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EXHIBIT 10.3
Automatic Flexible Premium Variable Life Reinsurance Agreement Number 3
(Referred to as this Agreement)
Between
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
St. Petersburg, Florida
(referred to as the Reinsured)
and
WMA LIFE INSURANCE COMPANY LIMITED
Xxxxxxxx, Bermuda
(referred to as the Reinsurer)
Effective October 1, 1999
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TABLE OF CONTENTS
ARTICLE TITLE PAGE
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I. BASIS OF REINSURANCE 3
II. DEFINITIONS 3
III. LIABILITY 5
IV. THE AMOUNT REINSURED 6
V. REDUCTION AND TERMINATIONS 6
VI. PREMIUMS 6
VII. PAYMENTS BY REINSURER 7
VIII. REPORTING 7
IX. REINSURANCE RESERVES 7
X. SETTLEMENT OF CLAIMS 8
XI. GENERAL PROVISIONS 10
XII. REINSTATEMENTS 14
XIII. POLICY CHANGES 14
XIV. RECAPTURE 14
XV. ARBITRATION 14
XVI. IMPROPER SOLICITATION OF REINSURED PLAN OWNERS 15
XVII. DAC TAX (Section 1.848-2(g)(8) Election) 15
XVIII. DURATION OF AGREEMENT 16
XIX. CONVERSION 17
XX. WRITTEN NOTICE 18
XXI. EXECUTION 19
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The Reinsured and the Reinsurer mutually agree to reinsure on the terms
and conditions set out below.
I. BASIS OF REINSURANCE
1. Insurance. The reinsured will cede on an automatic basis and
the Reinsurer will accept as reinsurance the individual
Reinsured Plans (policies) written by the Reinsured as shown
in Schedule A1. The Reinsured shall have the right to amend
the Automatic Acceptance Limits if the Reinsured modifies its
Retention Limits, as shown in Schedule A2.
2. Risks are reinsured on a monthly renewable term plan basis.
The Reinsurance Premiums shall be payable on a monthly
renewable term basis, with quarterly settlements as described
in Article III, Liability.
3. Coverages. The individual Reinsured Plans reinsured as shown
in Schedule A1, are the Financial Freedom Builder contracts
and any riders, supplemental benefits or endorsements attached
thereto, with an issue date on or after January 1, 1999.
Reinsurance will be limited in percentage as provided in
Schedule B1. Only plans sold by a Producer registered with an
affiliated broker-dealer identified in Exhibit A shall be
reinsured under this Agreement.
4. In no event shall reinsurance under this Agreement be in force
with respect to a Reinsured Plan unless the issuance and
delivery of the Reinsured Plan is in compliance with the laws
of all applicable jurisdictions and the Reinsured's corporate
charter.
5. The Reinsured declares and agrees that all Reinsured Plans and
benefits covered under this Agreement shall be issued in
accordance with its normal practices in effect when the
Reinsured Plan is issued. These practices will be provided to
the Reinsurer on request. The Reinsured will also notify the
Reinsurer of any material changes made to these practices
before applying them to Reinsured Plans and benefits covered
by this Agreement.
6. Reinsurance Outside This Agreement. The Reinsured retains the
right to reinsure, with any reinsurer, any or all of its plans
or coverages automatically in excess of the Reinsured's normal
retention and facultatively, where appropriate. The Reinsured
agrees to notify the Reinsurer in writing of any change in its
normal retention schedule that may affect the Reinsured Plans.
II. DEFINITIONS
"AMOUNT REINSURED" OR "AMOUNT OF REINSURANCE" means the amount of
reinsurance ceded by the Reinsured to the Reinsurer under this Agreement on the
life of an insured person(s). It is the amount of life insurance ceded for which
the Reinsurer is at risk under this Agreement on the life of the insured
person(s). The Amount Reinsured per insured life is calculated as set forth in
Paragraph 1 of Article IV, The Amount Reinsured.
"ARTICLE" OR "PARAGRAPH" refers to an Article or Paragraph of this
Agreement.
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"CASH VALUE" has the same meaning ascribed to it in a reinsured policy.
"THE CO/MODCO AGREEMENT" shall mean the Automatic Flexible Premium
Variable Life Reinsurance Agreement Number 2 between the Reinsured and the
Reinsurer, as amended.
"EFFECTIVE DATE", with respect to Reinsured Plans, means the date shown
in Article XXI, Execution. The Reinsured is liable for Reinsurance Premiums,
less applicable Reinsurance Allowances, due on or after the Effective Date of a
Reinsured Plan; and the Reinsurer is liable for any reinsured benefits occurring
on or after the Effective Date.
"EXECUTION DATE" means the date as of which this Agreement has been
executed, as shown in Article XXI, Execution.
"EXHIBIT" AND "SCHEDULE" mean, respectively, an exhibit or schedule
attached to this Agreement and shall be considered part of this Agreement.
"EXPERIENCE REFUND" means the portion of the reinsurance premium that
is returned to the Reinsured when claims experience is better than expected when
the premium was calculated. The experience refund, if any, shall be calculated
as shown in Schedule B3.
"FIXED ACCOUNT" means allocation option(s) other than the Separate
Account.
"FIXED ACCOUNT VALUE" means the value of the Fixed Account on any
valuation date.
"MONTHIVERSARY" has the same meaning ascribed to it in a reinsured
policy. It is the day of each calendar month coinciding with a policy's Policy
Date.
"MONTHLY COST OF INSURANCE" means the monthly cost of insurance for the
reinsured policy together with the charge for benefits provided by riders
attached to the reinsured policy.
"PARTY" or "PARTY" refers to either the Reinsured or the Reinsurer as
appropriate, and PARTIES refers to both collectively.
"POLICY DATE" means the policy date as set forth in the Policy Schedule
of a reinsured policy. It is the date coverage is effective under the Policy.
Policy months, years, Monthiversaries and anniversaries are measured from the
Policy Date.
"PRODUCER" means a licensed representative with a broker-dealer
identified in Exhibit A.
"REINSURED PLAN" means any life insurance policy form or rider form
reinsured under this Agreement, as set forth in Schedule A1.
"SEPARATE ACCOUNT" means a separate investment account shown on the
Policy Schedule page which is composed of several sub-accounts established to
receive and invest net premiums under the policy.
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"SERIES FUND" means a designated mutual fund from which each
sub-account of the Separate Account will buy shares.
"SETTLEMENT INTEREST RATE" means the interest rate for ninety (90) day
dealer commercial paper as published in The Wall Street Journal or a successor
or substitute publication, as agreed upon by both parties if The Wall Street
Journal should cease to exist. The Settlement Interest Rate for a given month
will be the Settlement Interest Rate published on the fifteenth (15th) of the
month or the next following business day if the fifteenth (15th) of the month is
not a publication date of The Wall Street Journal.
"SPECIFIED AMOUNT" means the Specified Amount as set forth in the
Policy Schedule of a reinsured policy.
"STATUTORY RESERVES AND LIABILITIES" refers to statutory reserves and
liabilities associated with the ceded risk for the reinsured contracts.
"SUB-ACCOUNT" means a subdivision of the Separate Account. Each
Sub-account invests exclusively in the shares of a specified Series Fund
portfolio.
III. LIABILITY
1. The liability of the Reinsurer on any reinsurance under this
Agreement begins upon the effective date of this Agreement as
set forth in Article XXI, Execution and ends after all
Reinsured Plans reinsured have been terminated or recaptured,
as set forth in Article XIV, Recapture.
2. The liability of the Reinsurer to the Reinsured under this
Agreement will be coexisting with the liability of the
Reinsured under the Reinsured Plans reinsured. In no event
shall the Reinsurer's liability for reinsurance continue after
termination of the Reinsured's liability for any claims
relating to its corresponding Reinsured Plans.
3. For a Reinsured Plan or rider reinsured under this Agreement:
(i) the liability of the Reinsurer under this Agreement shall
commence simultaneously with the beginning of the Reinsured's
liability under each corresponding Reinsured Plan or any
application or conditional receipt therefor; and (ii) the
liability of the Reinsured for Reinsurance Premiums under this
Agreement shall begin as of the Policy Date of the reinsured
policy or as of the effective date of reinsured rider, if
different. The Reinsured represents that its normal
underwriting practice is to promptly return any premium
payment taken with an application which the Reinsured has
declined without a counteroffer; however, failure of the
Reinsured to do so shall not relieve the Reinsurer for its
liability under this Paragraph.
4. In no event shall the Reinsurer's liability for reinsurance
continue after termination of the Reinsured's liability for
any claims relating to its corresponding reinsured policy or
rider.
5. On an ongoing basis the liability of the Reinsurer,
reinsurance premiums, reinsurance allowances, benefits and
other items due to or from each party shall be accounted for
and settled and paid quarterly on the basis of the quarterly
reports prepared by the Reinsured in the form of Schedule E5
and sent to Reinsurer via facsimile transmission or such other
medium mutually acceptable to both parties. Also included will
be any adjustments made necessary by changes in reinsurance
effective during the previous quarter, or changes due
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to any agreed upon errors on a previous report. Payment of any
amount due to be paid by the Reinsurer or the Reinsured shall
be determined on a net basis and shall be paid, in United
States currency, within two (2) weeks after receipt by
Reinsurer of the quarterly report.
6. The settlement, as shown in Schedule E5 will include interest
on monthly reinsurance premiums and allowances accruing from
the fifteenth (15th) of every month to the settlement date.
The interest rate will be the Settlement Interest Rate of the
month named on each Schedule E1 in the quarter. Interest will
be earned from the fifteenth (15th) of the month named on each
Schedule E1 of the quarter to the next following settlement
date.
IV. THE AMOUNT REINSURED
1. The Amount Reinsured will be the quota share percentage, as
specified in Schedule B1, of the death benefit and all other
benefits provided by the Reinsured Plan, including any riders,
supplementary benefits or endorsements attached thereto, as
specified in Schedule A1, less the cash value.
V. REDUCTIONS AND TERMINATIONS
1. If any of the Reinsured Plans reinsured under this Agreement
are reduced or terminated by payment of a death benefit,
withdrawal, surrender or termination due to lapsation,
maturation or expiration of the Reinsured Plan, the
reinsurance will be reduced proportionately. Any policy change
which affects the Death Benefit Proceeds, such as a change in
Option Type, a change in the policy's Specified Amount, a
change in the Face Amount of a rider, or an addition or
deletion of a rider, will result in a proportional change in
the Amount Reinsured. If the change affects the plan, the
amount of reinsurance, premiums, or policy changes under
cession, the Reinsured shall inform the Reinsurer in
subsequent Reinsurance Reports.
2. With regard to liability of the Reinsured under the terms of
an application for a policy or rider to be reinsured under
this Agreement or under the terms of a conditional receipt
issued in connection with such application, the liability of
the Reinsurer under this Agreement shall be equal to the quota
share percentage of the Reinsured's liability, plus any
amounts for which the Reinsurer is responsible under Article
III, Liability.
3. For purposes of Paragraph 1 of this Article, changes in a
policy's death benefit which are due to normal cash value
fluctuation shall be calculated and reported quarterly as
described in Article VIII, Reporting. Other changes in the
Amount Reinsured due to a policy change shall be recalculated
and reported under this Agreement in or for the quarter in
which the policy change occurs. For this purpose, such policy
changes may include, for example, a change in Option Type, a
change in the policy's Specified Amount, a change in the Face
Amount of a rider, and an addition or deletion of a rider.
VI. PREMIUMS
1. The premium to be paid to the Reinsurer by the Reinsured with
respect to each reinsured policy, as specified in Schedule A1,
will be the quota share percentage, as specified in Schedule
B1 of the total amount "Due WMA", as shown in Schedule E5.
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VII. PAYMENTS BY REINSURER
1. The Reinsurer shall pay to the Reinsured the Reinsurer's quota
share percentage of the total amount "Due WRL", as shown in
Schedule E5.
VIII. REPORTING
1. The Reinsured shall assume responsibility for the
administration of all reinsurance under this Agreement and
will provide the Reinsurer with information as set forth in
Schedules E1 through E6, and Schedule K of this Agreement. The
Reinsurer may request, at its option, to review, at the
administrative office of the Reinsured, any papers associated
with the issuance of any Reinsured Plan subject to Automatic
Reinsurance under this Agreement.
2. Not later than twenty (20) days after the end of each quarter,
the Reinsured will submit a report substantially in accordance
with Schedule X0, X0, and E5. The Reinsured agrees to provide
or make available to the Reinsurer such documentation as may
be necessary to support the items reported.
3. Not later than twenty (20) days after the end of each month,
the Reinsured will submit a report substantially in accordance
with Schedules X0, X0 and K.
4. Not later than thirty (30) days after the end of each calendar
year, the Reinsured will submit a report substantially in
accordance with Schedule E6.
5. Not later than ninety (90) days after the end of each calendar
year, the Reinsured will provide a copy of its statutory
statement as filed with the State of Ohio.
6. Not later than one hundred twenty (120) days after the end of
each calendar year, the Reinsurer will provide a copy of The
WMA Corporation Form 10-K.
7. Not later than sixty (60) days after the end of each quarter,
the Reinsurer will provide a copy of The WMA Corporation Form
10-Q.
IX. REINSURANCE RESERVES
1. The Reinsurer will set up Statutory Reserves and Liabilities
not less than the reduction taken by the Reinsured for the
reinsured contracts.
2. For purposes of Paragraph 1 of this Article, the Statutory
Reserves shall be calculated by the Reinsured according to the
"Commissioners Reserve Valuation Method," as prescribed in the
NAIC Standard Valuation Law and approved by the State of Ohio
Department of Insurance. The Statutory Reserves and
Liabilities will include the reserves for any supplemental
benefits and riders.
3. In the event the Reinsurer is not licensed or otherwise
accredited or authorized as a reinsurer in the State of Ohio,
and in any other jurisdiction where the Reinsured is
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licensed to do business, the Reinsurer agrees to provide
Letter(s) of Credit or other forms of security acceptable to
the State of Ohio otherwise available. Such Letter(s) of
Credit or other method(s) shall be issued in compliance with
the statutes and regulations of the State of Ohio and shall be
issued by a financial institution located in the United States
chosen by the Reinsurer, which has applied for and has met the
standards of financial conditions set forth by the NAIC's
Securities Valuation Office.
4. The Letter(s) of Credit in favor of the Reinsured will be an
amount which at all times must equal or exceed the reinsurance
credits taken or reasonably estimated to be taken by the
Reinsured in connection with this Agreement under Exhibit 8,
and under Exhibit 11, Part 1, Column 3, Line 4c, and any other
liabilities held for the Reinsured Policies and reported on
the Reinsured's statutory financial statements.
5. The Letter(s) of Credit shall be substantially in the form set
forth in Exhibit B or in such other form as the Ohio Insurance
Department or other applicable state Insurance Department may
require or permit. The terms of the Letter(s) of Credit shall
provide that: it is not conditioned on the delivery of any
other documents or materials; it is irrevocable without the
consent of the Reinsured; it is automatically renewable as
provided in Exhibit B; and its initial term is for a period of
not less than one (1) year. Such Letter(s) of Credit may be
drawn upon at any time, notwithstanding any other provisions
in this Agreement, but shall be utilized by the Reinsured or
its successors only for one or more of the following reasons:
(i) to fund an account on behalf of the Reinsured in an
amount at least equal to the deduction, for
reinsurance ceded, from the Reinsured's reserves and
liabilities for Reinsured Plans, as specified in this
Article; and
(ii) to pay any other amounts the Reinsured claims are due
under this Agreement.
6. Such Letter(s) of Credit shall be promptly issued and
delivered to the Reinsured; but in no event shall the
Letter(s) of Credit be issued or confirmed later than December
31st in respect of the year for which the Reinsured is taking
credits for such reinsurance in its statutory financial
statements, and in no event shall the Letter(s) of Credit be
delivered to the Reinsured later than thirty (30) days after
such December 31st.
X. SETTLEMENT OF CLAIMS
1. Notice. On a monthly basis, the Reinsured shall provide notice
to the Reinsurer of any death claims reported, paid, or
outstanding in a report in the form of Schedule K. On a
quarterly basis, the Reinsured shall account to the Reinsurer
for any death claims due, as provided in Paragraph 1 of
Article IV, The Amount Reinsured. Reinsured agrees to furnish
Reinsurer with copies of the proof of loss or other written
materials relating to a specific claim upon request of
Reinsurer or as provided in Paragraph 5 of this Article.
2. Standard Claim Practices. Reinsured agrees to act in accord
with its standard practices applicable to all claims in
enforcing the terms and conditions of the reinsured policies
or reinsured riders and with respect to the administration,
negotiation, payment, denial, or settlement of any claim or
legal proceeding.
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3. Payment and Settlement of Claim. Reinsurer agrees to accept
the good faith decision of the Reinsured in payment or
settlement of any claim for which Reinsurer has received the
required notice. Reinsurer agrees to pay Reinsured the Amount
Reinsured on which Reinsurance Premiums have been computed
upon receiving proper evidence the Reinsured has paid a policy
claim.
4. Reinsurer's Liability for Covered Claim Expenses. Except as
provided in Paragraph 5 of this Article, Reinsurer's liability
shall include indemnification of the quota share percentage of
any covered claim expenses incurred by Reinsured in defending
or investigating a policy claim. Covered claim expenses are in
addition to the claim expense allowance and shall include, but
not be limited to, cost of investigation, legal fees, court
costs and interest charges and cost of interpleader
proceedings. Covered claim expenses shall not include:
a) Compensation of salaried officers and employees; and
b) routine investigative expenses of incontestable
claims.
5. Contested, Litigated or Compromised Claims. The Reinsured
shall promptly notify Reinsurer of its intention to contest,
compromise or litigate any claim on a Reinsured Plan or its
intention to investigate or defend any litigation initiated
against the Reinsured in response to the Reinsured's denial of
a claim on a Reinsured Plan. With or immediately following
such notice, the Reinsured shall furnish Reinsurer with copies
of written materials relating to such claim. Reinsurer shall
promptly notify Reinsured of its decision whether or not to
accept any such action. If Reinsurer declines to accept any
such action, it will pay the full Amount Reinsured, as if
there had been no such contest, compromise or litigation, and
will be fully discharged as of the date of such payment from
any further liability on that claim under Paragraph 4 of this
Article. If the Reinsurer accepts such action, then: (i)
Reinsurer shall continue to share in the covered claim
expenses as described in Paragraph 4; (ii) the Reinsured shall
keep the Reinsurer informed of the status of any legal
proceeding or settlement negotiations in connection with such
claim; and (iii) if the contest or compromise reduces the
amount of the Reinsured's liability, the Reinsurer's liability
shall be reduced to its quota share percentage of the reduced
amount.
6. Recovery from Third Party. The Reinsured shall promptly notify
Reinsurer if the Reinsured should assert or bring a claim or
action against a third party for contribution, indemnification
or similar grounds to recover from the third party any monies
paid or expenses incurred by the Reinsured in connection with
a policy claim reinsured under this Agreement. Upon request,
the Reinsured shall furnish Reinsurer with copies of written
materials relating to such third party claim or action.
Reinsurer shall promptly notify Reinsured of its decision
whether or not to share in the expenses and potential recovery
of any such proceeding. If Reinsurer declines to so accept any
such proceeding, Reinsurer shall not participate in any costs
of such proceeding and shall not share in any monies so
recovered by the Reinsured. If the Reinsurer accepts such
action, then the Reinsurer shall continue to share in the
expenses of that proceeding and the Reinsurer shall share in
any monies recovered by the Reinsured. The Reinsured shall
keep the Reinsurer informed of the status of such proceeding
or settlement negotiations in connection with such proceeding.
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7. Adjustments for Misstatements. If the amount claimed as death
benefit under a reinsured policy or reinsured rider is
increased or reduced because of a misstatement of age, sex or
smoker status, the Reinsured Amount will be calculated based
on the adjusted amount of death benefit and the Amount
Reinsured will, if applicable, be increased or decreased
proportionately.
8. Interest. If the Reinsured pays interest on a claim, Reinsurer
agrees to pay the interest on the Amount Reinsured computed at
the same rate and for the same period as that paid by the
Reinsured, but in no event later than the date the claim is
finally adjudicated by the Reinsured.
9. Statutory Penalties. If the Reinsured is required to pay
penalties or interest imposed automatically by statute, other
than penalties or interest arising from Reinsured's negligent
or intentional violation of such a statute, Reinsurer shall
indemnify the Reinsured for the quota share percentage of such
penalties and interest.
10. Terminal Illness Accelerated Death Benefit Rider. The
Reinsurer shall participate in any claim under any Terminal
Illness Accelerated Death Benefit Rider in connection with the
Reinsured Plans. A claim for accelerated death benefits shall
be treated under this Agreement as though it were a death
claim and as though the death occurred on the date the claim
was made. If the claimant elects to take less than 100% of the
benefit under the Terminal Illness Accelerated Death Benefit
Rider and the reinsured policy thereby remains in force, then
the Reinsurer shall pay the Reinsured for the Terminal Illness
Accelerated Death Benefit Rider an amount equal to the
accelerated percentage elected by the claimant multiplied by
the present value, calculated in accordance with the rider
form, of the Amount Reinsured; and the reduced Amount
Reinsured for the policy shall be equal to the original Amount
Reinsured reduced by the same percentage used to calculate the
benefits paid under the Terminal Illness Accelerated Death
Benefit Rider.
XI. GENERAL PROVISIONS
1. Parties to Agreement. This Agreement is a contract solely
between the Reinsurer and the Reinsured. The acceptance of
reinsurance hereunder shall not create any right or legal
relation between the Reinsurer and the insured, beneficiary,
or any other party to any Reinsured Plan hereunder.
2. Reinsurance Conditions. The reinsurance is subject to the same
limitations and conditions as the insurance under the
Reinsured Plan written by the Reinsured on which the
reinsurance is based.
3. Expenses. The Reinsurer will not have liability for any
extra-contractual damages which are rendered against the
Reinsured as a result of acts, commission or course of conduct
committed by a Producer of an affiliated broker-dealer
identified in Exhibit A, in connection with the Reinsured
Plans. In no event whatsoever will the Reinsured have any
liability for extra-contractual damages assessed against the
Reinsurer as a result of acts, omissions, or course of conduct
committed by the Reinsurer in connection with the reinsurance
of the Reinsured Plans under this Agreement.
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4. Oversights. If failure to pay any premium due or to perform
any other act required by this Agreement is unintentional and
is caused by misunderstanding oversight or clerical error, the
Reinsured and the Reinsurer shall be restored to the position
they would have occupied had the misunderstanding, oversight
or clerical error not occurred.
5. Inspection. The Reinsured and the Reinsurer, their auditors
and any regulators having authority over the Reinsured and/or
the Reinsurer, shall have the right, at all reasonable times,
and at their expense, to inspect at the office of the other
party all books, records, procedures, and documents of the
other party relating to this Agreement. A party or its auditor
conducting such inspection shall give the other party one (1)
week advance written notice. The Reinsured, its auditors and
regulators shall have the same right to inspect, verify and
value any assets held in a trust account or otherwise held
for the benefit of the Reinsured. The party being audited or
inspected agrees to cooperate in the audit, including
providing any information requested by the other party or its
auditor in advance of the audit or inspection. Upon request,
the Reinsured agrees to permit the Reinsurer, at all
reasonable times and at Reinsurer's expense, to inspect at
the office of the Reinsured, any underwriting information in
the Reinsured's files pertaining to a reinsured policy or
reinsured rider.
It is mutually agreed by the Reinsured and the Reinsurer that
any information that is made available for inspection under
this section of the Agreement shall, to the extent legally
possible, be kept confidential and under no circumstances may
this information be disclosed to, or made available for
inspection by, any third party without the prior consent of
the other contracting party.
6. Assignment or transfer. In no event shall either the Reinsured
or the Reinsurer assign any of its rights, duties or
obligations under this Agreement without the prior written
approval of the other party. Such approval shall not
unreasonably be withheld.
In no event shall either the Reinsured or the Reinsurer
transfer either the Reinsured Plans reinsured under this
Agreement or the reinsurance without the prior written
approval of the other party. Such approval shall not
unreasonably be withheld.
7. Entire Agreement. This Agreement represents the entire
agreement between the Reinsurer and the Reinsured and
supersedes any prior oral or written agreements between the
parties regarding its subject matter.
8. Alterations to Agreement. Any alteration, which may from time
to time become necessary in this Agreement, shall be made by
amendment attached to the Agreement embodying such alterations
as may be agreed upon and taken as part of this Agreement and
equally binding. No modification or waiver of any provision of
this Agreement shall be effective unless set forth in written
amendment to this Agreement, which is executed by both
parties. A waiver shall constitute a waiver only with respect
to the particular circumstance for which it is given and not a
waiver of any future circumstance.
9. If any provision of this Agreement shall be held or made
invalid by an order of a court of competent jurisdiction,
statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby. This Agreement shall be
construed in accordance with the applicable federal law and
the laws of the State of Ohio and the rights and obligations
of this Agreement shall, at all times, be regulated under the
laws of the State of Ohio.
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10. Taxes. The Reinsurer shall reimburse the Reinsured for any
U.S. Excise Tax the Reinsured is required to pay under the
U.S. Internal Revenue Code for the reason that the Reinsurer
fails to make an election or terminates its election to file
U.S. federal income tax returns or otherwise ceases or fails
to file such return. This Paragraph does not diminish in any
way the provisions of Article XVII, DAC Tax.
11. Insolvency of the Reinsured.
(a) The Reinsured shall immediately give Reinsurer written
notice of an event constituting insolvency of the Reinsured.
However, whether such notice is timely given or not, in the
event of the insolvency of the Reinsured, all amounts relating
to reinsurance made, ceded, renewed or otherwise becoming
effective under this Agreement shall be payable by the
Reinsurer directly to the Reinsured or to its liquidator,
receiver or statutory successor on the basis of the liability
of the Reinsured without diminution because of the insolvency
of the Reinsured or because the Reinsured or Reinsured's legal
representative has failed to pay all or a portion of amounts
owed to Reinsurer under this Agreement. It is understood,
however, that in the event of the insolvency of the Reinsured,
the liquidator or receiver or statutory successor of the
insolvent Reinsured shall give written notice to the Reinsurer
of the pendency of a claim against the insolvent Reinsured on
the policy reinsured within a reasonable time after such claim
is filed in the insolvency proceeding and that during the
pendency of such claim that the Reinsurer may investigate such
claim and interpose in the name of the Reinsured (or its
liquidator, receiver or statutory successor), at the
Reinsurer's own expense, in the proceeding where such claim is
to be adjudicated any defense or defenses which it may deem
available to the Reinsured or its liquidator or receiver or
statutory successor.
(b) It is further understood that the expenses thus incurred
by the Reinsurer shall be chargeable, subject to court
approval, against the insolvent Reinsured as part of the
expense of liquidation to the extent of a proportionate share
of the benefit which may accrue to the Reinsured solely as a
result of the defense undertaken by the Reinsurer. When two or
more reinsurers are participating in the same claim and a
majority in interest elect to interpose a defense or defenses
to such claim, the expense shall be apportioned in accordance
with the terms of this Agreement as though such expense had
been incurred by the Reinsured.
12. Insolvency of the Reinsurer. The Reinsurer shall immediately
give the Reinsured written notice of an event constituting
insolvency of the Reinsurer. Upon the insolvency of the
Reinsurer, whether notice thereof was given by the Reinsurer
or not, the Reinsured has the right to immediately, by written
notice, terminate this Agreement and recapture all reinsurance
under this Agreement. Notwithstanding such termination or
recapture, Reinsurer or its legal representative shall
continue to be liable to the Reinsured for any obligations of
the Reinsurer under this Agreement still outstanding after
giving effect to such recapture.
13. For the purpose of this Agreement, either the Reinsurer or the
Reinsured shall be deemed "insolvent" under the following
circumstances:
(a) when a cease and desist order or injunction has been
issued by the commissioner or a court of competent
jurisdiction in its state or jurisdiction of domicile
ordering either party to cease and desist from
transacting, soliciting or writing any new
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business of any kind and is reasonably expected to
result in conservatorship, rehabilitation,
receivership, or liquidation; or
(b) when a court of competent jurisdiction order is
issued voluntarily or involuntarily placing either
party into conservatorship, rehabilitation,
receivership, or liquidation, or appointing a
conservator, rehabilitator, receiver or liquidator to
take over the business of either party; or
(c) when it files or consents to the filing of a petition
in bankruptcy, seeks reorganization or an arrangement
with creditors or takes advantage of any bankruptcy,
dissolution, liquidation or similar law or statute.
14. Offset. The Reinsurer and the Reinsured shall consider any
balance due and unpaid, matured or unmatured, liquidated or
unliquidated, regardless of when they arose or were
incurred, whether on account of premiums, allowances, policy
charges, losses, claims expenses, or any other amount in
accordance with the terms of this Agreement, or any other
reinsurance agreement, due from one party to another to be
mutual debits or credits under this Agreement and shall be
offset and only the balance allowed or paid. If either the
Reinsured or Reinsurer is then under any formal insolvency
proceedings, this right of offset shall be subject to the laws
of the domiciliary jurisdiction of the then insolvent party.
15. Non-Guaranteed Charges and Benefits. The Reinsured agrees to
manage the non-guaranteed charges and benefits in a way that
balances the interests of the owners, agents, stockholders,
contract owners, and the Reinsurer, while exercising sound
actuarial professional judgment. Any changes in the
non-guaranteed contract charges and benefits will be
accompanied by an actuarial report prepared in accordance with
the standards described in the Actuarial Standards of Practice
No. 1, as Reformatted and Readopted in 1990 by the Actuarial
Standards Board. The actuarial report should disclose a
description of the framework within which the actuary's advice
has been developed, a description of the facts, methods,
procedures and assumptions upon which the advice was based,
and the other information called for by the Actuarial Standard
of Practice No. 1. Should the Reinsurer determine that the
Reinsured has not balanced the interests of the Reinsured with
the interests of the Reinsurer and agreement cannot be
reached, any claims may be settled by arbitration in
accordance with Article XV, Arbitration.
16. Forms and Manuals. The Reinsured agrees to make available to
the Reinsurer copies of all appropriate policy forms,
prospectuses, application forms, and other related material.
If new material is published, or changes are made in the
material already filed, the Reinsured agrees to promptly
provide the Reinsurer with copies of such material.
17. Headings. The headings of the Articles, Paragraphs and any
subparagraphs and Schedules of this Agreement are inserted for
convenience of reference only and shall not constitute a part
of this Agreement.
18. Definitions. Any defined term used in this Agreement shall
have the meaning ascribed to it in this Article. Any term not
defined in this Agreement which is in general usage in the
life reinsurance industry shall be given the same meaning as
such general usage ascribes to that term, giving due
consideration to the context in which the term is used in this
Agreement.
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XII. REINSTATEMENTS
1. Should a Reinsured Plan lapse and subsequently be reinstated
in accordance with its terms and the normal rules of the
Reinsured, the reinsurance shall be reinstated automatically.
The Reinsured shall pay reinsurance premiums, net of
allowances, to the Reinsurer for the same period of time cost
of insurance charges are calculated and received by the
Reinsured on the reinstated policy.
XIII. POLICY CHANGES
1. Should the Reinsured make any material changes (including but
not limited to a change in Face Amount, Specified Amount or
Rating Classification) in the provisions and conditions of a
Reinsured Plan issued to an insured and upon which reinsurance
shall have been granted hereunder, the Reinsured shall reflect
such policy changes, as appropriate, in the monthly reports
called for in Article VIII, Reporting.
2. The Reinsured agrees to notify the Reinsurer in writing of any
anticipated material changes in the terms and conditions of
the Reinsured Plans.
XIV. RECAPTURE
1. Business reinsured under this Agreement will not be eligible
for recapture, except the Reinsured reserves the right to
recapture:
(i) any business that has been inforce twenty (20) years
after the policy issue date, or
(ii) all business subject to a decrease in the expense
allowances otherwise applicable as shown in Schedule
B2, provided the Reinsured notifies the Reinsurer of
its election to recapture within ninety (90) days
following notification by the Reinsurer of a decrease
in allowances in accordance with the terms shown in
Schedule B2.
2. Furthermore, should a state regulatory body rule that this
Agreement is not valid for any reason, and there is no
remedial action available to correct the situation, the
Reinsured reserves the right to recapture that portion of the
business that was reinsured. Any adjustment in values as a
result of recapture will be agreed upon at the time of the
recapture. If agreement cannot be reached, any claims will be
settled in accordance with the provision of Article XV,
Arbitration.
XV. ARBITRATION
1. Any controversy or claim between the Reinsured and the
Reinsurer, arising out of or relating to this Agreement or the
breach thereof or the coverage of this arbitration provision,
shall be settled by arbitration.
2. There shall be three (3) arbitrators who shall be current or
former officers of life insurance companies or life
reinsurers. However, unless otherwise consented to in
14
15
writing by the parties, such person shall not be a current or
former employee of, or current or former consultant to, the
parties or any affiliate or reinsurer of the parties; nor
shall he or she have any current employment or affiliation
with, consulting or contractual engagement with, or financial
interest in: a party to this Agreement or persons or companies
affiliated or associated with a party to this Agreement. The
Reinsured shall appoint one of the arbitrators and the
Reinsurer shall appoint a second arbitrator and these two
arbitrators shall select the third. If either party shall fail
to appoint an arbitrator within thirty (30) days after the
other party has given notice of its appointment of an
arbitrator, the appointment of the arbitrator for the party
which has so failed to appoint an arbitrator shall be left to
the other party. Should the two arbitrators appointed by or
for the parties fail to agree on the choice of the third,
within sixty (60) days of their appointment then each of them
shall name three (3) individuals, of whom the other shall
decline two (2), and the decision shall be made by drawing
lots.
3. Arbitration shall be conducted in accordance with the
Commercial Arbitration Rules of the American Arbitration
Association which shall be in effect on the date of delivery
of demand for arbitration; except, however, that arbitrators
shall be appointed in accordance with the provisions of
Paragraph 2 of this Article and that, to the extent any other
terms or provisions of this Article are inconsistent with or
in conflict with the Commercial Arbitration Rules, this
Article shall control.
4. The arbitration shall be conducted in a location to be
determined by a majority of the Arbitrators.
5. The Reinsured and the Reinsurer shall each pay that part of
the expense of arbitration which shall be apportioned to it by
the arbitrators.
6. The award rendered by the arbitrators shall be final, and
judgment may be entered upon it in any court having
jurisdiction thereof.
7. The Arbitrators shall base their decision on the terms and
conditions of this Agreement and, as necessary, on the customs
and practices of the life reinsurance and life insurance
industries rather than on a strict interpretation of
applicable law.
XVI. IMPROPER SOLICITATION OF REINSURED PLAN OWNERS
1. Neither party, nor any affiliate thereof, shall contact or
authorize any other person to contact owners of the Reinsured
Plans for the purpose of soliciting surrender of the Reinsured
Plans, conversion of the Reinsured Plans to another form of
insurance, making policy loans or withdrawals without prior
written approval of the other party.
XVII. DAC TAX - SECTION 1.848-2(G)(8) ELECTION
1. The Reinsurer and the Reinsured each acknowledge that it is
subject to taxation under Subchapter "L" of the Internal
Revenue Code of 1986 (The "Code").
2. The Reinsured and the Reinsurer hereby agree to the following
pursuant to Section 1.848-2(g)(8) of the Income Tax
Regulations issued December 1992, under Section 848 of the
15
16
Internal Revenue Code of 1986, as amended. This election shall
be effective for 1998 and for all subsequent taxable years for
which this Agreement remains in effect.
3. The terms used in this Article are defined by reference to
Regulation Section 1.848-2 in effect December 1992.
4. Each party agrees to attach a schedule to its federal income
tax return which identifies this Agreement for which the joint
election under the Regulation has been made.
5. The party with the net positive consideration for this
Agreement for each taxable year will capitalize specified
policy acquisition expenses with respect to this Agreement
without regard to the general deductions limitation of Section
848(c)(1).
6. Both Parties agree to exchange information pertaining to the
amount of net consideration under this Agreement each year to
ensure consistency or as otherwise required by the Internal
Revenue Service.
7. The Reinsured will submit a schedule to the Reinsurer by May
1, of each year, of its calculation of the net consideration
for the preceding calendar year. This schedule of calculations
will be accompanied by a statement signed by an officer of the
Reinsured stating that the Reinsured will report such net
consideration on its tax return for the preceding calendar
year.
8. The Reinsurer may contest such calculation by providing an
alternative calculation to the Reinsured in writing within
thirty (30) days of the Reinsurer's receipt of the Reinsured's
calculation. If the Reinsurer does not so notify the
Reinsured, the Reinsurer will report the net consideration as
determined by the Reinsured in the Reinsurer's tax return for
the previous calendar year.
9. If the Reinsurer contests the Reinsured's calculation of the
net consideration, the parties will act in good faith to reach
an agreement as to the correct amount within thirty (30) days
of the date the Reinsurer submits its alternative calculation.
If the Reinsured and the Reinsurer reach agreement on an
amount of net consideration, each party shall report such
amount in their respective tax returns for the previous
calendar year.
XVIII. DURATION OF AGREEMENT
1. Except as provided in Article XIV, Recapture, inforce
reinsurance which has been ceded under this Agreement shall be
unlimited as to its duration and shall be maintained in force
for so long as such policies shall remain in force and the
reinsurance premiums and payments referenced in Articles VI,
Premiums and Article VII, Payments By Reinsurer are paid when
due.
2. Term of Agreement. The initial term of this Agreement shall be
three and one-half (3 1/2) years. During and after the initial
term, this Agreement may be canceled as it pertains to the
reinsurance of new business thereafter:
(a) immediately upon written notice by a party if the
other party becomes insolvent, dissolves, ceases to
legally exist, or otherwise ceases to be legally
authorized to act as a reinsurer or insurer,
respectively, in its domiciliary jurisdiction;
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(b) upon thirty (30) days written notice by a party if
the other party has materially breached this
Agreement and has failed to cure such breach within
such thirty (30) days;
(c) when and as agreed upon by the parties in writing.
3. After the initial term of this Agreement, this Agreement may
also be canceled by either party, as it pertains to the
reinsurance of new business thereafter, by giving three
hundred sixty-five (365) days advance notice of cancellation
in writing. In such case, the Reinsured shall continue to
cede, and the Reinsurer shall continue to accept reinsurance,
under this Agreement on policies and riders issued during the
three hundred sixty-five (365) day period, and the interest of
the Reinsurer in new business shall cease at the end of the
three hundred sixty-five (365) day period.
XIX. CONVERSION
1. At any time, on or after January 1, 2000 and before April 1,
2003, the Reinsurer shall have the option (provided the
Reinsurer demonstrates sufficient capacity) to convert the
reinsurance on policies and riders issued from the beginning
of the prior calendar year to the date the Reinsurer elects to
convert the reinsurance of the policies and riders, to the
Co/ModCo Agreement. The Reinsurer shall demonstrate its
capacity by showing the Reinsured that its unassigned invested
securities, together with anticipated cash flows
(including retrocession facilities), will be sufficient to
meet expected reinsurance settlements, with regard to the
converted reinsurance, for a period of not less than
twenty-four months following the date the Reinsurer elects to
convert the reinsurance of the policies and riders to the
Co/ModCo Agreement. Upon election to convert the reinsurance
of the policies and riders, the initial ceding allowance
payable to the Reinsured shall equal (a) less (b) less (c),
where:
(a) equals settlements that would have otherwise occurred
under the Co/ModCo Agreement, had the policies and
riders been reinsured under the Co/ModCo Agreement
from the beginning of the prior calendar year to the
date the Reinsurer elects to convert the reinsurance
of the policies and riders, accrued at an effective
rate of *%,
(b) equals all settlements due or paid under this
Agreement from the beginning of the prior calendar
year to the date the Reinsurer elects to convert the
reinsurance of the policies and riders, accrued at an
effective rate of *%, and
(c) equals the settlement paid for business that was
recaptured for quarters one through three of 1999
under the Co/ModCo Agreement. This amount is $458,456
measured from October 1, 1999 or $482,441 measured
from November 3, 1999, accrued at an effective rate
of *%. This settlement is applicable only during Year
2000.
The initial ceding allowance shall be payable within 14 days
after the Reinsurer's election to convert the reinsurance of
the policies and riders.
----------------
* Material omitted pursuant to Rule 24b-2 under the Securities Exchange
Act of 1934.
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2. The Reinsured shall continue to provide the schedules
contained in the Co/ModCo agreement showing the policy
activity that would otherwise occur should the reinsurance on
policies and riders be converted to the Co/ModCo agreement,
until the option to convert said reinsurance on the policies
and riders expires.
XX. WRITTEN NOTICE
1. Any notice given in connection with this Agreement shall be
deemed to be provided when it is sent by facsimile to the
numbers shown below, or by first class mail or by courier to
the addresses set forth below, or to the last address or
facsimile number of record such party designates in writing:
If to the Reinsured: With a Copy to:
-------------------- ---------------
Western Reserve Life Assurance Co. of Western Reserve Life Assurance Co. of
Ohio Ohio
P. 0. Xxx 0000 X. X. Xxx 0000
Xxxxxxxxxx, Xxxxxxx 00000 Xxxxxxxxxx, Xxxxxxx 00000
Attn: Xxxx Xxxxxx, Chief Actuary Attn: Xxxxx Xxxxxxxx, Managing Actuary
Facsimile (000) 000-0000 Facsimile: (000) 000-0000
If to the Reinsurer: With a Copy to:
-------------------- ---------------
WMA Life Insurance Company Limited The WMA Corporation
Xxxxx Xxxxx, 00 Xxxxxx Xxxxxx 00000 Xxxxx Xxxxx Xxxxxxx
Xxxxxxxx XX 00, Xxxxxxx Xxxxxx, XX 00000-0000
Attn: Manager Attn: Chief Financial Officer
Facsimile: (000) 000-0000 Facsimile: (000) 000-0000
Xxxxx X. Xxxxxx, Esq.
Xxxxxxx & Xxxxxx
000 Xxxxxxxx Xxxxxxx, Xxxxx 000
Xxxxxxx, XX 00000
Facsimile: (000) 000-0000
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XXI. EXECUTION
In witness of the above, the Reinsured and the Reinsurer, by their
respective officers have executed this Agreement in duplicate at the
dates and places indicated and shall be effective as of October 1,
1999.
WESTERN RESERVE LIFE WMA LIFE INSURANCE
ASSURANCE CO. OF OHIO LIMITED COMPANY
at St. Petersburg, FL at Kamuela, Hawaii
on March 16, 2000. on March 20, 2000.
By: /s/ Xxxxx Xxxxxxxx By: /s/ Xxxxxx X. XxXxxxxx
---------------------------- --------------------------
Title: VP & Managing Actuary Title: VP & Actuary
By: /s/ Xxxx Xxxxxx By:/s/ Xxxxxx X. Xxxxxxxxxx
---------------------------- --------------------------
Title: EVP Title:
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Exhibit A
PRODUCER
Flexible Premium Variable Life policies, applicable riders, and endorsements
must be sold by and distributed through: WMA Securities, Inc. (and/or its
successors) and its affiliates.
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Exhibit B
FORM OF LETTER OF CREDIT
Effective Date
Western Reserve Life Assurance Co. of Ohio
P. O. Xxx 0000
Xxxxxxxxxx, XX 00000
Gentlemen:
We have established this clean, irrevocable and unconditional Letter of Credit
in your favor as beneficiary for drawings up to _______________________________
effective immediately. This Letter of Credit is issued, and payable at our
office at ______________________________ and expires with our close of business
on ___________________. Except when the amount of this Letter of Credit is
increased, this Letter of Credit cannot be modified or revoked without your
consent.
The term "Beneficiary" includes any successor by operation of law of the named
Beneficiary. If a court of law appoints a successor in interest to the named
Beneficiary, then the named Beneficiary includes and is limited to the court
appointed domiciliary receiver (including conservator, rehabilitator or
liquidator).
We hereby undertake to promptly honor your sight draft(s) drawn on us,
indicating our Letter of Credit No. _________, for all or any part of this
Letter of Credit upon presentation of your draft drawn on us at our office
specified in paragraph one on or before the expiration date hereof or any
automatically extended expiry date.
Except as expressly stated herein, this undertaking is not subject to any
agreement, requirement or qualification. Our obligation under this Letter of
Credit is our individual obligation and is in no way contingent upon
reimbursement with respect thereto, or upon our ability to perfect any lien,
security interest or any other reimbursement.
This Letter of Credit is deemed to be automatically extended, without amendment,
for one year from the expiration date hereof, or any future expiration date,
unless at least thirty days prior to such expiration date we notify you by
Registered Mail or Certified Mail that this Letter of Credit will not be renewed
for nay such additional period.
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This Letter of Credit is subject to and governed by the Laws of the State of
Ohio and the 1993 Revision of the Uniform Customs and Practice for Documentary
Credits of the International Chamber of Commerce (Publication 500) and, in the
event of any conflict, the Laws of the State of Ohio will control. If this
Letter of Credit expires during an interruption of business as described in
Article 17 of said Publication 500, we hereby specifically agree to effect
payment if this Letter of Credit is drawn against within thirty days after the
resumption of business.
Very truly yours,
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Schedule A1
BUSINESS REINSURED
FORM NUMBER DESCRIPTION
----------- -----------
VL.03 Flexible Premium Variable Life Insurance
ACCDB-10/94 Standard Accelerated DB Rider
ACCDB CT-10/94 Accelerated DB Rider -- CT
ACCDB IN-10/94 Accelerated DB Rider -- IN
ACCDB MN-10/94 Accelerated DB Rider -- MN
ACCDB MS-01/95 Accelerated DB Rider -- MS
ACCDB SC-02/95 Accelerated DB Rider -- SC
ACCDBTX Accelerated DB Rider -- TX
AG.41.07.80-SD All SD Replacements
END.05.04.79 All IL policies
EVL123MT-1997 MT FFBs
Form IGAIL All IL policies
IGAKS All KS policies
IGAMD All MD policies
IGAMT All MT policies
IGANC All NC policies
IGANH-V All variable NH policies
IGATX All TX policies
IGA.NP.TX2 All TX FFBs
IGA00012 All CA policies
IGA00013 All NV policies
IGA00015 All HI Variable policies
IGA00016 All AR policies
IGA00017 All CO policies
IGA00019-09/92R All LA policies
IGA00020 - 11/92 All NJ policies
IGA00021 - 11/92 All UT policies
IGA00022 - 06/93 All DC policies
IGA.01.03.89-MO-R3 All MO policies
IGA.02.06.89-OK-R All OK policies
IGA.03.02.90-SD All SD policies
IGA.05.04.90-TN All variable TN policies
IGA.08.07.90-ND All ND policies
IGA.09.12.90 All OH policies
IGA.10.05.91 All WY policies
IGA24194-WV All WV policies
ITPCA30L All CA policies - Owner 60 and over
ITP.01.09.88 VA policies - Agent info filled in by Assembly area
ITP0007 All TX policies
ITP.02.09.88 AR policies - Agent info filled in by Assembly area
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ITP.03.09.88 All TN & UT policies
ITP.06.12.90-R3 All CA policies
ITP9L All Replacement policies - CA, CO, DE, ID, IN, IA, KS, LA, MD, MA, MN, MO,
NE, NM, NC, OH, OK, OR, PA, SC, TN, UT, VT. WA, WI, WY
LD00084-12/96 Welcome letter
PIR10 Standard PIR
PIR11 Standard PIR+
PIR10-AA PIR - PA, WV
PIR11-AA PIR+ - PA, WV
PIR10MO PIR - MO
PIR11MO PIR+ - MO
PIR10NC PIR - NC
PIR11NC PIR+ - NC
PIR10ND PIR+ - ND
RE.END.02.05.89 All VT WRL (internal) Replacements
RE.END.03.06.90 All KS (life) Replacements
SUIC.01.06.84 All CO FFBs
ULB1.01.05.84 Standard Disability Waiver Rider
ULB1.02.08.84 Disability Waiver Rider - NJ, PA (although FFB not available)
ULB1.03.08.84 Disability Waiver Rider - SC, WV
ULB1.04.08.84 Disability Waiver Rider - VT
ULB1.05.11.84 Disability Waiver Rider - CA
ULB2.01.05.84 Standard Accidental Death Benefit Rider
ULB2.02.06.84 Accidental Death Benefit Rider - TN
ULB2.03.07.84 Accidental Death Benefit Rider - IN, MN
ULB2.04.07.84 Accidental Death Benefit Rider - AR, GA, MO, NH, SC, WA
ULB2.05.08.84 Accidental Death Benefit Rider - PA (although FFB not available)
ULB2.06.11.84 Accidental Death Benefit Rider - CA, WV
ULB2.07.11.84 Accidental Death Benefit Rider - CT
ULB2.08.11.84 Accidental Death Benefit Rider - NJ (although FFB not available)
ULB4.01.03.86 Standard Disability Waiver and Income Rider
ULB4.03.04.86 Disability Waiver and Income Rider - SC, WV
ULB4.04.04.86 Disability Waiver and Income Rider - VT
ULB4.05.04.86 Disability Waiver and Income Rider - MO, SD
ULB4.06.05.86 Disability Waiver and Income Rider - TN
ULB4.07.12.86 Disability Waiver and Income Rider - CT
ULR2.01.05.84 Standard Other Insured Rider
ULR2.02.08.84 Other Insured Rider - WV, PA (although FFB not available in PA)
ULR2.03.10.84 Other Insured Rider - TX (although FFB not available in TX)
ULR3.01.05.84 Standard Children's Insurance Rider
ULR3.02.08.84 Children's Insurance Rider - WV, PA (although FFB not available in PA)
ULR3.03.10.86 Children's Insurance Rider - NJ (although FFB not available in NJ)
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Schedule A2
REINSURANCE COVERAGE
I. Retention Schedule of the Reinsured:
1. Life Policies and Riders and Accidental Death Benefit Rider:
In determining retention limits, the Reinsured will retain
coverage in the following order: (1) Base Policy first and
coverages on Other Insured Riders; (2) Riders covering death
on the primary insured for all causes next; (3) the ADB Rider
last.
The Reinsured will retain 80% of all coverages and 20% will be
reinsured with the Reinsurer. The Reinsured will retain all
additional amounts of coverage until the total coverage of any
life exceeds the amount shown below.
ALL BUSINESS $750,000
The net effect is that the Reinsured will not retain more than
$600,000 on any one life under any one type of coverage. Note
that life insurance policies, life insurance riders and ADB
riders are considered he same type of coverage. "Single Life"
coverages and "Joint Insured" coverages are considered
different types of coverages.
B. Disability Waiver Rider, Disability Waiver and Income Rider:
Fully retained except for reinsurance provided through this
Agreement and the Co/ModCo Agreement.
II. Pool Automatic Acceptance Limits
A. Life
--------------------------------------------------------------------
Standard Through Table "4" Tables "5"
Issue Ages Flat Extras up to $5/$1,000 Through "16"
--------------------------------------------------------------------
0-75 $15,000,000 $10,000,000
--------------------------------------------------------------------
76-80 $ 7,500,000 $ 5,000,000
--------------------------------------------------------------------
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Schedule B1
AMOUNT OF REINSURANCE
The amount of reinsurance under this Agreement shall be the Reinsurer's quota
share percentage shown below of the liability of the Reinsured on all Reinsured
Plans in the forms listed in Schedule A1.
Quota Share Percentages for Issue Dates in 1999 and 2000: For issue dates in
1999 and 2000, the quota share percentage will be 20%.
Quota Share Percentages for Issue Dates in 2001 and later: The Reinsurer and the
Reinsured will jointly determine the quota share percentages no later than
December 1st applicable to new issues in the following calendar year. The
determining factors for the quota share percentage are the expected WMA Total
Flexible Premium Variable Life First Year Target Premiums Collected by the
Reinsured for the calendar year that the quota share percentage will be
applicable. This determination of the quota share percentage will be on a
mutually acceptable basis, recognizing the good faith nature of this Agreement,
and with references to the estimates made by both parties, based on results from
prior periods.
The Scheduled Quota Share Percentages for each threshold of expected WMA Total
Flexible Premium Variable Life First Year Target Premiums Collected by the
Reinsured are shown in the following table:
----------------------------------------------------------
WMA TOTAL FLEXIBLE PREMIUM VARIABLE LIFE SCHEDULED
FIRST YEAR TARGET QUOTA SHARE
PREMIUMS COLLECTED PERCENTAGE
BY THE REINSURED (IN MILLIONS)
----------------------------------------------------------
$50-149 20%
----------------------------------------------------------
$150-199 25%
----------------------------------------------------------
$200-249 30%
----------------------------------------------------------
$250-599 35%
----------------------------------------------------------
$600+ 40%
----------------------------------------------------------
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Schedule B2
REINSURANCE RATES & EXPENSE ALLOWANCES
1. The reinsurance premium rates shall be the base policy monthly cost of
insurance deductions and rider monthly deductions. No policy fee will
be charged.
2. The reinsurance allowances, as a percentage of premiums, are as
follows:
-----------------------------------------
POLICY YEAR REINSURANCE ALLOWANCE
-----------------------------------------
1-20 * %
-----------------------------------------
21+ * %
-----------------------------------------
The reinsurance allowances are non-guaranteed and may be reduced by the
Reinsurer upon providing ninety (90) days written notice. While the
parties anticipate that the reinsurance premiums and allowances will
not change, it may become necessary to pay an allowance that will
result in a net premium greater than that otherwise contemplated upon
the execution of this Agreement. Regardless, the Reinsurer shall not
re-determine an allowance, that, when taken together with the
reinsurance premium, exceeds the corresponding statutory net premium
rate based on the 1980 CSO Table at 4.0% interest for the applicable
mortality rating.
3. The Reinsurer will only change the reinsurance allowances in accordance
with its redetermination policy for non-guaranteed elements. *
4. The Reinsurer will not reimburse the Reinsured premium taxes for
reinsurance ceded under this agreement.
---------
* Material omitted pursuant to Rule 24b-2 under the Securities Exchange
Act of 1934.
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Schedule B3
EXPERIENCE REFUND FORMULA
The Reinsurer shall pay an experience refund to the Reinsured. The experience
refund shall be determined by accruing two experience funds: (a) expected
claims, as determined using the Reinsurer's pricing mortality table applicable
on December 31, 1999, less actual claims and experience refunds, accrued with
interest, and (b) expected claims, as determined using the Reinsurer's pricing
mortality table applicable on December 31, 1999, less expected claims, as
determined using the Reinsured's pricing mortality table applicable on
December 31, 1999, and experience refunds, accrued with interest. Provided both
(a) and (b) are greater than zero (0), the experience refund to be paid shall
be the lessor of (a) or (b), times a factor not less than one-third (1/3)
multiplied by one-fourth (1/4). Where,
A[t] = WMA Life Expected Claims in calendar quarter "t"
B[t] = WRL Expected Claims in calendar quarter "t"
C[t] = Actual Claims in calendar quarter "t"
i[t] = The average of the 52 week high and low Xxxxxxx Xxxx Yield
Index for 1-10 year high quality corporate bonds, as
published in the Wall Street Journal the first publication
date of each calendar quarter or, if not available, as
otherwise mutually agreed upon by the Reinsured and Reinsurer.
EFA[t] = {EFA[t-1] - ER[t-1]} x (1+ i[t] ) 1/4 + A[t] - B[t]
EFB[t] = {EFB[t-1] - ER[t-1]} x (1+ i[t] ) 1/4 + A[t] - C[t]
ER[t] = Experience Refund in calendar quarter "t"
= Max{0, (1/3 x 1/4) x Min[EFA[t], EFB[t]] }
Further, considering the complexities of calculating the experience refund,
this determination will be on a mutually acceptable basis, recognizing the good
faith nature of this Agreement.
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Schedule E1 - Monthly Reports
Monthly Production and Policy Loads Report
WRL Financial Freedom Builder
Modified Coinsurance
31-Dec-1999
1999 ISSUES Base Riders Base Rider 1998 WMA
Policies PiR, PIR+ Others Units Units Quota Share Source
--------- ------ ----------- ------
In Force 30-Nov-1999 0 0 0 0 0 XX% E1(mr)
Issues 0 0 0 0 0 LEx
Coverage Increases (decreases) 0 0 0 0 LEx
Reinstatements 0 0 0 0 0 LEx
Total Increases 0 0 0 0 0
Disabilities 0 0 0 0 0 LEx
Surrenders 0 0 0 0 0 LEx
Not-Takens 0 0 0 0 0 LEx
Maturities 0 0 0 0 0 LEx
Lapses 0 0 0 0 0 LEx
Expiry 0 0 0 0 0 LEx
Deaths 0 0 0 0 0 LEx
Total Terminations 0 0 0 0 0
Net Change 31-Dec-1999 0 0 0 0 0
In Force 31-Dec-1999 0 0 0 0 0
Allocated to Quota Share of
Premiums
Fixed Acct Separate Fixed Separate
Acct Acct Acct
Gross Premiums
Target Premiums - Year 1 0 0 0 0 Ext
Excess Premiums - Year 1 0 0 0 0 Ext
1st Year .......................................... 0 0 0 0
Target Premiums - Years 2 - 10 0 0 0 0 Ext
Excess Premiums - Years 2 - 10 0 0 0 0 Ext
Renewal Years 2 - 10 .............................. 0 0 0 0
Target Premiums - Years 11+ 0 0 0 0 Ext
Excess Premiums - Years 11+ 0 0 0 0 Ext
Renewal Years 11+ ................................. 0 0 0 0
Total Premiums for all years: ......................... 0 0 0 0
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Administrative Charges
Base COI Monthly Deductions 0 0 0 0 Ext
Rider Monthly Deductions 0 0 0 0 Ext
Monthly Policy Fee Deductions 0 0 0 0 Ext
Premium Collection Charges 0 0 0 0 Ext
Percent of Premium Charges 0 0 0 0 Ext
Total Policy Administrative Charges: .................. 0 0 0 0
Benefits Paid During Month:
Fixed Account Separate Account
Gross W/D Surr Chgs Gross W/D Surr Chgs
1. Surrenders 0 0 0 0 Stat
2. Not-Taken Refunds 0 0 0 0 Stat
3. Maturities 0 0 0 0 Stat
4. Disabilities 0 0 0 0 Stat
5. Partial Xxxxxxxxxxx 0 0 0 0 Xxxx
0. Death Claims 0 0 Stat
7. New Loans 0 0 Stat
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Schedule E2 - Quarterly Reports
Quarterly Production and Policy Loads Report
WRL Financial Freedom Builder
Modified Coinsurance
31-Dec-1999
1999 ISSUES Base Riders Base Rider 1998 WMA
Policies PiR, PIR+ Others Units Units Quota Share Source
--------- ------ ----------- ------
In Force 30-Sep-1999 0 0 0 0 0 XX% E1(mr)
Issues 0 0 0 0 0 LEx
Coverage Increases (decreases) 0 0 0 0 0 LEx
Reinstatements 0 0 0 0 0 LEx
Total Increases 0 0 0 0 0
Disabilities 0 0 0 0 0 LEx
Surrenders 0 0 0 0 0 LEx
Not-Takens 0 0 0 0 0 LEx
Maturities 0 0 0 0 0 LEx
Lapses 0 0 0 0 0 LEx
Expiry 0 0 0 0 0 LEx
Deaths 0 0 0 0 0 LEx
Total Terminations 0 0 0 0 0
Net Change 31-Dec-1999 0 0 0 0 0
In Force 31-Dec-1999 0 0 0 0 0
Allocated to Quota Share of Premiums
Fixed Acct Separate Fixed Acct Separate Acct
Acct
Gross Premiums
Target Premiums - Year 1 0 0 0 0 Ext
Excess Premiums - Year 1 0 0 0 0 Ext
1st Year ..................................... 0 0 0 0
Target Premiums - Years 2 - 10 0 0 0 0 Ext
Excess Premiums - Years 2 - 10 0 0 0 0 Ext
Renewal Years 2 - 10 ......................... 0 0 0 0
Target Premiums - Years 11+ 0 0 0 0 Ext
Excess Premiums - Years 11+ 0 0 0 0 Ext
Renewal Years 11+ ............................ 0 0 0 0
Total Premiums for all years: .................... 0 0 0 0
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Administrative Charges
Base COI Monthly Deductions 0 0 0 0 Ext
Rider Monthly Deductions 0 0 0 0 Ext
Monthly Policy Fee Deductions 0 0 0 0 Ext
Premium Collection Charges 0 0 0 0 Ext
Percent of Premium Charges 0 0 0 0 Ext
Total Policy Administrative Charges: ............ 0 0 0 0
Benefits Paid During Month:
Fixed Account Separate Account
Gross With's Surr Charges Gross With's Surr Charges
1. Surrenders 0 0 0 0 Stat
2. Not-Taken Refunds 0 0 0 0 Stat
3. Maturities 0 0 0 0 Stat
4. Disabilities 0 0 0 0 Stat
5. Partial Xxxxxxxxxxx 0 0 0 0 Xxxx
0. Death Claims 0 0 0 0 Stat
7. New Loans 0 0 0 0 Stat
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Schedule E3 - Quarterly Reports
Quarterly Reserve Report
WRL Financial Freedom Builder
Modified Coinsurance
31-Dec-1999
1999 ISSUES WMA
Total Quota Share Source
----- ----------- ------
A. Sources of Reserve Splits:
1. Total FFB Cash Values N/A N/A Ext
2. Reinsured FFB SA Values 0 0 Ext
3. Reinsured FFB GA Values
a. Fixed Account Values 0
b. Loan Collateral Fund 0
c. Total Reinsured FFB GA Values 0 0 Ext
4. Total Reinsured FFB Cash Values 0 0
B. CRVM Statutory Reserves Split between SA and GA:
1. Total FFB CRVM Statutory Reserves N/A N/A Ext
2. Reinsured FFB CRVM Statutory Reserves - Total 0 0 Ext
3. Reinsured FFB CRVM Statutory Reserves - SA only 0 0
4. Reinsured FFB CRVM Statutory Reserves - GA only 0 0
C. Additional Reserves Split between SA and GA:
1. Reinsured Mortality Charge Reserves - GA Only 0 0 Ext
2. Reinsured IPC Reserves - Total (.02 x B(2) ) 0 0
3. Reinsured IPC Reserves - SA only 0 0
4. Reinsured IPC Reserves - GA only 0 0
D. Other GA Reserves and Liabilities
1. Exhibit II, Part I, Column 3, Line 4a Liability 0 0 Acct
2. Disabled Lives Reserves 0 0 Acct
3. Other Reserves and Liabilities 0 0 Acct
4. Total Other GA Reserves and Liabilities 0 0
E. Total Reinsured FFB SA Reserves and Liabilities 0 0
F. Total Reinsured FFB GA Reserves and Liabilities 0 0
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Schedule E4 - Monthly Reports
Monthly Renewable Term Premiums and Allowances
WRL Financial Freedom Builder
31-Dec-1999
WMA
Quota Share
XX%
Total
A. 1. Base Monthly Cost of Insurance Deduction
2. Rider Monthly Deductions
B. Reinsurance Premiums (20% times total Monthly Deductions)
C. Reinsurance Allowances (* % of Reinsurance Premium)
D. Quota Share of Death Claims Paid
1. Actual Death Claims Paid
2. Less Cash Value
3. Equals Net Amount at Risk
E. Premiums less Allowances and Claims ( E = B - C - D )
F. Number of Policies In Force
Number of Riders In Force
---------
* Material omitted pursuant to rule 24b-2 under the Securities Exchange
Act of 1934.
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Schedule E5 - Quarterly Reports
Monthly Renewable Term Premiums and Allowances
WRL Financial Freedom Builder
31-Dec-1999
Total
A. 1. Base Monthly Cost of Insurance Deduction
2. Rider Monthly Deductions
B. Reinsurance Premiums (20% times total Monthly Deductions)
C. Reinsurance Allowances (* % of Reinsurance Premium)
D. Quota Share of Death Claims Paid
1. Actual Death Claims Paid
2. Less Cash Value
3. Equals Net Amount at Risk
E. Total Due WMA ( E = B - C - D )
F. Experience Fund A
1. Expected Claims using Reinsurer's Pricing Mortality
2. Actual Claims accrued to end of Quarter
3. Accrued Experience Refund (if any)
4. Expected Claims less Actual Claims and Experience Refunds
(4 = 1 - 2 - 3 )
G. Experience Fund B
1. Expected Claims using Reinsurer's Pricing Mortality
2. Expected Claims using Reinsured's Pricing Mortality
3. Accrued Experience Refund (if any)
4. Reinsurer's Expected Claims less Reinsured's Expected Claims
and Experience Refunds ( 4 = 1 - 2 - 3 )
H. Experience Refund
(Minimum of F and G times Factor, if they are both greater than zero)
Factor is 1/3 x 1/4
I. Settlement Due WMA ( I = E - H )
(Settlement is payable to WMA if positive, payable to WRL if negative)
J. Number of Policies In Force
Number of Riders In Force
K. Quota Share of Aggregate Death Benefit (000's omitted)
L. Quota Share of Aggregate Net Amount at Risk (000's omitted)
M. Reinsurance Reserve at Quarter End
----------------
* Material omitted pursuant to Rule 24b-2 under the Securities Exchange Act
of 1934.
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Schedule E6 - Annual Report
Monthly Renewable Term Premiums and Allowances
WRL Financial Freedom Builder
31-Dec-1999
Total
A. 1. Base Monthly Cost of Insurance Deduction
3. Rider Monthly Deductions
B. Reinsurance Premiums (20% times total Monthly Deductions)
C. Reinsurance Allowances (* % of Reinsurance Premium)
D. Quota Share of Death Claims Paid
1. Actual Death Claims Paid
2. Less Cash Value
3. Equals Net Amount at Risk
E. Total Due WMA ( E = B - C - D )
F. Experience Fund A
1. Expected Claims using Reinsurer's Pricing Mortality
2. Actual Claims accrued to ends of Quarters
3. Accrued Experience Refund (if any)
4. Expected Claims less Actual Claims and Experience Refunds
(4 = 1 - 2 - 3 )
G. Experience Fund B
1. Expected Claims using Reinsurer's Pricing Mortality
2. Expected Claims using Reinsured's Pricing Mortality
3. Accrued Experience Refund (if any)
4. Reinsurer's Expected Claims less Reinsured's Expected Claims
and Experience Refunds ( 4 = 1 - 2 - 3 )
H. Experience Refund
(Minimum of F and G times Factor, if they are both greater than zero)
Factor is 1/3 x 1/4
I. Settlement Due WMA ( I = E - H )
(Settlement is payable to WMA if positive, payable to WRL if negative)
J. Number of Policies In Force
Number of Riders In Force
K. Quota Share of Aggregate Death Benefit (000's omitted)
L. Quota Share of Aggregate Net Amount at Risk (000's omitted)
M. Reinsurance Reserve at Quarter End
-----------------
* Material omitted pursuant to Rule 24b-2 under the Securities Exchange Act
of 1934.
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SCHEDULE K - DEATH CLAIM REPORT
DEATH CLAIMS PAID
- Claims Paid From (Date)
- Report Run Date
- Claim Number
- Issue State
- Name
- Sex
- Issue Age
- Policy Number
- Risk Class
- Death Benefit Option Code
- Plan Code
- Issue Date
- Date of Death
- Date Death Reported
- Policy Face Amount
- Reinsurance Amount
- Cash Value
- Interest Paid
- Expenses Paid
- Date Claim Paid
- Remark Code
- Marketing Organization
- Quarter to Date Totals
- Month Totals
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SCHEDULE K - DEATH CLAIM REPORT
DEATH CLAIMS OUTSTANDING
- Claims Outstanding From (Date)
- Report Run Date
- Claim Number
- Issue State
- Name
- Sex
- Issue Age
- Policy Number
- Risk Class
- Death Benefit Option Code
- Plan Code
- Issue Date
- Date of Death
- Date Death Reported
- Policy Face Amount
- Reinsurance Amount
- Cash Value
- Interest Due
- Expenses Paid
- Date Claim Paid
- Remark Code
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SCHEDULE K - DEATH CLAIM REPORT
DEATH CLAIMS REPORTED
- Claims Reported From (Date)
- Report Run Date
- Claim Number
- Issue State
- Name
- Sex
- Issue Age
- Policy Number
- Risk Class
- Death Benefit Option Code
- Plan Code
- Issue Date
- Date of Death
- Date Death Reported
- Policy Face Amount
- Reinsurance Amount
- Cash Value
- Interest Due
- Expenses Paid
- Date Claim Paid
- Remark Code
39
