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Public Act 098-0157 Public Act 0157 98TH GENERAL ASSEMBLY |
Public Act 098-0157 | SB1729 Enrolled | LRB098 09834 RPM 39990 b |
|
| AN ACT concerning regulation.
| Be it enacted by the People of the State of Illinois,
| represented in the General Assembly:
| Section 5. The Illinois Insurance Code is amended by | changing Sections 35A-5, 35A-10, 35A-15, 35A-30, and 35A-60 as | follows:
| (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. 90-794, eff. 8-14-98; 91-549, eff. 8-14-99.)
| (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.
| (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. 91-549, eff. 8-14-99 .)
| (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 2.5 and has | a negative trend; or
| (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.
| (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. 97-955, eff. 8-14-12.)
| (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. 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 Section 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. 91-549, eff. 8-14-99.)
| Section 99. Effective date. This Act takes effect upon | becoming law.
|
Effective Date: 8/2/2013
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