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Public Act 097-0955


 

Public Act 0955 97TH GENERAL ASSEMBLY

  
  
  

 


 
Public Act 097-0955
 
HB1577 EnrolledLRB097 09798 RPM 49945 b

    AN ACT concerning health.
 
    Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
 
    Section 5. The Illinois Insurance Code is amended by
changing Sections 35A-15, 445, and 445a as follows:
 
    (215 ILCS 5/35A-15)
    Sec. 35A-15. Company action level event.
    (a) A company action level event means any of the following
events:
        (1) The filing of an RBC Report by an insurer that
    indicates that:
            (A) the insurer's total adjusted capital is
        greater than or equal to its regulatory action level
        RBC, but less than its company action level RBC; or
            (B) the The insurer, if a life, health, or life and
        health insurer, has total adjusted capital that is
        greater than or equal to its company action level RBC,
        but less than the product of its authorized control
        level RBC and 2.5 and has a negative trend; or .
            (C) the insurer, if a property and casualty
        insurer, has total adjusted capital that is greater
        than or equal to its company action level RBC, but less
        than the product of its authorized control level RBC
        and 3.0 and triggers the trend test determined in
        accordance with the trend test calculation included in
        the property and casualty RBC Instructions.
        (2) The notification by the Director to the insurer of
    an Adjusted RBC Report that indicates an event described in
    paragraph (1), provided the insurer does not challenge the
    Adjusted RBC Report under Section 35A-35.
        (3) The notification by the Director to the insurer
    that the Director has, after a hearing, rejected the
    insurer's challenge under Section 35A-35 to an Adjusted RBC
    Report that indicates the event described in paragraph (1).
    (b) In the event of a company action level event, the
insurer shall prepare and submit to the Director an RBC Plan
that does all of the following:
        (1) Identifies the conditions that contribute to the
    company action level event.
        (2) Contains proposed corrective actions that the
    insurer intends to take and that are expected to result in
    the elimination of the company action level event. A health
    organization is not prohibited from proposing recognition
    of a parental guarantee or a letter of credit to eliminate
    the company action level event; however the Director shall,
    at his discretion, determine whether or the extent to which
    the proposed parental guarantee or letter of credit is an
    acceptable part of a satisfactory RBC Plan or Revised RBC
    Plan.
        (3) Provides projections of the insurer's financial
    results in the current year and at least the 4 succeeding
    years, both in the absence of proposed corrective actions
    and giving effect to the proposed corrective actions,
    including projections of statutory operating income, net
    income, capital, and surplus. The projections for both new
    and renewal business may include separate projections for
    each major line of business and separately identify each
    significant income, expense, and benefit component.
        (4) Identifies the key assumptions affecting the
    insurer's projections and the sensitivity of the
    projections to the assumptions.
        (5) Identifies the quality of, and problems associated
    with, the insurer's business including, but not limited to,
    its assets, anticipated business growth and associated
    surplus strain, extraordinary exposure to risk, mix of
    business, and use of reinsurance, if any, in each case.
    (c) The insurer shall submit the RBC Plan to the Director
within 45 days after the company action level event occurs or
within 45 days after the Director notifies the insurer that the
Director has, after a hearing, rejected its challenge under
Section 35A-35 to an Adjusted RBC Report.
    (d) Within 60 days after an insurer submits an RBC Plan to
the Director, the Director shall notify the insurer whether the
RBC Plan shall be implemented or is, in the judgment of the
Director, unsatisfactory. If the Director determines the RBC
Plan is unsatisfactory, the notification to the insurer shall
set forth the reasons for the determination and may set forth
proposed revisions that will render the RBC Plan satisfactory
in the judgment of the Director. Upon notification from the
Director, the insurer shall prepare a Revised RBC Plan, which
may incorporate by reference any revisions proposed by the
Director. The insurer shall submit the Revised RBC Plan to the
Director within 45 days after the Director notifies the insurer
that the RBC Plan is unsatisfactory or within 45 days after the
Director notifies the insurer that the Director has, after a
hearing, rejected its challenge under Section 35A-35 to the
determination that the RBC Plan is unsatisfactory.
    (e) In the event the Director notifies an insurer that its
RBC Plan or Revised RBC Plan is unsatisfactory, the Director
may, at the Director's discretion and subject to the insurer's
right to a hearing under Section 35A-35, specify in the
notification that the notification constitutes a regulatory
action level event.
    (f) Every domestic insurer that files an RBC Plan or
Revised RBC Plan with the Director shall file a copy of the RBC
Plan or Revised RBC Plan with the chief insurance regulatory
official in any state in which the insurer is authorized to do
business if that state has a law substantially similar to the
confidentiality provisions in subsection (a) of Section 35A-50
and if that official requests in writing a copy of the plan.
The insurer shall file a copy of the RBC Plan or Revised RBC
Plan in that state no later than the later of 15 days after
receiving the written request for the copy or the date on which
the RBC Plan or Revised RBC Plan is filed under subsection (c)
or (d) of this Section.
(Source: P.A. 91-549, eff. 8-14-99.)
 
    (215 ILCS 5/445)  (from Ch. 73, par. 1057)
    Sec. 445. Surplus line.
    (1) Definitions. For the purposes of this Section: Surplus
line defined; surplus line insurer requirements. "Surplus line
insurance" means insurance on an Illinois risk of the kinds
specified in Classes 2 and 3 of Section 4 of this Code procured
from an unauthorized insurer after the insurance producer
representing the insured or the surplus line producer is
unable, after diligent effort, to procure said insurance from
authorized insurers.
    "Affiliate" means, with respect to an insured, any entity
that controls, is controlled by, or is under common control
with the insured. For the purpose of this definition, an entity
has control over another entity if:
        (A) the entity directly or indirectly or acting through
    one or more other persons owns, controls, or has the power
    to vote 25% or more of any class of voting securities of
    the other entity; or
        (B) the entity controls in any manner the election of a
    majority of the directors or trustees of the other entity.
    "Affiliated group" means any group of entities that are all
affiliated.
    "Authorized insurer" means an insurer that holds a
certificate of authority issued by the Director but, for the
purposes of this Section, does not include a domestic surplus
line insurer as defined in Section 445a or any residual market
mechanism.
    "Exempt commercial purchaser" means any person purchasing
commercial insurance that, at the time of placement, meets the
following requirements:
        (A) The person employs or retains a qualified risk
    manager to negotiate insurance coverage.
        (B) The person has paid aggregate nationwide
    commercial property and casualty insurance premiums in
    excess of $100,000 in the immediately preceding 12 months.
        (C) The person meets at least one of the following
    criteria:
            (I) The person possesses a net worth in excess of
        $20,000,000, as such amount is adjusted pursuant to the
        provision in this definition concerning percentage
        change.
            (II) The person generates annual revenues in
        excess of $50,000,000, as such amount is adjusted
        pursuant to the provision in this definition
        concerning percentage change.
            (III) The person employs more than 500 full-time or
        full-time equivalent employees per individual insured
        or is a member of an affiliated group employing more
        than 1,000 employees in the aggregate.
            (IV) The person is a not-for-profit organization
        or public entity generating annual budgeted
        expenditures of at least $30,000,000, as such amount is
        adjusted pursuant to the provision in this definition
        concerning percentage change.
            (V) The person is a municipality with a population
        in excess of 50,000 persons.
    Effective on January 1, 2015 and each fifth January 1
occurring thereafter, the amounts in subitems (I), (II), and
(IV) of item (C) of this definition shall be adjusted to
reflect the percentage change for such 5-year period in the
Consumer Price Index for All Urban Consumers published by the
Bureau of Labor Statistics of the Department of Labor.
    "Home state" means the following:
        (A) With respect to an insured, except as provided in
    item (B) of this definition:
            (I) the State in which an insured maintains its
        principal place of business or, in the case of an
        individual, the individual's principal residence; or
            (II) if 100% of the insured risk is located out of
        the State referred to in subitem (I), the State to
        which the greatest percentage of the insured's taxable
        premium for that insurance contract is allocated.
        (B) If more than one insured from an affiliated group
    are named insureds on a single surplus line insurance
    contract, then "home State" means the home State, as
    determined pursuant to item (A) of this definition, of the
    member of the affiliated group that has the largest
    percentage of premium attributed to it under such insurance
    contract.
    "Multi-State risk" means a risk with insured exposures in
more than one State.
    "NAIC" means the National Association of Insurance
Commissioners or any successor entity.
    "Qualified risk manager" means, with respect to a
policyholder of commercial insurance, a person who meets all of
the following requirements:
        (A) The person is an employee of, or third-party
    consultant retained by, the commercial policyholder.
        (B) The person provides skilled services in loss
    prevention, loss reduction, or risk and insurance coverage
    analysis, and purchase of insurance.
        (C) With regard to the person:
            (I) the person has:
                (a) a bachelor's degree or higher from an
            accredited college or university in risk
            management, business administration, finance,
            economics, or any other field determined by the
            Director or his designee to demonstrate minimum
            competence in risk management; and
                (b) the following:
                    (i) three years of experience in risk
                financing, claims administration, loss
                prevention, risk and insurance analysis, or
                purchasing commercial lines of insurance; or
                    (ii) alternatively has:
                        (AA) a designation as a Chartered
                    Property and Casualty Underwriter (in this
                    subparagraph (ii) referred to as "CPCU")
                    issued by the American Institute for
                    CPCU/Insurance Institute of America;
                        (BB) a designation as an Associate in
                    Risk Management (ARM) issued by the
                    American Institute for CPCU/Insurance
                    Institute of America;
                        (CC) a designation as Certified Risk
                    Manager (CRM) issued by the National
                    Alliance for Insurance Education &
                    Research;
                        (DD) a designation as a RIMS Fellow
                    (RF) issued by the Global Risk Management
                    Institute; or
                        (EE) any other designation,
                    certification, or license determined by
                    the Director or his designee to
                    demonstrate minimum competency in risk
                    management;
            (II) the person has:
                (a) at least 7 years of experience in risk
            financing, claims administration, loss prevention,
            risk and insurance coverage analysis, or
            purchasing commercial lines of insurance; and
                (b) has any one of the designations specified
            in subparagraph (ii) of paragraph (b);
            (III) the person has at least 10 years of
        experience in risk financing, claims administration,
        loss prevention, risk and insurance coverage analysis,
        or purchasing commercial lines of insurance; or
            (IV) the person has a graduate degree from an
        accredited college or university in risk management,
        business administration, finance, economics, or any
        other field determined by the Director or his or her
        designee to demonstrate minimum competence in risk
        management.
    "Residual market mechanism" means an association,
organization, or other entity described in Article XXXIII of
this Code or Section 7-501 of the Illinois Vehicle Code or any
similar association, organization, or other entity.
    "State" means any State of the United States, the District
of Columbia, the Commonwealth of Puerto Rico, Guam, the
Northern Mariana Islands, the Virgin Islands, and American
Samoa.
    "Surplus line insurance" means insurance on a risk:
        (A) of the kinds specified in Classes 2 and 3 of
    Section 4 of this Code; and
        (B) that is procured from an unauthorized insurer after
    the insurance producer representing the insured or the
    surplus line producer is unable, after diligent effort, to
    procure the insurance from authorized insurers; and
        (C) where Illinois is the home state of the insured,
    for policies effective, renewed or extended on July 21,
    2011 or later and for multiyear policies upon the policy
    anniversary that falls on or after July 21, 2011; and
        (D) that is located in Illinois, for policies effective
    prior to July 21, 2011.
    "Unauthorized insurer" means an insurer that does not hold
a valid certificate of authority issued by the Director but,
for the purposes of this Section, shall also include a domestic
surplus line insurer as defined in Section 445a.
    (1.5) Procuring surplus line insurance; surplus line
insurer requirements.
    (a) Insurance producers may procure surplus line insurance
only if licensed as a surplus line producer under this Section.
    (b) Licensed surplus line producers and may procure surplus
line that insurance only from an unauthorized insurer domiciled
in the United States only if the insurer:
        (i) is permitted in its domiciliary jurisdiction to
    write the type of insurance involved; and
        (ii) has, (a) that based upon information available to
    the surplus line producer, has a policyholders surplus of
    not less than $15,000,000 determined in accordance with the
    laws of its domiciliary jurisdiction accounting rules that
    are applicable to authorized insurers; and
        (iii) (b) that has standards of solvency and management
    that are adequate for the protection of policyholders. ; and
    Where (c) where an unauthorized insurer does not meet the
standards set forth in (ii) (a) and (iii) (b) above, a surplus
line producer may, if necessary, procure insurance from that
insurer only if prior written warning of such fact or condition
is given to the insured by the insurance producer or surplus
line producer.
    (c) Licensed surplus line producers may procure surplus
line insurance from an unauthorized insurer domiciled outside
of the United States only if the insurer is listed on the
Quarterly Listing of Alien Insurers maintained by the
International Insurers Department of the NAIC. The Director
shall make the Quarterly Listing of Alien Insurers available to
surplus line producers without charge.
    (d) Insurance producers shall not procure from an
unauthorized insurer an insurance policy:
        (i) that is designed to satisfy the proof of financial
    responsibility and insurance requirements in any Illinois
    law where the law requires that the proof of insurance is
    issued by an authorized insurer or residual market
    mechanism;
        (ii) that covers the risk of accidental injury to
    employees arising out of and in the course of employment
    according to the provisions of the Workers' Compensation
    Act; or
        (iii) that insures any Illinois personal lines risk, as
    defined in subsection (a), (b), or (c) of Section 143.13 of
    this Code, that is eligible for residual market mechanism
    coverage, unless the insured or prospective insured
    requests limits of liability greater than the limits
    provided by the residual market mechanism. In the course of
    making a diligent effort to procure insurance from
    authorized insurers, an insurance producer shall not be
    required to submit a risk to a residual market mechanism
    when the risk is not eligible for coverage or exceeds the
    limits available in the residual market mechanism.
    Where there is an insurance policy issued by an authorized
insurer or residual market mechanism insuring a risk described
in item (i), (ii), or (iii) above, nothing in this paragraph
shall be construed to prohibit a surplus line producer from
procuring from an unauthorized insurer a policy insuring the
risk on an excess or umbrella basis where the excess or
umbrella policy is written over one or more underlying
policies.
    (e) Licensed surplus line producers may procure surplus
line insurance from an unauthorized insurer for an exempt
commercial purchaser without making the required diligent
effort to procure the insurance from authorized insurers if:
        (i) the producer has disclosed to the exempt commercial
    purchaser that such insurance may or may not be available
    from authorized insurers that may provide greater
    protection with more regulatory oversight; and
        (ii) the exempt commercial purchaser has subsequently
    in writing requested the producer to procure such insurance
    from an unauthorized insurer.
    (2) Surplus line producer; license. Any licensed producer
who is a resident of this State, or any nonresident who
qualifies under Section 500-40, may be licensed as a surplus
line producer upon: (a) completing a prelicensing course of
study. The course provided for by this Section shall be
conducted under rules and regulations prescribed by the
Director. The Director may administer the course or may make
arrangements, including contracting with an outside
educational service, for administering the course and
collecting the non-refundable application fee provided for in
this subsection. Any charges assessed by the Director or the
educational service for administering the course shall be paid
directly by the individual applicants. Each applicant required
to take the course shall enclose with the application a
non-refundable $20 application fee payable to the Director plus
a separate course administration fee. An applicant who fails to
appear for the course as scheduled, or appears but fails to
complete the course, shall not be entitled to any refund, and
shall be required to submit a new request to attend the course
together with all the requisite fees before being rescheduled
for another course at a later date; and (b) payment of an
annual license fee of $400; and (c) procurement of the surety
bond required in subsection (4) of this Section.
    A surplus line producer so licensed shall keep a separate
account of the business transacted thereunder which shall be
open at all times to the inspection of the Director or his
representative.
    No later than July 21, 2012, the State of Illinois shall
participate in the national insurance producer database of the
NAIC, or any other equivalent uniform national database, for
the licensure of surplus line producers and the renewal of such
licenses.
    The prelicensing course of study requirement in (a) above
shall not apply to insurance producers who were licensed under
the Illinois surplus line law on or before January 1, 2002.
    (3) Taxes and reports.
        (a) Surplus line tax and penalty for late payment.
        The surplus line tax rate for a surplus line insurance
    policy or contract is determined as follows:
            (i) 3% for policies or contracts with an effective
        date prior to July 1, 2003;
            (ii) 3.5% for policies or contracts with an
        effective date of July 1, 2003 or later.
        A surplus line producer shall file with the Director on
    or before February 1 and August 1 of each year a report in
    the form prescribed by the Director on all surplus line
    insurance procured from unauthorized insurers during the
    preceding 6 month period ending December 31 or June 30
    respectively, and on the filing of such report shall pay to
    the Director for the use and benefit of the State a sum
    equal to the surplus line tax rate multiplied by 3.5% of
    the gross premiums less returned premiums upon all surplus
    line insurance submitted to the Surplus Line Association of
    Illinois procured or cancelled during the preceding 6
    months.
        Any surplus line producer who fails to pay the full
    amount due under this subsection is liable, in addition to
    the amount due, for such penalty and interest charges as
    are provided for under Section 412 of this Code. The
    Director, through the Attorney General, may institute an
    action in the name of the People of the State of Illinois,
    in any court of competent jurisdiction, for the recovery of
    the amount of such taxes and penalties due, and prosecute
    the same to final judgment, and take such steps as are
    necessary to collect the same.
        (b) Fire Marshal Tax.
        Each surplus line producer shall file with the Director
    on or before March 31 of each year a report in the form
    prescribed by the Director on all fire insurance procured
    from unauthorized insurers and submitted to the Surplus
    Line Association of Illinois subject to tax under Section
    12 of the Fire Investigation Act and shall pay to the
    Director the fire marshal tax required thereunder.
        (c) Taxes and fees charged to insured. The taxes
    imposed under this subsection and the countersigning fees
    charged by the Surplus Line Association of Illinois may be
    charged to and collected from surplus line insureds.
    (4) (Blank). Bond. Each surplus line producer, as a
condition to receiving a surplus line producer's license, shall
execute and deliver to the Director a surety bond to the People
of the State in the penal sum of $20,000, with a surety which
is authorized to transact business in this State, conditioned
that the surplus line producer will pay to the Director the
tax, interest and penalties levied under subsection (3) of this
Section.
    (5) Submission of documents to Surplus Line Association of
Illinois. A surplus line producer shall submit every insurance
contract issued under his or her license to the Surplus Line
Association of Illinois for recording and countersignature.
The submission and countersignature may be effected through
electronic means. The submission shall set forth:
        (a) the name of the insured;
        (b) the description and location of the insured
    property or risk;
        (c) the amount insured;
        (d) the gross premiums charged or returned;
        (e) the name of the unauthorized insurer from whom
    coverage has been procured;
        (f) the kind or kinds of insurance procured; and
        (g) amount of premium subject to tax required by
    Section 12 of the Fire Investigation Act.
    Proposals, endorsements, and other documents which are
incidental to the insurance but which do not affect the premium
charged are exempted from filing and countersignature.
    The submission of insuring contracts to the Surplus Line
Association of Illinois constitutes a certification by the
surplus line producer or by the insurance producer who
presented the risk to the surplus line producer for placement
as a surplus line risk that after diligent effort the required
insurance could not be procured from authorized insurers and
that such procurement was otherwise in accordance with the
surplus line law.
    (6) Countersignature required. It shall be unlawful for an
insurance producer to deliver any unauthorized insurer
contract unless such insurance contract is countersigned by the
Surplus Line Association of Illinois.
    (7) Inspection of records. A surplus line producer shall
maintain separate records of the business transacted under his
or her license, including complete copies of surplus line
insurance contracts maintained on paper or by electronic means,
which records shall be open at all times for inspection by the
Director and by the Surplus Line Association of Illinois.
    (8) Violations and penalties. The Director may suspend or
revoke or refuse to renew a surplus line producer license for
any violation of this Code. In addition to or in lieu of
suspension or revocation, the Director may subject a surplus
line producer to a civil penalty of up to $2,000 for each cause
for suspension or revocation. Such penalty is enforceable under
subsection (5) of Section 403A of this Code.
    (9) Director may declare insurer ineligible. If the
Director determines that the further assumption of risks might
be hazardous to the policyholders of an unauthorized insurer,
the Director may order the Surplus Line Association of Illinois
not to countersign insurance contracts evidencing insurance in
such insurer and order surplus line producers to cease
procuring insurance from such insurer.
    (10) Service of process upon Director. Insurance contracts
delivered under this Section from unauthorized insurers, other
than domestic surplus line insurers as defined in Section 445a,
shall contain a provision designating the Director and his
successors in office the true and lawful attorney of the
insurer upon whom may be served all lawful process in any
action, suit or proceeding arising out of such insurance.
Service of process made upon the Director to be valid hereunder
must state the name of the insured, the name of the
unauthorized insurer and identify the contract of insurance.
The Director at his option is authorized to forward a copy of
the process to the Surplus Line Association of Illinois for
delivery to the unauthorized insurer or the Director may
deliver the process to the unauthorized insurer by other means
which he considers to be reasonably prompt and certain.
    (10.5) Insurance contracts delivered under this Section
from unauthorized insurers, other than domestic surplus line
insurers as defined in Section 445a, shall have stamped or
imprinted on the first page thereof in not less than 12-pt.
bold face type the following legend: "Notice to Policyholder:
This contract is issued, pursuant to Section 445 of the
Illinois Insurance Code, by a company not authorized and
licensed to transact business in Illinois and as such is not
covered by the Illinois Insurance Guaranty Fund." Insurance
contracts delivered under this Section from domestic surplus
line insurers as defined in Section 445a shall have stamped or
imprinted on the first page thereof in not less than 12-pt.
bold face type the following legend: "Notice to Policyholder:
This contract is issued by a domestic surplus line insurer, as
defined in Section 445a of the Illinois Insurance Code,
pursuant to Section 445, and as such is not covered by the
Illinois Insurance Guaranty Fund."
    (11) The Illinois Surplus Line law does not apply to
insurance of property and operations of railroads or aircraft
engaged in interstate or foreign commerce, insurance of
vessels, crafts or hulls, cargoes, marine builder's risks,
marine protection and indemnity, or other risks including
strikes and war risks insured under ocean or wet marine forms
of policies.
    (12) Surplus line insurance procured under this Section,
including insurance procured from a domestic surplus line
insurer, is not subject to the provisions of the Illinois
Insurance Code other than Sections 123, 123.1, 401, 401.1, 402,
403, 403A, 408, 412, 445, 445.1, 445.2, 445.3, 445.4, and all
of the provisions of Article XXXI to the extent that the
provisions of Article XXXI are not inconsistent with the terms
of this Act.
(Source: P.A. 92-386, eff. 1-1-02; 93-29, eff. 6-20-03; 93-32,
eff. 7-1-03; 93-876, eff. 8-6-04.)
 
    (215 ILCS 5/445a)
    Sec. 445a. Domestic surplus line insurer.
    (a) A domestic insurer possessing policyholder surplus of
at least $15,000,000 may pursuant to a resolution by its board
of directors, and with the written approval of the Director, be
designated as a "domestic surplus line insurer".
    (b) A domestic surplus line insurer may only insure in this
State an Illinois risk only if procured from a surplus line
producer pursuant to Section 445 of this Code.
    (c) A domestic surplus line insurer must agree not to issue
a policy designed to satisfy the financial responsibility
requirements of the Illinois Vehicle Code, the Workers'
Compensation Act, or the Workers' Occupational Diseases Act. A
domestic surplus line insurer is not subject to the provisions
of Articles XXXIII, XXXIII 1/2, XXXIV, XXXVIIIA, Section 468,
or Section 478.1 of this Code.
    (d) For the purposes of the federal Nonadmitted and
Reinsurance Reform Act of 2010 (15 USC 8201 et seq.), a
domestic surplus line insurer shall be considered a nonadmitted
insurer, as the term is defined in the Act, with respect to
risks insured in this State.
(Source: P.A. 90-794, eff. 8-14-98.)
 
    Section 97. Severability. The provisions of this Act are
severable under Section 1.31 of the Statute on Statutes.
 
    Section 99. Effective date. This Act takes effect upon
becoming law.

Effective Date: 08/14/2012