Article VIII 1/2 - Insurance Holding Company Systems

(215 ILCS 5/Art. VIII.5 heading)

ARTICLE VIII 1/2.
INSURANCE HOLDING COMPANY SYSTEMS

(215 ILCS 5/131.1)

Sec. 131.1. Definitions. As used in this Article, the following terms have the respective
meanings set forth in this Section unless the context requires otherwise:

(a) An “affiliate” of, or person “affiliated” with, a specific person,
is a person that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control
with, the person specified.

(a-5) “Acquiring party” means such person by whom or on whose behalf the merger or other acquisition of control referred to in Section 131.4 is to be affected and any person that controls such person or persons.

(a-10) “Associated person” means, with respect to an acquiring party, (1) any beneficial owner of shares of the company to be acquired, owned, directly or indirectly, of record or beneficially by the acquiring party, (2) any affiliate of the acquiring party or beneficial owner, and (3) any other person acting in concert, directly or indirectly, pursuant to any agreement, arrangement, or understanding, whether written or oral, with the acquiring party or beneficial owner, or any of their respective affiliates, in connection with the merger, consolidation, or other acquisition of control referred to in Section 131.4 of this Code.

(a-15) “Company” has the same meaning as “company” as defined in Section 2 of this Code, except that it does not include agencies, authorities, or instrumentalities of the United States, its possessions and territories, the Commonwealth of Puerto Rico, the District of Columbia, or a state or political subdivision of a state.

(b) “Control” (including the terms “controlling”, “controlled by” and
“under common control with”) means the possession, direct or indirect, of
the power to direct or cause the direction of the management and policies
of a person, whether through the ownership of voting securities, the holding
of shareholders’ or policyholders’ proxies by
contract other than a commercial contract for goods or non-management
services, or otherwise, unless the power is solely the result of an
official position with or corporate office held by the person. Control is presumed
to exist if any person, directly or indirectly, owns, controls, holds with
the power to vote, or holds shareholders’ proxies representing 10% or
more of the voting securities of any other person, or holds or controls
sufficient policyholders’ proxies to elect the majority of the board of
directors of the domestic company. This presumption may be rebutted by a
showing made in the manner as the Director may provide by rule. The Director
may determine, after
furnishing all persons in interest notice and opportunity to be heard and
making specific findings of fact to support such determination, that
control exists in fact, notwithstanding the absence of a presumption to
that effect.

(b-5) “Enterprise risk” means any activity, circumstance, event, or series of events involving one or more affiliates of a company that, if not remedied promptly, is likely to have a material adverse effect upon the financial condition or liquidity of the company or its insurance holding company system as a whole, including, but not limited to, anything that would cause the company’s risk-based capital to fall into company action level as set forth in Article IIA of this Code or would cause the company to be in
hazardous financial condition as set forth in Article XII 1/2 of this Code.

(b-10) “Exchange Act” means the Securities Exchange Act of 1934, as amended, together with the rules and regulations promulgated thereunder.

(b-12) “Group capital calculation instructions” means the group capital calculation instructions as adopted by the NAIC and as amended by the NAIC from time to time in accordance with the procedures adopted by the NAIC.

(b-15) “Group-wide supervisor” means the regulatory official authorized to engage in conducting and coordinating group-wide supervision activities who is determined or acknowledged by the Director under Section 131.20d of this Code to have sufficient contacts with an internationally active insurance group.

(c) “Insurance holding company system” means two or more affiliated
persons, one or more of which is an insurance company as defined in
paragraph (e) of Section 2 of this Code.

(c-5) “Internationally active insurance group” means an insurance holding company system that:

(1) includes an insurer registered under Section 4 of this Code; and
(2) meets the following criteria:

(A) premiums written in at least 3 countries;
(B) the percentage of gross premiums written outside the United States is at least 10% of the insurance holding company system’s total gross written premiums; and
(C) based on a 3-year rolling average, the total assets of the insurance holding company system are at least $50,000,000,000 or the total gross written premiums of the insurance holding company system are at least $10,000,000,000.

(d) (Blank).

(d-1) “NAIC” means the National Association of Insurance Commissioners.

(d-2) “NAIC Liquidity Stress Test Framework” is a separate NAIC publication which includes a history of the NAIC’s development of regulatory liquidity stress testing, the scope criteria applicable for a specific data year, and the liquidity stress test instructions, and reporting templates for a specific data year, such scope criteria, instructions, and reporting template being as adopted by the NAIC and as amended by the NAIC from time to time in accordance with the procedures adopted by the NAIC.

(d-5) “Non-operating holding company” is a general business corporation functioning solely for the purpose of forming, owning, acquiring, and managing subsidiary business entities and having no other business operations not related thereto.

(d-10) “Own”, “owned,” or “owning” means shares (1) with respect to which a person
has title or to which a person’s nominee, custodian, or other agent has title and which such
nominee, custodian, or other agent is holding on behalf of the person or (2) with respect to
which a person (A) has purchased or has entered into an unconditional contract, binding on both
parties, to purchase the shares, but has not yet received the shares, (B) owns a security
convertible into or exchangeable for the shares and has tendered the security for conversion or
exchange, (C) has an option to purchase or acquire, or rights or warrants to subscribe to, the shares and has exercised such option, rights, or warrants, or (D) holds a securities futures contract
to purchase the shares and has received notice that the position will be physically settled and is
irrevocably bound to receive the underlying shares. To the extent that any
affiliates of the stockholder or beneficial owner are acting in concert with the stockholder or
beneficial owner, the determination of shares owned may include the effect of aggregating the
shares owned by the affiliate or affiliates. Whether shares constitute shares owned shall
be decided by the Director in his or her reasonable determination.

(e) “Person” means an individual, a corporation, a limited liability company, a partnership, an
association, a joint stock company, a trust, an unincorporated
organization, any similar entity or any combination of the foregoing acting
in concert, but does not include any securities broker performing no more
than the usual and customary broker’s function or joint venture
partnership exclusively engaged in owning, managing, leasing or developing
real or tangible personal property other than capital stock.

(e-5) “Policyholders’ proxies” are proxies that give the holder the right to vote for the election of the directors and other corporate actions not in the day to day operations of the company.

(f) (Blank).

(f-3) “Scope criteria”, as detailed in the NAIC Liquidity Stress Test Framework, are the designated exposure bases along with minimum magnitudes thereof for the specified data year, used to establish a preliminary list of insurers considered scoped into the NAIC Liquidity Stress Test Framework for that data year.

(f-5) “Securityholder” of a specified person is one who owns any security of such person, including common stock, preferred stock, debt obligations, and any other security convertible into or evidencing the right to acquire any of the foregoing.

(g) “Subsidiary” of a specified person is an affiliate controlled by
such person directly, or indirectly through one or more intermediaries.

(h) “Voting Security” is a security which gives to the holder thereof
the right to vote for the election of directors and includes any security
convertible into or evidencing a right to acquire a voting security.

(Source: P.A. 102-394, eff. 8-16-21; 102-578, eff. 7-1-22 (See Section 5 of P.A. 102-672 for effective date of P.A. 102-578); 102-813, eff. 5-13-22.)

(215 ILCS 5/131.2) (from Ch. 73, par. 743.2)

Sec. 131.2. Subsidiaries. A domestic company, either by itself or in cooperation with one or more persons, may organize or acquire one or more subsidiaries. The subsidiaries may conduct any kind of business or businesses and their authority to do so shall not be limited by reason of the fact that they are subsidiaries of a domestic company. In addition to investments in common stock,
preferred stock, debt obligations and other securities of subsidiaries
permitted under all other sections of this Code, a domestic company, other
than a company subject to Articles XVIII or XIX, may also:

(a) invest, in common stock, preferred stock, debt obligations, and other securities of one or more subsidiaries, amounts which do not exceed the lesser of 10% of the company’s assets or 50% of the company’s surplus as regards policyholders, but after such investments the company’s surplus as regards policyholders must be reasonable in relation to the company’s outstanding liabilities and adequate to its financial needs. In calculating the amount of such investments, there must be included (i) total net monies or other consideration expended and obligations assumed in the acquisition or formation of a subsidiary, including all organizational expenses and contributions to capital and surplus of the subsidiary whether or not represented by the purchase of capital stock or issuance of other securities, and (ii) all amounts expended in acquiring additional common stock, preferred stock, debt obligations, and other securities, and all contributions to the capital or surplus of a subsidiary subsequent to its acquisition or formation;
(b) invest any amount in common stock, preferred stock, debt obligations and other securities of one or more direct subsidiaries acting only as a non-operating holding company or engaged or organized exclusively for the ownership and management of assets authorized as investments for the company, provided that each subsidiary agrees to limit its investments in any asset so that such investments will not cause the amount of the total investment of the company to exceed the amount the company could have invested in such asset. For the purpose of this clause, “the total investment of the company” will include (i) any direct investment by the company in an asset and (ii) the company’s proportionate share of any investment in such asset by any subsidiary of the company, which must be calculated by multiplying the amount of the subsidiary’s investment by the percentage of the company’s ownership of such subsidiary;
(c) invest in common stock of one or more insurance corporation subsidiaries any amount by which the investing company’s capital and surplus exceeds the minimum capital and surplus required of a new company under Section 13 to qualify for a certificate of authority to write the kind or kinds of insurance which the company is authorized to write, if the company is a stock company, and if the company is other than a stock company, the company may invest the amount by which the company’s surplus exceeds the minimum surplus required of a new company under Section 43 or 66 to qualify for a certificate of authority to write the kind or kinds of insurance which the company is authorized to write;
(d) with the approval of the Director, invest any greater amount in common stock, preferred stock, debt obligations, or other securities of one or more subsidiaries, but after such investment the company’s surplus as regards policyholders must be reasonable in relation to the company’s outstanding liabilities and adequate to its financial needs.

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

(215 ILCS 5/131.3) (from Ch. 73, par. 743.3)

Sec. 131.3.
(1) Investments in common stock, preferred stock, debt obligations or
other securities of subsidiaries made under Section 131.2 of this Article
are subject to Sections 126.3, 126.4, 126.5, 126.6, 126.7, and 133 of this Code
but are not subject to any other of the otherwise applicable restrictions or
prohibitions contained in this Code applicable to such investments of a
domestic
company subject to this Code.

(2) If a company ceases to control a subsidiary, it must dispose of any
investment therein made under this section within 3 years from the time of
the cessation of control or within such further time as the Director may
prescribe, unless at any time after the investment is made, the investment
meets the requirements for investment under any other section of this Code,
and the company has notified the Director thereof.

(3) Whether any investment made pursuant to this Section meets the applicable requirements of this Section is to be determined before the investment is made by calculating the applicable investment limitations as though the investment had already been made, taking into account the then outstanding principal balance on all previous investments in debt obligations, and the value of all previous investments in equity securities as of the day they were made, net of any return of capital invested, not including dividends.

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

(215 ILCS 5/131.4) (from Ch. 73, par. 743.4)

Sec. 131.4. Acquisition of control of or merger with domestic company.

(a) No person other than the issuer may make a tender for or a request or
invitation for tenders of, or enter into an agreement to exchange
securities for, or seek to acquire or acquire shareholders’ proxies to vote or seek to acquire or acquire in the open market, or otherwise, any voting
security of a domestic company or acquire policyholders’ proxies of a
domestic company or any entity that controls a domestic company, for consideration if, after the consummation thereof, that
person would, directly or indirectly, (or by conversion or by exercise of
any right to acquire) be in control of the company, and no person may enter
into an agreement to merge or consolidate with or otherwise to acquire
control of a domestic company, unless the offer, request, invitation, or
agreement is conditioned on receiving the approval of the Director based on
Section 131.8 of this Article
and no such acquisition of control or a merger with a domestic
company may be consummated unless the person has filed with the Director and has sent to the company a statement containing the information required by Section 131.5 and the Director has approved the transaction
or granted an exemption. Prior to the acquisition,
the Director may conclude that a statement need not be filed by the
acquiring
party if the acquiring party demonstrates to the
satisfaction of the Director that:

(1) such transaction will not result in the change of control of the domestic company; or
(2) (blank);
(3) the acquisition of, or attempt to acquire control of, such other person is subject to requirements in the jurisdiction of its domicile which are substantially similar to those contained in this Section and Sections 131.5 through 131.12; or
(4) the control of the policyholders’ proxies is being acquired solely by virtue of the holders official office and not as the result of any agreement or for any consideration.

The purpose of this Section is to afford to the Director the
opportunity to review acquisitions in order to determine whether or not the
acquisition would be adverse to the interests of the existing and future
policyholders of the company.

(b) For purposes of this Section, any controlling person of a domestic company seeking to divest its controlling interest in the domestic company in any manner shall file with the Director, with a copy to the company, confidential notice of its proposed divestiture at least 30 days prior to the cessation of control. The Director shall determine those instances in which the party or parties seeking to divest or to acquire a controlling interest in a company shall be required to file for and obtain approval of the transaction. The information shall remain confidential until the conclusion of the transaction unless the Director, in his or her discretion, determines that confidential treatment shall interfere with enforcement of this Section. If the statement referred to in subsection (a) of this Section is otherwise filed in connection with the proposed divestiture or related acquisition, this subsection (b) shall not apply.

(c) For purposes of this Section, a domestic company shall include any person controlling a domestic company unless the person, as determined by the Director, is either directly or through its affiliates primarily engaged in business other than the business of insurance. For the purposes of this Section, “person” shall not include any securities broker holding, in the usual and customary broker’s function, less than 20% of the voting securities of an insurance company or of any person that controls an insurance company.

(Source: P.A. 98-609, eff. 1-1-14; 99-642, eff. 7-28-16.)

(215 ILCS 5/131.5) (from Ch. 73, par. 743.5)

Sec. 131.5. Statement; contents. In order to seek the approval of the
Director pursuant to Section 131.8, the applicant must file a statement
with the Director under oath or affirmation which contains as a minimum the
following information:

(1) The name and address of each acquiring party, and

(a) if such person is an individual, his principal occupation and all offices and positions held during the past 5 years, and any conviction of crimes, other than minor traffic violations, during the past 10 years;
(b) if such person is not an individual, a report of the nature of its business operations during the past 5 years or for such lesser period as the person and any predecessors thereof has been in existence; an informative description of the business intended to be conducted by the person and the person’s subsidiaries; and a list of all individuals who are or who have been selected to become directors or executive officers of the person, or who perform or will perform functions appropriate to such positions. The list must include for each individual the information required by subsection (1)(a).

(2) The source, nature and amount of the consideration used or to be used in effecting the merger, consolidation or other acquisition of control, a description of any transaction wherein funds were or are to be obtained for any such purpose, including any pledge of the company’s own securities or the securities of any of its subsidiaries or affiliates, and the identity of persons furnishing such consideration. However, where a source of such consideration is a loan made in the lender’s ordinary course of business, the identity of the lender must remain confidential, if the person filing the statement so requests.
(3) Financial information as to the earnings and financial condition of each acquiring party for the preceding 5 fiscal years of each acquiring party (or for such lesser period as the acquiring party and any predecessors thereof have been in existence) audited by an independent certified public accountant in accordance with generally accepted auditing standards and similar unaudited information as of a date not earlier than 90 days prior to the filing of the statement.
(4) Any plans or proposals which each acquiring party may have to liquidate such company, to sell its assets or merge or consolidate it with any person, or to make any other material change in its business or corporate structure or management.
(5) The number of shares of any security referred to in Section 131.4 which each acquiring party proposes to acquire, the terms of the offer, request, invitation, agreement, or acquisition referred to in Section 131.4, and a statement as to the method by which the fairness of the proposal was arrived.
(6) The amount of each class of any security referred to in Section 131.4 which is beneficially owned or concerning which there is a right to acquire beneficial ownership by each acquiring party.
(7) A full description of any existing contracts, arrangements or understandings with respect to any security referred to in Section 131.4 in which any acquiring party is involved, including but not limited to transfer of any of the securities, joint ventures, loan or option arrangements, puts or calls, guarantees of loans, guarantees against loss or guarantees of profits, division of losses or profits, or the giving or withholding of proxies. The description must identify the persons with whom such contracts, arrangements or understandings have been entered into.
(8) A description of the acquisition of any security or policyholders’ proxy referred to in Section 131.4 during the 12 calendar months preceding the filing of the statement, by any acquiring party, including the dates of acquisition, names of the acquiring parties, and consideration paid or agreed to be paid therefor.
(9) A description of any recommendations to acquire any security referred to in Section 131.4 made during the 12 calendar months preceding the filing of the statement, by any acquiring party, or by anyone based upon interviews or at the suggestion of such acquiring party.
(10) Copies of all tender offers for, requests or invitations for tenders of, exchange offers for, and agreements to acquire or exchange any securities referred to in Section 131.4, and (if distributed) of additional soliciting material relating thereto.
(11) The terms of any agreement, contract or understanding made with, or proposed to be made with, any broker-dealer as to solicitation of securities referred to in Section 131.4 for tender, and the amount of any fees, commissions or other compensation to be paid to broker-dealers with regard thereto.
(12) Beginning July 1, 2014, an agreement by the person required to file the statement referred to in this Section 131.5 that the person will provide the annual report specified in subsection (a) of Section 131.14b for so long as control exists.
(13) Beginning July 1, 2014, an acknowledgement by the person required to file the statement referred to in this Section 131.5 that the person and all subsidiaries within its control in the insurance holding company system shall provide information to the Director upon request as necessary to evaluate enterprise risk to the company.
(14) Any additional information as the Director may by rule or regulation prescribe as necessary or appropriate for the protection of policyholders or in the public interest.
(15) With respect to each acquiring party, the following information:

(A) the name and address of all associated persons and a detailed description of every agreement, arrangement, and understanding between the acquiring party and all associated persons in connection with the merger, consolidation, or other acquisition of control;
(B) the class or series and number of shares of securities of the company that are directly or indirectly owned beneficially and of record by the acquiring party or the associated persons or both; and
(C) a detailed description of each proxy, contract, arrangement, understanding, or relationship pursuant to which the acquiring party or the associated persons, or both, have a right to vote, or cause or direct the vote of, any securities of the company. (Source: P.A. 102-578, eff. 7-1-22 (See Section 5 of P.A. 102-672 for effective date of P.A. 102-578).)

(215 ILCS 5/131.6) (from Ch. 73, par. 743.6)

Sec. 131.6.
(1) If the person required to file the statement referred to in Section
131.5 is a partnership, limited partnership, syndicate or other group, the
Director may require that the information be
given with respect to each partner of such partnership or limited
partnership, each member of such syndicate or group, and each person who
controls such partner or member. If any partner, member or person is a
corporation or the person required to file the statement referred to in
Section 131.5 is a corporation, the Director may require that the
information be given with respect to the
corporation, each officer and director of the corporation, and each person
who is directly or indirectly the beneficial owner of more than 10% of the
outstanding voting securities of the corporation.

(2) If any material change occurs in the facts set forth in the
statement filed with the Director and sent to the company under Section 131.5, an amendment setting forth the change, together with
copies of all documents and other material relevant to the change, must be
filed with the Director and sent to the company within 2 business days
after the person learns of the change.

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

(215 ILCS 5/131.7) (from Ch. 73, par. 743.7)

Sec. 131.7.

If any offer, request, invitation, agreement or acquisition referred to
in Section 131.4 is proposed to be made by means of a registration
statement under the Securities Act of 1933 or in circumstances requiring
the disclosure of similar information under the Securities Exchange Act of
1934, or under a state law requiring similar registration or disclosure,
the person required to file the statement referred to in Section 131.4 may
utilize such documents in furnishing the information called for by that
statement.

(Source: P.A. 77-673.)

(215 ILCS 5/131.8) (from Ch. 73, par. 743.8)

Sec. 131.8.
(1) After the statement required by Section 131.5 has been
filed, the Director shall approve
any merger, consolidation or other acquisition of control referred to in
Section 131.4 unless
the Director finds that:

(a) after the change of control, the domestic company referred to in Section 131.4 would not be able to satisfy the requirements for the issuance of a license to write the line or lines of insurance for which it is presently licensed;
(b) the effect of the merger, consolidation or other acquisition of control would be substantially to lessen competition in insurance in this State or tend to create a monopoly therein. In applying the competitive standard in this paragraph:

(i) the informational requirements of subsection (3)(a) and the standards of subsection (4)(b) of Section 131.12a shall apply,
(ii) the merger or other acquisition shall not be found substantially to lessen competition in insurance in this State or tend to create a monopoly therein if the Director finds that any of the situations meeting the criteria provided by subsection (4)(c) of Section 131.12a exist, and
(iii) the Director may condition the approval of the merger or other acquisition on the removal of the basis of disapproval within a specified period of time;

(c) the financial condition of any acquiring party is such as might jeopardize the financial stability of the domestic company or jeopardize the interests of its policyholders;
(d) the plans or proposals which the acquiring party has to liquidate the domestic company, sell its assets or consolidate or merge it with any person, or to make any other material change in its business or corporate structure or management, are unfair and unreasonable to policyholders of such company and not in the public interest; or
(e) the competence, experience and integrity of those persons who would control the operation of the domestic company are such that it would not be in the best interests of policyholders of such company and of the insurance buying public to permit the merger, consolidation or other acquisition of control.

(2) The Director may hold a public hearing on any merger,
consolidation or other acquisition of control referred to in Section 131.4 if
the Director determines that the statement filed as required by
Section 131.5 does
not demonstrate compliance with the standards referred to in subsection (1), of
this Section, or if he determines that such acquisition of control is likely to be hazardous or prejudicial to the insurance buying public.

(3) The public hearing referred to in subsection
(2) must be held within 60 days after the statement
required by Section 131.5 is filed, and at least 20 days’
notice thereof must be
given by the Director to the person filing the statement and to the domestic
company. Not less than 7 days’ notice of such hearing must be given by the person
filing the statement to such other persons as may be designated by the
Director and by the company to its shareholders. The Director must make
a determination within 60 days after the conclusion of the hearing. At the
hearing, the person filing the statement, the domestic company, any person to
whom notice of the hearing was sent, and any other person whose interests
may be affected thereby has the right to present evidence, examine and
cross-examine witnesses, and offer oral and written arguments and in connection
therewith is entitled to conduct discovery proceedings in the same manner as is
presently allowed in the Circuit Courts of this State. All discovery proceedings
must be concluded not later than 3 days prior to the commencement of the public hearing.

(4) If the proposed acquisition of control will require the approval of more than one state insurance commissioner, the public hearing referred to in subsection (2) of this Section may be held on a consolidated basis upon request of the person filing the statement referred to in Section 131.5 of this Code. Such person shall file the statement referred to in Section 131.5 of this Code with the National Association of Insurance Commissioners (NAIC) within 5 days after making the request for a public hearing. A commissioner may opt out of a consolidated hearing and shall provide notice to the applicant of the opt out within 10 days after the receipt of the statement referred to in Section 131.5 of this Code. A hearing conducted on a consolidated basis shall be public and shall be held within the United States before the commissioners of the states in which the companies are domiciled. Such commissioners shall hear and receive evidence. A commissioner may attend such hearing in person or by telecommunication.

(5) In connection with a change of control of a domestic company, any determination by the Director that the person acquiring control of the company shall be required to maintain or restore the capital of the company to the level required by the laws and regulations of this State shall be made not later than 60 days after the filing of the statement required by Section 131.5 of this Code.

(Source: P.A. 102-394, eff. 8-16-21.)

(215 ILCS 5/131.8a) (from Ch. 73, par. 743.8a)

Sec. 131.8a.
The Director may retain at the applicant’s expense any
attorneys,
actuaries, accountants and other experts not otherwise a part of the Director’s
staff as may be reasonably necessary to assist in reviewing an acquisition proposed under
Section 131.4.

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

(215 ILCS 5/131.9) (from Ch. 73, par. 743.9)

Sec. 131.9.

All statements, amendments or other material filed under Section 131.5
must be delivered to the domestic company
within 10 business days after the
acquiring party has made the
filing with the Director. The domestic company shall then send
to its securityholders
the summary of the proposed acquisition within 5 business days of such delivery.
The notice shall contain an address where a copy of the statement filed
with the Director can be obtained upon request. The expenses of the mailing
and any requests
for the statement and the mailing
of the notice of hearing by the company required under subsection (2) of
Section 131.8 must be borne by the person making the filing. As security
for the payment of the expenses, the person may be required to
file with the Director an
acceptable bond or other deposit in an amount to be determined by the
Director.

(Source: P.A. 84-805.)

(215 ILCS 5/131.9a)

Sec. 131.9a. (Repealed).

(Source: P.A. 98-609, eff. 1-1-14. Repealed by P.A. 102-394, eff. 8-16-21.)

(215 ILCS 5/131.10) (from Ch. 73, par. 743.10)

Sec. 131.10.
Sections 131.4 through 131.12 do not apply to:

(1) any transaction which is subject to Article X of this Code
dealing with merger, consolidation or plans of exchange;

(2) any offer, request, invitation, agreement or acquisition which
the Director by order exempts therefrom as (a) not having been made or
entered into for the purpose and not having the effect of changing or
influencing the control of a domestic company, or (b) as otherwise not
comprehended within the purposes of Sections 131.4 through 131.12.

(Source: P.A. 80-545.)

(215 ILCS 5/131.11) (from Ch. 73, par. 743.11)

Sec. 131.11.

The following are violations of Sections 131.4 through 131.12:

(1) the failure to file any statement, amendment, or other material required to be filed under Sections 131.4 or 131.5; or
(2) the effectuation or any attempt to effectuate an acquisition of control of, divestiture of, or merger or consolidation with, a domestic company unless the Director has given his approval.

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

(215 ILCS 5/131.12) (from Ch. 73, par. 743.12)

Sec. 131.12.

The courts of this State are hereby vested with jurisdiction over every
person not resident, domiciled, or authorized to do business in this State
who files a statement with the Director under Section 131.4, and over all
actions involving such person arising out of violations of Sections 131.4,
131.5, 131.6, or 131.11, and each such person is deemed to have
performed acts equivalent to and constituting an appointment by such a
person of the Director to be his true and lawful attorney upon whom may be
served all lawful process in any action, suit or proceeding arising out of
violations of Sections 131.4, 131.5, 131.6, or 131.11. Copies of all
such lawful process must be served on the Director and transmitted by
registered or certified mail by the Director to such person at his last
known address.

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

(215 ILCS 5/131.12a) (from Ch. 73, par. 743.12a)

Sec. 131.12a. Acquisitions involving companies not otherwise covered.

(1) Definitions. The following definitions shall apply for the purposes
of this Section only:

(a) “Acquisition” means any agreement, arrangement or activity the
consummation
of which results in a person acquiring directly or indirectly the control
of another person or control of the insurance in force of another person,
and includes but is not limited to the acquisition of voting securities,
the acquisition of assets, the transaction of bulk reinsurance and the act
of merging or consolidating.

(b) An “involved company” includes a company which either acquires or
is acquired, is affiliated with an acquirer or acquired or is the result of a
merger.

(2) Scope.

(a) Except as exempted in paragraph (b) of this subsection (2), this Section
applies to any acquisition in which there is a change in control of a company
authorized to do business in this State.

(b) This Section shall not apply to the following:

(i) an acquisition subject to approval or disapproval by the Director pursuant to Section 131.8;
(ii) a purchase of securities solely for investment purposes so long as such securities are not used by voting or otherwise to cause or attempt to cause the substantial lessening of competition in any insurance market in this State. If a purchase of securities results in a presumption of control under subsection (b) of Section 131.1, it is not solely for investment purposes unless the commissioner of the company’s state of domicile accepts a disclaimer of control or affirmatively finds that control does not exist and such disclaimer action or affirmative finding is communicated by the domiciliary commissioner to the Director of this State;
(iii) the acquisition of a person by another person when both persons are neither directly nor through affiliates primarily engaged in the business of insurance, if pre-acquisition notification is filed with the Director in accordance with subsection (3)(a) of this Section, 30 days prior to the proposed effective date of the acquisition. However, such pre-acquisition notification is not required for exclusion from this Section if the acquisition would otherwise be excluded from this Section by any other subparagraph of subsection (2)(b);
(iv) the acquisition of already affiliated persons;
(v) an acquisition if, as an immediate result of the acquisition,

(A) in no market would the combined market share of the involved companies exceed 5% of the total market,
(B) there would be no increase in any market share, or
(C) in no market would the combined market share of the involved companies exceed 12% of the total market, and the market share increase by more than 2% of the total market.

For the purpose of this subparagraph (b)(v), “market” means direct written insurance premium in this State for a line of business as contained in the annual statement required to be filed by companies licensed to do business in this State;
(vi) an acquisition for which a pre-acquisition notification would be required pursuant to this Section due solely to the resulting effect on the ocean marine insurance line of business;
(vii) an acquisition of a company whose domiciliary commissioner affirmatively finds that such company is in failing condition; there is a lack of feasible alternative to improving such condition; the public benefits of improving such company’s condition through the acquisition exceed the public benefits that would arise from not lessening competition; and such findings are communicated by the domiciliary commissioner to the Director of this State.

(3) Pre-acquisition Notification; Waiting Period. An acquisition
covered by subsection (2) may be subject to an order pursuant to subsection
(5) unless the acquiring person files a pre-acquisition notification and the
waiting period has expired. The acquired person may file a pre-acquisition
notification. The Director shall give confidential treatment to information
submitted under this subsection in the same manner as provided in Section
131.22 of this Article.

(a) The pre-acquisition notification shall be in such form and contain
such information as prescribed by the Director, which shall conform
substantially to the form of notification adopted by the National Association
of Insurance Commissioners relating to those markets which, under subsection
(b)(v) of Section (2), cause the acquisition not to be exempted from the
provisions of this Section. The Director may require such additional material
and information as he deems necessary to determine whether the proposed
acquisition, if consummated, would violate the competitive standard of
subsection (4). The required information may include an opinion of an
economist as to the competitive impact of the acquisition in this State
accompanied by a summary of the education and experience of such person
indicating his or her ability to render an informed opinion.

(b) The waiting period required shall begin on the date of the receipt
by the Director of a pre-acquisition notification and shall end on the earlier
of the 30th day after the date of such receipt, or termination of the waiting
period by the Director. Prior to the end of the waiting period, the Director
on a one time basis may require the submission of additional needed information
relevant to the proposed acquisition, in which event the waiting period shall
end on the earlier of the 30th day after the receipt of such additional
information by the Director or termination of the waiting period by the
Director.

(4) Competitive Standard.

(a) The Director may enter an order under subsection (5)(a) with respect
to an acquisition if there is substantial evidence that the effect of the
acquisition may be substantially to lessen competition in any line of insurance
in this State or tend to create a monopoly therein or if the company fails
to file adequate information in compliance with subsection (3).

(b) In determining whether a proposed acquisition would violate the
competitive standard of paragraph (a) of this subsection the
Director shall consider the following:

(i) any acquisition covered under subsection (2) involving 2 or more companies competing in the same market is prima facie evidence of violation of the competitive standards:

(A) if the market is highly concentrated and the involved companies possess the following shares of the market:

Company A

Company B
4% 4% or more

10% 2% or more
15% 1% or more
(B) if the market is not highly concentrated and the involved companies possess the following shares of the market:

Company A

Company B
5% 5% or more

10% 4% or more

15% 3% or more
19% 1% or more

A highly concentrated market is one in which the share of the 4 largest companies is 75% or more of the market. Percentages not shown in the tables are to be interpolated proportionately to the percentages that are shown. If more than 2 companies are involved, exceeding the total of the 2 columns in the table is prima facie evidence of violation of the competitive standard in paragraph (a) of this subsection. For the purpose of this subparagraph, the company with the largest share of the market shall be deemed to be Company A.
(ii) There is a significant trend toward increased concentration when the aggregate market share of any grouping of the largest companies in the market from the 2 largest to the 8 largest has increased by 7% or more of the market over a period of time extending from any base year 5-10 years prior to the acquisition up to the time of the acquisition. Any acquisition covered under subsection (2) involving 2 or more companies competing in the same market is prima facie evidence of violation of the competitive standard in paragraph (a) of this subsection if:

(A) there is a significant trend toward increased concentration in the market,
(B) one of the companies involved is one of the companies in a grouping of such large companies showing the requisite increase in the market share, and
(C) another involved company’s market is 2% or more.

(iii) For the purpose of subsection (4)(b):

(A) The term “company” includes any company or group of companies under common management, ownership or control.
(B) The term “market” means the relevant product and geographic markets. In determining the relevant product and geographical markets, the Director shall give due consideration to, among other things, the definitions or guidelines, if any, promulgated by the National Association of Insurance Commissioners and to information, if any, submitted by parties to the acquisition. In the absence of sufficient information to the contrary, the relevant product market is assumed to be the direct written insurance premium for a line of business with such line being that used in the annual statement required to be filed by companies doing business in this State and the relevant geographical market is assumed to be this State.
(C) The burden of showing prima facie evidence of violation of the competitive standard rests upon the Director.

(iv) Even though an acquisition is not prima facie violative of the competitive standard under subparagraph (b)(i) and (b)(ii) of this subsection the Director may establish the requisite anticompetitive effect based upon other substantial evidence. Even though an acquisition is prima facie violative of the competitive standard under subparagraphs (b)(i) and (b)(ii) of this subsection (4), a party may establish the absence of the requisite anticompetitive effect based upon other substantial evidence. Relevant factors in making a determination under this paragraph include, but are not limited to, the following: market shares, volatility of ranking of market leaders, number of competitors, concentration, trend of concentration in the industry, and ease of entry and exit into the market.

(i) the acquisition will yield substantial economies of scale or economies in resource utilization that cannot be feasibly achieved in any other way, and the public benefits which would arise from such economies exceed the public benefits which would arise from not lessening competition; or
(ii) the acquisition will substantially increase the availability of insurance, and the public benefits of such increase exceed the public benefits which would arise from not lessening competition.

(5) Orders and Penalties:

(a)(i) If an acquisition violates the standard of this Section, the Director may enter an order

(A) requiring an involved company to cease and desist from doing business in this State with respect to the line or lines of insurance involved in the violation, or
(B) denying the application of an acquired or acquiring company for a license to do business in this State.

(ii) Such an order shall not be entered unless there is a hearing, notice of such hearing is issued prior to the end of the waiting period and not less than 15 days prior to the hearing, and the hearing is concluded and the order is issued no later than 60 days after the end of the waiting period. Every order shall be accompanied by a written decision of the Director setting forth his findings of fact and conclusions of law.
(iii) (Blank).
(iv) An order pursuant to this paragraph shall not apply if the acquisition is not consummated.

(b) Any person who violates a cease and desist order of the Director under
paragraph (a) and while such order is in effect may after notice and hearing
and upon order of the Director be subject at the discretion of the Director to
any one or more of the following:

(i) a monetary penalty of not more than $10,000 for every day of violation or
(ii) suspension or revocation of such person’s license.

(c) Any company or other person who fails to make any filing required
by this Section and who also fails to demonstrate a good faith effort to
comply with any such filing requirement shall be subject to a civil penalty of
not more than $50,000.

(6) Inapplicable Provisions. Subsections (2) and (3) of Section 131.23 and
Section 131.25 do not apply to acquisitions covered under subsection (2).

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

(215 ILCS 5/131.13) (from Ch. 73, par. 743.13)

Sec. 131.13. Registration of companies. Every company which is authorized to do business in this State and which
is a member of an insurance holding company system must register with the
Director, except a foreign or alien company subject to registration
requirements and standards adopted by statute or regulation in the
jurisdiction of its domicile which are substantially similar to those
contained in this section and Sections 131.14 through 131.20a. Any company
which is subject to registration under this section must register within 60
days after the effective date of this Article or 15 days after it becomes
subject to registration, whichever is later, unless the Director for good
cause shown extends the time for registration, and then within such
extended time. The Director may require any authorized company which is a
member of a holding company system which is not subject to registration
under this section to furnish a copy of the registration statement or other
information filed by such company with the insurance regulatory authority
of its domiciliary jurisdiction.

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

(215 ILCS 5/131.14) (from Ch. 73, par. 743.14)

Sec. 131.14.
Every company subject to registration must file a registration statement on a
form and in a format prescribed by the Director, which shall contain the following current information:

(1) the capital structure, general financial condition, ownership and management of the company and any person controlling the company;
(2) the identity and relationship of every member of the insurance holding company system;
(3) the following agreements in force, relationships subsisting, and transactions currently outstanding or that have occurred during the last calendar year between such company and its affiliates:

(a) loans, other investments, or purchases, sales or exchanges of securities of the affiliates by the company or of the company by its affiliates;
(b) purchases, sales, or exchanges of assets;
(c) transactions not in the ordinary course of business;
(d) guarantees or undertakings for the benefit of an affiliate which result in an actual contingent exposure of the company’s assets to liability, other than insurance contracts entered into in the ordinary course of the company’s business;
(e) all management agreements, service contracts, and cost-sharing arrangements;
(f) reinsurance agreements;
(f-5) dividends and other distributions to shareholders;
(g) any pledge of the company’s own securities, securities of any subsidiary or controlling affiliate, to secure a loan made to any member of the insurance holding company system; and
(h) consolidated tax allocation agreements;

(4) (blank);
(5) financial statements of or within an insurance holding company system, including all affiliates, if requested by the Director; financial statements may include, but are not limited to, annual audited financial statements filed with the U.S. Securities and Exchange Commission (SEC) pursuant to the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended; a company required to file financial statements pursuant to this paragraph (5) may satisfy the request by providing the Director with the most recently filed parent corporation financial statements that have been filed with the SEC;
(6) statements that the company’s or its parent company’s board of directors or a committee thereof oversees corporate governance and internal controls and that the company’s officers or senior management have approved and implemented and continue to maintain and monitor corporate governance and internal controls; and
(7) other matters concerning transactions between registered companies and any affiliates as may be included from time to time in any registration forms adopted or approved by the Director. (Source: P.A. 98-609, eff. 1-1-14.)

(215 ILCS 5/131.14a)

Sec. 131.14a. Summary filing. Every company subject to registration must file a summary outlining all items in the current registration statement representing changes from the prior registration statement.

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

(215 ILCS 5/131.14b)

Sec. 131.14b. Enterprise risk filings.

(a) Annual enterprise risk report. The ultimate controlling person of every company subject to registration shall also file an annual enterprise risk report. The report shall, to the best of the ultimate controlling person’s knowledge and belief, identify the material risks within the insurance holding company system that could pose enterprise risk to the company. The report shall be filed with the lead state commissioner of the insurance holding company system as determined by the procedures within the Financial Analysis Handbook adopted by the National Association of Insurance Commissioners.

(b) Group capital calculation. Except as provided in this subsection, the ultimate controlling person of every insurer subject to registration shall concurrently file with the registration an annual group capital calculation as directed by the lead state commissioner. The report shall be completed in accordance with the NAIC Group Capital Calculation Instructions, which may permit the lead state commissioner to allow a controlling person who is not the ultimate controlling person to file the group capital calculation. The report shall be filed with the lead state commissioner of the insurance holding company system as determined by the commissioner in accordance with the procedures within the Financial Analysis Handbook adopted by the NAIC. Insurance holding company systems described in the following are exempt from filing the group capital calculation:

(1) an insurance holding company system that has only one insurer within its holding company structure, that only writes business and is only licensed in Illinois, and that assumes no business from any other insurer;
(2) an insurance holding company system that is required to perform a group capital calculation specified by the United States Federal Reserve Board; the lead state commissioner shall request the calculation from the Federal Reserve Board under the terms of information sharing agreements in effect; if the Federal Reserve Board cannot share the calculation with the lead state commissioner, the insurance holding company system is not exempt from the group capital calculation filing;
(3) an insurance holding company system whose non-U.S. group-wide supervisor is located within a reciprocal jurisdiction as described in paragraph (C-10) of subsection (1) of Section 173.1 that recognizes the U.S. state regulatory approach to group supervision and group capital; and
(4) an insurance holding company system:

(i) that provides information to the lead state that meets the requirements for accreditation under the NAIC financial standards and accreditation program, either directly or indirectly through the group-wide supervisor, who has determined such information is satisfactory to allow the lead state to comply with the NAIC group supervision approach, as detailed in the NAIC Financial Analysis Handbook; and
(ii) whose non-U.S. group-wide supervisor that is not in a reciprocal jurisdiction recognizes and accepts, as specified by the commissioner in regulation, the group capital calculation as the world-wide group capital assessment for U.S. insurance groups who operate in that jurisdiction.

Notwithstanding the provisions of paragraphs (3) and (4) of this subsection, a lead state commissioner shall require the group capital calculation for U.S. operations of any non-U.S. based insurance holding company system where, after any necessary consultation with other supervisors or officials, it is deemed appropriate by the lead state commissioner for prudential oversight and solvency monitoring purposes or for ensuring the competitiveness of the insurance marketplace.

Notwithstanding the exemptions from filing the group capital calculation stated in paragraphs (1) through (4) of this subsection, the lead state commissioner has the discretion to exempt the ultimate controlling person from filing the annual group capital calculation or to accept a limited group capital filing or report in accordance with criteria as specified by the Director in regulation.

(c) Liquidity stress test. The ultimate controlling person of every insurer subject to registration and also scoped into the NAIC Liquidity Stress Test Framework shall file the results of a specific year’s liquidity stress test. The filing shall be made to the lead state insurance commissioner of the insurance holding company system as determined by the procedures within the Financial Analysis Handbook adopted by the National Association of Insurance Commissioners:

(1) The NAIC Liquidity Stress Test Framework includes scope criteria applicable to a specific data year. These scope criteria are reviewed at least annually by the NAIC Financial Stability Task Force or its successor. Any change to the NAIC Liquidity Stress Test Framework or to the data year for which the scope criteria are to be measured shall be effective on January 1 of the year following the calendar year when such changes are adopted. Insurers meeting at least one threshold of the scope criteria are considered scoped into the NAIC Liquidity Stress Test Framework for the specified data year unless the lead state insurance commissioner, in consultation with the NAIC Financial Stability Task Force or its successor, determines the insurer should not be scoped into the Framework for that data year. Similarly, insurers that do not trigger at least one threshold of the scope criteria are considered scoped out of the NAIC Liquidity Stress Test Framework for the specified data year, unless the lead state insurance commissioner, in consultation with the NAIC Financial Stability Task Force or its successor, determines the insurer should be scoped into the Framework for that data year.
The lead state insurance commissioner, in consultation with the Financial Stability Task Force or its successor, shall assess the regulator’s wish to avoid having insurers scoped in and out of the NAIC Liquidity Stress Test Framework on a frequent basis as part of the determination for an insurer.
(2) The performance of, and filing of the results from, a specific year’s liquidity stress test shall comply with the NAIC Liquidity Stress Test Framework’s instructions and reporting templates for that year and any lead state insurance commissioner determinations, in conjunction with the NAIC Financial Stability Task Force or its successor, provided within the Framework. (Source: P.A. 102-578, eff. 7-1-22 (See Section 5 of P.A. 102-672 for effective date of P.A. 102-578); 102-813, eff. 5-13-22.)

(215 ILCS 5/131.14c)

Sec. 131.14c. Violations. The failure to file a registration statement or any summary of the registration statement or enterprise risk filing required by this Article within the time specified for filing shall be a violation of this Article.

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

(215 ILCS 5/131.14d)

Sec. 131.14d. (Repealed).

(Source: P.A. 98-609, eff. 1-1-14. Repealed by P.A. 102-394, eff. 8-16-21.)

(215 ILCS 5/131.15) (from Ch. 73, par. 743.15)

Sec. 131.15.
No information need be disclosed on the registration statement filed
under Section 131.14 if the information is not material for the purposes of
Sections 131.13 through 131.19. Unless the Director by rule, regulation or
order provides otherwise, sales, purchases, exchanges, loans or extensions
of credit, investments, or guarantees involving one-half of one
percent or less of a
company’s admitted assets as of the 31st day of December next preceding,
are not deemed material for purposes of Sections 131.13 through 131.19. The description of materiality provided in this Section shall not apply for purposes of subsections (b) and (c) of Section 131.14b.

(Source: P.A. 102-578, eff. 7-1-22 (See Section 5 of P.A. 102-672 for effective date of P.A. 102-578).)

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

Sec. 131.16. Reporting material changes or additions; penalty for late
registration statement.

(1) Each registered company must keep current the information required to be
included in its registration statement by reporting all material changes
or additions on amendment forms designated by the Director within 15 days
after the end of the month in which it learns of each change or addition,
or within a longer time thereafter as the Director may establish. Any
transaction which has been submitted to the Director pursuant to Section
131.20a need not be reported to the Director under this subsection; except
each registered company must
report all dividends and other distributions to shareholders within 5
business days following the declaration, and no less than 10 business days prior to payment thereof.

(2) On or before May 1 each year, each company subject to registration
under this Article shall file a statement in a format as designated by
the Director. This statement shall include information previously included
in an amendment under subsection (1) of this Section, transactions and
agreements
submitted under Section 131.20a, and any other material transactions which
are required to be reported.

(2.5) Any person within an insurance holding company system subject to registration shall be required to provide complete and accurate information to a company where the information is reasonably necessary to enable the company to comply with the provisions of this Article.

(3) Any company failing, without just cause, to file any registration
statement, any summary of changes to a registration statement, or any Enterprise Risk Filing or any person within an insurance holding company system who fails to provide complete and accurate information to a company as required in this Code shall be required
to pay a penalty of up to $1,000 for each day’s delay, to be
recovered by the Director
of Insurance of the State of Illinois, using the notice and hearing procedure in subsection (2) of Section 403A of this Code, and the penalty so recovered shall
be paid into the General Revenue Fund of the State of Illinois. The maximum
penalty under this section is $50,000. The Director may reduce
the penalty if the company demonstrates to the Director that the imposition
of the penalty would constitute a financial hardship to the company.

(Source: P.A. 98-609, eff. 1-1-14; 98-910, eff. 7-1-15.)

(215 ILCS 5/131.17) (from Ch. 73, par. 743.17)

Sec. 131.17.

(1) The Director must terminate the registration of any company which
demonstrates that it no longer is a member of an insurance holding company
system.

(2) The Director may require or allow 2 or more
affiliated companies subject to registration to file a consolidated registration statement.

(3) A company which is authorized to do business in this State and which
is part of an insurance holding company system may register on behalf of
any affiliated company which is required to register under Section 131.13
and to file all information and material required to be filed under this
Article unless the Director requires a separate registration by the
affiliated company.

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

(215 ILCS 5/131.18) (from Ch. 73, par. 743.18)

Sec. 131.18.

Sections 131.13 through 131.19 do not apply to any company, information,
or transaction if and to the extent that the Director by rule, regulation,
or order may exempt the same from Sections 131.13 through 131.19.

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

(215 ILCS 5/131.19) (from Ch. 73, par. 743.19)

Sec. 131.19. Disclaimer of affiliation. Any person may file with the Director a disclaimer of affiliation
with any authorized company or a disclaimer may be filed by the company or
any member of an insurance holding company system. The disclaimer shall
fully disclose all material relationships and bases for affiliation between
the person and the company as well as the basis for disclaiming the
affiliation. A disclaimer of affiliation shall be deemed to have been granted unless the Director, within 30 days following receipt of a complete disclaimer, notifies the filing party that the disclaimer is disallowed. In the event of disallowance, the disclaiming party may request an administrative hearing, which shall be granted. The disclaiming party shall be relieved of its duty to register under Section 131.13 of this Code if approval of the disclaimer has been granted by the Director or if the disclaimer is deemed to have been approved.

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

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

Sec. 131.20. Standards for transactions with affiliates; adequacy of
surplus.

(1) Transactions with their affiliates by
companies subject to registration
are subject to the following standards:

(a) the terms are fair and reasonable;
(a-5) agreements for cost sharing services and management shall include such provisions as may be required by rules and regulations issued by the Director;
(b) charges or fees for services performed are reasonable;
(c) expenses incurred and payment received must be allocated to the company in conformity with customary insurance accounting practices consistently applied;
(d) the books, accounts, and records of each party must be so maintained as to clearly and accurately disclose the precise nature and details of the transactions, including accounting information necessary to support the reasonableness of the charges or fees to the respective parties; and
(e) the company’s surplus as regards policyholders following any transactions with affiliates or dividends or distributions to securityholders or affiliates must be reasonable in relation to the company’s outstanding liabilities and adequate to meet its financial needs.

(2) For purposes of this Article, in determining whether a company’s
surplus as regards policyholders is reasonable in relation to the company’s
outstanding liabilities and adequate to meet its needs, the following factors,
among others, may be considered:

(a) the size of the company as measured by its assets, capital and surplus, reserves, premium writings, insurance in force and other appropriate criteria;
(b) the extent to which the company’s business is diversified among several lines of insurance;
(c) the number and size of risks insured in each line of business;
(d) the extent of the geographical dispersion of the company’s insured risks;
(e) the nature and extent of the company’s reinsurance program;
(f) the quality, diversification, and liquidity of the company’s investment portfolio;
(g) the recent past and projected future trend in the size of the company’s investment portfolio;
(h) the surplus as regards policyholders maintained by companies comparable to the registrant in respect of the factors enumerated in this paragraph;
(i) the adequacy of the company’s reserves;
(j) the quality of the company’s earnings and the extent to which the reported earnings include extraordinary items; and
(k) the quality and liquidity of investments in affiliates. The Director may discount any such investment or treat any such investment as a non-admitted asset for purposes of determining the adequacy of surplus as regards policyholders whenever the investment so warrants.

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

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

Sec. 131.20a. Prior notification of transactions; dividends and
distributions.

(1) (a) The following transactions listed in items (i) through (vii) involving a domestic
company and any person in its insurance holding company system, including amendments or modifications (other than termination) of affiliate agreements previously filed pursuant to this Section, which are subject to any materiality standards contained in this Section, may not be entered
into unless the company has notified the Director in writing of its
intention to enter into such transaction at least 30 days prior thereto, or
such period as the Director may permit, and the Director has not
disapproved it within such period. The notice for amendments or modifications (other than termination) shall include the reasons for the change and the financial impact on the domestic company. Informal notice shall be reported, within 30 days after a termination of a previously filed agreement, to the Director for determination of the type of filing required, if any.

(i) Sales, purchases, exchanges of assets, loans or extensions of credit, guarantees, investments, or any other transaction, except dividends, that involves the transfer of assets from or liabilities to a company (A) equal to or exceeding the lesser of 3% of the company’s admitted assets or 25% of its surplus as regards policyholders as of the 31st day of December next preceding or (B) that is proposed when the domestic company is not eligible to declare and pay a dividend or other distribution pursuant to the provisions of Section 27.
(ii) Loans or extensions of credit to any person that is not an affiliate (A) that involve the lesser of 3% of the company’s admitted assets or 25% of the company’s surplus, each as of the 31st day of December next preceding, made with the agreement or understanding that the proceeds of such transactions, in whole or in substantial part, are to be used to make loans or extensions of credit to, to purchase assets of, or to make investments in, any affiliate of the company making such loans or extensions of credit or (B) that are proposed when the domestic company is not eligible to declare and pay a dividend or other distribution pursuant to the provisions of Section 27.
(iii) Reinsurance agreements or modifications thereto, including all reinsurance pooling agreements, reinsurance agreements in which the reinsurance premium or a change in the company’s liabilities, or the projected reinsurance premium or a change in the company’s liabilities in any of the next 3 years, equals or exceeds 5% of the company’s surplus as regards policyholders, as of the 31st day of December next preceding, including those agreements that may require as consideration the transfer of assets from a company to a nonaffiliate, if an agreement or understanding exists between the company and nonaffiliate that any portion of those assets will be transferred to one or more affiliates of the company.
(iv) All management agreements; service contracts, other than agency contracts; tax allocation agreements; all reinsurance allocation agreements related to reinsurance agreements required to be filed under this Section; and all cost-sharing arrangements.
(v) Direct or indirect acquisitions or investments in a person that controls the company, or in an affiliate of the company, in an amount which, together with its present holdings in such investments, exceeds 2.5% of the company’s surplus as regards policyholders. Direct or indirect acquisitions or investments in subsidiaries acquired pursuant to Section 131.2 of this Article (or authorized under any other Section of this Code), or in non-subsidiary insurance affiliates that are subject to the provisions of this Article, are exempt from this requirement.
(vi) Any series of the previously described transactions that are substantially similar to each other, that take place within any 180 day period, and that in total are equal to or exceed the lesser of 3% of the domestic company’s admitted assets or 25% of its policyholders surplus, as of the 31st day of the December next preceding.
(vii) Any other material transaction that the Director by rule determines might render the company’s surplus as regards policyholders unreasonable in relation to the company’s outstanding liabilities and inadequate to its financial needs or may otherwise adversely affect the interests of the company’s policyholders or shareholders.

Nothing herein contained shall be deemed to authorize or permit any
transactions that, in the case of a company not a member of the same holding
company system, would be otherwise contrary to law.

(b) Any transaction or contract otherwise described in paragraph (a) of this
subsection that is between a domestic company and any person that is not its
affiliate and that precedes or follows within 180 days or is concurrent with a
similar transaction between that nonaffiliate and an affiliate of the domestic
company and that involves amounts that are equal to or exceed the lesser of 3%
of the domestic company’s admitted assets or 25% of its surplus as regards
policyholders at the end of the prior year may not be entered into unless the
company has notified the Director in writing of its intention to enter into the
transaction at least 30 days prior thereto or such shorter period as the
Director may permit, and the Director has not disapproved it within such
period.

(c) A company may not enter into transactions which are part of
a plan
or series of like transactions with any person within the holding company
system if the purpose of those separate transactions is to avoid the
statutory threshold amount and thus avoid the review that would occur
otherwise. If the Director determines that such separate transactions were
entered into for such purpose, he may
exercise his authority under subsection (2) of Section 131.24.

(d) The Director, in reviewing transactions pursuant to paragraph (a),
shall consider whether the transactions comply with the standards set forth in
Section 131.20 and whether they may adversely affect the interests of
policyholders.

(e) The Director shall be notified within 30 days of any investment of the
domestic company in any one corporation if the total investment in that
corporation by the insurance holding company system exceeds 10% of that
corporation’s voting securities.

(f) Except for those transactions subject to approval
under other
Sections
of this Code,
any such transaction or agreements which are not disapproved by the
Director may be effective as of the date set forth in the notice required
under this Section.

(g) If a domestic company enters into a transaction described in this
subsection without having given the required notification, the Director, using the notice and hearing procedure in subsection (2) of Section 403A of this Code, may
cause the company to pay a civil forfeiture of not more than $250,000. Each
transaction so entered shall be considered a separate offense.

(2) No domestic company subject to registration under Section 131.13 may
pay any extraordinary dividend or make any other extraordinary distribution
to its shareholders until: (a) 30 days after the Director has received
notice of the declaration thereof and has not within such period
disapproved the payment, or (b) the Director approves such payment within
the 30-day period. For purposes of this subsection, an extraordinary
dividend or distribution is any dividend or distribution of cash or other
property whose fair market value, together with that of other dividends or
distributions, made within the period of 12 consecutive months ending on the
date on which the proposed dividend is scheduled for payment or
distribution exceeds the greater of: (a) 10% of the company’s
surplus as regards policyholders as of the 31st day of December next
preceding, or (b) the net income of the company for the 12-month period ending the 31st day
of December next preceding, but does not include pro rata distributions of
any class of the company’s own securities.

Notwithstanding any other provision of law, the company may declare an
extraordinary dividend or distribution which is conditional upon the
Director’s approval, and such a declaration confers no rights upon
security holders until: (a) the Director has approved the payment of the
dividend or distribution, or (b) the Director has not disapproved the
payment within the 30-day period referred to above.

(Source: P.A. 98-609, eff. 1-1-14; 98-910, eff. 7-1-15.)

(215 ILCS 5/131.20b)

Sec. 131.20b. Controlled companies; management; directors.

(1) Notwithstanding the control of a domestic company by any person, the
officers and directors of the company shall not thereby be relieved of any
obligation or liability to which they would otherwise be subject by law, and
the company shall be managed so as to assure its separate operating identity
consistent with this Article.

(2) Nothing in this Section shall preclude a domestic company from having or
sharing a common management or a cooperative or joint use of personnel,
property,
or services with one or more affiliated persons under arrangements meeting the
standards and requirements of Sections 131.20 and 131.20a.

(3) Not less than one-third of the directors of a
domestic company, and not less than one-third of the members of each committee of the board of directors of any domestic company, that is a member of an insurance holding company system shall
be persons who are not officers or employees of the company or of any entity
controlling, controlled by, or under common control with the company and who
are not beneficial owners of a controlling interest in the voting stock of the
company or any such entity. At least one such person shall be included in any
quorum for the transaction of business at any meeting of the board of directors
or any committee thereof.

(3.5) The board of directors of a domestic company or ultimate controlling company shall establish one or more committees comprised solely of directors who are not officers or employees of the company or of any entity controlling, controlled by, or under common control with the company and who are not beneficial owners of a controlling interest in the voting stock of the company or any such entity. The committee or committees shall have responsibility for nominating candidates for director for election by shareholders or policyholders, evaluating the performance of officers deemed to be principal officers of the company, and recommending to the board of directors the selection and compensation of the principal officers.

(4) Subsections (3) and (3.5) of this Section do not apply to a domestic company if
the ultimate controlling company or the person controlling the company, such as a company, a mutual insurance holding company, or a publicly held corporation, has a board of directors and committees thereof that meet the requirements of subsections (3) and (3.5) with respect to such controlling entity or are subject to and meet the
requirements of the corporate governance rules of a national securities exchange, such as the New
York Stock Exchange, or an inter-dealer quotation system, such as the National Association of
Securities Dealers Automatic Quotation.

(5) (Blank).

(6) A company may make application to the Director for a waiver from the requirements of this Section, if the company’s annual direct written and assumed premium, excluding premiums reinsured with the Federal Crop Insurance Corporation and Federal Flood Program, is less than $300,000,000. A company may also make application to the Director for a waiver from the requirements of this Section based upon unique circumstances. The Director may consider various factors, including, but not limited to, the type of business entity, volume of business written, availability of qualified board members, or the ownership or organizational structure of the entity.

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

(215 ILCS 5/131.20c)

Sec. 131.20c. Supervisory colleges.

(a) With respect to any company registered under Section 131.13 of this Code, and in accordance with subsection (c) of this Section, the Director shall also have the power to participate in a supervisory college for any domestic company that is part of an insurance holding company system with international operations in order to determine compliance by the company with this Article. The powers of the Director with respect to supervisory colleges include, but are not limited to:

(1) initiating the establishment of a supervisory college;
(2) clarifying the membership and participation of other supervisors in the supervisory college;
(3) clarifying the functions of the supervisory college and the role of other regulators, including the establishment of a group-wide supervisor;
(4) coordinating the ongoing activities of the supervisory college, including planning meetings, supervisory activities, and processes for information sharing; and
(5) establishing a crisis management plan.

(b) Each registered company subject to this Section shall be liable for and shall pay the reasonable expenses of the Director’s participation in a supervisory college in accordance with subsection (c) of this Section, including reasonable travel expenses. For purposes of this Section, a supervisory college may be convened as either a temporary or permanent forum for communication and cooperation between the regulators charged with the supervision of the company or its affiliates, and the Director may establish a regular assessment to the company for the payment of these expenses.

(c) In order to assess the business strategy, financial position, legal and regulatory position, risk exposure, risk management, and governance processes, and as part of the examination of individual companies in accordance with Section 131.21 of this Code, the Director may participate in a supervisory college with other regulators charged with supervision of the company or its affiliates, including other state, federal, and international regulatory agencies. The Director may enter into agreements in accordance with Section 131.22 of this Code providing the basis for cooperation between the Director and the other regulatory agencies and the activities of the supervisory college. Nothing in this Section shall delegate to the supervisory college the authority of the Director to regulate or supervise the company or its affiliates within its jurisdiction.

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

(215 ILCS 5/131.20d)

Sec. 131.20d. Group-wide supervision of internationally active insurance groups.

(a) The Director is authorized to act as the group-wide supervisor for any internationally active insurance group in accordance with the provisions of this Section.

(b) The Director may otherwise acknowledge another regulatory official as the group-wide supervisor where the internationally active insurance group:

(1) does not have substantial insurance operations in the United States;
(2) has substantial insurance operations in the United States, but not in this State; or
(3) has substantial insurance operations in the United States and this State, but the Director has determined pursuant to the factors set forth in subsections (d) and (h) that the other regulatory official is the appropriate group-wide supervisor.

(c) An insurance holding company system that does not otherwise qualify as an internationally active insurance group may request that the Director make a determination or acknowledgment as to a group-wide supervisor pursuant to this Section.

(d) In cooperation with other state, federal, and international regulatory agencies, the Director will identify a single group-wide supervisor for an internationally active insurance group. The Director may determine that the Director is the appropriate group-wide supervisor for an internationally active insurance group that conducts substantial insurance operations concentrated in this State. However, the Director may acknowledge that a regulatory official from another jurisdiction is the appropriate group-wide supervisor for the internationally active insurance group. A regulatory official identified under this Section as the group-wide supervisor may determine that it is appropriate to acknowledge another supervisor to serve as the group-wide supervisor. The acknowledgment of the group-wide supervisor shall be made after consideration of the factors listed in paragraphs (1) through (5) of this subsection, and shall be made in cooperation with and subject to the acknowledgment of other regulatory officials involved with supervision of members of the internationally active insurance group, and in consultation with the internationally active insurance group. The Director shall consider the following factors when making a determination or acknowledgment under this subsection:

(1) the place of domicile of the insurance companies within the internationally active insurance group that hold the largest share of the group’s written premiums, assets, or liabilities;
(2) the place of domicile of the top-tiered insurance company or companies in the insurance holding company system of the internationally active insurance group;
(3) the location of the executive offices or largest operational offices of the internationally active insurance group;
(4) whether another regulatory official is acting or is seeking to act as the group-wide supervisor under a regulatory system that the Director determines to be:

(A) substantially similar to the system of regulation provided under the laws of this State; or
(B) otherwise sufficient in terms of providing for group-wide supervision, enterprise risk analysis, and cooperation with other regulatory officials; and

(5) whether another regulatory official acting or seeking to act as the group-wide supervisor provides the Director with reasonably reciprocal recognition and cooperation.

(e) Notwithstanding any other provision of law, when another regulatory official is acting as the group-wide supervisor of an internationally active insurance group, the Director shall acknowledge that regulatory official as the group-wide supervisor. However, in the event of a material change in the internationally active insurance group that results in:

(1) the internationally active insurance group’s insurance companies domiciled in this State holding the largest share of the group’s premiums, assets, or liabilities; or
(2) this State being the place of domicile of the top-tiered insurance company or companies in the insurance holding company system of the internationally active insurance group, the Director shall make a determination or acknowledgment as to the appropriate group-wide supervisor for such an internationally active insurance group pursuant to subsection (d).

(f) The Director is authorized to collect from any company registered pursuant to Section 131.13 all information necessary to determine whether the Director may act as the group-wide supervisor of an internationally active insurance group or if the Director may acknowledge another regulatory official to act as the group-wide supervisor. Before issuing a determination that an internationally active insurance group is subject to group-wide supervision by the Director, the Director shall notify the company registered pursuant to Section 131.13 and the ultimate controlling person within the internationally active insurance group. The internationally active insurance group shall have not less than 30 days to provide the Director with additional information pertinent to the pending determination. The Department shall publish on its Internet website the identity of internationally active insurance groups that the Director has determined are subject to group-wide supervision by the Director.

(g) If the Director is the group-wide supervisor for an internationally active insurance group, the Director is authorized to engage in any of the following group-wide supervision activities:

(1) assess the enterprise risks within the internationally active insurance group to ensure that:

(A) the material financial condition and liquidity risks to the members of the internationally active insurance group that are engaged in the business of insurance are identified by management; and
(B) reasonable and effective mitigation measures are in place;

(2) request, from any member of an internationally active insurance group subject to the Director’s supervision, information necessary and appropriate to assess enterprise risk, including, but not limited to, information about the members of the internationally active insurance group regarding:

(A) governance, risk assessment, and management;
(B) capital adequacy; and
(C) material intercompany transactions;

(3) coordinate and, through the authority of the regulatory officials of the jurisdictions where members of the internationally active insurance group are domiciled, compel development and implementation of reasonable measures designed to ensure that the internationally active insurance group is able to timely recognize and mitigate enterprise risks to members of such internationally active insurance group that are engaged in the business of insurance;
(4) communicate with other state, federal, and international regulatory agencies for members within the internationally active insurance group and share relevant information subject to the confidentiality provisions of Section 131.22, through supervisory colleges as set forth in Section 131.20c or otherwise;
(5) enter into agreements with or obtain documentation from any company registered under Section 131.13, any member of the internationally active insurance group, and any other state, federal, and international regulatory agencies for members of the internationally active insurance group, providing the basis for or otherwise clarifying the Director’s role as group-wide supervisor, including provisions for resolving disputes with other regulatory officials. Such agreements or documentation shall not serve as evidence in any proceeding that any company or person within an insurance holding company system not domiciled or incorporated in this State is doing business in this State or is otherwise subject to jurisdiction in this State; and
(6) other group-wide supervision activities, consistent with the authorities and purposes enumerated above, as considered necessary by the Director.

(h) If the Director acknowledges that another regulatory official from a jurisdiction that is not accredited by the NAIC is the group-wide supervisor, the Director is authorized to reasonably cooperate, through supervisory colleges or otherwise, with group-wide supervision undertaken by the group-wide supervisor, provided that:

(1) the Director’s cooperation is in compliance with the laws of this State; and
(2) the regulatory official acknowledged as the group-wide supervisor also recognizes and cooperates with the Director’s activities as a group-wide supervisor for other internationally active insurance groups where applicable. Where such recognition and cooperation is not reasonably reciprocal, the Director is authorized to refuse recognition and cooperation.

(i) The Director is authorized to enter into agreements with or obtain documentation from any company registered under Section 131.13, any affiliate of the company, and other state, federal, and international regulatory agencies for members of the internationally active insurance group that provide the basis for or otherwise clarify a regulatory official’s role as group-wide supervisor.

(j) The Department may adopt regulations necessary for the administration of this Section.

(k) A registered company subject to this Section shall be liable for and shall pay the reasonable expenses of the Director’s participation in the administration of this Section, including the engagement of attorneys, actuaries, and any other professionals and all reasonable travel expenses.

(Source: P.A. 102-394, eff. 8-16-21.)

(215 ILCS 5/131.21) (from Ch. 73, par. 743.21)

Sec. 131.21. Examination.

(1) Subject to the limitation contained in this section and in addition
to the powers which the Director has under Sections 132 through 132.7 and
401 through 403
of this Code relating to the examination of companies, the Director shall have the power to examine any company registered under Section 131.13 of this Code and its affiliates to ascertain the financial condition of the company, including the enterprise risk to the company by the ultimate controlling party, or by any entity or combination of entities within the insurance holding company system, or by the insurance holding company system on a consolidated basis.

(1.5) The Director may order any company registered under Section 131.13 of this Code to produce such records, books, or other information papers in the possession of the company or its affiliates as are reasonably necessary to determine compliance with this Article. To determine compliance with this Article, the Director may order any company registered under Section 131.13 of this Code to produce information not in the possession of the company if the company can obtain access to such information pursuant to contractual relationships, statutory obligations, or other methods. In the event the company cannot obtain the information requested by the Director, the company shall provide the Director a detailed explanation of the reason that the company cannot obtain the information and the identity of the holder of the information. Whenever the Director determines that the detailed explanation is without merit, the Director may require, after notice and hearing, the company to pay a penalty of up to $1,000 for each day’s delay, or may suspend or revoke the company’s license.

(2) The Director may retain at the registered company’s expense any
attorneys, actuaries, accountants and other experts not otherwise a part of
the Director’s staff as may be reasonably necessary to assist in the
conduct of the examination under subsection (1). Any
persons so retained are
under the direction and control of the Director and may act in a purely
advisory capacity.

(3) Each registered company producing for examination records, books and
papers under subsection (1.5) is liable for and must pay
the expense of the
examination in accordance with Section 408 of this Code.

(4) The Director may retain at the registered company’s expense any attorneys, actuaries,
accountants, and other experts not otherwise a part of the Director’s staff as may be reasonably
necessary to assist in the conduct of the examination under subsection (1) of this Section. Any persons so
retained are under the direction and control of the Director and may act in a purely advisory
capacity.

(5) In the event the company fails to comply with an order, the Director shall have the power to examine the affiliates to obtain the information. The Director shall also have the power to issue subpoenas, to administer oaths, and to examine under oath any person for purposes of determining compliance with this Section. Upon the failure or refusal of any person to obey a subpoena, the Director may petition a court of competent jurisdiction and, upon proper showing, the court may enter an order compelling the witness to appear and testify or produce documentary evidence. Failure to obey the court order shall be punishable as contempt of court. Every person shall be obliged to attend as a witness at the place specified in the subpoena, when subpoenaed, anywhere within the State. He or she shall be entitled to the same fees and mileage, if claimed, as a witness in the Circuit Court, which fees, mileage, and actual expense, if any, necessarily incurred in securing the attendance of witnesses, and their testimony, shall be itemized and charged against, and be paid by, the company being examined.

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

(215 ILCS 5/131.22)

Sec. 131.22. Confidential treatment.

(a) Documents, materials, or other information in the possession or control of the Department that are obtained by or disclosed to the Director or any other person in the course of an examination or investigation made pursuant to this Article and all information reported or provided to the Department pursuant to paragraphs (12) and (13) of Section 131.5 and Sections 131.13 through 131.21 are recognized by this State as being proprietary and to contain trade secrets, and shall be confidential by law and privileged, shall not be subject to the Illinois Freedom of Information Act, shall not be subject to subpoena, and shall not be subject to discovery or admissible in evidence in any private civil action. However, the Director is authorized to use the documents, materials, or other information in the furtherance of any regulatory or legal action brought as a part of the Director’s official duties. The Director shall not otherwise make the documents, materials, or other information public without the prior written consent of the company to which it pertains unless the Director, after giving the company and its affiliates who would be affected thereby prior written notice and an opportunity to be heard, determines that the interest of policyholders, shareholders, or the public shall be served by the publication thereof, in which event the Director may publish all or any part in such manner as may be deemed appropriate.

(b) Neither the Director nor any person who received documents, materials, or other information while acting under the authority of the Director or with whom such documents, materials, or other information are shared pursuant to this Article shall be permitted or required to testify in any private civil action concerning any confidential documents, materials, or information subject to subsection (a) of this Section.

(1) may share documents, materials, or other information, including the confidential and privileged documents, materials, or information subject to subsection (a) of this Section, including proprietary and trade secret documents and materials, with other state, federal, and international regulatory agencies, with the NAIC and its affiliates and subsidiaries, with third-party consultants, and with state, federal, and international law enforcement authorities and regulatory agencies, including members of any supervisory college allowed by this Article, provided that the recipient agrees in writing to maintain the confidentiality and privileged status of the document, material, or other information, and has verified in writing the legal authority to maintain confidentiality;
(1.5) notwithstanding paragraph (1) of this subsection (c), may only share confidential and privileged documents, material, or information reported pursuant to subsection (a) of Section 131.14b with commissioners of states having statutes or regulations substantially similar to subsection (a) of this Section and who have agreed in writing not to disclose such information;
(1.7) notwithstanding paragraph (1) of this subsection (c), may only share confidential and privileged documents, material, or information reported pursuant to Section 131.14b with the Illinois Insurance Guaranty Fund regarding any member company defined in Section 534.5 if the member company has an authorized control level event as defined in Section 35A-25; the Director may disclose the information described in this subsection so long as the Fund agrees in writing to hold that information confidential, in a manner consistent with this Code, and uses that information to prepare for the possible liquidation of the member company; access to the information disclosed by the Director to the Fund shall be limited to the Fund’s staff and its counsel; the board of directors of the Fund may have access to the information disclosed by the Director to the Fund once the member company is subject to a delinquency proceeding under Article XIII subject to any terms and conditions established by the Director; and
(2) may receive documents, materials, or information, including otherwise confidential and privileged documents, materials, or information, including proprietary and trade secret information, from the NAIC and its affiliates and subsidiaries and from regulatory and law enforcement officials of other foreign or domestic jurisdictions, and shall maintain as confidential or privileged any document, material, or information received with notice or the understanding that it is confidential or privileged under the laws of the jurisdiction that is the source of the document, material, or information; any such documents, materials, or information, while in the Director’s possession, shall not be subject to the Illinois Freedom of Information Act and shall not be subject to subpoena.

(c-5) Written agreements with the NAIC or third-party consultants governing sharing and use of information provided pursuant to this Article consistent with subsection (c) shall:

(1) specify procedures and protocols regarding the confidentiality and security of information shared with the NAIC and its affiliates and subsidiaries or third-party consultants pursuant to this Article, including procedures and protocols for sharing by the NAIC with other state, federal, or international regulators; the agreement shall provide that the recipient agrees in writing to maintain the confidentiality and privileged status of the documents, materials, or other information and has verified in writing the legal authority to maintain such confidentiality;
(2) specify that ownership of information shared with the NAIC and its affiliates and subsidiaries or third-party consultants pursuant to this Article remains with the Director and the NAIC’s or third-party consultant’s use of the information is subject to the direction of the Director;
(3) require prompt notice to be given to a company whose confidential information in the possession of the NAIC or third-party consultant pursuant to this Article is subject to a request or subpoena for disclosure or production;
(4) require the NAIC and its affiliates and subsidiaries or third-party consultants to consent to intervention by a company in any judicial or administrative action in which the NAIC and its affiliates and subsidiaries or third-party consultants may be required to disclose confidential information about the company shared with the NAIC and its affiliates and subsidiaries or third-party consultants pursuant to this Article; and
(5) excluding documents, material, or information reported pursuant to subsection (c) of Section 131.14b, prohibit the NAIC or third-party consultant from storing the information shared pursuant to this Code in a permanent database after the underlying analysis is completed.

(d) The sharing of documents, materials, or information by the Director pursuant to this Article shall not constitute a delegation of regulatory authority or rulemaking, and the Director is solely responsible for the administration, execution, and enforcement of the provisions of this Article.

(e) No waiver of any applicable privilege or claim of confidentiality in the documents, materials, or information shall occur as a result of disclosure to the Director under this Section or as a result of sharing as authorized in subsection (c) of this Section.

(f) Documents, materials, or other information in the possession or control of the NAIC or third-party consultant pursuant to this Article shall be confidential by law and privileged, shall not be subject to the Illinois Freedom of Information Act, shall not be subject to subpoena, and shall not be subject to discovery or admissible in evidence in any private civil action.

(Source: P.A. 102-394, eff. 8-16-21; 102-578, eff. 7-1-22 (See Section 5 of P.A. 102-672 for effective date of P.A. 102-578); 102-813, eff. 5-13-22; 102-929, eff. 5-27-22.)

(215 ILCS 5/131.22a)

Sec. 131.22a. Restrictions on insurer publishing. The group capital calculation and resulting group capital ratio required under subsection (b) of Section 131.14b and the liquidity stress test along with its results and supporting disclosures required under subsection (c) of Section 131.14b are regulatory tools for assessing group risks and capital adequacy and group liquidity risks, respectively, and are not intended as a means to rank insurers or insurance holding company systems generally. Therefore, except as otherwise may be required under the provisions of this Code, the making, publishing, disseminating, circulating, or placing before the public, or causing directly or indirectly to be made, published, disseminated, circulated, or placed before the public in a newspaper, magazine, or other publication, or in the form of a notice, circular, pamphlet, letter, or poster, or over any radio or television station or any electronic means of communication available to the public, or in any other way as an advertisement, announcement, or statement containing a representation or statement with regard to the group capital calculation, group capital ratio, the liquidity stress test results, or supporting disclosures for the liquidity stress test of any insurer or any insurer group, or of any component derived in the calculation by any insurer, broker, or other person engaged in any manner in the insurance business would be misleading and is therefore prohibited; however, if any materially false statement with respect to the group capital calculation, resulting group capital ratio, an inappropriate comparison of any amount to an insurer’s or insurance group’s group capital calculation or resulting group capital ratio, liquidity stress test result, supporting disclosures for the liquidity stress test, or an inappropriate comparison of any amount to an insurer’s or insurance group’s liquidity stress test result or supporting disclosures is published in any written publication and the insurer is able to demonstrate to the Director with substantial proof the falsity of such statement or the inappropriateness, as the case may be, then the insurer may publish announcements in a written publication if the sole purpose of the announcement is to rebut the materially false statement.

(Source: P.A. 102-578, eff. 7-1-22 (See Section 5 of P.A. 102-672 for effective date of P.A. 102-578).)

(215 ILCS 5/131.23) (from Ch. 73, par. 743.23)

Sec. 131.23. Injunctions; prohibitions against voting securities; sequestration of
voting securities.

(1) Whenever it appears to the Director that any company or any
director, officer, employee or agent thereof has committed or is about to
commit a violation of this Article or of any rule, regulation, or order
issued by the Director hereunder, the Director may apply to the Circuit
Court for the county in which the principal office of the company is
located or to the Circuit Court for Sangamon County for an order enjoining
the company or the director, officer, employee or agent thereof from
violating or continuing to violate this Article or any rule, regulation or
order, and for any other equitable relief as the nature of the case and the
interests of the company’s policyholders, creditors or the
public may require. In any proceeding, the validity of the rule, regulation
or order alleged to have been violated may be determined by the Court.

(2) No security or shareholder’s or policyholder’s proxy which is the subject of any agreement or arrangement
regarding acquisition, or which is acquired or to be acquired, in
contravention of this Article or of any rule, regulation or order issued by
the Director hereunder may be voted at any shareholders’ meeting, or may be
counted for quorum purposes, and any action of shareholders requiring the
affirmative vote of a percentage of securities shall be taken as though such
securities (including securities that may be voted pursuant to such proxies) were not issued and outstanding; but no action taken at any such
meeting may be invalidated by the voting of such securities or proxies, unless the
action would materially affect control of the company or unless any court
of this State has so ordered. If the Director has reason to
believe that any security or shareholder’s or policyholder’s proxy of the company has been or is about to be
acquired in contravention of this Article or of any rule, regulation or
order issued by the Director hereunder the company or the Director may
apply to the Circuit Court for Sangamon County or to the Circuit Court for
the county in which the company has its principal place of business (a) to
enjoin the further pursuit or use of any offer, request, invitation,
agreement or acquisition made in contravention of Sections 131.4 through
131.12 or any rule, regulation, or order issued by the Director thereunder;
(b) to enjoin the voting of any security or proxy so acquired; (c) to void any vote
of such security or proxy already cast at any meeting of shareholders; and (d) for
any other equitable relief as the nature of the case and the interests of
the company’s policyholders, creditors, or the public may
require.

(3) In any case where a person has acquired or is proposing to acquire
any voting securities or shareholder’s or policyholder’s proxy in violation of this Article or any rule, regulation
or order issued by the Director hereunder, the Circuit Court for Sangamon
County or the Circuit Court for the county in which the company has its
principal place of business may, on such notice as the court deems
appropriate, upon the application of the company or the Director seize or
sequester any voting securities or shareholder’s or policyholder’s proxy of the company owned directly or indirectly
by such person, and issue any orders with respect thereto as may be
appropriate to effectuate this Article. Notwithstanding any other
provisions of law, for the purposes of this Article, the situs of the
ownership of the securities of domestic companies is deemed to be in this
State.

(4) If the Director has reason to believe that any shareholders’ or policyholders’ proxies
have been or are about to be acquired in contravention of this Article or
of any rule, regulations or order issued by the Director hereunder, the
Director may apply to the Circuit Court for Sangamon County or to the Circuit
Court for the county in which the company has its principal place of business
(a) to enjoin further pursuit or use of any offer, request, invitation,
agreement or acquisition made in contravention of Section 131.4 through
131.12 and (b) for any other equitable relief as the nature of the case
and the interests of the company’s policyholders, creditors or the public may require.

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

(215 ILCS 5/131.24) (from Ch. 73, par. 743.24)

Sec. 131.24. Sanctions.

(1) Every director or officer of an insurance
holding company system who knowingly violates, participates in, or assents
to, or who knowingly permits any of the officers or agents of the
company to engage in transactions or make investments which have not been
properly filed or approved or which violate this Article, shall pay, in
their individual capacity, a civil forfeiture of not more than $100,000
per violation, after notice and hearing before the Director. In determining
the amount of the civil forfeiture, the Director shall take into account the
appropriateness of the forfeiture with respect to the gravity of the
violation, the history of previous violations, and such other matters as
justice may require.

(2) Whenever the Director determines that any company subject to this
Article or any director, officer, employee or agent thereof has engaged in
any transaction or entered into a contract which is subject to Section
131.20, and any one of Sections 131.16, 131.20a, 141, 141.1, or 174 of this
Code and which would not have been approved had such
approval been requested or would have been disapproved had required notice
been given, the Director may order the company to cease and
desist immediately any further activity under that transaction or contract.
After notice and hearing the Director may also order (a) the company to void
any such contracts and restore the status quo if such action is in the best
interest of the policyholders or the public, and (b) any affiliate of the
company, which has received from the company dividends, distributions,
assets, loans, extensions of credit, guarantees, or investments in
violation of any such Section, to immediately repay, refund or restore to
the company such dividends, distributions, assets, extensions of credit,
guarantees or investments.

(3) Whenever the Director determines that any company or any
director, officer, employee or agent thereof has committed a willful
violation of this Article, the Director may cause criminal proceedings to
be instituted in the Circuit Court for the county in which the principal
office of the company is located or in the Circuit Court of Sangamon or
Cook County against such company or the responsible director, officer,
employee or agent thereof. Any company which willfully violates this
Article commits a business offense and may be fined up to $500,000. Any individual
who willfully
violates this Article commits a Class 4 felony and may be fined in his
individual capacity not more than
$500,000 or be imprisoned for not less than one year nor more
than
3 years, or both.

(4) Any officer, director, or employee of an insurance holding company
system who willfully and knowingly subscribes to or makes or causes to be
made any false statements or false reports or false filings with the intent
to deceive the Director in the performance of his duties under this
Article, commits a Class 3 felony and upon conviction thereof, shall be
imprisoned for not less than 2 years nor more than
5 years or fined $500,000 or both. Any fines imposed shall be
paid by
the officer, Director, or employee
in his individual capacity.

(5) Whenever the Director determines that any person has committed a violation of Section 131.14b of this Code which prevents the full understanding of the enterprise risk to the company by affiliates or by the insurance holding company system, the violation may serve as an independent basis, after an opportunity for a hearing, for disapproving dividends or distributions and for placing the company under an order of supervision in accordance with Article XII 1/2 of this Code.

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

(215 ILCS 5/131.25) (from Ch. 73, par. 743.25)

Sec. 131.25.
Receivership.
Whenever it appears to the Director that any person has committed a
violation of this Article which so impairs the financial condition of a
domestic company as to threaten insolvency or make the further transaction
of business by it hazardous to its policyholders, creditors
or the public, then the Director may proceed against the company under
Article XIII of this Code.

(Source: P.A. 83-749.)

(215 ILCS 5/131.25a) (from Ch. 73, par. 743.25a)

Sec. 131.25a.

Recovery upon order of liquidation or rehabilitation of
domestic insurer.

(a) If an order for liquidation or rehabilitation of a domestic insurer
has been entered, the receiver shall have the right subject to the
limitations set forth in subsections (b) and (c) of this Section to recover
on behalf of the insurer any or all of the following made during the 3
years before the filing of the petition for liquidation, conservation, or
rehabilitation:

(1) From any parent corporation, holding company, person, or affiliate who otherwise controlled the insurer, the amount of distributions, other than distributions of shares of the same class, paid by the insurer on its capital stock.
(2) From any director, officer, or employee, the amount of any payment in the form of a bonus, termination settlement, or extraordinary lump sum salary adjustment made by the insurer or a subsidiary.

(b) No distribution shall be recoverable if the parent or affiliate
shows that the distribution or payment was lawful and reasonable
when paid and that the insurer did not know and reasonably could not have known that
the distribution might adversely affect the ability of the insurer to
fulfill its contractual obligations.

(c) The maximum amount recoverable under this Section shall be the
amount in excess of all other available assets of the impaired or insolvent
insurer needed to pay the contractual obligations of that insurer and
reimburse any guaranty funds.

(d) Any person who was a parent corporation, holding company, or who
otherwise controlled the insurer or affiliate at the time the distributions
were paid shall be liable up to the amount of distributions the person
received. Any person who otherwise controlled the insurer at the time the
distributions were declared shall be liable up to the amount of
distributions the person would have received had the distributions been
paid immediately. If 2 or more persons are liable with respect to the same
distributions, they shall be jointly and severally liable.

(e) To the extent any person liable under subsection (d) is insolvent or
otherwise fails to pay claims due, its parent corporations, holding
company, or person who otherwise controlled it at the time the distribution
was paid shall be jointly and severally liable for any resulting deficiency
in the amount recovered.

(Source: P.A. 87-1090.)

(215 ILCS 5/131.26) (from Ch. 73, par. 743.26)

Sec. 131.26. Revocation, suspension, or non-renewal of company’s license. Whenever the Director determines that any person has committed a
violation of this Article which makes the continued operation of a company
contrary to the interests of policyholders or the public, the Director may,
after notice and hearing suspend, revoke or refuse to renew the company’s
license or authority to do business in this State for such period as the Director finds
is required for the protection of policyholders or the public. Any such
determination must be accompanied by specific findings of fact and
conclusions of law.

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

(215 ILCS 5/131.27) (from Ch. 73, par. 743.27)

Sec. 131.27. Judicial review.

(1) Any order or decision made,
issued or executed by the Director under this Article whereby any person
or company is aggrieved is subject to review
by the Circuit Court of
Sangamon County or the Circuit Court of Cook County.

The Administrative Review Law, as now or hereafter amended, and the rules
adopted pursuant
thereto, applies to and governs all proceedings for review of final
administrative decisions of the Director provided for in this Section. The
term “administrative decision” is defined as in Section 3-101 of the Code
of Civil Procedure.

(2) The filing of an appeal pursuant to this Section shall stay the application of any rule, regulation, order, or other action of the Director to the appealing party unless the court, after giving the party notice and an opportunity to be heard, determines that a stay would be detrimental to the interest of policyholders, shareholders, creditors, or the public.

(3) Any person aggrieved by any failure of the Director to act or make a determination required by this Article may petition the circuit courts of Sangamon County or Cook County for a writ in the nature of a mandamus or a peremptory mandamus directing the Director to act or make a determination.

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

(215 ILCS 5/131.28) (from Ch. 73, par. 743.28)

Sec. 131.28.
Separability of provisions.

If any provisions of this Article or the application thereof to any
person or circumstances is held invalid, the invalidity does not affect
other provisions or applications of this Article which can be given effect
without the invalid provision or application, and for this purpose the
provisions of this Article are separable.

(Source: P.A. 77-673.)

(215 ILCS 5/131.29)

Sec. 131.29. Rulemaking power.
The Director may adopt such administrative rules as are necessary to implement the provisions of this Article.

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

(215 ILCS 5/131.30)

Sec. 131.30. Conflict with other laws.
This Article supersedes all laws and parts of laws of this State inconsistent with this Code with respect to matters covered by this Code.

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

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Article VIII 1/2 – Insurance Holding Company Systems

Article VIII 1/2 – Insurance Holding Company Systems

Article VIII 1/2 – Insurance Holding Company Systems

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