(215 ILCS 5/126.6)
Sec. 126.6.
Loans to officers and directors.
A. (1) Except as provided in Section 126.6B, an insurer shall not directly
or indirectly, unless it has notified the Director in writing of its intention
to enter into the transaction at least 30 days prior thereto, or any shorter
period as the Director may permit, and the Director has not disapproved it
within that period:
(a) Make a loan to or other investment in an officer |
| or director of the insurer or a person in which the officer or director has any direct or indirect financial interest;
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(b) Make a guarantee for the benefit of or in favor
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| of an officer or director of the insurer or a person in which the officer or director has any direct or indirect financial interest; or
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(c) Enter into an agreement for the purchase or sale
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| of property from or to an officer or director of the insurer or a person in which the officer or director has any direct or indirect financial interest.
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(2) For purposes of this Section, an officer or director shall not be
deemed to have a financial interest by reason of an interest that is held
directly or indirectly through the ownership of equity interests representing
less than 2% of all outstanding equity interests issued by a person that is a
party to the transaction, or solely by reason of that individual's position as
a director or officer of a person that is a party to the transaction.
(3) This subsection does not permit an investment that is prohibited by
Section 126.5.
(4) This subsection does not apply to a transaction between an insurer and
any of its subsidiaries or affiliates that is entered into in compliance with
Section 131.20a of this Code, other than a transaction between an insurer
and its officer or director.
B. An insurer may make, without the prior written approval of the Director:
(1) Policy loans in accordance with the terms of the
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| policy or contract and Section 126.19;
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(2) Advances to officers or directors for expenses
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| reasonably expected to be incurred in the ordinary course of the insurer's business or guarantees associated with credit or charge cards issued or credit extended for the purpose of financing these expenses;
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(3) Loans secured by the principal residence of an
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| existing or new officer of the insurer made in connection with the officer's relocation at the insurer's request, if the loans comply with the requirements of Section 126.15 or 126.28 and the terms and conditions otherwise are the same as those generally available from unaffiliated third parties;
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(4) Secured loans to an existing or new officer of
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| the insurer made in connection with the officer's relocation at the insurer's request, if the loans:
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(a) Do not have a term exceeding 2 years;
(b) Are required to finance mortgage loans
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| outstanding at the same time on the prior and new residences of the officer;
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(c) Do not exceed an amount equal to the equity
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| of the officer in the prior residence; and
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(d) Are required to be fully repaid upon the
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| earlier of the end of the 2 year period or the sale of the prior residence; and
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(5) Loans and advances to officers or directors made
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| in compliance with state or federal law specifically related to the loans and advances by a regulated non-insurance subsidiary or affiliate of the insurer in the ordinary course of business and on terms no more favorable than available to other customers of the entity.
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(Source: P.A. 90-418, eff. 8-15-97.)
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(215 ILCS 5/126.10)
Sec. 126.10.
General 3% diversification, medium and lower grade
investments, and Canadian investments.
A. General 3% diversification.
(1) Except as otherwise specified in this Article, an |
| insurer shall not acquire, directly or indirectly through an investment subsidiary, an investment under this Article if, as a result of and after giving effect to the investment, the insurer would hold more than 3% of its admitted assets in investments of all kinds issued, assumed, accepted, guaranteed, or insured by a single person.
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(2) This 3% limitation shall not apply to the
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| aggregate amounts insured by a single financial guaranty insurer with the highest generic rating issued by a nationally recognized statistical rating organization.
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(3) Asset-backed securities shall not be subject to
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| the limitations of paragraph (1) of this subsection, however, except as permitted by subsection A(4) of this Section, an insurer shall not acquire an asset-backed security if, as a result of and after giving effect to the investment, the aggregate amount of asset-backed securities secured by or evidencing an interest in a single asset or single pool of assets held by a trust or other business entity, then held by the insurer would exceed 3% of its admitted assets.
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(4) A company's investments in mortgage related
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| securities, as defined by the Secondary Mortgage Market Enhancement Act of 1984 (United States Public Law 98-440) [12 U.S.C. 24, 1451, 1454 et seq.], that are backed by any single pool of mortgages and made pursuant to the authority of that Act, shall not exceed 5% of its admitted assets.
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B. Medium and lower grade investments.
(1) An insurer shall not acquire, directly or
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| indirectly through an investment subsidiary, an investment under Sections 126.11, 126.14, and 126.17 or counterparty exposure under Section 126.18D if, as a result of and after giving effect to the investment:
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(a) The aggregate amount of medium and lower
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| grade investments then held by the insurer would exceed 20% of its admitted assets;
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(b) The aggregate amount of lower grade
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| investments then held by the insurer would exceed 10% of its admitted assets;
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(c) The aggregate amount of investments rated 5
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| or 6 by the SVO then held by the insurer would exceed 3% of its admitted assets;
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(d) The aggregate amount of investments rated 6
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| by the SVO then held by the insurer would exceed 1% of its admitted assets; or
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(e) The aggregate amount of lower grade
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| investments then held by the insurer that receive as cash income less than the equivalent yield for Treasury issues with a comparative average life, would exceed 1% of its admitted assets.
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(2) An insurer shall not acquire, directly or
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| indirectly through an investment subsidiary, an investment under Sections 126.11, 126.14, and 126.17 or counterparty exposure under Section 126.18D if, as a result of and after giving effect to the investment:
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(a) The aggregate amount of medium and lower
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| grade investments issued, assumed, accepted, guaranteed, or insured by any one person or, as to asset-backed securities secured by or evidencing an interest in a single asset or pool of assets, then held by the insurer would exceed 1% of its admitted assets; or
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(b) The aggregate amount of lower grade
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| investments issued, assumed, accepted, guaranteed, or insured by any one person or, as to asset-backed securities secured by or evidencing an interest in a single asset or pool of assets, then held by the insurer would exceed 0.5% of its admitted assets.
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(3) If an insurer attains or exceeds the limit of any
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| one rating category referred to in this subsection, the insurer shall not thereby be precluded from acquiring investments in other rating categories subject to the specific and multi-category limits applicable to those investments.
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C. Canadian investments.
(1) An insurer shall not acquire, directly or
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| indirectly through an investment subsidiary, a Canadian investment authorized by this Article, if as a result of and after giving effect to the investment, the aggregate amount of these investments then held by the insurer would exceed 40% of its admitted assets, or if the aggregate amount of Canadian investments not acquired under Section 126.11B then held by the insurer would exceed 25% of its admitted assets.
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(2) However, as to an insurer that is authorized to
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| do business in Canada or that has outstanding insurance, annuity or reinsurance contracts on lives or risks resident or located in Canada and denominated in Canadian currency, the limitations of paragraph (1) of this subsection shall be increased by the greater of:
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(a) The amount the insurer is required by
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| Canadian law to invest in Canada or to be denominated in Canadian currency; or
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(b) 115% of the amount of its reserves and other
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| obligations under contracts on lives or risks resident or located in Canada.
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(Source: P.A. 90-418, eff. 8-15-97.)
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(215 ILCS 5/126.11)
Sec. 126.11.
Rated credit instruments.
Subject to the limitations of subsection F of this Section, an insurer may
acquire rated credit instruments:
A. Subject to the limitations of Section 126.10B, but not to the limitations
of Section 126.10A, except for that of subsection (4) of Section 126.10A, an
insurer may acquire rated credit instruments issued, assumed, guaranteed, or
insured by:
(1) The United States; or
(2) A government sponsored enterprise of the United |
| States, if the instruments of the government sponsored enterprise are assumed, guaranteed, or insured by the United States or are otherwise backed or supported by the full faith and credit of the United States.
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B. (1) Subject to the limitations of Section 126.10B,
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| but not to the limitations of Section 126.10A, an insurer may acquire rated credit instruments issued, assumed, guaranteed, or insured by:
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(a) Canada; or
(b) A government sponsored enterprise of Canada,
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| if the instruments of the government sponsored enterprise are assumed, guaranteed, or insured by Canada or are otherwise backed or supported by the full faith and credit of Canada;
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(2) However, an insurer shall not acquire an
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| instrument under this subsection if, as a result of and after giving effect to the investment, the aggregate amount of investments then held by the insurer under this subsection would exceed 40% of its admitted assets.
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C. (1) Subject to the limitations of Section 126.10B,
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| but not to the limitations of Section 126.10A, an insurer may acquire rated credit instruments, excluding asset-backed securities:
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(a) Issued by a government money market mutual
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| fund, a class one money market mutual fund or a class one bond mutual fund;
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(b) Issued, assumed, guaranteed, or insured by a
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| government sponsored enterprise of the United States other than those eligible under subsection A of this Section;
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(c) Issued, assumed, guaranteed, or insured by a
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| state, if the instruments are general obligations of the state; or
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(d) Issued by a multilateral development bank;
(2) However, an insurer shall not acquire an
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| instrument of any one fund, any one enterprise or entity or any one state under this subsection if, as a result of and after giving effect to the investment, the aggregate amount of investments then held by the insurer in any one fund, enterprise, entity, or state under this subsection would exceed 10% of its admitted assets.
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D. Subject to the limitations of Section 126.10, an insurer may acquire
preferred stocks that are not foreign investments and that meet the
requirements of rated credit instruments if, as a result of and after giving
effect to the investment:
(1) The aggregate amount of preferred stocks then
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| held by the insurer under this subsection does not exceed 33 1/3% of its admitted assets; and
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(2) The aggregate amount of preferred stocks then
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| held by the insurer under this subsection which are not sinking fund stocks or rated P1 or P2 by the SVO does not exceed 15% of its admitted assets.
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E. Subject to the limitations of Section 126.10, in addition to those
investments eligible under subsections A, B, C and D of this Section, an
insurer may acquire rated credit instruments that are not foreign investments.
F. An insurer shall not acquire special rated credit instruments under this
Section if, as a result of and after giving effect to the investment, the
aggregate amount of special rated credit instruments then held by the insurer
would exceed 5% of its admitted assets. The Director may, by
rule, identify certain special rated credit instruments that will be
exempt from the limitation imposed by this subsection.
(Source: P.A. 90-418, eff. 8-15-97.)
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(215 ILCS 5/126.12)
Sec. 126.12. Insurer investment pools.
A. An insurer may acquire investments in investment pools that:
(1) Invest only in:
(a) Obligations that are rated 1 or 2 by the SVO |
| or have an equivalent of an SVO 1 or 2 rating (or, in the absence of a 1 or 2 rating or equivalent rating, the issuer has outstanding obligations with an SVO 1 or 2 or equivalent rating) by a nationally recognized statistical rating organization recognized by the SVO and have:
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(i) A remaining maturity of 397 days or less
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| or a put that entitles the holder to receive the principal amount of the obligation which put may be exercised through maturity at specified intervals not exceeding 397 days; or
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(ii) A remaining maturity of 3 years or less
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| and a floating interest rate that resets no less frequently than quarterly on the basis of a current short-term index (federal funds, prime rate, treasury bills, London InterBank Offered Rate (LIBOR) or commercial paper) and is subject to no maximum limit, if the obligations do not have an interest rate that varies inversely to market interest rate changes;
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(b) Government money market mutual funds or class
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| one money market mutual funds; or
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(c) Securities lending, repurchase, and reverse
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| repurchase transactions that meet all the requirements of Section 126.16, except the quantitative limitations of Section 126.16D; or
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(2) Invest only in investments which an insurer may
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| acquire under this Article, if the insurer's proportionate interest in the amount invested in these investments when combined with amount of such investments made directly or indirectly through an investment subsidiary or other insurer investment pool permitted under this subsection A(2) does not exceed the applicable limits of this Article for such investments.
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B. For an investment in an investment pool to be qualified under this
Article, the investment pool shall not:
(1) Acquire securities issued, assumed, guaranteed or
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| insured by the insurer or an affiliate of the insurer;
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(2) Borrow or incur any indebtedness for borrowed
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| money, except for securities lending and reverse repurchase transactions that meet the requirements of Section 126.16 except the quantitative limitations of Section 126.16D; or
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(3) Acquire an investment if, as a result of such
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| transaction, the aggregate value of securities then loaned or sold to, purchased from or invested in any one business entity under this Section would exceed 10% of the total assets of the investment pool.
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C. The limitations of Section 126.10A shall not apply to an insurer's
investment in an investment pool, however an insurer shall not acquire an
investment in an investment pool under this Section if, as a result of and
after giving effect to the investment, the aggregate amount of investments then
held by the insurer under this Section:
(1) In all investment pools investing in investments
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| permitted under subsection A(2) of this Section would exceed 25% of its admitted assets; or
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(2) In all investment pools would exceed 35% of its
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D. For an investment in an investment pool to be qualified under this
Article, the manager of the investment pool shall:
(1) Be organized under the laws of the United States
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| or a state and designated as the pool manager in a pooling agreement;
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(2) Be the insurer, an affiliated insurer or a
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| business entity affiliated with the insurer, a qualified bank, a business entity registered under the Investment Advisers Act of 1940 (15 U.S.C. 80a-1 et seq.), as amended or, in the case of a reciprocal insurer or interinsurance exchange, its attorney-in-fact, or in the case of a United States branch of an alien insurer, its United States manager or an affiliate or subsidiary of its United States manager;
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(3) Be responsible for the compilation and
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| maintenance of detailed accounting records setting forth:
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(a) The cash receipts and disbursements
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| reflecting each participant's proportionate investment in the investment pool;
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(b) A complete description of all underlying
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| assets of the investment pool (including amount, interest rate, maturity date (if any) and other appropriate designations); and
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(c) Other records which, on a daily basis, allow
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| third parties to verify each participant's investment in the investment pool; and
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(4) Maintain the assets of the investment pool in one
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| or more accounts, in the name of or on behalf of the investment pool, under a custody agreement with a qualified bank. The custody agreement shall:
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(a) State and recognize the claims and rights of
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(b) Acknowledge that the underlying assets of the
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| investment pool are held solely for the benefit of each participant in proportion to the aggregate amount of its investments in the investment pool; and
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(c) Contain an agreement that the underlying
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| assets of the investment pool shall not be commingled with the general assets of the custodian qualified bank or any other person.
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E. The pooling agreement for each investment pool shall be in writing and
shall provide that:
(1) An insurer and its affiliated insurers or, in the
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| case of an investment pool investing solely in investments permitted under subsection A(1) of this Section, the insurer and its subsidiaries, affiliates or any pension or profit sharing plan of the insurer, its subsidiaries and affiliates or, in the case of a United States branch of an alien insurer, affiliates or subsidiaries of its United States manager, shall, at all times, hold 100% of the interests in the investment pool;
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(2) The underlying assets of the investment pool
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| shall not be commingled with the general assets of the pool manager or any other person;
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(3) In proportion to the aggregate amount of each
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| pool participant's interest in the investment pool:
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(a) Each participant owns an undivided interest
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| in the underlying assets of the investment pool; and
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(b) The underlying assets of the investment pool
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| are held solely for the benefit of each participant;
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(4) A participant, or in the event of the
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| participant's insolvency, bankruptcy or receivership, its trustee, receiver or other successor-in-interest, may withdraw all or any portion of its investment from the investment pool under the terms of the pooling agreement;
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(5) Withdrawals may be made on demand without penalty
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| or other assessment on any business day, but settlement of funds shall occur within a reasonable and customary period thereafter not to exceed 10 business days. Distributions under this paragraph shall be calculated in each case net of all then applicable fees and expenses of the investment pool. The pooling agreement shall provide that the pool manager shall distribute to a participant, at the discretion of the pool manager:
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(a) In cash, the then fair market value of the
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| participant's pro rata share of each underlying asset of the investment pool;
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(b) In kind, a pro rata share of each underlying
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(c) In a combination of cash and in kind
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| distributions, a pro rata share in each underlying asset; and
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(6) The pool manager shall make the records of the
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| investment pool available for inspection by the Director.
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F. Except for
the
formation of the investment pool, transactions and
between a domestic insurer and an affiliated insurer
investment pool shall not be subject to the requirements of Section
131.20a of this Code.
(Source: P.A. 100-201, eff. 8-18-17.)
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(215 ILCS 5/126.15)
Sec. 126.15.
Mortgage loans and real estate.
A. Mortgage loans.
(1) Subject to the limitations of Section 126.10, 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:
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(a) 90% of the fair market value of the real
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| 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;
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(b) 80% of the fair market value of the real
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| 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 that 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
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(c) 75% of the fair market value of the real
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| estate for mortgage loans that do not meet the requirements of subparagraph (a) or (b) of this paragraph.
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(2) For purposes of paragraph (1) of this subsection,
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| 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.
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(3) Subject to the limitations of Section 126.10, an
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| 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 126.15. 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.
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(4) A mortgage loan that is held by an insurer under
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| 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.
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(5) Subject to the limitations of Section 126.10,
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| credit lease transactions that do not qualify for investment under Section 126.11 with the following characteristics shall be exempt from the provisions of paragraph (1) of this subsection:
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(a) The loan amortizes over the initial fixed
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| 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;
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(b) The lease payments cover or exceed the total
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| debt service over the life of the loan;
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(c) A tenant or its affiliated entity, whose
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| 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;
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(d) The insurer holds or is the beneficial holder
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| of a first lien mortgage on the real estate;
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(e) The expenses of the real estate are passed
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| 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
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(f) There is a perfected assignment of the rents
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| due pursuant to the lease to, or for the benefit of, the insurer.
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B. Income producing real estate.
(1) An insurer may acquire, manage and dispose of
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| 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).
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(2) The real estate may be subject to mortgages,
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| 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.
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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
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| 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;
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(2) The real estate acquired under this subsection
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| 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
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(3) For purposes of this subsection, business
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| operations shall not include that portion of real estate used for the direct provision of health care services by an accident and health insurer for its insureds. An insurer may acquire real estate used for these purposes under subsection B of this Section.
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D. Quantitative limitations.
(1) An insurer shall not acquire an investment under
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| 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:
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(a) 1% of its admitted assets in mortgage loans
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| covering any one secured location;
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(b) 0.25% of its admitted assets in construction
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| loans covering any one secured location; or
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(c) 2% of its admitted assets in construction
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(2) An insurer shall not acquire an investment under
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| 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:
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(a) 1% of its admitted assets in one parcel or
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| 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 accident and health insurer for its insureds, such as hospitals, medical clinics, medical professional buildings or other health facilities used for the purpose of providing health services; or
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(b) 15% of its admitted assets in the aggregate,
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| but not more than 5% of its admitted assets in real estate to be improved or developed.
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(3) An insurer shall not acquire an investment under
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| subsections A or B of this Section if, as a result of and after giving effect to the investment and any guarantees made by the insurer 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 45% of its admitted assets. However, an insurer may exceed this limitation by no more than 30% of its admitted assets if:
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(a) This increased amount is invested only in
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| residential mortgage loans;
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(b) The insurer has no more than 10% of its
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| admitted assets invested in mortgage loans other than residential mortgage loans;
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(c) The loan-to-value ratio of each residential
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| mortgage loan does not exceed 60% at the time the mortgage loan is qualified under this increased authority, and the fair market value is supported by an appraisal no more than 2 years old, prepared by an independent appraiser;
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(d) A single mortgage loan qualified under this
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| increased authority shall not exceed 0.5% of its admitted assets;
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(e) The insurer files with the Director, and
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| receives approval from the Director for, a plan that is designed to result in a portfolio of residential mortgage loans that is sufficiently geographically diversified; and
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(f) The insurer agrees to file annually with the
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| Director records that demonstrate that its portfolio of residential mortgage loans is geographically diversified in accordance with the plan.
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(4) The limitations of Section 126.10 shall not apply
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| 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 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.
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(Source: P.A. 90-418, eff. 8-15-97.)
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(215 ILCS 5/126.16)
Sec. 126.16.
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;
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(2) Operational procedures to manage interest rate
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| 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
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(3) The extent to which the insurer may engage in
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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
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| agreements with each counterparty that are consistent with the requirements of this Section; and
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(2) Prohibits securities lending transactions
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| pursuant to the agreement with the agent or its affiliates.
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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
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(3) In the case of a jurisdiction outside of the
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| United States, title to, or rights of a secured creditor to, the acceptable collateral.
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D. The limitations of Sections 126.10 and 126.17 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
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| 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
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(2) The aggregate amount of all securities then
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| loaned, sold to or purchased from all business entities under this Section would exceed 40% of its admitted assets.
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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.)
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