Bill Text: IL SB3322 | 2013-2014 | 98th General Assembly | Enrolled

NOTE: There are more recent revisions of this legislation. Read Latest Draft

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Bill Title: Amends the Intergovernmental Cooperation Act. Makes changes in the provision concerning joint self-insurance. Provides that any statement of actuarial opinion, as defined in the Code of Professional Conduct of the American Academy of Actuaries (the Academy), must be prepared by an actuary who satisfies the qualification standards set forth by the Academy to issue the opinion in the particular area of actuarial practice. Amends the Illinois Insurance Code. In provisions concerning deposits of securities, deletes certain references to provisions of the Code concerning rated credit instruments. Makes changes in the provisions concerning the kinds of reinsurance agreements that shall not be entered into by any domestic company unless such agreements are approved in writing by the Director of Insurance and the assignability of life insurance. Repeals the Insurance Exchange, Assessment Legal Reserve Life Companies, Mutual Benefit Associations, and Small Employer Group Health Insurance Law Articles of the Code. Repeals provisions concerning the committee to create a uniform small employer group-health status questionnaire and individual health statement and accident and health expense reporting.

Sponsorship: Partisan Bill (Democrat 3)

Status: (Passed) 2014-08-15 - Public Act . . . . . . . . . 98-0969 [SB3322 Detail]

Download: Illinois-2013-SB3322-Enrolled.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 Intergovernmental Cooperation Act is
amended by changing Section 6 as follows:
(5 ILCS 220/6) (from Ch. 127, par. 746)
Sec. 6. Joint self-insurance. An intergovernmental
contract may, among other undertakings, authorize public
agencies to jointly self-insure and authorize each public
agency member of the contract to utilize its funds to pay to a
joint insurance pool its costs and reserves to protect, wholly
or partially, itself or any public agency member of the
contract against liability or loss in the designated insurable
area.
A joint insurance pool shall have an annual audit performed
by an independent certified public accountant and shall file an
annual audited financial report with the Director of Insurance
no later than 150 days after the end of the pool's immediately
preceding fiscal year. The Director of Insurance shall issue
rules necessary to implement this audit and report requirement.
The rule shall establish the due date for filing the initial
annual audited financial report. Within 30 days after January
1, 1991, and within 30 days after each January 1 thereafter,

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public agencies that are jointly self-insured to protect
against liability under the Workers' Compensation Act and the
Workers' Occupational Diseases Act shall file with the Illinois
Workers' Compensation Commission a report indicating an
election to self-insure.
The joint insurance pool shall also annually file with the
Director a statement of actuarial opinion that conforms to the
Actuarial Standards of Practice issued by the Actuarial
Standards Board. All statements of actuarial opinion shall be
issued by an independent actuary who is an associate or fellow
of the Casualty Actuarial Society or of the Society of
Actuaries. The statement of actuarial opinion shall include a
statement in a casualty actuarial society that the pool's
reserves are calculated in accordance with sound
loss-reserving standards and adequate for the payment of
claims. This opinion shall be filed no later than 150 days
after the end of each fiscal year. The joint insurance pool
shall be exempt from filing a statement of actuarial opinion by
an independent actuary who is an associate or fellow of the
Casualty Actuarial Society or of the Society of Actuaries in a
casualty actuarial society that the joint insurance pool's
reserves are in accordance with sound loss-reserving standards
and payment of claims for the primary level of coverage if the
joint insurance pool files with the Director, by the reporting
deadline, a statement of actuarial opinion from the provider of
the joint pool's aggregate coverage, reinsurance, or other

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similar excess insurance coverage. Any statement of actuarial
opinion must be prepared by an actuary who satisfies the
qualification standards set forth by the American Academy of
Actuaries to issue the opinion in the particular area of
actuarial practice.
The Director may assess penalties against a joint insurance
pool that fails to comply with the auditing, statement of
actuarial opinion, and examination requirements of this
Section in an amount equal to $500 per day for each violation,
up to a maximum of $10,000 for each violation. The Director (or
his or her staff) or a Director-selected independent auditor
(or actuarial firm) that is not owned or affiliated with an
insurance brokerage firm, insurance company, or other
insurance industry affiliated entity may examine, as often as
the Director deems advisable, the affairs, transactions,
accounts, records, and assets and liabilities of each joint
insurance pool that fails to comply with this Section. The
joint insurance pool shall cooperate fully with the Director's
representatives in all evaluations and audits of the joint
insurance pool and resolve issues raised in those evaluations
and audits. The failure to resolve those issues may constitute
a violation of this Section, and may, after notice and an
opportunity to be heard, result in the imposition of penalties
pursuant to this Section. No sanctions under this Section may
become effective until 30 days after the date that a notice of
sanctions is delivered by registered or certified mail to the

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joint insurance pool. The Director shall have the authority to
extend the time for filing any statement by any joint insurance
pool for reasons that he or she considers good and sufficient.
If a joint insurance pool 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 120 days,
except that this requirement applies only to joint insurance
pool agreements entered into, modified, or renewed on or after
the effective date of this amendatory Act of the 98th General
Assembly.
For purposes of this Section, "public agency member" means
any public agency defined or created under this Act, any local
public entity as defined in Section 1-206 of the Local
Governmental and Governmental Employees Tort Immunity Act, and
any public agency, authority, instrumentality, council, board,
service region, district, unit, bureau, or, commission, or any
municipal corporation, college, or university, whether
corporate or otherwise, and any other local governmental body
or similar entity that is presently existing or created after
the effective date of this amendatory Act of the 92nd General
Assembly, whether or not specified in this Section. Only public
agency members with tax receipts, tax revenues, taxing
authority, or other resources sufficient to pay costs and to
service debt related to intergovernmental activities described
in this Section, or public agency members created by or as part

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of a public agency with these powers, may enter into contracts
or otherwise associate among themselves as permitted in this
Section.
No joint insurance pool or other intergovernmental
cooperative offering health insurance shall interfere with the
statutory obligation of any public agency member to bargain
over or to reach agreement with a labor organization over a
mandatory subject of collective bargaining as those terms are
used in the Illinois Public Labor Relations Act. No
intergovernmental contract of insurance offering health
insurance shall limit the rights or obligations of public
agency members to engage in collective bargaining, and it shall
be unlawful for a joint insurance pool or other
intergovernmental cooperative offering health insurance to
discriminate against public agency members or otherwise
retaliate against such members for limiting their
participation in a joint insurance pool as a result of a
collective bargaining agreement.
It shall not be considered a violation of this Section for
an intergovernmental contract of insurance relating to health
insurance coverage, life insurance coverage, or both to permit
the pool or cooperative, if a member withdraws employees or
officers into a union-sponsored program, to re-price the costs
of benefits provided to the continuing employees or officers
based upon the same underwriting criteria used by that pool or
cooperative in the normal course of its business, but no member

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shall be expelled from a pool or cooperative if the continuing
employees or officers meet the general criteria required of
other members.
(Source: P.A. 98-504, eff. 1-1-14.)
Section 10. The Illinois Insurance Code is amended by
changing Sections 26, 53, 174, and 245.1 as follows:
(215 ILCS 5/26) (from Ch. 73, par. 638)
(Section scheduled to be repealed on January 1, 2017)
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 which 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 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;

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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

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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

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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

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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

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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.)
(215 ILCS 5/53) (from Ch. 73, par. 665)
(Section scheduled to be repealed on January 1, 2017)
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 which 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 minimum
surplus required to be maintained under Section 43. The

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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.

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(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.

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(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

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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

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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.)
(215 ILCS 5/174) (from Ch. 73, par. 786)
Sec. 174. Kinds of agreements requiring approval.

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(1) The following kinds of reinsurance agreements shall not
be entered into by any domestic company unless such agreements
are approved in writing by the Director:
(a) Agreements of reinsurance of any such company
transacting the kind or kinds of business enumerated in Class 1
of Section 4, or as a Fraternal Benefit Society under Article
XVII, a Mutual Benefit Association under Article XVIII, a
Burial Society under Article XIX or an Assessment Accident and
Assessment Accident and Health Company under Article XXI, cedes
previously issued and outstanding risks to any company, or
cedes any risks to a company not authorized to transact
business in this State, or assumes any outstanding risks on
which the aggregate reserves and claim liabilities exceed 20
percent of the aggregate reserves and claim liabilities of the
assuming company, as reported in the preceding annual
statement, for the business of either life or accident and
health insurance.
(b) Any agreement or agreements of reinsurance whereby any
company transacting the kind or kinds of business enumerated in
either Class 2 or Class 3 of Section 4 cedes to any company or
companies at one time, or during a period of six consecutive
months more than twenty per centum of the total amount of its
previously retained unearned premium reserve liability.
(c) (Blank). Any agreement or agreements of reinsurance
whereby any company transacting the kind or kinds of business
enumerated in either Class 2 or 3 of section 4 except Class

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2(a) cedes any outstanding risks to a stock company with less
than $2,000,000 in capital and surplus or to a mutual or
reciprocal company with less than $2,000,000 in surplus.
(2) An agreement which is not disapproved by the Director
within thirty days after its submission shall be deemed
approved.
(Source: P.A. 82-626.)
(215 ILCS 5/245.1) (from Ch. 73, par. 857.1)
Sec. 245.1. Assignability of Life Insurance.
No provision of the Illinois Insurance Code, or any other
law prohibits an insured under any policy of life insurance, or
any other person who may be the owner of any rights under such
policy, from making an assignment of all or any part of his
rights and privileges under the policy including but not
limited to the right to designate a beneficiary thereunder and
to have an individual policy issued in accordance with
paragraphs (G), (H), and (K) of Section 231.1 (d) and (g) of
Section 231 of the Illinois Insurance Code. Subject to the
terms of the policy or any contract relating thereto, an
assignment by an insured or by any other owner of rights under
the policy, made before or after the effective date of this
amendatory Act of 1969 is valid for the purpose of vesting in
the assignee, in accordance with any provisions included
therein as to the time at which it is effective, all rights and
privileges so assigned. However, such assignment is without

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prejudice to the company on account of any payment it makes or
individual policy it issues in accordance with paragraphs (d)
and (g) of Section 231 before receipt of notice of the
assignment. This amendatory Act of 1969 acknowledges, declares
and codifies the existing right of assignment of interests
under life insurance policies.
(Source: P.A. 76-1443.)
(215 ILCS 5/Art. V.5 rep.)
(215 ILCS 5/Art. XVI rep.)
(215 ILCS 5/Art. XVIII rep.)
(215 ILCS 5/Art. XIXB rep.)
(215 ILCS 5/178 rep.)
(215 ILCS 5/359b rep.)
(215 ILCS 5/359c rep.)
Section 15. The Illinois Insurance Code is amended by
repealing Articles V 1/2, XVI, XVIII, and XIXB and Sections
178, 359b, and 359c.
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INDEX
Statutes amended in order of appearance