MODIFIED COINSURANCE AGREEMENT
This Agreement made and entered into between Nationwide Life Insurance Company
(hereinafter referred to as "NWL") , a life insurance company organized under
the laws of the State of Ohio, and Nationwide Mutual Insurance Company
(hereinafter referred to as "NMIC"), an insurance company organized under the
laws of the State of Ohio.
WITNESSETH:
WHEREAS, NWL has written certain policies of individual health and medical
insurance; and
WHEREAS, NWL desires to cede NWL's entire liability arising under said policies;
and
WHEREAS, NMIC is willing to accept, as reinsurer the liability which NWL desires
to cede; and
WHEREAS, NWL represents that it has the power and authority to cede said
liability, which it hereby agrees to cede; and
WHEREAS, NMIC represents that it has the power and authority to reinsure said
liability, which it hereby agrees to reinsure;
NOW THEREFORE, NWL and NMIC agree as follows:
ARTICLE I
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BUSINESS REINSURED; CONSIDERATION
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1.1 Reinsurance and Indemnification. Upon the terms and subject to the
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conditions of this Agreement, NMIC does hereby agree to reinsure and to
reimburse and indemnify NWL, and NWL does hereby agree to accept such
reinsurance, reimbursement and indemnification, for 100% of the liability for
all of the Policies (including any liability resulting from any mandatory
provisions in such Policies), as set forth in Article V hereof.
1.2 Policies. The term "Policies" means the following:
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(a) All right, title and interest of NWL in, to and under all
Individual Health and Ohio Farm Bureau health insurance policies (except group
life) issued and in force as of the Effective Date or thereafter, including all
endorsements, riders and supplemental agreements which are parts thereof;
(b) All future premiums received under the Policies on and after the
Effective Date; and
(c) All of NWL's assignable right, title and interest in, to and under any
ceded or assumed reinsurance treaties or agreements (other than this Agreement)
applicable to the
Policies after all such treaties or agreements are settled. After the Effective
Date of this Agreement, neither changes to such agreements nor any new
reinsurance agreements applicable to the Policies will be executed without the
specific approval of NMIC.
1.3 Effect of Insolvency or Bankruptcy. In the event of the insolvency of NWL
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all reinsurance made, ceded, renewed or otherwise becoming effective under this
Agreement shall be payable by NMIC directly to NWL or its liquidator, receiver,
or statutory successor on the basis of the liability of NWL under the Policies
reinsured without diminution because of the insolvency of NWL.
1.4 Reserves. NWL shall retain and maintain all premium reserves, claims
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reserves and policy reserves with respect to the Policies.
ARTICLE II
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REPRESENTATIONS AND WARRANTIES OF NWL
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NWL represents and warrants to NMIC as follows:
2.1 Organization, Ownership, Standing and Authority. NWL is a life insurance
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company duly organized, validly existing and in good standing under the laws of
the State of Ohio and has all requisite power and authority to issue the
Policies and to carry on its business related thereto. NWL is duly licensed to
transact the business of life insurance, health insurance and annuities in the
State of Ohio and in such other states in which the Policies were issued at the
time of issuance.
2.2 Approved Policy Forms. All policy forms, endorsements and riders used in
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connection with the Policies are, to the extent required under applicable law,
on forms approved or deemed approved by the applicable insurance regulatory
authorities. To the good faith best knowledge of NWL, those forms which have
been filed with and deemed approved by the applicable insurance regulatory
authorities are in compliance with applicable insurance laws in all material
respects.
2.3 Agents Properly Licensed and Appointed. To the extent required by law, all
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of the Policies were issued through agents properly licensed as insurance agents
by the applicable state insurance regulatory authorities and properly appointed.
ARTICLE III
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REPRESENTATIONS AND WARRANTIES OF NMIC
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NMIC hereby represents and warrants to NWL as follows:
3.1 Litigation. There is no suit, action or proceeding pending or, to the best
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knowledge of
NMIC, threatened against NMIC which, if adversely determined, (i) would prohibit
any of the transactions contemplated by this Agreement, or insofar as reasonably
can be foreseen materially impair or threaten NMIC's ability to carry out and
Perform the obligations assumed by NMIC hereunder.
3 .2 Licenses, Permits and Authorization. Subject to receipt of the approvals
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and consents listed in Schedule 1, NMIC has all approvals, authorizations,
consents, licenses, franchises, orders and other permits necessary to carry out
the terms and provisions of this Agreement.
ARTICLE IV
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COVENANTS
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4.1 Regulatory Approvals. Both NWL and NMIC will promptly take all reasonable
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actions necessary to secure any regulatory approvals necessary or appropriate to
enable them to
consummate the transactions contemplated herein.
4.2 Premiums and Investment Income. Notwithstanding anything in this Agreement
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to the contrary, NMIC shall be entitled to receive, all premiums payable and
investment income with respect to the Policies on and after the Effective Date.
4.3 Assets. Notwithstanding anything in this Agreement to the contrary, NWL
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shall continue to invest and maintain all assets held in support of the Policies
reinsured.
4.4 Maintenance of Reserves. So long as any of the Policies remain in force,
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NWL shall maintain reserves with respect to the Policies in accordance with
applicable statutory and regulatory requirements. For purposes of this
Agreement, reserves will equal statutory policy and claim reserves included in
exhibits 7, 8, 9, 10 and 11 in the NAIC Blue Blank Annual Statement plus any
premiums paid in advance less any due and unpaid premiums. The basis for
calculation of reserves will not be changed without the written mutual agreement
of both parties to this Agreement.
4.5 Premiums Changes. To the extent allowed under the Policies, NWL will have
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the right to change premiums charged for the policies and will notify NMIC of
its intent to make such changes. Such changes shall conform to all applicable
standards of practice of the Actuarial Standards Board or its successors and
shall conform to all applicable laws and regulations. NWL will take any action
reasonably necessary including but not limited to board resolutions or state
regulatory filings to implement such changes on a timely basis.
4.6 Dividends and Non Guaranteed Elements. NWL will have the right to
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determine the dollar amount of policyholder dividends on participating policies
and extra contractual interest payable on all other policies if such
determination (1) conforms with all applicable standards of practice of the
Actuarial Standards Board or its successors, and (2) complies with applicable
law and regulation. NWL will provide NMIC with notice of all such
determinations, and NMIC will take action reasonably necessary or desirable to
implement
such determinations on a timely basis, including but not limited to, action of
the board of directors or state regulatory filings.
ARTICLE V
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REINSURANCE
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5.1 Reinsurance of Policies. Except as otherwise specifically provided, NMIC
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agrees to, and effective as of the Effective Date does hereby, reinsure and
agree to reimburse NWL for the following with respect to the Policies:
(a) 100% of all benefits paid on or after the Effective Date plus the
increase in reserves described in Article 1.4;
(b) 100% of all dividends paid in connection with the Policies;
(c) An allowance for expenses computed in accordance with normal life
insurance statutory accounting practices including commissions, premium taxes
and normal administrative expenses which include reasonable fees of legal
counsel and related disbursements;
(d) The above amounts shall be reduced by amounts incurred by NWL due to
reinsurance agreements described in Article 1.2 (c) .
5.2 Direct Obligations. From and after the Effective Date, the Policies shall
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continue to be direct obligations of NWL.
ARTICLE VI
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ACCOUNTING AND SETTLEMENT
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6.1 Accounting Period. The accounting under this Agreement shall be on a
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calendar quarter basis.
6.2 Accounting Reports. Accounting records shall be submitted by NWL to NMIC
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not later than 30 days after the end of each accounting period. Along with the
amount of settlement for the accounting period, such reports shall include
information on the amounts of reinsurance premiums, benefits, expenses,
investment income and capital gains or losses on the assets being held in
support of the reinsured Policies (as Provided in Article IV) plus a listing of
such assets and the reserves held on the Policies.
6.3 Settlements. Within 30 days of receipt of the accounting report, the
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amount of settlement shall be paid. The settlement amount will be equal to
premiums (in accordance with Article 4.2) plus the reserve adjustment (in
accordance with Article 6.3) less benefits, dividends,
losses and expenses (in accordance with Article 5.1). If the amount is positive,
it shall be paid to NMIC. If negative, it will be paid to NWL.
ARTICLE VII
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DEFERRED ACQUISITION COST ELECTION
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7.1 NWL and NMIC hereby agree to the following, pursuant to Treasury Regulation
Section 1.848-2(g)(8), issued under Section 848 of the Internal Revenue Code of
1986, as amended. This election shall be effective for 1993 and for all
subsequent taxable years for which this Agreement remains in effect.
(a) The terms used herein are defamed by reference to Treasury Regulation
Section 1.848-2 as in effect on December 29, 1992.
(b) The party with the net positive consideration for this reinsurance
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).
(c) Both parties agree to exchange information pertaining to the amount of
net consideration under this Agreement each year to ensure consistency or as
otherwise required by the Internal Revenue Service.
(d) NWL will submit a schedule to the NMIC by March 1 of each year of its
calculation of the net consideration for the preceding calendar year. This
schedule of calculations will be accompanied by a statement signed by an officer
of NWL stating that NWL will report such net consideration in its tax return for
the preceding calendar year.
(e) NMIC may contest such calculation by providing an alternative
calculation to NWL in writing within 30 days of NMIC's receipt of the
Reinsured's calculation. If NMIC does not so notify NWL, NMIC will report" the
net consideration as determined by NWL in NMIC's tax return for the previous
calendar year.
(f) If NMIC contests NWL's calculation of the net consideration, the
parties will act in good faith to reach an agreement as to the correct amount
within thirty (30) days of the date NMIC submits its alternative calculation.
If NWL and NMIC reach agreement on an amount of net consideration, each party
shall report such amount in their respective tax returns for the previous
calendar year.
ARTICLE VIII
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GENERAL PROVISIONS
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8.1 Amendment. Any change or modification to this Agreement shall be null and
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void unless made by amendment to the Agreement and signed by both parties.
8.2 Interpretation. The headings contained in this Agreement are for reference
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purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. All accounting terms not defined in this Agreement shall have
the meanings determined by insurance statutory accounting principles. Wherever
Agreement this refers to the "knowledge" or "best knowledge" of a party, it
means the knowledge or best knowledge of an Officer of such party responsible
for the administration and supervision of the Policies covered by this
Agreement.
8.3 Counterparts. This Agreement may be executed in two or more counterparts,
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all of which shall be considered one and the same agreement, and shall become
effective when two or more counterparts have been signed by each of the parties
and delivered to the other party, it being understood that both parties need not
sign the same counterpart.
8.4 Entire Agreement; Third-Party Beneficiaries. This Agreement constitutes
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the entire agreement between the parties with respect to the Policies and
supersedes all prior agreements and understandings, both written and oral,
between the parties with respect to the subject matter hereof. This Agreement
is not intended to confer upon any person other than the parties hereto any
rights or remedies hereunder.
8.6 Governing Laws. This Agreement shall be governed by and construed in
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accordance with the laws of the State of Ohio.
8.7 Assignment. Neither this Agreement nor any of the rights, interests or
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obligations of either party hereunder shall be assigned without the prior
written consent of the other party. This Agreement will be binding upon, inure
to the benefit of and be enforceable by the parties and their respective
successors and assigns.
8.8 Inspection of Books and Records. All books and records pertaining to the
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Policies shall be made available to NMIC for inspection during regular business
hours.
ARTICLE IX
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This Agreement shall remain in full force and effect until all liability
terminates under the Policies provided however that either party may terminate
this Agreement January 1 of any given year provided such party provides to the
other written notice no later than September 30 of the year immediately
preceding termination of its intention to terminate.
ARTICLE X
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The Effective Date of this Agreement shall be as of 12:01 a.m., 1/1/96.
IN WITNESS WHEREOF, NWL and NMIC have caused this Agreement to be executed, in
duplicate, by their respective officers duly authorized to do so, as of the date
shown above.
NATIONWIDE LIFE INSURANCE
COMPANY
/s/ Xxxx X. Xxxxxxxx
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Xxxx X.Xxxxxxxx
Vice President--Controller
NATIONWIDE MUTUAL INSURANCE
COMPANY
/s/ Xxxx X. Xxxxxxx
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Xxxx X. Xxxxxxx
Vice President--Health Actuary
SCHEDULE 1
STATES REQUIRING APPROVALS OR CONSENTS
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OHIO
