ModCo Account; Investment Guidelines. (a) On the Closing Date, the Ceding Company (i) established one or more custodial accounts (the “ ModCo Account”) and (ii) in accordance with Section 3.1(a), made the Initial ModCo Deposit. The ModCo Account and the assets maintained therein will (x) be retained, controlled, owned and maintained by the Ceding Company, (y) be used exclusively for the purposes set forth in this Agreement and (z) be maintained by the Ceding Company in one or more custodial accounts segregated and distinct from the Ceding Company’s other general account assets. Such assets shall be valued, for purposes of this Agreement, according to their Statutory Book Value. In accordance with SAP, the Ceding Company elects to cede all realized capital gains and losses in respect of the ModCo Assets to the Reinsurer on a gross basis. (b) The amount of the ModCo Reserves shall be determined for each Accounting Period by the Ceding Company in accordance with SAP consistently applied as of the last calendar day of such Accounting Period and shall be set forth in each applicable Settlement Statement; provided, that the Ceding Company shall not seek any permitted practices from a Governmental Authority that would have the effect of increasing the amount of ModCo Reserves required in respect of the liabilities ceded to the Reinsurer hereunder in accordance with SAP as applicable to Ceding Company without first consulting in good faith with the Reinsurer and considering any reasonable recommendations of the Reinsurer before proceeding; provided, that if the Ceding Company obtains any such permitted practice and does not accept the Reinsurer’s recommendations, and the Reinsurer determines that such permitted practice (x) is commercially unreasonable (viewed solely in the context of this Agreement and the other ModCo Reinsurance Agreements, without reference to any other business relationships the Ceding Company may have with any particular insured) and (y) has had a material adverse effect on the Reinsurer’s liability and/or overall economic position hereunder, then the Reinsurer must raise any such determination promptly to the Ceding Company. If the Ceding Company agrees, the Parties will cooperate to determine how to handle such situation in a mutually agreeable manner. If the Parties cannot so agree, then the Reinsurer may bring an arbitration proceeding pursuant to Section 10.3 hereof, with the Reinsurer bearing the burden of proof that such permitted practice was commercially unreasonable (viewed solely in the context of this Agreement and the other Modco Reinsurance Agreements, without reference to any other business relationships the Ceding Company may have with any particular insured), and caused a material adverse effect on the Reinsurer’s liability and/or overall economic position hereunder. The arbitration panel shall only be authorized to adjust the calculation of the ModCo Reserves required to be held in the ModCo Account as of any relevant date of determination to put the Reinsurer in substantially the same economic position it would have been in had the Ceding Company not obtained such permitted practice (with no other damages, including any equitable awards, being permissible). (c) For purposes of calculating the ModCo Reserves pursuant to this Agreement, the Ceding Company shall perform such calculations in a manner materially consistent with the VALIC/DSA Re Valuation Methodology Memorandum, from Rxxxx Xxxxxx to File (inclusive of the memoranda embedded therein), dated November 29, 2017, attached as Exhibit E, which sets forth the Ceding Company’s valuation methodology and basis for valuation, including valuation interest rates or assumptions, for the Covered Insurance Policies (the “Valuation Methodology”) as of the Effective Time. The Ceding Company shall not modify or change the Valuation Methodology on any of the Covered Insurance Policies without the prior written consent of the Reinsurer, unless such modifications or changes are required pursuant to SAP or otherwise under Applicable Law. In the event that the Reinsurer does not provide its consent to a modification or change requested by the Ceding Company (which change is not otherwise required by SAP or under Applicable Law, it being understood that no Reinsurer consent is required for modifications or changes required pursuant to SAP or otherwise under Applicable Law) and the Parties are unable to resolve the dispute within thirty (30) calendar days of the Ceding Company’s request for a change in the Valuation Methodology, notwithstanding Section 10.3, the Ceding Company shall engage an Independent Actuary, with the selection of the Independent Actuary subject to the Reinsurer’s prior written consent, not to be unreasonably withheld, and the Independent Actuary’s written determination as to whether the Ceding Company’s proposed modification or change to the Valuation Methodology is reasonable will be binding on the Parties. Both Parties will promptly supply the Independent Actuary with the necessary data to reach its determination, subject to such Independent Actuary’s entry into a customary non-disclosure agreement. The fees and expenses of such Independent Actuary will be borne equally by the Parties; provided, that if the Independent Actuary determines that the Valuation Methodology shall be modified as proposed by the Ceding Company, the Reinsurer will pay or promptly reimburse the Ceding Company for all fees and expenses of the Independent Actuary.
Appears in 2 contracts
Samples: Combination Coinsurance and Modified Coinsurance Agreement (SAFG Retirement Services, Inc.), Combination Coinsurance and Modified Coinsurance Agreement (SAFG Retirement Services, Inc.)
ModCo Account; Investment Guidelines. (a) On the Closing Date, the Ceding Company (i) established one or more custodial accounts (the “ “ModCo Account”) and (ii) in accordance with Section 3.1(a), made the Initial ModCo Deposit. The ModCo Account and the assets maintained therein will (x) be retained, controlled, owned and maintained by the Ceding Company, (y) be used exclusively for the purposes set forth in this Agreement and (z) be maintained by the Ceding Company in one or more custodial accounts segregated and distinct from the Ceding Company’s other general account assets. Such assets shall be valued, for purposes of this Agreement, according to their Statutory Book Value. In accordance with SAP, the Ceding Company elects to cede all realized capital gains and losses in respect of the ModCo Assets to the Reinsurer on a gross basis.
(b) The amount of the ModCo Reserves shall be determined for each Accounting Period by the Ceding Company in accordance with SAP consistently applied as of the last calendar day of such Accounting Period and shall be set forth in each applicable Settlement Statement; provided, that the Ceding Company shall not seek any permitted practices from a Governmental Authority that would have the effect of increasing the amount of ModCo Reserves required in respect of the liabilities ceded to the Reinsurer hereunder in accordance with SAP as applicable to Ceding Company without first consulting in good faith with the Reinsurer and considering any reasonable recommendations of the Reinsurer before proceeding; provided, that if the Ceding Company obtains any such permitted practice and does not accept the Reinsurer’s recommendations, and the Reinsurer determines that such permitted practice (x) is commercially unreasonable (viewed solely in the context of this Agreement and the other ModCo Reinsurance Agreements, without reference to any other business relationships the Ceding Company may have with any particular insured) and (y) has had a material adverse effect on the Reinsurer’s liability and/or overall economic position hereunder, then the Reinsurer must raise any such determination promptly to the Ceding Company. If the Ceding Company agrees, the Parties will cooperate to determine how to handle such situation in a mutually agreeable manner. If the Parties cannot so agree, then the Reinsurer may bring an arbitration proceeding pursuant to Section 10.3 hereof, with the Reinsurer bearing the burden of proof that such permitted practice was commercially unreasonable (viewed solely in the context of this Agreement and the other Modco Reinsurance Agreements, without reference to any other business relationships the Ceding Company may have with any particular insured), and caused a material adverse effect on the Reinsurer’s liability and/or overall economic position hereunder. The arbitration panel shall only be authorized to adjust the calculation of the ModCo Reserves required to be held in the ModCo Account as of any relevant date of determination to put the Reinsurer in substantially the same economic position it would have been in had the Ceding Company not obtained such permitted practice (with no other damages, including any equitable awards, being permissible).
(c) For purposes of calculating the ModCo Reserves pursuant to this Agreement, the Ceding Company shall perform such calculations in a manner materially consistent with the VALICAGL/DSA Re Valuation Methodology Memorandum, from Rxxxx Xxxxxx to File (inclusive of the memoranda embedded therein), dated November 29, 2017, attached as Exhibit EE , which sets forth the Ceding Company’s valuation methodology and basis for valuation, including valuation interest rates or assumptions, for the Covered Insurance Policies (the “Valuation Methodology”) as of the Effective Time. The Ceding Company shall not modify or change the Valuation Methodology on any of the Covered Insurance Policies without the prior written consent of the Reinsurer, unless such modifications or changes are required pursuant to SAP or otherwise under Applicable Law. In the event that the Reinsurer does not provide its consent to a modification or change requested by the Ceding Company (which change is not otherwise required by SAP or under Applicable Law, it being understood that no Reinsurer consent is required for modifications or changes required pursuant to SAP or otherwise under Applicable Law) and the Parties are unable to resolve the dispute within thirty (30) calendar days of the Ceding Company’s request for a change in the Valuation Methodology, notwithstanding Section 10.3, the Ceding Company shall engage an Independent Actuary, with the selection of the Independent Actuary subject to the Reinsurer’s prior written consent, not to be unreasonably withheld, and the Independent Actuary’s written determination as to whether the Ceding Company’s proposed modification or change to the Valuation Methodology is reasonable will be binding on the Parties. Both Parties will promptly supply the Independent Actuary with the necessary data to reach its determination, subject to such Independent Actuary’s entry into a customary non-disclosure agreement. The fees and expenses of such Independent Actuary will be borne equally by the Parties; provided, that if the Independent Actuary determines that the Valuation Methodology shall be modified as proposed by the Ceding Company, the Reinsurer will pay or promptly reimburse the Ceding Company for all fees and expenses of the Independent Actuary.
(d) The ModCo Assets (other than Policy Loans) (I) will be managed and invested by the Ceding Company and/or AIG Asset Management (U.S.), LLC, as the investment manager appointed by the Ceding Company hereunder, and/or such other investment manager designated from time to time as provided below (each, an “Investment Manager”) in a manner consistent with the investment guidelines attached hereto as Exhibit C (the “Investment Guidelines”), and (II) shall consist only of cash, any securities qualifying as admitted assets in the state of domicile of the Ceding Company, and any other form of security acceptable to the primary insurance regulatory authority in such state (“Permitted Assets”). Such assets will be free and clear of claims, liens and encumbrances running to the benefit of third parties other than those (x) arising in the ordinary course of investment management with respect to admitted assets, or (y) permitted in the Investment Guidelines; provided, that if a claim, lien or encumbrance arises with respect to any such asset, except as permitted under clause (x) and (y), the Ceding Company will use its commercially reasonable efforts to cure such claim, lien or encumbrance as promptly as practicable following its discovery thereof.
(i) The Ceding Company shall not amend, modify or otherwise change the investment guidelines pursuant to which any Investment Manager manages Permitted Assets, or, prior to the third anniversary of the Amendment Date, the terms relating to the fees and expense reimbursement payable to any such Investment Manager, without the Reinsurer’s prior written consent thereto. In addition, not less than ninety (90) calendar days prior to the effective date of any proposed amendments to the fees payable to any Investment Manager following the third anniversary of the Amendment Date, the Ceding Company shall give the Reinsurer written notice of such proposal, and the Parties shall consult in good faith with respect to such proposed amendments to such fees. If the Investment Manager resigns or is removed, or, following the third anniversary of the Amendment Date, the Reinsurer requests that the Investment Manager be replaced in accordance with the requirements of this Section 4.1(d), the Ceding Company shall appoint a replacement investment manager as directed by the Reinsurer with respect to the Permitted Assets, if such replacement investment manager is reasonably acceptable to the Ceding Company; provided, however, that no replacement investment manager shall have authority to engage in any of the following, for or in respect of, the Modco Assets: (A) derivatives, (B) foreign currency transactions (for the avoidance of doubt, not including foreign currency denominated securities), (C) Short Term Borrowing Transactions, or (D) Short Term Investments comprising reverse repurchase agreements, cash-out securities lending agreements or liquidity pools managed by the Ceding Company or any of its Affiliates.
(ii) From time to time following the third anniversary of the Amendment Date, if directed to do so by the Reinsurer, the Ceding Company shall appoint one or more additional Investment Managers reasonably acceptable to the Ceding Company with respect to the Permitted Assets; provided, however, that no additional investment manager shall have authority to engage in any of the following, for or in respect of, the Modco Assets: (A) derivatives, (B) foreign currency transactions (for the avoidance of doubt, not including foreign currency denominated securities), (C) Short Term Borrowing Transactions, or (D) Short Term Investments comprising reverse repurchase agreements, cash-out securities lending agreements or liquidity pools managed by the Ceding Company or any of its Affiliates. Not less than ninety (90) calendar days prior to the effective date of any proposed replacement or appointment of additional Investment Managers following the third anniversary of the Amendment Date, the Reinsurer shall give the Ceding Company written notice of such proposal, and the Parties shall consult in good faith with respect to such proposed replacement or additional Investment Managers. Any replacement or additional Investment Manager shall accept its appointment by entering into an investment management agreement with respect to the Permitted Assets in a form, including the terms and conditions, reasonably acceptable to the Ceding Company and the Reinsurer. Notwithstanding anything in this Agreement to the contrary, the Ceding Company shall not be responsible for any breach of the Investment Guidelines caused by an act or omission by any Investment Manager appointed at the direction of the Reinsurer; provided, that such breach was not caused by the act, failure to act or direction of the Ceding Company. Additionally, the Ceding Company agrees to consult with the Reinsurer, in advance, regarding any proposals by its Investment Managers to appoint any subadvisers in respect of ModCo Assets that are unaffiliated with the Investment Managers.
(iii) The Ceding Company and the Reinsurer will cooperate reasonably to give effect to (and the Ceding Company will instruct its applicable Investment Manager to give effect to) any (x) proposal by the Reinsurer to transfer for Fair Market Value one or more assets between an account owned by the Reinsurer, on the one hand, and the ModCo Account, on the other hand; provided, that the Ceding Company shall have no obligation to take any action with respect to any transfer that could, as reasonably determined by the Ceding Company or its advisors, (i) cause any breach or exception to any provision of this Agreement (including the Investment Guidelines) or any Applicable Insurance Regulation, (ii) give rise to a requirement to obtain any regulatory approval or non-disapproval; or (iii) contravene any provision of Applicable Law, including the U.S. securities laws, or any rule promulgated thereunder; or (y) other commercially reasonable direction from the Reinsurer with respect to management of the ModCo Assets; provided that such direction does not violate this Agreement (including the Investment Guidelines), any Applicable Law or any law or regulation applicable to such Investment Managers or insurance company investments; provided, further, that, in the case of either of clause (x) or (y), any such direction from, or proposal by, the Reinsurer shall be given in writing, including by email, by its designated representative described below. The Reinsurer shall designate an authorized individual to provide such direction or proposal, and the Ceding Company shall designate an individual to receive any such direction or proposal and deliver such direction or proposal to the applicable Investment Manager. Notwithstanding the foregoing, the Parties acknowledge that the Reinsurer bears the economic risk of the ModCo Assets as described in this Agreement, and agree that, other than the obligation to (A) cooperate in giving effect to any proposal in respect of a transfer and/or (B) deliver any direction to the applicable Investment Manager as contemplated above, the Ceding Company shall have no obligation, and shall incur no liability, with respect to such direction or proposal, as applicable.
(iv) Furthermore, each of the Ceding Company and the Reinsurer acknowledges and agrees that any fees and expenses paid by the Ceding Company under any Capital Markets Services Agreement in respect of ModCo Assets shall constitute Investment Expenses, and that the Ceding Company shall not agree to amend any terms relating to fees and expense reimbursements payable to any Person under such Capital Markets Services Agreement in respect of ModCo Assets without the Reinsurer’s prior written consent.
(e) For the avoidance of doubt, the Ceding Company and the Reinsurer agree that the IMR is ceded to the Reinsurer. The IMR shall be calculated by the Ceding Company.
Appears in 2 contracts
Samples: Combination Coinsurance and Modified Coinsurance Agreement (SAFG Retirement Services, Inc.), Combination Coinsurance and Modified Coinsurance Agreement (SAFG Retirement Services, Inc.)
ModCo Account; Investment Guidelines. (a) On the Closing Date, the Ceding Company (i) established one or more custodial accounts (the “ ModCo Account”) and (ii) in accordance with Section 3.1(a), made the Initial ModCo Deposit. The ModCo Account and the assets maintained therein will (x) be retained, controlled, owned and maintained by the Ceding Company, (y) be used exclusively for the purposes set forth in this Agreement and (z) be maintained by the Ceding Company in one or more custodial accounts segregated and distinct from the Ceding Company’s other general account assets. Such assets shall be valued, for purposes of this Agreement, according to their Statutory Book Value. In accordance with SAP, the Ceding Company elects to cede all realized capital gains and losses in respect of the ModCo Assets to the Reinsurer on a gross basis.
(b) The amount of the ModCo Reserves shall be determined for each Accounting Period by the Ceding Company in accordance with SAP consistently applied as of the last calendar day of such Accounting Period and shall be set forth in each applicable Settlement Statement; provided, that the Ceding Company shall not seek any permitted practices from a Governmental Authority that would have the effect of increasing the amount of ModCo Reserves required in respect of the liabilities ceded to the Reinsurer hereunder in accordance with SAP as applicable to Ceding Company without first consulting in good faith with the Reinsurer and considering any reasonable recommendations of the Reinsurer before proceeding; provided, that if the Ceding Company obtains any such permitted practice and does not accept the Reinsurer’s recommendations, and the Reinsurer determines that such permitted practice (x) is commercially unreasonable (viewed solely in the context of this Agreement and the other ModCo Reinsurance Agreements, without reference to any other business relationships the Ceding Company may have with any particular insured) and (y) has had a material adverse effect on the Reinsurer’s liability and/or overall economic position hereunder, then the Reinsurer must raise any such determination promptly to the Ceding Company. If the Ceding Company agrees, the Parties will cooperate to determine how to handle such situation in a mutually agreeable manner. If the Parties cannot so agree, then the Reinsurer may bring an arbitration proceeding pursuant to Section 10.3 hereof, with the Reinsurer bearing the burden of proof that such permitted practice was commercially unreasonable (viewed solely in the context of this Agreement and the other Modco Reinsurance Agreements, without reference to any other business relationships the Ceding Company may have with any particular insured), and caused a material adverse effect on the Reinsurer’s liability and/or overall economic position hereunder. The arbitration panel shall only be authorized to adjust the calculation of the ModCo Reserves required to be held in the ModCo Account as of any relevant date of determination to put the Reinsurer in substantially the same economic position it would have been in had the Ceding Company not obtained such permitted practice (with no other damages, including any equitable awards, being permissible).
(c) For purposes of calculating the ModCo Reserves pursuant to this Agreement, the Ceding Company shall perform such calculations in a manner materially consistent with the VALICUSL/DSA Re Valuation Methodology Memorandum, from Rxxxx Xxxxxx to File (inclusive of the memoranda embedded therein), dated November 29January 26, 20172018, attached as Exhibit E, which sets forth the Ceding Company’s valuation methodology and basis for valuation, including valuation interest rates or assumptions, for the Covered Insurance Policies (the “Valuation Methodology”) as of the Effective Time. The Ceding Company shall not modify or change the Valuation Methodology on any of the Covered Insurance Policies without the prior written consent of the Reinsurer, unless such modifications or changes are required pursuant to SAP or otherwise under Applicable Law, such as guidance issued by the New York Department of Financial Services. In the event that the Reinsurer does not provide its consent to a modification or change requested by the Ceding Company (which change is not otherwise required by SAP or under Applicable Law, it being understood that no Reinsurer consent is required for modifications or changes required pursuant to SAP or otherwise under Applicable Law) and the Parties are unable to resolve the dispute within thirty (30) calendar days of the Ceding Company’s request for a change in the Valuation Methodology, notwithstanding Section 10.39.3, the Ceding Company shall engage an Independent Actuary, with the selection of the Independent Actuary subject to the Reinsurer’s prior written consent, not to be unreasonably withheld, and the Independent Actuary’s written determination as to whether the Ceding Company’s proposed modification or change to the Valuation Methodology is reasonable will be binding on the Parties. Both Parties will promptly supply the Independent Actuary with the necessary data to reach its determination, subject to such Independent Actuary’s entry into a customary non-disclosure agreement. The fees and expenses of such Independent Actuary will be borne equally by the Parties; provided, that if the Independent Actuary determines that the Valuation Methodology shall be modified as proposed by the Ceding Company, the Reinsurer will pay or promptly reimburse the Ceding Company for all fees and expenses of the Independent Actuary.
(d) The ModCo Assets (other than Policy Loans) (I) will be managed and invested by the Ceding Company and/or AIG Asset Management (U.S.), LLC, as the investment manager appointed by the Ceding Company hereunder, and/or such other investment manager designated from time to time as provided below (each, an “Investment Manager”) in a manner consistent with the investment guidelines attached hereto as Exhibit C (the “Investment Guidelines”), and (II) shall consist only of cash, any securities qualifying as admitted assets in the state of domicile of the Ceding Company, and any other form of security acceptable to the primary insurance regulatory authority in such state ( “ Permitted Assets”). Such assets will be free and clear of claims, liens and encumbrances running to the benefit of third parties other than those (x) arising in the ordinary course of investment management with respect to admitted assets, or (y) permitted in the Investment Guidelines; provided , that if a claim, lien or encumbrance arises with respect to any such asset, except as permitted under clause (x) and (y), the Ceding Company will use its commercially reasonable efforts to cure such claim, lien or encumbrance as promptly as practicable following its discovery thereof.
(i) The Ceding Company shall not amend, modify or otherwise change the investment guidelines pursuant to which any Investment Manager manages Permitted Assets, or, prior to the third anniversary of the Amendment Date, the terms relating to the fees and expense reimbursement payable to any such Investment Manager, without the Reinsurer’s prior written consent thereto. In addition, not less than ninety (90) calendar days prior to the effective date of any proposed amendments to the fees payable to any Investment Manager following the third anniversary of the Amendment Date, the Ceding Company shall give the Reinsurer written notice of such proposal, and the Parties shall consult in good faith with respect to such proposed amendments to such fees. If the Investment Manager resigns or is removed, or, following the third anniversary of the Amendment Date, the Reinsurer requests that the Investment Manager be replaced in accordance with the requirements of this Section 4.1(d), the Ceding Company shall appoint a replacement investment manager as directed by the Reinsurer with respect to the Permitted Assets, if such replacement investment manager is reasonably acceptable to the Ceding Company; provided, however, that no replacement investment manager shall have authority to engage in any of the following, for or in respect of, the Modco Assets: (A) derivatives, (B) foreign currency transactions (for the avoidance of doubt, not including foreign currency denominated securities), (C) Short Term Borrowing Transactions, or (D) Short Term Investments comprising reverse repurchase agreements, cash-out securities lending agreements or liquidity pools managed by the Ceding Company or any of its Affiliates.
(ii) From time to time following the third anniversary of the Amendment Date, if directed to do so by the Reinsurer, the Ceding Company shall appoint one or more additional Investment Managers reasonably acceptable to the Ceding Company with respect to the Permitted Assets; provided, however, that no additional investment manager shall have authority to engage in any of the following, for or in respect of, the Modco Assets: (A) derivatives, (B) foreign currency transactions (for the avoidance of doubt, not including foreign currency denominated securities), (C) Short Term Borrowing Transactions, or (D) Short Term Investments comprising reverse repurchase agreements, cash-out securities lending agreements or liquidity pools managed by the Ceding Company or any of its Affiliates. Not less than ninety (90) calendar days prior to the effective date of any proposed replacement or appointment of additional Investment Managers following the third anniversary of the Amendment Date, the Reinsurer shall give the Ceding Company written notice of such proposal, and the Parties shall consult in good faith with respect to such proposed replacement or additional Investment Managers. Any replacement or additional Investment Manager shall accept its appointment by entering into an investment management agreement with respect to the Permitted Assets in a form, including the terms and conditions, reasonably acceptable to the Ceding Company and the Reinsurer. Notwithstanding anything in this Agreement to the contrary, the Ceding Company shall not be responsible for any breach of the Investment Guidelines caused by an act or omission by any Investment Manager appointed at the direction of the Reinsurer; provided, that such breach was not caused by the act, failure to act or direction of the Ceding Company. Additionally, the Ceding Company agrees to consult with the Reinsurer, in advance, regarding any proposals by its Investment Managers to appoint any subadvisers in respect of ModCo Assets that are unaffiliated with the Investment Managers.
(iii) The Ceding Company and the Reinsurer will cooperate reasonably to give effect to (and the Ceding Company will instruct its applicable Investment Manager to give effect to) any (x) proposal by the Reinsurer to transfer for Fair Market Value one or more assets between an account owned by the Reinsurer, on the one hand, and the ModCo Account, on the other hand; provided, that the Ceding Company shall have no obligation to take any action with respect to any transfer that could, as reasonably determined by the Ceding Company or its advisors, (i) cause any breach or exception to any provision of this Agreement (including the Investment Guidelines) or any Applicable Insurance Regulation, (ii) give rise to a requirement to obtain any regulatory approval or non-disapproval; or (iii) contravene any provision of Applicable Law, including the U.S. securities laws, or any rule promulgated thereunder; or (y) other commercially reasonable direction from the Reinsurer with respect to management of the ModCo Assets; provided that such direction does not violate this Agreement (including the Investment Guidelines), any Applicable Law or any law or regulation applicable to such Investment Managers or insurance company investments; provided, further, that, in the case of either of clause (x) or (y), any such direction from, or proposal by, the Reinsurer shall be given in writing, including by email, by its designated representative described below. The Reinsurer shall designate an authorized individual to provide such direction or proposal, and the Ceding Company shall designate an individual to receive any such direction or proposal and deliver such direction or proposal to the applicable Investment Manager. Notwithstanding the foregoing, the Parties acknowledge that the Reinsurer bears the economic risk of the ModCo Assets as described in this Agreement, and agree that, other than the obligation to (A) cooperate in giving effect to any proposal in respect of a transfer and/or (B) deliver any direction to the applicable Investment Manager as contemplated above, the Ceding Company shall have no obligation, and shall incur no liability, with respect to such direction or proposal, as applicable.
(iv) Furthermore, each of the Ceding Company and the Reinsurer acknowledges and agrees that any fees and expenses paid by the Ceding Company under any Capital Markets Services Agreement in respect of ModCo Assets shall constitute Investment Expenses, and that the Ceding Company shall not agree to amend any terms relating to fees and expense reimbursements payable to any Person under such Capital Markets Services Agreement in respect of ModCo Assets without the Reinsurer’s prior written consent.
(e) For the avoidance of doubt, the Ceding Company and the Reinsurer agree that the IMR is ceded to the Reinsurer. The IMR shall be calculated by the Ceding Company.
Appears in 2 contracts
Samples: Modified Coinsurance Agreement (SAFG Retirement Services, Inc.), Modified Coinsurance Agreement (SAFG Retirement Services, Inc.)
ModCo Account; Investment Guidelines. (a) On the Closing Date, the Ceding Company (i) established one or more custodial accounts (the “ “ModCo Account”) and (ii) in accordance with Section 3.1(a), made the Initial ModCo Deposit. The ModCo Account and the assets maintained therein will (x) be retained, controlled, owned and maintained by the Ceding Company, (y) be used exclusively for the purposes set forth in this Agreement and (z) be maintained by the Ceding Company in one or more custodial accounts segregated and distinct from the Ceding Company’s other general account assets. Such assets shall be valued, for purposes of this Agreement, according to their Statutory Book Value. In accordance with SAP, the Ceding Company elects to cede all realized capital gains and losses in respect of the ModCo Assets to the Reinsurer on a gross basis.
(b) The amount of the ModCo Reserves shall be determined for each Accounting Period by the Ceding Company in accordance with SAP consistently applied as of the last calendar day of such Accounting Period and shall be set forth in each applicable Settlement Statement; provided, that the Ceding Company shall not seek any permitted practices from a Governmental Authority that would have the effect of increasing the amount of ModCo Reserves required in respect of the liabilities ceded to the Reinsurer hereunder in accordance with SAP as applicable to Ceding Company without first consulting in good faith with the Reinsurer and considering any reasonable recommendations of the Reinsurer before proceeding; provided, that if the Ceding Company obtains any such permitted practice and does not accept the Reinsurer’s recommendations, and the Reinsurer determines that such permitted practice (x) is commercially unreasonable (viewed solely in the context of this Agreement and the other ModCo Reinsurance Agreements, without reference to any other business relationships the Ceding Company may have with any particular insured) and (y) has had a material adverse effect on the Reinsurer’s liability and/or overall economic position hereunder, then the Reinsurer must raise any such determination promptly to the Ceding Company. If the Ceding Company agrees, the Parties will cooperate to determine how to handle such situation in a mutually agreeable manner. If the Parties cannot so agree, then the Reinsurer may bring an arbitration proceeding pursuant to Section 10.3 hereof, with the Reinsurer bearing the burden of proof that such permitted practice was commercially unreasonable (viewed solely in the context of this Agreement and the other Modco Reinsurance Agreements, without reference to any other business relationships the Ceding Company may have with any particular insured), and caused a material adverse effect on the Reinsurer’s liability and/or overall economic position hereunder. The arbitration panel shall only be authorized to adjust the calculation of the ModCo Reserves required to be held in the ModCo Account as of any relevant date of determination to put the Reinsurer in substantially the same economic position it would have been in had the Ceding Company not obtained such permitted practice (with no other damages, including any equitable awards, being permissible).
(c) For purposes of calculating the ModCo Reserves pursuant to this Agreement, the Ceding Company shall perform such calculations in a manner materially consistent with the VALIC/DSA Re [***] Valuation Methodology Memorandum, from Rxxxx Xxxxxx [***] to File (inclusive of the memoranda embedded therein), dated November 29, 2017, attached as Exhibit E, which sets forth the Ceding Company’s valuation methodology and basis for valuation, including valuation interest rates or assumptions, for the Covered Insurance Policies (the “Valuation Methodology”) as of the Effective Time. The Ceding Company shall not modify or change the Valuation Methodology on any of the Covered Insurance Policies without the prior written consent of the Reinsurer, unless such modifications or changes are required pursuant to SAP or otherwise under Applicable Law. In the event that the Reinsurer does not provide its consent to a modification or change requested by the Ceding Company (which change is not otherwise required by SAP or under Applicable Law, it being understood that no Reinsurer consent is required for modifications or changes required pursuant to SAP or otherwise under Applicable Law) and the Parties are unable to resolve the dispute within thirty (30) calendar days of the Ceding Company’s request for a change in the Valuation Methodology, notwithstanding Section 10.3, the Ceding Company shall engage an Independent Actuary, with the selection of the Independent Actuary subject to the Reinsurer’s prior written consent, not to be unreasonably withheld, and the Independent Actuary’s written determination as to whether the Ceding Company’s proposed modification or change to the Valuation Methodology is reasonable will be binding on the Parties. Both Parties will promptly supply the Independent Actuary with the necessary data to reach its determination, subject to such Independent Actuary’s entry into a customary non-disclosure agreement. The fees and expenses of such Independent Actuary will be borne equally by the Parties; provided, that if the Independent Actuary determines that the Valuation Methodology shall be modified as proposed by the Ceding Company, the Reinsurer will pay or promptly reimburse the Ceding Company for all fees and expenses of the Independent Actuary.
(d) The ModCo Assets (other than Policy Loans) (I) will be managed and invested by the Ceding Company and/or AIG Asset Management (U.S.), LLC, as the investment manager appointed by the Ceding Company hereunder, and/or such other investment manager designated from time to time as provided below (each, an “Investment Manager”) in a manner consistent with the investment guidelines attached hereto as Exhibit C (the “Investment Guidelines”), and (II) shall consist only of cash, any securities qualifying as admitted assets in the state of domicile of the Ceding Company, and any other form of security acceptable to the primary insurance regulatory authority in such state (“Permitted Assets”). Such assets will be free and clear of claims, liens and encumbrances running to the benefit of third parties other than those (x) arising in the ordinary course of investment management with respect to admitted assets, or (y) permitted in the Investment Guidelines; provided, that if a claim, lien or encumbrance arises with respect to any such asset, except as permitted under clause (x) and (y), the Ceding Company will use its commercially reasonable efforts to cure such claim, lien or encumbrance as promptly as practicable following its discovery thereof.
(i) The Ceding Company shall not amend, modify or otherwise change the investment guidelines pursuant to which any Investment Manager manages Permitted Assets, or, prior to the third anniversary of the Amendment Date, the terms relating to the fees and expense reimbursement payable to any such Investment Manager, without the Reinsurer’s prior written consent thereto. In addition, not less than ninety (90) calendar days prior to the effective date of any proposed amendments to the fees payable to any Investment Manager following the third anniversary of the Amendment Date, the Ceding Company shall give the Reinsurer written notice of such proposal, and the Parties shall consult in good faith with respect to such proposed amendments to such fees. If the Investment Manager resigns or is removed, or, following the third anniversary of the Amendment Date, the Reinsurer requests that the Investment Manager be replaced in accordance with the requirements of this Section 4.1(d), the Ceding Company shall appoint a replacement investment manager as directed by the Reinsurer with respect to the Permitted Assets, if such replacement investment manager is reasonably acceptable to the Ceding Company; provided, however, that no replacement investment manager shall have authority to engage in any of the following, for or in respect of, the Modco Assets: (A) derivatives, (B) foreign currency transactions (for the avoidance of doubt, not including foreign currency denominated securities), (C) Short Term Borrowing Transactions, or (D) Short Term Investments comprising reverse repurchase agreements, cash-out securities lending agreements or liquidity pools managed by the Ceding Company or any of its Affiliates.
(ii) From time to time following the third anniversary of the Amendment Date, if directed to do so by the Reinsurer, the Ceding Company shall appoint one or more additional Investment Managers reasonably acceptable to the Ceding Company with respect to the Permitted Assets; provided, however, that no additional investment manager shall have authority to engage in any of the following, for or in respect of, the Modco Assets: (A) derivatives, (B) foreign currency transactions (for the avoidance of doubt, not including foreign currency denominated securities), (C) Short Term Borrowing Transactions, or (D) Short Term Investments comprising reverse repurchase agreements, cash-out securities lending agreements or liquidity pools managed by the Ceding Company or any of its Affiliates. Not less than ninety (90) calendar days prior to the effective date of any proposed replacement or appointment of additional Investment Managers following the third anniversary of the Amendment Date, the Reinsurer shall give the Ceding Company written notice of such proposal, and the Parties shall consult in good faith with respect to such proposed replacement or additional Investment Managers. Any replacement or additional Investment Manager shall accept its appointment by entering into an investment management agreement with respect to the Permitted Assets in a form, including the terms and conditions, reasonably acceptable to the Ceding Company and the Reinsurer. Notwithstanding anything in this Agreement to the contrary, the Ceding Company shall not be responsible for any breach of the Investment Guidelines caused by an act or omission by any Investment Manager appointed at the direction of the Reinsurer; provided, that such breach was not caused by the act, failure to act or direction of the Ceding Company. Additionally, the Ceding Company agrees to consult with the Reinsurer, in advance, regarding any proposals by its Investment Managers to appoint any subadvisers in respect of ModCo Assets that are unaffiliated with the Investment Managers.
(iii) The Ceding Company and the Reinsurer will cooperate reasonably to give effect to (and the Ceding Company will instruct its applicable Investment Manager to give effect to) any (x) proposal by the Reinsurer to transfer for Fair Market Value one or more assets between an account owned by the Reinsurer, on the one hand, and the ModCo Account, on the other hand; provided, that the Ceding Company shall have no obligation to take any action with respect to any transfer that could, as reasonably determined by the Ceding Company or its advisors, (i) cause any breach or exception to any provision of this Agreement (including the Investment Guidelines) or any Applicable Insurance Regulation, (ii) give rise to a requirement to obtain any regulatory approval or non-disapproval; or (iii) contravene any provision of Applicable Law, including the U.S. securities laws, or any rule promulgated thereunder; or (y) other commercially reasonable direction from the Reinsurer with respect to management of the ModCo Assets; provided that such direction does not violate this Agreement (including the Investment Guidelines), any Applicable Law or any law or regulation applicable to such Investment Managers or insurance company investments; provided, further, that, in the case of either of clause (x) or (y), any such direction from, or proposal by, the Reinsurer shall be given in writing, including by email, by its designated representative described below. The Reinsurer shall designate an authorized individual to provide such direction or proposal, and the Ceding Company shall designate an individual to receive any such direction or proposal and deliver such direction or proposal to the applicable Investment Manager. Notwithstanding the foregoing, the Parties acknowledge that the Reinsurer bears the economic risk of the ModCo Assets as described in this Agreement, and agree that, other than the obligation to (A) cooperate in giving effect to any proposal in respect of a transfer and/or (B) deliver any direction to the applicable Investment Manager as contemplated above, the Ceding Company shall have no obligation, and shall incur no liability, with respect to such direction or proposal, as applicable.
(iv) Furthermore, each of the Ceding Company and the Reinsurer acknowledges and agrees that any fees and expenses paid by the Ceding Company under any Capital Markets Services Agreement in respect of ModCo Assets shall constitute Investment Expenses, and that the Ceding Company shall not agree to amend any terms relating to fees and expense reimbursements payable to any Person under such Capital Markets Services Agreement in respect of ModCo Assets without the Reinsurer’s prior written consent.
(e) For the avoidance of doubt, the Ceding Company and the Reinsurer agree that the IMR is ceded to the Reinsurer. The IMR shall be calculated by the Ceding Company.
Appears in 1 contract
Samples: Combination Coinsurance and Modified Coinsurance Agreement (American International Group Inc)
