Illinois Administrative Code
Title 50 - INSURANCE
Part 1104 - CREDIT FOR REINSURANCE CEDED
Section 1104.80 - Letters of Credit Qualified Under Section 1104.60
Current through Register Vol. 48, No. 12, March 22, 2024
a) The letter of credit must be clean, irrevocable and unconditional and issued or confirmed by a qualified U.S. financial institution as defined in Section 173.1(3)(A) of the Code. The letter of credit shall contain an issue date and date of expiration and shall stipulate that the beneficiary need only draw a sight draft under the letter of credit and present it to obtain funds and that no other document need be presented. The letter of credit shall also indicate that it is not subject to any condition or qualifications outside of the letter of credit. In addition, the letter of credit itself shall not contain reference to any other agreements, documents or entities, except as provided in subsection (i)(1). As used in this Section, "beneficiary" means the domestic insurer for whose benefit the letter of credit has been established and any successor of the beneficiary by operation of law. If a court of law appoints a successor in interest to the named beneficiary, then the named beneficiary includes and is limited to the court appointed domiciliary receiver (including conservator, rehabilitator or liquidator).
b) The heading of the letter of credit may include a boxed section that contains the name of the applicant and other appropriate notations to provide a reference for the letter of credit. The boxed section shall be clearly marked to indicate that the information is for internal identification purposes only.
c) The letter of credit shall contain a statement to the effect that the obligation of the qualified U.S. financial institution under the letter of credit is in no way contingent upon reimbursement of the letter of credit.
d) The term of the letter of credit shall be for at least one year and shall contain an "evergreen clause" that prevents the expiration of the letter of credit without due notice from the issuer. The "evergreen clause" shall provide for a period of no less than 30 days' notice prior to the expiration date or nonrenewal.
e) The letter of credit shall state whether it is subject to and governed by the laws of this State or the "ICC Uniform Customs and Practice for Documentary Credits" (ICC Publication No. 600, July 2007) (UCP 600) or the "International Standby Practices of the International Chamber of Commerce" (ICC Publication No. 590, January 1999) (ISP98) (ICC Publishing, Inc., 1212 Avenue of the Americas, New York NY 10036 (no later amendments or editions)), and all drafts drawn under the letter of credit shall be presentable at an office in the U.S. of a qualified U.S. financial institution.
f) If the letter of credit is made subject to the UCP 600 or ISP98, the letter of credit shall specifically address and make provision for an extension of time to draw against the letter of credit in the event that one or more of the occurrences specified in Article 36 of UCP 600 occur.
g) The letter of credit shall be issued or confirmed by a qualified U.S. financial institution authorized to issue letters of credit, pursuant to Section 173.1(3)(A) of the Code.
h) If the letter of credit is issued by a nonqualified financial institution and is confirmed by a qualified U.S. financial institution as described in subsection (a), then the following additional requirements shall be met:
i) Reinsurance Agreement Provisions
j) A letter of credit may not be used to reduce any liability for reinsurance ceded to an unauthorized assuming insurer in financial statements required to be filed with the Department unless an acceptable letter of credit with the filing ceding insurer as beneficiary has been issued on or before the date of filing of the financial statement. Further, the reduction for the letter of credit may be up to the amount available under the letter of credit but no greater than the specific obligation under the reinsurance agreement that the letter of credit was intended to secure.