(215 ILCS 5/126.21) Sec. 126.21. Applicability. This Part 3 shall apply to the investments and investment practices of property and casualty insurers authorized to transact the kinds of insurance in either or both Class 2 or Class 3 of Section 4 of this Code, subject to the provisions of Section 126.1B. (Source: P.A. 90‑418, eff. 8‑15‑97.)
(215 ILCS 5/126.22) Sec. 126.22. Reserve requirements. A. Reserve requirements. (1) Subject to all other limitations and
requirements of this Article, a property and casualty insurer shall maintain an amount at least equal to the lesser of $250,000,000 or 100% of adjusted loss reserves and loss adjustment expense reserves, 100% of adjusted unearned premium reserves and 100% of statutorily required policy and contract reserves in:
(a) Cash and cash equivalents; (b) High and medium grade investments that
qualify under Sections 126.24 or 126.25;
(c) Equity interests that qualify under Section
126.26 and that are traded on a qualified exchange;
(d) Investments of the type set forth in Section
126.30 if the investments are rated in the highest generic rating category by a nationally recognized statistical rating organization recognized by the SVO for rating foreign jurisdictions and if any foreign currency exposure is effectively hedged through the maturity date of the investments;
(e) Qualifying investments of the type set forth
in subparagraphs (b), (c) or (d) of this paragraph that are acquired under Section 126.32;
(f) Interest and dividends receivable on
qualifying investments of the type set forth in subparagraphs (a) through (e) of this subsection; or
(g) Reinsurance recoverable on paid losses. (2) Reserve Requirement Amount: (a) For purposes of determining the amount of
assets to be maintained under this subsection, the calculation of adjusted loss reserves and loss adjustment expense reserves, adjusted unearned premium reserves and statutorily required policy and contract reserves shall be based on the amounts reported as of the most recent annual or quarterly statement date.
(b) Adjusted loss reserves and loss adjustment
expense reserves shall be equal to the sum of the amounts derived from the following calculations:
(i) The result of each amount reported by
the insurer as losses and loss adjustment expenses unpaid for each accident year for each individual line of business; multiplied by
(ii) The discount factor that is applicable
to the line of business and accident year published by the Internal Revenue Service under Internal Revenue Code Section 846 (26 U.S.C. 846), as amended, for the calendar year that corresponds to the most recent annual statement of the insurer; minus
(iii) Accrued retrospective premiums
discounted by an average discount factor. The discount factor shall be calculated by dividing the losses and loss adjustment expenses unpaid after discounting (the product of Items (i) and (ii) in this subparagraph) by loss and loss adjustment expense reserves before discounting Item (i) of this subparagraph.
(iv) For purposes of these calculations, the
losses and loss adjustment expenses unpaid shall be determined net of anticipated salvage and subrogation, and gross of any discount for the time value of money or tabular discount.
(c) Adjusted unearned premium reserves shall be
equal to the result of the following calculation:
(i) The amount reported by the insurer as
unearned premium reserves; minus
(ii) The admitted asset amounts reported by
the insurer as:
(I) Premiums in and agents' balances in
the course of collection, accident and health premiums due and unpaid and uncollected premiums for accident and health premiums;
(II) Premiums, agents' balances and
installments booked but deferred and not yet due;
(III) Bills receivable, taken for
premium; and
(IV) Equities and deposits in pools and
associations.
(d) Statutorily required policy and contract
reserves shall also include contingency reserves required for mortgage guaranty insurers, municipal bond insurers, and other financial guaranty insurers.
B. Monitoring and reporting. A property and casualty insurer shall supplement its annual statement with a reconciliation and summary of its assets and reserve requirements as required in subsection A of this Section. A reconciliation and summary showing that an insurer's assets as required in subsection A of this Section are greater than or equal to its undiscounted reserves referred to in subsection A of this Section shall be sufficient to satisfy this requirement. Upon prior notification, the Director may require an insurer to submit such a reconciliation and summary with any quarterly statement filed during the calendar year. C. Notification requirements and mandatory safeguards. If a property and casualty insurer's assets and reserves do not comply with subsection A of this Section, the insurer shall notify the Director immediately of the amount by which the reserve requirements exceed the annual statement value of the qualifying assets, explain why the deficiency exists and within 30 days of the date of the notice propose a plan of action to remedy the deficiency. D. Authority of the Director. (1) If the Director determines that an insurer is
not in compliance with subsection A of this Section, the Director shall require the insurer to eliminate the condition causing the noncompliance within a specified time from the date the notice of the Director's requirement is mailed or delivered to the insurer.
(2) If an insurer fails to comply with the
Director's requirement under paragraph (1) of this subsection, the insurer is deemed to be in hazardous financial condition, and the Director shall take one or more of the actions authorized by law as to insurers in hazardous financial condition.
E. An insurer subject to this Section must comply with the requirements of this Section after December 31, 1997. (Source: P.A. 90‑418, eff. 8‑15‑97.)
(215 ILCS 5/126.23) Sec. 126.23. General 5% diversification, medium and lower grade investments, and Canadian investments. A. General 5% diversification. (1) Except as otherwise specified in this Article,
an insurer shall not acquire directly or indirectly through an investment subsidiary an investment under this Article if, as a result of and after giving effect to the investment, the insurer would hold more than 5% of its admitted assets in investments of all kinds issued, assumed, accepted, guaranteed, or insured by a single person.
(2) This 5% limitation shall not apply to the
aggregate amounts insured by a single financial guaranty insurer with the highest generic rating issued by a nationally recognized statistical rating organization.
(3) Asset‑backed securities shall not be subject to
the limitations of paragraph (1) of this subsection, however, except as permitted by subsection A(4) of this Section, an insurer shall not acquire an asset‑backed security if, as a result of and after giving effect to the investment, the aggregate amount of asset‑backed securities secured by or evidencing an interest in a single asset or single pool of assets held by a trust or other business entity, then held by the insurer would exceed 5% of its admitted assets.
(4) A company's investments in mortgage related
securities, as defined by the Secondary Mortgage Market Enhancement Act of 1984 (United States Public Law 98‑440, 12 U.S.C. 24, 1451, 1454 et seq.), that are backed by any single pool of mortgages and made pursuant to the authority of that Act, shall not exceed 5% of its admitted assets.
B. Medium and lower grade investments. (1) An insurer shall not acquire, directly or
indirectly through an investment subsidiary, an investment under Sections 126.24, 126.27, and 126.30 or counterparty exposure under Section 126.31D if, as a result of and after giving effect to the investment:
(a) The aggregate amount of all medium and lower
grade investments then held by the insurer would exceed 20% of its admitted assets;
(b) The aggregate amount of lower grade
investments then held by the insurer would exceed 10% of its admitted assets;
(c) The aggregate amount of investments rated 5
or 6 by the SVO then held by the insurer would exceed 5% of its admitted assets;
(d) The aggregate amount of investments rated 6
by the SVO then held by the insurer would exceed 1% of its admitted assets; or
(e) The aggregate amount of lower grade
investments then held by the insurer that receive as cash income less than the equivalent yield for Treasury issues with a comparative average life, would exceed 1% of its admitted assets.
(2) An insurer shall not acquire, directly or
indirectly through an investment subsidiary, an investment under Sections 126.24, 126.27, and 126.30 or counterparty exposure under Section 126.31D if, as a result of and after giving effect to the investment:
(a) The aggregate amount of medium and lower
grade investments issued, assumed, accepted, guaranteed, or insured by any one person or, as to asset‑backed securities secured by or evidencing an interest in a single asset or pool of assets, then held by the insurer would exceed 1% of its admitted assets; or
(b) The aggregate amount of lower grade
investments issued, assumed, accepted, guaranteed, or insured by any one person or, as to asset‑backed securities secured by or evidencing an interest in a single asset or pool of assets, then held by the insurer would exceed 0.5% of its admitted assets.
(3) If an insurer attains or exceeds the limit of
any one rating category referred to in this subsection, the insurer shall not thereby be precluded from acquiring investments in other rating categories subject to the specific and multi‑category limits applicable to those investments.
C. Canadian investments. (1) An insurer shall not acquire, directly or
indirectly through an investment subsidiary, any Canadian investments authorized by this Article, if as a result of and after giving effect to the investment, the aggregate amount of these investments then held by the insurer would exceed 40% of its admitted assets, or if the aggregate amount of Canadian investments not acquired under Section 126.24B then held by the insurer would exceed 25% of its admitted assets.
(2) However, as to an insurer that is authorized
to do business in Canada or that has outstanding insurance, annuity or reinsurance contracts on lives or risks resident or located in Canada and denominated in Canadian currency, the limitations of paragraph (1) of this subsection shall be increased by the greater of:
(a) The amount the insurer is required by
Canadian law to invest in Canada or to be denominated in Canadian currency; or
(b) 125% of the amount of its reserves and
other obligations under contracts on risks resident or located in Canada.
(Source: P.A. 90‑418, eff. 8‑15‑97.)
(215 ILCS 5/126.24) Sec. 126.24. Rated credit instruments. Subject to the limitations of subsection F of this Section, an insurer may acquire rated credit instruments: A. Subject to the limitations of Section 126.23B, but not to the limitations of Section 126.23A except for the limitation of subsection (4) of Section 126.23A, an insurer may acquire rated credit instruments issued, assumed, guaranteed, or insured by: (1) The United States; or (2) A government sponsored enterprise of the United
States, if the instruments of the government sponsored enterprise are assumed, guaranteed, or insured by the United States or are otherwise backed or supported by the full faith and credit of the United States.
B.(1) Subject to the limitations of Section
126.23B, but not to the limitations of Section 126.23A, an insurer may acquire rated credit instruments issued, assumed, guaranteed, or insured by:
(a) Canada; or (b) A government sponsored enterprise of Canada,
if the instruments of the government sponsored enterprise are assumed, guaranteed, or insured by Canada or are otherwise backed or supported by the full faith and credit of Canada;
(2) However, an insurer shall not acquire an
instrument under this subsection if, as a result of and after giving effect to the investment, the aggregate amount of investments then held by the insurer under this subsection would exceed 40% of its admitted assets.
C.(1) Subject to the limitations of Section
126.23B, but not to the limitations of Section 126.23A, an insurer may acquire rated credit instruments, excluding asset‑backed securities:
(a) Issued by a government money market mutual
fund, a class one money market mutual fund or a class one bond mutual fund;
(b) Issued, assumed, guaranteed, or insured by a
government sponsored enterprise of the United States other than those eligible under subsection A of this Section;
(c) Issued, assumed, guaranteed, or insured by a
state, if the instruments are general obligations of the state; or
(d) Issued by a multilateral development bank. (2) However, an insurer shall not acquire an
instrument of any one fund, any one enterprise or entity, or any one state under this subsection if, as a result of and after giving effect to the investment, the aggregate amount of investments then held by the insurer in any one fund, enterprise, entity, or state under this subsection would exceed 10% of its admitted assets.
D. Subject to the limitations of Section 126.23, an insurer may acquire preferred stocks that are not foreign investments and that meet the requirements of rated credit instruments if, as a result of and after giving effect to the investment: (1) The aggregate amount of preferred stocks then
held by the insurer under this subsection does not exceed 33 1/3% of its admitted assets; and
(2) The aggregate amount of preferred stocks then
held by the insurer under this subsection which are not sinking fund stocks or rated P1 or P2 by the SVO does not exceed 15% of its admitted assets.
E. Subject to the limitations of Section 126.23 in addition to those investments eligible under subsections A, B, C and D of this Section, an insurer may acquire rated credit instruments that are not foreign investments. F. An insurer shall not acquire special rated credit instruments under this Section if, as a result of and after giving effect to the investment, the aggregate amount of special rated credit instruments then held by the insurer would exceed 5% of its admitted assets. The Director may, by rule, identify certain special rated credit instruments that are exempt from the limitation imposed by this subsection. (Source: P.A. 90‑418, eff. 8‑15‑97.)
(215 ILCS 5/126.25) Sec. 126.25. Insurer investment pools. A. An insurer may acquire investments in investment pools that: (1) Invest only in: (a) Obligations that are rated 1 or 2 by the SVO
or have an equivalent of an SVO 1 or 2 rating (or, in the absence of a 1 or 2 rating or equivalent rating, the issuer has outstanding obligations with an SVO 1 or 2 or equivalent rating) by a nationally recognized statistical rating organization recognized by the SVO and have:
(i) A remaining maturity of 397 days or less
or a put that entitles the holder to receive the principal amount of the obligation which put may be exercised through maturity at specified intervals not exceeding 397 days; or
(ii) A remaining maturity of 3 years or less
and a floating interest rate that resets no less frequently than quarterly on the basis of a current short‑term index (federal funds, prime rate, treasury bills, London InterBank Offered Rate (LIBOR) or commercial paper) and is subject to no maximum limit, if the obligations do not have an interest rate that varies inversely to market interest rate changes;
(b) Government money market mutual funds or
class one money market mutual funds; or
(c) Securities lending, repurchase, and reverse
repurchase, transactions that meet all the requirements of Section 126.29, except the quantitative limitations of Section 126.29D; or
(2) Invest only in investments which an insurer may
acquire under this Article, if the insurer's proportionate interest in the amount invested in these investments when combined with amounts of such investments made directly or indirectly through an investment subsidiary or other insurer investment pool permitted under this subsection A(2) does not exceed the applicable limits of this Article for such investments.
B. For an investment in an investment pool to be qualified under this Article, the investment pool shall not: (1) Acquire securities issued, assumed, guaranteed,
(215 ILCS 5/126.21) Sec. 126.21. Applicability. This Part 3 shall apply to the investments and investment practices of property and casualty insurers authorized to transact the kinds of insurance in either or both Class 2 or Class 3 of Section 4 of this Code, subject to the provisions of Section 126.1B. (Source: P.A. 90‑418, eff. 8‑15‑97.)
(215 ILCS 5/126.22) Sec. 126.22. Reserve requirements. A. Reserve requirements. (1) Subject to all other limitations and
requirements of this Article, a property and casualty insurer shall maintain an amount at least equal to the lesser of $250,000,000 or 100% of adjusted loss reserves and loss adjustment expense reserves, 100% of adjusted unearned premium reserves and 100% of statutorily required policy and contract reserves in:
(a) Cash and cash equivalents; (b) High and medium grade investments that
qualify under Sections 126.24 or 126.25;
(c) Equity interests that qualify under Section
126.26 and that are traded on a qualified exchange;
(d) Investments of the type set forth in Section
126.30 if the investments are rated in the highest generic rating category by a nationally recognized statistical rating organization recognized by the SVO for rating foreign jurisdictions and if any foreign currency exposure is effectively hedged through the maturity date of the investments;
(e) Qualifying investments of the type set forth
in subparagraphs (b), (c) or (d) of this paragraph that are acquired under Section 126.32;
(f) Interest and dividends receivable on
qualifying investments of the type set forth in subparagraphs (a) through (e) of this subsection; or
(g) Reinsurance recoverable on paid losses. (2) Reserve Requirement Amount: (a) For purposes of determining the amount of
assets to be maintained under this subsection, the calculation of adjusted loss reserves and loss adjustment expense reserves, adjusted unearned premium reserves and statutorily required policy and contract reserves shall be based on the amounts reported as of the most recent annual or quarterly statement date.
(b) Adjusted loss reserves and loss adjustment
expense reserves shall be equal to the sum of the amounts derived from the following calculations:
(i) The result of each amount reported by
the insurer as losses and loss adjustment expenses unpaid for each accident year for each individual line of business; multiplied by
(ii) The discount factor that is applicable
to the line of business and accident year published by the Internal Revenue Service under Internal Revenue Code Section 846 (26 U.S.C. 846), as amended, for the calendar year that corresponds to the most recent annual statement of the insurer; minus
(iii) Accrued retrospective premiums
discounted by an average discount factor. The discount factor shall be calculated by dividing the losses and loss adjustment expenses unpaid after discounting (the product of Items (i) and (ii) in this subparagraph) by loss and loss adjustment expense reserves before discounting Item (i) of this subparagraph.
(iv) For purposes of these calculations, the
losses and loss adjustment expenses unpaid shall be determined net of anticipated salvage and subrogation, and gross of any discount for the time value of money or tabular discount.
(c) Adjusted unearned premium reserves shall be
equal to the result of the following calculation:
(i) The amount reported by the insurer as
unearned premium reserves; minus
(ii) The admitted asset amounts reported by
the insurer as:
(I) Premiums in and agents' balances in
the course of collection, accident and health premiums due and unpaid and uncollected premiums for accident and health premiums;
(II) Premiums, agents' balances and
installments booked but deferred and not yet due;
(III) Bills receivable, taken for
premium; and
(IV) Equities and deposits in pools and
associations.
(d) Statutorily required policy and contract
reserves shall also include contingency reserves required for mortgage guaranty insurers, municipal bond insurers, and other financial guaranty insurers.
B. Monitoring and reporting. A property and casualty insurer shall supplement its annual statement with a reconciliation and summary of its assets and reserve requirements as required in subsection A of this Section. A reconciliation and summary showing that an insurer's assets as required in subsection A of this Section are greater than or equal to its undiscounted reserves referred to in subsection A of this Section shall be sufficient to satisfy this requirement. Upon prior notification, the Director may require an insurer to submit such a reconciliation and summary with any quarterly statement filed during the calendar year. C. Notification requirements and mandatory safeguards. If a property and casualty insurer's assets and reserves do not comply with subsection A of this Section, the insurer shall notify the Director immediately of the amount by which the reserve requirements exceed the annual statement value of the qualifying assets, explain why the deficiency exists and within 30 days of the date of the notice propose a plan of action to remedy the deficiency. D. Authority of the Director. (1) If the Director determines that an insurer is
not in compliance with subsection A of this Section, the Director shall require the insurer to eliminate the condition causing the noncompliance within a specified time from the date the notice of the Director's requirement is mailed or delivered to the insurer.
(2) If an insurer fails to comply with the
Director's requirement under paragraph (1) of this subsection, the insurer is deemed to be in hazardous financial condition, and the Director shall take one or more of the actions authorized by law as to insurers in hazardous financial condition.
E. An insurer subject to this Section must comply with the requirements of this Section after December 31, 1997. (Source: P.A. 90‑418, eff. 8‑15‑97.)
(215 ILCS 5/126.23) Sec. 126.23. General 5% diversification, medium and lower grade investments, and Canadian investments. A. General 5% diversification. (1) Except as otherwise specified in this Article,
an insurer shall not acquire directly or indirectly through an investment subsidiary an investment under this Article if, as a result of and after giving effect to the investment, the insurer would hold more than 5% of its admitted assets in investments of all kinds issued, assumed, accepted, guaranteed, or insured by a single person.
(2) This 5% limitation shall not apply to the
aggregate amounts insured by a single financial guaranty insurer with the highest generic rating issued by a nationally recognized statistical rating organization.
(3) Asset‑backed securities shall not be subject to
the limitations of paragraph (1) of this subsection, however, except as permitted by subsection A(4) of this Section, an insurer shall not acquire an asset‑backed security if, as a result of and after giving effect to the investment, the aggregate amount of asset‑backed securities secured by or evidencing an interest in a single asset or single pool of assets held by a trust or other business entity, then held by the insurer would exceed 5% of its admitted assets.
(4) A company's investments in mortgage related
securities, as defined by the Secondary Mortgage Market Enhancement Act of 1984 (United States Public Law 98‑440, 12 U.S.C. 24, 1451, 1454 et seq.), that are backed by any single pool of mortgages and made pursuant to the authority of that Act, shall not exceed 5% of its admitted assets.
B. Medium and lower grade investments. (1) An insurer shall not acquire, directly or
indirectly through an investment subsidiary, an investment under Sections 126.24, 126.27, and 126.30 or counterparty exposure under Section 126.31D if, as a result of and after giving effect to the investment:
(a) The aggregate amount of all medium and lower
grade investments then held by the insurer would exceed 20% of its admitted assets;
(b) The aggregate amount of lower grade
investments then held by the insurer would exceed 10% of its admitted assets;
(c) The aggregate amount of investments rated 5
or 6 by the SVO then held by the insurer would exceed 5% of its admitted assets;
(d) The aggregate amount of investments rated 6
by the SVO then held by the insurer would exceed 1% of its admitted assets; or
(e) The aggregate amount of lower grade
investments then held by the insurer that receive as cash income less than the equivalent yield for Treasury issues with a comparative average life, would exceed 1% of its admitted assets.
(2) An insurer shall not acquire, directly or
indirectly through an investment subsidiary, an investment under Sections 126.24, 126.27, and 126.30 or counterparty exposure under Section 126.31D if, as a result of and after giving effect to the investment:
(a) The aggregate amount of medium and lower
grade investments issued, assumed, accepted, guaranteed, or insured by any one person or, as to asset‑backed securities secured by or evidencing an interest in a single asset or pool of assets, then held by the insurer would exceed 1% of its admitted assets; or
(b) The aggregate amount of lower grade
investments issued, assumed, accepted, guaranteed, or insured by any one person or, as to asset‑backed securities secured by or evidencing an interest in a single asset or pool of assets, then held by the insurer would exceed 0.5% of its admitted assets.
(3) If an insurer attains or exceeds the limit of
any one rating category referred to in this subsection, the insurer shall not thereby be precluded from acquiring investments in other rating categories subject to the specific and multi‑category limits applicable to those investments.
C. Canadian investments. (1) An insurer shall not acquire, directly or
indirectly through an investment subsidiary, any Canadian investments authorized by this Article, if as a result of and after giving effect to the investment, the aggregate amount of these investments then held by the insurer would exceed 40% of its admitted assets, or if the aggregate amount of Canadian investments not acquired under Section 126.24B then held by the insurer would exceed 25% of its admitted assets.
(2) However, as to an insurer that is authorized
to do business in Canada or that has outstanding insurance, annuity or reinsurance contracts on lives or risks resident or located in Canada and denominated in Canadian currency, the limitations of paragraph (1) of this subsection shall be increased by the greater of:
(a) The amount the insurer is required by
Canadian law to invest in Canada or to be denominated in Canadian currency; or
(b) 125% of the amount of its reserves and
other obligations under contracts on risks resident or located in Canada.
(Source: P.A. 90‑418, eff. 8‑15‑97.)
(215 ILCS 5/126.24) Sec. 126.24. Rated credit instruments. Subject to the limitations of subsection F of this Section, an insurer may acquire rated credit instruments: A. Subject to the limitations of Section 126.23B, but not to the limitations of Section 126.23A except for the limitation of subsection (4) of Section 126.23A, an insurer may acquire rated credit instruments issued, assumed, guaranteed, or insured by: (1) The United States; or (2) A government sponsored enterprise of the United
States, if the instruments of the government sponsored enterprise are assumed, guaranteed, or insured by the United States or are otherwise backed or supported by the full faith and credit of the United States.
B.(1) Subject to the limitations of Section
126.23B, but not to the limitations of Section 126.23A, an insurer may acquire rated credit instruments issued, assumed, guaranteed, or insured by:
(a) Canada; or (b) A government sponsored enterprise of Canada,
if the instruments of the government sponsored enterprise are assumed, guaranteed, or insured by Canada or are otherwise backed or supported by the full faith and credit of Canada;
(2) However, an insurer shall not acquire an
instrument under this subsection if, as a result of and after giving effect to the investment, the aggregate amount of investments then held by the insurer under this subsection would exceed 40% of its admitted assets.
C.(1) Subject to the limitations of Section
126.23B, but not to the limitations of Section 126.23A, an insurer may acquire rated credit instruments, excluding asset‑backed securities:
(a) Issued by a government money market mutual
fund, a class one money market mutual fund or a class one bond mutual fund;
(b) Issued, assumed, guaranteed, or insured by a
government sponsored enterprise of the United States other than those eligible under subsection A of this Section;
(c) Issued, assumed, guaranteed, or insured by a
state, if the instruments are general obligations of the state; or
(d) Issued by a multilateral development bank. (2) However, an insurer shall not acquire an
instrument of any one fund, any one enterprise or entity, or any one state under this subsection if, as a result of and after giving effect to the investment, the aggregate amount of investments then held by the insurer in any one fund, enterprise, entity, or state under this subsection would exceed 10% of its admitted assets.
D. Subject to the limitations of Section 126.23, an insurer may acquire preferred stocks that are not foreign investments and that meet the requirements of rated credit instruments if, as a result of and after giving effect to the investment: (1) The aggregate amount of preferred stocks then
held by the insurer under this subsection does not exceed 33 1/3% of its admitted assets; and
(2) The aggregate amount of preferred stocks then
held by the insurer under this subsection which are not sinking fund stocks or rated P1 or P2 by the SVO does not exceed 15% of its admitted assets.
E. Subject to the limitations of Section 126.23 in addition to those investments eligible under subsections A, B, C and D of this Section, an insurer may acquire rated credit instruments that are not foreign investments. F. An insurer shall not acquire special rated credit instruments under this Section if, as a result of and after giving effect to the investment, the aggregate amount of special rated credit instruments then held by the insurer would exceed 5% of its admitted assets. The Director may, by rule, identify certain special rated credit instruments that are exempt from the limitation imposed by this subsection. (Source: P.A. 90‑418, eff. 8‑15‑97.)
(215 ILCS 5/126.25) Sec. 126.25. Insurer investment pools. A. An insurer may acquire investments in investment pools that: (1) Invest only in: (a) Obligations that are rated 1 or 2 by the SVO
or have an equivalent of an SVO 1 or 2 rating (or, in the absence of a 1 or 2 rating or equivalent rating, the issuer has outstanding obligations with an SVO 1 or 2 or equivalent rating) by a nationally recognized statistical rating organization recognized by the SVO and have:
(i) A remaining maturity of 397 days or less
or a put that entitles the holder to receive the principal amount of the obligation which put may be exercised through maturity at specified intervals not exceeding 397 days; or
(ii) A remaining maturity of 3 years or less
and a floating interest rate that resets no less frequently than quarterly on the basis of a current short‑term index (federal funds, prime rate, treasury bills, London InterBank Offered Rate (LIBOR) or commercial paper) and is subject to no maximum limit, if the obligations do not have an interest rate that varies inversely to market interest rate changes;
(b) Government money market mutual funds or
class one money market mutual funds; or
(c) Securities lending, repurchase, and reverse
repurchase, transactions that meet all the requirements of Section 126.29, except the quantitative limitations of Section 126.29D; or
(2) Invest only in investments which an insurer may
acquire under this Article, if the insurer's proportionate interest in the amount invested in these investments when combined with amounts of such investments made directly or indirectly through an investment subsidiary or other insurer investment pool permitted under this subsection A(2) does not exceed the applicable limits of this Article for such investments.
B. For an investment in an investment pool to be qualified under this Article, the investment pool shall not: (1) Acquire securities issued, assumed, guaranteed,
(215 ILCS 5/126.21) Sec. 126.21. Applicability. This Part 3 shall apply to the investments and investment practices of property and casualty insurers authorized to transact the kinds of insurance in either or both Class 2 or Class 3 of Section 4 of this Code, subject to the provisions of Section 126.1B. (Source: P.A. 90‑418, eff. 8‑15‑97.)
(215 ILCS 5/126.22) Sec. 126.22. Reserve requirements. A. Reserve requirements. (1) Subject to all other limitations and
requirements of this Article, a property and casualty insurer shall maintain an amount at least equal to the lesser of $250,000,000 or 100% of adjusted loss reserves and loss adjustment expense reserves, 100% of adjusted unearned premium reserves and 100% of statutorily required policy and contract reserves in:
(a) Cash and cash equivalents; (b) High and medium grade investments that
qualify under Sections 126.24 or 126.25;
(c) Equity interests that qualify under Section
126.26 and that are traded on a qualified exchange;
(d) Investments of the type set forth in Section
126.30 if the investments are rated in the highest generic rating category by a nationally recognized statistical rating organization recognized by the SVO for rating foreign jurisdictions and if any foreign currency exposure is effectively hedged through the maturity date of the investments;
(e) Qualifying investments of the type set forth
in subparagraphs (b), (c) or (d) of this paragraph that are acquired under Section 126.32;
(f) Interest and dividends receivable on
qualifying investments of the type set forth in subparagraphs (a) through (e) of this subsection; or
(g) Reinsurance recoverable on paid losses. (2) Reserve Requirement Amount: (a) For purposes of determining the amount of
assets to be maintained under this subsection, the calculation of adjusted loss reserves and loss adjustment expense reserves, adjusted unearned premium reserves and statutorily required policy and contract reserves shall be based on the amounts reported as of the most recent annual or quarterly statement date.
(b) Adjusted loss reserves and loss adjustment
expense reserves shall be equal to the sum of the amounts derived from the following calculations:
(i) The result of each amount reported by
the insurer as losses and loss adjustment expenses unpaid for each accident year for each individual line of business; multiplied by
(ii) The discount factor that is applicable
to the line of business and accident year published by the Internal Revenue Service under Internal Revenue Code Section 846 (26 U.S.C. 846), as amended, for the calendar year that corresponds to the most recent annual statement of the insurer; minus
(iii) Accrued retrospective premiums
discounted by an average discount factor. The discount factor shall be calculated by dividing the losses and loss adjustment expenses unpaid after discounting (the product of Items (i) and (ii) in this subparagraph) by loss and loss adjustment expense reserves before discounting Item (i) of this subparagraph.
(iv) For purposes of these calculations, the
losses and loss adjustment expenses unpaid shall be determined net of anticipated salvage and subrogation, and gross of any discount for the time value of money or tabular discount.
(c) Adjusted unearned premium reserves shall be
equal to the result of the following calculation:
(i) The amount reported by the insurer as
unearned premium reserves; minus
(ii) The admitted asset amounts reported by
the insurer as:
(I) Premiums in and agents' balances in
the course of collection, accident and health premiums due and unpaid and uncollected premiums for accident and health premiums;
(II) Premiums, agents' balances and
installments booked but deferred and not yet due;
(III) Bills receivable, taken for
premium; and
(IV) Equities and deposits in pools and
associations.
(d) Statutorily required policy and contract
reserves shall also include contingency reserves required for mortgage guaranty insurers, municipal bond insurers, and other financial guaranty insurers.
B. Monitoring and reporting. A property and casualty insurer shall supplement its annual statement with a reconciliation and summary of its assets and reserve requirements as required in subsection A of this Section. A reconciliation and summary showing that an insurer's assets as required in subsection A of this Section are greater than or equal to its undiscounted reserves referred to in subsection A of this Section shall be sufficient to satisfy this requirement. Upon prior notification, the Director may require an insurer to submit such a reconciliation and summary with any quarterly statement filed during the calendar year. C. Notification requirements and mandatory safeguards. If a property and casualty insurer's assets and reserves do not comply with subsection A of this Section, the insurer shall notify the Director immediately of the amount by which the reserve requirements exceed the annual statement value of the qualifying assets, explain why the deficiency exists and within 30 days of the date of the notice propose a plan of action to remedy the deficiency. D. Authority of the Director. (1) If the Director determines that an insurer is
not in compliance with subsection A of this Section, the Director shall require the insurer to eliminate the condition causing the noncompliance within a specified time from the date the notice of the Director's requirement is mailed or delivered to the insurer.
(2) If an insurer fails to comply with the
Director's requirement under paragraph (1) of this subsection, the insurer is deemed to be in hazardous financial condition, and the Director shall take one or more of the actions authorized by law as to insurers in hazardous financial condition.
E. An insurer subject to this Section must comply with the requirements of this Section after December 31, 1997. (Source: P.A. 90‑418, eff. 8‑15‑97.)
(215 ILCS 5/126.23) Sec. 126.23. General 5% diversification, medium and lower grade investments, and Canadian investments. A. General 5% diversification. (1) Except as otherwise specified in this Article,
an insurer shall not acquire directly or indirectly through an investment subsidiary an investment under this Article if, as a result of and after giving effect to the investment, the insurer would hold more than 5% of its admitted assets in investments of all kinds issued, assumed, accepted, guaranteed, or insured by a single person.
(2) This 5% limitation shall not apply to the
aggregate amounts insured by a single financial guaranty insurer with the highest generic rating issued by a nationally recognized statistical rating organization.
(3) Asset‑backed securities shall not be subject to
the limitations of paragraph (1) of this subsection, however, except as permitted by subsection A(4) of this Section, an insurer shall not acquire an asset‑backed security if, as a result of and after giving effect to the investment, the aggregate amount of asset‑backed securities secured by or evidencing an interest in a single asset or single pool of assets held by a trust or other business entity, then held by the insurer would exceed 5% of its admitted assets.
(4) A company's investments in mortgage related
securities, as defined by the Secondary Mortgage Market Enhancement Act of 1984 (United States Public Law 98‑440, 12 U.S.C. 24, 1451, 1454 et seq.), that are backed by any single pool of mortgages and made pursuant to the authority of that Act, shall not exceed 5% of its admitted assets.
B. Medium and lower grade investments. (1) An insurer shall not acquire, directly or
indirectly through an investment subsidiary, an investment under Sections 126.24, 126.27, and 126.30 or counterparty exposure under Section 126.31D if, as a result of and after giving effect to the investment:
(a) The aggregate amount of all medium and lower
grade investments then held by the insurer would exceed 20% of its admitted assets;
(b) The aggregate amount of lower grade
investments then held by the insurer would exceed 10% of its admitted assets;
(c) The aggregate amount of investments rated 5
or 6 by the SVO then held by the insurer would exceed 5% of its admitted assets;
(d) The aggregate amount of investments rated 6
by the SVO then held by the insurer would exceed 1% of its admitted assets; or
(e) The aggregate amount of lower grade
investments then held by the insurer that receive as cash income less than the equivalent yield for Treasury issues with a comparative average life, would exceed 1% of its admitted assets.
(2) An insurer shall not acquire, directly or
indirectly through an investment subsidiary, an investment under Sections 126.24, 126.27, and 126.30 or counterparty exposure under Section 126.31D if, as a result of and after giving effect to the investment:
(a) The aggregate amount of medium and lower
grade investments issued, assumed, accepted, guaranteed, or insured by any one person or, as to asset‑backed securities secured by or evidencing an interest in a single asset or pool of assets, then held by the insurer would exceed 1% of its admitted assets; or
(b) The aggregate amount of lower grade
investments issued, assumed, accepted, guaranteed, or insured by any one person or, as to asset‑backed securities secured by or evidencing an interest in a single asset or pool of assets, then held by the insurer would exceed 0.5% of its admitted assets.
(3) If an insurer attains or exceeds the limit of
any one rating category referred to in this subsection, the insurer shall not thereby be precluded from acquiring investments in other rating categories subject to the specific and multi‑category limits applicable to those investments.
C. Canadian investments. (1) An insurer shall not acquire, directly or
indirectly through an investment subsidiary, any Canadian investments authorized by this Article, if as a result of and after giving effect to the investment, the aggregate amount of these investments then held by the insurer would exceed 40% of its admitted assets, or if the aggregate amount of Canadian investments not acquired under Section 126.24B then held by the insurer would exceed 25% of its admitted assets.
(2) However, as to an insurer that is authorized
to do business in Canada or that has outstanding insurance, annuity or reinsurance contracts on lives or risks resident or located in Canada and denominated in Canadian currency, the limitations of paragraph (1) of this subsection shall be increased by the greater of:
(a) The amount the insurer is required by
Canadian law to invest in Canada or to be denominated in Canadian currency; or
(b) 125% of the amount of its reserves and
other obligations under contracts on risks resident or located in Canada.
(Source: P.A. 90‑418, eff. 8‑15‑97.)
(215 ILCS 5/126.24) Sec. 126.24. Rated credit instruments. Subject to the limitations of subsection F of this Section, an insurer may acquire rated credit instruments: A. Subject to the limitations of Section 126.23B, but not to the limitations of Section 126.23A except for the limitation of subsection (4) of Section 126.23A, an insurer may acquire rated credit instruments issued, assumed, guaranteed, or insured by: (1) The United States; or (2) A government sponsored enterprise of the United
States, if the instruments of the government sponsored enterprise are assumed, guaranteed, or insured by the United States or are otherwise backed or supported by the full faith and credit of the United States.
B.(1) Subject to the limitations of Section
126.23B, but not to the limitations of Section 126.23A, an insurer may acquire rated credit instruments issued, assumed, guaranteed, or insured by:
(a) Canada; or (b) A government sponsored enterprise of Canada,
if the instruments of the government sponsored enterprise are assumed, guaranteed, or insured by Canada or are otherwise backed or supported by the full faith and credit of Canada;
(2) However, an insurer shall not acquire an
instrument under this subsection if, as a result of and after giving effect to the investment, the aggregate amount of investments then held by the insurer under this subsection would exceed 40% of its admitted assets.
C.(1) Subject to the limitations of Section
126.23B, but not to the limitations of Section 126.23A, an insurer may acquire rated credit instruments, excluding asset‑backed securities:
(a) Issued by a government money market mutual
fund, a class one money market mutual fund or a class one bond mutual fund;
(b) Issued, assumed, guaranteed, or insured by a
government sponsored enterprise of the United States other than those eligible under subsection A of this Section;
(c) Issued, assumed, guaranteed, or insured by a
state, if the instruments are general obligations of the state; or
(d) Issued by a multilateral development bank. (2) However, an insurer shall not acquire an
instrument of any one fund, any one enterprise or entity, or any one state under this subsection if, as a result of and after giving effect to the investment, the aggregate amount of investments then held by the insurer in any one fund, enterprise, entity, or state under this subsection would exceed 10% of its admitted assets.
D. Subject to the limitations of Section 126.23, an insurer may acquire preferred stocks that are not foreign investments and that meet the requirements of rated credit instruments if, as a result of and after giving effect to the investment: (1) The aggregate amount of preferred stocks then
held by the insurer under this subsection does not exceed 33 1/3% of its admitted assets; and
(2) The aggregate amount of preferred stocks then
held by the insurer under this subsection which are not sinking fund stocks or rated P1 or P2 by the SVO does not exceed 15% of its admitted assets.
E. Subject to the limitations of Section 126.23 in addition to those investments eligible under subsections A, B, C and D of this Section, an insurer may acquire rated credit instruments that are not foreign investments. F. An insurer shall not acquire special rated credit instruments under this Section if, as a result of and after giving effect to the investment, the aggregate amount of special rated credit instruments then held by the insurer would exceed 5% of its admitted assets. The Director may, by rule, identify certain special rated credit instruments that are exempt from the limitation imposed by this subsection. (Source: P.A. 90‑418, eff. 8‑15‑97.)
(215 ILCS 5/126.25) Sec. 126.25. Insurer investment pools. A. An insurer may acquire investments in investment pools that: (1) Invest only in: (a) Obligations that are rated 1 or 2 by the SVO
or have an equivalent of an SVO 1 or 2 rating (or, in the absence of a 1 or 2 rating or equivalent rating, the issuer has outstanding obligations with an SVO 1 or 2 or equivalent rating) by a nationally recognized statistical rating organization recognized by the SVO and have:
(i) A remaining maturity of 397 days or less
or a put that entitles the holder to receive the principal amount of the obligation which put may be exercised through maturity at specified intervals not exceeding 397 days; or
(ii) A remaining maturity of 3 years or less
and a floating interest rate that resets no less frequently than quarterly on the basis of a current short‑term index (federal funds, prime rate, treasury bills, London InterBank Offered Rate (LIBOR) or commercial paper) and is subject to no maximum limit, if the obligations do not have an interest rate that varies inversely to market interest rate changes;
(b) Government money market mutual funds or
class one money market mutual funds; or
(c) Securities lending, repurchase, and reverse
repurchase, transactions that meet all the requirements of Section 126.29, except the quantitative limitations of Section 126.29D; or
(2) Invest only in investments which an insurer may
acquire under this Article, if the insurer's proportionate interest in the amount invested in these investments when combined with amounts of such investments made directly or indirectly through an investment subsidiary or other insurer investment pool permitted under this subsection A(2) does not exceed the applicable limits of this Article for such investments.
B. For an investment in an investment pool to be qualified under this Article, the investment pool shall not: (1) Acquire securities issued, assumed, guaranteed,
