(215 ILCS 5/179E‑15)
Sec. 179E‑15. Definitions. For purposes of this Article, the following terms have the indicated meanings:
"Aggregate limit" means the maximum sum payable to the ceding insurer under an SPRV contract.
"Ceding insurer" means one or more insurers or reinsurers under common control that enters into an SPRV contract with an SPRV.
"Control" (including the terms "controlling," "controlled by" and "under common control with") means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract other than a commercial contract for goods or non‑management services, or otherwise, unless the power is the result of an official position with or corporate office held by the person. Control shall be presumed to exist if any person, directly or indirectly, owns, controls, holds with the power to vote, or holds proxies representing, 10% or more of the voting securities of any other person. This presumption may be rebutted by a showing that control does not, in fact, exist. Notwithstanding the foregoing, for purposes of this Article, the fact that an SPRV exclusively provides reinsurance to a ceding insurer under an SPRV contract shall not by itself be sufficient grounds for a finding that the SPRV or the SPRV organizer or owner is controlled by or under common control with the ceding insurer.
"Fair Value" means:
(1) as to cash, the amount thereof; and
(2) as to an asset other than cash:
(A) the amount at which that asset could be |
| bought or sold in a current transaction between arms‑length, willing parties; | |
(B) quoted market price for the asset in active |
| markets should be used if available; and | |
(C) if quoted market prices are not available, a |
| value determined using the best information available considering values of like assets and other valuation methods, such as present value of future cash flows, historical value of the same or similar assets or comparison to values of other asset classes the value of which have been historically related to the subject asset. | |
"Fully funded" means that, with respect to an SPRV contract, the fair value of the assets held in trust by or on behalf of the SPRV under the SPRV contract on the date on which the SPRV contract is effected, equals or exceeds the aggregate limit as defined in this Article.
"Indemnity trigger" means a transaction term by which the SPRV's obligation to pay the ceding insurer for losses covered by an SPRV contract is triggered by the ceding insurer incurring a specified level of losses.
"Insolvency" or "insolvent" means that the SPRV is unable to pay its obligations when they are due, unless those obligations are the subject of a bona fide dispute.
"Non‑indemnity trigger" means a transaction term by which the SPRV's obligation to pay the ceding insurer under an SPRV contract arises from the occurrence or existence of some event or condition other than the ceding insurer incurring a specified level of losses under its insurance or reinsurance contracts.
"Permitted investments" means those investments that meet the qualifications set forth in Section 179E‑85.
"Qualified U.S. financial institution" means, for purposes of meeting the requirements of a trustee under this Article, a financial institution that is eligible to act as a fiduciary of a trust, and that is:
(1) organized or, in the case of a U.S. branch or |
| agency office of a foreign banking organization, licensed, under the laws of the United States or any state of the United States; and | |
(2) regulated, supervised, and examined by federal |
| or state authorities having regulatory authority over banks and trust companies. | |
"Special purpose reinsurance vehicle" or "SPRV" means an entity, domiciled in and organized under the laws of this State, that has received a limited certificate of authority from the Director under this Article exclusively for the limited purpose of entering into and effectuating SPRV insurance securitizations, SPRV contracts, and other related transactions permitted by this Article.
"SPRV contract" means a contract between the SPRV and the ceding insurer pursuant to which the SPRV agrees to pay the ceding insurer an agreed amount upon the occurrence of a triggering event.
"SPRV insurance securitization" means a package of related risk transfer instruments and facilitating administrative agreements by which proceeds are obtained by an SPRV through the issuance of securities, which proceeds are held in trust pursuant to the requirements of this Article to secure the obligations of the SPRV under an SPRV contract with one or more ceding insurers, wherein the SPRV's obligation to return the full initial investment to the holders of those securities, pursuant to the transaction terms, is contingent upon those funds not being used to pay the obligations of the SPRV to the ceding insurers under the SPRV Contract.
"SPRV organizer" means one or more persons who have organized or intend to organize an SPRV under authority obtained pursuant to Section 179E‑20.
"SPRV securities" means the securities issued by an SPRV.
"Triggering event" means an event or condition that, if and when it occurs or exists, obligates the SPRV to make a payment to the ceding insurer under the provisions of an SPRV contract.
(Source: P.A. 92‑124, eff. 7‑20‑01.) |
(215 ILCS 5/179E‑20)
Sec. 179E‑20. Limited certificate of authority.
(a) Within 30 days after receipt by the Director of a complete filing by the prospective SPRV organizer for authority to form or acquire an SPRV, which SPRV shall exist and operate expressly for the limited purposes set forth in this Article, the application shall be deemed approved and a limited certificate of authority shall be issued, unless before the expiration of the 30‑day period the Director approves or disapproves the application in writing. A limited certificate of authority may not be issued unless the country or state of domicile of each ceding insurer has notified the Director in writing that they have not disapproved the transaction. A complete filing of the application must include the following:
(1) an affidavit verifying that each prospective |
| SPRV organizer the SPRV meets the requirements as set forth in this Article; | |
(2) a representation that the prospective SPRV |
| organizer intends to form an SPRV to operate in accordance with the requirements set forth in this Article; | |
(3) the proposed name of the subject SPRV;
(4) biographical descriptions of each SPRV organizer |
| setting forth their legal names, any names under which they have or are conducting their affairs, and any affiliations with other persons as defined in Article VIII 1/2, together with such other biographical information as the Director may request; | |
(5) the source and form of the minimum capital to be |
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(6) any persons with which the SPRV is or, upon |
| formation, will be affiliated as defined in Article VIII 1/2; | |
(7) the names and biographical information of the |
| proposed members of the board of directors and principal officers of the SPRV, setting forth their legal names, any names under which they have or are conducting their affairs and any affiliations with other persons as defined in Article VIII 1/2, together with such other biographical information as the Director may request; and | |
(8) a plan of operation, consisting of a description |
| of the contemplated insurance securitization, the SPRV contract, and related transactions, which plan of operation must include: | |
(A) draft documentation or, at the discretion of |
| the Director, a written summary, of all material agreements that will be entered into to effectuate the insurance securitization and the related SPRV contract, including the names of the ceding insurers, the nature of the risks being assumed, and the maximum amounts, purpose, nature, and interrelationships of the various transactions required to effectuate the insurance securitization; | |
(B) the investment strategy of the SPRV and a |
| representation that (i) the investment strategy complies with the investment requirements set forth in this Article and (ii) includes investment practices or other provisions to preserve asset values that will facilitate attainment of full funding during the term of the securitization with assets that can be monetized in response to a triggering event without a substantial loss in value; | |
(C) a description of the method by which losses |
| covered by the SPRV contract that may develop after the termination of the contract period are to be addressed under the provisions of the SPRV contract; and | |
(D) a representation that the trust agreement |
| and the trusts holding assets that secure the obligations of the SPRV under the SPRV contract and the SPRV contract with the ceding insurers in connection with the contemplated insurance securitization will be structured in accordance with the requirements set forth in this Article. | |
(b) The Director may not approve the application or issue a limited certificate of authority until he or she has found that the proposed plan of operation provides a reasonable expectation of a successful operation, based on the proposed SPRV organizer, directors, and officers being of known good character and that there is no good reason to believe that they are affiliated, directly or indirectly, through ownership, control, management, reinsurance transactions, or other insurance or business relations with any person or persons known to have been involved in the improper manipulation of assets, accounts or reinsurance.
(c) Upon approval by the Director of the application and the issuance of a limited certificate of authority, the SPRV may be acquired or formed and, in accordance with the approved plan of operation, the SPRV may enter into contracts and conduct other activities within the parameters set forth in the filed plan of operation.
(d) The limited certificate of authority so issued shall state that the SPRV's authorization to be involved in the business of reinsurance is limited to only the reinsurance activities that the SPRV is allowed to conduct under this Article.
(e) The SPRV organizer must provide a complete set of the documentation of the insurance securitization to the Director upon closing of the transactions including, but not limited to, an opinion of legal counsel with respect to compliance with this and any other applicable laws as of the effective date of the transaction. Any material change of the SPRV's plan of operation described in items (1) through (8) of subsection (a) including, but not limited to, the issuance of new securities to continue the securitization activities of the SPRV under this Article after expiration and full satisfaction of the initial securitization transactions, requires prior approval of the Director, however, a change in the counterparty to swap transactions for an existing securitization as allowed under this Article shall not be deemed a material change. Any material change that is not disapproved by the Director in writing within 15 days after its submission shall be deemed approved.
(Source: P.A. 92‑124, eff. 7‑20‑01.) |
(215 ILCS 5/179E‑30)
Sec. 179E‑30. Approved transactions and operation of SPRVs.
(a) SPRVs authorized under this Article may at any given time enter into and effectuate SPRV contracts with one or more ceding insurers, provided that the SPRV contracts obligate the SPRV to indemnify the ceding insurer for losses and that contingent obligations of the SPRV under the SPRV contracts are securitized in full through a single SPRV insurance securitization and are fully funded and secured with assets held in trust in accordance with the requirements of this Article pursuant to agreements contemplated by this Article and invested in a manner that meets the criteria set forth in Section 179E‑85 of this Article.
(b) An SPRV may enter into such agreements with third parties and conduct such business as is necessary to fulfill its obligations and administrative duties incident to the insurance securitization and the SPRV contract. The agreements may include entering into swap agreements or other transactions that have the objective of leveling timing differences in funding up‑front or ongoing transaction expenses or managing credit or interest rate risk of the investments in trust to assure that the assets held in trust will be sufficient to satisfy (i) payment or repayment of the securities issued pursuant to an insurance securitization transaction or (ii) the obligations of the SPRV under the SPRV contract. In fulfilling its function, the SPRV shall adhere to the following requirements and shall, to the extent of its powers, ensure that contracts obligating other parties to perform certain functions incident to its operations are substantively and materially consistent with the following requirements and guidelines:
(1) An SPRV shall have a distinct name, which shall |
| include the designation "SPRV". The name of the SPRV may not be deceptively similar to, or likely to be confused with or mistaken for, any other existing business name registered in this State. | |
(2) Unless otherwise provided in the plan of |
| operation, the principal place of business and office of any SPRV organized under this Article must be located in this State. | |
(3) The assets of an SPRV must be preserved and |
| administered by or on behalf of the SPRV to satisfy the liabilities and obligations of the SPRV incident to the insurance securitization and other related agreements, including the SPRV contract. | |
(4) Assets of the SPRV that are pledged to secure |
| obligations of the SPRV to a ceding insurer under an SPRV contract must be held in trust and administered by a qualified U.S. financial institution. The qualified U.S. financial institution may not control, be controlled by, or be under common control with, the SPRV or the ceding insurers. | |
(5) The agreement governing any trust must create |
| one or more trust accounts into which all pledged assets must be deposited and held until distributed in accordance with the trust agreement. The pledged assets must be held by the trustee at the trustee's office in the United States and may be held in certificated or electronic form. | |
(6) The provisions for withdrawal by ceding insurers |
| of assets from the trust shall be clean and unconditional, subject only to the following requirements: | |
(A) the ceding insurer shall have the right to |
| withdraw assets from the trust account at any time, without notice to the SPRV, subject only to written notice to the trustee from the ceding insurer that funds in the amount requested are due and payable by the SPRV; | |
(B) no other statement or document need be |
| presented in order to withdraw assets, except the ceding insurer may be required to acknowledge receipt of withdrawn assets; | |
(C) the trust agreement must indicate that it is |
| not subject to any conditions or qualifications outside of the trust agreement; | |
(D) the trust agreement may not contain |
| references to any other agreements or documents; and | |
(E) no reference may be made to the fact that |
| the funds may represent reinsurance premiums or that the funds have been deposited for any specific purpose. | |
(7) The trust agreement must be established for the |
| sole use and benefit of the ceding insurer at least to the full extent of the SPRV's obligations to the ceding insurer under the SPRV contract. If there is more than one ceding insurer, a separate trust agreement must be entered with each ceding insurer and a separate trust account must be maintained for each ceding insurer. | |
(8) The trust agreement must provide for the trustee |
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(A) receive assets and hold all assets in a safe |
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(B) determine that all assets are in a form so |
| that the ceding insurer or the trustee, upon direction by the ceding insurer may, whenever necessary, negotiate any the assets, without consent or signature from the SPRV or any other person or entity; | |
(C) furnish to the SPRV, the Director, and the |
| ceding insurer a statement of all assets in the trust account reported at fair value upon its inception and at intervals no less frequent than the end of each calendar quarter; | |
(D) notify the SPRV and the ceding insurer, |
| within 10 days, of any deposits to or withdrawals from the trust account; | |
(E) upon written demand of the ceding insurer, |
| immediately take any and all steps necessary to transfer absolutely and unequivocally all right, title, and interest in the assets held in the trust account to the ceding insurer and deliver physical custody of the assets to the ceding insurer; and | |
(F) allow no substitutions or withdrawals of |
| assets from the trust account, except on written instructions from the ceding insurer. | |
(9) The trust agreement must provide that at least |
| 30 days, but not more than 45 days, before termination of the trust account, written notification of termination shall be delivered by the trustee to the ceding insurer. | |
(10) The trust agreement may be made subject to and |
| governed by the laws of any state, in addition to the requirements for the trust as provided in this Article, provided that the state is disclosed in the plan of operation filed with and approved, or deemed approved, by the Director under Section 179E‑20. | |
(11) The trust agreement must prohibit invasion of |
| the trust corpus for the purpose of paying compensation to, or reimbursing the expenses of, the trustee. | |
(12) The trust agreement must provide that the |
| trustee shall be liable for its own negligence, willful misconduct, or lack of good faith. | |
(13) Notwithstanding the provisions of items (6)(C), |
| (6)(D), and (6)(E) of this subsection or item (14)(E) of this subsection, when a trust agreement is established in conjunction with an SPRV contract, then the trust agreement may provide that the ceding insurer must undertake to use and apply any amounts drawn upon the trust account, without diminution because of the insolvency of the ceding insurer or the SPRV, for the following purposes: | |
(A) to pay or reimburse the ceding insurer |
| amounts due to the ceding insurer under the specific SPRV contract including, but not limited to, unearned premiums due to the ceding insurer, if not otherwise paid by the SPRV in accordance with the terms of the agreement; or | |
(B) when the ceding insurer has received |
| notification of termination of the trust account, and when the SPRV's entire "obligations" under the specific SPRV contract remain unliquidated and undischarged 10 days prior to the termination date, to withdraw amounts equal to those obligations and deposit those amounts in a separate account, in the name of the ceding insurer, in any qualified U.S. financial institution, apart from its general assets, in trust for those uses and purposes specified in item (13)(A) of this subsection as may remain executory after the withdrawal and for any period after the termination date. "Obligations" within the meaning of this subsection may, without duplication, include: | |
(i) losses and loss expenses paid by the |
| ceding insurer, but not recovered from the SPRV; | |
(ii) reserves for losses reported and |
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(iii) reserves for losses incurred but not |
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(iv) reserves for loss expenses;
(v) reserves for unearned premiums; and
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