SERVICE AGREEMENT
AND
INDEMNITY COMBINATION COINSURANCE AND MODIFIED
COINSURANCE AGREEMENT
OF CERTAIN LIFE INSURANCE POLICIES
BETWEEN
METLIFE INSURANCE COMPANY OF CONNECTICUT
AND
METROPOLITAN LIFE INSURANCE COMPANY
TREATY #20132
TABLE OF CONTENTS
ARTICLE 1: DEFINITIONS................................................... 4
ARTICLE 2: PURPOSE OF AGREEMENT.......................................... 6
ARTICLE 3: COVERAGES TO BE REINSURED..................................... 7
ARTICLE 4: INDEMNITY REINSURANCE PROVISIONS.............................. 8
ARTICLE 5: ACCOUNTING, PAYMENTS, AND PROCEDURES.......................... 9
ARTICLE 6: SERVICE....................................................... 13
ARTICLE 7: REGULATORY APPROVALS.......................................... 15
6
ARTICLE 8: REPRESENTATIONS AND WARRANTIES OF CEDING COMPANY.............. 16
ARTICLE 9: REPRESENTATIONS AND WARRANTIES OF REINSURER................... 19
ARTICLE 10: RECORDS, FEES, AND OWNERSHIP OF PREMIUMS...................... 22
ARTICLE 11: INDEMNIFICATION AND RECAPTURE................................. 24
ARTICLE 12: CLAIMS INVESTIGATIONS: PUNITIVE DAMAGES....................... 26
ARTICLE 13: ARBITRATION................................................... 27
8
ARTICLE 14: DELIVERIES AS OF THE EFFECTIVE DATE........................... 28
ARTICLE 15: GENERAL PROVISIONS............................................ 29
EXHIBIT A: DESCRIPTION OF REINSURED POLICIES............................. 33
EXHIBIT B: FORM OF EFFECTIVE DATE ACCOUNTING............................. 34
EXHIBIT C: ASSETS........................................................ 35
EXHIBIT D: QUARTERLY ACCOUNTING AND SETTLEMENT........................... 36
EXHIBIT E: FORM OF ACCOUNTING AND SETTLEMENT REPORTING................... 39
THIS AGREEMENT is made and entered into as of January 1, 2014 (herein "EFFECTIVE
DATE") between METLIFE INSURANCE COMPANY of CONNECTICUT (herein "CEDING
COMPANY"), and METROPOLITAN LIFE INSURANCE COMPANY of New York, New York (herein
REINSURER").
RECITALS
A. Immediately prior to the Effective Date, Ceding Company is incorporated
under the laws of Connecticut and is qualified to do business as a capital stock
life insurance company in all 50 states and the District of Columbia.
B. Reinsurer is incorporated under the laws of New York, and is qualified to
do business as a capital stock legal reserve life insurance company and as a
reinsurer.
C. As the Ceding Company shall have on its books certain life insurance
policies which it desires to cede 100% net of Other Reinsurance hereunder, and,
subject to the terms of this Agreement, Reinsurer desires to reinsure 100% of
such policies net of Other Reinsurance.
D. Although Ceding Company will continue to be legally obligated to the
policyholders, in accordance with the terms of such policies, this Agreement is
intended to transfer the economic benefits and liability to the Reinsurer.
AGREEMENT
---------
NOW, THEREFORE, IN CONSIDERATION of the mutual and foregoing recitals and the
mutual covenants and undertakings herein contained, and for other good and
valuable consideration, receipt of which is hereby acknowledged, the parties do
freely and voluntarily agree as follows:
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ARTICLE 1: DEFINITIONS
Section 1.01 As used herein, the following terms shall have the following
meanings:
"ACCOUNTING PERIOD" shall mean the calendar quarter beginning on the Effective
Date, and each calendar quarter and not less than quarterly thereafter while
this Agreement remains in effect.
"AGREEMENT" shall mean this Service Agreement and Indemnity Combination
Coinsurance and Modified Coinsurance Agreement of Certain Life Insurance
Policies Between Metlife Insurance Company of Connecticut and Metropolitan Life
Insurance Company and designated as Xxxxxx Xx. 00000 and all Exhibits and
Schedules hereto, and all amendments entered into in accordance with Section
15.02.
"ANNUAl STATEMENT" shall mean the 2013 Annual Statement of MetLife Insurance
Company of Connecticut for the year ended December 31, 2013.
"BANK ACCOUNTS" shall have the meaning ascribed to that term in Section 10.04
"COINSURANCE RESERVES" shall mean the statutory reserve for the obligations
reinsured pursuant to Section 3.03.
"COMMISSIONS" shall mean all commissions, renewal commissions and overrides,
expense allowances, benefit credits and other fees and compensation paid or
payable.
"CONTINUING PRODUCER" shall mean a former appointed insurance producer of the
Ceding Company who was authorized to solicit applications for the Reinsured
Policies acting as an appointed insurance producer of the Reinsurer after the
Effective Date.
"EFFECTIVE DATE" shall mean January 1, 2014.
"EFFECTIVE DATE ACCOUNTING" shall have the meaning ascribed to that term in
Section 5.01.
"MODIFIED COINSURANCE RESERVE" shall mean the statutory reserve for the
obligations reinsured pursuant to Section 3.02.
"NET COINSURANCE RESERVE" shall have the meaning ascribed to that term in
Section 5.01.
"NEW YORK POLICYHOLDERS" shall mean (i) all individuals to whom an approved New
York policy or contract form, in force as of the Effective Date, was issued by
the Company prior to the Effective Date; (ii) all owners of a group contract, in
force as of the Effective Date, sited in New York when the group contract was
issued by the Company, which group is an eligible group under New York Insurance
Law Section 4216, 4235 or 4238.
"NOVATED REINSURANCE" shall mean any Reinsurance Agreements that shall be
novated from the Ceding Company to the Reinsurer as of the Effective Date as set
forth in Schedule 8.02(c) hereto.
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"OTHER REINSURANCE" shall mean any Reinsurance Agreements that remain in
effect on and after the Effective Date and which continue to reinsure the Ceding
Company as set forth in Schedule 8.02(c) hereto.
"PREMIUMS" means premiums, considerations, deposits, premium adjustments and
similar receipts with respect to the Reinsured Policies net of Other
Reinsurance.
"REINSURANCE AGREEMENTS" shall mean any Reinsurance Agreements to the extent
they concern the Reinsured Policies, other than this Agreement. A list of the
Reinsurance Agreements in force immediately prior to the Effective Date is set
forth in Schedule 8.02(c) hereto.
"REINSURANCE CLAIMS" shall mean policy benefits paid or accrued to policyholders
under the Reinsured Policies net of Other Reinsurance.
"REINSURED POLICIES" shall mean the policies described in Exhibit A which is
attached hereto and made a part hereof. Notwithstanding anything contrary in
this Agreement, Reinsured Policies shall not include any policy for which any
applicable Initial Coinsurance Reinsurance Premium described in Section 5.05,
Initial Modco Reinsurance Premium described in Section 5.06, or any adjustment
thereto as described in Sections 5.02, 5.03 or 5.08, are not actually
transferred to Reinsurer.
"RELATED AGREEMENTS" shall mean the agreements providing for the payment of
commissions relating to the Reinsured Policies.
"SEPARATE ACCOUNTS" means the segregated asset accounts of Ceding Company that
were established to fund portions of the Reinsured Policies.
"SETTLEMENT DAYS" means business days.
"TOTAL CONTROL ACCOUNT" refers to the retained asset accounts, which are
supplemental contracts on Reinsured Policies.
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ARTICLE 2: PURPOSE OF AGREEMENT
Section 2.01 Purpose of Agreement. The purpose of this Agreement is to provide
for the one hundred percent (100%) indemnity reinsurance net of Other
Reinsurance by Reinsurer of all of the interest of Ceding Company in the
Reinsured Policies and to provide for servicing of such Reinsured Policies. The
reinsurance and service responsibilities are subject to the terms and conditions
set forth herein. Reinsurer shall not accept any liabilities of Ceding Company
other than those express, written contractual liabilities set forth in the
Reinsured Policies and the Related Agreements. Reinsurer shall be obligated only
under the express, written terms of the Reinsured Policies and the Related
Agreements and shall not be bound by any sales materials or other written or
verbal representations stated or implied by either Ceding Company or any of its
representatives, agents, or other parties or liable for any matter other than
contractual liabilities under the express, written terms of the Reinsured
Policies and the Related Agreements. Reinsurer shall not assume liability for:
(a) any misrepresentations that have been made or allegedly have been made to
the policyholders of Ceding Company, or to its representatives, agents, or other
parties on or prior to the Effective Date or (b) for any alterations in the
terms of the Reinsured Policies and the Related Agreements not expressly
reflected in the books and records of the Ceding Company transferred to
Reinsurer on the Effective Date pursuant to the terms of this Agreement.
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ARTICLE 3: COVERAGES TO BE REINSURED
Section 3.01 Cession. Ceding Company agrees to cede, and does cede, as of the
Effective Date, all of Ceding Company's rights and interest in the Reinsured
Policies and the Related Agreements so that then and thereafter, as between the
parties to this Agreement. Ceding Company shall have no liability for the
express, written benefits under the Reinsured Policies or the Related
Agreements; and all of the Ceding Company's rights and interest in all Novated
Reinsurance to the extent relating to the Reinsured Policies to the end that
then and thereafter Ceding Company shall have no liability on account of the
Reinsured Policies with respect to such Novated Reinsurance, except to the
extent otherwise specifically set forth herein.
Section 3.02 Modified Coinsurance. Reinsurer agrees to accept, and it does
accept as of the Effective Date, cession of the Reinsured Policies, and to
assume, and it does assume on a modified coinsurance basis, all Separate Account
obligations and liability as it relates to express written contractual liability
insured under the Reinsured Policies and provided under the Related Agreements
after such date (the "Modified Coinsurance Reserve"); and (b) all rights and
responsibilities of the Ceding Company under the Novated Reinsurance to the
extent applicable to the Reinsured Policies.
Section 3.03 Coinsurance. Reinsurer agrees to accept, and it does accept as of
the Effective Date, cession of the Reinsured Policies, and to assume, and it
does assume on a 100% indemnity coinsurance basis, all general account liability
as it relates to all remaining written contractual liability not assumed in
accordance with Section 3.02, except as otherwise provided in Section 4.02.
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ARTICLE 4: INDEMNITY REINSURANCE PROVISIONS
Section 4.01 Basis of Reinsurance. On and after 12:00 a.m. ET., on the Effective
Date, Ceding Company's liabilities under the Reinsured Policies shall be
reinsured on a one hundred percent (100%) indemnity coinsurance and modified
coinsurance basis net of Other Reinsurance by Reinsurer.
Section 4.02 Total Control Account. Reinsurer's assumption shall not include any
obligations related to a Total Control Account reinsured by Reinsurer.
Section 4.03 Reinstatements. Should a Reinsured Policy or a lapsed or
surrendered policy that would otherwise have been a Reinsured Policy be
reinstated in accordance with its terms and the rules of Ceding Company on and
after the Effective Date, the insurance under such policy shall be reinstated
automatically and the same shall be reinsured hereunder automatically. The
gain/or loss on the reinstatement shall be transferred to the Reinsurer on and
after the Effective Date only to the extent that Ceding Company incurred a gain
or loss on the reinstatement.
Section 4.04 Policy Changes. Ceding Company agrees that it shall not make any
changes as of Effective Date in the provisions and conditions of a Reinsured
Policy; provided, however, that after the Effective Date, Ceding Company may
make changes regarding non-guaranteed policy provisions of the Reinsured
Policies (e.g. mortality charges and interest rates). Ceding Company agrees that
it will follow its normal financial management processes that it follows on its
own business with regard to the Reinsured Policies and confer with the Reinsurer
prior to making any such changes. It is the parties' expectation that the Ceding
Company will credit a rate on the fixed account portion, if any, of the
Reinsured Policies under the Ceding Company's current crediting rate practice.
If the Ceding Company elects to credit interest rates outside its current
crediting practice, the Ceding Company shall first provide the Reinsurer with
the description of the Ceding Company's proposed strategy and the Ceding
Company's justification for crediting interest rates outside its current
crediting rate practice, and seek the Reinsurer's consent. Such consent shall
not be unreasonably withheld. At Reinsurer's request, Ceding Company shall
report its current crediting rates to Reinsurer (through electronic means or
otherwise) in such format and at such times as may be mutually agreed for
purposes of Reinsurer's administration and preparation of statutory accounting
reports in accordance with Section 6.01.
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ARTICLE 5: ACCOUNTING, PAYMENTS, AND PROCEDURES
Section 5.01 Effective Date Accounting. On the Effective Date, Ceding Company
shall have prepared as of the Effective Date, an estimate of all liabilities and
related assets customarily arising under statutory accounting principles on
account of the Reinsured Policies, substantially in the form set forth in
Exhibit B (the "EFFECTIVE DATE ACCOUNTING"). Such accounting shall have been
reviewed and certified by an officer of Ceding Company that is a Fellow of the
Society of Actuaries familiar with the business of Ceding Company. It is the
intent of the parties that such accounting and each of the entries thereof shall
have been prepared in accordance with insurance accounting principles prescribed
or permitted under statutory authority applied on a basis consistent with those
applied by the Ceding Company in prior years and shall present fairly the items
reflected therein in accordance with sound actuarial principles as of the date
of such accounting. The results of such accounting shall be called the "Net
Coinsurance Reserve" and the "Modified Coinsurance Reserve." It is anticipated
that all liabilities and assets arising from or relating to the Reinsured
Policies shall be reflected in the Effective Date Accounting, and omission of an
item from Exhibit B which properly relates to the Reinsured Policies shall not
be cause for omission of such item from the Effective Date Accounting. Ceding
Company agrees to supply Reinsurer a copy of all computer runs, work papers and
supporting data used in preparing the Effective Date Accounting.
Section 5.02 Adjustments. Within ninety (90) business days of the Effective
Date, the Ceding Company shall prepare and deliver to Reinsurer a revised
accounting, prepared as of the Effective Date in the manner prescribed in
Section 5.01. The revised accounting shall include a revised Exhibit A, which
can be in electronic format that includes all the Reinsured Policies as of the
Effective Date. Ceding Company shall also prepare a revised Schedule C listing
of all the assets transferred on the Effective Date, the actual fair market
value of those assets on the Effective Date and any differences between actual
fair market value and the estimated fair market value used in calculating the
Reinsurance Premium. Any payments required of either party as a result of the
revised accounting and revised asset listing shall be made within twenty (20)
business days after delivery of the revised accounting in accordance with
Exhibit B.
Section 5.03 Further Adjustments. In the event that subsequent data or
calculations or banking arrangements require revision of the Effective Date
Accounting, the required revision and appropriate payments thereunder with
interest in accordance with Exhibit B shall be made within twenty (20) business
days after reasonable determination of such revision.
Section 5.04 No Ceding Allowance. Reinsurer shall not provide Ceding Company
with a ceding allowance.
Section 5.05 Initial Coinsurance Reinsurance Premium. Ceding Company shall
deliver to Reinsurer an estimated accounting as described in Section 5.01
calculated as of the Effective Date, and Ceding Company shall transfer an
initial reinsurance premium ("INITIAL COINSURANCE REINSURANCE PREMIUM") to
Reinsurer within 20 business days of the Effective Date in the form of cash
and/or assets listed in Exhibit C with an estimated fair market value as of the
Effective Date equal to the greater of the Net Coinsurance Reserve described in
Exhibit B and the fair value of the coinsured liabilities as calculated by the
Ceding Company in accordance with generally accepted accounting principles as of
the Effective Date.
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Section 5.06 Initial Modco Reinsurance Premium and Reserve Adjustment. On the
Effective Date, the Ceding Company shall also transfer to the Reinsurer an
additional estimated reinsurance premium equal to the Modified Coinsurance
Reserve ("INITIAL MODCO REINSURANCE PREMIUM") and the Reinsurer shall
immediately transfer to the Ceding Company an amount equal to the Modified
Coinsurance Reserve. Such payments shall be settled on a net basis.
Section 5.07 Reserves. With respect to the Reinsured Policies, the Ceding
Company will maintain a liability equal to the Modified Coinsurance Reserve on
its statutory statements, and the Reinsurer agrees to establish and maintain a
liability on its statutory statements not less than the Coinsurance Reserve, as
required by the applicable regulatory authorities, for all liabilities except
those for which the reserves are held in the Separate Accounts.
Section 5.08 Adjustments Relating to Errors and Incorrect Data. Each party is
entitled to protection against the consequences of material errors with respect
to (i) data on the Reinsured Policies, and (ii) the Effective Date Accounting.
If material errors are discovered in the above described information within
three (3) years from the Effective Date, the parties will promptly make any
needed adjustments in the amounts so transferred.
Section 5.09 DAC Tax Election. In regards to the Reinsured Policies described in
Exhibit A, Ceding Company and Reinsurer agree to the following pursuant to
United States Treasury Regulation Section 1.848-2(g)(8):
(a) The term "party" will refer to either Ceding Company or
Reinsurer as appropriate.
(b) The terms used in this Section are defined by reference to
United States Treasury Regulation Section 1.848-1 and 1.848-2 as
in effect on the Effective Date and at all relevant times
thereafter. The term "net consideration" refers to net
consideration as defined in Regulation Section 1.848-2(f).
(c) For each taxable year ending on or after the Effective Date, the
party with net positive consideration under 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) of the
Internal Revenue Code of 1986, as amended, and Treasury
Regulations promulgated thereunder.
(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 United States
Internal Revenue Service.
(e) The exchange of information will follow the following procedure:
By May 1 of each year, Reinsurer will submit a schedule to Ceding
Company of its calculation of the net consideration for the
preceding taxable year. This schedule of calculations will be
accompanied by a statement signed by an officer of Reinsurer
stating the amount of net consideration Reinsurer will report in
its
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tax return for the preceding taxable year. To ensure consistency,
Ceding Company will utilize this information in determining its
net consideration for its preceding taxable year. Ceding Company
shall advise Reinsurer if it disagrees with the calculations
provided and the parties agree to act in good faith to resolve
such differences amicably.
(f) Both parties agree to attach a schedule to their respective
Federal Income Tax Return for the taxable year in which the
Effective Date occurs, which identifies the Agreement as a
reinsurance agreement for which the joint election under
Regulation Section 1.848-2(g)(8) has been made.
(g) Both parties warrant that they are U.S. taxpayers as defined by
United States Treasury Regulation 1.848-2(h)(2)(ii).
Section 5.10 Premium Tax. Reinsurer shall reimburse Ceding Company annually by
April 1 of each year (or such shorter period as the parties agree) for the
premium tax and any other tax required to be paid by Ceding Company for the
prior calendar year to any State or political sub-division thereof with respect
to any premiums received for the Reinsured Policies after the Effective Date as
described below. Reinsurer shall, on a timely basis and in accordance with
Section 6.01, provide Ceding Company any information necessary for Ceding
Company to make such tax payments.
The Reinsurer shall reimburse an amount equal to sum of (a) x (b) for each
state, where:
a) Equals the reinsurance premium paid in the prior calendar year by the
Ceding Company for the Reinsured Policies resident in the state as of
12/31 of the prior calendar year
b) Equals the overall effective premium tax rate for the prior calendar
year for the state, which is equal to c/d. where:
c) Equals the actual premium tax and any other tax paid by the Ceding
Company to the state with respect to any premiums received for the
prior calendar year, before credits, and for life insurance policies
d) Equals the actual taxable premium received by the Ceding Company in
the state for the prior calendar year for life insurance policies
Section 5.11 Quarterly Accounting and Settlement. Within sixty (60) days after
the end of each Accounting Period, the Reinsurer shall submit to Ceding Company
quarterly accounting reports, substantially in the form of Exhibit E - Form of
Accounting and Settlement Reports, for each Accounting Period (such reports
shall include, but are not limited to, the amounts determined in the manner
described in Exhibit D for Reinsurance Premiums, Net Policy Fees and Charges,
Reinsurance Claims, and Modified Coinsurance Reserves).
Within seventy-five (75) days after the end of each Accounting Period, an amount
equal to the Accounting Settlement, as defined in Exhibit D and calculated as
shown in Exhibit E, will be settled between the Ceding Company and Reinsurer.
Payment shall first be made by way of cash or cash equivalent, where: (i) if the
Accounting Settlement is greater than or equal to zero, the Ceding Company shall
pay the Reinsurer, and (ii) if the Accounting Settlement is less than zero, the
Reinsurer shall pay the Ceding Company the absolute value of the amount.
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Section 5.12 Delayed Quarterly Settlement. If there is a delayed quarterly
settlement, a party may impose an interest penalty charge on the other for the
period that an amount is overdue, as follows: (a) in the event Reinsurer timely
submits a Quarterly Accounting and Settlement Report and the Accounting
Settlement is greater than zero, Reinsurer may impose an interest penalty charge
for the period that the settlement amount is overdue; (b) in the event Reinsurer
does not timely submit a Quarterly Accounting and Settlement Report and the
Accounting Settlement is greater than zero, Reinsurer may impose an interest
penalty charge for the period that the settlement amount is overdue but any such
period shall not begin until fifteen (15) days after it submits the Quarterly
Accounting and Settlement Report; (c) in the event Reinsurer timely submits a
Quarterly Accounting and Settlement Report and the Accounting Settlement is less
than zero, Ceding Company may impose an interest penalty charge for the period
that the settlement amount is overdue; and (d) in the event Reinsurer does not
timely submit a Quarterly Accounting and Settlement Report and the Accounting
Settlement is less than zero, Ceding Company may impose an interest penalty
charge for the period that the Quarterly Accounting and Settlement Report is
overdue. Any interest penalty charged shall be calculated from the applicable
date described above, to the date of payment based on the three month LIBOR on a
per annum basis (containing 360 days) as published on the last day of the
calendar month plus 50 basis points. The three month LIBOR rate for this
calculation will reset at the last business day of each subsequent calendar
month until outstanding amounts due have been paid. Accrued balances of less
than $200,000 can be paid in the next subsequent Accounting Period settlement
without interest penalty.
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ARTICLE 6: SERVICE
Section 6.01 Services. After the Effective Date, Reinsurer agrees to provide the
following services (the "Services") on behalf of and in the name of the Ceding
Company at its own expense:
(a) All normal and necessary service on account of the Reinsured
Policies, including but not limited to:
(i) answering policyholder questions and correspondence; making
changes requested by policyholders to the Reinsured Policies and
maintaining policy information and other information storage
systems and files;
(ii) adjudicating claims and preparing checks or drafts to pay
claims, surrender benefits and other contractual benefits in
accordance with applicable state and federal law, provided that
at the option of Ceding Company, Ceding Company may pay all
claims and seek reimbursement from Reinsurer. For greater
clarity, it is the intention of the parties that although
Reinsurer will provide all Services required to administer the
Reinsured Policies after the Effective Date, Ceding Company will
initially, at the direction of Reinsurer, pay all claims and
will be subsequently reimbursed quarterly (or such shorter
period as the parties agree) by Reinsurer in accordance with the
Quarterly Accounting Settlement provisions in Section 5.11;
(iii) satisfying all policy filing tax reporting and any other
regulatory requirements with respect to the Reinsured Policies;
and
(iv) underwriting of increases on existing Reinsured Policies.
(b) All information with respect to the Reinsured Policies required by
Ceding Company to prepare: (i) the quarterly and annual NAIC reports
including all schedules thereto, (ii) any quarterly, quarterly and
annual tax reporting, and (iii) any other information with respect to
the Reinsured Policies which may be requested by any regulatory body
in any jurisdiction in which the Ceding Company is licensed.
(c) In order to permit Ceding Company to satisfy its reporting
obligations. Reinsurer agrees to maintain, in accordance with accepted
standards of prudent insurance recordkeeping, complaint records,
records regarding rescissions, claim activities, customer service and
other matters to the same extent that Ceding Company maintains such
records with respect to its individual life insurance policies issued
outside of New York.
(d) All data required for quarterly NAIC reports shall be submitted to
Ceding
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Company no later than the end of the third week of the month
following the quarter end. All data required for annual NAIC reporting
shall be submitted to the Ceding Company no later than January 31st.
Section 6.02 Delegation. Reinsurer may employ an affiliate to perform any of its
servicing responsibilities under this Agreement. The performance of such
servicing responsibilities by any entity other than the Reinsurer or its
affiliate shall require the written consent of the Ceding Company.
Section 6.03 Complaint Processing. Reinsurer shall be responsible for the
processing of all complaints involving the Reinsured Policies, and maintaining
adequate written records thereof including the name and address of the
complainant, the date received, the nature of the complaint and the resolution.
Reinsurer shall provide Ceding Company with such records on request. Reinsurer
will communicate with Ceding Company concerning any Complaints that, in
Reinsurer's good-faith judgment, appear to be likely to give rise to liability
(provided, however, that Reinsurer shall not be liable for, and the
indemnification responsibilities, outlined in Article 11, shall be unaffected
by, Reinsurer's error of judgment). Ceding Company shall promptly notify
Reinsurer of any Complaints it receives regarding the Reinsured Policies.
Complaints for the purposes of this paragraph shall be defined as any written
communication primarily expressing a grievance.
If Reinsurer receives any notice from any source (including, but not limited to,
a policyholder or regulatory agency) of a lawsuit or other legal or
administrative hearing or proceeding being brought against Ceding Company and
involving the Reinsured Policies or the threat of any such lawsuit, hearing or
proceeding ("Proceeding"), for which Reinsurer is entitled to indemnification by
Ceding Company, Reinsurer will promptly forward to Ceding Company notice of the
Proceeding and a copy of all legal documents, correspondence and other materials
relevant thereto which Reinsurer reasonably has access to as required by Article
10 hereof, provided, however, that failure to give such notice shall not affect
Ceding Company's obligations to indemnify Reinsurer unless such failure
materially prejudices Ceding Company's rights with respect to such Proceeding.
Reinsurer agrees to cooperate fully with Ceding Company in connection with the
Proceeding.
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ARTICLE 7: REGULATORY APPROVALS
Section 7.01 Regulatory Approval. Reinsurer and/or Ceding Company shall apply,
where applicable, to the Director of the Connecticut Department of Insurance (or
such other regulator as may have jurisdiction over the Ceding Company), and the
Superintendent of the Department of Financial Services of the State of New York
for approval of the transfer contemplated by this Agreement in accordance with
the relevant provisions of the applicable legislation in the United States on
the terms and conditions set out herein either without modification or with such
modification as may have been agreed by the parties hereto and approved by such
regulatory authorities.
Section 7.02 Regulatory Approval Following Amendment. Any change to this
Agreement which occurs after the approvals referred to in Section 7.01 hereof
have been obtained shall be subject to the required approval(s) of the Director
of the Connecticut Department of Insurance (or such other regulator as may have
jurisdiction over the Ceding Company), the Superintendent of the Department of
Financial Services of the State of New York and, to the extent necessary or
appropriate, to any federal authorities with jurisdiction over the subject
matter herein.
Section 7.03 Best Efforts. Reinsurer and Ceding Company agree that they will
each proceed with all due diligence to consummate the transaction set forth in
this Agreement.
Section 7.04 Filing. Reinsurer and Ceding Company shall file all documents
required to be filed by the Director of the Connecticut Department of Insurance
(or such other regulator as may have jurisdiction over the Ceding Company), the
Superintendent of the Department of Financial Services of the State of New York
and, to the extent necessary or appropriate, any federal authorities with
jurisdiction over the subject matter herein in order to consummate the
transaction set forth in this Agreement.
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ARTICLE 8: REPRESENTATIONS AND WARRANTIES OF CEDING COMPANY
Section 8.01 Authority. Ceding Company represents and warrants that Ceding
Company is a corporation duly organized as a capital stock life insurance
company, validly existing as of the Effective Date under the laws of the State
of Connecticut and the Ceding Company or its predecessor in interest was
licensed or otherwise authorized in New York to issue the Reinsured Policies.
Ceding Company has the full corporate power and authority to carry out and
perform its undertakings and obligations under this Agreement. Except as
provided in Article 7, the execution and delivery by Ceding Company of this
Agreement and the consummation by Ceding Company of the transactions
contemplated in this Agreement have been duly authorized by all proper and
requisite proceedings and will not conflict with, constitute a default under or
breach any provision of the Articles of Organization or Bylaws of Ceding
Company, or any material provision of any other instrument to which Ceding
Company is a party or by which it is bound, or any law, rule or regulation of
any governmental body applicable to Ceding Company or any order, writ,
injunction or decree of any court or governmental body directed against Ceding
Company. This Agreement has been duly and validly executed and delivered by
Ceding Company. Assuming due authorization, execution and delivery by Reinsurer,
this Agreement is the legal, valid and binding obligation of Ceding Company
enforceable against it in accordance with its terms.
Section 8.02 Other Representations and Warranties. The Ceding Company hereby
makes the following representations and warranties:
(a) Compliance with Law. The forms of the Reinsured Policies, including
but not limited to applications, amendments, endorsements, riders,
which have been reinsured under this Agreement have been filed and
approved, if required, by the applicable insurance departments in the
jurisdictions in which such filing is required. Advertising materials
and point-of-sale materials used in connection with the sale or
marketing of the Reinsured Policies were materially in compliance with
applicable laws and regulations when utilized.
(b) Validly Issued, No Adverse Affect, and No Litigation. (i) The
Reinsured Policies are validly issued; (ii) as of the Effective Date
there are currently no known material facts or conditions which have
not been disclosed to the Reinsurer, that would materially adversely
affect the contractual liabilities assumed by Reinsurer pursuant to
this Agreement; and (iii) except as provided in Schedule 8.02(b),
there is no material litigation or regulatory action proceeding
pending or threatened against Ceding Company on the Effective Date
which would adversely affect the Reinsured Policies under this
Agreement or the assets to be transferred hereunder or which would
prevent the consummation of this Agreement.
(c) Reinsurance Agreements. The Reinsurance Agreements, split between the
Novated Reinsurance and Other Reinsurance, are as shown in Schedule
8.02(c). Ceding Company has duly and punctually performed in all
material respects all the terms, covenants, and warranties of the
Novated Reinsurance. To the best of Ceding Company's knowledge, the
other parties to the Novated
16
Reinsurance are not in default in any material respect under any of
the terms thereof. The Ceding Company will notify the Reinsurer of
either 1) novation of any of the Reinsurance Agreements shown as Other
Reinsurance from the Ceding Company to the Reinsurer after the
Effective Date, or 2) recapture of any of the Reinsurance Agreements
shown as Other Reinsurance after the Effective Date.
(d) Title. No person, firm or corporation has any claim, lien, judgment
or right of action, legal or equitable, against or in any assets
transferred to Reinsurer under the terms of this Agreement. Reinsurer
shall obtain good and merchantable title to all such assets free and
clear of all claims, liens, judgments or rights of action upon such
assets being transferred to Reinsurer in accordance with the terms
hereof. Ceding Company agrees to indemnify and save harmless Reinsurer
against and from any and all claims or liens against said assets or
any claim or judgment which may be made or entered against or related
to said assets or any claim or judgment which may be made or entered
against Reinsurer for which the latter is not expressly obligated
under this Agreement.
(e) Accountings. Pursuant to the terms of this Agreement, Ceding Company
will make available to Reinsurer the Effective Date Accounting as well
as a copy of material computer runs, work papers, and supporting data
used in preparing such accounting. The accounting shall be prepared in
accordance with insurance accounting principles prescribed or
permitted under statutory authority applied on a basis consistent with
those applied by Ceding Company in prior years and to present fairly
the items reflected therein in accordance with sound accounting
principles as of the date of such accounting.
(f) Correct Information. The information concerning the Reinsured
Policies contained in Exhibit A, or any other exhibits to this
Agreement, is true and correct in all material respects.
(g) Consistent with Books and Records. The Reinsured Policies and the
Related Agreements are consistent with the books and records of Ceding
Company which are transferred to Reinsurer pursuant to the terms of
this Agreement. Any amendments, riders, or other modifications to the
Reinsured Policies shall be reflected in the books and records
transferred to Reinsurer.
(h) Related Agreements. Each of the Related Agreements is in one of the
forms made available by Ceding Company to Reinsurer on or before the
Effective Date. Ceding Company has duly performed all the material
terms, conditions, covenants, and warranties of the Related Agreements
required on the part of the Ceding Company, and, to the best of Ceding
Company's knowledge, other parties to the Related Agreements have duly
performed all the terms, conditions, covenants and warranties required
on their part.
(i) Litigation. Except as disclosed in Schedule 8.02(b), as of the
Effective Date
17
there are no material actions, suits, proceedings or investigations
pending, nor to the knowledge of Ceding Company, threatened against,
involving or affecting any of the Reinsured Policies, any of the
rights or assets to be transferred hereunder or any of the
transactions contemplated by this Agreement before any federal, state,
municipal or other governmental court department, commission, board,
arbitrator, bureau, agency or instrumentality. Except as disclosed in
Schedule 8.02(b), as of the Effective Date Ceding Company does not
have any knowledge of any state of facts or contemplated events that
reasonably may be expected to give rise to any such material claim,
action, suit, proceeding, or investigation.
18
ARTICLE 9: REPRESENTATIONS AND WARRANTIES OF REINSURER
Section 9.01 Authority. Reinsurer has the full corporate, legal and regulatory
authority to carry out and perform its undertakings and obligations under this
Agreement and will continue to maintain such authority for the duration of this
Agreement. Reinsurer will either maintain its licenses to conduct the business
of life insurance (including the authority to conduct annuity insurance
business) in New York, and in any jurisdiction where the Ceding Company or its
successor is domiciled, or will maintain licenses as an accredited Reinsurer in
those jurisdictions. The execution and delivery by Reinsurer of this Agreement
and the consummation by Reinsurer of the transactions contemplated in this
Agreement have been duly authorized by all proper and requisite proceedings and
will not conflict with, constitute a default under or breach any provision of
the Articles of Incorporation or Bylaws of Reinsurer, or any material provision
of any other instrument to which Reinsurer is a party or by which it is bound,
or any law, rule or regulation of any governmental body applicable to Reinsurer
or any order, writ, injunction or decree of any court or governmental body
directed against Reinsurer. This Agreement has been duly and validly executed
and delivered by Reinsurer. Assuming due authorization, execution and delivery
by Ceding Company, this Agreement is the legal valid and binding obligation of
Reinsurer enforceable against it in accordance with its terms. In the event that
the Reinsurer fails to have or maintain its license in any jurisdiction in which
the Ceding Company or its successor is licensed and such license is a
precondition for the Ceding Company to receive credit for reinsurance for the
Reinsured Policies, the Reinsurer shall immediately collateralize the
Coinsurance Reserves for the Reinsured Policies (and in no event beyond the end
of the calendar quarter during which such failure occurs) by either a letter of
credit or assets in trust or any combination of the two, which in total will
comply with statutory and regulatory requirements for obtaining the Ceding
Company's credit for reinsurance. The Reinsurer shall have the option of
determining the method of collateralization provided it is acceptable to the
insurance regulatory authorities having jurisdiction over the Ceding Company's
reserves.
When collateralizing by a letter of credit, the Reinsurer agrees to arrange for
the timely delivery of a clean, unconditional and irrevocable letter of credit
for the exclusive benefit of Ceding Company, issued in a form acceptable to the
insurance regulatory authorities having jurisdiction over Ceding Company's
reserves. The letter of credit (the "Letter of Credit") will be issued by a bank
that is neither the parent, subsidiary, or affiliate of either Reinsurer or
Ceding Company and is (1) organized or licensed in the United States, (2)
regulated, supervised and examined by U.S. federal or state authorities, and (3)
has been found acceptable to Ceding Company.
For every accounting period in which a Letter of Credit is to be provided under
this Section, the amount of the Letter of Credit will equal or exceed at all
times, the Coinsurance Reserves.
Not less than ten (10) days prior to the end of each accounting period, Ceding
Company shall estimate such Coinsurance Reserves and the amount of any Letter of
Credit required in accordance with this Section and prior to the close of the
accounting period in which such notice is received, Reinsurer shall obtain and
deliver to Ceding Company a Letter of Credit, or an amendment to a Letter of
Credit, in an amount not less than the aforementioned estimated amount.
19
Reinsurer further agrees that upon completion of any accounting period
reporting, if the Letter of Credit amount as based upon the aforementioned
estimate is less than the actual amount of the Letter of Credit provided under
this Section, Reinsurer shall obtain and provide to Ceding Company such other
Letter of Credit, or amendment to Letter of Credit, in such amount as needed to
meet the requirements of this Section.
Ceding Company agrees that upon completion of any accounting period reporting,
if the actual amount of the Letter of Credit provided by Reinsurer under this
Section is in excess of the Letter of Credit amount as based upon the
aforementioned estimate, Ceding Company shall promptly, upon receipt of
Reinsurer's written request, agree to an amendment reducing the amount of the
Letter of Credit by an amount equal to such excess.
Notwithstanding anything to the contrary in this Agreement, Reinsurer and Ceding
Company agree that the Letter of Credit may be drawn on by Ceding Company at any
time and will be utilized and applied by Ceding Company, including, without
limitation, any liquidator, rehabilitator, receiver or conservator of Ceding
Company, without diminution because of the insolvency on the part of Ceding
Company or Reinsurer only for the following purposes:
(a) To reimburse Ceding Company for Reinsurer's share of benefit payments
or losses paid by Ceding Company pursuant to the provisions of
policies reinsured under this Agreement, the payment of which is due
under the terms of this Agreement and which has not otherwise been
paid;
(b) In the event Ceding Company receives notice that the Letter of Credit
will not be renewed and on the thirtieth (30th) day following the date
of such notice, Reinsurer has not established a replacement Letter of
Credit or alternative security devise suitable to qualify Ceding
Company for reserve credit for the reinsurance hereunder, then Ceding
Company or its statutory successor may draw upon the Letter of Credit
to fund an amount with Ceding Company for Reinsurer's obligations
which are properly attributable to the Reinsured Policies reinsured
under this Agreement. Such amount will include, but not be limited to,
amounts for policy reserves, reserves for claims and losses incurred,
loss adjustment expenses and unearned premiums. The amount drawn on
the Letter of Credit shall be held in trust in an interest bearing
account separate from Ceding Company's other assets and interest
thereon shall accrue to the benefit of Reinsurer, and;
(c) To pay any other obligations of Ceding Company that are in fact due
from Reinsurer under this Agreement, the payment of which is due under
the terms of this Agreement and which has not otherwise been paid.
In the event that the amount drawn by Ceding Company on the Letter of Credit
exceeds the actual amount required for items (a), (b) and/or (c) above, or in
the case of a draw pursuant to (c) above, Ceding Company shall promptly return
to Reinsurer the excess amounts so drawn, together with interest thereon. All
the foregoing shall be applied without diminution because of insolvency on the
part of Ceding Company or Reinsurer.
20
Section 9.02 Conduct of Business. Reinsurer shall conduct its business and
perform its obligations hereunder in the same manner in which Reinsurer conducts
its own business and with the same degree of care.
21
ARTICLE 10: RECORDS, FEES, AND OWNERSHIP OF PREMIUMS
Section 10.01 Records. As requested by Reinsurer or Ceding Company, the other
party shall deliver unto the requesting party any policy records, files, charts,
books, ledgers, and other documents or copies thereof maintained by it
concerning the Reinsured Policies. Included in the foregoing, without
limitation, shall be all records relating to development, reserving or approval
of the Reinsured Policies. All records, books, files, accounts and materials of
any kind relating to the Reinsured Policies maintained by Ceding Company or
Reinsurer relating to the Reinsured Policies shall be open to examination and
audit by the other at reasonable times during normal business hours.
Section 10.02 Fees. Except as stated to the contrary in Article 13, each party
shall be responsible for its own fees and expenses in connection with the
transaction contemplated by this Agreement, including without limitation
attorneys', accountants', actuaries', and other similar fees.
Section 10.03 Ownership of Premiums. All monies, checks, drafts, money orders,
postal notes, and other instruments received after the Effective Date by Ceding
Company for premiums on the Reinsured Policies shall be either allocated to the
Separate Accounts in accordance with instructions from policyholders or
transferred to Reinsurer in accordance with the Quarterly Settlement provisions
under this Agreement.
Section 10.04 Bank Accounts. After the Effective Date, Reinsurer shall be
authorized by Ceding Company to process payments relating to the Reinsured
Policies. Ceding Company agrees to do whatever is necessary in order to give
Reinsurer the authority to prepare drafts on Ceding Company's bank accounts and
in Ceding Company's name to the extent necessary to process claims under the
Reinsured Policies and with respect to which Ceding Company shall have no
overdraft liability. All amounts due from Ceding Company to pay such claims
shall be deposited by Ceding Company in such account until the claim is paid,
and Reinsurer shall reimburse Ceding Company for such claims in accordance with
Section 5.11.
Section 10.05 Authorizations. After the Effective Date, if required, Ceding
Company shall provide specific authorizations for Reinsurer's employees to sign
letters and acknowledge policy modifications on behalf of Ceding Company
concerning inter alia, underwriting, policy administration, agent compensation,
and claim matters. Notwithstanding the failure of Ceding Company to grant
specific authorizations, Reinsurer shall be authorized hereunder to perform such
acts with respect to the Reinsured Policies and the Related Agreements.
Section 10.06 Security Agreement. The parties hereto agree that as security for
all the Secured Obligations (as hereinafter defined), Ceding Company does hereby
grant, bargain, sell, convey, assign and otherwise pledge to Reinsurer, all of
Ceding Company's rights, titles and interests, if any, (legal, equitable or
otherwise) to all premiums and fees due the Reinsurer under the Reinsured
Policies after the Effective Date (the "COLLATERAL"). As used herein, "SECURED
OBLIGATIONS" shall mean the obligations of Ceding Company pursuant to Article 10
and any other obligations of Ceding Company under this Agreement. Upon the
failure of Ceding Company to fully perform its obligations and undertakings
hereunder, Reinsurer shall have, in addition to all other rights under this
Agreement or under applicable law, the following
22
rights: the right to exercise all rights and remedies granted a secured party
under the Uniform Commercial Code, as said code has been enacted in the State of
New York (the "UCC"), as though all the Collateral constituted property subject
to a security interest under Article 10 thereof; the right to set off; and the
right to reasonable attorneys' fees incurred in connection with the enforcement
of this Agreement.
23
ARTICLE 11 INDEMNIFICATION AND RECAPTURE
Section 11.01 Indemnification of Reinsurer. Ceding Company hereby agrees to
indemnify and hold harmless Reinsurer against and in respect of any and all
liabilities, losses, claims, obligations, damages, deficiencies, costs and
expenses, including, but not limited to, reasonable attorney's fees, resulting
from or arising out of:
(a) any and all unpaid liabilities occurring prior to the Effective Date
other than those express, written contractual liabilities set forth in
the Reinsured Policies and the express, written contractual
liabilities in the Related Agreements;
(b) any misrepresentation or breach of any covenant or warranty made by
Ceding Company (or matter treated as a covenant or warranty made by
Ceding Company) in this Agreement, including but not limited to any
misrepresentation or breach of any covenant or warranty in Article 8
of this Agreement, or the matters that are the subject of any such
misrepresentation or breach (notwithstanding Ceding Company's
knowledge of such matter, misrepresentation or breach);
(c) any acts or omissions by or on behalf of Ceding Company, its agents
or employees, occurring prior to the Effective Date; and/or
(d) any acts or omissions committed by agents (including former agents)
of Ceding Company that occur before the Effective Date.
In the event of a misrepresentation or breach of warranty under Section 11.03 of
this Agreement, it is agreed that Ceding Company will to the extent reasonable
pursue administrative relief with the Internal Revenue Service to correct, both
prospectively and retroactively, any violation under Section 7702 of the
Internal Revenue Code, at the sole expense of Ceding Company.
Ceding Company will assume the defense of any lawsuits that may be brought
against Reinsurer that relate to the matters for which Ceding Company herein
agrees to indemnify Reinsurer.
Reinsurer shall give written notice to Ceding Company of any indemnity claims
unknown to the Ceding Company within thirty (30) days after Reinsurer has actual
notice of such claim, and in the event a suit or other proceeding is commenced,
within ten (10) days after receipt of notice to Reinsurer; provided, however
that failure to give such notice shall not affect Ceding Company's obligations
to indemnify unless such failure materially prejudices Ceding Company's rights
with respect to defending such claim. Reinsurer and Ceding Company shall
cooperate in reasonable requests for documents, testimony and other forms of
assistance in connection with an indemnity claim.
Section 11.02 Indemnification of Ceding Company. Reinsurer hereby agrees to
indemnity and hold harmless Ceding Company against and in respect of any and all
liabilities, losses, claims, obligations, damages, deficiencies, costs and
expenses, including, but not limited to reasonable attorneys' fees, resulting
from:
24
(a) any misrepresentation or breach of any covenant or warranty made by
the Reinsurer in this Agreement or the matters that are the subject of
such misrepresentation or breach;
(b) any liability, other than liabilities arising out of Ceding Company's
actions, resulting from the maintenance or operation of bank accounts
created pursuant to Section 10.4;
(c) any acts or omissions by or on behalf of Reinsurer, its agents or
employees occurring entirely after the Effective Date (provided that
such actions were not taken based on the books and records transferred
hereunder);
(d) any acts or omissions committed by appointed agents of the Reinsurer
in servicing the Reinsured Policies occurring after the Effective
Date, but excluding acts of concealment of wrongdoing by Ceding
Company or its agents that occurred prior to the Effective Date;
(e) any fines or penalties imposed on Ceding Company solely as a result
of the activities of Reinsurer, its agents or employees; and/or
(f) any acts or omissions committed by former agents of Ceding Company
with respect to the Reinsured Policies occurring after the Effective
Date (but excluding acts of concealment of wrongdoing by its former
agents that occurred prior to the Effective Date or acts undertaken
under apparent or actual authority arising independent of the
Reinsured Policies).
Reinsurer will assume the defense of any lawsuits that may be brought against
Ceding Company that relate to the matters for which Reinsurer agrees to
indemnify Ceding Company.
Ceding Company shall give written notice to Reinsurer of any indemnity claims
unknown to the Reinsurer within thirty (30) days after Ceding Company has actual
notice of such claim, and in the event a suit or other proceeding is commenced,
within ten (10) days after receipt of notice to Ceding Company; provided,
however that failure to give such notice shall not affect Reinsurer's
obligations to indemnify unless such failure materially prejudices Reinsurer's
rights with respect to defending such claim. Reinsurer and Ceding Company shall
cooperate in reasonable requests for documents, testimony and other forms of
assistance in connection with an indemnity claim.
Section 11.03 Recapture Right. Business ceded under the agreement shall not be
eligible for recapture.
25
ARTICLE 12: CLAIMS INVESTIGATIONS: PUNITIVE DAMAGES
Section 12.01 Investigation of Claims: Punitive Damages. Ceding Company shall
investigate, settle or defend any and all actions which may be filed against
Ceding Company or Reinsurer on account of any acts or omissions by or on behalf
of Ceding Company (including its agents or employees) occurring prior to the
Effective Date whether such action is filed before or after the Effective Date.
Ceding Company shall reimburse and hold Reinsurer harmless from any and all
costs, expenses and liabilities in any such action which exceeds the strict
policy limits. Without limiting the generality of the foregoing, Ceding Company
shall be solely liable for and shall defend any and all claims for punitive or
exemplary damages based on any facts or occurrences occurring prior to the
Effective Date and shall reimburse and hold Reinsurer harmless from any and all
costs, expenses or liabilities including attorneys' fees which it may incur as a
result of any such claim. Reinsurer shall be solely liable for and shall defend
any and all claims for punitive or exemplary damages based on any facts or
occurrences (a) arising solely out of the actions or omissions of Reinsurer, its
employees or agents occurring on or after the Effective Date (provided that such
actions were not taken based on the books and records transferred hereunder) and
(b) arising solely out of the acts of Continuing Producers and shall reimburse
and hold Ceding Company harmless from any and all costs, expenses and
liabilities including attorneys' fees which it may incur as a result of any such
claim. Notwithstanding any other provision contained herein which may be
construed to the contrary, Reinsurer assumes no responsibility or liability
whatsoever to any party for any claim made prior to the Effective Date made for
recovery of punitive or exemplary damages, and the indemnification provisions
contained herein are not intended to, and shall not be construed to, impose
liability on any party hereto vis-a-vis third parties.
26
ARTICLE 13: ARBITRATION
Section 13.01 Arbitration Clause. All disputes or differences between Ceding
Company and Reinsurer arising under or which are related to this Agreement upon
which an amicable understanding cannot be reached within thirty (30) days shall
be settled by arbitration in accordance with the Commercial Arbitration Rules of
the American Arbitration Association except as hereinafter provided, and
judgment upon the award entered by the arbitrators may be entered in any Court
having jurisdiction thereof. The Court of Arbitrators provided for herein shall
construe this Agreement in light of the prevailing custom and practices for
reinsurance in the insurance industry. The Court of Arbitrators shall consist of
three neutral arbitrators who must be active or retired officers of insurance
companies other than Ceding Company or Reinsurer or any one of their affiliates,
familiar with the reinsurance business. The parties will select such candidates
from the XXXXX-US Certified Arbitrators List available at xxx.XXXXX-XX.xxx. The
----------------
parties agree that this Court of Arbitrators, if implemented under this
Agreement, shall be held at a site selected by the Arbitrators in the State of
New York. The parties agree to arbitrate within thirty (30) days following the
transmittal of written demand of either party to arbitrate any dispute
arbitrable under this agreement. Each of the parties shall appoint an arbitrator
within thirty (30) days following notice of written demand to arbitrage,
notifying the other party of the name and address of such arbitrator. If either
party shall fail to appoint an Arbitrator as herein provided, or should the two
arbitrators so named fail to select the third arbitrator within thirty (30) days
of their appointment, then, in either event, the President of the American
Council of Life Insurance or its successor shall appoint such second and/or
third arbitrator. The three arbitrators so selected shall constitute the Court
of Arbitrators. A decision of a majority of the Court of Arbitrators shall be
final and binding and there shall be no appeal therefrom. The Court of
Arbitrators shall not be bound by legal rules of procedure and may receive
evidence in such a way as to do justice between the parties. The Court of
Arbitrators shall promptly enter an award which shall do justice between the
parties and the award shall be supported by a written opinion. The cost of
arbitration, including but not limited to the fees of the arbitrators and
attorneys, shall be borne by the losing party unless a Court of Arbitrators
shall decide that, in light of the circumstances, such would be inequitable, in
which case the arbitrators shall allocate costs among the parties.
27
ARTICLE 14: DELIVERIES AS OF THE EFFECTIVE DATE
Section 14.01 Deliveries by Ceding Company. Ceding Company shall use its
reasonable efforts to deliver or cause to be delivered to Reinsurer within
twenty (20) days of the Effective Date (i) a listing (electronic or otherwise)
of the Reinsured Policies, and ii) all instruments (including without limitation
bond powers) as may be necessary or advisable to cause Ceding Company's rights,
title, and interest in and to the properties, rights, or assets to be
transferred hereunder or to effect the purposes hereof to vest in Reinsurer
based on the Effective Date Accounting described in Section 5.01. Ceding Company
will cooperate with Reinsurer in connection with any required re-registration of
such instruments (or of any additional instruments as may be necessary in
connection with adjustments described in Sections 5.02 and 5.03), and Reinsurer
will bear any risks associated with such re-registration.
Section 14.02 Deliveries by Reinsurer. Reinsurer shall use its reasonable
efforts to deliver or cause to be delivered to Ceding Company within twenty (20)
business days of a revised accounting in accordance with Section 5.02 or 5.03
all instruments (including without limitation bond powers) as may be necessary
or advisable to vest in Ceding Company all of Reinsurer's rights, title, and
interest in and to the properties, rights, or assets to be transferred back to
Ceding Company to effect any correction of a prior accounting in favor of
Reinsurer.
28
ARTICLE 15: GENERAL PROVISIONS
Section 15.01 Successors, Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of both Ceding Company and the
Reinsurer; provided, that Reinsurer may not assign, transfer or reinsure the
obligations assumed by it under this Agreement, without the written consent of
Ceding Company and any necessary regulatory approvals.
Section 15.02 Entire Agreement. All prior or contemporaneous agreements and
representations between the parties relating to the subject matter hereof are
superseded by this Agreement which, together with any Exhibits and Schedules
attached, constitutes the entire contract between the parties. There are no
understandings or agreements between the parties with respect to the Reinsured
Policies other than as expressed in this Agreement. No waiver, amendment, or
modification hereof shall be of any force or effect unless in writing and signed
by the parties. The agreements, covenants, representations, and warranties
contained herein shall survive the closing hereunder.
Section 15.03 Non-Waiver. No waiver by any party of any default by any other
party in the performance of any promise, term or condition of this Agreement
shall be construed to be a waiver by such party of any other or subsequent
default in performance of the same or any other promise term or condition of
this Agreement. 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. No prior transactions or dealings between any of the parties shall
be deemed to establish any custom or usage waiving or modifying any provisions
hereof. The failure of any party to enforce any part of this Agreement shall not
constitute a waiver by such party of its right to do so, nor shall it be deemed
to be an act of ratification or consent. 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.
Section 15.04 Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of New York.
Section 15.05 Rights. Nothing herein, either expressed or implied, is intended
or shall be construed to confer upon or give any person, firm or corporation,
other than the Reinsurer and Ceding Company any rights or remedies under or by
reason of this Agreement.
Section 15.06 Counterparts. This Agreement may be executed in separate
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 15.07 Correspondence. Any and all correspondence, records or otherwise
coming to Ceding Company after the Effective Date pertaining to the Reinsured
Policies shall be immediately and forthwith delivered to Reinsurer without
charge to Reinsurer or its delegee pursuant to Section 6.02.
Section 15.08 Duration. This Agreement shall remain in force until the last
Reinsured Policy ceases to be in force unless otherwise terminated pursuant to
Section 15.14.
29
Section 15.09 Notices. Any notice hereunder shall be deemed to be duly given
when and if delivered or transmitted or three (3) business days after such
notice is deposited in the U.S. Mail for delivery by pre-paid first-class
registered or certified mail to:
(1) Reinsurer:
Metropolitan Life Insurance Company
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx Xxxxx
Xxxxxx@xxxxxxx.xxx
(2) Ceding Company:
MetLife Insurance Company of Connecticut
0000 Xxxx Xxxxxxxxx
Xxxxxxxxxx, XX 00000
Attention: Xxxxx Xxxxxx
Xxxxxxx@xxxxxxx.xxx
Or such other address as shall be furnished in writing by the parties to the
other.
Section 15.10 Cooperation. With regard to any matters not expressly stated
herein, the parties to this Agreement agree to furnish such information, to
execute such additional documents, and to cooperate with each other as may be
necessary to carry out the purposes of this Agreement, in accordance with
industry practice for transactions of this kind.
Section 15.11 Insolvency. Except as provided in Section 15.12 in the event of
the insolvency of Ceding Company, all reinsurance made, ceded, renewed or
otherwise becoming effective under this Agreement shall continue to be payable
by Reinsurer under the terms of the policies reinsured, on behalf of Ceding
Company, its liquidator, receiver or statutory successor, without diminution
because of the insolvency.
Section 15.12 Cut-Through Provision. In the event of the rehabilitation or
liquidation of Ceding Company, any claims of holders and beneficiaries under
Reinsured Policies issued by Ceding Company the reserves for which are held in
the Separate Accounts of Ceding Company shall first be paid out of the
respective Separate Account to fund those benefits. To the extent there are any
benefits under a Reinsured Policy that are not payable out of assets held in the
respective Separate Account, Reinsurer shall pay all such amounts due under that
Reinsured Policy, which would be otherwise due to the rehabilitator liquidator,
receiver, or statutory successor in the absence of this Section 15.12, directly
to the holder or beneficiary, as applicable of the Reinsured Policy, without
diminution on account of Ceding Company being placed in rehabilitation or
liquidation unless within [30] days of the commencement of the rehabilitation or
liquidation the Superintendent of Department of Financial Services of the State
of New York (Superintendent) directs the Reinsurer to make payments to the
rehabilitator, liquidator, receiver or statutory successor, and shall at the
direction of the Superintendent
30
provide within [30] days of the commencement of the rehabilitation or
liquidation each such policyholder with a certificate approved by the
Superintendent, which shall state, inter alia, that Reinsurer will directly pay
the contractual obligations of Ceding Company not satisfied out of the
respective Separate Account under such Reinsured Policy.
Section 15.13 Audit of Records and Procedures. Ceding Company shall have the
right to audit during normal business hours and at the office of Reinsurer or
any service provider designated by Reinsurer pursuant to Article 6 all records
and procedures relating to the Reinsured Policies and the Services provided by
or on behalf of Reinsurer under this Agreement. Further, Reinsurer agrees to
confirm, at reasonable request of Ceding Company, the existence of the Reinsured
Policies. In conjunction with any examination of Ceding Company by the Insurance
Department (or any regulatory body) of any jurisdiction in which Ceding Company
is licensed, Reinsurer shall permit an examination of its books and records
relating to the Reinsured Policies.
Section 15.14 Termination: This Agreement shall be in force as to such Reinsured
Policies until the termination of the Reinsurer's liability with respect to such
Reinsured Policies in accordance with its terms and the receipt by Ceding
Company of payments that discharge such liability in full in accordance with the
provisions of this Agreement.
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IN WITNESS WHEREOF, Ceding Company and Reinsurer have caused this instrument to
be executed by their duly authorized officers as of the day and year first
hereinabove written.
METLIFE INSURANCE COMPANY OF CONNECTICUT
By: /s/ Xxxxxxx Xxxxx
---------------------------
Name: Xxxxxxx Xxxxx
Title: Senior Vice President
Date: December 20, 2013
METROPOLITAN LIFE INSURANCE COMPANY
By: /s/ Xxxxxxx Xxxxx
---------------------------
Name: Xxxxxxx Xxxxx
Title: Senior Vice President
Date: December 20, 2013
32
EXHIBIT A: Description of Reinsured Policies
--------------------------------------------
Reinsured Policies as used in this Agreement shall mean (i) all life insurance
policies and group life certificates that include an insulated separate account
feature, including but not limited to variable life insurance policies, held by
New York Policyholders that are in force as of the Effective Date; and (ii) all
annuities issued as a settlement option under the policies and certificates
described in Item (i) above issued on or after the Effective Date.
33
EXHIBIT B: Form of Effective Date Accounting
--------------------------------------------
MICC ceded MLIC assumed
----------- ------------
1a) Aggregate reserves as shown on Exhibit 5 of the Annual 107,161,189 107.161,189
Statement and Exhibit 3 of the Separate Account Annual Statement*
1b) Other liabilities as shown on Exhibit 8 Part 1 of the 10,751 10,751
Annual Statement
1c) Aggregate reserves and other liabilities (equal (1a) plus (lb) 107,171,940 107,171,940
2) Modified Coinsurance Reserve 99,498,392 99,498,392
3) Coinsurance Reserve (equal to (1c) minus (2)) 7,673,548 7,673,548
* Aggregate reserves are reduced for aggregate reserves ceded under Other
Reinsurance.
The greater of the Net Coinsurance Reserve shown on Exhibit 5 of the Annual
Statement and the fair value of the coinsured liabilities as calculated by the
Ceding Company in accordance with generally accepted accounting principles as of
the Effective Date constitutes the Initial Coinsurance Reinsurance Premium
pursuant to Section 5.05, and the Modified Coinsurance Reserve shown on
Exhibit 3 of the Separate Account Annual Statement constitutes the Initial Modco
Reinsurance Premium and Reserve Adjustment pursuant to Section 5.06.
In the event adjustments are made under Section 5.02 or Section 5.03, the amount
owed will be increased with interest for the time elapsed between the Effective
Date and the date of payment. The annual interest rate to be used will be the
yield on 3 month US Treasury Bills, as published by the U.S Treasury, on the
last business day of the quarter ending on or immediately prior to the date of
any revised accounting.
34
EXHIBIT C: Assets
-----------------
Assets permitted in lieu of cash under Article 5.
The list of transferred assets shall contain a seriatim listing of all assets
transferred by Ceding Company and shall be provided to the Reinsurer upon
request.
Asset Summary:
Min. Max.
UST 5% 10%
ABS/CMBS/Non-Agency
RMBS 15% 20%
Public Corporates:
NAIC1 5% 10%
NAIC2 5% 10%
NAIC3 5% 10%
Private Corporates:
NAIC1 15% 20%
NAIC2 15% 20%
Mortgage Loans 15% 20%
35
EXHIBIT D: Quarterly Accounting and Settlement
----------------------------------------------
A. ACCOUNTING SETTLEMENT
For each Accounting Period as defined in Section 1.01, the Accounting Settlement
will be equal to (1) minus (2), minus (3), minus (4) where:
(1) Equals the Reinsurance Premiums as determined in accordance with Section B
of this Exhibit D.
(2) Reinsurance Claims as determined in accordance with Section C. of this
Exhibit D.
(3) Commissions and Premium Tax as determined in accordance with Section D of
this Exhibit D.
(4) Modco Reserve Adjustment as determined in accordance with Section F of
this Exhibit D.
For the avoidance of doubt, each of the amounts determined above, including the
Accounting Settlement may be a positive or negative number.
B. REINSURANCE PREMIUMS
Subsequent to the Effective Date, the Ceding Company will pay the Reinsurer
Reinsurance Premiums on all policies in effect under this Agreement in an
amount equal to all premiums collected under the Reinsured Policies less
premiums incurred by the Ceding Company under Other Reinsurance.
36
C. REINSURANCE CLAIMS
Subsequent to the Effective Date, the Reinsurer will reimburse the Ceding
Company for all Reinsurance Claims, which includes all benefits paid under
the Reinsured Policies, less claim reimbursements accrued by the Ceding
Company under Other Reinsurance, during the Accounting Period. Except as
noted in Section 4.02, the Reinsurer will pay the benefits on all
Reinsurance Claims in the same form of settlement by the Ceding Company.
Benefits paid under the Reinsured Policies include, but are not limited to:
i. Death Claims. Death Claims include the death benefit and any interest
paid associated with the Reinsured Policies.
ii. Surrenders and Withdrawals. Surrenders and withdrawals include the
total amount paid in the event of a partial withdrawal of account
value or full surrender of Reinsured Policies, net of any applicable
surrender charges. Surrender charges are the total amount that the
Ceding Company deducts before paying the cash surrender value upon a
full or partial surrender of Reinsured Policies.
iii. Annuity Payments. Annuity Payments include the amounts paid under
payout annuities.
iv. Other Benefits. Other benefits include any other miscellaneous policy
benefit paid on behalf of the Reinsured Policies.
D. COMMISSIONS AND PREMIUM TAX
Subsequent to the Effective Date, Commissions equal the total amount of
commission paid to distributors of the Reinsured Policies on the Reinsured
Policies. Premium tax shall be as defined in Section 5.10.
E. SEPARATE ACCOUNT MODCO INVESTMENT CREDIT
Subsequent to the Effective Date, the Separate Account Modco Investment
Credit is equal to the sum of all earned investment income, realized and
unrealized capital gains and losses, which has been credited to, or
deducted from, the Reinsured Policies during the Accounting Period. The
Separate Account Modco Investment Credit is gross of any fees deducted by
the underlying funds used with the Reinsured Policies. It is the intent of
the parties that the Separate Account Modco Investment Credit shall be
adjusted to reflect gains or losses to the Separate Accounts during the
Accounting Period resulting from Reinsurer's errors in providing services
described in Article 6.
F. MODCO RESERVE ADJUSTMENT
Subsequent to the Effective Date, the Modco Reserve Adjustment shall equal
(1) minus (2) minus (3), where,
37
(1) Equals a modified coinsurance reserve (the "Modco Reserve") held by
the Ceding Company at the end of the Accounting Period. For these
purposes, the Modco Reserve equals the amounts shown on Ceding
Company's statutory statements at the end of the Accounting Period for
its Separate Account liabilities related to the Reinsured Policies.
Ceding Company may. for purposes of determining accounting settlement,
exclude immaterial reserve amounts determined under the then
applicable Commissioners Reserve Valuation Method ("CRVM"); and
(2) Equals the Modco Reserve, determined in accordance with subsection
(1), at the end of the previous Accounting Period, except that for the
initial Accounting Period, the Modco Reserve will equal the Modified
Coinsurance Reserve determined as of the Effective Date, in accordance
with Sections 5.01, 5.02 and 5.03 and Exhibit B of this Agreement.
(3) Equals the Modco Investment Credit as per item E.
38
EXHIBIT E: Form of Accounting Settlement Report
-----------------------------------------------
Ceding Company:
-------------------
Reinsurer:
-------------------
Reporting Quarter and Year:
-------------------
Date Report Completed:
-------------------
Contact:
-------------------
1. Reinsurance premiums
-----------
2. Reinsurance claims:
a. Death benefits
-----------
b. Surrenders and withdrawals
-----------
c. Annuity Payments
-----------
d. Other benefits (list separately by type)
-----------
3. Commissions & premium tax
-----------
4. Modco reserve adjustment
-----------
Net Accounting Settlement (1)-(2)-(3)-(4)
-----------
39
Schedule 8.02(b)
----------------
None.
40
Schedule 8.02 (c)
-----------------
Novated Reinsurance:
Treaty
NAIC Effective
Reinsurer Name Code Fed ID Date TREATY ID(S)
Generali USA Life Reassurance Company 97071 00-0000000 8/1/1992 17613/17648
Canada Life Assurance Company 80659 00-0000000 7/1/2001 18067/18068
General Re Life Corporation 86258 00-0000000 4/1/2003 17796/17797
Munich American Reassurance Company 66346 00-0000000 4/5/1999 18032/18033/
18034/18035
Munich American Reassurance Company 66346 00-0000000 1/19/2005 17356/17362/
17368/17374/
17380/17386/
17392/17398/
17404/19342/
19349/19356/
19363/19370/
19377/19384/
19391/19397
Munich American Reassurance Company 66346 00-0000000 1/1/1996 17709/17710
Munich American Reassurance Company 66346 00-0000000 10/1/1996 17748/17749
Munich American Reassurance Company 66346 00-0000000 5/12/1997 17764/17765
Optimum Re Insurance Company 88099 00-0000000 8/1/2004 18107/17806
41
17355/17361/
17367/17373/
17379/17385/
17391/17397/
17403/19344/
19351/19358/
19365/19372/
19379/19386/
Optimum Re Insurance Company 88099 00-0000000 1/19/2005 19393/19399
Pacific Life Insurance Company 67466 00-0000000 9/16/2002 17788/17789
RGA REINSURANCE COMPANY 93572 00-0000000 10/15/2003 18036/18037
17357/17363/
17369/17375/
17381/17387/
17393/17399/
17405/19343/
19350/19357/
19364/19371/
19378/19385/
RGA REINSURANCE COMPANY 93572 00-0000000 1/19/2005 19392/19398
RGA REINSURANCE COMPANY 93572 00-0000000 11/1/1982 17551
RGA REINSURANCE COMPANY 93572 00-0000000 1/1/1994 17635
RGA REINSURANCE COMPANY 93572 00-0000000 6/1/1995 17678
RGA REINSURANCE COMPANY 93572 00-0000000 5/12/1997 17766/17767
RGA REINSURANCE COMPANY 93572 00-0000000 9/16/2002 17790/17791
Security Life of Denver Insurance Company 68713 00-0000000 4/1/2003 17798/17799
Security Life of Denver Insurance Company 68713 00-0000000 6/1/1991 17590
Security Life of Denver Insurance Company 68713 00-0000000 6/1/1994 17643/17644
Security Life of Denver Insurance Company 68713 00-0000000 6/1/1995 17689/17690
42
Security Life of Denver Insurance Company 68713 00-0000000 1/1/1996 17711/17712
Security Life of Denver Insurance Company 68713 00-0000000 10/1/1996 17750/17751
Security Life of Denver Insurance Company 68713 00-0000000 5/12/1997 17768/17769
Security Life of Denver Insurance Company 68713 00-0000000 9/16/2002 17794/17795
Swiss Re Life & Health America Inc. 82627 00-0000000 1/1/2007 19341/19348/
19355/19362/
19369/19376/
19383/19390/
19386
Swiss Re Life & Health America Inc. 82627 00-0000000 6/1/1994 17654/17655
Swiss Re Life & Health America Inc. 82627 00-0000000 6/1/1995 17699/17700
Swiss Re Life & Health America Inc. 82627 00-0000000 1/1/1996 17713/17714
Other Reinsurance:
Treaty
NAIC Effective
Reinsurer Name Code Fed ID Date Treaty ID(S)
Employers Reassurance Corporation 68276 00-0000000 6/1/1994 17640
Employers Reassurance Corporation 68276 00-0000000 6/1/1995 17687/17688
Employers Reassurance Corporation 68276 00-0000000 5/12/1997 17761/17762
19345/19352/
19359/19366/
19373/19380/
19387/19394/
SCOR Global Life Americas Reinsurance Company 64688 00-0000000 1/1/2007 19400
SCOR Global Life Americas Reinsurance Company 64688 00-0000000 11/15/2000 17784/17785
43
19346/19353/
19360/19367/
19374/19381/
19388/19395/
Transamerica Financial Life Insurance Company 70688 00-0000000 1/1/2007 19401
Transamerica Life Insurance Company 86231 00-0000000 6/1/1994 17646
Transamerica Life Insurance Company 86231 00-0000000 1/1/1995 17670/17671
Transamerica Life Insurance Company 86231 00-0000000 6/1/1995 17701/17702
Transamerica Financial Life Insurance Company 70688 00-0000000 4/1/2003 17800
Scottish Re Life Corporation 90670 00-0000000 5/12/1997 18062/18063
Scottish Re Life Corporation 90670 00-0000000 1/1/1996 17703/17708
Scottish Re (US) Inc 87572 00-0000000 3/1/2004 18071/18072
Scottish Re (US) Inc 87572 00-0000000 1/19/2005 18042/18043
44
