(215 ILCS 5/131.20a)
(from Ch. 73, par. 743.20a)
Prior notification of transactions; dividends and
(1) (a) The following transactions listed in items (i) through (vii) involving a domestic
company and any person in its insurance holding company system, including amendments or modifications (other than termination) of affiliate agreements previously filed pursuant to this Section, which are subject to any materiality standards contained in this Section, may not be entered
into unless the company has notified the Director in writing of its
intention to enter into such transaction at least 30 days prior thereto, or
such period as the Director may permit, and the Director has not
disapproved it within such period. The notice for amendments or modifications (other than termination) shall include the reasons for the change and the financial impact on the domestic company. Informal notice shall be reported, within 30 days after a termination of a previously filed agreement, to the Director for determination of the type of filing required, if any.
(i) Sales, purchases, exchanges of assets, loans or
extensions of credit, guarantees, investments, or any other transaction, except dividends, that involves the transfer of assets from or liabilities to a company (A) equal to or exceeding the lesser of 3% of the company's admitted assets or 25% of its surplus as regards policyholders as of the 31st day of December next preceding or (B) that is proposed when the domestic company is not eligible to declare and pay a dividend or other distribution pursuant to the provisions of Section 27.
(ii) Loans or extensions of credit to any person that
is not an affiliate (A) that involve the lesser of 3% of the company's admitted assets or 25% of the company's surplus, each as of the 31st day of December next preceding, made with the agreement or understanding that the proceeds of such transactions, in whole or in substantial part, are to be used to make loans or extensions of credit to, to purchase assets of, or to make investments in, any affiliate of the company making such loans or extensions of credit or (B) that are proposed when the domestic company is not eligible to declare and pay a dividend or other distribution pursuant to the provisions of Section 27.
(iii) Reinsurance agreements or modifications
thereto, including all reinsurance pooling agreements, reinsurance agreements in which the reinsurance premium or a change in the company's liabilities, or the projected reinsurance premium or a change in the company's liabilities in any of the next 3 years, equals or exceeds 5% of the company's surplus as regards policyholders, as of the 31st day of December next preceding, including those agreements that may require as consideration the transfer of assets from a company to a nonaffiliate, if an agreement or understanding exists between the company and nonaffiliate that any portion of those assets will be transferred to one or more affiliates of the company.
(iv) All management agreements; service contracts,
other than agency contracts; tax allocation agreements; all reinsurance allocation agreements related to reinsurance agreements required to be filed under this Section; and all cost-sharing arrangements.
(v) Direct or indirect acquisitions or investments in
a person that controls the company, or in an affiliate of the company, in an amount which, together with its present holdings in such investments, exceeds 2.5% of the company's surplus as regards policyholders. Direct or indirect acquisitions or investments in subsidiaries acquired pursuant to Section 131.2 of this Article (or authorized under any other Section of this Code), or in non-subsidiary insurance affiliates that are subject to the provisions of this Article, are exempt from this requirement.
(vi) Any series of the previously described
transactions that are substantially similar to each other, that take place within any 180 day period, and that in total are equal to or exceed the lesser of 3% of the domestic company's admitted assets or 25% of its policyholders surplus, as of the 31st day of the December next preceding.
(vii) Any other material transaction that the
Director by rule determines might render the company's surplus as regards policyholders unreasonable in relation to the company's outstanding liabilities and inadequate to its financial needs or may otherwise adversely affect the interests of the company's policyholders or shareholders.
Nothing herein contained shall be deemed to authorize or permit any
transactions that, in the case of a company not a member of the same holding
company system, would be otherwise contrary to law.
(b) Any transaction or contract otherwise described in paragraph (a) of this
subsection that is between a domestic company and any person that is not its
affiliate and that precedes or follows within 180 days or is concurrent with a
similar transaction between that nonaffiliate and an affiliate of the domestic
company and that involves amounts that are equal to or exceed the lesser of 3%
of the domestic company's admitted assets or 25% of its surplus as regards
policyholders at the end of the prior year may not be entered into unless the
company has notified the Director in writing of its intention to enter into the
transaction at least 30 days prior thereto or such shorter period as the
Director may permit, and the Director has not disapproved it within such
(c) A company may not enter into transactions which are part of
or series of like transactions with any person within the holding company
system if the purpose of those separate transactions is to avoid the
statutory threshold amount and thus avoid the review that would occur
otherwise. If the Director determines that such separate transactions were
entered into for such purpose, he may
exercise his authority under subsection (2) of Section 131.24.
(d) The Director, in reviewing transactions pursuant to paragraph (a),
shall consider whether the transactions comply with the standards set forth in
Section 131.20 and whether they may adversely affect the interests of
(e) The Director shall be notified within 30 days of any investment of the
domestic company in any one corporation if the total investment in that
corporation by the insurance holding company system exceeds 10% of that
corporation's voting securities.
(f) Except for those transactions subject to approval
of this Code,
any such transaction or agreements which are not disapproved by the
Director may be effective as of the date set forth in the notice required
under this Section.
(g) If a domestic company enters into a transaction described in this
subsection without having given the required notification, the Director, using the notice and hearing procedure in subsection (2) of Section 403A of this Code, may
cause the company to pay a civil forfeiture of not more than $250,000. Each
transaction so entered shall be considered a separate offense.
(2) No domestic company subject to registration under Section 131.13 may
pay any extraordinary dividend or make any other extraordinary distribution
to its shareholders until: (a) 30 days after the Director has received
notice of the declaration thereof and has not within such period
disapproved the payment, or (b) the Director approves such payment within
the 30-day period. For purposes of this subsection, an extraordinary
dividend or distribution is any dividend or distribution of cash or other
property whose fair market value, together with that of other dividends or
distributions, made within the period of 12 consecutive months ending on the
date on which the proposed dividend is scheduled for payment or
distribution exceeds the greater of: (a) 10% of the company's
surplus as regards policyholders as of the 31st day of December next
preceding, or (b) the net income of the company for the 12-month period ending the 31st day
of December next preceding, but does not include pro rata distributions of
any class of the company's own securities.
Notwithstanding any other provision of law, the company may declare an
extraordinary dividend or distribution which is conditional upon the
Director's approval, and such a declaration confers no rights upon
security holders until: (a) the Director has approved the payment of the
dividend or distribution, or (b) the Director has not disapproved the
payment within the 30-day period referred to above.
(Source: P.A. 98-609, eff. 1-1-14; 98-910, eff. 7-1-15