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90_SB0192 215 ILCS 5/531.03 from Ch. 73, par. 1065.80-3 Amends the Illinois Life and Health Insurance Association Guaranty Law Article of the Illinois Insurance Code. Extends coverage to certain unallocated annuity contracts issued before January 1, 1990. Applies retroactively. Effective immediately. LRB9001979JSmg LRB9001979JSmg 1 AN ACT to amend the Illinois Insurance Code by changing 2 Section 531.03. 3 Be it enacted by the People of the State of Illinois, 4 represented in the General Assembly: 5 Section 5. The Illinois Insurance Code is amended by 6 changing Section 531.03 as follows: 7 (215 ILCS 5/531.03) (from Ch. 73, par. 1065.80-3) 8 Sec. 531.03. Coverage and limitations. 9 (1) This Article shall provide coverage for the policies 10 and contracts specified in paragraph (2) of this Section: 11 (a) to persons who, regardless of where they reside 12 (except for non-resident certificate holders under group 13 policies or contracts), are the beneficiaries, assignees 14 or payees of the persons covered under subparagraph 15 (1)(b), and 16 (b) to persons who are owners of or certificate 17 holders under such policies or contracts; or, in the case 18 of unallocated annuity contracts, to the persons who are 19 the contract holders, and who 20 (i) are residents of this State, or 21 (ii) are not residents, but only under all of 22 the following conditions: 23 (A) the insurers which issued such 24 policies or contracts are domiciled in this 25 State; 26 (B) such insurers never held a license or 27 certificate of authority in the states in which 28 such persons reside; 29 (C) such states have associations similar 30 to the association created by this Act; and 31 (D) such persons are not eligible for -2- LRB9001979JSmg 1 coverage by such associations. 2 (2)(a) This Article shall provide coverage to the 3 persons specified in paragraph (l) of this Section for 4 direct, (i) nongroup life, health, annuity and supplemental 5 policies, or contracts, (ii) for certificates under direct 6 group policies or contracts, (iii) for unallocated annuity 7 contracts and (iv) for contracts to furnish health care 8 services and subscription certificates for medical or health 9 care services issued by persons licensed to transact 10 insurance business in this State under the Illinois Insurance 11 Code. Annuity contracts and certificates under group annuity 12 contracts include but are not limited to guaranteed 13 investment contracts, deposit administration contracts, 14 unallocated funding agreements, allocated funding agreements, 15 structured settlement agreements, lottery contracts and any 16 immediate or deferred annuity contracts. 17 (b) This Article shall not provide coverage for: 18 (i) that portion or part of such policies or 19 contracts under which the risk is borne by the 20 policyholder; provided however, that nothing in this 21 subparagraph (i) shall make this Article inapplicable to 22 assessment life and accident and health insurance 23 policies or contracts; or 24 (ii) any such policy or contract or part thereof 25 assumed by the impaired or insolvent insurer under a 26 contract of reinsurance, other than reinsurance for which 27 assumption certificates have been issued; or 28 (iii) any portion of a policy or contract to the 29 extent such portion represents an accrued value that the 30 rate of interest on which it is accrued 31 (A) averaged over the period of four years 32 prior to the date on which the Association becomes 33 obligated with respect to such policy or contract, 34 exceeds a rate of interest determined by subtracting -3- LRB9001979JSmg 1 two percentage points from Moody's Corporate Bond 2 Yield Average averaged for that same four year 3 period or for such lesser period if the policy or 4 contract was issued less than four years before the 5 Association became obligated; and 6 (B) on and after the date on which the 7 Association becomes obligated with respect to such 8 policy or contract, exceeds the rate of interest 9 determined by subtracting three percentage points 10 from Moody's Corporate Bond Yield Average as most 11 recently available; 12 (iv) any unallocated annuity contract issued to an 13 employee benefit plan protected under the federal Pension 14 Benefit Guaranty Corporation unless the unallocated 15 annuity contract was issued before January 1, 1990 to 16 replace or consolidate individual annuity contracts that 17 were validly issued before January 1, 1990; and 18 (v) any portion of any unallocated annuity contract 19 which is not issued to or in connection with a specific 20 employee, union or association of natural persons benefit 21 plan or a government lottery. 22 (vi) any burial society organized under Article XIX 23 of this Act, any fraternal benefit society organized 24 under Article XVII of this Act, any mutual benefit 25 association organized under Article XVIII of this Act, 26 and any foreign fraternal benefit society licensed under 27 Article VI of this Act; or 28 (vii) any health maintenance organization 29 established pursuant to the Health Maintenance 30 Organization Act including any health maintenance 31 organization business of a member insurer; or 32 (viii) any health services plan corporation 33 established pursuant to the Voluntary Health Services 34 Plans Act; or -4- LRB9001979JSmg 1 (ix) any vision service plan corporation 2 established pursuant to the Vision Service Plan Act; or 3 (x) any dental service plan corporation established 4 pursuant to the Dental Service Plan Act; or 5 (xi) any stop-loss insurance, as defined in clause 6 (b) of Class 1 or clause (a) of Class 2 of Section 4, and 7 further defined in subsection (d) of Section 352; or 8 (xii) that portion or part of a variable life 9 insurance or variable annuity contract not guaranteed by 10 an insurer. 11 The changes made by this amendatory Act of 1997 shall be 12 given retroactive effect and be applied to all affected 13 unallocated annuity contracts validly issued before January 14 1, 1990. This retroactive effect is declared to be a 15 necessary and appropriate measure to accomplish the remedial 16 purposes of the Illinois Life and Health Insurance Guaranty 17 Association Law; and that in the absence of the retroactive 18 application of the changes made by this amendatory Act of 19 1995, numerous Illinois residents will lose the protections 20 and benefits that they had a right to expect at the time the 21 covered annuity contract was issued. 22 (3) The benefits for which the Association may become 23 liable shall in no event exceed the lesser of: 24 (a) the contractual obligations for which the 25 insurer is liable or would have been liable if it were 26 not an impaired or insolvent insurer, or 27 (b)(i) with respect to any one life, regardless of 28 the number of policies or contracts: 29 (A) $300,000 in life insurance death benefits, 30 but not more than $100,000 in net cash surrender and 31 net cash withdrawal values for life insurance; 32 (B) $300,000 in health insurance benefits, 33 including any net cash surrender and net cash 34 withdrawal values; -5- LRB9001979JSmg 1 (C) $100,000 in the present value of annuity 2 benefits, including net cash surrender and net cash 3 withdrawal values; 4 (ii) with respect to each individual participating 5 in a governmental retirement plan established under 6 Section 401, 403(b) or 457 of the U.S. Internal Revenue 7 Code covered by an unallocated annuity contract or the 8 beneficiaries of each such individual if deceased, in the 9 aggregate, $100,000 in present value annuity benefits, 10 including net cash surrender and net cash withdrawal 11 values; provided, however, that in no event shall the 12 Association be liable to expend more than $300,000 in the 13 aggregate with respect to any one individual under 14 subparagraph (1) and this subparagraph: 15 (iii) with respect to any one contract holder 16 covered by any unallocated annuity contract not included 17 in subparagraph (3)(b)(ii) of this Section above, 18 $5,000,000 in benefits, irrespective of the number of 19 such contracts held by that contract holder. 20 (Source: P.A. 88-364.) 21 Section 99. Effective date. This Act takes effect upon 22 becoming law.
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