Bill Text: IL SB0765 | 2023-2024 | 103rd General Assembly | Engrossed

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Bill Title: Amends the Farm Mutual Insurance Company Act of 1986. Provides that, until the date that is 5 years after the effective date of the amendatory Act, a farm mutual insurance company insuring against the perils of wind or hail must have and maintain adequate catastrophic reinsurance (instead of catastrophic reinsurance which limits the company's exposure on any one loss occurrence to 20% of its policyholders' surplus). Defines "adequate catastrophic reinsurance" as reinsurance in an amount no less than that required for a 500-year event, based on an actuarially sound catastrophe model that limits the company's exposure on any one loss occurrence to (i) 20% of its policyholders' surplus or (ii) an amount authorized by the Director of Insurance. Provides that a farm mutual insurance company must additionally have and maintain aggregate reinsurance coverage in an amount no less than that required for a 250-year event, based on an actuarially sound catastrophe model. Provides that the reinsurance permitted or required under the provisions must be provided by (i) a farm mutual insurance company, (ii) an insurance company authorized to write the kinds of insurance described in the Illinois Insurance Code pertaining to casualty, fidelity, surety, fire, marine, and other types of insurance, or (iii) a reinsurer and reinsurance program meeting the standards set forth in the Illinois Insurance Code that permit a domestic company to take credit for reinsurance. Requires a farm mutual insurance company converting from unlimited catastrophic reinsurance to adequate catastrophic reinsurance to provide notice of the change to policyholders in a form approved by the Director of Insurance. Provides that the provisions of the amendatory Act become inoperative on and after the date that is 5 years after the effective date of the amendatory Act. Effective immediately.

Spectrum: Bipartisan Bill

Status: (Passed) 2023-11-17 - Public Act . . . . . . . . . 103-0566 [SB0765 Detail]

Download: Illinois-2023-SB0765-Engrossed.html

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AN ACT concerning regulation.
Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
Section 5. The Farm Mutual Insurance Company Act of 1986
is amended by changing Section 10 as follows:
(215 ILCS 120/10) (from Ch. 73, par. 1260)
Sec. 10. Property insurable; limitations of risk.
(a) Until the date that is 5 years after the effective date
of this amendatory Act of the 103rd General Assembly this
subsection (a) applies:
(1) Farm mutual insurance companies are permitted to
insure the following classes of property:
(A) (a) Farm property, including residences and
other farm buildings and all classes of personal
property in connection therewith, other than motor
vehicles required to be licensed for road use,
including such property temporarily located elsewhere;
(B) (b) Growing crops;
(C) (c) Buildings and personal property used in
the processing of agricultural products in conjunction
with a farming operation;
(D) (d) Residences, including household and
personal effects, and including such property

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temporarily located elsewhere;
(E) (e) Churches, schools and community buildings
and such property as may be properly contained
therein.
No farm mutual insurance company may insure any
property within the limits of any city containing over
50,000 inhabitants at the time of the organization of the
company.
(2) No farm mutual insurance company authorized to
write the kinds of insurance enumerated in Section 5 of
this Act may expose itself to any loss on any one risk in
an amount in excess of $20,000 plus 10% of its
policyholders' surplus in excess of $20,000.
A farm mutual insurance company insuring against
the perils of wind or hail must have and maintain adequate
catastrophic reinsurance which limits the company's
exposure on any one loss occurrence to 20% of its
policyholders' surplus.
A farm mutual insurance company converting from
unlimited catastrophic reinsurance to adequate
catastrophic reinsurance under this Section shall provide
notice of the change to policyholders in a form approved
by the Director of Insurance.
A farm mutual insurance company must additionally have
and maintain aggregate reinsurance coverage in an amount
no less than that required for a 250-year event, based on

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an actuarially sound catastrophe model.
The reinsurance permitted or required by this Section
must be provided by (i) a farm mutual insurance company,
(ii) an insurance company authorized to write the kinds of
insurance described in Class 2 or Class 3 of Section 4 of
the Illinois Insurance Code, or (iii) a reinsurer and
reinsurance program meeting the standards set forth in
Article XI of the Illinois Insurance Code that permit a
domestic company to take credit for reinsurance.
Nothing in this Section shall be construed to prohibit
a farm mutual insurance company from purchasing
reinsurance coverage greater than the minimum requirement
set forth under this Section, including purchasing
unlimited catastrophic coverage.
No portion of any such risk which has been reinsured
with a farm mutual insurance company or an insurance
company authorized to write the kinds of insurance
described in Class 2 or Class 3 of Section 4 of the
Illinois Insurance Code shall be included in determining
the limitation of risk described herein.
For purposes of this Section:
A single risk shall be all real and personal property
in one fixed location and not separated by 50 feet.
"Adequate catastrophic reinsurance" means reinsurance
in an amount no less than that required for a 500-year
event, based on an actuarially sound catastrophe model

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that limits the company's exposure on any one loss
occurrence to (i) 20% of its policyholders' surplus or
(ii) an amount authorized by the Director of Insurance.
As regards the peril of wind or hail, the term "loss
occurrence" shall mean all losses occasioned by tornadoes,
cyclones, windstorms, hurricanes, or hail stones arising
from the same atmospheric disturbance and occurring during
any continuous period of not less than 48 hours.
(3) Whenever the company's financial condition is such
that the further assumption of risks might be hazardous to
policyholders, the Director of Insurance may order the
company to take one or more of the following steps:
(A) (a) To reduce the loss exposure by
reinsurance;
(B) (b) To reduce the volume of business being
written or renewed;
(C) (c) To suspend the writing of new business;
(D) (d) To suspend the writing of both new and
renewal business;
(E) (e) To levy a special assessment of
policyholders;
(F) (f) To reduce general or acquisition expenses
by specified methods.
(4) Whenever the Director determines that a farm
mutual insurance company is insolvent he shall order the
farm mutual insurance company to levy a special assessment

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within 30 days of receipt of such order. If the insolvency
is not corrected within 90 days of the mailing of such
assessment, the company shall be subject to liquidation
pursuant to Article XIII of the Illinois Insurance Code.
(b) On and after the date that is 5 years after the
effective date of this amendatory Act of the 103rd General
Assembly this subsection (b) applies:
(1) Farm mutual insurance companies are permitted to
insure the following classes of property:
(A) Farm property, including residences and other
farm buildings and all classes of personal property in
connection therewith, other than motor vehicles
required to be licensed for road use, including such
property temporarily located elsewhere;
(B) Growing crops;
(C) Buildings and personal property used in the
processing of agricultural products in conjunction
with a farming operation;
(D) Residences, including household and personal
effects, and including such property temporarily
located elsewhere;
(E) Churches, schools and community buildings and
such property as may be properly contained therein.
No farm mutual insurance company may insure any
property within the limits of any city containing over
50,000 inhabitants at the time of the organization of the

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company.
(2) No farm mutual insurance company authorized to
write the kinds of insurance enumerated in Section 5 of
this Act may expose itself to any loss on any one risk in
an amount in excess of $20,000 plus 10% of its
policyholders' surplus in excess of $20,000.
A farm mutual insurance company insuring against the
perils of wind or hail must have and maintain catastrophic
reinsurance which limits the company's exposure on any one
loss occurrence to 20% of its policyholders' surplus.
No portion of any such risk which has been reinsured
with a farm mutual insurance company or an insurance
company authorized to write the kinds of insurance
described in Class 2 or Class 3 of Section 4 of the
Illinois Insurance Code shall be included in determining
the limitation of risk described herein.
For purposes of this Section:
A single risk shall be all real and personal property
in one fixed location and not separated by 50 feet.
As regards the peril of wind or hail, the term "loss
occurrence" shall mean all losses occasioned by tornadoes,
cyclones, windstorms, hurricanes, or hail stones arising
from the same atmospheric disturbance and occurring during
any continuous period of not less than 48 hours.
(3) Whenever the company's financial condition is such
that the further assumption of risks might be hazardous to

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policyholders, the Director of Insurance may order the
company to take one or more of the following steps:
(A) To reduce the loss exposure by reinsurance;
(B) To reduce the volume of business being written
or renewed;
(C) To suspend the writing of new business;
(D) To suspend the writing of both new and renewal
business;
(E) To levy a special assessment of policyholders;
(F) To reduce general or acquisition expenses by
specified methods.
(4) Whenever the Director determines that a farm
mutual insurance company is insolvent he shall order the
farm mutual insurance company to levy a special assessment
within 30 days of receipt of such order. If the insolvency
is not corrected within 90 days of the mailing of such
assessment, the company shall be subject to liquidation
pursuant to Article XIII of the Illinois Insurance Code.
(Source: P.A. 88-364.)