215 ILCS 5/ Illinois Insurance Code.

(215 ILCS 5/126.27)

Sec. 126.27. Tangible personal property under lease.

A. (1) Subject to the limitations of Section 126.23, an insurer may acquire tangible personal property or equity interests therein located or used wholly or in part within a domestic jurisdiction either directly or indirectly through limited partnership interests and general partnership interests not otherwise prohibited by Section 126.5D, joint ventures, stock of an investment subsidiary or membership interests in a limited liability company, trust certificates, or other similar instruments.

(2) Investments acquired under paragraph (1) of this subsection shall be eligible only if:

(a) The property is subject to a lease or other agreement with a person whose rated credit instruments in the amount of the purchase price of the personal property the insurer could then acquire under Section 126.24; and

(b) The lease or other agreement provides the insurer the right to receive rental, purchase or other fixed payments for the use or purchase of the property, and the aggregate value of the payments, together with the estimated residual value of the property at the end of its useful life and the estimated tax benefits to the insurer resulting from ownership of the property, shall be adequate to return the cost of the insurer's investment in the property, plus a return deemed adequate by the insurer.

B. The insurer shall compute the amount of each investment under this Section on the basis of the out of pocket purchase price and applicable related expenses paid by the insurer for the investment, net of each borrowing made to finance the purchase price and expenses, to the extent the borrowing is without recourse to the insurer.

C. An insurer shall not acquire directly or indirectly through an investment subsidiary an investment under this Section if, as a result of and after giving effect to the investment, the aggregate amount of all investments then held by the insurer under this Section would exceed:

(1) 2% of its admitted assets; or

(2) 0.5% of its admitted assets as to any single item of tangible personal property.

D. For purposes of determining compliance with the limitations of Section 126.23, investments acquired by an insurer under this Section shall be aggregated with those acquired under Section 126.24, and each lessee of the property under a lease referred to in this Section shall be deemed the issuer of an obligation in the amount of the investment of the insurer in the property determined as provided in subsection B of this Section.

E. Nothing in this Section is applicable to tangible personal property lease arrangements between an insurer and its subsidiaries and affiliates under a cost sharing arrangement or agreement permitted under Section 131.20a(1)(a)(iv) of this Code.

(Source: P.A. 90-418, eff. 8-15-97.)

(215 ILCS 5/126.28)

Sec. 126.28. Mortgage loans and real estate.

A. Mortgage loans.

(1) Subject to the limitations of Section 126.23, an insurer may acquire, either directly or indirectly through limited partnership interests and general partnership interests not otherwise prohibited by Section 126.5D, joint ventures, stock of an investment subsidiary or membership interests in a limited liability company, trust certificates, or other similar instruments, obligations secured by mortgages on real estate situated within a domestic jurisdiction, but a mortgage loan which is secured by other than a first lien shall not be acquired under this subsection (1) unless the insurer is the holder of the first lien. The obligations held by the insurer and any obligations with an equal lien priority, shall not, at the time of acquisition of the obligation, exceed:

(a) 90% of the fair market value of the real estate, if the mortgage loan is secured by a purchase money mortgage or like security received by the insurer upon disposition of the real estate;

(b) 80% of the fair market value of the real estate, if the mortgage loan requires immediate scheduled payment in periodic installments of principal and interest, has an amortization period of 30 years or less and periodic payments made no less frequently than annually. Each periodic payment shall be sufficient to assure that at all times the outstanding principal balance of the mortgage loan shall be not greater than the outstanding principal balance which would be outstanding under a mortgage loan with the same original principal balance, with the same interest rate and requiring equal payments of principal and interest with the same frequency over the same amortization period. Mortgage loans permitted under this subsection are permitted notwithstanding the fact that they provide for a payment of the principal balance prior to the end of the period of amortization of the loan. For residential mortgage loans, the 80% limitation may be increased to 97% if acceptable private mortgage insurance has been obtained; or

(c) 75% of the fair market value of the real estate for mortgage loans that do not meet the requirements of subparagraph (a) or (b) of this paragraph.

(2) For purposes of paragraph (1) of this subsection, the amount of an obligation required to be included in the calculation of the loan-to-value ratio may be reduced to the extent the obligation is insured by the Federal Housing Administration or guaranteed by the Administrator of Veterans Affairs, or their successors.

(3) Subject to the limitations of Section 126.23, an insurer may acquire, either directly or indirectly through limited partnership interests and general partnership interests not otherwise prohibited by Section 126.5D, joint ventures, stock of an investment subsidiary or membership interests in a limited liability company, trust certificates, or other similar instruments, obligations secured by a second mortgage on real estate situated within a domestic jurisdiction, other than as authorized in subsection (1) of this Section 126.28. The obligation held by the insurer shall be the sole second lien priority obligation and shall not, at the time of acquisition of the obligation, exceed 70% of the amount by which the fair market value of the real estate exceeds the amount outstanding under the first mortgage.

(4) A mortgage loan that is held by an insurer under Section 126.3F or acquired under this Section and is restructured in a manner that meets the requirements of a restructured mortgage loan in accordance with the NAIC Accounting Practices and Procedures Manual or successor publication shall continue to qualify as a mortgage loan under this Article.

(5) Subject to the limitations of Section 126.23, credit lease transactions that do not qualify for investment under Section 126.24 with the following characteristics shall be exempt from the provisions of paragraph (1) of this subsection:

(a) The loan amortizes over the initial fixed lease term at least in an amount sufficient so that the loan balance at the end of the lease term does not exceed the original appraised value of the real estate;

(b) The lease payments cover or exceed the total debt service over the life of the loan;

(c) A tenant or its affiliated entity, whose rated credit instruments have a SVO 1 or 2 designation or a comparable rating from a nationally recognized statistical rating organization recognized by the SVO, has a full faith and credit obligation to make the lease payments;

(d) The insurer holds or is the beneficial holder of a first lien mortgage on the real estate;

(e) The expenses of the real estate are passed through to the tenant, excluding exterior, structural, parking and heating, ventilation and air conditioning replacement expenses, unless annual escrow contributions, from cash flows derived from the lease payments, cover the expense shortfall; and

(f) There is a perfected assignment of the rents due pursuant to the lease to, or for the benefit of, the insurer.

B. Income producing real estate.

(1) An insurer may acquire, manage and dispose of real estate situated in a domestic jurisdiction either directly or indirectly through limited partnership interests and general partnership interests not otherwise prohibited by Section 126.5D, joint ventures, stock of an investment subsidiary or membership interests in a limited liability company, trust certificates, or other similar instruments. The real estate shall be income producing or intended for improvement or development for investment purposes under an existing program (in which case the real estate shall be deemed to be income producing).

(2) The real estate may be subject to mortgages, liens or other encumbrances, the amount of which shall, to the extent that the obligations secured by the mortgages, liens or encumbrances are without recourse to the insurer, be deducted from the amount of the investment of the insurer in the real estate for purposes of determining compliance with subsections D(2) and D(3) of this Section.

C. Real estate for the accommodation of business.

An insurer may acquire, manage, and dispose of real estate for the convenient accommodation of the insurer's (which may include its affiliates) business operations, including home office, branch office and field office operations.

(1) Real estate acquired under this subsection may include excess space for rent to others, if the excess space, valued at its fair market value, would otherwise be a permitted investment under subsection B of this Section and is so qualified by the insurer;

(2) The real estate acquired under this subsection may be subject to one or more mortgages, liens or other encumbrances, the amount of which shall, to the extent that the obligations secured by the mortgages, liens or encumbrances are without recourse to the insurer, be deducted from the amount of the investment of the insurer in the real estate for purposes of determining compliance with subsection D(4) of this Section; and

(3) For purposes of this subsection, business operations shall not include that portion of real estate used for the direct provision of health care services by an insurer whose insurance premiums and required statutory reserves for accident and health insurance constitute at least 95% of total premium considerations or total statutory required reserves, respectively. An insurer may acquire real estate used for these purposes under subsection B of this Section.

D. Quantitative limitations.

(1) An insurer shall not acquire an investment under subsection A of this Section if, as a result of and after giving effect to the investment, the aggregate amount of all investments then held by the insurer under subsection A of this Section would exceed:

(a) 1% of its admitted assets in mortgage loans covering any one secured location;

(b) 0.25% of its admitted assets in construction loans covering any one secured location; or

(c) 1% of its admitted assets in construction loans in the aggregate.

(2) An insurer shall not acquire an investment under subsection B of this Section if, as a result of and after giving effect to the investment and any outstanding guarantees made by the insurer in connection with the investment, the aggregate amount of investments then held by the insurer under subsection B of this Section plus the guarantees then outstanding would exceed:

(a) 1% of its admitted assets in any one parcel or group of contiguous parcels of real estate, except that this limitation shall not apply to that portion of real estate used for the direct provision of health care services by an insurer whose insurance premiums and required statutory reserves for accident and health insurance constitute at least 95% of total premium considerations or total statutory required reserves, respectively, such as hospitals, medical clinics, medical professional buildings or other health facilities used for the purpose of providing health services; or

(b) The lesser of 10% of its admitted assets or 40% of its surplus as regards policyholders in the aggregate, except for an insurer whose insurance premiums and required statutory reserves for accident and health insurance constitute at least 95% of total premium considerations or total statutory required reserves, respectively, this limitation shall be increased to 15% of its admitted assets in the aggregate.

(3) An insurer shall not acquire an investment under subsection A or B of this Section if, as a result of and after giving effect to the investment and any guarantees it has made in connection with the investment, the aggregate amount of all investments then held by the insurer under subsections A and B of this Section plus the guarantees then outstanding would exceed 25% of its admitted assets.

(4) The limitations of Section 126.23 shall not apply to an insurer's acquisition of real estate under subsection C of this Section. An insurer shall not acquire real estate under subsection C of this Section if, as a result of and after giving effect to the acquisition, the aggregate amount of all real estate then held by the insurer under subsection C of this Section would exceed 10% of its admitted assets. With the permission of the Director, additional amounts of real estate may be acquired under subsection C of this Section.

(Source: P.A. 90-418, eff. 8-15-97.)

(215 ILCS 5/126.29)

Sec. 126.29. Securities lending and repurchase, reverse repurchase, and dollar roll transactions. An insurer may enter into securities lending, repurchase, reverse repurchase, and dollar roll transactions with business entities, subject to the following requirements:

A. The insurer's board of directors shall adopt a written plan that is consistent with the requirements of the written plan in Section 126.4A that specifies guidelines and objectives to be followed, such as:

(1) A description of how cash received will be invested or used for general corporate purposes of the insurer;

(2) Operational procedures to manage interest rate risk, counterparty default risk, the conditions under which proceeds from reverse repurchase transactions may be used in the ordinary course of business and the use of acceptable collateral in a manner that reflects the liquidity needs of the transaction; and

(3) The extent to which the insurer may engage in these transactions.

B. The insurer shall enter into a written agreement for all transactions authorized in this Section other than dollar roll transactions. The written agreement shall require that each transaction terminate no more than one year from its inception or upon the earlier demand of the insurer. The agreement shall be with the business entity counterparty, but for securities lending transactions, the agreement may be with an agent acting on behalf of the insurer, if the agent is a qualified business entity, and if the agreement:

(1) Requires the agent to enter into separate agreements with each counterparty that are consistent with the requirements of this Section; and

(2) Prohibits securities lending transactions pursuant to the agreement with the agent or its affiliates.

C. Cash received in a transaction under this Section shall be invested in accordance with this Article and in a manner that recognizes the liquidity needs of the transaction or used by the insurer for its general corporate purposes. For so long as the transaction remains outstanding, the insurer, its agent or custodian shall maintain, as to acceptable collateral received in a transaction under this Section, either physically or through the book entry systems of the Federal Reserve, Depository Trust Company, Participants Trust Company or other securities depositories approved by the Director:

(1) Possession of the acceptable collateral;

(2) A perfected security interest in the acceptable collateral; or

(3) In the case of a jurisdiction outside of the United States, title to, or rights of a secured creditor to, the acceptable collateral.

D. The limitations of Sections 126.23 and 126.30 shall not apply to the business entity counterparty exposure created by transactions under this Section. For purposes of calculations made to determine compliance with this subsection, no effect will be given to the insurer's future obligation to resell securities, in the case of a repurchase transaction, or to repurchase securities, in the case of a reverse repurchase transaction. An insurer shall not enter into a transaction under this Section if, as a result of and after giving effect to the transaction:

(1) The aggregate amount of securities then loaned or sold to, or purchased from, any one business entity counterparty under this Section would exceed 5% of its admitted assets. In calculating the amount sold to or purchased from a business entity counterparty under repurchase or reverse repurchase transactions, effect may be given to netting provisions under a master written agreement; or

(2) The aggregate amount of all securities then loaned, sold to or purchased from all business entities under this Section would exceed 40% of its admitted assets but the limitation of this subsection shall not apply to reverse repurchase transactions for so long as the borrowing is used to meet operational liquidity requirements resulting from an officially declared catastrophe and subject to a plan approved by the Director.

E. In a dollar roll transaction, the insurer shall receive cash in an amount at least equal to the market value of the securities transferred by the insurer in the transaction as of the transaction date.

F. The Director may promulgate reasonable rules for investments and transactions under this Section including, but not limited to, rules which impose financial solvency standards, valuation standards, and reporting requirements.

(Source: P.A. 90-418, eff. 8-15-97.)

(215 ILCS 5/126.30)

Sec. 126.30. Foreign investments and foreign currency exposure.

A. Subject to the limitations of Section 126.23, an insurer may acquire directly or indirectly through an investment subsidiary, foreign investments, or engage in investment practices with persons of or in foreign jurisdictions, of substantially the same types as those that an insurer is permitted to acquire under this Article, other than of the type permitted under Section 126.25, if, as a result and after giving effect to the investment:

(1) the aggregate amount of foreign investments then held by the insurer under this subsection does not exceed 20% of its admitted assets; and

(2) the aggregate amount of foreign investments then held by the insurer under this subsection in a single foreign jurisdiction does not exceed 10% of its admitted assets as to a foreign jurisdiction that has a sovereign debt rating of SVO 1 or 5% of its admitted assets as to any other foreign jurisdiction.

B. Subject to the limitations of Section 126.23, an insurer may acquire investments, or engage in investment practices denominated in foreign currencies, whether or not they are foreign investments acquired under subsection A of this Section, or additional foreign currency exposure as a result of the termination or expiration of a hedging transaction with respect to investments denominated in a foreign currency, if, as a result of and after giving effect to the transaction:

(1) the aggregate amount of investments then held by the insurer under this subsection denominated in foreign currencies does not exceed 15% of its admitted assets; and

(2) the aggregate amount of investments then held by the insurer under this subsection denominated in the foreign currency of a single foreign jurisdiction does not exceed 10% of its admitted assets as to a foreign jurisdiction that has a sovereign debt rating of SVO 1 or 5% of its admitted assets as to any other foreign jurisdiction.

However, an investment shall not be considered denominated in a foreign currency if the acquiring insurer enters into one or more contracts in transactions permitted under Section 126.31 in which the business entity counterparty agrees to exchange, or grants to the insurer the option to exchange, all payments made on the foreign currency denominated investment (or amounts equivalent to the payments that are or will be due to the insurer in accordance with the terms of such investment) for United States currency during the period the contract or contracts are in effect to insulate the insurer against loss caused by diminution of the value of payments owed to the insurer due to future changes in currency exchange rates.

C. In addition to investments permitted under subsections A and B of this Section, an insurer that is authorized to do business in a foreign jurisdiction, and that has outstanding insurance, annuity or reinsurance contracts on lives or risks resident or located in that foreign jurisdiction and denominated in foreign currency of that jurisdiction, may acquire foreign investments respecting that foreign jurisdiction, and may acquire investments denominated in the currency of that jurisdiction, subject to the limitations of Section 126.23. However, investments made under this subsection in obligations of foreign governments, their political subdivisions and government sponsored enterprises shall not be subject to the limitations of Section 126.23 if those investments carry an SVO rating of 1 or 2. The aggregate amount of investments acquired by the insurer under this subsection shall not exceed the greater of:

(1) the amount the insurer is required by law to invest in the foreign jurisdiction; or

(2) 125% of the amount of its reserves, net of reinsurance, and other obligations under the contracts.

D. In addition to investments permitted under subsections A and B of this Section, an insurer that is not authorized to do business in a foreign jurisdiction but which has outstanding insurance, annuity or reinsurance contracts on lives or risks resident or located in a foreign jurisdiction and denominated in foreign currency of that jurisdiction, may acquire foreign investments respecting that foreign jurisdiction, and may acquire investments denominated in the currency of that jurisdiction subject to the limitations set forth of Section 126.24. However, investments made under this subsection in obligations of foreign governments, their political subdivisions and government sponsored enterprises shall not be subject to the limitations of Section 126.23 if those investments carry an SVO rating of 1 or 2. The aggregate amount of investments acquired by the insurer under this subsection shall not exceed 105% of the amount of its reserves, net of reinsurance, and other obligations under the contracts on risks resident or located in the foreign jurisdiction.

E. Investments acquired under this Section shall be aggregated with investments of the same types made under all other Sections of this Article, and in a similar manner, for purposes of determining compliance with the limitations, if any, contained in the other Sections. Investments in obligations of foreign governments, their political subdivisions and government sponsored enterprises of these persons, except for those exempted under subsections C and D of this Section, shall be subject to the limitations of Section 126.23.

(Source: P.A. 90-418, eff. 8-15-97; 91-357, eff. 7-29-99.)

(215 ILCS 5/126.31)

Sec. 126.31. Derivative transactions. An insurer may, directly or indirectly through an investment subsidiary, engage in derivative transactions under this Section under the following conditions:

A. General conditions.

(1) An insurer may use derivative instruments under this Section to engage in hedging transactions and income generation transactions.

(2) An insurer may use derivative instruments for replication transactions only after the Director promulgates reasonable rules that set forth methods of disclosure, reserving for risk-based capital, and determining the asset valuation reserve for these investments. Any asset being replicated is subject to all the provisions and limitations on the making thereof specified in this Article with respect to investments by the insurer as if the transaction constituted a direct investment by the insurer in the replicated asset.

(3) With respect to all hedging transactions, an insurer shall be able to demonstrate to the Director the intended hedging characteristics and the ongoing effectiveness of the derivative transaction or combination of transactions through cash flow testing or other appropriate analyses.

(4) The Director may promulgate reasonable rules for investments and transactions under this Section including, but not limited to, rules which impose financial solvency standards, valuation standards, and reporting requirements.

B. Limitations on hedging transactions. An insurer may enter into hedging transactions under this Section if, as a result of and after giving effect to the transaction:

(1) The aggregate statement value of options, caps, floors and warrants not attached to another financial instrument purchased and used in hedging transactions then engaged in by the insurer does not exceed 7.5% of its admitted assets;

(2) The aggregate statement value of options, caps and floors written in hedging transactions then engaged in by the insurer does not exceed 3% of its admitted assets; and

(3) The aggregate potential exposure of collars, swaps, forwards and futures used in hedging transactions then engaged in by the insurer does not exceed 6.5% of its admitted assets.

C. Limitations on income generation transactions. An insurer may enter into the following types of income generation transactions subject to the quantitative limits of subsection C(4):

(1) Sales of covered call options on noncallable fixed income securities, callable fixed income securities if the option expires by its terms prior to the end of the noncallable period or derivative instruments based on fixed income securities;

(2) Sales of covered call options on equity securities, if the insurer holds in its portfolio, or can immediately acquire through the exercise of options, warrants or conversion rights already owned, the equity securities subject to call during the complete term of the call option sold; or

(3) Sales of covered puts on investments that the insurer is permitted to acquire under this Article, if the insurer has escrowed, or entered into a custodian agreement segregating, cash or cash equivalents with a market value equal to the amount of its purchase obligations under the put during the complete term of the put option sold.

(4) If as a result of and after giving effect to the transactions, the aggregate statement value of the fixed income assets that are subject to call plus the face value of fixed income securities underlying a derivative instrument subject to call, plus the amount of the purchase obligations under the puts, does not exceed 10% of its admitted assets.

D. Counterparty exposure. An insurer shall include all counterparty exposure amounts in determining compliance with the limitations of Section 126.23.

E. Additional transactions. Pursuant to rules promulgated under Section 126.8, the Director may approve additional transactions involving the use of derivative instruments in excess of the limits of subsection B of this Section or for other risk management purposes.

(Source: P.A. 90-418, eff. 8-15-97.)

(215 ILCS 5/126.32)

Sec. 126.32. Additional investment authority.

A. Under this Section, an insurer may acquire investments or engage in investment practices of any kind that are not specifically prohibited by Section 126.5 and are not derivative instruments without regard to any limitation in Sections 126.23 through 126.30, but an insurer shall not acquire an investment or engage in an investment practice under this Section if, as a result of and after giving effect to the transaction, the aggregate amount of the investments then held by the insurer under this Section would exceed the greater of:

(1) Its unrestricted surplus; or

(2) The lesser of:

(a) 10% of its admitted assets; or

(b) 50% of its surplus as regards policyholders.

B. An insurer shall not acquire any investment or engage in any investment practice under subsection A(2) of this Section if, as a result of and after giving effect to the transaction the aggregate amount of all investments in any one person then held by the insurer under that subsection would exceed 5% of its admitted assets.

(Source: P.A. 90-418, eff. 8-15-97.)

(215 ILCS 5/Art. VIII.25 heading) ARTICLE VIII 1/4. RISK MANAGEMENT ANDOWN RISK AND SOLVENCY ASSESSMENT (Source: P.A. 98-910, eff. 7-1-15.)

(215 ILCS 5/129)

Sec. 129. Short title. This Article may be cited as the Risk Management and Own Risk and Solvency Assessment Law.

(Source: P.A. 98-910, eff. 7-1-15.)

(215 ILCS 5/129.1)

Sec. 129.1. Purpose and scope. The purpose of this Article is to provide the requirements for maintaining a risk management framework and completing an own risk and solvency assessment (ORSA) and provide guidance and instructions for filing an ORSA summary report with the Director.

The requirements of this Article shall apply to all insurers domiciled in this State unless exempt pursuant to Section 129.7.

The General Assembly finds and declares that an ORSA summary report will contain confidential and sensitive information related to an insurer or insurance group's identification of risks material and relevant to the insurer or insurance group filing the report. This information will include proprietary and trade secret information that has the potential for harm and competitive disadvantage to the insurer or insurance group if the information is made public. It is the intent of this General Assembly that the ORSA summary report shall be a confidential document filed with the Director, that the ORSA summary report shall be shared only as stated herein and to assist the Director in the performance of his or her duties, and that in no event shall an ORSA summary report be subject to public disclosure.

(Source: P.A. 98-910, eff. 7-1-15.)

(215 ILCS 5/129.2)

Sec. 129.2. Definitions. In this Article:

"Insurance group", for the purpose of conducting an ORSA, means those insurers and affiliates included within an insurance holding company system as defined in Section 131.1 of this Code.

"Insurer" has the same meaning as set forth in Section 2 of this Code, except that it shall not include agencies, authorities, or instrumentalities of the United States or its possessions or territories, the Commonwealth of Puerto Rico, the District of Columbia, or a state or political subdivision of a state.

"Own risk and solvency assessment" or "ORSA" means a confidential internal assessment, appropriate to the nature, scale, and complexity of an insurer or insurance group, conducted by that insurer or insurance group of the material and relevant risks associated with the insurer or insurance group's current business plan, and the sufficiency of capital resources to support those risks.

"ORSA Guidance Manual" means the current version of the Own Risk and Solvency Assessment Guidance Manual developed and adopted by the National Association of Insurance Commissioners (NAIC) and as amended from time to time. A change in the ORSA Guidance Manual shall be effective on the January 1 following the calendar year in which the changes have been adopted by the NAIC.

"ORSA summary report" means a confidential high-level summary of an insurer or insurance group's ORSA.

(Source: P.A. 98-910, eff. 7-1-15.)

(215 ILCS 5/129.3)

Sec. 129.3. Risk management framework. An insurer shall maintain a risk management framework to assist the insurer with identifying, assessing, monitoring, managing, and reporting on its material and relevant risks. The requirement of this Section may be satisfied if the insurance group of which the insurer is a member maintains a risk management framework applicable to the operations of the insurer.

(Source: P.A. 98-910, eff. 7-1-15.)

(215 ILCS 5/129.4)

Sec. 129.4. ORSA requirement. Subject to Section 129.7 of this Code, an insurer, or the insurance group of which the insurer is a member, shall regularly conduct an ORSA consistent with a process comparable to the ORSA Guidance Manual. The ORSA shall be conducted no less than annually but also at any time when there are significant changes to the risk profile of the insurer or the insurance group of which the insurer is a member.

(Source: P.A. 98-910, eff. 7-1-15.)

(215 ILCS 5/129.5)

Sec. 129.5. ORSA summary report.

(a) Upon the Director's request, and no more than once each year, an insurer shall submit to the Director an ORSA summary report or any combination of reports that together contain the information described in the ORSA Guidance Manual, applicable to the insurer and the insurance group of which it is a member. Notwithstanding any request from the Director, if the insurer is a member of an insurance group, the insurer shall submit the report or reports required by this subsection (a) if the Director is the lead state commissioner of the insurance group as determined by the procedures within the Financial Analysis Handbook adopted by the National Association of Insurance Commissioners.

(b) The report or reports shall include a signature of the insurer or insurance group's chief risk officer or other executive having responsibility for the oversight of the insurer's enterprise risk management process attesting to the best of his or her belief and knowledge that the insurer applies the enterprise risk management process described in the ORSA summary report and that a copy of the report has been provided to the insurer's board of directors or the appropriate committee thereof.

(c) An insurer may comply with subsection (a) of this Section by providing the most recent and substantially similar report or reports provided by the insurer or another member of an insurance group of which the insurer is a member to the commissioner of another state or to a supervisor or regulator of a foreign jurisdiction, if that report provides information that is comparable to the information described in the ORSA Guidance Manual. Any such report in a language other than English must be accompanied by a translation of that report into the English language.

(d) The first filing of the ORSA summary report shall be in 2015.

(Source: P.A. 98-910, eff. 7-1-15.)

(215 ILCS 5/129.6)

Sec. 129.6. Contents of ORSA summary report.

(a) The ORSA summary report shall be prepared consistent with the ORSA Guidance Manual, subject to the requirements of subsection (b) of this Section. Documentation and supporting information shall be maintained and made available upon examination or upon the request of the Director.

(b) The review of the ORSA summary report, and any additional requests for information, shall be made using similar procedures currently used in the analysis and examination of multi-state or global insurers and insurance groups.

(Source: P.A. 98-910, eff. 7-1-15.)

(215 ILCS 5/129.7)

Sec. 129.7. Exemption.

(a) An insurer shall be exempt from the requirements of this Article if:

(1) the insurer has annual direct written and unaffiliated assumed premium, including international direct and assumed premium, but excluding premiums reinsured with the Federal Crop Insurance Corporation and Federal Flood Program, less than $500,000,000; and

(2) the insurance group of which the insurer is a member has annual direct written and unaffiliated assumed premium, including international direct and assumed premium, but excluding premiums reinsured with the Federal Crop Insurance Corporation and Federal Flood Program, less than $1,000,000,000.

(b) If an insurer qualifies for exemption pursuant to item (1) of subsection (a) of this Section, but the insurance group of which the insurer is a member does not qualify for exemption pursuant to item (2) of subsection (a) of this Section, then the ORSA summary report that may be required pursuant to Section 129.5 of this Code shall include every insurer within the insurance group. This requirement may be satisfied by the submission of more than one ORSA summary report for any combination of insurers, provided any combination of reports includes every insurer within the insurance group.

(c) If an insurer does not qualify for exemption pursuant to item (1) of subsection (a) of this Section, but the insurance group of which it is a member qualifies for exemption pursuant to item (2) of subsection (a) of this Section, then the only ORSA summary report that may be required pursuant to Section 129.5 shall be the report applicable to that insurer.

(d) An insurer that does not qualify for exemption pursuant to subsection (a) of this Section may apply to the Director for a waiver from the requirements of this Article based upon unique circumstances. In deciding whether to grant the insurer's request for waiver, the Director may consider the type and volume of business written, ownership and organizational structure, and any other factor the Director considers relevant to the insurer or insurance group of which the insurer is a member. If the insurer is part of an insurance group with insurers domiciled in more than one state, the Director shall coordinate with the lead state commissioner and with the other domiciliary commissioners in considering whether to grant the insurer's request for a waiver.

(e) Notwithstanding the exemptions stated in this Section, the following provisions shall apply:

(1) The Director may require that an insurer maintain a risk management framework, conduct an ORSA, and file an ORSA summary report based on unique circumstances, including, but not limited to, the type and volume of business written, ownership and organizational structure, federal agency requests, and international supervisor requests.

(2) The Director may require that an insurer maintain a risk management framework, conduct an ORSA, and file an ORSA summary report if the insurer has risk-based capital for a company action level event as set forth in Section 35A-15 of this Code, meets one or more of the standards of an insurer deemed to be in hazardous financial condition as defined in Section 186.1 of this Code, or otherwise exhibits qualities of a troubled insurer as determined by the Director.

(f) If an insurer that qualifies for an exemption pursuant to subsection (a) of this Section subsequently no longer qualifies for that exemption due to changes in premium as reflected in the insurer's most recent annual statement or in the most recent annual statements of the insurers within the insurance group of which the insurer is a member, the insurer shall have one year following the year the threshold is exceeded to comply with the requirements of this Article.

(Source: P.A. 98-910, eff. 7-1-15.)

(215 ILCS 5/129.8)

Sec. 129.8. Confidentiality.

(a) Documents, materials, or other information, including the ORSA summary report, in the possession or control of the Department that are obtained by, created by, or disclosed to the Director or any other person under this Article, is recognized by this State as being proprietary and to contain trade secrets. All such documents, materials, or other information shall be confidential by law and privileged, shall not be subject to the Freedom of Information Act, shall not be subject to subpoena, and shall not be subject to discovery or admissible in evidence in any private civil action. However, the Director is authorized to use the documents, materials, or other information in the furtherance of any regulatory or legal action brought as a part of the Director's official duties. The Director shall not otherwise make the documents, materials, or other information public without the prior written consent of the insurer.

(b) Neither the Director nor any person who received documents, materials, or other ORSA-related information, through examination or otherwise, while acting under the authority of the Director or with whom such documents, materials, or other information are shared pursuant to this Article shall be permitted or required to testify in any private civil action concerning any confidential documents, materials, or information subject to subsection (a) of this Section.

(c) In order to assist in the performance of regulatory duties, the Director may:

(1) upon request, share documents, materials, or other ORSA-related information, including the confidential and privileged documents, materials, or information subject to subsection (a) of this Section, including proprietary and trade secret documents and materials with other state, federal, and international financial regulatory agencies, including members of any supervisory college as defined in the Section 131.20c of this Code, with the NAIC, and with any third-party consultants designated by the Director, provided that the recipient agrees in writing to maintain the confidentiality and privileged status of the ORSA-related documents, materials, or other information and has verified in writing the legal authority to maintain confidentiality; and

(2) receive documents, materials, or other ORSA-related information, including otherwise confidential and privileged documents, materials, or information, including proprietary and trade-secret information or documents, from regulatory officials of other foreign or domestic jurisdictions, including members of any supervisory college as defined in the Section 131.20c of this Code, and from the NAIC, and shall maintain as confidential or privileged any documents, materials, or information received with notice or the understanding that it is confidential or privileged under the laws of the jurisdiction that is the source of the document, material, or information.

(d) The Director shall enter into a written agreement with the NAIC or a third-party consultant governing sharing and use of information provided pursuant to this Article, consistent with this Section that shall:

(1) specify procedures and protocols regarding the confidentiality and security of information shared with the NAIC or a third-party consultant pursuant to this Article, including procedures and protocols for sharing by the NAIC with other state regulators from states in which the insurance group has domiciled insurers; the agreement shall provide that the recipient agrees in writing to maintain the confidentiality and privileged status of the ORSA-related documents, materials, or other information and has verified in writing the legal authority to maintain confidentiality;

(2) specify that ownership of information shared with the NAIC or a third-party consultant pursuant to this Article remains with the Director and the NAIC's or a third-party consultant's use of the information is subject to the direction of the Director;

(3) prohibit the NAIC or third-party consultant from storing the information shared pursuant to this Article in a permanent database after the underlying analysis is completed;

(4) require prompt notice to be given to an insurer whose confidential information in the possession of the NAIC or a third-party consultant pursuant to this Article is subject to a request or subpoena to the NAIC or a third-party consultant for disclosure or production;

(5) require the NAIC or a third-party consultant to consent to intervention by an insurer in any judicial or administrative action in which the NAIC or a third-party consultant may be required to disclose confidential information about the insurer shared with the NAIC or a third-party consultant pursuant to this Article; and

(6) in the case of an agreement involving a third-party consultant, provide for the insurer's written consent.

(e) The sharing of information and documents by the Director pursuant to this Article shall not constitute a delegation of regulatory authority or rulemaking, and the Director is solely responsible for the administration, execution, and enforcement of the provisions of this Article.

(f) No waiver of any applicable privilege or claim of confidentiality in the documents, proprietary and trade-secret materials, or other ORSA-related information shall occur as a result of disclosure of such ORSA-related information or documents to the Director under this Section or as a result of sharing as authorized in this Article.

(g) Documents, materials, or other information in the possession or control of the NAIC or any third-party consultants pursuant to this Article shall be confidential by law and privileged, shall not be subject to the Freedom of Information Act, shall not be subject to subpoena, and shall not be subject to discovery or admissible in evidence in any private civil action.

(Source: P.A. 98-910, eff. 7-1-15.)

(215 ILCS 5/129.9)

Sec. 129.9. Sanctions. Any insurer failing, without just cause, to timely file the ORSA summary report as required in this Article shall be required, after notice and hearing, to pay a penalty of $200 for each day's delay, to be recovered by the Director, and the penalty so recovered shall be paid into the General Revenue Fund of this State. The Director may reduce the penalty if the insurer demonstrates to the Director that the imposition of the penalty would constitute a financial hardship to the insurer.

(Source: P.A. 98-910, eff. 7-1-15.)

(215 ILCS 5/Art. VIII.33 heading) ARTICLE VIII 1/3. CORPORATE GOVERNANCE ANNUAL DISCLOSURE LAW (Source: P.A. 101-600, eff. 12-6-19.)

(215 ILCS 5/130.1)

Sec. 130.1. Short title. This Article may be cited as the Corporate Governance Annual Disclosure Law.

(Source: P.A. 101-600, eff. 12-6-19.)

(215 ILCS 5/130.2)

Sec. 130.2. Purpose and scope. The purpose of this Article is to:

(1) provide the Director a summary of an insurer's or insurance group's corporate governance structure, policies, and practices to permit the Director to gain and maintain an understanding of the insurer's corporate governance framework;

(2) outline the requirements for completing a corporate governance annual disclosure with the Director;

(3) provide for the confidential treatment of the corporate governance annual disclosure and related information that will contain confidential and sensitive information related to an insurer's or insurance group's internal operations and proprietary and trade-secret information that, if made public, could potentially cause the insurer or insurance group competitive harm or disadvantage.

Nothing in this Article shall be construed to prescribe or impose corporate governance standards and internal procedures beyond that which is required under applicable State corporate law. Notwithstanding the foregoing, nothing in this Article shall be construed to limit the Director's authority or the rights or obligations of third parties under Sections 131.21, 132 through 132.7, and 401 through 403. The requirements of this Article apply to all insurers domiciled in this State.

(Source: P.A. 101-600, eff. 12-6-19.)

(215 ILCS 5/130.3)

Sec. 130.3. Definitions. As used in this Article:

"Director" means the Director of Insurance.

"Corporate governance annual disclosure" means a confidential report filed by the insurer or insurance group made in accordance with the requirements of this Article.

"Insurance group" means those insurers and affiliates included within an insurance holding company system as defined in Section 131.1.

"Insurer" has the same meaning given to "company" in Section 2, except that it does not include agencies, authorities, or instrumentalities of the United States, its possessions and territories, the Commonwealth of Puerto Rico, the District of Columbia, or a state or political subdivision of a state.

"ORSA summary report" means the own risk and solvency assessment report filed in accordance with Article VIII 1/4.

(Source: P.A. 101-600, eff. 12-6-19.)

(215 ILCS 5/130.4)

Sec. 130.4. Disclosure requirement.

(a) An insurer, or the insurance group of which the insurer is a member, shall, no later than June 1 of each calendar year, submit to the Director a corporate governance annual disclosure that contains the information described in subsection (b) of Section 130.5. Notwithstanding any request from the Director made pursuant to subsection (c), if the insurer is a member of an insurance group, the insurer shall submit the report required by this Section to the Director of the lead state for the insurance group, in accordance with the laws of the lead state, as determined by the procedures outlined in the most recent Financial Analysis Handbook adopted by the National Association of Insurance Commissioners.

(b) The corporate governance annual disclosure must include a signature of the insurer's or insurance group's chief executive officer or corporate secretary attesting to the best of that individual's belief and knowledge that the insurer has implemented the corporate governance practices and that a copy of the disclosure has been provided to the insurer's board of directors or the appropriate committee thereof.

(c) An insurer not required to submit a corporate governance annual disclosure under this Section shall do so upon the Director's request.

(d) For purposes of completing the corporate governance annual disclosure, the insurer or insurance group may provide information regarding corporate governance at the ultimate controlling parent level, an intermediate holding company level, or the individual legal entity level, depending upon how the insurer or insurance group has structured its system of corporate governance. The insurer or insurance group is encouraged to make the corporate governance annual disclosure at the level at which the insurer's or insurance group's risk appetite is determined, the level at which the earnings, capital, liquidity, operations, and reputation of the insurer are overseen collectively and at which the supervision of those factors is coordinated and exercised, or the level at which legal liability for failure of general corporate governance duties would be placed. If the insurer or insurance group determines the level of reporting based on these criteria, it shall indicate which of the 3 criteria was used to determine the level of reporting and explain any subsequent changes in the level of reporting.

(e) The review of the corporate governance annual disclosure and any additional requests for information shall be made through the lead state as determined by the procedures within the most recent Financial Analysis Handbook adopted by the National Association of Insurance Commissioners.

(f) Insurers providing information substantially similar to the information required by this Article in other documents provided to the Director, including proxy statements filed in conjunction with the requirements of Section 131.13 or other State or federal filings provided to the Department, are not required to duplicate that information in the corporate governance annual disclosure but are only required to cross-reference the document in which the information is included.

(Source: P.A. 101-600, eff. 12-6-19; 102-135, eff. 7-23-21.)

(215 ILCS 5/130.5)

Sec. 130.5. Contents of corporate governance annual disclosure.

(a) The insurer or insurance group has discretion over the responses to the corporate governance annual disclosure inquiries if the corporate governance annual disclosure contains the material information necessary to permit the Director to gain an understanding of the insurer's or insurance group's corporate governance structure, policies, and practices. The Director may request additional information that he or she deems material and necessary to provide the Director with a clear understanding of the corporate governance policies, the reporting or information system, or controls implementing those policies.

(b) Notwithstanding subsection (a), the corporate governance annual disclosure shall be prepared in a manner consistent with rules adopted by the Director. Documentation and supporting information shall be maintained and made available upon examination or upon the request of the Director.

(c) The Director may retain, at the insurer's expense, third-party consultants, including attorneys, actuaries, accountants, and other experts not otherwise a part of the Director's staff, as may be reasonably necessary to assist the Director in reviewing the corporate governance annual disclosure and related information or the insurer's compliance with this Article. Any persons retained shall be under the direction and control of the Director and shall act only in an advisory capacity.

(Source: P.A. 101-600, eff. 12-6-19.)

(215 ILCS 5/130.6)

Sec. 130.6. Confidentiality.

(a) Documents, materials, or other information, including the corporate governance annual disclosure, in the possession or control of the Department that are obtained by, created by, or disclosed to the Director or any other person under this Article are recognized by this State as being proprietary and to contain trade secrets. All such documents, materials, or other information shall be confidential by law and privileged, shall not be subject to the Freedom of Information Act, shall not be subject to subpoena, and shall not be subject to discovery or admissible in evidence in any private civil action. However, the Director is authorized to use the documents, materials, or other information in furtherance of any regulatory or legal action brought as a part of the Director's official duties. The Director shall not otherwise make the documents, materials, or other information public without the prior written consent of the insurer.

(b) Neither the Director nor any person who received documents, materials, or other corporate governance annual disclosure-related information through examination or otherwise, while acting under the authority of the Director or with whom such documents, materials, or other information are shared pursuant to this Article, shall be permitted or required to testify in any private civil action concerning any confidential documents, materials, or information subject to subsection (a).

(c) In order to assist in the performance of the Director's regulatory duties, the Director may:

(1) upon request, share documents, materials, or other corporate governance annual disclosure-related information, including the confidential and privileged documents, materials, and information subject to subsection (a), including proprietary and trade-secret documents and materials with other state, federal, and international financial regulatory agencies, including members of any supervisory college as defined in subsection (c) of Section 131.20, with the National Association of Insurance Commissioners, and with third-party consultants, if the recipient agrees in writing to maintain the confidentiality and privileged status of the corporate governance annual disclosure-related documents, materials, or other information and has verified in writing the legal authority to maintain confidentiality; and

(2) receive documents, materials, or other corporate governance annual disclosure-related information, including otherwise confidential and privileged documents, materials, and information, including proprietary and trade-secret information and documents from regulatory officials of other state, federal, and international financial regulatory agencies, including members of any supervisory college as defined in subsection (c) of Section 131.20, and from the National Association of Insurance Commissioners, and shall maintain as confidential or privileged any documents, materials, or information received with notice or the understanding that it is confidential or privileged under the laws of the jurisdiction that is the source of the document, material, or information.

(d) A written agreement with the National Association of Insurance Commissioners or a third-party consultant governing sharing and use of information provided pursuant to this Article shall:

(1) include specific procedures and protocols for maintaining the confidentiality and security of corporate governance annual disclosure-related information shared with the National Association of Insurance Commissioners or a third-party consultant pursuant to this Article, including procedures and protocols for sharing by the National Association of Insurance Commissioners only with other state regulators from states in which the insurance group has domiciled insurers; the agreement shall provide that the recipient agrees in writing to maintain the confidentiality and privileged status of the corporate governance annual disclosure-related documents, materials, or other information and has verified in writing the legal authority to maintain confidentiality;

(2) specify that ownership of the corporate governance annual disclosure-related information shared with the National Association of Insurance Commissioners or a third-party consultant remains with the Director and that the National Association of Insurance Commissioners' or third-party consultant's use of the information is subject to the direction of the Director;

(3) prohibit the National Association of Insurance Commissioners or a third-party consultant from storing the information shared pursuant to this Article in a permanent database after the underlying analysis is completed;

(4) require the National Association of Insurance Commissioners or a third-party consultant to provide prompt notice to the Director and to the insurer or insurance group regarding any subpoena, request for disclosure, or request for production of the insurer's or insurance group's corporate governance annual disclosure-related information;

(5) require the National Association of Insurance Commissioners or a third-party consultant to consent to intervention by an insurer in any judicial or administrative action in which the National Association of Insurance Commissioners or a third-party consultant may be required to disclose confidential information about the insurer shared with the National Association of Insurance Commissioners or a third-party consultant pursuant to this Article; and

(6) require the National Association of Insurance Commissioners or a third-party consultant to obtain written consent of the insurer before making any of the insurer's corporate governance annual disclosure-related information public.

(e) The sharing of information and documents by the Director pursuant to this Article shall not constitute a delegation of regulatory authority or rulemaking, and the Director is solely responsible for the administration, execution, and enforcement of this Article.

(f) No waiver of any applicable privilege or claim of confidentiality in the documents, proprietary and trade-secret materials, or other corporate governance annual disclosure-related information shall occur as a result of disclosure of such information or documents to the Director under this Section or as a result of sharing as authorized in this Article.

(g) Documents, materials, or other information in the possession or control of the National Association of Insurance Commissioners or any third-party consultants pursuant to this Article shall be confidential by law and privileged, shall not be subject to the Freedom of Information Act, shall not be subject to subpoena, and shall not be subject to discovery or admissible in evidence in any private civil action.

(Source: P.A. 101-600, eff. 12-6-19.)

(215 ILCS 5/130.7)

Sec. 130.7. Sanctions. Any insurer failing, without just cause, to timely file the corporate governance annual disclosure as required in this Article shall be required, after notice and a hearing, to pay a penalty of $200 for each day's delay, to be recovered by the Director. Any penalty recovered shall be paid into the General Revenue Fund. The Director may reduce the penalty if the insurer demonstrates to the Director that the imposition of the penalty would constitute a financial hardship to the insurer.

(Source: P.A. 101-600, eff. 12-6-19.)

(215 ILCS 5/Art. VIII.5 heading) ARTICLE VIII 1/2. INSURANCE HOLDING COMPANY SYSTEMS

(215 ILCS 5/131.1)

Sec. 131.1. Definitions. As used in this Article, the following terms have the respective meanings set forth in this Section unless the context requires otherwise:

(a) An "affiliate" of, or person "affiliated" with, a specific person, is a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the person specified.

(a-5) "Acquiring party" means such person by whom or on whose behalf the merger or other acquisition of control referred to in Section 131.4 is to be affected and any person that controls such person or persons.

(a-10) "Associated person" means, with respect to an acquiring party, (1) any beneficial owner of shares of the company to be acquired, owned, directly or indirectly, of record or beneficially by the acquiring party, (2) any affiliate of the acquiring party or beneficial owner, and (3) any other person acting in concert, directly or indirectly, pursuant to any agreement, arrangement, or understanding, whether written or oral, with the acquiring party or beneficial owner, or any of their respective affiliates, in connection with the merger, consolidation, or other acquisition of control referred to in Section 131.4 of this Code.

(a-15) "Company" has the same meaning as "company" as defined in Section 2 of this Code, except that it does not include agencies, authorities, or instrumentalities of the United States, its possessions and territories, the Commonwealth of Puerto Rico, the District of Columbia, or a state or political subdivision of a state.

(b) "Control" (including the terms "controlling", "controlled by" and "under common control with") means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, the holding of shareholders' or policyholders' proxies by contract other than a commercial contract for goods or non-management services, or otherwise, unless the power is solely the result of an official position with or corporate office held by the person. Control is presumed to exist if any person, directly or indirectly, owns, controls, holds with the power to vote, or holds shareholders' proxies representing 10% or more of the voting securities of any other person, or holds or controls sufficient policyholders' proxies to elect the majority of the board of directors of the domestic company. This presumption may be rebutted by a showing made in the manner as the Director may provide by rule. The Director may determine, after furnishing all persons in interest notice and opportunity to be heard and making specific findings of fact to support such determination, that control exists in fact, notwithstanding the absence of a presumption to that effect.

(b-5) "Enterprise risk" means any activity, circumstance, event, or series of events involving one or more affiliates of a company that, if not remedied promptly, is likely to have a material adverse effect upon the financial condition or liquidity of the company or its insurance holding company system as a whole, including, but not limited to, anything that would cause the company's risk-based capital to fall into company action level as set forth in Article IIA of this Code or would cause the company to be in hazardous financial condition as set forth in Article XII 1/2 of this Code.

(b-10) "Exchange Act" means the Securities Exchange Act of 1934, as amended, together with the rules and regulations promulgated thereunder.

(b-12) "Group capital calculation instructions" means the group capital calculation instructions as adopted by the NAIC and as amended by the NAIC from time to time in accordance with the procedures adopted by the NAIC.

(b-15) "Group-wide supervisor" means the regulatory official authorized to engage in conducting and coordinating group-wide supervision activities who is determined or acknowledged by the Director under Section 131.20d of this Code to have sufficient contacts with an internationally active insurance group.

(c) "Insurance holding company system" means two or more affiliated persons, one or more of which is an insurance company as defined in paragraph (e) of Section 2 of this Code.

(c-5) "Internationally active insurance group" means an insurance holding company system that:

(1) includes an insurer registered under Section 4 of this Code; and

(2) meets the following criteria:

(A) premiums written in at least 3 countries;

(B) the percentage of gross premiums written outside the United States is at least 10% of the insurance holding company system's total gross written premiums; and

(C) based on a 3-year rolling average, the total assets of the insurance holding company system are at least $50,000,000,000 or the total gross written premiums of the insurance holding company system are at least $10,000,000,000.

(d) (Blank).

(d-1) "NAIC" means the National Association of Insurance Commissioners.

(d-2) "NAIC Liquidity Stress Test Framework" is a separate NAIC publication which includes a history of the NAIC's development of regulatory liquidity stress testing, the scope criteria applicable for a specific data year, and the liquidity stress test instructions, and reporting templates for a specific data year, such scope criteria, instructions, and reporting template being as adopted by the NAIC and as amended by the NAIC from time to time in accordance with the procedures adopted by the NAIC.

(d-5) "Non-operating holding company" is a general business corporation functioning solely for the purpose of forming, owning, acquiring, and managing subsidiary business entities and having no other business operations not related thereto.

(d-10) "Own", "owned," or "owning" means shares (1) with respect to which a person has title or to which a person's nominee, custodian, or other agent has title and which such nominee, custodian, or other agent is holding on behalf of the person or (2) with respect to which a person (A) has purchased or has entered into an unconditional contract, binding on both parties, to purchase the shares, but has not yet received the shares, (B) owns a security convertible into or exchangeable for the shares and has tendered the security for conversion or exchange, (C) has an option to purchase or acquire, or rights or warrants to subscribe to, the shares and has exercised such option, rights, or warrants, or (D) holds a securities futures contract to purchase the shares and has received notice that the position will be physically settled and is irrevocably bound to receive the underlying shares. To the extent that any affiliates of the stockholder or beneficial owner are acting in concert with the stockholder or beneficial owner, the determination of shares owned may include the effect of aggregating the shares owned by the affiliate or affiliates. Whether shares constitute shares owned shall be decided by the Director in his or her reasonable determination.

(e) "Person" means an individual, a corporation, a limited liability company, a partnership, an association, a joint stock company, a trust, an unincorporated organization, any similar entity or any combination of the foregoing acting in concert, but does not include any securities broker performing no more than the usual and customary broker's function or joint venture partnership exclusively engaged in owning, managing, leasing or developing real or tangible personal property other than capital stock.

(e-5) "Policyholders' proxies" are proxies that give the holder the right to vote for the election of the directors and other corporate actions not in the day to day operations of the company.

(f) (Blank).

(f-3) "Scope criteria", as detailed in the NAIC Liquidity Stress Test Framework, are the designated exposure bases along with minimum magnitudes thereof for the specified data year, used to establish a preliminary list of insurers considered scoped into the NAIC Liquidity Stress Test Framework for that data year.

(f-5) "Securityholder" of a specified person is one who owns any security of such person, including common stock, preferred stock, debt obligations, and any other security convertible into or evidencing the right to acquire any of the foregoing.

(g) "Subsidiary" of a specified person is an affiliate controlled by such person directly, or indirectly through one or more intermediaries.

(h) "Voting Security" is a security which gives to the holder thereof the right to vote for the election of directors and includes any security convertible into or evidencing a right to acquire a voting security.

(Source: P.A. 102-394, eff. 8-16-21; 102-578, eff. 7-1-22 (See Section 5 of P.A. 102-672 for effective date of P.A. 102-578); 102-813, eff. 5-13-22.)

(215 ILCS 5/131.2) (from Ch. 73, par. 743.2)

Sec. 131.2. Subsidiaries. A domestic company, either by itself or in cooperation with one or more persons, may organize or acquire one or more subsidiaries. The subsidiaries may conduct any kind of business or businesses and their authority to do so shall not be limited by reason of the fact that they are subsidiaries of a domestic company. In addition to investments in common stock, preferred stock, debt obligations and other securities of subsidiaries permitted under all other sections of this Code, a domestic company, other than a company subject to Articles XVIII or XIX, may also:

(a) invest, in common stock, preferred stock, debt obligations, and other securities of one or more subsidiaries, amounts which do not exceed the lesser of 10% of the company's assets or 50% of the company's surplus as regards policyholders, but after such investments the company's surplus as regards policyholders must be reasonable in relation to the company's outstanding liabilities and adequate to its financial needs. In calculating the amount of such investments, there must be included (i) total net monies or other consideration expended and obligations assumed in the acquisition or formation of a subsidiary, including all organizational expenses and contributions to capital and surplus of the subsidiary whether or not represented by the purchase of capital stock or issuance of other securities, and (ii) all amounts expended in acquiring additional common stock, preferred stock, debt obligations, and other securities, and all contributions to the capital or surplus of a subsidiary subsequent to its acquisition or formation;

(b) invest any amount in common stock, preferred stock, debt obligations and other securities of one or more direct subsidiaries acting only as a non-operating holding company or engaged or organized exclusively for the ownership and management of assets authorized as investments for the company, provided that each subsidiary agrees to limit its investments in any asset so that such investments will not cause the amount of the total investment of the company to exceed the amount the company could have invested in such asset. For the purpose of this clause, "the total investment of the company" will include (i) any direct investment by the company in an asset and (ii) the company's proportionate share of any investment in such asset by any subsidiary of the company, which must be calculated by multiplying the amount of the subsidiary's investment by the percentage of the company's ownership of such subsidiary;

(c) invest in common stock of one or more insurance corporation subsidiaries any amount by which the investing company's capital and surplus exceeds the minimum capital and surplus required of a new company under Section 13 to qualify for a certificate of authority to write the kind or kinds of insurance which the company is authorized to write, if the company is a stock company, and if the company is other than a stock company, the company may invest the amount by which the company's surplus exceeds the minimum surplus required of a new company under Section 43 or 66 to qualify for a certificate of authority to write the kind or kinds of insurance which the company is authorized to write;

(d) with the approval of the Director, invest any greater amount in common stock, preferred stock, debt obligations, or other securities of one or more subsidiaries, but after such investment the company's surplus as regards policyholders must be reasonable in relation to the company's outstanding liabilities and adequate to its financial needs.

(Source: P.A. 98-609, eff. 1-1-14.)

(215 ILCS 5/131.3) (from Ch. 73, par. 743.3)

Sec. 131.3. (1) Investments in common stock, preferred stock, debt obligations or other securities of subsidiaries made under Section 131.2 of this Article are subject to Sections 126.3, 126.4, 126.5, 126.6, 126.7, and 133 of this Code but are not subject to any other of the otherwise applicable restrictions or prohibitions contained in this Code applicable to such investments of a domestic company subject to this Code.

(2) If a company ceases to control a subsidiary, it must dispose of any investment therein made under this section within 3 years from the time of the cessation of control or within such further time as the Director may prescribe, unless at any time after the investment is made, the investment meets the requirements for investment under any other section of this Code, and the company has notified the Director thereof.

(3) Whether any investment made pursuant to this Section meets the applicable requirements of this Section is to be determined before the investment is made by calculating the applicable investment limitations as though the investment had already been made, taking into account the then outstanding principal balance on all previous investments in debt obligations, and the value of all previous investments in equity securities as of the day they were made, net of any return of capital invested, not including dividends.

(Source: P.A. 98-609, eff. 1-1-14.)

(215 ILCS 5/131.4) (from Ch. 73, par. 743.4)

Sec. 131.4. Acquisition of control of or merger with domestic company.

(a) No person other than the issuer may make a tender for or a request or invitation for tenders of, or enter into an agreement to exchange securities for, or seek to acquire or acquire shareholders' proxies to vote or seek to acquire or acquire in the open market, or otherwise, any voting security of a domestic company or acquire policyholders' proxies of a domestic company or any entity that controls a domestic company, for consideration if, after the consummation thereof, that person would, directly or indirectly, (or by conversion or by exercise of any right to acquire) be in control of the company, and no person may enter into an agreement to merge or consolidate with or otherwise to acquire control of a domestic company, unless the offer, request, invitation, or agreement is conditioned on receiving the approval of the Director based on Section 131.8 of this Article and no such acquisition of control or a merger with a domestic company may be consummated unless the person has filed with the Director and has sent to the company a statement containing the information required by Section 131.5 and the Director has approved the transaction or granted an exemption. Prior to the acquisition, the Director may conclude that a statement need not be filed by the acquiring party if the acquiring party demonstrates to the satisfaction of the Director that:

(1) such transaction will not result in the change of control of the domestic company; or

(2) (blank);

(3) the acquisition of, or attempt to acquire control of, such other person is subject to requirements in the jurisdiction of its domicile which are substantially similar to those contained in this Section and Sections 131.5 through 131.12; or

(4) the control of the policyholders' proxies is being acquired solely by virtue of the holders official office and not as the result of any agreement or for any consideration.

The purpose of this Section is to afford to the Director the opportunity to review acquisitions in order to determine whether or not the acquisition would be adverse to the interests of the existing and future policyholders of the company.

(b) For purposes of this Section, any controlling person of a domestic company seeking to divest its controlling interest in the domestic company in any manner shall file with the Director, with a copy to the company, confidential notice of its proposed divestiture at least 30 days prior to the cessation of control. The Director shall determine those instances in which the party or parties seeking to divest or to acquire a controlling interest in a company shall be required to file for and obtain approval of the transaction. The information shall remain confidential until the conclusion of the transaction unless the Director, in his or her discretion, determines that confidential treatment shall interfere with enforcement of this Section. If the statement referred to in subsection (a) of this Section is otherwise filed in connection with the proposed divestiture or related acquisition, this subsection (b) shall not apply.

(c) For purposes of this Section, a domestic company shall include any person controlling a domestic company unless the person, as determined by the Director, is either directly or through its affiliates primarily engaged in business other than the business of insurance. For the purposes of this Section, "person" shall not include any securities broker holding, in the usual and customary broker's function, less than 20% of the voting securities of an insurance company or of any person that controls an insurance company.

(Source: P.A. 98-609, eff. 1-1-14; 99-642, eff. 7-28-16.)

(215 ILCS 5/131.5) (from Ch. 73, par. 743.5)

Sec. 131.5. Statement; contents. In order to seek the approval of the Director pursuant to Section 131.8, the applicant must file a statement with the Director under oath or affirmation which contains as a minimum the following information:

(1) The name and address of each acquiring party, and

(a) if such person is an individual, his principal occupation and all offices and positions held during the past 5 years, and any conviction of crimes, other than minor traffic violations, during the past 10 years;

(b) if such person is not an individual, a report of the nature of its business operations during the past 5 years or for such lesser period as the person and any predecessors thereof has been in existence; an informative description of the business intended to be conducted by the person and the person's subsidiaries; and a list of all individuals who are or who have been selected to become directors or executive officers of the person, or who perform or will perform functions appropriate to such positions. The list must include for each individual the information required by subsection (1)(a).

(2) The source, nature and amount of the consideration used or to be used in effecting the merger, consolidation or other acquisition of control, a description of any transaction wherein funds were or are to be obtained for any such purpose, including any pledge of the company's own securities or the securities of any of its subsidiaries or affiliates, and the identity of persons furnishing such consideration. However, where a source of such consideration is a loan made in the lender's ordinary course of business, the identity of the lender must remain confidential, if the person filing the statement so requests.

(3) Financial information as to the earnings and financial condition of each acquiring party for the preceding 5 fiscal years of each acquiring party (or for such lesser period as the acquiring party and any predecessors thereof have been in existence) audited by an independent certified public accountant in accordance with generally accepted auditing standards and similar unaudited information as of a date not earlier than 90 days prior to the filing of the statement.

(4) Any plans or proposals which each acquiring party may have to liquidate such company, to sell its assets or merge or consolidate it with any person, or to make any other material change in its business or corporate structure or management.

(5) The number of shares of any security referred to in Section 131.4 which each acquiring party proposes to acquire, the terms of the offer, request, invitation, agreement, or acquisition referred to in Section 131.4, and a statement as to the method by which the fairness of the proposal was arrived.

(6) The amount of each class of any security referred to in Section 131.4 which is beneficially owned or concerning which there is a right to acquire beneficial ownership by each acquiring party.

(7) A full description of any existing contracts, arrangements or understandings with respect to any security referred to in Section 131.4 in which any acquiring party is involved, including but not limited to transfer of any of the securities, joint ventures, loan or option arrangements, puts or calls, guarantees of loans, guarantees against loss or guarantees of profits, division of losses or profits, or the giving or withholding of proxies. The description must identify the persons with whom such contracts, arrangements or understandings have been entered into.

(8) A description of the acquisition of any security or policyholders' proxy referred to in Section 131.4 during the 12 calendar months preceding the filing of the statement, by any acquiring party, including the dates of acquisition, names of the acquiring parties, and consideration paid or agreed to be paid therefor.

(9) A description of any recommendations to acquire any security referred to in Section 131.4 made during the 12 calendar months preceding the filing of the statement, by any acquiring party, or by anyone based upon interviews or at the suggestion of such acquiring party.

(10) Copies of all tender offers for, requests or invitations for tenders of, exchange offers for, and agreements to acquire or exchange any securities referred to in Section 131.4, and (if distributed) of additional soliciting material relating thereto.

(11) The terms of any agreement, contract or understanding made with, or proposed to be made with, any broker-dealer as to solicitation of securities referred to in Section 131.4 for tender, and the amount of any fees, commissions or other compensation to be paid to broker-dealers with regard thereto.

(12) Beginning July 1, 2014, an agreement by the person required to file the statement referred to in this Section 131.5 that the person will provide the annual report specified in subsection (a) of Section 131.14b for so long as control exists.

(13) Beginning July 1, 2014, an acknowledgement by the person required to file the statement referred to in this Section 131.5 that the person and all subsidiaries within its control in the insurance holding company system shall provide information to the Director upon request as necessary to evaluate enterprise risk to the company.

(14) Any additional information as the Director may by rule or regulation prescribe as necessary or appropriate for the protection of policyholders or in the public interest.

(15) With respect to each acquiring party, the following information:

(A) the name and address of all associated persons and a detailed description of every agreement, arrangement, and understanding between the acquiring party and all associated persons in connection with the merger, consolidation, or other acquisition of control;

(B) the class or series and number of shares of securities of the company that are directly or indirectly owned beneficially and of record by the acquiring party or the associated persons or both; and

(C) a detailed description of each proxy, contract, arrangement, understanding, or relationship pursuant to which the acquiring party or the associated persons, or both, have a right to vote, or cause or direct the vote of, any securities of the company.

(Source: P.A. 102-578, eff. 7-1-22 (See Section 5 of P.A. 102-672 for effective date of P.A. 102-578).)

(215 ILCS 5/131.6) (from Ch. 73, par. 743.6)

Sec. 131.6. (1) If the person required to file the statement referred to in Section 131.5 is a partnership, limited partnership, syndicate or other group, the Director may require that the information be given with respect to each partner of such partnership or limited partnership, each member of such syndicate or group, and each person who controls such partner or member. If any partner, member or person is a corporation or the person required to file the statement referred to in Section 131.5 is a corporation, the Director may require that the information be given with respect to the corporation, each officer and director of the corporation, and each person who is directly or indirectly the beneficial owner of more than 10% of the outstanding voting securities of the corporation.

(2) If any material change occurs in the facts set forth in the statement filed with the Director and sent to the company under Section 131.5, an amendment setting forth the change, together with copies of all documents and other material relevant to the change, must be filed with the Director and sent to the company within 2 business days after the person learns of the change.

(Source: P.A. 98-609, eff. 1-1-14.)

(215 ILCS 5/131.7) (from Ch. 73, par. 743.7)

Sec. 131.7. If any offer, request, invitation, agreement or acquisition referred to in Section 131.4 is proposed to be made by means of a registration statement under the Securities Act of 1933 or in circumstances requiring the disclosure of similar information under the Securities Exchange Act of 1934, or under a state law requiring similar registration or disclosure, the person required to file the statement referred to in Section 131.4 may utilize such documents in furnishing the information called for by that statement.

(Source: P.A. 77-673.)

(215 ILCS 5/131.8) (from Ch. 73, par. 743.8)

Sec. 131.8. (1) After the statement required by Section 131.5 has been filed, the Director shall approve any merger, consolidation or other acquisition of control referred to in Section 131.4 unless the Director finds that:

(a) after the change of control, the domestic company referred to in Section 131.4 would not be able to satisfy the requirements for the issuance of a license to write the line or lines of insurance for which it is presently licensed;

(b) the effect of the merger, consolidation or other acquisition of control would be substantially to lessen competition in insurance in this State or tend to create a monopoly therein. In applying the competitive standard in this paragraph:

(i) the informational requirements of subsection (3)(a) and the standards of subsection (4)(b) of Section 131.12a shall apply,

(ii) the merger or other acquisition shall not be found substantially to lessen competition in insurance in this State or tend to create a monopoly therein if the Director finds that any of the situations meeting the criteria provided by subsection (4)(c) of Section 131.12a exist, and

(iii) the Director may condition the approval of the merger or other acquisition on the removal of the basis of disapproval within a specified period of time;

(c) the financial condition of any acquiring party is such as might jeopardize the financial stability of the domestic company or jeopardize the interests of its policyholders;

(d) the plans or proposals which the acquiring party has to liquidate the domestic company, sell its assets or consolidate or merge it with any person, or to make any other material change in its business or corporate structure or management, are unfair and unreasonable to policyholders of such company and not in the public interest; or

(e) the competence, experience and integrity of those persons who would control the operation of the domestic company are such that it would not be in the best interests of policyholders of such company and of the insurance buying public to permit the merger, consolidation or other acquisition of control.

(2) The Director may hold a public hearing on any merger, consolidation or other acquisition of control referred to in Section 131.4 if the Director determines that the statement filed as required by Section 131.5 does not demonstrate compliance with the standards referred to in subsection (1), of this Section, or if he determines that such acquisition of control is likely to be hazardous or prejudicial to the insurance buying public.

(3) The public hearing referred to in subsection (2) must be held within 60 days after the statement required by Section 131.5 is filed, and at least 20 days' notice thereof must be given by the Director to the person filing the statement and to the domestic company. Not less than 7 days' notice of such hearing must be given by the person filing the statement to such other persons as may be designated by the Director and by the company to its shareholders. The Director must make a determination within 60 days after the conclusion of the hearing. At the hearing, the person filing the statement, the domestic company, any person to whom notice of the hearing was sent, and any other person whose interests may be affected thereby has the right to present evidence, examine and cross-examine witnesses, and offer oral and written arguments and in connection therewith is entitled to conduct discovery proceedings in the same manner as is presently allowed in the Circuit Courts of this State. All discovery proceedings must be concluded not later than 3 days prior to the commencement of the public hearing.

(4) If the proposed acquisition of control will require the approval of more than one state insurance commissioner, the public hearing referred to in subsection (2) of this Section may be held on a consolidated basis upon request of the person filing the statement referred to in Section 131.5 of this Code. Such person shall file the statement referred to in Section 131.5 of this Code with the National Association of Insurance Commissioners (NAIC) within 5 days after making the request for a public hearing. A commissioner may opt out of a consolidated hearing and shall provide notice to the applicant of the opt out within 10 days after the receipt of the statement referred to in Section 131.5 of this Code. A hearing conducted on a consolidated basis shall be public and shall be held within the United States before the commissioners of the states in which the companies are domiciled. Such commissioners shall hear and receive evidence. A commissioner may attend such hearing in person or by telecommunication.

(5) In connection with a change of control of a domestic company, any determination by the Director that the person acquiring control of the company shall be required to maintain or restore the capital of the company to the level required by the laws and regulations of this State shall be made not later than 60 days after the filing of the statement required by Section 131.5 of this Code.

(Source: P.A. 102-394, eff. 8-16-21.)

(215 ILCS 5/131.8a) (from Ch. 73, par. 743.8a)

Sec. 131.8a. The Director may retain at the applicant's expense any attorneys, actuaries, accountants and other experts not otherwise a part of the Director's staff as may be reasonably necessary to assist in reviewing an acquisition proposed under Section 131.4.

(Source: P.A. 98-609, eff. 1-1-14.)

(215 ILCS 5/131.9) (from Ch. 73, par. 743.9)

Sec. 131.9. All statements, amendments or other material filed under Section 131.5 must be delivered to the domestic company within 10 business days after the acquiring party has made the filing with the Director. The domestic company shall then send to its securityholders the summary of the proposed acquisition within 5 business days of such delivery. The notice shall contain an address where a copy of the statement filed with the Director can be obtained upon request. The expenses of the mailing and any requests for the statement and the mailing of the notice of hearing by the company required under subsection (2) of Section 131.8 must be borne by the person making the filing. As security for the payment of the expenses, the person may be required to file with the Director an acceptable bond or other deposit in an amount to be determined by the Director.

(Source: P.A. 84-805.)

(215 ILCS 5/131.9a)

Sec. 131.9a. (Repealed).

(Source: P.A. 98-609, eff. 1-1-14. Repealed by P.A. 102-394, eff. 8-16-21.)

(215 ILCS 5/131.10) (from Ch. 73, par. 743.10)

Sec. 131.10. Sections 131.4 through 131.12 do not apply to:

(1) any transaction which is subject to Article X of this Code dealing with merger, consolidation or plans of exchange;

(2) any offer, request, invitation, agreement or acquisition which the Director by order exempts therefrom as (a) not having been made or entered into for the purpose and not having the effect of changing or influencing the control of a domestic company, or (b) as otherwise not comprehended within the purposes of Sections 131.4 through 131.12.

(Source: P.A. 80-545.)

(215 ILCS 5/131.11) (from Ch. 73, par. 743.11)

Sec. 131.11. The following are violations of Sections 131.4 through 131.12:

(1) the failure to file any statement, amendment, or other material required to be filed under Sections 131.4 or 131.5; or

(2) the effectuation or any attempt to effectuate an acquisition of control of, divestiture of, or merger or consolidation with, a domestic company unless the Director has given his approval.

(Source: P.A. 98-609, eff. 1-1-14.)

(215 ILCS 5/131.12) (from Ch. 73, par. 743.12)

Sec. 131.12. The courts of this State are hereby vested with jurisdiction over every person not resident, domiciled, or authorized to do business in this State who files a statement with the Director under Section 131.4, and over all actions involving such person arising out of violations of Sections 131.4, 131.5, 131.6, or 131.11, and each such person is deemed to have performed acts equivalent to and constituting an appointment by such a person of the Director to be his true and lawful attorney upon whom may be served all lawful process in any action, suit or proceeding arising out of violations of Sections 131.4, 131.5, 131.6, or 131.11. Copies of all such lawful process must be served on the Director and transmitted by registered or certified mail by the Director to such person at his last known address.

(Source: P.A. 98-609, eff. 1-1-14.)

(215 ILCS 5/131.12a) (from Ch. 73, par. 743.12a)

Sec. 131.12a. Acquisitions involving companies not otherwise covered.

(1) Definitions. The following definitions shall apply for the purposes of this Section only:

(a) "Acquisition" means any agreement, arrangement or activity the consummation of which results in a person acquiring directly or indirectly the control of another person or control of the insurance in force of another person, and includes but is not limited to the acquisition of voting securities, the acquisition of assets, the transaction of bulk reinsurance and the act of merging or consolidating.

(b) An "involved company" includes a company which either acquires or is acquired, is affiliated with an acquirer or acquired or is the result of a merger.

(2) Scope.

(a) Except as exempted in paragraph (b) of this subsection (2), this Section applies to any acquisition in which there is a change in control of a company authorized to do business in this State.

(b) This Section shall not apply to the following:

(i) an acquisition subject to approval or disapproval by the Director pursuant to Section 131.8;

(ii) a purchase of securities solely for investment purposes so long as such securities are not used by voting or otherwise to cause or attempt to cause the substantial lessening of competition in any insurance market in this State. If a purchase of securities results in a presumption of control under subsection (b) of Section 131.1, it is not solely for investment purposes unless the commissioner of the company's state of domicile accepts a disclaimer of control or affirmatively finds that control does not exist and such disclaimer action or affirmative finding is communicated by the domiciliary commissioner to the Director of this State;

(iii) the acquisition of a person by another person when both persons are neither directly nor through affiliates primarily engaged in the business of insurance, if pre-acquisition notification is filed with the Director in accordance with subsection (3)(a) of this Section, 30 days prior to the proposed effective date of the acquisition. However, such pre-acquisition notification is not required for exclusion from this Section if the acquisition would otherwise be excluded from this Section by any other subparagraph of subsection (2)(b);

(iv) the acquisition of already affiliated persons;

(v) an acquisition if, as an immediate result of the acquisition,

(A) in no market would the combined market share of the involved companies exceed 5% of the total market,

(B) there would be no increase in any market share, or

(C) in no market would the combined market share of the involved companies exceed 12% of the total market, and the market share increase by more than 2% of the total market.

For the purpose of this subparagraph (b)(v), "market" means direct written insurance premium in this State for a line of business as contained in the annual statement required to be filed by companies licensed to do business in this State;

(vi) an acquisition for which a pre-acquisition notification would be required pursuant to this Section due solely to the resulting effect on the ocean marine insurance line of business;

(vii) an acquisition of a company whose domiciliary commissioner affirmatively finds that such company is in failing condition; there is a lack of feasible alternative to improving such condition; the public benefits of improving such company's condition through the acquisition exceed the public benefits that would arise from not lessening competition; and such findings are communicated by the domiciliary commissioner to the Director of this State.

(3) Pre-acquisition Notification; Waiting Period. An acquisition covered by subsection (2) may be subject to an order pursuant to subsection (5) unless the acquiring person files a pre-acquisition notification and the waiting period has expired. The acquired person may file a pre-acquisition notification. The Director shall give confidential treatment to information submitted under this subsection in the same manner as provided in Section 131.22 of this Article.

(a) The pre-acquisition notification shall be in such form and contain such information as prescribed by the Director, which shall conform substantially to the form of notification adopted by the National Association of Insurance Commissioners relating to those markets which, under subsection (b)(v) of Section (2), cause the acquisition not to be exempted from the provisions of this Section. The Director may require such additional material and information as he deems necessary to determine whether the proposed acquisition, if consummated, would violate the competitive standard of subsection (4). The required information may include an opinion of an economist as to the competitive impact of the acquisition in this State accompanied by a summary of the education and experience of such person indicating his or her ability to render an informed opinion.

(b) The waiting period required shall begin on the date of the receipt by the Director of a pre-acquisition notification and shall end on the earlier of the 30th day after the date of such receipt, or termination of the waiting period by the Director. Prior to the end of the waiting period, the Director on a one time basis may require the submission of additional needed information relevant to the proposed acquisition, in which event the waiting period shall end on the earlier of the 30th day after the receipt of such additional information by the Director or termination of the waiting period by the Director.

(4) Competitive Standard.

(a) The Director may enter an order under subsection (5)(a) with respect to an acquisition if there is substantial evidence that the effect of the acquisition may be substantially to lessen competition in any line of insurance in this State or tend to create a monopoly therein or if the company fails to file adequate information in compliance with subsection (3).

(b) In determining whether a proposed acquisition would violate the competitive standard of paragraph (a) of this subsection the Director shall consider the following:

(i) any acquisition covered under subsection (2) involving 2 or more companies competing in the same market is prima facie evidence of violation of the competitive standards:

(A) if the market is highly concentrated and the involved companies possess the following shares of the market:

Company A Company B

4% 4% or more

10% 2% or more

15% 1% or more

(B) if the market is not highly concentrated and the involved companies possess the following shares of the market:

Company A Company B

5% 5% or more

10% 4% or more

15% 3% or more

19% 1% or more

A highly concentrated market is one in which the share of the 4 largest companies is 75% or more of the market. Percentages not shown in the tables are to be interpolated proportionately to the percentages that are shown. If more than 2 companies are involved, exceeding the total of the 2 columns in the table is prima facie evidence of violation of the competitive standard in paragraph (a) of this subsection. For the purpose of this subparagraph, the company with the largest share of the market shall be deemed to be Company A.

(ii) There is a significant trend toward increased concentration when the aggregate market share of any grouping of the largest companies in the market from the 2 largest to the 8 largest has increased by 7% or more of the market over a period of time extending from any base year 5-10 years prior to the acquisition up to the time of the acquisition. Any acquisition covered under subsection (2) involving 2 or more companies competing in the same market is prima facie evidence of violation of the competitive standard in paragraph (a) of this subsection if:

(A) there is a significant trend toward increased concentration in the market,

(B) one of the companies involved is one of the companies in a grouping of such large companies showing the requisite increase in the market share, and

(C) another involved company's market is 2% or more.

(iii) For the purpose of subsection (4)(b):

(A) The term "company" includes any company or group of companies under common management, ownership or control.

(B) The term "market" means the relevant product and geographic markets. In determining the relevant product and geographical markets, the Director shall give due consideration to, among other things, the definitions or guidelines, if any, promulgated by the National Association of Insurance Commissioners and to information, if any, submitted by parties to the acquisition. In the absence of sufficient information to the contrary, the relevant product market is assumed to be the direct written insurance premium for a line of business with such line being that used in the annual statement required to be filed by companies doing business in this State and the relevant geographical market is assumed to be this State.

(C) The burden of showing prima facie evidence of violation of the competitive standard rests upon the Director.

(iv) Even though an acquisition is not prima facie violative of the competitive standard under subparagraph (b)(i) and (b)(ii) of this subsection the Director may establish the requisite anticompetitive effect based upon other substantial evidence. Even though an acquisition is prima facie violative of the competitive standard under subparagraphs (b)(i) and (b)(ii) of this subsection (4), a party may establish the absence of the requisite anticompetitive effect based upon other substantial evidence. Relevant factors in making a determination under this paragraph include, but are not limited to, the following: market shares, volatility of ranking of market leaders, number of competitors, concentration, trend of concentration in the industry, and ease of entry and exit into the market.

(c) An order may not be entered under subsection (5)(a) if:

(i) the acquisition will yield substantial economies of scale or economies in resource utilization that cannot be feasibly achieved in any other way, and the public benefits which would arise from such economies exceed the public benefits which would arise from not lessening competition; or

(ii) the acquisition will substantially increase the availability of insurance, and the public benefits of such increase exceed the public benefits which would arise from not lessening competition.

(5) Orders and Penalties:

(a)(i) If an acquisition violates the standard of this Section, the Director may enter an order

(A) requiring an involved company to cease and desist from doing business in this State with respect to the line or lines of insurance involved in the violation, or

(B) denying the application of an acquired or acquiring company for a license to do business in this State.

(ii) Such an order shall not be entered unless there is a hearing, notice of such hearing is issued prior to the end of the waiting period and not less than 15 days prior to the hearing, and the hearing is concluded and the order is issued no later than 60 days after the end of the waiting period. Every order shall be accompanied by a written decision of the Director setting forth his findings of fact and conclusions of law.

(iii) (Blank).

(iv) An order pursuant to this paragraph shall not apply if the acquisition is not consummated.

(b) Any person who violates a cease and desist order of the Director under paragraph (a) and while such order is in effect may after notice and hearing and upon order of the Director be subject at the discretion of the Director to any one or more of the following:

(i) a monetary penalty of not more than $10,000 for every day of violation or

(ii) suspension or revocation of such person's license.

(c) Any company or other person who fails to make any filing required by this Section and who also fails to demonstrate a good faith effort to comply with any such filing requirement shall be subject to a civil penalty of not more than $50,000.

(6) Inapplicable Provisions. Subsections (2) and (3) of Section 131.23 and Section 131.25 do not apply to acquisitions covered under subsection (2).

(Source: P.A. 98-609, eff. 1-1-14.)