in the third year preceding, and a schedule showing such distribution shall be included in the annual statement.

9. All unallocated compensation loss expense payments made in a given calendar year subsequent to the first three years in which an insurer has been issuing compensation policies shall be distributed as follows: Forty per centum shall be charged to the policies written in that year, forty-five per centum to the policies written in the preceding year, ten per centum to the policies written in the second year preceding and five per centum to the policies written in the third year preceding, and such payments made in each of the first three calendar years in which an insurer issues compensation policies shall be distributed as follows. In the first calendar year one hundred per centum shall be charged to the policies written in that year, in the second calendar year fifty per centum shall be charged to the policies written in that year and fifty per centum to the policies written in the preceding year, in the third calendar year forty-five per centum shall be charged to the policies written in that year, forty-five per centum to the policies written in the preceding year and ten per centum to the policies written in the second year preceding, and a schedule showing such distribution shall be included in the annual statement.

10. Whenever, in the judgment of the Department, the liability or compensation loss reserves of any insurer under its supervision, calculated in accordance with the foregoing provisions, are inadequate, the Department may, in its discretion, require such insurer to maintain. reserves based upon estimated individual claims.

11. Each insurer that writes liability or compensation policies shall include in the annual statement required by law a schedule of its experience thereunder in such form as the Department may prescribe. § 2. The title of said Act shall be amended to read as follows: "An Act concerning the business of casualty insurance."

(HOUSE BILL No. 527. APPROVED JUNE 28, 1919.)

AN ACT relating to the consolidation and reinsurance of insurance companies, associations and societies.

SECTION 1. Be it enacted by the People of the State of Illinois, represented in the General Assembly: That the word "company" when

used in this Act shall include any corporation, association or society authorized to transact the business of insurance on the stock, mutual, stock and mutual, assessment or fraternal plan; the word "member" shall mean the insured under a policy or certificate issued by any company other than a purely stock company; the words "stock company" shall mean a company whose directors are elected by the stockholders alone; the words "stock and mutual company" shall mean a company whose directors are elected by its stockholders and policy-holders; the words "mutual company" shall mean a company all of whose directors are elected by its policy-holders; a "resident company" shall mean a company incorporated in this State; a "non-resident company" shali mean a company incorporated in some other state or territory of the United States; a "consolidated company" shall mean a company formed by the consolidation of two or more other companies; a "reinsured. company" shall mean a company which reinsures its risks, in whole or in part, in another company; a "reinsuring company" shall mean a company which accepts, by transfer to itself, the risks, in whole or in part, of another company.

$2. Upon complying with the provisions of this Act, any resident company is hereby authorized and empowered to:

(1) Consolidate with any other resident company;

(2) Reinsure its risks, in whole or in part, with any other resident company;

(3) Reinsure the risks, in whole or in part, of any other resident company;

(4) Consolidate with any non-resident company which is authorized to engage in the insurance business in this State if such consolidation is authorized by the laws of the state or territory in which such non-resident company is organized;

(5) Reinsure its risks in whole or in part with any non-resident company which is authorized to engage in the insurance business in this State;

(6) Reinsure the risks in whole or in part of any non-resident

company.

3. Nothing in this Act contained shall be construed to enlarge the charter power of any insurance company, nor to authorize any insurance company to engage in any kind of insurance business not authorized by its charter, nor to authorize any non-resident insurance company to engage in any kind of insurance business in this State not covered by its certificate of authority to do business in this State; but nothing in this Act contained shall prevent any life company from reinsuring all or any portion of an individual risk in any insurance company authorized to transact business in this State and receiving credit for the reserve on any such reinsured portion, nor prevent any other company from reinsuring all or any portion of an individual risk in any insurance company, in the manner as is now or may hereafter be authorized by law, and receiving credit for the reserve on any such reinsured portion.

4. When any resident company shall propose to enter into articles of consolidation or a contract of reinsurance with any other

company, the board of directors, trustees, or other governing body. shall submit the question of such consolidation or reinsurance to the stockholders or members, or both, as the case may be, of such company, at any regular, annual or periodic meeting thereof, provided a full, true and correct copy of such proposed contract shall, together with notice, stating the time, place and purposes for such meeting. shall be delivered personally, or deposited in the post office at least thirty days prior to the time fixed for such meeting, addressed to each stockholder, or member, or both, as the case may be, at his last postoffice address appearing on the records of the company. Or a special meeting may be called by the board of directors, trustees or other governing body, or a majority thereof, by delivering to each stockholder, or member, or both a copy of such proposed contract, together with a thirty days' notice, as provided for in the submission of such question of consolidation, merger or reinsurance at any regular annual or periodic meeting.

§ 5. At any such meeting of the stockholders or members, or both, as the case may be, held pursuant to notice, or specially called. for the purpose of entering into any such articles of consolidation or contract of reinsurance, the stockholders or members may vote in person or by proxy, each stockholder to be entitled to one vote for each share of stock held by him and each member to one vote for each one thousand dollars of insurance held by him: Provided, however, that each member holding less than one thousand dollars of insurance shal be entitled to one vote; and votes representing two-thirds of all the stock in the case of purely stock companies, or two-thirds of all the stock, if any, and of two-thirds of all the votes cast by members represented at the meeting in person or by proxy in the case of other companies, shall be necessary for the adoption of such proposed articles of consolidation or contract of reinsurance. In the case of a consolidation the articles thereof shall contain the proposed charter or articles of association of the consolidated company, and such other particulars as may be necessary to explain and make manifest the objects and purposes of the consolidated company and the manner in which it is to be conducted; and the approval of such articles of consolidation shall constitute an approval of such proposed charter of articles of association.

§ 6. Upon the adoption of the articles of consolidation or contract of reinsurance, as provided for herein, said proposed articles of consolidation or contract of reinsurance shall be duly executed by the president and attested by the secretary, or the executive officers corresponding thereto, under the corporate seal of each of the consolidating or contracting companies, and thereupon a certified copy of such articles of consolidation or contract of reinsurance, together with a certificate of its adoption, as provided for herein, verified by the af fidavits of such officers and under the seal of each of said companies. shall be submitted to the Director of Trade and Commerce for his approval. The Director of Trade and Commerce shall thereupon con sider such articles of consolidation or contract of reinsurance, and if satisfied that the same is in accordance with the provisions of this Act.

not inconsistent with the laws and the Constitution of this State and of the United States, and that no reasonable objection exists thereto, he shall approve said articles or contract as submitted, and shall cause the same to be recorded in a book kept for that purpose. If the Director of Trade and Commerce shall refuse to approve such articles of consolidation or contract of reinsurance, notification of such refusal, assigning the reasons therefor, shall, within fifteen days from the date of submission to him of such articles or contract, be given in writing by such director to each of said companies parties thereto. No articles of consolidation or contract of reinsurance shall take effect unless and until the provisions of this Act have been complied with and the approval of the Director of Trade and Commerce has been obtained as herein provided.

7. Any resident company, desiring to reinsure its fire or casualty business, in lieu of complying with sections 4, 5 and 6 of this Act, may, for good cause shown to the Director of Trade and Commerce and subject to the conditions hereinafter set forth, enter into a reinsurance contract with another company when a resolution authorizing the same has been duly adopted by its board of directors or other managing body. Said company shall thereupon file with the said Director of Trade and Commerce a copy of said contract and copies of all papers relating thereto, certified under the seal of said corporation to be true and correct copies of the originals, which said certificate shall be signed and verified by the affidavits of the president and secretary of said company, or executive officers corresponding thereto. If the said Director shall find no reasonable objection to such contract, he shall approve the same; provided, that in case either of the parties to said contract is a mutual company, then the reinsuring company shall forthwith mail to each person holding a policy so reinsured a notice of the fact of such reinsurance, and the said reinsurance shall take effect when and not until the said contract has been approved as aforesaid, and there shall have been filed with the said Director an affidavit, signed by the president or secretary of such reinsuring company, having knowledge of the fact that a notice has been mailed to each policy holder as aforesaid: Provided, further, that if not less than five per cent of such policy-holders so reinsured shall, within thirty days after the filing of such affidavit, file a petition with the said Director of Trade and Commerce for a hearing on the question of such reinsurance, the Director of Trade and Commerce shall order a hearing on the said petition, notice of which shall be given by the reinsuring company, by mail, to each holder of a policy so reinsured, at least ten days before such hearing. At the time and place fixed in such notice, or at the time or times and place or places to which such hearing shall be adjourned, the Director of Trade and Commerce shall proceed with the hearing and may make or order such examination into the affairs and condition of either or both of such companies as he may deem proper. Said Director shall have the power to summon and compel the attendance and testimony of witnesses and the production of books and papers before him at such hearing. Any policy-holder or stockholder, as the case may be, of the company so petitioning may appear before said

Director and be heard with reference to said reinsurance. If upon such hearing being had, said Director is not satisfied that the interests of the policy-holders or stockholders, as the case may be, of such company are properly protected, or if he finds that any reasonable objection exists to such reinsurance, he shall revoke the approval already given, and the said contract of reinsurance shall thereupon become null and void. And said Director shall have like power to revoke any approval of any such contract of reinsurance if any officer, director or employee of either company party to such reinsurance shall, after reasonable notice, fail or refuse to attend and testify at such hearing, or to produce any books or papers called for by said Director.

§ 8. Any resident fraternal benefit association or society desiring to enter into a contract of consolidation or reinsurance may follow the procedure set forth in this section in lieu of complying with the provisions contained in sections 4 and 5 hereof. Such consolidation or reinsurance shall be evidenced by a contract in writing, setting forth in full the terms and conditions thereof. The board of managers, directors or trustees of such association or society shall submit such contract to the supreme legislative and governing body of such association or society at any regular or special meeting thereof, provided, a full, true and correct copy of such proposed consolidation or reinsurance shall be given with the notice of such meeting. Such notice shall be given as provided in the laws of the respective association or society for the convening of such supreme legislative and governing body in regular or special session, as the case may be. The affirmative votes of two-thirds of all members of such supreme legislative and governing body shall be necessary for the approval of such contract; provided, that the provisions of the law or the certificate of association of any such society or association with reference to age limit and as to medical examination shall, for the purposes hereof, be declared to be inoperative in so far as contracts contemplated herein are concerned.

§ 9. In case of a consolidation or contract of reinsurance between a resident and a non-resident company, the articles of consolidation or the contract of reinsurance shall be executed by the proper officers of said non-resident company when they are duly authorized thereto by such action on the part of the directors, stockholders or members of said non-resident company as may be required by the laws of the state where the same is incorporated; and upon execution, said articles of consolidation or contract of reinsurance shall be submitted to the commissioner of insurance or other officer at the head of the insurance department in the state where such non-resident company is incorporated; and no such consolidation or contract of reinsurance shall take effect until it shall have been approved by the Director of Trade and Commerce of this State, and by such insurance official of the state where said non-resident company is incorporated, and a certificate of his approval, signed by such proper official of such state, has been filed in the office of the Director of Trade and Commerce of this State: Provided, that such submission to and approval by the proper official of such other state shall not be required unless the same are required by the laws of such state.