Illinois Compiled Statutes
215 ILCS 5/ - Illinois Insurance Code.
Article VIIB - Risk Retention Companies

(215 ILCS 5/Art. VIIB heading)

 
(215 ILCS 5/123B-1) (from Ch. 73, par. 735B-1)
(Section scheduled to be repealed on January 1, 2027)
Sec. 123B-1.
Purpose.
The purpose of this Article is to regulate the formation
or operation, or both, of risk retention groups and purchasing
groups in Illinois formed pursuant to the provisions
of the federal Liability Risk Retention Act of 1986
to the extent permitted by such law.

(Source: P.A. 85-131.)
 
(215 ILCS 5/123B-2) (from Ch. 73, par. 735B-2)
(Section scheduled to be repealed on January 1, 2027)
Sec. 123B-2. Definitions. As used in this Article:
(1) "Director" means the Director of the Department of Insurance.
(2) "Completed operations liability" means liability
arising out of the installation,
maintenance, or repair of any product at a site
which is not owned or controlled by:
(3) "Domicile", for purposes of determining the state
in which a purchasing group is domiciled, means:
(4) "Hazardous financial condition" means that, based
on its present or reasonably anticipated financial condition,
a risk retention group, although not yet financially
impaired or insolvent, is unlikely to be able:
(5) "Insurance" means primary insurance, excess insurance,
reinsurance, surplus lines insurance, and any other
arrangement for shifting and distributing risk which
is determined to be insurance under the laws of Illinois.
(6) "Liability" means:
(7) "Personal risk liability" means liability for
damage because of injury to any person, damage to property,
or other loss or damage resulting from any personal,
familial, or household responsibilities or activities,
rather than from responsibilities or activities referred
to in paragraph (a) of subsection (6) of this Section;
(8) "Plan of operation or a feasibility study" means
an analysis which presents the expected activities and
results of a risk retention group including, at a minimum:
(9) "Product liability" means liability for damages
because of any personal injury, death, emotional harm,
consequential economic damage, or property damage (including
damages resulting from the loss of use of property)
arising out of the manufacture, design, importation,
distribution, packaging, labeling, lease, or sale of
a product, but does not include the liability of any
person for those damages if the product involved was
in the possession of such a person when the incident
giving rise to the claim occurred.
(10) "Purchasing group" means any group which:
(11) "Risk retention group" means any corporation
or other limited liability association:
(12) "State" means any state of the United States
or the District of Columbia.
(13) "NAIC" means the National Association of Insurance Commissioners.
(Source: P.A. 99-512, eff. 1-1-17.)
 
(215 ILCS 5/123B-3) (from Ch. 73, par. 735B-3)
(Section scheduled to be repealed on January 1, 2027)
Sec. 123B-3. Risk retention groups organized in this State.
A. A risk retention group shall either:
Except that, as of the effective date of this amendatory Act of 1995, a new
risk retention group must qualify under paragraph (1) of this subsection.
B. Before it may offer insurance in any state, each risk retention group
shall also submit for approval to the Director a plan of operation or a
feasibility study and revisions of such plan or study if the group intends to
offer any additional lines of liability insurance. In the event of any
subsequent material change in any item of its plan or study, such risk
retention group shall submit an appropriate revision to the Director within 10
days of any such change for approval by the Director. The group shall not
offer any additional kinds of liability insurance, in this State or in any
other state, until a revision of such plan or study is approved by the
Director.
C. At the time of filing its application for organization, the risk
retention group shall provide to the Director in summary form the following
information: the identity of the initial members of the group, the identity of
those individuals who organized the group or who will provide administrative
services or otherwise influence or control the activities of the group, the
amount and nature of initial capitalization, the coverages to be afforded, and
the states in which the group intends to operate. Upon receipt of this information, the Director shall forward the information to the NAIC. Providing notification to the NAIC is in addition to and shall not be sufficient to satisfy the requirements of Section 123B-4 of this Code or any other provisions of this Article.
D. The name under which a risk retention group may be organized and
licensed shall include the phrase "Risk Retention Group".
E. Notwithstanding any other provision to the contrary, all risk
retention groups chartered in this State shall file an annual statement with
the Department and NAIC.
The annual statement shall be in a form prescribed by the Director. The
statement may be required to be in diskette form. The statement shall be
completed in accordance with the annual statement instructions and the NAIC
Accounting Practices and Procedures Manual.
F. As used in this subsection F:
"Board of directors" means the governing body of the risk retention group elected by shareholders or members to establish policy, elect or appoint officers and committees, and make other governing decisions.
"Director" means a natural person designated in the articles of the risk retention group, or designated, elected, or appointed by any other manner, name, or title, to act as a director.
"Material relationship" means a relationship of a person with the risk retention group that includes, but is not limited to:
Within one year after the effective date of this amendatory Act of the 99th General Assembly, existing risk retention groups shall be in compliance with the following governance standards and new risk retention groups shall be in compliance with the standards at the time of licensure:
 
(215 ILCS 5/123B-4) (from Ch. 73, par. 735B-4)
(Section scheduled to be repealed on January 1, 2027)
Sec. 123B-4. Risk retention groups not organized in this State. Any risk retention group organized and licensed in a state other than this
State and seeking to do business as a risk retention group in this State shall
comply with the laws of this State as follows:
A. Notice of operations and designation of the Director as agent.
Before offering insurance in this State, a risk retention group shall submit
to the Director on a form prescribed by the NAIC:
A risk retention group shall submit a copy of any material revision to its plan of operation or feasibility study required by subsection B of Section 123B-3 of this Code within 30 days after the date of the approval of the revision by the Director or, if no such approval is required, within 30 days after filing.
B. Financial condition. Any risk retention group doing business in this
State shall submit to the Director:
C. Taxation.
D. Compliance With unfair claims practices provisions. Any risk retention
group, its agents and representatives shall be subject to the unfair claims
practices provisions of Sections 154.5 through 154.8 of this Code.
E. Deceptive, false, or fraudulent practices. Any risk retention group
shall comply with the laws of this State regarding deceptive, false, or
fraudulent acts or practices. However, if the Director seeks an injunction
regarding such conduct, the injunction must be obtained from a court of
competent jurisdiction.
F. Examination regarding financial condition. Any risk retention group must
submit to an examination by the Director to determine its financial condition
if the commissioner of insurance of the jurisdiction in which the group is
organized and licensed has not initiated an examination or does not initiate an
examination within 60 days after a request by the Director. Any such
examination shall be coordinated to avoid unjustified repetition and conducted
in an expeditious manner and in accordance with the NAIC's Examiner Handbook.
G. Notice to purchasers. Every application form for insurance from a
risk retention group and the front page and declaration page of every policy
issued by a risk retention group shall contain in 10 point type the following
notice:


This policy is issued by your risk retention group. Your risk retention group
is not subject to all of the insurance laws and regulations of your state.
State insurance insolvency guaranty fund protection is not available for your
risk retention group".
H. Prohibited acts regarding solicitation or sale. The following acts by a
risk retention group are hereby prohibited:
I. Prohibition on ownership by an insurance company. No risk retention
group shall be allowed to do business in this State if an insurance company is
directly or indirectly a member or owner of such risk retention group, other
than in the case of a risk retention group all of whose members are insurance
companies.
J. Prohibited coverage. No risk retention group may offer insurance policy
coverage prohibited by Articles IX or XI of this Code or declared unlawful by
the Illinois Supreme Court; provided however, a risk retention group
organized and licensed in a state other than this State that selects the law of
this State to govern the validity, construction, or enforceability of policies
issued by it is permitted to provide coverage under policies issued by it for
penalties in the nature of compensatory damages including, without limitation,
punitive damages and the multiplied portion of multiple damages, so long as
coverage of those penalties is not prohibited by the law of the state under
which the risk retention group is organized.
K. Delinquency proceedings. A risk retention group not organized in this
State and doing business in this State shall comply with a lawful order issued
in a voluntary dissolution proceeding or in a conservation, rehabilitation,
liquidation, or other delinquency proceeding commenced by the Director or by
another state insurance commissioner if there has been a finding of financial
impairment after an examination under subsection F of Section 123B-4 of this
Article.
L. Compliance with injunctive relief. A risk retention group shall comply
with an injunctive order issued in another state by a court of competent
jurisdiction or by a United States District Court based on a finding of
financial impairment or hazardous financial condition.
M. Penalties. A risk retention group that violates any provision of this
Article will be subject to fines and penalties applicable to licensed insurers
generally, including revocation of its license or the right to do business in
this State, or both.
N. (Blank).

(Source: P.A. 99-512, eff. 1-1-17.)
 
(215 ILCS 5/123B-5) (from Ch. 73, par. 735B-5)
(Section scheduled to be repealed on January 1, 2027)
Sec. 123B-5.
Compulsory associations.
A. No risk retention group shall
be required or permitted
to join or contribute financially to the Illinois Insurance
Guaranty Fund, or any other plan, pool, association or guaranty or
insolvency fund or any similar mechanism, in this State,
nor shall any risk retention group, or its insureds
or claimants against its insureds, receive any benefit
from any such fund or any such plan, pool, association or guaranty or insolvency fund for
claims arising under the insurance
policies issued by such risk retention group.
B. When a purchasing group obtains insurance covering
its members' risks from an insurer not authorized in
this State or a risk retention group, no such risks,
wherever resident or located, shall be covered by an
insurance guaranty fund or similar mechanism in this
State.
C. When a purchasing group obtains insurance covering
its members' risks from an authorized insurer, only
risks resident or located in this State shall be covered
by the State guaranty fund subject to the provisions
of Article XXXIV.

(Source: P.A. 85-131.)
 
(215 ILCS 5/123B-6) (from Ch. 73, par. 735B-6)
(Section scheduled to be repealed on January 1, 2027)
Sec. 123B-6.
Countersignatures not required.
Notwithstanding any
contrary provision of this Code,
a policy of insurance issued to a risk retention group
or any member of that group shall not be required to
be countersigned.

(Source: P.A. 85-131.)
 
(215 ILCS 5/123B-7) (from Ch. 73, par. 735B-7)
(Section scheduled to be repealed on January 1, 2027)
Sec. 123B-7. Purchasing groups - exemption from certain laws relating to
the group purchase of insurance.
Any purchasing group meeting the criteria established
under the provisions of the federal Liability Risk Retention
Act of 1986 shall be exempt from any law of this State prohibiting
the creation of risk purchasing of groups for the purchase
of insurance; any countersignature requirements as provided
in this Code; and any prohibition of group purchasing or any
law that would discriminate against a purchasing group
or its members, prohibit a purchasing group from obtaining insurance on a group basis or because the group has not been in existence for a minimum period of time or because any member has not belonged to the group for a minimum period of time, require that a purchasing group must have a minimum number of members, common ownership or affiliation, or certain legal form, or require that a certain percentage of a purchasing group must obtain insurance on a group basis. In addition, an insurer shall be exempt
from any law of this State which prohibits providing,
or offering to provide, to a purchasing group or its
members advantages based on their loss and expense experience
not afforded to other persons with respect to rates,
policy forms, coverages or other matters. A purchasing
group shall be subject to all other applicable laws
of this State.

(Source: P.A. 99-512, eff. 1-1-17.)
 
(215 ILCS 5/123B-8) (from Ch. 73, par. 735B-8)
(Section scheduled to be repealed on January 1, 2027)
Sec. 123B-8.
Notice and registration requirements
of purchasing groups.
A. A purchasing group that intends to do business
in this State shall, prior to doing business, furnish
notice to the Director, on a form prescribed by the Director, that shall:
B. A purchasing group shall, within 10 days, notify the Director of any
changes in any item set forth in subsection A of this Section.
C. The purchasing group shall register with and designate
the Director as its agent solely for the purpose of
receiving service of legal documents or process, for
which a filing fee of $100 payable to the Director shall
be required, except that such requirements shall not
apply in the case of a purchasing group:
D. Any purchasing group which was doing business in
this State prior to August 3, 1987, shall,
within 30 days after that date, furnish notice to the Director pursuant to
the provisions of subsection A of this Section and furnish
such information as may be required pursuant to subsection B
of this Section.

(Source: P.A. 87-1090.)
 
(215 ILCS 5/123B-9) (from Ch. 73, par. 735B-9)
(Section scheduled to be repealed on January 1, 2027)
Sec. 123B-9.
Restrictions on insurance purchased by purchasing groups.
A. A purchasing group may not purchase insurance from
a risk retention group that is not organized in a state
or from an insurer not admitted in the state in which
the purchasing group is located, unless the purchase
is effected through a licensed surplus line producer acting
pursuant to the surplus lines laws and regulations of such state.
B. No purchasing group may offer insurance policy
coverage prohibited by this Code or declared unlawful
by the Illinois Supreme Court.
C. A purchasing group which obtains liability insurance
from an insurer not admitted in this State or a risk
retention group shall inform each of the members of
such group which has a risk resident or located in this
State that such risk is not protected by an insurance
insolvency guaranty fund in this State, and that such
risk retention group or such insurer may not be subject
to all insurance laws and regulations of this State.
D. No purchasing group may purchase insurance providing for a deductible
or an aggregate limit unless the deductible or aggregate limit applies
separately to each individual member of the purchasing group.

(Source: P.A. 85-131.)
 
(215 ILCS 5/123B-10) (from Ch. 73, par. 735B-10)
(Section scheduled to be repealed on January 1, 2027)
Sec. 123B-10.
Administrative and procedural authority
regarding risk retention groups and purchasing groups.
The Director is authorized to make use of any of the
powers established under this Code to enforce the laws
of this State so long as those powers are not specifically
preempted by the Product Liability Risk Retention Act
of 1981, as amended by the Risk Retention Amendments
of 1986. This includes, but is not limited to, the
Director's administrative authority to investigate,
issue subpoenas, conduct depositions and hearings, issue
orders (including without limitation orders pursuant
to Article XII 1/2 and Section 401.1), and impose penalties.
With regard to any investigation, administrative proceedings,
or litigation, the Director can rely on the procedural
law and regulations of this State.

(Source: P.A. 85-131.)
 
(215 ILCS 5/123B-11) (from Ch. 73, par. 735B-11)
(Section scheduled to be repealed on January 1, 2027)
Sec. 123B-11.
Duty on producers to obtain
license.
A. Any person offering, acting or seeking to solicit,
sell, purchase, administer or otherwise
service a liability insurance
contract between a
purchasing group located in this State and a risk retention
group or insurance company, and any person offering,
acting or seeking to solicit, sell, purchase, administer
or otherwise service membership contracts, certificates
or agreements for enrollment in any purchasing group
to any resident of this State, must obtain a license
to act as an insurance producer for casualty
lines of insurance under Article XXXI; provided,
however, that the foregoing provisions of this subsection A, and the
following provisions of this Section 123B-11, shall not apply, if:
B. Any such person shall be subject to all requirements
of and regulations under Article XXXI, except that:
C. Activities described under subsection A of this Section
shall require licensing if carried out, in whole or
in part, within this State either directly or indirectly
by the use of the mails, advertising or other means
of communication with a terminal located in this State.
D. In addition to any other lawful duties, any person
engaging in the activities described in subsection A
of this Section shall be obligated to exercise reasonable
and customary skill and diligence to ascertain that:
E. Any insurance producer who breaches a fiduciary
duty or who violates any provision of this Section will
be subject to fine and revocation or suspension of its
license in accordance with the procedures established
under Article XXXI and may be held liable for civil
damages to any person or group resulting from such violation
or breach of a fiduciary duty.
F. Any person retained or employed to solicit, offer,
sell or purchase memberships in a purchasing group may
be ordered to cease any such enrollment activity in
this State whenever the Director has reason to believe
that any such purchasing group has liability insurance
coverage from a risk retention group or insurance company
which is insolvent or in a hazardous financial condition.
Orders entered under this paragraph shall be issued
in accordance with the procedures set forth at Section
401.1.
G. The Director may permit, on a reciprocal basis,
a person licensed in another state to engage in the
activities described in subsection A of this Section,
whenever he is satisfied that the laws of such other
state impose standards and duties
on such licensee no less stringent
than the standards and duties required by this Section.

(Source: P.A. 85-131.)
 
(215 ILCS 5/123B-12) (from Ch. 73, par. 735B-12)
(Section scheduled to be repealed on January 1, 2027)
Sec. 123B-12.
Binding effect of orders issued in
U.S. District Court. An order issued by any United States District Court
enjoining a risk retention group from soliciting or
selling insurance, or operating, in any state (or in
all states or in any territory or possession of the
United States) upon a finding that such a group is in
a hazardous financial condition or financially impaired condition shall be
enforceable in the courts of this State.

(Source: P.A. 85-131.)
 
(215 ILCS 5/123B-13) (from Ch. 73, par. 735B-13)
(Section scheduled to be repealed on January 1, 2027)
Sec. 123B-13.
Rules and regulations.
The Director may establish and from time to time amend
such rules relating to risk retention groups as may
be necessary or desirable to carry out the provisions
of this Article.

(Source: P.A. 85-131.)
 
(215 ILCS 5/123B-14) (from Ch. 73, par. 735B-14)
(Section scheduled to be repealed on January 1, 2027)
Sec. 123B-14.
Severability.
If any clause, sentence, paragraph,
Section or part of this Article or the application thereof to any person or
circumstances, shall, for any reason, be adjudged by any court of competent
jurisdiction to be invalid, such judgment shall not affect, impair or
invalidate the remainder of this Article, and the application thereof to
other persons or circumstances, but shall be confined in its operation to
the clause, sentence, paragraph, Section or part thereof directly involved
in the controversy in which such judgment shall have been rendered and to
the person or circumstances involved.

(Source: P.A. 85-131.)

Structure Illinois Compiled Statutes