Illinois Compiled Statutes 215 ILCS 5/131.20a – Prior notification of transactions; dividends and distributions
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(1) (a) The following transactions listed in items (i) through (vii) involving a domestic company and any person in its insurance holding company system, including amendments or modifications (other than termination) of affiliate agreements previously filed pursuant to this Section, which are subject to any materiality standards contained in this Section, may not be entered into unless the company has notified the Director in writing of its intention to enter into such transaction at least 30 days prior thereto, or such period as the Director may permit, and the Director has not disapproved it within such period. The notice for amendments or modifications (other than termination) shall include the reasons for the change and the financial impact on the domestic company. Informal notice shall be reported, within 30 days after a termination of a previously filed agreement, to the Director for determination of the type of filing required, if any.
(i) Sales, purchases, exchanges of assets, loans or
(i) Sales, purchases, exchanges of assets, loans or
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extensions of credit, guarantees, investments, or any other transaction, except dividends, that involves the transfer of assets from or liabilities to a company (A) equal to or exceeding the lesser of 3% of the company’s admitted assets or 25% of its surplus as regards policyholders as of the 31st day of December next preceding or (B) that is proposed when the domestic company is not eligible to declare and pay a dividend or other distribution pursuant to the provisions of Section 27.
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(ii) Loans or extensions of credit to any person that
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is not an affiliate (A) that involve the lesser of 3% of the company’s admitted assets or 25% of the company’s surplus, each as of the 31st day of December next preceding, made with the agreement or understanding that the proceeds of such transactions, in whole or in substantial part, are to be used to make loans or extensions of credit to, to purchase assets of, or to make investments in, any affiliate of the company making such loans or extensions of credit or (B) that are proposed when the domestic company is not eligible to declare and pay a dividend or other distribution pursuant to the provisions of Section 27.
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(iii) Reinsurance agreements or modifications
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thereto, including all reinsurance pooling agreements, reinsurance agreements in which the reinsurance premium or a change in the company’s liabilities, or the projected reinsurance premium or a change in the company’s liabilities in any of the next 3 years, equals or exceeds 5% of the company’s surplus as regards policyholders, as of the 31st day of December next preceding, including those agreements that may require as consideration the transfer of assets from a company to a nonaffiliate, if an agreement or understanding exists between the company and nonaffiliate that any portion of those assets will be transferred to one or more affiliates of the company.
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(iv) All management agreements; service contracts,
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other than agency contracts; tax allocation agreements; all reinsurance allocation agreements related to reinsurance agreements required to be filed under this Section; and all cost-sharing arrangements.
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(v) Direct or indirect acquisitions or investments in
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a person that controls the company, or in an affiliate of the company, in an amount which, together with its present holdings in such investments, exceeds 2.5% of the company’s surplus as regards policyholders. Direct or indirect acquisitions or investments in subsidiaries acquired pursuant to Section 131.2 of this Article (or authorized under any other Section of this Code), or in non-subsidiary insurance affiliates that are subject to the provisions of this Article, are exempt from this requirement.
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(vi) Any series of the previously described
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transactions that are substantially similar to each other, that take place within any 180 day period, and that in total are equal to or exceed the lesser of 3% of the domestic company’s admitted assets or 25% of its policyholders surplus, as of the 31st day of the December next preceding.
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(vii) Any other material transaction that the
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Director by rule determines might render the company’s surplus as regards policyholders unreasonable in relation to the company’s outstanding liabilities and inadequate to its financial needs or may otherwise adversely affect the interests of the company’s policyholders or shareholders.
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Nothing herein contained shall be deemed to authorize or permit any transactions that, in the case of a company not a member of the same holding company system, would be otherwise contrary to law.
(b) Any transaction or contract otherwise described in paragraph (a) of this subsection that is between a domestic company and any person that is not its affiliate and that precedes or follows within 180 days or is concurrent with a similar transaction between that nonaffiliate and an affiliate of the domestic company and that involves amounts that are equal to or exceed the lesser of 3% of the domestic company’s admitted assets or 25% of its surplus as regards policyholders at the end of the prior year may not be entered into unless the company has notified the Director in writing of its intention to enter into the transaction at least 30 days prior thereto or such shorter period as the Director may permit, and the Director has not disapproved it within such period.
(c) A company may not enter into transactions which are part of a plan or series of like transactions with any person within the holding company system if the purpose of those separate transactions is to avoid the statutory threshold amount and thus avoid the review that would occur otherwise. If the Director determines that such separate transactions were entered into for such purpose, he may exercise his authority under subsection (2) of Section 131.24.
(d) The Director, in reviewing transactions pursuant to paragraph (a), shall consider whether the transactions comply with the standards set forth in Section 131.20 and whether they may adversely affect the interests of policyholders.
(e) The Director shall be notified within 30 days of any investment of the domestic company in any one corporation if the total investment in that corporation by the insurance holding company system exceeds 10% of that corporation’s voting securities.
(f) Except for those transactions subject to approval under other Sections of this Code, any such transaction or agreements which are not disapproved by the Director may be effective as of the date set forth in the notice required under this Section.
(g) If a domestic company enters into a transaction described in this subsection without having given the required notification, the Director, using the notice and hearing procedure in subsection (2) of Section 403A of this Code, may cause the company to pay a civil forfeiture of not more than $250,000. Each transaction so entered shall be considered a separate offense.
(2) No domestic company subject to registration under Section 131.13 may pay any extraordinary dividend or make any other extraordinary distribution to its shareholders until: (a) 30 days after the Director has received notice of the declaration thereof and has not within such period disapproved the payment, or (b) the Director approves such payment within the 30-day period. For purposes of this subsection, an extraordinary dividend or distribution is any dividend or distribution of cash or other property whose fair market value, together with that of other dividends or distributions, made within the period of 12 consecutive months ending on the date on which the proposed dividend is scheduled for payment or distribution exceeds the greater of: (a) 10% of the company’s surplus as regards policyholders as of the 31st day of December next preceding, or (b) the net income of the company for the 12-month period ending the 31st day of December next preceding, but does not include pro rata distributions of any class of the company’s own securities.
Notwithstanding any other provision of law, the company may declare an extraordinary dividend or distribution which is conditional upon the Director’s approval, and such a declaration confers no rights upon security holders until: (a) the Director has approved the payment of the dividend or distribution, or (b) the Director has not disapproved the payment within the 30-day period referred to above.
Terms Used In Illinois Compiled Statutes 215 ILCS 5/131.20a
- Assets: (1) The property comprising the estate of a deceased person, or (2) the property in a trust account.
- Civil forfeiture: The loss of ownership of property used to conduct illegal activity.
- Contract: A legal written agreement that becomes binding when signed.
- Corporation: A legal entity owned by the holders of shares of stock that have been issued, and that can own, receive, and transfer property, and carry on business in its own name.
- Fair market value: The price at which an asset would change hands in a transaction between a willing, informed buyer and a willing, informed seller.
- Liabilities: The aggregate of all debts and other legal obligations of a particular person or legal entity.
(b) Any transaction or contract otherwise described in paragraph (a) of this subsection that is between a domestic company and any person that is not its affiliate and that precedes or follows within 180 days or is concurrent with a similar transaction between that nonaffiliate and an affiliate of the domestic company and that involves amounts that are equal to or exceed the lesser of 3% of the domestic company’s admitted assets or 25% of its surplus as regards policyholders at the end of the prior year may not be entered into unless the company has notified the Director in writing of its intention to enter into the transaction at least 30 days prior thereto or such shorter period as the Director may permit, and the Director has not disapproved it within such period.
(c) A company may not enter into transactions which are part of a plan or series of like transactions with any person within the holding company system if the purpose of those separate transactions is to avoid the statutory threshold amount and thus avoid the review that would occur otherwise. If the Director determines that such separate transactions were entered into for such purpose, he may exercise his authority under subsection (2) of Section 131.24.
(d) The Director, in reviewing transactions pursuant to paragraph (a), shall consider whether the transactions comply with the standards set forth in Section 131.20 and whether they may adversely affect the interests of policyholders.
(e) The Director shall be notified within 30 days of any investment of the domestic company in any one corporation if the total investment in that corporation by the insurance holding company system exceeds 10% of that corporation’s voting securities.
(f) Except for those transactions subject to approval under other Sections of this Code, any such transaction or agreements which are not disapproved by the Director may be effective as of the date set forth in the notice required under this Section.
(g) If a domestic company enters into a transaction described in this subsection without having given the required notification, the Director, using the notice and hearing procedure in subsection (2) of Section 403A of this Code, may cause the company to pay a civil forfeiture of not more than $250,000. Each transaction so entered shall be considered a separate offense.
(2) No domestic company subject to registration under Section 131.13 may pay any extraordinary dividend or make any other extraordinary distribution to its shareholders until: (a) 30 days after the Director has received notice of the declaration thereof and has not within such period disapproved the payment, or (b) the Director approves such payment within the 30-day period. For purposes of this subsection, an extraordinary dividend or distribution is any dividend or distribution of cash or other property whose fair market value, together with that of other dividends or distributions, made within the period of 12 consecutive months ending on the date on which the proposed dividend is scheduled for payment or distribution exceeds the greater of: (a) 10% of the company’s surplus as regards policyholders as of the 31st day of December next preceding, or (b) the net income of the company for the 12-month period ending the 31st day of December next preceding, but does not include pro rata distributions of any class of the company’s own securities.
Notwithstanding any other provision of law, the company may declare an extraordinary dividend or distribution which is conditional upon the Director’s approval, and such a declaration confers no rights upon security holders until: (a) the Director has approved the payment of the dividend or distribution, or (b) the Director has not disapproved the payment within the 30-day period referred to above.