CONTACT PERSONS:

August 15, 1997, Governor Edgar signed Senate Bill 801 (PA 90-418) which contains a major rewrite of the Illinois Investment Article. While this new investment article contains many similarities to the NAIC Investments of Insurers Model Act (Defined Limits Version), there are some differences.

Due to the complexity of the topic, any summary of the Bill would tend to confuse rather than inform, so one is not provided here. However, there is one section that will require your immediate attention. New section 126.4 places a requirement on the Board of Directors of an insurer subject to the investment article, to adopt a "written plan for acquiring and holding investments and for engaging in investment practices." Broad guidance for the contents of the plan is provided in Section 126.4 A, and that section requires the Board to adopt a written investment plan within three months of the effective date of the new investment article. For compliance purposes, the three month period ends on November 15, 1997. Section 126.4 C. puts the responsibility on the Board to monitor compliance with the written plan on no less than a quarterly basis. For further details, please review Section 126.4.

Consideration should also be given to the impact the new investment article will have on any asset management agreements that the company may have in place now or in the future. Each company's Board of Directors will be responsible for ensuring that asset managers are operating in compliance with the company's written investment plan.

The new investment article does not require that written investment plans be filed with the Director of Insurance. However, in order to ensure uniform compliance with the guidance in Section 126.4, the Department of Insurance is requesting that all insurers subject to the new investment article submit an affidavit signed by the chairman of the insurer's Board of Directors indicating that the Board has complied with Section 126.4 of the new investment article by adopting a written investment plan that meets the requirements of the article. The affidavit should be submitted to the Illinois Department of Insurance no later than December 1, 1997. Please forward the signed affidavit to Amy Davidson at the Department of Insurance.

This Department intends to review the written investment guidelines in light of the guidance provided in the new investment article for a sample of insurance companies. The review period is expected to last about six months. The Department may make comments on compliance with the guidance in Section 126.4, but will not comment on the soundness of the specific investment strategy. Failure to receive any comments from the Department should not be construed as acceptance of the written investment guidelines.

Copies of Senate Bill 801 (PA 90-418) may be obtained by calling the Office of the Secretary of State, Index Division at 217-782-6537.