Exhibit (g)
SAMPLE SUBSTANDARD POOL REINSURANCE AGREEMENT
Effective ________________
Between
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
Milwaukee, Wisconsin
and
REINSURANCE COMPANY
City, State
This Agreement of yearly renewable term reinsurance is effective
__________________ by and between The Northwestern Mutual Life Insurance
Company, Milwaukee, Wisconsin ("NML") and Reinsurance Company ("Pool
Reinsurer"). As between NML and Pool Reinsurer, this Agreement is referred to as
the "Agreement."
This Agreement is a pooling reinsurance arrangement whereby NML cedes risk
to various reinsurers, including the Pool Reinsurer. The distribution of the
pooling is set forth in Exhibit B. The term "Pool Reinsurers" refers to all of
the reinsurers participating in the pool, including the Pool Reinsurer.
NML and Pool Reinsurer agree as follows:
1. Automatic Yearly Renewable Term Reinsurance
1.1 NML shall retain no mortality risk on policies in the pool. NML
agrees to cede and Pool Reinsurers agree to accept (as set forth in Exhibit B),
on the terms and conditions set forth in this Agreement, equal shares of the
risk specified in Exhibit A on qualifying policies evaluated within the
classification range specified in Exhibit A, as subject to this Agreement.
1.2 NML policies qualify for automatic yearly renewable term
reinsurance under this Agreement only if:
1.2.1 The proposed insured applies for single-life fixed or
single-life variable insurance while this Agreement is in force and submits
evidence of insurability appropriate for personal applications at his/her age
and amount according to NML's usual underwriting requirements;
1.2.2 The proposed insured's insurance age is within the range
specified in Exhibit A;
1.2.3 NML has not sought to improve its classification on the
life of the proposed insured through facultative reinsurance at any time in the
last five years;
1.2.4 The face amount of the application satisfies the Minimum
Risk Amount requirements provided in Exhibit A;
1.2.5 The current application will not cause the aggregate amount
of insurance in force in the pool to exceed the Maximum Risk Amount specified in
Exhibit A;
1.2.6 The proposed insured is not a jumbo risk as defined in
Exhibit A;
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1.2.7 Applying NML's usual underwriting rules and standards, the
classification of the proposed insured as of the application signed date
satisfies the range specified in Exhibit A; and
1.2.8 The proposed insured resides in a locale acceptable to NML
under its regular underwriting standards applicable to residents.
2. Inforce Substandard Policies on Qualifying Lives
2.1 Inforce single-life policies on the life of any insured newly
qualifying for reinsurance under this Agreement that meet all of the
qualifications of Section 1, are not otherwise reinsured, and would obtain a
more favorable retail classification from the change will also be reinsured
under this Agreement, effective as of their next monthly anniversary dates. The
reinsurance premiums for such policies will be based upon the original policy
date and issue age of the insured life.
2.2 NML shall have the authority to reinsure previously retained
substandard policies under this Agreement upon their reinstatement if the life
meets all of the qualifications of Section 1 of this Agreement.
3. Liability of Pool Reinsurer
3.1 The liability of each Pool Reinsurer shall begin and end
simultaneously with that of NML except as otherwise expressly stated in this
Agreement.
3.2 Each Pool Reinsurer shall establish and hold statutory reserves,
including required deficiency reserves, at the level established by NML for its
share of the risks reinsured. Any Pool Reinsurer not authorized to write
reinsurance in all jurisdictions where NML operates will establish and maintain
a letter of credit or other security acceptable to NML to allow NML to reflect
its full statutory reserve credit in its statutory statements.
3.3 The reinsurance provided under this Agreement is indemnity
reinsurance. No right or legal relation whatsoever exists between Pool Reinsurer
and the insured, owner, or beneficiary of any insurance policy or contract of
NML. Further, the participation of each Pool Reinsurer in this Agreement shall
be separate and apart from the participation of all other Pool Reinsurers and
shall not be joint with other Pool Reinsurers.
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3.4 Whenever NML becomes liable for a death benefit under the
provisions of a Conditional Life Insurance Agreement, as shown in Exhibit D,
Pool Reinsurer will assume liability for its proportionate share of cumulative
benefits up to $2 million, provided the insured qualifies for automatic
reinsurance under this Agreement.
3.5 NML will provide Pool Reinsurer with notice of any change in
NML's Conditional Life Insurance Agreement and the practices and procedures
respecting the same.
3.6 Pool Reinsurer does not reinsure the Accidental Death or Waiver
of Premium benefits and does not participate in policy loans, dividends, or
surrender values.
4. Risk Amounts
4.1 NML shall retain no mortality risk on policies in the pool. Pool
Reinsurers shall share equally in the net amount at risk so long as the policy
is in force including by reinstatement and operation of a nonforfeiture option,
except as otherwise expressly provided in Section 5, Section 6, Exhibit G, and
as follows:
4.1.1 Contractual Increases. Pool Reinsurers shall assume
increases in risk of reinsured policies arising through contractual provisions,
including but not limited to, additional premium deposits, scheduled increases
in coverage, and corridor risk amounts on variable insurance contracts.
4.1.2 Noncontractual Increases. NML shall have the authority to
approve noncontractual increases in coverage to policies reinsured in the pool,
subject to all of the provisions of Section 1 of this Agreement.
4.1.3 Reductions. If the face amount of a policy reinsured under
this Agreement is reduced, the amount reinsured in the pool shall be reduced
proportionately. Neither reduction nor termination of an NML policy other than a
policy reinsured under this Agreement will affect the amount of reinsurance on a
policy reinsured under this Agreement.
4.1.4 Conversions. Policies arising from conversions of term
policies reinsured under this Agreement shall also be reinsured under this
Agreement. The reinsurance pricing for such policies will be based upon the
original policy date and issue age of the insured life.
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4.1.5 Reinstatements. NML shall have sole authority to reinstate
policies reinsured under this Agreement according to its usual reinstatement
practices and procedures. When a policy reinsured under this Agreement is
reinstated, reinsurance under this Agreement is reinstated concurrently. NML
will pay all reinsurance premiums in arrears for that period for which NML
receives premiums in arrears under the reinsured policy.
4.1.6 Reconsiderations. NML shall have the right to improve the
classification of insureds under this Agreement only with respect to smoking
habits. For this purpose, NML shall apply its normal smoker reconsideration
rules.
4.1.7 Plan Changes. If a policy reinsured under this Agreement is
changed to another single-life plan of insurance, the reinsurance shall continue
from the original policy date.
5. Changes in Retention Limits
5.1 In the event NML changes its limits of retention, it will provide
prompt written notice of the new retention limits and the effective date of the
change.
6. Recapture
6.1 In the event NML increases its limits of retention for business
eligible for this Agreement, it may recapture reinsurance under this Agreement
as follows:
6.1.1 NML may reduce the reinsurance on all policies reinsured
under this Agreement so long as its remaining proportionate retention is no more
than its proportionate retention on otherwise similar new issues.
6.1.2 If NML elects to recapture reinsurance under Section 6, it
must do so such that its total retention on the policy reinsured under this
Agreement equals its new retention as indicated in Exhibit C after the increase
in its limits of retention. Further, in the event of any such recapture, Pool
Reinsurer shall continue to reinsure automatically the excess over NML's new
retention following recapture, each Pool Reinsurer bearing risk in the same
proportion to total reinsurance on the policy as it did immediately before
recapture.
6.1.3 If NML elects to recapture reinsurance under Section 6, it
must exercise its option by giving written notice of its election to all
affected Pool Reinsurers within ninety (90) days of the effective date of any
increase in its limits of retention. Such recapture will
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become effective only on the later of the following: the anniversary date of the
affected policy immediately following the notice of election, or the tenth
anniversary of the policy.
7. Reinsurance Premiums
7.1 Reinsurance premiums for business reinsured under this Agreement
shall be at the classification specified in Exhibit A, using the appropriate
premium schedule shown in Exhibit E.
7.2 Flat extra premiums assessed on policies reinsured under this
Agreement shall be coinsured. Pool Reinsurer will pay NML allowances.
7.3 With the exception of certain plans as determined by NML,
reinsurance premiums for fixed dollar coverages shall be paid on an annual basis
for all reinsured policies newly issued or experiencing anniversary processing
dates within a calendar month. In the case of new issues, such premiums are due
by the fifteenth (15) day of the month following the first month in which the
policy is both issued and paid for. In the case of renewals, such premiums are
due by the fifteenth (15) day of the month following the anniversary processing
date of the policy.
7.4 For variable coverages and certain fixed-dollar plans (as
determined by NML) reinsured under this Agreement, NML shall calculate and pay
reinsurance premiums each month for each reinsured policy based on the net
amount at risk as of the last working day of the month. Such premiums are due by
the fifteenth (15) day of the following month. To offset Pool Reinsurer's loss
of interest because reinsurance premiums are not paid annually in advance, the
monthly premium shall be 8.63 percent of the otherwise applicable annual
premium.
7.5 NML and Pool Reinsurer anticipate that the premium rates
specified in Exhibits A and E for individual reinsured policies will remain in
effect so long as those policies are reinsured under this Agreement. Pool
Reinsurer guarantees to provide the coverage at rates no higher than the yearly
renewable term net premium on the valuation mortality basis of the underlying
policies. If Pool Reinsurer does increase the reinsurance premium rates, NML has
the right to recapture the coverage immediately at no cost or penalty.
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7.6 The payment of net reinsurance premiums due is a condition
precedent to the continuing liability of the Pool Reinsurer under this
Agreement. If any reinsurance premium is not paid when due, the Pool Reinsurer
or Pool Reinsurers to which it is owed may terminate the corresponding
reinsurance upon sixty (60) days prior written notice to NML. If all overdue
premiums are paid within the notice period, the reinsurance will not terminate.
7.7 There shall be no experience refunds paid with respect to
reinsurance effected under this Agreement.
8. Currency
8.1 All amounts reinsured under this Agreement and all payments by
NML and Pool Reinsurer shall be in United States dollars.
9. Administration and Expenses
9.1 NML will self-administer all reinsurance provided under this
Agreement by providing: (a) a monthly accounting statement indicating the net
amount of reinsurance premium due; (b) a monthly policy exhibit indicating the
amounts of reinsurance in force at the beginning and end of the month and the
interim changes; (c) periodic electronic records of reinsured policies in force,
as well as new issues, terminations, and other changes; and (d) periodic
summaries and electronic records of statutory reserves on reinsured policies.
9.2 NML will furnish Pool Reinsurer with specimen copies of its
application, policy and rider forms, and such tables of rates and values as are
reasonably required for proper administration of the business reinsured under
this Agreement.
9.3 NML shall bear the expense of all medical examinations,
inspection fees, commissions, and other charges incurred in connection with the
issuance and maintenance of its policies reinsured under this Agreement.
10. Claims
10.1 NML shall give Pool Reinsurer prompt notice of each claim
submitted on a policy reinsured under this Agreement. Claim proofs accepted by
NML will be deemed accepted by and binding upon Pool Reinsurer. In administering
claims on policies reinsured under this Agreement, NML shall employ its
customary practices and procedures. Pool Reinsurer will
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abide by all claim payments and settlements of NML. Upon request, NML will give
affected Pool Reinsurer copies of proofs and other documents bearing on a claim.
10.2 Each Pool Reinsurer shall pay its respective share of each claim
(including interest, if any) in one lump sum, regardless of the method of
settlement employed by NML under its reinsured policy. Pool Reinsurers' shares
shall be due within twenty (20) days of receipt by the Pool Reinsurer of
notification by NML that the claim has been settled.
10.3 Each Pool Reinsurer shall pay its respective share of such
interest as is credited or paid by NML on the principal amount of a claim.
10.4 In the event of adjustment by NML in the amount of any claim due
to misstatement of age or sex of the insured, reinsurance under this Agreement
will be reinstituted as of the original policy date based upon the correct age
and sex, and reinsurance premiums shall be adjusted retroactively to reflect the
correct age and sex. Pool Reinsurers will then participate in the adjusted claim
amount, each in the same share as it held before discovery of the misstatement.
10.5 In the event of misstatement of smoking habits, NML shall have
sole authority to rescind the policy or to adjust the policy premium
accordingly. In the event the policy premium is adjusted, reinsurance premiums
shall be retroactively adjusted accordingly; and each Pool Reinsurer shall pay
its respective share of the net settlement made by NML. In the event of
rescission, NML shall recover from Pool Reinsurer all net reinsurance premiums
on the policy rescinded.
10.6 NML and Pool Reinsurers shall bear, each Pool Reinsurer according
to its share of the risk on the affected policy, related claims expenses
incurred in connection with settling claims, including, by way of description
only and not limited to, fees and expenses of third parties utilized by NML in
connection with claims investigation and litigation (including litigation
concerning policy rescission), but not including overhead expenses and
compensation of NML's salaried officers and employees allocated to regular claim
procedures, and not including expenses resulting from disputes over the
entitlement of beneficiaries to proceeds NML admits are payable. NML may request
each Pool Reinsurer to pay its share of expenses on a periodic basis before a
case is finally resolved.
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10.7 NML shall not be required to notify Pool Reinsurer of its
intention to contest a claim or assert defenses to a claim under a policy
reinsured under this Agreement. Pool Reinsurers shall pay their respective
shares of the costs of any such contest or defense, including their shares of
any costs of a rescission action, but Pool Reinsurers shall not be liable for
any extra-contractual damages, exemplary, compensatory or punitive, awarded
under statute or otherwise as a result of NML's actions.
11. Error and Oversight
11.1 If, through unintentional error, oversight, omission, or
misunderstanding (collectively referred to as "errors"), Pool Reinsurer or NML
fails to comply with the terms of this Agreement and if, upon discovery of the
error by either party, the other is promptly notified, each will be restored to
the position it would have occupied if the error had not occurred, including the
effect of the time value of money, using the 13-week U.S. Treasury Xxxx rate or
such other rate to which the parties may agree.
11.2 If it is not possible to restore each party to the position it
would have occupied but for the error, the parties will endeavor in good faith
to fashion a prompt resolution to the situation created by the error that is
fair and reasonable and most closely approximates the intent of the parties as
evidenced by this Agreement. However, Pool Reinsurer will not provide
reinsurance for policies that do not satisfy the parameters of this Agreement.
If either party discovers that NML has failed to cede reinsurance as provided in
this Agreement, or failed to comply with its reporting requirements, Pool
Reinsurer may require NML to audit its records for similar errors and to take
the actions necessary to avoid similar errors in the future.
12. Offset
12.1 Any amount which either NML or any Pool Reinsurer is obligated to
pay the other under this Agreement may be paid net of any amount then due and
unpaid by the other under this or any other reinsurance agreement between them.
13. Inspection of Records
13.1 At any reasonable time during normal business hours and upon
prior reasonable written notice, Pool Reinsurers, or any of them, may inspect,
at their own expense, at
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the Home Office of NML, all existing records of applications for policies
reinsured under this Agreement and any and all records pertaining to reinsurance
under this Agreement.
13.2 At any reasonable time during normal business hours and upon
prior reasonable written notice, NML may inspect, at its own expense, at the
Home Office of any one or more Pool Reinsurers, any and all records pertaining
to reinsurance under this Agreement.
14. Insolvency of NML
14.1 In the event of the insolvency of NML, the reinsurance under this
Agreement will be payable by Pool Reinsurer directly to NML or its liquidator,
receiver or statutory successor, on the basis of the liability of NML under the
policy or policies reinsured, without diminution because of the insolvency of
NML. It is agreed, however, that the liquidator, receiver or statutory successor
of the insolvent NML shall give written notice to each Pool Reinsurer of the
pendency of a claim against the insolvent NML on a policy reinsured under this
Agreement within a reasonable time after such claim is filed in the insolvency
proceedings and that during the pendency of such claim Pool Reinsurers, or any
of them, may investigate such claim and interpose, in the proceeding where such
claim is to be adjudicated, any defense which they or it may deem available to
NML or its liquidator, receiver or statutory successor. The expense thus
incurred by Pool Reinsurer or any of them shall be chargeable, subject to court
approval, against the insolvent NML as part of the expense of liquidation or
receivership to the extent that any benefit accrues to the insolvent NML as a
result of the defense undertaken by the Pool Reinsurers or any of them.
15. Arbitration
15.1 It is the intention of NML and each Pool Reinsurer that the
customs and practices of the insurance and reinsurance industry shall be given
full effect in the operation and interpretation of this Agreement. The parties
agree to act in all things with the highest good faith; however, if NML and Pool
Reinsurers, or any of them, cannot mutually resolve a dispute which arises out
of, or relates to this Agreement, the dispute shall be decided through
arbitration in accordance with the Arbitration Rules attached as Exhibit F. The
parties agree that the threshold questions of whether an issue is arbitrable
shall be decided by the arbitrators, not a court, and said question shall also
be subject to the final and binding arbitration provisions set
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forth in this Agreement. The arbitrators shall base their decision on the terms
and conditions of this Agreement, and on applicable law, but may also refer, as
necessary to decide the matter, to the course of dealings between the parties
and the customs and practices of the insurance and reinsurance industries.
15.2 The decision of the arbitrators shall be final and binding on NML
and the Pool Reinsurer(s) involved in the arbitration process. There shall be no
appeal from the arbitrators' decision, except that any party to the arbitration
may petition a court having jurisdiction over the parties and the subject matter
to reduce the arbitrators' decision to judgment.
15.3 The parties intend this article to be enforceable in accordance
with the Federal Arbitration Act (9 U.S.C. (S)(S) 1 et seq.), including
amendments and successors to that Act. In the event that any party to a dispute
refuses to submit to arbitration as required by Section 15.1, the other party to
the dispute may request the United States District Court for the Eastern
District of Wisconsin to compel arbitration in accordance with the Federal
Arbitration Act. NML and Pool Reinsurer hereby consent to the jurisdiction of
such court to enforce Section 15 and to confirm and enforce the performance of
any arbitration award obtained hereunder.
15.4 Notwithstanding anything in this Agreement to the contrary,
however, Pool Reinsurer may not require arbitration of a dispute under this
Agreement if NML has been made the subject of delinquency proceedings under
Chapter 645 of the Wisconsin Statutes.
16. Premium Taxes
16.1 Each Pool Reinsurer will reimburse NML for state premium taxes
NML is required to pay on gross reinsurance premiums paid to the Pool Reinsurer.
Premium tax reimbursement will be at NML's average premium tax rate and may be
deducted from its periodic reinsurance premium payments or reimbursed on an
annual basis. In the latter case, it is NML's responsibility to notify each Pool
Reinsurer of the amount of its liability for premium taxes paid by NML and to
request reimbursement within six months of the close of the calendar year to
which the taxes apply.
17. Changes in Circumstances of Pool Reinsurer
17.1 In view of the importance of financially sound reinsurers to the
financial security of NML's policyholders, NML and Pool Reinsurer agree to the
information, security,
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transfer of risk, and other provisions set forth in attached Exhibit G, Changes
in Circumstances of Pool Reinsurer.
18. Choice of Law
18.1 This Agreement shall be construed in accordance with and shall be
governed by the laws of the State of Wisconsin, without giving effect to the
choice-of-law principles of such state.
19. Assignment and Transfer
19.1 This Agreement may not be assigned or transferred by NML without
the prior written consent of Pool Reinsurer; and this Agreement, any rights or
duties under this Agreement, or any reinsurance under this Agreement may not be
sold, assigned, or transferred in any manner by any Pool Reinsurer without the
prior written consent of NML. Included among the transfers prohibited by this
provision are bulk transfers of the reinsurance under this Agreement without
NML's prior consent, but this provision shall not be interpreted to prohibit
retrocessions made in the ordinary course of business by Pool Reinsurer.
20. Publication Prohibited
20.1 Pool Reinsurers shall not publish (whether orally or in writing)
or otherwise use their reinsurance relationships with NML in connection with
their direct insurance operations, if any; provided, however, that Pool
Reinsurers may disclose their reinsurance relationships with NML, and facts
pertinent thereto, to regulatory authorities and in material filed with
regulatory authorities as required by law.
21. Severability
21.1 If any provision of this Agreement is found by a court of
competent jurisdiction to violate any applicable law, statute, or regulation,
such provision shall be deemed void and unenforceable. However, the parties
shall abide by the remainder of this Agreement in accordance with its terms.
21.2 If the operation of any provision of Exhibit G of this Agreement
is determined, by any regulatory authority having jurisdiction, to foreclose NML
from taking credit on its annual statement for reinsurance ceded under this
Agreement, NML may at its election
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declare such provision to be null and void as to one or more Pool Reinsurers,
whereupon it shall be so, the parties to abide by the remainder of this
Agreement in accordance with its terms.
22. Execution, Duration, and Termination of Agreement
22.1 This Reinsurance Pool Agreement may be executed in counterparts,
each of which shall be deemed an original but all of which shall together
constitute one and the same instrument.
22.2 This Agreement shall be of unlimited duration. It may be amended
at any time as to all parties upon written agreement of all parties; it may be
amended at any time as to NML and any Pool Reinsurer upon written agreement,
signed by NML and the Pool Reinsurer. In addition to termination afforded by
Exhibit G, this Agreement may be terminated as to any one or more Pool
Reinsurers, for purposes of new business only, upon one hundred twenty (120)
days prior written notice to NML, by each terminating Pool Reinsurer; and it may
be terminated by NML as to any one or more Pool Reinsurers, upon ninety (90)
days prior written notice to the affected Pool Reinsurer(s). In any case of
termination under this Section 22.2, however, the terminating or terminated Pool
Reinsurer shall continue to accept reinsurance during the notice period, and
shall remain liable on all existing reinsurance effected under this Agreement,
in accordance with this Agreement, until such existing reinsurance under this
Agreement ceases.
23. DAC Tax.
23.1 NML and Pool Reinsurer each represents and warrants that it is
subject to taxation under subchapter L or subpart F of part III of subchapter N
of Chapter 1 of the Internal Revenue Code of 1986, as amended (the "Code").
23.2 NML and Pool Reinsurer (for purposes of this section each,
singularly, a "party" and collectively, the "parties") agree and elect as
follows pursuant to Section 1.848-2 (g)(8) of the Income Tax Regulations issued
December 29, 1992 under Section 848 of the Code ("Regulations"):
23.2.1 The party with a positive net consideration for the
Agreement for each taxable year will capitalize specified policy acquisition
expenses with respect to the Agreement without regard to the general deductions
limitation of Section 848 (c)(1) of the Code.
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23.2.2 For purposes of this section, "consideration" shall be
determined in accordance with Section 1.848-2(f) of the Regulations.
23.2.3 The parties agree to exchange information pertaining to
the amount of net consideration under the Agreement to effect this election and
to ensure consistency in the computation of net consideration.
23.2.4 NML will submit a Schedule to Pool Reinsurer by April 1 of
each year of its calculation of the net consideration under the Agreement for
the preceding calendar year. Pool Reinsurer may contest the calculation of net
consideration by submitting an alternative to NML in writing within sixty (60)
days of receipt of the Schedule. If Pool Reinsurer does not do so, the amounts
shown on the Schedule shall be presumed, conclusively, to be correct. If Pool
Reinsurer does contest the calculation of net consideration, the parties will
act in good faith to reach an agreement as to the correct amount within thirty
(30) days of submission by Pool Reinsurer, of this alternative calculation. Each
party shall then report the amount agreed upon on its respective tax return for
the preceding calendar year.
23.2.5 This election shall be effective for all taxable years for
which the Agreement remains in effect.
24. Entire Agreement
24.1 This Agreement, including the Exhibits, constitutes the entire
agreement between NML and Pool Reinsurer with respect to the business that is
the subject of this Agreement, and there are no understandings between the
parties with respect to the business reinsured under this Agreement, other than
as expressed in this Agreement.
24.2 The parties have negotiated this Agreement and agree that it
should not be construed against either party as the drafter of this Agreement.
This Agreement is executed in duplicate by NML and Pool Reinsurer by
their respective officers duly authorized to do so on the date below.
THE NORTHWESTERN MUTUAL REINSURANCE COMPANY
LIFE INSURANCE COMPANY
By: ________________________ By: _________________________
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Title: ________________________ Title: _________________________
Attest: Attest:
By: ________________________ By: _________________________
Title: Ass_____________________ Title: _________________________
Date Signed:_______________ Date Signed:_________________
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Exhibit A
Qualifications for the Pool
[This Exhibit sets forth the parameters for the policies reinsured by this
pool.]
Exhibit B
Allocation of Reinsurance
[This Exhibit defines the portion of each risk that is ceded to each
reinsurer.]
Exhibit C
NORTHWESTERN MUTUAL RETENTION LIMITS
[This Exhibit sets forth NML's retention limits.]
Exhibit D
Conditional Life Insurance Agreement
[Exhibit D consists of a sample of Northwestern Mutual's current
Conditional Life Insurance Agreement.]
Exhibit E
Reinsurance Premium Rates
[This Exhibit sets forth the reinsurance premium rates.]
EXHIBIT F
ARBITRATION RULES
To initiate arbitration, either NML or a Pool Reinsurer engaged in the
dispute shall notify the other in writing of its desire to arbitrate, stating
the nature of the dispute and the remedy sought. The party to whom the notice is
sent shall respond to the notification in writing within ten (10) business days
of its receipt.
The arbitration hearing shall be before a panel of three arbitrators, each
of whom must be a current or former officer of a life insurance or life
reinsurance company domiciled in North America. NML, as one party, and the Pool
Reinsurer or Pool Reinsurers engaged in dispute, collectively, as the other
party, shall each name three (3) candidates to serve as arbitrator. No candidate
so named may be a present officer, attorney, or consultant of NML or any Pool
Reinsurer, or any of their affiliates, and if any candidate so named is a former
officer, attorney, or consultant of NML or any Pool Reinsurer, or any of their
affiliates, that fact and the dates of service and titles held in such capacity
shall be disclosed and, upon the objection of the other party, such candidate
shall be removed from the list of the party naming such candidate and replaced
with another candidate within two business days. After formulation of the lists
in this fashion, the two parties shall each choose one candidate from the
other's list and these two candidates shall serve as the first two arbitrators.
If one or more candidates so chosen shall decline to serve as an arbitrator, the
party who named such candidate shall add an additional candidate to its list,
subject to the limitations stated above, and the other party shall again choose
one candidate from the list. This process shall continue until two arbitrators
have been chosen and have accepted. The parties shall each present their initial
lists of three (3) candidates by written notification to the other within
twenty-five (25) business days of the date of the mailing of the notification
initiating the arbitration. Any subsequent additions to the list which are
required (except for replacements upon objection to a former officer, attorney
or consultant which shall be made within two (2) business days as indicated
above) shall be presented within ten (10) business days of the date the naming
party receives notice that a chosen candidate has declined to serve. If either
party refuses or neglects to present its initial list of arbitrators within the
twenty-five (25) business days allotted, or to make any subsequent additions to
the list within the time allotted, the other party may appoint both arbitrators.
The two arbitrators shall then select the third arbitrator from the four
(4) candidates remaining on the lists of the parties within fourteen (14) days
of the acceptance of their positions as arbitrators. If the two arbitrators
cannot agree on the choice of the third, then this choice shall be referred back
to the parties. The parties shall take turns striking the name of one of the
remaining candidates from the initial six (6) candidates until only one
candidate remains. If the candidate so chosen shall decline to serve as the
third arbitrator, the candidate whose name was stricken last shall be nominated
as the third arbitrator. This process shall continue until a candidate has been
chosen and has accepted. This candidate shall serve as the third arbitrator.
The first turn at striking the name of a candidate shall belong to the party
that is initiating the arbitration. Once chosen, the arbitrators are empowered
to decide all substantive and procedural issues by a majority of votes.
It is agreed that each of the three arbitrators should be impartial
regarding the dispute and should resolve the dispute on the basis set forth in
the Agreement. Therefore, at no time will NML or any Pool Reinsurer contact or
otherwise communicate with any person who has been designated as a candidate to
serve as an arbitrator concerning the dispute. Likewise, any written or oral
arguments provided to the arbitrators concerning the dispute shall be provided
simultaneously to the other party or shall take place in the presence of the
other party.
The arbitration hearing shall be held in Milwaukee, Wisconsin, or such
other place as is agreed to by the parties, on the date fixed by the
arbitrators. In no event shall this date be later than six (6) months after the
appointment of the third arbitrator. As soon as possible, the arbitrators shall
establish pre-arbitration procedures as warranted by the facts and issues of the
particular case. At least ten (10) business days prior to the arbitration
hearing, each party shall provide the other party and the arbitrators with a
detailed statement of the facts and arguments it will present at the arbitration
hearing. The arbitrators may consider any relevant evidence; they shall give the
evidence such weight as they deem it entitled to after consideration of any
objections raised concerning it. The party initiating the arbitration shall have
the burden of proving its case by a preponderance of the evidence. Each party
may examine any witnesses who testify at the arbitration hearing. Within twenty
(20) business days after the end of the arbitration hearing, the arbitrators
shall issue a written decision. In their decision the arbitrators shall
apportion the costs of arbitration, which shall include, but not be limited to,
their own fees and expenses, as they deem appropriate.
EXHIBIT G
Changes in Circumstances of Pool Reinsurers
[This Exhibit sets forth detailed financial parameters for NML's
reinsurers.]
