The Illinois House of Representatives has passed a new bill, HB 5534, entitled the Insurance Business Transfer Act (the “IL IBT Act”), to address the current significant limitations that are in place concerning the sale and transfer of blocks of insurance. Under the IL IBT Act, an insurer seeking to transfer and novate existing in-force policies to an assuming insurer (the “Applicant”) must first submit a business insurance transfer plan to the Illinois Director of Insurance (the “Director”). The transfer plan consists of a summary of the plan for transferring the subject business, a description of the subject business, the most recent audited financial statements of the Applicant, pro forma financial statements projecting the performance of the subject business for the 3 years following the proposed transfer, a report expressing the opinion of an independent expert regarding the likely effects of the transfer plan on policyholders, reinsurers, and claimants, among various other components. Once the plan is deemed complete, the Director will then have 60 days (with a potential 30 day extension at the Director’s discretion) to review the plan. Unless the Director determines that the plan would have a material adverse impact on the interests of policyholders and other stakeholders, the Director shall authorize the submission of the plan to a court for review.
The Applicant must then file its transfer plan with a court within 30 days of receiving authorization from the Director. Following such filing, the Applicant shall file a verified petition for implementation of the transfer plan which informs the court of the reasons why the Applicant believes the court should find that the plan will not result in a material adverse impact to policyholders, reinsurers, or claimants affected by the proposed transfer. The court will then schedule a hearing on the petition. The IL IBT Act requires the Applicant to notify the chief insurance regulator in each jurisdiction in which the Applicant is licensed and in which policies that are part of the subject business were issued, all relevant state insurance guarantee associations, the Applicant’s reinsurers, and all affected policyholders of the petition and hearing. The Applicant is further required to publish notice of the petition and hearing in a newspaper of general circulation in the state in which the applicant has its principal place of business. If the court finds that the implementation of the plan would not materially adversely affect the interests of policyholders, reinsurers, or claimants, the court will at that point enter a judgement and implementation order.
The IL IBT Act is currently pending assignment to a committee of the Illinois Senate. We will continue to monitor the progress of the IL IBT Act through the Illinois Legislature.