Common use of Security for Reinsurance Credit Clause in Contracts

Security for Reinsurance Credit. If the Ceding Company believes in good faith it may not be entitled to claim Reinsurance Credit, as described above, in total or in part, due to a change in law or regulation, or due to a change in the interpretation or application of existing law or regulation by a regulator (hereinafter an "Uncontrollable Reserve Credit Event"), or due to a failure by the Reinsurer to maintain in effect a required license or accreditation in any of the jurisdictions in which the Ceding Company is licensed to transact insurance business (hereinafter a "Controllable Reserve Credit Event"), then, subject to the Reinsurer's rights and obligations to cure as defined in this Article, the Parties will take the steps specified below in this Article. The Party who first becomes aware of such event will provide prompt notice to the other Party of the occurrence of either an Uncontrollable Reserve Credit Event or a Controllable Reserve Credit Event (hereinafter collectively "Reserve Credit Event"). Within fifteen (15) days of delivery of (if the delivering Party) or receipt of (if the receiving Party) such notice, the Reinsurer shall propose to the Ceding Company a cure to the Reserve Credit Event in a manner that eliminates the need for or enables the Ceding Company to continue to receive Reinsurance Credit. The Ceding Company may approve or disapprove the Reinsurer's cure proposal at its sole discretion, except that the Ceding Company shall not deny unreasonably disapprove any cure proposal presented by the Reinsurer as long as the proposed cure meets all applicable laws and regulations regarding Reinsurance Credit and does not require the payment of any United States tax by the Ceding Company. Without limiting potential cure options, the Reinsurer's proposed cure may include: (i) Modifying the settlement terms of this Agreement during the Reserve Credit Event to provide for monthly settlements in arrears during the pendency of the Reserve Credit Event; or (ii) Modifying the settlement terms of this Agreement during the Reserve Credit Event to provide for settlements on a funds-withheld basis during the pendency of the Reserve Credit Event; or (iii) Transferring the reinsurance provided under this Agreement to another reinsurer by novation of this Agreement, provided that such other reinsurer meets the Ceding Company's established reinsurer credit criteria in place at the time of the transfer and that such other reinsurer accepts transfer of this Agreement (including all amendments thereto) by novation without any material modification to the substantive terms of the Agreement (notwithstanding the terms of Article XIV, if the Reinsurer novates this Agreement to an entity that is not subject to United States taxation, then the joint DAC Tax Election under Article XIV shall be invalid for consideration received after the date of novation); or (iv) The Reinsurer establishing and maintaining sufficient collateral, the form of which may be a letter of credit or assets in trust or some combination of the two, provided such collateral meets all applicable laws and regulations regarding Reinsurance Allocated Retention Pool -- Effective 10/1/2008 Between HLIC and Swiss Re Credit amending this Agreement accordingly and entering into additional agreements as necessary; or (v) Any combination of the foregoing or comparable approaches. In the event the Parties agree upon a cure, the Parties shall amend this Agreement, in accordance with Section I.B, to reflect the agreed-upon terms of such cure. If the Reinsurer cannot cure an Uncontrollable Reserve Credit Event, as set forth above, but such Uncontrollable Reserve Credit Event can be cured by the posting of collateral, within fifteen (15) days the Reinsurer shall establish and maintain collateral, either a trust or a letter of credit, in a form which meets all applicable standards of law and regulation to enable the Ceding Company to claim Reinsurance Credit during the pendency of the Reserve Credit Event. The Parties agree that in such an event, the cost of establishing and maintaining the collateral will be shared equally by the Ceding Company and the Reinsurer. If the Reinsurer cannot cure a Controllable Reserve Credit Event, as set forth above, but such Controllable Reserve Credit Event can be cured by the posting of collateral, within fifteen (15) days the Reinsurer shall establish and maintain collateral, either a trust or a letter of credit, in a form which meets all applicable standards of law and regulation to enable the Ceding Company to claim Credit during the pendency of the Reserve Credit Event. The Parties agree that in such an event, the cost of establishing and maintaining the collateral will be borne entirely by the Reinsurer. If a Reserve Credit Event is not cured or the Reinsurer fails to establish or maintain collateral as set forth above, then the Ceding Company may recapture the Business Reinsured under this Agreement in accordance with the terms of Article XVI. In no event shall recapture be construed to be the exclusive remedy of the Ceding Company.

Security for Reinsurance Credit. If the Ceding Company believes in good faith it may not be entitled to claim Reinsurance Credit, as described above, in total or in part, due to a change in law or regulation, or due to a change in the interpretation or application of existing law or regulation by a regulator (hereinafter an "Uncontrollable Reserve Credit Event"), or due to a failure by the Reinsurer to maintain in effect a required license or accreditation in any of the jurisdictions in which the Ceding Company is licensed to transact insurance business (hereinafter a "Controllable Reserve Credit Event"), then, subject to the Reinsurer's rights and obligations to cure as defined in this Article, the Parties will take the steps specified below in this Article. The Party who first becomes aware of such event will provide prompt notice to the other Party of the occurrence of either an Uncontrollable Reserve Credit Event or a Controllable Reserve Credit Event (hereinafter collectively "Reserve Credit Event"). Within fifteen (15) days of delivery of (if the delivering Party) or receipt of (if the receiving Party) such notice, the Reinsurer shall propose to the Ceding Company a cure to the Reserve Credit Event in a manner that eliminates the need for or enables the Ceding Company to continue to receive Reinsurance Credit. The Ceding Company may approve or disapprove the Reinsurer's cure proposal at its sole discretion, except that the Ceding Company shall not deny unreasonably disapprove any cure proposal presented by the Reinsurer as long as the proposed cure meets all applicable laws and regulations regarding Reinsurance Credit and does not require the payment of any United States tax by the Ceding Company. Without limiting potential cure options, the Reinsurer's proposed cure may include: (i) Modifying the settlement terms of this Agreement during the Reserve Credit Event to provide for monthly settlements in arrears during the pendency of the Reserve Credit Event; or (ii) Modifying the settlement terms of this Agreement during the Reserve Credit Event to provide for settlements on a funds-withheld basis during the pendency of the Reserve Credit Event; or (iii) Transferring the reinsurance provided under this Agreement to another reinsurer by novation of this Agreement, provided that such other reinsurer meets the Ceding Company's established reinsurer credit criteria in place at the time of the transfer and that such other reinsurer accepts transfer of this Agreement (including all amendments thereto) by novation without any material modification to the substantive terms of the Agreement (notwithstanding the terms of Article XIV, if the Reinsurer novates this Agreement to an entity that is not subject to United States taxation, then the joint DAC Tax Election under Article XIV shall be invalid for consideration received after the date of novation); or (iv) The Reinsurer establishing and maintaining sufficient collateral, the form of which may be a letter of credit or assets in trust or some combination of the two, provided such collateral meets all applicable laws and regulations regarding Reinsurance Allocated Retention Pool -- Effective 10/1/2008 Between HLIC ILA and Swiss Re Credit amending this Agreement accordingly and entering into additional agreements as necessary; or (v) Any combination of the foregoing or comparable approaches. In the event the Parties agree upon a cure, the Parties shall amend this Agreement, in accordance with Section I.B, to reflect the agreed-upon terms of such cure. If the Reinsurer cannot cure an Uncontrollable Reserve Credit Event, as set forth above, but such Uncontrollable Reserve Credit Event can be cured by the posting of collateral, within fifteen (15) days the Reinsurer shall establish and maintain collateral, either a trust or a letter of credit, in a form which meets all applicable standards of law and regulation to enable the Ceding Company to claim Reinsurance Credit during the pendency of the Reserve Credit Event. The Parties agree that in such an event, the cost of establishing and maintaining the collateral will be shared equally by the Ceding Company and the Reinsurer. If the Reinsurer cannot cure a Controllable Reserve Credit Event, as set forth above, but such Controllable Reserve Credit Event can be cured by the posting of collateral, within fifteen (15) days the Reinsurer shall establish and maintain collateral, either a trust or a letter of credit, in a form which meets all applicable standards of law and regulation to enable the Ceding Company to claim Credit during the pendency of the Reserve Credit Event. The Parties agree that in such an event, the cost of establishing and maintaining the collateral will be borne entirely by the Reinsurer. If a Reserve Credit Event is not cured or the Reinsurer fails to establish or maintain collateral as set forth above, then the Ceding Company may recapture the Business Reinsured under this Agreement in accordance with the terms of Article XVI. In no event shall recapture be construed to be the exclusive remedy of the Ceding Company.