ARTICLE VIII 1/2. INSURANCE HOLDING COMPANY SYSTEMS
(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. (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 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. (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) "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. (e) "Person" means an individual, a corporation, 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. (f) "Securityholder" of a specified person is one who owns any security of such person, including common stock, preferred stock, debt obligations, and any other security convertible into or evidencing the right to acquire any of the foregoing. (g) "Subsidiary" of a specified person is an affiliate controlled by such person directly, or indirectly through one or more intermediaries. (h) "Voting Security" is a security which gives to the holder thereof the right to vote for the election of directors and includes any security convertible into or evidencing a right to acquire a voting security. (i) "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. (j) "Policyholders' Proxies" are proxies which 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. (k) "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. (Source: P.A. 84‑805.)
(215 ILCS 5/131.2)(from Ch. 73, par. 743.2) Sec. 131.2. Subsidiaries. In addition to investments in common stock, preferred stock, debt obligations and other securities of subsidiaries permitted under all other sections of this Code, a domestic company, other than a company subject to Articles XVIII or XIX, may also: (a) invest, in common stock, preferred stock, debt obligations, and other securities of one or more subsidiaries, amounts which do not exceed the lesser of 10% of the company's assets or 50% of the company's surplus as regards policyholders, but after such investments the company's surplus as regards policyholders must be reasonable in relation to the company's outstanding liabilities and adequate to its financial needs. In calculating the amount of such investments, there must be included (i) total net monies or other consideration expended and obligations assumed in the acquisition or formation of a subsidiary, including all organizational expenses and contributions to capital and surplus of the subsidiary whether or not represented by the purchase of capital stock or issuance of other securities, and (ii) all amounts expended in acquiring additional common stock, preferred stock, debt obligations, and other securities, and all contributions to the capital or surplus of a subsidiary subsequent to its acquisition or formation; (b) invest any amount in common stock, preferred stock, debt obligations and other securities of one or more direct subsidiaries acting only as a non‑operating holding company or engaged or organized exclusively for the ownership and management of assets authorized as investments for the company, provided that each subsidiary agrees to limit its investments in any asset so that such investments will not cause the amount of the total investment of the company to exceed the amount the company could have invested in such asset. For the purpose of this clause, "the total investment of the company" will include (i) any direct investment by the company in an asset and (ii) the company's proportionate share of any investment in such asset by any direct subsidiary of the company, which must be calculated by multiplying the amount of the subsidiary's investment by the percentage of the company's ownership of such subsidiary; (c) invest in common stock of one or more insurance corporation subsidiaries any amount by which the investing company's capital and surplus exceeds the minimum capital and surplus required of a new company under Section 13 to qualify for a certificate of authority to write the kind or kinds of insurance which the company is authorized to write, if the company is a stock company, and if the company is other than a stock company, the company may invest the amount by which the company's surplus exceeds the minimum surplus required of a new company under Section 43 or 66 to qualify for a certificate of authority to write the kind or kinds of insurance which the company is authorized to write; (d) with the approval of the Director, invest any greater amount in common stock, preferred stock, debt obligations, or other securities of one or more subsidiaries, but after such investment the company's surplus as regards policyholders must be reasonable in relation to the company's outstanding liabilities and adequate to its financial needs. (Source: P.A. 85‑1186.)
(215 ILCS 5/131.3)(from Ch. 73, par. 743.3) Sec. 131.3. (1) Investments in common stock, preferred stock, debt obligations or other securities of subsidiaries made under Section 131.2 of this Article are subject to Sections 126.3, 126.4, 126.5, 126.6, 126.7, and 133 of this Code but are not subject to any other of the otherwise applicable restrictions or prohibitions contained in this Code applicable to such investments of a domestic company subject to this Code. (2) If a company ceases to control a subsidiary, it must dispose of any investment therein made under this section within 3 years from the time of the cessation of control or within such further time as the Director may prescribe, unless at any time after the investment is made, the investment meets the requirements for investment under any other section of this Code, and the company has notified the Director thereof. (Source: P.A. 90‑418, eff. 8‑15‑97.)
(215 ILCS 5/131.4)(from Ch. 73, par. 743.4) Sec. 131.4. Acquisition of control of or merger with domestic company. No person other than the issuer may make a tender for or a request or invitation for tenders of, or enter into an agreement to exchange securities for or acquire in the open market, or otherwise, any voting security of a domestic company or acquire policyholders' proxies of a domestic company for consideration if, after the consummation thereof, that person would, directly or indirectly, (or by conversion or by exercise of any right to acquire) be in control of the company, and no person may enter into an agreement to merge or consolidate with or otherwise to acquire control of a domestic company, unless the offer, request, invitation, or agreement is conditioned on receiving the approval of the Director based on Section 131.8 of this Article and no such acquisition of control or a merger with a domestic company may be consummated unless the Director has approved the transaction or granted an exemption. For purposes of this Section a domestic company includes any other person which controls a domestic company or holds or controls sufficient policyholders' proxies to elect the majority of the board of directors of the domestic company. Prior to the acquisition, the Director may conclude that a statement need not be filed by the acquiring party if the acquiring party demonstrates to the satisfaction of the Director that: (1) such transaction will not result in the change of control of the domestic company; or (2) the person which is subject to the acquisition has assets in excess of $1,000,000 and shareholders of record of 500 or more and its insurance business either directly or through its affiliates is an insignificant portion of its total business; or (3) the acquisition of, or attempt to acquire control of, such other person is subject to requirements in the jurisdiction of its domicile which are substantially similar to those contained in this Section and Sections 131.5 through 131.12; or (4) the control of the policyholders' proxies is being acquired solely by virtue of the holders official office and not as the result of any agreement or for any consideration. The purpose of this Section is to afford to the Director the opportunity to review acquisitions in order to determine whether or not the acquisition would be adverse to the interests of the existing and future policyholders of the company. (Source: P.A. 86‑784.)
(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 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 for the second and third preceding fiscal years and as of a date not earlier than 90 days prior to the filing of the statement. If an acquiring party is an insurer which has been actively engaged in the business of insurance for 10 years, the financial information need not be audited, provided it is based on the annual statements of such acquiring person filed with the insurance department of the person's domiciliary state and is in accordance with the requirement of insurance or other accounting principles prescribed or permitted under the laws and regulations of such state. (a) When an applicant is controlled by an individual, financial information for that individual will not be required if the applicant is currently subject to the registration and reporting requirements of Section 12(g) of the Securities Exchange Act of 1934 or is an insurer which has been actively engaged in the business of insurance for a period in excess of 10 years; (b) When an individual as an acquiring party must file financial information under this paragraph such information need not be delivered to the company. However, such information shall be available if the Director holds a hearing pursuant to Section 131.8. (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, and the terms of the offer, request, invitation, agreement, or acquisition referred to in Section 131.4. (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 acquirors, 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 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) 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. (Source: P.A. 84‑805.)
(215 ILCS 5/131.6)(from Ch. 73, par. 743.6) Sec. 131.6. (1) If the person required to file the statement referred to in Section 131.5 is a partnership, limited partnership, syndicate or other group, the Director may require that the information be given with respect to each partner of such partnership or limited partnership, each member of such syndicate or group, and each person who controls such partner or member. If any partner, member or person is a corporation or the person required to file the statement referred to in Section 131.5 is a corporation, the Director may require that the information be given with respect to the corporation, each officer and director of the corporation, and each person who is directly or indirectly the beneficial owner of more than 10% of the outstanding voting securities of the corporation. (2) If any material change occurs in the facts set forth in the statement filed with the Director and sent to the company under Section 131.9, an amendment setting forth the change, together with copies of all documents and other material relevant to the change, must be filed with the Director and sent to the company within 2 business days after the person learns of the change. (Source: P.A. 84‑805.)
(215 ILCS 5/131.7)(from Ch. 73, par. 743.7) Sec. 131.7. If any offer, request, invitation, agreement or acquisition referred to in Section 131.4 is proposed to be made by means of a registration statement under the Securities Act of 1933 or in circumstances requiring the disclosure of similar information under the Securities Exchange Act of 1934, or under a state law requiring similar registration or disclosure, the person required to file the statement referred to in Section 131.4 may utilize such documents in furnishing the information called for by that statement. (Source: P. A. 77‑673.)
(215 ILCS 5/131.8)(from Ch. 73, par. 743.8) Sec. 131.8. (1) After the statement required by Section 131.5 has been filed, the Director must disapprove any merger, consolidation or other acquisition of control referred to in Section 131.4 unless the acquiring party demonstrates to the Director that: (a) After change of control the domestic company referred to in Section 131.4 would be able to satisfy the requirements for the issuance of a license to write the line or lines of insurance for which it is presently licensed; (b) the effect of the merger, consolidation or other acquisition of control would not substantially lessen competition in insurance in this State or not tend to create a monopoly therein. In applying the competitive standard in this paragraph: (i) the informational requirements of subsection (3)(a) and the standards of subsection (4)(b) of Section 131.12a shall apply, (ii) the merger or other acquisition shall not be disapproved if the acquiring party demonstrates that any of the situations meeting the criteria provided by subsection (4)(c) of Section 131.12a exist, and (iii) the Director may condition the approval of the merger or other acquisition on the removal of the basis of disapproval within a specified period of time; (c) the financial condition of any acquiring party is such as to not jeopardize the financial stability of the domestic company or not jeopardize the interests of its policyholders; (d) the plans or proposals which the acquiring party has to liquidate the domestic company, sell its assets or consolidate or merge it with any person, or to make any other material change in its business or corporate structure or management, are fair and reasonable to policyholders of such company; or (e) the competence, experience and integrity of those persons who would control the operation of the domestic company are such that it would be in the best interests of policyholders of such company and of the insurance buying public to permit the merger, consolidation or other acquisition of control. (2) The Director may hold a public hearing on any merger, consolidation or other acquisition of control referred to in Section 131.4 if the Director determines that the statement filed as required by Section 131.5 does not demonstrate compliance with the standards referred to in subsection (1), of this Section, or if he determines that such acquisition of control will adversely affect policyholders or the insurance buying public. (3) The public hearing referred to in subsection (2) must be held within 60 days after the statement required by Section 131.5 is filed, and at least 20 days' notice thereof must be given by the Director to the person filing the statement and to the domestic company. Not less than 12 days' notice of such hearing must be given by the person filing the statement to such other persons as may be designated by the Director and by the company to its securityholders. The Director must make a determination within 30 days after the conclusion of the hearing. At the hearing, the person filing the statement, the domestic company, any person to whom notice of the hearing was sent, and any other person whose interests may be affected thereby has the right to present evidence, examine and cross‑examine witnesses, and offer oral and written arguments and in connection therewith is entitled to conduct discovery proceedings in the same manner as is presently allowed in the Circuit Courts of this State. All discovery proceedings must be concluded not later than 3 days prior to the commencement of the public hearing. (Source: P.A. 84‑805.)
(215 ILCS 5/131.8a)(from Ch. 73, par. 743.8a) Sec. 131.8a. The Director may retain at the applicant's expense any attorneys, actuaries, accountants and other experts not otherwise a part of the Director's staff as may be reasonably necessary to assist in the conduct of financial or character examinations in conjunction with an acquisition proposed under Section 131.4. The applicant shall deposit with the Director cash, bonds or securities, acceptable to the Director, in a reasonable amount not to exceed $100,000, for purpose of securing the payment of any expert's cost. (Source: P.A. 86‑753.)
(215 ILCS 5/131.9)(from Ch. 73, par. 743.9) Sec. 131.9. All statements, amendments or other material filed under Section 131.5 must be delivered to the domestic company within 10 business days after the acquiring party has made the filing with the Director. The domestic company shall then send to its securityholders the summary of the proposed acquisition within 5 business days of such delivery. The notice shall contain an address where a copy of the statement filed with the Director can be obtained upon request. The expenses of the mailing and any requests for the statement and the mailing of the notice of hearing by the company required under subsection (2) of Section 131.8 must be borne by the person making the filing. As security for the payment of the expenses, the person may be required to file with the Director an acceptable bond or other deposit in an amount to be determined by the Director. (Source: P.A. 84‑805.)
(215 ILCS 5/131.10)(from Ch. 73, par. 743.10) Sec. 131.10. Sections 131.4 through 131.12 do not apply to: (1) any transaction which is subject to Article X of this Code dealing with merger, consolidation or plans of exchange; (2) any offer, request, invitation, agreement or acquisition which the Director by order exempts therefrom as (a) not having been made or entered into for the purpose and not having the effect of changing or influencing the control of a domestic company, or (b) as otherwise not comprehended within the purposes of Sections 131.4 through 131.12. (Source: P.A. 80‑545.)
(215 ILCS 5/131.11)(from Ch. 73, par. 743.11) Sec. 131.11. The following are violations of Sections 131.4 through 131.12: (1) the failure to file any statement, amendment, or other material required to be filed under Sections 131.4 or 131.5; or (2) the effectuation or any attempt to effectuate an acquisition of control of or merger or consolidation with, a domestic company unless the Director has given his approval thereto. (Source: P. A. 77‑673.)
(215 ILCS 5/131.12)(from Ch. 73, par. 743.12) Sec. 131.12. The courts of this State are hereby vested with jurisdiction over every person not resident, domiciled, or authorized to do business in this State who files a statement with the Director under Section 131.4, and over all actions involving such person arising out of violations of Sections 131.4, 131.5, 131.6, 131.9 or 131.11, and each such person is deemed to have performed acts equivalent to and constituting an appointment by such a person of the Director to be his true and lawful attorney upon whom may be served all lawful process in any action, suit or proceeding arising out of violations of Sections 131.4, 131.5, 131.6, 131.9 or 131.11. Copies of all such lawful process must be served on the Director and transmitted by registered or certified mail by the Director to such person at his last known address. (Source: P. A. 77‑673.)
(215 ILCS 5/131.12a)(from Ch. 73, par. 743.12a) Sec. 131.12a. Acquisitions involving insurers not otherwise covered. (1) Definitions. The following definitions shall apply for the purposes of this Section only: (a) "Acquisition" means any agreement, arrangement or activity the consummation of which results in a person acquiring directly or indirectly the control of another person or control of the insurance in force of another person, and includes but is not limited to the acquisition of voting securities, the acquisition of assets, the transaction of bulk reinsurance and the act of merging or consolidating. (b) An "involved insurer" includes an insurer which either acquires or is acquired, is affiliated with an acquirer or acquired or is the result of a merger.
(2) Scope. (a) Except as exempted in paragraph (b) of this subsection (2), this Section applies to any acquisition in which there is a change in control of an insurer authorized to do business in this State. (b) This Section shall not apply to the following: (i) an acquisition subject to approval or
disapproval by the Director pursuant to Section 131.8;
(ii) a purchase of securities solely for investment
purposes so long as such securities are not used by voting or otherwise to cause or attempt to cause the substantial lessening of competition in any insurance market in this State. If a purchase of securities results in a presumption of control under subsection (b) of Section 131.1, it is not solely for investment purposes unless the commissioner of the insurer's state of domicile accepts a disclaimer of control or affirmatively finds that control does not exist and such disclaimer action or affirmative finding is communicated by the domiciliary commissioner to the Director of this State;
(iii) the acquisition of a person by another person
when both persons are neither directly nor through affiliates primarily engaged in the business of insurance, if pre‑acquisition notification is filed with the Director in accordance with subsection (3)(a) of this Section, 30 days prior to the proposed effective date of the acquisition. However, such pre‑acquisition notification is not required for exclusion from this Section if the acquisition would otherwise be excluded from this Section by any other subparagraph of subsection (2)(b);
(iv) the acquisition of already affiliated persons; (v) an acquisition if, as an immediate result of the
acquisition,
(A) in no market would the combined market share
of the involved insurers exceed 5% of the total market,
(B) there would be no increase in any market
share, or
(C) in no market would the combined market share
of the involved insurers exceed 12% of the total market, and the market share increase by more than 2% of the total market.
For the purpose of this subparagraph (b)(v),
"market" means direct written insurance premium in this State for a line of business as contained in the annual statement required to be filed by insurers licensed to do business in this State;
(vi) an acquisition for which a pre‑acquisition
notification would be required pursuant to this Section due solely to the resulting effect on the ocean marine insurance line of business;
(vii) an acquisition of an insurer whose domiciliary
commissioner affirmatively finds that such insurer is in failing condition; there is a lack of feasible alternative to improving such condition; the public benefits of improving such insurer's condition through the acquisition exceed the public benefits that would arise from not lessening competition; and such findings are communicated by the domiciliary commissioner to the Director of this State.
(3) Pre‑acquisition Notification; Waiting Period. An acquisition covered by subsection (2) may be subject to an order pursuant to subsection (5) unless the acquiring person files a pre‑acquisition notification and the waiting period has expired. The acquired person may file a pre‑acquisition notification. The Director shall give confidential treatment to information submitted under this subsection in the same manner as provided in Section 131.22 of this Article. (a) The pre‑acquisition notification shall be in such form and contain such information as prescribed by the Director, which shall conform substantially to the form of notification adopted by the National Association of Insurance Commissioners relating to those markets which, under subsection (b)(v) of Section (2), cause the acquisition not to be exempted from the provisions of this Section. The Director may require such additional material and information as he deems necessary to determine whether the proposed acquisition, if consummated, would violate the competitive standard of subsection (4). The required information may include an opinion of an economist as to the competitive impact of the acquisition in this State accompanied by a summary of the education and experience of such person indicating his or her ability to render an informed opinion. (b) The waiting period required shall begin on the date of the receipt by the Director of a pre‑acquisition notification and shall end on the earlier of the 30th day after the date of such receipt, or termination of the waiting period by the Director. Prior to the end of the waiting period, the Director on a one time basis may require the submission of additional needed information relevant to the proposed acquisition, in which event the waiting period shall end on the earlier of the 30th day after the receipt of such additional information by the Director or termination of the waiting period by the Director.
(4) Competitive Standard. (a) The Director may enter an order under subsection (5)(a) with respect to an acquisition if there is substantial evidence that the effect of the acquisition may be substantially to lessen competition in any line of insurance in this State or tend to create a monopoly therein or if the insurer fails to file adequate information in compliance with subsection (3). (b) In determining whether a proposed acquisition would violate the competitive standard of paragraph (a) of this subsection the Director shall consider the following: (i) any acquisition covered under subsection (2)
involving 2 or more insurers competing in the same market is prima facie evidence of violation of the competitive standards:
ARTICLE VIII 1/2. INSURANCE HOLDING COMPANY SYSTEMS
(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. (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 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. (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) "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. (e) "Person" means an individual, a corporation, 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. (f) "Securityholder" of a specified person is one who owns any security of such person, including common stock, preferred stock, debt obligations, and any other security convertible into or evidencing the right to acquire any of the foregoing. (g) "Subsidiary" of a specified person is an affiliate controlled by such person directly, or indirectly through one or more intermediaries. (h) "Voting Security" is a security which gives to the holder thereof the right to vote for the election of directors and includes any security convertible into or evidencing a right to acquire a voting security. (i) "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. (j) "Policyholders' Proxies" are proxies which 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. (k) "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. (Source: P.A. 84‑805.)
(215 ILCS 5/131.2)(from Ch. 73, par. 743.2) Sec. 131.2. Subsidiaries. In addition to investments in common stock, preferred stock, debt obligations and other securities of subsidiaries permitted under all other sections of this Code, a domestic company, other than a company subject to Articles XVIII or XIX, may also: (a) invest, in common stock, preferred stock, debt obligations, and other securities of one or more subsidiaries, amounts which do not exceed the lesser of 10% of the company's assets or 50% of the company's surplus as regards policyholders, but after such investments the company's surplus as regards policyholders must be reasonable in relation to the company's outstanding liabilities and adequate to its financial needs. In calculating the amount of such investments, there must be included (i) total net monies or other consideration expended and obligations assumed in the acquisition or formation of a subsidiary, including all organizational expenses and contributions to capital and surplus of the subsidiary whether or not represented by the purchase of capital stock or issuance of other securities, and (ii) all amounts expended in acquiring additional common stock, preferred stock, debt obligations, and other securities, and all contributions to the capital or surplus of a subsidiary subsequent to its acquisition or formation; (b) invest any amount in common stock, preferred stock, debt obligations and other securities of one or more direct subsidiaries acting only as a non‑operating holding company or engaged or organized exclusively for the ownership and management of assets authorized as investments for the company, provided that each subsidiary agrees to limit its investments in any asset so that such investments will not cause the amount of the total investment of the company to exceed the amount the company could have invested in such asset. For the purpose of this clause, "the total investment of the company" will include (i) any direct investment by the company in an asset and (ii) the company's proportionate share of any investment in such asset by any direct subsidiary of the company, which must be calculated by multiplying the amount of the subsidiary's investment by the percentage of the company's ownership of such subsidiary; (c) invest in common stock of one or more insurance corporation subsidiaries any amount by which the investing company's capital and surplus exceeds the minimum capital and surplus required of a new company under Section 13 to qualify for a certificate of authority to write the kind or kinds of insurance which the company is authorized to write, if the company is a stock company, and if the company is other than a stock company, the company may invest the amount by which the company's surplus exceeds the minimum surplus required of a new company under Section 43 or 66 to qualify for a certificate of authority to write the kind or kinds of insurance which the company is authorized to write; (d) with the approval of the Director, invest any greater amount in common stock, preferred stock, debt obligations, or other securities of one or more subsidiaries, but after such investment the company's surplus as regards policyholders must be reasonable in relation to the company's outstanding liabilities and adequate to its financial needs. (Source: P.A. 85‑1186.)
(215 ILCS 5/131.3)(from Ch. 73, par. 743.3) Sec. 131.3. (1) Investments in common stock, preferred stock, debt obligations or other securities of subsidiaries made under Section 131.2 of this Article are subject to Sections 126.3, 126.4, 126.5, 126.6, 126.7, and 133 of this Code but are not subject to any other of the otherwise applicable restrictions or prohibitions contained in this Code applicable to such investments of a domestic company subject to this Code. (2) If a company ceases to control a subsidiary, it must dispose of any investment therein made under this section within 3 years from the time of the cessation of control or within such further time as the Director may prescribe, unless at any time after the investment is made, the investment meets the requirements for investment under any other section of this Code, and the company has notified the Director thereof. (Source: P.A. 90‑418, eff. 8‑15‑97.)
(215 ILCS 5/131.4)(from Ch. 73, par. 743.4) Sec. 131.4. Acquisition of control of or merger with domestic company. No person other than the issuer may make a tender for or a request or invitation for tenders of, or enter into an agreement to exchange securities for or acquire in the open market, or otherwise, any voting security of a domestic company or acquire policyholders' proxies of a domestic company for consideration if, after the consummation thereof, that person would, directly or indirectly, (or by conversion or by exercise of any right to acquire) be in control of the company, and no person may enter into an agreement to merge or consolidate with or otherwise to acquire control of a domestic company, unless the offer, request, invitation, or agreement is conditioned on receiving the approval of the Director based on Section 131.8 of this Article and no such acquisition of control or a merger with a domestic company may be consummated unless the Director has approved the transaction or granted an exemption. For purposes of this Section a domestic company includes any other person which controls a domestic company or holds or controls sufficient policyholders' proxies to elect the majority of the board of directors of the domestic company. Prior to the acquisition, the Director may conclude that a statement need not be filed by the acquiring party if the acquiring party demonstrates to the satisfaction of the Director that: (1) such transaction will not result in the change of control of the domestic company; or (2) the person which is subject to the acquisition has assets in excess of $1,000,000 and shareholders of record of 500 or more and its insurance business either directly or through its affiliates is an insignificant portion of its total business; or (3) the acquisition of, or attempt to acquire control of, such other person is subject to requirements in the jurisdiction of its domicile which are substantially similar to those contained in this Section and Sections 131.5 through 131.12; or (4) the control of the policyholders' proxies is being acquired solely by virtue of the holders official office and not as the result of any agreement or for any consideration. The purpose of this Section is to afford to the Director the opportunity to review acquisitions in order to determine whether or not the acquisition would be adverse to the interests of the existing and future policyholders of the company. (Source: P.A. 86‑784.)
(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 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 for the second and third preceding fiscal years and as of a date not earlier than 90 days prior to the filing of the statement. If an acquiring party is an insurer which has been actively engaged in the business of insurance for 10 years, the financial information need not be audited, provided it is based on the annual statements of such acquiring person filed with the insurance department of the person's domiciliary state and is in accordance with the requirement of insurance or other accounting principles prescribed or permitted under the laws and regulations of such state. (a) When an applicant is controlled by an individual, financial information for that individual will not be required if the applicant is currently subject to the registration and reporting requirements of Section 12(g) of the Securities Exchange Act of 1934 or is an insurer which has been actively engaged in the business of insurance for a period in excess of 10 years; (b) When an individual as an acquiring party must file financial information under this paragraph such information need not be delivered to the company. However, such information shall be available if the Director holds a hearing pursuant to Section 131.8. (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, and the terms of the offer, request, invitation, agreement, or acquisition referred to in Section 131.4. (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 acquirors, 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 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) 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. (Source: P.A. 84‑805.)
(215 ILCS 5/131.6)(from Ch. 73, par. 743.6) Sec. 131.6. (1) If the person required to file the statement referred to in Section 131.5 is a partnership, limited partnership, syndicate or other group, the Director may require that the information be given with respect to each partner of such partnership or limited partnership, each member of such syndicate or group, and each person who controls such partner or member. If any partner, member or person is a corporation or the person required to file the statement referred to in Section 131.5 is a corporation, the Director may require that the information be given with respect to the corporation, each officer and director of the corporation, and each person who is directly or indirectly the beneficial owner of more than 10% of the outstanding voting securities of the corporation. (2) If any material change occurs in the facts set forth in the statement filed with the Director and sent to the company under Section 131.9, an amendment setting forth the change, together with copies of all documents and other material relevant to the change, must be filed with the Director and sent to the company within 2 business days after the person learns of the change. (Source: P.A. 84‑805.)
(215 ILCS 5/131.7)(from Ch. 73, par. 743.7) Sec. 131.7. If any offer, request, invitation, agreement or acquisition referred to in Section 131.4 is proposed to be made by means of a registration statement under the Securities Act of 1933 or in circumstances requiring the disclosure of similar information under the Securities Exchange Act of 1934, or under a state law requiring similar registration or disclosure, the person required to file the statement referred to in Section 131.4 may utilize such documents in furnishing the information called for by that statement. (Source: P. A. 77‑673.)
(215 ILCS 5/131.8)(from Ch. 73, par. 743.8) Sec. 131.8. (1) After the statement required by Section 131.5 has been filed, the Director must disapprove any merger, consolidation or other acquisition of control referred to in Section 131.4 unless the acquiring party demonstrates to the Director that: (a) After change of control the domestic company referred to in Section 131.4 would be able to satisfy the requirements for the issuance of a license to write the line or lines of insurance for which it is presently licensed; (b) the effect of the merger, consolidation or other acquisition of control would not substantially lessen competition in insurance in this State or not tend to create a monopoly therein. In applying the competitive standard in this paragraph: (i) the informational requirements of subsection (3)(a) and the standards of subsection (4)(b) of Section 131.12a shall apply, (ii) the merger or other acquisition shall not be disapproved if the acquiring party demonstrates that any of the situations meeting the criteria provided by subsection (4)(c) of Section 131.12a exist, and (iii) the Director may condition the approval of the merger or other acquisition on the removal of the basis of disapproval within a specified period of time; (c) the financial condition of any acquiring party is such as to not jeopardize the financial stability of the domestic company or not jeopardize the interests of its policyholders; (d) the plans or proposals which the acquiring party has to liquidate the domestic company, sell its assets or consolidate or merge it with any person, or to make any other material change in its business or corporate structure or management, are fair and reasonable to policyholders of such company; or (e) the competence, experience and integrity of those persons who would control the operation of the domestic company are such that it would be in the best interests of policyholders of such company and of the insurance buying public to permit the merger, consolidation or other acquisition of control. (2) The Director may hold a public hearing on any merger, consolidation or other acquisition of control referred to in Section 131.4 if the Director determines that the statement filed as required by Section 131.5 does not demonstrate compliance with the standards referred to in subsection (1), of this Section, or if he determines that such acquisition of control will adversely affect policyholders or the insurance buying public. (3) The public hearing referred to in subsection (2) must be held within 60 days after the statement required by Section 131.5 is filed, and at least 20 days' notice thereof must be given by the Director to the person filing the statement and to the domestic company. Not less than 12 days' notice of such hearing must be given by the person filing the statement to such other persons as may be designated by the Director and by the company to its securityholders. The Director must make a determination within 30 days after the conclusion of the hearing. At the hearing, the person filing the statement, the domestic company, any person to whom notice of the hearing was sent, and any other person whose interests may be affected thereby has the right to present evidence, examine and cross‑examine witnesses, and offer oral and written arguments and in connection therewith is entitled to conduct discovery proceedings in the same manner as is presently allowed in the Circuit Courts of this State. All discovery proceedings must be concluded not later than 3 days prior to the commencement of the public hearing. (Source: P.A. 84‑805.)
(215 ILCS 5/131.8a)(from Ch. 73, par. 743.8a) Sec. 131.8a. The Director may retain at the applicant's expense any attorneys, actuaries, accountants and other experts not otherwise a part of the Director's staff as may be reasonably necessary to assist in the conduct of financial or character examinations in conjunction with an acquisition proposed under Section 131.4. The applicant shall deposit with the Director cash, bonds or securities, acceptable to the Director, in a reasonable amount not to exceed $100,000, for purpose of securing the payment of any expert's cost. (Source: P.A. 86‑753.)
(215 ILCS 5/131.9)(from Ch. 73, par. 743.9) Sec. 131.9. All statements, amendments or other material filed under Section 131.5 must be delivered to the domestic company within 10 business days after the acquiring party has made the filing with the Director. The domestic company shall then send to its securityholders the summary of the proposed acquisition within 5 business days of such delivery. The notice shall contain an address where a copy of the statement filed with the Director can be obtained upon request. The expenses of the mailing and any requests for the statement and the mailing of the notice of hearing by the company required under subsection (2) of Section 131.8 must be borne by the person making the filing. As security for the payment of the expenses, the person may be required to file with the Director an acceptable bond or other deposit in an amount to be determined by the Director. (Source: P.A. 84‑805.)
(215 ILCS 5/131.10)(from Ch. 73, par. 743.10) Sec. 131.10. Sections 131.4 through 131.12 do not apply to: (1) any transaction which is subject to Article X of this Code dealing with merger, consolidation or plans of exchange; (2) any offer, request, invitation, agreement or acquisition which the Director by order exempts therefrom as (a) not having been made or entered into for the purpose and not having the effect of changing or influencing the control of a domestic company, or (b) as otherwise not comprehended within the purposes of Sections 131.4 through 131.12. (Source: P.A. 80‑545.)
(215 ILCS 5/131.11)(from Ch. 73, par. 743.11) Sec. 131.11. The following are violations of Sections 131.4 through 131.12: (1) the failure to file any statement, amendment, or other material required to be filed under Sections 131.4 or 131.5; or (2) the effectuation or any attempt to effectuate an acquisition of control of or merger or consolidation with, a domestic company unless the Director has given his approval thereto. (Source: P. A. 77‑673.)
(215 ILCS 5/131.12)(from Ch. 73, par. 743.12) Sec. 131.12. The courts of this State are hereby vested with jurisdiction over every person not resident, domiciled, or authorized to do business in this State who files a statement with the Director under Section 131.4, and over all actions involving such person arising out of violations of Sections 131.4, 131.5, 131.6, 131.9 or 131.11, and each such person is deemed to have performed acts equivalent to and constituting an appointment by such a person of the Director to be his true and lawful attorney upon whom may be served all lawful process in any action, suit or proceeding arising out of violations of Sections 131.4, 131.5, 131.6, 131.9 or 131.11. Copies of all such lawful process must be served on the Director and transmitted by registered or certified mail by the Director to such person at his last known address. (Source: P. A. 77‑673.)
(215 ILCS 5/131.12a)(from Ch. 73, par. 743.12a) Sec. 131.12a. Acquisitions involving insurers not otherwise covered. (1) Definitions. The following definitions shall apply for the purposes of this Section only: (a) "Acquisition" means any agreement, arrangement or activity the consummation of which results in a person acquiring directly or indirectly the control of another person or control of the insurance in force of another person, and includes but is not limited to the acquisition of voting securities, the acquisition of assets, the transaction of bulk reinsurance and the act of merging or consolidating. (b) An "involved insurer" includes an insurer which either acquires or is acquired, is affiliated with an acquirer or acquired or is the result of a merger.
(2) Scope. (a) Except as exempted in paragraph (b) of this subsection (2), this Section applies to any acquisition in which there is a change in control of an insurer authorized to do business in this State. (b) This Section shall not apply to the following: (i) an acquisition subject to approval or
disapproval by the Director pursuant to Section 131.8;
(ii) a purchase of securities solely for investment
purposes so long as such securities are not used by voting or otherwise to cause or attempt to cause the substantial lessening of competition in any insurance market in this State. If a purchase of securities results in a presumption of control under subsection (b) of Section 131.1, it is not solely for investment purposes unless the commissioner of the insurer's state of domicile accepts a disclaimer of control or affirmatively finds that control does not exist and such disclaimer action or affirmative finding is communicated by the domiciliary commissioner to the Director of this State;
(iii) the acquisition of a person by another person
when both persons are neither directly nor through affiliates primarily engaged in the business of insurance, if pre‑acquisition notification is filed with the Director in accordance with subsection (3)(a) of this Section, 30 days prior to the proposed effective date of the acquisition. However, such pre‑acquisition notification is not required for exclusion from this Section if the acquisition would otherwise be excluded from this Section by any other subparagraph of subsection (2)(b);
(iv) the acquisition of already affiliated persons; (v) an acquisition if, as an immediate result of the
acquisition,
(A) in no market would the combined market share
of the involved insurers exceed 5% of the total market,
(B) there would be no increase in any market
share, or
(C) in no market would the combined market share
of the involved insurers exceed 12% of the total market, and the market share increase by more than 2% of the total market.
For the purpose of this subparagraph (b)(v),
"market" means direct written insurance premium in this State for a line of business as contained in the annual statement required to be filed by insurers licensed to do business in this State;
(vi) an acquisition for which a pre‑acquisition
notification would be required pursuant to this Section due solely to the resulting effect on the ocean marine insurance line of business;
(vii) an acquisition of an insurer whose domiciliary
commissioner affirmatively finds that such insurer is in failing condition; there is a lack of feasible alternative to improving such condition; the public benefits of improving such insurer's condition through the acquisition exceed the public benefits that would arise from not lessening competition; and such findings are communicated by the domiciliary commissioner to the Director of this State.
(3) Pre‑acquisition Notification; Waiting Period. An acquisition covered by subsection (2) may be subject to an order pursuant to subsection (5) unless the acquiring person files a pre‑acquisition notification and the waiting period has expired. The acquired person may file a pre‑acquisition notification. The Director shall give confidential treatment to information submitted under this subsection in the same manner as provided in Section 131.22 of this Article. (a) The pre‑acquisition notification shall be in such form and contain such information as prescribed by the Director, which shall conform substantially to the form of notification adopted by the National Association of Insurance Commissioners relating to those markets which, under subsection (b)(v) of Section (2), cause the acquisition not to be exempted from the provisions of this Section. The Director may require such additional material and information as he deems necessary to determine whether the proposed acquisition, if consummated, would violate the competitive standard of subsection (4). The required information may include an opinion of an economist as to the competitive impact of the acquisition in this State accompanied by a summary of the education and experience of such person indicating his or her ability to render an informed opinion. (b) The waiting period required shall begin on the date of the receipt by the Director of a pre‑acquisition notification and shall end on the earlier of the 30th day after the date of such receipt, or termination of the waiting period by the Director. Prior to the end of the waiting period, the Director on a one time basis may require the submission of additional needed information relevant to the proposed acquisition, in which event the waiting period shall end on the earlier of the 30th day after the receipt of such additional information by the Director or termination of the waiting period by the Director.
(4) Competitive Standard. (a) The Director may enter an order under subsection (5)(a) with respect to an acquisition if there is substantial evidence that the effect of the acquisition may be substantially to lessen competition in any line of insurance in this State or tend to create a monopoly therein or if the insurer fails to file adequate information in compliance with subsection (3). (b) In determining whether a proposed acquisition would violate the competitive standard of paragraph (a) of this subsection the Director shall consider the following: (i) any acquisition covered under subsection (2)
involving 2 or more insurers competing in the same market is prima facie evidence of violation of the competitive standards:
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ARTICLE VIII 1/2. INSURANCE HOLDING COMPANY SYSTEMS
(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. (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 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. (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) "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. (e) "Person" means an individual, a corporation, 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. (f) "Securityholder" of a specified person is one who owns any security of such person, including common stock, preferred stock, debt obligations, and any other security convertible into or evidencing the right to acquire any of the foregoing. (g) "Subsidiary" of a specified person is an affiliate controlled by such person directly, or indirectly through one or more intermediaries. (h) "Voting Security" is a security which gives to the holder thereof the right to vote for the election of directors and includes any security convertible into or evidencing a right to acquire a voting security. (i) "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. (j) "Policyholders' Proxies" are proxies which 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. (k) "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. (Source: P.A. 84‑805.)
(215 ILCS 5/131.2)(from Ch. 73, par. 743.2) Sec. 131.2. Subsidiaries. In addition to investments in common stock, preferred stock, debt obligations and other securities of subsidiaries permitted under all other sections of this Code, a domestic company, other than a company subject to Articles XVIII or XIX, may also: (a) invest, in common stock, preferred stock, debt obligations, and other securities of one or more subsidiaries, amounts which do not exceed the lesser of 10% of the company's assets or 50% of the company's surplus as regards policyholders, but after such investments the company's surplus as regards policyholders must be reasonable in relation to the company's outstanding liabilities and adequate to its financial needs. In calculating the amount of such investments, there must be included (i) total net monies or other consideration expended and obligations assumed in the acquisition or formation of a subsidiary, including all organizational expenses and contributions to capital and surplus of the subsidiary whether or not represented by the purchase of capital stock or issuance of other securities, and (ii) all amounts expended in acquiring additional common stock, preferred stock, debt obligations, and other securities, and all contributions to the capital or surplus of a subsidiary subsequent to its acquisition or formation; (b) invest any amount in common stock, preferred stock, debt obligations and other securities of one or more direct subsidiaries acting only as a non‑operating holding company or engaged or organized exclusively for the ownership and management of assets authorized as investments for the company, provided that each subsidiary agrees to limit its investments in any asset so that such investments will not cause the amount of the total investment of the company to exceed the amount the company could have invested in such asset. For the purpose of this clause, "the total investment of the company" will include (i) any direct investment by the company in an asset and (ii) the company's proportionate share of any investment in such asset by any direct subsidiary of the company, which must be calculated by multiplying the amount of the subsidiary's investment by the percentage of the company's ownership of such subsidiary; (c) invest in common stock of one or more insurance corporation subsidiaries any amount by which the investing company's capital and surplus exceeds the minimum capital and surplus required of a new company under Section 13 to qualify for a certificate of authority to write the kind or kinds of insurance which the company is authorized to write, if the company is a stock company, and if the company is other than a stock company, the company may invest the amount by which the company's surplus exceeds the minimum surplus required of a new company under Section 43 or 66 to qualify for a certificate of authority to write the kind or kinds of insurance which the company is authorized to write; (d) with the approval of the Director, invest any greater amount in common stock, preferred stock, debt obligations, or other securities of one or more subsidiaries, but after such investment the company's surplus as regards policyholders must be reasonable in relation to the company's outstanding liabilities and adequate to its financial needs. (Source: P.A. 85‑1186.)
(215 ILCS 5/131.3)(from Ch. 73, par. 743.3) Sec. 131.3. (1) Investments in common stock, preferred stock, debt obligations or other securities of subsidiaries made under Section 131.2 of this Article are subject to Sections 126.3, 126.4, 126.5, 126.6, 126.7, and 133 of this Code but are not subject to any other of the otherwise applicable restrictions or prohibitions contained in this Code applicable to such investments of a domestic company subject to this Code. (2) If a company ceases to control a subsidiary, it must dispose of any investment therein made under this section within 3 years from the time of the cessation of control or within such further time as the Director may prescribe, unless at any time after the investment is made, the investment meets the requirements for investment under any other section of this Code, and the company has notified the Director thereof. (Source: P.A. 90‑418, eff. 8‑15‑97.)
(215 ILCS 5/131.4)(from Ch. 73, par. 743.4) Sec. 131.4. Acquisition of control of or merger with domestic company. No person other than the issuer may make a tender for or a request or invitation for tenders of, or enter into an agreement to exchange securities for or acquire in the open market, or otherwise, any voting security of a domestic company or acquire policyholders' proxies of a domestic company for consideration if, after the consummation thereof, that person would, directly or indirectly, (or by conversion or by exercise of any right to acquire) be in control of the company, and no person may enter into an agreement to merge or consolidate with or otherwise to acquire control of a domestic company, unless the offer, request, invitation, or agreement is conditioned on receiving the approval of the Director based on Section 131.8 of this Article and no such acquisition of control or a merger with a domestic company may be consummated unless the Director has approved the transaction or granted an exemption. For purposes of this Section a domestic company includes any other person which controls a domestic company or holds or controls sufficient policyholders' proxies to elect the majority of the board of directors of the domestic company. Prior to the acquisition, the Director may conclude that a statement need not be filed by the acquiring party if the acquiring party demonstrates to the satisfaction of the Director that: (1) such transaction will not result in the change of control of the domestic company; or (2) the person which is subject to the acquisition has assets in excess of $1,000,000 and shareholders of record of 500 or more and its insurance business either directly or through its affiliates is an insignificant portion of its total business; or (3) the acquisition of, or attempt to acquire control of, such other person is subject to requirements in the jurisdiction of its domicile which are substantially similar to those contained in this Section and Sections 131.5 through 131.12; or (4) the control of the policyholders' proxies is being acquired solely by virtue of the holders official office and not as the result of any agreement or for any consideration. The purpose of this Section is to afford to the Director the opportunity to review acquisitions in order to determine whether or not the acquisition would be adverse to the interests of the existing and future policyholders of the company. (Source: P.A. 86‑784.)
(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 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 for the second and third preceding fiscal years and as of a date not earlier than 90 days prior to the filing of the statement. If an acquiring party is an insurer which has been actively engaged in the business of insurance for 10 years, the financial information need not be audited, provided it is based on the annual statements of such acquiring person filed with the insurance department of the person's domiciliary state and is in accordance with the requirement of insurance or other accounting principles prescribed or permitted under the laws and regulations of such state. (a) When an applicant is controlled by an individual, financial information for that individual will not be required if the applicant is currently subject to the registration and reporting requirements of Section 12(g) of the Securities Exchange Act of 1934 or is an insurer which has been actively engaged in the business of insurance for a period in excess of 10 years; (b) When an individual as an acquiring party must file financial information under this paragraph such information need not be delivered to the company. However, such information shall be available if the Director holds a hearing pursuant to Section 131.8. (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, and the terms of the offer, request, invitation, agreement, or acquisition referred to in Section 131.4. (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 acquirors, 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 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) 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. (Source: P.A. 84‑805.)
(215 ILCS 5/131.6)(from Ch. 73, par. 743.6) Sec. 131.6. (1) If the person required to file the statement referred to in Section 131.5 is a partnership, limited partnership, syndicate or other group, the Director may require that the information be given with respect to each partner of such partnership or limited partnership, each member of such syndicate or group, and each person who controls such partner or member. If any partner, member or person is a corporation or the person required to file the statement referred to in Section 131.5 is a corporation, the Director may require that the information be given with respect to the corporation, each officer and director of the corporation, and each person who is directly or indirectly the beneficial owner of more than 10% of the outstanding voting securities of the corporation. (2) If any material change occurs in the facts set forth in the statement filed with the Director and sent to the company under Section 131.9, an amendment setting forth the change, together with copies of all documents and other material relevant to the change, must be filed with the Director and sent to the company within 2 business days after the person learns of the change. (Source: P.A. 84‑805.)
(215 ILCS 5/131.7)(from Ch. 73, par. 743.7) Sec. 131.7. If any offer, request, invitation, agreement or acquisition referred to in Section 131.4 is proposed to be made by means of a registration statement under the Securities Act of 1933 or in circumstances requiring the disclosure of similar information under the Securities Exchange Act of 1934, or under a state law requiring similar registration or disclosure, the person required to file the statement referred to in Section 131.4 may utilize such documents in furnishing the information called for by that statement. (Source: P. A. 77‑673.)
(215 ILCS 5/131.8)(from Ch. 73, par. 743.8) Sec. 131.8. (1) After the statement required by Section 131.5 has been filed, the Director must disapprove any merger, consolidation or other acquisition of control referred to in Section 131.4 unless the acquiring party demonstrates to the Director that: (a) After change of control the domestic company referred to in Section 131.4 would be able to satisfy the requirements for the issuance of a license to write the line or lines of insurance for which it is presently licensed; (b) the effect of the merger, consolidation or other acquisition of control would not substantially lessen competition in insurance in this State or not tend to create a monopoly therein. In applying the competitive standard in this paragraph: (i) the informational requirements of subsection (3)(a) and the standards of subsection (4)(b) of Section 131.12a shall apply, (ii) the merger or other acquisition shall not be disapproved if the acquiring party demonstrates that any of the situations meeting the criteria provided by subsection (4)(c) of Section 131.12a exist, and (iii) the Director may condition the approval of the merger or other acquisition on the removal of the basis of disapproval within a specified period of time; (c) the financial condition of any acquiring party is such as to not jeopardize the financial stability of the domestic company or not jeopardize the interests of its policyholders; (d) the plans or proposals which the acquiring party has to liquidate the domestic company, sell its assets or consolidate or merge it with any person, or to make any other material change in its business or corporate structure or management, are fair and reasonable to policyholders of such company; or (e) the competence, experience and integrity of those persons who would control the operation of the domestic company are such that it would be in the best interests of policyholders of such company and of the insurance buying public to permit the merger, consolidation or other acquisition of control. (2) The Director may hold a public hearing on any merger, consolidation or other acquisition of control referred to in Section 131.4 if the Director determines that the statement filed as required by Section 131.5 does not demonstrate compliance with the standards referred to in subsection (1), of this Section, or if he determines that such acquisition of control will adversely affect policyholders or the insurance buying public. (3) The public hearing referred to in subsection (2) must be held within 60 days after the statement required by Section 131.5 is filed, and at least 20 days' notice thereof must be given by the Director to the person filing the statement and to the domestic company. Not less than 12 days' notice of such hearing must be given by the person filing the statement to such other persons as may be designated by the Director and by the company to its securityholders. The Director must make a determination within 30 days after the conclusion of the hearing. At the hearing, the person filing the statement, the domestic company, any person to whom notice of the hearing was sent, and any other person whose interests may be affected thereby has the right to present evidence, examine and cross‑examine witnesses, and offer oral and written arguments and in connection therewith is entitled to conduct discovery proceedings in the same manner as is presently allowed in the Circuit Courts of this State. All discovery proceedings must be concluded not later than 3 days prior to the commencement of the public hearing. (Source: P.A. 84‑805.)
(215 ILCS 5/131.8a)(from Ch. 73, par. 743.8a) Sec. 131.8a. The Director may retain at the applicant's expense any attorneys, actuaries, accountants and other experts not otherwise a part of the Director's staff as may be reasonably necessary to assist in the conduct of financial or character examinations in conjunction with an acquisition proposed under Section 131.4. The applicant shall deposit with the Director cash, bonds or securities, acceptable to the Director, in a reasonable amount not to exceed $100,000, for purpose of securing the payment of any expert's cost. (Source: P.A. 86‑753.)
(215 ILCS 5/131.9)(from Ch. 73, par. 743.9) Sec. 131.9. All statements, amendments or other material filed under Section 131.5 must be delivered to the domestic company within 10 business days after the acquiring party has made the filing with the Director. The domestic company shall then send to its securityholders the summary of the proposed acquisition within 5 business days of such delivery. The notice shall contain an address where a copy of the statement filed with the Director can be obtained upon request. The expenses of the mailing and any requests for the statement and the mailing of the notice of hearing by the company required under subsection (2) of Section 131.8 must be borne by the person making the filing. As security for the payment of the expenses, the person may be required to file with the Director an acceptable bond or other deposit in an amount to be determined by the Director. (Source: P.A. 84‑805.)
(215 ILCS 5/131.10)(from Ch. 73, par. 743.10) Sec. 131.10. Sections 131.4 through 131.12 do not apply to: (1) any transaction which is subject to Article X of this Code dealing with merger, consolidation or plans of exchange; (2) any offer, request, invitation, agreement or acquisition which the Director by order exempts therefrom as (a) not having been made or entered into for the purpose and not having the effect of changing or influencing the control of a domestic company, or (b) as otherwise not comprehended within the purposes of Sections 131.4 through 131.12. (Source: P.A. 80‑545.)
(215 ILCS 5/131.11)(from Ch. 73, par. 743.11) Sec. 131.11. The following are violations of Sections 131.4 through 131.12: (1) the failure to file any statement, amendment, or other material required to be filed under Sections 131.4 or 131.5; or (2) the effectuation or any attempt to effectuate an acquisition of control of or merger or consolidation with, a domestic company unless the Director has given his approval thereto. (Source: P. A. 77‑673.)
(215 ILCS 5/131.12)(from Ch. 73, par. 743.12) Sec. 131.12. The courts of this State are hereby vested with jurisdiction over every person not resident, domiciled, or authorized to do business in this State who files a statement with the Director under Section 131.4, and over all actions involving such person arising out of violations of Sections 131.4, 131.5, 131.6, 131.9 or 131.11, and each such person is deemed to have performed acts equivalent to and constituting an appointment by such a person of the Director to be his true and lawful attorney upon whom may be served all lawful process in any action, suit or proceeding arising out of violations of Sections 131.4, 131.5, 131.6, 131.9 or 131.11. Copies of all such lawful process must be served on the Director and transmitted by registered or certified mail by the Director to such person at his last known address. (Source: P. A. 77‑673.)
(215 ILCS 5/131.12a)(from Ch. 73, par. 743.12a) Sec. 131.12a. Acquisitions involving insurers not otherwise covered. (1) Definitions. The following definitions shall apply for the purposes of this Section only: (a) "Acquisition" means any agreement, arrangement or activity the consummation of which results in a person acquiring directly or indirectly the control of another person or control of the insurance in force of another person, and includes but is not limited to the acquisition of voting securities, the acquisition of assets, the transaction of bulk reinsurance and the act of merging or consolidating. (b) An "involved insurer" includes an insurer which either acquires or is acquired, is affiliated with an acquirer or acquired or is the result of a merger.
(2) Scope. (a) Except as exempted in paragraph (b) of this subsection (2), this Section applies to any acquisition in which there is a change in control of an insurer authorized to do business in this State. (b) This Section shall not apply to the following: (i) an acquisition subject to approval or
disapproval by the Director pursuant to Section 131.8;
(ii) a purchase of securities solely for investment
purposes so long as such securities are not used by voting or otherwise to cause or attempt to cause the substantial lessening of competition in any insurance market in this State. If a purchase of securities results in a presumption of control under subsection (b) of Section 131.1, it is not solely for investment purposes unless the commissioner of the insurer's state of domicile accepts a disclaimer of control or affirmatively finds that control does not exist and such disclaimer action or affirmative finding is communicated by the domiciliary commissioner to the Director of this State;
(iii) the acquisition of a person by another person
when both persons are neither directly nor through affiliates primarily engaged in the business of insurance, if pre‑acquisition notification is filed with the Director in accordance with subsection (3)(a) of this Section, 30 days prior to the proposed effective date of the acquisition. However, such pre‑acquisition notification is not required for exclusion from this Section if the acquisition would otherwise be excluded from this Section by any other subparagraph of subsection (2)(b);
(iv) the acquisition of already affiliated persons; (v) an acquisition if, as an immediate result of the
acquisition,
(A) in no market would the combined market share
of the involved insurers exceed 5% of the total market,
(B) there would be no increase in any market
share, or
(C) in no market would the combined market share
of the involved insurers exceed 12% of the total market, and the market share increase by more than 2% of the total market.
For the purpose of this subparagraph (b)(v),
"market" means direct written insurance premium in this State for a line of business as contained in the annual statement required to be filed by insurers licensed to do business in this State;
(vi) an acquisition for which a pre‑acquisition
notification would be required pursuant to this Section due solely to the resulting effect on the ocean marine insurance line of business;
(vii) an acquisition of an insurer whose domiciliary
commissioner affirmatively finds that such insurer is in failing condition; there is a lack of feasible alternative to improving such condition; the public benefits of improving such insurer's condition through the acquisition exceed the public benefits that would arise from not lessening competition; and such findings are communicated by the domiciliary commissioner to the Director of this State.
(3) Pre‑acquisition Notification; Waiting Period. An acquisition covered by subsection (2) may be subject to an order pursuant to subsection (5) unless the acquiring person files a pre‑acquisition notification and the waiting period has expired. The acquired person may file a pre‑acquisition notification. The Director shall give confidential treatment to information submitted under this subsection in the same manner as provided in Section 131.22 of this Article. (a) The pre‑acquisition notification shall be in such form and contain such information as prescribed by the Director, which shall conform substantially to the form of notification adopted by the National Association of Insurance Commissioners relating to those markets which, under subsection (b)(v) of Section (2), cause the acquisition not to be exempted from the provisions of this Section. The Director may require such additional material and information as he deems necessary to determine whether the proposed acquisition, if consummated, would violate the competitive standard of subsection (4). The required information may include an opinion of an economist as to the competitive impact of the acquisition in this State accompanied by a summary of the education and experience of such person indicating his or her ability to render an informed opinion. (b) The waiting period required shall begin on the date of the receipt by the Director of a pre‑acquisition notification and shall end on the earlier of the 30th day after the date of such receipt, or termination of the waiting period by the Director. Prior to the end of the waiting period, the Director on a one time basis may require the submission of additional needed information relevant to the proposed acquisition, in which event the waiting period shall end on the earlier of the 30th day after the receipt of such additional information by the Director or termination of the waiting period by the Director.
(4) Competitive Standard. (a) The Director may enter an order under subsection (5)(a) with respect to an acquisition if there is substantial evidence that the effect of the acquisition may be substantially to lessen competition in any line of insurance in this State or tend to create a monopoly therein or if the insurer fails to file adequate information in compliance with subsection (3). (b) In determining whether a proposed acquisition would violate the competitive standard of paragraph (a) of this subsection the Director shall consider the following: (i) any acquisition covered under subsection (2)
involving 2 or more insurers competing in the same market is prima facie evidence of violation of the competitive standards:
