company's
22    surplus, each as of the 31st day of December next
23    preceding, made with the agreement or understanding that
24    the proceeds of such transactions, in whole or in
25    substantial part, are to be used to make loans or
26    extensions of credit to, to purchase assets of, or to make

 

 

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1    investments in, any affiliate of the company making such
2    loans or extensions of credit or (B) that are proposed when
3    the domestic company is not eligible to declare and pay a
4    dividend or other distribution pursuant to the provisions
5    of Section 27.
6        (iii) Reinsurance agreements or modifications thereto,
7    including all reinsurance pooling agreements, reinsurance
8    agreements in which the reinsurance premium or a change in
9    the company's liabilities, or the projected reinsurance
10    premium or a change in the company's liabilities in any of
11    the next 3 years, equals or exceeds 5% of the company's
12    surplus as regards policyholders, as of the 31st day of
13    December next preceding, including those agreements that
14    may require as consideration the transfer of assets from a
15    company an insurer to a nonaffiliate, if an agreement or
16    understanding exists between the company insurer and
17    nonaffiliate that any portion of those assets will be
18    transferred to one or more affiliates of the company
19    insurer.
20        (iv) All management agreements, service contracts,
21    other than agency contracts, tax allocation agreements,
22    all reinsurance allocation agreements related to
23    reinsurance agreements required to be filed under this
24    Section, and all cost-sharing arrangements, and any other
25    contracts providing for the rendering of services on a
26    regular systematic basis.

 

 

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1        (v) Direct or indirect acquisitions or investments in a
2    person that controls the company, or in an affiliate of the
3    company, in an amount which, together with its present
4    holdings in such investments, exceeds 2.5% of the company's
5    surplus as regards policyholders. Direct or indirect
6    acquisitions or investments in subsidiaries acquired
7    pursuant to Section 131.2 of this Article (or authorized
8    under any other Section of this Code), or in non-subsidiary
9    insurance affiliates that are subject to the provisions of
10    this Article, are exempt from this requirement.
11        (vi) Any series of the previously described
12    transactions that are substantially similar to each other,
13    that take place within any 180 day period, and that in
14    total are equal to or exceed the lesser of 3% of the
15    domestic company's insurer's admitted assets or 25% of its
16    policyholders surplus, as of the 31st day of the December
17    next preceding.
18        (vii) (vi) Any other material transaction that the
19    Director by rule determines might render the company's
20    surplus as regards policyholders unreasonable in relation
21    to the company's outstanding liabilities and inadequate to
22    its financial needs or may otherwise adversely affect the
23    interests of the company's policyholders or shareholders.
24    Nothing herein contained shall be deemed to authorize or
25permit any transactions that, in the case of a company an
26insurer not a member of the same holding company system, would

 

 

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1be otherwise contrary to law.
2    (b) Any transaction or contract otherwise described in
3paragraph (a) of this subsection that is between a domestic
4company insurer and any person that is not its affiliate and
5that precedes or follows within 180 days or is concurrent with
6a similar transaction between that nonaffiliate and an
7affiliate of the domestic company and that involves amounts
8that are equal to or exceed the lesser of 3% of the domestic
9company's insurer's admitted assets or 25% of its surplus as
10regards policyholders at the end of the prior year may not be
11entered into unless the company has notified the Director in
12writing of its intention to enter into the transaction at least
1330 days prior thereto or such shorter period as the Director
14may permit, and the Director has not disapproved it within such
15period.
16    (c) A company may not enter into transactions which are
17part of a plan or series of like transactions with any person
18within the holding company system if the purpose of those
19separate transactions is to avoid the statutory threshold
20amount and thus avoid the review that would occur otherwise. If
21the Director determines that such separate transactions were
22entered into for such purpose, he may exercise his authority
23under subsection (2) of Section 131.24.
24    (d) The Director, in reviewing transactions pursuant to
25paragraph (a), shall consider whether the transactions comply
26with the standards set forth in Section 131.20 and whether they

 

 

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1may adversely affect the interests of policyholders.
2    (e) The Director shall be notified within 30 days of any
3investment of the domestic company insurer in any one
4corporation if the total investment in that corporation by the
5insurance holding company system exceeds 10% of that
6corporation's voting securities.
7    (f) Except for those transactions subject to approval under
8other Sections of this Code, any such transaction or agreements
9which are not disapproved by the Director may be effective as
10of the date set forth in the notice required under this
11Section.
12    (g) If a domestic company insurer enters into a transaction
13described in this subsection without having given the required
14notification, the Director may cause the company insurer to pay
15a civil forfeiture of not more than $250,000. Each transaction
16so entered shall be considered a separate offense.
17    (2) No domestic company subject to registration under
18Section 131.13 may pay any extraordinary dividend or make any
19other extraordinary distribution to its shareholders
20securityholders until: (a) 30 days after the Director has
21received notice of the declaration thereof and has not within
22such period disapproved the payment, or (b) the Director
23approves such payment within the 30-day period. For purposes of
24this subsection, an extraordinary dividend or distribution is
25any dividend or distribution of cash or other property whose
26fair market value, together with that of other dividends or

 

 

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1distributions, made within the period of 12 consecutive months
2ending on the date on which the proposed dividend is scheduled
3for payment or distribution exceeds the greater of: (a) 10% of
4the company's surplus as regards policyholders as of the 31st
5day of December next preceding, or (b) the net income of the
6company for the 12-month period ending the 31st day of December
7next preceding, but does not include pro rata distributions of
8any class of the company's own securities.
9    Notwithstanding any other provision of law, the company may
10declare an extraordinary dividend or distribution which is
11conditional upon the Director's approval, and such a
12declaration confers no rights upon security holders until: (a)
13the Director has approved the payment of the dividend or
14distribution, or (b) the Director has not disapproved the
15payment within the 30-day period referred to above.
16(Source: P.A. 92-140, eff. 7-24-01.)
 
17    (215 ILCS 5/131.20b)
18    Sec. 131.20b. Controlled companies insurers; management;
19directors.
20    (1) Notwithstanding the control of a domestic company
21insurer by any person, the officers and directors of the
22company insurer shall not thereby be relieved of any obligation
23or liability to which they would otherwise be subject by law,
24and the company insurer shall be managed so as to assure its
25separate operating identity consistent with this Article VIII

 

 

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11/2 of this Code.
2    (2) Nothing in this Section shall preclude a domestic
3company insurer from having or sharing a common management or a
4cooperative or joint use of personnel, property, or services
5with one or more affiliated persons under arrangements meeting
6the standards and requirements of Sections 131.20 and 131.20a.
7    (3) Not After June 30, 2002, not less than one-third of the
8directors of a domestic company, and not less than one-third of
9the members of each committee of the board of directors of any
10domestic company, insurer that is a member of an insurance
11holding company system shall be persons who are not officers or
12employees of the company insurer or of any entity controlling,
13controlled by, or under common control with the company insurer
14and who are not beneficial owners of a controlling interest in
15the voting stock of the company insurer or any such entity. At
16least one such person shall be included in any quorum for the
17transaction of business at any meeting of the board of
18directors or any committee thereof.
19    (3.5) The board of directors of a domestic company shall
20establish one or more committees comprised solely of directors
21who are not officers or employees of the company or of any
22entity controlling, controlled by, or under common control with
23the company and who are not beneficial owners of a controlling
24interest in the voting stock of the company or any such entity.
25The committee or committees shall have responsibility for
26nominating candidates for director for election by

 

 

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1shareholders or policyholders, evaluating the performance of
2officers deemed to be principal officers of the company, and
3recommending to the board of directors the selection and
4compensation of the principal officers.
5    (4) Subsections Subsection (3) and (3.5) of this Section do
6does not apply to a domestic company insurer if the person
7entity controlling the company, such as a company, a mutual
8insurance holding company, or a publicly held corporation, has
9a board of directors and committees thereof that meet the
10requirements of subsections (3) and (4) with respect to such
11controlling entity the insurer, whether directly or through an
12intermediate subsidiary, has a board of directors composed in
13accordance with that subsection.
14    (5) (Blank). Subsection (3) of this Section does not apply
15to a domestic insurer if the ultimate controlling party of the
16domestic insurer is a corporation whose equity securities or
17equivalent instruments are listed on the New York Stock
18Exchange.
19    (6) A company may make application to the Director for a
20waiver from the requirements of this Section, if the company's
21annual direct written and assumed premium, excluding premiums
22reinsured with the Federal Crop Insurance Corporation and
23Federal Flood Program, is less than $300,000,000. A company may
24also make application to the Director for a waiver from the
25requirements of this subsection (6) based upon unique
26circumstances. The Director may consider various factors,

 

 

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1including, but not limited to, the type of business entity,
2volume of business written, availability of qualified board
3members, or the ownership or organizational structure of the
4entity.
5(Source: P.A. 92-140, eff. 7-24-01.)
 
6    (215 ILCS 5/131.20c new)
7    Sec. 131.20c. Supervisory colleges.
8    (a) With respect to any company registered under Section
9131.13 of this Code, and in accordance with subsection (c) of
10this Section, the Director shall also have the power to
11participate in a supervisory college for any domestic company
12that is part of an insurance holding company system with
13international operations in order to determine compliance by
14the company with this Article. The powers of the Director with
15respect to supervisory colleges include, but are not limited
16to:
17        (1) initiating the establishment of a supervisory
18    college;
19        (2) clarifying the membership and participation of
20    other supervisors in the supervisory college;
21        (3) clarifying the functions of the supervisory
22    college and the role of other regulators, including the
23    establishment of a group-wide supervisor;
24        (4) coordinating the ongoing activities of the
25    supervisory college, including planning meetings,

 

 

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1    supervisory activities, and processes for information
2    sharing; and
3        (5) establishing a crisis management plan.
4    (b) Each registered company subject to this Section shall
5be liable for and shall pay the reasonable expenses of the
6Director's participation in a supervisory college in
7accordance with subsection (c) of this Section, including
8reasonable travel expenses. For purposes of this Section, a
9supervisory college may be convened as either a temporary or
10permanent forum for communication and cooperation between the
11regulators charged with the supervision of the company or its
12affiliates, and the Director may establish a regular assessment
13to the company for the payment of these expenses.
14    (c) In order to assess the business strategy, financial
15position, legal and regulatory position, risk exposure, risk
16management, and governance processes, and as part of the
17examination of individual companies in accordance with Section
18131.21 of this Code, the Director may participate in a
19supervisory college with other regulators charged with
20supervision of the company or its affiliates, including other
21state, federal, and international regulatory agencies. The
22Director may enter into agreements in accordance with Section
23131.22 of this Code providing the basis for cooperation between
24the Director and the other regulatory agencies and the
25activities of the supervisory college. Nothing in this Section
26shall delegate to the supervisory college the authority of the

 

 

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1Director to regulate or supervise the company or its affiliates
2within its jurisdiction.
 
3    (215 ILCS 5/131.21)  (from Ch. 73, par. 743.21)
4    Sec. 131.21. Examination.
5    (1) Subject to the limitation contained in this section and
6in addition to the powers which the Director has under Sections
7132 through 132.7 and 401 through 403 of this Code relating to
8the examination of companies, the Director shall have the power
9to examine any company registered under Section 131.13 of this
10Code and its affiliates to ascertain the financial condition of
11the company, including the enterprise risk to the company by
12the ultimate controlling party, or by any entity or combination
13of entities within the insurance holding company system, or by
14the insurance holding company system on a consolidated basis.
15also has the power to order any company registered under
16Section 131.13 to produce such records, books, or other
17information papers in the possession of the company or its
18affiliates as are reasonably necessary to ascertain the
19financial condition of such company or to determine compliance
20with this Article. In the event the company fails to comply
21with the order, the Director has the power to examine the
22affiliates to obtain such information.
23    (1.5) The Director may order any company registered under
24Section 131.13 of this Code to produce such records, books, or
25other information papers in the possession of the company or

 

 

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1its affiliates as are reasonably necessary to determine
2compliance with this Article. To determine compliance with this
3Article, the Director may order any company registered under
4Section 131.13 of this Code to produce information not in the
5possession of the company if the company can obtain access to
6such information pursuant to contractual relationships,
7statutory obligations, or other methods. In the event the
8company cannot obtain the information requested by the
9Director, the company shall provide the Director a detailed
10explanation of the reason that the company cannot obtain the
11information and the identity of the holder of the information.
12Whenever it appears to the Director that the detailed
13explanation is without merit, the Director may require, after
14notice and hearing, the company to pay a penalty of up to
15$1,000 for each day's delay, or may suspend or revoke the
16company's license.
17    (2) The Director may retain at the registered company's
18expense any attorneys, actuaries, accountants and other
19experts not otherwise a part of the Director's staff as may be
20reasonably necessary to assist in the conduct of the
21examination under subsection (1). Any persons so retained are
22under the direction and control of the Director and may act in
23a purely advisory capacity.
24    (3) Each registered company producing for examination
25records, books and papers under subsection (1.5) (1) is liable
26for and must pay the expense of the examination in accordance

 

 

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1with Section 408 of this Code.
2    (4) In the event the company fails to comply with an order,
3the Director shall have the power to examine the affiliates to
4obtain the information. The Director shall also have the power
5to issue subpoenas, to administer oaths, and to examine under
6oath any person for purposes of determining compliance with
7this Section. Upon the failure or refusal of any person to obey
8a subpoena, the Director may petition a court of competent
9jurisdiction and, upon proper showing, the court may enter an
10order compelling the witness to appear and testify or produce
11documentary evidence. Failure to obey the court order shall be
12punishable as contempt of court. Every person shall be obliged
13to attend as a witness at the place specified in the subpoena,
14when subpoenaed, anywhere within the State. He or she shall be
15entitled to the same fees and mileage, if claimed, as a witness
16in the Circuit Court, which fees, mileage, and actual expense,
17if any, necessarily incurred in securing the attendance of
18witnesses, and their testimony, shall be itemized and charged
19against, and be paid by, the company being examined.
20(Source: P.A. 89-97, eff. 7-7-95.)
 
21    (215 ILCS 5/131.22)  (from Ch. 73, par. 743.22)
22    Sec. 131.22. Confidential treatment.
23    (a) Documents, materials, or other information in the
24possession or control of the Department that are obtained by or
25disclosed to the Director or any other person in the course of

 

 

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1an examination or investigation made pursuant to this Article
2and all information reported pursuant to this Article shall be
3confidential by law and privileged, shall not be subject to the
4Illinois Freedom of Information Act, shall not be subject to
5subpoena, and shall not be subject to discovery or admissible
6in evidence in any private civil action. However, the Director
7is authorized to use the documents, materials, or other
8information in the furtherance of any regulatory or legal
9action brought as a part of the Director's official duties. The
10Director shall not otherwise make the documents, materials, or
11other information public without the prior written consent of
12the company to which it pertains unless the Director, after
13giving the company and its affiliates who would be affected
14thereby notice and opportunity to be heard, determines that the
15interest of policyholders, shareholders, or the public shall be
16served by the publication thereof, in which event the Director
17may publish all or any part in such manner as may be deemed
18appropriate.
19    (b) Neither the Director nor any person who received
20documents, materials, or other information while acting under
21the authority of the Director or with whom such documents,
22materials, or other information are shared pursuant to this
23Code shall be permitted or required to testify in any private
24civil action concerning any confidential documents, materials,
25or information subject to subsection (a) of this Section.
26    (c) In order to assist in the performance of the Director's

 

 

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1duties, the Director:
2        (1) may share documents, materials, or other
3    information, including the confidential and privileged
4    documents, materials, or information subject to subsection
5    (a) of this Section, with other state, federal, and
6    international regulatory agencies, with the NAIC and its
7    affiliates and subsidiaries, and with state, federal, and
8    international law enforcement authorities, including
9    members of any supervisory college allowed by this Article,
10    provided that the recipient agrees in writing to maintain
11    the confidentiality and privileged status of the document,
12    material, or other information, and has verified in writing
13    the legal authority to maintain confidentiality;
14        (1.5) notwithstanding paragraph (1) of this subsection
15    (c), may only share confidential and privileged documents,
16    material, or information reported pursuant to Section
17    131.14b with commissioners of states having statutes or
18    regulations substantially similar to subsection (a) of
19    this Section and who have agreed in writing not to disclose
20    such information;
21        (2) may receive documents, materials, or information,
22    including otherwise confidential and privileged documents,
23    materials, or information from the NAIC and its affiliates
24    and subsidiaries and from regulatory and law enforcement
25    officials of other foreign or domestic jurisdictions, and
26    shall maintain as confidential or privileged any document,

 

 

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1    material, or information received with notice or the
2    understanding that it is confidential or privileged under
3    the laws of the jurisdiction that is the source of the
4    document, material, or information; and
5        (3) shall enter into written agreements with the NAIC
6    governing sharing and use of information provided pursuant
7    to this Code consistent with this subsection (c) that shall
8    (i) specify procedures and protocols regarding the
9    confidentiality and security of information shared with
10    the NAIC and its affiliates and subsidiaries pursuant to
11    this Code, including procedures and protocols for sharing
12    by the NAIC with other state, federal, or international
13    regulators; (ii) specify that ownership of information
14    shared with the NAIC and its affiliates and subsidiaries
15    pursuant to this Code remains with the Director and the
16    NAIC's use of the information is subject to the direction
17    of the Director; (iii) require prompt notice to be given to
18    a company whose confidential information in the possession
19    of the NAIC pursuant to this Code is subject to a request
20    or subpoena to the NAIC for disclosure or production; and
21    (iv) require the NAIC and its affiliates and subsidiaries
22    to consent to intervention by a company in any judicial or
23    administrative action in which the NAIC and its affiliates
24    and subsidiaries may be required to disclose confidential
25    information about the company shared with the NAIC and its
26    affiliates and subsidiaries pursuant to this Code.

 

 

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1    (d) The sharing of information by the Director pursuant to
2this Code shall not constitute a delegation of regulatory
3authority or rulemaking, and the Director is solely responsible
4for the administration, execution, and enforcement of the
5provisions of this Code.
6    (e) No waiver of any applicable privilege or claim of
7confidentiality in the documents, materials, or information
8shall occur as a result of disclosure to the Director under
9this Section or as a result of sharing as authorized in
10subsection (c) of this Section.
11    (f) Documents, materials, or other information in the
12possession or control of the NAIC pursuant to this Code shall
13be confidential by law and privileged, shall not be subject to
14the Illinois Freedom of Information Act, shall not be subject
15to subpoena, and shall not be subject to discovery or
16admissible in evidence in any private civil action. All
17information, documents, and copies thereof obtained by or
18disclosed to the Director or any other person in the course of
19an examination or investigation made under Section 131.21 and
20all information submitted under Sections 131.13 or 131.20a and
21all personal financial statement information submitted under
22Section 131.5 must be given confidential treatment and is not
23subject to subpoena and may not be made public by the Director
24or any other person, without the prior written consent of the
25company to which it pertains unless the Director, after giving
26the company and its affiliates who would be affected thereby

 

 

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1notice and opportunity to be heard, determines that the
2interests of policyholders, shareholders or the public will be
3served by the publication thereof in which event he may publish
4all or any part thereof in such manner as he may deem
5appropriate.
6    Nothing contained in this Section shall prevent or be
7construed as prohibiting the Director from disclosing such
8information to the insurance department of any other state or
9county or to law enforcement officials of this or any other
10state or agency of the federal government at any time upon the
11written agreement of the entity receiving the information to
12hold that information confidential and in a manner consistent
13with this Code.
14(Source: P.A. 88-364.)
 
15    (215 ILCS 5/131.23)  (from Ch. 73, par. 743.23)
16    Sec. 131.23. Injunctions; prohibitions against voting
17securities; sequestration of voting securities. (1) Whenever
18it appears to the Director that any company or any director,
19officer, employee or agent thereof has committed or is about to
20commit a violation of this Article or of any rule, regulation,
21or order issued by the Director hereunder, the Director may
22apply to the Circuit Court for the county in which the
23principal office of the company is located or to the Circuit
24Court for Sangamon County for an order enjoining the company or
25the director, officer, employee or agent thereof from violating

 

 

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1or continuing to violate this Article or any rule, regulation
2or order, and for any other equitable relief as the nature of
3the case and the interests of the company's policyholders,
4creditors or the public may require. In any proceeding, the
5validity of the rule, regulation or order alleged to have been
6violated may be determined by the Court.
7    (2) No security which is the subject of any agreement or
8arrangement regarding acquisition, or which is acquired or to
9be acquired, in contravention of this Article or of any rule,
10regulation or order issued by the Director hereunder may be
11voted at any shareholders' securityholders' meeting, or may be
12counted for quorum purposes, and any action of shareholders
13securityholders' requiring the affirmative vote of a
14percentage of securities may be taken as though such securities
15were not issued and outstanding; but no action taken at any
16such meeting may be invalidated by the voting of such
17securities, unless the action would materially affect control
18of the company or unless any court of this State has so
19ordered. If the Director has reason to believe that any
20security of the company has been or is about to be acquired in
21contravention of this Article or of any rule, regulation or
22order issued by the Director hereunder the company or the
23Director may apply to the Circuit Court for Sangamon County or
24to the Circuit Court for the county in which the company has
25its principal place of business (a) to enjoin the further
26pursuit or use of any offer, request, invitation, agreement or

 

 

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1acquisition made in contravention of Sections 131.4 through
2131.12 or any rule, regulation, or order issued by the Director
3thereunder; (b) to enjoin the voting of any security so
4acquired; (c) to void any vote of such security already cast at
5any meeting of shareholders securityholders; and (d) for any
6other equitable relief as the nature of the case and the
7interests of the company's policyholders, creditors, or the
8public may require.
9    (3) In any case where a person has acquired or is proposing
10to acquire any voting securities in violation of this Article
11or any rule, regulation or order issued by the Director
12hereunder, the Circuit Court for Sangamon County or the Circuit
13Court for the county in which the company has its principal
14place of business may, on such notice as the court deems
15appropriate, upon the application of the company or the
16Director seize or sequester any voting securities of the
17company owned directly or indirectly by such person, and issue
18any orders with respect thereto as may be appropriate to
19effectuate this Article. Notwithstanding any other provisions
20of law, for the purposes of this Article, the situs of the
21ownership of the securities of domestic companies is deemed to
22be in this State.
23    (4) If the Director has reason to believe that any
24policyholders' proxies have been or are about to be acquired in
25contravention of this Article or of any rule, regulations or
26order issued by the Director hereunder, the Director may apply

 

 

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1to the Circuit Court for Sangamon County or to the Circuit
2Court for the county in which the company has its principal
3place of business (a) to enjoin further pursuit or use of any
4offer, request, invitation, agreement or acquisition made in
5contravention of Section 131.4 through 131.12 and (b) for any
6other equitable relief as the nature of the case and the
7interests of the company's policyholders, creditors or the
8public may require.
9(Source: P.A. 84-805.)
 
10    (215 ILCS 5/131.24)  (from Ch. 73, par. 743.24)
11    Sec. 131.24. Sanctions.
12    (1) Every director or officer of an insurance holding
13company system who knowingly violates, participates in, or
14assents to, or who knowingly permits any of the officers or
15agents of the company to engage in transactions or make
16investments which have not been properly filed or approved or
17which violate this Article, shall pay, in their individual
18capacity, a civil forfeiture of not more than $100,000 per
19violation, after notice and hearing before the Director. In
20determining the amount of the civil forfeiture, the Director
21shall take into account the appropriateness of the forfeiture
22with respect to the gravity of the violation, the history of
23previous violations, and such other matters as justice may
24require.
25    (2) Whenever it appears to the Director that any company

 

 

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1subject to this Article or any director, officer, employee or
2agent thereof has engaged in any transaction or entered into a
3contract which is subject to Section 131.20, and any one of
4Sections 131.16, 131.20a, 141, 141.1, or 174 of this Code and
5which would not have been approved had such approval been
6requested or would have been disapproved had required notice
7been given, the Director may order the company to cease and
8desist immediately any further activity under that transaction
9or contract. After notice and hearing the Director may also
10order (a) the company to void any such contracts and restore
11the status quo if such action is in the best interest of the
12policyholders or the public, and (b) any affiliate of the
13company, which has received from the company dividends,
14distributions, assets, loans, extensions of credit,
15guarantees, or investments in violation of any such Section, to
16immediately repay, refund or restore to the company such
17dividends, distributions, assets, extensions of credit,
18guarantees or investments.
19    (3) Whenever it appears to the Director that any company or
20any director, officer, employee or agent thereof has committed
21a willful violation of this Article, the Director may cause
22criminal proceedings to be instituted in the Circuit Court for
23the county in which the principal office of the company is
24located or in the Circuit Court of Sangamon or Cook County
25against such company or the responsible director, officer,
26employee or agent thereof. Any company which willfully violates

 

 

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1this Article commits a business offense and may be fined up to
2$500,000. Any individual who willfully violates this Article
3commits a Class 4 felony and may be fined in his individual
4capacity not more than $500,000 or be imprisoned for not less
5than one year nor more than 3 years, or both.
6    (4) Any officer, director, or employee of an insurance
7holding company system who willfully and knowingly subscribes
8to or makes or causes to be made any false statements or false
9reports or false filings with the intent to deceive the
10Director in the performance of his duties under this Article,
11commits a Class 3 felony and upon conviction thereof, shall be
12imprisoned for not less than 2 years nor more than 5 years or
13fined $500,000 or both. Any fines imposed shall be paid by the
14officer, Director, or employee in his individual capacity.
15    (5) Whenever it appears to the Director that any person has
16committed a violation of Section 131.14b of this Code which
17prevents the full understanding of the enterprise risk to the
18company by affiliates or by the insurance holding company
19system, the violation may serve as an independent basis for
20disapproving dividends or distributions and for placing the
21company under an order of supervision in accordance with
22Article XII 1/2 of this Code.
23(Source: P.A. 93-32, eff. 7-1-03.)
 
24    (215 ILCS 5/131.26)  (from Ch. 73, par. 743.26)
25    Sec. 131.26. Revocation, suspension, or non-renewal of

 

 

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1company's license.
2    Whenever it appears to the Director that any person has
3committed a violation of this Article which makes the continued
4operation of a company contrary to the interests of
5policyholders or the public, the Director may, after notice and
6hearing suspend, revoke or refuse to renew the company's
7license or authority to do business in this State for such a
8period as the Director he finds is required for the protection
9of policyholders or the public. Any such determination must be
10accompanied by specific findings of fact and conclusions of
11law.
12(Source: P.A. 77-673.)
 
13    (215 ILCS 5/131.27)  (from Ch. 73, par. 743.27)
14    Sec. 131.27. Judicial review.
15    (1) Any order or decision made, issued or executed by the
16Director under this Article whereby any person or company is
17aggrieved is subject to review by the Circuit Court of Sangamon
18County.
19    The Administrative Review Law, as now or hereafter amended,
20and the rules adopted pursuant thereto, applies to and governs
21all proceedings for review of final administrative decisions of
22the Director provided for in this Section. The term
23"administrative decision" is defined as in Section 3-101 of the
24Code of Civil Procedure.
25    (2) The filing of an appeal pursuant to this Section shall

 

 

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1stay the application of any rule, regulation, order, or other
2action of the Director to the appealing party unless the court,
3after giving the party notice and an opportunity to be heard,
4determines that a stay would be detrimental to the interest of
5policyholders, shareholders, creditors, or the public.
6    (3) Any person aggrieved by any failure of the Director to
7act or make a determination required by this Code may petition
8for a writ in the nature of a mandamus or a peremptory mandamus
9directing the Director to act or make a determination.
10(Source: P.A. 82-783.)
 
11    (215 ILCS 5/131.29 new)
12    Sec. 131.29. Rulemaking power. The Director may adopt such
13administrative rules as are necessary to implement the
14provisions of this Article.
 
15    (215 ILCS 5/131.30 new)
16    Sec. 131.30. Conflict with other laws. This Code supersedes
17all laws and parts of laws of this State inconsistent with this
18Code with respect to matters covered by this Code.
 
19    (215 ILCS 5/356z.12)
20    Sec. 356z.12. Dependent coverage.
21    (a) A group or individual policy of accident and health
22insurance or managed care plan that provides coverage for
23dependents and that is amended, delivered, issued, or renewed

 

 

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1after the effective date of this amendatory Act of the 95th
2General Assembly shall not terminate coverage or deny the
3election of coverage for an unmarried dependent by reason of
4the dependent's age before the dependent's 26th birthday.
5    (b) A policy or plan subject to this Section shall, upon
6amendment, delivery, issuance, or renewal, establish an
7initial enrollment period of not less than 90 days during which
8an insured may make a written election for coverage of an
9unmarried person as a dependent under this Section. After the
10initial enrollment period, enrollment by a dependent pursuant
11to this Section shall be consistent with the enrollment terms
12of the plan or policy.
13    (c) A policy or plan subject to this Section shall allow
14for dependent coverage during the annual open enrollment date
15or the annual renewal date if the dependent, as of the date on
16which the insured elects dependent coverage under this
17subsection, has:
18        (1) a period of continuous creditable coverage of 90
19    days or more; and
20        (2) not been without creditable coverage for more than
21    63 days.
22An insured may elect coverage for a dependent who does not meet
23the continuous creditable coverage requirements of this
24subsection (c) and that dependent shall not be denied coverage
25due to age.
26    For purposes of this subsection (c), "creditable coverage"

 

 

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1shall have the meaning provided under subsection (C)(1) of
2Section 20 of the Illinois Health Insurance Portability and
3Accountability Act.
4    (d) Military personnel. A group or individual policy of
5accident and health insurance or managed care plan that
6provides coverage for dependents and that is amended,
7delivered, issued, or renewed after the effective date of this
8amendatory Act of the 95th General Assembly shall not terminate
9coverage or deny the election of coverage for an unmarried
10dependent by reason of the dependent's age before the
11dependent's 30th birthday if the dependent (i) is an Illinois
12resident, (ii) served as a member of the active or reserve
13components of any of the branches of the Armed Forces of the
14United States, and (iii) has received a release or discharge
15other than a dishonorable discharge. To be eligible for
16coverage under this subsection (d), the eligible dependent
17shall submit to the insurer a form approved by the Illinois
18Department of Veterans' Affairs stating the date on which the
19dependent was released from service.
20    (e) Calculation of the cost of coverage provided to an
21unmarried dependent under this Section shall be identical.
22    (f) Nothing in this Section shall prohibit an employer from
23requiring an employee to pay all or part of the cost of
24coverage provided under this Section.
25    (g) No exclusions or limitations may be applied to coverage
26elected pursuant to this Section that do not apply to all

 

 

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1dependents covered under the policy.
2    (h) A policy or plan subject to this Section shall not
3condition eligibility for dependent coverage provided pursuant
4to this Section on enrollment in any educational institution.
5    (i) Notice regarding coverage for a dependent as provided
6pursuant to this Section shall be provided to an insured by the
7insurer:
8        (1) upon application or enrollment;
9        (2) in the certificate of coverage or equivalent
10    document prepared for an insured and delivered on or about
11    the date on which the coverage commences; and
12        (3) (blank) in a notice delivered to an insured on a
13    semi-annual basis.
14(Source: P.A. 95-958, eff. 6-1-09.)
 
15    (215 ILCS 5/131.9 rep.)
16    Section 10. The Illinois Insurance Code is amended by
17repealing Section 131.9.
 
18    Section 97. Severability. The provisions of this Act are
19severable under Section 1.31 of the Statute on Statutes.
 
20    Section 99. Effective date. This Act takes effect January
211, 2013, except that Section 131.14b of the Illinois Insurance
22Code takes effect July 1, 2013.

 

 

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1 INDEX
2 Statutes amended in order of appearance
3    215 ILCS 5/131.1from Ch. 73, par. 743.1
4    215 ILCS 5/131.2from Ch. 73, par. 743.2
5    215 ILCS 5/131.3from Ch. 73, par. 743.3
6    215 ILCS 5/131.4from Ch. 73, par. 743.4
7    215 ILCS 5/131.5from Ch. 73, par. 743.5
8    215 ILCS 5/131.6from Ch. 73, par. 743.6
9    215 ILCS 5/131.8from Ch. 73, par. 743.8
10    215 ILCS 5/131.8afrom Ch. 73, par. 743.8a
11    215 ILCS 5/131.11from Ch. 73, par. 743.11
12    215 ILCS 5/131.12from Ch. 73, par. 743.12
13    215 ILCS 5/131.12afrom Ch. 73, par. 743.12a
14    215 ILCS 5/131.13from Ch. 73, par. 743.13
15    215 ILCS 5/131.14from Ch. 73, par. 743.14
16    215 ILCS 5/131.14a new
17    215 ILCS 5/131.14b new
18    215 ILCS 5/131.14c new
19    215 ILCS 5/131.16from Ch. 73, par. 743.16
20    215 ILCS 5/131.17from Ch. 73, par. 743.17
21    215 ILCS 5/131.18from Ch. 73, par. 743.18
22    215 ILCS 5/131.19from Ch. 73, par. 743.19
23    215 ILCS 5/131.20from Ch. 73, par. 743.20
24    215 ILCS 5/131.20afrom Ch. 73, par. 743.20a
25    215 ILCS 5/131.20b

 

 

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1    215 ILCS 5/131.20c new
2    215 ILCS 5/131.21from Ch. 73, par. 743.21
3    215 ILCS 5/131.22from Ch. 73, par. 743.22
4    215 ILCS 5/131.24from Ch. 73, par. 743.24
5    215 ILCS 5/131.27from Ch. 73, par. 743.27
6    215 ILCS 5/131.9 rep.