093_SB2125

 
                                     LRB093 14114 AMC 19580 b

 1        AN ACT concerning insurance.

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

 4        Section 5.  The Illinois Insurance  Code  is  amended  by
 5    adding Article VIID as follows:

 6        (215 ILCS 5/Art. VIID heading new)
 7             ARTICLE VIID. NONPROFIT RISK ORGANIZATIONS

 8        (215 ILCS 5/123D-1 new)
 9        Sec. 123D-1.  Purpose; construction.
10        (a)  The  purpose  of  this Article is to provide for the
11    organization of and issuance of a certificate of authority to
12    nonprofit   risk   organizations   that   insure    nonprofit
13    organizations and that will qualify, and continue to qualify,
14    as a qualified charitable risk pool, as defined in subsection
15    (n) of Section 501 of the Internal Revenue Code.
16        (b)  This  Article shall be liberally construed to effect
17    the purpose under subsection (a) of this Section, which shall
18    constitute an aid and guide to interpretation.

19        (215 ILCS 5/123D-5 new)
20        Sec. 123D-5.  Definitions. As used in this Article:
21        "Member" shall have the meaning set forth in the articles
22    or  declaration  of  organization  of  the   nonprofit   risk
23    organization.
24        "Nonmember   charitable   organization"  shall  have  the
25    meaning set forth in subsection (n) of  Section  501  of  the
26    Internal Revenue Code.
27        "Nonprofit  organizations"  means organizations described
28    in paragraph (3) of subsection (c), and exempt from  taxation
29    under  subsection (a), of Section 501 of the Internal Revenue
 
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 1    Code.
 2        "Nonprofit risk organization" means a  nonprofit  company
 3    organized  to do business solely with nonprofit organizations
 4    as a qualified charitable risk pool under subsection  (n)  of
 5    Section 501 of the Internal Revenue Code that is organized in
 6    accordance with this Article.
 7        "Startup  capital"  shall  have  the meaning set forth in
 8    subsection (n) of Section 501 of the Internal Revenue Code.

 9        (215 ILCS 5/123D-10 new)
10        Sec.    123D-10.  Organization    of    nonprofit    risk
11    organizations.
12        (a)  A company organized pursuant to Articles II, III, or
13    IV, including such companies organized as  a  risk  retention
14    group  in  this  State pursuant to Article VIIB of this Code,
15    that satisfies  the  requirements  of  this  Article  may  be
16    organized as a nonprofit risk organization.
17        (b)  Notwithstanding any contrary provision in subsection
18    A   of   Section  123B-3  of  this  Code,  a  nonprofit  risk
19    organization may  be  organized  as  a  reciprocal  insurance
20    company  and qualify for organization under Article VIIB as a
21    risk retention group.
22        (c)  No nonprofit risk organization issued a  certificate
23    of authority pursuant to this Article shall be converted into
24    a  corporation or other entity organized for pecuniary profit
25    or into a for-profit organization of any kind.

26        (215 ILCS 5/123D-15 new)
27        Sec. 123D-15.  Conduct of insurance business by nonprofit
28    risk organizations.
29        (a)  No person, firm, corporation, or  association  shall
30    do any insurance business as a nonprofit risk organization in
31    this  State  unless  authorized  to  do  so  pursuant  to the
32    provisions of this Article.
 
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 1        (b)  The Director may, pursuant to this Article, issue  a
 2    certificate  of  authority  to  a nonprofit risk organization
 3    that is a company organized pursuant to Articles II, III,  or
 4    IV,  including  such  companies organized as a risk retention
 5    group in  this  State  pursuant  to  Article  VIIB,  if  such
 6    organization:
 7             (1)  complies  with  the  applicable requirements of
 8        Articles II, III, or IV and VIIB, if organized as a  risk
 9        retention group; and
10             (2)  has  an  initial paid-up capital and surplus at
11        least equal to the amount of applicable  paid-up  capital
12        and  surplus  required  by  Articles II, III, or IV for a
13        newly organized company doing the same kind or  kinds  of
14        insurance business.
15    Thereafter,  every  such  nonprofit  risk  organization shall
16    maintain capital and surplus at least equal to the amount  of
17    applicable  capital  and surplus required to be maintained by
18    companies under Articles II, III, or IV doing the  same  kind
19    or kinds of insurance business.
20        (c)  Every  certificate  of  authority  to  engage  in an
21    insurance business issued by the Director  to  any  nonprofit
22    risk  organization pursuant to the provisions of this Article
23    shall  specify  the  company's  name,  the  location  of  its
24    principal office, the  name  and  principal  address  of  its
25    attorney-in-fact,  if any, and the kind or kinds of insurance
26    business that it is authorized to engage in this State.

27        (215 ILCS 5/123D-20 new)
28        Sec. 123D-20.  Relevant criteria.
29        (a)  In  applying  this  Article,  the   Director   shall
30    consider the provisions of paragraph (3) of subsection (c) of
31    Section  501  of the Internal Revenue Code and subsection (n)
32    of Section 501 of the Internal Revenue Code.
33        (b)  Notwithstanding  any  other  provision  of  law,   a
 
                            -4-      LRB093 14114 AMC 19580 b
 1    nonprofit  risk  organization  must meet all of the following
 2    criteria:
 3             (1)  Be operated  solely  to  insure  risks  of  its
 4        members.
 5             (2)  Directly  provide  information  to  its members
 6        with respect to loss control and risk management.
 7             (3)  Obtain at least $1,000,000 in  startup  capital
 8        from  nonmember  charitable  organizations.  Such startup
 9        capital may take the form of advancements  or  borrowings
10        in  the form permitted by Section 34.1, 56, or 76 of this
11        Code, as applicable.  Startup  capital  may  be  used  to
12        satisfy  the  financial  requirements  contained  in this
13        Article applicable to a nonprofit risk organization  only
14        to  the  extent  the Director determines that it complies
15        with such requirements.
16             (4)  Be  controlled  by  a  board  of  directors,  a
17        majority of whom are policy holders of the nonprofit risk
18        organization, or who are elected by the  members  of  the
19        nonprofit risk organization.
20             (5)  Require in its organizational documents that:
21                  (A)  each   member   of   the   nonprofit  risk
22             organization shall at all times be  an  organization
23             described  in  paragraph  (3)  of  subsection (c) of
24             Section 501 of the Internal Revenue Code and  exempt
25             from  tax under subsection (a) of Section 501 of the
26             Internal Revenue Code;
27                  (B)  any   member   that   receives   a   final
28             determination that it  no  longer  qualifies  as  an
29             organization   described   in   paragraph   (3)   of
30             subsection  (c)  of  Section  501  of  the  Internal
31             Revenue  Code shall immediately notify the nonprofit
32             risk  organization  of  the  determination  and  the
33             effective date of the determination; and
34                  (C)  each policy of  insurance  issued  by  the
 
                            -5-      LRB093 14114 AMC 19580 b
 1             nonprofit  risk organization shall provide that such
 2             policy will not cover the insured  with  respect  to
 3             events   occurring   after   the   date   the  final
 4             determination was issued to the insured.

 5        (215 ILCS 5/123D-25 new)
 6        Sec. 123D-25.  Applicability of other provisions of  this
 7    Code.
 8        (a)  Except  as otherwise provided in this Article, where
 9    inconsistent  with  this  Article,  or  where   the   context
10    otherwise  requires,  all  of the provisions of this Code and
11    the rules of the Director relating to all insurers and  those
12    relating to a company organized pursuant to Articles II, III,
13    or  IV  or  a  risk  retention  group organized in this State
14    pursuant to Article VIIB transacting the same kind  or  kinds
15    of   insurance  shall  be  applicable  to  a  nonprofit  risk
16    organization organized and issued a certificate of  authority
17    pursuant to this Article. Where any of such provisions of law
18    refer to a corporation, company, or insurer, such references,
19    when  read in connection with and applicable to this Article,
20    shall mean such a nonprofit risk organization.
21        (b)  Every nonprofit risk organization shall  be  subject
22    to  rehabilitation, liquidation, conservation, or dissolution
23    pursuant to the provisions of Article XIII of this Code,  and
24    such  proceeding  shall  be  under  the  supervision  of  the
25    Director,  who  shall  have  the powers granted to him or her
26    under the provisions of that Article  as  are  applicable  to
27    domestic insurance companies.

28        (215 ILCS 5/123D-30 new)
29        Sec.    123D-30.  Tax    exemption;    residual    market
30    participation exemption; security funds.
31        (a)  Every  nonprofit  risk  organization  subject to the
32    provisions of this Article shall be  exempt  from  any  fees,
 
                            -6-      LRB093 14114 AMC 19580 b
 1    taxes, special ad valorem levies, or assessments of any kind,
 2    including,  but not limited to, franchise taxes, sales taxes,
 3    or other taxes, upon or with respect to any property owned by
 4    it or under its jurisdiction,  control,  or  supervision,  or
 5    upon  the  uses  thereof,  or  upon  or  with  respect to its
 6    activities  or  operations  in  furtherance  of  the   powers
 7    conferred upon it by this Article, or upon or with respect to
 8    any  revenues  or other income received by the nonprofit risk
 9    organization.
10        (b)  A nonprofit risk organization shall not be permitted
11    or required to join or contribute financially  to  any  plan,
12    pool,  association,  or  guaranty  or insolvency fund in this
13    State, nor shall any nonprofit  risk  organization,  nor  its
14    insureds  nor  any  claimants  against  the insureds, nor its
15    parent  nor  any   affiliated   company,   nor   any   member
16    organization of its association, receive any benefit from any
17    such  plan,  pool association, or guaranty or insolvency fund
18    for claims arising out of the operations  of  such  nonprofit
19    risk  organization.  Each  nonprofit  risk  organization must
20    inform each insured, in both the  application  for  insurance
21    and  in  the  policy  issued  to  the  insured,  that (i) the
22    nonprofit risk organization is not  subject  to  all  of  the
23    insurance  laws  and  rules  of  this  State,  and (ii) State
24    insurance insolvency guaranty funds are not available to such
25    insured for claims arising out  of  the  operations  of  such
26    nonprofit risk organization.

27        (215 ILCS 5/123D-35 new)
28        Sec. 123D-35.  Rules. The Director shall adopt such rules
29    as  may  be necessary for the implementation of this Article.
30    This regulation may be necessary in light  of  the  nonprofit
31    risk organization being owned by nonprofit organizations that
32    it   insures,   including   the  proprietary  nature  of  the
33    information relating to  the  nonprofit  risk  organization's
 
                            -7-      LRB093 14114 AMC 19580 b
 1    insurance company's operations.