Illinois Compiled Statutes
215 ILCS 5/ - Illinois Insurance Code.
Article XI - Reinsurance

(215 ILCS 5/Art. XI heading)

 
(215 ILCS 5/173) (from Ch. 73, par. 785)
Sec. 173.
Reinsurance authorized.
(a) Subject to the provisions of this Article, any domestic company may,
by a reinsurance agreement, accept any part or all of any risks of the
kind which it is authorized to insure and it may cede all or any part of
its risks to another solvent company having the power to make such
reinsurance. It may take credit for the reserves on such ceded risks to
the extent reinsured subject to the exceptions provided in Sections
173.1 through 173.5.
(b) The purpose of this Article is to protect the interest of insureds,
claimants, ceding insurers, assuming insurers, and the public generally. The
legislature hereby declares its intent is to ensure adequate regulation of
insurers and reinsurers and adequate protection for those to whom they owe
obligations. In furtherance of that State interest, the legislature hereby
provides a mandate that upon the insolvency of a non-U.S. insurer or reinsurer
that provides security to fund its U.S. obligations in accordance with this
Article, the assets representing the security shall be maintained in the United
States and claims shall be filed and valued by the state insurance
official with regulatory oversight, and the assets shall be distributed in
accordance with the insurance laws of the state in which the trust is
domiciled that are applicable to the liquidation of domestic U.S. insurance
companies. The legislature declares that the matters contained in this Article
are fundamental to the business of insurance in accordance with 15 U.S.C
Sections 1011 through 1012.

(Source: P.A. 90-381, eff. 8-14-97.)
 
(215 ILCS 5/173.1) (from Ch. 73, par. 785.1)
Sec. 173.1. Credit allowed a domestic ceding insurer.
(1) Except as otherwise provided under Article VIII 1/2 of this Code and
related provisions of the Illinois Administrative Code, credit for
reinsurance shall be allowed a domestic ceding insurer as
either an admitted asset or a deduction from liability on account of
reinsurance ceded only when the reinsurer meets the requirements of paragraph (A), (B), (B-5), (C), (C-5), (C-10), or (D) of this subsection (1).
Credit shall be allowed under paragraph (A), (B), or (B-5) of this subsection (1) only as respects
cessions of those kinds or classes of business in which the assuming insurer is
licensed or otherwise permitted to write or assume in its state of domicile, or
in the case of a U.S. branch of an alien assuming insurer, in the state through
which it is entered and licensed to transact insurance or reinsurance. Credit
shall be allowed under paragraph (B-5) or (C) of this subsection (1) only
if the applicable requirements of paragraph (E) of this subsection (1)
have been
satisfied.

(C)(1) Credit shall be allowed when the reinsurance is ceded to an assuming insurer that maintains a trust fund in a qualified United States financial institution, as defined in paragraph (B) of subsection (3) of this Section, for the payment of the valid claims of its United States policyholders and ceding insurers, their assigns and successors in interest. The assuming insurer shall report to the Director information substantially the same as that required to be reported on the NAIC annual and quarterly financial statement by authorized insurers and any other financial information that the Director deems necessary to determine the financial condition of the assuming insurer and the sufficiency of the trust fund. The assuming insurer shall provide or make the information available to the ceding insurer. The assuming insurer may decline to release trade secrets or commercially sensitive information that would qualify as exempt from disclosure under the Freedom of Information Act. The Director shall also make the information publicly available, subject only to such reasonable objections as might be raised to a request pursuant to the Freedom of Information Act, as determined by the Director. The assuming insurer shall submit to examination of its books and records by the Director and bear the expense of examination.
(2) Credit for the reinsurance ceded by a
domestic
insurer to an assuming insurer not meeting the requirements of subsection
(1) of this Section shall be allowed in an amount not exceeding the assets or liabilities
carried by
the ceding insurer. The credit shall not exceed the amount of funds held
by or held in trust for the ceding insurer under a reinsurance contract with the assuming insurer
as security for the payment of obligations thereunder, if the security is
held in the United States subject to withdrawal solely by, and under the
exclusive control of, the ceding insurer; or, in the case of a trust, held
in a qualified United States financial institution, as defined in paragraph (B) of
subsection (3) of this Section. This security may be in the form of:
(3)(A) For purposes of paragraph (C) of subsection (2) of this Section, a "qualified United States
financial institution" means an institution that:
(B) A "qualified United States financial institution" means, for
purposes of those provisions of this law specifying those institutions that
are eligible to act as a fiduciary of a trust, an institution that:
(C) Except as set forth in subparagraph (11) of paragraph (C-5) of subsection (1) of this Section as to cessions by certified reinsurers, this amendatory Act of the 100th General Assembly shall apply to all cessions after the effective date of this amendatory Act of the 100th General Assembly under reinsurance agreements that have an inception, anniversary, or renewal date not less than 6 months after the effective date of this amendatory Act of the 100th General Assembly.
(D) The Department shall adopt rules implementing the provisions of this Article.
(Source: P.A. 102-578, eff. 7-1-22 (See Section 5 of P.A. 102-672 for effective date of P.A. 102-578).)
 
(215 ILCS 5/173.2) (from Ch. 73, par. 785.2)
Sec. 173.2.
Reserve credit for liability assumed.
No credit shall be allowed as an admitted asset or as a deduction from
liability, to any ceding company for reinsurance unless the reinsurance is
payable by the assuming company on the basis of the liability of the ceding
company under the contract or contracts reinsured without diminution
because of the insolvency of the ceding company.

(Source: Laws 1965, p. 1077.)
 
(215 ILCS 5/173.3) (from Ch. 73, par. 785.3)
Sec. 173.3.
Payment by assuming company.
(1) No such credit shall be allowed for reinsurance unless the
reinsurance agreement provides that payments by the assuming company shall
be made directly to the ceding company or to its liquidator, receiver, or
statutory successor, except where the contract specifically provides
another payee of such reinsurance in the event of the insolvency of the
ceding company or where the assuming company with the consent of the direct
insured or insureds has assumed such policy obligations of the ceding
company to the payees under such policies and in substitution for the
obligations of the ceding company to such payees.
(2) Except as provided in this Section, no assuming company may pay or
settle, or agree to pay or settle, any policy claim, or any portion
thereof, directly to or with a policyholder of any ceding company if an
Order of Rehabilitation or Liquidation has been entered against such ceding
company.

(Source: P.A. 77-1329.)
 
(215 ILCS 5/173.4) (from Ch. 73, par. 785.4)
Sec. 173.4.
Assuming company may defend claims for insolvent ceding company.
Such reinsurance agreement may provide that the liquidator or receiver
of an insolvent ceding company shall give written notice of the pendency of
a claim against the insolvent ceding company on the policy or bond
reinsured within a reasonable time after such claim is filed in the
insolvency proceeding and that during the pendency of such claim any
assuming company may investigate such claim and interpose, at its own
expense, in the proceeding where such claim is to be adjudicated any
defense or defenses which it considers available to the ceding company or
its liquidator or receiver. The expense thus incurred by the assuming
company is chargeable against the insolvent ceding company as a part of the
expense of liquidation to the extent of a proportionate share of the
benefit which accrues to the ceding company solely as a result of the
defense undertaken by the assuming company.
Where two or more assuming companies are involved in the same claim and
a majority in interest elect to interpose a defense to such claim, the
expense shall be apportioned in accordance with the terms of the
reinsurance agreement as though such expense had been incurred by the
ceding company.

(Source: Laws 1965, p. 1077.)
 
(215 ILCS 5/173.5) (from Ch. 73, par. 785.5)
Sec. 173.5.
Crediting of commissions from cancellable reinsurance.
Where the parties to a reinsurance contract cancel such contract within
90 days of its effective date without providing for a runoff of the
reinsurance in force at the date of cancellation, credit for commission
shall be allowed on the financial statement of the ceding company only for
that amount of such commission as is actually earned. In the case of any
cancellation of reinsurance contracts involving more than 20% of the ceding
company's premiums in force, the ceding company shall notify the Director
thereof in writing, stating the estimated amount of gross unearned premiums
and return commissions involved.

(Source: Laws 1965, p. 1077.)
 
(215 ILCS 5/174) (from Ch. 73, par. 786)
Sec. 174. Kinds of
agreements requiring approval.
(1) The following kinds of reinsurance agreements shall not be entered into
by any domestic company unless such agreements are approved in writing by
the Director:
(2) An agreement which is not disapproved by the Director within thirty
days after its submission shall be deemed approved.

(Source: P.A. 98-969, eff. 1-1-15.)
 
(215 ILCS 5/174.1) (from Ch. 73, par. 786.1)
Sec. 174.1.
Kinds of Agreements Prohibited.
No domestic stock company with
less than $5,000,000 capital and surplus nor domestic mutual or reciprocal company
with less than $5,000,000 surplus may assume as reinsurance any of the kind or
kinds of businesses enumerated in Class 2 or Class 3 of Section 4 of this
Code, except Class 2(a), and except for facultative reinsurance of specific
risks and assumption of risks from companies subject to "An Act
relating to local, mutual district, county and township insurance
companies", approved March 13, 1936, as amended. If approval of the
Director is obtained prior to the reinsurance
assumption, this prohibition shall not apply to any company organized and
authorized to do business in Illinois between July 1, 1981, and June 30,
1983, until January 1, 1989.

(Source: P.A. 84-671.)
 
(215 ILCS 5/175) (from Ch. 73, par. 787)
Sec. 175.

Conditions
for approval.
Any reinsurance agreement requiring the written approval of the Director
under section 174 shall be approved by him if the terms thereof do not
injuriously affect the rights of policyholders of any of the companies
which are parties thereto. If the Director refuses to approve any such
agreement, he shall grant the company a hearing upon request.

(Source: Laws 1965, p. 1077.)
 
(215 ILCS 5/176) (from Ch. 73, par. 788)
Sec. 176.

Pending
actions.
Whenever a company agrees to assume and carry out directly with the
policyholder any of the policy obligations of the ceding company under a
reinsurance agreement, any claim existing or action or proceeding pending
arising out of such policy, by or against the ceding company with respect
to such obligations may be prosecuted to judgment as if such reinsurance
agreement had not been made, or the assuming company may be substituted in
place of the ceding company.

(Source: Laws 1937, p. 696.)
 
(215 ILCS 5/177) (from Ch. 73, par. 789)
Sec. 177.

Transfer
of deposits.
The provisions of section 170 applicable to the transfer of deposits
of legal reserves on policies of merged or consolidated companies shall
apply to the transfer of deposits of such reserves of a ceding company in
the case of a reinsurance agreement, and for the purposes of determining
the conditions and requirements for such transfer the assuming company
shall be regarded as a surviving or new company and the ceding company
shall be regarded as a company that has been merged or consolidated.

(Source: Laws 1937, p. 696.)
 
(215 ILCS 5/178)
Sec. 178. (Repealed).


(Source: Laws 1937, p. 696. Repealed by P.A. 98-692, eff. 7-1-14; 98-969, eff. 1-1-15.)
 
(215 ILCS 5/179) (from Ch. 73, par. 791)
Sec. 179.

Payment of
fees to officer or director prohibited.
(1) No director or officer of any company, party to a reinsurance
agreement, except as fully expressed in the reinsurance agreement, shall
receive any fee, commission, other compensation or valuable consideration
whatever, directly or indirectly, for in any manner aiding, promoting or
assisting in the negotiation of such reinsurance agreement.
(2) Any person violating the provisions of this section shall be guilty
of a Class A misdemeanor.

(Source: P.A. 77-2699.)
 
(215 ILCS 5/179a)
Sec. 179a.
Managing general agent prohibition.
(a) No managing general agent, as defined in Section 141a, shall receive any
compensation or remuneration for, or in any manner profit from, obtaining or
arranging reinsurance for a domestic company with respect to business
underwritten by that managing general agent.
(b) Any person violating the provisions of this Section is guilty of a Class
A misdemeanor.

(Source: P.A. 88-364.)
 
(215 ILCS 5/179b)
Sec. 179b.
Reinsurance committee.
Each domestic company that cedes any
reinsurance must establish and maintain a reinsurance committee with not fewer
than 3 members, at least one of which must be a member of the company's board
of directors. The committee shall review and approve all treaty reinsurance
placements and review and approve guidelines for facultative placements for the
company, with the
exception of a reinsurance agreement in which the aggregate premium ceded in
any one year is
less than 1% of the company's annual gross written premium.
The committee shall give special attention to reinsurers' financial
strength and performance record.

(Source: P.A. 88-364.)

Structure Illinois Compiled Statutes