Illinois Compiled Statutes Farm Mutual Insurance Company Act of 1986
215 ILCS 120/

1. companies organized or operating prior to the effective date of this Act, under an Act entitled, "An Act relating to local mutual district, county and township insurance companies", approved March 13, 1936, as amended, and

2. any fire insurance company, corporation or association operating in this State under a special charter and heretofore subject to "An Act relating to local mutual district, county and township insurance companies", approved March 13, 1936, as amended.

1. Cash funds held in the company's office and under the company's control.

2. Interest due and accrued on bonds, certificates of deposit and other investments permitted by this Act that are not in default.

3. Dividends declared and unpaid on mutual funds, common stock, and preferred stock, permitted by this Act.

4. Amounts recoverable from solvent insurance companies licensed to do business in this State.

5. Tax refunds due from the United States or the State of Illinois.

6. Premiums receivable on policies not over 90 days past due. The due date of the premium shall be considered to be the first day of the coverage period for which the premium is payable.

1. Any company operating under this Act is authorized to insure or to accept reinsurance from other farm mutual companies against loss or damage by:

   1. any peril or perils, except earthquake, resulting in physical loss or damage to property;

   2. animal mortality;

   3. consequential loss coverages if written in conjunction with the policy providing direct coverage for same.

2. A company authorized under this Act may insure against loss or damage by the perils of wind, only if such company has and maintains policyholders' surplus equal to or greater than $100,000.

3. A company may undertake to insure against the peril of flood to the extent such company is reinsured pursuant to the National Flood Insurance Program, and only if such company has and maintains policyholders' surplus equal to or greater than $100,000.

1. A farm mutual company may amend its articles of incorporation in any respect not in violation of this Act.

2. Amendments to the articles shall be made in the following manner:

   The board of directors shall adopt a resolution to amend the articles of incorporation and sign a Statement of Directors setting forth such resolution and deliver the Statement of Directors in duplicate to the Director of Insurance together with duplicate copies of the restated articles of incorporation to be approved or disapproved by the Director. If approved, the Director shall place on file in his office all of the documents so delivered to him except one of the duplicate originals of the amended articles of incorporation which shall be delivered to the farm mutual insurance company. The farm mutual insurance company shall file the duplicate original copy of the amended articles of incorporation for record, within 15 days after it has been delivered to the farm mutual insurance company, in the office of the Recorder of the domiciliary county.

3. Amended articles must set forth:

   1. The corporate name which must include the words "Mutual Insurance Company".

   2. The location of its principal office: city and county.

   3. The period of duration, which may be perpetual.

   4. The kinds of insurance as provided in Section 5 of this Act, in which it proposes to write.

   5. The exact number, terms of office of and the manner of electing the members of the board.

   6. The date, time and place of the annual meeting of members.

   7. The territory in which the farm mutual insurance company operates, pursuant to Sections 6 and 7 of this Act.

4. Each farm mutual insurance company shall hold an annual meeting of its members on the date and time and at the place specified in its articles of incorporation; immediately thereafter, a separate meeting of the board of directors shall be held for the purpose of electing officers. The annual meeting shall be held on or before the first day of May and shall be held in the domiciliary county where the home office of the company is located. At such meeting the Treasurer shall present an annual statement showing the condition of the company on December 31 of the preceding year. Notice of the annual meeting of the members shall be stamped or printed in or on the policy.

5. The number of directors shall not be less than 7, nor more than 15 members, a majority of whom shall constitute a quorum to do business, to be elected by ballot of the members and who shall be elected in the manner and for the length of time prescribed in the articles of incorporation. Directors may be elected for a period of no more than 3 years. No more than one-half of the directors shall be elected in any one year. Said election shall be held at the annual meeting of the company. Every person insured shall be entitled to one vote and may cast the same in person or by proxy. Vacancies on the board shall be filled by the remaining directors until the next annual meeting.

   The directors shall elect from their number a president and at their option a vice president, and such additional officers as they may deem necessary, and shall also elect a treasurer, and a Secretary, who may or may not be a member of the company. The offices of Secretary and treasurer may be occupied by one person. All of such officers shall hold their office for one year, and until their successors are elected and qualified.

6. The company shall prepare and maintain a surety bond on any person handling company funds and on any officer, director, or employee for the faithful performance of his duties, in such amounts pursuant to the regulations promulgated by the Director. (see Admin Code 3501.50  and the chart can be found in Exhibit R)

(a) Until the date that is 5 years after the effective date of this amendatory Act of the 103rd General Assembly this subsection (a) applies:

• (1) Farm mutual insurance companies are permitted to insure the following classes of property:
• (A) Farm property, including residences and other farm buildings and all classes of personal property in connection therewith, other than motor vehicles required to be licensed for road use, including such property temporarily located elsewhere;
• (B) Growing crops;
• (C) Buildings and personal property used in the processing of agricultural products in conjunction with a farming operation;
• (D) Residences, including household and personal effects, and including such property temporarily located elsewhere;
• (E) Churches, schools and community buildings and such property as may be properly contained therein.
• No farm mutual insurance company may insure any property within the limits of any city containing over 50,000 inhabitants at the time of the organization of the company.
• (2) No farm mutual insurance company authorized to write the kinds of insurance enumerated in Section 5 of this Act may expose itself to any loss on any one risk in an amount in excess of $20,000 plus 10% of its policyholders' surplus in excess of $20,000.
• A farm mutual insurance company insuring against the perils of wind or hail must have and maintain adequate catastrophic reinsurance.
• A farm mutual insurance company converting from unlimited catastrophic reinsurance to adequate catastrophic reinsurance under this Section shall provide notice of the change to policyholders in a form approved by the Director of Insurance.
• A farm mutual insurance company must additionally have and maintain aggregate reinsurance coverage in an amount no less than that required for a 250-year event, based on an actuarially sound catastrophe model.
• The reinsurance permitted or required by this Section must be provided by (i) a farm mutual insurance company, (ii) an insurance company authorized to write the kinds of insurance described in Class 2 or Class 3 of Section 4 of the Illinois Insurance Code, or (iii) a reinsurer and reinsurance program meeting the standards set forth in Article XI of the Illinois Insurance Code that permit a domestic company to take credit for reinsurance.
• Nothing in this Section shall be construed to prohibit a farm mutual insurance company from purchasing reinsurance coverage greater than the minimum requirement set forth under this Section, including purchasing unlimited catastrophic coverage.
• For purposes of this Section:
• A single risk shall be all real and personal property in one fixed location and not separated by 50 feet.
• "Adequate catastrophic reinsurance" means reinsurance in an amount no less than that required for a 500-year event, based on an actuarially sound catastrophe model that limits the company's exposure on any one loss occurrence to (i) 20% of its policyholders' surplus or (ii) an amount authorized by the Director of Insurance.
• As regards the peril of wind or hail, the term "loss occurrence" shall mean all losses occasioned by tornadoes, cyclones, windstorms, hurricanes, or hail stones arising from the same atmospheric disturbance and occurring during any continuous period of not less than 48 hours.
• (3) Whenever the company's financial condition is such that the further assumption of risks might be hazardous to policyholders, the Director of Insurance may order the company to take one or more of the following steps:
• (A) To reduce the loss exposure by reinsurance;
• (B) To reduce the volume of business being written or renewed;
• (C) To suspend the writing of new business;
• (D) To suspend the writing of both new and renewal business;
• (E) To levy a special assessment of policyholders;
• (F) To reduce general or acquisition expenses by specified methods.
• (4) Whenever the Director determines that a farm mutual insurance company is insolvent he shall order the farm mutual insurance company to levy a special assessment within 30 days of receipt of such order. If the insolvency is not corrected within 90 days of the mailing of such assessment, the company shall be subject to liquidation pursuant to Article XIII of the Illinois Insurance Code.

(b) On and after the date that is 5 years after the effective date of this amendatory Act of the 103rd General Assembly this subsection (b) applies:

• (1) Farm mutual insurance companies are permitted to insure the following classes of property:
• (A) Farm property, including residences and other farm buildings and all classes of personal property in connection therewith, other than motor vehicles required to be licensed for road use, including such property temporarily located elsewhere;
• (B) Growing crops;
• (C) Buildings and personal property used in the processing of agricultural products in conjunction with a farming operation;
• (D) Residences, including household and personal effects, and including such property temporarily located elsewhere;
• (E) Churches, schools and community buildings and such property as may be properly contained therein.
• No farm mutual insurance company may insure any property within the limits of any city containing over 50,000 inhabitants at the time of the organization of the company.
• (2) No farm mutual insurance company authorized to write the kinds of insurance enumerated in Section 5 of this Act may expose itself to any loss on any one risk in an amount in excess of $20,000 plus 10% of its policyholders' surplus in excess of $20,000.
• A farm mutual insurance company insuring against the perils of wind or hail must have and maintain catastrophic reinsurance which limits the company's exposure on any one loss occurrence to 20% of its policyholders' surplus.
• No portion of any such risk which has been reinsured with a farm mutual insurance company or an insurance company authorized to write the kinds of insurance described in Class 2 or Class 3 of Section 4 of the Illinois Insurance Code shall be included in determining the limitation of risk described herein.
• For purposes of this Section:
• A single risk shall be all real and personal property in one fixed location and not separated by 50 feet.
• As regards the peril of wind or hail, the term "loss occurrence" shall mean all losses occasioned by tornadoes, cyclones, windstorms, hurricanes, or hail stones arising from the same atmospheric disturbance and occurring during any continuous period of not less than 48 hours.
• (3) Whenever the company's financial condition is such that the further assumption of risks might be hazardous to policyholders, the Director of Insurance may order the company to take one or more of the following steps:
• (A) To reduce the loss exposure by reinsurance;
• (B) To reduce the volume of business being written or renewed;
• (C) To suspend the writing of new business;
• (D) To suspend the writing of both new and renewal business;
• (E) To levy a special assessment of policyholders;
• (F) To reduce general or acquisition expenses by specified methods.
• (4) Whenever the Director determines that a farm mutual insurance company is insolvent he shall order the farm mutual insurance company to levy a special assessment within 30 days of receipt of such order. If the insolvency is not corrected within 90 days of the mailing of such assessment, the company shall be subject to liquidation pursuant to Article XIII of the Illinois Insurance Code

1. Direct obligations of the United States of America, or obligations of agencies or instrumentalities

   of the United States to the extent guaranteed or insured as to the payment of principal and interest

   by the United States of America;

2. Bonds which are direct, general obligations of the State of Illinois or any other state subject to the

   following conditions:

   (a) Maximum of 30% of admitted assets in states other than Illinois in the aggregate:

3. Bonds which are direct, general obligations of political subdivisions of the State of Illinois or any

   other state, subject to the following conditions:

   (a) Maximum of 5% of admitted assets in any one political subdivision;

   (b) Maximum of 30% of admitted assets in all political subdivisions in the aggregate;

   (c) Subject to a rating of A3 or higher by Moody’s or A- or higher by Standard & Poor’s;

4. Bonds, notes, debentures, or other similar obligations of the United States of America, its

   agencies, and its instrumentalities subject to a maximum investment of 10% of admitted assets in

   any one entity;

5. Bonds that are obligations of corporations organized by the United States of America – subject to

   the following conditions:

   (a) Maximum of 5% of admitted assets in any one entity;

   (b) Maximum of 15% of admitted assets in the aggregate;

   (c) Subject to a rating of A3 or higher by Moody’s or A- or higher by Standard & Poor’s;

   (d) Subject to a maximum maturity of no longer that 10 years.

6. Mutual funds, Unit Investment Trusts and Exchange Traded Funds subject to the following

   conditions:

   (a) Maximum of 6% of policyholders' surplus in any one balanced or growth mutual fund that

   invests in common stock;

   (b) Maximum of 5% of admitted assets in any one bond or income mutual fund or any one nongovernmental

   money market mutual fund;

   (c) Maximum of 10% of admitted assets in any one governmental money market mutual fund;

   (d) Maximum of 25% of admitted assets in all mutual funds in the aggregate;

7. Common stock and preferred stock subject to the following conditions:

   (a) Common stock and preferred stock shall be traded on the New York Stock Exchange or the

   American Stock Exchange or listed on the National Association of Securities Dealers

   Automated Quotation (NASDAQ) system;

   (b) Maximum of 3% of policyholders' surplus in excess of $400,000 in any one common stock or

   preferred stock issuer provided that the net unearned premium reserve does not exceed

   policyholders' surplus;

8. Investments authorized under subdivision (a) of item (6) and subdivision (a) of item (7) of this

   Section shall not in the aggregate exceed 15% of policyholders' surplus;

9. Funds on deposit in solvent banks and savings and loan associations which are insured by the

   Federal Deposit Insurance Corporation; however, the uninsured portion of funds held in

   any one such bank or association shall not exceed 5% of the company's policyholders'

   surplus;

10. Real estate for home office building purposes, provided that such investments are approved by the

    Director of Insurance on the basis of a showing by the company that the company has adequate

    assets available for such investment and that the proposed acquisition does not exceed the

    reasonable normal value of such property.

11. Amounts in excess of the investment limitations contained in items (2) through (9) may be

allowed subject to the following conditions:

(a) Maximum additional investment of 3% of admitted assets in any one entity;

(b) Maximum additional investment of 6% of admitted assets in the aggregate.

An investment that qualified under this Section at the time it was acquired by the company shall continue to qualify under this Section.

Investments permitted under this Section shall be registered in the name of the company and under its direct control or shall be held in a custodial account with a bank or trust company that is qualified to administer trusts in Illinois under the Corporate Fiduciary Act and that has an office in Illinois.

However, securities may be held in street form and in the custody of a licensed dealer for a period not to exceed 30 days.

Notwithstanding the provisions of this Act, the Director may, after notice and hearing, order a company to limit or withdraw from certain investments or discontinue certain investments or investment practices to the extent the Director finds those investments or investment practices endanger the solvency of the company. (Source: P.A. 90-794, eff. 1-1-99.)  2013 update