Exhibit (g)(3)
LETTER OF INTENT
This Letter of Intent (hereinafter referred to as "Letter of Intent" or "LOI")
shall take effect as of August 30, 2005 and is made by and between [name of
reinsurance company] (hereinafter referred to as "Reinsurer") with offices in
[city and state of reinsurance company], and IDS Life Insurance Company
(hereinafter referred to as "Ceding Company" or "IDSL") with offices in
Minneapolis, Minnesota.
WHEREAS, Reinsurer and Ceding Company desire to enter into a reinsurance
arrangement whereby Reinsurer will reinsure a certain block of life
insurance policies issued and underwritten by Ceding Company;
WHEREAS, until such time as the parties can negotiate and execute a
reinsurance agreement covering the reinsurance transaction, the parties
desire to set forth in writing the general terms the parties have agreed
upon with respect to the reinsurance transaction; and
WHEREAS, those terms are expressed in this Letter of Intent, which the
parties intend to serve as a binding contract until such time that the
reinsurance agreement can be negotiated and executed, and which the
parties intend to serve as the basis for negotiation of the reinsurance
agreement;
NOW THEREFORE, the parties hereby agree to the terms outlined as follows:
o REINSURANCE EFFECTIVE DATE
August 30, 2005
The Reinsurer will accept backdated policies with issue dates up to six
months prior to the effective date.
o PRODUCT SPECIFICATIONS
See Exhibit A
o REINSURANCE METHOD
90/10 First Dollar Quota Share YRT and 100% Excess of Retention
o REINSURANCE BASIS
Mortality only - YRT
1. Reinsured risk amounts will be calculated on each policy anniversary
4. the amount of life insurance in force in all companies, including
any coverage to be replaced plus the amount currently applied for on
that life in all companies, does not exceed the Jumbo Limit stated
in this LOI, and
5. the application is on a life that has not been submitted
facultatively to the Reinsurer or any other reinsurer within the
last two (2) years, including the current application, unless the
reason for any prior facultative submission was solely for capacity
that may now be accommodated within the terms of this LOI.
It is understood and agreed that Reinsurer will generally accept IDSL's
underwriting decisions as long as IDSL's underwriters act in good faith
and consistent with IDSL's underwriting guidelines and manual, age and
amount requirements and control procedures, thus allowing for occasional
mistakes (provided such mistakes are not systematic or part of a pattern
that evidences disregard for the company's underwriting guidelines) and
reasonable underwriter discretion (which may deviate from the underwriting
guidelines or other requirements when deemed warranted and appropriate by
the IDSL underwriter exercising his or her professional judgment).
Notwithstanding the foregoing, business exceptions are not covered by the
automatic provisions of this Agreement unless approved in advance by the
Reinsurer. A business exception is a risk intentionally accepted by the
Ceding Company without a sound basis for accepting the risk based on
currently available underwriting evidence, including the waiving of normal
age and amount requirements without justification, in determining whether
there is justification for waiving underwriting requirements, the Ceding
Company's underwriter may exercise reasonable judgment in assessing the
protective value versus the additional cost, inconvenience or availability
of the requirement in question.
o INTERNAL REPLACEMENTS
A policy issued as an internal exchange or replacement of another policy
(whether or not the original policy was reinsured under this Agreement),
and underwritten by the Ceding Company in accordance with its underwriting
guidelines, standards and procedures for exchanges and replacements, will
be treated and covered as new business under this Agreement
(notwithstanding that suicide and contestability periods may be applied
from the date of the replaced or exchanged policy for coverage up to the
face amount of the replaced or exchanged policy in accordance with the
Ceding Company's exchange guidelines). Reinsurance of any such policy may
be ceded automatically or facultatively under this Agreement according to
the same terms and conditions as apply to other new business. Reinsurance
premium rates will be based on the issue age, issue date, and underwriting
classification of the new policy.
If a policy reinsured under this Agreement is internally exchanged or
replaced with another policy, reinsurance will continue under this
Agreement or, if applicable, any different agreement between the parties
providing reinsurance coverage for the new policy. In that event,
reinsurance premium rates will be based on issue age and duration of the
original
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policy and on the underwriting classification of the new policy.
Notwithstanding the foregoing, if there is a reinsurance agreement between
the parties providing reinsurance coverage for the new policy and such
agreement treats the policy as new business, then the issue age, duration,
and underwriting classification shall be based on the new policy.
It is understood and agreed that policies resulting from any wholesale
internal exchange program undertaken by the Ceding Company shall not be
covered by this LOI, unless approved in advance in writing by the
Reinsurer. The foregoing restriction on wholesale internal exchange
programs shall not be construed to prohibit waiver of surrender charges or
other policies or practices set forth in the Ceding Company's Internal
Replacement Exchange Guidelines which the parties acknowledge have been
shared with the Reinsurer, nor prevent any communication to the company's
sales force about such guidelines.
o CONVERSIONS
Contractual term conversions from Ceding Company's term insurance policies
or riders (such as an Other Insured Rider or Children's Insurance Rider)
to a policy reinsured under this Agreement will be covered and treated the
same as any other new business under this Agreement except the issue age
and issue date of the original term policy or rider shall apply for
purposes of determining reinsurance premium rates and Reinsurer's share,
if any, shall be as provided in any reinsurance agreement that covered the
original term policy or rider. Notwithstanding the foregoing, contractual
term conversions from term insurance policies or riders less than one year
old at time of conversion and which were not reinsured facultatively will
be reinsured as new business under this Agreement based on issue age,
issue date, and underwriting classification of the new policy, in any
event, contractual conversions for purposes of this paragraph shall not
include any increase in the amount ceded to Reinsurer nor any improvement
in underwriting classification, which instead shall be handled as
described in the following paragraph.
In the event a term insurance policyholder seeks to convert to a policy
reinsured under this Agreement and at the same time increase the face
value or specified amount of the policy, or improve the underwriting
classification, if the exchange is agreed to by the Ceding Company, such
exchange shall be treated as an internal replacement and handled in the
manner set forth in the first paragraph of the foregoing section relating
to internal replacements.
In the event of a contractual conversion of an Other Insured Rider that is
issued in connection with a policy reinsured under this Agreement, such
conversion shall be treated as an internal replacement and handled in the
manner set forth in the second paragraph of the foregoing section relating
to internal replacements.
o TRANSITION
Following introduction of the VUL IV Plus and VUL IV Plus - ES plans in
any given state, a policy issued on existing IDSL life plans may be
returned for a policy on the new plans without requiring additional
underwriting evidence, if the policyowner's request for the new
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policy is made within the original policy's free-look period. For purposes
of this paragraph, the free-look period administered by IDSL will be 30
days. The underwriting class may be improved in this event only if the
insured fully qualifies for the new class based on the underwriting
evidence submitted for the original application. The new policy shall be
treated as new business under this Agreement reinsured automatically or
facultatively, as applicable, subject to the terms herein.
o MAXIMUM MORTALITY FOR AUTOMATIC REINSURANCE
Each individual risk must not exceed Table P or its equivalent on a flat
extra premium basis.
O RESIDENCE & MAXIMUM ISSUE AGE REQUIREMENTS FOR AUTOMATIC REINSURANCE
Ceding Company may automatically cede risk on (i) any insureds who are not
international clients or (ii) any international clients who meet the
criteria listed in the Ceding Company's "Guidelines for Underwriting
International Clients" which has been reviewed and approved by the
Reinsurer.
o CEDING COMPANY'S MAXIMUM RETENTION LIMIT
-------------------------------------------------
Issue Age Retention
-------------------------------------------------
[ages] [dollar amount]
-------------------------------------------------
[ages] [dollar amount]
-------------------------------------------------
1. The per life retention limit shall apply to all of Ceding Company's
policies other than VUL III; and
2. Any excess over the retention limit will be ceded automatically in
accordance with the terms of this LOI unless the Ceding Company
seeks facultative coverage for the applicable policy.
o POOL BINDING LIMIT
-------------------------------------------------------------------------
Issue Age Standard -Table D Table E - H Table I - P
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[ages] [dollar amount] [dollar amount] [dollar amount]
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[ages] [dollar amount] [dollar amount] [dollar amount]
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[ages] [dollar amount] [dollar amount] [dollar amount]
-------------------------------------------------------------------------
1. The Ceding Company may not cede reinsurance automatically if the sum of
all amounts inforce and applied for on the same life with the Ceding
Company, excluding amounts being replaced, exceed the binding limits set
forth herein.
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2. There is no minimum for automatic cessions.
3. Potential AIBR increases are not subject to the binding and jumbo
limits and may be ceded automatically if the base policy is ceded
automatically.
4. If an applicant has existing joint coverage with the Ceding Company,
the full face amount of the joint policy will be applied against the
binding and jumbo limits.
o CONDITIONAL RECEIPT POOL BINDING LIMIT
With respect to conditional receipts in connection with applications taken
by the Ceding Company, the Reinsurer's liability will not exceed its
proportionate share of (a) [dollar amount], or (b) [dollar amount] if the
amount is ordered by a court of competent jurisdiction or the result of a
settlement with the applicant.
o JUMBO LIMIT
-----------------------------------------
Issue Age Jumbo Limit
-----------------------------------------
[ages] [dollar amount]
-----------------------------------------
[ages] [dollar amount]
-----------------------------------------
Jumbo is defined as inforce and applied for, before replacement.
o CLAIMS REQUIREMENTS
For (i) all non-contestable claims whether facultative or automatic and
(ii) all contestable claims covered by automatic reinsurance with a total
death benefit less than or equal to [dollar amount], the Ceding Company
will review and settle such claims without prior approval from or
consultation with the Reinsurer.
For (i) all contestable claims covered by automatic reinsurance with total
death benefits exceeding [dollar amount], (ii) all contestable claims
covered by facultative reinsurance regardless of amount, and (iii) all
claims (whether contestable or non-contestable) in excess of [dollar
amount] in which the death of the insured occurred in a country other than
the United States (including territories and possessions) or Canada, the
Ceding Company will send the Reinsurer full underwriting and claims
investigation information prior to payment or admission of liability. The
Ceding Company will wait at least 5 business days for the Reinsurer's
recommendations before admitting liability or proceeding to settle the
claim. Reinsurer may request up to an additional ten days.
Reinsurer's failure to provide a recommendation within 5 business days (or
any agreed upon extension) shall be deemed acceptance of any action taken
by the Ceding Company. In any event, the ultimate authority to pay or deny
a claim will rest solely with the Ceding Company. Failure to follow the
Reinsurer's recommendation will not relieve the Reinsurer of its
reinsurance liability hereunder. The Ceding Company's contractual
liability for
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policies reinsured under this LOI is binding on the Reinsurer, provided
that the claim was paid in good faith and the company's standard practices
were followed in the adjudication of the claim. Any required consultation
will not impair the Ceding Company's freedom to determine the proper
action on the claim.
Notwithstanding the foregoing, the Reinsurer retains the right upon
reasonable notice to request and receive claim papers on any claim for
audit purposes. Payment of claims shall not be delayed pending any claim
audit. Claims shall be paid promptly upon submission of a proper proof of
reinsurance claim subject to the other provisions in this "Claims
Requirements" section.
The Ceding Company will promptly advise the Reinsurer of its intention to
contest, compromise, or litigate any claim involving a reinsured policy.
Once notified, the Reinsurer will have five (5) business days to notify
the Ceding Company in writing of its decision to accept participation in
the contest, compromise, or litigation.
If the Reinsurer does not accept participation in such contest,
compromise, or litigation, the Reinsurer must then fulfill its obligation
by paying the Ceding Company its full share of reinsurance and will not
share in any subsequent reduction or increase in liability arising out of
or in connection with the claim. If the Reinsurer accepts participation,
the Reinsurer will share proportionately in any resulting reduction or
increase arising out of or in connection with the claim. If litigation has
commenced or claimant has made a demand for an amount exceeding the
contract benefits, the Reinsurer may discharge its liability only by
tendering payment of reinsurance proceeds to the Ceding Company in an
amount proportionate to a pending settlement offer made by the claimant to
the Ceding Company.
Reinsurer's liability for claims shall include its proportionate share of
any interest the Ceding Company must pay on death proceeds through the
date of settlement. Reinsurer shall also pay its share of non-routine
claim investigation and legal expenses in connection with the
investigation, settlement, or litigation of claims unless it has already
discharged its liability in the manner mentioned above.
The Reinsurer will not participate in punitive damages or compensatory
damages ("extra contractual obligations") that are awarded against the
Ceding Company as a result of an act, omission, or course of conduct
committed solely by the Ceding Company, its agents, or representatives in
connection with claims covered under this LOI.
However, the parties recognize that circumstances may arise in which
equity would require the Reinsurer, to the extent permitted by law, to
share proportionately in extra contractual obligations. Such circumstances
are difficult to define in advance but would generally be those situations
in which the Reinsurer, in writing, recommended, consented to, or ratified
the act or course of conduct of the Ceding Company that ultimately
resulted in the assessment of extra contractual obligations. In those
situations, the Reinsurer shall be responsible for paying its
proportionate share of the extra contractual obligations.
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o STATUTORY RESERVES
Reinsurer and Ceding Company intend that the Ceding Company will receive
statutory reserve credit in its state of domicile for the insurance risks
ceded to the Reinsurer. They agree to make all reasonable efforts to
ensure that this is accomplished.
o ADMINISTRATION
Self-Administered
o REPORTING MEDIA
Reporting requirements will be as mutually agreed upon by the parties.
Monthly transaction reports will include:
o New Business
o First Year - Other than New Business
o Renewal Year
o Changes and Terminations
o Accounting Information
Quarterly Periodic Reports will include:
o Statutory Reserve Information
o Policy Exhibit Information
o Inforce
o RECAPTURE
Recapture shall be permitted without fee after 20 policy years at the
option of the Ceding Company which will be exercised by increasing its per
life retention limit and/or by increasing its retained share for policies
ceded under this LOI. Once elected, recapture must be applied consistently
to all policies covered under this LOI.
o TERMINATION
This agreement will be unlimited in its duration and with respect to
existing business will remain inforce until termination or expiry of the
covered policies or until termination for nonpayment of reinsurance
premiums.
Either the Ceding Company or the Reinsurer may terminate the reinsurance
agreement with respect to new business by giving ninety (90) days' written
notice by certified or registered mail to the other party. Notwithstanding
the foregoing, in the event either company materially breaches its
obligations under the reinsurance agreement, the other party may
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immediately terminate the agreement for new business, in addition to all
other available rights and remedies.
o YRT RATE GUARANTEE
The maximum reinsurance premium rates which may be charged by the
Reinsurer shall be the statutory valuation premiums for yearly renewable
term insurance at the maximum interest rates and minimum mortality rates
applicable to the reinsured policies for each year of issue as prescribed
by law.
If the Reinsurer increases its premium rates for existing business, the
Ceding Company reserves the right to recapture business affected with no
recapture fee. In any event, Reinsurer may not increase rates for either
new or existing business until it has given 90 days advance written notice
to Ceding Company. Reinsurer's rate increase or Ceding Company's
recapture, as applicable, shall take effect on the anniversary of each
policy covered by this Agreement following the aforementioned 90 day
notice period.
o CONFIDENTIALITY
The Reinsurer will protect Ceding Company's customer and proprietary
information and will ensure compliance with all applicable state and
federal privacy laws.
o GENERAL PROVISIONS
Reinsurance Agreement. Reinsurer and Ceding Company agree to execute a
reinsurance agreement or amendment which will cover the business specified
above. The reinsurance agreement will include the following provisions:
Arbitration, Insolvency, Entire Agreement and Amendment, Extra-Contractual
Damages, Errors and Omissions, Inspection of Records, OFAC Compliance,
Offset, DAC Tax, Insolvency, Non-Transferability, Dispute Resolution, Good
Faith, and Confidentiality.
Term. This Letter of Intent shall begin as of the effective date set forth
above and shall run continuously until the date on which the reinsurance
agreement has been executed by both parties, or until terminated in
writing by mutual agreement of the parties.
Authorization. Each party shall proceed to obtain all corporate approvals
and authorizations that it deems necessary to allow it to enter into the
reinsurance agreement.
Assignment. This Letter of Intent may not be assigned without the express
written consent of the non-assigning party and shall be binding on both
parties' successors, heirs and permitted assigns.
Choice of Law. This Letter of Intent shall be governed by and construed in
accordance with the laws of the State of Minnesota.
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IN WITNESS WHEREOF, Reinsurer and Ceding Company have executed this Letter of
Intent reflecting their mutual agreement to the terms and conditions specified
herein.
IDS LIFE INSURANCE COMPANY [name of reinsurance company]
By: /s/ Xxxxxxx X. Xxxxxxxx By: [signature]
----------------------------
(signature) [signature]
Xxxxxxx X. Xxxxxxxx [name][name]
(print or type name) (print or type name)
Title: President Title: [title]
Date: Aug. 30, 2005 Date: Aug 29, 2005
Location: Minneapolis, MN Location: [city and state of reinsurance company]
Attest: /s/ Xxxxxxx X. Xxxxxxxx Attest: [signature]
----------------------------
(signature) (signature)
Title: Officer Title: [title]
ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
REINSURER'S POOL SHARE: [PERCENTAGE]
ANTICIPATED DATE OF FIRST REPORTING: OCTOBER 31, 2005
--------------------------------------------------------------------------------
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IDSL - [redacted]
EXHIBIT A
Specifications
o PRODUCT(S) REINSURED
VUL IV Plus; VUL IV Plus - ES
o AUTOMATIC REINSURANCE PREMIUMS
YRT reinsurance rates per $1000 net amount at risk are expressed in the
following table as a percentage of the 2001 VBT ALB as modified by the
Ceding Company to be attached to the treaty:
U/W CLASS YEARS 1+
----------------------------------------------- --------------
Super Preferred NS [percentage]
Preferred Nonsmoker [percentage]
Standard Nonsmoker [percentage]
Preferred Smoker [percentage]
Standard Smoker [percentage]
Reinsurance premiums for substandard table ratings are an additional 25%
per table of the base plan rates.
Flat extra premiums are reinsured at the Ceding Company's flat extra
premium rates:
TERM OF FLAT EXTRA FIRST YEAR ALLOWANCE RENEWAL YEARS ALLOWANCE
------------------ -------------------- -----------------------
More than 5 Years [percentage] [percentage]
5 Years or Less [percentage] [percentage]
o FACULTATIVE REINSURANCE PREMIUMS
Facultative reinsurance premiums are the same as the automatic reinsurance
premiums specified above.
o RIDER(S) REINSURED
Other Insured Rider (OIR)
Automatic Increasing Benefit Rider (AIBR)
Base Insured Rider (BIR)
Exchange of Insured Rider (EOI)
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IDSL - [redacted]
o RIDER(S) NOT REINSURED
Waiver of Monthly Deduction Rider
Children's Insurance Rider
Accidental Death Benefit Rider
Accelerated Benefit Rider (the Ceding Company will treat any payments
under the Accelerated Benefit Rider as a lien and recover reinsurance upon
death of the insured)
o AGE BASIS
ALB
O PREMIUM PAYMENT MODE
Annually in advance
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IDSL - [redacted]
