Exhibit (g)(viii)
REINSURANCE TREATY
(hereinafter called the Agreement)
Between
SECURITY EQUITY LIFE INSURANCE COMPANY
ARMONK, NEW YORK
(hereinafter called Security Equity or SELIC)
and
SUN LIFE ASSURANCE COMPANY OF CANADA
TORONTO, ONTARIO
(hereinafter called the Reinsurer)
TABLE OF CONTENTS
ARTICLES
1 Basis of Reinsurance
2 Parties to the Agreement
3 Automatic Reinsurance
4 Facultative Reinsurance
5 Liability
6 Amounts of Reinsurance
7 Reductions, Terminations and Changes
8 Reinsurance Premiums
9 Premium Accounting
10 Claims
11 Oversights
12 Inspection of Records
13 Insolvency
14 Currency
15 Experience Refunds
16 Changes in Retention and Recapture Privileges
17 Arbitration
18 Duration of Agreement
19 Applicable Law
20 Execution
SCHEDULES
A Premiums
B Terms of Agreement
C Retention Limits
D Binding Limits
ARTICLE 1
BASIS OF REINSURANCE
Security Equity and the Reinsurer mutually agree to reinsure on the terms and
conditions set out in the Agreement. The Agreement reinsures insurance issued by
Security Equity on risks as outlined in Schedule B.
END OF ARTICLE 1.
ARTICLE 2
PARTIES TO THE AGREEMENT
This is an indemnity reinsurance agreement solely between Security Equity and
the Reinsurer, and performance of the obligations of each party under the
Agreement shall be rendered solely to the other party. The acceptance of
reinsurance hereunder shall not create any right or legal relation between the
Reinsurer and the insured, beneficiary, or any other party to any policy
reinsured hereunder.
END OF ARTICLE 2.
ARTICLE 3
AUTOMATIC REINSURANCE
Security Equity's life insurance, with policy issue dates of January 1, 1994, or
later, which are eligible for automatic reinsurance shall be reinsured on an
automatic basis with the Reinsurer. The Reinsurer shall automatically accept a
share of such insurance, as specified in Schedule D, up to the amount specified
in Schedule D in accordance with and subject to the terms and conditions of the
Agreement.
Security Equity's life insurance shall qualify for automatic reinsurance under
the Agreement provided each one of the following conditions are satisfied:
1. Each risk is underwritten and classified in accordance with
underwriting rules as outlined in Schedule B.
2. All risks ceded automatically under the Agreement shall be between the
ages of 20 and 65 inclusive.
3 On each life, Security Equity must retain the amounts of insurance
according to the retention schedule in Schedule C.
4. Risks fall under the binding limits according to Schedule D.
END OF ARTICLE 3.
ARTICLE 4
FACULTATIVE REINSURANCE
Amounts in excess of the automatic limit outlined in Schedule D, shall be
submitted to the Reinsurer on a facultative basis.
An application for facultative reinsurance shall be made by submitting to the
Reinsurer a "Preliminary Application for Reinsurance" together with a copy of
each paper pertaining to the insurability of the risk. The Reinsurer promptly
shall notify Security Equity of its underwriting action after the Reinsurer has
examined the evidence of insurability submitted.
END OF ARTICLE 4.
ARTICLE 5
LIABILITY
The liability of the Reinsurer will commence on the later of the start of
Security Equity's liability or in the case of facultative business, the written
acceptance by Security Equity of the Reinsurer's offer. Subject to the
provisions of Article 9 and Article 18 of the Agreement, each reinsurance will
be continued in force as long as Security Equity is liable under the policy and
will cease when the liability of Security Equity ceases.
END OF ARTICLE 5.
ARTICLE 6
AMOUNTS OF REINSURANCE
Life reinsurance under the Agreement shall be on the Yearly Renewable Term plan
for the net amount at risk under the policy reinsured. For the purpose of the
Agreement, the net amount at risk shall be calculated in the following manner.
1. For all policy years the net amount at risk shall be defined as the
difference between the face amount of reinsurance ceded to the
Reinsurer and the corresponding cash value (taken to the nearest
dollar) as of the beginning of such policy year.
2. Policies where the amount of reinsurance, in total, is less than
$10,000 will not be ceded under the Agreement.
END OF ARTICLE 6.
ARTICLE 7
REDUCTIONS, TERMINATIONS AND CHANGES
1. Reductions and Terminations
Reinsurance amounts are calculated in terms of coverages on the life of
a person. If any of the policies or riders on the person reinsured by
Security Equity are reduced or terminated, the reinsurance will be
reduced by the proportionate amount or terminated if appropriate.
2. Changes
In the event that the correct age or sex was not used, then the premium
will be adjusted on an ongoing basis, but not retroactively.
END OF ARTICLE 7.
ARTICLE 8
REINSURANCE PREMIUMS
The premiums for life reinsurance will be computed, on the basis of the amount
at risk, at the rates shown in Schedule A provided, however, that the renewal
rates which are guaranteed are those shown in the appropriate Schedules, except
where such rates are less than the guaranteed rates in Schedule A, in which case
such premium rates are guaranteed for renewals. Changes in inforce and new
business rates must be mutually agreed upon by the Reinsurer and Security
Equity.
There will be a refund of unearned premiums upon termination due to lapse or
death.
The Reinsurer shall not be required to reimburse Security Equity for any premium
taxes.
END OF ARTICLE 8.
ARTICLE 9
PREMIUM ACCOUNTING
1. Payments
Premiums are payable annually in advance.
2. Procedure
At the end of each quarter, Security Equity will send an itemized
statement covering the prior three months together with a remittance
for any balance due the Reinsurer as shown therein. The statement will
cover the following:
a. Premiums on existing reinsurance due during the prior three
months.
b. Premium adjustments outstanding on changes in reinsurance and
previous accounting statement entries.
If the balance is due Security Equity, the Reinsurer will promptly
remit the amount of such balance to Security Equity.
The Reinsurer will note to Security Equity any discrepancies and proper
adjustment will be made.
3. Annual Statement Data
On or before January 25 of each year, Security Equity will furnish the
Reinsurer with the annual statement data on reinsurance ceded
hereunder.
ARTICLE 9 CONTINUES
ARTICLE 9 (CONTINUED)
4. Premium Default
The Reinsurer shall have the right to terminate the reinsurance for
which reinsurance premiums are in default for 60 days or more by giving
ninety days written notice of termination to Security Equity. As of the
close of the last day of this ninety-day notice period measured from
the date the notice was mailed, all of the Reinsurer's liability for
the following reinsurance shall terminate:
- Reinsurance for risks which are the subject of the termination
notice and, in addition,
- Reinsurance for risks for which the reinsurance premiums went
into default during the ninety-day notice period.
Notwithstanding termination of the reinsurance, Security Equity shall
continue to be liable to the Reinsurer for all unpaid reinsurance
premiums earned by the Reinsurer under the Agreement.
END OF ARTICLE 9.
ARTICLE 10
CLAIMS
1. Claim Notice
Notice of any claim will be given promptly to the Reinsurer after first
receipt of such information by Security Equity. Copies of all
underwriting and claims papers shall be mailed upon request by Security
Equity to the Reinsurer. In cases where the Reinsurer has over 50% of
the risk and the case is facultative and within the contestable time
period, all papers in connection with the claim shall be submitted to
the Reinsurer and Security Equity shall wait for up to three working
days from the date of mailing for the Reinsurer's recommendation before
conceding liability or making settlement to the claimant.
2. Claim Settlement
In settlement of any life claim, the Reinsurer will pay one sum
regardless of the method of settlement used by Security Equity under
its policy or policies.
If payment under the Security Equity policy is delayed, and interest is
allowed on the proceeds by Security Equity, the Reinsurer shall pay its
proportionate share of interest at the same rate for the same period on
the amount of reinsurance.
In the event that the correct age or sex was not used, the reinsurance
benefit shall be changed to that which would have been purchased with
the premiums paid, based on the corrected age and sex.
3. Expenses
Security Equity alone shall bear the routine expenses incurred in
connection with settling claims including, as a matter of description
only, compensation of agents and employees and the cost of routine
investigations.
ARTICLE 10 CONTINUES
ARTICLE 10 (CONTINUED)
The Reinsurer shall pay its share of all non-routine expenses.
Non-routine expenses include such items as legal and investigative fees
and not expenses incurred by Security Equity's employees in following
normal claim procedures.
4. Contested Claims
Security Equity shall promptly notify the Reinsurer of its intention to
contest insurance reinsured under the Agreement or to assert a defense
to a claim for such insurance. The Reinsurer will not be liable for any
extra-contractual damages, either compensatory or punitive, awarded
under a statute or otherwise, in connection with a claim under a policy
reinsured hereunder, unless the Reinsurer agrees in writing to the acts
giving rise to such damages, in which case, the Reinsurer will pay its
proportionate share of any such damages.
If the Reinsurer declines to participate in the contest, the Reinsurer
will discharge all of its liability by payment of the full amount of
the reinsurance due to Security Equity.
If any claim or suit is contested or compromised and the amount is
thereby reduced, the Reinsurer shall share, unless it has chosen not to
participate in the contest, in the reduction in the proportion that the
net liability of the Reinsurer bore to the sum of the retained net
liability of Security Equity and any other reinsurers.
END OF ARTICLE 10.
ARTICLE 11
OVERSIGHTS
It is hereby agreed that if nonpayment of premiums within the time specified, or
failure to comply with any terms of the Agreement, is shown to be unintentional
and the result of misunderstanding or oversight on the part of either party, the
Agreement will not be deemed abrogated thereby, but both parties will be
restored to the position they would have occupied had no such oversight or
misunderstanding occurred.
END OF ARTICLE 11.
ARTICLE 12
INSPECTION OF RECORDS
At any reasonable time the Reinsurer may inspect the original papers and any and
all other books or documents at the Home Office of Security Equity relating to
or affecting reinsurance under the Agreement.
Security Equity on request will furnish the Reinsurer with any specimen copies
of its applications, policy and rider forms, and any tables of rates and values
which may be required for the proper administration of the business reinsured
under the Agreement.
END OF ARTICLE 12.
ARTICLE 13
INSOLVENCY
All reinsurance under the Agreement will be paid by the Reinsurer directly to
Security Equity, its liquidator, receiver, or statutory successor, on the basis
of the liability of Security Equity under the policy or policies without
diminution because of the insolvency of Security Equity. In the event of the
insolvency of Security Equity, the liquidator, receiver or statutory successor
of Security Equity will give written notice of a pending claim against Security
Equity on any policy reinsured within a reasonable time after the claim is filed
in the insolvency proceedings. While the claim is pending, the Reinsurer may
investigate the claim and interpose, at its own expense, in the proceedings
where the claim is to be adjudicated, any defense which it may deem available to
Security Equity or its liquidator, receiver or statutory successor. The expense
incurred by the Reinsurer will be charged, subject to court approval, against
Security Equity as an expense of liquidation to the extent of a proportionate
share of the benefit that accrues to Security Equity as a result of the defense
by the Reinsurer. Where two or more reinsurers are involved and a majority in
interest elect to defend a claim, the expense will be apportioned in accordance
with the terms of the reinsurance agreement as if the expense had been incurred
by Security Equity.
In the event of the insolvency of either the Reinsurer or Security Equity, any
amounts owed by Security Equity to the Reinsurer and by the Reinsurer to
Security Equity with respect to the Agreement shall be set off and only the
balance shall be paid.
END OF ARTICLE 13.
ARTICLE 14
CURRENCY
All amounts reinsured under the Agreement and all payments by either Security
Equity or the Reinsurer will be in United States dollars.
END OF ARTICLE 14.
ARTICLE 15
EXPERIENCE REFUNDS
Life reinsurance accepted under the Agreement will be eligible for experience
refunds, as outlined in Schedule B.
END OF ARTICLE 15.
ARTICLE 16
CHANGES IN RETENTION AND RECAPTURE PRIVILEGES
A. Security Equity may elect at any time to change its existing retention
limits, as shown in Schedule C, in which event Security Equity shall
give prompt written notice of the change to the Reinsurer, provided
however that to give such notice shall not effect the rights and
obligations of the parties under the Agreement.
B. Security Equity may apply the new limits of retention to existing
individual reinsurance and reduce and recapture reinsurance in force in
accordance with the following rules:
1. No recapture will be made unless reinsurance has been in force
at least ten (10) years.
2. Recapture will become effective on the policy anniversary date
following notification of the intent of Security Equity to
recapture.
3. No recapture will be made unless Security Equity retained its
maximum limit of retention for the plan, age and mortality
rating at the time the policy was issued, as referred in
Schedule C. No recapture will be allowed in any class of fully
reinsured business or in any classes of risks for which
Security Equity established special retention limits less than
Security Equity's maximum retention limits for the plan, age
and mortality rating at the time the policy was issued.
4. If any reinsurance is recaptured all reinsurance eligible for
recapture under the provisions of this Article must be
recaptured.
5. If there is reinsurance in other companies on risks eligible
for recapture, the necessary reduction is to be applied to
each company in proportion to the total outstanding
reinsurance.
END OF ARTICLE 16.
ARTICLE 17
ARBITRATION
1. It is the intention of Security Equity and the Reinsurer that the
customs and practices of the insurance and reinsurance industry will be
given full effect in the operation and interpretation of the Agreement.
The parties agree to act in all things with the highest good faith. If
Security Equity or the Reinsurer cannot mutually resolve a dispute
which arises out of or relates to the Agreement, however, the dispute
will be decided through arbitration. The arbitrators will base their
decision on the terms and conditions of the Agreement plus, as
necessary, on the customs and practices of the insurance and
reinsurance industry rather than solely on a strict interpretation of
the applicable law; there will be no appeal from their decision, and
any court having jurisdiction of the subject matter and the parties may
reduce that decision to judgment.
2. To initiate arbitration, either the Reinsurer or Security Equity will
notify the other party by Certified Mail of its desire to arbitrate,
stating the nature of its dispute and the remedy sought. The party to
which the notice is sent will respond to the notification in writing
within ten (10) days of its receipt.
3. There will be three arbitrators who will be current or former officers
of life insurance companies other than the contracting companies. Each
of the contracting companies will appoint one of the arbitrators and
these two arbitrators will select the third. If either party refuses or
neglects to appoint an arbitrator within sixty days, the other party
may appoint the second arbitrator. If the two arbitrators do not agree
on a third arbitrator within sixty days of their appointment, each of
the arbitrators will nominate three individuals. Each arbitrator will
then decline two of the nominations presented by the other arbitrator.
The third arbitrator will then be chosen from the remaining two
nominations by drawing lots.
ARTICLE 17 CONTINUES
ARTICLE 17 (CONTINUED)
4. It is agreed that each of the three arbitrators should be impartial
regarding the dispute and should resolve the dispute on the basis
described in Section 1 of this Article. Therefore, at no time will
either the Reinsurer or Security Equity contact or otherwise
communicate with any person who is to be or has been designated as a
candidate to serve as an arbitrator concerning the dispute, except upon
the basis of jointly drafted communications provided by both the
Reinsurer and Security Equity to inform the arbitrators of the nature
and facts of the dispute. Likewise, any written or oral arguments
provided to the arbitrators concerning the dispute will be coordinated
with the other party and will be provided simultaneously to the other
party or will take place in the presence of the other party. Further,
at no time will any arbitrator be informed that the arbitrator has been
named or chosen by one party or the other.
5. The arbitration hearing will be held on the date fixed by arbitrators.
In no event will this date be later than six (6) months after the
appointment of the third arbitrator. As soon as possible, the
arbitrators will establish pre-arbitration procedures as warranted by
the facts and issues of the particular case. At least ten (10) days
prior to the arbitration hearing, each party will 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 will give the evidence such
weight as they deem it entitled to after consideration of any
objections raise concerning it. The party initiating the arbitration
will 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.
6. The cost of arbitration will be borne by the losing party unless the
arbitrators decide otherwise.
END OF ARTICLE 17.
ARTICLE 18
DURATION OF AGREEMENT
The Agreement will be effective on and after the effective date stated in the
EXECUTION. It is unlimited in duration but may be amended by mutual consent of
Security Equity and the Reinsurer. The Agreement may be terminated for new
business by providing 90 days notice, during which new business will be accepted
under the Agreement. Existing reinsurance will remain in force until termination
of Security Equity's policy or policies on which the reinsurance is based in
accordance with the terms of the Agreement.
END OF ARTICLE 18.
ARTICLE 19
APPLICABLE LAW
The Agreement shall be governed by and construed in accordance with the laws of
the State of New York and shall be treated in all respects as a New York
contract.
END OF ARTICLE 19.
ARTICLE 20
EXECUTION
In witness of the above, the Agreement is signed in duplicate at the dates and
places indicated with an effective date of January 1, 1994.
SUN LIFE ASSURANCE COMPANY
OF CANADA
Date: ____________ For President
Place: ____________ By: _____________________
For Secretary
By: ______________________
SECURITY EQUITY LIFE
INSURANCE COMPANY
Date: ____________ By: ___________________
Place: ____________ Title: ___________________
By: ___________________
Title: ___________________
END OF ARTICLE 20.
SCHEDULE A
a) Automatic
Premiums:
Current Premiums: 104% of attached mortality tables:
1. fully underwritten
2. simplified issue
3. guaranteed issue
Guaranteed Premiums: 80CSO mortality
Current premiums may be adjusted, but not to exceed the guaranteed premiums
b) Facultative
YRT rates to be used for amounts greater then the guaranteed limit of
$1,000,000.
YRT rates to be equivalent to those used for fully underwritten
automatic risk.
SECURITY EQUITY LIFE INSURANCE COMPANY
Annual Mortality Rates Per $1.000
Date Prepared, 01/18/94
Issue Age 20-99
Male Non-Smoker
Female Non-Smoker
Male Smoker
Female Smoker
SCHEDULE B
TERMS OF AGREEMENT
Products
Policy forms: Individual
Group
Underwriting
Security Equity will offer three types of underwriting, namely: full medical,
simplified issue and guaranteed issue.
Full Medical:
Security Equity will follow General American's underwriting requirements.
Security Equity also expects to use full underwriting on those insureds who need
coverage over and above $1,000,000 in the guaranteed issue cases or simplified
issue cases.
Simplified Issue:
Security Equity will ask only these medical questions:
1) Has the proposed insured applied for life insurance and been declined
or postponed in the past 5 years?
2) Does the proposed insured have heart disease or cancer?
3) Has the proposed insured been treated for or been diagnosed as having
deficiency of the immune system, such as Acquired Immune Deficiency
Syndrome (AIDS) or AIDS Related complex (ARC) or the AIDS virus?
The guidelines for simplified issue are as follows:
1. At least 25 lives must be insured.
2. All insureds must be actively at work at least 20 hours per
week and performing all the usual and necessary duties of
employment for a minimum of 500 hours semi annually at the
time of issue without absences of more than 20 business days
during such period due to sickness or accident.
3. Selected Face Amounts must be formula-driven so as to prevent
individual anti-selection.
SCHEDULE B - CONTINUED
4. At least 70% of a class of employees defined by position with
the Firm must be insured.
5. Maximum issue age is 65.
6. The maximum initial Selected Face Amount may not exceed
$1,000,000.
7. Annual increases in Selected Face Amount must be limited to
10%. Increases must be justified by a formula.
8. Cumulative increases in Selected Face Amount may not exceed
the smaller of the initial Selected Face Amount and
$1,000,000. Such increases must be automatic and set at issue
or must be based on documented compensation increases.
9. Owner of the policy must be either a United States Citizen or
a corporation domiciled in the United States. The insured must
be a citizen of the United States. The beneficiary must be an
entity in the United States or a citizen of the United States.
Please note that the 70% participation rule will be maintained at and
after issue. Guaranteed Issue:
As per Simplified Issue without the underwriting questions,
and the participation requirement is 90% which will be
maintained at and after issue. Security Equity will reserve
the right to refuse the case based on the type of corporation
or other reasons.
Experience Rating
For group experience rated policies, the following factors apply:
Threshold Minimum
No. of Years Credibility PFR Mortality Charge
------------ ----------- --- ----------------
500 10% 100%* 75%*
5,000 100% 100%* 75%*
10,000 100% 50%* 70%*
50,000 100% 10%* 30%*
* These percentages are based upon SELIC's current pooled rates.
The formula description are attached in Schedule B 1).
SCHEDULE B1
The Reinsurer will participate in Security Equity's experience refund in the
following manner:
At the beginning of each year Security Equity will remit to the Reinsurer
premium based upon a client's expected experience plus 3% of 1980 CSO mortality.
At the end of a policy year for a client, Security Equity will calculate actual
mortality and a refundable amount for the case. If the refundable amount is
positive (i.e. mortality was less than expected) the Reinsurer will reimburse
Security Equity for its proportionate share of the refundable amount. If a
client's mortality was worse than expected and Security Equity recovers extra
charges from the cash value, Security Equity will remit to the Reinsurer a
proportionate share of the deduction from cash value.
The Reinsurer's proportionate share will be based upon the reinsured amount at
the beginning of the year divided by the amount at risk at the beginning of the
year.
SCHEDULE C
RETENTION LIMITS
Security Equity retention limits - 50% of the net amount at risk, up to a
maximum of $125,000 ages 20-65.
SCHEDULE D
BINDING LIMITS
The Reinsurer agrees to accept on a First dollar Quota Share basis, 50% of the
net amount at risk up to a maximum of $125,000 ages 20-65, and 100% in excess of
$250,000 to $1,000,000 per life. Total Binding Limit is $875,000.
There is a $20,000,000 Jumbo Limit.
REINSURANCE TREATY
DOC #9385102
