(215 ILCS 150/14.1) (from Ch. 148, par. 214.1)
Sec. 14.1.
Contribution Certificate.
A trust fund may issue
contribution certificates, evidencing a contingent obligation to repay
amounts advanced to the trust fund, for the purpose of obtaining funds to
defray the expenses of organization, or providing surplus funds to the
trust fund, or for any purpose required by its business, subject to the
following provisions:
(a) Any such contribution certificate shall be evidenced by a written
agreement providing that payments of principal and accrued interest may be
made only out of the trust fund's net fund balance (surplus) in excess of
that stipulated in the agreement. Any such agreement shall, at a minimum,
provide that repayments of principal or payments of accrued interest shall
be made only to the extent that trust fund assets exceed the sum of (i) all
trust fund liabilities (including but not limited to reserves for losses,
reinsurance payables, unpaid production and general expenses, unpaid taxes,
loans and advances, but excluding principal and interest obligations
evidenced by contribution certificates issued pursuant to this Section)
plus (ii) the then outstanding unpaid principal balance evidenced by
contribution certificates and, if the trust fund is reorganizing
or has reorganized as a mutual insurance company or a reciprocal
(inter-insurance exchange) pursuant to Section 25.1
of this Act, an amount equal to the amount of capital and surplus required
of a newly organized insurer to write like lines of business
pursuant to Section 43 of the Illinois Insurance Code if a mutual
insurance company, or pursuant to Section 66 of the Illinois Insurance Code
if a reciprocal. Any such agreement
may contain repayment terms and conditions which are more restrictive than
those provided herein.
(b) In the financial statement of a trust fund required to be filed
pursuant to Section 14 of this Act or which may be published or distributed
by the issuing trust fund, the outstanding and unpaid principal balance on
contribution certificates may be reported as part of the trust fund's net
fund balance (surplus) and that portion of the accrued but unpaid interest
on contribution certificates which is in excess of the amount permitted to
be paid by the trust fund pursuant to subsection (a) need not be
reported as a liability of the trust fund, provided that the financial
statement shall contain an appropriate footnote identifying the essential
terms of repayment of the contribution certificates and the amount thereof
then unpaid together with any accrued but unpaid interest thereon.
(c) Any agreement evidencing contribution certificates shall be filed
with and approved by the Director of Insurance prior to its effective date.
The Director shall approve any such agreement which complies with the
provisions of this Section 14.1 provided that the terms of repayment are
reasonable and the interest rate provided therein is not excessive. A rate
of not more than 2% above the prevailing prime bank rate, either fixed as
of the effective date of the agreement or floating during the term of the
agreement, shall not be considered excessive.
(d) The repayment of principal and the payment of accrued interest on
contribution certificates by a trust fund shall be subject to approval by
the Director of Insurance.
(Source: P.A. 86-847.)
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