98TH GENERAL ASSEMBLY State of Illinois 2013 and 2014 HB4725

Introduced , by Rep. Frank J. Mautino

SYNOPSIS AS INTRODUCED:

See Index

Amends the Freedom of Information Act. Exempts from inspection and copying under the Act information that is exempted from disclosure under the provision concerning confidentiality of the Risk Management and Own Risk and Solvency Assessment Law of the Illinois Insurance Code. Amends the Illinois Insurance Code. Creates a new Article which may be cited as the Risk Management and Own Risk and Solvency Assessment Law. Provides that an insurer shall maintain a risk management framework to assist the insurer with identifying, assessing, monitoring, managing, and reporting on its material and relevant risks and that the requirement may be satisfied if the insurance group of which the insurer is a member maintains a risk management framework applicable to the operations of the insurer. Provides that an insurer, or the insurance group of which the insurer is a member, shall regularly conduct an own risk and solvency assessment (ORSA) consistent with a process comparable to the ORSA Guidance Manual. Requires that the ORSA be conducted no less than annually but also at any time when there are significant changes to the risk profile of the insurer or the insurance group of which the insurer is a member. Provides that upon the Director of Insurance's request, and no more than once each year, an insurer shall submit to the Director an ORSA summary report or any combination of reports that together contain the information described in the ORSA Guidance Manual, applicable to the insurer and the insurance group of which it is a member. Sets forth provisions concerning the ORSA summary report and the contents of the ORSA summary report; exemption; confidentiality; and sanctions. Makes other changes. Contains a severability provision. Effective January 1, 2015.

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FISCAL NOTE ACT MAY APPLY

A BILL FOR

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1 AN ACT concerning regulation.

2 Be it enacted by the People of the State of Illinois,

3 represented in the General Assembly:

4 Section 5. The Freedom of Information Act is amended by

5 changing Section 7.5 as follows:

6 (5 ILCS 140/7.5)

7 Sec. 7.5. Statutory Exemptions. To the extent provided for

8 by the statutes referenced below, the following shall be exempt

9 from inspection and copying:

10 (a) All information determined to be confidential under

11 Section 4002 of the Technology Advancement and Development Act.

12 (b) Library circulation and order records identifying

13 library users with specific materials under the Library Records

14 Confidentiality Act.

15 (c) Applications, related documents, and medical records

16 received by the Experimental Organ Transplantation Procedures

17 Board and any and all documents or other records prepared by

18 the Experimental Organ Transplantation Procedures Board or its

19 staff relating to applications it has received.

20 (d) Information and records held by the Department of

21 Public Health and its authorized representatives relating to

22 known or suspected cases of sexually transmissible disease or

23 any information the disclosure of which is restricted under the

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1 Illinois Sexually Transmissible Disease Control Act.

2 (e) Information the disclosure of which is exempted under

3 Section 30 of the Radon Industry Licensing Act.

4 (f) Firm performance evaluations under Section 55 of the

5 Architectural, Engineering, and Land Surveying Qualifications

6 Based Selection Act.

7 (g) Information the disclosure of which is restricted and

8 exempted under Section 50 of the Illinois Prepaid Tuition Act.

9 (h) Information the disclosure of which is exempted under

10 the State Officials and Employees Ethics Act, and records of

11 any lawfully created State or local inspector general's office

12 that would be exempt if created or obtained by an Executive

13 Inspector General's office under that Act.

14 (i) Information contained in a local emergency energy plan

15 submitted to a municipality in accordance with a local

16 emergency energy plan ordinance that is adopted under Section

17 11-21.5-5 of the Illinois Municipal Code.

18 (j) Information and data concerning the distribution of

19 surcharge moneys collected and remitted by wireless carriers

20 under the Wireless Emergency Telephone Safety Act.

21 (k) Law enforcement officer identification information or

22 driver identification information compiled by a law

23 enforcement agency or the Department of Transportation under

24 Section 11-212 of the Illinois Vehicle Code.

25 (l) Records and information provided to a residential

26 health care facility resident sexual assault and death review

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1 team or the Executive Council under the Abuse Prevention Review

2 Team Act.

3 (m) Information provided to the predatory lending database

4 created pursuant to Article 3 of the Residential Real Property

5 Disclosure Act, except to the extent authorized under that

6 Article.

7 (n) Defense budgets and petitions for certification of

8 compensation and expenses for court appointed trial counsel as

9 provided under Sections 10 and 15 of the Capital Crimes

10 Litigation Act. This subsection (n) shall apply until the

11 conclusion of the trial of the case, even if the prosecution

12 chooses not to pursue the death penalty prior to trial or

13 sentencing.

14 (o) Information that is prohibited from being disclosed

15 under Section 4 of the Illinois Health and Hazardous Substances

16 Registry Act.

17 (p) Security portions of system safety program plans,

18 investigation reports, surveys, schedules, lists, data, or

19 information compiled, collected, or prepared by or for the

20 Regional Transportation Authority under Section 2.11 of the

21 Regional Transportation Authority Act or the St. Clair County

22 Transit District under the Bi-State Transit Safety Act.

23 (q) Information prohibited from being disclosed by the

24 Personnel Records Review Act.

25 (r) Information prohibited from being disclosed by the

26 Illinois School Student Records Act.

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1 (s) Information the disclosure of which is restricted under

2 Section 5-108 of the Public Utilities Act.

3 (t) All identified or deidentified health information in

4 the form of health data or medical records contained in, stored

5 in, submitted to, transferred by, or released from the Illinois

6 Health Information Exchange, and identified or deidentified

7 health information in the form of health data and medical

8 records of the Illinois Health Information Exchange in the

9 possession of the Illinois Health Information Exchange

10 Authority due to its administration of the Illinois Health

11 Information Exchange. The terms "identified" and

12 "deidentified" shall be given the same meaning as in the Health

13 Insurance Accountability and Portability Act of 1996, Public

14 Law 104-191, or any subsequent amendments thereto, and any

15 regulations promulgated thereunder.

16 (u) Records and information provided to an independent team

17 of experts under Brian's Law.

18 (v) Names and information of people who have applied for or

19 received Firearm Owner's Identification Cards under the

20 Firearm Owners Identification Card Act or applied for or

21 received a concealed carry license under the Firearm Concealed

22 Carry Act, unless otherwise authorized by the Firearm Concealed

23 Carry Act; and databases under the Firearm Concealed Carry Act,

24 records of the Concealed Carry Licensing Review Board under the

25 Firearm Concealed Carry Act, and law enforcement agency

26 objections under the Firearm Concealed Carry Act.

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1 (w) Personally identifiable information which is exempted

2 from disclosure under subsection (g) of Section 19.1 of the

3 Toll Highway Act.

4 (x) Information which is exempted from disclosure under

5 Section 5-1014.3 of the Counties Code or Section 8-11-21 of the

6 Illinois Municipal Code.

7 (y) Confidential information under the Adult Protective

8 Services Act and its predecessor enabling statute, the Elder

9 Abuse and Neglect Act, including information about the identity

10 and administrative finding against any caregiver of a verified

11 and substantiated decision of significant abuse, neglect, or

12 financial exploitation of an eligible adult maintained in the

13 Department of Public Health's Health Care Worker Registry.

14 (z) Records and information provided to an at-risk adult

15 fatality review team or the Illinois At-Risk Adult Fatality

16 Review Team Advisory Council under Section 15 of the Adult

17 Protective Services Act.

18 (aa) Information that is exempted from disclosure under

19 Section 129.8 of the Illinois Insurance Code.

20 (Source: P.A. 97-80, eff. 7-5-11; 97-333, eff. 8-12-11; 97-342,

21 eff. 8-12-11; 97-813, eff. 7-13-12; 97-976, eff. 1-1-13; 98-49,

22 eff. 7-1-13; 98-63, eff. 7-9-13; revised 7-23-13.)

23 Section 10. The Illinois Insurance Code is amended by

24 changing Sections 131.16, 131.20a, and 139 and adding Article

25 VIII 1/4 as follows:

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1 (215 ILCS 5/Art. VIII 1/4 heading new)

2 ARTICLE VIII 1/4. RISK MANAGEMENT AND

3 OWN RISK AND SOLVENCY ASSESSMENT

4 (215 ILCS 5/129 new)

5 Sec. 129. Short title. This Article may be cited as the

6 Risk Management and Own Risk and Solvency Assessment Law.

7 (215 ILCS 5/129.1 new)

8 Sec. 129.1. Purpose and scope. The purpose of this Article

9 is to provide the requirements for maintaining a risk

10 management framework and completing an own risk and solvency

11 assessment (ORSA) and provide guidance and instructions for

12 filing an ORSA summary report with the Director.

13 The requirements of this Article shall apply to all

14 insurers domiciled in this State unless exempt pursuant to

15 Section 129.7.

16 The General Assembly finds and declares that an ORSA

17 summary report will contain confidential and sensitive

18 information related to an insurer or insurance group's

19 identification of risks material and relevant to the insurer or

20 insurance group filing the report. This information will

21 include proprietary and trade secret information that has the

22 potential for harm and competitive disadvantage to the insurer

23 or insurance group if the information is made public. It is the

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1 intent of this General Assembly that the ORSA summary report

2 shall be a confidential document filed with the Director, that

3 the ORSA summary report shall be shared only as stated herein

4 and to assist the Director in the performance of his or her

5 duties, and that in no event shall an ORSA summary report be

6 subject to public disclosure.

7 (215 ILCS 5/129.2 new)

8 Sec. 129.2. Definitions. In this Article:

9 "Insurance group", for the purpose of conducting an ORSA,

10 means those insurers and affiliates included within an

11 insurance holding company system as defined in Section 131.1 of

12 this Code.

13 "Insurer" has the same meaning as set forth in Section 2 of

14 this Code, except that it shall not include agencies,

15 authorities, or instrumentalities of the United States or its

16 possessions or territories, the Commonwealth of Puerto Rico,

17 the District of Columbia, or a state or political subdivision

18 of a state.

19 "Own risk and solvency assessment" or "ORSA" means a

20 confidential internal assessment, appropriate to the nature,

21 scale, and complexity of an insurer or insurance group,

22 conducted by that insurer or insurance group of the material

23 and relevant risks associated with the insurer or insurance

24 group's current business plan, and the sufficiency of capital

25 resources to support those risks.

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1 "ORSA Guidance Manual" means the current version of the Own

2 Risk and Solvency Assessment Guidance Manual developed and

3 adopted by the National Association of Insurance Commissioners

4 (NAIC) and as amended from time to time. A change in the ORSA

5 Guidance Manual shall be effective on the January 1 following

6 the calendar year in which the changes have been adopted by the

7 NAIC.

8 "ORSA summary report" means a confidential high-level

9 summary of an insurer or insurance group's ORSA.

10 (215 ILCS 5/129.3 new)

11 Sec. 129.3. Risk management framework. An insurer shall

12 maintain a risk management framework to assist the insurer with

13 identifying, assessing, monitoring, managing, and reporting on

14 its material and relevant risks. The requirement of this

15 Section may be satisfied if the insurance group of which the

16 insurer is a member maintains a risk management framework

17 applicable to the operations of the insurer.

18 (215 ILCS 5/129.4 new)

19 Sec. 129.4. ORSA requirement. Subject to Section 129.7 of

20 this Code, an insurer, or the insurance group of which the

21 insurer is a member, shall regularly conduct an ORSA consistent

22 with a process comparable to the ORSA Guidance Manual. The ORSA

23 shall be conducted no less than annually but also at any time

24 when there are significant changes to the risk profile of the

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1 insurer or the insurance group of which the insurer is a

2 member.

3 (215 ILCS 5/129.5 new)

4 Sec. 129.5. ORSA summary report.

5 (a) Upon the Director's request, and no more than once each

6 year, an insurer shall submit to the Director an ORSA summary

7 report or any combination of reports that together contain the

8 information described in the ORSA Guidance Manual, applicable

9 to the insurer and the insurance group of which it is a member.

10 Notwithstanding any request from the Director, if the insurer

11 is a member of an insurance group, the insurer shall submit the

12 report or reports required by this subsection (a) if the

13 Director is the lead state commissioner of the insurance group

14 as determined by the procedures within the Financial Analysis

15 Handbook adopted by the National Association of Insurance

16 Commissioners.

17 (b) The report or reports shall include a signature of the

18 insurer or insurance group's chief risk officer or other

19 executive having responsibility for the oversight of the

20 insurer's enterprise risk management process attesting to the

21 best of his or her belief and knowledge that the insurer

22 applies the enterprise risk management process described in the

23 ORSA summary report and that a copy of the report has been

24 provided to the insurer's board of directors or the appropriate

25 committee thereof.

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1 (c) An insurer may comply with subsection (a) of this

2 Section by providing the most recent and substantially similar

3 report or reports provided by the insurer or another member of

4 an insurance group of which the insurer is a member to the

5 commissioner of another state or to a supervisor or regulator

6 of a foreign jurisdiction, if that report provides information

7 that is comparable to the information described in the ORSA

8 Guidance Manual. Any such report in a language other than

9 English must be accompanied by a translation of that report

10 into the English language.

11 (d) The first filing of the ORSA summary report shall be in

12 2015.

13 (215 ILCS 5/129.6 new)

14 Sec. 129.6. Contents of ORSA summary report.

15 (a) The ORSA summary report shall be prepared consistent

16 with the ORSA Guidance Manual, subject to the requirements of

17 subsection (b) of this Section. Documentation and supporting

18 information shall be maintained and made available upon

19 examination or upon the request of the Director.

20 (b) The review of the ORSA summary report, and any

21 additional requests for information, shall be made using

22 similar procedures currently used in the analysis and

23 examination of multi-state or global insurers and insurance

24 groups.

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1 (215 ILCS 5/129.7 new)

2 Sec. 129.7. Exemption.

3 (a) An insurer shall be exempt from the requirements of

4 this Article if:

5 (1) the insurer has annual direct written and

6 unaffiliated assumed premium, including international

7 direct and assumed premium, but excluding premiums

8 reinsured with the Federal Crop Insurance Corporation and

9 Federal Flood Program, less than $500,000,000; and

10 (2) the insurance group of which the insurer is a

11 member has annual direct written and unaffiliated assumed

12 premium, including international direct and assumed

13 premium, but excluding premiums reinsured with the Federal

14 Crop Insurance Corporation and Federal Flood Program, less

15 than $1,000,000,000.

16 (b) If an insurer qualifies for exemption pursuant to item

17 (1) of subsection (a) of this Section, but the insurance group

18 of which the insurer is a member does not qualify for exemption

19 pursuant to item (2) of subsection (a) of this Section, then

20 the ORSA summary report that may be required pursuant to

21 Section 129.5 of this Code shall include every insurer within

22 the insurance group. This requirement may be satisfied by the

23 submission of more than one ORSA summary report for any

24 combination of insurers, provided any combination of reports

25 includes every insurer within the insurance group.

26 (c) If an insurer does not qualify for exemption pursuant

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1 to item (1) of subsection (a) of this Section, but the

2 insurance group of which it is a member qualifies for exemption

3 pursuant to item (2) of subsection (a) of this Section, then

4 the only ORSA summary report that may be required pursuant to

5 Section 129.5 shall be the report applicable to that insurer.

6 (d) An insurer that does not qualify for exemption pursuant

7 to subsection (a) of this Section may apply to the Director for

8 a waiver from the requirements of this Article based upon

9 unique circumstances. In deciding whether to grant the

10 insurer's request for waiver, the Director may consider the

11 type and volume of business written, ownership and

12 organizational structure, and any other factor the Director

13 considers relevant to the insurer or insurance group of which

14 the insurer is a member. If the insurer is part of an insurance

15 group with insurers domiciled in more than one state, the

16 Director shall coordinate with the lead state commissioner and

17 with the other domiciliary commissioners in considering

18 whether to grant the insurer's request for a waiver.

19 (e) Notwithstanding the exemptions stated in this Section,

20 the following provisions shall apply:

21 (1) The Director may require that an insurer maintain a

22 risk management framework, conduct an ORSA, and file an

23 ORSA summary report based on unique circumstances,

24 including, but not limited to, the type and volume of

25 business written, ownership and organizational structure,

26 federal agency requests, and international supervisor

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1 requests.

2 (2) The Director may require that an insurer maintain a

3 risk management framework, conduct an ORSA, and file an

4 ORSA summary report if the insurer has risk-based capital

5 for a company action level event as set forth in Section

6 35A-15 of this Code, meets one or more of the standards of

7 an insurer deemed to be in hazardous financial condition as

8 defined in Section 186.1 of this Code, or otherwise

9 exhibits qualities of a troubled insurer as determined by

10 the Director.

11 (f) If an insurer that qualifies for an exemption pursuant

12 to subsection (a) of this Section subsequently no longer

13 qualifies for that exemption due to changes in premium as

14 reflected in the insurer's most recent annual statement or in

15 the most recent annual statements of the insurers within the

16 insurance group of which the insurer is a member, the insurer

17 shall have one year following the year the threshold is

18 exceeded to comply with the requirements of this Article.

19 (215 ILCS 5/129.8 new)

20 Sec. 129.8. Confidentiality.

21 (a) Documents, materials, or other information, including

22 the ORSA summary report, in the possession or control of the

23 Department that are obtained by, created by, or disclosed to

24 the Director or any other person under this Article, is

25 recognized by this State as being proprietary and to contain

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1 trade secrets. All such documents, materials, or other

2 information shall be confidential by law and privileged, shall

3 not be subject to the Freedom of Information Act, shall not be

4 subject to subpoena, and shall not be subject to discovery or

5 admissible in evidence in any private civil action. However,

6 the Director is authorized to use the documents, materials, or

7 other information in the furtherance of any regulatory or legal

8 action brought as a part of the Director's official duties. The

9 Director shall not otherwise make the documents, materials, or

10 other information public without the prior written consent of

11 the insurer.

12 (b) Neither the Director nor any person who received

13 documents, materials, or other ORSA-related information,

14 through examination or otherwise, while acting under the

15 authority of the Director or with whom such documents,

16 materials, or other information are shared pursuant to this

17 Article shall be permitted or required to testify in any

18 private civil action concerning any confidential documents,

19 materials, or information subject to subsection (a) of this

20 Section.

21 (c) In order to assist in the performance of regulatory

22 duties, the Director may:

23 (1) upon request, share documents, materials, or other

24 ORSA-related information, including the confidential and

25 privileged documents, materials, or information subject to

26 subsection (a) of this Section, including proprietary and

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1 trade secret documents and materials with other state,

2 federal, and international financial regulatory agencies,

3 including members of any supervisory college as defined in

4 the Section 131.20c of this Code, with the NAIC, and with

5 any third-party consultants designated by the Director,

6 provided that the recipient agrees in writing to maintain

7 the confidentiality and privileged status of the

8 ORSA-related documents, materials, or other information

9 and has verified in writing the legal authority to maintain

10 confidentiality; and

11 (2) receive documents, materials, or other

12 ORSA-related information, including otherwise confidential

13 and privileged documents, materials, or information,

14 including proprietary and trade-secret information or

15 documents, from regulatory officials of other foreign or

16 domestic jurisdictions, including members of any

17 supervisory college as defined in the Section 131.20c of

18 this Code, and from the NAIC, and shall maintain as

19 confidential or privileged any documents, materials, or

20 information received with notice or the understanding that

21 it is confidential or privileged under the laws of the

22 jurisdiction that is the source of the document, material,

23 or information.

24 (d) The Director shall enter into a written agreement with

25 the NAIC or a third-party consultant governing sharing and use

26 of information provided pursuant to this Article, consistent

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1 with this Section that shall:

2 (1) specify procedures and protocols regarding the

3 confidentiality and security of information shared with

4 the NAIC or a third-party consultant pursuant to this

5 Article, including procedures and protocols for sharing by

6 the NAIC with other state regulators from states in which

7 the insurance group has domiciled insurers; the agreement

8 shall provide that the recipient agrees in writing to

9 maintain the confidentiality and privileged status of the

10 ORSA-related documents, materials, or other information

11 and has verified in writing the legal authority to maintain

12 confidentiality;

13 (2) specify that ownership of information shared with

14 the NAIC or a third-party consultant pursuant to this

15 Article remains with the Director and the NAIC's or a

16 third-party consultant's use of the information is subject

17 to the direction of the Director;

18 (3) prohibit the NAIC or third-party consultant from

19 storing the information shared pursuant to this Article in

20 a permanent database after the underlying analysis is

21 completed;

22 (4) require prompt notice to be given to an insurer

23 whose confidential information in the possession of the

24 NAIC or a third-party consultant pursuant to this Article

25 is subject to a request or subpoena to the NAIC or a

26 third-party consultant for disclosure or production;

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1 (5) require the NAIC or a third-party consultant to

2 consent to intervention by an insurer in any judicial or

3 administrative action in which the NAIC or a third-party

4 consultant may be required to disclose confidential

5 information about the insurer shared with the NAIC or a

6 third-party consultant pursuant to this Article; and

7 (6) in the case of an agreement involving a third-party

8 consultant, provide for the insurer's written consent.

9 (e) The sharing of information and documents by the

10 Director pursuant to this Article shall not constitute a

11 delegation of regulatory authority or rulemaking, and the

12 Director is solely responsible for the administration,

13 execution, and enforcement of the provisions of this Article.

14 (f) No waiver of any applicable privilege or claim of

15 confidentiality in the documents, proprietary and trade-secret

16 materials, or other ORSA-related information shall occur as a

17 result of disclosure of such ORSA-related information or

18 documents to the Director under this Section or as a result of

19 sharing as authorized in this Article.

20 (g) Documents, materials, or other information in the

21 possession or control of the NAIC or any third-party

22 consultants pursuant to this Article shall be confidential by

23 law and privileged, shall not be subject to the Freedom of

24 Information Act, shall not be subject to subpoena, and shall

25 not be subject to discovery or admissible in evidence in any

26 private civil action.

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1 (215 ILCS 5/129.9 new)

2 Sec. 129.9. Sanctions. Any insurer failing, without just

3 cause, to timely file the ORSA summary report as required in

4 this Article shall be required, after notice and hearing, to

5 pay a penalty of $200 for each day's delay, to be recovered by

6 the Director, and the penalty so recovered shall be paid into

7 the General Revenue Fund of this State. The Director may reduce

8 the penalty if the insurer demonstrates to the Director that

9 the imposition of the penalty would constitute a financial

10 hardship to the insurer.

11 (215 ILCS 5/131.16) (from Ch. 73, par. 743.16)

12 Sec. 131.16. Reporting material changes or additions;

13 penalty for late registration statement.

14 (1) Each registered company must keep current the

15 information required to be included in its registration

16 statement by reporting all material changes or additions on

17 amendment forms designated by the Director within 15 days after

18 the end of the month in which it learns of each change or

19 addition, or within a longer time thereafter as the Director

20 may establish. Any transaction which has been submitted to the

21 Director pursuant to Section 131.20a need not be reported to

22 the Director under this subsection; except each registered

23 company must report all dividends and other distributions to

24 shareholders within 15 business days following the

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1 declaration.

2 (2) On or before May 1 each year, each company subject to

3 registration under this Article shall file a statement in a

4 format as designated by the Director. This statement shall

5 include information previously included in an amendment under

6 subsection (1) of this Section, transactions and agreements

7 submitted under Section 131.20a, and any other material

8 transactions which are required to be reported.

9 (2.5) Any person within an insurance holding company system

10 subject to registration shall be required to provide complete

11 and accurate information to a company where the information is

12 reasonably necessary to enable the company to comply with the

13 provisions of this Article.

14 (3) Any company failing, without just cause, to file any

15 registration statement, any summary of changes to a

16 registration statement, or any Enterprise Risk Filing or any

17 person within an insurance holding company system who fails to

18 provide complete and accurate information to a company as

19 required in this Code shall be required~~, after notice and~~

20 ~~hearing,~~to pay a penalty of up to $1,000 for each day's delay,

21 to be recovered by the Director of Insurance of the State of

22 Illinois, using the notice and hearing procedure in subsection

23 (2) of Section 403A of this Code, and the penalty so recovered

24 shall be paid into the General Revenue Fund of the State of

25 Illinois. The maximum penalty under this section is $50,000.

26 The Director may reduce the penalty if the company demonstrates

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1 to the Director that the imposition of the penalty would

2 constitute a financial hardship to the company.

3 (Source: P.A. 98-609, eff. 1-1-14.)

4 (215 ILCS 5/131.20a) (from Ch. 73, par. 743.20a)

5 Sec. 131.20a. Prior notification of transactions;

6 dividends and distributions.

7 (1) (a) The following transactions listed in items (i)

8 through (vii) involving a domestic company and any person in

9 its insurance holding company system, including amendments or

10 modifications (other than termination) of affiliate agreements

11 previously filed pursuant to this Section, which are subject to

12 any materiality standards contained in this Section, may not be

13 entered into unless the company has notified the Director in

14 writing of its intention to enter into such transaction at

15 least 30 days prior thereto, or such~~shorter~~ period as the

16 Director may permit, and the Director has not disapproved it

17 within such period. The notice for amendments or modifications

18 (other than termination) shall include the reasons for the

19 change and the financial impact on the domestic company.

20 Informal notice shall be reported, within 30 days after a

21 termination of a previously filed agreement, to the Director

22 for determination of the type of filing required, if any.

23 (i) Sales, purchases, exchanges of assets, loans or

24 extensions of credit, guarantees, investments, or any

25 other transaction, except dividends, that involves the

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1 transfer of assets from or liabilities to a company (A)

2 equal to or exceeding the lesser of 3% of the company's

3 admitted assets or 25% of its surplus as regards

4 policyholders as of the 31st day of December next preceding

5 or (B) that is proposed when the domestic company is not

6 eligible to declare and pay a dividend or other

7 distribution pursuant to the provisions of Section 27.

8 (ii) Loans or extensions of credit to any person that

9 is not an affiliate (A) that involve the lesser of 3% of

10 the company's admitted assets or 25% of the company's

11 surplus, each as of the 31st day of December next

12 preceding, made with the agreement or understanding that

13 the proceeds of such transactions, in whole or in

14 substantial part, are to be used to make loans or

15 extensions of credit to, to purchase assets of, or to make

16 investments in, any affiliate of the company making such

17 loans or extensions of credit or (B) that are proposed when

18 the domestic company is not eligible to declare and pay a

19 dividend or other distribution pursuant to the provisions

20 of Section 27.

21 (iii) Reinsurance agreements or modifications thereto,

22 including all reinsurance pooling agreements, reinsurance

23 agreements in which the reinsurance premium or a change in

24 the company's liabilities, or the projected reinsurance

25 premium or a change in the company's liabilities in any of

26 the next 3 years, equals or exceeds 5% of the company's

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1 surplus as regards policyholders, as of the 31st day of

2 December next preceding, including those agreements that

3 may require as consideration the transfer of assets from a

4 company to a nonaffiliate, if an agreement or understanding

5 exists between the company and nonaffiliate that any

6 portion of those assets will be transferred to one or more

7 affiliates of the company.

8 (iv) All management agreements; service contracts,

9 other than agency contracts; tax allocation agreements;

10 all reinsurance allocation agreements related to

11 reinsurance agreements required to be filed under this

12 Section; and all cost-sharing arrangements.

13 (v) Direct or indirect acquisitions or investments in a

14 person that controls the company, or in an affiliate of the

15 company, in an amount which, together with its present

16 holdings in such investments, exceeds 2.5% of the company's

17 surplus as regards policyholders. Direct or indirect

18 acquisitions or investments in subsidiaries acquired

19 pursuant to Section 131.2 of this Article (or authorized

20 under any other Section of this Code), or in non-subsidiary

21 insurance affiliates that are subject to the provisions of

22 this Article, are exempt from this requirement.

23 (vi) Any series of the previously described

24 transactions that are substantially similar to each other,

25 that take place within any 180 day period, and that in

26 total are equal to or exceed the lesser of 3% of the

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1 domestic company's admitted assets or 25% of its

2 policyholders surplus, as of the 31st day of the December

3 next preceding.

4 (vii) Any other material transaction that the Director

5 by rule determines might render the company's surplus as

6 regards policyholders unreasonable in relation to the

7 company's outstanding liabilities and inadequate to its

8 financial needs or may otherwise adversely affect the

9 interests of the company's policyholders or shareholders.

10 Nothing herein contained shall be deemed to authorize or

11 permit any transactions that, in the case of a company not a

12 member of the same holding company system, would be otherwise

13 contrary to law.

14 (b) Any transaction or contract otherwise described in

15 paragraph (a) of this subsection that is between a domestic

16 company and any person that is not its affiliate and that

17 precedes or follows within 180 days or is concurrent with a

18 similar transaction between that nonaffiliate and an affiliate

19 of the domestic company and that involves amounts that are

20 equal to or exceed the lesser of 3% of the domestic company's

21 admitted assets or 25% of its surplus as regards policyholders

22 at the end of the prior year may not be entered into unless the

23 company has notified the Director in writing of its intention

24 to enter into the transaction at least 30 days prior thereto or

25 such shorter period as the Director may permit, and the

26 Director has not disapproved it within such period.

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1 (c) A company may not enter into transactions which are

2 part of a plan or series of like transactions with any person

3 within the holding company system if the purpose of those

4 separate transactions is to avoid the statutory threshold

5 amount and thus avoid the review that would occur otherwise. If

6 the Director determines that such separate transactions were

7 entered into for such purpose, he may exercise his authority

8 under subsection (2) of Section 131.24.

9 (d) The Director, in reviewing transactions pursuant to

10 paragraph (a), shall consider whether the transactions comply

11 with the standards set forth in Section 131.20 and whether they

12 may adversely affect the interests of policyholders.

13 (e) The Director shall be notified within 30 days of any

14 investment of the domestic company in any one corporation if

15 the total investment in that corporation by the insurance

16 holding company system exceeds 10% of that corporation's voting

17 securities.

18 (f) Except for those transactions subject to approval under

19 other Sections of this Code, any such transaction or agreements

20 which are not disapproved by the Director may be effective as

21 of the date set forth in the notice required under this

22 Section.

23 (g) If a domestic company enters into a transaction

24 described in this subsection without having given the required

25 notification, the Director, using the notice and hearing

26 procedure in subsection (2) of Section 403A of this Code,may

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1 cause the company to pay a civil forfeiture of not more than

2 $250,000. Each transaction so entered shall be considered a

3 separate offense.

4 (2) No domestic company subject to registration under

5 Section 131.13 may pay any extraordinary dividend or make any

6 other extraordinary distribution to its shareholders until:

7 (a) 30 days after the Director has received notice of the

8 declaration thereof and has not within such period disapproved

9 the payment, or (b) the Director approves such payment within

10 the 30-day period. For purposes of this subsection, an

11 extraordinary dividend or distribution is any dividend or

12 distribution of cash or other property whose fair market value,

13 together with that of other dividends or distributions, made

14 within the period of 12 consecutive months ending on the date

15 on which the proposed dividend is scheduled for payment or

16 distribution exceeds the lesser ~~greater~~ of: (a) 10% of the

17 company's surplus as regards policyholders as of the 31st day

18 of December next preceding, or (b) the net income of the

19 company for the 12-month period ending the 31st day of December

20 next preceding, but does not include pro rata distributions of

21 any class of the company's own securities.

22 Notwithstanding any other provision of law, the company may

23 declare an extraordinary dividend or distribution which is

24 conditional upon the Director's approval, and such a

25 declaration confers no rights upon security holders until: (a)

26 the Director has approved the payment of the dividend or

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1 distribution, or (b) the Director has not disapproved the

2 payment within the 30-day period referred to above.

3 (Source: P.A. 98-609, eff. 1-1-14.)

4 (215 ILCS 5/139) (from Ch. 73, par. 751)

5 Sec. 139. Penalties for late or false annual statement.

6 (1) Any company failing, without just cause, to file its

7 financial statements as required in this Code shall be

8 required, after notice and hearing, to pay a penalty of up to

9 $1,000 for each day's delay, to be recovered by the Director of

10 Insurance of the State of Illinois using the notice and hearing

11 procedure in subsection (2) of Section 403A of this Code, and

12 the penalty so recovered shall be paid into the General Revenue

13 fund of the State of Illinois. The Director may reduce the

14 penalty if the company demonstrates to the Director that the

15 imposition of the penalty would constitute a financial hardship

16 to the company.

17 Any statement which is not materially complete when filed

18 shall not be considered to have been properly filed until those

19 deficiencies which make the filing incomplete have been

20 corrected and filed.

21 (2) Any director, officer, agent or employee of any

22 company, who subscribes to, makes or concurs in making or

23 publishing any annual or other statement required by law,

24 knowing the same to contain any material statement which is

25 false shall, after notice and hearing, be guilty of a business

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1 offense and shall be fined not more than $50,000.

2 The penalty shall be paid into the General Revenue fund of

3 the State of Illinois.

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

5 Section 97. Severability. The provisions of this Act are

6 severable under Section 1.31 of the Statute on Statutes.

7 Section 99. Effective date. This Act takes effect July 1,

8 2015.

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INDEX

Statutes amended in order of appearance