Illinois Administrative Code › Title 50 - INSURANCE › Part 205 - MUNICIPAL BOND INSURANCE › Section 205.60 - Financial Statements

Current through Register Vol. 48, No. 28, July 12, 2024
a) A
			 municipal bond insurer shall maintain an unearned premium reserve computed to
			 show gross premiums, without any deductions, received and receivable upon all
			 unexpired risks, net of reinsurance, on a monthly pro rata basis, except that
			 in the case of premiums paid more than one (1) year in advance, the premiums
			 shall be earned proportionally with the expiration of exposure, or by such
			 other method which will correlate the expiration of exposure with the premium
			 earned as the Director may prescribe or approve when the company's exposure to
			 loss does not correlate with the passage of time.
b) In addition to the contingency reserve, a
			 municipal bond insurer shall compute and maintain reserves for losses and loss
			 adjustment expenses for claims reported and unpaid determined by use of the
			 case basis method or, when the requirements of Section 378 of the Insurance
			 Code will not be met by the case basis method, such other methods as the
			 Director may prescribe or approve which produces the reserves required by
			 Section 378 of the Insurance Code. (Ill. Rev. Stat. 1985, ch. 73, par. 990).
1) Except as otherwise permitted by the
			 Director, no deduction shall be made for anticipated salvage in computing case
			 basis loss reserves unless such salvage is held by or under the control of the
			 insurer and would qualify as an admitted asset under Section 3.1 of the
			 Illinois Insurance Code (Ill. Rev. Stat. 1985, ch. 73, par. 615.1 ) or unless
			 such salvage constitutes or is secured by a clean, irrevocable letter of
			 credit.
2) A deduction from
			 reserves for losses shall be allowed for the time value of money by application
			 of a discount rate equal to the average rate of return on the admitted assets
			 of the insurer as of the date of the computation of any such reserve. The
			 discount rate shall be adjusted annually on the last day of each year. No
			 deduction from reserves for losses shall be otherwise allowed for the time
			 value of money unless the insurer can satisfy the Director that bonds, notes
			 and other fixed income investment, as authorized under Sections 124 through
			 125.24 a of the Illinois Insurance Code (Ill. Rev. Stat. 1985, ch. 73, pars.
			 736 through 737.24 a inclusive) sufficient to meet obligations for insured
			 unpaid principal and insured unpaid interest calculated to the redemption of
			 the defaulted issue have been deposited in trust for the purpose of meeting
			 such obligations.
3) If the insured
			 principal and interest on a defaulted issue of bonds due and payable over the
			 period of the next three years exceeds ten percent (10%) of the insurer's
			 policyholders' surplus plus its contingency reserve, and such default is a
			 default in payment of sums due, the insurer's reserve shall be supported by a
			 report from a qualified independent source if the reserve is set up for less
			 than the entire unpaid insured principal and unpaid insured interest to
			 redemption.