Bill Text: IL SB0682 | 2017-2018 | 100th General Assembly | Introduced

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

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Bill Title: Amends the Illinois Insurance Code. In the Article concerning the Illinois Life and Health Insurance Guaranty Association, makes changes to the organization of provisions concerning coverage and limitations and powers and duties of the Association. Makes changes in the provisions concerning definitions; the Board of Directors of the Association; assessments; and miscellaneous provisions. In a provision concerning duties of the Director of Insurance as liquidator, provides that upon the entry of an order directing liquidation of a company, the Director may, subject to a provision of the Insurance Code that allows the Association to exercise all the rights of the Director with respect to covered policies after the Association becomes obligated by statute or a provision of the Health Maintenance Organization Act, cede or reinsure all or so much as may be necessary of the in-force business to another company using assets of the liquidated company to pay therefor in preference to satisfying other obligations or creditors. Effective immediately.

Spectrum: Partisan Bill (Democrat 7-0)

Status: (Passed) 2018-08-22 - Public Act . . . . . . . . . 100-1023 [SB0682 Detail]

Download: Illinois-2017-SB0682-Introduced.html

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100TH GENERAL ASSEMBLY State of Illinois 2017 and 2018 SB0682 Introduced 1/25/2017, by Sen. John G. Mulroe SYNOPSIS AS INTRODUCED:
215 ILCS 5/193 from Ch. 73, par. 805
215 ILCS 5/531.03 from Ch. 73, par. 1065.80-3
215 ILCS 5/531.05 from Ch. 73, par. 1065.80-5
215 ILCS 5/531.07 from Ch. 73, par. 1065.80-7
215 ILCS 5/531.08 from Ch. 73, par. 1065.80-8
215 ILCS 5/531.09 from Ch. 73, par. 1065.80-9
215 ILCS 5/531.10 from Ch. 73, par. 1065.80-10
215 ILCS 5/531.14 from Ch. 73, par. 1065.80-14
Amends the Illinois Insurance Code. In the Article concerning the Illinois Life and Health Insurance Guaranty Association, makes changes to the organization of provisions concerning coverage and limitations and powers and duties of the Association. Makes changes in the provisions concerning definitions; the Board of Directors of the Association; assessments; and miscellaneous provisions. In a provision concerning duties of the Director of Insurance as liquidator, provides that upon the entry of an order directing liquidation of a company, the Director may, subject to a provision of the Insurance Code that allows the Association to exercise all the rights of the Director with respect to covered policies after the Association becomes obligated by statute or a provision of the Health Maintenance Organization Act, cede or reinsure all or so much as may be necessary of the in-force business to another company using assets of the liquidated company to pay therefor in preference to satisfying other obligations or creditors. Effective immediately.
LRB100 06022 SMS 16052 b
A BILL FOR
SB0682 LRB100 06022 SMS 16052 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 193, 531.03, 531.05, 531.07, 531.08, 531.09,
531.10, and 531.14 as follows:
(215 ILCS 5/193) (from Ch. 73, par. 805)
Sec. 193. Duties of Director as liquidator; sales;
reinsurance.
(1) Upon the entry of an order directing liquidation, the
Director shall immediately proceed to liquidate the property,
business, and affairs of the company. The Director is hereby
authorized to deal with the property, business, and affairs of
the company in his name as Director, or, if the court shall so
order, in the name of the company.
(2) The Director may, subject to the approval of the court,
sell or otherwise dispose of the real and personal property, or
any part thereof, and sell or compromise all debts or claims
owing to the company, except that whenever the value of any
real or personal property or the amount of any debt owing to
the company does not exceed $25,000, the Director may sell,
dispose of, compromise, or compound the same upon such terms as
the Director deems to be in the best interest of the company

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without obtaining approval of the court.
(3) The Director may bring any action, claim, suit, or
proceeding against any director or officer of the company or
against any other person with respect to that person's dealings
with the company including, but not limited to, prosecuting any
action, claim, suit, or proceeding on behalf of the creditors,
members, policyholders, or shareholders of the company.
Nothing in this subsection shall be construed to affect the
standing of the Illinois Insurance Guaranty Fund, the Illinois
Life and Health Insurance Guaranty Association, or the Illinois
Health Maintenance Organization Guaranty Association to sue or
be sued under applicable law.
(4) In order to preserve so far as possible the rights and
interests of the policyholders of the company whose contracts
were cancelled by the liquidation order and of such other
creditors as may be possible, the Director may solicit a
contract or contracts whereby a solvent company or companies
will agree to assume in whole, or in part, or upon a modified
basis, the liabilities owing to said former policyholders or
creditors. The Director may, subject to paragraph (h) of
subsection (11) of Section 531.08 531.08(h) of this Code or
Section 6-8 of the Health Maintenance Organization Act, cede or
reinsure all or so much as may be necessary of the in-force
business to another company using assets of the liquidated
company to pay therefor in preference to satisfying other
obligations or creditors. The Director may assign any rights or

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interests of the company to receive reinsurance proceeds for
losses to the Illinois Life and Health Insurance Guaranty
Association, the Illinois Health Maintenance Organization
Guaranty Association or any similar organization in any other
state. If, after a full hearing upon a petition filed by the
Director, the court shall find that the Director endeavored to
obtain the best contract for the benefit of said parties in
interest, and if the said Director shall report to the court
that he is ready and willing to enter into a contract and
submit a copy thereof to the court, the court shall examine the
procedure and acts of the Director, and if the court shall find
that the best possible contract in the interests of said
parties has been obtained and that it is best for the interests
of said parties that said contract be entered into, the court
shall by written order approve the acts of the Director and
authorize him to execute said contract.
(5) In recognition of the rights of policyholders whose
"claims made" contracts were cancelled by the liquidation
order, he may, in his discretion, permit such policyholders to
purchase an extended discovery period which is subject to the
limitations in this Article. The policyholder shall pay to the
liquidator a premium which is appropriate for the rights
purchased as determined by the liquidator and approved by the
court. No extended discovery period purchased before or after
the entry of the liquidation order shall extend the time to
file claims as set by the court pursuant to Section 208 of this

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Code. Claims accruing by virtue of such extended discovery
period shall be treated as any other claim under Article XXXIV
of this Code, and shall be subject to the limitations,
exclusions and conditions in the Illinois Insurance Guaranty
Fund Act and in the laws governing similar organizations in
other states.
(6) The Director is authorized to cancel policies, bonds,
and contracts of insurance subject to court approval.
(7) All persons, companies, and entities shall immediately
turn over to the Director all unearned premium that has been
collected by or on behalf of the company and all earned premium
owing the company unless otherwise directed in writing by the
Director or by court order. Within 30 days of the date of a
written request of the Director, those persons, companies, and
entities shall submit affidavits verifying amounts collected
by, on behalf of, or due and owing the company and further
shall provide copies of all premium fund trust account
information and such other applicable documentation as
requested by the Director. Nothing in this subsection shall be
construed to affect the rights of (i) the Illinois Life and
Health Insurance Guaranty Association to collect premium under
subsection (4) item (6) of Section 531.08 of this Code or (ii)
the Illinois Health Maintenance Organization Guaranty
Association to collect premium under item (11) of Section 6-8
of the Health Maintenance Organization Act.
(8) The amount recoverable by the Director from a reinsurer

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shall not be reduced or diminished as a result of the entry of
an order of liquidation notwithstanding any provision in the
reinsurance contract or other such agreement. Payment made by a
reinsurer to or on behalf of an insured of the company shall
not diminish the reinsurer's obligation to the company except
when the reinsurance agreement lawfully provides for payment to
or on behalf of the company's insured by the reinsurer. All
reinsurance contracts to which the company is a party, which do
not contain the provisions required with respect to the
obligation of a reinsurer in the event of insolvency of the
reinsured to obtain credit for reinsurance or pursuant to other
applicable statutes, shall contain or be construed to contain
all of the following provisions:
(a) Upon the entry of an order of liquidation and
notwithstanding the Director's failure to pay all or a
portion of a claim, the reinsurance obligation shall be due
and owing to the Director on the basis of claims allowed in
the liquidation proceeding. The reinsurer shall submit the
amounts due and owing directly to the company as ceding
insurer or to the Director.
(b) The Director shall give written notice or arrange
for the giving of written notice to reinsurers or their
agents of the pendency of a claim against the company
indicating the policy or bond reinsured within a reasonable
time after the claim is filed. The reinsurer may interpose,
at its own expense, in the proceeding where the claim is to

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be adjudicated, any defenses that it may deem available to
the company or the Director.
(Source: P.A. 88-297; 89-206, eff. 7-21-95.)
(215 ILCS 5/531.03) (from Ch. 73, par. 1065.80-3)
Sec. 531.03. Coverage and limitations.
(1) This Article shall provide coverage for the policies
and contracts specified in paragraph (2) of this Section:
(a) to persons who, regardless of where they reside
(except for non-resident certificate holders under group
policies or contracts), are the beneficiaries, assignees
or payees of the persons covered under subparagraph (1)(b),
and
(b) to persons who are owners of or certificate holders
under the policies or contracts (other than unallocated
annuity contracts and structured settlement annuities) and
in each case who:
(i) are residents; or
(ii) are not residents, but only under all of the
following conditions:
(A) the insurer that issued the policies or
contracts is domiciled in this State;
(B) the states in which the persons reside have
associations similar to the Association created by
this Article;
(C) the persons are not eligible for coverage

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by an association in any other state due to the
fact that the insurer was not licensed in that
state at the time specified in that state's
guaranty association law.
(c) For unallocated annuity contracts specified in
subsection (2), paragraphs (a) and (b) of this subsection
(1) shall not apply and this Article shall (except as
provided in paragraphs (e) and (f) of this subsection)
provide coverage to:
(i) persons who are the owners of the unallocated
annuity contracts if the contracts are issued to or in
connection with a specific benefit plan whose plan
sponsor has its principal place of business in this
State; and
(ii) persons who are owners of unallocated annuity
contracts issued to or in connection with government
lotteries if the owners are residents.
(d) For structured settlement annuities specified in
subsection (2), paragraphs (a) and (b) of this subsection
(1) shall not apply and this Article shall (except as
provided in paragraphs (e) and (f) of this subsection)
provide coverage to a person who is a payee under a
structured settlement annuity (or beneficiary of a payee if
the payee is deceased), if the payee:
(i) is a resident, regardless of where the contract
owner resides; or

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(ii) is not a resident, but only under both of the
following conditions:
(A) with regard to residency:
(I) the contract owner of the structured
settlement annuity is a resident; or
(II) the contract owner of the structured
settlement annuity is not a resident but the
insurer that issued the structured settlement
annuity is domiciled in this State and the
state in which the contract owner resides has
an association similar to the Association
created by this Article; and
(B) neither the payee or beneficiary nor the
contract owner is eligible for coverage by the
association of the state in which the payee or
contract owner resides.
(e) This Article shall not provide coverage to:
(i) a person who is a payee or beneficiary of a
contract owner resident of this State if the payee or
beneficiary is afforded any coverage by the
association of another state; or
(ii) a person covered under paragraph (c) of this
subsection (1), if any coverage is provided by the
association of another state to that person.
(f) This Article is intended to provide coverage to a
person who is a resident of this State and, in special

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circumstances, to a nonresident. In order to avoid
duplicate coverage, if a person who would otherwise receive
coverage under this Article is provided coverage under the
laws of any other state, then the person shall not be
provided coverage under this Article. In determining the
application of the provisions of this paragraph in
situations where a person could be covered by the
association of more than one state, whether as an owner,
payee, beneficiary, or assignee, this Article shall be
construed in conjunction with other state laws to result in
coverage by only one association.
(2)(a) This Article shall provide coverage to the persons
specified in paragraph (1) of this Section for direct, (i)
nongroup life, health, annuity and supplemental policies, or
contracts, (ii) for certificates under direct group policies or
contracts, (iii) for unallocated annuity contracts and (iv) for
contracts to furnish health care services and subscription
certificates for medical or health care services issued by
persons licensed to transact insurance business in this State
under the Illinois Insurance Code. Annuity contracts and
certificates under group annuity contracts include but are not
limited to guaranteed investment contracts, deposit
administration contracts, unallocated funding agreements,
allocated funding agreements, structured settlement
agreements, lottery contracts and any immediate or deferred
annuity contracts.

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(b) This Article shall not provide coverage for:
(i) that portion of a policy or contract not guaranteed
by the insurer, or under which the risk is borne by the
policy or contract owner;
(ii) any such policy or contract or part thereof
assumed by the impaired or insolvent insurer under a
contract of reinsurance, other than reinsurance for which
assumption certificates have been issued;
(iii) any portion of a policy or contract to the extent
that the rate of interest on which it is based or the
interest rate, crediting rate, or similar factor is
determined by use of an index or other external reference
stated in the policy or contract employed in calculating
returns or changes in value:
(A) averaged over the period of 4 years prior to
the date on which the member insurer becomes an
impaired or insolvent insurer under this Article,
whichever is earlier, exceeds the rate of interest
determined by subtracting 2 percentage points from
Moody's Corporate Bond Yield Average averaged for that
same 4-year period or for such lesser period if the
policy or contract was issued less than 4 years before
the member insurer becomes an impaired or insolvent
insurer under this Article, whichever is earlier; and
(B) on and after the date on which the member
insurer becomes an impaired or insolvent insurer under

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this Article, whichever is earlier, exceeds the rate of
interest determined by subtracting 3 percentage points
from Moody's Corporate Bond Yield Average as most
recently available;
(iv) any unallocated annuity contract issued to or in
connection with a benefit plan protected under the federal
Pension Benefit Guaranty Corporation, regardless of
whether the federal Pension Benefit Guaranty Corporation
has yet become liable to make any payments with respect to
the benefit plan;
(v) any portion of any unallocated annuity contract
which is not issued to or in connection with a specific
employee, union or association of natural persons benefit
plan or a government lottery;
(vi) an obligation that does not arise under the
express written terms of the policy or contract issued by
the insurer to the contract owner or policy owner,
including without limitation:
(A) a claim based on marketing materials;
(B) a claim based on side letters, riders, or other
documents that were issued by the insurer without
meeting applicable policy form filing or approval
requirements;
(C) a misrepresentation of or regarding policy
benefits;
(D) an extra-contractual claim; or

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(E) a claim for penalties or consequential or
incidental damages;
(vii) any stop-loss insurance, as defined in clause (b)
of Class 1 or clause (a) of Class 2 of Section 4, and
further defined in subsection (d) of Section 352;
(viii) any policy or contract providing any hospital,
medical, prescription drug, or other health care benefits
pursuant to Part C or Part D of Subchapter XVIII, Chapter 7
of Title 42 of the United States Code (commonly known as
Medicare Part C & D) or any regulations issued pursuant
thereto;
(ix) any portion of a policy or contract to the extent
that the assessments required by Section 531.09 of this
Code with respect to the policy or contract are preempted
or otherwise not permitted by federal or State law;
(x) any portion of a policy or contract issued to a
plan or program of an employer, association, or other
person to provide life, health, or annuity benefits to its
employees, members, or others to the extent that the plan
or program is self-funded or uninsured, including, but not
limited to, benefits payable by an employer, association,
or other person under:
(A) a multiple employer welfare arrangement as
defined in 29 U.S.C. Section 1002 29 U.S.C. Section
1144;
(B) a minimum premium group insurance plan;

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(C) a stop-loss group insurance plan; or
(D) an administrative services only contract;
(xi) any portion of a policy or contract to the extent
that it provides for:
(A) dividends or experience rating credits;
(B) voting rights; or
(C) payment of any fees or allowances to any
person, including the policy or contract owner, in
connection with the service to or administration of the
policy or contract;
(xii) any policy or contract issued in this State by a
member insurer at a time when it was not licensed or did
not have a certificate of authority to issue the policy or
contract in this State;
(xiii) any contractual agreement that establishes the
member insurer's obligations to provide a book value
accounting guaranty for defined contribution benefit plan
participants by reference to a portfolio of assets that is
owned by the benefit plan or its trustee, which in each
case is not an affiliate of the member insurer;
(xiv) any portion of a policy or contract to the extent
that it provides for interest or other changes in value to
be determined by the use of an index or other external
reference stated in the policy or contract, but which have
not been credited to the policy or contract, or as to which
the policy or contract owner's rights are subject to

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forfeiture, as of the date the member insurer becomes an
impaired or insolvent insurer under this Code, whichever is
earlier. If a policy's or contract's interest or changes in
value are credited less frequently than annually, then for
purposes of determining the values that have been credited
and are not subject to forfeiture under this Section, the
interest or change in value determined by using the
procedures defined in the policy or contract will be
credited as if the contractual date of crediting interest
or changing values was the date of impairment or
insolvency, whichever is earlier, and will not be subject
to forfeiture; or
(xv) that portion or part of a variable life insurance
or variable annuity contract not guaranteed by an insurer.
(3) The benefits for which the Association may become
liable shall in no event exceed the lesser of:
(a) the contractual obligations for which the insurer
is liable or would have been liable if it were not an
impaired or insolvent insurer, or
(b)(i) with respect to any one life, regardless of the
number of policies or contracts:
(A) $300,000 in life insurance death benefits, but
not more than $100,000 in net cash surrender and net
cash withdrawal values for life insurance;
(B) in health insurance benefits:
(I) $100,000 for coverages not defined as

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disability insurance or basic hospital, medical,
and surgical insurance or major medical insurance
or long-term care insurance, including any net
cash surrender and net cash withdrawal values;
(II) $300,000 for disability insurance and
$300,000 for long-term care insurance as defined
in Section 351A-1 of this Code; and
(III) $500,000 for basic hospital medical and
surgical insurance or major medical insurance;
(C) $250,000 in the present value of annuity
benefits, including net cash surrender and net cash
withdrawal values;
(ii) with respect to each individual participating in a
governmental retirement benefit plan established under
Sections 401, 403(b), or 457 of the U.S. Internal Revenue
Code covered by an unallocated annuity contract or the
beneficiaries of each such individual if deceased, in the
aggregate, $250,000 in present value annuity benefits,
including net cash surrender and net cash withdrawal
values;
(iii) with respect to each payee of a structured
settlement annuity or beneficiary or beneficiaries of the
payee if deceased, $250,000 in present value annuity
benefits, in the aggregate, including net cash surrender
and net cash withdrawal values, if any; or
(iv) with respect to either (1) one contract owner

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provided coverage under subparagraph (ii) of paragraph (c)
of subsection (1) of this Section or (2) one plan sponsor
whose plans own directly or in trust one or more
unallocated annuity contracts not included in subparagraph
(ii) of paragraph (b) of this subsection, $5,000,000 in
benefits, irrespective of the number of contracts with
respect to the contract owner or plan sponsor. However, in
the case where one or more unallocated annuity contracts
are covered contracts under this Article and are owned by a
trust or other entity for the benefit of 2 or more plan
sponsors, coverage shall be afforded by the Association if
the largest interest in the trust or entity owning the
contract or contracts is held by a plan sponsor whose
principal place of business is in this State. In no event
shall the Association be obligated to cover more than
$5,000,000 in benefits with respect to all these
unallocated contracts.
(3.1) Notwithstanding the provisions of subsection (3), in
In no event shall the Association be obligated to cover more
than (1) an aggregate of $300,000 in benefits with respect to
any one life under subparagraphs (i), (ii), and (iii) of this
paragraph (b) of subsection (3) except with respect to benefits
for basic hospital, medical, and surgical insurance and major
medical insurance under item (B) of subparagraph (i) of this
paragraph (b) of subsection (3), in which case the aggregate
liability of the Association shall not exceed $500,000 with

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respect to any one individual or (2) with respect to one owner
of multiple nongroup policies of life insurance, whether the
policy owner is an individual, firm, corporation, or other
person and whether the persons insured are officers, managers,
employees, or other persons, $5,000,000 in benefits,
regardless of the number of policies and contracts held by the
owner.
(3.2) The limitations set forth in subsections (3) and
(3.1) this subsection are limitations on the benefits for which
the Association is obligated before taking into account either
its subrogation and assignment rights or the extent to which
those benefits could be provided out of the assets of the
impaired or insolvent insurer attributable to covered
policies. The costs of the Association's obligations under this
Article may be met by the use of assets attributable to covered
policies or reimbursed to the Association pursuant to its
subrogation and assignment rights.
(4) In performing its obligations to provide coverage under
Section 531.08 of this Code, the Association shall not be
required to guarantee, assume, reinsure, or perform or cause to
be guaranteed, assumed, reinsured, or performed the
contractual obligations of the insolvent or impaired insurer
under a covered policy or contract that do not materially
affect the economic values or economic benefits of the covered
policy or contract.
(Source: P.A. 96-1450, eff. 8-20-10.)

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(215 ILCS 5/531.05) (from Ch. 73, par. 1065.80-5)
Sec. 531.05. Definitions. As used in this Act:
"Account" means either of the 2 3 accounts created under
Section 531.06.
"Association" means the Illinois Life and Health Insurance
Guaranty Association created under Section 531.06.
"Authorized assessment" or the term "authorized" when used
in the context of assessments means a resolution by the Board
of Directors has been passed whereby an assessment shall be
called immediately or in the future from member insurers for a
specified amount. An assessment is authorized when the
resolution is passed.
"Benefit plan" means a specific employee, union, or
association of natural persons benefit plan.
"Called assessment" or the term "called" when used in the
context of assessments means that a notice has been issued by
the Association to member insurers requiring that an authorized
assessment be paid within the time frame set forth within the
notice. An authorized assessment becomes a called assessment
when notice is mailed by the Association to member insurers.
"Director" means the Director of Insurance of this State.
"Contractual obligation" means any obligation under a
policy or contract or certificate under a group policy or
contract, or portion thereof for which coverage is provided
under Section 531.03.

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"Covered person" means any person who is entitled to the
protection of the Association as described in Section 531.02.
"Covered policy" means any policy or contract within the
scope of this Article under Section 531.03.
"Extra-contractual claims" shall include, for example,
claims relating to bad faith in the payment of claims, punitive
or exemplary damages, or attorneys' fees and costs.
"Impaired insurer" means (A) a member insurer which, after
the effective date of this amendatory Act of the 96th General
Assembly, is not an insolvent insurer, and is placed under an
order of rehabilitation or conservation by a court of competent
jurisdiction or (B) a member insurer deemed by the Director
after the effective date of this amendatory Act of the 96th
General Assembly to be potentially unable to fulfill its
contractual obligations and not an insolvent insurer.
"Insolvent insurer" means a member insurer that, after the
effective date of this amendatory Act of the 96th General
Assembly, is placed under a final order of liquidation by a
court of competent jurisdiction with a finding of insolvency.
"Member insurer" means an insurer licensed or holding a
certificate of authority to transact in this State any kind of
insurance for which coverage is provided under Section 531.03
of this Code and includes an insurer whose license or
certificate of authority in this State may have been suspended,
revoked, not renewed, or voluntarily withdrawn or whose
certificate of authority may have been suspended pursuant to

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Section 119 of this Code, but does not include:
(1) a hospital or medical service organization,
whether profit or nonprofit;
(2) a health maintenance organization;
(3) any burial society organized under Article XIX of
this Code, any fraternal benefit society organized under
Article XVII of this Code, any mutual benefit association
organized under Article XVIII of this Code, and any foreign
fraternal benefit society licensed under Article VI of this
Code or a fraternal benefit society;
(4) a mandatory State pooling plan;
(5) a mutual assessment company or other person that
operates on an assessment basis;
(6) an insurance exchange;
(7) an organization that is permitted to issue
charitable gift annuities pursuant to Section 121-2.10 of
this Code;
(8) any health services plan corporation established
pursuant to the Voluntary Health Services Plans Act;
(9) any dental service plan corporation established
pursuant to the Dental Service Plan Act; or
(10) an entity similar to any of the above.
"Moody's Corporate Bond Yield Average" means the Monthly
Average Corporates as published by Moody's Investors Service,
Inc., or any successor thereto.
"Owner" of a policy or contract and "policy owner" and

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"contract owner" mean the person who is identified as the legal
owner under the terms of the policy or contract or who is
otherwise vested with legal title to the policy or contract
through a valid assignment completed in accordance with the
terms of the policy or contract and properly recorded as the
owner on the books of the insurer. The terms owner, contract
owner, and policy owner do not include persons with a mere
beneficial interest in a policy or contract.
"Person" means an individual, corporation, limited
liability company, partnership, association, governmental body
or entity, or voluntary organization.
"Plan sponsor" means:
(1) the employer in the case of a benefit plan
established or maintained by a single employer;
(2) the employee organization in the case of a benefit
plan established or maintained by an employee
organization; or
(3) in a case of a benefit plan established or
maintained by 2 or more employers or jointly by one or more
employers and one or more employee organizations, the
association, committee, joint board of trustees, or other
similar group of representatives of the parties who
establish or maintain the benefit plan.
"Premiums" mean amounts or considerations, by whatever
name called, received on covered policies or contracts less
returned premiums, considerations, and deposits and less

SB0682 - 22 - LRB100 06022 SMS 16052 b
dividends and experience credits.
"Premiums" does not include:
(A) amounts or considerations received for policies or
contracts or for the portions of policies or contracts for
which coverage is not provided under Section 531.03 of this
Code except that assessable premium shall not be reduced on
account of the provisions of subparagraph (iii) of
paragraph (b) of subsection (2) (a) of Section 531.03 of
this Code relating to interest limitations and the
provisions of paragraph (b) of subsection (3), subsection
(3.1), or subsection (3.2) of Section 531.03 relating to
limitations with respect to one individual, one
participant, and one contract owner;
(B) premiums in excess of $5,000,000 on an unallocated
annuity contract not issued under a governmental
retirement benefit plan (or its trustee) established under
Section 401, 403(b) or 457 of the United States Internal
Revenue Code; or
(C) with respect to multiple nongroup policies of life
insurance owned by one owner, whether the policy owner is
an individual, firm, corporation, or other person, and
whether the persons insured are officers, managers,
employees, or other persons, premiums in excess of
$5,000,000 with respect to these policies or contracts,
regardless of the number of policies or contracts held by
the owner.

SB0682 - 23 - LRB100 06022 SMS 16052 b
"Principal place of business" of a plan sponsor or a person
other than a natural person means the single state in which the
natural persons who establish policy for the direction,
control, and coordination of the operations of the entity as a
whole primarily exercise that function, determined by the
Association in its reasonable judgment by considering the
following factors:
(A) the state in which the primary executive and
administrative headquarters of the entity is located;
(B) the state in which the principal office of the
chief executive officer of the entity is located;
(C) the state in which the board of directors (or
similar governing person or persons) of the entity conducts
the majority of its meetings;
(D) the state in which the executive or management
committee of the board of directors (or similar governing
person or persons) of the entity conducts the majority of
its meetings;
(E) the state from which the management of the overall
operations of the entity is directed; and
(F) in the case of a benefit plan sponsored by
affiliated companies comprising a consolidated
corporation, the state in which the holding company or
controlling affiliate has its principal place of business
as determined using the above factors.
However, in the case of a plan sponsor, if more than 50% of

SB0682 - 24 - LRB100 06022 SMS 16052 b
the participants in the benefit plan are employed in a single
state, that state shall be deemed to be the principal place of
business of the plan sponsor.
The principal place of business of a plan sponsor of a
benefit plan described in paragraph (3) of the definition of
"plan sponsor" this Section shall be deemed to be the principal
place of business of the association, committee, joint board of
trustees, or other similar group of representatives of the
parties who establish or maintain the benefit plan that, in
lieu of a specific or clear designation of a principal place of
business, shall be deemed to be the principal place of business
of the employer or employee organization that has the largest
investment in the benefit plan in question.
"Receivership court" means the court in the insolvent or
impaired insurer's state having jurisdiction over the
conservation, rehabilitation, or liquidation of the insurer.
"Resident" means a person to whom a contractual obligation
is owed and who resides in this State on the date of entry of a
court order that determines a member insurer to be an impaired
insurer or a court order that determines a member insurer to be
an insolvent insurer. A person may be a resident of only one
state, which in the case of a person other than a natural
person shall be its principal place of business. Citizens of
the United States that are either (i) residents of foreign
countries or (ii) residents of United States possessions,
territories, or protectorates that do not have an association

SB0682 - 25 - LRB100 06022 SMS 16052 b
similar to the Association created by this Article, shall be
deemed residents of the state of domicile of the insurer that
issued the policies or contracts.
"Structured settlement annuity" means an annuity purchased
in order to fund periodic payments for a plaintiff or other
claimant in payment for or with respect to personal injury
suffered by the plaintiff or other claimant.
"State" means a state, the District of Columbia, Puerto
Rico, and a United States possession, territory, or
protectorate.
"Supplemental contract" means a written agreement entered
into for the distribution of proceeds under a life, health, or
annuity policy or a life, health, or annuity contract.
"Unallocated annuity contract" means any annuity contract
or group annuity certificate which is not issued to and owned
by an individual, except to the extent of any annuity benefits
guaranteed to an individual by an insurer under such contract
or certificate.
(Source: P.A. 96-1450, eff. 8-20-10.)
(215 ILCS 5/531.07) (from Ch. 73, par. 1065.80-7)
Sec. 531.07. Board of Directors.) The board of directors
of the Association consists of not less than 7 nor more than 11
members serving terms as established in the plan of operation.
The insurer members insurers of the board are to be selected by
member insurers subject to the approval of the Director. In

SB0682 - 26 - LRB100 06022 SMS 16052 b
addition, 2 persons who must be public representatives may be
appointed by the Director to the board of directors. A public
representative may not be an officer, director, or employee of
an insurance company or any person engaged in the business of
insurance. Vacancies on the board must be filled for the
remaining period of the term in the manner described in the
plan of operation.
In approving selections or in appointing members to the
board, the Director must consider, whether all member insurers
are fairly represented.
Members of the board may be reimbursed from the assets of
the Association for expenses incurred by them as members of the
board of directors but members of the board may not otherwise
be compensated by the Association for their services.
(Source: P.A. 96-1450, eff. 8-20-10.)
(215 ILCS 5/531.08) (from Ch. 73, par. 1065.80-8)
Sec. 531.08. Powers and duties of the Association.
(a) In addition to the powers and duties enumerated in
other Sections of this Article:
(1) If a member insurer is an impaired insurer, then
the Association may, in its discretion and subject to any
conditions imposed by the Association that do not impair
the contractual obligations of the impaired insurer and
that are approved by the Director:
(a) (A) guarantee, assume, or reinsure or cause to

SB0682 - 27 - LRB100 06022 SMS 16052 b
be guaranteed, assumed, or reinsured, any or all of the
policies or contracts of the impaired insurer; or
(b) (B) provide such money, pledges, loans, notes,
guarantees, or other means as are proper to effectuate
paragraph (a) (A) and assure payment of the contractual
obligations of the impaired insurer pending action
under paragraph (a) (A).
(2) If a member insurer is an insolvent insurer, then
the Association shall, in its discretion, either:
(a) (A) guaranty, assume, or reinsure or cause to
be guaranteed, assumed, or reinsured the policies or
contracts of the insolvent insurer or assure payment of
the contractual obligations of the insolvent insurer
and provide money, pledges, loans, notes, guarantees,
or other means reasonably necessary to discharge the
Association's duties; or
(b) (B) provide benefits and coverages in
accordance with the following provisions:
(i) with respect to life and health insurance
policies and annuities, ensure payment of benefits
for premiums identical to the premiums and
benefits (except for terms of conversion and
renewability) that would have been payable under
the policies or contracts of the insolvent insurer
for claims incurred:
(A) (a) with respect to group policies and

SB0682 - 28 - LRB100 06022 SMS 16052 b
contracts, not later than the earlier of the
next renewal date under those policies or
contracts or 45 days, but in no event less than
30 days, after the date on which the
Association becomes obligated with respect to
the policies and contracts;
(B) (b) with respect to nongroup policies,
contracts, and annuities not later than the
earlier of the next renewal date (if any) under
the policies or contracts or one year, but in
no event less than 30 days, from the date on
which the Association becomes obligated with
respect to the policies or contracts;
(ii) make diligent efforts to provide all
known insureds or annuitants (for nongroup
policies and contracts), or group policy owners
with respect to group policies and contracts, 30
days notice of the termination (pursuant to
subparagraph (i) of this paragraph (b) (B)) of the
benefits provided;
(iii) with respect to nongroup life and health
insurance policies and annuities covered by the
Association, make available to each known insured
or annuitant, or owner if other than the insured or
annuitant, and with respect to an individual
formerly insured or formerly an annuitant under a

SB0682 - 29 - LRB100 06022 SMS 16052 b
group policy who is not eligible for replacement
group coverage, make available substitute coverage
on an individual basis in accordance with the
provisions of subparagraph (iv) paragraph (3), if
the insureds or annuitants had a right under law or
the terminated policy or annuity to convert
coverage to individual coverage or to continue an
individual policy or annuity in force until a
specified age or for a specified time, during which
the insurer had no right unilaterally to make
changes in any provision of the policy or annuity
or had a right only to make changes in premium by
class.
(iv) (b) In providing the substitute coverage
required under subparagraph (iii) of this
subsection (2), of paragraph (B) of item (2) of
subsection (a) of this Section, the Association
may offer either to reissue the terminated
coverage or to issue an alternative policy.
Alternative or reissued policies shall be
offered without requiring evidence of
insurability, and shall not provide for any
waiting period or exclusion that would not have
applied under the terminated policy.
The Association may reinsure any alternative
or reissued policy.

SB0682 - 30 - LRB100 06022 SMS 16052 b
Alternative policies adopted by the
Association shall be subject to the approval of the
Director. The Association may adopt alternative
policies of various types for future insurance
without regard to any particular impairment or
insolvency.
(v) Alternative policies shall contain at
least the minimum statutory provisions required in
this State and provide benefits that shall not be
unreasonable in relation to the premium charged.
The Association shall set the premium in
accordance with a table of rates which it shall
adopt. The premium shall reflect the amount of
insurance to be provided and the age and class of
risk of each insured, but shall not reflect any
changes in the health of the insured after the
original policy was last underwritten.
Any alternative policy issued by the
Association shall provide coverage of a type
similar to that of the policy issued by the
impaired or insolvent insurer, as determined by
the Association.
(vi) (c) If the Association elects to reissue
terminated coverage at a premium rate different
from that charged under the terminated policy, the
premium shall be set by the Association in

SB0682 - 31 - LRB100 06022 SMS 16052 b
accordance with the amount of insurance provided
and the age and class of risk, subject to approval
of the Director or by a court of competent
jurisdiction.
(vii) (d) The Association's obligations with
respect to coverage under any policy of the
impaired or insolvent insurer or under any
reissued or alternative policy shall cease on the
date such coverage or policy is replaced by another
similar policy by the policyholder, the insured,
or the Association.
(viii) (e) When proceeding under this Section
with respect to any policy or contract carrying
guaranteed minimum interest rates, the Association
shall assure the payment or crediting of a rate of
interest consistent with subparagraph
(2)(b)(iii)(B) of Section 531.03.
(3) (f) Nonpayment of premiums thirty-one days after
the date required under the terms of any guaranteed,
assumed, alternative or reissued policy or contract or
substitute coverage shall terminate the Association's
obligations under such policy or coverage under this Act
with respect to such policy or coverage, except with
respect to any claims incurred or any net cash surrender
value which may be due in accordance with the provisions of
this Act.

SB0682 - 32 - LRB100 06022 SMS 16052 b
(4) (g) Premiums due for coverage after entry of an
order of liquidation of an insolvent insurer shall belong
to and be payable at the direction of the Association, and
the Association shall be liable for unearned premiums due
to policy or contract owners arising after the entry of
such order.
(5) (h) In carrying out its duties under subsection
paragraph (2) of subsection (a) of this Section, the
Association may:
(a) (1) subject to approval by a court in this
State, impose permanent policy or contract liens in
connection with a guarantee, assumption, or
reinsurance agreement if the Association finds that
the amounts which can be assessed under this Article
are less than the amounts needed to assure full and
prompt performance of the Association's duties under
this Article or that the economic or financial
conditions as they affect member insurers are
sufficiently adverse to render the imposition of such
permanent policy or contract liens to be in the public
interest; or
(b) (2) subject to approval by a court in this
State, impose temporary moratoriums or liens on
payments of cash values and policy loans or any other
right to withdraw funds held in conjunction with
policies or contracts in addition to any contractual

SB0682 - 33 - LRB100 06022 SMS 16052 b
provisions for deferral of cash or policy loan value.
In addition, in the event of a temporary moratorium or
moratorium charge imposed by the receivership court on
payment of cash values or policy loans or on any other
right to withdraw funds held in conjunction with
policies or contracts, out of the assets of the
impaired or insolvent insurer, the Association may
defer the payment of cash values, policy loans, or
other rights by the Association for the period of the
moratorium or moratorium charge imposed by the
receivership court, except for claims covered by the
Association to be paid in accordance with a hardship
procedure established by the liquidator or
rehabilitator and approved by the receivership court.
(6) (i) There shall be no liability on the part of and
no cause of action shall arise against the Association or
against any transferee from the Association in connection
with the transfer by reinsurance or otherwise of all or any
part of an impaired or insolvent insurer's business by
reason of any action taken or any failure to take any
action by the impaired or insolvent insurer at any time.
(7) (j) If the Association fails to act within a
reasonable period of time as provided in subsection (2) of
this Section with respect to an insolvent insurer, the
Director shall have the powers and duties of the
Association under this Act with regard to such insolvent

SB0682 - 34 - LRB100 06022 SMS 16052 b
insurers.
(8) (k) The Association or its designated
representatives may render assistance and advice to the
Director, upon his request, concerning rehabilitation,
payment of claims, continuations of coverage, or the
performance of other contractual obligations of any
impaired or insolvent insurer.
(9) (l) The Association shall have standing to appear
or intervene before a court or agency in this State with
jurisdiction over an impaired or insolvent insurer
concerning which the Association is or may become obligated
under this Article or with jurisdiction over any person or
property against which the Association may have rights
through subrogation or otherwise. Standing shall extend to
all matters germane to the powers and duties of the
Association, including, but not limited to, proposals for
reinsuring, modifying, or guaranteeing the policies or
contracts of the impaired or insolvent insurer and the
determination of the policies or contracts and contractual
obligations. The Association shall also have the right to
appear or intervene before a court or agency in another
state with jurisdiction over an impaired or insolvent
insurer for which the Association is or may become
obligated or with jurisdiction over any person or property
against whom the Association may have rights through
subrogation or otherwise.

SB0682 - 35 - LRB100 06022 SMS 16052 b
(10)(a) (m)(1) A person receiving benefits under this
Article shall be deemed to have assigned the rights under
and any causes of action against any person for losses
arising under, resulting from, or otherwise relating to the
covered policy or contract to the Association to the extent
of the benefits received because of this Article, whether
the benefits are payments of or on account of contractual
obligations, continuation of coverage, or provision of
substitute or alternative coverages. The Association may
require an assignment to it of such rights and cause of
action by any payee, policy, or contract owner,
beneficiary, insured, or annuitant as a condition
precedent to the receipt of any right or benefits conferred
by this Article upon the person.
(b) (2) The subrogation rights of the Association
under this subsection have the same priority against the
assets of the impaired or insolvent insurer as that
possessed by the person entitled to receive benefits under
this Article.
(c) (3) In addition to paragraphs (a) (1) and (b) (2),
the Association shall have all common law rights of
subrogation and any other equitable or legal remedy that
would have been available to the impaired or insolvent
insurer or owner, beneficiary, or payee of a policy or
contract with respect to the policy or contracts, including
without limitation, in the case of a structured settlement

SB0682 - 36 - LRB100 06022 SMS 16052 b
annuity, any rights of the owner, beneficiary, or payee of
the annuity to the extent of benefits received pursuant to
this Article, against a person originally or by succession
responsible for the losses arising from the personal injury
relating to the annuity or payment therefor, excepting any
such person responsible solely by reason of serving as an
assignee in respect of a qualified assignment under
Internal Revenue Code Section 130.
(d) (4) If the preceding provisions of this subsection
(10) (l) are invalid or ineffective with respect to any
person or claim for any reason, then the amount payable by
the Association with respect to the related covered
obligations shall be reduced by the amount realized by any
other person with respect to the person or claim that is
attributable to the policies, or portion thereof, covered
by the Association.
(e) (5) If the Association has provided benefits with
respect to a covered obligation and a person recovers
amounts as to which the Association has rights as described
in the preceding paragraphs of this subsection (10), then
the person shall pay to the Association the portion of the
recovery attributable to the policies, or portion thereof,
covered by the Association.
(11) (n) The Association may:
(a) (1) Enter into such contracts as are necessary
or proper to carry out the provisions and purposes of

SB0682 - 37 - LRB100 06022 SMS 16052 b
this Article.
(b) (2) Sue or be sued, including taking any legal
actions necessary or proper for recovery of any unpaid
assessments under Section 531.09. The Association
shall not be liable for punitive or exemplary damages.
(c) (3) Borrow money to effect the purposes of
this Article. Any notes or other evidence of
indebtedness of the Association not in default are
legal investments for domestic insurers and may be
carried as admitted assets.
(d) (4) Employ or retain such persons as are
necessary to handle the financial transactions of the
Association, and to perform such other functions as
become necessary or proper under this Article.
(e) (5) Negotiate and contract with any
liquidator, rehabilitator, conservator, or ancillary
receiver to carry out the powers and duties of the
Association.
(f) (6) Take such legal action as may be necessary
to avoid payment of improper claims.
(g) (7) Exercise, for the purposes of this Article
and to the extent approved by the Director, the powers
of a domestic life or health insurer, but in no case
may the Association issue insurance policies or
annuity contracts other than those issued to perform
the contractual obligations of the impaired or

SB0682 - 38 - LRB100 06022 SMS 16052 b
insolvent insurer.
(h) (8) Exercise all the rights of the Director
under Section 193(4) of this Code with respect to
covered policies after the association becomes
obligated by statute.
(i) (9) Request information from a person seeking
coverage from the Association in order to aid the
Association in determining its obligations under this
Article with respect to the person, and the person
shall promptly comply with the request.
(j) (10) Take other necessary or appropriate
action to discharge its duties and obligations under
this Article or to exercise its powers under this
Article.
(12) (o) With respect to covered policies for which
the Association becomes obligated after an entry of an
order of liquidation or rehabilitation, the Association
may elect to succeed to the rights of the insolvent insurer
arising after the date of the order of liquidation or
rehabilitation under any contract of reinsurance to which
the insolvent insurer was a party, to the extent that such
contract provides coverage for losses occurring after the
date of the order of liquidation or rehabilitation. As a
condition to making this election, the Association must pay
all unpaid premiums due under the contract for coverage
relating to periods before and after the date of the order

SB0682 - 39 - LRB100 06022 SMS 16052 b
of liquidation or rehabilitation.
(13) (p) A deposit in this State, held pursuant to law
or required by the Director for the benefit of creditors,
including policy owners, not turned over to the domiciliary
liquidator upon the entry of a final order of liquidation
or order approving a rehabilitation plan of an insurer
domiciled in this State or in a reciprocal state, pursuant
to Article XIII 1/2 of this Code, shall be promptly paid to
the Association. The Association shall be entitled to
retain a portion of any amount so paid to it equal to the
percentage determined by dividing the aggregate amount of
policy owners' claims related to that insolvency for which
the Association has provided statutory benefits by the
aggregate amount of all policy owners' claims in this State
related to that insolvency and shall remit to the
domiciliary receiver the amount so paid to the Association
less the amount retained pursuant to this subsection (13).
Any amount so paid to the Association and retained by it
shall be treated as a distribution of estate assets
pursuant to applicable State receivership law dealing with
early access disbursements.
(14) (q) The Board of Directors of the Association
shall have discretion and may exercise reasonable business
judgment to determine the means by which the Association is
to provide the benefits of this Article in an economical
and efficient manner.

SB0682 - 40 - LRB100 06022 SMS 16052 b
(15) (r) Where the Association has arranged or offered
to provide the benefits of this Article to a covered person
under a plan or arrangement that fulfills the Association's
obligations under this Article, the person shall not be
entitled to benefits from the Association in addition to or
other than those provided under the plan or arrangement.
(16) (s) Venue in a suit against the Association
arising under the Article shall be in Cook County. The
Association shall not be required to give any appeal bond
in an appeal that relates to a cause of action arising
under this Article.
(17) (t) The Association may join an organization of
one or more other State associations of similar purposes to
further the purposes and administer the powers and duties
of the Association.
(18) (u) In carrying out its duties in connection with
guaranteeing, assuming, or reinsuring policies or
contracts under subsections (1) or (2), the Association
may, subject to approval of the receivership court, issue
substitute coverage for a policy or contract that provides
an interest rate, crediting rate, or similar factor
determined by use of an index or other external reference
stated in the policy or contract employed in calculating
returns or changes in value by issuing an alternative
policy or contract in accordance with the following
provisions:

SB0682 - 41 - LRB100 06022 SMS 16052 b
(a) (1) in lieu of the index or other external
reference provided for in the original policy or
contract, the alternative policy or contract provides
for (i) a fixed interest rate, or (ii) payment of
dividends with minimum guarantees, or (iii) a
different method for calculating interest or changes
in value;
(b) (2) there is no requirement for evidence of
insurability, waiting period, or other exclusion that
would not have applied under the replaced policy or
contract; and
(c) (3) the alternative policy or contract is
substantially similar to the replaced policy or
contract in all other material terms.
(Source: P.A. 96-1450, eff. 8-20-10; 97-333, eff. 8-12-11.)
(215 ILCS 5/531.09) (from Ch. 73, par. 1065.80-9)
Sec. 531.09. Assessments.
(1) For the purpose of providing the funds necessary to
carry out the powers and duties of the Association, the board
of directors shall assess the member insurers, separately for
each account, at such times and for such amounts as the board
finds necessary. Assessments shall be due not less than 30 days
after written notice to the member insurers and shall accrue
interest from the due date at such adjusted rate as is
established under Section 6621 of Chapter 26 of the United

SB0682 - 42 - LRB100 06022 SMS 16052 b
States Code and such interest shall be compounded daily.
(2) There shall be 2 classes of assessments, as follows:
(a) Class A assessments shall be made for the purpose
of meeting administrative costs and other general expenses
and examinations conducted under the authority of the
Director under subsection (5) of Section 531.12.
(b) Class B assessments shall be made to the extent
necessary to carry out the powers and duties of the
Association under Section 531.08 with regard to an impaired
or insolvent domestic insurer or insolvent foreign or alien
insurers.
(3)(a) The amount of any Class A assessment shall be
determined at the discretion of the board of directors and such
assessments shall be authorized and called on a non-pro rata
basis. The amount of any Class B assessment shall be allocated
for assessment purposes among the accounts and subaccounts
pursuant to an allocation formula which may be based on the
premiums or reserves of the impaired or insolvent insurer or
any other standard deemed by the board in its sole discretion
as being fair and reasonable under the circumstances.
(b) Class B assessments against member insurers for each
account and subaccount shall be in the proportion that the
premiums received on business in this State by each assessed
member insurer on policies or contracts covered by each account
or subaccount for the three most recent calendar years for
which information is available preceding the year in which the

SB0682 - 43 - LRB100 06022 SMS 16052 b
insurer became impaired or insolvent, as the case may be, bears
to such premiums received on business in this State for such
calendar years by all assessed member insurers.
(c) Assessments for funds to meet the requirements of the
Association with respect to an impaired or insolvent insurer
shall not be made until necessary to implement the purposes of
this Article. Classification of assessments under subsection
(2) and computations of assessments under this subsection shall
be made with a reasonable degree of accuracy, recognizing that
exact determinations may not always be possible.
(4) The Association may abate or defer, in whole or in
part, the assessment of a member insurer if, in the opinion of
the board, payment of the assessment would endanger the ability
of the member insurer to fulfill its contractual obligations.
In the event an assessment against a member insurer is abated
or deferred in whole or in part the amount by which the
assessment is abated or deferred may be assessed against the
other member insurers in a manner consistent with the basis for
assessments set forth in this Section. Once the conditions that
caused a deferral have been removed or rectified, the member
insurer shall pay all assessments that were deferred pursuant
to a repayment plan approved by the Association.
(5) (a) (i) Subject to the provisions of subparagraph (ii)
of this paragraph, the total of all assessments authorized by
the Association with respect to a member insurer for each
subaccount of the life insurance and annuity account and for

SB0682 - 44 - LRB100 06022 SMS 16052 b
the health account shall not in one calendar year exceed 2% of
that member insurer's average annual premiums received in this
State on the policies and contracts covered by the subaccount
or account during the 3 calendar years preceding the year in
which the insurer became an impaired or insolvent insurer.
(ii) If 2 or more assessments are authorized in one
calendar year with respect to insurers that become impaired or
insolvent in different calendar years, the average annual
premiums for purposes of the aggregate assessment percentage
limitation referenced in subparagraph (a) of this paragraph
shall be equal and limited to the higher of the 3-year average
annual premiums for the applicable subaccount or account as
calculated pursuant to this Section.
(iii) If the maximum assessment, together with the other
assets of the Association in an account, does not provide in
one year in either account an amount sufficient to carry out
the responsibilities of the Association, the necessary
additional funds shall be assessed as soon thereafter as
permitted by this Article.
(b) The board may provide in the plan of operation a method
of allocating funds among claims, whether relating to one or
more impaired or insolvent insurers, when the maximum
assessment will be insufficient to cover anticipated claims.
(c) If the maximum assessment for a subaccount of the life
insurance and annuity account in one year does not provide an
amount sufficient to carry out the responsibilities of the

SB0682 - 45 - LRB100 06022 SMS 16052 b
Association, then pursuant to paragraph (b) of subsection (3),
the board shall assess the other subaccounts of the life and
annuity account for the necessary additional amount, subject to
the maximum stated in paragraph (a) of this subsection.
(6) The board may, by an equitable method as established in
the plan of operation, refund to member insurers, in proportion
to the contribution of each insurer to that account, the amount
by which the assets of the account exceed the amount the board
finds is necessary to carry out during the coming year the
obligations of the Association with regard to that account,
including assets accruing from net realized gains and income
from investments. A reasonable amount may be retained in any
account to provide funds for the continuing expenses of the
Association and for future losses.
(7) An assessment is deemed to occur on the date upon which
the board votes such assessment. The board may defer calling
the payment of the assessment or may call for payment in one or
more installments.
(8) It is proper for any member insurer, in determining its
premium rates and policyowner dividends as to any kind of
insurance within the scope of this Article, to consider the
amount reasonably necessary to meet its assessment obligations
under this Article.
(9) The Association must issue to each insurer paying a
Class B assessment under this Article a certificate of
contribution, in a form acceptable to the Director, for the

SB0682 - 46 - LRB100 06022 SMS 16052 b
amount of the assessment so paid. All outstanding certificates
are of equal dignity and priority without reference to amounts
or dates of issue. A certificate of contribution may be shown
by the insurer in its financial statement as an asset in such
form and for such amount, if any, and period of time as the
Director may approve, provided the insurer shall in any event
at its option have the right to show a certificate of
contribution as an admitted asset at percentages of the
original face amount for calendar years as follows:
100% for the calendar year after the year of issuance;
80% for the second calendar year after the year of
issuance;
60% for the third calendar year after the year of issuance;
40% for the fourth calendar year after the year of
issuance;
20% for the fifth calendar year after the year of issuance.
(10) The Association may request information of member
insurers in order to aid in the exercise of its power under
this Section and member insurers shall promptly comply with a
request.
(Source: P.A. 95-86, eff. 9-25-07 (changed from 1-1-08 by P.A.
95-632); 96-1450, eff. 8-20-10.)
(215 ILCS 5/531.10) (from Ch. 73, par. 1065.80-10)
Sec. 531.10. Plan of Operation.)
(1)(a) The Association must submit to the Director a plan

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of operation and any amendments thereto necessary or suitable
to assure the fair, reasonable, and equitable administration of
the Association. The plan of operation and any amendments
thereto become effective upon approval in writing by the
Director.
(b) If the Association fails to submit a suitable plan of
operation within 180 days following the effective date of this
Article or if at any time thereafter the Association fails to
submit suitable amendments to the plan, the Director may, after
notice and hearing, adopt and promulgate such reasonable rules
as are necessary or advisable to effectuate the provisions of
this Article. Such rules are in force until modified by the
Director or superseded by a plan submitted by the Association
and approved by the Director.
(2) All member insurers must comply with the plan of
operation.
(3) The plan of operation must, in addition to requirements
enumerated elsewhere in this Article:
(a) Establish procedures for handling the assets of the
Association;
(b) Establish the amount and method of reimbursing
members of the board of directors under Section 531.07;
(c) Establish regular places and times for meetings of
the board of directors;
(d) Establish procedures for records to be kept of all
financial transactions of the Association, its agents, and

SB0682 - 48 - LRB100 06022 SMS 16052 b
the board of directors;
(e) Establish the procedures whereby selections for
the board of directors will be made and submitted to the
Director;
(f) Establish any additional procedures for
assessments under Section 531.09; and
(g) Contain additional provisions necessary or proper
for the execution of the powers and duties of the
Association.
(4) The plan of operation shall establish a procedure for
protest by any member insurer of assessments made by the
Association pursuant to Section 531.09. Such procedures shall
require that:
(a) a member insurer that wishes to protest all or part
of an assessment shall pay when due the full amount of the
assessment as set forth in the notice provided by the
Association. The payment shall be available to meet
Association obligations during the pendency of the protest
or any subsequent appeal. Payment shall be accompanied by a
statement in writing that the payment is made under protest
and setting forth a brief statement of the grounds for the
protest;
(b) within 30 days following the payment of an
assessment under protest by any protesting member insurer,
the Association must notify the member insurer in writing
of its determination with respect to the protest unless the

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Association notifies the member that additional time is
required to resolve the issues raised by the protest;
(c) in the event the Association determines that the
protesting member insurer is entitled to a refund, such
refund shall be made within 30 days following the date upon
which the Association makes its determination;
(d) the decision of the Association with respect to a
protest may be appealed to the Director pursuant to Section
531.11(3);
(e) in the alternative to rendering a decision with
respect to any protest based on a question regarding the
assessment base, the Association may refer such protests to
the Director for final decision, with or without a
recommendation from the Association; and
(f) interest on any refund due a protesting member
insurer shall be paid at the rate actually earned by the
Association.
(5) The plan of operation may provide that any or all
powers and duties of the Association, except those under
paragraph (c) of subsection (11) (10) of Section 531.08 and
Section 531.09 are delegated to a corporation, association or
other organization which performs or will perform functions
similar to those of this Association, or its equivalent, in 2
or more states. Such a corporation, association or organization
shall be reimbursed for any payments made on behalf of the
Association and shall be paid for its performance of any

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function of the Association. A delegation under this subsection
shall take effect only with the approval of both the Board of
Directors and the Director, and may be made only to a
corporation, association or organization which extends
protection not substantially less favorable and effective than
that provided by this Act.
(Source: P.A. 96-1450, eff. 8-20-10.)
(215 ILCS 5/531.14) (from Ch. 73, par. 1065.80-14)
Sec. 531.14. Miscellaneous Provisions.
(1) Nothing in this Article may be construed to reduce the
liability for unpaid assessments of the insured of an impaired
or insolvent insurer operating under a plan with assessment
liability.
(2) Records must be kept of all negotiations and meetings
in which the Association or its representatives are involved to
discuss the activities of the Association in carrying out its
powers and duties under Section 531.08. Records of such
negotiations or meetings may be made public only upon the
termination of a liquidation, rehabilitation, or conservation
proceeding involving the impaired or insolvent insurer, upon
the termination of the impairment or insolvency of the insurer,
or upon the order of a court of competent jurisdiction. Nothing
in this paragraph (2) limits the duty of the Association to
render a report of its activities under Section 531.15.
(3) For the purpose of carrying out its obligations under

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this Article, the Association is deemed to be a creditor of the
impaired or insolvent insurer to the extent of assets
attributable to covered policies reduced by any amounts to
which the Association is entitled as subrogee (under subsection
(10) paragraph (8) of Section 531.08). All assets of the
impaired or insolvent insurer attributable to covered policies
must be used to continue all covered policies and pay all
contractual obligations of the impaired insurer as required by
this Article. "Assets attributable to covered policies", as
used in this paragraph (3), is that proportion of the assets
which the reserves that should have been established for such
policies bear to the reserve that should have been established
for all policies of insurance written by the impaired or
insolvent insurer.
(4) (a) Prior to the termination of any liquidation,
rehabilitation, or conservation proceeding, the court may take
into consideration the contributions of the respective
parties, including the Association, the shareholders and
policyowners of the impaired or insolvent insurer, and any
other party with a bona fide interest, in making an equitable
distribution of the ownership rights of such impaired or
insolvent insurer. In such a determination, consideration must
be given to the welfare of the policyholders of the continuing
or successor insurer.
(b) No distribution to stockholders, if any, of an impaired
or insolvent insurer may be made until and unless the total

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amount of valid claims of the Association for funds expended
with interest in carrying out its powers and duties under
Section 531.08, with respect to such insurer have been fully
recovered by the Association.
(5) (a) If an order for liquidation or rehabilitation of an
insurer domiciled in this State has been entered, the receiver
appointed under such order has a right to recover on behalf of
the insurer, from any affiliate that controlled it, the amount
of distributions, other than stock dividends paid by the
insurer on its capital stock, made at any time during the 5
years preceding the petition for liquidation or rehabilitation
subject to the limitations of paragraphs (b) to (d).
(b) No such dividend is recoverable if the insurer shows
that when paid the distribution was lawful and reasonable, and
that the insurer did not know and could not reasonably have
known that the distribution might adversely affect the ability
of the insurer to fulfill its contractual obligations.
(c) Any person who as an affiliate that controlled the
insurer at the time the distributions were paid is liable up to
the amount of distributions he received. Any person who was an
affiliate that controlled the insurer at the time the
distributions were declared, is liable up to the amount of
distributions he would have received if they had been paid
immediately. If 2 persons are liable with respect to the same
distributions, they are jointly and severally liable.
(d) The maximum amount recoverable under subsection (5) of

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this Section is the amount needed in excess of all other
available assets of the insolvent insurer to pay the
contractual obligations of the insolvent insurer.
(e) If any person liable under paragraph (c) of subsection
(5) of this Section is insolvent, all its affiliates that
controlled it at the time the dividend was paid are jointly and
severally liable for any resulting deficiency in the amount
recovered from the insolvent affiliate.
(6) As a creditor of the impaired or insolvent insurer as
established in subsection (3) of this Section and consistent
with subsection (2) of Section 205 of this Code, the
Association and other similar associations shall be entitled to
receive a disbursement of assets out of the marshaled assets,
from time to time as the assets become available to reimburse
it, as a credit against contractual obligations under this
Article. If the liquidator has not, within 120 days after a
final determination of insolvency of an insurer by the
receivership court, made an application to the court for the
approval of a proposal to disburse assets out of marshaled
assets to guaranty associations having obligations because of
the insolvency, then the Association shall be entitled to make
application to the receivership court for approval of its own
proposal to disburse these assets.
(Source: P.A. 96-1450, eff. 8-20-10.)
Section 99. Effective date. This Act takes effect upon
becoming law.