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INSURANCE
(215 ILCS 5/) Illinois Insurance Code.

215 ILCS 5/Art. V.75

 
    (215 ILCS 5/Art. V.75 heading)
Article V 3/4 Group Workers' Compensation
Pools; pooling; insolvency fund.

215 ILCS 5/107a.01

    (215 ILCS 5/107a.01)
    Sec. 107a.01. Short title. This Article may be cited as the Workers' Compensation Pool Law.
(Source: P.A. 91-757, eff. 1-1-01.)

215 ILCS 5/107a.02

    (215 ILCS 5/107a.02)
    Sec. 107a.02. Scope. This Article applies to all qualified group workers' compensation pools.
(Source: P.A. 91-757, eff. 1-1-01.)

215 ILCS 5/107a.03

    (215 ILCS 5/107a.03)
    Sec. 107a.03. Purpose. The purpose of this Article is to permit 2 or more employers with homogeneous risk characteristics or that are members of a bona fide professional, commercial, industrial, or trade association, with homogenous risk characteristics to pool their workers' compensation and employer's liability exposures under this Article.
    The State of Illinois, a unit of local government or school district, or association or instrumentality thereof, or an intergovernmental risk management association, self-insurance pool or self-administered health and accident cooperative or pool shall not be deemed an "employer" or "pool" for the purpose of this Article.
(Source: P.A. 91-757, eff. 1-1-01.)

215 ILCS 5/107a.04

    (215 ILCS 5/107a.04)
    Sec. 107a.04. Organization under the Illinois Insurance Code.
    (a) After December 31, 2000, group workers' compensation pools shall for the purpose of this Article, and this Article only, be considered as though they were assessable domestic mutual insurance companies and subject to the following:
        (1) Article XII 1/2, Article XIII, Article XIII 1/2,
    
Article XXIV; and
        (2) Sections 126.2, 126.4, 126.7, 132, 132.1 through
    
132.7, 133, 134, 137, 139, 140, 141.1, 141.2, 142, 143, 143c, 147, 148, 149, 154.5, 154.6, 154.7, 154.8, 155.01, 155.04, 173.1, 173.2, 173.3, 173.4, 173.5, 174, 174.1, 175, 176, 178, 179b, 378, 379.1, 408, 408.3, 449, 456, 457, and 458, subsections A, B, C, and E of Section 126.5, subsection A of Section 126.6, and subsections (1) and (7) of Section 412 of this Code.
    (b) If there is a conflict between any Section of this Article and any other Section of this Code, then the provisions of this Article shall apply.
    (c) No other provision of this Code shall be applicable to any qualified workers' compensation group workers' compensation pool except as provided in this Article.
    (d) A certificate of authority that is in effect on the effective date of this amendatory Act of the 91st General Assembly and that was issued pursuant to Section 4a of the Workers' Compensation Act or Section 4a of the Workers' Occupational Diseases Act to a group self-insurer shall remain in effect under this Article. Such group self-insurer shall then be deemed to be a qualified group workers' compensation pool and shall be subject to this Article.
(Source: P.A. 91-757, eff. 1-1-01.)

215 ILCS 5/107a.05

    (215 ILCS 5/107a.05)
    Sec. 107a.05. Definitions and interchangeable terms.
    (a) Unless otherwise provided, the following definitions shall apply:
    "Authorized insurer" means an insurer licensed in this State to transact business as described in Clauses (c) and (d) of Class 2 of Section 4 of this Code.
    "Calendar Quarter" means the 3-month periods ending March 31, June 30, September 30, and December 31.
    "Director" means the Director of Insurance.
    "Engaged actively in the business" means a bona fide business concern having conducted commerce, trade, or industry in this State for a specified period of time. Any and all records relating to this requirement shall be open to inspection by the Director or his designee during normal business hours.
    "Gross annual payroll" means payroll for the preceding fiscal year.
    "Independent actuarial opinion" means an opinion expressed by a member of the American Academy of Actuaries or Casualty Actuarial Society.
    "Independent CPA" means an independent certified public accountant or independent certified public accounting firm in good standing and licensed to practice by the Department of Professional Regulation.
    "Pool" means a qualified group workers' compensation pool as authorized by this Article.
    "Qualified group workers' compensation pool" means a group workers' compensation pool that has received a certificate of authority pursuant to this Article.
    (b) For purposes of incorporating the provisions of this Code designated in paragraphs (1) and (2) of subsection (a) of Section 107a.04 into this Article, the following terms shall be interchangeable:
    "Contribution" shall be considered premium.
    "Pooling agreement" shall be considered a policy of insurance.
    "Trustees of a group workers' compensation pool" shall be considered as though they were directors of a domestic mutual insurance company.
(Source: P.A. 91-757, eff. 1-1-01.)

215 ILCS 5/107a.06

    (215 ILCS 5/107a.06)
    Sec. 107a.06. Pool administration.
    (a) An application for Certificate of Authority to establish a pool must include the documentation and information regarding its administrator, pooling agreement, plan of operation, and membership required by this Section.
    (b) Administrators must disclose all of the following:
        (1) Biography of the risk manager on forms prescribed
    
by the Director.
        (2) If a corporation, biographies of all officers and
    
directors.
        (3) The size of staff and other information, such as
    
the kinds of staff positions, location of administrative offices and the nature of any electronic data processing equipment, if any, available for servicing the pool, to demonstrate that the administrator has the resources to administer the program disclosed pursuant to subsection (d).
        (4) The most recent financial statement of the
    
administrator. If a publicly held company, a copy of the last 10-K filed with the Securities and Exchange Commission.
        (5) The compensation contract of the administrator.
        (6) The bylaws of the pool and articles of
    
incorporation, if any.
        (7) Any agreement that subcontracts any of the
    
administrator's duties or responsibilities.
    (c) A pooling agreement must contain all of the following:
        (1) A description of the services to be provided by
    
the administrator.
        (2) The manner in which costs are to be apportioned
    
by the administrator.
        (3) The initial premium deposit.
        (4) The assessment provision.
        (5) The termination provisions and minimum term of
    
membership, which minimum term of membership shall not be less than one year.
        (6) The duration of liability for additional
    
assessments following termination of membership, which shall be for a period of not less than 3 years.
        (7) The prerequisites for membership.
        (8) A provision stating that a claim shall be paid by
    
the pool, regardless of the size of the claim, and that the pool shall be reimbursed by the employer for any amounts required to be paid by the employer under the agreement.
        (9) A provision stating that the terms of termination
    
after the first year of pool membership shall be dictated by the pooling agreement.
        (10) If a pooling agreement requires a member to
    
submit written notice in order for the member to withdraw from a qualified pool, then the period in which the member must provide the written notice cannot be greater than 90 days.
    (d) Plans of operation must disclose all of the following:
        (1) A listing of initial members.
        (2) The aggregate loss history of initial members for
    
each of the last 3 years.
        (3) The amount of the net retention of the pool and a
    
list of reinsurers.
        (4) The names of all entities that will provide
    
services for the pool and copies of proposed contracts in connection those services.
        (5) The safety and loss control programs to be
    
provided or required.
    (e) The application must contain information about initial members specified on forms prescribed by the Director.
    (f) The application must contain the combined loss experience for the group for the last 3 years and any other financial data required by the Director.
    (g) A pool administrator's original books and records relating to the operations of the pool shall at all times be located within the State of Illinois.
    (h) Any change of the pooling agreement, bylaws, plan of operation, reinsurance agreements, or membership shall be delivered to the Director within 30 days after the amendment or change.
    (i) A pool trustee must be an employee, officer, director, or owner of a pool member.
(Source: P.A. 91-757, eff. 1-1-01.)

215 ILCS 5/107a.07

    (215 ILCS 5/107a.07)
    Sec. 107a.07. Standards for issuing and maintaining pool certificates of authority.
    (a) The Department shall consider the following in evaluating the financial strength of the pool:
        (1) The number of employees covered by the pool.
        (2) The particular industries in which the
    
participants are engaged.
        (3) The combined net worth of pool participants.
        (4) Any excess insurance purchased from authorized
    
insurers.
        (5) The gross annual payroll of members, which must
    
be at least $10,000,000 for active pools not in runoff.
    (b) The pool administrator must either contract with a licensed service company or have sufficient resources, such as those set forth in item (3) of subsection (b) of Section 107a.06, to administer the proposed pool.
    (c) The Department must determine whether the pool can ensure that individual pool members are in compliance with Section 107a.08.
(Source: P.A. 96-965, eff. 7-2-10.)

215 ILCS 5/107a.08

    (215 ILCS 5/107a.08)
    Sec. 107a.08. Provisions applicable to members of a group workers' compensation pool.
    (a) All members of a group workers' compensation pool must have homogeneous risk characteristics as provided in Section 107a.03.
    (b) In determining whether members exhibit homogeneous risk characteristics, the Director shall consider any or all of the following characteristics:
        (1) The loss frequency inherent in the occupational
    
framework of group members.
        (2) The loss severity inherent in the occupational
    
framework of group members.
        (3) The occupational disease potential inherent in
    
the occupational framework of group members.
        (4) The occupational tasks of member employees.
        (5) Any other relevant fact the group members present
    
to the Director that has reference to the classification of similar risks (e.g. SIC codes).
    (c) Eligibility as a pool participant shall be based upon having a minimum of:
        (1) 20 employees and $250,000 gross annual payroll; or
        (2) 10 employees and $125,000 gross annual payroll
    
for participants who have engaged actively in business for a minimum of 3 years; or
        (3) 5 employees and $62,500 gross annual payroll for
    
participants who have actively engaged in business for a minimum of 5 years.
    (d) Exceptions to the minimum eligibility requirements of this Section may be allowed by any pool whenever the following conditions are met:
        (1) the participant has been actively engaged in
    
business for a minimum period of 5 consecutive years in Illinois; and
        (2) the participant agrees to make all of its
    
financial records available to the Director for reasonable inspection during the period of membership; and
        (3) the pool administrator certifies to the Director
    
that he examined the financial records of the pool participant prior to the participant's admission to the pool and found the participant to be solvent and financially stable.
(Source: P.A. 91-757, eff. 1-1-01.)

215 ILCS 5/107a.09

    (215 ILCS 5/107a.09)
    Sec. 107a.09. Service companies for group workers' compensation pools.
    (a) No association, corporation, partnership, sole proprietorship, trust, or other business entity shall provide services in the design, establishment, or administration of a group workers' compensation pool unless it is licensed to do so by the Department. An applicant for a license shall state in writing the type of activities it seeks authorization to engage in and the type of services it seeks authorization to provide. The license shall be granted only when the Director is satisfied that the entity possesses the necessary organization, background, character, expertise, and financial integrity to supply the services sought to be offered. The Department may issue a license subject to restrictions or limitations, including restrictions or limitations on the type of services that may be supplied or the activities in which the entity may engage. A license issued under this Section shall be valid for 2 years.
    (b) To assure that administrators are financially solvent, that pools are administered in a fair and capable fashion, and that administrators are able to process claims and pay benefits in a prompt, fair, and equitable manner, entities licensed to engage in those activities under this Section are subject to supervision and examination by the Department.
    (c) The Department may adopt rules for the purposes of this Article. The rules shall (i) establish reporting requirements for administrators for group workers' compensation pools, including experience reporting requirements consistent with those established under this Code for insurers; (ii) establish bonding requirements or other provisions assuring the financial integrity of entities administering group self-insurance; and (iii) establish other reasonable requirements to further the purposes of this Article.
(Source: P.A. 91-757, eff. 1-1-01.)

215 ILCS 5/107a.10

    (215 ILCS 5/107a.10)
    Sec. 107a.10. Bond requirements.
    (a) An administrator shall obtain and maintain in force fidelity bonds on employees, officers, or positions in an amount not less than the amount set forth in the column "Minimum Amount of Bond", based on the amount of assets administered on behalf of pools by the administrator (as determined from year to year) stated in the annual statement of the pools as filed with the Department. All such bonds shall be written with at least a one-year discovery period and, if written with less than a 3-year discovery period, shall contain a provision that no cancellation or termination of the bond, whether by or at the request of the insured or by the underwriter, shall take effect before the expiration of 90 days after written notice of the cancellation or termination has been filed with the Department unless an earlier date of cancellation or termination is approved by the Department.
    (b) The bonds shall include all employees, officers, or positions for the following perils, which may be covered under separate policies:
        (1) dishonesty of employees and officers;
        (2) robbery, burglary, larceny, theft, false
    
pretense, hold-up, misplacement, mysterious disappearance, and damage or destruction while property is in any bank, any recognized place of safe deposit, or in transit; and
        (3) forgery or alteration.
    (c) The bond shall be written by an insurer licensed to transact business in the State of Illinois.
    (d) Schedule of assets in relationship to amount of bond:
TOTAL ASSETSMINIMUM AMOUNT OF BOND
$500,000 or less..........$20,000 plus 6% of total
assets
more than $ 500,000 and
not more than $1,000,000.....$50,000 plus 4% of assets
over $500,000
more than $1,000,000 and
not more than $3,000,000.....$70,000 plus 3% of assets
over $1,000,000
more than $3,000,000 and
not more than $5,000,000.....$130,000 plus 2% of assets
over $3,000,000
more than $5,000,000 and
not more than $10,000,000.....$170,000 plus 1.5% of assets
over $5,000,000
more than $10,000,000.......$245,000 plus 0.75% of assets
more than $10,000,000
(Source: P.A. 91-757, eff. 1-1-01.)

215 ILCS 5/107a.11

    (215 ILCS 5/107a.11)
    Sec. 107a.11. Admissible assets.
    (a) Admitted assets include amounts permitted under Section 107a.12 as modified by only the following:
        (1) Direct obligations of the United States of
    
America for the payment of money or obligations for the payment of money that are guaranteed as to the payment of principal and interest by the United States of America.
        (2) Direct obligations for the payment of money
    
issued by an agency or instrumentality of the United States of America or obligations for the payment of money that are guaranteed as to payment of principal and interest by an agency or instrumentality of the United States of America.
        (3) Bonds or securities that are issued by any state
    
of the United States and that are secured by the full faith and credit of that state.
        (4) Certificates of deposit, time deposits, or demand
    
deposits in a bank in the State of Illinois that has deposits insured by the Federal Deposit Insurance Corporation.
        (5) Saving certificates issued by any savings and
    
loan association in the State of Illinois that has deposits insured by the Federal Deposit Insurance Corporation.
        (6) Direct, unconditional obligations of a solvent
    
business corporation for the payment of money on the following conditions:
            (A) the corporation is incorporated under the
        
laws of the United States of America or any state of the United States of America;
            (B) the corporation has a tangible net worth of
        
not less than $500,000 and the obligations have been awarded a "1" or "2" rating by the Securities Valuation Office of the National Association of Insurance Commissioners;
            (C) the corporation is not affiliated with any
        
member of the pool;
            (D) no such obligation of the corporation has
        
been in default as to principal or interest during the 5 years preceding the date of investment, however, the corporation need not have had obligations outstanding during that period and need not have been in existence for that period, and obligations acquired under this Section may be newly issued;
            (E) a pool may not invest more than 33 1/3% of
        
its assets under this item (6); and
            (F) a pool may not invest under this Section more
        
than 5% of its assets in the obligations of any one corporation.
        (7) Obligations of any political subdivision of any
    
state of the United States of America for the payment of money on the following conditions:
            (A) the obligations are payable from ad valorem
        
taxes;
            (B) the political subdivision is not in default
        
in the payment of principal or interest on any of its direct, general obligations;
            (C) no investment may be made under this Section
        
in obligations that are secured only by special assessments for local improvements;
            (D) a pool may not invest under this Section more
        
than 4% of its assets in direct, general obligations issued by any one political subdivision; and
            (E) a pool may not invest more than 50% of its
        
assets under this item (7).
        (8) Mutual funds:
            (A) government money market mutual funds that
        
meet the conditions of paragraphs (c)(2), (c)(3), and (c)(4) of 17 C.F.R. 270.2a-7, revised as of April 1, 1992, that have been rated in one of the 2 highest rating categories by an independent rating agency recognized by the National Association of Insurance Commissioners, and that invest in obligations issued, guaranteed, or insured by the United States or Canada or any agency or instrumentality of the United States or Canada.
            (B) fixed income bond mutual funds that meet the
        
conditions of paragraphs (c)(2), (c)(3), and (c)(4) of 17 C.F.R. 270.2a-7, revised as of April 1, 1992, and that have been rated in one of the 2 highest rating categories by an independent rating agency recognized by the National Association of Insurance Commissioners, however, a pool may not invest in fixed income bond mutual funds more than the greater of $100,000 or 10% of its total assets in any one fund.
        (9) Not more than 5% of a pool's admitted assets may
    
be assessment receivables. In order to be an admitted asset, an assessment receivable cannot be more than 60 days past due.
        (10) Not more than 10% of a pool's admitted assets
    
may be reinsurance receivables. In order to be an admitted asset, a reinsurance receivable cannot be more than 90 days past due.
    (b) Amounts recoverable from authorized reinsurers on unpaid losses may be deducted from the reserves required by Section 4 of the Workers' Compensation Act.
    (c) All securities eligible for registration shall be registered in the name of the pool and all securities shall be maintained in a State or National Bank having trust powers and located within this State.
(Source: P.A. 91-757, eff. 1-1-01.)

215 ILCS 5/107a.12

    (215 ILCS 5/107a.12)
    Sec. 107a.12. Annual statement.
    (a) A pool authorized to do business in this State shall file with the Director by March 1st in each year 2 copies of its financial statement for the year ending December 31st immediately preceding on forms prescribed by the Director, which shall conform substantially to the form of statement adopted by the National Association of Insurance Commissioners. Unless the Director provides otherwise, the annual statement is to be prepared in accordance with the annual statement instructions and the Accounting Practices and Procedures Manual adopted by the National Association of Insurance Commissioners. The Director may promulgate rules for determining which portions of the annual statement instructions and Accounting Practices and Procedures Manual adopted by the National Association of Insurance Commissioners are germane for the purpose of ascertaining the condition and affairs of a pool.
    (b) The Director shall have authority to extend the time for filing any statement by any pool for reasons that he considers good and sufficient. The admitted assets shall be shown in the statement at the actual values as of the last day of the preceding year, in accordance with Section 126.7 of this Code. The statement shall be verified by oaths of a majority of the trustees or directors of the pool. In addition, when the Director considers it to be necessary and appropriate for the protection of policyholders, creditors, shareholders, or claimants, the Director may require the pool to file, within 60 days after mailing to the pool a notice that a supplemental summary statement is required, a supplemental summary statement, as of the last day of any calendar month occurring during the 100 days next preceding the mailing of the notice, designated by him or her on forms prescribed and furnished by the Director. The Director may require supplemental summary statements to be certified by an independent actuary deemed competent by the Director or by an independent certified public accountant.
    (c) On or before June 1 of each year, a pool shall file with the Director an audited financial statement reporting the financial condition of the pool as of the end of the most recent calendar year and changes in the surplus funds for the year then ending. The annual audited financial report shall include the following:
        (1) a report of an independent certified public
    
accountant;
        (2) a balance sheet reporting assets, as defined in
    
this Article, liabilities, and surplus funds;
        (3) a statement of gain and loss from operations;
        (4) a statement of changes in financial position;
        (5) a statement of changes in surplus funds; and
        (6) the notes to financial statements.
    (d) The Director shall require a pool to file an independent actuarial opinion as to the sufficiency of the loss and loss adjustment expense reserves. This opinion shall be due on March 1 of each year.
(Source: P.A. 102-135, eff. 1-1-22.)

215 ILCS 5/107a.13

    (215 ILCS 5/107a.13)
    Sec. 107a.13. Group Workers' Compensation Pool Insolvency Fund.
    (a) All qualified group workers' compensation pools shall pay a sum equal to 0.5% of all compensation and medical service payments made under either the Workers' Compensation Act or the Workers' Occupational Diseases Act during the 6 months immediately preceding the date of payment, into the Group Workers' Compensation Pool Insolvency Fund, the successor fund to the Group Self-Insurers' Insolvency Fund. On the effective date of this amendatory Act of the 91st General Assembly, all moneys in the Group Self-Insurers' Insolvency Fund shall be transferred into the Group Workers' Compensation Pool Insolvency Fund.
    (b) The State Treasurer is ex-officio custodian of the Group Workers' Compensation Pool Insolvency Fund. Moneys in the Fund shall be deposited the same as are State funds and any interest accruing on moneys in the Fund shall be added to the Fund every 6 months. The Fund shall be subject to audit the same as State funds and accounts and shall be protected by the general bond given by the State Treasurer. The Fund shall be considered always appropriated for the purposes of compensating employees who are eligible to receive benefits from their employers pursuant to the provisions of the Workers' Compensation Act or Workers' Occupational Diseases Act when their employer is a member of a qualified group workers' compensation pool and the qualified group workers' compensation pool has become unable to pay compensation and medical service payments due to financial insolvency either prior to or following the date of award. Moneys in the Fund may be used to compensate any type of injury or occupational disease that is compensable under either the Workers' Compensation Act or the Workers' Occupational Diseases Act. The State Treasurer shall be joined with the qualified group workers' compensation pool as party respondent in any claim or application for adjustment of claim filed against a qualified group workers' compensation pool whenever the compensation and medical services provided pursuant to this Article may be unpaid by reason of default of an insolvent qualified group workers' compensation pool.
    (c) Payment shall be made out of the Group Workers' Compensation Pool Insolvency Fund only upon order of the Director and only after the penal sum of the fidelity bond and securities, if any, has been exhausted. It shall be the obligation of a qualified group workers' compensation pool or its successor to make arrangements to repay the Group Workers' Compensation Pool Insolvency Fund for all moneys paid out in its behalf. The Director is authorized to make arrangements with the qualified group workers' compensation pool as to terms of repayment. The obligations of qualified group workers' compensation pools to make contributions to the Group Workers' Compensation Pool Insolvency Fund shall be waived on any January 1 or July 1, if the Fund has a positive balance of at least $2,000,000 on the date one month prior to the date of payment.
(Source: P.A. 91-757, eff. 1-1-01.)

215 ILCS 5/107a.14

    (215 ILCS 5/107a.14)
    Sec. 107a.14. Group workers' compensation pools assessment provisions.
    (a) When the Director determines by means of audit, annual certified statement, actuarial opinion, or otherwise that the assets possessed by a pool are less than the reserves required together with any other unpaid liabilities, he or she shall order the pool trustees to assess the individual pool participants in an amount not less than necessary to correct the deficiency. This Section is not intended to restrict or preclude the trustees from time to time levying assessments or increasing premium deposits in accordance with the pooling agreement.
    (b) When the Director determines that the compensation and medical services provided pursuant to this Article may be unpaid by reason of the default of an insolvent qualified group workers' compensation pool and the penal sum of the fidelity bond and the securities provided by the qualified group workers' compensation pool are about to become exhausted, the Director shall declare the qualified group workers' compensation pool to be in default and first levy upon and collect from the individual employer members of the qualified group workers' compensation pool in default an assessment to assure prompt payment of compensation and medical services. No assessment of any individual employer member of the qualified group workers' compensation pool made pursuant to this subsection shall exceed 25% of the average annual contribution paid by that employer over the previous 3-year period; however, if the Group Workers' Compensation Pool Insolvency Fund is then for any reason financially unable to assure prompt payment of compensation and medical services, the employer member may be assessed without limitation. If and only if (i) the Group Workers' Compensation Pool Insolvency Fund has a positive balance of less than $1,000,000, (ii) the Director has declared a qualified group workers' compensation pool to be in default, and (iii) the Group Workers' Compensation Pool Insolvency Fund is financially unable to pay all employees whose compensation and medical services have been approved, the Director shall levy upon and collect from all qualified group workers' compensation pools an assessment to provide the balance necessary to assure prompt payment of approved compensation and medical services. If an insurance carrier becomes liable for workers' compensation and occupational diseases payments under the terms of the policy covering the qualified group workers' compensation pool, the carrier shall make appropriate payments and payments from the Fund shall cease. Payments from the Fund shall resume only when the insurance carrier's liability is exhausted.
(Source: P.A. 91-757, eff. 1-1-01.)

215 ILCS 5/107a.15

    (215 ILCS 5/107a.15)
    Sec. 107a.15. Authority of Director.
    (a) If the Director determines that a group workers' compensation pool is not in compliance with this Article, the Director shall require the pool to eliminate the condition causing the noncompliance within a specified time from the date the notice of the Director's requirement is mailed or delivered to the pool.
    (b) If a pool fails to comply with the Director's requirement, the pool shall be deemed to be in a hazardous financial condition, and the Director may take one or more of the actions authorized by law as to pools in hazardous financial condition.
(Source: P.A. 91-757, eff. 1-1-01.)