Illinois General Assembly - Full Text of SB2411
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Full Text of SB2411  102nd General Assembly

SB2411enr 102ND GENERAL ASSEMBLY

  
  
  

 


 
SB2411 EnrolledLRB102 16864 BMS 22270 b

1    AN ACT concerning regulation.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 5. The Illinois Insurance Code is amended by
5changing Sections 35B-25, 131.1, 131.5, 131.14b, 131.15,
6131.22, and 173.1 and by adding Section 131.22a as follows:
 
7    (215 ILCS 5/35B-25)
8    Sec. 35B-25. Plan of division approval.
9    (a) A division shall not become effective until it is
10approved by the Director after reasonable notice and a public
11hearing, if the notice and hearing are deemed by the Director
12to be in the public interest. The Director shall hold a public
13hearing if one is requested by the dividing company. A hearing
14conducted under this Section shall be conducted in accordance
15with Article 10 of the Illinois Administrative Procedure Act.
16    (b) The Director shall approve a plan of division unless
17the Director finds that:
18        (1) the interest of any class of policyholder or
19    shareholder of the dividing company will not be properly
20    protected;
21        (2) each new company created by the proposed division,
22    except a new company that is a nonsurviving party to a
23    merger pursuant to subsection (b) of Section 156, would be

 

 

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1    ineligible to receive a license to do insurance business
2    in this State pursuant to Section 5;
3        (2.5) each new company created by the proposed
4    division, except a new company that is a nonsurviving
5    party to a merger pursuant to subsection (b) of Section
6    156, that will be a member insurer of the Illinois Life and
7    Health Insurance Guaranty Association and that will have
8    policy liabilities allocated to it will not be licensed to
9    do insurance business in each state where such policies
10    were written by the dividing company;
11        (3) the proposed division violates a provision of the
12    Uniform Fraudulent Transfer Act;
13        (4) the division is being made for purposes of
14    hindering, delaying, or defrauding any policyholders or
15    other creditors of the dividing company;
16        (5) one or more resulting companies will not be
17    solvent upon the consummation of the division; or
18        (6) the remaining assets of one or more resulting
19    companies will be, upon consummation of a division,
20    unreasonably small in relation to the business and
21    transactions in which the resulting company was engaged or
22    is about to engage.
23    (c) In determining whether the standards set forth in
24paragraph (3) of subsection (b) have been satisfied, the
25Director shall only apply the Uniform Fraudulent Transfer Act
26to a dividing company in its capacity as a resulting company

 

 

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1and shall not apply the Uniform Fraudulent Transfer Act to any
2dividing company that is not proposed to survive the division.
3    (d) In determining whether the standards set forth in
4paragraphs (3), (4), (5), and (6) of subsection (b) have been
5satisfied, the Director may consider all proposed assets of
6the resulting company, including, without limitation,
7reinsurance agreements, parental guarantees, support or keep
8well agreements, or capital maintenance or contingent capital
9agreements, in each case, regardless of whether the same would
10qualify as an admitted asset as defined in Section 3.1.
11    (e) In determining whether the standards set forth in
12paragraph (3) of subsection (b) have been satisfied, with
13respect to each resulting company, the Director shall, in
14applying the Uniform Fraudulent Transfer Act, treat:
15        (1) the resulting company as a debtor;
16        (2) liabilities allocated to the resulting company as
17    obligations incurred by a debtor;
18        (3) the resulting company as not having received
19    reasonably equivalent value in exchange for incurring the
20    obligations; and
21        (4) assets allocated to the resulting company as
22    remaining property.
23    (f) All information, documents, materials, and copies
24thereof submitted to, obtained by, or disclosed to the
25Director in connection with a plan of division or in
26contemplation thereof, including any information, documents,

 

 

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1materials, or copies provided by or on behalf of a domestic
2stock company in advance of its adoption or submission of a
3plan of division, shall be confidential and shall be subject
4to the same protection and treatment in accordance with
5Section 131.22 131.14d as documents and reports disclosed to
6or filed with the Director pursuant to subsection (a) of
7Section 131.14b until such time, if any, as a notice of the
8hearing contemplated by subsection (a) is issued.
9    (g) From and after the issuance of a notice of the hearing
10contemplated by subsection (a), all business, financial, and
11actuarial information that the domestic stock company requests
12confidential treatment, other than the plan of division, shall
13continue to be confidential and shall not be available for
14public inspection and shall be subject to the same protection
15and treatment in accordance with Section 131.22 131.14d as
16documents and reports disclosed to or filed with the Director
17pursuant to subsection (a) of Section 131.14b.
18    (h) All expenses incurred by the Director in connection
19with proceedings under this Section, including expenses for
20the services of any attorneys, actuaries, accountants, and
21other experts as may be reasonably necessary to assist the
22Director in reviewing the proposed division, shall be paid by
23the dividing company filing the plan of division. A dividing
24company may allocate expenses described in this subsection in
25a plan of division in the same manner as any other liability.
26    (i) If the Director approves a plan of division, the

 

 

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1Director shall issue an order that shall be accompanied by
2findings of fact and conclusions of law.
3    (j) The conditions in this Section for freeing one or more
4of the resulting companies from the liabilities of the
5dividing company and for allocating some or all of the
6liabilities of the dividing company shall be conclusively
7deemed to have been satisfied if the plan of division has been
8approved by the Director in a final order that is not subject
9to further appeal.
10(Source: P.A. 100-1118, eff. 11-27-18; 101-549, eff. 1-1-20.)
 
11    (215 ILCS 5/131.1)  (from Ch. 73, par. 743.1)
12    Sec. 131.1. Definitions. As used in this Article, the
13following terms have the respective meanings set forth in this
14Section unless the context requires otherwise:
15    (a) An "affiliate" of, or person "affiliated" with, a
16specific person, is a person that directly, or indirectly
17through one or more intermediaries, controls, or is controlled
18by, or is under common control with, the person specified.
19    (a-5) "Acquiring party" means such person by whom or on
20whose behalf the merger or other acquisition of control
21referred to in Section 131.4 is to be affected and any person
22that controls such person or persons.
23    (a-10) "Associated person" means, with respect to an
24acquiring party, (1) any beneficial owner of shares of the
25company to be acquired, owned, directly or indirectly, of

 

 

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1record or beneficially by the acquiring party, (2) any
2affiliate of the acquiring party or beneficial owner, and (3)
3any other person acting in concert, directly or indirectly,
4pursuant to any agreement, arrangement, or understanding,
5whether written or oral, with the acquiring party or
6beneficial owner, or any of their respective affiliates, in
7connection with the merger, consolidation, or other
8acquisition of control referred to in Section 131.4 of this
9Code.
10    (a-15) "Company" has the same meaning as "company" as
11defined in Section 2 of this Code, except that it does not
12include agencies, authorities, or instrumentalities of the
13United States, its possessions and territories, the
14Commonwealth of Puerto Rico, the District of Columbia, or a
15state or political subdivision of a state.
16    (b) "Control" (including the terms "controlling",
17"controlled by" and "under common control with") means the
18possession, direct or indirect, of the power to direct or
19cause the direction of the management and policies of a
20person, whether through the ownership of voting securities,
21the holding of shareholders' or policyholders' proxies by
22contract other than a commercial contract for goods or
23non-management services, or otherwise, unless the power is
24solely the result of an official position with or corporate
25office held by the person. Control is presumed to exist if any
26person, directly or indirectly, owns, controls, holds with the

 

 

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1power to vote, or holds shareholders' proxies representing 10%
2or more of the voting securities of any other person, or holds
3or controls sufficient policyholders' proxies to elect the
4majority of the board of directors of the domestic company.
5This presumption may be rebutted by a showing made in the
6manner as the Director may provide by rule. The Director may
7determine, after furnishing all persons in interest notice and
8opportunity to be heard and making specific findings of fact
9to support such determination, that control exists in fact,
10notwithstanding the absence of a presumption to that effect.
11    (b-5) "Enterprise risk" means any activity, circumstance,
12event, or series of events involving one or more affiliates of
13a company that, if not remedied promptly, is likely to have a
14material adverse effect upon the financial condition or
15liquidity of the company or its insurance holding company
16system as a whole, including, but not limited to, anything
17that would cause the company's risk-based capital to fall into
18company action level as set forth in Article IIA of this Code
19or would cause the company to be in hazardous financial
20condition as set forth in Article XII 1/2 of this Code.
21    (b-10) "Exchange Act" means the Securities Exchange Act of
221934, as amended, together with the rules and regulations
23promulgated thereunder.
24    (b-12) "Group capital calculation instructions" means the
25group capital calculation instructions as adopted by the NAIC
26and as amended by the NAIC from time to time in accordance with

 

 

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1the procedures adopted by the NAIC.
2    (c) "Insurance holding company system" means two or more
3affiliated persons, one or more of which is an insurance
4company as defined in paragraph (e) of Section 2 of this Code.
5    (d) (Blank).
6    (d-2) "NAIC Liquidity Stress Test Framework" is a separate
7NAIC publication which includes a history of the NAIC's
8development of regulatory liquidity stress testing, the scope
9criteria applicable for a specific data year, and the
10liquidity stress test instructions, and reporting templates
11for a specific data year, such scope criteria, instructions,
12and reporting template being as adopted by the NAIC and as
13amended by the NAIC from time to time in accordance with the
14procedures adopted by the NAIC.
15    (d-5) "Non-operating holding company" is a general
16business corporation functioning solely for the purpose of
17forming, owning, acquiring, and managing subsidiary business
18entities and having no other business operations not related
19thereto.
20    (d-10) "Own", "owned," or "owning" means shares (1) with
21respect to which a person has title or to which a person's
22nominee, custodian, or other agent has title and which such
23nominee, custodian, or other agent is holding on behalf of the
24person or (2) with respect to which a person (A) has purchased
25or has entered into an unconditional contract, binding on both
26parties, to purchase the shares, but has not yet received the

 

 

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1shares, (B) owns a security convertible into or exchangeable
2for the shares and has tendered the security for conversion or
3exchange, (C) has an option to purchase or acquire, or rights
4or warrants to subscribe to, the shares and has exercised such
5option, rights, or warrants, or (D) holds a securities futures
6contract to purchase the shares and has received notice that
7the position will be physically settled and is irrevocably
8bound to receive the underlying shares. To the extent that any
9affiliates of the stockholder or beneficial owner are acting
10in concert with the stockholder or beneficial owner, the
11determination of shares owned may include the effect of
12aggregating the shares owned by the affiliate or affiliates.
13Whether shares constitute shares owned shall be decided by the
14Director in his or her reasonable determination.
15    (e) "Person" means an individual, a corporation, a limited
16liability company, a partnership, an association, a joint
17stock company, a trust, an unincorporated organization, any
18similar entity or any combination of the foregoing acting in
19concert, but does not include any securities broker performing
20no more than the usual and customary broker's function or
21joint venture partnership exclusively engaged in owning,
22managing, leasing or developing real or tangible personal
23property other than capital stock.
24    (e-5) "Policyholders' proxies" are proxies that give the
25holder the right to vote for the election of the directors and
26other corporate actions not in the day to day operations of the

 

 

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1company.
2    (f) (Blank).
3    (f-5) "Scope criteria", as detailed in the NAIC Liquidity
4Stress Test Framework, are the designated exposure bases along
5with minimum magnitudes thereof for the specified data year,
6used to establish a preliminary list of insurers considered
7scoped into the NAIC Liquidity Stress Test Framework for that
8data year.
9    (g) "Subsidiary" of a specified person is an affiliate
10controlled by such person directly, or indirectly through one
11or more intermediaries.
12    (h) "Voting Security" is a security which gives to the
13holder thereof the right to vote for the election of directors
14and includes any security convertible into or evidencing a
15right to acquire a voting security.
16    (i) (Blank).
17    (j) (Blank).
18    (k) (Blank).
19(Source: P.A. 98-609, eff. 1-1-14.)
 
20    (215 ILCS 5/131.5)  (from Ch. 73, par. 743.5)
21    Sec. 131.5. Statement; contents. In order to seek the
22approval of the Director pursuant to Section 131.8, the
23applicant must file a statement with the Director under oath
24or affirmation which contains as a minimum the following
25information:

 

 

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1        (1) The name and address of each acquiring party, and
2            (a) if such person is an individual, his principal
3        occupation and all offices and positions held during
4        the past 5 years, and any conviction of crimes, other
5        than minor traffic violations, during the past 10
6        years;
7            (b) if such person is not an individual, a report
8        of the nature of its business operations during the
9        past 5 years or for such lesser period as the person
10        and any predecessors thereof has been in existence; an
11        informative description of the business intended to be
12        conducted by the person and the person's subsidiaries;
13        and a list of all individuals who are or who have been
14        selected to become directors or executive officers of
15        the person, or who perform or will perform functions
16        appropriate to such positions. The list must include
17        for each individual the information required by
18        subsection (1)(a).
19        (2) The source, nature and amount of the consideration
20    used or to be used in effecting the merger, consolidation
21    or other acquisition of control, a description of any
22    transaction wherein funds were or are to be obtained for
23    any such purpose, including any pledge of the company's
24    own securities or the securities of any of its
25    subsidiaries or affiliates, and the identity of persons
26    furnishing such consideration. However, where a source of

 

 

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1    such consideration is a loan made in the lender's ordinary
2    course of business, the identity of the lender must remain
3    confidential, if the person filing the statement so
4    requests.
5        (3) Financial information as to the earnings and
6    financial condition of each acquiring party for the
7    preceding 5 fiscal years of each acquiring party (or for
8    such lesser period as the acquiring party and any
9    predecessors thereof have been in existence) audited by an
10    independent certified public accountant in accordance with
11    generally accepted auditing standards and similar
12    unaudited information as of a date not earlier than 90
13    days prior to the filing of the statement.
14        (4) Any plans or proposals which each acquiring party
15    may have to liquidate such company, to sell its assets or
16    merge or consolidate it with any person, or to make any
17    other material change in its business or corporate
18    structure or management.
19        (5) The number of shares of any security referred to
20    in Section 131.4 which each acquiring party proposes to
21    acquire, the terms of the offer, request, invitation,
22    agreement, or acquisition referred to in Section 131.4,
23    and a statement as to the method by which the fairness of
24    the proposal was arrived.
25        (6) The amount of each class of any security referred
26    to in Section 131.4 which is beneficially owned or

 

 

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1    concerning which there is a right to acquire beneficial
2    ownership by each acquiring party.
3        (7) A full description of any existing contracts,
4    arrangements or understandings with respect to any
5    security referred to in Section 131.4 in which any
6    acquiring party is involved, including but not limited to
7    transfer of any of the securities, joint ventures, loan or
8    option arrangements, puts or calls, guarantees of loans,
9    guarantees against loss or guarantees of profits, division
10    of losses or profits, or the giving or withholding of
11    proxies. The description must identify the persons with
12    whom such contracts, arrangements or understandings have
13    been entered into.
14        (8) A description of the acquisition of any security
15    or policyholders' proxy referred to in Section 131.4
16    during the 12 calendar months preceding the filing of the
17    statement, by any acquiring party, including the dates of
18    acquisition, names of the acquiring parties, and
19    consideration paid or agreed to be paid therefor.
20        (9) A description of any recommendations to acquire
21    any security referred to in Section 131.4 made during the
22    12 calendar months preceding the filing of the statement,
23    by any acquiring party, or by anyone based upon interviews
24    or at the suggestion of such acquiring party.
25        (10) Copies of all tender offers for, requests or
26    invitations for tenders of, exchange offers for, and

 

 

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1    agreements to acquire or exchange any securities referred
2    to in Section 131.4, and (if distributed) of additional
3    soliciting material relating thereto.
4        (11) The terms of any agreement, contract or
5    understanding made with, or proposed to be made with, any
6    broker-dealer as to solicitation of securities referred to
7    in Section 131.4 for tender, and the amount of any fees,
8    commissions or other compensation to be paid to
9    broker-dealers with regard thereto.
10        (12) Beginning July 1, 2014, an agreement by the
11    person required to file the statement referred to in this
12    Section 131.5 that the person will provide the annual
13    report specified in subsection (a) of Section 131.14b for
14    so long as control exists.
15        (13) Beginning July 1, 2014, an acknowledgement by the
16    person required to file the statement referred to in this
17    Section 131.5 that the person and all subsidiaries within
18    its control in the insurance holding company system shall
19    provide information to the Director upon request as
20    necessary to evaluate enterprise risk to the company.
21        (14) Any additional information as the Director may by
22    rule or regulation prescribe as necessary or appropriate
23    for the protection of policyholders or in the public
24    interest.
25        (15) With respect to each acquiring party, the
26    following information:

 

 

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1            (A) the name and address of all associated persons
2        and a detailed description of every agreement,
3        arrangement, and understanding between the acquiring
4        party and all associated persons in connection with
5        the merger, consolidation, or other acquisition of
6        control;
7            (B) the class or series and number of shares of
8        securities of the company that are directly or
9        indirectly owned beneficially and of record by the
10        acquiring party or the associated persons or both; and
11            (C) a detailed description of each proxy,
12        contract, arrangement, understanding, or relationship
13        pursuant to which the acquiring party or the
14        associated persons, or both, have a right to vote, or
15        cause or direct the vote of, any securities of the
16        company.
17(Source: P.A. 98-609, eff. 1-1-14.)
 
18    (215 ILCS 5/131.14b)
19    Sec. 131.14b. Enterprise risk filings filing.
20    (a) Annual enterprise risk report. The ultimate
21controlling person of every company subject to registration
22shall also file an annual enterprise risk report. The report
23shall, to the best of the ultimate controlling person's
24knowledge and belief, identify the material risks within the
25insurance holding company system that could pose enterprise

 

 

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1risk to the company. The report shall be filed with the lead
2state commissioner of the insurance holding company system as
3determined by the procedures within the Financial Analysis
4Handbook adopted by the National Association of Insurance
5Commissioners.
6    (b) Group capital calculation. Except as provided in this
7subsection, the ultimate controlling person of every insurer
8subject to registration shall concurrently file with the
9registration an annual group capital calculation as directed
10by the lead state commissioner. The report shall be completed
11in accordance with the NAIC Group Capital Calculation
12Instructions, which may permit the lead state commissioner to
13allow a controlling person who is not the ultimate controlling
14person to file the group capital calculation. The report shall
15be filed with the lead state commissioner of the insurance
16holding company system as determined by the commissioner in
17accordance with the procedures within the Financial Analysis
18Handbook adopted by the NAIC. Insurance holding company
19systems described in the following are exempt from filing the
20group capital calculation:
21        (1) an insurance holding company system that has only
22    one insurer within its holding company structure, that
23    only writes business and is only licensed in Illinois, and
24    that assumes no business from any other insurer;
25        (2) an insurance holding company system that is
26    required to perform a group capital calculation specified

 

 

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1    by the United States Federal Reserve Board; the lead state
2    commissioner shall request the calculation from the
3    Federal Reserve Board under the terms of information
4    sharing agreements in effect; if the Federal Reserve Board
5    cannot share the calculation with the lead state
6    commissioner, the insurance holding company system is not
7    exempt from the group capital calculation filing;
8        (3) an insurance holding company system whose non-U.S.
9    group-wide supervisor is located within a reciprocal
10    jurisdiction as described in paragraph (C-10) of
11    subsection (1) of Section 173.1 that recognizes the U.S.
12    state regulatory approach to group supervision and group
13    capital; and
14        (4) an insurance holding company system:
15            (i) that provides information to the lead state
16        that meets the requirements for accreditation under
17        the NAIC financial standards and accreditation
18        program, either directly or indirectly through the
19        group-wide supervisor, who has determined such
20        information is satisfactory to allow the lead state to
21        comply with the NAIC group supervision approach, as
22        detailed in the NAIC Financial Analysis Handbook; and
23            (ii) whose non-U.S. group-wide supervisor that is
24        not in a reciprocal jurisdiction recognizes and
25        accepts, as specified by the commissioner in
26        regulation, the group capital calculation as the

 

 

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1        world-wide group capital assessment for U.S. insurance
2        groups who operate in that jurisdiction.
3        (5) Notwithstanding the provisions of paragraphs (3)
4    and (4) of this subsection, a lead state commissioner
5    shall require the group capital calculation for U.S.
6    operations of any non-U.S. based insurance holding company
7    system where, after any necessary consultation with other
8    supervisors or officials, it is deemed appropriate by the
9    lead state commissioner for prudential oversight and
10    solvency monitoring purposes or for ensuring the
11    competitiveness of the insurance marketplace.
12        (6) Notwithstanding the exemptions from filing the
13    group capital calculation stated in paragraphs (1) through
14    (4) of this subsection, the lead state commissioner has
15    the discretion to exempt the ultimate controlling person
16    from filing the annual group capital calculation or to
17    accept a limited group capital filing or report in
18    accordance with criteria as specified by the Director in
19    regulation.
20    (c) Liquidity stress test. The ultimate controlling person
21of every insurer subject to registration and also scoped into
22the NAIC Liquidity Stress Test Framework shall file the
23results of a specific year's liquidity stress test. The filing
24shall be made to the lead state insurance commissioner of the
25insurance holding company system as determined by the
26procedures within the Financial Analysis Handbook adopted by

 

 

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1the National Association of Insurance Commissioners:
2        (1) The NAIC Liquidity Stress Test Framework includes
3    scope criteria applicable to a specific data year. These
4    scope criteria are reviewed at least annually by the NAIC
5    Financial Stability Task Force or its successor. Any
6    change to the NAIC Liquidity Stress Test Framework or to
7    the data year for which the scope criteria are to be
8    measured shall be effective on January 1 of the year
9    following the calendar year when such changes are adopted.
10    Insurers meeting at least one threshold of the scope
11    criteria are considered scoped into the NAIC Liquidity
12    Stress Test Framework for the specified data year unless
13    the lead state insurance commissioner, in consultation
14    with the NAIC Financial Stability Task Force or its
15    successor, determines the insurer should not be scoped
16    into the Framework for that data year. Similarly, insurers
17    that do not trigger at least one threshold of the scope
18    criteria are considered scoped out of the NAIC Liquidity
19    Stress Test Framework for the specified data year, unless
20    the lead state insurance commissioner, in consultation
21    with the NAIC Financial Stability Task Force or its
22    successor, determines the insurer should be scoped into
23    the Framework for that data year.
24        The lead state insurance commissioner, in consultation
25    with the Financial Stability Task Force or its successor,
26    shall assess the regulator's wish to avoid having insurers

 

 

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1    scoped in and out of the NAIC Liquidity Stress Test
2    Framework on a frequent basis as part of the determination
3    for an insurer.
4        (2) The performance of, and filing of the results
5    from, a specific year's liquidity stress test shall comply
6    with the NAIC Liquidity Stress Test Framework's
7    instructions and reporting templates for that year and any
8    lead state insurance commissioner determinations, in
9    conjunction with the NAIC Financial Stability Task Force
10    or its successor, provided within the Framework.
11(Source: P.A. 98-609, eff. 7-1-14.)
 
12    (215 ILCS 5/131.15)  (from Ch. 73, par. 743.15)
13    Sec. 131.15. No information need be disclosed on the
14registration statement filed under Section 131.14 if the
15information is not material for the purposes of Sections
16131.13 through 131.19. Unless the Director by rule, regulation
17or order provides otherwise, sales, purchases, exchanges,
18loans or extensions of credit, investments, or guarantees
19involving one-half of one percent or less of a company's
20admitted assets as of the 31st day of December next preceding,
21are not deemed material for purposes of Sections 131.13
22through 131.19. The description of materiality provided in
23this Section shall not apply for purposes of subsections (b)
24and (c) of Section 131.14b.
25(Source: P.A. 84-805.)
 

 

 

SB2411 Enrolled- 21 -LRB102 16864 BMS 22270 b

1    (215 ILCS 5/131.22)  (from Ch. 73, par. 743.22)
2    Sec. 131.22. Confidential treatment.
3    (a) Documents, materials, or other information in the
4possession or control of the Department that are obtained by
5or disclosed to the Director or any other person in the course
6of an examination or investigation made pursuant to this
7Article and all information reported or provided to the
8Department pursuant to paragraphs (12) and (13) of Section
9131.5 and Sections 131.13 through 131.21 are recognized by
10this State as being proprietary and to contain trade secrets,
11and this Article shall be confidential by law and privileged,
12shall not be subject to the Illinois Freedom of Information
13Act, shall not be subject to subpoena, and shall not be subject
14to discovery or admissible in evidence in any private civil
15action. However, the Director is authorized to use the
16documents, materials, or other information in the furtherance
17of any regulatory or legal action brought as a part of the
18Director's official duties. The Director shall not otherwise
19make the documents, materials, or other information public
20without the prior written consent of the company to which it
21pertains unless the Director, after giving the company and its
22affiliates who would be affected thereby prior written notice
23and an opportunity to be heard, determines that the interest
24of policyholders, shareholders, or the public shall be served
25by the publication thereof, in which event the Director may

 

 

SB2411 Enrolled- 22 -LRB102 16864 BMS 22270 b

1publish all or any part in such manner as may be deemed
2appropriate.
3    (b) Neither the Director nor any person who received
4documents, materials, or other information while acting under
5the authority of the Director or with whom such documents,
6materials, or other information are shared pursuant to this
7Article shall be permitted or required to testify in any
8private civil action concerning any confidential documents,
9materials, or information subject to subsection (a) of this
10Section.
11    (c) In order to assist in the performance of the
12Director's duties, the Director:
13        (1) may share documents, materials, or other
14    information, including the confidential and privileged
15    documents, materials, or information subject to subsection
16    (a) of this Section, including proprietary and trade
17    secret documents and materials, with other state, federal,
18    and international regulatory agencies, with the NAIC and
19    its affiliates and subsidiaries, and with state, federal,
20    and international law enforcement authorities, including
21    members of any supervisory college allowed by this
22    Article, provided that the recipient agrees in writing to
23    maintain the confidentiality and privileged status of the
24    document, material, or other information, and has verified
25    in writing the legal authority to maintain
26    confidentiality;

 

 

SB2411 Enrolled- 23 -LRB102 16864 BMS 22270 b

1        (1.5) notwithstanding paragraph (1) of this subsection
2    (c), may only share confidential and privileged documents,
3    material, or information reported pursuant to subsection
4    (a) of Section 131.14b with commissioners of states having
5    statutes or regulations substantially similar to
6    subsection (a) of this Section and who have agreed in
7    writing not to disclose such information;
8        (2) may receive documents, materials, or information,
9    including otherwise confidential and privileged documents,
10    materials, or information, including proprietary and trade
11    secret information, from the NAIC and its affiliates and
12    subsidiaries and from regulatory and law enforcement
13    officials of other foreign or domestic jurisdictions, and
14    shall maintain as confidential or privileged any document,
15    material, or information received with notice or the
16    understanding that it is confidential or privileged under
17    the laws of the jurisdiction that is the source of the
18    document, material, or information; any such documents,
19    materials, or information, while in the Director's
20    possession, shall not be subject to the Illinois Freedom
21    of Information Act and shall not be subject to subpoena;
22    and
23        (3) (blank).
24    (c-5) Written shall enter into written agreements with the
25NAIC governing sharing and use of information provided
26pursuant to this Article consistent with this subsection (c)

 

 

SB2411 Enrolled- 24 -LRB102 16864 BMS 22270 b

1that shall:
2        (1) (i) specify procedures and protocols regarding the
3    confidentiality and security of information shared with
4    the NAIC and its affiliates and subsidiaries pursuant to
5    this Article, including procedures and protocols for
6    sharing by the NAIC with other state, federal, or
7    international regulators; the agreement shall provide that
8    the recipient agrees in writing to maintain the
9    confidentiality and privileged status of the documents,
10    materials, or other information and has verified in
11    writing the legal authority to maintain such
12    confidentiality;
13        (2) (ii) specify that ownership of information shared
14    with the NAIC and its affiliates and subsidiaries pursuant
15    to this Article remains with the Director and the NAIC's
16    use of the information is subject to the direction of the
17    Director;
18        (3) (iii) require prompt notice to be given to a
19    company whose confidential information in the possession
20    of the NAIC pursuant to this Article is subject to a
21    request or subpoena to the NAIC for disclosure or
22    production; and
23        (4) (iv) require the NAIC and its affiliates and
24    subsidiaries to consent to intervention by a company in
25    any judicial or administrative action in which the NAIC
26    and its affiliates and subsidiaries may be required to

 

 

SB2411 Enrolled- 25 -LRB102 16864 BMS 22270 b

1    disclose confidential information about the company shared
2    with the NAIC and its affiliates and subsidiaries pursuant
3    to this Article; and .
4        (5) excluding documents, material, or information
5    reported pursuant to subsection (c) of Section 131.14b,
6    prohibit the NAIC or third-party consultant from storing
7    the information shared pursuant to this Code in a
8    permanent database after the underlying analysis is
9    completed.
10    (d) The sharing of documents, materials, or information by
11the Director pursuant to this Article shall not constitute a
12delegation of regulatory authority or rulemaking, and the
13Director is solely responsible for the administration,
14execution, and enforcement of the provisions of this Article.
15    (e) No waiver of any applicable privilege or claim of
16confidentiality in the documents, materials, or information
17shall occur as a result of disclosure to the Director under
18this Section or as a result of sharing as authorized in
19subsection (c) of this Section.
20    (f) Documents, materials, or other information in the
21possession or control of the NAIC pursuant to this Article
22shall be confidential by law and privileged, shall not be
23subject to the Illinois Freedom of Information Act, shall not
24be subject to subpoena, and shall not be subject to discovery
25or admissible in evidence in any private civil action.
26(Source: P.A. 98-609, eff. 1-1-14.)
 

 

 

SB2411 Enrolled- 26 -LRB102 16864 BMS 22270 b

1    (215 ILCS 5/131.22a new)
2    Sec. 131.22a. Restrictions on insurer publishing. The
3group capital calculation and resulting group capital ratio
4required under subsection (b) of Section 131.14b and the
5liquidity stress test along with its results and supporting
6disclosures required under subsection (c) of Section 131.14b
7are regulatory tools for assessing group risks and capital
8adequacy and group liquidity risks, respectively, and are not
9intended as a means to rank insurers or insurance holding
10company systems generally. Therefore, except as otherwise may
11be required under the provisions of this Code, the making,
12publishing, disseminating, circulating, or placing before the
13public, or causing directly or indirectly to be made,
14published, disseminated, circulated, or placed before the
15public in a newspaper, magazine, or other publication, or in
16the form of a notice, circular, pamphlet, letter, or poster,
17or over any radio or television station or any electronic
18means of communication available to the public, or in any
19other way as an advertisement, announcement, or statement
20containing a representation or statement with regard to the
21group capital calculation, group capital ratio, the liquidity
22stress test results, or supporting disclosures for the
23liquidity stress test of any insurer or any insurer group, or
24of any component derived in the calculation by any insurer,
25broker, or other person engaged in any manner in the insurance

 

 

SB2411 Enrolled- 27 -LRB102 16864 BMS 22270 b

1business would be misleading and is therefore prohibited;
2however, if any materially false statement with respect to the
3group capital calculation, resulting group capital ratio, an
4inappropriate comparison of any amount to an insurer's or
5insurance group's group capital calculation or resulting group
6capital ratio, liquidity stress test result, supporting
7disclosures for the liquidity stress test, or an inappropriate
8comparison of any amount to an insurer's or insurance group's
9liquidity stress test result or supporting disclosures is
10published in any written publication and the insurer is able
11to demonstrate to the Director with substantial proof the
12falsity of such statement or the inappropriateness, as the
13case may be, then the insurer may publish announcements in a
14written publication if the sole purpose of the announcement is
15to rebut the materially false statement.
 
16    (215 ILCS 5/173.1)  (from Ch. 73, par. 785.1)
17    Sec. 173.1. Credit allowed a domestic ceding insurer.
18    (1) Except as otherwise provided under Article VIII 1/2 of
19this Code and related provisions of the Illinois
20Administrative Code, credit for reinsurance shall be allowed a
21domestic ceding insurer as either an admitted asset or a
22deduction from liability on account of reinsurance ceded only
23when the reinsurer meets the requirements of paragraph (A), or
24(B), or (B-5), or (C), or (C-5), (C-10), or (D) of this
25subsection (1). Credit shall be allowed under paragraph (A),

 

 

SB2411 Enrolled- 28 -LRB102 16864 BMS 22270 b

1(B), or (B-5) of this subsection (1) only as respects cessions
2of those kinds or classes of business in which the assuming
3insurer is licensed or otherwise permitted to write or assume
4in its state of domicile, or in the case of a U.S. branch of an
5alien assuming insurer, in the state through which it is
6entered and licensed to transact insurance or reinsurance.
7Credit shall be allowed under paragraph (B-5) or (C) of this
8subsection (1) only if the applicable requirements of
9paragraph (E) of this subsection (1) have been satisfied.
10        (A) Credit shall be allowed when the reinsurance is
11    ceded to an assuming insurer that is authorized in this
12    State to transact the types of insurance ceded and has at
13    least $5,000,000 in capital and surplus.
14        (B) Credit shall be allowed when the reinsurance is
15    ceded to an assuming insurer that is accredited as a
16    reinsurer in this State. An accredited reinsurer is one
17    that:
18            (1) files with the Director evidence of its
19        submission to this State's jurisdiction;
20            (2) submits to this State's authority to examine
21        its books and records;
22            (3) is licensed to transact insurance or
23        reinsurance in at least one state, or in the case of a
24        U.S. branch of an alien assuming insurer is entered
25        through and licensed to transact insurance or
26        reinsurance in at least one state;

 

 

SB2411 Enrolled- 29 -LRB102 16864 BMS 22270 b

1            (4) files annually with the Director a copy of its
2        annual statement filed with the insurance department
3        of its state of domicile and a copy of its most recent
4        audited financial statement; and
5            (5) maintains a surplus as regards policyholders
6        in an amount that is not less than $20,000,000 and
7        whose accreditation has been approved by the Director.
8        (B-5)(1) Credit shall be allowed when the reinsurance
9    is ceded to an assuming insurer that is domiciled in, or in
10    the case of a U.S. branch of an alien assuming insurer is
11    entered through, a state that employs standards regarding
12    credit for reinsurance substantially similar to those
13    applicable under this Code and the assuming insurer or
14    U.S. branch of an alien assuming insurer:
15            (a) maintains a surplus as regards policyholders
16        in an amount not less than $20,000,000; and
17            (b) submits to the authority of this State to
18        examine its books and records.
19        (2) The requirement of item (a) of subparagraph (1) of
20    paragraph (B-5) of this subsection (1) does not apply to
21    reinsurance ceded and assumed pursuant to pooling
22    arrangements among insurers in the same holding company
23    system.
24         (C)(1) Credit shall be allowed when the reinsurance
25    is ceded to an assuming insurer that maintains a trust
26    fund in a qualified United States financial institution,

 

 

SB2411 Enrolled- 30 -LRB102 16864 BMS 22270 b

1    as defined in paragraph (B) of subsection (3) of this
2    Section, for the payment of the valid claims of its United
3    States policyholders and ceding insurers, their assigns
4    and successors in interest. The assuming insurer shall
5    report to the Director information substantially the same
6    as that required to be reported on the NAIC annual and
7    quarterly financial statement by authorized insurers and
8    any other financial information that the Director deems
9    necessary to determine the financial condition of the
10    assuming insurer and the sufficiency of the trust fund.
11    The assuming insurer shall provide or make the information
12    available to the ceding insurer. The assuming insurer may
13    decline to release trade secrets or commercially sensitive
14    information that would qualify as exempt from disclosure
15    under the Freedom of Information Act. The Director shall
16    also make the information publicly available, subject only
17    to such reasonable objections as might be raised to a
18    request pursuant to the Freedom of Information Act, as
19    determined by the Director. The assuming insurer shall
20    submit to examination of its books and records by the
21    Director and bear the expense of examination.
22        (2)(a) Credit for reinsurance shall not be granted
23    under this subsection unless the form of the trust and any
24    amendments to the trust have been approved by:
25            (i) the regulatory official of the state where the
26        trust is domiciled; or

 

 

SB2411 Enrolled- 31 -LRB102 16864 BMS 22270 b

1            (ii) the regulatory official of another state who,
2        pursuant to the terms of the trust instrument, has
3        accepted principal regulatory oversight of the trust.
4        (b) The form of the trust and any trust amendments
5    also shall be filed with the regulatory official of every
6    state in which the ceding insurer beneficiaries of the
7    trust are domiciled. The trust instrument shall provide
8    that contested claims shall be valid and enforceable upon
9    the final order of any court of competent jurisdiction in
10    the United States. The trust shall vest legal title to its
11    assets in its trustees for the benefit of the assuming
12    insurer's United States policyholders and ceding insurees
13    and their assigns and successors in interest. The trust
14    and the assuming insurer shall be subject to examination
15    as determined by the Director.
16        (c) The trust shall remain in effect for as long as the
17    assuming insurer has outstanding obligations due under the
18    reinsurance agreements subject to the trust. No later than
19    February 28 of each year the trustee of the trust shall
20    report to the Director in writing the balance of the trust
21    and a list of the trust's investments at the preceding
22    year-end and shall certify the date of termination of the
23    trust, if so planned, or certify that the trust will not
24    expire prior to the next following December 31.
25        No later than February 28 of each year, the assuming
26    insurer's chief executive officer or chief financial

 

 

SB2411 Enrolled- 32 -LRB102 16864 BMS 22270 b

1    officer shall certify to the Director that the trust fund
2    contains funds in an amount not less than the assuming
3    insurer's liabilities (as reported to the assuming insurer
4    by its cedent) attributable to reinsurance ceded by U.S.
5    ceding insurers, and in addition, a trusteed surplus of no
6    less than $20,000,000. In the event that item (a-5) of
7    subparagraph (3) of this paragraph (C) applies to the
8    trust, the assuming insurer's chief executive officer or
9    chief financial officer shall then certify to the Director
10    that the trust fund contains funds in an amount not less
11    than the assuming insurer's liabilities (as reported to
12    the assuming insurer by its cedent) attributable to
13    reinsurance ceded by U.S. ceding insurers and, in
14    addition, a reduced trusteed surplus of not less than the
15    amount that has been authorized by the regulatory
16    authority having principal regulatory oversight of the
17    trust.
18        (d) No later than February 28 of each year, an
19    assuming insurer that maintains a trust fund in accordance
20    with this paragraph (C) shall provide or make available,
21    if requested by a beneficiary under the trust fund, the
22    following information to the assuming insurer's U.S.
23    ceding insurers or their assigns and successors in
24    interest:
25            (i) a copy of the form of the trust agreement and
26        any trust amendments to the trust agreement pertaining

 

 

SB2411 Enrolled- 33 -LRB102 16864 BMS 22270 b

1        to the trust fund;
2            (ii) a copy of the annual and quarterly financial
3        information, and its most recent audited financial
4        statement provided to the Director by the assuming
5        insurer, including any exhibits and schedules thereto;
6            (iii) any financial information provided to the
7        Director by the assuming insurer that the Director has
8        deemed necessary to determine the financial condition
9        of the assuming insurer and the sufficiency of the
10        trust fund;
11            (iv) a copy of any annual and quarterly financial
12        information provided to the Director by the trustee of
13        the trust fund maintained by the assuming insurer,
14        including any exhibits and schedules thereto;
15            (v) a copy of the information required to be
16        reported by the trustee of the trust to the Director
17        under the provisions of this paragraph (C); and
18            (vi) a written certification that the trust fund
19        consists of funds in trust in an amount not less than
20        the assuming insurer's liabilities attributable to
21        reinsurance liabilities (as reported to the assuming
22        insurer by its cedent) attributable to reinsurance
23        ceded by U.S. ceding insurers and, in addition, a
24        trusteed surplus of not less than $20,000,000.
25        (3) The following requirements apply to the following
26    categories of assuming insurer:

 

 

SB2411 Enrolled- 34 -LRB102 16864 BMS 22270 b

1            (a) The trust fund for a single assuming insurer
2        shall consist of funds in trust in an amount not less
3        than the assuming insurer's liabilities attributable
4        to reinsurance ceded by U.S. ceding insurers, and in
5        addition, the assuming insurer shall maintain a
6        trusteed surplus of not less than $20,000,000, except
7        as provided in item (a-5) of this subparagraph (3).
8            (a-5) At any time after the assuming insurer has
9        permanently discontinued underwriting new business
10        secured by the trust for at least 3 full years, the
11        Director with principal regulatory oversight of the
12        trust may authorize a reduction in the required
13        trusteed surplus, but only after a finding, based on
14        an assessment of the risk, that the new required
15        surplus level is adequate for the protection of U.S.
16        ceding insurers, policyholders, and claimants in light
17        of reasonably foreseeable adverse loss development.
18        The risk assessment may involve an actuarial review,
19        including an independent analysis of reserves and cash
20        flows, and shall consider all material risk factors,
21        including, when applicable, the lines of business
22        involved, the stability of the incurred loss
23        estimates, and the effect of the surplus requirements
24        on the assuming insurer's liquidity or solvency. The
25        minimum required trusteed surplus may not be reduced
26        to an amount less than 30% of the assuming insurer's

 

 

SB2411 Enrolled- 35 -LRB102 16864 BMS 22270 b

1        liabilities attributable to reinsurance ceded by U.S.
2        ceding insurers covered by the trust.
3            (b)(i) In the case of a group including
4        incorporated and individual unincorporated
5        underwriters:
6                (I) for reinsurance ceded under reinsurance
7            agreements with an inception, amendment, or
8            renewal date on or after January 1, 1993, the
9            trust shall consist of a trusteed account in an
10            amount not less than the respective underwriters'
11            several liabilities attributable to business ceded
12            by U.S. domiciled ceding insurers to any member of
13            the group;
14                (II) for reinsurance ceded under reinsurance
15            agreements with an inception date on or before
16            December 31, 1992 and not amended or renewed after
17            that date, notwithstanding the other provisions of
18            this Act, the trust shall consist of a trusteed
19            account in an amount not less than the group's
20            several insurance and reinsurance liabilities
21            attributable to business written in the United
22            States; and
23                (III) in addition to these trusts, the group
24            shall maintain in trust a trusteed surplus of
25            which not less than $100,000,000 shall be held
26            jointly for the benefit of the U.S. domiciled

 

 

SB2411 Enrolled- 36 -LRB102 16864 BMS 22270 b

1            ceding insurers of any member of the group for all
2            years of account.
3            (ii) The incorporated members of the group shall
4        not be engaged in any business other than underwriting
5        as a member of the group and shall be subject to the
6        same level of solvency regulation and control by the
7        group's domiciliary regulator as are the
8        unincorporated members.
9            (iii) Within 90 days after its financial
10        statements are due to be filed with the group's
11        domiciliary regulator, the group shall provide to the
12        Director an annual certification by the group's
13        domiciliary regulator of the solvency of each
14        underwriter member, or if a certification is
15        unavailable, financial statements prepared by
16        independent public accountants of each underwriter
17        member of the group.
18            (c) In the case of a group of incorporated
19        insurers under common administration, the group shall:
20                (i) have continuously transacted an insurance
21            business outside the United States for at least 3
22            years immediately before making application for
23            accreditation;
24                (ii) maintain aggregate policyholders' surplus
25            of not less than $10,000,000,000;
26                (iii) maintain a trust in an amount not less

 

 

SB2411 Enrolled- 37 -LRB102 16864 BMS 22270 b

1            than the group's several liabilities attributable
2            to business ceded by United States domiciled
3            ceding insurers to any member of the group
4            pursuant to reinsurance contracts issued in the
5            name of the group;
6                (iv) in addition, maintain a joint trusteed
7            surplus of which not less than $100,000,000 shall
8            be held jointly for the benefit of the United
9            States ceding insurers of any member of the group
10            as additional security for these liabilities; and
11                (v) within 90 days after its financial
12            statements are due to be filed with the group's
13            domiciliary regulator, make available to the
14            Director an annual certification of each
15            underwriter member's solvency by the member's
16            domiciliary regulator and financial statements of
17            each underwriter member of the group prepared by
18            its independent public accountant.
19        (C-5) Credit shall be allowed when the reinsurance is
20    ceded to an assuming insurer that has been certified by
21    the Director as a reinsurer in this State and secures its
22    obligations in accordance with the requirements of this
23    paragraph (C-5).
24            (1) In order to be eligible for certification, the
25        assuming insurer shall meet the following
26        requirements:

 

 

SB2411 Enrolled- 38 -LRB102 16864 BMS 22270 b

1                (a) the assuming insurer must be domiciled and
2            licensed to transact insurance or reinsurance in a
3            qualified jurisdiction, as determined by the
4            Director pursuant to subparagraph (3) of this
5            paragraph (C-5);
6                (b) the assuming insurer must maintain minimum
7            capital and surplus, or its equivalent, in an
8            amount not less than $250,000,000 or such greater
9            amount as determined by the Director pursuant to
10            regulation; this requirement may also be satisfied
11            by an association, including incorporated and
12            individual unincorporated underwriters, having
13            minimum capital and surplus equivalents (net of
14            liabilities) of at least $250,000,000 and a
15            central fund containing a balance of at least
16            $250,000,000;
17                (c) the assuming insurer must maintain
18            financial strength ratings from 2 or more rating
19            agencies deemed acceptable by the Director; these
20            ratings shall be based on interactive
21            communication between the rating agency and the
22            assuming insurer and shall not be based solely on
23            publicly available information; each certified
24            reinsurer shall be rated on a legal entity basis,
25            with due consideration being given to the group
26            rating where appropriate, except that an

 

 

SB2411 Enrolled- 39 -LRB102 16864 BMS 22270 b

1            association, including incorporated and individual
2            unincorporated underwriters, that has been
3            approved to do business as a single certified
4            reinsurer may be evaluated on the basis of its
5            group rating; these financial strength ratings
6            shall be one factor used by the Director in
7            determining the rating that is assigned to the
8            assuming insurer; acceptable rating agencies
9            include the following:
10                    (i) Standard & Poor's;
11                    (ii) Moody's Investors Service;
12                    (iii) Fitch Ratings;
13                    (iv) A.M. Best Company; or
14                    (v) any other nationally recognized
15                statistical rating organization;
16                (d) the assuming insurer must agree to submit
17            to the jurisdiction of this State, appoint the
18            Director as its agent for service of process in
19            this State, and agree to provide security for 100%
20            of the assuming insurer's liabilities attributable
21            to reinsurance ceded by U.S. ceding insurers if it
22            resists enforcement of a final U.S. judgment; and
23                (e) the assuming insurer must agree to meet
24            applicable information filing requirements as
25            determined by the Director, both with respect to
26            an initial application for certification and on an

 

 

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1            ongoing basis.
2            (2) An association, including incorporated and
3        individual unincorporated underwriters, may be a
4        certified reinsurer. In order to be eligible for
5        certification, in addition to satisfying the
6        requirements of subparagraph (1) of this paragraph
7        (C-5):
8                (a) the association shall satisfy its minimum
9            capital and surplus requirements through the
10            capital and surplus equivalents (net of
11            liabilities) of the association and its members,
12            which shall include a joint central fund that may
13            be applied to any unsatisfied obligation of the
14            association or any of its members, in the amounts
15            specified in item (b) of subparagraph (1) of this
16            paragraph (C-5);
17                (b) the incorporated members of the
18            association shall not be engaged in any business
19            other than underwriting as a member of the
20            association and shall be subject to the same level
21            of regulation and solvency control by the
22            association's domiciliary regulator as are the
23            unincorporated members; and
24                (c) within 90 days after its financial
25            statements are due to be filed with the
26            association's domiciliary regulator, the

 

 

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1            association shall provide to the Director an
2            annual certification by the association's
3            domiciliary regulator of the solvency of each
4            underwriter member; or if a certification is
5            unavailable, financial statements, prepared by
6            independent public accountants, of each
7            underwriter member of the association.
8            (3) The Director shall create and publish a list
9        of qualified jurisdictions, under which an assuming
10        insurer licensed and domiciled in such jurisdiction is
11        eligible to be considered for certification by the
12        Director as a certified reinsurer.
13                (a) In order to determine whether the
14            domiciliary jurisdiction of a non-U.S. assuming
15            insurer is eligible to be recognized as a
16            qualified jurisdiction, the Director shall
17            evaluate the appropriateness and effectiveness of
18            the reinsurance supervisory system of the
19            jurisdiction, both initially and on an ongoing
20            basis, and consider the rights, benefits, and
21            extent of reciprocal recognition afforded by the
22            non-U.S. jurisdiction to reinsurers licensed and
23            domiciled in the U.S. A qualified jurisdiction
24            must agree in writing to share information and
25            cooperate with the Director with respect to all
26            certified reinsurers domiciled within that

 

 

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1            jurisdiction. A jurisdiction may not be recognized
2            as a qualified jurisdiction if the Director has
3            determined that the jurisdiction does not
4            adequately and promptly enforce final U.S.
5            judgments and arbitration awards. The costs and
6            expenses associated with the Director's review and
7            evaluation of the domiciliary jurisdictions of
8            non-U.S. assuming insurers shall be borne by the
9            certified reinsurer or reinsurers domiciled in
10            such jurisdiction.
11                (b) Additional factors to be considered in
12            determining whether to recognize a qualified
13            jurisdiction include, but are not limited to, the
14            following:
15                    (i) the framework under which the assuming
16                insurer is regulated;
17                    (ii) the structure and authority of the
18                domiciliary regulator with regard to solvency
19                regulation requirements and financial
20                surveillance;
21                    (iii) the substance of financial and
22                operating standards for assuming insurers in
23                the domiciliary jurisdiction;
24                    (iv) the form and substance of financial
25                reports required to be filed or made publicly
26                available by reinsurers in the domiciliary

 

 

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1                jurisdiction and the accounting principles
2                used;
3                    (v) the domiciliary regulator's
4                willingness to cooperate with U.S. regulators
5                in general and the Director in particular;
6                    (vi) the history of performance by
7                assuming insurers in the domiciliary
8                jurisdiction;
9                    (vii) any documented evidence of
10                substantial problems with the enforcement of
11                final U.S. judgments in the domiciliary
12                jurisdiction; and
13                    (viii) any relevant international
14                standards or guidance with respect to mutual
15                recognition of reinsurance supervision adopted
16                by the International Association of Insurance
17                Supervisors or its successor organization.
18                (c) If, upon conducting an evaluation under
19            this paragraph with respect to the reinsurance
20            supervisory system of any non-U.S. assuming
21            insurer, the Director determines that the
22            jurisdiction qualifies to be recognized as a
23            qualified jurisdiction, the Director shall publish
24            notice and evidence of such recognition in an
25            appropriate manner. The Director may establish a
26            procedure to withdraw recognition of those

 

 

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1            jurisdictions that are no longer qualified.
2                (d) The Director shall consider the list of
3            qualified jurisdictions through the NAIC committee
4            process in determining qualified jurisdictions. If
5            the Director approves a jurisdiction as qualified
6            that does not appear on the list of qualified
7            jurisdictions, then the Director shall provide
8            thoroughly documented justification in accordance
9            with criteria to be developed under regulations.
10                (e) U.S. jurisdictions that meet the
11            requirement for accreditation under the NAIC
12            financial standards and accreditation program
13            shall be recognized as qualified jurisdictions.
14                (f) If a certified reinsurer's domiciliary
15            jurisdiction ceases to be a qualified
16            jurisdiction, then the Director may suspend the
17            reinsurer's certification indefinitely, in lieu of
18            revocation.
19            (4) If an applicant for certification has been
20        certified as a reinsurer in an NAIC accredited
21        jurisdiction, then the Director may defer to that
22        jurisdiction's certification and to the rating
23        assigned by that jurisdiction if the assuming insurer
24        submits a properly executed Form CR-1 and such
25        additional information as the Director requires. Such
26        assuming insurer shall be considered to be a certified

 

 

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1        reinsurer in this State but only upon the Director's
2        assignment of an Illinois rating, which shall be made
3        based on the requirements of subparagraph (5) of this
4        paragraph (C-5). The following shall apply:
5                (a) Any change in the certified reinsurer's
6            status or rating in the other jurisdiction shall
7            apply automatically in Illinois as of the date it
8            takes effect in the other jurisdiction. The
9            certified reinsurer shall notify the Director of
10            any change in its status or rating within 10 days
11            after receiving notice of the change.
12                (b) The Director may withdraw recognition of
13            the other jurisdiction's rating at any time and
14            assign a new rating in accordance with
15            subparagraph (5) of this paragraph (C-5).
16                (c) The Director may withdraw recognition of
17            the other jurisdiction's certification at any time
18            with written notice to the certified reinsurer.
19            Unless the Director suspends or revokes the
20            certified reinsurer's certification in accordance
21            with item (c) of subparagraph (9) of this
22            paragraph (C-5), the certified reinsurer's
23            certification shall remain in good standing in
24            Illinois for a period of 3 months, which shall be
25            extended if additional time is necessary to
26            consider the assuming insurer's application for

 

 

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1            certification in Illinois.
2            (5) The Director shall assign a rating to each
3        certified reinsurer pursuant to rules adopted by the
4        Department. Factors that shall be considered as part
5        of the evaluation process include the following:
6                (a) The certified reinsurer's financial
7            strength rating from an acceptable rating agency.
8            Financial strength ratings shall be classified
9            according to the following ratings categories:
10                    (i) Ratings Category "Secure - 1"
11                corresponds to the highest level of rating
12                given by a rating agency, including, but not
13                limited to, A.M. Best Company rating A++;
14                Standard & Poor's rating AAA; Moody's
15                Investors Service rating Aaa; and Fitch
16                Ratings rating AAA.
17                    (ii) Ratings Category "Secure - 2"
18                corresponds to the second-highest level of
19                rating or group of ratings given by a rating
20                agency, including, but not limited to, A.M.
21                Best Company rating A+; Standard & Poor's
22                rating AA+, AA, or AA-; Moody's Investors
23                Service ratings Aa1, Aa2, or Aa3; and Fitch
24                Ratings ratings AA+, AA, or AA-.
25                    (iii) Ratings Category "Secure - 3"
26                corresponds to the third-highest level of

 

 

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1                rating or group of ratings given by a rating
2                agency, including, but not limited to, A.M.
3                Best Company rating A; Standard & Poor's
4                ratings A+ or A; Moody's Investors Service
5                ratings A1 or A2; and Fitch Ratings ratings A+
6                or A.
7                    (iv) Ratings Category "Secure - 4"
8                corresponds to the fourth-highest level of
9                rating or group of ratings given by a rating
10                agency, including, but not limited to, A.M.
11                Best Company rating A-; Standard & Poor's
12                rating A-; Moody's Investors Service rating
13                A3; and Fitch Ratings rating A-.
14                    (v) Ratings Category "Secure - 5"
15                corresponds to the fifth-highest level of
16                rating or group of ratings given by a rating
17                agency, including, but not limited to, A.M.
18                Best Company ratings B++ or B+; Standard &
19                Poor's ratings BBB+, BBB, or BBB-; Moody's
20                Investors Service ratings Baa1, Baa2, or Baa3;
21                and Fitch Ratings ratings BBB+, BBB, or BBB-.
22                    (vi) Ratings Category "Vulnerable - 6"
23                corresponds to a level of rating given by a
24                rating agency, other than those described in
25                subitems (i) through (v) of this item (a),
26                including, but not limited to, A.M. Best

 

 

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1                Company rating B, B-, C++, C+, C, C-, D, E, or
2                F; Standard & Poor's ratings BB+, BB, BB-, B+,
3                B, B-, CCC, CC, C, D, or R; Moody's Investors
4                Service ratings Ba1, Ba2, Ba3, B1, B2, B3,
5                Caa, Ca, or C; and Fitch Ratings ratings BB+,
6                BB, BB-, B+, B, B-, CCC+, CCC, CCC-, or D.
7                A failure to obtain or maintain at least 2
8            financial strength ratings from acceptable rating
9            agencies shall result in loss of eligibility for
10            certification.
11                (b) The business practices of the certified
12            reinsurer in dealing with its ceding insurers,
13            including its record of compliance with
14            reinsurance contractual terms and obligations.
15                (c) For certified reinsurers domiciled in the
16            U.S., a review of the most recent applicable NAIC
17            Annual Statement Blank, either Schedule F (for
18            property and casualty reinsurers) or Schedule S
19            (for life and health reinsurers).
20                (d) For certified reinsurers not domiciled in
21            the U.S., a review annually of Form CR-F (for
22            property and casualty reinsurers) or Form CR-S
23            (for life and health reinsurers).
24                (e) The reputation of the certified reinsurer
25            for prompt payment of claims under reinsurance
26            agreements, based on an analysis of ceding

 

 

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1            insurers' Schedule F reporting of overdue
2            reinsurance recoverables, including the proportion
3            of obligations that are more than 90 days past due
4            or are in dispute, with specific attention given
5            to obligations payable to companies that are in
6            administrative supervision or receivership.
7                (f) Regulatory actions against the certified
8            reinsurer.
9                (g) The report of the independent auditor on
10            the financial statements of the insurance
11            enterprise, on the basis described in item (h) of
12            this subparagraph (5).
13                (h) For certified reinsurers not domiciled in
14            the U.S., audited financial statements (audited
15            Generally Accepted Accounting Principles (U.S.
16            GAAP) basis statement if available, audited
17            International Financial Reporting Standards (IFRS)
18            basis statements are allowed but must include an
19            audited footnote reconciling equity and net income
20            to U.S. GAAP basis or, with the permission of the
21            Director, audited IFRS basis statements with
22            reconciliation to U.S. GAAP basis certified by an
23            officer of the company), regulatory filings, and
24            actuarial opinion (as filed with the non-U.S.
25            jurisdiction supervisor). Upon the initial
26            application for certification, the Director shall

 

 

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1            consider the audited financial statements filed
2            with its non-U.S. jurisdiction supervisor for the
3            3 years immediately preceding the date of the
4            initial application for certification.
5                (i) The liquidation priority of obligations to
6            a ceding insurer in the certified reinsurer's
7            domiciliary jurisdiction in the context of an
8            insolvency proceeding.
9                (j) A certified reinsurer's participation in
10            any solvent scheme of arrangement, or similar
11            procedure, that involves U.S. ceding insurers. The
12            Director shall receive prior notice from a
13            certified reinsurer that proposes participation by
14            the certified reinsurer in a solvent scheme of
15            arrangement.
16            The maximum rating that a certified reinsurer may
17        be assigned shall correspond to its financial strength
18        rating, which shall be determined according to
19        subitems (i) through (vi) of item (a) of this
20        subparagraph (5). The Director shall use the lowest
21        financial strength rating received from an acceptable
22        rating agency in establishing the maximum rating of a
23        certified reinsurer.
24            (6) Based on the analysis conducted under item (e)
25        of subparagraph (5) of this paragraph (C-5) of a
26        certified reinsurer's reputation for prompt payment of

 

 

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1        claims, the Director may make appropriate adjustments
2        in the security the certified reinsurer is required to
3        post to protect its liabilities to U.S. ceding
4        insurers, provided that the Director shall, at a
5        minimum, increase the security the certified reinsurer
6        is required to post by one rating level under item (a)
7        of subparagraph (8) of this paragraph (C-5) if the
8        Director finds that:
9                (a) more than 15% of the certified reinsurer's
10            ceding insurance clients have overdue reinsurance
11            recoverables on paid losses of 90 days or more
12            that are not in dispute and that exceed $100,000
13            for each cedent; or
14                (b) the aggregate amount of reinsurance
15            recoverables on paid losses that are not in
16            dispute that are overdue by 90 days or more
17            exceeds $50,000,000.
18            (7) The Director shall post notice on the
19        Department's website promptly upon receipt of any
20        application for certification, including instructions
21        on how members of the public may respond to the
22        application. The Director may not take final action on
23        the application until at least 30 days after posting
24        the notice required by this subparagraph. The Director
25        shall publish a list of all certified reinsurers and
26        their ratings.

 

 

SB2411 Enrolled- 52 -LRB102 16864 BMS 22270 b

1            (8) A certified reinsurer shall secure obligations
2        assumed from U.S. ceding insurers under this
3        subsection (1) at a level consistent with its rating.
4                (a) The amount of security required in order
5            for full credit to be allowed shall correspond
6            with the applicable ratings category:
7                    Secure - 1: 0%.
8                    Secure - 2: 10%.
9                    Secure - 3: 20%.
10                    Secure - 4: 50%.
11                    Secure - 5: 75%.
12                    Vulnerable - 6: 100%.
13                (b) Nothing in this subparagraph (8) shall
14            prohibit the parties to a reinsurance agreement
15            from agreeing to provisions establishing security
16            requirements that exceed the minimum security
17            requirements established for certified reinsurers
18            under this Section.
19                (c) In order for a domestic ceding insurer to
20            qualify for full financial statement credit for
21            reinsurance ceded to a certified reinsurer, the
22            certified reinsurer shall maintain security in a
23            form acceptable to the Director and consistent
24            with the provisions of subsection (2) of this
25            Section, or in a multibeneficiary trust in
26            accordance with paragraph (C) of this subsection

 

 

SB2411 Enrolled- 53 -LRB102 16864 BMS 22270 b

1            (1), except as otherwise provided in this
2            subparagraph (8).
3                (d) If a certified reinsurer maintains a trust
4            to fully secure its obligations subject to
5            paragraph (C) of this subsection (1), and chooses
6            to secure its obligations incurred as a certified
7            reinsurer in the form of a multibeneficiary trust,
8            then the certified reinsurer shall maintain
9            separate trust accounts for its obligations
10            incurred under reinsurance agreements issued or
11            renewed as a certified reinsurer with reduced
12            security as permitted by this subsection or
13            comparable laws of other U.S. jurisdictions and
14            for its obligations subject to paragraph (C) of
15            this subsection (1). It shall be a condition to
16            the grant of certification under this paragraph
17            (C-5) that the certified reinsurer shall have
18            bound itself, by the language of the trust and
19            agreement with the Director with principal
20            regulatory oversight of each such trust account,
21            to fund, upon termination of any such trust
22            account, out of the remaining surplus of such
23            trust any deficiency of any other such trust
24            account. The certified reinsurer shall also
25            provide or make available, if requested by a
26            beneficiary under a trust, all the information

 

 

SB2411 Enrolled- 54 -LRB102 16864 BMS 22270 b

1            that is required to be provided under the
2            requirements of item (d) of subparagraph (2) of
3            paragraph (C) of this subsection (1) to the
4            certified reinsurer's U.S. ceding insurers or
5            their assigns and successors in interest. The
6            assuming insurer may decline to release trade
7            secrets or commercially sensitive information that
8            would qualify as exempt from disclosure under the
9            Freedom of Information Act.
10                (e) The minimum trusteed surplus requirements
11            provided in paragraph (C) of this subsection (1)
12            are not applicable with respect to a
13            multibeneficiary trust maintained by a certified
14            reinsurer for the purpose of securing obligations
15            incurred under this subsection, except that such
16            trust shall maintain a minimum trusteed surplus of
17            $10,000,000.
18                (f) With respect to obligations incurred by a
19            certified reinsurer under this subsection (1), if
20            the security is insufficient, then the Director
21            may reduce the allowable credit by an amount
22            proportionate to the deficiency and may impose
23            further reductions in allowable credit upon
24            finding that there is a material risk that the
25            certified reinsurer's obligations will not be paid
26            in full when due.

 

 

SB2411 Enrolled- 55 -LRB102 16864 BMS 22270 b

1            (9)(a) In the case of a downgrade by a rating
2        agency or other disqualifying circumstance, the
3        Director shall by written notice assign a new rating
4        to the certified reinsurer in accordance with the
5        requirements of subparagraph (5) of this paragraph
6        (C-5).
7            (b) If the rating of a certified reinsurer is
8        upgraded by the Director, then the certified reinsurer
9        may meet the security requirements applicable to its
10        new rating on a prospective basis, but the Director
11        shall require the certified reinsurer to post security
12        under the previously applicable security requirements
13        as to all contracts in force on or before the effective
14        date of the upgraded rating. If the rating of a
15        certified reinsurer is downgraded by the Director,
16        then the Director shall require the certified
17        reinsurer to meet the security requirements applicable
18        to its new rating for all business it has assumed as a
19        certified reinsurer.
20            (c) The Director may suspend, revoke, or otherwise
21        modify a certified reinsurer's certification at any
22        time if the certified reinsurer fails to meet its
23        obligations or security requirements under this
24        Section or if other financial or operating results of
25        the certified reinsurer, or documented significant
26        delays in payment by the certified reinsurer, lead the

 

 

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1        Director to reconsider the certified reinsurer's
2        ability or willingness to meet its contractual
3        obligations. In seeking to suspend, revoke, or
4        otherwise modify a certified reinsurer's
5        certification, the Director shall follow the
6        procedures provided in paragraph (G) of this
7        subsection (1).
8            (d) For purposes of this subsection (1), a
9        certified reinsurer whose certification has been
10        terminated for any reason shall be treated as a
11        certified reinsurer required to secure 100% of its
12        obligations.
13                (i) As used in this item (d), the term
14            "terminated" refers to revocation, suspension,
15            voluntary surrender and inactive status.
16                (ii) If the Director continues to assign a
17            higher rating as permitted by other provisions of
18            this Section, then this requirement does not apply
19            to a certified reinsurer in inactive status or to
20            a reinsurer whose certification has been
21            suspended.
22            (e) Upon revocation of the certification of a
23        certified reinsurer by the Director, the assuming
24        insurer shall be required to post security in
25        accordance with subsection (2) of this Section in
26        order for the ceding insurer to continue to take

 

 

SB2411 Enrolled- 57 -LRB102 16864 BMS 22270 b

1        credit for reinsurance ceded to the assuming insurer.
2        If funds continue to be held in trust, then the
3        Director may allow additional credit equal to the
4        ceding insurer's pro rata share of the funds,
5        discounted to reflect the risk of uncollectibility and
6        anticipated expenses of trust administration.
7            (f) Notwithstanding the change of a certified
8        reinsurer's rating or revocation of its certification,
9        a domestic insurer that has ceded reinsurance to that
10        certified reinsurer may not be denied credit for
11        reinsurance for a period of 3 months for all
12        reinsurance ceded to that certified reinsurer, unless
13        the reinsurance is found by the Director to be at high
14        risk of uncollectibility.
15            (10) A certified reinsurer that ceases to assume
16        new business in this State may request to maintain its
17        certification in inactive status in order to continue
18        to qualify for a reduction in security for its
19        in-force business. An inactive certified reinsurer
20        shall continue to comply with all applicable
21        requirements of this subsection (1), and the Director
22        shall assign a rating that takes into account, if
23        relevant, the reasons why the reinsurer is not
24        assuming new business.
25            (11) Credit for reinsurance under this paragraph
26        (C-5) shall apply only to reinsurance contracts

 

 

SB2411 Enrolled- 58 -LRB102 16864 BMS 22270 b

1        entered into or renewed on or after the effective date
2        of the certification of the assuming insurer.
3            (12) The Director shall comply with all reporting
4        and notification requirements that may be established
5        by the NAIC with respect to certified reinsurers and
6        qualified jurisdictions.
7        (C-10)(1) Credit shall be allowed when the reinsurance
8    is ceded to an assuming insurer meeting each of the
9    conditions set forth in this subparagraph.
10            (a) The assuming insurer must have its head office
11        in or be domiciled in, as applicable, and be licensed
12        in a reciprocal jurisdiction. As used in this
13        paragraph (C-10), "reciprocal jurisdiction" means a
14        jurisdiction that meets one of the following:
15                (i) a non-U.S. jurisdiction that is subject to
16            an in-force covered agreement with the United
17            States, each within its legal authority, or, in
18            the case of a covered agreement between the United
19            States and European Union, is a member state of
20            the European Union; as used in this subitem,
21            "covered agreement" means an agreement entered
22            into pursuant to the Dodd-Frank Wall Street Reform
23            and Consumer Protection Act (31 U.S.C. 313 and
24            314) that is currently in effect or in a period of
25            provisional application and addresses the
26            elimination, under specified conditions, of

 

 

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1            collateral requirements as a condition for
2            entering into any reinsurance agreement with a
3            ceding insurer domiciled in this State or for
4            allowing the ceding insurer to recognize credit
5            for reinsurance;
6                (ii) a U.S. jurisdiction that meets the
7            requirements for accreditation under the NAIC
8            financial standards and accreditation program; or
9                (iii) a qualified jurisdiction, as determined
10            by the Director pursuant to subparagraph (3) of
11            paragraph (C-5) of subsection (1) of this Section,
12            that is not otherwise described in subitem (i) or
13            (ii) of this item and that meets certain
14            additional requirements, consistent with the terms
15            and conditions of in-force covered agreements, as
16            specified by the Department by rule.
17            (b) The assuming insurer must have and maintain,
18        on an ongoing basis, minimum capital and surplus, or
19        its equivalent, calculated according to the
20        methodology of its domiciliary jurisdiction, in an
21        amount to be set forth by rule. If the assuming insurer
22        is an association, including incorporated and
23        individual unincorporated underwriters, it must have
24        and maintain, on an ongoing basis, minimum capital and
25        surplus equivalents (net of liabilities) calculated
26        according to the methodology applicable in its

 

 

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1        domiciliary jurisdiction and a central fund containing
2        a balance in amounts to be set forth by rule.
3            (c) The assuming insurer must have and maintain,
4        on an ongoing basis, a minimum solvency or capital
5        ratio, as applicable, that will be set forth by rule.
6        If the assuming insurer is an association, including
7        incorporated and individual unincorporated
8        underwriters, it must have and maintain, on an ongoing
9        basis, a minimum solvency or capital ratio in the
10        reciprocal jurisdiction where the assuming insurer has
11        its head office or is domiciled, as applicable, and is
12        also licensed.
13            (d) The assuming insurer must provide adequate
14        assurance to the Director, in a form specified by the
15        Department by rule, as follows:
16                (i) the assuming insurer must provide prompt
17            written notice and explanation to the Director if
18            it falls below the minimum requirements set forth
19            in items (b) or (c) of this subparagraph or if any
20            regulatory action is taken against it for serious
21            noncompliance with applicable law;
22                (ii) the assuming insurer must consent in
23            writing to the jurisdiction of the courts of this
24            State and to the appointment of the Director as
25            agent for service of process; the Director may
26            require that consent for service of process be

 

 

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1            provided to the Director and included in each
2            reinsurance agreement; nothing in this subitem
3            (ii) shall limit or in any way alter the capacity
4            of parties to a reinsurance agreement to agree to
5            alternative dispute resolution mechanisms, except
6            to the extent such agreements are unenforceable
7            under applicable insolvency or delinquency laws;
8                (iii) the assuming insurer must consent in
9            writing to pay all final judgments obtained by a
10            ceding insurer or its legal successor, whenever
11            enforcement is sought, that have been declared
12            enforceable in the jurisdiction where the judgment
13            was obtained;
14                (iv) each reinsurance agreement must include a
15            provision requiring the assuming insurer to
16            provide security in an amount equal to 100% of the
17            assuming insurer's liabilities attributable to
18            reinsurance ceded pursuant to that agreement if
19            the assuming insurer resists enforcement of a
20            final judgment that is enforceable under the law
21            of the jurisdiction in which it was obtained or a
22            properly enforceable arbitration award, whether
23            obtained by the ceding insurer or by its legal
24            successor on behalf of its resolution estate; and
25                (v) the assuming insurer must confirm that it
26            is not presently participating in any solvent

 

 

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1            scheme of arrangement which involves this State's
2            ceding insurers and agree to notify the ceding
3            insurer and the Director and to provide security
4            in an amount equal to 100% of the assuming
5            insurer's liabilities to the ceding insurer if the
6            assuming insurer enters into such a solvent scheme
7            of arrangement; the security shall be in a form
8            consistent with the provisions of paragraph (C-5)
9            of subsection (1) and subsection (2) and as
10            specified by the Department by rule.
11            (e) If requested by the Director, the assuming
12        insurer or its legal successor must provide, on behalf
13        of itself and any legal predecessors, certain
14        documentation to the Director, as specified by the
15        Department by rule.
16            (f) The assuming insurer must maintain a practice
17        of prompt payment of claims under reinsurance
18        agreements pursuant to criteria set forth by rule.
19            (g) The assuming insurer's supervisory authority
20        must confirm to the Director on an annual basis, as of
21        the preceding December 31 or at the annual date
22        otherwise statutorily reported to the reciprocal
23        jurisdiction, that the assuming insurer complied with
24        the requirements set forth in items (b) and (c) of this
25        subparagraph.
26            (h) Nothing in this subparagraph precludes an

 

 

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1        assuming insurer from providing the Director with
2        information on a voluntary basis.
3        (2) The Director shall timely create and publish a
4    list of reciprocal jurisdictions.
5            (a) The Director's list shall include any
6        reciprocal jurisdiction as defined under subitems (i)
7        and (ii) of item (a) of subparagraph (1) of this
8        paragraph, and shall consider any other reciprocal
9        jurisdiction included on the list of reciprocal
10        jurisdictions published through the NAIC committee
11        process. The Director may approve a jurisdiction that
12        does not appear on the NAIC list of reciprocal
13        jurisdictions in accordance with criteria to be
14        developed by rules adopted by the Department.
15            (b) The Director may remove a jurisdiction from
16        the list of reciprocal jurisdictions upon a
17        determination that the jurisdiction no longer meets
18        the requirements of a reciprocal jurisdiction in
19        accordance with a process set forth in rules adopted
20        by the Department, except that the Director shall not
21        remove from the list a reciprocal jurisdiction as
22        defined under subitems (i) and (ii) of item (a) of
23        subparagraph (1) of this paragraph. If otherwise
24        allowed pursuant to this Section, credit for
25        reinsurance ceded to an assuming insurer that has its
26        home office or is domiciled in that jurisdiction shall

 

 

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1        be allowed upon removal of a reciprocal jurisdiction
2        from this list.
3        (3) The Director shall timely create and publish a
4    list of assuming insurers that have satisfied the
5    conditions set forth in this paragraph and to which
6    cessions shall be granted credit in accordance with this
7    paragraph. The Director may add an assuming insurer to the
8    list if a NAIC-accredited jurisdiction has added the
9    assuming insurer to a list of assuming insurers or if,
10    upon initial eligibility, the assuming insurer submits the
11    information to the Director as required under item (d) of
12    subparagraph (1) of this paragraph and complies with any
13    additional requirements that the Department may impose by
14    rule except to the extent that they conflict with an
15    applicable covered agreement.
16        (4) If the Director determines that an assuming
17    insurer no longer meets one or more of the requirements
18    under this paragraph, the Director may revoke or suspend
19    the eligibility of the assuming insurer for recognition
20    under this paragraph in accordance with procedures set
21    forth by rule.
22            (a) While an assuming insurer's eligibility is
23        suspended, no reinsurance agreement issued, amended,
24        or renewed after the effective date of the suspension
25        qualifies for credit except to the extent that the
26        assuming insurer's obligations under the contract are

 

 

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1        secured in accordance with subsection (2).
2            (b) If an assuming insurer's eligibility is
3        revoked, no credit for reinsurance may be granted
4        after the effective date of the revocation with
5        respect to any reinsurance agreements entered into by
6        the assuming insurer, including reinsurance agreements
7        entered into before the date of revocation, except to
8        the extent that the assuming insurer's obligations
9        under the contract are secured in a form acceptable to
10        the Director and consistent with the provisions of
11        subsection (2).
12        (5) If subject to a legal process of rehabilitation,
13    liquidation, or conservation, as applicable, the ceding
14    insurer or its representative may seek and, if determined
15    appropriate by the court in which the proceedings are
16    pending, may obtain an order requiring that the assuming
17    insurer post security for all outstanding ceded
18    liabilities.
19        (6) Nothing in this paragraph shall limit or in any
20    way alter the capacity of parties to a reinsurance
21    agreement to agree on requirements for security or other
22    terms in that reinsurance agreement except as expressly
23    prohibited by this Section or other applicable law or
24    regulation.
25        (7) Credit may be taken under this paragraph only for
26    reinsurance agreements entered into, amended, or renewed

 

 

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1    on or after the effective date of this amendatory Act of
2    the 102nd General Assembly and only with respect to losses
3    incurred and reserves reported on or after the later of:
4            (i) the date on which the assuming insurer has met
5        all eligibility requirements pursuant to subparagraph
6        (1) of this paragraph; and
7            (ii) the effective date of the new reinsurance
8        agreement, amendment, or renewal.
9        This subparagraph does not alter or impair a ceding
10    insurer's right to take credit for reinsurance, to the
11    extent that credit is not available under this paragraph,
12    as long as the reinsurance qualifies for credit under any
13    other applicable provision of this Section.
14        (8) Nothing in this paragraph shall authorize an
15    assuming insurer to withdraw or reduce the security
16    provided under any reinsurance agreement except as
17    permitted by the terms of the agreement.
18        (9) Nothing in this paragraph shall limit or in any
19    way alter the capacity of parties to any reinsurance
20    agreement to renegotiate the agreement.
21        (D) Credit shall be allowed when the reinsurance is
22    ceded to an assuming insurer not meeting the requirements
23    of paragraph (A), (B), (B-5), or (C), (C-5), or (C-10) of
24    this subsection (1) but only with respect to the insurance
25    of risks located in jurisdictions where that reinsurance
26    is required by applicable law or regulation of that

 

 

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1    jurisdiction.
2        (E) If the assuming insurer is not licensed to
3    transact insurance in this State or an accredited or
4    certified reinsurer in this State, the credit permitted by
5    paragraphs (B-5) and (C) of this subsection (1) shall not
6    be allowed unless the assuming insurer agrees in the
7    reinsurance agreements:
8            (1) that in the event of the failure of the
9        assuming insurer to perform its obligations under the
10        terms of the reinsurance agreement, the assuming
11        insurer, at the request of the ceding insurer, shall
12        submit to the jurisdiction of any court of competent
13        jurisdiction in any state of the United States, will
14        comply with all requirements necessary to give the
15        court jurisdiction, and will abide by the final
16        decision of the court or of any appellate court in the
17        event of an appeal; and
18            (2) to designate the Director or a designated
19        attorney as its true and lawful attorney upon whom may
20        be served any lawful process in any action, suit, or
21        proceeding instituted by or on behalf of the ceding
22        company.
23        This provision is not intended to conflict with or
24    override the obligation of the parties to a reinsurance
25    agreement to arbitrate their disputes, if an obligation to
26    arbitrate is created in the agreement.

 

 

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1        (F) If the assuming insurer does not meet the
2    requirements of paragraph (A), or (B), (B-5), or (C-10) of
3    this subsection (1), the credit permitted by paragraph (C)
4    or (C-5) of this subsection (1) shall not be allowed
5    unless the assuming insurer agrees in the trust agreements
6    to the following conditions:
7            (1) Notwithstanding any other provisions in the
8        trust instrument, if the trust fund is inadequate
9        because it contains an amount less than the amount
10        required by subparagraph (3) of paragraph (C) of this
11        subsection (1) or if the grantor of the trust has been
12        declared insolvent or placed into receivership,
13        rehabilitation, liquidation, or similar proceedings
14        under the laws of its state or country of domicile, the
15        trustee shall comply with an order of the state
16        official with regulatory oversight over the trust or
17        with an order of a court of competent jurisdiction
18        directing the trustee to transfer to the state
19        official with regulatory oversight all of the assets
20        of the trust fund.
21            (2) The assets shall be distributed by and claims
22        shall be filed with and valued by the state official
23        with regulatory oversight in accordance with the laws
24        of the state in which the trust is domiciled that are
25        applicable to the liquidation of domestic insurance
26        companies.

 

 

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1            (3) If the state official with regulatory
2        oversight determines that the assets of the trust fund
3        or any part thereof are not necessary to satisfy the
4        claims of the U.S. ceding insurers of the grantor of
5        the trust, the assets or part thereof shall be
6        returned by the state official with regulatory
7        oversight to the trustee for distribution in
8        accordance with the trust agreement.
9            (4) The grantor shall waive any rights otherwise
10        available to it under U.S. law that are inconsistent
11        with the provision.
12        (G) If an accredited or certified reinsurer ceases to
13    meet the requirements for accreditation or certification,
14    then the Director may suspend or revoke the reinsurer's
15    accreditation or certification.
16            (1) The Director must give the reinsurer notice
17        and opportunity for hearing. The suspension or
18        revocation may not take effect until after the
19        Director's order on hearing, unless:
20                (a) the reinsurer waives its right to hearing;
21                (b) the Director's order is based on
22            regulatory action by the reinsurer's domiciliary
23            jurisdiction or the voluntary surrender or
24            termination of the reinsurer's eligibility to
25            transact insurance or reinsurance business in its
26            domiciliary jurisdiction or in the primary

 

 

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1            certifying state of the reinsurer under
2            subparagraph (4) of paragraph (C-5) of this
3            subsection (1); or
4                (c) the Director finds that an emergency
5            requires immediate action and a court of competent
6            jurisdiction has not stayed the Director's action.
7            (2) While a reinsurer's accreditation or
8        certification is suspended, no reinsurance contract
9        issued or renewed after the effective date of the
10        suspension qualifies for credit except to the extent
11        that the reinsurer's obligations under the contract
12        are secured in accordance with subsection (2) of this
13        Section. If a reinsurer's accreditation or
14        certification is revoked, no credit for reinsurance
15        may be granted after the effective date of the
16        revocation, except to the extent that the reinsurer's
17        obligations under the contract are secured in
18        accordance with subsection (2) of this Section.
19        (H) The following provisions shall apply concerning
20    concentration of risk:
21            (1) A ceding insurer shall take steps to manage
22        its reinsurance recoverable proportionate to its own
23        book of business. A domestic ceding insurer shall
24        notify the Director within 30 days after reinsurance
25        recoverables from any single assuming insurer, or
26        group of affiliated assuming insurers, exceeds 50% of

 

 

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1        the domestic ceding insurer's last reported surplus to
2        policyholders, or after it is determined that
3        reinsurance recoverables from any single assuming
4        insurer, or group of affiliated assuming insurers, is
5        likely to exceed this limit. The notification shall
6        demonstrate that the exposure is safely managed by the
7        domestic ceding insurer.
8            (2) A ceding insurer shall take steps to diversify
9        its reinsurance program. A domestic ceding insurer
10        shall notify the Director within 30 days after ceding
11        to any single assuming insurer, or group of affiliated
12        assuming insurers, more than 20% of the ceding
13        insurer's gross written premium in the prior calendar
14        year, or after it has determined that the reinsurance
15        ceded to any single assuming insurer, or group of
16        affiliated assuming insurers, is likely to exceed this
17        limit. The notification shall demonstrate that the
18        exposure is safely managed by the domestic ceding
19        insurer.
20    (2) Credit for the reinsurance ceded by a domestic insurer
21to an assuming insurer not meeting the requirements of
22subsection (1) of this Section shall be allowed in an amount
23not exceeding the assets or liabilities carried by the ceding
24insurer. The credit shall not exceed the amount of funds held
25by or held in trust for the ceding insurer under a reinsurance
26contract with the assuming insurer as security for the payment

 

 

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1of obligations thereunder, if the security is held in the
2United States subject to withdrawal solely by, and under the
3exclusive control of, the ceding insurer; or, in the case of a
4trust, held in a qualified United States financial
5institution, as defined in paragraph (B) of subsection (3) of
6this Section. This security may be in the form of:
7        (A) Cash.
8        (B) Securities listed by the Securities Valuation
9    Office of the National Association of Insurance
10    Commissioners, including those deemed exempt from filing
11    as defined by the Purposes and Procedures Manual of the
12    Securities Valuation Office that conform to the
13    requirements of Article VIII of this Code that are not
14    issued by an affiliate of either the assuming or ceding
15    company.
16        (C) Clean, irrevocable, unconditional, letters of
17    credit issued or confirmed by a qualified United States
18    financial institution, as defined in paragraph (A) of
19    subsection (3) of this Section. The letters of credit
20    shall be effective no later than December 31 of the year
21    for which filing is being made, and in the possession of,
22    or in trust for, the ceding company on or before the filing
23    date of its annual statement. Letters of credit meeting
24    applicable standards of issuer acceptability as of the
25    dates of their issuance (or confirmation) shall,
26    notwithstanding the issuing (or confirming) institution's

 

 

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1    subsequent failure to meet applicable standards of issuer
2    acceptability, continue to be acceptable as security until
3    their expiration, extension, renewal, modification, or
4    amendment, whichever first occurs.
5        (D) Any other form of security acceptable to the
6    Director.
7    (3)(A) For purposes of paragraph (C) of subsection (2) of
8this Section, a "qualified United States financial
9institution" means an institution that:
10        (1) is organized or, in the case of a U.S. office of a
11    foreign banking organization, licensed under the laws of
12    the United States or any state thereof;
13        (2) is regulated, supervised, and examined by U.S.
14    federal or state authorities having regulatory authority
15    over banks and trust companies;
16        (3) has been designated by either the Director or the
17    Securities Valuation Office of the National Association of
18    Insurance Commissioners as meeting such standards of
19    financial condition and standing as are considered
20    necessary and appropriate to regulate the quality of
21    financial institutions whose letters of credit will be
22    acceptable to the Director; and
23        (4) is not affiliated with the assuming company.
24    (B) A "qualified United States financial institution"
25means, for purposes of those provisions of this law specifying
26those institutions that are eligible to act as a fiduciary of a

 

 

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1trust, an institution that:
2        (1) is organized or, in the case of the U.S. branch or
3    agency office of a foreign banking organization, licensed
4    under the laws of the United States or any state thereof
5    and has been granted authority to operate with fiduciary
6    powers;
7        (2) is regulated, supervised, and examined by federal
8    or state authorities having regulatory authority over
9    banks and trust companies; and
10        (3) is not affiliated with the assuming company,
11    however, if the subject of the reinsurance contract is
12    insurance written pursuant to Section 155.51 of this Code,
13    the financial institution may be affiliated with the
14    assuming company with the prior approval of the Director.
15    (C) Except as set forth in subparagraph (11) of paragraph
16(C-5) of subsection (1) of this Section as to cessions by
17certified reinsurers, this amendatory Act of the 100th General
18Assembly shall apply to all cessions after the effective date
19of this amendatory Act of the 100th General Assembly under
20reinsurance agreements that have an inception, anniversary, or
21renewal date not less than 6 months after the effective date of
22this amendatory Act of the 100th General Assembly.
23    (D) The Department shall adopt rules implementing the
24provisions of this Article.
25(Source: P.A. 100-1118, eff. 11-27-18.)
 
26    Section 99. Effective date. This Act takes effect December

 

 

SB2411 Enrolled- 75 -LRB102 16864 BMS 22270 b

131, 2022.

 

 

SB2411 Enrolled- 76 -LRB102 16864 BMS 22270 b

1 INDEX
2 Statutes amended in order of appearance
3    215 ILCS 5/35B-25
4    215 ILCS 5/131.1from Ch. 73, par. 743.1
5    215 ILCS 5/131.5from Ch. 73, par. 743.5
6    215 ILCS 5/131.14b
7    215 ILCS 5/131.15from Ch. 73, par. 743.15
8    215 ILCS 5/131.22from Ch. 73, par. 743.22
9    215 ILCS 5/131.22a new
10    215 ILCS 5/173.1from Ch. 73, par. 785.1