On November 14, the second day of its 2018 veto session, the Illinois Senate voted unanimously to override Governor Rauner's amendatory veto of Senate Bill 1737 (Bill). As we have previously reported, the Bill is a proposed new law that would reform the Illinois Insurance Code's regulatory framework for captive insurance companies and significantly drop the state's current premium tax rate on self-procured insurance. The Illinois General Assembly passed the Bill on May 31, 2018, with bi-partisan support. The Illinois Department of Insurance, key industry groups and several large Illinois-based taxpayers also support the legislation.
If it becomes law, the Bill would create a much more favorable regulatory framework for Illinois captives, following the lead of multiple jurisdictions, including Vermont, Hawaii, South Carolina and the District of Columbia.
The Bill also would substantially drop the premium tax rate for contracts of insurance independently procured directly from an unauthorized insurer by an industrial insured (self-procured insurance) from 3.5 percent to 0.5 percent of gross premium.
On August 26, 2018, Illinois Governor Bruce Rauner issued an amendatory veto of the Bill, in which he vetoed aspects of the Bill that were unrelated to the captive reform provisions. The governor said he supported the Bill's captive insurance provisions, as well as its reinsurance provisions. The governor issued an Amendatory Veto Message in connection with his action.
Only three days of the Illinois General Assembly's veto session remain, on November 27 – 29. We'll be watching closely to see if the Illinois House follows the Senate's lead and votes to override the amendatory veto, thereby assuring the enactment of this helpful legislation. If the Illinois House does not act, the Bill will die and would need to be reintroduced and reapproved in the next legislative session, which will begin (with new Illinois Governor JB Pritzker) in January 2019.
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