215 ILCS 5/ Illinois Insurance Code.

(215 ILCS 5/Art. I heading) ARTICLE I. SHORT TITLE, DEFINITIONS AND CLASSIFICATIONS

(215 ILCS 5/1) (from Ch. 73, par. 613)

Sec. 1. Short title. This Act shall be known and may be cited as the Illinois Insurance Code.

(Source: P.A. 96-328, eff. 8-11-09.)

(215 ILCS 5/2) (from Ch. 73, par. 614)

Sec. 2. General definitions.

In this Code, unless the context otherwise requires,

(a) "Director" means the Director of Insurance.

(b) "Department" means the Department of Insurance.

(c) "State" or "State of the United States" includes the District of Columbia and a territory or possession of the United States.

(d) "Country" or "Foreign Country" includes a state, province or political subdivision thereof.

(e) "Company" means an insurance or surety company and shall be deemed to include a corporation, company, partnership, association, society, order, individual or aggregation of individuals engaging in or proposing or attempting to engage in any kind of insurance or surety business, including the exchanging of reciprocal or inter-insurance contracts between individuals, partnerships and corporations.

(f) "Domestic Company" means a company incorporated or organized under the laws of this State.

(g) "Foreign Company" means a company incorporated or organized under the laws of any state of the United States other than this State.

(h) "Alien Company" means a company incorporated or organized under the laws of any country other than the United States.

(i) "Mutual Legal Reserve Life Company" means a mutual life company issuing contracts without contingent liability on the policyholder.

(j) "Assessment Legal Reserve Life Company" means a life company issuing contracts providing for contingent liability on the policyholder.

(k) "Reciprocal" includes Inter-Insurance Exchange.

(l) "Person" includes an individual, aggregation of individuals, corporation, association and partnership.

(m) Personal pronouns include all genders, the singular includes the plural and the plural includes the singular.

(n) "Policy" means an insurance policy or contract and includes certificates of fraternal benefit societies, assessment companies, mutual benefit associations, and burial societies.

(o) "Policyholder" means a holder of an insurance policy or contract and includes holders of certificates of fraternal benefit societies, assessment companies, mutual benefit associations, and burial societies.

(p) "Articles of Incorporation" means the basic instrument of an incorporated company and all amendments thereto and includes "Charter," "Articles of Organization," "Articles of Reorganization," "Articles of Association," and "Deed of Settlement."

(q) "Officer" when used to refer to an officer of a company includes an attorney-in-fact for a reciprocal or Lloyds.

(Source: Laws 1937, p. 696.)

(215 ILCS 5/2.1) (from Ch. 73, par. 614.1)

Sec. 2.1. Public Policy.

It is declared to be the public policy of this State, pursuant to paragraphs (h) and (i) of Section 6 of Article VII of the Illinois Constitution of 1970, that any power or function set forth in this Act to be exercised by the State is an exclusive State power or function. Such power or function shall not be exercised concurrently, either directly or indirectly, by any unit of local government, including home rule units, except as otherwise provided in this Act. Provided further that the fees, charges and taxes provided for by this Act shall, as provided for in Section 415 of this Act, be in lieu of all license fees or privilege or occupation taxes or other fees levied or assessed by any home rule unit and said Section 415 of this Act is declared to be a denial and limitation of the powers of home rule units pursuant to paragraph (g) of Section 6 of Article VII of the Illinois Constitution of 1970.

(Source: P.A. 78-1224.)

(215 ILCS 5/2.5)

Sec. 2.5. Exemption. This Code shall not be construed to apply to the administration of the Drycleaner Environmental Response Trust Fund under the Drycleaner Environmental Response Trust Fund Act.

(Source: P.A. 90-502, eff. 8-19-97.)

(215 ILCS 5/3.1) (from Ch. 73, par. 615.1)

Sec. 3.1. Definitions of admitted assets. "Admitted Assets" includes the investments authorized or permitted by this Code, the credit for reinsurance allowed by this Code, and in addition thereto, only the following:

(1) Amounts, other than premium, receivable from affiliates, not outstanding for more than 3 months, and arising under, management contracts or service agreements which meet the requirements of Section 141.1 of the Illinois Insurance Code to the extent that the affiliate has liquid assets sufficient to pay the balance. The amount of those receivables included in admitted assets may not exceed the lesser of 5% of the company's admitted assets or 10% of the company's surplus as regards policyholders. For purposes of this subsection, "affiliate" has the meaning given that term in Article VIII 1/2 of the Illinois Insurance Code.

(2) Amounts permitted under Section 136.

(Source: P.A. 90-418, eff. 8-15-97; 91-549, eff. 8-14-99.)

(215 ILCS 5/4) (from Ch. 73, par. 616)

Sec. 4. Classes of insurance. Insurance and insurance business shall be classified as follows:

Class 1. Life, Accident and Health.

(a) Life. Insurance on the lives of persons and every insurance appertaining thereto or connected therewith and granting, purchasing or disposing of annuities. Policies of life or endowment insurance or annuity contracts or contracts supplemental thereto which contain provisions for additional benefits in case of death by accidental means and provisions operating to safeguard such policies or contracts against lapse, to give a special surrender value, or special benefit, or an annuity, in the event, that the insured or annuitant shall become a person with a total and permanent disability as defined by the policy or contract, or which contain benefits providing acceleration of life or endowment or annuity benefits in advance of the time they would otherwise be payable, as an indemnity for long term care which is certified or ordered by a physician, including but not limited to, professional nursing care, medical care expenses, custodial nursing care, non-nursing custodial care provided in a nursing home or at a residence of the insured, or which contain benefits providing acceleration of life or endowment or annuity benefits in advance of the time they would otherwise be payable, at any time during the insured's lifetime, as an indemnity for a terminal illness shall be deemed to be policies of life or endowment insurance or annuity contracts within the intent of this clause.

Also to be deemed as policies of life or endowment insurance or annuity contracts within the intent of this clause shall be those policies or riders that provide for the payment of up to 75% of the face amount of benefits in advance of the time they would otherwise be payable upon a diagnosis by a physician licensed to practice medicine in all of its branches that the insured has incurred a covered condition listed in the policy or rider.

"Covered condition", as used in this clause, means: heart attack, stroke, coronary artery surgery, life-threatening cancer, renal failure, Alzheimer's disease, paraplegia, major organ transplantation, total and permanent disability, and any other medical condition that the Department may approve for any particular filing.

The Director may issue rules that specify prohibited policy provisions, not otherwise specifically prohibited by law, which in the opinion of the Director are unjust, unfair, or unfairly discriminatory to the policyholder, any person insured under the policy, or beneficiary.

(b) Accident and health. Insurance against bodily injury, disablement or death by accident and against disablement resulting from sickness or old age and every insurance appertaining thereto, including stop-loss insurance. In this clause, "stop-loss insurance" means insurance against the risk of economic loss issued to or for the benefit of a single employer self-funded employee disability benefit plan or an employee welfare benefit plan as described in 29 U.S.C. 1001 et seq., where (i) the policy is issued to and insures an employer, trustee, or other sponsor of the plan, or the plan itself, but not employees, members, or participants; and (ii) payments by the insurer are made to the employer, trustee, or other sponsors of the plan, or the plan itself, but not to the employees, members, participants, or health care providers. The insurance laws of this State, including this Code, do not apply to arrangements between a religious organization and the organization's members or participants when the arrangement and organization meet all of the following criteria:

(i) the organization is described in Section 501(c)(3) of the Internal Revenue Code and is exempt from taxation under Section 501(a) of the Internal Revenue Code;

(ii) members of the organization share a common set of ethical or religious beliefs and share medical expenses among members in accordance with those beliefs and without regard to the state in which a member resides or is employed;

(iii) no funds that have been given for the purpose of the sharing of medical expenses among members described in paragraph (ii) of this subsection (b) are held by the organization in an off-shore trust or bank account;

(iv) the organization provides at least monthly to all of its members a written statement listing the dollar amount of qualified medical expenses that members have submitted for sharing, as well as the amount of expenses actually shared among the members;

(v) members of the organization retain membership even after they develop a medical condition;

(vi) the organization or a predecessor organization has been in existence at all times since December 31, 1999, and medical expenses of its members have been shared continuously and without interruption since at least December 31, 1999;

(vii) the organization conducts an annual audit that is performed by an independent certified public accounting firm in accordance with generally accepted accounting principles and is made available to the public upon request;

(viii) the organization includes the following statement, in writing, on or accompanying all applications and guideline materials:

"Notice: The organization facilitating the sharing of medical expenses is not an insurance company, and neither its guidelines nor plan of operation constitute or create an insurance policy. Any assistance you receive with your medical bills will be totally voluntary. As such, participation in the organization or a subscription to any of its documents should never be considered to be insurance. Whether or not you receive any payments for medical expenses and whether or not this organization continues to operate, you are always personally responsible for the payment of your own medical bills.";

(ix) any membership card or similar document issued by the organization and any written communication sent by the organization to a hospital, physician, or other health care provider shall include a statement that the organization does not issue health insurance and that the member or participant is personally liable for payment of his or her medical bills;

(x) the organization provides to a participant, within 30 days after the participant joins, a complete set of its rules for the sharing of medical expenses, appeals of decisions made by the organization, and the filing of complaints;

(xi) the organization does not offer any other services that are regulated under any provision of the Illinois Insurance Code or other insurance laws of this State; and

(xii) the organization does not amass funds as reserves intended for payment of medical services, rather the organization facilitates the payments provided for in this subsection (b) through payments made directly from one participant to another.

(c) Legal Expense Insurance. Insurance which involves the assumption of a contractual obligation to reimburse the beneficiary against or pay on behalf of the beneficiary, all or a portion of his fees, costs, or expenses related to or arising out of services performed by or under the supervision of an attorney licensed to practice in the jurisdiction wherein the services are performed, regardless of whether the payment is made by the beneficiaries individually or by a third person for them, but does not include the provision of or reimbursement for legal services incidental to other insurance coverages. The insurance laws of this State, including this Act do not apply to:

(i) retainer contracts made by attorneys at law with individual clients with fees based on estimates of the nature and amount of services to be provided to the specific client, and similar contracts made with a group of clients involved in the same or closely related legal matters;

(ii) plans owned or operated by attorneys who are the providers of legal services to the plan;

(iii) plans providing legal service benefits to groups where such plans are owned or operated by authority of a state, county, local or other bar association;

(iv) any lawyer referral service authorized or operated by a state, county, local or other bar association;

(v) the furnishing of legal assistance by labor unions and other employee organizations to their members in matters relating to employment or occupation;

(vi) the furnishing of legal assistance to members or dependents, by churches, consumer organizations, cooperatives, educational institutions, credit unions, or organizations of employees, where such organizations contract directly with lawyers or law firms for the provision of legal services, and the administration and marketing of such legal services is wholly conducted by the organization or its subsidiary;

(vii) legal services provided by an employee welfare benefit plan defined by the Employee Retirement Income Security Act of 1974;

(viii) any collectively bargained plan for legal services between a labor union and an employer negotiated pursuant to Section 302 of the Labor Management Relations Act as now or hereafter amended, under which plan legal services will be provided for employees of the employer whether or not payments for such services are funded to or through an insurance company.

Class 2. Casualty, Fidelity and Surety.

(a) Accident and health. Insurance against bodily injury, disablement or death by accident and against disablement resulting from sickness or old age and every insurance appertaining thereto, including stop-loss insurance. In this clause, "stop-loss insurance" has meaning given to that term in clause (b) of Class 1.

(b) Vehicle. Insurance against any loss or liability resulting from or incident to the ownership, maintenance or use of any vehicle (motor or otherwise), draft animal or aircraft. Any policy insuring against any loss or liability on account of the bodily injury or death of any person may contain a provision for payment of disability benefits to injured persons and death benefits to dependents, beneficiaries or personal representatives of persons who are killed, including the named insured, irrespective of legal liability of the insured, if the injury or death for which benefits are provided is caused by accident and sustained while in or upon or while entering into or alighting from or through being struck by a vehicle (motor or otherwise), draft animal or aircraft, and such provision shall not be deemed to be accident insurance.

(c) Liability. Insurance against the liability of the insured for the death, injury or disability of an employee or other person, and insurance against the liability of the insured for damage to or destruction of another person's property.

(d) Workers' compensation. Insurance of the obligations accepted by or imposed upon employers under laws for workers' compensation.

(e) Burglary and forgery. Insurance against loss or damage by burglary, theft, larceny, robbery, forgery, fraud or otherwise; including all householders' personal property floater risks.

(f) Glass. Insurance against loss or damage to glass including lettering, ornamentation and fittings from any cause.

(g) Fidelity and surety. Become surety or guarantor for any person, copartnership or corporation in any position or place of trust or as custodian of money or property, public or private; or, becoming a surety or guarantor for the performance of any person, copartnership or corporation of any lawful obligation, undertaking, agreement or contract of any kind, except contracts or policies of insurance; and underwriting blanket bonds. Such obligations shall be known and treated as suretyship obligations and such business shall be known as surety business.

(h) Miscellaneous. Insurance against loss or damage to property and any liability of the insured caused by accidents to boilers, pipes, pressure containers, machinery and apparatus of any kind and any apparatus connected thereto, or used for creating, transmitting or applying power, light, heat, steam or refrigeration, making inspection of and issuing certificates of inspection upon elevators, boilers, machinery and apparatus of any kind and all mechanical apparatus and appliances appertaining thereto; insurance against loss or damage by water entering through leaks or openings in buildings, or from the breakage or leakage of a sprinkler, pumps, water pipes, plumbing and all tanks, apparatus, conduits and containers designed to bring water into buildings or for its storage or utilization therein, or caused by the falling of a tank, tank platform or supports, or against loss or damage from any cause (other than causes specifically enumerated under Class 3 of this Section) to such sprinkler, pumps, water pipes, plumbing, tanks, apparatus, conduits or containers; insurance against loss or damage which may result from the failure of debtors to pay their obligations to the insured; and insurance of the payment of money for personal services under contracts of hiring.

(i) Other casualty risks. Insurance against any other casualty risk not otherwise specified under Classes 1 or 3, which may lawfully be the subject of insurance and may properly be classified under Class 2.

(j) Contingent losses. Contingent, consequential and indirect coverages wherein the proximate cause of the loss is attributable to any one of the causes enumerated under Class 2. Such coverages shall, for the purpose of classification, be included in the specific grouping of the kinds of insurance wherein such cause is specified.

(k) Livestock and domestic animals. Insurance against mortality, accident and health of livestock and domestic animals.

(l) Legal expense insurance. Insurance against risk resulting from the cost of legal services as defined under Class 1(c).

Class 3. Fire and Marine, etc.

(a) Fire. Insurance against loss or damage by fire, smoke and smudge, lightning or other electrical disturbances.

(b) Elements. Insurance against loss or damage by earthquake, windstorms, cyclone, tornado, tempests, hail, frost, snow, ice, sleet, flood, rain, drought or other weather or climatic conditions including excess or deficiency of moisture, rising of the waters of the ocean or its tributaries.

(c) War, riot and explosion. Insurance against loss or damage by bombardment, invasion, insurrection, riot, strikes, civil war or commotion, military or usurped power, or explosion (other than explosion of steam boilers and the breaking of fly wheels on premises owned, controlled, managed, or maintained by the insured).

(d) Marine and transportation. Insurance against loss or damage to vessels, craft, aircraft, vehicles of every kind, (excluding vehicles operating under their own power or while in storage not incidental to transportation) as well as all goods, freights, cargoes, merchandise, effects, disbursements, profits, moneys, bullion, precious stones, securities, choses in action, evidences of debt, valuable papers, bottomry and respondentia interests and all other kinds of property and interests therein, in respect to, appertaining to or in connection with any or all risks or perils of navigation, transit, or transportation, including war risks, on or under any seas or other waters, on land or in the air, or while being assembled, packed, crated, baled, compressed or similarly prepared for shipment or while awaiting the same or during any delays, storage, transshipment, or reshipment incident thereto, including marine builder's risks and all personal property floater risks; and for loss or damage to persons or property in connection with or appertaining to marine, inland marine, transit or transportation insurance, including liability for loss of or damage to either arising out of or in connection with the construction, repair, operation, maintenance, or use of the subject matter of such insurance, (but not including life insurance or surety bonds); but, except as herein specified, shall not mean insurances against loss by reason of bodily injury to the person; and insurance against loss or damage to precious stones, jewels, jewelry, gold, silver and other precious metals whether used in business or trade or otherwise and whether the same be in course of transportation or otherwise, which shall include jewelers' block insurance; and insurance against loss or damage to bridges, tunnels and other instrumentalities of transportation and communication (excluding buildings, their furniture and furnishings, fixed contents and supplies held in storage) unless fire, tornado, sprinkler leakage, hail, explosion, earthquake, riot and civil commotion are the only hazards to be covered; and to piers, wharves, docks and slips, excluding the risks of fire, tornado, sprinkler leakage, hail, explosion, earthquake, riot and civil commotion; and to other aids to navigation and transportation, including dry docks and marine railways, against all risk.

(e) Vehicle. Insurance against loss or liability resulting from or incident to the ownership, maintenance or use of any vehicle (motor or otherwise), draft animal or aircraft, excluding the liability of the insured for the death, injury or disability of another person.

(f) Property damage, sprinkler leakage and crop. Insurance against the liability of the insured for loss or damage to another person's property or property interests from any cause enumerated in this class; insurance against loss or damage by water entering through leaks or openings in buildings, or from the breakage or leakage of a sprinkler, pumps, water pipes, plumbing and all tanks, apparatus, conduits and containers designed to bring water into buildings or for its storage or utilization therein, or caused by the falling of a tank, tank platform or supports or against loss or damage from any cause to such sprinklers, pumps, water pipes, plumbing, tanks, apparatus, conduits or containers; insurance against loss or damage from insects, diseases or other causes to trees, crops or other products of the soil.

(g) Other fire and marine risks. Insurance against any other property risk not otherwise specified under Classes 1 or 2, which may lawfully be the subject of insurance and may properly be classified under Class 3.

(h) Contingent losses. Contingent, consequential and indirect coverages wherein the proximate cause of the loss is attributable to any of the causes enumerated under Class 3. Such coverages shall, for the purpose of classification, be included in the specific grouping of the kinds of insurance wherein such cause is specified.

(i) Legal expense insurance. Insurance against risk resulting from the cost of legal services as defined under Class 1(c).

(Source: P.A. 103-718, eff. 7-19-24.)

(215 ILCS 5/5) (from Ch. 73, par. 617)

Sec. 5. Classes of companies.

(1) All Companies now or hereafter authorized to transact business in this State shall be classified according to their functions into one or more of the classes of insurance enumerated in section 4.

(2) No company shall be authorized to transact any kind or kinds of business other than those enumerated in its respective class, or classes, except as otherwise specifically provided in this Code, but any company, upon complying with all applicable provisions of this Code, may be authorized to transact all or any part of its business on the basis of reinsurance, except that no certificate of authority shall be limited in whole or in part to reinsurance unless the restriction as to such reinsurance is expressed in the articles of incorporation of said company.

(Source: Laws 1959, p. 638.)

(215 ILCS 5/5.5)

Sec. 5.5. Compliance with the Department of Healthcare and Family Services. A company authorized to do business in this State or accredited by the State to issue policies of health insurance, including but not limited to, self-insured plans, group health plans (as defined in Section 607(1) of the Employee Retirement Income Security Act of 1974), service benefit plans, managed care organizations, pharmacy benefit managers, or other parties that are by statute, contract, or agreement legally responsible for payment of a claim for a health care item or service as a condition of doing business in the State must:

(1) provide to the Department of Healthcare and Family Services, or any successor agency, on at least a quarterly basis if so requested by the Department, information to determine during what period any individual may be, or may have been, covered by a health insurer and the nature of the coverage that is or was provided by the health insurer, including the name, address, and identifying number of the plan;

(2) accept the State's right of recovery and the assignment to the State of any right of an individual or other entity to payment from the party for an item or service for which payment has been made under the medical programs of the Department of Healthcare and Family Services, or any successor or authorized agency, under this Code, the Illinois Public Aid Code, or any other applicable law; and (other than parties expressly excluded under 42 U.S.C. 1396a(a)(25)(I)(ii)(II)) accept authorization provided by the State that the item or service is covered under such medical programs for the individual, as if the State's authorization was the prior authorization made by the company for the item or service;

(3) not later than 60 days after receiving any inquiry by the Department of Healthcare and Family Services regarding a claim for payment for any health care item or service that is submitted not later than 3 years after the date of the provision of such health care item or service, respond to such inquiry; and

(4) agree not to deny a claim submitted by the Department of Healthcare and Family Services solely on the basis of the date of submission of the claim, the type or format of the claim form, a failure to present proper documentation at the point-of-sale that is the basis of the claim, or (other than parties expressly excluded under 42 U.S.C. 1396a(a)(25)(I)(iv)) a failure to obtain a prior authorization for the item or service for which the claim is being submitted if (i) the claim is submitted by the Department of Healthcare and Family Services within the 3-year period beginning on the date on which the item or service was furnished and (ii) any action by the Department of Healthcare and Family Services to enforce its rights with respect to such claim is commenced within 6 years of its submission of such claim.

The Department of Healthcare and Family Services may impose an administrative penalty as provided under Section 12-4.45 of the Illinois Public Aid Code on entities that have established a pattern of failure to provide the information required under this Section, or in cases in which the Department of Healthcare and Family Services has determined that an entity that provides health insurance coverage has established a pattern of failure to provide the information required under this Section, and has subsequently certified that determination, along with supporting documentation, to the Director of the Department of Insurance, the Director of the Department of Insurance, based upon the certification of determination made by the Department of Healthcare and Family Services, may commence regulatory proceedings in accordance with all applicable provisions of the Illinois Insurance Code.

(Source: P.A. 103-102, eff. 1-1-24.)

(215 ILCS 5/Art. II heading) ARTICLE II. DOMESTIC STOCK COMPANIES (Article scheduled to be repealed on January 1, 2027)

(215 ILCS 5/6) (from Ch. 73, par. 618)

(Section scheduled to be repealed on January 1, 2027)

Sec. 6. Scope of Article. This Article shall apply to all domestic stock companies transacting or being organized to transact any of the kinds of insurance business enumerated in Section 4.

(Source: Laws 1937, p. 696.)

(215 ILCS 5/7) (from Ch. 73, par. 619)

(Section scheduled to be repealed on January 1, 2027)

Sec. 7. Name. The corporate name of any company organized under this Article shall not be the same as, or deceptively similar to, the name of any domestic company, or of any foreign or alien company authorized to transact business in this State.

(Source: Laws 1937, p. 696.)

(215 ILCS 5/8) (from Ch. 73, par. 620)

(Section scheduled to be repealed on January 1, 2027)

Sec. 8. Principal office and place of business. The principal office of any company organized under this Article shall be located in this State. Unless the Director has approved otherwise, the principal place of business of any company organized under this Article shall be located in this State.

(Source: P.A. 82-498.)

(215 ILCS 5/9) (from Ch. 73, par. 621)

(Section scheduled to be repealed on January 1, 2027)

Sec. 9. Authorized kinds of business.

(1) Companies may be organized under this Article either for the purpose of transacting any of the kind or kinds of business enumerated in Class 1 of Section 4, or for the purpose of transacting any of the kind or kinds of business enumerated in Classes 2 and 3 of that Section, except that those companies offering mortgage pool or mortgage guaranty insurance may provide no other types of insurance.

(2) A domestic company may, notwithstanding limitations otherwise applicable, and provided it maintains books and records which account for such business, engage directly in any of the following businesses: (a) rendering investment advice; (b) rendering services related to the functions involved in the operation of its insurance business including, but not limited to, actuarial, loss prevention, safety engineering, data processing, accounting, claims, appraisal and collection services; (c) acting as administrative agent for a government instrumentality which is performing an insurance function for a health or welfare program; (d) reinsuring the business of title insurance companies, provided such domestic company if organized as a stock company shall have capital and surplus of not less than $5,000,000 and if organized as a domestic mutual or reciprocal company have surplus of not less than $5,000,000; (e) any other business activity reasonably complementary or supplementary to its insurance business; either to the extent necessarily or properly incidental to the insurance business the company is authorized to do in this State or to the extent approved by the Director and subject to any limitations he may prescribe for the protection of the interests of the policyholders of the company taking into account the effect of such business on the company's existing insurance business and its surplus, the proposed allocation of the estimated cost of such business and the risks inherent in such business as well as the relative advantages to the company and its policyholders of conducting such business directly instead of through a subsidiary.

(Source: P.A. 86-1156.)

(215 ILCS 5/10) (from Ch. 73, par. 622)

(Section scheduled to be repealed on January 1, 2027)

Sec. 10. Directors.

(1) After the date of incorporation, as determined by Section 18, and until the first meeting of shareholders, the incorporators shall have the powers and perform the duties ordinarily possessed and exercised by a board of directors.

(2) Upon the issuance of a certificate of authority to a company organized under this article, the corporate powers shall be exercised by, and its business and affairs shall be under the control of, a board of directors composed of not less than 3 nor more than 21 natural persons who are shareholders, except where the Company is a wholly owned subsidiary, and who are at least 18 years of age and at least 3 of whom are residents and citizens of this State. After June 30, 2002, at least 20%, but not less than one, of the directors of a company that is not subject to Section 131.20b shall be persons who are not officers or employees of the company. A person convicted of a felony may not be a director, and all directors shall be of good character and known professional, administrative, or business ability, such business ability to include a practical knowledge of insurance, finance, or investment. The first board of directors shall be elected at the first meeting of shareholders, and, except as provided in subsection (3) below, all directors shall be elected annually thereafter.

(3) If the board of directors consists of 6 or more members, in lieu of electing the membership of the whole board of directors annually, the articles of incorporation may provide that the directors shall be divided into two or three classes, each class to be as nearly equal in number as is possible. The term of office of directors of the first class shall expire at the first annual meeting of shareholders after their election, that of the second class shall expire at the second annual meeting after their election, and that of the third class, if any, shall expire at the third annual meeting after their election. At each annual meeting after such classification, a number of directors equal to the number of directors in the class whose terms expire at the time of such meeting shall be elected to hold office until the second succeeding annual meeting, if there are two classes, or until the third succeeding annual meeting, if there are three classes.

(4) In all elections for directors every shareholder of common shares has the right to vote, in person or by proxy, for the number of common shares owned by him, for as many persons as there are directors to be elected, or to cumulate his shares, and give one candidate as many votes as the number of directors multiplied by the number of his shares equals, or to distribute them on the same principle among as many candidates as he thinks fit, and directors shall not be elected in any other manner.

(5) Meetings of the board of directors, regular or special, may be held either within or without the State. Meetings of the board of directors shall be upon such notice as the by-laws may prescribe. Attendance of a director at any meeting shall constitute a waiver of notice of such meeting except where a director attends the meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the board of directors need be specified in the notice or waiver of notice of such meeting, unless expressly otherwise provided by this Code. Unless specifically prohibited by the articles of incorporation or by-laws, members of the board of directors or of any committee of the board of directors may participate in and act at any meeting of such board or committee through the use of a conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other. Participation in such meeting shall constitute attendance and presence in person at the meeting of the person or persons so participating. Unless specifically prohibited by the articles of incorporation or by-laws, members of the board of directors or of any committee of the board of directors may take action without a meeting, if a consent in writing setting forth the action so taken shall be signed by all of the directors entitled to vote with respect to the subject matter thereof, or by all of the members of such committee, as the case may be. The consent shall be evidenced by one or more written approvals, each of which sets forth the action taken and bears the signature of one or more directors or committee members. All approvals evidencing the consent shall be filed in the company's corporate records. The action taken shall be effective when all of the directors, or members of the committee, have approved the consent unless the consent specifies a different effective date.

(6) If the number of directors provided for in the articles of incorporation be indefinite, the number of directors to be elected, within the minimum and maximum limits set forth in paragraph (2), shall be as provided in the by-laws. The number of directors may be increased or decreased from time to time by amendment to the by-laws. The by-laws may establish a variable range for the size of the board by prescribing a minimum and maximum number of directors. The maximum may not exceed the minimum by more than 5. If a variable range is established, the number of directors may be fixed or changed from time to time, within the minimum and maximum, by the directors or the shareholders without further amendment to the by-laws.

(7) (a) A company may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the company) by reason of the fact that he or she is or was a director, officer, employee or agent, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding, if such person acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to the best interests of the company, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interest of the company or, with respect to any criminal action or proceeding, that the person had reasonable cause to believe that his or her conduct was unlawful.

(b) A company may indemnify any person who was or is a party, or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the company to procure a judgment in its favor by reason of the fact that such person is or was a director, officer, employee or agent of the company, or is or was serving at the request of the company as a director, officer, employee or agent of another company, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit, if such person acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to the best interests of the company, provided that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of his or her duty to the company, unless, and only to the extent that the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability, but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnification for such expenses as the court shall deem proper.

(c) To the extent that a director, officer, employee or agent of a company has been successful, on the merits or otherwise, in the defense of any action, suit or proceeding referred to in subsections (a) and (b), or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by such person in connection therewith.

(d) Any indemnification under subsections (a) and (b) (unless ordered by a court) shall be made by the company only as authorized in the specific case, upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances because he or she has met the applicable standard of conduct set forth in subsections (a) or (b). Such determination shall be made (1) by the board of directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding, or (2) if such a quorum is not obtainable, or even if obtainable, if a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (3) by the shareholders.

(e) Expenses incurred in defending a civil or criminal action, suit or proceeding may be paid by the company in advance of the final disposition of such action, suit or proceeding, as authorized by the board of directors in the specific case, upon receipt of an undertaking by or on behalf of the director, officer, employee or agent to repay such amount, unless it shall ultimately be determined that he or she is entitled to be indemnified by the company as authorized in this Section.

(f) The indemnification provided by this Section shall not be deemed exclusive of any other rights to which those seeking indemnification may be entitled under any by-law, agreement, vote of shareholders or disinterested directors, or otherwise, both as to action in his or her official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee or agent, and shall inure to the benefit of the heirs, executors and administrators of such a person.

(g) A company may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the company, or who is or was serving at the request of the company as a director, officer, employee or agent of another company, partnership, joint venture, trust or other enterprise, against any liability asserted against such person and incurred by such person in any such capacity, or arising out of his or her status as such, whether or not the company would have the power to indemnify such person against such liability under the provisions of this Section.

(h) If a company has paid indemnification or has advanced expenses to a director, officer, employee or agent, the company shall report the indemnification or advance in writing to the shareholders with or before the notice of the next shareholders meeting.

(i) For purposes of this Section, references to "the company" shall include, in addition to the surviving company, any merging company (including any company having merged with a merging company) absorbed in a merger which, if its separate existence had continued, would have had the power and authority to indemnify its directors, officers, and employees or agents, so that any person who was a director, officer, employee or agent of such merging company, or was serving at the request of such merging company as a director, officer, employee or agent of another company, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this Section with respect to the surviving company as such person would have with respect to such merging company if its separate existence had continued.

(j) For purposes of this Section, references to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on a person with respect to any employee benefit plan; and references to "serving at the request of the company" shall include any service as a director, officer, employee or agent of the company which imposes duties on, or involves services by such director, officer, employee, or agent with respect to any employee benefit plan, its participants, or beneficiaries. A person who acted in good faith and in a manner he or she reasonably believed to be in the best interests of the participants and beneficiaries of any employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interest of the company" as referred to in this Section.

(Source: P.A. 92-140, eff. 7-24-01.)

(215 ILCS 5/11) (from Ch. 73, par. 623)

(Section scheduled to be repealed on January 1, 2027)

Sec. 11. Executive committee. If the by-laws of any company subject to the provisions of this article, so provide, the board of directors, by a resolution adopted by a majority of the whole board, may designate three or more directors to constitute an executive committee, which committee, to the extent provided in the resolution or in the by-laws, shall have and exercise, during the interim between the meetings of the board, all of the authority of the board in the management of the company, but the designation of such committee shall not relieve the board nor any member thereof of any responsibility imposed by law.

(Source: Laws 1937, p. 696.)

(215 ILCS 5/12) (from Ch. 73, par. 624)

(Section scheduled to be repealed on January 1, 2027)

Sec. 12. By-laws.

(1) The incorporators shall adopt by-laws for the company and such by-laws may not be altered, amended, or repealed, prior to the issuance of a certificate of authority to the company, except by written consent of subscribers representing at least two-thirds of the shares subscribed, and the approval of the Director.

(2) After a certificate of authority is issued to a company, the power to make, alter, amend or repeal by-laws shall be vested in the board of directors unless reserved to the shareholders by the articles of incorporation.

(Source: Laws 1937, 696.)

(215 ILCS 5/13) (from Ch. 73, par. 625)

(Section scheduled to be repealed on January 1, 2027)

Sec. 13. Minimum capital and surplus requirements.

(1) A company organized after December 31, 1985 under this Article must have and at all times maintain a paid-up capital of not less than the minimum capital requirement applicable to the class or classes and clause or clauses of section 4 describing the kind or kinds of insurance which it is authorized to write, as follows: Life, Accident, Health and Legal Expense (a) Class 1, Clauses (a), (b) or (c), $1,000,000; more than one clause, $1,000,000.

Casualty, Fidelity and Surety (b) Class 2, Clauses (a), (b), (c), (d), (g), (h), (i) or (j) $1,000,000; more than one clause, $1,000,000.

Fire, Marine and Legal Expense (c) Class 2, Clauses (e), (f), (k), (l) or Class 3, any or all clauses or any combination thereof, $400,000.

Multiple Line (d) Class 2, any or all clauses other than those specified in (c) above, and Class 3, any or all clauses, $1,000,000.

Glass and Livestock and Domestic Animals (e) Class 2, Clause (f) only or (k) only, $100,000; provided any company to which this subparagraph is applicable shall not expose itself to any loss on any one risk in an amount exceeding $5,000.

Any company organized prior to January 1, 1986 and regulated under this Article must have and at all times maintain paid-up capital of not less than the minimum capital that was required for that particular company at the time it was organized, unless any clause or clauses have been added. If any clause or clauses have been added, then such company must have and at all times maintain paid-up capital of not less than the minimum capital requirement applicable to the class or classes and clause or clauses of Section 4 at the time that the additional clause or clauses are authorized.

(2) A company organized after December 31, 1985 under this Article must have at the time its Certificate of Authority is issued by the Director paid-in surplus of not less than the minimum paid-in surplus requirement applicable to the class or classes and clause or clauses of Section 4 describing the kind or kinds of insurance which it is authorized to write, as follows: Life, Accident, Health and Legal Expense (a) Class 1, Clauses (a), (b) or (c), $1,000,000; more than one clause, $1,000,000.

Casualty, Fidelity and Surety (b) Class 2, Clauses (a), (b), (c), (d), (g), (h), (i) or (j), $1,000,000; more than one clause, $1,000,000.

Fire, Marine and Legal Expense (c) Class 2, Clauses (e), (f), (k), (l), or Class 3, any or all clauses or any combination thereof, $600,000.

Multiple Line (d) Class 2, any or all clauses other than those specified in (c) above, and Class 3, any or all clauses, $1,000,000.

Glass and Livestock and Domestic Animals (e) Class 2, Clause (f) only or (k) only, $150,000; provided any company to which this subparagraph is applicable shall not expose itself to any loss on any one risk in an amount exceeding $5,000.

(3) Any company organized after December 31, 1985 under this Article must have and at all times maintain, in addition to the minimum capital required by paragraph (1) of this Section, minimum surplus requirement applicable to the class or classes and clause or clauses of Section 4 describing the kind or kinds of insurance which it is authorized to write, as follows: Life, Accident, Health and Legal Expense (a) Class 1, Clauses (a), (b) or (c), $500,000; more than one clause, $500,000.

Casualty, Fidelity and Surety (b) Class 2, Clauses (a), (b), (c), (d), (g), (h), (i) or (j), $500,000; more than one clause, $500,000.

Fire, Marine and Legal Expense (c) Class 2, Clauses (e), (f), (k), (l), or Class 3, any or all clauses or any combination thereof, $300,000.

Multiple Line (d) Class 2, any or all clauses other than those specified in (c) above, and Class 3, any or all clauses, $500,000.

Glass and Livestock and Domestic Animals (e) Class 2, Clause (f) only or (k) only, $50,000; provided any company to which this subparagraph is applicable shall not expose itself to any loss on any one risk in an amount exceeding $5,000.

(4) Any company organized prior to January 1, 1986 and regulated under this Article, in addition to the minimum capital which is required by paragraph (1) of this Section, must have and at all times maintain until December 31, 1986, minimum surplus of $300,000; and on December 31, 1986 and thereafter such company must have and maintain at all times, surplus of no less than the following amounts: Life, Accident, Health and Legal Expense (a) Class 1, Clauses (a), (b) or (c), $500,000; more than one clause, $500,000.

Casualty, Fidelity and Surety (b) Class 2, Clauses (a), (b), (c), (d), (g), (h), (i) or (j), $500,000; more than one clause, $500,000.

Fire, Marine and Legal Expense (c) Class 2, Clauses (e), (f), (k), (l), or Class 3, any or all clauses or any combination thereof, $300,000.

Multiple Line (d) Class 2, any or all clauses other than those specified in (c) above, and Class 3, any or all clauses, $500,000.

Glass and Livestock and Domestic Animals (e) Class 2, Clause (f) only or (k) only, $50,000; provided any company to which this subparagraph is applicable shall not expose itself to any loss on any one risk in an amount exceeding $5,000.

(5) Any company organized prior to January 1, 1986 and regulated under this Article must have on December 31, 1990 and thereafter maintain until December 31, 1995 the greater of (a) minimum capital required by paragraph (1) of this Section plus the surplus required to be maintained after December 31, 1986 by paragraph (4) of this Section; or (b) combined capital and surplus of not less than the minimum requirement applicable to the class or classes and clause or clauses of Section 4 describing the kind or kinds of insurance which it is authorized to write as follows: Life, Accident, Health and Legal Expense (a) Class 1, Clauses (a), (b) or (c), $1,200,000; more than one clause, $1,200,000.

Casualty, Fidelity and Surety (b) Class 2, Clauses (a), (b), (c), (d), (g), (h), (i) or (j), $1,200,000; more than one clause, $1,200,000.

Fire, Marine and Legal Expense (c) Class 2, Clauses (e), (f), (k), (l), or Class 3, any or all clauses or any combination thereof, $600,000.

Multiple Line (d) Class 2, any or all clauses other than those specified in (c) above, and Class 3, any or all clauses, $1,200,000.

Glass and Livestock and Domestic Animals (e) Class 2, Clause (f) only or (k) only, $100,000; provided any company to which this subparagraph is applicable shall not expose itself to any loss on any one risk in an amount exceeding $5,000.

(6) Any company organized prior to January 1, 1986 and regulated under this Article must have on December 31, 1995 and thereafter maintain at all times combined capital and surplus of not less than the minimum requirement applicable to the class or classes and clause or clauses of Section 4 describing the kind or kinds of insurance which it is authorized to write as follows: Life, Accident, Health and Legal Expense (a) Class 1, Clauses (a), (b) or (c), $1,500,000; more than one clause, $1,500,000.

Casualty, Fidelity and Surety (b) Class 2, Clauses (a), (b), (c), (d), (g), (h), (i) or (j), $1,500,000; more than one clause, $1,500,000.

Fire, Marine and Legal Expense (c) Class 2, Clauses (e), (f), (k), (l), or Class 3, any or all clauses or any combination thereof, $700,000.

Multiple Line (d) Class 2, any or all clauses other than those specified in (c) above, and Class 3, any or all clauses, $1,500,000.

Glass and Livestock and Domestic Animals (e) Class 2, Clause (f) only or (k) only, $150,000; provided any company to which this subparagraph is applicable shall not expose itself to any loss on any one risk in an amount exceeding $5,000.

(7) Any company organized prior to January 1, 1986 and regulated under this Article experiencing a change in control, as control is defined in Section 131.1(b) of this Code, must have simultaneously with the change in control and thereafter maintain at all times combined capital and surplus of not less than the minimum requirement applicable to the class or classes and clause or clauses of Section 4 describing the kind or kinds of insurance which it is authorized to write as follows: Life, Accident, Health and Legal Expense (a) Class 1, Clauses (a), (b) or (c), $1,500,000; more than one clause, $1,500,000.

Casualty, Fidelity and Surety (b) Class 2, Clauses (a), (b), (c), (d), (g), (h), (i) or (j), $1,500,000; more than one clause, $1,500,000.

Fire, Marine and Legal Expense (c) Class 2, Clauses (e), (f), (k), (l), or Class 3, any or all clauses or any combination thereof, $700,000.

Multiple Line (d) Class 2, any or all clauses other than those specified in (c) above, and Class 3, any or all clauses, $1,500,000.

Glass and Livestock and Domestic Animals (e) Class 2, Clause (f) only or (k) only, $150,000; provided any company to which this subparagraph is applicable shall not expose itself to any loss on any one risk in an amount exceeding $5,000.

Notwithstanding, the foregoing provisions of this paragraph (7), any company which experiences a change in control, as control is defined in Section 131.1(b) of this Code, by reason of any laws of descent, distribution or probate, shall be exempt from the requirements of this paragraph (7) for a period of 2 years following the date of death or incompetency giving rise to the change in control.

(8) Any company organized prior to September 10, 1971 or converted from a mutual company to a stock company between July 1, 1983 and June 30, 1985, which had less than $1,000,000 capital and surplus on January 1, 1986, and whose authority is limited to Class 2 of Section 4 of this Code and which is regulated under this Article, shall be exempt from the requirements of paragraphs (5) and (6) of this Section.

(9) The Director shall take action under Section 34 of this Code against any company which fails to maintain the minimum surplus required by this Section. The words "minimum surplus" mean the net total of the following accounts, where applicable, as they appear in the annual statement of a stock company on the usual and proper annual statement form prescribed by the National Association of Insurance Commissioners: paid-in surplus; contributed surplus; unassigned or earned surplus; and special surplus.

(Source: P.A. 87-315.)

(215 ILCS 5/14) (from Ch. 73, par. 626)

(Section scheduled to be repealed on January 1, 2027)

Sec. 14. Incorporators. Any one or more natural persons, at least one of whom is a resident of this State, who desire to form a company under this Article shall sign and acknowledge before an officer authorized to take acknowledgments, articles of incorporation in duplicate.

(Source: P.A. 84-502.)

(215 ILCS 5/14.1) (from Ch. 73, par. 626.1)

(Section scheduled to be repealed on January 1, 2027)

Sec. 14.1. Articles of incorporation. The articles shall set forth:

(a) the corporate name;

(b) the location of its principal office;

(c) the period of duration, which may be perpetual;

(d) the class or classes of insurance business as provided in Section 4, in which it proposes to engage and the kinds of insurance in each class it proposes to write;

(e) the number of its directors, or that the number of directors shall be not less than the minimum nor more than the maximum stated in Section 10, the terms of office; and the manner of electing the directors;

(f) the amount of its authorized capital, the number of authorized common and non-voting preferred shares, the par value of each share, and the number of the common and non-voting preferred shares to be issued and sold in accordance with this Article to provide at least the minimum paid-up capital and paid-in surplus as set forth in Section 13 of this Article;

(g) the terms and conditions on which preferred shares may be converted to common shares, if any shares are issued with the right of conversion;

(h) such other provisions not inconsistent with law as may be deemed by the incorporators to be necessary or advisable.

(Source: P.A. 90-381, eff. 8-14-97.)

(215 ILCS 5/15) (from Ch. 73, par. 627)

(Section scheduled to be repealed on January 1, 2027)

Sec. 15. Documents to be delivered to Director by incorporators. Upon the execution of the articles of incorporation, there shall be delivered to the Director:

(a) duplicate originals of the articles of incorporation;

(b) a copy of the by-laws adopted by the incorporators;

(c) the form of subscription agreement to be used by the company;

(d) 2 organization bonds or the cash or securities provided for in Section 16; and

(e) the form of escrow agreement for the deposit of cash or securities.

(Source: P.A. 100-863, eff. 8-14-18.)

(215 ILCS 5/16) (from Ch. 73, par. 628)

(Section scheduled to be repealed on January 1, 2027)

Sec. 16. Organization bonds.

(1) The incorporators except as stated in subsection (3) of this Section, shall deliver to the Director two bonds in favor of the State of Illinois, in the penalty of $50,000 each, with the incorporators as principals and a duly authorized surety company as surety. One of such bonds shall be for the use and benefit of the State of Illinois, and shall be conditioned upon the payment of costs incurred by the State by reason of any legal proceedings for liquidation or dissolution of such company prior to the issuance to it of a certificate of authority to do an insurance business. The other bond shall be for the use and benefit of subscribers, shareholders and creditors, and shall be conditioned upon the full and complete accounting for all funds and property coming into the possession of the incorporators or into the possession of the company prior to the issuance to it of a certificate of authority to do an insurance business.

(2) In lieu of delivering the above bonds, the incorporators may deposit with the Director $100,000 in cash or securities of the United States Government or of the State of Illinois, having a market value of at least $100,000. The cash or securities so deposited shall be held in trust by the Director, until the issuance of a certificate of authority to the company, to indemnify the State of Illinois and all subscribers, shareholders and creditors of the company for the same matters and things set forth as conditions of the organization bonds mentioned in subsection (1).

(3) No bonds are required if the stock of the company is to be purchased by a sole shareholder.

(Source: P.A. 84-1431.)

(215 ILCS 5/17) (from Ch. 73, par. 629)

(Section scheduled to be repealed on January 1, 2027)

Sec. 17. Publication of intention.

(1) Upon complying with the provisions of Section 15, the incorporators shall cause to be published in a newspaper of general circulation in this State, in the county where the principal office of the company is to be located, once each week for 3 consecutive weeks, a notice setting forth:

(a) their intent to form the company and the proposed name thereof;

(b) the class or classes of insurance business in which the company proposes to engage; and

(c) the address where its principal office shall be located.

(2) Proof of such publication made by a certificate of the publisher or his agent shall be delivered to the Director.

(Source: P.A. 100-863, eff. 8-14-18.)

(215 ILCS 5/18) (from Ch. 73, par. 630)

(Section scheduled to be repealed on January 1, 2027)

Sec. 18. Approval of documents.

(1) If the Director finds that the documents and papers so delivered comply with this Code, he must place on file in his office the by-laws, form of subscription agreement, bonds or securities, and one of the duplicate originals of the articles of incorporation, and endorse upon the other duplicate original his approval, and the month, day and year of approval and deliver it to the incorporators. The company is deemed to be fully organized on the date of the approval of the articles of incorporation by the Director, and that date is the date of incorporation of the company.

(2) If the Director finds that any of said documents are insufficient or do not comply with this Code, he shall notify the incorporators in writing in what respect said documents are found to be insufficient and if requested so to do must grant the incorporators a hearing.

(Source: P.A. 77-747.)

(215 ILCS 5/19) (from Ch. 73, par. 631)

(Section scheduled to be repealed on January 1, 2027)

Sec. 19. Recording articles of incorporation. The duplicate original of the articles of incorporation returned by the Director shall be filed for record, within 15 days after it is delivered to the company, in the office of the recorder of the county where the principal office of the company is to be located.

(Source: P.A. 83-358.)

(215 ILCS 5/20) (from Ch. 73, par. 632)

(Section scheduled to be repealed on January 1, 2027)

Sec. 20. Authority to solicit subscriptions.

(1) Upon the approval of the articles of incorporation by the Director and upon compliance with such reasonable regulations relating to the offering and subscription of or for shares as may be promulgated by the Director to the end that no inequity, fraud or deceit may be worked or tend to be worked upon prospective subscribers to or purchasers of such shares, he shall issue to the company a permit, which shall expire at the end of two years from its date, authorizing it to solicit subscriptions in accordance with such regulations, this Code and the form of subscription agreement filed with him, to receive payment for its shares and to do such other acts as may be necessary and proper in order to complete its organization and to entitle it to receive a certificate of authority to transact an insurance business.

(2) No subscription for shares shall be solicited, until such subscriptions or shares shall have been qualified or registered in accordance with any law of this State or of the United States requiring qualification or registration.

(3) If the Director finds that any company in process of organization has failed to comply with, or has violated any provision of the Code, he may proceed against the company under Article XIII, and may after notice and hearing, if any provision of the Code or any regulation promulgated under subsection (1) has been violated, revoke the permit issued to it under subsection (1).

(Source: Laws 1959, p. 1428.)

(215 ILCS 5/21) (from Ch. 73, par. 633)

(Section scheduled to be repealed on January 1, 2027)

Sec. 21. Subscription agreement.

(1) The company and each subscriber shall enter into an agreement for the subscription to the shares of the company and such agreement shall also constitute an agreement between the several subscribers. It shall state:

(a) the price of the shares, terms, time, and medium of payment therefor;

(b) the part of the price that may be used for commission, promotion, organization, and other expenses;

(c) the name of the bank or trust company in this State in which the funds or securities are to be deposited pending the completion of the organization of the company; and

(d) that the total cash or securities received in payment will be returned to the subscribers who have made such payments in the event the organization of the company is not completed.

(2) Subscriptions to shares shall be irrevocable unless subscribers representing 50% or more of the amount subscribed consent to the revocation.

(3) Any subscription agreement may provide for payment in installments but in the case of subscriptions prior to the issuance of a certificate of authority to the company, such installments shall not extend beyond 2 years from the date of the permit of the Director authorizing the solicitation of subscriptions.

(Source: P.A. 100-863, eff. 8-14-18.)

(215 ILCS 5/21.1) (from Ch. 73, par. 633.1)

(Section scheduled to be repealed on January 1, 2027)

Sec. 21.1. Escrow agreement. The company and the bank or trust company designated in the subscription agreement shall execute an escrow agreement. The escrow agreement shall state that the proceeds of all subscriptions to shares shall be placed in the bank or trust company and remain until an organization examination has been completed, at which time the escrow agent is authorized to purchase securities for deposit in the amount required by Section 26 and forward them to the Director. The escrow agent is authorized to release the balance of the escrowed funds to the company only upon notification that a Certificate of Authority or similar documentation has been issued by the Director.

(Source: P.A. 84-502.)

(215 ILCS 5/22) (from Ch. 73, par. 634)

(Section scheduled to be repealed on January 1, 2027)

Sec. 22. Payments for shares-Promotion expenses. The net proceeds of all subscriptions to shares prior to the issuance of a certificate of authority to the company to transact business shall not be less than the paid up capital specified in the articles of incorporation and the required paid-in surplus. Payments upon subscriptions shall be made only in cash or securities that are eligible for investment under Article VIII. The part of the subscription price, that may be used for commission, promotion, organization, and other expenses, in no event shall be in excess of 15% of the amount collected on the respective subscriptions and in no case shall such expenses be paid out of the subscription proceeds until such time as the sale of all of the shares constituting the offering has been completed.

(Source: Laws 1961, p. 3735.)

(215 ILCS 5/23) (from Ch. 73, par. 635)

(Section scheduled to be repealed on January 1, 2027)

Sec. 23. Deposit of proceeds of shares - When subscribers deemed shareholders.

(1) The cash or securities received by the company upon subscriptions for shares shall be placed in the bank or trust company designated in the escrow and subscription agreements. No part of the cash or securities so deposited shall be used by the company prior to the issuance to it of a certificate of authority to transact business, except when payments for all the shares to be issued and sold, as set forth in the articles of incorporation, are completed, for the purpose of making the deposit as provided for in Section 26.

(2) Any officer, director or incorporator of a company who, prior to the issuance of the certificate of authority to the company, withdraws, causes to be withdrawn or knowingly permits the withdrawal of any cash or securities on deposit in such bank or trust company, for any purposes other than those authorized in subsection (1), shall be guilty of a Class A misdemeanor.

(3) The subscribers shall be deemed to be shareholders when full payment upon the subscriptions for all shares which the company proposes to issue and sell, as set forth in the articles of incorporation, shall have been received by the company, but no certificate for shares may be issued by the company prior to the issuance to it of a certificate of authority to transact business.

(4) In the event that payments for all shares to be issued and sold by the company, as set forth in the articles of incorporation, are not completed within the time provided in the permit of the Director authorizing the solicitation of subscriptions the cash and securities received in payment shall be returned to the subscribers who have made the payments.

(Source: P.A. 84-502.)

(215 ILCS 5/24) (from Ch. 73, par. 636)

(Section scheduled to be repealed on January 1, 2027)

Sec. 24. Certificate of authority to do an insurance business. When the Director has been notified that the capital required by the articles of incorporation has been fully subscribed, and that such capital and the required surplus has been fully collected, he shall conduct an examination of the company. If he finds that the organization of the company is complete, that the required capital provided in the articles of incorporation and required surplus has been fully collected and deposited with the designated bank or trust company, that the deposit provided for by Section 26 has been made and that all of the requirements imposed by this Code, have been met, he shall issue to the company a certificate of authority to transact the kind or kinds of business specified therein. No company shall transact any business of insurance until it has received a certificate of authority as herein prescribed nor any business of insurance not specified in such certificate of authority.

(Source: Laws 1957, p. 603.)

(215 ILCS 5/25) (from Ch. 73, par. 637)

(Section scheduled to be repealed on January 1, 2027)

Sec. 25. Voluntary surrender of the articles of incorporation. At any time prior to the issuance of the certificate of authority to the company the articles of incorporation may be voluntarily surrendered and the company dissolved by written agreement filed with the Director, signed by a majority of the incorporators, and by subscribers representing at least two-thirds of the shares subscribed. Such surrender and dissolution shall become effective only upon the approval thereof by the Director. The Director shall approve the surrender of such articles of incorporation if upon investigation he shall find that:

(a) no insurance business has been transacted by the company;

(b) all sums of money or securities, if any, collected upon subscriptions, have been returned to the subscribers; and

(c) all obligations of the company have been paid or discharged.

(Source: P.A. 100-863, eff. 8-14-18.)

(215 ILCS 5/26) (from Ch. 73, par. 638)

(Section scheduled to be repealed on January 1, 2027)

Sec. 26. Deposit.

(a) A company subject to the provisions of this Article shall make and maintain with the Director for the protection of all creditors, policyholders and policy obligations of the company, a deposit of securities having a fair market value equal to the minimum capital and surplus required to be maintained under Section 13. The Director may release the required deposit of securities upon receipt of an order of a court having proper jurisdiction or upon: (i) certification by the company that it has no outstanding creditors, policyholders, or policy obligations in effect and no plans to engage in the business of insurance; (ii) receipt of a lawful resolution of the company's board of directors effecting the surrender of its articles of incorporation for administrative dissolution by the Director; and (iii) receipt of the name and forwarding address for each of the final officers and directors of the company, together with a plan of dissolution approved by the Director.

(b) All deposits by insurers subject to this Article must be limited to the following types:

(1) United States government bonds, notes, and bills for which the full faith and credit of the government of the United States is pledged for the payment of principal and interest.

(2) United States public bonds and notes of any state or of the District of Columbia, or Canadian public bonds and notes of any province thereof, for which the full faith and credit of the issuer has been pledged for the payment of principal and interest.

(3) United States and Canadian county, provincial, municipal, and district bonds and notes for which the issuer has lawful authority to levy taxes or make assessments for the payment of principal and interest.

(4) Bonds and notes of any federal agency that are guaranteed as to payment of principal and interest by the United States.

(5) International development bank bonds, bonds issued by the State of Israel and sold through the Development Corporation for Israel or its successor entities, and notes issued, assumed, and guaranteed by the International Bank for Reconstruction and Development, the Inter-American Development Bank, the Asian Development Bank, the African Development Bank, or the International Finance Corporation.

(6) Corporate bonds and notes of any private corporations that are not affiliates or subsidiaries of the insurer, which corporations are organized under the laws of the United States, Canada, any state, the District of Columbia, any territory or possession of the United States, or any province of Canada.

(7) Certificates of deposit.

(c) To be eligible for deposit under subsection (b), any bond or note must have the following characteristics:

(1) The bond or note must be interest-bearing or interest-accruing, and the insurer must be the exclusive owner of the interest accruing thereon and entitled to receive the interest for its account.

(2) The issuer must be in a solvent financial condition and the bond or note must not be in default.

(3) The bond, note, or debt of the issuing country must be rated in one of the 4 highest classifications by an established, nationally recognized investment rating service or must have been given a rating of 1 by the Securities Valuation Office of the National Association of Insurance Commissioners.

(4) The market value of the bond or note must be readily ascertainable or the value of the bond or note must be obtainable by the insurer or its custodian from the issuer's fiscal agent.

(5) The bond or note must be the direct obligation of the issuer.

(6) The bond or note must be stated in United States dollar denominations.

(7) The bond or note must be eligible for book-entry form on the books of the Federal Reserve's book-entry system or in a depository trust clearing system or on the books of the issuer's transfer agent or evidenced by a certificate delivered to the insurer or its custodian.

(d) To be eligible for deposit under item (7) of subsection (b), a certificate of deposit must have the following characteristics:

(1) The certificate of deposit must be issued by a bank, savings bank, or savings association that is organized under the laws of the United States, of this State, or of any other state and that has a principal office or branch office in this State that is authorized to receive deposits in this State.

(2) The certificate of deposit must be interest-bearing and may not be issued in discounted form.

(3) The certificate of deposit must be issued for a period of not less than one year.

(4) The issuing bank, savings bank, or savings association must agree to the terms and conditions of the Director regarding the rights to the certificate of deposit and must have executed a written certificate of deposit agreement with the Director. The terms and conditions of the agreement shall include, but need not be limited to:

(A) Exclusive authorized signature authority for the chief financial officer.

(B) An agreement to pay, without protest, the proceeds of its certificate of deposit to the Director within 30 business days after presentation.

(C) A prohibition against levies, setoffs, survivorship, or other conditions that might hinder the Director's ability to recover the full face value of a certificate of deposit.

(D) Instructions regarding interest payments, renewals, taxpayer identification, and early withdrawal penalties.

(E) An agreement to be subject to the jurisdiction of the courts of this State, or those of the United States that are located in this State, for the purposes of any litigation arising out of this Section.

(F) Such other conditions as the Director requires.

(e) The Director may refuse to accept certain securities or refuse to accept the reported market value of certain securities offered pursuant to this Section in order to ensure that sufficient cash and securities are on hand to meet the purposes of the deposit. In making a refusal under this subsection (e), the guidelines for use of the Director may include, but need not be limited to, whether the market value of the securities cannot be readily ascertained and the lack of liquidity of the securities. Securities refused under this subsection (e) are not acceptable as deposits.

(f) All deposits required of a domestic insurer pursuant to the laws of another state, province, or country must be comprised of securities of the kinds required under subsection (b), having the characteristics required under subsections (c) and (d), and permitted by the laws of the other state, province, or country, except common stocks, mortgages or loans of any kind, real estate investment trust funds or programs, commercial paper, and letters of credit.

(Source: P.A. 98-110, eff. 1-1-14; 98-969, eff. 1-1-15.)

(215 ILCS 5/27) (from Ch. 73, par. 639)

(Section scheduled to be repealed on January 1, 2027)

Sec. 27. Dividends and other distributions.

(1) The board of directors of any company subject to this Article may declare and the company may pay dividends and other distributions (i) on its outstanding shares in cash, property, or its own shares and (ii) on its treasury shares in its own shares, subject to the following provisions:

(a) No dividend or other distribution may be declared or paid at any time except out of earned, as distinguished from contributed, surplus, nor when the surplus of the company is less than the surplus required by Section 13 for the kind or kinds of business authorized to be transacted by such company, nor when the payment of a dividend or other distribution would reduce its surplus to less than such amount.

(b) Except in the case of share dividends, surplus for determining whether dividends or other distributions may be declared shall not include surplus arising from unrealized appreciation in value, or revaluation of assets, or from unrealized profits upon investments.

(c) No dividend or other distribution may be declared or paid contrary to any restriction contained in the articles of incorporation.

(d) No dividend or other distribution may be declared or paid contrary to Section 131.20 or 131.20a.

(2) No payments may be made to policyholders by way of dividends unless the company possesses admitted assets in the amount of such payments in excess of its capital, minimum required surplus and all liabilities.

(Source: P.A. 88-364.)

(215 ILCS 5/27.1) (from Ch. 73, par. 639.1)

(Section scheduled to be repealed on January 1, 2027)

Sec. 27.1. Treasury shares. "Treasury shares" means (a) shares of a company which have been issued, have been subsequently acquired by and belong to the company, and have not, either by reason of the acquisition or thereafter, been cancelled or restored to the status of authorized but unissued shares and (b) shares declared and paid as a share dividend on the shares referred to in clause (a) or this clause (b) of this Section. Treasury shares shall be deemed to be "issued" shares but not outstanding shares and shall not be voted. Shares converted into or exchanged for other shares of the company shall not be deemed to be treasury shares.

(Source: P.A. 100-863, eff. 8-14-18.)

(215 ILCS 5/28) (from Ch. 73, par. 640)

(Section scheduled to be repealed on January 1, 2027)

Sec. 28. Dealing in shares of company.

(1) A company subject to the provisions of this Article shall have the power to purchase, take, receive, or otherwise acquire, hold, own, pledge, transfer, or otherwise dispose of its own shares, provided that it shall not purchase, either directly or indirectly, its own shares when its net assets are less than the sum of its paid-up capital, and its required surplus, any surplus arising from unrealized appreciation in value or revaluation of its assets and any surplus arising from surrender to the corporation of any of its shares, or when by so doing its net assets would be reduced below the minimum capital and surplus requirements of Section 13 hereof, and as set forth in the articles of incorporation. Notwithstanding the foregoing limitations, a company may purchase its own shares for any of the following purposes:

(a) eliminating fractional shares;

(b) collecting or compromising claims of the company or securing any indebtedness to the company previously incurred;

(c) paying dissenting shareholders entitled to payment for their shares in the event of a merger or consolidation;

(d) effecting a plan for the mutualization of the company; or

(e) furthering a general savings and investment plan for employees of the company.

(2) No shares which are or have been reacquired, purchased, pledged or held pursuant to paragraph (1) of this Section shall be considered an admitted asset as defined in this Code, or considered in determining the solvency of such company.

(Source: Laws 1959, p. 631.)

(215 ILCS 5/28.1) (from Ch. 73, par. 640.1)

(Section scheduled to be repealed on January 1, 2027)

Sec. 28.1. Dealing in shares of company by officers, directors and principal stockholders.

(a) Any person who is directly or indirectly the beneficial owner of more than 10% of any class of any equity security of a domestic stock insurance company, or who is a director or an officer of such company, shall file in the office of the Director by January 31, 1966 or within 10 days after he becomes such beneficial owner, director or officer, a statement, in such form as the Director may prescribe, of the amount of all equity securities of such company of which he is the beneficial owner; and, within 10 days after the close of each calendar month thereafter, if there has been a change in such ownership during such month, shall file in the office of the Director a statement, in such form as the Director may prescribe, indicating his ownership at the close of the calendar month and such changes in his ownership as have occurred during such calendar month.

(b) For the purpose of preventing the unfair use of information which may have been obtained by such beneficial owner, director or officer by reason of his relationship to such company, any profit realized by such beneficial owner, officer or director from any purchase and sale, or any sale and purchase, of any equity security of such company within any period of less than 6 months, unless such security was acquired in good faith in connection with a debt previously contracted, shall inure to and be recoverable by the company, irrespective of any intention on the part of such beneficial owner, director or officer in entering into such transaction of holding the security purchased or of not repurchasing the security sold for a period exceeding 6 months. Suit to recover such profit may be instituted at law or in equity by the company, or if the company shall fail or refuse to bring such suit within 60 days after request or shall fail diligently to prosecute such a suit, a suit may be instituted by the owner of any security of the company in the name and in behalf of the company, but no such suit shall be brought more than 2 years after the date such profit was realized. This subsection shall not be construed to cover any transaction where such beneficial owner was not such both at the time of the purchase and sale, or the sale and purchase, of the security involved, or any transaction or transactions which the Director by rules and regulations may exempt as not comprehended within the purpose of this subsection.

(c) It is unlawful for any such beneficial owner, director or officer, directly or indirectly, to sell any equity security of such company if the person selling the security or his principal (i) does not own the security sold, or (ii) if owning the security, does not deliver it against such sale within 20 days thereafter, or does not within 5 days after such sale deposit it in the mails or other usual channels of transportation; provided, however, that this provision does not apply if such person proves that notwithstanding the exercise of good faith he was unable to make such delivery or deposit within such time, or that to do so would cause undue inconvenience or expense.

(d) The provisions of paragraph b of this Section do not apply to any purchase and sale, or sale and purchase, and the provisions of paragraph c of this Section do not apply to any sale, of an equity security of a domestic stock insurance company not then or theretofore held by such beneficial owner, director or officer in an investment account, by a dealer in the ordinary course of his business and incident to the establishment or maintenance by him of a primary or secondary market (otherwise than on an exchange as defined in the Securities Exchange Act of 1934) for such security. The Director may, by such rules and regulations as he finds to be necessary or appropriate in the public interest, define and prescribe terms and conditions with respect to securities held in an investment account and transactions made in the ordinary course of business and incident to the establishment or maintenance of a primary or secondary market.

(e) The provisions of paragraphs a, b and c of this Section do not apply to foreign or domestic arbitrage transactions unless made in contravention of such rules and regulations as the Director may adopt in order to carry out the purposes of this Act.

(f) The term "equity security" when used in this Act means any stock or similar security; or any security convertible, with or without consideration, into such a security, or carrying any warrant or right to subscribe to or purchase such a security; or any such warrant or right; or any other security which the Director finds to be of similar nature and considers necessary or appropriate, by such rules and regulations as he may prescribe in the public interest or for the protection of investors, to treat as an equity security.

(g) The provisions of paragraphs a, b and c of this Section do not apply to equity securities of a domestic stock insurance company if (i) such securities are registered, or are required to be registered, pursuant to Section 12 of the Securities Exchange Act of 1934, as amended, or if (ii) such domestic stock insurance company does not have any class of its equity securities held of record by 100 or more persons on the last business day of the year next preceding the year in which equity securities of the company would be subject to the provisions of paragraphs a, b and c of this Section except for the provisions of this subsection (ii).

(h) The Director may make such rules and regulations as may be necessary for the execution of the functions vested in him by this Section, and may for such purpose classify domestic stock insurance companies, securities, and other persons or matters within his jurisdiction. No provision of this Section imposing any liability shall apply to any act done or omitted in good faith in conformity with any rule or regulation of the Director, notwithstanding that such rule or regulation may, after such act or omission, be amended or rescinded or determined by judicial or other authority to be invalid for any reason.

(i) The provisions of this Section do not apply to any sale made prior to its effective date.

(Source: Laws 1965, p. 2257.)

(215 ILCS 5/28.2) (from Ch. 73, par. 640.2)

(Section scheduled to be repealed on January 1, 2027)

Sec. 28.2. Proxies, consents and authorizations of domestic stock companies.

(a) The Director is authorized to regulate proxies, consents, and authorizations in respect of securities issued by any company subject to the provisions of this Article to the extent as may be necessary or appropriate in the public interest or for the protection of investors, and such regulation may include but shall not be limited to rules and regulations under which any such company, director, or employee of the company or any other person may solicit or permit the use of his name to solicit any proxy, consent or authorization in respect of securities issued by any such company.

(b) Unless proxies, consents or authorizations in respect of a security of a company subject to the provisions of this Article are solicited by or on behalf of the management of such company from the holders of record of such security in accordance with the provisions of any rules and regulations prescribed under subsection (a) of this Section, prior to any annual or other meeting of the holders of such security, such company shall, if required by such rules and regulations prescribed by the Director as may be necessary or appropriate in the public interest or for the protection of investors, file with the Director and transmit to all holders of record of such security information substantially equivalent to the information which would be required to be transmitted if a solicitation were made.

(c) The authority granted under subsections (a) and (b) hereof includes the power on the part of the Director to require such companies to file with the Director and transmit to shareholders prior to the annual meeting of shareholders an annual report containing such financial statements for the last fiscal year as are referred to in the Stockholder Information Supplement filed with the annual statement of any such company under the provisions of Section 136 of this Code.

(d) If the Director finds, after notice and hearing, that such company or any director, officer or employee of such company or any other person has willfully violated the provisions of this Section or of any rule or regulation prescribed by the Director hereunder, he may order such company or any director, officer or employee of such company, or any other person, as the case may be, to pay to the State of Illinois a penalty in a sum not exceeding $5,000 for each such offense. The findings, determinations and orders of the Director made pursuant to this Section shall be subject to judicial review under the Administrative Review Law, as now or hereafter amended.

(Source: P.A. 82-783.)

(215 ILCS 5/28.2a) (from Ch. 73, par. 640.2a)

(Section scheduled to be repealed on January 1, 2027)

Sec. 28.2a. Proxies.

(1) A shareholder may appoint a proxy to vote or otherwise act for him or her by signing an appointment form and delivering it to the person so appointed.

(2) No proxy shall be valid after the expiration of 11 months from the date thereof unless otherwise provided in the proxy. Every proxy continues in full force and effect until revoked by the person executing it prior to the vote pursuant thereto, except as otherwise provided in this Section. Such revocation may be effected by a writing delivered to the corporation stating that the proxy is revoked or by a subsequent proxy executed by, or by attendance at the meeting and voting in person by, the person executing the proxy. The dates contained on the forms of proxy presumptively determine the order of execution, regardless of the postmark dates on the envelopes in which they are mailed.

(3) An appointment of a proxy is revocable by the shareholder unless the appointment form conspicuously states that it is irrevocable and the appointment is coupled with an interest in the shares or in the corporation generally. By way of example and without limiting the generality of the foregoing, a proxy is coupled with an interest when the proxy appointed is one of the following:

(a) a pledgee;

(b) a person who has purchased or had agreed to purchase the shares;

(c) a creditor of the corporation who has extended it credit under terms requiring the appointment, if the appointment states the purpose for which it was given, the name of the creditor, and the amount of credit extended; or

(d) an employee of the corporation whose employment contract requires the appointment, if the appointment states the purpose for which it was given, the name of the employee, and the period of employment.

(4) The death or incapacity of the shareholder appointing a proxy does not revoke the proxy's authority unless notice of the death or incapacity is received by the officer or agent who maintains the corporation's share transfer book before the proxy exercises his or her authority under the appointment.

(5) An appointment made irrevocable under subsection (3) becomes revocable when the interest in the proxy terminates such as when the pledge is redeemed, the shares are registered in the purchaser's name, the creditor's debt is paid, the employment contract ends, or the voting agreement expires.

(6) A transferee for value of shares subject to an irrevocable appointment may revoke the appointment if the transferee was ignorant of its existence when the shares were acquired and both the existence of the appointment and its revocability were not noted conspicuously on the certificate (or information statement for shares without certificates) representing the shares.

(7) Unless the appointment of a proxy contains an express limitation on the proxy's authority, a corporation may accept one proxy's vote or other action as that of the shareholder making the appointment. If the proxy appointed fails to vote or otherwise act in accordance with the appointment, the shareholder is entitled to such legal or equitable relief as is appropriate in the circumstances.

(Source: P.A. 102-558, eff. 8-20-21.)

(215 ILCS 5/29) (from Ch. 73, par. 641)

(Section scheduled to be repealed on January 1, 2027)

Sec. 29. Amendment of articles of incorporation.

(1) A company subject to the provisions of this article may amend its articles of incorporation in any respect not in violation of law but may not amend its articles to insert any provision prohibited, or to delete any provision required, in original articles of incorporation for a similar domestic company organized under this Code, except as provided by Section 35.

(2) Amendments to the articles of incorporation, after a certificate of authority has been issued to the company, shall be made in the following manner:

(a) The board of directors shall adopt a resolution setting forth the proposed amendment and directing that it be submitted to a vote of shareholders at either an annual or special meeting.

(b) Written or printed notice setting forth the proposed amendment or a summary of the changes to be effected thereby and stating the time and place of the meeting at which the same will be considered, shall be mailed, postage prepaid and properly addressed, to each shareholder at least ten days before the time fixed for such meeting. A written waiver of notice signed by the shareholders, whether before or after the date of the meeting mentioned therein, shall be deemed equivalent to the notice in this Section provided.

(c) At such meeting a vote of the shareholders shall be taken on the proposed amendment. The proposed amendment shall be adopted upon receiving the affirmative vote of the holders of at least two-thirds of the outstanding shares.

(3) Amendments to the articles of incorporation, prior to the issuance of a certificate of authority to the company, shall be made by the submission of the proposed amendment by the incorporators to a vote of the subscribers in the same manner as provided in subsection (2) for submission to shareholders. The proposed amendment in such cases shall be adopted upon receiving the affirmative vote of all subscribers. If such company has no subscribers the proposed amendment shall be adopted by the written consent of all the incorporators.

(4) Upon the adoption of the amendment to the articles of incorporation, the restated articles of incorporation shall be executed in duplicate by the company by its president or vice-president and its secretary or assistant secretary, or officers corresponding thereto, and the corporate seal shall be thereunto affixed.

(5) There shall be delivered to the Director duplicate originals of the restated articles of incorporation and an affidavit of the secretary or assistant secretary of the company, setting forth the facts showing that the requirements of this Section have been complied with.

(Source: P.A. 84-502.)

(215 ILCS 5/30) (from Ch. 73, par. 642)

(Section scheduled to be repealed on January 1, 2027)

Sec. 30. Approval of amendment. The restated articles of incorporation and the other documents so delivered to the Director may be approved or disapproved by the Director in the same manner as original articles of incorporation. If said restated articles of incorporation be approved by the Director, he shall place on file in his office all the documents so delivered to him, except one of the duplicate originals of the restated articles of incorporation, and shall endorse upon such duplicate original his approval thereof and the month, day and year of such approval and deliver it to the company. The restated articles shall be effective as of the date of the approval thereof by the Director.

(Source: P.A. 84-1431.)

(215 ILCS 5/31) (from Ch. 73, par. 643)

(Section scheduled to be repealed on January 1, 2027)

Sec. 31. Recording restated articles of incorporation. The duplicate original of the restated articles of incorporation returned by the Director shall be filed for record, within 15 days after it is delivered to the company, in the office of the recorder of the county where the principal office of the company is located.

(Source: P.A. 84-1431.)

(215 ILCS 5/32) (from Ch. 73, par. 644)

(Section scheduled to be repealed on January 1, 2027)

Sec. 32. Increase in capital.

(1) Any company subject to this Article may increase its paid-up capital either by issuing additional shares not to exceed the number of authorized shares as set forth in its Articles or by increasing the par value of its shares. No company shall issue additional shares nor increase the par value of its shares without first procuring from the Director a permit so to do, which permit shall expire one year from its date. If the proposed increase in capital is part of a series of transactions that includes subsequent transactions that will be subject to Article VIII 1/2, the company shall provide the Director all of the information called for in Article VIII 1/2 prior to the Director's issuance of a permit. The Director may decline to issue a permit if the Director is not satisfied that the proposed series of transactions satisfies the standards established in Article VIII 1/2.

The Director, upon compliance by the company with the applicable provisions of this Code, and such reasonable regulations relating to the offering, issuance, subscription or sale of or for shares as may be promulgated by the Director to the end that no inequity, fraud or deceit may be worked or tend to be worked upon prospective subscribers to, recipients or purchasers of shares or present holders thereof, shall issue a permit to the company to issue additional shares upon receipt of a copy of a resolution by the Board of Directors authorizing the issuance of such shares.

If preferred shares having a right of conversion to common shares are to be issued, the terms and conditions on which the shares may be converted shall be provided to the Director before a permit may be issued pursuant to this Section.

In the case of shares to be issued for sale, the permit shall authorize the company to solicit subscriptions to such shares on a form of subscription agreement which shall have been submitted to and approved by the Director.

All of the provisions of this Code relative to the filing, terms and effect of subscription agreements, payment for shares, the limitations of expenses, filing of bonds except that no bonds shall be required when a company issues stock to its sole shareholder, deposit of proceeds of shares, return of funds in the event the payment for all of the additional shares is not completed, and qualification or registration shall apply to the same extent and effect as if the additional shares were shares representing the original capital of a company being organized under this Article, except that no organization bond with regard to costs incurred in connection with liquidation or dissolution shall be required, and if the subscription agreement provides for payment in installments, such installments shall not extend beyond one year from date of the permit of the Director.

If shares are to be issued as a stock dividend, or if the par value of shares is to be increased, the permit shall authorize the company to pay for such additional shares or increase in par value by transferring the requisite amount of surplus to paid-up capital provided, however, no transfer of such surplus shall be made which will reduce the remaining surplus to less than the surplus required by Section 13. In the case of an increase in par value, the company may require each shareholder to surrender his or her certificate and to accept in lieu thereof a new certificate conforming to such increase in par value.

No more than one permit of the types under this Section may be outstanding in the name of any company at any time.

(2) When the Director is notified that the additional shares proposed to be issued have, or that the increase in par value has, been fully paid, and that all of the requirements of the permit have been satisfied, he or she shall make an examination of the company and if he or she finds that the provisions of this Section have been complied with, he or she shall issue a certificate of paid-up capital to that effect which shall be filed with the recorder of the county in which the principal office of the company is located within 15 days from the date of said certificate. Upon the issuance of such certificate, the company may withdraw the proceeds of the sale, if any, of its shares and the bond, conditioned upon the full and complete accounting by the company for the proceeds of any such sale of shares, shall terminate or the cash deposited with the Director in lieu of such bond shall be returned.

(3) If the Director finds that any company has failed to comply with, or has violated any provision of the Code or any regulation promulgated under subsection (1), he or she may, in addition to and notwithstanding any other procedure, remedy or penalty provided under the laws of this State, after notice and hearing, revoke the permit issued to it under subsection (1).

(Source: P.A. 90-381, eff. 8-14-97.)

(215 ILCS 5/32.1) (from Ch. 73, par. 644.1)

(Section scheduled to be repealed on January 1, 2027)

Sec. 32.1. Stock option plans. A company subject to this Article which has done business in Illinois for 3 or more years and which has adopted a stock option plan shall submit that plan to the Director. Unless the Director finds that such stock option plan creates an inequity, fraud, or deception upon shareholders of the company, the Director shall approve such plan and issue a permit to the company authorizing the issuance of such shares of stock as optionees under the plan are entitled from time to time to acquire by the exercise of their options, including an adjustment in the number of shares to be issued as may at any time be appropriate due to the increase or decrease in the number of shares resulting from any share dividend, and subdivision or combination of shares, or any reorganization, merger, consolidation, or other recapitalization or change in the corporate structure or shares of the company. A stock option plan is deemed prima facie as not creating any inequity, fraud, or deception upon shareholders if it complies with applicable provisions of the Internal Revenue Code in effect at the time of the adoption of the plan and continues in compliance with those provisions or other new provisions of the Internal Revenue Code as it hereafter may be amended; provided, however, that the number of shares in respect to such plan together with the number of shares in respect of which unexpired options are outstanding or may be granted under any and all option plans of the company shall in no event exceed 10% of the total shares outstanding. The permit is effective with respect to all shares issued at any time to optionees under the plan. After receipt of the permit and upon receipt by the company of the full purchase price for any shares to be issued to any optionee, the company may issue such shares to any such optionee without further authorization from the Director. If a plan approved by the Director is amended, no shares may be issued under the plan as amended until the amendment, or the plan as amended, has been approved by the Director. Upon such approval, the permit previously issued shall be deemed to authorize the issuance of shares under the plan as amended. A permit or permits to issue shares under this Section may be outstanding in addition to any outstanding permit to issue shares for any other purpose.

On or before the 25th day of each month a company which issued shares during the preceding month under this Section shall provide the Director with the following information and affidavit:

(1) a list of the names of the individuals to whom were issued shares during the preceding month under the stock option plan;

(2) the number of shares and a description of the shares issued to each individual;

(3) the date of each issue;

(4) the price per share and total price paid by each said individual; and

(5) an affidavit signed by either the president, a vice president, the secretary, or the treasurer of the company under oath averring that the dollar consideration due from each such individual was actually received by the company before the issuance of those shares. Such information and affidavit shall be accompanied by the company's request for a certificate of paid-up capital.

After receiving the information and affidavit and satisfying himself as to the accuracy thereof, the Director shall issue a certificate of paid-up capital which shall be recorded by the company with the recorder of the county in which the principal office of the company is located, within 15 days from the date of the issuance of the certificate. No bond or cash deposit with the Director is required with respect to shares issued under this Section.

(Source: P.A. 83-358.)

(215 ILCS 5/33) (from Ch. 73, par. 645)

(Section scheduled to be repealed on January 1, 2027)

Sec. 33. Decrease of capital.

(1) When articles of amendment providing for a decrease of capital or a decrease in the par value of shares, or both, become effective, each issued share of the company shall thereupon be changed into and be a fractional part of a share, or a share having a reduced par value, or both, as provided by such amendment, and the holders of shares issued before the amendment shall thereupon cease to be holders of such shares and shall be and become holders of the shares authorized by the amendment upon the basis specified in the amendment, whether or not certificates representing the shares authorized by the amendment are then issued and delivered. The company may require each shareholder to surrender his or her certificate and accept in lieu thereof a new certificate conforming to such decrease.

(2) No distribution of the assets of the company shall be made to the shareholders upon any decrease of capital which shall reduce its surplus to less than the surplus required by this Code for the kind or kinds of business authorized to be transacted by the company.

(3) If the proposed articles of amendment providing for a decrease of capital or a decrease in the par value of shares, or both, is part of a series of transactions that includes subsequent transactions that will be subject to Article VIII 1/2, the company shall provide the Director all of the information called for in Article VIII 1/2 prior to the Director's approval. The Director may decline to approve if the Director is not satisfied that the proposed series of transactions satisfies the standards established in Article VIII 1/2.

(Source: P.A. 90-381, eff. 8-14-97.)

(215 ILCS 5/34) (from Ch. 73, par. 646)

(Section scheduled to be repealed on January 1, 2027)

Sec. 34. Procedure when insufficient assets possessed by company.

(1) Whenever the Director finds that the admitted assets of any company subject to the provisions of this Article are less than its capital, minimum required surplus and all liabilities, he or she must give written notice to the company of the amount of the impairment and require that the impairment be removed within such period, which must be not less than 30 nor more than 90 days from the date of the notice, as he or she may designate. Unless otherwise allowed by the Director, the company must discontinue the issuance of new and renewal policies while the impairment exists.

(2) Upon the receipt of the notice from the Director, the board of directors of the company must cause the impairment to be removed and call upon its shareholders ratably for the necessary amount to remove the impairment, or, by proper action, reduce its capital to meet the impairment providing the reduced capital is not less than the minimum requirements fixed by this Code or by other means remove the impairment. If the impairment is not removed within the period of time designated, the Director may order the board of directors to call upon its shareholders ratably. If a shareholder of the company refuses or neglects to pay the amount so called for after notice, given personally or by mail, by a date stated in the notice not less than 15 days from the date of such notice, the Director may order the board of directors to declare, by resolution, the shares of such person cancelled, and in lieu thereof may issue new certificates for shares and dispose of the same at the best price obtainable not less than par. If the amount received for such new certificates for shares exceeds the amount required to be paid by such shareholder, the excess must be paid to the shareholder so refusing to pay his or her ratable share of the impairment. Nothing contained in this subsection may be construed to impose any liability on any shareholder as a result of any call, enforceable in any manner other than through a sale of his or her shares as provided in this subsection.

(3) If the impairment is not removed within the period specified in the Director's notice, the company shall be deemed insolvent and the Director shall proceed against the company in accordance with Article XIII.

(4) If while the impairment exists any officer or director of the company knowingly renews, issues or delivers or causes to be renewed, issued or delivered any policy, contract or certificate of insurance unless allowed by the Director, and the fact of such impairment is known to the officer or director of the company, such officer or director shall be guilty of a business offense and may be fined not less than $200 and not more than $5,000 for each offense.

(5) Nothing in this Section prohibits, while such impairment exists, any such officer, director, trustee, agent or employee from issuing or renewing a policy of insurance when an insured or owner exercises an option granted to him or her under an existing policy to obtain new, renewed or converted insurance coverage.

(Source: P.A. 90-381, eff. 8-14-97.)

(215 ILCS 5/34.1) (from Ch. 73, par. 646.1)

(Section scheduled to be repealed on January 1, 2027)

Sec. 34.1. Subordinated indebtedness. A company organized under this Article may borrow or assume a liability for the repayment of a sum of money under a written agreement. The loan or advance shall bear interest either (1) at a fixed rate not exceeding the corporate base rate as reported by the largest bank (measured by assets) with its head office located in Chicago, Illinois, in effect on the first business day of the month in which the loan document is executed, plus 3% per annum or (2) at a variable rate equal to the corporate base rate determined on the first business day of each month during the term of the loan plus 2% per annum. In no event shall the variable interest rate for any month exceed the initial rate for the loan or advance by more than 10% per annum. The insurer shall elect at the time of execution of the loan or advance agreement whether the interest rate is to be fixed or floating for the term of the agreement. The loan and interest shall be repaid only out of surplus of the company in excess of the minimum surplus as is stipulated in and by the agreement. The agreement shall first be submitted to and approved by not less than a majority of the voting shares of the company and the Director. Repayment of principal or payment of interest may be made only with the approval of the Director when he is satisfied that the financial condition of the company warrants that action, but approval may not be withheld if the company shall have and submit satisfactory evidence of surplus of not less than the amount stipulated in the repayment of principal or interest payment clause of the agreement. No loan or advance made under this Section or interest accruing thereon shall form a part of the legal liabilities of the company until authorized for payment by the Director but until that authorization all statements published by the company or filed with the Director shall show the amount thereof then remaining unpaid as a special surplus account. Subject to approval of the Director, the interest rate on all subordinated surplus debentures existing on the effective date of this amendatory Act of 1991 can be amended to the rate as permitted in this Section with the mutual agreement of the company and the subordinated surplus debenture holder. Nothing in this Section shall be construed to mean that a company may not otherwise borrow money, but the amount so borrowed with accrued interest thereon shall be carried by the company as a liability.

(Source: P.A. 87-777; 87-1090.)

(215 ILCS 5/35) (from Ch. 73, par. 647)

(Section scheduled to be repealed on January 1, 2027)

Sec. 35. Stock companies may become mutuals.

(1) Any domestic stock company may become a mutual company by complying with the provisions of this Section.

(2) The board of directors shall adopt a mutualization plan and amended articles of incorporation, which articles shall conform to the articles required by this Code of a mutual company authorized to transact the kind or kinds of insurance stated in the articles. The mutualization plan and amended articles of incorporation shall be executed in duplicate by the company by its president or vice-president and its secretary or assistant secretary, or officers corresponding thereto, and shall be delivered to the Director. The plan and amended articles of incorporation delivered to the Director may be approved or disapproved by him in the same manner as original articles of incorporation. If the Director does not approve the plan and amended articles, he or she shall notify the company in writing of the reasons for such disapproval and if requested so to do, shall grant the company a hearing.

(3) If the plan and amended articles of incorporation be approved by the Director he or she shall place on file in his or her office one of the duplicate copies of each of the documents, shall endorse upon the other duplicate copies his approval thereof, and the month, day and year of such approval, and deliver the same to the company.

(4) The plan and amended articles of incorporation shall thereupon be submitted to and be approved by the shareholders in the same manner as is required for the submission and approval of amendments to articles of incorporation.

(5) After approval by the shareholders, a written or printed notice setting forth a copy of the plan and amended articles of incorporation, or a summary of the same, and stating the time and place of the special meeting at which they will be considered, and the manner of voting, shall be mailed to each policyholder of the company at least thirty days before the date set for such meeting. In a life insurance company each policyholder shall have one vote for each $1,000 of insurance which on the day of the meeting has been in force for one year or longer. In a company other than life, each policyholder shall be entitled to one vote for each policy in force on the day of the meeting, and upon which the premium has been paid at the time of the meeting. A policyholder may vote in person, by proxy or by mail. The election shall be under the supervision of not less than 3 nor more than 5 inspectors who shall be appointed by the Director. Such inspectors shall pass upon the qualifications of the voters, the validity of the ballots, shall canvass the vote and certify the result of such vote to the Director and to the company. If 2/3 of the votes cast at the meeting are in favor of the adoption of the plan, the said plan shall become effective. All necessary expenses incurred by the Director or by the inspectors in connection with the vote shall be certified to by the Director and paid by the company.

(6) The plan may provide for the acquisition by the company of its own shares, by purchase, by gift or otherwise in the manner provided therein. Any shares so acquired shall be held in trust for the company and shall be assigned and transferred on the books of the company to three individual trustees or to any trust company authorized under the laws of this State to do a trust business, to be chosen or approved by a majority vote of those policyholders who vote at the meeting referred to in subsection (5) of this Section, and such trustee or trustees shall vote the shares held by them or by it at any company meeting. Each such trustee shall file with the company a verified acceptance of his, hers or its appointment and a declaration that he or it will faithfully discharge his, hers or its duties as such trustee. Any dividends or other sums acquired or accruing to the trustees upon shares coming within their trusteeship shall upon the termination of the trust be delivered to the company.

(7) If a shareholder of the company shall file with such company, prior to or at the meeting of shareholders at which the plan of mutualization is submitted to a vote, a written objection to such plan and shall not vote in favor thereof, and such shareholder within 20 days after the plan is approved by such meeting shall make written demand on the company for payment of the fair value of his shares as of the day prior to the date on which such plan is approved by the shareholders, such shareholder shall be entitled to receive prior to the completion of the plan, upon surrender of his certificate or certificates representing said shares, such fair value thereof. Any shareholder who fails to make such objection or having objected fails to make demand within the 20 day period shall be conclusively presumed to have consented to the said plan and shall be bound by the terms thereof.

(8) If within 30 days after the date of the written demand mentioned in subsection (7), the value of such shares is agreed upon between the dissenting shareholder, the company and the Director, payment therefor shall be made within 90 days after the date of such agreement upon the surrender of his or her certificate or certificates representing the shares. Upon payment of the agreed value the dissenting shareholder shall cease to have any interest in such shares and cease to be a shareholder in the company.

(9) If, within such period of 30 days, the shareholder and the company do not so agree, then the dissenting shareholder may within 60 days after the expiration of the 30 day period, petition the Circuit Court of the county in which the principal office of the company is located, to appraise the value of such shares as of the date of the day prior to the date on which such vote was taken approving such plan. A copy of the petition shall be delivered or mailed by registered mail to the Director within 5 days after the filing thereof and proof of such delivery or mailing shall be filed with the court. The Director shall have the right to appear through the Attorney General and be heard upon all questions and issues in the proceeding. The practice, procedure, and judgment shall be, so far as practicable, the same as that under the eminent domain laws of this State.

(10) The judgment shall be payable only upon and simultaneously with the surrender to the company of the certificate or certificates representing the shares. Upon the payment of the judgment the dissenting shareholder shall cease to have any interest in such shares, and cease to be a shareholder in the company. Unless the dissenting shareholder shall file such petition within the time herein limited, such shareholder and all persons claiming under him or her shall be conclusively presumed to have approved and ratified the mutualization plan, and shall be bound by the terms thereof. The right of a dissenting shareholder to be paid the fair value of his shares as herein provided shall cease if and when the company shall abandon the mutualization plan.

(11) When all the shares of the Company have been acquired and cancelled in conformity with the plan and this Section, the Director shall issue a certificate to that effect, and the amended articles of incorporation shall thereupon become effective and the company shall thenceforth be a mutual company.

(12) The certificate mentioned in subsection (11) together with the duplicate original of the amended articles of incorporation theretofore approved by the Director shall be filed for record in the office of the recorder where the principal office of the company is located, within 15 days from the date of such certificate.

(Source: P.A. 83-358.)

(215 ILCS 5/35.1) (from Ch. 73, par. 647.1)

(Section scheduled to be repealed on January 1, 2027)

Sec. 35.1. Par value of stock. No company organized after August 10, 1961 under this Article shall issue any shares of stock having a par value of less than $1.00 per share. No company organized under this article whose stock has a par value of $1.00 or more per share, or after August 10, 1961, whose stock shall be increased to $1.00 or more per share, shall decrease the par value of its stock to less than $1.00 per share; and after October 1, 1963, no such company whose stock has a par value of less than $1.00 per share shall decrease the par value below the value fixed for it on October 1, 1963. The restrictions of this Section shall not apply to a decrease in par value because of any reduction of capital under subsection (2) of Section 34.

(Source: Laws 1963, p. 2765.)

(215 ILCS 5/Art. IIA heading) ARTICLE IIA. RISK-BASED CAPITAL.

(215 ILCS 5/35A-1)

Sec. 35A-1. Short title. This Article may be cited as the Risk-Based Capital Law.

(Source: P.A. 88-364.)

(215 ILCS 5/35A-5)

Sec. 35A-5. Definitions. As used in this Article, the terms listed in this Section have the meaning given herein.

"Adjusted RBC Report" means an RBC Report that has been adjusted by the Director in accordance with subsection (f) of Section 35A-10.

"Authorized control level RBC" means the number determined under the risk-based capital formula in accordance with the RBC Instructions.

"Company action level RBC" means the product of 2.0 and the insurer's authorized control level RBC.

"Corrective Order" means an order issued by the Director in accordance with Article XII 1/2 specifying corrective actions that the Director determines are required.

"Domestic insurer" means any insurance company domiciled in this State under Article II, Article III, Article III 1/2, or Article IV or a health organization as defined by this Article, except this shall include only those health maintenance organizations that are "domestic companies" in accordance with Section 5-3 of the Health Maintenance Organization Act and only those limited health service organizations that are "domestic companies" in accordance with Section 4003 of the Limited Health Service Organization Act.

"Fraternal benefit society" means any insurance company licensed under Article XVII of this Code.

"Foreign insurer" means any foreign or alien insurance company licensed under Article VI that is not domiciled in this State and any health maintenance organization that is not a "domestic company" in accordance with Section 5-3 of the Health Maintenance Organization Act and any limited health service organization that is not a "domestic company" in accordance with Section 4003 of the Limited Health Service Organization Act.

"Health organization" means an entity operating under a certificate of authority issued pursuant to the Health Maintenance Organization Act, the Dental Service Plan Act, the Limited Health Service Organization Act, or the Voluntary Health Services Plans Act, unless the entity is otherwise defined as a "life, health, or life and health insurer" pursuant to this Act.

"Life, health, or life and health insurer" means an insurance company that has authority to transact the kinds of insurance described in either or both clause (a) or clause (b) of Class 1 of Section 4 or a licensed property and casualty insurer writing only accident and health insurance.

"Mandatory control level RBC" means the product of 0.70 and the insurer's authorized control level RBC.

"NAIC" means the National Association of Insurance Commissioners.

"Negative trend" means, with respect to a life, health, or life and health insurer or a fraternal benefit society, a negative trend over a period of time, as determined in accordance with the trend test calculation included in the Life or Fraternal RBC Instructions.

"Property and casualty insurer" means an insurance company that has authority to transact the kinds of insurance in either or both Class 2 or Class 3 of Section 4 or a licensed insurer writing only insurance authorized under clause (c) of Class 1, but does not include monoline mortgage guaranty insurers, financial guaranty insurers, and title insurers.

"RBC" means risk-based capital.

"RBC Instructions" means the RBC Report including risk-based capital instructions adopted by the NAIC as those instructions may be amended by the NAIC from time to time in accordance with the procedures adopted by the NAIC.

"RBC level" means an insurer's company action level RBC, regulatory action level RBC, authorized control level RBC, or mandatory control level RBC.

"RBC Plan" means a comprehensive financial plan containing the elements specified in subsection (b) of Section 35A-15.

"RBC Report" means the risk-based capital report required under Section 35A-10.

"Receivership" means conservation, rehabilitation, or liquidation under Article XIII.

"Regulatory action level RBC" means the product of 1.5 and the insurer's authorized control level RBC.

"Revised RBC Plan" means an RBC Plan rejected by the Director and revised by the insurer with or without the Director's recommendations.

"Total adjusted capital" means the sum of (1) an insurer's statutory capital and surplus and (2) any other items that the RBC Instructions may provide.

(Source: P.A. 98-157, eff. 8-2-13.)

(215 ILCS 5/35A-10)

Sec. 35A-10. RBC Reports.

(a) On or before each March 1 (the "filing date"), every domestic insurer shall prepare and submit to the Director a report of its RBC levels as of the end of the previous calendar year in the form and containing the information required by the RBC Instructions. Every domestic insurer shall also file its RBC Report with the NAIC in accordance with the RBC Instructions. In addition, if requested in writing by the chief insurance regulatory official of any state in which it is authorized to do business, every domestic insurer shall file its RBC Report with that official no later than the later of 15 days after the insurer receives the written request or the filing date.

(b) A life, health, or life and health insurer's or fraternal benefit society's RBC shall be determined under the formula set forth in the RBC Instructions. The formula shall take into account (and may adjust for the covariance between):

(1) the risk with respect to the insurer's assets;

(2) the risk of adverse insurance experience with respect to the insurer's liabilities and obligations;

(3) the interest rate risk with respect to the insurer's business; and

(4) all other business risks and other relevant risks set forth in the RBC Instructions.

These risks shall be determined in each case by applying the factors in the manner set forth in the RBC Instructions. Notwithstanding the foregoing, and notwithstanding the RBC Instructions, health maintenance organizations operating as Medicaid managed care plans under contract with the Department of Healthcare and Family Services shall not be required to include in its RBC calculations any capitation revenue identified by Medicaid managed care plans as authorized under Section 5A-12.6(r) of the Illinois Public Aid Code.

(c) A property and casualty insurer's RBC shall be determined in accordance with the formula set forth in the RBC Instructions. The formula shall take into account (and may adjust for the covariance between):

(1) asset risk;

(2) credit risk;

(3) underwriting risk; and

(4) all other business risks and other relevant risks set forth in the RBC Instructions.

These risks shall be determined in each case by applying the factors in the manner set forth in the RBC Instructions.

(d) A health organization's RBC shall be determined in accordance with the formula set forth in the RBC Instructions. The formula shall take the following into account (and may adjust for the covariance between):

(1) asset risk;

(2) credit risk;

(3) underwriting risk; and

(4) all other business risks and other relevant risks set forth in the RBC Instructions.

These risks shall be determined in each case by applying the factors in the manner set forth in the RBC Instructions.

(e) An excess of capital over the amount produced by the risk-based capital requirements contained in this Code and the formulas, schedules, and instructions referenced in this Code is desirable in the business of insurance. Accordingly, insurers should seek to maintain capital above the RBC levels required by this Code. Additional capital is used and useful in the insurance business and helps to secure an insurer against various risks inherent in, or affecting, the business of insurance and not accounted for or only partially measured by the risk-based capital requirements contained in this Code.

(f) If a domestic insurer files an RBC Report that, in the judgment of the Director, is inaccurate, the Director shall adjust the RBC Report to correct the inaccuracy and shall notify the insurer of the adjustment. The notice shall contain a statement of the reason for the adjustment.

(Source: P.A. 100-580, eff. 3-12-18.)

(215 ILCS 5/35A-15)

Sec. 35A-15. Company action level event.

(a) A company action level event means any of the following events:

(1) The filing of an RBC Report by an insurer that indicates that:

(A) the insurer's total adjusted capital is greater than or equal to its regulatory action level RBC, but less than its company action level RBC;

(B) the insurer, if a life, health, or life and health insurer or a fraternal benefit society, has total adjusted capital that is greater than or equal to its company action level RBC, but less than the product of its authorized control level RBC and 3.0 and has a negative trend;

(C) the insurer, if a property and casualty insurer, has total adjusted capital that is greater than or equal to its company action level RBC, but less than the product of its authorized control level RBC and 3.0 and triggers the trend test determined in accordance with the trend test calculation included in the property and casualty RBC Instructions; or

(D) the insurer, if a health organization, has total adjusted capital that is greater than or equal to its company action level RBC but less than the product of its authorized control level RBC and 3.0 and triggers the trend test determined in accordance with the trend test calculation included in the Health RBC Instructions.

(2) The notification by the Director to the insurer of an Adjusted RBC Report that indicates an event described in paragraph (1), provided the insurer does not challenge the Adjusted RBC Report under Section 35A-35.

(3) The notification by the Director to the insurer that the Director has, after a hearing, rejected the insurer's challenge under Section 35A-35 to an Adjusted RBC Report that indicates the event described in paragraph (1).

(b) In the event of a company action level event, the insurer shall prepare and submit to the Director an RBC Plan that does all of the following:

(1) Identifies the conditions that contribute to the company action level event.

(2) Contains proposed corrective actions that the insurer intends to take and that are expected to result in the elimination of the company action level event. A health organization is not prohibited from proposing recognition of a parental guarantee or a letter of credit to eliminate the company action level event; however the Director shall, at his discretion, determine whether or the extent to which the proposed parental guarantee or letter of credit is an acceptable part of a satisfactory RBC Plan or Revised RBC Plan.

(3) Provides projections of the insurer's financial results in the current year and at least the 4 succeeding years, both in the absence of proposed corrective actions and giving effect to the proposed corrective actions, including projections of statutory operating income, net income, capital, and surplus. The projections for both new and renewal business may include separate projections for each major line of business and separately identify each significant income, expense, and benefit component.

(4) Identifies the key assumptions affecting the insurer's projections and the sensitivity of the projections to the assumptions.

(5) Identifies the quality of, and problems associated with, the insurer's business including, but not limited to, its assets, anticipated business growth and associated surplus strain, extraordinary exposure to risk, mix of business, and use of reinsurance, if any, in each case.

(c) The insurer shall submit the RBC Plan to the Director within 45 days after the company action level event occurs or within 45 days after the Director notifies the insurer that the Director has, after a hearing, rejected its challenge under Section 35A-35 to an Adjusted RBC Report.

(d) Within 60 days after an insurer submits an RBC Plan to the Director, the Director shall notify the insurer whether the RBC Plan shall be implemented or is, in the judgment of the Director, unsatisfactory. If the Director determines the RBC Plan is unsatisfactory, the notification to the insurer shall set forth the reasons for the determination and may set forth proposed revisions that will render the RBC Plan satisfactory in the judgment of the Director. Upon notification from the Director, the insurer shall prepare a Revised RBC Plan, which may incorporate by reference any revisions proposed by the Director. The insurer shall submit the Revised RBC Plan to the Director within 45 days after the Director notifies the insurer that the RBC Plan is unsatisfactory or within 45 days after the Director notifies the insurer that the Director has, after a hearing, rejected its challenge under Section 35A-35 to the determination that the RBC Plan is unsatisfactory.

(e) In the event the Director notifies an insurer that its RBC Plan or Revised RBC Plan is unsatisfactory, the Director may, at the Director's discretion and subject to the insurer's right to a hearing under Section 35A-35, specify in the notification that the notification constitutes a regulatory action level event.

(f) Every domestic insurer that files an RBC Plan or Revised RBC Plan with the Director shall file a copy of the RBC Plan or Revised RBC Plan with the chief insurance regulatory official in any state in which the insurer is authorized to do business if that state has a law substantially similar to the confidentiality provisions in subsection (a) of Section 35A-50 and if that official requests in writing a copy of the plan. The insurer shall file a copy of the RBC Plan or Revised RBC Plan in that state no later than the later of 15 days after receiving the written request for the copy or the date on which the RBC Plan or Revised RBC Plan is filed under subsection (c) or (d) of this Section.

(Source: P.A. 99-542, eff. 7-8-16; 100-201, eff. 8-18-17.)

(215 ILCS 5/35A-20)

Sec. 35A-20. Regulatory action level event.

(a) A regulatory action level event means any of the following events:

(1) The filing of an RBC Report by the insurer that indicates that the insurer's total adjusted capital is greater than or equal to its authorized control level RBC, but less than its regulatory action level RBC.

(2) The notification by the Director to an insurer of an Adjusted RBC Report that indicates the event described in paragraph (1), provided the insurer does not challenge the Adjusted RBC Report under Section 35A-35.

(3) The notification by the Director to the insurer that the Director has, after a hearing, rejected the insurer's challenge under Section 35A-35 to an Adjusted RBC Report that indicates the event described in paragraph (1).

(4) The failure of the insurer to file an RBC Report by the filing date, unless the insurer has provided an explanation for the failure that is satisfactory to the Director and has cured the failure within 10 days after the filing date.

(5) The failure of the insurer to submit an RBC Plan to the Director within the time period set forth in subsection (c) of Section 35A-15.

(6) The notification by the Director to the insurer that the insurer's RBC Plan or revised RBC Plan is, in the judgment of the Director, unsatisfactory and that the notification constitutes a regulatory action level event with respect to the insurer, provided the insurer does not challenge the determination under Section 35A-35.

(7) The notification by the Director to the insurer that the Director has, after a hearing, rejected the insurer's challenge under Section 35A-35 to the determination made by the Director under paragraph (6).

(8) The notification by the Director to the insurer that the insurer has failed to adhere to its RBC Plan or Revised RBC Plan, but only if that failure has a substantial adverse effect on the ability of the insurer to eliminate the company action level event in accordance with its RBC Plan or Revised RBC Plan and the Director has so stated in the notification, provided the insurer does not challenge the determination under Section 35A-35.

(9) The notification by the Director to the insurer that the Director has, after a hearing, rejected the insurer's challenge under Section 35A-35 to the determination made by the Director under paragraph (8).

(b) In the event of a regulatory action level event, the Director shall do all of the following:

(1) Require the insurer to prepare and submit an RBC Plan or, if applicable, a Revised RBC Plan to the Director within 45 days after the regulatory action level event occurs or within 45 days after the Director notifies the insurer that the Director has, after a hearing, rejected its challenge under Section 35A-35 to either an Adjusted RBC Report or a Revised RBC Plan. However, if the insurer previously prepared and submitted an RBC Plan or a Revised RBC Plan in accordance with any provision of this Article, the Director may determine that the previously prepared RBC Plan or Revised RBC Plan satisfies the requirement of this subsection (b)(1).

(2) Perform any examination or analysis of the assets, liabilities, and operations of the insurer, including a review of its RBC Plan or Revised RBC Plan, that the Director deems necessary.

(3) After the examination or analysis, issue a Corrective Order specifying the corrective actions the Director determines are required.

(c) In determining corrective actions, the Director may take into account any factors the Director deems relevant based upon the examination or analysis of the assets, liabilities, and operations of the insurer including, but not limited to, the results of any sensitivity tests undertaken under the RBC Instructions. The regulatory action level event shall be deemed sufficient grounds for the Director to issue a Corrective Order in accordance with Article XII 1/2. The Director shall have rights, powers, and duties with respect to the insurer that are set forth in Article XII 1/2 and the insurer shall be entitled to the protections afforded insurers under Article XII 1/2.

(d) The Director may retain actuaries, investment experts, and other consultants necessary to review an insurer's RBC Plan or Revised RBC Plan, examine or analyze the assets, liabilities, and operations of the insurer, and formulate the Corrective Order with respect to the insurer. The fees, costs, and expenses related to the actuaries, investment experts, and other consultants shall be reasonable and customary for the nature of the services provided and shall be borne by the affected insurer or the party designated by the Director.

(Source: P.A. 90-794, eff. 8-14-98; 91-549, eff. 8-14-99.)

(215 ILCS 5/35A-25)

Sec. 35A-25. Authorized control event.

(a) An authorized control event means any of the following events:

(1) The filing of an RBC Report by the insurer that indicates that the insurer's total adjusted capital is greater than or equal to its mandatory control level RBC, but less than its authorized control level RBC.

(2) The notification by the Director to the insurer of an Adjusted RBC Report that indicates the event described in paragraph (1), provided the insurer does not challenge the Adjusted RBC Report under Section 35A-35.

(3) The notification by the Director to the insurer that the Director has, after a hearing, rejected the insurer's challenge under Section 35A-35 to an Adjusted RBC Report that indicates the event described in paragraph (1).

(4) The insurer's failure to respond to a Corrective Order in a manner satisfactory to the Director, provided the insurer does not challenge the Corrective Order under Section 35A-35.

(5) The insurer's failure to respond to a challenged or modified Corrective Order in a manner satisfactory to the Director after the Director has, after a hearing, rejected the insurer's challenge under Section 35A-35 or modified the Corrective Order.

(b) In the event of an authorized control level event, the Director shall take the actions required under Section 35A-20 regarding an insurer with respect to which a regulatory action level event has occurred or, if the Director deems it to be in the best interests of the insurer's policyholders and creditors and of the public, take the actions necessary to cause the insurer to be placed in receivership under Article XIII. In the event the Director determines that receivership is necessary, the authorized control level event shall be deemed sufficient grounds for the Director to take action under Article XIII, and the Director shall have the rights, powers, and duties with respect to the insurer that are set forth in Article XIII. In the event the Director takes action under this subsection regarding an Adjusted RBC Report, the insurer shall be entitled to the protections afforded insurers under Article XIII.

(Source: P.A. 88-364.)

(215 ILCS 5/35A-30)

Sec. 35A-30. Mandatory control level event.

(a) A mandatory control level event means any of the following events:

(1) The filing of an RBC Report that indicates that the insurer's total adjusted capital is less than its mandatory control level RBC.

(2) The notification by the Director to the insurer of an Adjusted RBC Report that indicates the event described in paragraph (1), provided the insurer does not challenge the Adjusted RBC Report under Section 35A-35.

(3) The notification by the Director to the insurer that the Director has, after a hearing, rejected the insurer's challenge under Section 35A-35 to the Adjusted RBC Report that indicates the event described in paragraph (1).

(b) In the event of a mandatory control level event with respect to a life, health, or life and health insurer or a fraternal benefit society, the Director shall take actions necessary to place the insurer in receivership under Article XIII. In that event, the mandatory control level event shall be deemed sufficient grounds for the Director to take action under Article XIII, and the Director shall have the rights, powers, and duties with respect to the insurer that are set forth in Article XIII. If the Director takes action under this subsection regarding an Adjusted RBC Report, the insurer shall be entitled to the protections of Article XIII. If the Director finds that there is a reasonable expectation that the mandatory control level event may be eliminated within 90 days after it occurs, the Director may delay action for not more than 90 days after the mandatory control level event.

(c) In the case of a mandatory control level event with respect to a property and casualty insurer, the Director shall take the actions necessary to place the insurer in receivership under Article XIII or, in the case of an insurer that is writing no business and that is running-off its existing business, may allow the insurer to continue its run-off under the supervision of the Director. In either case, the mandatory control level event is deemed sufficient grounds for the Director to take action under Article XIII, and the Director has the rights, powers, and duties with respect to the insurer that are set forth in Article XIII. If the Director takes action regarding an Adjusted RBC Report, the insurer shall be entitled to the protections of Article XIII. If the Director finds that there is a reasonable expectation that the mandatory control level event may be eliminated within 90 days after it occurs, the Director may delay action for not more than 90 days after the mandatory control level event.

(d) In the case of a mandatory control level event with respect to a health organization, the Director shall take the actions necessary to place the insurer in receivership under Article XIII or, in the case of an insurer that is writing no business and that is running-off its existing business, may allow the insurer to continue its run-off under the supervision of the Director. In either case, the mandatory control level event is deemed sufficient grounds for the Director to take action under Article XIII, and the Director has the rights, powers, and duties with respect to the insurer that are set forth in Article XIII. If the Director takes action regarding an Adjusted RBC Report, the insurer shall be entitled to the protections of Article XIII. If the Director finds that there is a reasonable expectation that the mandatory control level event may be eliminated within 90 days after it occurs, the Director may delay action for not more than 90 days after the mandatory control level event.

(Source: P.A. 98-157, eff. 8-2-13.)

(215 ILCS 5/35A-35)

Sec. 35A-35. Hearings.

(a) An insurer has the right to an administrative hearing with respect to any of the following:

(1) The notification by the Director to the insurer of an Adjusted RBC Report.

(2) The notification by the Director to the insurer that the insurer's RBC Plan or Revised RBC Plan is unsatisfactory and that the notification constitutes a regulatory action level event.

(3) The notification by the Director to the insurer that the insurer has failed to adhere to its RBC Plan or Revised RBC Plan and that the failure has a substantial adverse effect on the ability of the insurer to eliminate the company action level event in accordance with its RBC Plan or Revised RBC Plan.

(b) At the administrative hearing, the insurer may challenge any determination or action by the Director. The insurer shall notify the Director of its request for a hearing within 5 days after notification by the Director made under subsection (a). Upon receipt of the insurer's request for a hearing, the Director shall set a date for the hearing. The hearing shall be held no fewer than 10 days and no more than 30 days after the date of the insurer's request for the hearing.

(Source: P.A. 90-794, eff. 8-14-98.)

(215 ILCS 5/35A-40)

Sec. 35A-40. Foreign insurers.

(a) Upon the written request of the Director, a foreign insurer shall submit to the Director an RBC Report as of the end of the previous calendar year no later than the later of the date an RBC Report would be required to be filed by a domestic insurer under this Article or 15 days after the foreign insurer receives the Director's request. Upon the written request of the Director, a foreign insurer shall promptly submit to the Director a copy of any RBC Plan that is filed with the chief insurance regulatory official or any other state.

(b) In the event of a company action level event, regulatory action level event, or authorized control level event with respect to any foreign insurer as determined under the RBC statute applicable in the state of domicile of the insurer or, if no RBC statute is in force in that state, under the provisions of this Article, if the chief insurance regulatory official of the state of domicile of the foreign insurer fails to require the foreign insurer to file an RBC Plan in the manner specified under that state's RBC statute or, if no RBC statute is in force in that state, under Section 35A-15, the Director may require the foreign insurer to file an RBC Plan with the Director. In that event, the failure of the foreign insurer to file an RBC Plan with the Director is grounds to order the insurer to cease and desist from writing new insurance business in this State.

(c) In the event of a mandatory control level event with respect to any foreign insurer, if no domiciliary receiver has been appointed with respect to the foreign insurer under the rehabilitation and liquidation statute applicable in the state of domicile of the foreign insurer, the Director may make application to the Circuit Court of Sangamon County or Cook County as permitted under Article XIII with respect to the liquidation of property of foreign insurers found in this State, and the occurrence of the mandatory control level event shall be considered adequate grounds for the application.

(Source: P.A. 88-364; 89-97, eff. 7-7-95.)

(215 ILCS 5/35A-45)

Sec. 35A-45. Notices. All notices by the Director to an insurer that may result in regulatory action under this Article are effective upon dispatch if transmitted by registered or certified mail, and are effective upon the insurer's receipt thereof in the case of any other means of transmission.

(Source: P.A. 88-364.)

(215 ILCS 5/35A-50)

Sec. 35A-50. Confidentiality and prohibition on announcements.

(a) All RBC Reports, to the extent the information therein is not required to be set forth in a publicly available annual statement schedule, and RBC Plans, including the results or report of any examination or analysis of an insurer performed under this Article and any Corrective Order issued by the Director pursuant to the examination or analysis, with respect to any domestic insurer or foreign insurer that are filed with the Director constitute information that might be damaging to the insurer if made available to its competitors and shall be kept confidential by the Director. This information shall not be made public or be subject to subpoena, other than by the Director and then only for the purpose of enforcement actions taken by the Director under this Code or other provisions of the insurance laws of this State.

(b) It is the judgment of the legislature that the comparison of an insurer's total adjusted capital to any of its RBC levels is a regulatory tool that may indicate the need for possible corrective action with respect to the insurer and not a means to rank insurers generally. Therefore, except as otherwise required under the provisions of this Code, the disclosure, in any manner or form, directly or indirectly, of information containing an assertion, representation, or statement regarding the RBC levels of any insurer or any component derived in the calculation of RBC levels by any insurer, insurance producer, limited insurance producer, broker, or other person engaged in any manner in the insurance business would be misleading and is prohibited. In the event that a materially false statement with respect to the comparison regarding an insurer's total adjusted capital to any of its RBC levels or an inappropriate comparison of any other amount to the insurer's RBC levels is published in any written publication and the insurer is able to demonstrate to the Director with substantial proof the falsity of the statement or the inappropriateness thereof, the insurer may publish an announcement in a written publication if the sole purpose of the announcement is to rebut the materially false statement.

(c) It is the further judgment of the legislature that the RBC Instructions, RBC Reports, Adjusted RBC Reports, RBC Plans, and Revised RBC Plans are intended solely for use by the Director in monitoring the solvency of insurers and the need for possible corrective action with respect to insurers and shall not be used by the Director for ratemaking or considered or introduced as evidence in any rate proceeding or used by the Director to calculate or derive any elements of an appropriate premium level or rate of return for any line of insurance that an insurer or an affiliate is authorized to write.

(Source: P.A. 88-364; 89-97, eff. 7-7-95.)

(215 ILCS 5/35A-55)

Sec. 35A-55. Provisions of Article supplemental; exemptions.

(a) The provisions of this Article are supplemental to the provisions of any other laws of this State and do not preclude or limit other powers or duties of the Director under any other laws.

(b) The Director may exempt from the application of this Article any domestic property and casualty insurer that:

(1) writes direct business only in this State;

(2) writes direct annual premiums of $2,000,000 or less; and

(3) assumes no reinsurance in excess of 5% of direct premium written.

(c) The Director may exempt from the application of this Article any company that is organized under Article IV of this Code, that writes direct business only in this State, and that assumes no reinsurance in excess of 5% of direct written premiums.

(d) The Director may exempt from the application of this Article any domestic health organization upon a showing by the health organization of the reasons for requesting the exemption and a determination by the Director of good cause for an exemption.

(e) The Director may by rule impose upon any insurer exempted from the application of this Article under subsection (b), (c), or (d) of this Section conditions to the exemption that require maintenance of adequate capital. These conditions shall not exceed the requirements of this Article.

(Source: P.A. 91-549, eff. 8-14-99.)

(215 ILCS 5/35A-60)

Sec. 35A-60. Phase-in of Article.

(a) For RBC Reports filed with respect to the December 31, 1993 annual statement, instead of the provisions of Sections 35A-15, 35A-20, 35A-25, and 35A-30, the following provisions apply:

(1) In the event of a company action level event, the Director shall take no action under this Article.

(2) In the event of a regulatory action level event under paragraph (1), (2), or (3) of subsection (a) of Section 35A-20, the Director shall take the actions required under Section 35A-15.

(3) In the event of a regulatory action level event under paragraph (4), (5), (6), (7), (8), or (9) of subsection (a) of Section 35A-20 or an authorized control level event, the Director shall take the actions required under Section 35A-20.

(4) In the event of a mandatory control level event, the Director shall take the actions required under Section 35A-25.

(b) For RBC Reports required to be filed by property and casualty insurers with respect to the December 31, 1995 annual statement, instead of the provisions of Sections 35A-15, 35A-20, 35A-25, and 35A-30, the following provisions apply:

(1) In the event of a company action level event with respect to a domestic insurer, the Director shall take no regulatory action under this Article.

(2) In the event of a regulatory action level event under paragraph (1), (2), or (3) of subsection (a) of Section 35A-20, the Director shall take the actions required under Section 35A-15.

(3) In the event of a regulatory action level event under paragraph (4), (5), (6), (7), (8), or (9) of subsection (a) of Section 35A-20 or an authorized control level event, the Director shall take the actions required under Section 35A-20.

(4) In the event of a mandatory control level event, the Director shall take the actions required under Section 35A-25.

(c) For RBC Reports required to be filed by health organizations with respect to the December 31, 1999 annual statement and the December 31, 2000 annual statement, instead of the provisions of Sections 35A-15, 35A-20, 35A-25, and 35A-30, the following provisions apply:

(1) In the event of a company action level event with respect to a domestic insurer, the Director shall take no regulatory action under this Article.

(2) In the event of a regulatory action level event under paragraph (1), (2), or (3) of subsection (a) of Section 35A-20, the Director shall take the actions required under Section 35A-15.

(3) In the event of a regulatory action level event under paragraph (4), (5), (6), (7), (8), or (9) of subsection (a) of Section 35A-20 or an authorized control level event, the Director shall take the actions required under Section 35A-20.

(4) In the event of a mandatory control level event, the Director shall take the actions required under Section 35A-25.

This subsection does not apply to a health organization that provides or arranges for a health care plan under which enrollees may access health care services from contracted providers without a referral from their primary care physician.

Nothing in this subsection shall preclude or limit other powers or duties of the Director under any other laws.

(d) For RBC Reports required to be filed by fraternal benefit societies with respect to the December 31, 2013 annual statement and the December 31, 2014 annual statement, instead of the provisions of Sections 35A-15, 35A-20, 35A-25, and 35A-30, the following provisions apply:

(1) In the event of a company action level event with respect to a domestic insurer, the Director shall take no regulatory action under this Article.

(2) In the event of a regulatory action level event under paragraph (1), (2), or (3) of subsection (a) of Section 35A-20, the Director shall take the actions required under Section 35A-15.

(3) In the event of a regulatory action level event under paragraph (4), (5), (6), (7), (8), or (9) of subsection (a) of Section 35A-20 or an authorized control level event, the Director shall take the actions required under Section 35A-20.

(4) In the event of a mandatory control level event, the Director shall take the actions required under Section 35A-25.

Nothing in this subsection shall preclude or limit other powers or duties of the Director under any other laws.

(Source: P.A. 100-201, eff. 8-18-17.)

(215 ILCS 5/35A-65)

Sec. 35A-65. Liability of Director. There shall be no liability on the part of, and no cause of action shall arise against, the Director or the Department or its employees or agents for any action taken by them in the performance of their powers and duties under this Article.

(Source: P.A. 89-97, eff. 7-7-95.)

(215 ILCS 5/35A-70)

Sec. 35A-70. Severability. The provisions of this Article are severable under Section 1.31 of the Statute on Statutes.

(Source: P.A. 89-97, eff. 7-7-95.)

(215 ILCS 5/Art. IIB heading) ARTICLE IIB. DOMESTIC STOCK COMPANY DIVISION (Source: P.A. 100-1118, eff. 11-27-18.)

(215 ILCS 5/35B-1)

Sec. 35B-1. Short title. This Article may be cited as the Domestic Stock Company Division Law.

(Source: P.A. 100-1118, eff. 11-27-18.)

(215 ILCS 5/35B-5)

Sec. 35B-5. Purpose. The purpose of this Article is to stimulate economic development in the State of Illinois by creating and sustaining employment opportunities and increasing and sustaining taxable revenue, through improving the competitive position of domestic stock companies, maintaining the competitiveness of this State as a state of domicile for domestic stock companies, and enhancing the desirability of this State as a jurisdiction of domicile for newly incorporating and existing foreign stock companies.

(Source: P.A. 100-1118, eff. 11-27-18.)

(215 ILCS 5/35B-10)

Sec. 35B-10. Definitions. As used in this Article:

"Assets" means all assets or property, whether real, personal or mixed, tangible or intangible, and any right or interest therein, including all rights under contracts and other agreements.

"Capital" means the capital stock component of statutory surplus, as defined in the National Association of Insurance Commissioners Accounting Practices and Procedures Manual, version effective January 1, 2001, and subsequent revisions.

"Divide" or "division" means the act by operation of law by which a domestic stock company divides into 2 or more resulting companies in accordance with a plan of division and this Article;

"Dividing company" means a domestic stock company that approves a plan of division pursuant to Section 35B-20;

"Domestic stock company" means a domestic stock company transacting or being organized to transact any of the kinds of insurance business enumerated in Section 4.

"Liability" means a liability or obligation of any kind, character, or description, whether known or unknown, absolute or contingent, accrued or unaccrued, disputed or undisputed, liquidated or unliquidated, secured or unsecured, joint or several, due or to become due, determined, determinable, or otherwise.

"New company" means a domestic stock company that is created by a division occurring on or after the effective date of this amendatory Act of the 100th General Assembly.

"Plan of division" means a plan of division approved by a dividing company in accordance Section 35B-20.

"Policy liability" means a liability as defined in this Section arising out of or related to an insurance policy, contract of insurance, or reinsurance agreement.

"Recorder" means the office of the recorder of the county where the principal office of a domestic stock company is located.

"Resulting company" means a domestic stock company created by a division or a dividing company that survives a division.

"Shareholder" means the person in whose name shares are registered in the records of a corporation or the beneficial owner of shares to the extent of the rights granted by a nominee certificate on file with a corporation.

"Sign" or "signature" includes a manual, facsimile, or conformed or electronic signature.

"Surplus" means total statutory surplus less capital, calculated in accordance with the National Association of Insurance Commissioners Accounting Practices and Procedures Manual, version effective January 1, 2001, and subsequent revisions.

"Transfer" includes an assignment, assumption, conveyance, sale, lease, encumbrance, including a mortgage or security interest, gift, or transfer by operation of law.

(Source: P.A. 100-1118, eff. 11-27-18.)

(215 ILCS 5/35B-15)

Sec. 35B-15. Plan of division.

(a) A domestic stock company may, in accordance with the requirements of this Article, divide into 2 or more resulting companies pursuant to a plan of division.

(b) Each plan of division shall include:

(1) the name of the domestic stock company seeking to divide;

(2) the name of each resulting company that will be created by the proposed division;

(3) for each new company that will be created by the proposed division, a copy of its:

(A) proposed articles of incorporation;

(B) proposed bylaws; and

(C) the kinds of insurance business enumerated in Section 4 that the new company would be authorized to conduct;

(4) the manner of allocating between or among the resulting companies:

(A) the assets of the domestic stock company that will not be owned by all of the resulting companies as tenants in common pursuant to Section 35B-35; and

(B) the liabilities of the domestic stock company, including policy liabilities, to which not all of the resulting companies will become jointly and severally liable pursuant to paragraph (3) of subsection (a) of Section 35B-40;

(5) the manner of distributing shares in the new companies to the dividing company or its shareholders;

(6) a reasonable description of the liabilities, including policy liabilities, and items of capital, surplus, or other assets, in each case, that the domestic stock company proposes to allocate to each resulting company, including specifying the reinsurance contract, reinsurance coverage obligations, and related claims that are applicable to those policies;

(7) all terms and conditions required by the laws of this State or the articles of incorporation and bylaws of the domestic stock company;

(8) evidence demonstrating that the interest of all classes of policyholders of the dividing company will be properly protected; and

(9) all other terms and conditions of the division.

Nothing in this subsection (b) shall expand or reduce the allocation and assignment of reinsurance as stated in the reinsurance contract.

(c) If the domestic stock company survives the division, the plan of division shall include, in addition to the information required by subsection (b):

(1) all proposed amendments to the dividing company's articles of incorporation and bylaws, if any;

(2) if the dividing company desires to cancel some, but less than all, shares in the dividing company, the manner in which it will cancel such shares; and

(3) if the dividing company desires to convert some, but less than all, shares in the dividing company into shares, securities, obligations, money, other property, rights to acquire shares or securities, or any combination thereof, a statement disclosing the manner in which it will convert the shares.

(d) If the domestic stock company does not survive the proposed division, the plan of division shall contain, in addition to the information required by subsection (b), the manner in which the dividing company will cancel or convert shares in the dividing company into shares, securities, obligations, money, other property, rights to acquire shares or securities, or any combination thereof.

(e) Terms of a plan of division may be made dependent on facts objectively ascertainable outside of the plan of division.

(f) A dividing company may amend a plan of division in accordance with any procedures set forth in the plan of division or, if no such procedures are set forth in the plan of division, in any manner determined by the board of directors of the dividing company, except that a shareholder that was entitled to vote on or consent to approval of the plan of division is entitled to vote on or consent to any amendment of the plan of division that will change:

(1) the amount or kind of shares, securities, obligations, money, other property, rights to acquire shares or securities, or any combination thereof, to be received by any of the shareholders of the dividing company under the plan of division;

(2) the articles of incorporation or bylaws of any resulting company that will be in effect when the division becomes effective, except for changes that do not require approval of the shareholders of the resulting company under its articles of incorporation or bylaws; or

(3) any other terms or conditions of the plan of division, if the change would adversely affect the shareholders in any material respect.

(g) A dividing company may abandon a plan of division after it has approved the plan of division without any action by the shareholders and in accordance with any procedures set forth in the plan of division or, if no such procedures are set forth in the plan of division, in a manner determined by the board of directors of the dividing company.

(h) A dividing company may abandon a plan of division after it has filed a certificate of division with the recorder by filing with the recorder, with concurrent copy to the director, a certificate of abandonment signed by the dividing company. The certificate of abandonment shall be effective on the date it is filed with the recorder and the dividing company shall be deemed to have abandoned its plan of division on such date.

(i) A dividing company may not abandon or amend its plan of division once the division becomes effective.

(Source: P.A. 100-1118, eff. 11-27-18.)

(215 ILCS 5/35B-20)

Sec. 35B-20. Requirements of a plan of division.

(a) A domestic stock company shall not file a plan of division with the Director unless the plan of division has been approved in accordance with:

(1) any applicable provisions of its articles of incorporation and bylaws; and

(2) all laws of this State governing the internal affairs of a domestic stock company that provide for approval of a merger.

(b) If any provision of the articles of incorporation or bylaws of a domestic stock company requires that a specific number or percentage of board of directors or shareholders approve the proposal or adoption of a plan of merger, or imposes other special procedures for the proposal or adoption of a plan of merger, such domestic stock company shall adhere to such provision in proposing or adopting a plan of division. If any provision of the articles of incorporation or bylaws of a domestic stock company is amended, such amendment shall thereafter apply to a division only in accordance with its express terms.

(Source: P.A. 100-1118, eff. 11-27-18.)

(215 ILCS 5/35B-25)

Sec. 35B-25. Plan of division approval.

(a) A division shall not become effective until it is approved by the Director after reasonable notice and a public hearing, if the notice and hearing are deemed by the Director to be in the public interest. Any decision by the Director on whether or not to hold a public hearing on either a plan of division or an amended plan of division may be made independently by the Director. The Director shall hold a public hearing if one is requested by the dividing company. A hearing conducted under this Section shall be conducted in accordance with Article 10 of the Illinois Administrative Procedure Act.

(b) The Director shall approve a plan of division unless the Director finds that:

(1) the interest of any class of policyholder or shareholder of the dividing company will not be properly protected;

(2) each new company created by the proposed division, except a new company that is a nonsurviving party to a merger pursuant to subsection (b) of Section 156, would be ineligible to receive a license to do insurance business in this State pursuant to Section 5;

(2.5) each new company created by the proposed division, except a new company that is a nonsurviving party to a merger pursuant to subsection (b) of Section 156, that will be a member insurer of the Illinois Life and Health Insurance Guaranty Association and that will have policy liabilities allocated to it will not be licensed to do insurance business in each state where such policies were written by the dividing company;

(3) the proposed division violates a provision of the Uniform Fraudulent Transfer Act;

(4) the division is being made for purposes of hindering, delaying, or defrauding any policyholders or other creditors of the dividing company;

(5) one or more resulting companies will not be solvent upon the consummation of the division; or

(6) the remaining assets of one or more resulting companies will be, upon consummation of a division, unreasonably small in relation to the business and transactions in which the resulting company was engaged or is about to engage.

(c) In determining whether the standards set forth in paragraph (3) of subsection (b) have been satisfied, the Director shall only apply the Uniform Fraudulent Transfer Act to a dividing company in its capacity as a resulting company and shall not apply the Uniform Fraudulent Transfer Act to any dividing company that is not proposed to survive the division.

(d) In determining whether the standards set forth in paragraphs (3), (4), (5), and (6) of subsection (b) have been satisfied, the Director may consider all proposed assets of the resulting company, including, without limitation, reinsurance agreements, parental guarantees, support or keep well agreements, or capital maintenance or contingent capital agreements, in each case, regardless of whether the same would qualify as an admitted asset as defined in Section 3.1.

(e) In determining whether the standards set forth in paragraph (3) of subsection (b) have been satisfied, with respect to each resulting company, the Director shall, in applying the Uniform Fraudulent Transfer Act, treat:

(1) the resulting company as a debtor;

(2) liabilities allocated to the resulting company as obligations incurred by a debtor;

(3) the resulting company as not having received reasonably equivalent value in exchange for incurring the obligations; and

(4) assets allocated to the resulting company as remaining property.

(f) All information, documents, materials, and copies thereof submitted to, obtained by, or disclosed to the Director in connection with a plan of division or in contemplation thereof, including any information, documents, materials, or copies provided by or on behalf of a domestic stock company in advance of its adoption or submission of a plan of division, shall be confidential and shall be subject to the same protection and treatment in accordance with Section 131.22 as documents and reports disclosed to or filed with the Director pursuant to subsection (a) of Section 131.14b until such time, if any, as a notice of the hearing contemplated by subsection (a) is issued.

(g) From and after the issuance of a notice of the hearing contemplated by subsection (a), all business, financial, and actuarial information that the domestic stock company requests confidential treatment, other than the plan of division, shall continue to be confidential and shall not be available for public inspection and shall be subject to the same protection and treatment in accordance with Section 131.22 as documents and reports disclosed to or filed with the Director pursuant to subsection (a) of Section 131.14b.

(h) All expenses incurred by the Director in connection with proceedings under this Section, including expenses for the services of any attorneys, actuaries, accountants, and other experts as may be reasonably necessary to assist the Director in reviewing the proposed division, shall be paid by the dividing company filing the plan of division. A dividing company may allocate expenses described in this subsection in a plan of division in the same manner as any other liability.

(i) If the Director approves a plan of division, the Director shall issue an order that shall be accompanied by findings of fact and conclusions of law.

(j) The conditions in this Section for freeing one or more of the resulting companies from the liabilities of the dividing company and for allocating some or all of the liabilities of the dividing company shall be conclusively deemed to have been satisfied if the plan of division has been approved by the Director in a final order that is not subject to further appeal.

(k) If a dividing company amends its plan of division at any time before the plan of division becomes effective, including after the Director's approval of the plan or after any hearing has been conducted under this Section, then the dividing company shall file the amended plan of division for approval by the Director pursuant to the provisions of this Section. If the Director has already issued an order approving the dividing company's previous plan of division under subsection (i), then that order shall not be rescinded by the Director's subsequent disapproval of an amended plan.

(1) If a hearing is conducted on the amended plan of division after the Director has approved a previous plan of division, then the hearing shall not be considered a rehearing or a reopening of any hearing conducted on the previous plan. Nothing in this Section shall prohibit the dividing company from requesting a rehearing or reopening of any hearing conducted on any disapproved plan of division, amended or otherwise.

(2) Whether under direct review or in a hearing, the Director may rely on information already submitted or developed in connection with the previous plan of division, as well as any findings of fact or conclusions of law if a hearing has been conducted or an approval order has been issued on the previous plan, to the extent the information, findings, or conclusions remain relevant to the amended plan of division, and the Director shall collect any other information necessary to make a determination under subsection (b).

(3) The fee assessed under Section 408 for filing a plan of division shall not apply to the filing of an amended plan of division, but subsection (h) shall apply to all proceedings related to the amended plan.

(Source: P.A. 102-394, eff. 8-16-21; 102-578, eff. 7-1-22 (See Section 5 of P.A. 102-672 for effective date of P.A. 102-578); 103-90, eff. 6-9-23.)

(215 ILCS 5/35B-30)

Sec. 35B-30. Certificate of division.

(a) After a plan of division has been adopted and approved, an officer or duly authorized representative of the dividing company shall sign a certificate of division.

(b) The certificate of division shall set forth:

(1) the name of the dividing company;

(2) a statement disclosing whether the dividing company will survive the division;

(3) the name of each new company that will be created by the division;

(4) the kinds of insurance business enumerated in Section 4 that the new company will be authorized to conduct;

(5) the date that the division is to be effective, which shall not be more than 90 days after the dividing company has filed the certificate of division with the recorder, with a concurrent copy to the Director;

(6) a statement that the division was approved by the Director in accordance with Section 35B-25, including the date when approval was served on the dividing company;

(7) a statement that the dividing company provided, no later than 10 business days after the dividing company filed the plan of division with the Director, reasonable notice to each reinsurer that is party to a reinsurance contract that is applicable to the policies included in the plan of division;

(8) if the dividing company will survive the division, an amendment to its articles of incorporation or bylaws approved as part of the plan of division;

(9) for each new company created by the division, its articles of incorporation and bylaws, provided that the articles of incorporation and bylaws need not state the name or address of an incorporator; and

(10) a reasonable description of the capital, surplus, other assets and liabilities, including policy liabilities, of the dividing company that are to be allocated to each resulting company.

(c) The articles of incorporation and bylaws of each new company must satisfy the requirements of the laws of this State, provided that the documents need not be signed or include a provision that need not be included in a restatement of the document.

(d) A certificate of division is effective when filed with the recorder, with a concurrent copy to the Director, as provided in this Section or on another date specified in the plan of division, whichever is later, provided that a certificate of division shall become effective not more than 90 days after it is filed with the recorder. A division is effective when the relevant certificate of division is effective.

(e) If the dividing company files an amended plan of division with the Director after a certificate of division has been filed for a previous plan, then the dividing company shall file a certificate of stay with the recorder, with a concurrent copy to the Director. The certificate of stay shall identify the certificate of division being stayed and the date on which the amended plan of division was filed with the Director. If the Director issues an order on the amended plan, or if the dividing company withdraws the amended plan before an order is issued, then the dividing company shall file an amended certificate of division pursuant to this Section. Nothing in this subsection (e) shall allow a dividing company to amend its plan of division under Section 35B-15 on or after the effective date specified in a certificate of division that is active or that has been stayed.

(Source: P.A. 102-775, eff. 5-13-22; 103-90, eff. 6-9-23.)

(215 ILCS 5/35B-35)

Sec. 35B-35. Effects of division.

(a) When a division becomes effective pursuant to Section 35B-30:

(1) if the dividing company has survived the division:

(A) it continues to exist;

(B) its articles of incorporation shall be amended, if necessary, as provided in the plan of division; and

(C) its bylaws shall be amended, if necessary, as provided in the plan of division;

(2) if the dividing company has not survived the division, its separate existence ceases to exist;

(3) each new company:

(A) comes into existence;

(B) shall hold any capital, surplus, and other assets allocated to such new company by the plan of division as a successor to the dividing company, automatically, by operation of law and not by transfer, whether directly or indirectly; and

(C) its articles of incorporation, if any, and bylaws, if any, shall be effective;

(4) capital, surplus, and other assets of the dividing company:

(A) that is allocated by the plan of division either:

(i) vests in the applicable new company as provided in the plan of division; or

(ii) remains vested in the dividing company as provided in the plan of division;

(B) that is not allocated by the plan of division either:

(i) remains vested in the dividing company, if the dividing company survives the division; or

(ii) is allocated to and vests equally in the resulting companies as tenants in common, if the dividing company does not survive the division; or

(C) otherwise vests as provided in this subsection without transfer, reversion, or impairment;

(5) a resulting company to which a cause of action is allocated as provided in paragraph (4) of this subsection (a) may be substituted or added in any pending action or proceeding to which the dividing company is a party when the division becomes effective;

(6) the liabilities, including policy liabilities, of the dividing company are allocated between or among the resulting companies as provided in Section 35B-40 and each resulting company to which liabilities are allocated is liable only for those liabilities, including policy liabilities, so allocated as successors to the dividing company, automatically, by operation of law, and not by transfer (or, for the avoidance of doubt, assumption), whether directly or indirectly; and

(7) the shares in the dividing company that are to be converted or canceled in the division are converted or canceled, and the shareholders of those shares are entitled only to the rights provided to them under the plan of division and any appraisal rights that they may have pursuant to Section 35B-45.

(b) Except as provided in the articles of incorporation or bylaws of the dividing company, the division does not give rise to any rights that a shareholder, director of a domestic stock company, or third party would have upon a dissolution, liquidation, or winding up of the dividing company.

(c) The allocation to a new company of capital, surplus, or other assets that is collateral covered by an effective financing statement shall not be effective until a new financing statement naming the new company as a debtor is effective under the Uniform Commercial Code.

(d) Unless otherwise provided in the plan of division, the shares in and any securities of each new company shall be distributed to:

(1) the dividing company, if it survives the division; or

(2) shareholders of the dividing company that do not assert any appraisal rights that they may have pursuant to Section 35B-45, pro rata.

(Source: P.A. 100-1118, eff. 11-27-18.)

(215 ILCS 5/35B-40)

Sec. 35B-40. Resulting company liabilities.

(a) Except as otherwise expressly provided in this Section, when a division becomes effective, each resulting company is responsible, automatically, by operation of law, for:

(1) individually, the liabilities, including policy liabilities, that the resulting company issues, undertakes, or incurs in its own name after the division;

(2) individually, the liabilities, including policy liabilities, of the dividing company that are allocated to or remain the liability of the resulting company to the extent specified in the plan of division; and

(3) jointly and severally with the other resulting companies, the liabilities, including policy liabilities, of the dividing company that are not allocated by the plan of division.

(b) Except as otherwise expressly provided in this Section, when a division becomes effective, no resulting company is responsible for or shall have any liability or obligation in respect of:

(1) any liabilities, including policy liabilities, that another resulting company issues, undertakes, or incurs in its own name after the division; or

(2) any liabilities, including policy liabilities, of the dividing company that are allocated to or remain the liability of another resulting company in accordance with the plan of division.

(c) If a provision of a debt security, note, or similar evidence of indebtedness for money borrowed, whether secured or unsecured, indenture or other contract relating to indebtedness, or a provision of any other type of contract other than an insurance policy, annuity, or reinsurance agreement, that was issued, incurred, or executed by the domestic stock company before requires the consent of the obligee to a merger of the dividing company or treats the merger as a default, that provision applies to a division of the dividing company as if the division was a merger.

(d) If a division breaches a contractual obligation of the dividing company at the time the division becomes effective, all of the resulting companies are liable, jointly and severally, for the contractual breach, but the validity and effectiveness of the division, including, without limitation, the allocation of liabilities in accordance with the plan of division, shall not be affected by the contractual breach.

(e) A direct or indirect allocation of capital, surplus, assets, or liabilities, including policy liabilities, in a division shall occur automatically, by operation of law, and shall not be treated as a distribution or transfer for any purpose with respect to either the dividing company or any of the resulting companies.

(f) Liens, security interests, and other charges on the capital, surplus, or other assets of the dividing company are not impaired by the division, notwithstanding any otherwise enforceable allocation of liabilities, including policy liabilities, of the dividing company.

(g) If the dividing company is bound by a security agreement governed by Article 9 of the Uniform Commercial Code as enacted in this State or in any other jurisdiction, and the security agreement provides that the security interest attaches to after-acquired collateral, each resulting company is bound by the security agreement.

(h) An allocation of a policy or other liability does not:

(1) except as provided in the plan of division and specifically approved by the Director, affect the rights that a policyholder or creditor has under other law in respect of the policy or other liability, except that those rights are available only against a resulting company responsible for the policy or liability under this Section; or

(2) release or reduce the obligation of a reinsurer, surety, or guarantor of the policy or liability.

(Source: P.A. 100-1118, eff. 11-27-18.)

(215 ILCS 5/35B-45)

Sec. 35B-45. Shareholder rights. If the dividing company does not survive the division, an objecting shareholder of a dividing company is entitled to appraisal rights and to obtain payment of the fair value of that shareholder's shares, in the same manner and to the extent provided for pursuant to Section 167.

(Source: P.A. 100-1118, eff. 11-27-18.)

(215 ILCS 5/35B-50)

Sec. 35B-50. Rules. The Director may adopt such rules as are necessary or appropriate to carry out this Article.

(Source: P.A. 100-1118, eff. 11-27-18.)

(215 ILCS 5/Art. III heading) ARTICLE III. DOMESTIC MUTUAL COMPANIES (Article scheduled to be repealed on January 1, 2027)

(215 ILCS 5/36) (from Ch. 73, par. 648)

(Section scheduled to be repealed on January 1, 2027)

Sec. 36. Scope of Article. This Article shall apply to all domestic mutual companies transacting or being organized to transact any of the kinds of business enumerated in Section 4.

(Source: Laws 1937, p. 696.)

(215 ILCS 5/37) (from Ch. 73, par. 649)

(Section scheduled to be repealed on January 1, 2027)

Sec. 37. Name. The corporate name of any company organized under this Article shall contain the word "Mutual" and shall not be the same as, or deceptively similar to, the name of any domestic company, or of any foreign or alien company authorized to transact business in this State.

(Source: Laws 1937, p. 696.)

(215 ILCS 5/38) (from Ch. 73, par. 650)

(Section scheduled to be repealed on January 1, 2027)

Sec. 38. Principal office and place of business. The principal office of any company organized under this Article shall be located in this State. Unless the Director has approved otherwise, the principal place of business of any company organized under this Article shall be located in this State.

(Source: P.A. 82-498.)

(215 ILCS 5/39) (from Ch. 73, par. 651)

(Section scheduled to be repealed on January 1, 2027)

Sec. 39. Authorized kinds of business.

(1) Companies may be organized under this Article either for the purpose of transacting any of the kind or kinds of business enumerated in Class 1 of Section 4, or for the purpose of transacting any of the kind or kinds of business enumerated in Classes 2 and 3 of that Section.

(2) A domestic company may, notwithstanding limitations otherwise applicable, and provided it maintains books and records which account for such business, engage directly in any of the following businesses: (a) rendering investment advice; (b) rendering services related to the functions involved in the operation of its insurance business including, but not limited to, actuarial, loss prevention, safety engineering, data processing, accounting, claims, appraisal and collection services; (c) acting as administrative agent for a health or welfare program; (d) any other business activity reasonably complementary or supplementary to its insurance business; either to the extent necessarily or properly incidental to the insurance business the company is authorized to do in this State or to the extent approved by the Director and subject to any limitations he may prescribe for the protection of the interests of the policyholders of the company taking into account the effect of such business on the company's existing insurance business and its surplus, the proposed allocation of the estimated cost of such business and the risks inherent in such business as well as relative advantages to the company and its policyholders of conducting such business directly instead of through a subsidiary.

(Source: P.A. 77-673.)

(215 ILCS 5/40) (from Ch. 73, par. 652)

(Section scheduled to be repealed on January 1, 2027)

Sec. 40. Directors or trustees.

(1) After the date of incorporation, as determined by Section 48, and until the first meeting of the members, the incorporators shall have the powers and perform the duties ordinarily possessed and exercised by a board of directors.

(2) Upon the issuance of a certificate of authority to a company organized under this Article, the corporate powers shall be exercised by, and its business and affairs shall be under the control of, a board of directors or trustees composed of not less than 3 nor more than 21 natural persons who are members and who are at least 18 years of age and at least 3 of whom are residents and citizens of this State. After June 30, 2002, at least 20%, but not less than one, of the directors of a company that is not subject to Section 131.20b shall be persons who are not officers or employees of the company. A person convicted of a felony may not be a director, and all directors shall be of good character and known professional, administrative, or business ability, such business ability to include a practical knowledge of insurance, finance, or investment. The first board of directors or trustees shall be elected at the first meeting of the members, and all directors or trustees shall be elected annually thereafter, except only as provided in subsection (3).

(3) The articles of incorporation may provide for the division of the board into classes, as nearly equal in number as possible, and fix the term of office for each class, but no term shall be for more than 3 years.

(4) Meetings of the board of directors or trustees, regular or special, may be held either within or without the State. Meetings of the board of directors or trustees shall be upon such notice as the by-laws may prescribe. Attendance of a director or trustee at any meeting shall constitute a waiver of notice of such meeting except where a director or trustee attends the meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the board of directors or trustees need be specified in the notice or waiver of notice of such meeting, unless expressly otherwise provided by this Code. Unless specifically prohibited by the articles of incorporation or by-laws, members of the board of directors or of any committee of the board of directors may participate in and act at any meeting of such board or committee through the use of a conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other. Participation in such meeting shall constitute attendance and presence in person at the meeting of the person or persons so participating. Unless specifically prohibited by the articles of incorporation or by-laws, members of the board of directors or of any committee of the board of directors may take action without a meeting, if a consent in writing setting forth the action so taken shall be signed by all of the directors entitled to vote with respect to the subject matter thereof, or by all of the members of such committee, as the case may be. The consent shall be evidenced by one or more written approvals, each of which sets forth the action taken and bears the signature of one or more directors or committee members. All approvals evidencing the consent shall be filed in the company's corporate records. The action taken shall be effective when all of the directors, or members of the committee, have approved the consent unless the consent specifies a different effective date.

(5) A company may indemnify any person in conformance with subsection (7) of Section 10.

(Source: P.A. 92-140, eff. 7-24-01.)

(215 ILCS 5/41) (from Ch. 73, par. 653)

(Section scheduled to be repealed on January 1, 2027)

Sec. 41. Executive committee. If the by-laws so provide, the board of directors or trustees, by a resolution adopted by a majority of the whole board, may designate three or more of their number to constitute an executive committee, which committee shall, to the extent provided in the resolution or in the by-laws, have and exercise, during the interim between the meetings of the board, all of the authority of the board in the management of the company, but the designation of such committee shall not relieve the board or any member thereof of any responsibility imposed by law.

(Source: Laws 1937, p. 696.)

(215 ILCS 5/42) (from Ch. 73, par. 654)

(Section scheduled to be repealed on January 1, 2027)

Sec. 42. By-laws.

(1) The incorporators shall adopt by-laws for the company which shall not be altered, amended, or repealed prior to the issuance of a certificate of authority to the company without the approval of the Director. The by-laws shall provide that each policyholder of the company shall be a member of the company and shall be entitled to one or more votes in person or by proxy, based upon the amount of insurance in force, the number of policies held or the amount of premium paid, as shall be stated in such by-laws.

(2) After a certificate of authority is issued to the company, the power to make, alter, amend or repeal by-laws shall be vested in the board of directors or trustees unless reserved to the members by the articles of incorporation.

(3) The by-laws of a mutual legal reserve life company shall provide for a specific premium and that there shall be no assessment or contingent liability on the part of the member.

(4) The by-laws of a mutual company other than life shall provide

(a) for a specific premium or premium deposit; and

(b) except as provided in section 55, for a contingent liability of each member in an amount not less than one nor more than ten times the specific premium or premium deposit stated in the policy.

(Source: Laws 1937, p. 696.)

(215 ILCS 5/43) (from Ch. 73, par. 655)

(Section scheduled to be repealed on January 1, 2027)

Sec. 43. Minimum surplus requirements.

(1) No company organized after December 31, 1985 under this Article may receive a certificate of authority from the Director to issue policies or contracts of insurance until it has complied with the requirements in respect of original surplus applicable to the class or classes and clause or clauses of section 4 describing the kind or kinds of insurance it is organized to write, as set forth in the following table: Life, Accident, Health and Legal Expense (a) Class 1, Clauses (a), (b) or (c), a surplus of at least $2,000,000; more than one clause, a surplus of at least $2,000,000.

Casualty, Fidelity and Surety (b) Class 2, Clauses (a), (b), (c), (d), (g), (h), (i) or (j), a surplus of at least $2,000,000; more than one clause, a surplus of at least $2,000,000.

Fire, Marine and Legal Expense (c) Class 2, Clauses (e), (f), (k), (l) or Class 3, any or all clauses or any combination thereof, a surplus of at least $1,000,000.

Multiple Line (d) Class 2, any or all clauses other than those specified in (c) above, and Class 3, any or all clauses, a surplus of at least $2,000,000.

Glass and Livestock and Domestic Animals (e) Class 2, Clause (f) only or (k) only, $250,000; provided any company to which this subparagraph is applicable shall not expose itself to any loss on any one risk in an amount exceeding $5,000.

(2) Every company subject to this Article and organized on or after June 28, 1965 must have and at all times maintain a minimum surplus equal to 2/3 of the original surplus required for that particular company at the time it was organized. Any such company organized prior to June 28, 1965 must have and at all times maintain a minimum surplus equal to that which would have been required for that particular company at the time it was issued a Certificate of Authority. Any company which has added any clause or clauses must have and at all times maintain minimum surplus not less than the minimum surplus requirement applicable to the class or classes and clause or clauses of Section 4 at the time that the additional clause or clauses are authorized. Any company organized prior to October 1, 1972 must have and at all times maintain, in addition to the minimum surplus required to be maintained by that particular company, additional minimum surplus of not less than $300,000.

(3) Any company organized prior to January 1, 1986 and regulated under this Article, in addition to the minimum surplus which is required by paragraph (2) of this Section must have by December 31, 1986 and at all times maintain until December 31, 1990 additional minimum surplus of $200,000.

(4) Provided, however, mutual companies organized prior to October 1, 1972 and authorized to engage only in insurance business as specified in Class 2(f) of Section 4 on an assessable basis shall not be required to establish an additional minimum surplus as provided herein.

(5) Subsections (2) and (3) shall be applicable until December 31, 1990 for all companies organized prior to January 1, 1986; thereafter, such companies must have and maintain surplus as required by subsections (7) and (8).

(6) Every company subject to this Article and organized after December 31, 1985 under this Article must maintain minimum surplus applicable to the class or classes and clause or clauses of Section 4 describing the kind or kinds of insurance which it is authorized to write, as follows: Life, Accident, Health and Legal Expense (a) Class 1, Clauses (a), (b) or (c), a surplus of at least $1,500,000; more than one clause, a surplus of at least $1,500,000.

Casualty, Fidelity and Surety (b) Class 2, Clauses (a), (b), (c), (d), (g), (h), (i) or (j), a surplus of at least $1,500,000; more than one clause, a surplus of at least $1,500,000.

Fire, Marine and Legal Expense (c) Class 2, Clauses (e), (f), (k), (l) or Class 3, any or all clauses or any combination thereof, a surplus of at least $700,000.

Multiple Line (d) Class 2, any or all clauses other than those specified in (c) above, and Class 3, any or all clauses, a surplus of at least $1,500,000.

Glass and Livestock and Domestic Animals (e) Class 2, Clause (f) only or (k) only, $150,000; provided any company to which this subparagraph is applicable shall not expose itself to any loss on any one risk in an amount exceeding $5,000.

(7) Any company organized prior to January 1, 1986, regulated under this Article must have by December 31, 1990, and thereafter maintain until December 31, 1995, surplus not less than the minimum applicable to the class or classes and clause or clauses of Section 4 describing the kind or kinds of insurance which it is authorized to write, as follows: Life, Accident, Health and Legal Expense (a) Class 1, Clauses (a), (b) or (c), a surplus of at least $1,200,000; more than one clause, a surplus of at least $1,200,000.

Casualty, Fidelity and Surety (b) Class 2, Clauses (a), (b), (c), (d), (g), (h), (i) or (j), a surplus of at least $1,200,000; more than one clause, a surplus of at least $1,200,000.

Fire, Marine and Legal Expense (c) Class 2, Clauses (e), (f), (k), (l) or Class 3, any or all clauses or any combination thereof, a surplus of at least $600,000.

Multiple Line (d) Class 2, any or all clauses other than those specified in (c) above, and Class 3, any or all clauses, a surplus of at least $1,200,000.

Glass and Livestock and Domestic Animals (e) Class 2, Clause (f) only or (k) only, $100,000; provided any company to which this subparagraph is applicable shall not expose itself to any loss on any one risk in an amount exceeding $5,000.

(8) Any company organized prior to January 1, 1986, regulated under this Article must have by December 31, 1995, and thereafter maintain at all times, surplus not less than the minimum applicable to the class or classes and clause or clauses of Section 4 describing the kind or kinds of insurance which it is authorized to write, as follows: Life, Accident, Health and Legal Expense (a) Class 1, Clauses (a), (b) or (c), a surplus of at least $1,500,000; more than one clause, a surplus of at least $1,500,000.

Casualty, Fidelity and Surety (b) Class 2, Clauses (a), (b), (c), (d), (g), (h), (i) or (j), a surplus of at least $1,500,000; more than one clause, a surplus of at least $1,500,000.

Fire, Marine and Legal Expense (c) Class 2, Clauses (e), (f), (k), (l) or Class 3, any or all clauses or any combination thereof, a surplus of at least $700,000.

Multiple Line (d) Class 2, any or all clauses other than those specified in (c) above, and Class 3, any or all clauses, a surplus of at least $1,500,000.

Glass and Livestock and Domestic Animals (e) Class 2, Clause (f) only or (k) only, $150,000; provided any company to which this subparagraph is applicable shall not expose itself to any loss on any one risk in an amount exceeding $5,000.

(9) The Director shall take action under Section 60 of this Code against any company which fails to maintain the minimum surplus required by this section. The words "minimum surplus" mean the "surplus as regards policyholders", as it appears on the annual statement of a mutual company on the usual and proper annual statement form prescribed by the National Association of Insurance Commissioners.

(Source: P.A. 84-934.)

(215 ILCS 5/44) (from Ch. 73, par. 656)

(Section scheduled to be repealed on January 1, 2027)

Sec. 44. Articles of incorporation. Any one or more natural persons, at least one of whom is a resident of Illinois, who desire to form a company under this Article, shall sign and acknowledge before an officer authorized to take acknowledgments articles of incorporation in duplicate. The articles shall set forth

(a) the corporate name;

(b) the location of its principal office;

(c) the period of duration, which may be perpetual;

(d) the class or classes of insurance business, as provided in Section 4, in which it proposes to engage, and the kinds of insurance in each class it proposes to write;

(e) the name of the governing body of the company, whether board of trustees or board of directors, and the number, the terms of office of and the manner of electing the members of the board; and

(f) such other provisions not inconsistent with law as may be deemed by the incorporators to be necessary or advisable.

(Source: P.A. 84-502.)

(215 ILCS 5/45) (from Ch. 73, par. 657)

(Section scheduled to be repealed on January 1, 2027)

Sec. 45. Documents to be delivered to Director by incorporators. Upon the execution of the articles of incorporation, there shall be delivered to the Director

(a) duplicate originals of the articles of incorporation;

(b) a copy of the by-laws adopted by the incorporators;

(c) 2 organization bonds, or the cash or securities, provided for in Section 46;

(d) the form of guaranty fund agreements and of guaranty capital shares, if any, as provided in Section 56 to be issued in connection with solicitation of surplus; and

(e) the form of escrow agreement for the deposit of cash or securities.

(Source: P.A. 84-502.)

(215 ILCS 5/45.1) (from Ch. 73, par. 657.1)

(Section scheduled to be repealed on January 1, 2027)

Sec. 45.1. Escrow agreements. The company shall designate a bank or trust company with whom it will enter into an escrow agreement, which agreement shall state that the organization surplus shall be placed in escrow and remain so, until an organization examination has been completed. When the examination has been completed the escrow agent is authorized to purchase securities for deposit as required by Section 53 and forward them to the Director. The escrow agent is authorized to release the balance of the escrowed funds to the company only upon notification that a Certificate of Authority or similar documentation has been issued by the Director.

(Source: P.A. 84-502.)

(215 ILCS 5/46) (from Ch. 73, par. 658)

(Section scheduled to be repealed on January 1, 2027)

Sec. 46. Organization bonds. The incorporators shall deliver to the Director two bonds in the same penalties and containing the same provisions, so far as applicable, as the bonds required for the organization of a stock company by Section 16, for the use and benefit of the State of Illinois and subscribers, members and creditors, or in lieu of delivering such bonds, the incorporators may deposit cash or securities of the same kind and amount on the same terms and conditions, so far as applicable, as provided by said Section.

(Source: Laws 1937, p. 696.)

(215 ILCS 5/47) (from Ch. 73, par. 659)

(Section scheduled to be repealed on January 1, 2027)

Sec. 47. Publication of intention.

(1) Upon compliance with the provisions of Section 45, the incorporators shall cause to be published in a newspaper of general circulation in this State, in the county where the principal office of the company is to be located, once each week for three consecutive weeks, a notice setting forth

(a) their intent to form the company and the proposed name thereof;

(b) the class or classes of insurance business in which the company proposes to engage; and

(c) the address where its principal office shall be located.

(2) Proof of such publication made by a certificate of the publisher or his agent shall be delivered to the Director.

(Source: Laws 1937, p. 696.)

(215 ILCS 5/48) (from Ch. 73, par. 660)

(Section scheduled to be repealed on January 1, 2027)

Sec. 48. Approval of documents. The documents and papers so delivered to the Director may be approved or disapproved by the Director and the incorporators are entitled to a hearing in the same manner as provided in Section 18 in the case of documents delivered for approval in connection with the organization of stock companies. If the documents and papers so delivered are approved by the Director, the Director must file in his office the bylaws, bond or securities and one of the duplicate originals of the articles of incorporation, and endorse upon the other duplicate original his approval and the month, day and year of approval and deliver it to the incorporators. The company is deemed to be fully organized on the date of the approval of the articles of incorporation by the Director, and that date is the date of incorporation of the company.

(Source: P.A. 82-498.)

(215 ILCS 5/49) (from Ch. 73, par. 661)

(Section scheduled to be repealed on January 1, 2027)

Sec. 49. Recording of articles of incorporation. The duplicate original of the articles of incorporation returned by the Director shall be filed for record, within 15 days after it is delivered to the company, in the office of the recorder of the county where the principal office of the company is to be located.

(Source: P.A. 83-358.)

(215 ILCS 5/50) (from Ch. 73, par. 662)

(Section scheduled to be repealed on January 1, 2027)

Sec. 50. Authority to solicit subscriptions to surplus.

(1) Upon the approval of the articles of incorporation by the Director he shall issue to the company a permit which shall expire at the end of two years from its date, authorizing it to solicit subscriptions to surplus in accordance with this Code and to do such other acts as may be necessary and proper in order to complete its organization and to entitle it to receive a certificate of authority to transact an insurance business.

(2) If the Director finds that any company in process of organization has failed to comply with, or has violated any provision of the Code, he may proceed against the company under Article XIII, and may after notice and hearing revoke the permit issued to it under subsection (1) of this Section.

(Source: Laws 1951, p. 1565.)

(215 ILCS 5/51) (from Ch. 73, par. 663)

(Section scheduled to be repealed on January 1, 2027)

Sec. 51. Issuance of certificate of authority. When the Director has been notified that the company has the required surplus as set forth in Section 43 of this Article as now and hereafter amended, he shall conduct an examination of the company. If he finds that the organization is complete and that all of the requirements of this Code have been met he shall issue to such company a certificate of authority to transact the kind or kinds of business specified therein. No company shall transact any business of insurance in this State until it shall have received such certificate of authority as herein prescribed nor any business of insurance not specified in such certificate of authority.

(Source: Laws 1967, p. 1808.)

(215 ILCS 5/52) (from Ch. 73, par. 664)

(Section scheduled to be repealed on January 1, 2027)

Sec. 52. Voluntary surrender of articles of incorporation. At any time prior to the issuance of the certificate of authority to the company the articles of incorporation may be voluntarily surrendered and the company dissolved by written agreement filed with the Director, signed by a majority of the incorporators. Such surrender and dissolution shall become effective only upon the approval thereof by the Director. The Director shall approve the surrender of such articles of incorporation if upon investigation he shall find that

(a) no insurance business has been transacted by the company;

(b) all sums of money or securities, if any, collected upon applications or subscriptions, have been returned to the applicants or subscribers; and

(c) all obligations of the company have been paid or discharged.

(Source: Laws 1937, p. 696.)

(215 ILCS 5/53) (from Ch. 73, par. 665)

(Section scheduled to be repealed on January 1, 2027)

Sec. 53. Deposit.

(a) A company subject to the provisions of this Article shall make and maintain with the Director for the protection of all creditors, policyholders and policy obligations of the company, a deposit of securities having a fair market value equal to the minimum surplus required to be maintained under Section 43. The Director may release the required deposit of securities upon receipt of an order of a court having proper jurisdiction or upon: (i) certification by the company that it has no outstanding creditors, policyholders, or policy obligations in effect and no plans to engage in the business of insurance; (ii) receipt of a lawful resolution of the company's board of directors effecting the surrender of its articles of incorporation for administrative dissolution by the Director; and (iii) receipt of the name and forwarding address for each of the final officers and directors of the company, together with a plan of dissolution approved by the Director.

(b) All deposits by insurers subject to this Article must be limited to the following types:

(1) United States government bonds, notes, and bills for which the full faith and credit of the government of the United States is pledged for the payment of principal and interest.

(2) United States public bonds and notes of any state or of the District of Columbia, or Canadian public bonds and notes of any province thereof, for which the full faith and credit of the issuer has been pledged for the payment of principal and interest.

(3) United States and Canadian county, provincial, municipal, and district bonds and notes for which the issuer has lawful authority to levy taxes or make assessments for the payment of principal and interest.

(4) Bonds and notes of any federal agency that are guaranteed as to payment of principal and interest by the United States.

(5) International development bank bonds, bonds issued by the State of Israel and sold through the Development Corporation for Israel or its successor entities, and notes issued, assumed, and guaranteed by the International Bank for Reconstruction and Development, the Inter-American Development Bank, the Asian Development Bank, the African Development Bank, or the International Finance Corporation.

(6) Corporate bonds and notes of any private corporations that are not affiliates or subsidiaries of the insurer, which corporations are organized under the laws of the United States, Canada, any state, the District of Columbia, any territory or possession of the United States, or any province of Canada.

(7) Certificates of deposit.

(c) To be eligible for deposit under subsection (b), any bond or note must have the following characteristics:

(1) The bond or note must be interest-bearing or interest-accruing, and the insurer must be the exclusive owner of the interest accruing thereon and entitled to receive the interest for its account.

(2) The issuer must be in a solvent financial condition and the bond or note must not be in default.

(3) The bond, note, or debt of the issuing country must be rated in one of the 4 highest classifications by an established, nationally recognized investment rating service or must have been given a rating of 1 by the Securities Valuation Office of the National Association of Insurance Commissioners.

(4) The market value of the bond or note must be readily ascertainable or the value of the bond or note must be obtainable by the insurer or its custodian from the issuer's fiscal agent.

(5) The bond or note must be the direct obligation of the issuer.

(6) The bond or note must be stated in United States dollar denominations.

(7) The bond or note must be eligible for book-entry form on the books of the Federal Reserve's book-entry system or in a depository trust clearing system or on the books of the issuer's transfer agent or evidenced by a certificate delivered to the insurer or its custodian.

(d) To be eligible for deposit under item (7) of subsection (b), a certificate of deposit must have the following characteristics:

(1) The certificate of deposit must be issued by a bank, savings bank, or savings association that is organized under the laws of the United States, of this State, or of any other state and that has a principal office or branch office in this State that is authorized to receive deposits in this State.

(2) The certificate of deposit must be interest-bearing and may not be issued in discounted form.

(3) The certificate of deposit must be issued for a period of not less than one year.

(4) The issuing bank, savings bank, or savings association must agree to the terms and conditions of the Director regarding the rights to the certificate of deposit and must have executed a written certificate of deposit agreement with the Director. The terms and conditions of the agreement shall include, but need not be limited to:

(A) Exclusive authorized signature authority for the chief financial officer.

(B) An agreement to pay, without protest, the proceeds of its certificate of deposit to the Director within 30 business days after presentation.

(C) A prohibition against levies, setoffs, survivorship, or other conditions that might hinder the Director's ability to recover the full face value of a certificate of deposit.

(D) Instructions regarding interest payments, renewals, taxpayer identification, and early withdrawal penalties.

(E) An agreement to be subject to the jurisdiction of the courts of this State, or those of the United States that are located in this State, for the purposes of any litigation arising out of this Section.

(F) Such other conditions as the Director requires.

(e) The Director may refuse to accept certain securities or refuse to accept the reported market value of certain securities offered pursuant to this Section in order to ensure that sufficient cash and securities are on hand to meet the purposes of the deposit. In making a refusal under this subsection (e), the guidelines for use of the Director may include, but need not be limited to, whether the market value of the securities cannot be readily ascertained and the lack of liquidity of the securities. Securities refused under this subsection (e) are not acceptable as deposits.

(f) All deposits required of a domestic insurer pursuant to the laws of another state, province, or country must be comprised of securities of the kinds required under subsection (b), having the characteristics required under subsections (c) and (d), and permitted by the laws of the other state, province, or country, except common stocks, mortgages or loans of any kind, real estate investment trust funds or programs, commercial paper, and letters of credit.

(Source: P.A. 98-110, eff. 1-1-14; 98-969, eff. 1-1-15.)

(215 ILCS 5/54) (from Ch. 73, par. 666)

(Section scheduled to be repealed on January 1, 2027)

Sec. 54. Dividends.

(1) The board of directors or trustees of any company subject to the provisions of this Article doing the kind or kinds of insurance business described in Class 1 of Section 4 may declare dividends to its members.

(2) The board of directors or trustees of any company subject to the provisions of this article doing any of the kind or kinds of business described in Classes 2 and 3 of Section 4 may from time to time fix and determine the amount of dividends or of unabsorbed or unused premiums or premium deposits to be returned to each policyholder, and may for such purpose establish reasonable classifications or groupings of policyholders and plans for the distribution of such refunds upon each general kind of insurance or groups or classes thereof and may establish reasonable territorial divisions upon policies expiring during a fixed period, after retaining sufficient funds for the payment by the company of all outstanding policy and other obligations.

(3) The declaration and payment of dividends by any company subject to the provisions of this Article shall be subject to the following conditions:

(a) No dividend shall be declared or paid at any time except out of earned, as distinguished from contributed, surplus, nor when the surplus of the company is less than the surplus required in section 43 for the kind or kinds of insurance the company is authorized to write, nor when the payment of such dividend will reduce its surplus to less than such amount.

(b) No dividend shall be declared or paid contrary to any restriction contained in the articles of incorporation.

(Source: P.A. 86-753.)

(215 ILCS 5/55) (from Ch. 73, par. 667)

(Section scheduled to be repealed on January 1, 2027)

Sec. 55. Contingent liability policy provisions. In cases where contingent liability of members is provided for, the provision therefor shall be plainly stated in each policy with prominence equal to the indemnifying clause. In addition, each such assessable policy, other than an accident or health policy, issued or delivered in this State insuring against the hazards included in Class 2, subparagraph (b) of Section 4 after September 1, 1967 must have the following statement printed in bold face on the face of the policy: "This is an assessable policy". If a mutual company other than life has a surplus equal to the capital and surplus required in Section 13, for a stock company transacting the same kind or kinds of business, such company may issue policies without contingent liability. Any such mutual company which shall have issued policies without contingent liability after the acquisition of such surplus may continue to do so as long as it maintains a surplus equal to the capital and surplus of a stock company doing the same kind or kinds of business, but no company may issue such policies except during such time as it shall continue to have such a surplus, but any company which is, immediately prior to July 1, 1965, issuing policies without contingent liability, may continue to do so as long as it maintains a surplus equal in amount to that which would have been required immediately prior to July 1, 1965. After July 18, 1967, no company subject to this Article may make, levy or impose upon its members any assessment based on their contingent liability unless ordered to do so by the Director under Section 60 of this Code.

(Source: P.A. 86-753.)

(215 ILCS 5/56) (from Ch. 73, par. 668)

(Section scheduled to be repealed on January 1, 2027)

Sec. 56. Accumulation of guaranty fund or guaranty capital. Any company subject to the provisions of this Article, may provide for a surplus either by accumulating a guaranty fund or a guaranty capital as follows:

(a) Guaranty fund. It may accumulate a guaranty fund by borrowing money at an interest rate either (1) at a fixed rate not exceeding the corporate base rate as reported by the largest bank (measured by assets) with its head office located in Chicago, Illinois, in effect on the first business day of the month in which the loan document is executed, plus 3% per annum or (2) at a variable rate equal to the corporate base rate determined on the first business day of each month during the term of the loan plus 2% per annum. In no event shall the variable interest rate for any month exceed the initial rate for the loan or advance by more than 10% per annum. The insurer shall elect at the time of execution of the loan or advance agreement whether the interest rate is to be fixed or floating for the term of the agreement. An agreement issued after the insurer has received its Certificate of Authority shall first be approved by resolution of the Board of Directors and the Director. The agreement shall provide that such loan and the interest thereon shall be repaid only out of the surplus of such company in excess of the greater of the original or minimum surplus required of such company by Section 43. Such excess of surplus shall be calculated upon the fair market value of the assets of the company, and such guaranty loan fund shall constitute and be enforceable as a liability of the company only as against such excess of surplus. Any unpaid balance of such guaranty fund loan shall be reported in the annual statement to be filed with the Director. Repayment of principal or payment of interest may be made only with the approval of the Director when he or she is satisfied that the financial condition of the company warrants that action, but approval may not be withheld if the company shall have and submit satisfactory evidence of surplus of not less than the amount stipulated in the repayment of principal or interest payment clause of the agreement.

(b) Guaranty capital. It may in addition to any advances provided for herein, establish and maintain a guaranty capital divided into shares having a par value of not more than $100 nor less than $5 each. The guaranty capital shall be applied to the payment of losses only when the company has exhausted its assets in excess of unearned premium reserve and other liabilities; and when thus impaired the directors may make good the whole or any part of it by assessment on its policyholders as provided for in Section 60. Said guaranty capital may, by vote of the board of directors of the company and the written consent of the Director be reduced or retired by any amount, provided that the net surplus of the company together with the remaining guaranty capital shall equal or exceed the amount of surplus required by Section 43, and due notice of such proposed action on the part of the company shall be published in a newspaper of general circulation, approved by the Director, not less than once each week for at least 4 consecutive weeks before such action is taken. No company with a guaranty capital, which has ceased to do business, shall divide any part of its assets or guaranty capital among its shareholders unless it has paid or it has otherwise been released from its policy obligations. The holders of the shares of such guaranty capital shall be entitled to interest either (1) at a fixed rate not exceeding the corporate base rate as reported by the largest bank (measured by assets) with its head office located in Chicago, Illinois, in effect on the first business day of the month in which the loan document is executed, plus 3% per annum or (2) at a variable rate equal to the corporate base rate determined on the first business day of each month during the term of the loan plus 2% per annum. In no event shall the variable interest rate for any month exceed the initial rate for the loan or advance by more than 10% per annum. The insurer shall elect at the time of issuance of the shares whether the interest rate is to be fixed or floating for the term of the agreement. Such interest shall be payable from the surplus in excess of the surplus required of the company by Section 43. In the event of dissolution and liquidation of such a company after the retirement of all outstanding obligations of the company, the holders of such shares of guaranty capital shall be entitled to a preferential right in the assets of such company equal to the par value of their share of such guaranty capital before any distribution to members.

(Source: P.A. 90-381, eff. 8-14-97; 91-357, eff. 7-29-99.)

(215 ILCS 5/57) (from Ch. 73, par. 669)

(Section scheduled to be repealed on January 1, 2027)

Sec. 57. Amendment of articles of incorporation.

(1) A company subject to the provisions of this Article may amend its articles of incorporation in any respect not in violation of law, but may not amend such articles to insert any provision prohibited, or to delete any provision required, in original articles of incorporation for a similar domestic company organized under this Code except as otherwise provided in Section 59.1 or 59.2 of this Code.

(2) Amendments to the articles of incorporation for the various classes of companies shall be made in the following manner:

(a) Class 1. The board of directors or trustees shall adopt a resolution setting forth the proposed amendment and directing that it be submitted to a vote of the policyholders at either an annual or special meeting. Written or printed notice shall be given to policyholders in the same manner as is required in the case of notices to shareholders of stock companies by Section 29. The proposed amendment shall be adopted upon receiving the affirmative vote of 2/3 of the policyholders present in person or by proxy at such meeting. Restated articles of incorporation setting forth the articles of incorporation as amended shall thereupon be executed in duplicate by the company or its president or vice president, and its secretary or assistant secretary, and duplicate originals of such restated articles of incorporation and an affidavit of the secretary of the company setting forth the facts to show that this section has been fully complied with shall be delivered to the Director.

(b) Classes 2 and 3. The board of directors or trustees shall adopt the amendment and deliver to the Director duplicate original restated articles of incorporation setting forth the articles of incorporation as amended and a copy of the resolution of the board of directors or trustees adopting such an amendment certified to by the secretary of the company.

(3) The restated articles of incorporation of any company subject to the provisions of this article so delivered to the Director may be approved or disapproved by the Director in the same manner as the original articles of incorporation. If approved, the Director shall place on file in his office all of the documents so delivered to him except one of the duplicate originals of the restated articles of incorporation, and shall endorse upon such duplicate original his approval thereof and the month, day and year of such approval, and deliver it to the company. The amendment shall be effective as of the date of the approval thereof by the Director. Such duplicate original shall be filed for record, within 15 days after it has been delivered to the company, in the office of the recorder of the county where the principal office of the company is located.

(Source: P.A. 90-810, eff. 1-6-99.)

(215 ILCS 5/58) (from Ch. 73, par. 670)

(Section scheduled to be repealed on January 1, 2027)

Sec. 58. Governmental agencies and corporations may be members. Any government or governmental agency, state or political subdivision thereof, public or private corporation, board, association, estate, trustee or fiduciary in this State or elsewhere, may make application, enter into agreements for and hold policies or contracts in or with, and be a member of, any domestic, foreign or alien mutual company subject to the provisions of this Code. Any officer, representative, trustee, receiver or legal representative of any such member or policyholder, shall be recognized as acting for or on its behalf for the purpose of such contract or membership, but shall not be personally liable upon such contract by reason of acting in such representative capacity.

(Source: Laws 1937, p. 696.)

(215 ILCS 5/59) (from Ch. 73, par. 671)

(Section scheduled to be repealed on January 1, 2027)

Sec. 59. Reinsurance agreements. Unless the contract provides otherwise any reinsurance agreement effected by any company subject to the provisions of this Article upon the whole or any part of any risk shall be without contingent liability or participation or membership.

(Source: Laws 1937, p. 696.)

(215 ILCS 5/59.1)

(Section scheduled to be repealed on January 1, 2027)

Sec. 59.1. Conversion to stock company.

(1) Definitions. For the purposes of this Section, the following terms shall have the meanings indicated:

(a) "Eligible member" is a member as of the date the mutual company's board of directors adopts a plan of conversion. A person insured under a group policy is not an eligible member, unless:

(i) the person is insured or covered under a group life policy or group annuity contract under which funds are accumulated and allocated to the respective covered persons;

(ii) the person has the right to direct the application of the funds so allocated;

(iii) the group policyholder makes no contribution to the premiums or deposits for the policy or contract; and

(iv) the mutual company has the names and addresses of the persons covered under the group life policy or group annuity contract.

A person whose policy is issued after the board of directors adopts the plan but before the plan's effective date is not an eligible member but shall have those rights set forth in subsection (10) of this Section.

(b) "Converted stock company" is an Illinois domiciled stock company that converted from an Illinois domiciled mutual company under this Section.

(c) "Plan of conversion" or "plan" is a plan adopted by an Illinois domestic mutual company's board of directors under this Section to convert the mutual company into an Illinois domiciled stock company.

(d) "Policy" includes an annuity contract.

(e) "Member" means a person who, on the records of the mutual company and pursuant to its articles of incorporation or bylaws, is deemed to be a holder of a membership interest in the mutual company.

(2) Adoption of the plan of conversion by the board of directors.

(a) A mutual company seeking to convert to a stock company shall, by the affirmative vote of two-thirds of its board of directors, adopt a plan of conversion consistent with the requirements of subsection (6) of this Section.

(b) At any time before approval of a plan by the Director, the mutual company by the affirmative vote of two-thirds of its board of directors, may amend or withdraw the plan.

(3) Approval of the plan of conversion by the Director of Insurance.

(a) Required findings. After adoption by the mutual company's board of directors, the plan shall be submitted to the Director for review and approval. The Director shall approve the plan upon finding that:

(i) the provisions of this Section have been complied with;

(ii) the plan will not prejudice the interests of the members; and

(iii) the plan's method of allocating subscription rights is fair and equitable.

(b) Documents to be filed.

(i) Prior to the members' approval of the plan, a mutual company seeking the Director's approval of a plan shall file the following documents with the Director for review and approval:

(A) the plan of conversion, including the independent evaluation of pro forma market value required by item (f) of subsection (6) of this Section;

(B) the form of notice required by item (b) of subsection (4) of this Section for eligible members of the meeting to vote on the plan;

(C) any proxies to be solicited from eligible members pursuant to subitem (ii) of item (c) of subsection (4) of this Section;

(D) the form of notice required by item (a) of subsection (10) of this Section for persons whose policies are issued after adoption of the plan but before its effective date; and

(E) the proposed articles of incorporation and bylaws of the converted stock company.

Once filed, these documents shall be approved or disapproved by the Director within a reasonable time.

(ii) After the members have approved the plan, the converted stock company shall file the following documents with the Director:

(A) the minutes of the meeting of the members at which the plan was voted upon; and

(B) the revised articles of incorporation and bylaws of the converted stock company.

(c) Consultant. The Director may retain, at the mutual company's expense, any qualified expert not otherwise a part of the Director's staff to assist in reviewing the plan and the independent evaluation of the pro forma market value which is required by item (f) of subsection (6) of this Section.

(4) Approval of the plan by the members.

(a) Members entitled to notice of and to vote on the plan. All eligible members shall be given notice of and an opportunity to vote upon the plan.

(b) Notice required. All eligible members shall be given notice of the members' meeting to vote upon the plan. A copy of the plan or a summary of the plan shall accompany the notice. The notice shall be mailed to each member's last known address, as shown on the mutual company's records, within 45 days of the Director's approval of the plan. The meeting to vote upon the plan shall not be set for a date less than 30 days after the date when the notice of the meeting is mailed by the mutual company. If the meeting to vote upon the plan is held coincident with the mutual company's annual meeting of policyholders, only one combined notice of meeting is required.

(c) Vote required for approval.

(i) After approval by the Director, the plan shall be adopted upon receiving the affirmative vote of at least two-thirds of the votes cast by eligible members.

(ii) Members entitled to vote upon the proposed plan may vote in person or by proxy. Any proxies to be solicited from eligible members shall be filed with and approved by the Director.

(iii) The number of votes each eligible member may cast shall be determined by the mutual company's bylaws. If the bylaws are silent, each eligible member may cast one vote.

(5) Adoption of revised articles of incorporation. Adoption of the revised articles of incorporation of the converted stock company is necessary to implement the plan and shall be governed by the applicable provisions of Section 57 of this Code. For a Class 1 mutual company, the members may adopt the revised articles of incorporation at the same meeting at which the members approve the plan. For a Class 2 or 3 mutual company, the revised articles of incorporation may be adopted solely by the board of directors or trustees, as provided in Section 57 of this Code.

(5.5) Prior to the completion of a plan of conversion filed by a mutual company with the Director, no person shall knowingly acquire, make any offer, or make any announcement of an offer for any security issued or to be issued by the converting mutual company in connection with its plan of conversion or for any security issued or to be issued by any other company authorized in item(c)(i) of subsection (6) of this Section and organized for purposes of effecting the conversion, except in compliance with the maximum purchase limitations imposed by item (i) of subsection (6) of this Section or the terms of the plan of conversion as approved by the Director.

(6) Required provisions in a plan of conversion. The following provisions shall be included in the plan:

(a) Reasons for conversion. The plan shall set forth the reasons for the proposed conversion.

(b) Effect of conversion on existing policies.

(i) The plan shall provide that all policies in force on the effective date of conversion shall continue to remain in force under the terms of those policies, except that any voting rights of the policyholders provided for under the policies or under this Code and any contingent liability policy provisions of the type described in Section 55 of this Code shall be extinguished on the effective date of the conversion.

(ii) The plan shall further provide that holders of participating policies in effect on the date of conversion shall continue to have the right to receive dividends as provided in the participating policies, if any.

(iii) Except for a mutual company's participating life policies, guaranteed renewable accident and health policies, and non-cancelable accident and health policies, the converted stock company may issue the insured a nonparticipating policy as a substitute for the participating policy upon the renewal date of a participating policy.

(c) Subscription rights to eligible members.

(i) The plan shall provide that each eligible member is to receive, without payment, nontransferable subscription rights to purchase a portion of the capital stock of the converted stock company. As an alternative to subscription rights in the converted stock company, the plan may provide that each eligible member is to receive, without payment, nontransferable subscription rights to purchase a portion of the capital stock of: (A) a corporation organized and owned by the mutual company for the purpose of acquiring or holding all the stock of the converted stock company; or (B) a stock insurance company owned by the mutual company into which the mutual company will be merged.

(ii) The subscription rights shall be allocated in whole shares among the eligible members using a fair and equitable formula. This formula may but need not take into account how the different classes of policies of the eligible members contributed to the surplus of the mutual company.

(d) Oversubscription. The plan shall provide a fair and equitable means for the allocation of shares of capital stock in the event of an oversubscription to shares by eligible members exercising subscription rights received pursuant to item (c) of subsection (6) of this Section.

(e) Undersubscription. The plan shall provide that any shares of capital stock not subscribed to by eligible members exercising subscription rights received under item (c) of subsection (6) of this Section shall be sold in a public offering through an underwriter. If the number of shares of capital stock not subscribed by eligible members is so small or the additional time or expense required for a public offering of those shares would be otherwise unwarranted under the circumstances, the plan of conversion may provide for the purchase of the unsubscribed shares by a private placement or other alternative method approved by the Director that is fair and equitable to the eligible members.

(f) Total price of stock. The plan shall set the total price of the capital stock equal to the estimated pro forma market value of the converted stock company based upon an independent evaluation by a qualified person. The pro forma market value may be the value that is estimated to be necessary to attract full subscription for the shares as indicated by the independent evaluation.

(g) Purchase price of each share. The plan shall set the purchase price of each share of capital stock equal to any reasonable amount that will not inhibit the purchase of shares by members. The purchase price of each share shall be uniform for all purchasers except the price may be modified by the Director by reason of his consideration of a plan for the purchase of unsubscribed stock pursuant to item (e) of subsection (6) of this Section.

(h) Closed block of business for participating life policies of a Class 1 mutual company.

(i) The plan shall provide that a Class 1 mutual company's participating life policies in force on the effective date of the conversion shall be operated by the converted stock company for dividend purposes as a closed block of participating business except that any or all classes of group participating policies may be excluded from the closed block.

(ii) The plan shall establish one or more segregated accounts for the benefit of the closed block of business and shall allocate to those segregated accounts enough assets of the mutual company so that the assets together with the revenue from the closed block of business are sufficient to support the closed block including, but not limited to, the payment of claims, expenses, taxes, and any dividends that are provided for under the terms of the participating policies with appropriate adjustments in the dividends for experience changes. The plan shall be accompanied by an opinion of a qualified actuary or an appointed actuary who meets the standards set forth in the insurance laws or regulations for the submission of actuarial opinions as to the adequacy of reserves or assets. The opinion shall relate to the adequacy of the assets allocated to the segregated accounts in support of the closed block of business. The actuarial opinion shall be based on methods of analysis deemed appropriate for those purposes by the Actuarial Standards Board.

(iii) The amount of assets allocated to the segregated accounts of the closed block shall be based upon the mutual company's last annual statement that is updated to the effective date of the conversion.

(iv) The converted stock company shall keep a separate accounting for the closed block and shall make and include in the annual statement to be filed with the Director each year a separate statement showing the gains, losses, and expenses properly attributable to the closed block.

(v) Periodically, upon the Director's approval, those assets allocated to the closed block as provided in subitem (ii) of item (h) of subsection (6) of this Section that are in excess of the amount of assets necessary to support the remaining policies in the closed block shall revert to the benefit of the converted stock company.

(vi) The Director may waive the requirement for the establishment of a closed block of business if the Director deems it to be in the best interests of the participating policyholders of the mutual insurer to do so.

(i) Limitations on acquisition of control. The plan shall provide that any one person or group of persons acting in concert may not acquire, through public offering or subscription rights, more than 5% of the capital stock of the converted stock company for a period of 5 years from the effective date of the plan except with the approval of the Director. This limitation does not apply to any entity that is to purchase 100% of the capital stock of the converted company as part of the plan of conversion approved by the Director or to a purchase of stock by a tax-qualified employee benefit plan pursuant to subscription grants granted to that plan as authorized under item (b) of subsection (7) of this Section and to a purchase of unsubscribed stock pursuant to item (e) of subsection (6) of this Section.

(7) Optional provisions in a plan of conversion. The following provisions may be included in the plan:

(a) Directors and officers subscription rights.

(i) The plan may provide that the directors and officers of the mutual company shall receive, without payment, nontransferable subscription rights to purchase capital stock of the converted stock company or the stock of another corporation that is participating in the conversion plan as provided in subitem (i) of item (c) of subsection (6) of this Section. Those subscription rights shall be allocated among the directors and officers by a fair and equitable formula.

(ii) The total number of shares that may be purchased under subitem (i) of item (a) of subsection (7) of this Section may not exceed 35% of the total number of shares to be issued in the case of a mutual company with total assets of less than $50 million or 25% of the total shares to be issued in the case of a mutual company with total assets of more than $500 million. For mutual companies with total assets between $50 million and $500 million, the total number of shares that may be purchased shall be interpolated.

(iii) Stock purchased by a director or officer under subitem (i) of item (a) of subsection (7) of this Section may not be sold within one year following the effective date of the conversion.

(iv) The plan may also provide that a director or officer or person acting in concert with a director or officer of the mutual company may not acquire any capital stock of the converted stock company for 3 years after the effective date of the plan, except through a broker or dealer, without the permission of the Director. That provision may not apply to prohibit the directors and officers from purchasing stock through subscription rights received in the plan under subitem (i) of item (a) of subsection (7) of this Section.

(b) Tax-qualified employee stock benefit plan. The plan may allocate to a tax-qualified employee benefit plan nontransferable subscription rights to purchase up to 10% of the capital stock of the converted stock company or the stock of another corporation that is participating in the conversion plan as provided in subitem (i) of item (c) of subsection (6) of this Section. That employee benefit plan shall be entitled to exercise its subscription rights regardless of the amount of shares purchased by other persons.

(8) Alternative plan of conversion. The board of directors may adopt a plan of conversion that does not rely in whole or in part upon the issuance to members of non-transferable subscription rights to purchase stock of the converted stock company if the Director finds that the plan does not prejudice the interests of the members, is fair and equitable, and is based upon an independent appraisal of the market value of the mutual company by a qualified person and a fair and equitable allocation of any consideration to be given eligible members. The Director may retain, at the mutual company's expense, any qualified expert not otherwise a part of the Director's staff to assist in reviewing whether the plan may be approved by the Director.

(9) Effective date of the plan. A plan shall become effective when the Director has approved the plan, the members have approved the plan, and the revised articles of incorporation have been adopted.

(10) Rights of members whose policies are issued after adoption of the plan and before its effective date.

(a) Notice. All members whose policies are issued after the proposed plan has been adopted by the board of directors and before the effective date of the plan shall be given written notice of the plan of conversion. The notice shall specify the member's right to rescind that policy as provided in item (b) of subsection (10) of this Section within 45 days after the effective date of the plan. A copy of the plan or a summary of the plan shall accompany the notice. The form of the notice shall be filed with and approved by the Director.

(b) Option to rescind. Any member entitled to receive the notice described in item (a) of subsection (10) of this Section shall be entitled to rescind his or her policy and receive a full refund of any amounts paid for the policy or contract within 10 days after the receipt of the notice.

(11) Corporate existence.

(a) Upon the conversion of a mutual company to a converted stock company according to the provisions of this Section, the corporate existence of the mutual company shall be continued in the converted stock company. All the rights, franchises, and interests of the mutual company in and to every type of property, real, personal, and mixed, and things in action thereunto belonging, is deemed transferred to and vested in the converted stock company without any deed or transfer. Simultaneously, the converted stock company is deemed to have assumed all the obligations and liabilities of the mutual company.

(b) The directors and officers of the mutual company, unless otherwise specified in the plan of conversion, shall serve as directors and officers of the converted stock company until new directors and officers of the converted stock company are duly elected pursuant to the articles of incorporation and bylaws of the converted stock company.

(12) Conflict of interest. No director, officer, agent, or employee of the mutual company or any other person shall receive any fee, commission, or other valuable consideration, other than his or her usual regular salary and compensation, for in any manner aiding, promoting, or assisting in the conversion except as set forth in the plan approved by the Director. This provision does not prohibit the payment of reasonable fees and compensation to attorneys, accountants, and actuaries for services performed in the independent practice of their professions, even if the attorney, accountant, or actuary is also a Director of the mutual company.

(13) Costs and expenses. All the costs and expenses connected with a plan of conversion shall be paid for or reimbursed by the mutual company or the converted stock company except where the plan provides either for a holding company to acquire the stock of the converted stock company or for the merger of the mutual company into a stock insurance company as provided in subitem (i) of item (c) of subsection (6) of this Section. In those cases, the acquiring holding company or the stock insurance company shall pay for or reimburse all the costs and expenses connected with the plan.

(14) Failure to give notice. If the mutual company complies substantially and in good faith with the notice requirements of this Section, the mutual company's failure to give any member or members any required notice does not impair the validity of any action taken under this Section.

(15) Limitation of actions. Any action challenging the validity of or arising out of acts taken or proposed to be taken under this Section shall be commenced within 30 days after the effective date of the plan.

(Source: P.A. 98-755, eff. 7-16-14.)

(215 ILCS 5/59.2)

(Section scheduled to be repealed on January 1, 2027)

Sec. 59.2. Formation of mutual insurance holding company and conversion of mutual company to stock company.

(1) Definitions. For the purposes of this Section, the following terms shall have the meanings indicated:

(a) "Converted company" means an Illinois domiciled stock insurance company subject to the provisions of Article II, except as otherwise provided in this Section, that continues in existence after a reorganization under this Section in connection with the formation of a mutual holding company.

(b) "Converted mutual holding company" means the stock corporation into which a mutual holding company has been converted in accordance with Section 59.1 and subsection (13) of this Section.

(c) "Eligible member" means a member as of the date the board of directors adopts a plan of MHC conversion under this Section. For the conversion of a mutual holding company, "eligible member" means a member of the mutual holding company who is of record as of the date the mutual holding company board of directors adopts a plan of conversion under Section 59.1.

(d) "Intermediate holding company" means a corporation authorized to issue one or more classes of capital stock, the corporate purposes of which include holding directly or indirectly the voting stock of a converted company.

(e) "Member" means a person who, on the records of the mutual company and pursuant to its articles of incorporation or bylaws, is deemed to be a holder of a membership interest in the mutual company and shall also include a person or persons insured under a group policy, subject to the following conditions:

(i) the person is insured or covered under a group life policy or group annuity contract under which funds are accumulated and allocated to the respective covered persons;

(ii) the person has the right to direct the application of the funds so allocated;

(iii) the group policyholder makes no contribution to the premiums or deposits for the policy or contract; and

(iv) the mutual company has the names and addresses of the persons covered under the group life policy or group annuity contract.

On and after the effective date of a plan of MHC conversion under this Section, the term "member" shall mean a member of the mutual holding company created thereby.

(f) "Mutual holding company" or "MHC" means a corporation resulting from a reorganization of a mutual company under this Section. A mutual holding company shall be subject to the provisions of this Article and to any other provisions of this Code applicable to mutual companies, except as otherwise provided in this Section. The articles of incorporation of a mutual holding company shall include provisions setting forth the following:

(i) that it is a mutual holding company organized under this Article;

(ii) that the mutual holding company may hold not less than a majority of the shares of voting stock of a converted company or an intermediate holding company, which in turn holds directly or indirectly all of the voting stock of a converted company;

(iii) that it is not authorized to issue any capital stock except pursuant to a conversion in accordance with the provisions of Section 59.1 and subsection (13) of this Section;

(iv) that its members shall have the rights specified in this Section and in its articles of incorporation and bylaws; and

(v) that its assets shall be subject to inclusion in the estate of the converted company in any proceedings initiated by the Director against the converted company under Article XIII.

(g) "Mutual company" means for purposes of this Section a mutual life insurer or mutual property-casualty insurer that may convert pursuant to a plan of MHC conversion under this Section.

(h) "Plan of MHC conversion," or "plan" when used in this Section means a plan adopted pursuant to this Section by the board of directors of an Illinois domestic mutual company for the conversion of the mutual company into a direct or indirect stock subsidiary of a mutual holding company.

(i) "Policy" includes any group or individual insurance policy or contract issued by a mutual company, including an annuity contract. The term policy does not include a certificate of insurance issued in connection with a group policy or contract.

(j) "Policyholder" means the holder of a policy other than a reinsurance contract.

(2) Formation of mutual holding company and conversion of mutual company. A mutual company, upon approval of the Director, may reorganize by forming a mutual holding company and continue the corporate existence of the reorganizing mutual company as a stock insurance company in accordance with this Section. Upon effectiveness of a plan of MHC conversion, and without any further action:

(a) The mutual company shall become a stock corporation, the membership interests of the policyholders in the mutual company shall be deemed extinguished and all eligible members of the mutual company shall be and become members of the mutual holding company, in accordance with the articles of incorporation and bylaws of the mutual holding company and the applicable provisions of this Section and Article III; and

(b) all of the shares of the capital stock of the converted company shall be issued to the mutual holding company, which at all times shall own a majority of the shares of the voting stock of the converted company, except that either at the time of conversion, or at a later time with the approval of the Director, an intermediate holding company or companies may be created, so long as the mutual holding company at all times owns directly or indirectly a majority of the shares of the voting stock of the converted company.

(3) MHC membership interests.

(a) No member of a mutual holding company may transfer membership in the mutual holding company or any right arising from the membership.

(b) A member of a mutual holding company shall not, as a member, be personally liable for the acts, debts, liabilities, or obligations of the company.

(c) No assessments of any kind may be imposed upon the members of a mutual holding company by the directors or members, or because of any liability of any company owned or controlled by the mutual holding company or because of any act, debt, liability, or obligation of the mutual holding company itself.

(d) A membership interest in a domestic mutual holding company shall not constitute a security under any law of this State.

(4) Adoption of the plan of MHC conversion by the board of directors.

(a) A mutual company seeking to convert to a mutual holding company structure shall, by the affirmative vote of two-thirds of its board of directors, adopt a plan of MHC conversion consistent with the requirements of subsection (8) of this Section.

(b) At any time before approval of a plan by eligible members, the mutual company, by the affirmative vote of two-thirds of its board of directors, may amend or withdraw the plan of MHC conversion.

(5) Approval of the plan of MHC conversion by the Director.

(a) Required findings. After adoption or amendment of the plan by the mutual company's board of directors, the plan of MHC conversion shall be submitted to the Director for review and approval. The Director shall hold a public hearing on the plan. The Director shall approve the plan upon finding that:

(i) the provisions of this Section have been complied with; and

(ii) the plan is fair and equitable as it relates to the interests of the members.

(b) Documents to be filed.

(i) Prior to the members' approval of the plan of MHC conversion, a mutual company seeking the Director's approval of a plan shall file the following documents with the Director for review and approval:

(A) the plan of MHC conversion;

(B) the form of notice required by item (b) of subsection (6) of this Section for eligible members to vote on the plan;

(C) any proxies to be solicited from eligible members and any other soliciting materials;

(D) the proposed articles of incorporation and bylaws of the mutual holding company, each intermediate holding company, if any, and the revised articles of incorporation and bylaws of the converted company.

Once filed, these documents shall be approved or disapproved by the Director within a reasonable time.

(ii) After the members have approved the plan, the converted company shall file the following documents with the Director:

(A) the minutes of the meeting of the members at which the plan of MHC conversion was voted upon; and

(B) the articles and bylaws of the mutual holding company and each intermediate holding company, if any, and the revised articles of incorporation and bylaws of the converted company.

(c) The Director's approval of a plan pursuant to this subsection (5) may be made conditional at the sole discretion of the Director whenever he determines that such conditions are reasonably necessary to protect policyholder interests. Such conditions may include, but shall not be limited to, limitations, requirements, or prohibitions as follows:

(i) prior approval of any acquisition or formation of affiliate entities of the MHC;

(ii) prior approval of the capital structure of any intermediate holding company or any changes thereto;

(iii) prior approval of any initial public offering or other issuance of equity or debt securities of an intermediate holding company or the converted company in a private sale or public offering;

(iv) prior approval of the expansion of the mutual holding company system into lines of business, industries, or operations not presented at the time of the conversion;

(v) limitations on dividends and distributions if the effect would be to reduce capital and surplus of the converted company, in addition to any limitations which may otherwise be authorized by law; and

(vi) limitations on the pledge, incumbrance, or transfer of the stock of the converted company.

(d) Consultant. The Director may retain, at the mutual company's expense, any qualified expert not otherwise a part of the Director's staff to assist in reviewing the plan of MHC conversion.

(6) Approval of the plan by the members.

(a) Members entitled to notice of and to vote on the plan. All eligible members shall be given notice of and an opportunity to vote upon the plan of MHC conversion.

(b) Notice required. All eligible members shall be given notice of the members' meeting to vote upon the plan of MHC conversion. The notice shall identify in reasonable detail the benefits and risks of the MHC conversion. A copy of the plan of MHC conversion or a summary of the plan, if so authorized by the Director, shall accompany the notice. If a summary of the plan accompanies the notice, a copy of the plan shall be made available without charge to any eligible member upon request. The notice shall state that approval by the Director does not constitute a recommendation that eligible members approve the plan. The notice shall be mailed to each member's last known address, as shown on the mutual company's records, within 45 days of the Director's approval of the plan. The meeting to vote upon the plan shall not be set for a date less than 60 days after the date when the notice of the meeting is mailed by the mutual company. If the meeting to vote upon the plan is held coincident with the mutual company's annual meeting of policyholders, only one combined notice of meeting is required.

(c) Vote required for approval.

(i) After approval by the Director, the plan of MHC conversion shall be adopted, at an annual or special meeting of policyholders at which a quorum is present, upon receiving the affirmative vote of at least two-thirds of the votes cast by eligible members.

(ii) Members entitled to vote upon the proposed plan may vote in person or by proxy. Any proxies to be solicited from eligible members, together with the related proxy statement and any other soliciting materials, shall be filed with and approved by the Director.

(iii) The number of votes each eligible member may cast shall be determined by the mutual company's bylaws. If the bylaws are silent, each eligible member may cast one vote.

(7) Adoption of articles of incorporation. Adoption of articles of incorporation for the mutual holding company, each intermediate holding company, if any, and revised articles of incorporation for the converted company is necessary to implement the plan of MHC conversion. Procedures for adoption or revision of such articles shall be governed by the applicable provisions of this Code or, in the case of an intermediate holding company, the business corporation law of the state in which the intermediate holding company is incorporated. For a Class I mutual company, the members may adopt revised articles of incorporation at the same meeting at which the members approve the plan. For a Class 2 or 3 mutual company, the articles of incorporation may be adopted solely by the board of directors or trustees, as provided in Section 57 of this Code.

(8) Required provisions in a plan of MHC conversion. The following provisions shall be included in the plan of MHC conversion:

(a) The plan shall set forth the reasons for the proposed conversion.

(b) Effect of MHC conversion on existing policies.

(i) The plan shall provide that all policies of the converted company in force on the effective date of conversion shall continue to remain in force under the terms of those policies, except that any voting or other membership rights of the policyholders provided for under the policies or under this Code and any contingent liability policy provisions of the type described in Section 55 of this Code shall be extinguished on the effective date of the conversion.

(ii) The plan shall further provide that holders of participating policies in effect on the date of conversion shall continue to have the right to receive dividends as provided in the participating policies, if any.

(iii) Except for a mutual company's life policies, guaranteed renewable accident and health policies, and non-cancelable accident and health policies, the converted stock company may issue the insured a nonparticipating policy as a substitute for the participating policy upon the renewal date of a participating policy.

(iv) The plan shall provide that a Class I mutual company's participating life policies in force on the effective date of the conversion shall be operated by the converted company for dividend purposes as a closed block of participating business except that any or all classes of group participating policies may be excluded from the closed block. The plan shall establish one or more segregated accounts for the benefit of the closed block of business and shall allocate to those segregated accounts enough assets of the mutual company so that the assets together with the revenue from the closed block of business are sufficient to support the closed block including, but not limited to, the payment of claims, expenses, taxes, and any dividends that are provided for under the terms of the participating policies with appropriate adjustments in the dividends for experience changes. The plan shall be accompanied by an opinion of a qualified actuary or an appointed actuary who meets the standards set forth in the insurance laws or regulations for the submission of actuarial opinions as to the adequacy of reserves or assets. The opinion shall relate to the adequacy of the assets allocated to the segregated accounts in support of the closed block of business. The actuarial opinion shall be based on methods of analysis deemed appropriate for those purposes by the Actuarial Standards Board. The amount of assets allocated to the segregated accounts of the closed block shall be based upon the mutual company's last annual statement that is updated to the effective date of the conversion. The converted stock company shall keep a separate accounting for the closed block and shall make and include in the annual statement to be filed with the Director each year a separate statement showing the gains, losses, and expenses properly attributable to the closed block. Periodically, upon the Director's approval, those assets allocated to the closed block as provided herein that are in excess of the amount of assets necessary to support the remaining policies in the closed block shall revert to the benefit of the converted company. The Director may waive the requirement for the establishment of a closed block of business if the Director deems it to be in the best interests of the participating policyholders of the mutual company to do so.

(c) The plan shall set forth the requirements for granting membership interests to future policyholders of the converted company.

(d) The plan shall include information sufficient to demonstrate that the financial condition of the converted company will not be diminished by the plan of MHC conversion.

(e) The plan shall include a description of any current proposal to issue shares of an intermediate holding company or the converted company to the public or to other persons who are not direct or indirect subsidiaries of the mutual holding company.

(f) The plan shall include the identity of the proposed officers and directors of the mutual holding company and each intermediate holding company, if any, together with such other biographical information as the Director may request.

(g) The plan shall include such other information as the Director may request or may prescribe by rule.

(9) Effective date of the plan of MHC conversion. A plan shall become effective when the Director has approved the plan, the members have approved the plan and the articles of incorporation of the mutual holding company, each intermediate holding company, if any, and the revised articles of incorporation of the converted company have been adopted and filed with the Director.

(10) Corporate existence.

(a) Upon the conversion of a mutual company to a converted company according to the provisions of this Section, the corporate existence of the mutual company shall be continued in the converted company with the original date of incorporation of the mutual company. All the rights, franchises, and interests of the mutual company in and to every type of property, real, personal, and mixed, and things in action thereunto belonging, is deemed transferred to and vested in the converted company without any deed or transfer. Simultaneously, the converted company is deemed to have assumed all the obligations and liabilities of the mutual company.

(b) The directors and officers of the mutual company, unless otherwise specified in the plan of conversion shall serve as directors and officers of the converted company until new directors and officers of the converted company are duly elected pursuant to the articles of incorporation and bylaws of the converted company.

(11) Regulation and authority of mutual holding company.

(a) A mutual holding company shall have the same powers granted to domestic mutual companies and be subject to the same requirements and provisions of Article III and any other provisions of this Code applicable to mutual companies that are not inconsistent with the provisions of this Section, provided however that a mutual holding company shall not have the authority to transact insurance pursuant to Section 39(1).

(b) Neither the mutual holding company nor any intermediate holding company shall issue or reinsure policies of insurance.

(c) A mutual holding company may enter into an affiliation agreement or a merger agreement either at the time of conversion, or at some later time with the approval of the Director, with any mutual insurance company authorized to do business in this State or another mutual holding company. Any such merger agreement may authorize members of the mutual insurance company or other mutual holding company to become members of the mutual holding company. Any such affiliation agreement or merger agreement shall be subject to the insurance laws of this State relating to such transactions entered into by a domestic mutual company.

(d) The assets of the MHC shall be held in trust, under such arrangements and on such terms as the Director may approve, for the benefit of the policyholders of the converted company. Any residual rights of the MHC in such assets or any assets of the MHC determined not to be held in trust shall be subject to a lien in favor of the policyholders of the converted company under such terms as the Director may approve. Upon conversion of the mutual holding company as provided for in subsection (13) of this Section, such assets shall be released from trust in accordance with the plan of conversion approved by the Director.

(12) Diversion of business to affiliates. Without prior approval of the Director, neither the converted company nor any other person affiliated with or controlling the converted company shall divert business from the converted company to any insurance company affiliate if the purpose or effect would be to significantly reduce the number of members of the mutual holding company.

(13) Conversion of mutual holding company. A mutual holding company created pursuant to this Section may reorganize by complying with the applicable provisions of Section 59. For purposes of effecting a conversion under that Section, the mutual holding company shall be deemed a "mutual company" and the converted mutual holding company shall be deemed a "converted stock company," as such terms are defined in Section 59.1.

(14) Conflict of interest. No director, officer, agent, or employee of the mutual company or any other person shall receive any fee, commission, or other valuable consideration, other than his or her usual regular salary and compensation, for in any manner aiding, promoting, or assisting in the conversion except as set forth in the plan of MHC conversion approved by the Director. This provision does not prohibit the payment of reasonable fees and compensation to attorneys, accountants, and actuaries for services performed in the independent practice of their professions, even if the attorney, accountant, or actuary is also a director of the mutual company.

(15) Costs and expenses. All the costs and expenses connected with a plan of MHC conversion shall be paid for or reimbursed by the mutual company or the converted company.

(16) Failure to give notice. If the mutual company complies substantially and in good faith with the notice requirements of this Section, the mutual company's failure to give any member or members any required notice does not impair the validity of any action taken under this Section.

(17) Limitation of actions. Any action challenging the validity of or arising out of acts taken or proposed to be taken under this Section shall be commenced within 30 days after the effective date of the plan of MHC conversion.

(Source: P.A. 90-810, eff. 1-6-99.)

(215 ILCS 5/60) (from Ch. 73, par. 672)

(Section scheduled to be repealed on January 1, 2027)

Sec. 60. Procedure when insufficient assets are possessed by company.

(1) Whenever the Director finds that the admitted assets of a company subject to the provisions of this Article are less than the aggregate of (a) its liabilities and (b) the minimum surplus required to be maintained by Section 43, he must notify the company in writing of the amount of such impairment and require that such impairment must be removed within such period, which shall not be less than 30 nor more than 90 days, as he may designate. Unless otherwise allowed by the Director, the company must discontinue the issuance of new or renewal policies while such impairment exists. If the contracts issued by the company contain a provision for a contingent liability, the Director may order the board of directors or trustees of the company to levy an assessment for the purpose of removing such impairment against each member in accordance with the terms of his policy. If the Director finds that the company will remove the impairment or a part thereof from sources other than an assessment, he may permit a reduction in the amount of the assessment to the extent of the sum so to be obtained. No member is liable for an assessment unless notified of the company's claim therefor within one year after the termination of the policy whether by expiration, cancellation or otherwise. Nothing contained in this paragraph may be construed to limit or restrict the authority of any liquidator, conservator or rehabilitator acting under Article XIII or XIII 1/2 of this Act.

(2) If policies containing provisions for a contingent liability are outstanding, and the company fails to levy an assessment within 20 days from the date of an order, or if the impairment is not removed within the period specified in the Director's notice, the company shall be deemed insolvent and the Director may cancel the company's certificate of authority and shall proceed against it in accordance with Article XIII.

(3) If, while the impairment exists, any officer, director, or trustee of the company renews, issues or delivers or causes to be renewed, issued or delivered any policy, contract or certificate of insurance unless otherwise allowed by the Director, and the fact of such impairment is known to the officer, director, or trustee of the company, such officer, director, or trustee shall be guilty of a business offense and may be fined not less than $200 and not more than $5,000 for each offense.

(4) Nothing in this Section prohibits, while such impairment exists, any such officer, director, trustee, agent or employee from issuing or renewing a policy of insurance when an insured or owner exercises an option granted to him under an existing policy to obtain new, renewed or converted insurance coverage.

(Source: P.A. 82-498.)

(215 ILCS 5/Art. III.5 heading) ARTICLE III 1/2. ALIEN COMPANIES

(215 ILCS 5/60a) (from Ch. 73, par. 672a)

Sec. 60a. Alien companies; Illinois State of entry.

(1) An alien company may use Illinois as a state of entry to transact insurance in the United States by obtaining a certificate of authority pursuant to Section 111 and maintaining in this State a deposit of assets in trust in accordance with the provisions of Section 60b.

(2) A United States branch of an alien company that uses Illinois as a state of entry to transact insurance in the United States shall be considered a domestic company, and as such shall be subject to all applicable provisions of this Code. Transactions between the United States branch and the home office of an alien company shall not be subject to the provisions of Section 131.20 and subsection (1) of Section 131.20a, but remittances of profits of the United States branch to the home office of an alien company shall be considered dividends subject to the requirements of subsection (2) of Section 131.20a.

(Source: P.A. 89-97, eff. 7-7-95.)

(215 ILCS 5/60b) (from Ch. 73, par. 672b)

Sec. 60b. Alien companies; Illinois trusteed assets.

(1) An alien company may not use Illinois as a state of entry to transact insurance in the United States unless it maintains in this State a deposit of assets in trust for the benefit of policyholders in the United States, which assets shall be its "Trusteed Assets". The United States branch of an alien company shall maintain Trusteed Assets at least equal to (a) the sum of (i) its minimum capital and surplus, and (ii) the amount of its liabilities to policyholders, net of reinsurance for which credit is allowed pursuant to Article XI, as reflected in its most recent financial statement on file with the Director, minus (b) the sum of (i) the amount of all of its general state deposits (including all interest accrued and due and payable to the holder of the deposit), (ii) the amount of its special state deposits (including all interest accrued and due and payable to the holder of the deposit), (iii) the amount of its reinsurance recoverable on paid losses (where such reinsurance is the type for which credit would be allowed pursuant to Article XI), (iv) the amounts of its notes and bills receivable, taken for premiums; (v) with respect to a company authorized to write the kinds of insurance specified in Classes 2 and 3 of Section 4 of this Code, the amount of its agents' balances and uncollected premiums; and (vi) the amount of its funds held by or deposited with reinsureds.

(2) Only those assets that qualify as authorized investments as provided in Article VIII (and in Sections 131.2 and 131.3) shall be included in an alien company's Trusteed Assets.

(Source: P.A. 88-45; 89-97, eff. 7-7-95.)

(215 ILCS 5/60c) (from Ch. 73, par. 672c)

Sec. 60c. Requirements and contents of trust agreement. Trust agreements governing Trusteed Assets required by Section 60b shall satisfy the following conditions:

(1) Legal title to the Trusteed Assets shall be vested in the trustee or trustees, and their successors lawfully appointed, in trust for the benefit and security of policyholders of the alien company in the United States.

(2) The agreement shall provide for substitution of a new trustee or trustees, subject to the Director's approval.

(3) All Trusteed Assets shall at all times be maintained as a trust fund separate and distinct from all other assets.

(4) The trustee or trustees shall maintain a record at all times sufficient to identify the assets of the trust.

(5) Withdrawal of or from the Trusteed Assets shall be made only as provided in Section 60d.

(Source: P.A. 85-1373.)

(215 ILCS 5/60d) (from Ch. 73, par. 672d)

Sec. 60d. Withdrawal of Trusteed Assets. (1) The trust agreement shall provide that no withdrawals of Trusteed Assets shall be made by the alien company or permitted by the trustee or trustees without the prior approval of the Director, except as follows:

(a) Any or all income, earnings, dividends, or interest accumulations of the Trusteed Assets may be paid over to the United States branch of the alien company upon request of the company or its manager, provided that no withdrawal shall be made that reduces the Trusteed Assets below the amount required by Section 60b.

(b) For the purpose of substituting other assets authorized for investment by Article VIII and at least equal in value (as reflected in the most recent financial statement on file with the Director) to those being withdrawn, if such withdrawal is requested in writing by the alien company's (i) United States manager or (ii) other United States representative pursuant to general or specific written authority previously given or delegated by the alien company's board of directors or other similar governing body, and a copy of such authority has been filed with the trustee or trustees.

(c) For the purpose of making deposits required by law in any state for the protection of the alien company's policyholders in the United States. The trustee or trustees shall transfer any assets so withdrawn, and in the amount so required to be deposited in the other state, directly to the depository required to receive such deposit in such other state.

(d) For the payment of obligations due from the United States branch of the alien company to policyholders in the United States, provided that no withdrawal shall be made that reduces the Trusteed Assets below the amount required by Section 60b.

(e) For the purpose of withdrawing any amount of the Trusteed Assets in excess of the amount required by Section 60b, as determined by the alien company's then most current annual statement on file with the Director.

(f) For the purpose of transferring the Trusteed Assets to an appointed liquidator, conservator, or rehabilitator pursuant to the order of a court of competent jurisdiction.

(2) If at any time the alien company becomes insolvent, or if its Trusteed Assets are less than required under Section 60b, the Director shall in writing order the trustee to suspend the right of the alien company or any other person to withdraw assets as otherwise authorized under paragraphs (a), (b), (c), (d) and (e) of subsection (1); and the trustee shall comply with such order until otherwise ordered by the Director.

(Source: P.A. 85-1373.)

(215 ILCS 5/60e) (from Ch. 73, par. 672e)

Sec. 60e. Domestication of Alien Company; definitions. As used in Sections 60e through 60i:

(1) "Domestication" means the reorganization of the United States branch of an alien company as the result of which a domestic company shall succeed to all the business and assets and assume all the liabilities of the United States branch of the alien company.

(2) "United States branch" means the business unit through which business is transacted within the United States by an alien company and the assets and liabilities of such insurer within the United States pertaining to such business.

(3) "Domestic Company" means a stock or mutual insurer incorporated under the laws of this State.

(Source: P.A. 85-1373.)

(215 ILCS 5/60f) (from Ch. 73, par. 672f)

Sec. 60f. Domestication procedure. (1) Upon compliance with Sections 60e through 60i, any alien company authorized to do business in this State may, with the prior written approval of the Director, domesticate its United States branch by entering into an agreement in writing with a domestic company providing for the acquisition by the domestic company of all of the assets and the assumption of all of the liabilities of the United States branch.

(2) The acquisition of assets and assumption of liabilities of the United States branch by the domestic company shall be effected by filing with the Director an instrument of transfer and assumption in form satisfactory to the Director and executed by the alien company and the domestic company.

(Source: P.A. 85-1373.)

(215 ILCS 5/60g) (from Ch. 73, par. 672g)

Sec. 60g. Domestication agreement; authorization; execution. (1) The domestication agreement referred to in Section 60f shall be authorized, adopted, approved, signed, and acknowledged by the alien company in accordance with the laws of the country under which it is organized.

(2) In the case of a domestic company, the domestication agreement shall be approved, adopted, and authorized by its board of directors and executed by its president or any vice president and attested by its secretary or assistant secretary under its corporate seal.

(Source: P.A. 85-1373.)

(215 ILCS 5/60h) (from Ch. 73, par. 672h)

Sec. 60h. Director's approval of domestication agreement. An executed counterpart of the domestication agreement, together with certified copies of the corporate proceedings of the domestic company and the alien company, approving, adopting and authorizing the execution of the domestication agreement, shall be submitted to the Director for approval. The Director shall thereupon consider the agreement, and, if the Director finds that the same is in accordance with the provisions hereof and that the interests of policyholders of the United States branch of the alien insurer and of the domestic company are not materially adversely affected, the Director shall approve the domestication agreement and authorize the consummation thereof in compliance with the provisions of Section 60i. The Director shall approve or disapprove the domestication agreement within 60 days after it is submitted to the Director.

(Source: P.A. 85-1373.)

(215 ILCS 5/60i) (from Ch. 73, par. 672i)

Sec. 60i. Consummation of domestication; transfer of assets and deposits. (1) Upon the filing with the Director of a certified copy of the instrument of transfer and assumption pursuant to which a domestic company succeeds to the business and assets of the United States branch of an alien company and assumes all its liabilities, the domestication of the United States branch shall be deemed to be effective; and thereupon all the rights, franchises, and interests of the United States branch in and to every species of property, real, personal, and mixed, and things in actions thereunder belonging shall be deemed as transferred to and vested in the domestic company, and simultaneously therewith the domestic company shall be deemed to have assumed all of the liabilities of the United States branch. The domestic company shall be considered as having the age as the oldest of the 2 parties to the domestication agreement for purposes of complying with the requirements of laws relating to age of company.

(2) All deposits of the United States branch held by the Director, or by state officers or other state regulatory agencies pursuant to requirements of state laws, shall be deemed to be held as security for the satisfaction by the domestic company of all liabilities to policyholders within the United States assumed from the United States branch; and such deposits shall be deemed to be assets of the domestic company and shall be reported as such in the annual financial statements and other reports which the domestic company may be required to file. Upon the ultimate release by any such state officer or agency of any such deposits, the securities and cash constituting such released deposit shall be delivered and paid over to the domestic company as the lawful successor in interest to the United States branch.

(3) Contemporaneously with the consummation of the domestication of the United States branch, the Director shall direct the trustee, if any, of the U. S. branch's Trusteed Assets to transfer and deliver to the domestic company all assets, if any, held by such trustee.

(Source: P.A. 85-1373.)

(215 ILCS 5/60j) (from Ch. 73, par. 672j)

Sec. 60j. Trustees of alien companies. (1) The directors of an alien company may appoint citizens or corporations of the United States as its trustees to hold funds and assets in trust for the benefit of the policyholders and creditors of the company in the United States. A certified copy of the record of such appointment and of the deed of trust, approved by the Director, shall be filed with him.

(2) The Director may examine such trustee and any officers and agents, books and papers thereof, with respect to the affairs of such alien company in the same manner as he may examine officers, agents, books, papers and affairs of companies.

(3) The funds and assets so held by such trustees shall, with the deposits otherwise made by the United States branch of the alien company in the United States together with loans in connection with its policies to policyholders, and all other funds and assets held by the United States branch of the alien company in the United States, constitute the assets of the company for the purpose of making its financial statements required by this Code. For purposes of making financial statements required by this Code, the liabilities of an alien company shall be limited to only those liabilities incurred in connection with its United States business.

(4) In applying the risk limitations as provided in Section 144 or any limit on premium volume, the Director shall calculate such limitations based solely on the alien company's assets in the United States that, pursuant to subsection (3) of this Section, constitute the assets of the company for purposes of making its financial statements required by this Code and its surplus as regards policyholders as reflected in the most recent financial statement on file with the Director.

(Source: P.A. 85-1373.)

(215 ILCS 5/Art. IV heading) ARTICLE IV. RECIPROCALS (Article scheduled to be repealed on January 1, 2027)

(215 ILCS 5/61) (from Ch. 73, par. 673)

(Section scheduled to be repealed on January 1, 2027)

Sec. 61. Scope of Article.

(1) This Article shall apply to all reciprocals transacting or being organized to transact any of the kinds of business specified in this Article.

(2) As used in this Article the word "subscriber" shall mean the participant or policyholder. The word "attorney-in-fact" shall mean the representative of the subscribers. The word "reciprocal" shall mean the organization or group of all the subscribers. The word "governmental reciprocal" shall mean a reciprocal in which all subscribers are governmental entities, including, but not limited to, federal, State, territorial, commonwealth, and local governments and agencies, subdivisions, departments, joint ventures, partnerships, and consortia of these governments.

(Source: P.A. 88-364.)

(215 ILCS 5/62) (from Ch. 73, par. 674)

(Section scheduled to be repealed on January 1, 2027)

Sec. 62. Authority to exchange contracts. Individuals, partnerships and corporations of this State are hereby authorized to exchange reciprocal or inter-insurance contracts with each other or with individuals, partnerships and corporations of other states and countries, in accordance with the provisions of this Code and not otherwise. All insurance contracts so exchanged shall be executed by an attorney-in-fact duly authorized and acting for the subscribers.

(Source: Laws 1937, p. 696.)

(215 ILCS 5/63) (from Ch. 73, par. 675)

(Section scheduled to be repealed on January 1, 2027)

Sec. 63. Name. The name or designation under which contracts are to be exchanged shall include the words "Reciprocal" or "Inter-Insurance Exchange" or be supplemented by the following words immediately below the name or designation under which such contracts are exchanged: "A Reciprocal" or "An Inter-Insurance Exchange." Such name or designation shall not be the same as or deceptively similar to the name or designation adopted by any other domestic company or any foreign or alien company authorized to transact business in this State.

(Source: Laws 1937, p. 696.)

(215 ILCS 5/64) (from Ch. 73, par. 676)

(Section scheduled to be repealed on January 1, 2027)

Sec. 64. Principal office. The principal office of the attorney-in-fact of a domestic reciprocal shall be maintained in this State, at such place as may be designated by the subscribers in the power of attorney or other authority under which insurance is to be effected or exchanged.

(Source: Laws 1937, p. 696.)

(215 ILCS 5/65) (from Ch. 73, par. 677)

(Section scheduled to be repealed on January 1, 2027)

Sec. 65. Authorized kinds of business. A reciprocal may be authorized to exchange contracts covering any or all of the kinds of insurance enumerated in Classes 2 and 3 of Section 4.

(Source: Laws 1951, p. 605.)

(215 ILCS 5/66) (from Ch. 73, par. 678)

(Section scheduled to be repealed on January 1, 2027)

Sec. 66. Minimum surplus requirements.

(1) No reciprocal may after December 31, 1985 receive a certificate of authority from the Director to exchange contracts under this Article in the name of the subscribers until it has complied with the requirements in respect of original surplus applicable to the class or classes and clause or clauses of section 4 describing the kind or kinds of insurance it seeks to exchange, as set forth in the following table: Casualty, Fidelity and Surety (a) Class 2, Clauses (a), (b), (c), (d), (g), (h), (i) or (j), a surplus of at least $2,000,000; more than one clause, a surplus of at least $2,000,000.

Fire and Marine (b) Class 2, Clauses (e), (f), (k) or (l) or Class 3, any or all clauses or any combination thereof, a surplus of at least $1,000,000.

Multiple Line (c) Class 2, any or all clauses other than those specified in (b) above, and Class 3, any or all clauses, a surplus of at least $2,000,000.

Glass and Livestock and Domestic Animals (d) Class 2, Clause (f) only or (k) only $250,000; provided any reciprocal to which this subparagraph is applicable shall not expose itself to any loss on any one risk in any amount exceeding $5,000.

(2) Every reciprocal subject to this Article issued a certificate of authority on or after June 28, 1965 must have and at all times maintain a minimum surplus in an amount equal to 2/3 of the original surplus required for that particular company at the time it was organized. Any such reciprocal organized prior to June 28, 1965 must have and at all times maintain admitted assets in excess of all liabilities in an amount not less than the minimum amount of advance cash deposits or surplus which was required for that particular reciprocal at the time it was issued a certificate of authority. Any reciprocal which has added any clause or clauses must have and at all times maintain minimum surplus not less than the minimum surplus requirement applicable to the class or classes and clause or clauses of section 4 at the time that the additional clause or clauses are authorized. Any reciprocal organized prior to October 1, 1972 must have and at all times maintain, in addition to the minimum surplus required to be maintained by that particular reciprocal, additional minimum surplus of not less than $300,000.

(3) Any company organized prior to January 1, 1986 and regulated under this Article, in addition to the minimum surplus which is required by paragraph (2) of this Section must have by December 31, 1986 and at all times maintain until December 31, 1990 additional minimum surplus of $200,000.

(4) Subsections (2) and (3) shall be applicable until December 31, 1990 for all reciprocals organized prior to January 1, 1986, thereafter, such reciprocals must have and maintain surplus as required by subsections (6) and (7).

(5) Every reciprocal subject to this Article and organized after December 31, 1985 must have and maintain at all times minimum surplus applicable to the class or classes and clause or clauses of Section 4 describing the kind or kinds of insurance which it is authorized to write, as follows: Casualty, Fidelity and Surety (a) Class 2, Clauses (a), (b), (c), (d), (g), (h) or (i), a surplus of at least $1,500,000; more than one clause, a surplus of at least $1,500,000.

Fire, Marine and Legal Expense (b) Class 2, Clauses (e), (f), (k), (l) or Class 3, any or all clauses or any combination thereof, a surplus of at least $700,000.

Multiple Line (c) Class 2, any or all clauses other than those specified in (b) above, and Class 3, any or all clauses, a surplus of at least $1,500,000.

Glass and Livestock and Domestic Animals (d) Class 2, Clause (f) only or (k) only, $150,000; provided no reciprocal to which this subparagraph is applicable shall not expose itself to any loss on any one risk in an amount exceeding $5,000.

(6) Any reciprocal subject to this Article and organized prior to January 1, 1986 must have by December 31, 1990, and thereafter maintain until December 31, 1995, minimum surplus applicable to the class or classes and clause or clauses of Section 4 describing the kind or kinds of insurance which it is authorized to write, as follows: Casualty, Fidelity and Surety (a) Class 2, Clauses (a), (b), (c), (d), (g), (h), (i) or (j), a surplus of at least $1,200,000; more than one clause, a surplus of at least $1,200,000.

Fire, Marine and Legal Expense (b) Class 2, Clauses (e), (f), (k), (1) or Class 3, any or all clauses or any combination thereof, a surplus of at least $600,000.

Multiple Line (c) Class 2, any or all clauses other than those specified in (b) above, and Class 3, any or all clauses, a surplus of at least $1,200,000.

Glass and Livestock and Domestic Animals (d) Class 2, Clause (f) only or (k) only, $100,000; provided no reciprocal to which this subparagraph is applicable shall not expose itself to any loss on any one risk in an amount exceeding $5,000.

(7) Any reciprocal subject to this Article and organized prior to January 1, 1986 must have by December 31, 1995 and thereafter maintain at all times minimum surplus applicable to the class or classes and clause or clauses of Section 4 describing the kind or kinds of insurance which it is authorized to write, as follows: Casualty, Fidelity and Surety (a) Class 2, Clauses (a), (b), (c), (d), (g), (h), (i) or (j), a surplus of at least $1,500,000; more than one clause, a surplus of at least $1,500,000.

Fire, Marine and Legal Expense (b) Class 2, Clauses (e), (f), (k), (l) or Class 3, any or all clauses or any combination thereof, a surplus of at least $700,000.

Multiple Line (c) Class 2, any or all clauses other than those specified in (b) above, and Class 3, any or all clauses, a surplus of at least $1,500,000.

Glass and Livestock and Domestic Animals (d) Class 2, Clause (f) only or (k) only, $150,000; provided no reciprocal to which this subparagraph is applicable shall not expose itself to any loss on any one risk in the amount exceeding $5,000.

(8) The Director shall take action under Section 83 of this Code against any reciprocal which fails to maintain the minimum surplus required by this section. The words "minimum surplus" mean the "surplus as regards policyholders" as it appears on the annual statement of a reciprocal company on the usual and proper annual statement form prescribed by the National Association of Insurance Commissioners.

(Source: P.A. 85-293.)

(215 ILCS 5/67) (from Ch. 73, par. 679)

(Section scheduled to be repealed on January 1, 2027)

Sec. 67. Power of attorney. The power of attorney or other authority of the attorney-in-fact under which contracts of insurance are to be exchanged pursuant to this Article shall set forth

(a) the address of the principal office of the attorney-in-fact;

(b) that the attorney-in-fact is authorized to accept service of process on behalf of the reciprocal and to appoint the Director and his successor or successors in office the true and lawful attorney of such reciprocal for the service of process in actions upon contracts exchanged;

(c) the amount to be deducted from advance deposits to be paid to the attorney-in-fact and the items of expense, in addition to losses, to be paid by the reciprocal;

(d) a provision for a cash deposit;

(e) except as provided in Section 75, a provision for a contingent several liability of each subscriber in an amount of not less than one nor more than ten times the cash deposit stated in the contract; and

(f) such other provisions not inconsistent with law as may be deemed necessary or advisable.

(Source: Laws 1937, p. 696.)

(215 ILCS 5/68) (from Ch. 73, par. 680)

(Section scheduled to be repealed on January 1, 2027)

Sec. 68. Declaration of organization. The attorney-in-fact of subscribers who desire to form a reciprocal under this Article shall sign and acknowledge, before an officer authorized to take acknowledgments, a declaration of organization in duplicate. When the attorney-in-fact is a corporation, the declaration shall be acknowledged by an officer thereof. The declaration shall set forth

(a) the name of the attorney-in-fact and the name or designation under which contracts are to be exchanged;

(b) the location of the principal office of the attorney-in-fact;

(c) the class or classes of insurance, as provided in Section 65, which it proposes to effect or exchange and the kinds of insurance in each class to be effected or exchanged;

(d) such other provisions not inconsistent with law which may be deemed by the attorney-in-fact or subscribers to be necessary or advisable.

(Source: Laws 1937, p. 696.)

(215 ILCS 5/69) (from Ch. 73, par. 681)

(Section scheduled to be repealed on January 1, 2027)

Sec. 69. Documents to be delivered to Director. Upon the execution of a declaration of organization, there shall be delivered to the Director

(a) duplicate originals of the declaration of organization;

(b) a copy of the power of attorney of the attorney-in-fact under or by virtue of which such insurance is to be effected or exchanged;

(c) an instrument authorizing service of process on the Director provided for in Section 77;

(d) 2 organization bonds, or the cash or securities, provided for in Section 70;

(e) the form of guaranty fund agreements and of guaranty capital shares, if any, as provided in Section 76 to be issued in connection with solicitation of surplus; and

(f) the form of escrow agreement for the deposit of cash or securities.

(Source: P.A. 84-502.)

(215 ILCS 5/69.1) (from Ch. 73, par. 681.1)

(Section scheduled to be repealed on January 1, 2027)

Sec. 69.1. Escrow agreements. The company shall designate a bank or trust company with whom it will enter into an escrow agreement, which agreement shall state that the organization surplus shall be placed in escrow and remain so, until an organization examination has been completed. When the exam has been completed the escrow agent is authorized to purchase securities for deposit as required by Section 74 and forward them to the Director. The escrow agent is authorized to release the balance of the escrow funds to the company only upon notification that a Certificate of Authority or similar documentation has been issued by the Director.

(Source: P.A. 84-502.)

(215 ILCS 5/70) (from Ch. 73, par. 682)

(Section scheduled to be repealed on January 1, 2027)

Sec. 70. Organization bonds. The attorney-in-fact shall deliver to the Director two bonds in the same penalties and containing the same provisions, so far as applicable, as the bonds required for the organization of a stock company by Section 16 for the use and benefit of the State of Illinois, subscribers and creditors, or in lieu of delivering such bonds, the attorney-in-fact may deposit cash or securities of the same kind and amount and on the same terms and conditions, so far as applicable, as provided by said Section.

(Source: Laws 1937, p. 696.)

(215 ILCS 5/71) (from Ch. 73, par. 683)

(Section scheduled to be repealed on January 1, 2027)

Sec. 71. Approval of documents. The documents and papers so delivered to the Director may be approved or disapproved by the Director, and the attorney-in-fact is entitled to a hearing, in the same manner as provided in Section 18 in the case of documents delivered for approval in connection with the organization of stock companies. If the documents and papers so delivered are approved by the Director he must file in his office the power of attorney, forms of policies and applications, bonds or securities and one of the duplicate originals of the declaration of organization, and endorse upon the other duplicate original his approval and the month, day and year of approval and deliver it to the attorney-in-fact. Upon the date of approval of the declaration of organization by the Director, the reciprocal is deemed to be organized.

(Source: P.A. 77-747.)

(215 ILCS 5/72) (from Ch. 73, par. 684)

(Section scheduled to be repealed on January 1, 2027)

Sec. 72. Authority to solicit subscriptions to surplus. Upon the approval of the declaration of organization by the Director, he shall issue to the attorney-in-fact a permit, which shall expire at the end of two years from its date, authorizing him to solicit subscriptions to surplus in accordance with this Code and to do such other acts as may be necessary and proper in order to complete its organization and to entitle it to receive a certificate of authority to transact an insurance business.

(Source: Laws 1951, p. 1565.)

(215 ILCS 5/73) (from Ch. 73, par. 685)

(Section scheduled to be repealed on January 1, 2027)

Sec. 73. Issuance of certificate of authority. When the Director has been notified that the required surplus has been fully collected, he shall conduct an examination of the reciprocal. If he finds that the organization is complete, that all of the requirements of this Code have been met, that the required surplus has been fully collected, and that the deposits provided for by Section 74 have been met, he shall issue to the attorney-in-fact a certificate of authority to transact the kind or kinds of business specified therein. No attorney-in-fact shall transact any business of insurance until he or it has received a certificate of authority as herein prescribed nor any business of insurance not specified in such certificate of authority.

(Source: Laws 1951, p. 1565.)

(215 ILCS 5/74) (from Ch. 73, par. 686)

(Section scheduled to be repealed on January 1, 2027)

Sec. 74. Deposit. A domestic reciprocal subject to the provisions of this Article shall make and maintain with the Director, for the protection of all creditors, policyholders and policy obligations of the reciprocal, a deposit of securities that are authorized investments under Section 126.11A(1), 126.11A(2), 126.24A(1), or 126.24A(2), having a fair market value equal to the surplus required to be maintained under Section 66. The Director may release the required deposit of securities upon receipt of an order of a court having proper jurisdiction or upon: (i) certification by the reciprocal company that it has no outstanding creditors, policyholders, or policy obligations in effect and no plans to engage in the business of insurance; (ii) receipt of a lawful resolution of the governing body of the reciprocal's attorney-in-fact effecting the surrender of its certificate of authority and declaration of organization for administrative dissolution by the Director; and (iii) receipt of the name and forwarding address for each of the final officers and directors of the reciprocal's attorney-in-fact, together with a plan of dissolution approved by the Director.

(Source: P.A. 92-75, eff. 7-12-01.)

(215 ILCS 5/75) (from Ch. 73, par. 687)

(Section scheduled to be repealed on January 1, 2027)

Sec. 75. Contingent liability policy provisions.

(1) Except as provided in subsection (2) any contract of insurance exchanged under this Article shall provide for a cash deposit and a contingent several liability of the subscriber in an amount not less than one nor more than 10 times the amount of the cash deposit stated in the contract.

(2) In cases where contingent liability of subscribers is provided for, the provision therefor must be plainly stated in each policy with prominence equal to the indemnifying clause. In addition, each assessable policy, other than an accident and health policy, issued or delivered in this State after September 1, 1967 must have the following statement printed in bold face type on the face of the policy: "This is an assessable policy". If a reciprocal has a surplus equal to the minimum capital and surplus required in Section 13 for a stock company transacting the same kind or kinds of business, such reciprocal may issue policies without contingent liability. Any such reciprocal which has issued policies without contingent liability after the acquisition of such surplus may continue to do so as long as it maintains a surplus equal to the capital and minimum surplus of a stock company doing the same kind or kinds of business, but no reciprocal may issue such policies except during such time as it continues to have such a surplus, provided, however, that any reciprocal which is, immediately prior to July 1, 1965, issuing policies without contingent liability, may continue to do so as long as it maintains a surplus equal in amount to that which would have been required immediately prior to July 1, 1965. Any reciprocal with a surplus equal to the minimum capital and surplus required in Section 13 for a stock company transacting the same kind or kinds of business may issue policies without the limitations contained in subsection (1). After July 18, 1967, no company subject to this Article may make, levy or impose upon its subscribers any assessment based on their contingent liability unless ordered by the Director pursuant to Section 83 of this Code.

(Source: P.A. 83-333.)

(215 ILCS 5/76) (from Ch. 73, par. 688)

(Section scheduled to be repealed on January 1, 2027)

Sec. 76. Guaranty fund or guaranty capital. Any domestic reciprocal may provide for a surplus by accumulating a guaranty fund or guaranty capital in the same manner and upon the same terms and conditions as is provided in Section 56 for mutual companies.

(Source: Laws 1937, p. 696.)

(215 ILCS 5/77) (from Ch. 73, par. 689)

(Section scheduled to be repealed on January 1, 2027)

Sec. 77. Director as attorney - Service of process.

(1) The attorney-in-fact of every reciprocal transacting business in this State shall file with the Director a duly executed instrument whereby the attorney-in-fact shall appoint and constitute the Director and his successor or successors in office, the true and lawful attorney of such reciprocal upon whom all lawful process in any action or legal proceeding against such reciprocal may be served and shall agree that any lawful process against such reciprocal which may be served upon said attorney shall be of the same force and validity as if served upon the attorney-in-fact and that the authority thereof shall continue in force irrevocably so long as any liability of the reciprocal in the State shall remain outstanding.

(2) Any reciprocal transacting business in this State may sue or be sued in the name or designation under which its contracts are authorized to be exchanged. Any such suit may be brought in the county in which the cause of action arises or in which the claimant resides, or in the county in which the attorney-in-fact has his principal office. Service may be had upon such reciprocal by service upon the last appointed attorney-in-fact or by service upon the Director. Service of process on an individual subscriber shall not constitute service upon the reciprocal. When such process is served upon the Director, duplicate copies of such process shall be delivered to him and he shall immediately forward one copy of such process to the last appointed attorney-in-fact, by certified or registered mail, postage prepaid, giving the date and hour of such service.

(Source: P.A. 83-598.)

(215 ILCS 5/78) (from Ch. 73, par. 690)

(Section scheduled to be repealed on January 1, 2027)

Sec. 78. Governmental subscribers accounts; dividends; other returns.

(a) The attorney-in-fact of a governmental reciprocal, in addition to the books of account of the reciprocal, shall keep and maintain from and after the effective date of this amendatory Act of 1993, a separate account for each individual subscriber, setting forth therein the date or periods of the subscriber's participation in the reciprocal, the subscriber's deposits, the savings returned to the subscriber and such other information as may be necessary for the determination of the subscriber's proportionate share, if any, of the surplus funds of the reciprocal in case of liquidation. The attorney-in-fact shall not be required to file a list of the subscribers with the Department.

(b) The board of directors of the attorney-in-fact of any governmental reciprocal may in its discretion and subject to the prior approval of the advisory committee of the governmental reciprocal and the Director of Insurance:

(1) declare dividends to its subscribers in the same manner and upon and subject to the same terms and conditions as are provided in Section 54 for mutual companies, except that the reference to "articles of incorporation" in Section 54 shall mean the declaration of organization or the power of attorney or other authority of the attorney-in-fact under which contracts of insurance are to be exchanged pursuant to this article as applied to governmental reciprocals; and

(2) return guaranty fund or guaranty capital contributions in the same manner and upon and subject to the same terms and conditions as are provided in Section 56 for mutual companies and upon compliance with the provisions of the agreement to subscribe (the agreement to make the contributions), if any.

No payment or return of surplus (other than return of guaranty fund or of guaranty capital) shall be made except in accordance with this Section and sound business judgment.

(Source: P.A. 90-817, eff. 3-23-99.)

(215 ILCS 5/79) (from Ch. 73, par. 691)

(Section scheduled to be repealed on January 1, 2027)

Sec. 79. Reserves. All reciprocals subject to this Article shall maintain reserves calculated in the same manner and upon the same basis as stock and mutual companies doing the same kind or kinds of business are required to maintain.

(Source: Laws 1937, p. 696.)

(215 ILCS 5/80) (from Ch. 73, par. 692)

(Section scheduled to be repealed on January 1, 2027)

Sec. 80. Amendments to power of attorney and other documents.

(1) The attorney-in-fact of any reciprocal subject to the provisions of this article may amend the declaration of organization or power of attorney in any respect not in violation of law, but may not amend such documents to insert any provision prohibited, or to delete any provision required, in original declarations of organization or powers of attorney of a similar domestic reciprocal organized under this Code.

(2) Amendments of the declarations of organization or powers of attorney, shall be made in the following manner:

(a) Amendment of declaration of organization. The attorney-in-fact shall sign and acknowledge, before an officer authorized to take acknowledgments, an amendment to the declaration of organization, in duplicate. When the attorney-in-fact is a corporation, such amendment shall be acknowledged by an officer thereof. The attorney-in-fact shall deliver such duplicate originals of the amendment to the Director. Such amendment may be approved or disapproved by the Director in the same manner as the original declaration of organization. If approved, the Director shall place on file in his office one of the duplicate originals of the amendment and shall endorse upon the other duplicate original his approval thereof and the month, day and year of such approval, and deliver it to the attorney-in-fact. The amendment shall be effective as of the date of the approval thereof by the Director.

(b) Amendment of power of attorney. The attorney-in-fact shall deliver to the Director a copy of any form of power of attorney under or by virtue of which it is proposed that insurance is to be effected or exchanged, which varies from the form of any power of attorney previously filed with the Director by such attorney-in-fact, before the same shall be used by any reciprocal. Such power of attorney may be approved or disapproved by the Director in the same manner as the original power of attorney. If approved, the Director shall place on file in his office a duplicate original of the power of attorney and shall endorse upon the other duplicate original his approval thereof and the month, day and year of such approval, and deliver it to the attorney-in-fact. The amendment shall be effective as of the date of approval thereof by the Director.

(Source: P.A. 96-328, eff. 8-11-09.)

(215 ILCS 5/81) (from Ch. 73, par. 693)

(Section scheduled to be repealed on January 1, 2027)

Sec. 81. Governmental agencies and corporations may be subscribers. Any government or governmental agency, state or political subdivision thereof, public or private corporation, board, association, estate, trustee or fiduciary in this State, or elsewhere, may make application, enter into agreements for, and hold policies or contracts in or with, and be a subscriber of any reciprocal subject to the provisions of this Article. Any officer, representative, trustee, receiver, or legal representative of any such subscriber shall be recognized as acting for or on its behalf for the purpose of such contract but shall not be personally liable upon such contract by reason of acting in such representative capacity.

(Source: Laws 1937, p. 696.)

(215 ILCS 5/82) (from Ch. 73, par. 694)

(Section scheduled to be repealed on January 1, 2027)

Sec. 82. Reinsurance. Any domestic reciprocal may enter into reinsurance contracts subject to the provisions of Article XI.

(Source: Laws 1937, p. 696.)

(215 ILCS 5/83) (from Ch. 73, par. 695)

(Section scheduled to be repealed on January 1, 2027)

Sec. 83. Procedure when insufficient assets are possessed by reciprocal.

(1) Whenever the Director finds that the admitted assets in excess of all liabilities of a reciprocal are less than the amount required by subsection (2) of Section 66, the Director shall proceed in the manner set forth as provided in Section 60 applicable to mutual companies and the reciprocal, its attorney-in-fact or any officers thereof, shall be subject to the same requirements and penalties in such Section provided. Nothing contained in this paragraph shall be construed to limit or restrict the authority of any liquidator, conservator or rehabilitator acting under the provisions of Article XIII or XIII 1/2 of this Act.

(2) The attorney-in-fact of any such reciprocal may repair such deficiency within the period designated by the Director, by advancing the amount or any part thereof, at an interest rate not exceeding 7% per annum. The funds so advanced shall not be treated as a liability of such reciprocal and such advance including interest thereon shall be repaid only out of the surplus funds of the reciprocal in excess of the amount required by Section 66.

(Source: Laws 1965, p. 2630.)

(215 ILCS 5/84) (from Ch. 73, par. 696)

(Section scheduled to be repealed on January 1, 2027)

Sec. 84. Penalties. No person shall act as attorney-in-fact for a reciprocal except in accordance with the provisions of this Article and any person, who violates any of the provisions of this Section or who knowingly participates in or abets such violation shall be guilty of a business offense and shall be required to pay a penalty of not more than one thousand dollars, for each offense, to be recovered in the name of the People of the State of Illinois by the State's Attorney of the county in which the violation occurs, and the penalty so recovered shall be paid into the county treasury.

(Source: P.A. 77-2699.)

(215 ILCS 5/85) (from Ch. 73, par. 697)

(Section scheduled to be repealed on January 1, 2027)

Sec. 85. Application of other Code provisions. Unless otherwise provided in this Article every reciprocal shall be subject to other applicable provisions of this Code.

(Source: Laws 1937, p. 696.)

(215 ILCS 5/Art. V heading) ARTICLE V. LLOYDS (Article scheduled to be repealed on January 1, 2027)

(215 ILCS 5/86) (from Ch. 73, par. 698)

(Section scheduled to be repealed on January 1, 2027)

Sec. 86. Scope of Article.

(1) This Article applies to all groups including incorporated and individual unincorporated underwriters transacting an insurance business in this State through an attorney-in-fact under the name Lloyds or under a Lloyds plan of operation. Groups that meet the requirements of subsection (3) are referred to in this Code as "Lloyds", and incorporated and individual unincorporated underwriters are referred to as "underwriters".

(2) As used in this Code:

"Domestic Lloyds" means a Lloyds having its home office in this State.

"Foreign Lloyds" means a Lloyds having its home office in any state of the United States other than this State.

"Alien Lloyds" means a Lloyds having its home office or principal place of business in any country other than the United States.

(3) A domestic Lloyds must: (i) be established pursuant to a statute or written charter; (ii) provide for governance by a board of directors or similar body; and (iii) establish and monitor standards of solvency of its underwriters. A foreign or alien Lloyds must be subject to requirements of its state or country of domicile. Those requirements must be substantially similar to those required of domestic Lloyds. Domestic, foreign, and alien Lloyds shall not be subject to Section 144 of this Code.

(4) All foreign and alien entities and individuals transacting an insurance business as domestic, foreign, or alien Lloyds shall notify the Director and the Secretary of State under the provisions of this Article, shall be regulated exclusively by the Director, and shall not be required to obtain a certificate of authority from the Secretary of State pursuant to any other law of this State so long as they solely transact business as a domestic, foreign, or alien Lloyds. Upon notification, the Secretary of State may require submission of additional information to determine whether a foreign or alien individual or entity is transacting business solely as a domestic, foreign, or alien Lloyds.

(Source: P.A. 100-863, eff. 8-14-18.)

(215 ILCS 5/87) (from Ch. 73, par. 699)

(Section scheduled to be repealed on January 1, 2027)

Sec. 87. Certificate of authority. It shall be unlawful for any domestic, foreign or alien Lloyds to transact business in this State unless it has first obtained and has in force a certificate of authority issued by the Director. All certificates of authority issued under the provisions of this Article shall terminate on the thirtieth day of June next following the date of issuance and may be renewed upon compliance with this Code.

(Source: Laws 1937, p. 696.)

(215 ILCS 5/88) (from Ch. 73, par. 700)

(Section scheduled to be repealed on January 1, 2027)

Sec. 88. Name. The name of any Lloyds authorized to transact business under this Article shall not be the same as, or deceptively similar to, the name of any domestic company or of any foreign or alien company authorized to transact business in this State.

(Source: Laws 1937, p. 696.)

(215 ILCS 5/89) (from Ch. 73, par. 701)

(Section scheduled to be repealed on January 1, 2027)

Sec. 89. Principal office of attorney-in-fact. The principal office of the attorney-in-fact of a domestic Lloyds shall be maintained in this State.

(Source: Laws 1937, p. 696.)

(215 ILCS 5/90) (from Ch. 73, par. 702)

(Section scheduled to be repealed on January 1, 2027)

Sec. 90. Kinds of business permitted. Except as otherwise provided in this Article, a Lloyds may be authorized to transact any or all of the kind or kinds of business enumerated in Classes 2 and 3 of Section 4.

(Source: Laws 1937, p. 696.)

(215 ILCS 5/91) (from Ch. 73, par. 703)

(Section scheduled to be repealed on January 1, 2027)

Sec. 91. Declaration of domestic Lloyds. The attorney-in-fact for underwriters who desire to form a domestic Lloyds under this Article shall sign and acknowledge before an officer authorized to take acknowledgments, a declaration in duplicate. When the attorney-in-fact is a corporation the declaration shall be acknowledged by an officer of such corporation. The declaration shall set forth

(a) the name of the attorney-in-fact, and the name or designation under which contracts are to be effected;

(b) the location of the office of the attorney-in-fact;

(c) the names and addresses, including streets and numbers, if any, of the underwriters;

(d) the class or classes of insurance which such Lloyds proposes to transact and the kinds of insurance in each class which it proposes to write;

(e) such other provisions not inconsistent with law which may be deemed by the attorney-in-fact or the underwriters to be necessary or advisable.

(Source: P.A. 88-535.)

(215 ILCS 5/92) (from Ch. 73, par. 704)

(Section scheduled to be repealed on January 1, 2027)

Sec. 92. Documents to be delivered to director. Upon the execution of the declaration by the attorney-in-fact for a domestic Lloyds, there shall be delivered to the Director

(a) duplicate originals of the declaration;

(b) a copy of the power of attorney of the attorney-in-fact;

(c) an instrument authorizing the service of process on the Director provided for in Section 105;

(d) 2 organization bonds or the cash or securities provided for in Section 93.

(Source: Laws 1965, p. 422.)

(215 ILCS 5/93) (from Ch. 73, par. 705)

(Section scheduled to be repealed on January 1, 2027)

Sec. 93. Bonds. The attorney-in-fact for any domestic Lloyds in the process of organization shall deliver to the Director two bonds in the same penalties and containing the same provisions so far as applicable as the bonds required for the organization of a stock company by Section 16, for the use and benefit of the State of Illinois, the underwriters and creditors, or in lieu of delivering such bonds the attorney-in-fact may deposit cash or securities of the same kind or amount and on the same terms and conditions so far as applicable as provided by said Section.

(Source: Laws 1937, p. 696.)

(215 ILCS 5/94) (from Ch. 73, par. 706)

(Section scheduled to be repealed on January 1, 2027)

Sec. 94. Approval of documents. The documents and papers so delivered to the Director may be approved or disapproved by the Director, and the attorney-in-fact or underwriters shall be entitled to a hearing in the same manner as provided in Section 18 in the case of documents delivered for approval in connection with the organization of stock companies. If the documents and papers so delivered are approved by the Director, the Director shall, thereupon, place on file in his office all of such documents except one of the duplicate originals of the declaration, and shall endorse upon such duplicate original his approval thereof and the month, day and year of such approval, and deliver it to the attorney-in-fact. Upon the date of approval of said declaration by the Director, the domestic Lloyds shall be deemed to be in existence.

(Source: Laws 1959, p. 627.)

(215 ILCS 5/95) (from Ch. 73, par. 707)

(Section scheduled to be repealed on January 1, 2027)

Sec. 95. Authority to solicit underwriters. Upon the approval of the declaration by the Director, he shall issue to the attorney-in-fact a permit which shall expire at the end of one year from its date, authorizing the attorney-in-fact to solicit deposits of underwriters in accordance with this Code and in accordance with the power of attorney filed with the Director, and to do such other acts as may be necessary or proper in order to complete the organization of such Lloyds and to entitle it to receive a certificate of authority to transact an insurance business.

(Source: Laws 1937, p. 696.)

(215 ILCS 5/96) (from Ch. 73, par. 708)

(Section scheduled to be repealed on January 1, 2027)

Sec. 96. Issuance of certificate of authority. When the Director has been notified that the underwriters have deposited a sum not less than the minimum admitted assets required by Section 99, he shall conduct an examination of such Lloyds. If he finds that the organization has been completed and that all other requirements of this Code have been met, he shall issue to such Lloyds a certificate of authority to transact the kind or kinds of business specified in the declaration.

(Source: Laws 1937, p. 696.)

(215 ILCS 5/97) (from Ch. 73, par. 709)

(Section scheduled to be repealed on January 1, 2027)

Sec. 97. Deposit required of underwriters. Each underwriter of a domestic Lloyds shall make and maintain a deposit of cash or securities, or both, in trust with a responsible bank or trust company in this State to indemnify policyholders against loss. Securities so deposited shall be of a character conformable to the requirements of Article VIII applicable to companies transacting the same kind or kinds of business. The attorney-in-fact shall file with the Director an authenticated copy of each trust agreement under which any such deposit is made. All such deposits shall be considered as admitted assets of such Lloyds. No change or withdrawal of cash or securities deposited in trust shall be made without the approval of the Director.

(Source: Laws 1959, p. 1431.)

(215 ILCS 5/98) (from Ch. 73, par. 710)

(Section scheduled to be repealed on January 1, 2027)

Sec. 98. Verified statement. Whenever the Director shall so require, the attorney-in-fact of a domestic Lloyds shall file with the Director a verified statement setting forth

(a) the names and addresses of all underwriters; and

(b) a description of the cash and securities deposited in trust by each underwriter.

(Source: P.A. 90-794, eff. 8-14-98.)

(215 ILCS 5/99) (from Ch. 73, par. 711)

(Section scheduled to be repealed on January 1, 2027)

Sec. 99. Minimum admitted assets required of domestic Lloyds. Each domestic Lloyds shall at all times keep and maintain in this State admitted assets, including the deposits of underwriters required by section 97, exceeding all outstanding claims and other liabilities plus the unearned premiums (less reinsurance premiums) on the policies in force, by not less than $900,000 if such Lloyds is writing all or any kinds of insurance enumerated in Class 2 of section 4, by not less than $600,000 if such Lloyds is writing all or any kinds of insurance enumerated in Class 3 of section 4 and by not less than $1,500,000 if such Lloyds is writing the kinds of insurance enumerated in both Class 2 and Class 3 of section 4, provided however, that any such Lloyds organized prior to the effective date of this amendatory Act of 1965 shall have and at all times maintain admitted assets in excess of all liabilities in the amount which was required for that particular Lloyds at the time it was issued a certificate of authority.

(Source: Laws 1965, p. 971.)

(215 ILCS 5/100) (from Ch. 73, par. 712)

(Section scheduled to be repealed on January 1, 2027)

Sec. 100. Minimum available assets required of domestic Lloyds. The aggregate of the amounts on deposit of all underwriters and all other admitted assets of each domestic Lloyds available for the payment of losses shall at all times be at least five times the amount to be assumed by such Lloyds, net not including reinsurance in licensed insurers, upon a single risk cumulative for each kind of insurance.

(Source: Laws 1937, p. 696.)

(215 ILCS 5/101) (from Ch. 73, par. 713)

(Section scheduled to be repealed on January 1, 2027)

Sec. 101. Restrictions upon domestic Lloyds.

(1) A domestic Lloyds shall not

(a) change its name or title without first obtaining the written approval of the Director; nor

(b) establish branches under other or different names or titles; nor

(c) amend or change its declaration or power of attorney without the approval of the Director and any amendment thereto or change therein shall be set forth in an amended verified declaration or power of attorney filed with the Director.

(2) A domestic Lloyds shall

(a) maintain the assets required by this Article either in cash or in investments permitted by this Code;

(b) maintain in this State the principal office of its attorney-in-fact for the transaction of business therein, and shall notify the Director of any change in the location of the principal office of its attorney-in-fact;

(c) notify the Director of any change in underwriters; and

(d) notify the Director of any change of attorney-in-fact by filing with the Director an instrument signed by the underwriters of such Lloyds revoking the previous appointment of any attorney-in-fact and designating and appointing a substitute attorney-in-fact.

(3) All notices required by subsections (1) and (2) except the notice prescribed by clause (d) of subsection (2) shall be in writing and shall be verified by the attorney-in-fact if an individual or by an officer of the attorney-in-fact if a corporation.

(4) Additional underwriters may join and be included in any such Lloyds, subject to such conditions and requirements as may from time to time be imposed by such Lloyds and upon meeting the requirements in this Article with regard to underwriters. Such additional underwriters who may so join such Lloyds shall be bound by the documents on file with the Director in the same manner as though they had personally executed the same and shall have the same rights, powers and duties as all other underwriters of such Lloyds. The attorney-in-fact authorized by the underwriters to act for them shall thereafter also be the attorney-in-fact for such additional underwriters.

(Source: Laws 1937, p. 696.)

(215 ILCS 5/102) (from Ch. 73, par. 714)

(Section scheduled to be repealed on January 1, 2027)

Sec. 102. Restrictions upon foreign Lloyds.

(1) Each foreign Lloyds authorized to transact business in this State shall

(a) maintain cash and securities, including the deposits of its underwriters, of a character conformable to the requirements of Article VIII of this Code for domestic companies, at least equal at all times to the minimum admitted assets required by this Article for a domestic Lloyds doing the same kind or kinds of business.

(b) file with the Director an authenticated copy of its power of attorney and an authenticated copy of the trust agreement or other agreement under which deposits made by underwriters are held;

(c) notify the Director forthwith of any amendment to its power of attorney, deposit agreement or other documents underlying its organization, by filing with the Director an authenticated copy of such document as amended;

(d) notify the Director forthwith of any change in its name or change of attorney-in-fact or change of address of its attorney-in-fact.

(2) A foreign Lloyds shall not establish branches under other or different names or titles.

(3) There shall be filed with the Director by the attorney-in-fact of such foreign Lloyds at the time of filing the annual statement, or more often if required by the Director, a statement verified by the appropriate official of such Lloyds, setting forth

(a) the names and addresses of all underwriters of such Lloyds; and

(b) a description of the cash and securities deposited in trust by each underwriter.

(Source: P.A. 90-794, eff. 8-14-98.)

(215 ILCS 5/103) (from Ch. 73, par. 715)

(Section scheduled to be repealed on January 1, 2027)

Sec. 103. Alien Lloyds.

(1) Each alien Lloyds authorized to transact business in this State shall

(a) maintain in this State or any other state of the United States in which they are authorized to transact business, cash or securities of a character conformable to the requirements of Article VIII of this Code for domestic companies at least equal at all times to the minimum of admitted assets required by this Article for a domestic Lloyds doing the same kind or kinds of business;

(b) make deposits of underwriters in this State in accordance with the requirements imposed upon domestic Lloyds;

(c) file with the Director an authenticated copy of its power of attorney and an authenticated copy of the trust agreement or other agreement under which deposits made by underwriters in this State are held;

(d) notify the Director forthwith of any amendment to its power of attorney, deposit agreement or other documents by filing with the Director an authenticated copy of such document as amended; and

(e) notify the Director forthwith of any change in its name or change of attorney-in-fact or change of address of its attorney-in-fact.

(2) An alien Lloyds shall not establish branches under other or different names or titles.

(3) There shall be filed with the Director by the attorney-in-fact for such Lloyds, who or which shall be a resident person or corporation of this State, at the time of filing the annual statement, or more often if required by the Director, a verified statement setting forth

(a) the names and addresses of all underwriters of such Lloyds; and

(b) a description of the cash and securities deposited in trust by each underwriter.

(4) Additional underwriters may join and be included in any such Lloyds subject to such conditions and requirements as may from time to time be imposed by such Lloyds and upon meeting the requirements of this Section, such additional underwriters who may so join such Lloyds shall be bound by the documents on file with the Director in the same manner as though they had personally executed the same and shall have the same rights, powers and duties as all other underwriters of such Lloyds. The attorney-in-fact authorized by the underwriters to act for them shall thereafter be the attorney-in-fact for such additional underwriters to the extent of the power of attorney or other document or authorization by such underwriters to the attorney-in-fact.

(Source: P.A. 90-794, eff. 8-14-98.)

(215 ILCS 5/104) (from Ch. 73, par. 716)

(Section scheduled to be repealed on January 1, 2027)

Sec. 104. Policy forms. Every policy issued in this State by any domestic, foreign or alien Lloyds shall have printed upon its face and back the name of such Lloyds, the name and address of its attorney-in-fact in this State or agent for service of process in this State, and in type not smaller than ten point the words "Not Incorporated."

(Source: Laws 1937, p. 696.)

(215 ILCS 5/105) (from Ch. 73, par. 717)

(Section scheduled to be repealed on January 1, 2027)

Sec. 105. Director as agent; service of process.

(1) The attorney-in-fact of every Lloyds transacting business in this State shall file with the Director a duly executed instrument whereby such Lloyds shall appoint and constitute the Director, his successor or successors in office, the true and lawful agent of such Lloyds upon whom all lawful process in any action or legal proceeding against such Lloyds may be served, and shall agree that any lawful process against such Lloyds which may be served upon said agent shall be of the same force and validity as if served upon the attorney-in-fact, and that the authority thereof shall continue in force irrevocably so long as any liability of such Lloyds in this State shall remain outstanding.

(2) In any suit instituted against any domestic, foreign or alien Lloyds transacting business in this State, it shall not be necessary to name the underwriters as parties defendant, but such Lloyds may be named as the party defendant in any such suit and service may be had upon all the underwriters by service upon the last appointed attorney-in-fact or by service upon the Director, and not otherwise. Any such suit may be brought in the county in which the cause of action arises or in which the claimant resides. When such process is served upon the Director as agent to accept service, duplicate copies of such process shall be delivered to him and he shall immediately forward one copy of each such process to the last appointed attorney-in-fact by certified or registered mail, postage prepaid, giving the day and hour of such service.

(Source: P.A. 88-535.)

(215 ILCS 5/106) (from Ch. 73, par. 718)

(Section scheduled to be repealed on January 1, 2027)

Sec. 106. Penalties. It shall be unlawful for any person to act as an underwriter of or attorney-in-fact for a Lloyds except in accordance with the provisions of this Article, and any person violating any of the provisions of this section shall be guilty of a business offense and shall be required to pay a penalty of not more than one thousand dollars, for each offense, to be recovered in the name of the People of the State of Illinois by the State's Attorney of the county in which the violation occurs, and the penalty so recovered shall be paid into the county treasury.

(Source: P.A. 77-2699.)

(215 ILCS 5/107) (from Ch. 73, par. 719)

(Section scheduled to be repealed on January 1, 2027)

Sec. 107. Application of other Code provisions. Unless otherwise provided in this Article, every Lloyds shall be subject to other applicable provisions of this Code.

(Source: Laws 1937, p. 696.)

(215 ILCS 5/Art. V.5 heading) ARTICLE V 1/2. INSURANCE EXCHANGE (Repealed by P.A. 98-969, eff. 1-1-15)

(215 ILCS 5/Art. V.75 heading) Article V 3/4 Group Workers' Compensation Pools; pooling; insolvency fund.

(215 ILCS 5/107a.01)

Sec. 107a.01. Short title. This Article may be cited as the Workers' Compensation Pool Law.

(Source: P.A. 91-757, eff. 1-1-01.)

(215 ILCS 5/107a.02)

Sec. 107a.02. Scope. This Article applies to all qualified group workers' compensation pools.

(Source: P.A. 91-757, eff. 1-1-01.)

(215 ILCS 5/107a.03)

Sec. 107a.03. Purpose. The purpose of this Article is to permit 2 or more employers with homogeneous risk characteristics or that are members of a bona fide professional, commercial, industrial, or trade association, with homogenous risk characteristics to pool their workers' compensation and employer's liability exposures under this Article.

The State of Illinois, a unit of local government or school district, or association or instrumentality thereof, or an intergovernmental risk management association, self-insurance pool or self-administered health and accident cooperative or pool shall not be deemed an "employer" or "pool" for the purpose of this Article.

(Source: P.A. 91-757, eff. 1-1-01.)

(215 ILCS 5/107a.04)

Sec. 107a.04. Organization under the Illinois Insurance Code.

(a) After December 31, 2000, group workers' compensation pools shall for the purpose of this Article, and this Article only, be considered as though they were assessable domestic mutual insurance companies and subject to the following:

(1) Article XII 1/2, Article XIII, Article XIII 1/2, Article XXIV; and

(2) Sections 126.2, 126.4, 126.7, 132, 132.1 through 132.7, 133, 134, 137, 139, 140, 141.1, 141.2, 142, 143, 143c, 147, 148, 149, 154.5, 154.6, 154.7, 154.8, 155.01, 155.04, 173.1, 173.2, 173.3, 173.4, 173.5, 174, 174.1, 175, 176, 178, 179b, 378, 379.1, 408, 408.3, 449, 456, 457, and 458, subsections A, B, C, and E of Section 126.5, subsection A of Section 126.6, and subsections (1) and (7) of Section 412 of this Code.

(b) If there is a conflict between any Section of this Article and any other Section of this Code, then the provisions of this Article shall apply.

(c) No other provision of this Code shall be applicable to any qualified workers' compensation group workers' compensation pool except as provided in this Article.

(d) A certificate of authority that is in effect on the effective date of this amendatory Act of the 91st General Assembly and that was issued pursuant to Section 4a of the Workers' Compensation Act or Section 4a of the Workers' Occupational Diseases Act to a group self-insurer shall remain in effect under this Article. Such group self-insurer shall then be deemed to be a qualified group workers' compensation pool and shall be subject to this Article.

(Source: P.A. 91-757, eff. 1-1-01.)

(215 ILCS 5/107a.05)

Sec. 107a.05. Definitions and interchangeable terms.

(a) Unless otherwise provided, the following definitions shall apply:

"Authorized insurer" means an insurer licensed in this State to transact business as described in Clauses (c) and (d) of Class 2 of Section 4 of this Code.

"Calendar Quarter" means the 3-month periods ending March 31, June 30, September 30, and December 31.

"Director" means the Director of Insurance.

"Engaged actively in the business" means a bona fide business concern having conducted commerce, trade, or industry in this State for a specified period of time. Any and all records relating to this requirement shall be open to inspection by the Director or his designee during normal business hours.

"Gross annual payroll" means payroll for the preceding fiscal year.

"Independent actuarial opinion" means an opinion expressed by a member of the American Academy of Actuaries or Casualty Actuarial Society.

"Independent CPA" means an independent certified public accountant or independent certified public accounting firm in good standing and licensed to practice by the Department of Professional Regulation.

"Pool" means a qualified group workers' compensation pool as authorized by this Article.

"Qualified group workers' compensation pool" means a group workers' compensation pool that has received a certificate of authority pursuant to this Article.

(b) For purposes of incorporating the provisions of this Code designated in paragraphs (1) and (2) of subsection (a) of Section 107a.04 into this Article, the following terms shall be interchangeable:

"Contribution" shall be considered premium.

"Pooling agreement" shall be considered a policy of insurance.

"Trustees of a group workers' compensation pool" shall be considered as though they were directors of a domestic mutual insurance company.

(Source: P.A. 91-757, eff. 1-1-01.)

(215 ILCS 5/107a.06)

Sec. 107a.06. Pool administration.

(a) An application for Certificate of Authority to establish a pool must include the documentation and information regarding its administrator, pooling agreement, plan of operation, and membership required by this Section.

(b) Administrators must disclose all of the following:

(1) Biography of the risk manager on forms prescribed by the Director.

(2) If a corporation, biographies of all officers and directors.

(3) The size of staff and other information, such as the kinds of staff positions, location of administrative offices and the nature of any electronic data processing equipment, if any, available for servicing the pool, to demonstrate that the administrator has the resources to administer the program disclosed pursuant to subsection (d).

(4) The most recent financial statement of the administrator. If a publicly held company, a copy of the last 10-K filed with the Securities and Exchange Commission.

(5) The compensation contract of the administrator.

(6) The bylaws of the pool and articles of incorporation, if any.

(7) Any agreement that subcontracts any of the administrator's duties or responsibilities.

(c) A pooling agreement must contain all of the following:

(1) A description of the services to be provided by the administrator.

(2) The manner in which costs are to be apportioned by the administrator.

(3) The initial premium deposit.

(4) The assessment provision.

(5) The termination provisions and minimum term of membership, which minimum term of membership shall not be less than one year.

(6) The duration of liability for additional assessments following termination of membership, which shall be for a period of not less than 3 years.

(7) The prerequisites for membership.

(8) A provision stating that a claim shall be paid by the pool, regardless of the size of the claim, and that the pool shall be reimbursed by the employer for any amounts required to be paid by the employer under the agreement.

(9) A provision stating that the terms of termination after the first year of pool membership shall be dictated by the pooling agreement.

(10) If a pooling agreement requires a member to submit written notice in order for the member to withdraw from a qualified pool, then the period in which the member must provide the written notice cannot be greater than 90 days.

(d) Plans of operation must disclose all of the following:

(1) A listing of initial members.

(2) The aggregate loss history of initial members for each of the last 3 years.

(3) The amount of the net retention of the pool and a list of reinsurers.

(4) The names of all entities that will provide services for the pool and copies of proposed contracts in connection those services.

(5) The safety and loss control programs to be provided or required.

(e) The application must contain information about initial members specified on forms prescribed by the Director.

(f) The application must contain the combined loss experience for the group for the last 3 years and any other financial data required by the Director.

(g) A pool administrator's original books and records relating to the operations of the pool shall at all times be located within the State of Illinois.

(h) Any change of the pooling agreement, bylaws, plan of operation, reinsurance agreements, or membership shall be delivered to the Director within 30 days after the amendment or change.

(i) A pool trustee must be an employee, officer, director, or owner of a pool member.

(Source: P.A. 91-757, eff. 1-1-01.)

(215 ILCS 5/107a.07)

Sec. 107a.07. Standards for issuing and maintaining pool certificates of authority.

(a) The Department shall consider the following in evaluating the financial strength of the pool:

(1) The number of employees covered by the pool.

(2) The particular industries in which the participants are engaged.

(3) The combined net worth of pool participants.

(4) Any excess insurance purchased from authorized insurers.

(5) The gross annual payroll of members, which must be at least $10,000,000 for active pools not in runoff.

(b) The pool administrator must either contract with a licensed service company or have sufficient resources, such as those set forth in item (3) of subsection (b) of Section 107a.06, to administer the proposed pool.

(c) The Department must determine whether the pool can ensure that individual pool members are in compliance with Section 107a.08.

(Source: P.A. 96-965, eff. 7-2-10.)

(215 ILCS 5/107a.08)

Sec. 107a.08. Provisions applicable to members of a group workers' compensation pool.

(a) All members of a group workers' compensation pool must have homogeneous risk characteristics as provided in Section 107a.03.

(b) In determining whether members exhibit homogeneous risk characteristics, the Director shall consider any or all of the following characteristics:

(1) The loss frequency inherent in the occupational framework of group members.

(2) The loss severity inherent in the occupational framework of group members.

(3) The occupational disease potential inherent in the occupational framework of group members.

(4) The occupational tasks of member employees.

(5) Any other relevant fact the group members present to the Director that has reference to the classification of similar risks (e.g. SIC codes).

(c) Eligibility as a pool participant shall be based upon having a minimum of:

(1) 20 employees and $250,000 gross annual payroll; or

(2) 10 employees and $125,000 gross annual payroll for participants who have engaged actively in business for a minimum of 3 years; or

(3) 5 employees and $62,500 gross annual payroll for participants who have actively engaged in business for a minimum of 5 years.

(d) Exceptions to the minimum eligibility requirements of this Section may be allowed by any pool whenever the following conditions are met:

(1) the participant has been actively engaged in business for a minimum period of 5 consecutive years in Illinois; and

(2) the participant agrees to make all of its financial records available to the Director for reasonable inspection during the period of membership; and

(3) the pool administrator certifies to the Director that he examined the financial records of the pool participant prior to the participant's admission to the pool and found the participant to be solvent and financially stable.

(Source: P.A. 91-757, eff. 1-1-01.)

(215 ILCS 5/107a.09)

Sec. 107a.09. Service companies for group workers' compensation pools.

(a) No association, corporation, partnership, sole proprietorship, trust, or other business entity shall provide services in the design, establishment, or administration of a group workers' compensation pool unless it is licensed to do so by the Department. An applicant for a license shall state in writing the type of activities it seeks authorization to engage in and the type of services it seeks authorization to provide. The license shall be granted only when the Director is satisfied that the entity possesses the necessary organization, background, character, expertise, and financial integrity to supply the services sought to be offered. The Department may issue a license subject to restrictions or limitations, including restrictions or limitations on the type of services that may be supplied or the activities in which the entity may engage. A license issued under this Section shall be valid for 2 years.

(b) To assure that administrators are financially solvent, that pools are administered in a fair and capable fashion, and that administrators are able to process claims and pay benefits in a prompt, fair, and equitable manner, entities licensed to engage in those activities under this Section are subject to supervision and examination by the Department.

(c) The Department may adopt rules for the purposes of this Article. The rules shall (i) establish reporting requirements for administrators for group workers' compensation pools, including experience reporting requirements consistent with those established under this Code for insurers; (ii) establish bonding requirements or other provisions assuring the financial integrity of entities administering group self-insurance; and (iii) establish other reasonable requirements to further the purposes of this Article.

(Source: P.A. 91-757, eff. 1-1-01.)

(215 ILCS 5/107a.10)

Sec. 107a.10. Bond requirements.

(a) An administrator shall obtain and maintain in force fidelity bonds on employees, officers, or positions in an amount not less than the amount set forth in the column "Minimum Amount of Bond", based on the amount of assets administered on behalf of pools by the administrator (as determined from year to year) stated in the annual statement of the pools as filed with the Department. All such bonds shall be written with at least a one-year discovery period and, if written with less than a 3-year discovery period, shall contain a provision that no cancellation or termination of the bond, whether by or at the request of the insured or by the underwriter, shall take effect before the expiration of 90 days after written notice of the cancellation or termination has been filed with the Department unless an earlier date of cancellation or termination is approved by the Department.

(b) The bonds shall include all employees, officers, or positions for the following perils, which may be covered under separate policies:

(1) dishonesty of employees and officers;

(2) robbery, burglary, larceny, theft, false pretense, hold-up, misplacement, mysterious disappearance, and damage or destruction while property is in any bank, any recognized place of safe deposit, or in transit; and

(3) forgery or alteration.

(c) The bond shall be written by an insurer licensed to transact business in the State of Illinois.

(d) Schedule of assets in relationship to amount of bond:

(Source: P.A. 91-757, eff. 1-1-01.)

(215 ILCS 5/107a.11)

Sec. 107a.11. Admissible assets.

(a) Admitted assets include amounts permitted under Section 107a.12 as modified by only the following:

(1) Direct obligations of the United States of America for the payment of money or obligations for the payment of money that are guaranteed as to the payment of principal and interest by the United States of America.

(2) Direct obligations for the payment of money issued by an agency or instrumentality of the United States of America or obligations for the payment of money that are guaranteed as to payment of principal and interest by an agency or instrumentality of the United States of America.

(3) Bonds or securities that are issued by any state of the United States and that are secured by the full faith and credit of that state.

(4) Certificates of deposit, time deposits, or demand deposits in a bank in the State of Illinois that has deposits insured by the Federal Deposit Insurance Corporation.

(5) Saving certificates issued by any savings and loan association in the State of Illinois that has deposits insured by the Federal Deposit Insurance Corporation.

(6) Direct, unconditional obligations of a solvent business corporation for the payment of money on the following conditions:

(A) the corporation is incorporated under the laws of the United States of America or any state of the United States of America;

(B) the corporation has a tangible net worth of not less than $500,000 and the obligations have been awarded a "1" or "2" rating by the Securities Valuation Office of the National Association of Insurance Commissioners;

(C) the corporation is not affiliated with any member of the pool;

(D) no such obligation of the corporation has been in default as to principal or interest during the 5 years preceding the date of investment, however, the corporation need not have had obligations outstanding during that period and need not have been in existence for that period, and obligations acquired under this Section may be newly issued;

(E) a pool may not invest more than 33 1/3% of its assets under this item (6); and

(F) a pool may not invest under this Section more than 5% of its assets in the obligations of any one corporation.

(7) Obligations of any political subdivision of any state of the United States of America for the payment of money on the following conditions:

(A) the obligations are payable from ad valorem taxes;

(B) the political subdivision is not in default in the payment of principal or interest on any of its direct, general obligations;

(C) no investment may be made under this Section in obligations that are secured only by special assessments for local improvements;

(D) a pool may not invest under this Section more than 4% of its assets in direct, general obligations issued by any one political subdivision; and

(E) a pool may not invest more than 50% of its assets under this item (7).

(8) Mutual funds:

(A) government money market mutual funds that meet the conditions of paragraphs (c)(2), (c)(3), and (c)(4) of 17 C.F.R. 270.2a-7, revised as of April 1, 1992, that have been rated in one of the 2 highest rating categories by an independent rating agency recognized by the National Association of Insurance Commissioners, and that invest in obligations issued, guaranteed, or insured by the United States or Canada or any agency or instrumentality of the United States or Canada.

(B) fixed income bond mutual funds that meet the conditions of paragraphs (c)(2), (c)(3), and (c)(4) of 17 C.F.R. 270.2a-7, revised as of April 1, 1992, and that have been rated in one of the 2 highest rating categories by an independent rating agency recognized by the National Association of Insurance Commissioners, however, a pool may not invest in fixed income bond mutual funds more than the greater of $100,000 or 10% of its total assets in any one fund.

(9) Not more than 5% of a pool's admitted assets may be assessment receivables. In order to be an admitted asset, an assessment receivable cannot be more than 60 days past due.

(10) Not more than 10% of a pool's admitted assets may be reinsurance receivables. In order to be an admitted asset, a reinsurance receivable cannot be more than 90 days past due.

(b) Amounts recoverable from authorized reinsurers on unpaid losses may be deducted from the reserves required by Section 4 of the Workers' Compensation Act.

(c) All securities eligible for registration shall be registered in the name of the pool and all securities shall be maintained in a State or National Bank having trust powers and located within this State.

(Source: P.A. 91-757, eff. 1-1-01.)

(215 ILCS 5/107a.12)

Sec. 107a.12. Annual statement.

(a) A pool authorized to do business in this State shall file with the Director by March 1st in each year 2 copies of its financial statement for the year ending December 31st immediately preceding on forms prescribed by the Director, which shall conform substantially to the form of statement adopted by the National Association of Insurance Commissioners. Unless the Director provides otherwise, the annual statement is to be prepared in accordance with the annual statement instructions and the Accounting Practices and Procedures Manual adopted by the National Association of Insurance Commissioners. The Director may promulgate rules for determining which portions of the annual statement instructions and Accounting Practices and Procedures Manual adopted by the National Association of Insurance Commissioners are germane for the purpose of ascertaining the condition and affairs of a pool.

(b) The Director shall have authority to extend the time for filing any statement by any pool for reasons that he considers good and sufficient. The admitted assets shall be shown in the statement at the actual values as of the last day of the preceding year, in accordance with Section 126.7 of this Code. The statement shall be verified by oaths of a majority of the trustees or directors of the pool. In addition, when the Director considers it to be necessary and appropriate for the protection of policyholders, creditors, shareholders, or claimants, the Director may require the pool to file, within 60 days after mailing to the pool a notice that a supplemental summary statement is required, a supplemental summary statement, as of the last day of any calendar month occurring during the 100 days next preceding the mailing of the notice, designated by him or her on forms prescribed and furnished by the Director. The Director may require supplemental summary statements to be certified by an independent actuary deemed competent by the Director or by an independent certified public accountant.

(c) On or before June 1 of each year, a pool shall file with the Director an audited financial statement reporting the financial condition of the pool as of the end of the most recent calendar year and changes in the surplus funds for the year then ending. The annual audited financial report shall include the following:

(1) a report of an independent certified public accountant;

(2) a balance sheet reporting assets, as defined in this Article, liabilities, and surplus funds;

(3) a statement of gain and loss from operations;

(4) a statement of changes in financial position;

(5) a statement of changes in surplus funds; and

(6) the notes to financial statements.

(d) The Director shall require a pool to file an independent actuarial opinion as to the sufficiency of the loss and loss adjustment expense reserves. This opinion shall be due on March 1 of each year.

(Source: P.A. 102-135, eff. 1-1-22.)

(215 ILCS 5/107a.13)

Sec. 107a.13. Group Workers' Compensation Pool Insolvency Fund.

(a) All qualified group workers' compensation pools shall pay a sum equal to 0.5% of all compensation and medical service payments made under either the Workers' Compensation Act or the Workers' Occupational Diseases Act during the 6 months immediately preceding the date of payment, into the Group Workers' Compensation Pool Insolvency Fund, the successor fund to the Group Self-Insurers' Insolvency Fund. On the effective date of this amendatory Act of the 91st General Assembly, all moneys in the Group Self-Insurers' Insolvency Fund shall be transferred into the Group Workers' Compensation Pool Insolvency Fund.

(b) The State Treasurer is ex-officio custodian of the Group Workers' Compensation Pool Insolvency Fund. Moneys in the Fund shall be deposited the same as are State funds and any interest accruing on moneys in the Fund shall be added to the Fund every 6 months. The Fund shall be subject to audit the same as State funds and accounts and shall be protected by the general bond given by the State Treasurer. The Fund shall be considered always appropriated for the purposes of compensating employees who are eligible to receive benefits from their employers pursuant to the provisions of the Workers' Compensation Act or Workers' Occupational Diseases Act when their employer is a member of a qualified group workers' compensation pool and the qualified group workers' compensation pool has become unable to pay compensation and medical service payments due to financial insolvency either prior to or following the date of award. Moneys in the Fund may be used to compensate any type of injury or occupational disease that is compensable under either the Workers' Compensation Act or the Workers' Occupational Diseases Act. The State Treasurer shall be joined with the qualified group workers' compensation pool as party respondent in any claim or application for adjustment of claim filed against a qualified group workers' compensation pool whenever the compensation and medical services provided pursuant to this Article may be unpaid by reason of default of an insolvent qualified group workers' compensation pool.

(c) Payment shall be made out of the Group Workers' Compensation Pool Insolvency Fund only upon order of the Director and only after the penal sum of the fidelity bond and securities, if any, has been exhausted. It shall be the obligation of a qualified group workers' compensation pool or its successor to make arrangements to repay the Group Workers' Compensation Pool Insolvency Fund for all moneys paid out in its behalf. The Director is authorized to make arrangements with the qualified group workers' compensation pool as to terms of repayment. The obligations of qualified group workers' compensation pools to make contributions to the Group Workers' Compensation Pool Insolvency Fund shall be waived on any January 1 or July 1, if the Fund has a positive balance of at least $2,000,000 on the date one month prior to the date of payment.

(Source: P.A. 91-757, eff. 1-1-01.)

(215 ILCS 5/107a.14)

Sec. 107a.14. Group workers' compensation pools assessment provisions.

(a) When the Director determines by means of audit, annual certified statement, actuarial opinion, or otherwise that the assets possessed by a pool are less than the reserves required together with any other unpaid liabilities, he or she shall order the pool trustees to assess the individual pool participants in an amount not less than necessary to correct the deficiency. This Section is not intended to restrict or preclude the trustees from time to time levying assessments or increasing premium deposits in accordance with the pooling agreement.

(b) When the Director determines that the compensation and medical services provided pursuant to this Article may be unpaid by reason of the default of an insolvent qualified group workers' compensation pool and the penal sum of the fidelity bond and the securities provided by the qualified group workers' compensation pool are about to become exhausted, the Director shall declare the qualified group workers' compensation pool to be in default and first levy upon and collect from the individual employer members of the qualified group workers' compensation pool in default an assessment to assure prompt payment of compensation and medical services. No assessment of any individual employer member of the qualified group workers' compensation pool made pursuant to this subsection shall exceed 25% of the average annual contribution paid by that employer over the previous 3-year period; however, if the Group Workers' Compensation Pool Insolvency Fund is then for any reason financially unable to assure prompt payment of compensation and medical services, the employer member may be assessed without limitation. If and only if (i) the Group Workers' Compensation Pool Insolvency Fund has a positive balance of less than $1,000,000, (ii) the Director has declared a qualified group workers' compensation pool to be in default, and (iii) the Group Workers' Compensation Pool Insolvency Fund is financially unable to pay all employees whose compensation and medical services have been approved, the Director shall levy upon and collect from all qualified group workers' compensation pools an assessment to provide the balance necessary to assure prompt payment of approved compensation and medical services. If an insurance carrier becomes liable for workers' compensation and occupational diseases payments under the terms of the policy covering the qualified group workers' compensation pool, the carrier shall make appropriate payments and payments from the Fund shall cease. Payments from the Fund shall resume only when the insurance carrier's liability is exhausted.

(Source: P.A. 91-757, eff. 1-1-01.)

(215 ILCS 5/107a.15)

Sec. 107a.15. Authority of Director.

(a) If the Director determines that a group workers' compensation pool is not in compliance with this Article, the Director shall require the pool to eliminate the condition causing the noncompliance within a specified time from the date the notice of the Director's requirement is mailed or delivered to the pool.

(b) If a pool fails to comply with the Director's requirement, the pool shall be deemed to be in a hazardous financial condition, and the Director may take one or more of the actions authorized by law as to pools in hazardous financial condition.

(Source: P.A. 91-757, eff. 1-1-01.)

(215 ILCS 5/Art. VI heading) ARTICLE VI. FOREIGN OR ALIEN COMPANIES (Article scheduled to be repealed on January 1, 2027)