Section 205.40 Requirements

Section 205

Section 205.40  Requirements

a)         Any direct insurer issuing contracts insuring municipal bonds

must:

1)         be authorized to write the kinds of business defined in Class

2(g) and 2(h) of Section 4 of the Illinois Insurance Code (Ill. Rev. Stat.

1985, ch. 73, par. 616), and

2)         have a policyholders' surplus and contingency reserve of not

less than $50,000,000 as shown by its last annual statement on file with the

Director.

b)         Any insurer issuing contracts insuring municipal bonds shall

establish a contingency reserve which shall consist of allocations of sums

representing fifty percent (50%) of the earned premiums on policies insuring

municipal bonds.  Allocations to such reserve made during each calendar year

shall be maintained for a period of at least 240 months, except that

withdrawals may be made by the company in any year and to the extent that the

actual incurred losses on policies insuring municipal bonds exceed thirty-five

percent (35%) of the earned premiums thereon or, notwithstanding the foregoing,

withdrawals may be made by the company in any year and to the extent that the

contingency reserve equals or exceeds one half of one percent (½%) of the

cumulative net liability.  No such release shall be made without written notice

to the Director.