Legislation pending in the Illinois General Assembly would impose restrictions on entities and individuals that have a controlling interest in an Illinois domestic insurance company. Senate Bill 2817 would amend Illinois' Insurance Holding Company Act to provide that a person possessing a controlling interest in a domestic insurer could not divest, transfer, donate or otherwise alienate or dispose of a domestic insurer's securities, in whole or in part, without obtaining the prior written consent of the Director of Insurance. Under the Illinois Insurance Holding Company Act, a rebuttable presumption of control exists with respect to any person or entity that directly or indirectly holds 10 percent or more of the voting securities of a domestic insurer. The pending legislation would require a controlling person to make filings and obtain the director's approval (or obtain an exemption from the director) prior to any divestiture. Failure to comply would be a violation of the Illinois Insurance Holding Company Act.
The proposed restriction would apply even to transactions for which no Form A approval would be required. For example, a 20 percent shareholder's sale of any shares in open market transactions apparently could not occur without prior filings with the director and the director's authorization (either consent or exemption). It is not clear whether the restriction would be interpreted to apply to a holding company's issuance of new shares (for example, a public stock offering by a holding company owning an Illinois domestic insurer).
Senate Bill 2817 was passed by the Illinois Senate on March 16, 2010. It survived a first reading in the Illinois House on March 17 and was assigned to the House Insurance Committee on April 8, 2010.