(215 ILCS 5/531.03)
(from Ch. 73, par. 1065.80-3)
Coverage and limitations.
(1) This Article shall provide
coverage for the policies and contracts specified in subsection (2) of this
(a) to persons who, regardless of where they reside
(except for non-resident certificate holders under group policies or contracts), are the beneficiaries, assignees or payees, including health care providers rendering services covered under a health insurance policy or certificate, of the persons covered under paragraph (b) of this subsection, and
(b) to persons who are owners of or certificate
holders or enrollees under the policies or contracts (other than unallocated annuity contracts and structured settlement annuities) and in each case who:
(i) are residents; or
(ii) are not residents, but only under all of the
(A) the member insurer that issued the
policies or contracts is domiciled in this State;
(B) the states in which the persons reside
have associations similar to the Association created by this Article;
(C) the persons are not eligible for coverage
by an association in any other state due to the fact that the insurer or health maintenance organization was not licensed in that state at the time specified in that state's guaranty association law.
(c) For unallocated annuity contracts specified in
subsection (2), paragraphs (a) and (b) of this subsection (1) shall not apply and this Article shall (except as provided in paragraphs (e) and (f) of this subsection) provide coverage to:
(i) persons who are the owners of the unallocated
annuity contracts if the contracts are issued to or in connection with a specific benefit plan whose plan sponsor has its principal place of business in this State; and
(ii) persons who are owners of unallocated
annuity contracts issued to or in connection with government lotteries if the owners are residents.
(d) For structured settlement annuities specified in
subsection (2), paragraphs (a) and (b) of this subsection (1) shall not apply and this Article shall (except as provided in paragraphs (e) and (f) of this subsection) provide coverage to a person who is a payee under a structured settlement annuity (or beneficiary of a payee if the payee is deceased), if the payee:
(i) is a resident, regardless of where the
contract owner resides; or
(ii) is not a resident, but only under both of
the following conditions:
(A) with regard to residency:
(I) the contract owner of the structured
settlement annuity is a resident; or
(II) the contract owner of the structured
settlement annuity is not a resident but the insurer that issued the structured settlement annuity is domiciled in this State and the state in which the contract owner resides has an association similar to the Association created by this Article; and
(B) neither the payee or beneficiary nor
the contract owner is eligible for coverage by the association of the state in which the payee or contract owner resides.
(e) This Article shall not provide coverage to:
(i) a person who is a payee or beneficiary of a
contract owner resident of this State if the payee or beneficiary is afforded any coverage by the association of another state; or
(ii) a person covered under paragraph (c) of this
subsection (1), if any coverage is provided by the association of another state to that person.
(f) This Article is intended to provide coverage to
a person who is a resident of this State and, in special circumstances, to a nonresident. In order to avoid duplicate coverage, if a person who would otherwise receive coverage under this Article is provided coverage under the laws of any other state, then the person shall not be provided coverage under this Article. In determining the application of the provisions of this paragraph in situations where a person could be covered by the association of more than one state, whether as an owner, payee, enrollee, beneficiary, or assignee, this Article shall be construed in conjunction with other state laws to result in coverage by only one association.
(2)(a) This Article shall provide coverage to the persons
specified in subsection (1) of this Section for policies or contracts of direct, (i)
nongroup life insurance, health insurance (that, for the purposes of this Article, includes health maintenance organization subscriber contracts and certificates), annuities and
supplemental contracts to any of these, (ii) for
certificates under direct group policies or contracts, (iii) for unallocated
annuity contracts and (iv) for contracts to furnish
health care services and subscription certificates for medical or health
care services issued by persons licensed to transact insurance business
in this State under this Code.
Annuity contracts and certificates under group annuity contracts include
but are not limited to guaranteed investment contracts, deposit
administration contracts, unallocated funding agreements, allocated funding
agreements, structured settlement agreements, lottery contracts
and any immediate or deferred annuity contracts.
(b) Except as otherwise provided in paragraph (c) of this subsection, this Article shall not provide coverage for:
(i) that portion of a policy or contract not
guaranteed by the member insurer, or under which the risk is borne by the policy or contract owner;
(ii) any such policy or contract or part thereof
assumed by the impaired or insolvent insurer under a contract of reinsurance, other than reinsurance for which assumption certificates have been issued;
(iii) any portion of a policy or contract to the
extent that the rate of interest on which it is based or the interest rate, crediting rate, or similar factor is determined by use of an index or other external reference stated in the policy or contract employed in calculating returns or changes in value:
(A) averaged over the period of 4 years prior to
the date on which the member insurer becomes an impaired or insolvent insurer under this Article, whichever is earlier, exceeds the rate of interest determined by subtracting 2 percentage points from Moody's Corporate Bond Yield Average averaged for that same 4-year period or for such lesser period if the policy or contract was issued less than 4 years before the member insurer becomes an impaired or insolvent insurer under this Article, whichever is earlier; and
(B) on and after the date on which the member
insurer becomes an impaired or insolvent insurer under this Article, whichever is earlier, exceeds the rate of interest determined by subtracting 3 percentage points from Moody's Corporate Bond Yield Average as most recently available;
(iv) any unallocated annuity contract issued to or in
connection with a benefit plan protected under the federal Pension Benefit Guaranty Corporation, regardless of whether the federal Pension Benefit Guaranty Corporation has yet become liable to make any payments with respect to the benefit plan;
(v) any portion of any unallocated annuity contract
which is not issued to or in connection with a specific employee, union or association of natural persons benefit plan or a government lottery;
(vi) an obligation that does not arise under the
express written terms of the policy or contract issued by the member insurer to the enrollee, certificate holder, contract owner, or policy owner, including without limitation:
(A) a claim based on marketing materials;
(B) a claim based on side letters, riders, or
other documents that were issued by the member insurer without meeting applicable policy or contract form filing or approval requirements;
(C) a misrepresentation of or regarding policy
(D) an extra-contractual claim; or
(E) a claim for penalties or consequential or
(vii) any stop-loss insurance, as defined in clause
(b) of Class 1 or clause (a) of Class 2 of Section 4, and further defined in subsection (d) of Section 352;
(viii) any policy or contract providing any hospital,
medical, prescription drug, or other health care benefits pursuant to Part C or Part D of Subchapter XVIII, Chapter 7 of Title 42 of the United States Code (commonly known as Medicare Part C & D), Subchapter XIX, Chapter 7 of Title 42 of the United States Code (commonly known as Medicaid), or any regulations issued pursuant thereto;
(ix) any portion of a policy or contract to the
extent that the assessments required by Section 531.09 of this Code with respect to the policy or contract are preempted or otherwise not permitted by federal or State law;
(x) any portion of a policy or contract issued to a
plan or program of an employer, association, or other person to provide life, health, or annuity benefits to its employees, members, or others to the extent that the plan or program is self-funded or uninsured, including, but not limited to, benefits payable by an employer, association, or other person under:
(A) a multiple employer welfare arrangement as
defined in 29 U.S.C. Section 1002;
(B) a minimum premium group insurance plan;
(C) a stop-loss group insurance plan; or
(D) an administrative services only contract;
(xi) any portion of a policy or contract to the
extent that it provides for:
(A) dividends or experience rating credits;
(B) voting rights; or
(C) payment of any fees or allowances to any
person, including the policy or contract owner, in connection with the service to or administration of the policy or contract;
(xii) any policy or contract issued in this State by
a member insurer at a time when it was not licensed or did not have a certificate of authority to issue the policy or contract in this State;
(xiii) any contractual agreement that establishes the
member insurer's obligations to provide a book value accounting guaranty for defined contribution benefit plan participants by reference to a portfolio of assets that is owned by the benefit plan or its trustee, which in each case is not an affiliate of the member insurer;
(xiv) any portion of a policy or contract to the
extent that it provides for interest or other changes in value to be determined by the use of an index or other external reference stated in the policy or contract, but which have not been credited to the policy or contract, or as to which the policy or contract owner's rights are subject to forfeiture, as of the date the member insurer becomes an impaired or insolvent insurer under this Code, whichever is earlier. If a policy's or contract's interest or changes in value are credited less frequently than annually, then for purposes of determining the values that have been credited and are not subject to forfeiture under this Section, the interest or change in value determined by using the procedures defined in the policy or contract will be credited as if the contractual date of crediting interest or changing values was the date of impairment or insolvency, whichever is earlier, and will not be subject to forfeiture; or
(xv) that portion or part of a variable life
insurance or variable annuity contract not guaranteed by a member insurer.
(c) The exclusion from coverage referenced in subdivision (iii) of paragraph (b) of this subsection shall not apply to any portion of a policy or contract, including a rider, that provides long-term care or other health insurance benefits.
(3) The benefits for which the Association may become liable shall in
no event exceed the lesser of:
(a) the contractual obligations for which the member
insurer is liable or would have been liable if it were not an impaired or insolvent insurer, or
(b)(i) with respect to any one life, regardless of
the number of policies or contracts:
(A) $300,000 in life insurance death benefits,
but not more than $100,000 in net cash surrender and net cash withdrawal values for life insurance;
(B) for health insurance benefits:
(I) $100,000 for coverages not defined as
disability income insurance or health benefit plans or long-term care insurance, including any net cash surrender and net cash withdrawal values;
(II) $300,000 for disability income
insurance and $300,000 for long-term care insurance; and
(III) $500,000 for health benefit plans;
(C) $250,000 in the present value of annuity
benefits, including net cash surrender and net cash withdrawal values;
(ii) with respect to each individual participating in
a governmental retirement benefit plan established under Section 401, 403(b), or 457 of the U.S. Internal Revenue Code covered by an unallocated annuity contract or the beneficiaries of each such individual if deceased, in the aggregate, $250,000 in present value annuity benefits, including net cash surrender and net cash withdrawal values;
(iii) with respect to each payee of a structured
settlement annuity or beneficiary or beneficiaries of the payee if deceased, $250,000 in present value annuity benefits, in the aggregate, including net cash surrender and net cash withdrawal values, if any; or
(iv) with respect to either (1) one contract owner
provided coverage under subparagraph (ii) of paragraph (c) of subsection (1) of this Section or (2) one plan sponsor whose plans own directly or in trust one or more unallocated annuity contracts not included in subparagraph (ii) of paragraph (b) of this subsection, $5,000,000 in benefits, irrespective of the number of contracts with respect to the contract owner or plan sponsor. However, in the case where one or more unallocated annuity contracts are covered contracts under this Article and are owned by a trust or other entity for the benefit of 2 or more plan sponsors, coverage shall be afforded by the Association if the largest interest in the trust or entity owning the contract or contracts is held by a plan sponsor whose principal place of business is in this State. In no event shall the Association be obligated to cover more than $5,000,000 in benefits with respect to all these unallocated contracts.
In no event shall the Association be obligated to cover more than (1) an aggregate of $300,000 in benefits with respect to any one life under subparagraphs (i), (ii), and (iii) of this paragraph (b) except with respect to benefits for health benefit plans under item (B) of subparagraph (i) of this paragraph (b), in which case the aggregate liability of the Association shall not exceed $500,000 with respect to any one individual or (2) with respect to one owner of multiple nongroup policies of life insurance, whether the policy or contract owner is an individual, firm, corporation, or other person and whether the persons insured are officers, managers, employees, or other persons, $5,000,000 in benefits, regardless of the number of policies and contracts held by the owner.
The limitations set forth in this subsection are limitations on the benefits for which the Association is obligated before taking into account either its subrogation and assignment rights or the extent to which those benefits could be provided out of the assets of the impaired or insolvent insurer attributable to covered policies. The costs of the Association's obligations under this Article may be met by the use of assets attributable to covered policies or reimbursed to the Association pursuant to its subrogation and assignment rights.
For purposes of this Article, benefits provided by a long-term care rider to a life insurance policy or annuity contract shall be considered the same type of benefits as the base life insurance policy or annuity contract to which it relates.
(4) In performing its obligations to provide coverage under Section 531.08 of this Code, the Association shall not be required to guarantee, assume, reinsure, reissue, or perform or cause to be guaranteed, assumed, reinsured, reissued, or performed the contractual obligations of the insolvent or impaired insurer under a covered policy or contract that do not materially affect the economic values or economic benefits of the covered policy or contract.
(Source: P.A. 100-687, eff. 8-3-18; 100-863, eff. 8-14-18.)
(215 ILCS 5/531.05)
(from Ch. 73, par. 1065.80-5)
As used in this Act:
"Account" means either of the 2 accounts created under Section
"Association" means the Illinois Life and Health Insurance
Guaranty Association created under Section 531.06.
"Authorized assessment" or the term "authorized" when used in the context of assessments means a resolution by the Board of Directors has been passed whereby an assessment shall be called immediately or in the future from member insurers for a specified amount. An assessment is authorized when the resolution is passed.
"Benefit plan" means a specific employee, union, or association of natural persons benefit plan.
"Called assessment" or the term "called" when used in the context of assessments means that a notice has been issued by the Association to member insurers requiring that an authorized assessment be paid within the time frame set forth within the notice. An authorized assessment becomes a called assessment when notice is mailed by the Association to member insurers.
"Director" means the Director of Insurance of this State.
"Contractual obligation" means any obligation under a policy or
contract or certificate under a group policy or contract, or portion
thereof for which coverage is provided under Section 531.03.
"Covered person" means any person who is entitled to the
protection of the Association as described in Section 531.02.
"Covered contract" or "covered policy" means any policy or contract within the scope
of this Article under Section 531.03.
"Extra-contractual claims" shall include, but are not limited to, claims relating to bad faith in the payment of claims, punitive or exemplary damages, or attorneys' fees and costs.
"Health benefit plan" means any hospital or medical expense policy or certificate or
health maintenance organization subscriber contract or any other similar health
contract. "Health benefit plan" does not include:
(1) accident only insurance;
(2) credit insurance;
(3) dental only insurance;
(4) vision only insurance;
(5) Medicare supplement insurance;
(6) benefits for long-term care, home health care,
community-based care, or any combination thereof;
(7) disability income insurance;
(8) coverage for on-site medical clinics; or
(9) specified disease, hospital confinement
indemnity, or limited benefit health insurance if the types of coverage do not provide coordination of benefits and are provided under separate policies or certificates.
"Impaired insurer" means (A) a member insurer which, after the effective date of this amendatory Act of the 96th General Assembly, is not an insolvent insurer, and is placed under an order of rehabilitation or conservation by a court of competent jurisdiction or (B) a member insurer deemed by the Director after the effective date of this amendatory Act of the 96th General Assembly to be potentially unable to fulfill its contractual obligations and not an insolvent insurer.
"Insolvent insurer" means a member insurer that, after the effective date of this amendatory Act of the 96th General Assembly, is placed under a final order of liquidation by a court of competent jurisdiction with a finding of insolvency.
"Member insurer" means an insurer or health maintenance organization licensed or holding a certificate of authority to transact in this State any kind of insurance or health maintenance organization business for which coverage is provided under Section 531.03 of this Code and includes an insurer or health maintenance organization whose license or certificate of authority in this State may have been suspended, revoked, not renewed, or voluntarily withdrawn or whose certificate of authority may have been suspended pursuant to Section 119 of this Code, but does not include:
(1) a hospital or medical service organization,
whether profit or nonprofit;
(3) any burial society organized under Article
XIX of this Code, any fraternal benefit society organized under Article XVII of this Code, any mutual benefit association organized under Article XVIII of this Code, and any foreign fraternal benefit society licensed under Article VI of this Code;
(4) a mandatory State pooling plan;
(5) a mutual assessment company or other person that
operates on an assessment basis;
(6) an insurance exchange;
(7) an organization that is permitted to issue
charitable gift annuities pursuant to Section 121-2.10 of this Code;
(8) any health services plan corporation
established pursuant to the Voluntary Health Services Plans Act;
(9) any dental service plan corporation
established pursuant to the Dental Service Plan Act; or
(10) an entity similar to any of the above.
"Moody's Corporate Bond Yield Average" means the Monthly Average
Corporates as published by Moody's Investors Service, Inc., or any successor
"Owner" of a policy or contract and "policyholder", "policy owner", and "contract owner" mean the person who is identified as the legal owner under the terms of the policy or contract or who is otherwise vested with legal title to the policy or contract through a valid assignment completed in accordance with the terms of the policy or contract and properly recorded as the owner on the books of the member insurer. The terms owner, contract owner, policyholder, and policy owner do not include persons with a mere beneficial interest in a policy or contract.
"Person" means an individual, corporation, limited liability company, partnership, association, governmental body or entity, or voluntary organization.
"Plan sponsor" means:
(1) the employer in the case of a benefit plan
established or maintained by a single employer;
(2) the employee organization in the case of a
benefit plan established or maintained by an employee organization; or
(3) in a case of a benefit plan established or
maintained by 2 or more employers or jointly by one or more employers and one or more employee organizations, the association, committee, joint board of trustees, or other similar group of representatives of the parties who establish or maintain the benefit plan.
"Premiums" mean amounts or considerations, by whatever name called, received on covered policies or contracts less returned premiums, considerations, and deposits and less dividends and experience credits.
"Premiums" does not include:
(A) amounts or considerations received for policies
or contracts or for the portions of policies or contracts for which coverage is not provided under Section 531.03 of this Code except that assessable premium shall not be reduced on account of the provisions of subparagraph (iii) of paragraph (b) of subsection (2) of Section 531.03 of this Code relating to interest limitations and the provisions of paragraph (b) of subsection (3) of Section 531.03 relating to limitations with respect to one individual, one participant, and one policy owner or contract owner;
(B) premiums in excess of $5,000,000 on an
unallocated annuity contract not issued under a governmental retirement benefit plan (or its trustee) established under Section 401, 403(b) or 457 of the United States Internal Revenue Code; or
(C) with respect to multiple nongroup policies of
life insurance owned by one owner, whether the policy owner or contract owner is an individual, firm, corporation, or other person, and whether the persons insured are officers, managers, employees, or other persons, premiums in excess of $5,000,000 with respect to these policies or contracts, regardless of the number of policies or contracts held by the owner.
"Principal place of business" of a plan sponsor or a person other than a natural person means the single state in which the natural persons who establish policy for the direction, control, and coordination of the operations of the entity as a whole primarily exercise that function, determined by the Association in its reasonable judgment by considering the following factors:
(A) the state in which the primary executive and
administrative headquarters of the entity is located;
(B) the state in which the principal office of the
chief executive officer of the entity is located;
(C) the state in which the board of directors (or
similar governing person or persons) of the entity conducts the majority of its meetings;
(D) the state in which the executive or management
committee of the board of directors (or similar governing person or persons) of the entity conducts the majority of its meetings;
(E) the state from which the management of the
overall operations of the entity is directed; and
(F) in the case of a benefit plan sponsored by
affiliated companies comprising a consolidated corporation, the state in which the holding company or controlling affiliate has its principal place of business as determined using the above factors. However, in the case of a plan sponsor, if more than 50% of the participants in the benefit plan are employed in a single state, that state shall be deemed to be the principal place of business of the plan sponsor.
The principal place of business of a plan sponsor of a benefit plan described in paragraph (3) of the definition of "plan sponsor" shall be deemed to be the principal place of business of the association, committee, joint board of trustees, or other similar group of representatives of the parties who establish or maintain the benefit plan that, in lieu of a specific or clear designation of a principal place of business, shall be deemed to be the principal place of business of the employer or employee organization that has the largest investment in the benefit plan in question.
"Receivership court" means the court in the insolvent or impaired insurer's state having jurisdiction over the conservation, rehabilitation, or liquidation of the member insurer.
"Resident" means a person to whom a contractual obligation is owed and who resides in this State on the date of entry of a court order that determines a member insurer to be an impaired insurer or a court order that determines a member insurer to be an insolvent insurer. A person may be a resident of only one state, which in the case of a person other than a natural person shall be its principal place of business. Citizens of the United States that are either (i) residents of foreign countries or (ii) residents of United States possessions, territories, or protectorates that do not have an association similar to the Association created by this Article, shall be deemed residents of the state of domicile of the member insurer that issued the policies or contracts.
"Structured settlement annuity" means an annuity purchased in order to fund periodic payments for a plaintiff or other claimant in payment for or with respect to personal injury suffered by the plaintiff or other claimant.
"State" means a state, the District of Columbia, Puerto Rico, and a United States possession, territory, or protectorate.
"Supplemental contract" means a written agreement entered into for the distribution of proceeds under a life, health, or annuity policy or a life, health, or annuity contract.
"Unallocated annuity contract" means any annuity contract or group
annuity certificate which is not issued to and owned by an individual,
except to the extent of any annuity benefits guaranteed to an individual by
an insurer under such contract or certificate.
(Source: P.A. 100-687, eff. 8-3-18.)
(215 ILCS 5/531.08)
(from Ch. 73, par. 1065.80-8)
Powers and duties of the Association.
(a) In addition to
the powers and duties enumerated in other Sections of this Article:
(1) If a member insurer is an impaired insurer, then
the Association may, in its discretion and subject to any conditions imposed by the Association that do not impair the contractual obligations of the impaired insurer and that are approved by the Director:
(A) guarantee, assume, reissue, or reinsure or
cause to be guaranteed, assumed, reissued, or reinsured, any or all of the policies or contracts of the impaired insurer; or
(B) provide such money, pledges, loans, notes,
guarantees, or other means as are proper to effectuate paragraph (A) and assure payment of the contractual obligations of the impaired insurer pending action under paragraph (A).
(2) If a member insurer is an insolvent insurer,
then the Association shall, in its discretion, either:
(A) guaranty, assume, reissue, or reinsure or
cause to be guaranteed, assumed, reissued, or reinsured the policies or contracts of the insolvent insurer or assure payment of the contractual obligations of the insolvent insurer and provide money, pledges, loans, notes, guarantees, or other means reasonably necessary to discharge the Association's duties; or
(B) provide benefits and coverages in accordance
with the following provisions:
(i) with respect to policies and contracts,
ensure payment of benefits that would have been payable under the policies or contracts of the insolvent insurer for claims incurred:
(a) with respect to group policies and
contracts, not later than the earlier of the next renewal date under those policies or contracts or 45 days, but in no event less than 30 days, after the date on which the Association becomes obligated with respect to the policies and contracts;
(b) with respect to nongroup policies,
contracts, and annuities not later than the earlier of the next renewal date (if any) under the policies or contracts or one year, but in no event less than 30 days, from the date on which the Association becomes obligated with respect to the policies or contracts;
(ii) make diligent efforts to provide all
known insureds, enrollees, or annuitants (for nongroup policies and contracts), or group policy owners or contract owners with respect to group policies and contracts, 30 days notice of the termination (pursuant to subparagraph (i) of this paragraph (B)) of the benefits provided;
(iii) with respect to nongroup policies and
contracts covered by the Association, make available to each known insured, enrollee, or annuitant, or owner if other than the insured, enrollee, or annuitant, and with respect to an individual formerly an insured, enrollee, or annuitant under a group policy or contract who is not eligible for replacement group coverage, make available substitute coverage on an individual basis in accordance with the provisions of subsection (b), if the insureds, enrollees, or annuitants had a right under law or the terminated policy, contract, or annuity to convert coverage to individual coverage or to continue an individual policy, contract, or annuity in force until a specified age or for a specified time, during which the insurer or health maintenance organization had no right unilaterally to make changes in any provision of the policy, contract, or annuity or had a right only to make changes in premium by class.
(b) In providing the substitute coverage required under subparagraph (iii) of paragraph (B) of item (2) of subsection (a)
of this Section, the Association may offer either to reissue the
terminated coverage or to issue an alternative policy or contract at actuarially justified rates, subject to the prior approval of the Director.
Alternative or reissued policies or contracts shall be offered without requiring
evidence of insurability, and shall not provide for any waiting period or
exclusion that would not have applied under the terminated policy or contract.
The Association may reinsure any alternative or reissued policy or contract.
Alternative policies or contracts adopted by the Association shall be subject
to the approval of the Director. The Association may adopt alternative
policies or contracts of various types for future issuance without regard to any
particular impairment or insolvency.
Alternative policies or contracts shall contain at least the minimum statutory
provisions required in this State and provide benefits that shall not be
unreasonable in relation to the premium charged. The
Association shall set the premium in accordance with a table of rates which
it shall adopt. The premium shall reflect the amount of insurance to be
provided and the age and class of risk of each insured, but shall not
reflect any changes in the health of the insured after the original policy or contract
was last underwritten.
Any alternative policy or contract issued by the Association shall provide
coverage of a type similar to that of the policy or contract issued by the impaired or
insolvent insurer, as determined by the Association.
(c) If the Association elects to reissue terminated coverage at a
premium rate different from that charged under the terminated policy or contract, the
premium shall be actuarially justified and set by the Association in accordance with the amount of
insurance or coverage provided and the age and class of risk, subject to approval of
(d) The Association's obligations with respect to coverage under any
policy or contract of the impaired or insolvent insurer or under any reissued or
alternative policy or contract shall cease on the date such coverage or policy or contract is
replaced by another similar policy or contract by the policyholder, the insured, the enrollee, or the
(e) When proceeding under this Section with
respect to any policy or contract carrying guaranteed minimum interest
rates, the Association shall assure the payment or crediting of a rate of
interest consistent with subparagraph (2)(b)(iii)(B) of Section 531.03.
(f) Nonpayment of premiums thirty-one days after the date required under
the terms of any guaranteed, assumed, alternative or reissued policy or
contract or substitute coverage shall terminate the Association's
obligations under such policy, contract, or coverage under this Act with respect to
such policy, contract, or coverage, except with respect to any claims incurred or any
net cash surrender value which may be due in accordance with the provisions of
(g) Premiums due for coverage after entry of an order of liquidation of
an insolvent insurer shall belong to and be payable at the direction of the
and the Association shall be liable for unearned premiums due to policy or
contract owners arising after the entry of such order.
(h) In carrying out its duties under paragraph (2) of subsection (a) of this Section, the Association may:
(1) subject to approval by a court in this State,
impose permanent policy or contract liens in connection with a guarantee, assumption, or reinsurance agreement if the Association finds that the amounts which can be assessed under this Article are less than the amounts needed to assure full and prompt performance of the Association's duties under this Article or that the economic or financial conditions as they affect member insurers are sufficiently adverse to render the imposition of such permanent policy or contract liens to be in the public interest; or
(2) subject to approval by a court in this State,
impose temporary moratoriums or liens on payments of cash values and policy loans or any other right to withdraw funds held in conjunction with policies or contracts in addition to any contractual provisions for deferral of cash or policy loan value. In addition, in the event of a temporary moratorium or moratorium charge imposed by the receivership court on payment of cash values or policy loans or on any other right to withdraw funds held in conjunction with policies or contracts, out of the assets of the impaired or insolvent insurer, the Association may defer the payment of cash values, policy loans, or other rights by the Association for the period of the moratorium or moratorium charge imposed by the receivership court, except for claims covered by the Association to be paid in accordance with a hardship procedure established by the liquidator or rehabilitator and approved by the receivership court.
(i) There shall be no liability on the part of and no cause of action
shall arise against the Association or against any transferee from the
Association in connection with the transfer by reinsurance or otherwise of
all or any part of an impaired or insolvent insurer's business by reason of
any action taken or any failure to take any action by the impaired or
insolvent insurer at any time.
(j) If the Association fails to act within a reasonable period of
time as provided in subsection (2) of this Section with respect to an
insolvent insurer, the
Director shall have the powers and duties of the Association under this
Act with regard to such insolvent insurers.
(k) The Association or its designated representatives
may render assistance and advice to the
Director, upon his request, concerning rehabilitation, payment of
claims, continuations of coverage, or the performance of other
contractual obligations of any impaired or insolvent insurer.
(l) The Association shall have standing to appear or intervene before a court or agency in this State with jurisdiction over an impaired or insolvent insurer concerning which the Association is or may become obligated under this Article or with jurisdiction over any person or property against which the Association may have rights through subrogation or otherwise. Standing shall extend to all matters germane to the powers and duties of the Association, including, but not limited to, proposals for reinsuring, reissuing, modifying, or guaranteeing the policies or contracts of the impaired or insolvent insurer and the determination of the policies or contracts and contractual obligations. The Association shall also have the right to appear or intervene before a court or agency in another state with jurisdiction over an impaired or insolvent insurer for which the Association is or may become obligated or with jurisdiction over any person or property against whom the Association may have rights through subrogation or otherwise.
(m)(1) A person receiving benefits under this Article shall be deemed to have assigned the rights under and any causes of action against any person for losses arising under, resulting from, or otherwise relating to the covered policy or contract to the Association to the extent of the benefits received because of this Article, whether the benefits are payments of or on account of contractual obligations, continuation of coverage, or provision of substitute or alternative policies, contracts, or coverages. The Association may require an assignment to it of such rights and cause of action by any enrollee, payee, policy, or contract owner, beneficiary, insured, or annuitant as a condition precedent to the receipt of any right or benefits conferred by this Article upon the person.
(2) The subrogation rights of the Association under this subsection
have the same priority against the assets of the impaired or insolvent insurer as
that possessed by the person entitled to receive benefits under this
(3) In addition to paragraphs (1) and (2), the Association shall have all common law rights of subrogation and any other equitable or legal remedy that would have been available to the impaired or insolvent insurer or owner, beneficiary, enrollee, or payee of a policy or contract with respect to the policy or contracts, including without limitation, in the case of a structured settlement annuity, any rights of the owner, beneficiary, enrollee, or payee of the annuity to the extent of benefits received pursuant to this Article, against a person originally or by succession responsible for the losses arising from the personal injury relating to the annuity or payment therefor, excepting any such person responsible solely by reason of serving as an assignee in respect of a qualified assignment under Internal Revenue Code Section 130.
(4) If the preceding provisions of this subsection (m) are invalid or ineffective with respect to any person or claim for any reason, then the amount payable by the Association with respect to the related covered obligations shall be reduced by the amount realized by any other person with respect to the person or claim that is attributable to the policies or contracts, or portion thereof, covered by the Association.
(5) If the Association has provided benefits with respect to a covered obligation and a person recovers amounts as to which the Association has rights as described in the preceding paragraphs of this subsection (10), then the person shall pay to the Association the portion of the recovery attributable to the policies or contracts, or portion thereof, covered by the Association.
(n) The Association may:
(1) Enter into such contracts as are necessary or
proper to carry out the provisions and purposes of this Article.
(2) Sue or be sued, including taking any legal
actions necessary or proper for recovery of any unpaid assessments under Section 531.09. The Association shall not be liable for punitive or exemplary damages.
(3) Borrow money to effect the purposes of this
Article. Any notes or other evidence of indebtedness of the Association not in default are legal investments for domestic member insurers and may be carried as admitted assets.
(4) Employ or retain such persons as are necessary to
handle the financial transactions of the Association, and to perform such other functions as become necessary or proper under this Article.
(5) Negotiate and contract with any liquidator,
rehabilitator, conservator, or ancillary receiver to carry out the powers and duties of the Association.
(6) Take such legal action as may be necessary to
avoid payment of improper claims.
(7) Exercise, for the purposes of this Article and to
the extent approved by the Director, the powers of a domestic life insurer, health insurer, or health maintenance organization, but in no case may the Association issue policies or contracts other than those issued to perform the contractual obligations of the impaired or insolvent insurer.
(8) Exercise all the rights of the Director under
Section 193(4) of this Code with respect to covered policies after the association becomes obligated by statute.
(9) Request information from a person seeking
coverage from the Association in order to aid the Association in determining its obligations under this Article with respect to the person, and the person shall promptly comply with the request.
(9.5) Unless prohibited by law, in accordance with
the terms and conditions of the policy or contract, file for actuarially justified rate or premium increases for any policy or contract for which it provides coverage under this Article.
(10) Take other necessary or appropriate action to
discharge its duties and obligations under this Article or to exercise its powers under this Article.
(o) With respect to covered policies for which the Association becomes
obligated after an entry of an order of liquidation or rehabilitation,
the Association may
elect to succeed to the rights of the insolvent insurer arising after the
date of the order of liquidation or rehabilitation under any contract
of reinsurance to which
the insolvent insurer was a party, to the extent that such contract
provides coverage for losses occurring after the date of the order of
liquidation or rehabilitation. As a condition to making this election,
the Association must pay all unpaid premiums due under the contract for
coverage relating to periods before and after the date of the order of
liquidation or rehabilitation.
(p) A deposit in this State, held pursuant to law or required by the Director for the benefit of creditors, including policy owners or contract owners, not turned over to the domiciliary liquidator upon the entry of a final order of liquidation or order approving a rehabilitation plan of a member insurer domiciled in this State or in a reciprocal state, pursuant to Article XIII 1/2 of this Code, shall be promptly paid to the Association. The Association shall be entitled to retain a portion of any amount so paid to it equal to the percentage determined by dividing the aggregate amount of policy owners' or contract owners' claims related to that insolvency for which the Association has provided statutory benefits by the aggregate amount of all policy owners' or contract owners' claims in this State related to that insolvency and shall remit to the domiciliary receiver the amount so paid to the Association less the amount retained pursuant to this subsection (p). Any amount so paid to the Association and retained by it shall be treated as a distribution of estate assets pursuant to applicable State receivership law dealing with early access disbursements.
(q) The Board of Directors of the Association shall have discretion and may exercise reasonable business judgment to determine the means by which the Association is to provide the benefits of this Article in an economical and efficient manner.
(r) Where the Association has arranged or offered to provide the benefits of this Article to a covered person under a plan or arrangement that fulfills the Association's obligations under this Article, the person shall not be entitled to benefits from the Association in addition to or other than those provided under the plan or arrangement.
(s) Venue in a suit against the Association arising under the Article shall be in Cook County. The Association shall not be required to give any appeal bond in an appeal that relates to a cause of action arising under this Article.
(t) The Association may join an organization of one or more other State associations of similar purposes to further the purposes and administer the powers and duties of the Association.
(u) In carrying out its duties in connection with guaranteeing, assuming, reissuing, or reinsuring policies or contracts under subsections (1) or (2), the Association may issue substitute coverage for a policy or contract that provides an interest rate, crediting rate, or similar factor determined by use of an index or other external reference stated in the policy or contract employed in calculating returns or changes in value by issuing an alternative policy or contract in accordance with the following provisions:
(1) in lieu of the index or other external reference
provided for in the original policy or contract, the alternative policy or contract provides for (i) a fixed interest rate, or (ii) payment of dividends with minimum guarantees, or (iii) a different method for calculating interest or changes in value;
(2) there is no requirement for evidence of
insurability, waiting period, or other exclusion that would not have applied under the replaced policy or contract; and
(3) the alternative policy or contract is
substantially similar to the replaced policy or contract in all other material terms.
(Source: P.A. 100-687, eff. 8-3-18.)
(215 ILCS 5/531.10)
(from Ch. 73, par. 1065.80-10)
Plan of operation.
(1)(a) The Association must
submit to the Director a plan of operation and any amendments thereto necessary
or suitable to assure the fair, reasonable, and equitable administration of the
Association. The plan of operation and any amendments thereto become effective
upon approval in writing by the Director.
(b) If the Association fails to submit a suitable plan of operation
within 180 days following the effective date of this Article or if at any time
thereafter the Association fails to submit suitable amendments to the plan, the
Director may, after notice and hearing, adopt and promulgate such reasonable
rules as are necessary or advisable to effectuate the provisions of this Article.
Such rules are in force until modified by the Director or superseded by a plan
submitted by the Association and approved by the Director.
(2) All member insurers must comply with the plan of operation.
(3) The plan of operation must, in addition to requirements enumerated
elsewhere in this Article:
(a) Establish procedures for handling the assets of
(b) Establish the amount and method of reimbursing
members of the board of directors under Section 531.07;
(c) Establish regular places and times for meetings
of the board of directors;
(d) Establish procedures for records to be kept of
all financial transactions of the Association, its agents, and the board of directors;
(e) Establish the procedures whereby selections for
the board of directors will be made and submitted to the Director;
(f) Establish any additional procedures for
assessments under Section 531.09; and
(g) Contain additional provisions necessary or proper
for the execution of the powers and duties of the Association.
(4) The plan of operation shall establish a procedure for protest by
any member insurer of assessments made by the Association pursuant to
Section 531.09. Such procedures shall require that:
(a) a member insurer that wishes to protest all or
part of an assessment shall pay when due the full amount of the assessment as set forth in the notice provided by the Association. The payment shall be available to meet Association obligations during the pendency of the protest or any subsequent appeal. Payment shall be accompanied by a statement in writing that the payment is made under protest and setting forth a brief statement of the grounds for the protest;
(b) within 30 days following the payment of an
assessment under protest by any protesting member insurer, the Association must notify the member insurer in writing of its determination with respect to the protest unless the Association notifies the member that additional time is required to resolve the issues raised by the protest;
(c) in the event the Association determines that the
protesting member insurer is entitled to a refund, such refund shall be made within 30 days following the date upon which the Association makes its determination;
(d) the decision of the Association with respect to a
protest may be appealed to the Director pursuant to Section 531.11(3);
(e) in the alternative to rendering a decision with
respect to any protest based on a question regarding the assessment base, the Association may refer such protests to the Director for final decision, with or without a recommendation from the Association; and
(f) interest on any refund due a protesting member
insurer shall be paid at the rate actually earned by the Association.
(5) The plan of operation may provide that any or all powers and duties
of the Association, except those under paragraph (3) of subsection (n)
of Section 531.08 and Section 531.09 are delegated to a corporation,
association or other organization which performs or will perform functions
similar to those of this Association, or its equivalent, in 2 or more states.
Such a corporation, association or organization shall be reimbursed for any
payments made on behalf of the Association and shall be paid for its
performance of any function of the Association. A delegation under this
subsection shall take effect only with the approval of both the Board of
Directors and the Director, and may be made only to a corporation, association
or organization which extends protection not substantially less favorable and
effective than that provided by this Act.
(Source: P.A. 100-687, eff. 8-3-18.)
(215 ILCS 5/531.12)
(from Ch. 73, par. 1065.80-12)
Prevention of Insolvencies.
To aid in the detection and
prevention of member insurer insolvencies or impairments:
(1) It shall be the duty of the Director:
(a) To notify the Commissioners of all other
states, territories of the United States, and the District of Columbia when he takes any of the following actions against a member insurer:
(i) revocation of license;
(ii) suspension of license;
(iii) makes any formal order except for an
order issued pursuant to Article XII 1/2 of this Code that such member insurer restrict its premium writing, obtain additional contributions to surplus, withdraw from the State, reinsure all or any part of its business, or increase capital, surplus or any other account for the security of policy owners, contract owners, certificate holders, or creditors.
Such notice shall be transmitted to all
commissioners within 30 days following the action taken or the date on which the action occurs.
(b) To report to the board of directors when he
has taken any of the actions set forth in subparagraph (a) of this paragraph or has received a report from any other commissioner indicating that any such action has been taken in another state. Such report to the board of directors shall contain all significant details of the action taken or the report received from another commissioner.
(c) To report to the board of directors when the
Director has reasonable cause to believe from an examination, whether completed or in process, of any member insurer that the member insurer may be an impaired or insolvent insurer.
(d) To furnish to the board of directors the
National Association of Insurance Commissioners Insurance Regulatory Information System ratios and listings of companies not included in the ratios developed by the National Association of Insurance Commissioners. The board may use the information contained therein in carrying out its duties and responsibilities under this Section. The report and the information contained therein shall be kept confidential by the board of directors until such time as made public by the Director or other lawful authority.
(2) The Director may seek the advice and
recommendations of the board of directors concerning any matter affecting his or her duties and responsibilities regarding the financial condition of member insurers and insurers or health maintenance organizations seeking admission to transact business in this State.
(3) The board of directors may, upon majority vote,
make reports and recommendations to the Director upon any matter germane to the liquidation, rehabilitation or conservation of any member insurer and insurers or health maintenance organizations seeking admission to transact business in this State. Such reports and recommendations shall not be considered public documents.
(4) The board of directors may, upon majority vote,
make recommendations to the Director for the detection and prevention of member insurer insolvencies.
(5) The board of directors shall, at the conclusion
of any member insurer insolvency in which the Association was obligated to pay covered claims prepare a report to the Director containing such information as it may have in its possession bearing on the history and causes of such insolvency. The board shall cooperate with the boards of directors of guaranty associations in other states in preparing a report on the history and causes for insolvency of a particular member insurer, and may adopt by reference any report prepared by such other associations.
(Source: P.A. 100-687, eff. 8-3-18.)