State of Illinois
91st General Assembly

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SB1701 Enrolled                                LRB9112329JSpc

 1        AN ACT concerning insurance exchanges.

 2        Be it enacted by the People of  the  State  of  Illinois,
 3    represented in the General Assembly:

 4        Section  5.   The  Illinois  Insurance Code is amended by
 5    changing Sections 107.02, 107.15a, 107.15b,  107.17,  107.21,
 6    107.26, and 107.29 as follows:

 7        (215 ILCS 5/107.02) (from Ch. 73, par. 719.02)
 8        Sec. 107.02. Incorporation.
 9        (a)  There  is  hereby authorized created an exchange for
10    the reinsurance and insurance of risks.  An  exchange  formed
11    pursuant   to   this  Article  shall  be  a  privately  owned
12    organization separate and distinct from the State.  Within 60
13    days after this Act becomes law, the  Director  of  Insurance
14    shall   appoint  an  interim  Board  of  Directors  to  adopt
15    temporary by-laws, hire employees, and take such other  steps
16    as  are  authorized  or  necessary to establish the Exchange.
17    When subscriptions totalling $4,000,000  have  been  received
18    pursuant  to  Section  107.07,  the  Board of Directors shall
19    apply to the Director for a  Certificate  of  Authority.  The
20    Director shall approve such Certificate within 30 days unless
21    he  determines that the requirements of this Article have not
22    been met and specifies his objections in writing.  Within  30
23    days  after  receiving  proof  from  the  Exchange  that  the
24    objections  have  been  met,  the  Director shall approve the
25    application of the Exchange.
26        (b)  After the effective date of this amendatory  Act  of
27    1997,   the   Director   may  organize,  in  accordance  with
28    subsection (a), an additional exchange  for  the  reinsurance
29    and insurance of risks.  The additional exchange shall comply
30    with the provisions of this Article.
31    (Source: P.A. 90-499, eff. 8-19-97.)
SB1701 Enrolled             -2-                LRB9112329JSpc
 1        (215 ILCS 5/107.15a) (from Ch. 73, par. 719.15a)
 2        Sec.  107.15a.  Duties and powers of trustees.  The Board
 3    of Trustees shall have such power as may be necessary for the
 4    management  and  operations   of   the   Exchange   and   the
 5    Association.   Such  powers  shall include but not be limited
 6    to:
 7             (a)  establishment    of     the     qualifications,
 8        requirements, limitations and obligations for syndicates,
 9        limited syndicates, subscribers, and Exchange brokers;
10             (b)  denying  access  to  the Exchange to applicants
11        which do not meet such qualifications, requirements,  and
12        obligations;
13             (c)  imposing   penalties   on  syndicates,  limited
14        syndicates,  subscribers   and   Exchange   brokers   for
15        violations  of  the regulations of the Exchange or orders
16        of the Board;
17             (d)  assessing fees annually on syndicates,  limited
18        syndicates,  subscribers and Exchange brokers, and making
19        assessments  on  syndicates,   limited   syndicates   and
20        subscribers for the expenses of the Exchange;
21             (e)  suspending,  in whole or in part, access to the
22        Exchange or  expelling  syndicates,  limited  syndicates,
23        subscribers  or  Exchange  brokers who do not continue to
24        meet the qualifications,  requirements,  and  obligations
25        established  by  the  Board,  who  fail  or refuse to pay
26        penalties,  fees,  or  assessments  when  due,  or  whose
27        continued  operation  the  Board  determines   would   be
28        injurious   to   the  best  interests  of  the  Exchange,
29        policyholders, claimants, or creditors;
30             (f)  obtaining immediate access for the  benefit  of
31        the   Immediate   Access   Security  Association  to  the
32        following assets of the impaired or insolvent syndicate:
33                  (i)  the full amount held in its security trust
34             or custodial account; and
SB1701 Enrolled             -3-                LRB9112329JSpc
 1                  (ii)  the assets of its subscribers under their
 2             certificates of guaranty;.
 3             (g)  organizing a guaranty mechanism or fund for the
 4        protection of policyholders.
 5    (Source: P.A. 91-77, eff. 7-9-99.)

 6        (215 ILCS 5/107.15b)
 7        Sec. 107.15b.  Board rulemaking authority.
 8        (a)  The Board has the authority to adopt such  rules  as
 9    it deems necessary to carry out its duties under this Article
10    and  to  maintain a well-regulated marketplace.  A syndicate,
11    limited syndicate,  subscriber,  or  exchange  broker,  as  a
12    condition  of  its authority to transact business through the
13    Exchange, shall comply with this Article, all existing  rules
14    of  the  Exchange, and all rules or modifications of existing
15    rules adopted  by  the  Board  and  not  disapproved  by  the
16    Director,  including,  but  not  limited  to, rules extending
17    requirements  and   obligations   with   effect   after   the
18    suspension,   expulsion,   or  voluntary  withdrawal  of  the
19    syndicate, limited syndicate, subscriber, or exchange  broker
20    from access to the Exchange.
21        (b)  A  rule  or modification to an existing rule adopted
22    by the Board after the effective date of this amendatory  Act
23    of  1997  shall  be  filed with the Director not less than 30
24    days before the  proposed  effective  date  of  the  rule  or
25    modification.    The   Director,   upon  written  order,  may
26    disapprove the rule or modification, in  whole  or  in  part,
27    upon  a finding that the rule or modification would cause the
28    exchange to be operated in a manner that would  be  hazardous
29    to the public or its policyholders.
30        (c)  An  order  by  the  Director  disapproving a rule or
31    modification shall be deemed to  be  a  final  administrative
32    decision  and shall be subject to judicial review pursuant to
33    the provisions of the Administrative Review Law.
SB1701 Enrolled             -4-                LRB9112329JSpc
 1        (d)  Neither the Board nor the Exchange is an  agency  of
 2    the   State  for  purposes  of  the  Illinois  Administrative
 3    Procedure Act or otherwise.
 4    (Source: P.A. 90-499, eff. 1-1-98.)

 5        (215 ILCS 5/107.17) (from Ch. 73, par. 719.17)
 6        Sec. 107.17.  Governance.  The business  and  affairs  of
 7    the  Exchange shall be managed by an Executive Committee with
 8    the advice and consent of the Board of Trustees.
 9        There  shall  be  2  classes  of  trustees:    Subscriber
10    trustees  and  public  trustees.     Both public trustees and
11    subscriber trustees shall be elected by a  majority  vote  of
12    the  subscribers.   In addition, the public trustees shall be
13    approved by the Director.
14        The trustees shall be 13 in number.  There  shall  be  at
15    least  5  public trustees who shall be individual persons who
16    are not insurers, subscribers, exchange brokers, or employees
17    of insurers, subscribers, exchange  brokers,  syndicates,  or
18    affiliates thereof.
19        The  Executive  Committee  shall  be composed of 3 public
20    trustees elected by the  Board.   Members  of  the  Executive
21    Committee  shall  serve for a term of 3 years, except that of
22    the initial members of the Executive  Committee,  one  member
23    shall  serve  for  a term of one year, one member shall serve
24    for a term of 2 years, and one member shall serve for a  term
25    of  3  years.   The  terms  of  the  initial  members  of the
26    Executive Committee shall be determined by lot.
27        All decisions of the Executive Committee, except those of
28    a ministerial nature that may  be  delegated  by  the  Board,
29    shall be subject to the approval of the Board.  All action of
30    the  Executive Committee shall be approved unless disapproved
31    on a recorded vote by 9 members of the Board.
32    (Source: P.A. 89-206,  eff.  7-21-95;  89-669,  eff.  1-1-97;
33    90-499, eff. 1-1-98.)
SB1701 Enrolled             -5-                LRB9112329JSpc
 1        (215 ILCS 5/107.21) (from Ch. 73, par. 719.21)
 2        Sec. 107.21.  Central Processing Facility. Establishment:
 3    The  Exchange  shall  establish  a  facility  for centralized
 4    record keeping, data collection, and statistical  compilation
 5    of  all  insurance  and  reinsurance transactions involving a
 6    subscriber.
 7        Scope:  Except  with  respect  to  reinsurance  contracts
 8    where the risks are transferred from a syndicate to a limited
 9    syndicate  and  security  for the exposure is held in a fully
10    funded  trust  account,  all  monies  due  on  contracts   of
11    insurance  and  reinsurance  issued  by  syndicates  shall be
12    payable  to  the  Exchange  and  disbursed  directly  to  the
13    Facility  for  recording   and   distribution.    All   other
14    transactions  of  business  on the Exchange shall be reported
15    concurrently to the Facility unless exempted by the Board.
16        Management:  The management and operation of the Facility
17    shall be conducted pursuant to rules adopted  by  the  Board.
18    The  facility  shall  keep  full  and  accurate  accounts and
19    records of receipts and  disbursements  of  the  funds  being
20    processed  by the Facility and maintain accounting records of
21    all transactions of each subscriber, syndicate,  and  limited
22    syndicate.    Monthly   reports   stating  the  receipts  and
23    disbursements of the Facility shall be  made  to  the  Board.
24    The  Board  may  also  require any other report that it deems
25    necessary.
26    (Source: P.A. 81-1047.)

27        (215 ILCS 5/107.26) (from Ch. 73, par. 719.26)
28        Sec. 107.26.  Immediate Access Security Association.
29        (a)  There is authorized created a non-profit corporation
30    which  shall  be  known  as  the  Immediate  Access  Security
31    Association, and which shall be established  as  a  privately
32    owned  organization  incorporated  under  the General Not for
33    Profit Corporation Act separate and distinct from  the  State
SB1701 Enrolled             -6-                LRB9112329JSpc
 1    and  not a part of the State government. All syndicates shall
 2    be members  of  the  Association  as  a  condition  of  their
 3    authority   to   transact   business  on  the  Exchange.  The
 4    Association shall be exempt from payment of all fees and  all
 5    taxes levied by this State or any of its subdivisions.
 6        (b)  In   the   event   of  the  entry  of  an  Order  of
 7    Rehabilitation,  Conservation,  or  Liquidation   against   a
 8    syndicate  pursuant  to Section 107.08, the Association shall
 9    establish a claims date, which shall be not  later  than  one
10    year  after the date of such Order, by which time all persons
11    having claims arising out of  insurance  obligations  of  the
12    syndicate  must  file  their  claim with the Association. The
13    Association shall give notice to all policyholders and  other
14    persons  who  may have a claim against the syndicate as shown
15    by the syndicate's records. Such  notice  shall  include  the
16    date  of  the  Order,  the  claims  date  established  by the
17    Association and the procedure and form  for  filing  a  claim
18    with  the  Association.  The  Association shall determine the
19    syndicate's insurance obligations based on all  claims  filed
20    on or before the claims date.  The Association shall then pay
21    all  claims for which an insurance obligation exists from the
22    assets of the syndicate's  trust  or  custodial  account  and
23    certificates  of  guaranty.   In  the  event those assets are
24    insufficient to pay all claims in full, the Association shall
25    make payment  pursuant  to  a  plan  approved  by  the  court
26    entering   the  Order  of  Rehabilitation,  Conservation,  or
27    Liquidation. The Rehabilitator,  Conservator,  or  Liquidator
28    shall be bound by any settlement made by the Association. Any
29    person  not  receiving  full reimbursement for his claim from
30    the Association shall have a claim against the  assets  being
31    administered by the Rehabilitator, Conservator, or Liquidator
32    for  the remaining amounts. In settling claims and subject to
33    limitations in this Section, the Association shall  have  the
34    same  rights  and duties of the insolvent syndicate as if the
SB1701 Enrolled             -7-                LRB9112329JSpc
 1    syndicate had not become insolvent.
 2        (c)  The Association may delegate to such other person or
 3    entity as it deems appropriate the performance  of  any  duty
 4    imposed on it by this Section.
 5    (Source:  P.A.  89-97,  eff.  7-7-95;  89-206,  eff. 7-21-95;
 6    89-626, eff. 8-9-96; 90-794, eff. 8-14-98.)

 7        (215 ILCS 5/107.29)
 8        Sec. 107.29.  Exchange operations runoff.
 9        (a)  The Board may adopt a  plan  of  operation  for  the
10    orderly  runoff  of the operations of the exchange.  The plan
11    of operation shall provide  that  all  funds,  legal  rights,
12    title  to  property,  and  causes  of  action of the Exchange
13    including, but not limited to, all assessments,  subscription
14    payments,  proceeds,  investments,  premium  fees,  surcharge
15    receipts,  and  funds  maintained  under  Sections 107.26 and
16    107.27  and  the  rules  or  regulations  of   the   Exchange
17    implementing  those  Sections  or any other provision of this
18    Article, shall be accounted for and paid over to the Director
19    as receiver of any delinquent syndicate in receivership after
20    settlement of all claims against the exchange.
21             (1)  In the event that 2 or more syndicates are then
22        in receivership, the amount  paid  over  to  each  estate
23        shall be proportional to the relative size of the surplus
24        deficiency of each.
25             (2)  Any  excess  remaining after the payment of any
26        and all claims against such receivership estates shall be
27        transferred, in equal shares, to the  domestic  companies
28        which   result   from   the  reorganization,  merger,  or
29        consolidation  of  former  syndicates  of  the   Illinois
30        Insurance Exchange.
31        (b)  For  purposes  of  this Section, "syndicate" means a
32    syndicate or a limited syndicate.
33    (Source: P.A. 90-499, eff. 8-19-97; 91-77, eff. 7-9-99.)
SB1701 Enrolled             -8-                LRB9112329JSpc
 1        Section 99.  Effective date.  This Act takes effect  upon
 2    becoming law.

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