Bill Text: IL SB2411 | 2021-2022 | 102nd General Assembly | Chaptered

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Bill Title: Amends the Illinois Insurance Code. In provisions concerning enterprise risk filings, describes insurance holding company systems that are required to file an annual group capital calculation and those that are exempt from filing a group capital calculation. Provides that the ultimate controlling person of every insurer subject to registration and scoped into the NAIC Liquidity Stress Test Framework shall file the results of a specific year's liquidity stress test. Sets forth restrictions on insurer publishing. In provisions concerning credit allowed for domestic ceding insurers, provides terms by which credit is allowed for reinsurance. Provides that credit shall be allowed when reinsurance is ceded to an assuming insurer that meets specified conditions. Provides that the Director shall timely create and publish a list of reciprocal jurisdictions. Provides that the Director shall timely create and publish a list of assuming insurers that have satisfied specified conditions and to which cessions shall be granted. Provides that the Director may revoke or suspend the eligibility of the assuming insurer. Provides that the ceding insurer or its representative may seek and obtain an order requiring that the assuming insurer post security for all outstanding ceded liabilities under specified conditions. Provides that credit may be taken only for reinsurance agreements entered into, amended, or renewed on or after the effective date of the amendatory Act and only for losses incurred and reported on or after specified dates. Provides that the amendatory Act shall not limit or in any way alter the capacity of parties to a reinsurance agreement to agree on requirements for security or other terms in that reinsurance agreement except as expressly prohibited by applicable law or regulation, shall not authorize an assuming insurer to withdraw or reduce the security provided under any reinsurance agreement except as permitted by the terms of the agreement, and shall not limit or in any way alter the capacity of parties to any reinsurance agreement to renegotiate the agreement. Defines "group capital calculation instructions", "NAIC Liquidity Stress Test Framework", and "scope criteria". Makes other changes. Effective December 31, 2022.

Spectrum: Bipartisan Bill

Status: (Passed) 2021-08-24 - Public Act . . . . . . . . . 102-0578 [SB2411 Detail]

Download: Illinois-2021-SB2411-Chaptered.html

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Public Act 102-0578
SB2411 Enrolled LRB102 16864 BMS 22270 b
AN ACT concerning regulation.
Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
Section 5. The Illinois Insurance Code is amended by
changing Sections 35B-25, 131.1, 131.5, 131.14b, 131.15,
131.22, and 173.1 and by adding Section 131.22a as follows:
(215 ILCS 5/35B-25)
Sec. 35B-25. Plan of division approval.
(a) A division shall not become effective until it is
approved by the Director after reasonable notice and a public
hearing, if the notice and hearing are deemed by the Director
to be in the public interest. The Director shall hold a public
hearing if one is requested by the dividing company. A hearing
conducted under this Section shall be conducted in accordance
with Article 10 of the Illinois Administrative Procedure Act.
(b) The Director shall approve a plan of division unless
the Director finds that:
(1) the interest of any class of policyholder or
shareholder of the dividing company will not be properly
protected;
(2) each new company created by the proposed division,
except a new company that is a nonsurviving party to a
merger pursuant to subsection (b) of Section 156, would be

ineligible to receive a license to do insurance business
in this State pursuant to Section 5;
(2.5) each new company created by the proposed
division, except a new company that is a nonsurviving
party to a merger pursuant to subsection (b) of Section
156, that will be a member insurer of the Illinois Life and
Health Insurance Guaranty Association and that will have
policy liabilities allocated to it will not be licensed to
do insurance business in each state where such policies
were written by the dividing company;
(3) the proposed division violates a provision of the
Uniform Fraudulent Transfer Act;
(4) the division is being made for purposes of
hindering, delaying, or defrauding any policyholders or
other creditors of the dividing company;
(5) one or more resulting companies will not be
solvent upon the consummation of the division; or
(6) the remaining assets of one or more resulting
companies will be, upon consummation of a division,
unreasonably small in relation to the business and
transactions in which the resulting company was engaged or
is about to engage.
(c) In determining whether the standards set forth in
paragraph (3) of subsection (b) have been satisfied, the
Director shall only apply the Uniform Fraudulent Transfer Act
to a dividing company in its capacity as a resulting company

and shall not apply the Uniform Fraudulent Transfer Act to any
dividing company that is not proposed to survive the division.
(d) In determining whether the standards set forth in
paragraphs (3), (4), (5), and (6) of subsection (b) have been
satisfied, the Director may consider all proposed assets of
the resulting company, including, without limitation,
reinsurance agreements, parental guarantees, support or keep
well agreements, or capital maintenance or contingent capital
agreements, in each case, regardless of whether the same would
qualify as an admitted asset as defined in Section 3.1.
(e) In determining whether the standards set forth in
paragraph (3) of subsection (b) have been satisfied, with
respect to each resulting company, the Director shall, in
applying the Uniform Fraudulent Transfer Act, treat:
(1) the resulting company as a debtor;
(2) liabilities allocated to the resulting company as
obligations incurred by a debtor;
(3) the resulting company as not having received
reasonably equivalent value in exchange for incurring the
obligations; and
(4) assets allocated to the resulting company as
remaining property.
(f) All information, documents, materials, and copies
thereof submitted to, obtained by, or disclosed to the
Director in connection with a plan of division or in
contemplation thereof, including any information, documents,

materials, or copies provided by or on behalf of a domestic
stock company in advance of its adoption or submission of a
plan of division, shall be confidential and shall be subject
to the same protection and treatment in accordance with
Section 131.22 131.14d as documents and reports disclosed to
or filed with the Director pursuant to subsection (a) of
Section 131.14b until such time, if any, as a notice of the
hearing contemplated by subsection (a) is issued.
(g) From and after the issuance of a notice of the hearing
contemplated by subsection (a), all business, financial, and
actuarial information that the domestic stock company requests
confidential treatment, other than the plan of division, shall
continue to be confidential and shall not be available for
public inspection and shall be subject to the same protection
and treatment in accordance with Section 131.22 131.14d as
documents and reports disclosed to or filed with the Director
pursuant to subsection (a) of Section 131.14b.
(h) All expenses incurred by the Director in connection
with proceedings under this Section, including expenses for
the services of any attorneys, actuaries, accountants, and
other experts as may be reasonably necessary to assist the
Director in reviewing the proposed division, shall be paid by
the dividing company filing the plan of division. A dividing
company may allocate expenses described in this subsection in
a plan of division in the same manner as any other liability.
(i) If the Director approves a plan of division, the

Director shall issue an order that shall be accompanied by
findings of fact and conclusions of law.
(j) The conditions in this Section for freeing one or more
of the resulting companies from the liabilities of the
dividing company and for allocating some or all of the
liabilities of the dividing company shall be conclusively
deemed to have been satisfied if the plan of division has been
approved by the Director in a final order that is not subject
to further appeal.
(Source: P.A. 100-1118, eff. 11-27-18; 101-549, eff. 1-1-20.)
(215 ILCS 5/131.1) (from Ch. 73, par. 743.1)
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.
(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.
(d) (Blank).
(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-5) "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.
(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.
(i) (Blank).
(j) (Blank).
(k) (Blank).
(Source: P.A. 98-609, eff. 1-1-14.)
(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. 98-609, eff. 1-1-14.)
(215 ILCS 5/131.14b)
Sec. 131.14b. Enterprise risk filings filing.
(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.
(5) 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.
(6) 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. 98-609, eff. 7-1-14.)
(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. 84-805.)

(215 ILCS 5/131.22) (from Ch. 73, par. 743.22)
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 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. 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.
(c) In order to assist in the performance of the
Director's duties, the Director:
(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, and with state, federal,
and international law enforcement authorities, 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;
(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;
and
(3) (blank).
(c-5) Written shall enter into written agreements with the
NAIC governing sharing and use of information provided
pursuant to this Article consistent with this subsection (c)

that shall:
(1) (i) specify procedures and protocols regarding the
confidentiality and security of information shared with
the NAIC and its affiliates and subsidiaries 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) (ii) specify that ownership of information shared
with the NAIC and its affiliates and subsidiaries pursuant
to this Article remains with the Director and the NAIC's
use of the information is subject to the direction of the
Director;
(3) (iii) require prompt notice to be given to a
company whose confidential information in the possession
of the NAIC pursuant to this Article is subject to a
request or subpoena to the NAIC for disclosure or
production; and
(4) (iv) require the NAIC and its affiliates and
subsidiaries to consent to intervention by a company in
any judicial or administrative action in which the NAIC
and its affiliates and subsidiaries may be required to

disclose confidential information about the company shared
with the NAIC and its affiliates and subsidiaries 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 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. 98-609, eff. 1-1-14.)

(215 ILCS 5/131.22a new)
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.
(215 ILCS 5/173.1) (from Ch. 73, par. 785.1)
Sec. 173.1. Credit allowed a domestic ceding insurer.
(1) Except as otherwise provided under Article VIII 1/2 of
this Code and related provisions of the Illinois
Administrative Code, credit for reinsurance shall be allowed a
domestic ceding insurer as either an admitted asset or a
deduction from liability on account of reinsurance ceded only
when the reinsurer meets the requirements of paragraph (A), or
(B), or (B-5), or (C), or (C-5), (C-10), or (D) of this
subsection (1). Credit shall be allowed under paragraph (A),

(B), or (B-5) of this subsection (1) only as respects cessions
of those kinds or classes of business in which the assuming
insurer is licensed or otherwise permitted to write or assume
in its state of domicile, or in the case of a U.S. branch of an
alien assuming insurer, in the state through which it is
entered and licensed to transact insurance or reinsurance.
Credit shall be allowed under paragraph (B-5) or (C) of this
subsection (1) only if the applicable requirements of
paragraph (E) of this subsection (1) have been satisfied.
(A) Credit shall be allowed when the reinsurance is
ceded to an assuming insurer that is authorized in this
State to transact the types of insurance ceded and has at
least $5,000,000 in capital and surplus.
(B) Credit shall be allowed when the reinsurance is
ceded to an assuming insurer that is accredited as a
reinsurer in this State. An accredited reinsurer is one
that:
(1) files with the Director evidence of its
submission to this State's jurisdiction;
(2) submits to this State's authority to examine
its books and records;
(3) is licensed to transact insurance or
reinsurance in at least one state, or in the case of a
U.S. branch of an alien assuming insurer is entered
through and licensed to transact insurance or
reinsurance in at least one state;

(4) files annually with the Director a copy of its
annual statement filed with the insurance department
of its state of domicile and a copy of its most recent
audited financial statement; and
(5) maintains a surplus as regards policyholders
in an amount that is not less than $20,000,000 and
whose accreditation has been approved by the Director.
(B-5)(1) Credit shall be allowed when the reinsurance
is ceded to an assuming insurer that is domiciled in, or in
the case of a U.S. branch of an alien assuming insurer is
entered through, a state that employs standards regarding
credit for reinsurance substantially similar to those
applicable under this Code and the assuming insurer or
U.S. branch of an alien assuming insurer:
(a) maintains a surplus as regards policyholders
in an amount not less than $20,000,000; and
(b) submits to the authority of this State to
examine its books and records.
(2) The requirement of item (a) of subparagraph (1) of
paragraph (B-5) of this subsection (1) does not apply to
reinsurance ceded and assumed pursuant to pooling
arrangements among insurers in the same holding company
system.
(C)(1) Credit shall be allowed when the reinsurance
is ceded to an assuming insurer that maintains a trust
fund in a qualified United States financial institution,

as defined in paragraph (B) of subsection (3) of this
Section, for the payment of the valid claims of its United
States policyholders and ceding insurers, their assigns
and successors in interest. The assuming insurer shall
report to the Director information substantially the same
as that required to be reported on the NAIC annual and
quarterly financial statement by authorized insurers and
any other financial information that the Director deems
necessary to determine the financial condition of the
assuming insurer and the sufficiency of the trust fund.
The assuming insurer shall provide or make the information
available to the ceding insurer. The assuming insurer may
decline to release trade secrets or commercially sensitive
information that would qualify as exempt from disclosure
under the Freedom of Information Act. The Director shall
also make the information publicly available, subject only
to such reasonable objections as might be raised to a
request pursuant to the Freedom of Information Act, as
determined by the Director. The assuming insurer shall
submit to examination of its books and records by the
Director and bear the expense of examination.
(2)(a) Credit for reinsurance shall not be granted
under this subsection unless the form of the trust and any
amendments to the trust have been approved by:
(i) the regulatory official of the state where the
trust is domiciled; or

(ii) the regulatory official of another state who,
pursuant to the terms of the trust instrument, has
accepted principal regulatory oversight of the trust.
(b) The form of the trust and any trust amendments
also shall be filed with the regulatory official of every
state in which the ceding insurer beneficiaries of the
trust are domiciled. The trust instrument shall provide
that contested claims shall be valid and enforceable upon
the final order of any court of competent jurisdiction in
the United States. The trust shall vest legal title to its
assets in its trustees for the benefit of the assuming
insurer's United States policyholders and ceding insurees
and their assigns and successors in interest. The trust
and the assuming insurer shall be subject to examination
as determined by the Director.
(c) The trust shall remain in effect for as long as the
assuming insurer has outstanding obligations due under the
reinsurance agreements subject to the trust. No later than
February 28 of each year the trustee of the trust shall
report to the Director in writing the balance of the trust
and a list of the trust's investments at the preceding
year-end and shall certify the date of termination of the
trust, if so planned, or certify that the trust will not
expire prior to the next following December 31.
No later than February 28 of each year, the assuming
insurer's chief executive officer or chief financial

officer shall certify to the Director that the trust fund
contains funds in an amount not less than the assuming
insurer's liabilities (as reported to the assuming insurer
by its cedent) attributable to reinsurance ceded by U.S.
ceding insurers, and in addition, a trusteed surplus of no
less than $20,000,000. In the event that item (a-5) of
subparagraph (3) of this paragraph (C) applies to the
trust, the assuming insurer's chief executive officer or
chief financial officer shall then certify to the Director
that the trust fund contains funds in an amount not less
than the assuming insurer's liabilities (as reported to
the assuming insurer by its cedent) attributable to
reinsurance ceded by U.S. ceding insurers and, in
addition, a reduced trusteed surplus of not less than the
amount that has been authorized by the regulatory
authority having principal regulatory oversight of the
trust.
(d) No later than February 28 of each year, an
assuming insurer that maintains a trust fund in accordance
with this paragraph (C) shall provide or make available,
if requested by a beneficiary under the trust fund, the
following information to the assuming insurer's U.S.
ceding insurers or their assigns and successors in
interest:
(i) a copy of the form of the trust agreement and
any trust amendments to the trust agreement pertaining

to the trust fund;
(ii) a copy of the annual and quarterly financial
information, and its most recent audited financial
statement provided to the Director by the assuming
insurer, including any exhibits and schedules thereto;
(iii) any financial information provided to the
Director by the assuming insurer that the Director has
deemed necessary to determine the financial condition
of the assuming insurer and the sufficiency of the
trust fund;
(iv) a copy of any annual and quarterly financial
information provided to the Director by the trustee of
the trust fund maintained by the assuming insurer,
including any exhibits and schedules thereto;
(v) a copy of the information required to be
reported by the trustee of the trust to the Director
under the provisions of this paragraph (C); and
(vi) a written certification that the trust fund
consists of funds in trust in an amount not less than
the assuming insurer's liabilities attributable to
reinsurance liabilities (as reported to the assuming
insurer by its cedent) attributable to reinsurance
ceded by U.S. ceding insurers and, in addition, a
trusteed surplus of not less than $20,000,000.
(3) The following requirements apply to the following
categories of assuming insurer:

(a) The trust fund for a single assuming insurer
shall consist of funds in trust in an amount not less
than the assuming insurer's liabilities attributable
to reinsurance ceded by U.S. ceding insurers, and in
addition, the assuming insurer shall maintain a
trusteed surplus of not less than $20,000,000, except
as provided in item (a-5) of this subparagraph (3).
(a-5) At any time after the assuming insurer has
permanently discontinued underwriting new business
secured by the trust for at least 3 full years, the
Director with principal regulatory oversight of the
trust may authorize a reduction in the required
trusteed surplus, but only after a finding, based on
an assessment of the risk, that the new required
surplus level is adequate for the protection of U.S.
ceding insurers, policyholders, and claimants in light
of reasonably foreseeable adverse loss development.
The risk assessment may involve an actuarial review,
including an independent analysis of reserves and cash
flows, and shall consider all material risk factors,
including, when applicable, the lines of business
involved, the stability of the incurred loss
estimates, and the effect of the surplus requirements
on the assuming insurer's liquidity or solvency. The
minimum required trusteed surplus may not be reduced
to an amount less than 30% of the assuming insurer's

liabilities attributable to reinsurance ceded by U.S.
ceding insurers covered by the trust.
(b)(i) In the case of a group including
incorporated and individual unincorporated
underwriters:
(I) for reinsurance ceded under reinsurance
agreements with an inception, amendment, or
renewal date on or after January 1, 1993, the
trust shall consist of a trusteed account in an
amount not less than the respective underwriters'
several liabilities attributable to business ceded
by U.S. domiciled ceding insurers to any member of
the group;
(II) for reinsurance ceded under reinsurance
agreements with an inception date on or before
December 31, 1992 and not amended or renewed after
that date, notwithstanding the other provisions of
this Act, the trust shall consist of a trusteed
account in an amount not less than the group's
several insurance and reinsurance liabilities
attributable to business written in the United
States; and
(III) in addition to these trusts, the group
shall maintain in trust a trusteed surplus of
which not less than $100,000,000 shall be held
jointly for the benefit of the U.S. domiciled

ceding insurers of any member of the group for all
years of account.
(ii) The incorporated members of the group shall
not be engaged in any business other than underwriting
as a member of the group and shall be subject to the
same level of solvency regulation and control by the
group's domiciliary regulator as are the
unincorporated members.
(iii) Within 90 days after its financial
statements are due to be filed with the group's
domiciliary regulator, the group shall provide to the
Director an annual certification by the group's
domiciliary regulator of the solvency of each
underwriter member, or if a certification is
unavailable, financial statements prepared by
independent public accountants of each underwriter
member of the group.
(c) In the case of a group of incorporated
insurers under common administration, the group shall:
(i) have continuously transacted an insurance
business outside the United States for at least 3
years immediately before making application for
accreditation;
(ii) maintain aggregate policyholders' surplus
of not less than $10,000,000,000;
(iii) maintain a trust in an amount not less

than the group's several liabilities attributable
to business ceded by United States domiciled
ceding insurers to any member of the group
pursuant to reinsurance contracts issued in the
name of the group;
(iv) in addition, maintain a joint trusteed
surplus of which not less than $100,000,000 shall
be held jointly for the benefit of the United
States ceding insurers of any member of the group
as additional security for these liabilities; and
(v) within 90 days after its financial
statements are due to be filed with the group's
domiciliary regulator, make available to the
Director an annual certification of each
underwriter member's solvency by the member's
domiciliary regulator and financial statements of
each underwriter member of the group prepared by
its independent public accountant.
(C-5) Credit shall be allowed when the reinsurance is
ceded to an assuming insurer that has been certified by
the Director as a reinsurer in this State and secures its
obligations in accordance with the requirements of this
paragraph (C-5).
(1) In order to be eligible for certification, the
assuming insurer shall meet the following
requirements:

(a) the assuming insurer must be domiciled and
licensed to transact insurance or reinsurance in a
qualified jurisdiction, as determined by the
Director pursuant to subparagraph (3) of this
paragraph (C-5);
(b) the assuming insurer must maintain minimum
capital and surplus, or its equivalent, in an
amount not less than $250,000,000 or such greater
amount as determined by the Director pursuant to
regulation; this requirement may also be satisfied
by an association, including incorporated and
individual unincorporated underwriters, having
minimum capital and surplus equivalents (net of
liabilities) of at least $250,000,000 and a
central fund containing a balance of at least
$250,000,000;
(c) the assuming insurer must maintain
financial strength ratings from 2 or more rating
agencies deemed acceptable by the Director; these
ratings shall be based on interactive
communication between the rating agency and the
assuming insurer and shall not be based solely on
publicly available information; each certified
reinsurer shall be rated on a legal entity basis,
with due consideration being given to the group
rating where appropriate, except that an

association, including incorporated and individual
unincorporated underwriters, that has been
approved to do business as a single certified
reinsurer may be evaluated on the basis of its
group rating; these financial strength ratings
shall be one factor used by the Director in
determining the rating that is assigned to the
assuming insurer; acceptable rating agencies
include the following:
(i) Standard & Poor's;
(ii) Moody's Investors Service;
(iii) Fitch Ratings;
(iv) A.M. Best Company; or
(v) any other nationally recognized
statistical rating organization;
(d) the assuming insurer must agree to submit
to the jurisdiction of this State, appoint the
Director as its agent for service of process in
this State, and agree to provide security for 100%
of the assuming insurer's liabilities attributable
to reinsurance ceded by U.S. ceding insurers if it
resists enforcement of a final U.S. judgment; and
(e) the assuming insurer must agree to meet
applicable information filing requirements as
determined by the Director, both with respect to
an initial application for certification and on an

ongoing basis.
(2) An association, including incorporated and
individual unincorporated underwriters, may be a
certified reinsurer. In order to be eligible for
certification, in addition to satisfying the
requirements of subparagraph (1) of this paragraph
(C-5):
(a) the association shall satisfy its minimum
capital and surplus requirements through the
capital and surplus equivalents (net of
liabilities) of the association and its members,
which shall include a joint central fund that may
be applied to any unsatisfied obligation of the
association or any of its members, in the amounts
specified in item (b) of subparagraph (1) of this
paragraph (C-5);
(b) the incorporated members of the
association shall not be engaged in any business
other than underwriting as a member of the
association and shall be subject to the same level
of regulation and solvency control by the
association's domiciliary regulator as are the
unincorporated members; and
(c) within 90 days after its financial
statements are due to be filed with the
association's domiciliary regulator, the

association shall provide to the Director an
annual certification by the association's
domiciliary regulator of the solvency of each
underwriter member; or if a certification is
unavailable, financial statements, prepared by
independent public accountants, of each
underwriter member of the association.
(3) The Director shall create and publish a list
of qualified jurisdictions, under which an assuming
insurer licensed and domiciled in such jurisdiction is
eligible to be considered for certification by the
Director as a certified reinsurer.
(a) In order to determine whether the
domiciliary jurisdiction of a non-U.S. assuming
insurer is eligible to be recognized as a
qualified jurisdiction, the Director shall
evaluate the appropriateness and effectiveness of
the reinsurance supervisory system of the
jurisdiction, both initially and on an ongoing
basis, and consider the rights, benefits, and
extent of reciprocal recognition afforded by the
non-U.S. jurisdiction to reinsurers licensed and
domiciled in the U.S. A qualified jurisdiction
must agree in writing to share information and
cooperate with the Director with respect to all
certified reinsurers domiciled within that

jurisdiction. A jurisdiction may not be recognized
as a qualified jurisdiction if the Director has
determined that the jurisdiction does not
adequately and promptly enforce final U.S.
judgments and arbitration awards. The costs and
expenses associated with the Director's review and
evaluation of the domiciliary jurisdictions of
non-U.S. assuming insurers shall be borne by the
certified reinsurer or reinsurers domiciled in
such jurisdiction.
(b) Additional factors to be considered in
determining whether to recognize a qualified
jurisdiction include, but are not limited to, the
following:
(i) the framework under which the assuming
insurer is regulated;
(ii) the structure and authority of the
domiciliary regulator with regard to solvency
regulation requirements and financial
surveillance;
(iii) the substance of financial and
operating standards for assuming insurers in
the domiciliary jurisdiction;
(iv) the form and substance of financial
reports required to be filed or made publicly
available by reinsurers in the domiciliary

jurisdiction and the accounting principles
used;
(v) the domiciliary regulator's
willingness to cooperate with U.S. regulators
in general and the Director in particular;
(vi) the history of performance by
assuming insurers in the domiciliary
jurisdiction;
(vii) any documented evidence of
substantial problems with the enforcement of
final U.S. judgments in the domiciliary
jurisdiction; and
(viii) any relevant international
standards or guidance with respect to mutual
recognition of reinsurance supervision adopted
by the International Association of Insurance
Supervisors or its successor organization.
(c) If, upon conducting an evaluation under
this paragraph with respect to the reinsurance
supervisory system of any non-U.S. assuming
insurer, the Director determines that the
jurisdiction qualifies to be recognized as a
qualified jurisdiction, the Director shall publish
notice and evidence of such recognition in an
appropriate manner. The Director may establish a
procedure to withdraw recognition of those

jurisdictions that are no longer qualified.
(d) The Director shall consider the list of
qualified jurisdictions through the NAIC committee
process in determining qualified jurisdictions. If
the Director approves a jurisdiction as qualified
that does not appear on the list of qualified
jurisdictions, then the Director shall provide
thoroughly documented justification in accordance
with criteria to be developed under regulations.
(e) U.S. jurisdictions that meet the
requirement for accreditation under the NAIC
financial standards and accreditation program
shall be recognized as qualified jurisdictions.
(f) If a certified reinsurer's domiciliary
jurisdiction ceases to be a qualified
jurisdiction, then the Director may suspend the
reinsurer's certification indefinitely, in lieu of
revocation.
(4) If an applicant for certification has been
certified as a reinsurer in an NAIC accredited
jurisdiction, then the Director may defer to that
jurisdiction's certification and to the rating
assigned by that jurisdiction if the assuming insurer
submits a properly executed Form CR-1 and such
additional information as the Director requires. Such
assuming insurer shall be considered to be a certified

reinsurer in this State but only upon the Director's
assignment of an Illinois rating, which shall be made
based on the requirements of subparagraph (5) of this
paragraph (C-5). The following shall apply:
(a) Any change in the certified reinsurer's
status or rating in the other jurisdiction shall
apply automatically in Illinois as of the date it
takes effect in the other jurisdiction. The
certified reinsurer shall notify the Director of
any change in its status or rating within 10 days
after receiving notice of the change.
(b) The Director may withdraw recognition of
the other jurisdiction's rating at any time and
assign a new rating in accordance with
subparagraph (5) of this paragraph (C-5).
(c) The Director may withdraw recognition of
the other jurisdiction's certification at any time
with written notice to the certified reinsurer.
Unless the Director suspends or revokes the
certified reinsurer's certification in accordance
with item (c) of subparagraph (9) of this
paragraph (C-5), the certified reinsurer's
certification shall remain in good standing in
Illinois for a period of 3 months, which shall be
extended if additional time is necessary to
consider the assuming insurer's application for

certification in Illinois.
(5) The Director shall assign a rating to each
certified reinsurer pursuant to rules adopted by the
Department. Factors that shall be considered as part
of the evaluation process include the following:
(a) The certified reinsurer's financial
strength rating from an acceptable rating agency.
Financial strength ratings shall be classified
according to the following ratings categories:
(i) Ratings Category "Secure - 1"
corresponds to the highest level of rating
given by a rating agency, including, but not
limited to, A.M. Best Company rating A++;
Standard & Poor's rating AAA; Moody's
Investors Service rating Aaa; and Fitch
Ratings rating AAA.
(ii) Ratings Category "Secure - 2"
corresponds to the second-highest level of
rating or group of ratings given by a rating
agency, including, but not limited to, A.M.
Best Company rating A+; Standard & Poor's
rating AA+, AA, or AA-; Moody's Investors
Service ratings Aa1, Aa2, or Aa3; and Fitch
Ratings ratings AA+, AA, or AA-.
(iii) Ratings Category "Secure - 3"
corresponds to the third-highest level of

rating or group of ratings given by a rating
agency, including, but not limited to, A.M.
Best Company rating A; Standard & Poor's
ratings A+ or A; Moody's Investors Service
ratings A1 or A2; and Fitch Ratings ratings A+
or A.
(iv) Ratings Category "Secure - 4"
corresponds to the fourth-highest level of
rating or group of ratings given by a rating
agency, including, but not limited to, A.M.
Best Company rating A-; Standard & Poor's
rating A-; Moody's Investors Service rating
A3; and Fitch Ratings rating A-.
(v) Ratings Category "Secure - 5"
corresponds to the fifth-highest level of
rating or group of ratings given by a rating
agency, including, but not limited to, A.M.
Best Company ratings B++ or B+; Standard &
Poor's ratings BBB+, BBB, or BBB-; Moody's
Investors Service ratings Baa1, Baa2, or Baa3;
and Fitch Ratings ratings BBB+, BBB, or BBB-.
(vi) Ratings Category "Vulnerable - 6"
corresponds to a level of rating given by a
rating agency, other than those described in
subitems (i) through (v) of this item (a),
including, but not limited to, A.M. Best

Company rating B, B-, C++, C+, C, C-, D, E, or
F; Standard & Poor's ratings BB+, BB, BB-, B+,
B, B-, CCC, CC, C, D, or R; Moody's Investors
Service ratings Ba1, Ba2, Ba3, B1, B2, B3,
Caa, Ca, or C; and Fitch Ratings ratings BB+,
BB, BB-, B+, B, B-, CCC+, CCC, CCC-, or D.
A failure to obtain or maintain at least 2
financial strength ratings from acceptable rating
agencies shall result in loss of eligibility for
certification.
(b) The business practices of the certified
reinsurer in dealing with its ceding insurers,
including its record of compliance with
reinsurance contractual terms and obligations.
(c) For certified reinsurers domiciled in the
U.S., a review of the most recent applicable NAIC
Annual Statement Blank, either Schedule F (for
property and casualty reinsurers) or Schedule S
(for life and health reinsurers).
(d) For certified reinsurers not domiciled in
the U.S., a review annually of Form CR-F (for
property and casualty reinsurers) or Form CR-S
(for life and health reinsurers).
(e) The reputation of the certified reinsurer
for prompt payment of claims under reinsurance
agreements, based on an analysis of ceding

insurers' Schedule F reporting of overdue
reinsurance recoverables, including the proportion
of obligations that are more than 90 days past due
or are in dispute, with specific attention given
to obligations payable to companies that are in
administrative supervision or receivership.
(f) Regulatory actions against the certified
reinsurer.
(g) The report of the independent auditor on
the financial statements of the insurance
enterprise, on the basis described in item (h) of
this subparagraph (5).
(h) For certified reinsurers not domiciled in
the U.S., audited financial statements (audited
Generally Accepted Accounting Principles (U.S.
GAAP) basis statement if available, audited
International Financial Reporting Standards (IFRS)
basis statements are allowed but must include an
audited footnote reconciling equity and net income
to U.S. GAAP basis or, with the permission of the
Director, audited IFRS basis statements with
reconciliation to U.S. GAAP basis certified by an
officer of the company), regulatory filings, and
actuarial opinion (as filed with the non-U.S.
jurisdiction supervisor). Upon the initial
application for certification, the Director shall

consider the audited financial statements filed
with its non-U.S. jurisdiction supervisor for the
3 years immediately preceding the date of the
initial application for certification.
(i) The liquidation priority of obligations to
a ceding insurer in the certified reinsurer's
domiciliary jurisdiction in the context of an
insolvency proceeding.
(j) A certified reinsurer's participation in
any solvent scheme of arrangement, or similar
procedure, that involves U.S. ceding insurers. The
Director shall receive prior notice from a
certified reinsurer that proposes participation by
the certified reinsurer in a solvent scheme of
arrangement.
The maximum rating that a certified reinsurer may
be assigned shall correspond to its financial strength
rating, which shall be determined according to
subitems (i) through (vi) of item (a) of this
subparagraph (5). The Director shall use the lowest
financial strength rating received from an acceptable
rating agency in establishing the maximum rating of a
certified reinsurer.
(6) Based on the analysis conducted under item (e)
of subparagraph (5) of this paragraph (C-5) of a
certified reinsurer's reputation for prompt payment of

claims, the Director may make appropriate adjustments
in the security the certified reinsurer is required to
post to protect its liabilities to U.S. ceding
insurers, provided that the Director shall, at a
minimum, increase the security the certified reinsurer
is required to post by one rating level under item (a)
of subparagraph (8) of this paragraph (C-5) if the
Director finds that:
(a) more than 15% of the certified reinsurer's
ceding insurance clients have overdue reinsurance
recoverables on paid losses of 90 days or more
that are not in dispute and that exceed $100,000
for each cedent; or
(b) the aggregate amount of reinsurance
recoverables on paid losses that are not in
dispute that are overdue by 90 days or more
exceeds $50,000,000.
(7) The Director shall post notice on the
Department's website promptly upon receipt of any
application for certification, including instructions
on how members of the public may respond to the
application. The Director may not take final action on
the application until at least 30 days after posting
the notice required by this subparagraph. The Director
shall publish a list of all certified reinsurers and
their ratings.

(8) A certified reinsurer shall secure obligations
assumed from U.S. ceding insurers under this
subsection (1) at a level consistent with its rating.
(a) The amount of security required in order
for full credit to be allowed shall correspond
with the applicable ratings category:
Secure - 1: 0%.
Secure - 2: 10%.
Secure - 3: 20%.
Secure - 4: 50%.
Secure - 5: 75%.
Vulnerable - 6: 100%.
(b) Nothing in this subparagraph (8) shall
prohibit the parties to a reinsurance agreement
from agreeing to provisions establishing security
requirements that exceed the minimum security
requirements established for certified reinsurers
under this Section.
(c) In order for a domestic ceding insurer to
qualify for full financial statement credit for
reinsurance ceded to a certified reinsurer, the
certified reinsurer shall maintain security in a
form acceptable to the Director and consistent
with the provisions of subsection (2) of this
Section, or in a multibeneficiary trust in
accordance with paragraph (C) of this subsection

(1), except as otherwise provided in this
subparagraph (8).
(d) If a certified reinsurer maintains a trust
to fully secure its obligations subject to
paragraph (C) of this subsection (1), and chooses
to secure its obligations incurred as a certified
reinsurer in the form of a multibeneficiary trust,
then the certified reinsurer shall maintain
separate trust accounts for its obligations
incurred under reinsurance agreements issued or
renewed as a certified reinsurer with reduced
security as permitted by this subsection or
comparable laws of other U.S. jurisdictions and
for its obligations subject to paragraph (C) of
this subsection (1). It shall be a condition to
the grant of certification under this paragraph
(C-5) that the certified reinsurer shall have
bound itself, by the language of the trust and
agreement with the Director with principal
regulatory oversight of each such trust account,
to fund, upon termination of any such trust
account, out of the remaining surplus of such
trust any deficiency of any other such trust
account. The certified reinsurer shall also
provide or make available, if requested by a
beneficiary under a trust, all the information

that is required to be provided under the
requirements of item (d) of subparagraph (2) of
paragraph (C) of this subsection (1) to the
certified reinsurer's U.S. ceding insurers or
their assigns and successors in interest. The
assuming insurer may decline to release trade
secrets or commercially sensitive information that
would qualify as exempt from disclosure under the
Freedom of Information Act.
(e) The minimum trusteed surplus requirements
provided in paragraph (C) of this subsection (1)
are not applicable with respect to a
multibeneficiary trust maintained by a certified
reinsurer for the purpose of securing obligations
incurred under this subsection, except that such
trust shall maintain a minimum trusteed surplus of
$10,000,000.
(f) With respect to obligations incurred by a
certified reinsurer under this subsection (1), if
the security is insufficient, then the Director
may reduce the allowable credit by an amount
proportionate to the deficiency and may impose
further reductions in allowable credit upon
finding that there is a material risk that the
certified reinsurer's obligations will not be paid
in full when due.

(9)(a) In the case of a downgrade by a rating
agency or other disqualifying circumstance, the
Director shall by written notice assign a new rating
to the certified reinsurer in accordance with the
requirements of subparagraph (5) of this paragraph
(C-5).
(b) If the rating of a certified reinsurer is
upgraded by the Director, then the certified reinsurer
may meet the security requirements applicable to its
new rating on a prospective basis, but the Director
shall require the certified reinsurer to post security
under the previously applicable security requirements
as to all contracts in force on or before the effective
date of the upgraded rating. If the rating of a
certified reinsurer is downgraded by the Director,
then the Director shall require the certified
reinsurer to meet the security requirements applicable
to its new rating for all business it has assumed as a
certified reinsurer.
(c) The Director may suspend, revoke, or otherwise
modify a certified reinsurer's certification at any
time if the certified reinsurer fails to meet its
obligations or security requirements under this
Section or if other financial or operating results of
the certified reinsurer, or documented significant
delays in payment by the certified reinsurer, lead the

Director to reconsider the certified reinsurer's
ability or willingness to meet its contractual
obligations. In seeking to suspend, revoke, or
otherwise modify a certified reinsurer's
certification, the Director shall follow the
procedures provided in paragraph (G) of this
subsection (1).
(d) For purposes of this subsection (1), a
certified reinsurer whose certification has been
terminated for any reason shall be treated as a
certified reinsurer required to secure 100% of its
obligations.
(i) As used in this item (d), the term
"terminated" refers to revocation, suspension,
voluntary surrender and inactive status.
(ii) If the Director continues to assign a
higher rating as permitted by other provisions of
this Section, then this requirement does not apply
to a certified reinsurer in inactive status or to
a reinsurer whose certification has been
suspended.
(e) Upon revocation of the certification of a
certified reinsurer by the Director, the assuming
insurer shall be required to post security in
accordance with subsection (2) of this Section in
order for the ceding insurer to continue to take

credit for reinsurance ceded to the assuming insurer.
If funds continue to be held in trust, then the
Director may allow additional credit equal to the
ceding insurer's pro rata share of the funds,
discounted to reflect the risk of uncollectibility and
anticipated expenses of trust administration.
(f) Notwithstanding the change of a certified
reinsurer's rating or revocation of its certification,
a domestic insurer that has ceded reinsurance to that
certified reinsurer may not be denied credit for
reinsurance for a period of 3 months for all
reinsurance ceded to that certified reinsurer, unless
the reinsurance is found by the Director to be at high
risk of uncollectibility.
(10) A certified reinsurer that ceases to assume
new business in this State may request to maintain its
certification in inactive status in order to continue
to qualify for a reduction in security for its
in-force business. An inactive certified reinsurer
shall continue to comply with all applicable
requirements of this subsection (1), and the Director
shall assign a rating that takes into account, if
relevant, the reasons why the reinsurer is not
assuming new business.
(11) Credit for reinsurance under this paragraph
(C-5) shall apply only to reinsurance contracts

entered into or renewed on or after the effective date
of the certification of the assuming insurer.
(12) The Director shall comply with all reporting
and notification requirements that may be established
by the NAIC with respect to certified reinsurers and
qualified jurisdictions.
(C-10)(1) Credit shall be allowed when the reinsurance
is ceded to an assuming insurer meeting each of the
conditions set forth in this subparagraph.
(a) The assuming insurer must have its head office
in or be domiciled in, as applicable, and be licensed
in a reciprocal jurisdiction. As used in this
paragraph (C-10), "reciprocal jurisdiction" means a
jurisdiction that meets one of the following:
(i) a non-U.S. jurisdiction that is subject to
an in-force covered agreement with the United
States, each within its legal authority, or, in
the case of a covered agreement between the United
States and European Union, is a member state of
the European Union; as used in this subitem,
"covered agreement" means an agreement entered
into pursuant to the Dodd-Frank Wall Street Reform
and Consumer Protection Act (31 U.S.C. 313 and
314) that is currently in effect or in a period of
provisional application and addresses the
elimination, under specified conditions, of

collateral requirements as a condition for
entering into any reinsurance agreement with a
ceding insurer domiciled in this State or for
allowing the ceding insurer to recognize credit
for reinsurance;
(ii) a U.S. jurisdiction that meets the
requirements for accreditation under the NAIC
financial standards and accreditation program; or
(iii) a qualified jurisdiction, as determined
by the Director pursuant to subparagraph (3) of
paragraph (C-5) of subsection (1) of this Section,
that is not otherwise described in subitem (i) or
(ii) of this item and that meets certain
additional requirements, consistent with the terms
and conditions of in-force covered agreements, as
specified by the Department by rule.
(b) The assuming insurer must have and maintain,
on an ongoing basis, minimum capital and surplus, or
its equivalent, calculated according to the
methodology of its domiciliary jurisdiction, in an
amount to be set forth by rule. If the assuming insurer
is an association, including incorporated and
individual unincorporated underwriters, it must have
and maintain, on an ongoing basis, minimum capital and
surplus equivalents (net of liabilities) calculated
according to the methodology applicable in its

domiciliary jurisdiction and a central fund containing
a balance in amounts to be set forth by rule.
(c) The assuming insurer must have and maintain,
on an ongoing basis, a minimum solvency or capital
ratio, as applicable, that will be set forth by rule.
If the assuming insurer is an association, including
incorporated and individual unincorporated
underwriters, it must have and maintain, on an ongoing
basis, a minimum solvency or capital ratio in the
reciprocal jurisdiction where the assuming insurer has
its head office or is domiciled, as applicable, and is
also licensed.
(d) The assuming insurer must provide adequate
assurance to the Director, in a form specified by the
Department by rule, as follows:
(i) the assuming insurer must provide prompt
written notice and explanation to the Director if
it falls below the minimum requirements set forth
in items (b) or (c) of this subparagraph or if any
regulatory action is taken against it for serious
noncompliance with applicable law;
(ii) the assuming insurer must consent in
writing to the jurisdiction of the courts of this
State and to the appointment of the Director as
agent for service of process; the Director may
require that consent for service of process be

provided to the Director and included in each
reinsurance agreement; nothing in this subitem
(ii) shall limit or in any way alter the capacity
of parties to a reinsurance agreement to agree to
alternative dispute resolution mechanisms, except
to the extent such agreements are unenforceable
under applicable insolvency or delinquency laws;
(iii) the assuming insurer must consent in
writing to pay all final judgments obtained by a
ceding insurer or its legal successor, whenever
enforcement is sought, that have been declared
enforceable in the jurisdiction where the judgment
was obtained;
(iv) each reinsurance agreement must include a
provision requiring the assuming insurer to
provide security in an amount equal to 100% of the
assuming insurer's liabilities attributable to
reinsurance ceded pursuant to that agreement if
the assuming insurer resists enforcement of a
final judgment that is enforceable under the law
of the jurisdiction in which it was obtained or a
properly enforceable arbitration award, whether
obtained by the ceding insurer or by its legal
successor on behalf of its resolution estate; and
(v) the assuming insurer must confirm that it
is not presently participating in any solvent

scheme of arrangement which involves this State's
ceding insurers and agree to notify the ceding
insurer and the Director and to provide security
in an amount equal to 100% of the assuming
insurer's liabilities to the ceding insurer if the
assuming insurer enters into such a solvent scheme
of arrangement; the security shall be in a form
consistent with the provisions of paragraph (C-5)
of subsection (1) and subsection (2) and as
specified by the Department by rule.
(e) If requested by the Director, the assuming
insurer or its legal successor must provide, on behalf
of itself and any legal predecessors, certain
documentation to the Director, as specified by the
Department by rule.
(f) The assuming insurer must maintain a practice
of prompt payment of claims under reinsurance
agreements pursuant to criteria set forth by rule.
(g) The assuming insurer's supervisory authority
must confirm to the Director on an annual basis, as of
the preceding December 31 or at the annual date
otherwise statutorily reported to the reciprocal
jurisdiction, that the assuming insurer complied with
the requirements set forth in items (b) and (c) of this
subparagraph.
(h) Nothing in this subparagraph precludes an

assuming insurer from providing the Director with
information on a voluntary basis.
(2) The Director shall timely create and publish a
list of reciprocal jurisdictions.
(a) The Director's list shall include any
reciprocal jurisdiction as defined under subitems (i)
and (ii) of item (a) of subparagraph (1) of this
paragraph, and shall consider any other reciprocal
jurisdiction included on the list of reciprocal
jurisdictions published through the NAIC committee
process. The Director may approve a jurisdiction that
does not appear on the NAIC list of reciprocal
jurisdictions in accordance with criteria to be
developed by rules adopted by the Department.
(b) The Director may remove a jurisdiction from
the list of reciprocal jurisdictions upon a
determination that the jurisdiction no longer meets
the requirements of a reciprocal jurisdiction in
accordance with a process set forth in rules adopted
by the Department, except that the Director shall not
remove from the list a reciprocal jurisdiction as
defined under subitems (i) and (ii) of item (a) of
subparagraph (1) of this paragraph. If otherwise
allowed pursuant to this Section, credit for
reinsurance ceded to an assuming insurer that has its
home office or is domiciled in that jurisdiction shall

be allowed upon removal of a reciprocal jurisdiction
from this list.
(3) The Director shall timely create and publish a
list of assuming insurers that have satisfied the
conditions set forth in this paragraph and to which
cessions shall be granted credit in accordance with this
paragraph. The Director may add an assuming insurer to the
list if a NAIC-accredited jurisdiction has added the
assuming insurer to a list of assuming insurers or if,
upon initial eligibility, the assuming insurer submits the
information to the Director as required under item (d) of
subparagraph (1) of this paragraph and complies with any
additional requirements that the Department may impose by
rule except to the extent that they conflict with an
applicable covered agreement.
(4) If the Director determines that an assuming
insurer no longer meets one or more of the requirements
under this paragraph, the Director may revoke or suspend
the eligibility of the assuming insurer for recognition
under this paragraph in accordance with procedures set
forth by rule.
(a) While an assuming insurer's eligibility is
suspended, no reinsurance agreement issued, amended,
or renewed after the effective date of the suspension
qualifies for credit except to the extent that the
assuming insurer's obligations under the contract are

secured in accordance with subsection (2).
(b) If an assuming insurer's eligibility is
revoked, no credit for reinsurance may be granted
after the effective date of the revocation with
respect to any reinsurance agreements entered into by
the assuming insurer, including reinsurance agreements
entered into before the date of revocation, except to
the extent that the assuming insurer's obligations
under the contract are secured in a form acceptable to
the Director and consistent with the provisions of
subsection (2).
(5) If subject to a legal process of rehabilitation,
liquidation, or conservation, as applicable, the ceding
insurer or its representative may seek and, if determined
appropriate by the court in which the proceedings are
pending, may obtain an order requiring that the assuming
insurer post security for all outstanding ceded
liabilities.
(6) Nothing in this paragraph shall limit or in any
way alter the capacity of parties to a reinsurance
agreement to agree on requirements for security or other
terms in that reinsurance agreement except as expressly
prohibited by this Section or other applicable law or
regulation.
(7) Credit may be taken under this paragraph only for
reinsurance agreements entered into, amended, or renewed

on or after the effective date of this amendatory Act of
the 102nd General Assembly and only with respect to losses
incurred and reserves reported on or after the later of:
(i) the date on which the assuming insurer has met
all eligibility requirements pursuant to subparagraph
(1) of this paragraph; and
(ii) the effective date of the new reinsurance
agreement, amendment, or renewal.
This subparagraph does not alter or impair a ceding
insurer's right to take credit for reinsurance, to the
extent that credit is not available under this paragraph,
as long as the reinsurance qualifies for credit under any
other applicable provision of this Section.
(8) Nothing in this paragraph shall authorize an
assuming insurer to withdraw or reduce the security
provided under any reinsurance agreement except as
permitted by the terms of the agreement.
(9) Nothing in this paragraph shall limit or in any
way alter the capacity of parties to any reinsurance
agreement to renegotiate the agreement.
(D) Credit shall be allowed when the reinsurance is
ceded to an assuming insurer not meeting the requirements
of paragraph (A), (B), (B-5), or (C), (C-5), or (C-10) of
this subsection (1) but only with respect to the insurance
of risks located in jurisdictions where that reinsurance
is required by applicable law or regulation of that

jurisdiction.
(E) If the assuming insurer is not licensed to
transact insurance in this State or an accredited or
certified reinsurer in this State, the credit permitted by
paragraphs (B-5) and (C) of this subsection (1) shall not
be allowed unless the assuming insurer agrees in the
reinsurance agreements:
(1) that in the event of the failure of the
assuming insurer to perform its obligations under the
terms of the reinsurance agreement, the assuming
insurer, at the request of the ceding insurer, shall
submit to the jurisdiction of any court of competent
jurisdiction in any state of the United States, will
comply with all requirements necessary to give the
court jurisdiction, and will abide by the final
decision of the court or of any appellate court in the
event of an appeal; and
(2) to designate the Director or a designated
attorney as its true and lawful attorney upon whom may
be served any lawful process in any action, suit, or
proceeding instituted by or on behalf of the ceding
company.
This provision is not intended to conflict with or
override the obligation of the parties to a reinsurance
agreement to arbitrate their disputes, if an obligation to
arbitrate is created in the agreement.

(F) If the assuming insurer does not meet the
requirements of paragraph (A), or (B), (B-5), or (C-10) of
this subsection (1), the credit permitted by paragraph (C)
or (C-5) of this subsection (1) shall not be allowed
unless the assuming insurer agrees in the trust agreements
to the following conditions:
(1) Notwithstanding any other provisions in the
trust instrument, if the trust fund is inadequate
because it contains an amount less than the amount
required by subparagraph (3) of paragraph (C) of this
subsection (1) or if the grantor of the trust has been
declared insolvent or placed into receivership,
rehabilitation, liquidation, or similar proceedings
under the laws of its state or country of domicile, the
trustee shall comply with an order of the state
official with regulatory oversight over the trust or
with an order of a court of competent jurisdiction
directing the trustee to transfer to the state
official with regulatory oversight all of the assets
of the trust fund.
(2) The assets shall be distributed by and claims
shall be filed with and valued by the state official
with regulatory oversight in accordance with the laws
of the state in which the trust is domiciled that are
applicable to the liquidation of domestic insurance
companies.

(3) If the state official with regulatory
oversight determines that the assets of the trust fund
or any part thereof are not necessary to satisfy the
claims of the U.S. ceding insurers of the grantor of
the trust, the assets or part thereof shall be
returned by the state official with regulatory
oversight to the trustee for distribution in
accordance with the trust agreement.
(4) The grantor shall waive any rights otherwise
available to it under U.S. law that are inconsistent
with the provision.
(G) If an accredited or certified reinsurer ceases to
meet the requirements for accreditation or certification,
then the Director may suspend or revoke the reinsurer's
accreditation or certification.
(1) The Director must give the reinsurer notice
and opportunity for hearing. The suspension or
revocation may not take effect until after the
Director's order on hearing, unless:
(a) the reinsurer waives its right to hearing;
(b) the Director's order is based on
regulatory action by the reinsurer's domiciliary
jurisdiction or the voluntary surrender or
termination of the reinsurer's eligibility to
transact insurance or reinsurance business in its
domiciliary jurisdiction or in the primary

certifying state of the reinsurer under
subparagraph (4) of paragraph (C-5) of this
subsection (1); or
(c) the Director finds that an emergency
requires immediate action and a court of competent
jurisdiction has not stayed the Director's action.
(2) While a reinsurer's accreditation or
certification is suspended, no reinsurance contract
issued or renewed after the effective date of the
suspension qualifies for credit except to the extent
that the reinsurer's obligations under the contract
are secured in accordance with subsection (2) of this
Section. If a reinsurer's accreditation or
certification is revoked, no credit for reinsurance
may be granted after the effective date of the
revocation, except to the extent that the reinsurer's
obligations under the contract are secured in
accordance with subsection (2) of this Section.
(H) The following provisions shall apply concerning
concentration of risk:
(1) A ceding insurer shall take steps to manage
its reinsurance recoverable proportionate to its own
book of business. A domestic ceding insurer shall
notify the Director within 30 days after reinsurance
recoverables from any single assuming insurer, or
group of affiliated assuming insurers, exceeds 50% of

the domestic ceding insurer's last reported surplus to
policyholders, or after it is determined that
reinsurance recoverables from any single assuming
insurer, or group of affiliated assuming insurers, is
likely to exceed this limit. The notification shall
demonstrate that the exposure is safely managed by the
domestic ceding insurer.
(2) A ceding insurer shall take steps to diversify
its reinsurance program. A domestic ceding insurer
shall notify the Director within 30 days after ceding
to any single assuming insurer, or group of affiliated
assuming insurers, more than 20% of the ceding
insurer's gross written premium in the prior calendar
year, or after it has determined that the reinsurance
ceded to any single assuming insurer, or group of
affiliated assuming insurers, is likely to exceed this
limit. The notification shall demonstrate that the
exposure is safely managed by the domestic ceding
insurer.
(2) Credit for the reinsurance ceded by a domestic insurer
to an assuming insurer not meeting the requirements of
subsection (1) of this Section shall be allowed in an amount
not exceeding the assets or liabilities carried by the ceding
insurer. The credit shall not exceed the amount of funds held
by or held in trust for the ceding insurer under a reinsurance
contract with the assuming insurer as security for the payment

of obligations thereunder, if the security is held in the
United States subject to withdrawal solely by, and under the
exclusive control of, the ceding insurer; or, in the case of a
trust, held in a qualified United States financial
institution, as defined in paragraph (B) of subsection (3) of
this Section. This security may be in the form of:
(A) Cash.
(B) Securities listed by the Securities Valuation
Office of the National Association of Insurance
Commissioners, including those deemed exempt from filing
as defined by the Purposes and Procedures Manual of the
Securities Valuation Office that conform to the
requirements of Article VIII of this Code that are not
issued by an affiliate of either the assuming or ceding
company.
(C) Clean, irrevocable, unconditional, letters of
credit issued or confirmed by a qualified United States
financial institution, as defined in paragraph (A) of
subsection (3) of this Section. The letters of credit
shall be effective no later than December 31 of the year
for which filing is being made, and in the possession of,
or in trust for, the ceding company on or before the filing
date of its annual statement. Letters of credit meeting
applicable standards of issuer acceptability as of the
dates of their issuance (or confirmation) shall,
notwithstanding the issuing (or confirming) institution's

subsequent failure to meet applicable standards of issuer
acceptability, continue to be acceptable as security until
their expiration, extension, renewal, modification, or
amendment, whichever first occurs.
(D) Any other form of security acceptable to the
Director.
(3)(A) For purposes of paragraph (C) of subsection (2) of
this Section, a "qualified United States financial
institution" means an institution that:
(1) is organized or, in the case of a U.S. office of a
foreign banking organization, licensed under the laws of
the United States or any state thereof;
(2) is regulated, supervised, and examined by U.S.
federal or state authorities having regulatory authority
over banks and trust companies;
(3) has been designated by either the Director or the
Securities Valuation Office of the National Association of
Insurance Commissioners as meeting such standards of
financial condition and standing as are considered
necessary and appropriate to regulate the quality of
financial institutions whose letters of credit will be
acceptable to the Director; and
(4) is not affiliated with the assuming company.
(B) A "qualified United States financial institution"
means, for purposes of those provisions of this law specifying
those institutions that are eligible to act as a fiduciary of a

trust, an institution that:
(1) is organized or, in the case of the U.S. branch or
agency office of a foreign banking organization, licensed
under the laws of the United States or any state thereof
and has been granted authority to operate with fiduciary
powers;
(2) is regulated, supervised, and examined by federal
or state authorities having regulatory authority over
banks and trust companies; and
(3) is not affiliated with the assuming company,
however, if the subject of the reinsurance contract is
insurance written pursuant to Section 155.51 of this Code,
the financial institution may be affiliated with the
assuming company with the prior approval of the Director.
(C) Except as set forth in subparagraph (11) of paragraph
(C-5) of subsection (1) of this Section as to cessions by
certified reinsurers, this amendatory Act of the 100th General
Assembly shall apply to all cessions after the effective date
of this amendatory Act of the 100th General Assembly under
reinsurance agreements that have an inception, anniversary, or
renewal date not less than 6 months after the effective date of
this amendatory Act of the 100th General Assembly.
(D) The Department shall adopt rules implementing the
provisions of this Article.
(Source: P.A. 100-1118, eff. 11-27-18.)
Section 99. Effective date. This Act takes effect December

31, 2022.
INDEX
Statutes amended in order of appearance