Sen. William R. Haine

Filed: 5/5/2011

 

 


 

 


 
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1
AMENDMENT TO HOUSE BILL 1870

2    AMENDMENT NO. ______. Amend House Bill 1870 by replacing
3everything after the enacting clause with the following:
 
4    "Section 5. The Illinois Insurance Code is amended by
5changing Sections 245.21, 531.03, 531.05, 531.07, 531.08,
6531.09, and 531.14 as follows:
 
7    (215 ILCS 5/245.21)  (from Ch. 73, par. 857.21)
8    Sec. 245.21. Establishment of separate accounts by
9domestic companies organized to do a life, annuity, or accident
10and health insurance business. A domestic company, including
11for the purposes of this Article all domestic fraternal benefit
12societies, may, for authorized classes of insurance, establish
13one or more separate accounts, and may allocate thereto amounts
14(including without limitation proceeds applied under optional
15modes of settlement or under dividend options) to provide for
16life, annuity, or accident and health insurance (and benefits

 

 

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1incidental thereto), payable in fixed or variable amounts or
2both, subject to the following:
3    (1) The income, gains and losses, realized or unrealized,
4from assets allocated to a separate account must be credited to
5or charged against the account, without regard to other income,
6gains or losses of the company.
7    (2) Except as may be provided with respect to reserves for
8guaranteed benefits and funds referred to in paragraph (3) of
9this Section (i) amounts allocated to any separate account and
10accumulations thereon may be invested and reinvested without
11regard to any requirements or limitations of Part 2 or Part 3
12of Article VIII of this Code and (ii) the investments in any
13separate account or accounts may not be taken into account in
14applying the investment limitations otherwise applicable to
15the investments of the company.
16    (3) Except with the approval of the Director and under the
17conditions as to investments and other matters as the Director
18may prescribe, that must recognize the guaranteed nature of the
19benefits provided, reserves for (i) benefits guaranteed as to
20dollar amount and duration and (ii) funds guaranteed as to
21principal amount or stated rate of interest may not be
22maintained in a separate account.
23    (4) Unless otherwise approved by the Director, assets
24allocated to a separate account must be valued at their market
25value on the date of valuation, or if there is no readily
26available market, then as provided in the contract or the rules

 

 

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1or other written agreement applicable to the separate account.
2Unless otherwise approved by the Director, the portion, if any,
3of the assets of the separate account equal to the company's
4reserve liability with regard to the guaranteed benefits and
5funds referred to in paragraph (3) of this Section must be
6valued in accordance with the rules otherwise applicable to the
7company's assets.
8    (5) Amounts allocated to a separate account under this
9Article are owned by the company, and the company may not be,
10nor hold itself out to be, a trustee with respect to those
11amounts. The assets of any separate account equal to the
12reserves and other contract liabilities with respect to the
13account may not be charged with liabilities arising out of any
14other business the company may conduct, except with approval of
15the Director under conditions as to investments and other
16matters as the Director may prescribe.
17    (6) No sale, exchange or other transfer of assets may be
18made by a company between any of its separate accounts or
19between any other investment account and one or more of its
20separate accounts unless, in case of a transfer into a separate
21account, the transfer is made solely to establish the account
22or to support the operation of the contracts with respect to
23the separate account to which the transfer is made, and unless
24the transfer, whether into or from a separate account, is made
25(i) by a transfer of cash, or (ii) by a transfer of securities
26having a readily determinable market value, if the transfer of

 

 

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1securities is approved by the Director. The Director may
2approve other transfers among those accounts if, in his or her
3opinion, the transfers would not be inequitable.
4    (7) To the extent a company considers it necessary to
5comply with any applicable federal or state laws, the company,
6with respect to any separate account, including without
7limitation any separate account which is a management
8investment company or a unit investment trust, may provide for
9persons having an interest therein appropriate voting and other
10rights and special procedures for the conduct of the business
11of the account, including without limitation special rights and
12procedures relating to investment policy, investment advisory
13services, selection of independent public accountants, and the
14selection of a committee, the members of which need not be
15otherwise affiliated with the company, to manage the business
16of the account.
17(Source: P.A. 90-381, eff. 8-14-97; 90-418, eff. 8-15-97;
1890-655, eff. 7-30-98.)".
 
19    (215 ILCS 5/531.03)  (from Ch. 73, par. 1065.80-3)
20    Sec. 531.03. Coverage and limitations.
21    (1) This Article shall provide coverage for the policies
22and contracts specified in paragraph (2) of this Section:
23        (a) to persons who, regardless of where they reside
24    (except for non-resident certificate holders under group
25    policies or contracts), are the beneficiaries, assignees

 

 

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1    or payees of the persons covered under subparagraph (1)(b),
2    and
3        (b) to persons who are owners of or certificate holders
4    under the policies or contracts (other than unallocated
5    annuity contracts and structured settlement annuities) and
6    in each case who:
7            (i) are residents; or
8            (ii) are not residents, but only under all of the
9        following conditions:
10                (A) the insurer that issued the policies or
11            contracts is domiciled in this State;
12                (B) the states in which the persons reside have
13            associations similar to the Association created by
14            this Article;
15                (C) the persons are not eligible for coverage
16            by an association in any other state due to the
17            fact that the insurer was not licensed in that
18            state at the time specified in that state's
19            guaranty association law.
20        (c) For unallocated annuity contracts specified in
21    subsection (2), paragraphs (a) and (b) of this subsection
22    (1) shall not apply and this Article shall (except as
23    provided in paragraphs (e) and (f) of this subsection)
24    provide coverage to:
25            (i) persons who are the owners of the unallocated
26        annuity contracts if the contracts are issued to or in

 

 

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1        connection with a specific benefit plan whose plan
2        sponsor has its principal place of business in this
3        State; and
4            (ii) persons who are owners of unallocated annuity
5        contracts issued to or in connection with government
6        lotteries if the owners are residents.
7        (d) For structured settlement annuities specified in
8    subsection (2), paragraphs (a) and (b) of this subsection
9    (1) shall not apply and this Article shall (except as
10    provided in paragraphs (e) and (f) of this subsection)
11    provide coverage to a person who is a payee under a
12    structured settlement annuity (or beneficiary of a payee if
13    the payee is deceased), if the payee:
14            (i) is a resident, regardless of where the contract
15        owner resides; or
16            (ii) is not a resident, but only under both of the
17        following conditions:
18                (A) with regard to residency:
19                    (I) the contract owner of the structured
20                settlement annuity is a resident; or
21                    (II) the contract owner of the structured
22                settlement annuity is not a resident but the
23                insurer that issued the structured settlement
24                annuity is domiciled in this State and the
25                state in which the contract owner resides has
26                an association similar to the Association

 

 

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1                created by this Article; and
2                (B) neither the payee or beneficiary nor the
3            contract owner is eligible for coverage by the
4            association of the state in which the payee or
5            contract owner resides.
6        (e) This Article shall not provide coverage to:
7            (i) a person who is a payee or beneficiary of a
8        contract owner resident of this State if the payee or
9        beneficiary is afforded any coverage by the
10        association of another state; or
11            (ii) a person covered under paragraph (c) of this
12        subsection (1), if any coverage is provided by the
13        association of another state to that person.
14        (f) This Article is intended to provide coverage to a
15    person who is a resident of this State and, in special
16    circumstances, to a nonresident. In order to avoid
17    duplicate coverage, if a person who would otherwise receive
18    coverage under this Article is provided coverage under the
19    laws of any other state, then the person shall not be
20    provided coverage under this Article. In determining the
21    application of the provisions of this paragraph in
22    situations where a person could be covered by the
23    association of more than one state, whether as an owner,
24    payee, beneficiary, or assignee, this Article shall be
25    construed in conjunction with other state laws to result in
26    coverage by only one association.

 

 

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1    (2)(a) This Article shall provide coverage to the persons
2specified in paragraph (l) of this Section for direct, (i)
3nongroup life, health, annuity and supplemental policies, or
4contracts, (ii) for certificates under direct group policies or
5contracts, (iii) for unallocated annuity contracts and (iv) for
6contracts to furnish health care services and subscription
7certificates for medical or health care services issued by
8persons licensed to transact insurance business in this State
9under the Illinois Insurance Code. Annuity contracts and
10certificates under group annuity contracts include but are not
11limited to guaranteed investment contracts, deposit
12administration contracts, unallocated funding agreements,
13allocated funding agreements, structured settlement
14agreements, lottery contracts and any immediate or deferred
15annuity contracts.
16    (b) This Article shall not provide coverage for:
17        (i) that portion of a policy or contract not guaranteed
18    by the insurer, or under which the risk is borne by the
19    policy or contract owner;
20        (ii) any such policy or contract or part thereof
21    assumed by the impaired or insolvent insurer under a
22    contract of reinsurance, other than reinsurance for which
23    assumption certificates have been issued;
24        (iii) any portion of a policy or contract to the extent
25    that the rate of interest on which it is based or the
26    interest rate, crediting rate, or similar factor is

 

 

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1    determined by use of an index or other external reference
2    stated in the policy or contract employed in calculating
3    returns or changes in value:
4            (A) averaged over the period of 4 years prior to
5        the date on which the member insurer becomes an
6        impaired or insolvent insurer under this Article,
7        whichever is earlier, exceeds the rate of interest
8        determined by subtracting 2 percentage points from
9        Moody's Corporate Bond Yield Average averaged for that
10        same 4-year period or for such lesser period if the
11        policy or contract was issued less than 4 years before
12        the member insurer becomes an impaired or insolvent
13        insurer under this Article, whichever is earlier; and
14            (B) on and after the date on which the member
15        insurer becomes an impaired or insolvent insurer under
16        this Article, whichever is earlier, exceeds the rate of
17        interest determined by subtracting 3 percentage points
18        from Moody's Corporate Bond Yield Average as most
19        recently available;
20        (iv) any unallocated annuity contract issued to or in
21    connection with a benefit plan protected under the federal
22    Pension Benefit Guaranty Corporation, regardless of
23    whether the federal Pension Benefit Guaranty Corporation
24    has yet become liable to make any payments with respect to
25    the benefit plan;
26        (v) any portion of any unallocated annuity contract

 

 

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1    which is not issued to or in connection with a specific
2    employee, union or association of natural persons benefit
3    plan or a government lottery;
4        (vi) an obligation that does not arise under the
5    express written terms of the policy or contract issued by
6    the insurer to the contract owner or policy owner,
7    including without limitation:
8            (A) a claim based on marketing materials;
9            (B) a claim based on side letters, riders, or other
10        documents that were issued by the insurer without
11        meeting applicable policy form filing or approval
12        requirements;
13            (C) a misrepresentation of or regarding policy
14        benefits;
15            (D) an extra-contractual claim; or
16            (E) a claim for penalties or consequential or
17        incidental damages;
18        (vii) any stop-loss insurance, as defined in clause (b)
19    of Class 1 or clause (a) of Class 2 of Section 4, and
20    further defined in subsection (d) of Section 352;
21        (viii) any policy or contract providing any hospital,
22    medical, prescription drug, or other health care benefits
23    pursuant to Part C or Part D of Subchapter XVIII, Chapter 7
24    of Title 42 of the United States Code (commonly known as
25    Medicare Part C & D) or any regulations issued pursuant
26    thereto;

 

 

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1        (ix) any portion of a policy or contract to the extent
2    that the assessments required by Section 531.09 of this
3    Code with respect to the policy or contract are preempted
4    or otherwise not permitted by federal or State law;
5        (x) any portion of a policy or contract issued to a
6    plan or program of an employer, association, or other
7    person to provide life, health, or annuity benefits to its
8    employees, members, or others to the extent that the plan
9    or program is self-funded or uninsured, including, but not
10    limited to, benefits payable by an employer, association,
11    or other person under:
12            (A) a multiple employer welfare arrangement as
13        defined in 29 U.S.C. Section 1002 29 U.S.C. Section
14        1144;
15            (B) a minimum premium group insurance plan;
16            (C) a stop-loss group insurance plan; or
17            (D) an administrative services only contract;
18        (xi) any portion of a policy or contract to the extent
19    that it provides for:
20            (A) dividends or experience rating credits;
21            (B) voting rights; or
22            (C) payment of any fees or allowances to any
23        person, including the policy or contract owner, in
24        connection with the service to or administration of the
25        policy or contract;
26        (xii) any policy or contract issued in this State by a

 

 

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1    member insurer at a time when it was not licensed or did
2    not have a certificate of authority to issue the policy or
3    contract in this State;
4        (xiii) any contractual agreement that establishes the
5    member insurer's obligations to provide a book value
6    accounting guaranty for defined contribution benefit plan
7    participants by reference to a portfolio of assets that is
8    owned by the benefit plan or its trustee, which in each
9    case is not an affiliate of the member insurer;
10        (xiv) any portion of a policy or contract to the extent
11    that it provides for interest or other changes in value to
12    be determined by the use of an index or other external
13    reference stated in the policy or contract, but which have
14    not been credited to the policy or contract, or as to which
15    the policy or contract owner's rights are subject to
16    forfeiture, as of the date the member insurer becomes an
17    impaired or insolvent insurer under this Code, whichever is
18    earlier. If a policy's or contract's interest or changes in
19    value are credited less frequently than annually, then for
20    purposes of determining the values that have been credited
21    and are not subject to forfeiture under this Section, the
22    interest or change in value determined by using the
23    procedures defined in the policy or contract will be
24    credited as if the contractual date of crediting interest
25    or changing values was the date of impairment or
26    insolvency, whichever is earlier, and will not be subject

 

 

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1    to forfeiture; or
2        (xv) that portion or part of a variable life insurance
3    or variable annuity contract not guaranteed by an insurer.
4    (3) The benefits for which the Association may become
5liable shall in no event exceed the lesser of:
6        (a) the contractual obligations for which the insurer
7    is liable or would have been liable if it were not an
8    impaired or insolvent insurer, or
9        (b)(i) with respect to any one life, regardless of the
10    number of policies or contracts:
11            (A) $300,000 in life insurance death benefits, but
12        not more than $100,000 in net cash surrender and net
13        cash withdrawal values for life insurance;
14            (B) in health insurance benefits:
15                (I) $100,000 for coverages not defined as
16            disability insurance or basic hospital, medical,
17            and surgical insurance or major medical insurance
18            or long-term care insurance, including any net
19            cash surrender and net cash withdrawal values;
20                (II) $300,000 for disability insurance and
21            $300,000 for long-term care insurance as defined
22            in Section 351A-1 of this Code; and
23                (III) $500,000 for basic hospital medical and
24            surgical insurance or major medical insurance;
25            (C) $250,000 in the present value of annuity
26        benefits, including net cash surrender and net cash

 

 

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1        withdrawal values;
2        (ii) with respect to each individual participating in a
3    governmental retirement benefit plan established under
4    Sections 401, 403(b), or 457 of the U.S. Internal Revenue
5    Code covered by an unallocated annuity contract or the
6    beneficiaries of each such individual if deceased, in the
7    aggregate, $250,000 in present value annuity benefits,
8    including net cash surrender and net cash withdrawal
9    values;
10        (iii) with respect to each payee of a structured
11    settlement annuity or beneficiary or beneficiaries of the
12    payee if deceased, $250,000 in present value annuity
13    benefits, in the aggregate, including net cash surrender
14    and net cash withdrawal values, if any; or
15        (iv) with respect to either (1) one contract owner
16    provided coverage under subparagraph (ii) of paragraph (c)
17    of subsection (1) of this Section or (2) one plan sponsor
18    whose plans own directly or in trust one or more
19    unallocated annuity contracts not included in subparagraph
20    (ii) of paragraph (b) of this subsection, $5,000,000 in
21    benefits, irrespective of the number of contracts with
22    respect to the contract owner or plan sponsor. However, in
23    the case where one or more unallocated annuity contracts
24    are covered contracts under this Article and are owned by a
25    trust or other entity for the benefit of 2 or more plan
26    sponsors, coverage shall be afforded by the Association if

 

 

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1    the largest interest in the trust or entity owning the
2    contract or contracts is held by a plan sponsor whose
3    principal place of business is in this State. In no event
4    shall the Association be obligated to cover more than
5    $5,000,000 in benefits with respect to all these
6    unallocated contracts.
7    (3.1) Notwithstanding the provisions of subsection (3), in
8In no event shall the Association be obligated to cover more
9than (1) an aggregate of $300,000 in benefits with respect to
10any one life under subparagraphs (i), (ii), and (iii) of this
11paragraph (b) of subsection (3) except with respect to benefits
12for basic hospital, medical, and surgical insurance and major
13medical insurance under item (B) of subparagraph (i) of this
14paragraph (b) of subsection (3), in which case the aggregate
15liability of the Association shall not exceed $500,000 with
16respect to any one individual or (2) with respect to one owner
17of multiple nongroup policies of life insurance, whether the
18policy owner is an individual, firm, corporation, or other
19person and whether the persons insured are officers, managers,
20employees, or other persons, $5,000,000 in benefits,
21regardless of the number of policies and contracts held by the
22owner.
23    (3.2) The limitations set forth in subsections (3) and
24(3.1) this subsection are limitations on the benefits for which
25the Association is obligated before taking into account either
26its subrogation and assignment rights or the extent to which

 

 

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1those benefits could be provided out of the assets of the
2impaired or insolvent insurer attributable to covered
3policies. The costs of the Association's obligations under this
4Article may be met by the use of assets attributable to covered
5policies or reimbursed to the Association pursuant to its
6subrogation and assignment rights.
7    (4) In performing its obligations to provide coverage under
8Section 531.08 of this Code, the Association shall not be
9required to guarantee, assume, reinsure, or perform or cause to
10be guaranteed, assumed, reinsured, or performed the
11contractual obligations of the insolvent or impaired insurer
12under a covered policy or contract that do not materially
13affect the economic values or economic benefits of the covered
14policy or contract.
15(Source: P.A. 96-1450, eff. 8-20-10.)
 
16    (215 ILCS 5/531.05)  (from Ch. 73, par. 1065.80-5)
17    Sec. 531.05. Definitions. As used in this Act:
18    "Account" means either of the 2 3 accounts created under
19Section 531.06.
20    "Association" means the Illinois Life and Health Insurance
21Guaranty Association created under Section 531.06.
22    "Authorized assessment" or the term "authorized" when used
23in the context of assessments means a resolution by the Board
24of Directors has been passed whereby an assessment shall be
25called immediately or in the future from member insurers for a

 

 

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1specified amount. An assessment is authorized when the
2resolution is passed.
3    "Benefit plan" means a specific employee, union, or
4association of natural persons benefit plan.
5    "Called assessment" or the term "called" when used in the
6context of assessments means that a notice has been issued by
7the Association to member insurers requiring that an authorized
8assessment be paid within the time frame set forth within the
9notice. An authorized assessment becomes a called assessment
10when notice is mailed by the Association to member insurers.
11    "Director" means the Director of Insurance of this State.
12    "Contractual obligation" means any obligation under a
13policy or contract or certificate under a group policy or
14contract, or portion thereof for which coverage is provided
15under Section 531.03.
16    "Covered person" means any person who is entitled to the
17protection of the Association as described in Section 531.02.
18    "Covered policy" means any policy or contract within the
19scope of this Article under Section 531.03.
20    "Extra-contractual claims" shall include, for example,
21claims relating to bad faith in the payment of claims, punitive
22or exemplary damages, or attorneys' fees and costs.
23    "Impaired insurer" means (A) a member insurer which, after
24the effective date of this amendatory Act of the 96th General
25Assembly, is not an insolvent insurer, and is placed under an
26order of rehabilitation or conservation by a court of competent

 

 

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1jurisdiction or (B) a member insurer deemed by the Director
2after the effective date of this amendatory Act of the 96th
3General Assembly to be potentially unable to fulfill its
4contractual obligations and not an insolvent insurer.
5    "Insolvent insurer" means a member insurer that, after the
6effective date of this amendatory Act of the 96th General
7Assembly, is placed under a final order of liquidation by a
8court of competent jurisdiction with a finding of insolvency.
9    "Member insurer" means an insurer licensed or holding a
10certificate of authority to transact in this State any kind of
11insurance for which coverage is provided under Section 531.03
12of this Code and includes an insurer whose license or
13certificate of authority in this State may have been suspended,
14revoked, not renewed, or voluntarily withdrawn or whose
15certificate of authority may have been suspended pursuant to
16Section 119 of this Code, but does not include:
17        (1) a hospital or medical service organization,
18    whether profit or nonprofit;
19        (2) a health maintenance organization;
20        (3) any burial society organized under Article XIX of
21    this Code, any fraternal benefit society organized under
22    Article XVII of this Code, any mutual benefit association
23    organized under Article XVIII of this Code, and any foreign
24    fraternal benefit society licensed under Article VI of this
25    Code or a fraternal benefit society;
26        (4) a mandatory State pooling plan;

 

 

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1        (5) a mutual assessment company or other person that
2    operates on an assessment basis;
3        (6) an insurance exchange;
4        (7) an organization that is permitted to issue
5    charitable gift annuities pursuant to Section 121-2.10 of
6    this Code;
7        (8) any health services plan corporation established
8    pursuant to the Voluntary Health Services Plans Act;
9        (9) any dental service plan corporation established
10    pursuant to the Dental Service Plan Act; or
11        (10) an entity similar to any of the above.
12    "Moody's Corporate Bond Yield Average" means the Monthly
13Average Corporates as published by Moody's Investors Service,
14Inc., or any successor thereto.
15    "Owner" of a policy or contract and "policy owner" and
16"contract owner" mean the person who is identified as the legal
17owner under the terms of the policy or contract or who is
18otherwise vested with legal title to the policy or contract
19through a valid assignment completed in accordance with the
20terms of the policy or contract and properly recorded as the
21owner on the books of the insurer. The terms owner, contract
22owner, and policy owner do not include persons with a mere
23beneficial interest in a policy or contract.
24    "Person" means an individual, corporation, limited
25liability company, partnership, association, governmental body
26or entity, or voluntary organization.

 

 

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1    "Plan sponsor" means:
2        (1) the employer in the case of a benefit plan
3    established or maintained by a single employer;
4        (2) the employee organization in the case of a benefit
5    plan established or maintained by an employee
6    organization; or
7        (3) in a case of a benefit plan established or
8    maintained by 2 or more employers or jointly by one or more
9    employers and one or more employee organizations, the
10    association, committee, joint board of trustees, or other
11    similar group of representatives of the parties who
12    establish or maintain the benefit plan.
13    "Premiums" mean amounts or considerations, by whatever
14name called, received on covered policies or contracts less
15returned premiums, considerations, and deposits and less
16dividends and experience credits.
17    "Premiums" does not include:
18        (A) amounts or considerations received for policies or
19    contracts or for the portions of policies or contracts for
20    which coverage is not provided under Section 531.03 of this
21    Code except that assessable premium shall not be reduced on
22    account of the provisions of subparagraph (iii) of
23    paragraph (b) of subsection (2) (a) of Section 531.03 of
24    this Code relating to interest limitations and the
25    provisions of paragraph (b) of subsection (3), subsection
26    (3.1), or subsection (3.2) of Section 531.03 relating to

 

 

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1    limitations with respect to one individual, one
2    participant, and one contract owner;
3        (B) premiums in excess of $5,000,000 on an unallocated
4    annuity contract not issued under a governmental
5    retirement benefit plan (or its trustee) established under
6    Section 401, 403(b) or 457 of the United States Internal
7    Revenue Code; or
8        (C) with respect to multiple nongroup policies of life
9    insurance owned by one owner, whether the policy owner is
10    an individual, firm, corporation, or other person, and
11    whether the persons insured are officers, managers,
12    employees, or other persons, premiums in excess of
13    $5,000,000 with respect to these policies or contracts,
14    regardless of the number of policies or contracts held by
15    the owner.
16    "Principal place of business" of a plan sponsor or a person
17other than a natural person means the single state in which the
18natural persons who establish policy for the direction,
19control, and coordination of the operations of the entity as a
20whole primarily exercise that function, determined by the
21Association in its reasonable judgment by considering the
22following factors:
23        (A) the state in which the primary executive and
24    administrative headquarters of the entity is located;
25        (B) the state in which the principal office of the
26    chief executive officer of the entity is located;

 

 

09700HB1870sam002- 22 -LRB097 08603 AMC 55159 a

1        (C) the state in which the board of directors (or
2    similar governing person or persons) of the entity conducts
3    the majority of its meetings;
4        (D) the state in which the executive or management
5    committee of the board of directors (or similar governing
6    person or persons) of the entity conducts the majority of
7    its meetings;
8        (E) the state from which the management of the overall
9    operations of the entity is directed; and
10        (F) in the case of a benefit plan sponsored by
11    affiliated companies comprising a consolidated
12    corporation, the state in which the holding company or
13    controlling affiliate has its principal place of business
14    as determined using the above factors.
15    However, in the case of a plan sponsor, if more than 50% of
16the participants in the benefit plan are employed in a single
17state, that state shall be deemed to be the principal place of
18business of the plan sponsor.
19    The principal place of business of a plan sponsor of a
20benefit plan described in paragraph (3) of the definition of
21"plan sponsor" this Section shall be deemed to be the principal
22place of business of the association, committee, joint board of
23trustees, or other similar group of representatives of the
24parties who establish or maintain the benefit plan that, in
25lieu of a specific or clear designation of a principal place of
26business, shall be deemed to be the principal place of business

 

 

09700HB1870sam002- 23 -LRB097 08603 AMC 55159 a

1of the employer or employee organization that has the largest
2investment in the benefit plan in question.
3    "Receivership court" means the court in the insolvent or
4impaired insurer's state having jurisdiction over the
5conservation, rehabilitation, or liquidation of the insurer.
6    "Resident" means a person to whom a contractual obligation
7is owed and who resides in this State on the date of entry of a
8court order that determines a member insurer to be an impaired
9insurer or a court order that determines a member insurer to be
10an insolvent insurer. A person may be a resident of only one
11state, which in the case of a person other than a natural
12person shall be its principal place of business. Citizens of
13the United States that are either (i) residents of foreign
14countries or (ii) residents of United States possessions,
15territories, or protectorates that do not have an association
16similar to the Association created by this Article, shall be
17deemed residents of the state of domicile of the insurer that
18issued the policies or contracts.
19    "Structured settlement annuity" means an annuity purchased
20in order to fund periodic payments for a plaintiff or other
21claimant in payment for or with respect to personal injury
22suffered by the plaintiff or other claimant.
23    "State" means a state, the District of Columbia, Puerto
24Rico, and a United States possession, territory, or
25protectorate.
26    "Supplemental contract" means a written agreement entered

 

 

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1into for the distribution of proceeds under a life, health, or
2annuity policy or a life, health, or annuity contract.
3    "Unallocated annuity contract" means any annuity contract
4or group annuity certificate which is not issued to and owned
5by an individual, except to the extent of any annuity benefits
6guaranteed to an individual by an insurer under such contract
7or certificate.
8(Source: P.A. 96-1450, eff. 8-20-10.)
 
9    (215 ILCS 5/531.07)  (from Ch. 73, par. 1065.80-7)
10    Sec. 531.07. Board of Directors.) The board of directors
11of the Association consists of not less than 7 nor more than 11
12members serving terms as established in the plan of operation.
13The insurer members insurers of the board are to be selected by
14member insurers subject to the approval of the Director. In
15addition, 2 persons who must be public representatives may be
16appointed by the Director to the board of directors. A public
17representative may not be an officer, director, or employee of
18an insurance company or any person engaged in the business of
19insurance. Vacancies on the board must be filled for the
20remaining period of the term in the manner described in the
21plan of operation.
22    In approving selections or in appointing members to the
23board, the Director must consider, whether all member insurers
24are fairly represented.
25    Members of the board may be reimbursed from the assets of

 

 

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1the Association for expenses incurred by them as members of the
2board of directors but members of the board may not otherwise
3be compensated by the Association for their services.
4(Source: P.A. 96-1450, eff. 8-20-10.)
 
5    (215 ILCS 5/531.08)  (from Ch. 73, par. 1065.80-8)
6    Sec. 531.08. Powers and duties of the Association.
7    (a) In addition to the powers and duties enumerated in
8other Sections of this Article:
9        (1) If a member insurer is an impaired insurer, then
10    the Association may, in its discretion and subject to any
11    conditions imposed by the Association that do not impair
12    the contractual obligations of the impaired insurer and
13    that are approved by the Director:
14            (a) (A) guarantee, assume, or reinsure or cause to
15        be guaranteed, assumed, or reinsured, any or all of the
16        policies or contracts of the impaired insurer; or
17            (b) (B) provide such money, pledges, loans, notes,
18        guarantees, or other means as are proper to effectuate
19        paragraph (a) (A) and assure payment of the contractual
20        obligations of the impaired insurer pending action
21        under paragraph (a) (A).
22        (2) If a member insurer is an insolvent insurer, then
23    the Association shall, in its discretion, either:
24            (a) (A) guaranty, assume, or reinsure or cause to
25        be guaranteed, assumed, or reinsured the policies or

 

 

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1        contracts of the insolvent insurer or assure payment of
2        the contractual obligations of the insolvent insurer
3        and provide money, pledges, loans, notes, guarantees,
4        or other means reasonably necessary to discharge the
5        Association's duties; or
6            (b) (B) provide benefits and coverages in
7        accordance with the following provisions:
8                (i) with respect to life and health insurance
9            policies and annuities, assure ensure payment of
10            benefits for premiums identical to the premiums
11            and benefits (except for terms of conversion and
12            renewability) that would have been payable under
13            the policies or contracts of the insolvent insurer
14            for claims incurred:
15                    (A) (a) with respect to group policies and
16                contracts, not later than the earlier of the
17                next renewal date under those policies or
18                contracts or 45 days, but in no event less than
19                30 days, after the date on which the
20                Association becomes obligated with respect to
21                the policies and contracts;
22                    (B) (b) with respect to nongroup policies,
23                contracts, and annuities not later than the
24                earlier of the next renewal date (if any) under
25                the policies or contracts or one year, but in
26                no event less than 30 days, from the date on

 

 

09700HB1870sam002- 27 -LRB097 08603 AMC 55159 a

1                which the Association becomes obligated with
2                respect to the policies or contracts;
3                (ii) make diligent efforts to provide all
4            known insureds or annuitants (for nongroup
5            policies and contracts), or group policy owners
6            with respect to group policies and contracts, 30
7            days notice of the termination (pursuant to
8            subparagraph (i) of this paragraph (b) (B)) of the
9            benefits provided;
10                (iii) with respect to nongroup life and health
11            insurance policies and annuities covered by the
12            Association, make available to each known insured
13            or annuitant, or owner if other than the insured or
14            annuitant, and with respect to an individual
15            formerly insured or formerly an annuitant under a
16            group policy who is not eligible for replacement
17            group coverage, make available substitute coverage
18            on an individual basis in accordance with the
19            provisions of paragraph (iv) (3), if the insureds
20            or annuitants had a right under law or the
21            terminated policy or annuity to convert coverage
22            to individual coverage or to continue an
23            individual policy or annuity in force until a
24            specified age or for a specified time, during which
25            the insurer had no right unilaterally to make
26            changes in any provision of the policy or annuity

 

 

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1            or had a right only to make changes in premium by
2            class.
3                 (iv) (b) In providing the substitute coverage
4            required under subparagraph (iii), of paragraph
5            (B) of item (2) of subsection (a) of this Section,
6            the Association may offer either to reissue the
7            terminated coverage or to issue an alternative
8            policy.
9                 Alternative or reissued policies shall be
10            offered without requiring evidence of
11            insurability, and shall not provide for any
12            waiting period or exclusion that would not have
13            applied under the terminated policy.
14                 The Association may reinsure any alternative
15            or reissued policy.
16                 Alternative policies adopted by the
17            Association shall be subject to the approval of the
18            Director. The Association may adopt alternative
19            policies of various types for future insurance
20            without regard to any particular impairment or
21            insolvency.
22                 (v) Alternative policies shall contain at
23            least the minimum statutory provisions required in
24            this State and provide benefits that shall not be
25            unreasonable in relation to the premium charged.
26            The Association shall set the premium in

 

 

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1            accordance with a table of rates which it shall
2            adopt. The premium shall reflect the amount of
3            insurance to be provided and the age and class of
4            risk of each insured, but shall not reflect any
5            changes in the health of the insured after the
6            original policy was last underwritten.
7                 Any alternative policy issued by the
8            Association shall provide coverage of a type
9            similar to that of the policy issued by the
10            impaired or insolvent insurer, as determined by
11            the Association.
12                 (vi) (c) If the Association elects to reissue
13            terminated coverage at a premium rate different
14            from that charged under the terminated policy, the
15            premium shall be set by the Association in
16            accordance with the amount of insurance provided
17            and the age and class of risk, subject to approval
18            of the Director or by a court of competent
19            jurisdiction.
20                 (vii) (d) The Association's obligations with
21            respect to coverage under any policy of the
22            impaired or insolvent insurer or under any
23            reissued or alternative policy shall cease on the
24            date such coverage or policy is replaced by another
25            similar policy by the policyholder, the insured,
26            or the Association.

 

 

09700HB1870sam002- 30 -LRB097 08603 AMC 55159 a

1                 (viii) (e) When proceeding under this Section
2            with respect to any policy or contract carrying
3            guaranteed minimum interest rates, the Association
4            shall assure the payment or crediting of a rate of
5            interest consistent with subparagraph
6            (2)(b)(iii)(B) of Section 531.03.
7         (3) (f) Nonpayment of premiums thirty-one days after
8    the date required under the terms of any guaranteed,
9    assumed, alternative or reissued policy or contract or
10    substitute coverage shall terminate the Association's
11    obligations under such policy or coverage under this Act
12    with respect to such policy or coverage, except with
13    respect to any claims incurred or any net cash surrender
14    value which may be due in accordance with the provisions of
15    this Act.
16         (4) (g) Premiums due for coverage after entry of an
17    order of liquidation of an insolvent insurer shall belong
18    to and be payable at the direction of the Association, and
19    the Association shall be liable for unearned premiums due
20    to policy or contract owners arising after the entry of
21    such order.
22        (5) (h) In carrying out its duties under paragraph (2)
23    of subsection (a) of this Section, the Association may:
24            (a) (1) subject to approval by a court in this
25        State, impose permanent policy or contract liens in
26        connection with a guarantee, assumption, or

 

 

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1        reinsurance agreement if the Association finds that
2        the amounts which can be assessed under this Article
3        are less than the amounts needed to assure full and
4        prompt performance of the Association's duties under
5        this Article or that the economic or financial
6        conditions as they affect member insurers are
7        sufficiently adverse to render the imposition of such
8        permanent policy or contract liens to be in the public
9        interest; or
10            (b) (2) subject to approval by a court in this
11        State, impose temporary moratoriums or liens on
12        payments of cash values and policy loans or any other
13        right to withdraw funds held in conjunction with
14        policies or contracts in addition to any contractual
15        provisions for deferral of cash or policy loan value.
16        In addition, in the event of a temporary moratorium or
17        moratorium charge imposed by the receivership court on
18        payment of cash values or policy loans or on any other
19        right to withdraw funds held in conjunction with
20        policies or contracts, out of the assets of the
21        impaired or insolvent insurer, the Association may
22        defer the payment of cash values, policy loans, or
23        other rights by the Association for the period of the
24        moratorium or moratorium charge imposed by the
25        receivership court, except for claims covered by the
26        Association to be paid in accordance with a hardship

 

 

09700HB1870sam002- 32 -LRB097 08603 AMC 55159 a

1        procedure established by the liquidator or
2        rehabilitator and approved by the receivership court.
3        (6) (i) There shall be no liability on the part of and
4    no cause of action shall arise against the Association or
5    against any transferee from the Association in connection
6    with the transfer by reinsurance or otherwise of all or any
7    part of an impaired or insolvent insurer's business by
8    reason of any action taken or any failure to take any
9    action by the impaired or insolvent insurer at any time.
10        (7) (j) If the Association fails to act within a
11    reasonable period of time as provided in subsection (2) of
12    this Section with respect to an insolvent insurer, the
13    Director shall have the powers and duties of the
14    Association under this Act with regard to such insolvent
15    insurers.
16        (8) (k) The Association or its designated
17    representatives may render assistance and advice to the
18    Director, upon his request, concerning rehabilitation,
19    payment of claims, continuations of coverage, or the
20    performance of other contractual obligations of any
21    impaired or insolvent insurer.
22        (9) (l) The Association shall have standing to appear
23    or intervene before a court or agency in this State with
24    jurisdiction over an impaired or insolvent insurer
25    concerning which the Association is or may become obligated
26    under this Article or with jurisdiction over any person or

 

 

09700HB1870sam002- 33 -LRB097 08603 AMC 55159 a

1    property against which the Association may have rights
2    through subrogation or otherwise. Standing shall extend to
3    all matters germane to the powers and duties of the
4    Association, including, but not limited to, proposals for
5    reinsuring, modifying, or guaranteeing the policies or
6    contracts of the impaired or insolvent insurer and the
7    determination of the policies or contracts and contractual
8    obligations. The Association shall also have the right to
9    appear or intervene before a court or agency in another
10    state with jurisdiction over an impaired or insolvent
11    insurer for which the Association is or may become
12    obligated or with jurisdiction over any person or property
13    against whom the Association may have rights through
14    subrogation or otherwise.
15        (10)(a) (m)(1) A person receiving benefits under this
16    Article shall be deemed to have assigned the rights under
17    and any causes of action against any person for losses
18    arising under, resulting from, or otherwise relating to the
19    covered policy or contract to the Association to the extent
20    of the benefits received because of this Article, whether
21    the benefits are payments of or on account of contractual
22    obligations, continuation of coverage, or provision of
23    substitute or alternative coverages. The Association may
24    require an assignment to it of such rights and cause of
25    action by any payee, policy, or contract owner,
26    beneficiary, insured, or annuitant as a condition

 

 

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1    precedent to the receipt of any right or benefits conferred
2    by this Article upon the person.
3        (b) (2) The subrogation rights of the Association under
4    this subsection have the same priority against the assets
5    of the impaired or insolvent insurer as that possessed by
6    the person entitled to receive benefits under this Article.
7        (c) (3) In addition to paragraphs (a) (1) and (b) (2),
8    the Association shall have all common law rights of
9    subrogation and any other equitable or legal remedy that
10    would have been available to the impaired or insolvent
11    insurer or owner, beneficiary, or payee of a policy or
12    contract with respect to the policy or contracts, including
13    without limitation, in the case of a structured settlement
14    annuity, any rights of the owner, beneficiary, or payee of
15    the annuity to the extent of benefits received pursuant to
16    this Article, against a person originally or by succession
17    responsible for the losses arising from the personal injury
18    relating to the annuity or payment therefor, excepting any
19    such person responsible solely by reason of serving as an
20    assignee in respect of a qualified assignment under
21    Internal Revenue Code Section 130.
22        (d) (4) If the preceding provisions of this subsection
23    (10) (l) are invalid or ineffective with respect to any
24    person or claim for any reason, then the amount payable by
25    the Association with respect to the related covered
26    obligations shall be reduced by the amount realized by any

 

 

09700HB1870sam002- 35 -LRB097 08603 AMC 55159 a

1    other person with respect to the person or claim that is
2    attributable to the policies, or portion thereof, covered
3    by the Association.
4        (e) (5) If the Association has provided benefits with
5    respect to a covered obligation and a person recovers
6    amounts as to which the Association has rights as described
7    in the preceding paragraphs of this subsection (10), then
8    the person shall pay to the Association the portion of the
9    recovery attributable to the policies, or portion thereof,
10    covered by the Association.
11        (11) (n) The Association may:
12            (a) (1) Enter into such contracts as are necessary
13        or proper to carry out the provisions and purposes of
14        this Article. ;
15            (b) (2) Sue or be sued, including taking any legal
16        actions necessary or proper for recovery of any unpaid
17        assessments under Section 531.09. The Association
18        shall not be liable for punitive or exemplary damages. ;
19            (c) (3) Borrow money to effect the purposes of this
20        Article. Any notes or other evidence of indebtedness of
21        the Association not in default are legal investments
22        for domestic insurers and may be carried as admitted
23        assets.
24            (d) (4) Employ or retain such persons as are
25        necessary to handle the financial transactions of the
26        Association, and to perform such other functions as

 

 

09700HB1870sam002- 36 -LRB097 08603 AMC 55159 a

1        become necessary or proper under this Article.
2            (e) (5) Negotiate and contract with any
3        liquidator, rehabilitator, conservator, or ancillary
4        receiver to carry out the powers and duties of the
5        Association.
6            (f) (6) Take such legal action as may be necessary
7        to avoid payment of improper claims.
8            (g) (7) Exercise, for the purposes of this Article
9        and to the extent approved by the Director, the powers
10        of a domestic life or health insurer, but in no case
11        may the Association issue insurance policies or
12        annuity contracts other than those issued to perform
13        the contractual obligations of the impaired or
14        insolvent insurer.
15            (h) (8) Exercise all the rights of the Director
16        under Section 193(4) of this Code with respect to
17        covered policies after the association becomes
18        obligated by statute.
19            (i) (9) Request information from a person seeking
20        coverage from the Association in order to aid the
21        Association in determining its obligations under this
22        Article with respect to the person, and the person
23        shall promptly comply with the request.
24            (j) (10) Take other necessary or appropriate
25        action to discharge its duties and obligations under
26        this Article or to exercise its powers under this

 

 

09700HB1870sam002- 37 -LRB097 08603 AMC 55159 a

1        Article.
2         (12) (o) With respect to covered policies for which
3    the Association becomes obligated after an entry of an
4    order of liquidation or rehabilitation, the Association
5    may elect to succeed to the rights of the insolvent insurer
6    arising after the date of the order of liquidation or
7    rehabilitation under any contract of reinsurance to which
8    the insolvent insurer was a party, to the extent that such
9    contract provides coverage for losses occurring after the
10    date of the order of liquidation or rehabilitation. As a
11    condition to making this election, the Association must pay
12    all unpaid premiums due under the contract for coverage
13    relating to periods before and after the date of the order
14    of liquidation or rehabilitation.
15        (13) (p) A deposit in this State, held pursuant to law
16    or required by the Director for the benefit of creditors,
17    including policy owners, not turned over to the domiciliary
18    liquidator upon the entry of a final order of liquidation
19    or order approving a rehabilitation plan of an insurer
20    domiciled in this State or in a reciprocal state, pursuant
21    to Article XIII 1/2 of this Code, shall be promptly paid to
22    the Association. The Association shall be entitled to
23    retain a portion of any amount so paid to it equal to the
24    percentage determined by dividing the aggregate amount of
25    policy owners' claims related to that insolvency for which
26    the Association has provided statutory benefits by the

 

 

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1    aggregate amount of all policy owners' claims in this State
2    related to that insolvency and shall remit to the
3    domiciliary receiver the amount so paid to the Association
4    less the amount retained pursuant to this subsection (13).
5    Any amount so paid to the Association and retained by it
6    shall be treated as a distribution of estate assets
7    pursuant to applicable State receivership law dealing with
8    early access disbursements.
9        (14) (q) The Board of Directors of the Association
10    shall have discretion and may exercise reasonable business
11    judgment to determine the means by which the Association is
12    to provide the benefits of this Article in an economical
13    and efficient manner.
14        (15) (r) Where the Association has arranged or offered
15    to provide the benefits of this Article to a covered person
16    under a plan or arrangement that fulfills the Association's
17    obligations under this Article, the person shall not be
18    entitled to benefits from the Association in addition to or
19    other than those provided under the plan or arrangement.
20        (16) (s) Venue in a suit against the Association
21    arising under the Article shall be in Cook County. The
22    Association shall not be required to give any appeal bond
23    in an appeal that relates to a cause of action arising
24    under this Article.
25        (17) (t) The Association may join an organization of
26    one or more other State associations of similar purposes to

 

 

09700HB1870sam002- 39 -LRB097 08603 AMC 55159 a

1    further the purposes and administer the powers and duties
2    of the Association.
3        (18) (u) In carrying out its duties in connection with
4    guaranteeing, assuming, or reinsuring policies or
5    contracts under subsections (1) or (2), the Association
6    may, subject to approval of the receivership court, issue
7    substitute coverage for a policy or contract that provides
8    an interest rate, crediting rate, or similar factor
9    determined by use of an index or other external reference
10    stated in the policy or contract employed in calculating
11    returns or changes in value by issuing an alternative
12    policy or contract in accordance with the following
13    provisions:
14            (a) (1) in lieu of the index or other external
15        reference provided for in the original policy or
16        contract, the alternative policy or contract provides
17        for (i) a fixed interest rate, or (ii) payment of
18        dividends with minimum guarantees, or (iii) a
19        different method for calculating interest or changes
20        in value;
21            (b) (2) there is no requirement for evidence of
22        insurability, waiting period, or other exclusion that
23        would not have applied under the replaced policy or
24        contract; and
25            (c) (3) the alternative policy or contract is
26        substantially similar to the replaced policy or

 

 

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1        contract in all other material terms.
2(Source: P.A. 96-1450, eff. 8-20-10; revised 9-16-10.)
 
3    (215 ILCS 5/531.09)  (from Ch. 73, par. 1065.80-9)
4    Sec. 531.09. Assessments.
5    (1) For the purpose of providing the funds necessary to
6carry out the powers and duties of the Association, the board
7of directors shall assess the member insurers, separately for
8each account, at such times and for such amounts as the board
9finds necessary. Assessments shall be due not less than 30 days
10after written notice to the member insurers and shall accrue
11interest from the due date at such adjusted rate as is
12established under Section 6621 of Chapter 26 of the United
13States Code and such interest shall be compounded daily.
14    (2) There shall be 2 classes of assessments, as follows:
15        (a) Class A assessments shall be made for the purpose
16    of meeting administrative costs and other general expenses
17    and examinations conducted under the authority of the
18    Director under subsection (5) of Section 531.12.
19        (b) Class B assessments shall be made to the extent
20    necessary to carry out the powers and duties of the
21    Association under Section 531.08 with regard to an impaired
22    or insolvent domestic insurer or insolvent foreign or alien
23    insurers.
24    (3)(a) The amount of any Class A assessment shall be
25determined at the discretion of the board of directors and such

 

 

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1assessments shall be authorized and called on a non-pro rata
2basis. The amount of any Class B assessment shall be allocated
3for assessment purposes among the accounts and subaccounts
4pursuant to an allocation formula which may be based on the
5premiums or reserves of the impaired or insolvent insurer or
6any other standard deemed by the board in its sole discretion
7as being fair and reasonable under the circumstances.
8    (b) Class B assessments against member insurers for each
9account and subaccount shall be in the proportion that the
10premiums received on business in this State by each assessed
11member insurer on policies or contracts covered by each account
12or subaccount for the three most recent calendar years for
13which information is available preceding the year in which the
14insurer became impaired or insolvent, as the case may be, bears
15to such premiums received on business in this State for such
16calendar years by all assessed member insurers.
17    (c) Assessments for funds to meet the requirements of the
18Association with respect to an impaired or insolvent insurer
19shall not be made until necessary to implement the purposes of
20this Article. Classification of assessments under subsection
21(2) and computations of assessments under this subsection shall
22be made with a reasonable degree of accuracy, recognizing that
23exact determinations may not always be possible.
24    (4) The Association may abate or defer, in whole or in
25part, the assessment of a member insurer if, in the opinion of
26the board, payment of the assessment would endanger the ability

 

 

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1of the member insurer to fulfill its contractual obligations.
2In the event an assessment against a member insurer is abated
3or deferred in whole or in part the amount by which the
4assessment is abated or deferred may be assessed against the
5other member insurers in a manner consistent with the basis for
6assessments set forth in this Section. Once the conditions that
7caused a deferral have been removed or rectified, the member
8insurer shall pay all assessments that were deferred pursuant
9to a repayment plan approved by the Association.
10    (5) (a) (i) Subject to the provisions of subparagraph (ii)
11of this paragraph, the total of all assessments authorized by
12the Association with respect to a member insurer for each
13subaccount of the life insurance and annuity account and for
14the health account shall not in one calendar year exceed 2% of
15that member insurer's average annual premiums received in this
16State on the policies and contracts covered by the subaccount
17or account during the 3 calendar years preceding the year in
18which the insurer became an impaired or insolvent insurer.
19    (ii) If 2 or more assessments are authorized in one
20calendar year with respect to insurers that become impaired or
21insolvent in different calendar years, the average annual
22premiums for purposes of the aggregate assessment percentage
23limitation referenced in subparagraph (a) of this paragraph
24shall be equal and limited to the higher of the 3-year average
25annual premiums for the applicable subaccount or account as
26calculated pursuant to this Section.

 

 

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1    (iii) If the maximum assessment, together with the other
2assets of the Association in an account, does not provide in
3one year in either account an amount sufficient to carry out
4the responsibilities of the Association, the necessary
5additional funds shall be assessed as soon thereafter as
6permitted by this Article.
7    (b) The board may provide in the plan of operation a method
8of allocating funds among claims, whether relating to one or
9more impaired or insolvent insurers, when the maximum
10assessment will be insufficient to cover anticipated claims.
11    (c) If the maximum assessment for a subaccount of the life
12insurance and annuity account in one year does not provide an
13amount sufficient to carry out the responsibilities of the
14Association, then pursuant to paragraph (b) of subsection (3),
15the board shall assess the other subaccounts of the life and
16annuity account for the necessary additional amount, subject to
17the maximum stated in paragraph (a) of this subsection.
18    (6) The board may, by an equitable method as established in
19the plan of operation, refund to member insurers, in proportion
20to the contribution of each insurer to that account, the amount
21by which the assets of the account exceed the amount the board
22finds is necessary to carry out during the coming year the
23obligations of the Association with regard to that account,
24including assets accruing from net realized gains and income
25from investments. A reasonable amount may be retained in any
26account to provide funds for the continuing expenses of the

 

 

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1Association and for future losses.
2    (7) An assessment is deemed to occur on the date upon which
3the board votes such assessment. The board may defer calling
4the payment of the assessment or may call for payment in one or
5more installments.
6    (8) It is proper for any member insurer, in determining its
7premium rates and policyowner dividends as to any kind of
8insurance within the scope of this Article, to consider the
9amount reasonably necessary to meet its assessment obligations
10under this Article.
11    (9) The Association must issue to each insurer paying a
12Class B assessment under this Article a certificate of
13contribution, in a form acceptable to the Director, for the
14amount of the assessment so paid. All outstanding certificates
15are of equal dignity and priority without reference to amounts
16or dates of issue. A certificate of contribution may be shown
17by the insurer in its financial statement as an asset in such
18form and for such amount, if any, and period of time as the
19Director may approve, provided the insurer shall in any event
20at its option have the right to show a certificate of
21contribution as an admitted asset at percentages of the
22original face amount for calendar years as follows:
23    100% for the calendar year after the year of issuance;
24    80% for the second calendar year after the year of
25issuance;
26    60% for the third calendar year after the year of issuance;

 

 

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1    40% for the fourth calendar year after the year of
2issuance;
3    20% for the fifth calendar year after the year of issuance.
4    (10) The Association may request information of member
5insurers in order to aid in the exercise of its power under
6this Section and member insurers shall promptly comply with a
7request.
8(Source: P.A. 95-86, eff. 9-25-07 (changed from 1-1-08 by P.A.
995-632); 96-1450, eff. 8-20-10.)
 
10    (215 ILCS 5/531.14)  (from Ch. 73, par. 1065.80-14)
11    Sec. 531.14. Miscellaneous Provisions.
12    (1) Nothing in this Article may be construed to reduce the
13liability for unpaid assessments of the insured of an impaired
14or insolvent insurer operating under a plan with assessment
15liability.
16    (2) Records must be kept of all negotiations and meetings
17in which the Association or its representatives are involved to
18discuss the activities of the Association in carrying out its
19powers and duties under Section 531.08. Records of such
20negotiations or meetings may be made public only upon the
21termination of a liquidation, rehabilitation, or conservation
22proceeding involving the impaired or insolvent insurer, upon
23the termination of the impairment or insolvency of the insurer,
24or upon the order of a court of competent jurisdiction. Nothing
25in this paragraph (2) limits the duty of the Association to

 

 

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1render a report of its activities under Section 531.15.
2    (3) For the purpose of carrying out its obligations under
3this Article, the Association is deemed to be a creditor of the
4impaired or insolvent insurer to the extent of assets
5attributable to covered policies reduced by any amounts to
6which the Association is entitled as subrogee (under paragraph
7(8) of Section 531.08). All assets of the impaired or insolvent
8insurer attributable to covered policies must be used to
9continue all covered policies and pay all contractual
10obligations of the impaired insurer as required by this
11Article. "Assets attributable to covered policies", as used in
12this paragraph (3), is that proportion of the assets which the
13reserves that should have been established for such policies
14bear to the reserve that should have been established for all
15policies of insurance written by the impaired or insolvent
16insurer.
17    (4) (a) Prior to the termination of any liquidation,
18rehabilitation, or conservation proceeding, the court may take
19into consideration the contributions of the respective
20parties, including the Association, the shareholders and
21policyowners of the impaired or insolvent insurer, and any
22other party with a bona fide interest, in making an equitable
23distribution of the ownership rights of such impaired or
24insolvent insurer. In such a determination, consideration must
25be given to the welfare of the policyholders of the continuing
26or successor insurer.

 

 

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1    (b) No distribution to stockholders, if any, of an impaired
2or insolvent insurer may be made until and unless the total
3amount of valid claims of the Association for funds expended,
4with interest, in carrying out its powers and duties under
5Section 531.08, with respect to such insurer have been fully
6recovered by the Association.
7    (5) (a) If an order for liquidation or rehabilitation of an
8insurer domiciled in this State has been entered, the receiver
9appointed under such order has a right to recover on behalf of
10the insurer, from any affiliate that controlled it, the amount
11of distributions, other than stock dividends paid by the
12insurer on its capital stock, made at any time during the 5
13years preceding the petition for liquidation or rehabilitation
14subject to the limitations of paragraphs (b) to (d).
15    (b) No such dividend is recoverable if the insurer shows
16that when paid the distribution was lawful and reasonable, and
17that the insurer did not know and could not reasonably have
18known that the distribution might adversely affect the ability
19of the insurer to fulfill its contractual obligations.
20    (c) Any person who as an affiliate that controlled the
21insurer at the time the distributions were paid is liable up to
22the amount of distributions he received. Any person who was an
23affiliate that controlled the insurer at the time the
24distributions were declared, is liable up to the amount of
25distributions he would have received if they had been paid
26immediately. If 2 persons are liable with respect to the same

 

 

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1distributions, they are jointly and severally liable.
2    (d) The maximum amount recoverable under subsection (5) of
3this Section is the amount needed in excess of all other
4available assets of the insolvent insurer to pay the
5contractual obligations of the insolvent insurer.
6    (e) If any person liable under paragraph (c) of subsection
7(5) of this Section is insolvent, all its affiliates that
8controlled it at the time the dividend was paid are jointly and
9severally liable for any resulting deficiency in the amount
10recovered from the insolvent affiliate.
11    (6) As a creditor of the impaired or insolvent insurer as
12established in subsection (3) of this Section and consistent
13with subsection (2) of Section 205 of this Code, the
14Association and other similar associations shall be entitled to
15receive a disbursement of assets out of the marshaled assets,
16from time to time as the assets become available to reimburse
17it, as a credit against contractual obligations under this
18Article. If the liquidator has not, within 120 days after a
19final determination of insolvency of an insurer by the
20receivership court, made an application to the court for the
21approval of a proposal to disburse assets out of marshaled
22assets to guaranty associations having obligations because of
23the insolvency, then the Association shall be entitled to make
24application to the receivership court for approval of its own
25proposal to disburse these assets.
26(Source: P.A. 96-1450, eff. 8-20-10.)
 

 

 

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1    Section 10. The Health Maintenance Organization Act is
2amended by changing Section 6-14 as follows:
 
3    (215 ILCS 125/6-14)  (from Ch. 111 1/2, par. 1418.14)
4    Sec. 6-14. Miscellaneous Provisions. (1) Records must be
5kept of all negotiations and meetings in which the Association
6or its representatives are involved to discuss the activities
7of the Association in carrying out its powers and duties under
8Section 6-8. Records of such negotiations or meetings may be
9made public only upon the termination of a liquidation,
10rehabilitation, or conservation proceeding involving the
11impaired or insolvent organization, upon the termination of the
12impairment or insolvency of the organization, or upon the order
13of a court of competent jurisdiction. Nothing in this
14subsection (1) limits the duty of the Association to submit a
15report of its activities under Section 6-15.
16    (2) For the purpose of carrying out its obligations under
17this Article, the Association is deemed to be a creditor of the
18impaired or insolvent organization to the extent of assets
19attributable to covered health care plan certificates reduced
20by any amounts to which the Association is entitled as subrogee
21(under subsection (7) of Section 6-8). All assets of the
22impaired or insolvent organization attributable to covered
23health care plan certificates must be used to continue all
24covered health care plan certificates and pay all contractual

 

 

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1obligations of the impaired organization as required by this
2Article. "Assets attributable to covered health care plan
3certificates", as used in this subsection (2), is that
4proportion of the assets which the reserves that should have
5been established for such health care plan certificates bear to
6the reserve that should have been established for all health
7care plan certificates of the impaired or insolvent
8organization.
9    (3) (a) Prior to the termination of any liquidation,
10rehabilitation, or conservation proceeding, the court may take
11into consideration the contributions of the respective
12parties, including the Association, the shareholders of the
13impaired or insolvent organization, and any other party with a
14bona fide interest, in making an equitable distribution of the
15ownership rights of such impaired or insolvent organization. In
16such a determination, consideration must be given to the
17welfare of the enrollees of the continuing or successor
18organization.
19    (b) No distribution to stockholders, if any, of an impaired
20or insolvent organization may be made until and unless the
21total amount of valid claims of the Association for funds
22expended in carrying out its powers and duties under Section
236-8, with interest, with respect to such organization have been
24fully recovered by the Association.
25    (4) (a) If an order for liquidation or rehabilitation of an
26organization domiciled in this State has been entered, the

 

 

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1receiver appointed under such order has a right to recover on
2behalf of the organization, from any affiliate that controlled
3it, the amount of distributions, other than stock dividends
4paid by the organization on its capital stock, made at any time
5during the 5 years preceding the petition for liquidation or
6rehabilitation subject to the limitations of paragraphs (b) to
7(d).
8    (b) No such distribution is recoverable if the organization
9shows that when paid the distribution was lawful and
10reasonable, and that the organization did not know and could
11not reasonably have known that the distribution might adversely
12affect the ability of the organization to fulfill its
13contractual obligations.
14    (c) Any person who was an affiliate that controlled the
15organization at the time the distributions were paid is liable
16up to the amount of distributions he received. Any person who
17was an affiliate that controlled the organization at the time
18the distributions were declared, is liable up to the amount of
19distributions he would have received if they had been paid
20immediately. If 2 persons are liable with respect to the same
21distributions, they are jointly and severally liable.
22    (d) The maximum amount recoverable under subsection (4) of
23this Section is the amount needed in excess of all other
24available assets of the insolvent organization to pay the
25contractual obligations of the insolvent organization.
26    (e) If any person liable under paragraph (c) of subsection

 

 

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1(4) of this Section is insolvent, all its affiliates that
2controlled it at the time the distribution was paid are jointly
3and severally liable for any resulting deficiency in the amount
4recovered from the insolvent affiliate.
5(Source: P.A. 86-620.)".