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CHICAGO-A bill passed by the Illinois Legislature to help restore the stability and credibility of the Illinois Insurance Exchange also provides for its dissolution.
The bill, which passed May 31 and awaits Gov. Jim Edgar's signature, gives the state Insurance Department greater oversight of the exchange's solvency, following three syndicate insolvencies during an eight-month period spanning late 1996 and early 1997 (BI, March 10).
However, new provisions in the final version of the bill also would amend the Insurance Exchange article of the Illinois Insurance Code to:
Authorize dissolution of the current Chicago-based exchange.
"There is not a plan for the dissolution of the existing exchange. However, the bill expressly provides authority for it and clarifies some procedural aspects," said James E. Tait, the IIE's president and chief executive officer. "I wouldn't want to predict a dissolution, but it is an alternative that is provided for," he added.
Authorize creation of "an additional exchange."
"There are definitely plans" with unnamed investors to consider establishing an additional exchange to deal with "substantially different" types of risk, such as untraditional "securitization" products, Mr. Tait said.
Require any new syndicate to organize under the Illinois Insurance Code.
"While existing syndicates would not have to reorganize, new syndicates would have to organize under the Illinois Insurance Code," said Arnold Dutcher, chief deputy director of the Illinois Department.
This provision is designed to enhance the Insurance Department's authority over any IIE syndicate by banning future syndicates organized under the Illinois business code or other states' insurance codes, he said.
Other provisions of the bill, which was sponsored by State Rep. Frank Mautino, D-Spring Valley, give the Insurance Department responsibility for examining the financial records of the exchange, which it previously reviewed annually.
The bill imposes new financial reporting requirements on syndicates, which will have to file quarterly statements, actuarial opinions and audited financial reports with the department.
The bill also creates an Executive Committee, which will consist of three of five public trustees on the IIE's 13-member board. That committee will oversee IIE operations, though it will be subject to a nine-member majority of the board.
Insurance Department regulators are currently reviewing the bill, Mr. Dutcher said. He said he expects the department will ask the governor to sign it, because the IIE appears to have included all the solvency-related measures regulators sought.