(215 ILCS 5/126.10)
Sec. 126.10. General 3% diversification, medium and lower grade investments, and Canadian investments.
A. General 3% 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 3% of its admitted assets in investments of all kinds issued, assumed, accepted, guaranteed, or insured by a single person. | |
(2) This 3% 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 3% 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 126.11, 126.14, and 126.17 or counterparty exposure under Section 126.18D if, as a result of and after giving effect to the investment: | |
(a) The aggregate amount of 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 3% 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 126.11, 126.14, and 126.17 or counterparty exposure under Section 126.18D 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, a Canadian investment 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 126.11B 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) 115% of the amount of its reserves and other |
| obligations under contracts on lives or risks resident or located in Canada. | |
(Source: P.A. 90‑418, eff. 8‑15‑97.) |
(215 ILCS 5/126.11)
Sec. 126.11. 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 126.10B, but not to the limitations of Section 126.10A, except for that of subsection (4) of Section 126.10A, 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 126.10B, |
| but not to the limitations of Section 126.10A, 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 126.10B, |
| but not to the limitations of Section 126.10A, 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 126.10, 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 126.10, 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 will be exempt from the limitation imposed by this subsection.
(Source: P.A. 90‑418, eff. 8‑15‑97.) |
(215 ILCS 5/126.12)
Sec. 126.12. 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 126.16, except the quantitative limitations of Section 126.16D; 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 amount 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 |
| or insured by the insurer or an affiliate of the insurer; | |
(2) Borrow or incur any indebtedness for borrowed |
| money, except for securities lending and reverse repurchase transactions that meet the requirements of Section 126.16 except the quantitative limitations of Section 126.16D; or | |
(3) Acquire an investment if, as a result of such |
| transaction, the aggregate value of securities then loaned or sold to, purchased from or invested in any one business entity under this Section would exceed 10% of the total assets of the investment pool. | |
C. The limitations of Section 126.10A shall not apply to an insurer's investment in an investment pool, however an insurer shall not acquire an investment in an investment pool under this Section if, as a result of and after giving effect to the investment, the aggregate amount of investments then held by the insurer under this Section:
(1) In all investment pools investing in investments |
| permitted under subsection A(2) of this Section would exceed 25% of its admitted assets; or | |
(2) In all investment pools would exceed 35% of its |
| |
D. For an investment in an investment pool to be qualified under this Article, the manager of the investment pool shall:
(1) Be organized under the laws of the United States |
| or a state and designated as the pool manager in a pooling agreement; | |
(2) Be the insurer, an affiliated insurer or a |
| business entity affiliated with the insurer, a qualified bank, a business entity registered under the Investment Advisors Act of 1940 (15 U.S.C. 80a‑1 et seq.), as amended or, in the case of a reciprocal insurer or interinsurance exchange, its attorney‑in‑fact, or in the case of a United States branch of an alien insurer, its United States manager or an affiliate or subsidiary of its United States manager; | |
(3) Be responsible for the compilation and |
| maintenance of detailed accounting records setting forth: | |
(a) The cash receipts and disbursements |
| reflecting each participant's proportionate investment in the investment pool; | |
(b) A complete description of all underlying |
| assets of the investment pool (including amount, interest rate, maturity date (if any) and other appropriate designations); and | |
(c) Other records which, on a daily basis, allow |
| third parties to verify each participant's investment in the investment pool; and | |
(4) Maintain the assets of the investment pool in |
| one or more accounts, in the name of or on behalf of the investment pool, under a custody agreement with a qualified bank. The custody agreement shall: | |
(a) State and recognize the claims and rights of |
| |
(b) Acknowledge that the underlying assets of |
| the investment pool are held solely for the benefit of each participant in proportion to the aggregate amount of its investments in the investment pool; and | |
(c) Contain an agreement that the underlying |
| assets of the investment pool shall not be commingled with the general assets of the custodian qualified bank or any other person. | |
E. The pooling agreement for each investment pool shall be in writing and shall provide that:
(1) An insurer and its affiliated insurers or, in |
| the case of an investment pool investing solely in investments permitted under subsection A(1) of this Section, the insurer and its subsidiaries, affiliates or any pension or profit sharing plan of the insurer, its subsidiaries and affiliates or, in the case of a United States branch of an alien insurer, affiliates or subsidiaries of its United States manager, shall, at all times, hold 100% of the interests in the investment pool; | |
(2) The underlying assets of the investment pool |
| shall not be commingled with the general assets of the pool manager or any other person; | |
(3) In proportion to the aggregate amount of each |
| pool participant's interest in the investment pool: | |
(a) Each participant owns an undivided interest |
| in the underlying assets of the investment pool; and | |
(b) The underlying assets of the investment pool |
| are held solely for the benefit of each participant; | |
(4) A participant, or in the event of the |
| participant's insolvency, bankruptcy or receivership, its trustee, receiver or other successor‑in‑interest, may withdraw all or any portion of its investment from the investment pool under the terms of the pooling agreement; | |
(5) Withdrawals may be made on demand without |
| penalty or other assessment on any business day, but settlement of funds shall occur within a reasonable and customary period thereafter not to exceed 10 business days. Distributions under this paragraph shall be calculated in each case net of all then applicable fees and expenses of the investment pool. The pooling agreement shall provide that the pool manager shall distribute to a participant, at the discretion of the pool manager: | |
(a) In cash, the then fair market value of the |
| participant's pro rata share of each underlying asset of the investment pool; | |
(b) In kind, a pro rata share of each underlying |
| |
(c) In a combination of cash and in kind |
| distributions, a pro rata share in each underlying asset; and | |
(6) The pool manager shall make the records of the |
| investment pool available for inspection by the Director. | |
F. Except for the formation of the investment pool, transactions and between a domestic insurer and an affiliated insurer investment pool shall not be subject to the requirements of Section 131.20a of this Code.
(Source: P.A. 90‑418, eff. 8‑15‑97.) |