Exhibit (g)(vii)
SWISS RE AMERICA
AUTOMATIC REINSURANCE AGREEMENT
Between the
SECURITY EQUITY LIFE INSURANCE COMPANY
Armonk, New York
And
SWISS RE LIFE COMPANY AMERICA
New York, New York
Effective 10/1/95
SWISS RE AMERICA
AUTOMATIC REINSURANCE AGREEMENT
Contents
ARTICLE I Basis of Reinsurance
Automatic Coverage
Special Automatic Coverage
Exceptions to Automatic Coverage
Facultative Reinsurance
ARTICLE II Facultative Submissions
Confirmation of Reinsurance
ARTICLE III Commencement & Termination of Liability
ARTICLE IV Oversights - Clerical Errors
ARTICLE V Plan of Reinsurance
ARTICLE VI Reinsurance Administration
Electronic Data Transmission
ARTICLE VII Reinsurance Premiums
Life
ARTICLE VIII Experience Refunds
ARTICLE IX Tax Credits
ARTICLE X Reductions
ARTICLE XI Retention Limit Increases (Recapture)
ARTICLE XII Reinstatements
ARTICLE XIII Policy Changes
ARTICLE XIV Settlement of Claims
ARTICLE XV Inspection of Records
ARTICLE XVI Insolvency
ARTICLE XVII Arbitration
ARTICLE XVIII Parties to Agreement
ARTICLE XIX Right of Offsetting Balances Due
ARTICLE XX Reinsurer's Right of Notice of Unusual Practices
ARTICLE XXI Federal Taxes
ARTICLE XXII Entire Agreement
ARTICLE XXIII - Duration of Agreement
Signature Page
EXHIBIT A - Report Forms
EXHIBIT B - Reinsurance Premiums
SCHEDULE 1 - Maximum Limits of Retention, Automatic
Reinsurance Coverage, and Jumbo Limits
SWISS RE AMERICA
AUTOMATIC REINSURANCE AGREEMENT
THIS AGREEMENT between the SECURITY EQUITY LIFE INSURANCE COMPANY, a corporation
organized under the laws of the State of New York, hereinafter referred to as
the "Company", and SWISS RE LIFE COMPANY AMERICA, a corporation organized under
the laws of the State of New York, hereinafter referred to as "Swiss Re
America", WITNESSETH AS FOLLOWS:
ARTICLE I
Basis of Reinsurance
1. On and after the 1st day of October, 1995, a portion of
amounts of Individual Life and Waiver of Premium Disability Insurance, as
defined in Exhibit B, which have been issued on a Fully Underwritten basis,
which are in excess of the Company's retention, and which have been issued
directly by the Company on lives whose surnames are spelled commencing with any
letter from A to Z, inclusive, on the plans of insurance stated in Exhibit B,
shall be reinsured with Swiss Re America. At the option of the Company,
reinsurance may be ceded to Swiss Re America on an automatic basis as provided
in Paragraphs 3 and 4 of this Article or applications for reinsurance may be
submitted to Swiss Re America for facultative consideration as provided in
Paragraph 6 of this Article. Any reinsurance ceded hereunder shall employ the
same underwriting classification as that used by the Company in issuing its
policy.
2. On and after the 1st day of October, 1995, the Company may
submit risks to Swiss Re America for facultative consideration as provided in
Paragraph 6 any of this Article, any of the plans of insurance specified in
Exhibit B, which have been issued on a Guaranteed Issue Basis, along with any
associated supplemental benefits.
Automatic Coverage
3. Except as specified in Paragraph 5, whenever the Company
retains its maximum limit of retention, as shown in Schedule I, the Company
shall automatically cede and Swiss Re America shall automatically accept such
Life reinsurance, as provided herein, with any associated Waiver of Premium
Benefit, up to the limits specified in Schedule I.
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SWISS RE AMERICA
Special Automatic Coverage
4. Even though the Company may already be on a risk for its
maximum limit of retention under policies previously issued and therefore unable
to retain any part of the insurance currently applied for, the Company, without
retaining any more for its own account, shall still have the right to utilize
any unused automatic coverage remaining from previous issues. The new insurance
may be ceded automatically, on the same terms on which the Company would be
willing to accept the risk for its own account if it did not already have its
maximum limit of retention, provided the sum of the new and old reinsurance does
not exceed the limits specified in Paragraph 3, above.
Exceptions to Automatic Coverage
5. Unless Swiss Re America has specifically agreed to the
contrary in writing, reinsurance shall not be ceded automatically under this
Agreement on any life where:
(a) the amount of Life insurance in force, including
coverage to be replaced, plus the amount currently
being applied for on that life in all companies
exceeds the Jumbo Limit specified in Schedule I, or
(b) the substandard mortality rating assessed to the risk
exceeds Class P (500%) or its equivalent on an extra
premium basis, or
(c) the insurance is issued as a group conversion, a
noncontractual conversion, rollover or policy
exchange, or is issued under any program where either
full current evidence of insurability consistent with
the amount of insurance is not obtained or where
conventional selection criteria are not applied in
underwriting the risk, or
(d) the policy is a continuation of coverage, as defined
in Article XXXX, Xxxxxxxxx 0, of this Agreement, of a
previously issued policy that had been reinsured with
another reinsurer, or
(e) the policy does not provide for the maximum normal
periods of suicide and contestability protection
permitted in the state in which the policy is
executed, or
(f) the life to be reinsured is not a permanent resident
of the United States, its territories, or Canada, or
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SWISS RE AMERICA
(g) the Company has submitted the risk to another
reinsurer for facultative consideration or has
received a declination from Swiss Re America on a
facultative submission.
Facultative Reinsurance
6. Applications for reinsurance of amounts in excess of the
automatic limits provided above, and any risks which the Company does not care
to cede to Swiss Re America automatically or which may not be so ceded under the
terms of this Agreement, may be submitted to Swiss Re America for facultative
consideration. If Swiss Re America makes an offer to reinsure such a risk, the
Company must accept the offer during the lifetime of the proposed insured, but
not later than 120 days after the offer is made, to effect the reinsurance.
Acceptance by the Company of a facultative offer made by Swiss Re America shall
be documented by a dated notation in the Company's underwriting file and
subsequent formal notice to Swiss Re America as described in Article II,
Paragraph 2, of this Agreement.
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SWISS RE AMERICA
ARTICLE II
Facultative Submissions
1. If the Company submits a risk to Swiss Re America on a
facultative basis, copies of the complete underwriting file and all other
information the Company may have pertaining to the insurability of the risk
shall be sent to Swiss Re America along with the appropriately completed
Bordereau Facultative Application, Form L(POL)B-FAC, as shown in Exhibit A.
Swiss Re America shall promptly notify the Company of its decision on the risk.
Confirmation of Reinsurance
2. When a policy is placed in force on which reinsurance is to be
ceded to Swiss Re America, the Company shall notify Swiss Re America that the
reinsurance has been effected by including an entry in the next Quarterly
Premium Report, as described in Article VI, Paragraph 1(a).
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SWISS RE AMERICA
ARTICLE III
Commencement & Termination of Liability.
1. On automatic reinsurance coverage, the liability of Swiss Re
America shall commence simultaneously with that of the Company.
2. On facultative reinsurance coverage, the liability of Swiss Re
America shall commence simultaneously with that of the Company provided the
Company has accepted, during the lifetime of the insured and within 120 days of
the offer, a facultative offer made by Swiss Re America on that life.
3. The liability of Swiss Re America shall terminate
simultaneously with that of the Company, unless it is terminated earlier in
accordance with Article X or XI.
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SWISS RE AMERICA
ARTICLE IV
Oversights - Clerical Errors
1. Should the Company fail to cede reinsurance that otherwise
would have been ceded on an automatic basis in accordance with the provisions of
this Agreement, or should either the Company or Swiss Re America fail to comply
with any of the other terms of this Agreement, and if this is shown to be
unintentional and the result of a misunderstanding, oversight or clerical error
on the part of either the Company or Swiss Re America, then this Agreement shall
not be deemed abrogated thereby, but both companies shall be restored to the
position they would have occupied had no such oversight, misunderstanding, or
clerical error occurred. Such conditions are to be reported and corrected
promptly after discovery.
2. If the Company does discover that it did not cede reinsurance
on a policy it should have reinsured automatically under this Agreement, the
Company is required to do an audit of its records sufficient to determine if
automatic reinsurance was unreported on any other policies.
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SWISS RE AMERICA
ARTICLE V
Plan of Reinsurance
1. Life reinsurance shall be on the risk premium basis. The
reinsured risk amount shall be calculated annually in advance and shall be equal
to the death benefit less the cash value less the Company's retention.
2. Reinsurance of Disability benefits shall be on a coinsurance
basis in accordance with the original forms of the Company.
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SWISS RE AMERICA
ARTICLE VI
Reinsurance Administration
1. The Company shall have the responsibility of maintaining
adequate records for the administration of the reinsurance account and shall
furnish Swiss Re America with periodic reports, in substantial conformity with
the following:
(a) Quarterly Premium Report: At the end of each quarter,
the Company shall send Swiss Re America a listing of
all reinsured policies issued or renewing during the
past quarter accompanied by the reinsurance premiums
for such policies. The listing should be segregated
into first year issues and renewals and should
provide the following information:
i) policy number
ii) full name of insured
iii) date of birth
iv) sex and issue age
v) effective date
vi) underwriting classification
vii) automatic or facultative indicator
viii) plan
ix) total initial risk amount
x) reinsured risk amount at the end of the
quarter
xi) total net reinsurance premium due for each
reinsured policy for the quarter
(b) Quarterly Change Report: The Company shall report the
details of all policy terminations and changes on
reinsured policies. In addition to the data indicated
in 1.(a), above, the report should provide
information about the nature, the effective date, and
the financial result of the change with respect to
the reinsurance.
(c) Quarterly Policy Exhibit Report: A summary of new
business, terminations, changes, death claims and
reinstatements during the quarter and the inforce
reinsurance at the end of the quarter shall be
reported.
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SWISS RE AMERICA
(d) Annual Policy Reserve Report: The Company shall
provide Swiss Re America with a listing of the mean
reserves attributable to the reinsured portion of
each policy reinsured.
(e) Annual Tax Reserve Report: Shortly after the close of
the year, the Company shall report to Swiss Re
America the amount by which the Company will reduce
its tax reserve because of the reinsurance ceded
under this Agreement. The details of the report
should conform to the current requirements of
Internal Revenue Code Section 807.
(f) Annual Inforce Listing: Shortly after the close of
the year, the Company shall furnish Swiss Re America
with a listing of all inforce reinsured policies,
providing items I) through xii) in 1.(a), above.
(g) Claims: Shall be reported as incurred on an
individual basis.
Electronic Data Transmission
2. If the Company chooses to report its reinsurance transactions
via electronic media, the Company shall consult with Swiss Re America to
determine the appropriate reporting format. Should the Company subsequently
desire to make changes in the data format or the code structure, the Company
shall communicate such changes to Swiss Re America prior to the use of such
changes in reports to Swiss Re America.
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SWISS RE AMERICA
ARTICLE VII
Reinsurance Premiums
Life Premiums
1. Until further notice, reinsurance premiums shall be at the
rates given in the attached Exhibit B. Swiss Re America guarantees that premium
rates for a given attained age, rating and duration shall not exceed the higher
of the rate shown in the attached schedule (Exhibit B) for that age, rating and
duration or the one year term rate on the appropriate multiple of the applicable
1980 CSO table at the maximum statutory valuation rate approved in New York
State.
2. Reinsurance premiums are annual premiums payable at the end of
the quarter in which they become due.
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SWISS RE AMERICA
ARTICLE VIII
Experience Refunds
1. The schedule of reinsurance premiums applicable to reinsurance
ceded under this Agreement has been especially designed to require minimum cash
outlay. Therefore, reinsurance ceded under this Agreement shall not be eligible
for participation in experience refunds.
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SWISS RE AMERICA
ARTICLE IX
Tax Credits
1. The reinsurance premium rates applicable under this Agreement
take into consideration the Company's liability for premium taxes. Accordingly,
Swiss Re America shall make no separate reimbursement to the Company for premium
taxes on the portion of the Company's premium paid to Swiss Re America as
reinsurance premiums.
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SWISS RE AMERICA
ARTICLE X
Reductions
1. If any portion of the Company's insurance on a life is
terminated, any reinsurance on that life will also be decreased by a like
amount. If the amount of insurance terminated equals or exceeds the amount of
reinsurance, the full amount of reinsurance will be terminated.
2. Reinsurance on the affected policy should be adjusted first.
If the entire reduction can be made on this reinsurance, then reinsurance on
other policies will not be adjusted.
3. Should the amount of reduction in the Company's insurance
exceed the amount of reinsurance on the affected policy, then such reinsurance
should be cancelled and the remainder of the reduction will be applied to
reinsurance on other policies in force on the same life.
4. The other policies to be reduced or terminated will be those
most similar to the cancelled policy. Similarity will be judged on the basis
first of rating, then plans of insurance, and then supplementary benefits.
5. If more than one reinsurer is providing reinsurance on the
life involved, the reduction in reinsurance shall be shared as follows. Each
reinsurer's share of the reduction indicated in Paragraph 2, above, will be
proportional to their share of the reinsurance on that policy. Any additional
reduction in reinsurance required, as indicated in Paragraphs 3 or 4 above,
shall be proportional to each reinsurer's share of the total reinsurance under
all the other policies being affected by the reduction or terminations.
6. The principle to be observed is that the retention of the
Company on the affected life is to be maintained unchanged. The operation of
this Article cannot result in the Company retaining more coverage than its
retention prior to the reduction or termination of its policy.
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SWISS RE AMERICA
ARTICLE XI
Retention Limit Increases (Recapture)
1. If the Company increases its limit of retention, a
corresponding reduction may be made at the option of the Company in the
reinsurance in force on all lives on which the Company had its maximum limit of
retention at the time reinsurance was ceded. However:
(a) No risk shall be recaptured prior to the policy
anniversary (earliest recapture date) specified in
Exhibit B.
(b) Risks wholly reinsured because the Company's normal
schedule of retention provides for zero retention at
the particular age and rating assigned to the risk
shall not be considered eligible for recapture.
(c) Retention increases for a five year period
immediately following a merger with another insurance
company shall be recognized for recapture purposes to
a maximum 50% increase over the pre-merger retention
of the Company.
(d) No recapture will be allowed for any classes of risks
for which the Company established special retention
limits less than the Company's maximum retention
limits at the time the policy was issued.
2. Recapture shall be effected as follows:
(a) After the retention increase is effected, the Company
shall promptly notify Swiss Re America of its
intention to recapture.
(b) Eligible policies shall be recaptured on the first
renewal date following the notice of intention to
recapture.
(c) All eligible policies shall be recaptured unless
there is mutual agreement to the contrary expressed
in writing.
(d) If the Company has reinsured any portion of the risk
in another company, the reduction in reinsurance
ceded under this Agreement shall be in the same
proportion to the total reduction in reinsurance as
the amount reinsured under the Agreement bears to the
total reinsurance on the risk.
(e) In determining the new retention for a particular
policy, the age and rating at issue should be used.
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SWISS RE AMERICA
(f) If at the time of recapture the risk is on active
claim for Waiver of Premium Disability, the Life risk
shall still be considered eligible for recapture.
However, the Disability reinsurance shall remain in
force until such time as the policy is returned to a
premium paying status. The Disability risk shall be
recaptured upon such return to premium paying status.
If within two years of said recapture the Waiver of
Premium claim is resumed due to an extension of the
initial disablement, Swiss Re America shall again be
liable for payment of its share of premiums waived by
the Company, subject to collection of Disability
premiums on Swiss Re America's share of the risk for
the period in which the policy was in a premium
paying status.
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SWISS RE AMERICA
ARTICLE XII
Reinstatements
1. Should an insured under a lapsed or surrendered policy apply
for reinstatement of that policy in accordance with the terms of the policy or
the practices of the Company, the Company may automatically reinstate any
reinsurance on that policy provided the reinsurance was originally ceded on an
automatic basis or the application for reinstatement is made within 90 days of
the date of lapse. Otherwise, the reinstatement application shall be submitted
to Swiss Re America for facultative consideration.
2. Premiums and interest on reinstated reinsurance shall be
payable only to the extent that the Company collects premiums and interest on
such insurance.
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SWISS RE AMERICA
ARTICLE XIII
Policy Changes
1. Should the Company make any material changes in the provisions
and conditions of a policy reinsured hereunder, the Company shall, within a
reasonable time, inform Swiss Re America of such change.
2. Should a policy reinsured under this Agreement be exchanged
for or converted to a new policy of the Company, the new policy shall be
considered as a continuation of the original policy if any of the following
conditions exist:
(a) full evidence of insurability, commensurate with the full
current amount of insurance, is not secured;
(b) full new suicide and contestability periods, commensurate with
those used for normal newly issued policies, are not employed;
(c) a commission lower than that normally paid for new issues of
the plan of insurance on the new policy is paid.
If such a policy is so construed as a continuation of the original policy, the
full amount of reinsurance on the original policy shall be continued on the new
policy. Unless another arrangement is specifically agreed to by Swiss Re
America, point-in-scale reinsurance rates, measured from the effective date of
the original policy, shall be payable by the Company. The recapture period
applicable to the original policy shall govern the reissued policy and duration
shall be measured from the effective date of the original policy.
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Swiss Re America
ARTICLE XIV
Settlement of Claims
1. Claim settlements made by the Company, including compromises,
shall be unconditionally binding upon Swiss Re America. If the whole risk on any
particular claim is carried by Swiss Re America and the claim is contestable,
Swiss Re America shall be consulted before admission or acknowledgement of the
validity of the claim is made by the Company. However, such consultation shall
not impair the Company's freedom to determine the proper action on the claim and
the settlement made by the Company shall still be unconditionally binding on
Swiss Re America.
2. The Company shall furnish Swiss Re America with copies of the
proofs of claim, together with any other information the Company may possess in
connection with the claim. On automatic cases, Swiss Re America may request
copies of the underwriting file. Payment in settlement of the reinsurance under
a claim approved and paid by the Company for a life reinsured hereunder shall be
made by Swiss Re America upon the receipt of the claim papers.
3. Swiss Re America shall share in the expense of any contest or
compromise of a claim in the same proportion that the net amount at risk
reinsured with Swiss Re America bears to the total net risk of the Company under
all policies on that life being contested by the Company and shall share in the
total amount of any reduction in liability in the same proportion. Compensation
of salaried officers and employees of the Company shall not be considered claim
expenses.
4. If the amount of the Company's insurance on any policy
reinsured hereunder is adjusted because of a misstatement of age or sex being
established after the death of the Insured, the Company and Swiss Re America
shall share in such adjustment in proportion to their respective net amounts at
risk under such policy.
5. If a claim is approved for Waiver of Premium benefit on a
reinsured policy, the Company shall continue to pay the premiums for
reinsurance, except the premium for Disability reinsurance. Swiss Re America
shall pay its proportionate share of the premiums waived on the original policy,
including the premiums for benefits that remain in effect during disability.
6. Swiss Re America shall not be liable for any extra contractual
damages, including, but not limited to, punitive, exemplary, compensatory and
consequential damages, assessed against the Company.
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SWISS RE AMERICA
7. Swiss Re America shall reimburse the Company for its
proportionate share of any interest paid by the Company on any claim payment.
Swiss Re America shall refund to the Company the unearned portion of the
reinsurance premiums for the period from the date of death to the premium
paid-to date.
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SWISS RE AMERICA
ARTICLE XV
Inspection of Records
1. Swiss Re America shall have the right at all reasonable times
and for any reasonable purpose to inspect at the office of the Company all books
and documents referring to reinsurance ceded to Swiss Re America.
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SWISS RE AMERICA
ARTICLE XVI
Insolvency
1. In the event of the insolvency of the Company, all reinsurance
made, ceded, renewed or otherwise becoming effective under this Agreement shall
be payable by Swiss Re America directly to the Company or to its liquidator,
receiver, or statutory successor on the basis of the liability of the Company
under the contract or contracts reinsured without diminution because of the
insolvency of the Company. It is understood, however, that in the event of the
insolvency of the Company, the liquidator, receiver or statutory successor of
the insolvent Company shall give written notice of the pendency of a claim
against the insolvent Company 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, Swiss Re America may investigate such claim and
interpose, at its own expense, in the proceeding where such claim is to be
adjudicated, any defense or defenses which it may deem available to the Company
or to its liquidator, receiver or statutory successor.
2. It is further understood that the expense thus incurred by
Swiss Re America shall be chargeable, subject to court approval, against the
insolvent Company as part of the expense of liquidation to the extent of a
proportionate share of the benefit which may accrue to the Company solely as a
result of the defense undertaken by Swiss Re America. Where two or more assuming
insurers are involved in the same claim and a majority in interest elect to
interpose defense to such claim, the expense shall be apportioned in accordance
with the terms of the Reinsurance Agreement as though such expense had been
incurred by the Company.
3. In the event of the insolvency of Swiss Re America and the
appointment of receivers therefor, the liability of Swiss Re America shall not
terminate but shall continue with respect to the reinsurance ceded to Swiss Re
America by the Company prior to the date of such insolvency or appointment, and
the Company shall have a security interest in any and all sums held by or under
deposit in the name of Swiss Re America.
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SWISS RE AMERICA
ARTICLE XVII
Arbitration
1. In the event of any difference arising hereafter between the
contracting parties with reference to any transaction under this Agreement, the
same shall be referred to three arbitrators who must be current or former
executive officers of life insurance or life reinsurance companies other than
the two parties to this Agreement or their affiliates, each of the contracting
companies to appoint one of the arbitrators and such two arbitrators to select
the third. If either party refuses or neglects to appoint an arbitrator within
60 days after receipt of the written request for arbitration, the other party
may appoint a second arbitrator.
2. If the two arbitrators fail to agree on the selection of a
third arbitrator within 60 days of their appointment, each of them shall name
three individuals, of whom the other shall decline two, and the decision shall
be made by drawing lots.
3. The arbitrators shall consider this Reinsurance Agreement not
merely as a legal document but also as a gentlemen's agreement. In resolving the
dispute, the arbitrators will give full consideration to the customs and
practices of the life insurance and life reinsurance industry, insofar as they
are not in conflict with the specific terms of this Agreement. The arbitrators
shall decide by a majority vote. There shall be no appeal from their written
decision.
4. Unless the arbitrators decide otherwise, each party shall bear
the expense of its own arbitration, including its arbitrator and outside
attorney fees, and shall jointly and equally bear with the other party the
expense of the third arbitrator. Any remaining costs of the arbitration
proceedings shall be apportioned by the Board of Arbitrators.
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SWISS RE AMERICA
ARTICLE XVIII
Parties to Agreement
1. This Agreement is an indemnity reinsurance agreement solely
between the Company and Swiss Re America. The acceptance of reinsurance
hereunder shall not create any right or legal relation whatever between Swiss Re
America and the insured, owner, beneficiary or any other party under any
policies of the Company which may be reinsured hereunder, and the Company shall
be and remain solely liable to the insured, owner or the beneficiary under such
policies reinsured hereunder.
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SWISS RE AMERICA
ARTICLE XIX
Right of Offsetting Balances Due
1. The Company and Swiss Re America shall have, and may exercise
at any time, the right to offset any balance or balances due one party to the
other, its successors or assigns, against balances due the other party under
this Agreement or under any other Agreements or Contracts previously or
subsequently entered into between the Company and Swiss Re America. This right
of offset shall not be affected or diminished because of insolvency of either
party to this Agreement.
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SWISS RE AMERICA
ARTICLE XX
Reinsurer's Right of Notice of Unusual Practices
1. In providing reinsurance facilities to the Company under this
Agreement, Swiss Re America has granted the Company considerable authority with
respect to automatic binding power, reinstatements, claim settlements, and the
general administration of the reinsurance account. To facilitate transactions,
Swiss Re America has required the minimum amount of information and
documentation possible, reflecting its utmost faith and confidence in the
Company. Swiss Re America assumes that, except as otherwise notified by the
Company, the underwriting, claims and other insurance practices employed by the
Company with respect to reinsurance ceded under this Agreement are generally
consistent with the customary and usual practices of the insurance industry as a
whole. Where the Company does engage in exceptional or uncustomary practices,
the Company agrees to make those practices known to Swiss Re America before
assigning any liability to Swiss Re America with respect to any reinsurance
issued under such practices.
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SWISS RE AMERICA
ARTICLE XXI
Federal Taxes
1. The Company and Swiss Re America hereby agree to the following
pursuant to Section 1.848-2(g)(8) of the Income Tax Regulation issued December
1992, under Section 848 of the Internal Revenue Code of 1986, as amended. This
election shall be effective as of the Effective Date of this Agreement and for
all subsequent taxable years for which this Agreement remains in effect.
(a) The term "party" will refer to either the Company or
Swiss Re America as appropriate.
(b) The terms used in this Article are defined by
reference to Regulation 1.848-2 in effect December
1992.
(c) 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).
(d) 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.
(e) The Company will submit a schedule to Swiss Re
America 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 stating that the Company
will report such net consideration in its tax return
for the preceding calendar year.
(f) Swiss Re America may contest such calculation by
providing an alternative calculation to the Company
by June 1. If Swiss Re America does not so notify the
Company, the Company will report the net
consideration as determined by the Company in the
Company's tax return for the previous calendar year.
(g) If Swiss Re America contests the Company's
calculation of the net consideration, the parties
will act in good faith to reach an agreement as to
the correct amount by July 1. If the Company and
Swiss Re America reach agreement on an amount
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SWISS RE AMERICA
of the net consideration, each party shall report
such amount in their respective tax returns for the
previous calendar year.
2. Swiss Re America and the Company represent and warrant that
they are subject to U.S. taxation under Subchapter L of Chapter 1 of the
Internal Revenue Code.
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SWISS RE AMERICA
ARTICLE XXII
Entire Agreement
1. This Agreement shall constitute the entire agreement between
the parties with respect to business reinsured hereunder. There are no
understandings between the parties other than as expressed in this Agreement and
any changes or modifications of this Agreement shall be null and void unless
made by amendment to the Agreement and signed by both parties.
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SWISS RE AMERICA
ARTICLE XXIII
Duration of Agreement
1. This Agreement shall be unlimited as to its duration but may
be cancelled at any time, insofar as it pertains to the handling of new business
thereafter, by either party giving ninety (90) days' notice of cancellation in
writing. Swiss Re America shall continue to accept reinsurance in accordance
with this Agreement during such ninety (90) day period.
2. Except as provided in Articles X and XI of this Agreement, the
Company shall be obliged to maintain in force any reinsurance ceded under this
Agreement as long as the reinsured insurance coverage remains in force and,
except as provided under Xxxxxxxxx 0, xxxxx, Xxxxx Re America shall be obliged
to provide such continued reinsurance coverage. Any sale or other transfer of
the policies reinsured hereunder shall not affect the obligation to maintain the
reinsurance in force.
3. Should the Company fail to pay reinsurance premiums when due,
Swiss Re America may give the Company thirty (30) days notice, after reinsurance
premiums are ninety (90) days or more in arrears, that reinsurance coverage on
the affected reinsurance is suspended. The reinsurance coverage will be
reinstated at the option of Swiss Re America upon receipt of all the overdue
premiums. However, Swiss Re America shall have no liability for claims that
occur during a period of suspension. Also, suspension of reinsurance coverage
shall not relieve the Company of liability for premiums due Swiss Re America.
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SWISS RE AMERICA
IN WITNESS WHEREOF, the Company and Swiss Re America have caused their names to
be subscribed and duly attested hereunder by their respective Authorized
Officers.
SECURITY EQUITY LIFE INSURANCE COMPANY
By: /s/ XX Xxxxxx Attest: /s/ Xxxx Xxxxxx
----------------------- -----------------------
Title: President Title: 2nd Vice President
Date: 429/96 Date: 4/29/96
SWISS RE LIFE COMPANY AMERICA
By: /s/ Xxxxxxx Xxxxxxxxx Attest: /s/ Xxxxxxx Xxxxx
----------------------- -----------------------
Title: Assistant Vice President Title: Assistant Vice President
Date: May 1, 1996 Date: 5/1/96
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SWISS RE AMERICA
EXHIBIT A
Report Forms
REPORTING SWISS RE AMERICA
LOGO
Swiss Re Life Company America
000 Xxxx Xxxxxx
Xxx Xxxx, X.X. 00000
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Company Name and State Report as of (month/year)
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Prepared by Name Title Date
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Mode of Reinsurance Report
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A. Category Premiums
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Life Disability Accident Total
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PRM. 1st yr.
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Uniting summary (Reinsurance only)
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Policy fee 1st yr.
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PRM. Renewal
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Policy fee renewal
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Comm. & allow. 1st yr.
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Comm. & allow. ren.
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Dividends
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Cash Values
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Claims
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Total
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B. Classification Number of policies Amount of reinsurance
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In force as of last report
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New business
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Policy exhibit summary (Reinsurance only)
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Reinstatements
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Increase (net)
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Deduct. ceased by
Death
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Maturities
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Expiries
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Surrenders
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Lapses
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Conversions
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Recapture
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Decrease other
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Decrease (net)
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In force as of current report
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Note: Amounts of Reinsurance are based on Risk Amounts Death Benefits.
Please retain copy for company files
Facultative SWISS RE AMERICA
LOGO
Swiss Re Life Company America
000 Xxxx Xxxxxx
Xxx Xxxx, X.X. 00000
PLEASE PRINT OR TYPE
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Has the risk been submitted to Swiss Re Life Company America
previously [ ] Yes [ ] No
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Insured's First Middle Date of State of State of Sex Age Social
last name birth birth res. Security No
--------------------------------------------------------------------------------
Joint insured
--------------------------------------------------------------------------------
Second life to be considered for reinsurance [ ] Yes [ ] No
LIFE ADD'I LIFE BENEFIT W. P. ACCIDENT BENEFIT
--------------------------------------------------------------------------------
INSURANCE IN FORCE OUR COMPANY ->
--------------------------------------------------------------------------------
OF WHICH WE RETAIN ->
--------------------------------------------------------------------------------
NEW INSURANCE APPLIED FOR ->
--------------------------------------------------------------------------------
REINSURANCE APPLIED FOR ->
--------------------------------------------------------------------------------
*Please indicate liability under additional life benefits such as: Term riders,
Dividend options, Cash value rider, Etc.
Is the product an increasing It is understood that the named
amount at risk plan [ ] Yes [ ] No applicant has been
given-Pre-Notice of the Medical
If yes, please indicate the information Bureau and that the
original amount at risk and ceding company has in its Home
include a policy value Office an approved
illustration form. Authorization form signed by
this applicant.
PLEASE REPLY BY
[ ] Telephone [ ] Fax [ ] Other
--------------------------------------------------------------------------------
NAME OF CEDING COMPANY STATE DATE UNDERWRITER FOR PHONE CONTACT
--------------------------------------------------------------------------------
REMARKS:
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
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Facultative application for reinsurance - To be submitted to Swiss Re Life
Company America with papers
Facultative SWISS RE AMERICA
LOGO
Swiss Re Life Company America
000 Xxxx Xxxxxx
Xxx Xxxx, X.X. 00000
PLEASE PRINT OR TYPE
--------------------------------------------------------------------------------
Has the risk been submitted to Swiss Re Life Company America
previously [ ] Yes [ ] No
--------------------------------------------------------------------------------
Insured's First Middle Date of State of State of Sex Age Social
last name birth birth res. Security No
--------------------------------------------------------------------------------
Joint insured
--------------------------------------------------------------------------------
Second life to be considered for reinsurance [ ] Yes [ ] No
LIFE ADD'I LIFE BENEFIT W. P. ACCIDENT BENEFIT
--------------------------------------------------------------------------------
INSURANCE IN FORCE OUR COMPANY ->
--------------------------------------------------------------------------------
OF WHICH WE RETAIN ->
--------------------------------------------------------------------------------
NEW INSURANCE APPLIED FOR ->
--------------------------------------------------------------------------------
REINSURANCE APPLIED FOR ->
--------------------------------------------------------------------------------
*Please indicate liability under additional life benefits such as: Term riders,
Dividend options, Cash value rider, Etc.
Is the product an increasing It is understood that the named
amount at risk plan [ ] Yes [ ] No applicant has been
given-Pre-Notice of the Medical
If yes, please indicate the information Bureau and that the
original amount at risk and ceding company has in its Home
include a policy value Office an approved
illustration form. Authorization form signed by
this applicant.
PLEASE REPLY BY
[ ] Telephone [ ] Fax [ ] Other
--------------------------------------------------------------------------------
NAME OF CEDING COMPANY STATE DATE UNDERWRITER FOR PHONE CONTACT
--------------------------------------------------------------------------------
REMARKS:
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
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Facultative application for reinsurance - To be retained by client
CANCELLATION OF REINSURANCE APPLICATION
Facultative SWISS RE AMERICA
LOGO
Swiss Re Life Company America
000 Xxxx Xxxxxx
Xxx Xxxx, X.X. 00000
PLEASE PRINT OR TYPE
--------------------------------------------------------------------------------
Has the risk been submitted to Swiss Re Life Company America
previously [ ] Yes [ ] No
--------------------------------------------------------------------------------
Insured's First Middle Date of State of State of Sex Age Social
last name birth birth res. Security No
--------------------------------------------------------------------------------
Joint insured
--------------------------------------------------------------------------------
Second life to be considered for reinsurance [ ] Yes [ ] No
LIFE ADD'I LIFE BENEFIT W. P.
ACCIDENT
BENEFIT
--------------------------------------------------------------------------------
INSURANCE IN FORCE OUR COMPANY ->
--------------------------------------------------------------------------------
OF WHICH WE RETAIN ->
--------------------------------------------------------------------------------
NEW INSURANCE APPLIED FOR ->
--------------------------------------------------------------------------------
REINSURANCE APPLIED FOR ->
--------------------------------------------------------------------------------
*Please indicate liability under additional life benefits such as: Term riders,
Dividend options, Cash value rider, Etc.
Is the product an increasing It is understood that the named
amount at risk plan [ ] Yes [ ] No applicant has been
given-Pre-Notice of the Medical
If yes, please indicate the information Bureau and that the
original amount at risk and ceding company has in its Home
include a policy value Office an approved
illustration form. Authorization form signed by
this applicant.
PLEASE REPLY BY
[ ] Telephone [ ] Fax [ ] Other
--------------------------------------------------------------------------------
NAME OF CEDING COMPANY STATE DATE UNDERWRITER FOR PHONE CONTACT
--------------------------------------------------------------------------------
REMARKS:
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Facultative application for reinsurance - To be submitted to Swiss Re Life
Company America for cancellation
SWISS RE AMERICA
EXHIBIT B
Reinsurance Premiums
SWISS RE AMERICA
REINSURANCE PREMIUMS
I. Plan and Rider: Fully Underwritten and Guaranteed Issue Variable
Universal Life
Fully Underwritten Joint Last Survivor Rider
II. Swiss Re America's Portion of the Reinsurance:
A. When the Variable Universal Life plan is issued without the
Joint Last Survivor Rider, Swiss Re America will automatically
reinsure 33 1/3% of the amount reinsured, not to exceed the
limits shown in Section II of Schedule 1.
B. When the Variable Universal Life plan is issued with the Joint
Last Survivor Rider, Swiss Re America will automatically
reinsure 100% of amounts of the base plan and rider which are
in excess of the Company's retention, not to exceed the limits
shown in Section II of Schedule I.
III. Standard Reinsurance Risk Premiums for the Variable Universal Life
Plan: For reinsurance ceded on the plan use the rates shown in
Reinsurance Rate Schedule NRN-7314, attached to this Exhibit B,
multiplied by the following factors:
Plan/Rider Factor
----------
Fully Underwritten Variable Universal Life 1.03
Guaranteed Issue Variable Universal Life 1.45**
**The reinsurance premium rates for policies issued on a Guaranteed Issue basis
will revert to the Fully Underwritten attained age rate at the end of the 20th
policy year or age 65, whichever is later.
IV. Standard Reinsurance Risk Premiums for the Joint Last Survivor Rider:
Reinsurance premium rates for the Joint Last Survivor Rider are
developed by taking the base plan single life mortality rate for each
life and blending the rates using the Company's Xxxxxxx Formula. The
mortality rate is calculated by using the formulas shown in Attachment
1 to this Exhibit B. The Frasierized rate is then increased by 10% to
allow for the heartbreak factor, and is again increased by adding $.10
per $1,000 to allow for the contagion factor. The resulting rate is
then multiplied by a factor of 1.18 to yield the standard reinsurance
risk premium. The minimum annual reinsurance premium rate is $15 per
$1,000. An example of the calculation is shown in Attachment 2 to this
Exhibit B.
On Joint Last Survivor Riders where one life is uninsurable, the
healthy life must be rated no more than Table D. The applicable
reinsurance premium rates shall be the base plan single life mortality
rates attached to this Exhibit B.
EXHIBIT B
Page 1 of 2
SWISS RE AMERICA
V. Flat Extra Substandard Reinsurance Premiums for the Variable Universal
Life Plan:
a) Permanent Flat Extra Premiums are ones assessed for more than 5
years. Swiss Re America should receive its proportionate share of
any such premiums less the percentage premium reductions below:
First Year 75%
Renewal Years 10%
b) Temporary Flat Extra Premiums are ones assessed for 5 years or less.
Swiss Re America should receive its proportionate share of any such
premiums less a 10% reduction in all policy years.
VI. Reinsurance Premiums for Policies Converted To The Above Plan: Any
reinsurance in force with Swiss Re America on policies converted to or
reissued on the above plan and rider shall be continued with Swiss Re
America. The reinsured risk amount shall be determined as described in
Article V following the conversion or reissue. The applicable
reinsurance premiums will be determined as described in this Exhibit B,
with age and duration measured from the date of issue of the original
policy.
VII. Maximum Amount of Reinsurance on One Life on These Reinsurance
Premiums: $5,000,000. Reinsured amounts over $5,000,000 shall be
considered on an individual basis.
EXHIBIT B
Page 2 of 2
SWISS RE AMERICA
Attachment I
LAST SURVIVOR CALCULATION
Description
The mortality rate for Variable Universal Life contracts with a Last Survivor
Rider is computed on each contract anniversary using the attained age of both
insureds regardless of the death of one of the insureds. The mortality rate is
the probability that the last survivor will die during the policy year. If one
of the insureds has attained maturity age of 100, then the most recent
probability for that insured is used until either the death of the remaining
insured or the maturity date of the contract, whichever occurs first.
Definitions
x issue age of one insured
y issue age of the other insured
z symbol representing the "life" that lives until the death of
both x and y
t policy duration
tPx probability of x living to end of policy year t
tPy probability of y living to end of policy year t
tPz probability of either x or y living to end of policy year t
Qz+t-1 mortality rate for policy year t
Formulas
tPz = tPx - tPy - (tPx) (tPy)
tPz = 1
Qz + t - 1 = 1 - (tPz + t-1Pz)
Attachment 2
Lagre Case Life 2 - Last Survivor
Sample Mortality Rate Calculation
Male Issue Age 65 Nonsmoker / Female Issue Age 65 Nonsmoker
SWISS RE LIFE COMPANY AMERICA
7 YEAR SELECT
NON-REFUND
REINSURANCE
RATES
DIFFERENTIATED BY SMOKING HABIT
NRN-7314-1 AGE NEAREST BIRTHDAY
SEVEN YEAR SELECT NON REFUND YRT REINSURANCE PROGRAM
SMOKER / NONSMOKER DIFFERENTIATION
This schedule contains YRT rates which are differentiated by sex and
smoking habit for issue ages 20-85. These rates are to be used only
where the Ceding Company's gross premiums are differentiated by smoking
habit.
SUBSTANDARD RISKS
Multiple table substandard premiums are equal to the sum of the
standard premium (Smoker or Nonsmoker) and 25% of the Standard Premium
for each 25% excess mortality.
POLICY FEE
The Company will retain the entire policy fee.
RECAPTURE
Reinsurance ceded under this program will not be eligible for recapture
before the tenth policy anniversary.
MAXIMUM LIMITS OF RETENTION, AUTOMATIC REINSURANCE COVERAGE,
AND JUMBO LIMITS
I. Maximum Limits of Retention
A. Life: Ages 20-80, Standard to 500% - $125,000 per life
For the Joint Last Survivor Rider, the Company will retain
separately on each life.
B. Waiver of Premium: Fully Retained.
II. Maximum Automatic Reinsurance Coverage
A. Life:
1. Variable Universal Life Plan
Total Pool Coverage: $1,875,000
Swiss Re America's share: 33 and 1/3% of the Total
Pool Coverage, not to exceed $625,000.
2. Variable Universal Life plan issued with Joint Last
Survivor Rider
Swiss Re America's share: $1,875,000
B. Waiver of Premium: Not reinsured
III. Jumbo Limit
A. Life: $15,000,000
SCHEDULE 1
DOC #9384050
