AUTOMATIC AND FACULTATIVE
YEARLY RENEWABLE TERM REINSURANCE AGREEMENT
Effective January 1, 2002
Between
NATIONAL LIFE INSURANCE COMPANY
("Ceding Company")
Xxx Xxxxxxxx Xxxx Xxxxx
Xxxxxxxxxx, Xxxxxxx 00000
And
("Reinsurer")
Reinsurer Agreement No.
AUTOMATIC AND FACULTATIVE
YEARLY RENEWABLE TERM REINSURANCE AGREEMENT
This Agreement is between
NATIONAL LIFE INSURANCE COMPANY (Ceding Company),
Xxx Xxxxxxxx Xxxx Xxxxx, Xxxxxxxxxx, Xxxxxxx 00000
And
(Reinsurer),
.
The Reinsurer agrees to reinsure certain portions of the Ceding Company's
contract risks as described in the terms and conditions of this Agreement, which
includes any attached Schedules and Exhibits.
This reinsurance Agreement constitutes the entire Agreement between the parties
with respect to the business being reinsured hereunder and there are no
understandings between the parties other than as expressed in this Agreement.
Any change or modification to this Agreement is null and void unless made by
amendment to this Agreement and signed by both parties.
In witness of the above, the Ceding Company and the Reinsurer have by their
respective officers executed and delivered this Agreement in duplicate on the
dates indicated below, with an effective date of January 1, 2002.
NATIONAL LIFE
INSURANCE COMPANY
By: ______________________________ By: __________________________________
Title:______________________________ Title:________________________________
Date:_______________________________ Date:_________________________________
By: ______________________________ By: ________________________________
Title:______________________________ Title:________________________________
Date:_______________________________ Date:_________________________________
AUTOMATIC AND FACULTATIVE YEARLY RENEWABLE TERM
REINSURANCE AGREEMENT
Table of Contents
1. PARTIES TO AGREEMENT..................................................1
--------------------
2. REINSURANCE BASIS.....................................................1
-----------------
3. AUTOMATIC REINSURANCE TERMS...........................................1
---------------------------
a. CONVENTIONAL UNDERWRITING....................................1
-------------------------
b. MAXIMUM DOLLAR RETENTION.....................................2
------------------------
c. REINSURERS' AUTOMATIC ACCEPTANCE LIMITS......................2
---------------------------------------
d. AUTOMATIC IN FORCE AND APPLIED FOR LIMIT.....................2
----------------------------------------
e. RESIDENCE....................................................2
---------
f. MINIMUM CESSION..............................................2
---------------
g. NO PRIOR FACULTATIVE SUBMISSIONS. ...........................2
----------------------------------
4. AUTOMATIC REINSURANCE NOTICE PROCEDURE................................2
--------------------------------------
5. FACULTATIVE REINSURANCE...............................................2
-----------------------
6. COMMENCEMENT OF REINSURANCE COVERAGE..................................3
------------------------------------
a. AUTOMATIC REINSURANCE........................................3
---------------------
b. FACULTATIVE REINSURANCE......................................3
-----------------------
c. PRE-ISSUE COVERAGE...........................................3
------------------
7. BASIS OF REINSURANCE AMOUNT AND REINSURANCE PREMIUM RATES.............4
---------------------------------------------------------
a. LIFE REINSURANCE.............................................4
----------------
b. SUPPLEMENTAL BENEFITS AND RIDERS.............................4
--------------------------------
c. PRELIMINARY TERM INSURANCE...................................4
--------------------------
d. TERM INSURANCE RENEWALS......................................4
-----------------------
e. TABLE RATED SUBSTANDARD PREMIUMS.............................4
--------------------------------
f. FLAT EXTRA PREMIUMS..........................................4
-------------------
g. PREMIUM ADJUSTMENTS..........................................5
-------------------
8. CASH VALUES OR LOANS..................................................5
--------------------
9. PAYMENT OF REINSURANCE PREMIUMS.......................................5
-------------------------------
a. PREMIUM DUE..................................................5
-----------
b. FAILURE TO PAY REINSURANCE PREMIUMS..........................5
-----------------------------------
c. OVERPAYMENT OF REINSURANCE PREMIUM...........................5
----------------------------------
d. UNDERPAYMENT OF REINSURANCE PREMIUM..........................5
------------------------------------
e. RETURN OF REINSURANCE PREMIUM................................6
-----------------------------
f. UNEARNED REINSURANCE PREMIUMS................................6
-----------------------------
10. PREMIUM TAX REIMBURSEMENT.............................................6
-------------------------
11. DAC TAX AGREEMENT.....................................................6
-----------------
i
12. REPORTS...............................................................7
-------
13. RESERVES FOR REINSURANCE..............................................7
------------------------
14. DEATH CLAIMS..........................................................7
------------
a. NOTICE OF DEATH..............................................7
---------------
b. PROOFS.......................................................7
------
c. DEATH CLAIMS PAYABLE.........................................7
--------------------
d. AMOUNT AND PAYMENT OF DEATH CLAIMS...........................7
----------------------------------
e. CONTESTED CLAIMS.............................................8
----------------
f. CLAIM EXPENSES...............................................8
--------------
g. EXTRACONTRACTUAL DAMAGES.....................................8
------------------------
15. POLICY CHANGES........................................................9
--------------
a. NOTICE.......................................................9
------
b. INCREASES....................................................9
---------
c. REDUCTIONS OR TERMINATIONS...................................9
--------------------------
d. RISK CLASSIFICATION CHANGES..................................9
---------------------------
e. NON-FORFEITURE BENEFITS......................................9
------------------------
16. TERM CONVERSIONS, EXCHANGES AND REPLACEMENTS.........................10
--------------------------------------------
a. NOTICE......................................................10
-------
b. TERM CONVERSIONS............................................10
----------------
c. EXCHANGES AND REPLACEMENTS..................................10
--------------------------
17. POLICYHOLDER REINSTATEMENTS..........................................11
---------------------------
a. AUTOMATIC REINSTATEMENT.....................................11
-----------------------
b. FACULTATIVE REINSTATEMENT...................................11
-------------------------
c. PREMIUM ADJUSTMENT..........................................11
------------------
d. REINSTATEMENT FOLLOWING REINSURANCE OF NON-FORFEITURE
-----------------------------------------------------
BENEFITS..............................................11
---------
18. INCREASE IN MAXIMUM DOLLAR RETENTION LIMITS AND RECAPTURE............12
---------------------------------------------------------
a. NEW BUSINESS................................................12
------------
b. RECAPTURE...................................................12
---------
19. ERROR AND OMISSION...................................................12
------------------
20. INSOLVENCY...........................................................13
----------
21. ARBITRATION..........................................................13
-----------
a. GENERAL.....................................................13
-------
b. NOTICE......................................................14
------
c. PROCEDURE...................................................14
---------
22. OFFSET...............................................................14
-------
23. GOOD FAITH; FINANCIAL SOLVENCY.......................................15
------------------------------
24. TREATMENT OF CONFIDENTIAL INFORMATION................................15
--------------------------------------
ii
25. TERM OF THIS AGREEMENT AND TERMINATION...............................15
--------------------------------------
26. MEDICAL INFORMATION BUREAU...........................................15
--------------------------
27. SEVERABILITY.........................................................15
------------
28. SURVIVAL.............................................................16
---------
29. NON-WAIVER...........................................................16
-----------
iii
Listing of Schedules:
SCHEDULE A - COVERAGE AND LIMITS
1. Plans Reinsured
2. Reinsurance Amount
3. Ceding Company's Maximum Dollar Retention Limits
4. Reinsurers' Automatic Acceptance Limits
5. Automatic In Force and Applied for Limits
6. Premium Due
7. Recapture Period
8. Net Amount at Risk
9. Additional Underwriting Requirements
SCHEDULE B - REINSURANCE PREMIUMS
1. Automatic Reinsurance Premiums
2. Age Basis
3. Rates After Exercise of Term Conversion Option
4. Facultative Rate Limit
Exhibit B.I - Basic Select and Ultimate Table
Exhibit B.II - Calculation of "Frasierized" Second to Die Mortality Rates
Exhibit B.III - Last Survivor Premium Rates
Exhibit B.IV - Beneficiary Insurance Option Rates
Exhibit B.V - Survivor Purchase Option/Designated Second Life Rates
Exhibit X.XX - Continuing Coverage Rider Premiums
SCHEDULE C - REPORTING INFORMATION
Information on Risks Reinsured
Policy Exhibit Summary
Reserve Credit Summary
Accounting Summary
SCHEDULE D - FACULTATIVE FORMS
Application for Reinsurance
Notification of Reinsurance
iv
ADDENDUM A - REINSURANCE COVERAGE FOR ACCELERATED CARE RIDER
SCHEDULE A.1 - ACCELERATED CARE RIDER COVERAGE AND LIMITS
Exhibit A.1.1 - Accelerated Care Rider Final Specifications
Exhibit A.1.2 - National Life of Vermont California Non-Qualified
Acceleration Rider Actuarial Memorandum Addendum
SCHEDULE B.1 - ACCELERATED CARE RIDER PREMIUMS
Exhibit B.1.1 - Rates for Qualified Accelerated Care Rider
Exhibit B.1.2 - Rates for Non-Qualified Accelerated Care Rider
Exhibit B.1.3
v
AUTOMATIC AND FACULTATIVE YEARLY RENEWABLE TERM
REINSURANCE AGREEMENT
1. PARTIES TO AGREEMENT.
This Agreement is solely between the Reinsurer and the Ceding Company.
There is no third party beneficiary to this Agreement. Reinsurance
under this Agreement will not create any right or legal relationship
between the Reinsurer and any other person, for example, any insured,
policyholder, agent, beneficiary, assignee, or other reinsurer. The
Ceding Company agrees that it will not make the Reinsurer a party to
any litigation between any such third party and the Ceding Company. The
Ceding Company and the Reinsurer will not disclose the other's name to
these third parties with regard to the agreements or transactions that
are between the Ceding Company and the Reinsurer, unless the Ceding
Company or the Reinsurer gives prior written approval for the use of
its own name.
The terms of this Agreement are binding upon the parties, their
representatives, successors, and assigns. The parties to this Agreement
are bound by ongoing and continuing obligations and liabilities until
this Agreement terminates for new business and the underlying policies
are no longer in force, whichever occurs later. This Agreement shall
not be bifurcated, partially assigned, or partially assumed.
2. REINSURANCE BASIS.
This Agreement, including the attached Schedules, states the terms and
conditions of automatic and facultative reinsurance that is on a Yearly
Renewable Term basis. This Agreement is applicable only to reinsurance
of policies directly written by the Ceding Company, or directly written
by Life of the Southwest and reinsured by Ceding Company. Any policies
acquired through merger with another company, reinsurance, or purchase
of another company's policies are not included under the terms of this
Agreement.
3. AUTOMATIC REINSURANCE TERMS.
The Ceding Company agrees to cede and the Reinsurer agrees to
automatically accept contractual risks on the life insurance plans and
supplemental benefits shown in Section 1 of Schedule A, subject to the
following requirements:
a. CONVENTIONAL UNDERWRITING.
Automatic reinsurance applies only to insurance applications
underwritten by the Ceding Company with conventional underwriting
and issue practices that are consistently applied. Conventional
underwriting and issue practices are those customarily used and
generally accepted by life insurance companies.
Some examples of non-customary underwriting practices that are
not acceptable for automatic reinsurance under this Agreement are
table-shaving programs, guaranteed issue, any form of simplified
underwriting, short-form applications, any form of non-customary
non-medical underwriting limits, or internal or external policy
exchanges that do not require conventional underwriting.
Some examples of unacceptable issue practices that are not
acceptable for automatic reinsurance under this Agreement are the
issuance of a policy that has contestability or suicide clauses
with time limitations that are shorter than the maximum allowed
by state law and policy exchanges, replacements or term
conversions resulting from policies not originally reinsured by
the Reinsurer.
-1-
The Ceding Company must comply with Underwriting Guidelines at
least as restrictive as those set forth in Exhibit A.I and
Additional Underwriting Requirements at least as restrictive as
those set forth in Section 9 of Schedule A. The Additional
Underwriting Requirements may be changed by the Reinsurer. The
Reinsurer will provide 120 days advance written notice to the
Ceding Company before the effective date of such change.
b. MAXIMUM DOLLAR RETENTION.
The Ceding Company will retain, and not otherwise reinsure, an
amount of insurance on each life equal to its Maximum Dollar
Retention Limits shown in Section 3 of Schedule A. If the Ceding
Company's scheduled Maximum Dollar Retention Limit is zero,
automatic reinsurance is not available.
c. REINSURERS' AUTOMATIC ACCEPTANCE LIMITS.
On any one life, the amount automatically reinsured under all
agreements with all reinsurers must not exceed the Reinsurers'
Automatic Acceptance Limits shown in Section 4 of Schedule A.
d. AUTOMATIC IN FORCE AND APPLIED FOR LIMIT.
The total amount of life insurance in force and applied for on
any one life with all companies, of which the Ceding Company is
aware, must not exceed the In Force and Applied For Limit shown
in Section 5 of Schedule A.
e. RESIDENCE.
Each insured must be a resident of the United States or Canada at
the time of issue.
f. MINIMUM CESSION.
The minimum amount of reinsurance per cession that the Reinsurer
will accept is $10,000 and reinsurance of a cession will be
terminated when the amount reinsured is less than $10,000.
g. NO PRIOR FACULTATIVE SUBMISSIONS. .
To be eligible for automatic reinsurance, the risk must not have
been submitted on a facultative basis to the Reinsurer or any
other reinsurer.
4. AUTOMATIC REINSURANCE NOTICE PROCEDURE.
After the policy has been paid for and delivered, the Ceding Company
will submit all relevant individual policy information, as defined in
Schedule C, in its next statement to the Reinsurer.
5. FACULTATIVE REINSURANCE.
The Ceding Company may apply for facultative reinsurance with the
Reinsurer on a risk if the automatic reinsurance terms are not met, or
if the terms are met and it prefers to apply for facultative
reinsurance. If the Ceding Company wishes to obtain a facultative
quote from other reinsurers on a risk eligible for automatic
reinsurance, the risk must also be submitted to the Reinsurer for a
facultative offer. The following items must be submitted to obtain a
facultative quote:
a. A form substantially similar to the Reinsurer's "Application for
Reinsurance" form shown in Schedule D.
-2-
b. Copies of the original insurance application, medical examiner's
reports, financial information, and all other papers and
information obtained by the Ceding Company regarding the
insurability of the risk.
c. The initial and ultimate risk amounts requested.
After receipt of the Ceding Company's application, the Reinsurer will
promptly examine the materials and notify the Ceding Company either of
the terms and conditions of the Reinsurer's offer for facultative
reinsurance or that no offer will be made. The Reinsurer's offer
expires 120 days after the offer is made, unless the written offer
specifically states otherwise. If the Ceding Company accepts the
Reinsurer's offer, then the Ceding Company will note its acceptance in
its underwriting file and mail, as soon as possible but no later than
90 days, a formal reinsurance cession to the Reinsurer using a form
substantially similar to the "Notification of Reinsurance" form shown
in Schedule D Automatic reinsurance rates can be used for facultative
business up to the Facultative Rate Limits shown in Section 4 of
Schedule B.
6. COMMENCEMENT OF REINSURANCE COVERAGE.
Commencement of the Reinsurer's reinsurance coverage on any policy or
pre-issue risk under this Agreement is described below:
a. AUTOMATIC REINSURANCE.
The Reinsurer's reinsurance coverage for any policy that is ceded
automatically under this Agreement will begin and terminate
simultaneously with the Ceding Company's contractual liability
for the policy reinsured, unless otherwise terminated in
accordance with the terms of this Agreement.
b. FACULTATIVE REINSURANCE.
The Reinsurer's reinsurance coverage for any policy that is ceded
facultatively under this Agreement will begin when:
i. The Ceding Company accepts the Reinsurer's offer; and
ii. The policy has been issued.
Reinsurer's reinsurance coverage for any policy that is ceded
facultatively under this Agreement will terminate
simultaneously with the Ceding Company's contractual liability
for the policy reinsured, unless otherwise terminated in
accordance with the terms of this Agreement.
c. PRE-ISSUE COVERAGE.
The Reinsurer will not be liable for benefits paid under the
Ceding Company's conditional receipt or temporary insurance
agreement unless all the conditions for automatic reinsurance
coverage under Article 3 of this Agreement are met. The
Reinsurer's liability under the Ceding Company's conditional
receipt or temporary insurance agreement is limited to the
lesser of i. or ii. below:
b. The Reinsurer's share of the Reinsurers' Automatic Acceptance Limits
shown in Section 4 of Schedule A.
i. The amount for which the Ceding Company is liable, less the
amount the Ceding Company retained pursuant to Section 3 of
Schedule A, less any amount of reinsurance with other reinsurers.
-3-
The pre-issue liability applies only once on any given life
regardless of how many receipts were issued or initial
premiums were accepted by the Ceding Company. After a policy
has been issued, no reinsurance benefits are payable under
this pre-issue coverage provision.
In the event that the Ceding Company's rules with respect to
cash handling and the issuance of conditional receipt or
temporary insurance are not followed, the Reinsurer will
participate in the liability if the conditions for automatic
reinsurance are met and the Ceding Company does not knowingly
allow such rules to be violated or condone such a practice.
Such liability shall be limited to the lesser of i or ii
above. As in all cases, the provisions of Article 14 apply to
such a claim.
2. BASIS OF REINSURANCE AMOUNT AND REINSURANCE PREMIUM RATES.
a. LIFE REINSURANCE.
Reinsurance shall be on an excess basis. The amount reinsured
on a policy is the policy's net amount at risk less the Ceding
Company's retention available on the policy less any amount of
reinsurance with other reinsurers. The retention on each life,
or both lives for joint policies, is shown in Section 3 of
Schedule A. The net amount at risk is defined in Section 8 of
Schedule A. The reinsurance premiums per $1000 are shown in
Section 1 of Schedule B.
b. SUPPLEMENTAL BENEFITS AND RIDERS.
The supplemental benefits and riders reinsured under this
Agreement are listed in Section 1 of Schedule A.
i. ACCELERATED BENEFITS RIDER.
The reinsurance benefit is the Reinsurer's
proportionate share of the accelerated death benefit
payable under this Agreement. The maximum benefit
payable by the Reinsurer is the lesser of the amount
specifically reinsured by the Reinsurer, or
$1,000,000. This will be a cumulative limit in the
case of repeated partial accelerations. There are no
reinsurance premiums for this benefit.
c. PRELIMINARY TERM INSURANCE.
Premiums for reinsurance of preliminary term insurance are at
the second year rate for the insured's attained age, as shown
in Schedule B, for the fraction of a year covered.
d. TERM INSURANCE RENEWALS.
The reinsurance premium rates for term renewals are calculated
using the original issue age, duration since issuance of the
original policy, and the original underwriting classification.
e. TABLE RATED SUBSTANDARD PREMIUMS.
If the Ceding Company's policy is issued with a table rated
substandard premium, the reinsurance premiums shown in Section
1.q of Schedule B will apply.
f. FLAT EXTRA PREMIUMS.
If the Ceding Company's policy is issued with a flat extra
premium, the reinsurance premiums shown in Section 1.o of
Schedule B will apply.
-4-
g. PREMIUM ADJUSTMENTS.
The reinsurance premium rates are not guaranteed. The
Reinsurer reserves the right to change the rates at any time.
If the Reinsurer changes the rates, it will give the Ceding
Company 90 days' prior written notice of the change. Any
change applies only to reinsurance premiums due after the
expiration of the notice period. The maximum reinsurance
premiums are equal to the statutory valuation premiums for
yearly renewable term insurance at the maximum interest rates
and minimum mortality rates applicable at the policy issue
date.
In the event the Reinsurer increases the reinsurance premium
rates without a proportionate increase by the Ceding Company
to the policyowner premiums or cost of insurance rates, the
Ceding Company will have the right to cancel this Agreement on
or after the effective date of the reinsurance premium rate
increase. Such right to cancel shall be exercised by providing
the Reinsurer with a written notice of Ceding Company's intent
to recapture ceded business. If Ceding Company exercises such
right to cancel and recapture ceded business, such election
shall be in lieu of any premature recapture fee and Reinsurer
will not be obligated to reimburse Ceding Company for any
unearned premiums.
3. CASH VALUES OR LOANS.
This Agreement does not provide reinsurance for cash surrender values.
In addition, the Reinsurer will not participate in policy loans or
other forms of indebtedness on reinsured business.
4. PAYMENT OF REINSURANCE PREMIUMS
a. PREMIUM DUE.
The reinsurance premiums for each reinsurance cession are due
as shown in Section 6 of Schedule A.
b. FAILURE TO PAY REINSURANCE PREMIUMS.
If the reinsurance premiums are 60 days past due, for reasons
other than those due to error or omission as defined below in
Article 19, the premiums will be considered in default and the
Reinsurer may terminate the reinsurance upon 30 days' prior
written notice to the Ceding Company. The Reinsurer will have
no further liability as of the termination date. The Ceding
Company will be liable for the prorated reinsurance premiums
to the termination date. The Ceding Company agrees that it
will not force termination under the provisions of this
paragraph to avoid the recapture requirements or to transfer
the block of business reinsured to another reinsurer.
c. OVERPAYMENT OF REINSURANCE PREMIUM.
If the Ceding Company overpays a reinsurance premium and the
Reinsurer accepts the overpayment, the Reinsurer's acceptance
will not constitute nor create a reinsurance liability nor
result in any additional reinsurance. Instead, the Reinsurer
will be liable to the Ceding Company for a credit in the
amount of the overpayment, without interest.
d. UNDERPAYMENT OF REINSURANCE PREMIUM.
If the Ceding Company fails to make a full premium payment for
a policy or policies reinsured hereunder, due to an error or
omission as defined below in Article 19, the amount of
reinsurance coverage provided by the Reinsurer shall not be
reduced. However, once the underpayment is discovered, the
Ceding Company will be required to pay to the Reinsurer the
difference between the full premium amount and the amount
actually paid, without interest. If payment of the full
premium is not made within 60 days after the discovery of the
underpayment, the underpayment shall be treated as a failure
to pay premiums and subject to the conditions of Article 9.b.,
above.
-5-
e. RETURN OF REINSURANCE PREMIUM.
If a misrepresentation or misstatement on an application or a
death of an insured by suicide results in the Ceding Company
returning the policy premiums to the policy owner rather than
paying the policy benefits, the Reinsurer will refund all of
the reinsurance premiums it received on that policy to the
Ceding Company, without interest.
This refund given by the Reinsurer will be in lieu of all
other reinsurance benefits payable on that policy under this
Agreement. If there is an adjustment to the policy benefits
due to a misrepresentation or misstatement of age or sex, a
corresponding adjustment will be made to the reinsurance
benefits.
f. UNEARNED REINSURANCE PREMIUMS.
Unearned reinsurance premiums will be returned on deaths,
surrenders and other terminations, except as set forth in
Article 7.g. This refund will be on a prorated basis without
interest from the date of termination of the policy to the
date through which a reinsurance premium has been paid.
5. PREMIUM TAX REIMBURSEMENT.
The Reinsurer will not reimburse the Ceding Company for premium taxes.
6. DAC TAX AGREEMENT.
The Ceding Company and the Reinsurer hereby enter into an election
under Treasury Regulations Section 1.848-2(g) (8) whereby:
a. For each taxable year under this Agreement, the party with the
net positive consideration, as defined in the regulations
promulgated under Treasury Code Section 848, will capitalize
specified policy acquisition expenses with respect to this
Agreement without regard to general deductions limitation of
Section 848 (c) (1);
b. The Ceding Company and the Reinsurer agree to exchange
information pertaining to the net consideration under this
Agreement each year to ensure consistency or as otherwise
required by the Internal Revenue Service;
c. The Ceding Company will submit to the Reinsurer by May 1 of
each year 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 the Ceding
Company stating that the Ceding Company will report such net
consideration in its tax return for the preceding calendar
year;
d. The Reinsurer may contest such calculation by providing an
alternative calculation to the Ceding Company in writing
within 30 days of the Reinsurer's receipt of the Ceding
Company's calculation. If the Reinsurer does not so notify the
Ceding Company, the Reinsurer will report the net
consideration as determined by the Ceding Company in the
Reinsurer's tax return for the previous calendar year;
e. If the Reinsurer contests the Ceding Company's calculation of
the net consideration, the parties will act in good faith to
reach an agreement as to the correct amount within 30 days of
the date the Reinsurer submits its alternative calculation. If
the Ceding Company and the Reinsurer reach agreement on the
net amount of consideration, each party will report such
amount in their respective tax returns for the previous
calendar year.
-6-
Both Ceding Company and Reinsurer represent and warrant that they are
subject to U.S. taxation under either Subchapter L of Chapter 1, or
Subpart F of Subchapter N of Chapter 1 of the Internal Revenue Code of
1986, as amended.
7. REPORTS.
The administering party is the Ceding Company. The reporting period is
monthly. For each reporting period, the Ceding Company will submit a
statement to the Reinsurer with information that is substantially
similar to the information displayed in Schedule C. The statement will
include information on the risks reinsured with the Reinsurer, premiums
owed, policy exhibit activity, and an accounting summary. Within 15
days after the end of each calendar quarter, the Ceding Company will
submit a reserve credit summary similar to that shown in Schedule C.
8. RESERVES FOR REINSURANCE.
The Reinsurer shall hold reinsurance reserves in accordance with all
applicable laws and regulations that the Reinsurer deems controlling.
9. DEATH CLAIMS.
a. NOTICE OF DEATH.
The Ceding Company will notify the Reinsurer, as soon as
reasonably possible, after it receives notice of a death claim
arising from a death of an insured under a policy reinsured.
b. PROOFS.
The Ceding Company will promptly provide the Reinsurer with
proper death claim proofs (including, for example, proofs
required under the policy), all relevant information
respecting the existence and validity of the death claim, and
an itemized statement of the death claim benefits paid by the
Ceding Company under the policy.
c. DEATH CLAIMS PAYABLE.
Death claims are payable only as a result of the actual death
of an insured, to the extent reinsured under this Agreement
and for which there is contractual liability for the death
claim under the issuing company's in force policy. Except for
accelerated death benefits for terminally ill insured
individuals (certified by a physician as having an illness or
physical condition that can reasonably be expected to result
in death in 24 months or less after the date of certification)
or accelerated benefits for chronically ill insured
individuals (certified by a physician as having a covered
chronic illness as defined by the Ceding Company), for which
benefits are contractually provided under the issuing
company's policy, and which are reinsured hereunder, no
acceleration nor estimation of death claims on living
individuals is permitted, will not be due, owing or payable,
nor form the basis of any claim against the Reinsurer
whatsoever.
-7-
d. AMOUNT AND PAYMENT OF DEATH CLAIMS.
After the Reinsurer receives proper death claim notice, proofs
of the death claim, and proof of payment of the death claim by
the Ceding Company, the Reinsurer will promptly pay the
reinsurance death benefits due and owing to the Ceding Company
in one lump sum The Ceding Company's contractual liability for
death claims is binding on the Reinsurer. The maximum death
benefit payable to the Ceding Company under each reinsured
policy is the net amount at risk specifically reinsured
hereunder; the Reinsurer will not be nor become liable for any
amounts or reserves to be held by the Ceding Company on
policies reinsured under this Agreement. The total reinsurance
in all companies on a policy shall not exceed the Ceding
Company's total contractual liability on the policy, less its
amount retained on the policy. The excess, if any, of the
total reinsurance in all companies plus the Ceding Company's
retained amount on the policy over its contractual liability
under the reinsured policy will first be applied to reduce all
reinsurance on the policy. This reduction in reinsurance will
be shared among all the reinsurers in proportion to their
respective amounts of reinsurance prior to the reduction.
In the event payment is made under any policy prior to the
death of the insured due to the exercise of an accelerated
benefit option, the amount of reinsurance will be reduced in
proportion to the reduction in the reinsured policy's net
amount at risk.
e. CONTESTED CLAIMS.
The Ceding Company will notify the Reinsurer of its intention
to contest, compromise, or litigate a claim involving a
reinsured policy. If the Ceding Company's contest, compromise,
or litigation results in a reduction in its liability, the
Reinsurer will share in the reduction in the proportion that
the Reinsurer's net liability bears to the sum of the net
liability of all reinsurers on the insured's date of death.
If the Reinsurer should decline to participate in the contest,
compromise or litigation, the Reinsurer will then release all
of its liability by paying the Ceding Company its full share
of reinsurance death benefits for the policy and not sharing
in any subsequent reduction in liability.
f. CLAIM EXPENSES.
The Reinsurer will pay its share of reasonable investigation
and legal expenses connected with the litigation or settlement
of contractual liability claims unless the Reinsurer has
released its liability, in which case the Reinsurer will not
participate in any expenses after the date of release.
However, claim expenses do not include routine claim and
administration expenses, including the Ceding Company's home
office expenses. Also, expenses incurred in connection with a
dispute or contest arising out of conflicting claims of
entitlement to policy proceeds or benefits that the Ceding
Company admits are payable are not a claim expense under this
Agreement.
g. EXTRACONTRACTUAL DAMAGES.
The Reinsurer will not participate in and shall not be liable
to pay the Ceding Company or others for any amounts in excess
of the Reinsurer's share of the net amount at risk on the
mortality risk reinsured hereunder. Extracontractual damages
or liabilities and related expenses and fees are specifically
excluded from the reinsurance coverage provided under this
Agreement. Extracontractual damages are any damages awarded
against the Ceding Company, including, for example, those
resulting from negligence, reckless or intentional conduct,
fraud, oppression, or bad faith committed by the Ceding
Company in connection with the mortality risk insurance
reinsured under this Agreement.
The excluded extracontractual damages shall include, by way of
example and not limitation:
i. Actual and consequential damages;
ii. Damages for emotional distress or oppression;
iii. Punitive, exemplary or compensatory damages;
iv. Statutory damages, fines, or penalties;
-8-
v. Amounts in excess of the risk reinsured hereunder that the Ceding
Company pays to settle a dispute or claim;
vi. Third-party attorney fees, costs and expenses.
10. POLICY CHANGES. a. NOTICE.
If a reinsured policy is changed, a corresponding change will
be made in the reinsurance coverage for that policy. The
Ceding Company will notify the Reinsurer of the change in the
Ceding Company's next accounting statement.
b. INCREASES.
If life insurance on a reinsured policy is increased and the
increase is subject to new underwriting evidence, then the
increase of life insurance on the reinsured policy will be
administered the same as the issuance of a new policy. If the
increase is not subject to new underwriting evidence, and
increases are scheduled and known at issue, then the increase
will be automatically accepted by the Reinsurer, but the total
amount of reinsurance is not to exceed the Reinsurers'
Automatic Acceptance Limits shown in Section 4 of Schedule A.
Reinsurance rates will be based on the original issue age,
duration since issuance of the original policy and the
original underwriting classification. Other increases not
subject to new underwriting evidence are not allowed under
this Agreement.
c. REDUCTIONS OR TERMINATIONS.
If life insurance on a reinsured policy is reduced, the
reduction shall be applied first to the reinsured portion,
among all reinsurers in accordance to their percentages. If
life insurance on a reinsured policy is terminated, then
reinsurance will cease on the date of such termination.
Reductions and terminations are permitted only when the
underlying policyholder directs such a reduction or
termination of the issuing company policy that is in force at
the time that the reductions and terminations take place.
d. RISK CLASSIFICATION CHANGES.
If a policyholder requests a Table Rating reduction or removal
of a Flat Extra, such change will be underwritten according to
the Ceding Company's Underwriting Guidelines as set forth in
Exhibit I. Risk classification changes on facultative policies
will be subject to the Reinsurer's approval.
e. NON-FORFEITURE BENEFITS. 1) EXTENDED TERM.
If the original policy lapses and extended term insurance is
elected under the terms of the policy, the Ceding Company will
notify the Reinsurer of the new amount of reinsurance. The
reinsurance rates will remain the same as the rates used for
the original policy and will be based on the original issue
age, duration since issuance of the original policy and the
original underwriting classification.
-9-
2) REDUCED PAID UP.
If the original policy lapses and reduced paid up insurance is
elected under the terms of the policy, the amount reinsured
will be reduced and the Ceding Company will notify the
Reinsurer of the new amount of reinsurance. If reinsurance is
on an excess basis, reinsurance will be reduced by the full
amount of the reduction. If the amount of the reduction
exceeds the risk amount reinsured, the reinsurance on the
policy will be terminated. If reinsurance is on a first dollar
quota share basis, the amount reinsured and the amount
retained by the Ceding Company will be reduced based upon
their respective quota share percentages. The reinsurance
rates will remain the same as the rates used for the original
policy and will be based on the original issue age, duration
since issuance of the original policy and the original
underwriting classification.
11. TERM CONVERSIONS, EXCHANGES AND REPLACEMENTS.
a. NOTICE.
If a policy reinsured under this Agreement is exchanged or
replaced, as defined below in 16.b and 16.c, the Ceding
Company will notify the Reinsurer of the change in the Ceding
Company's next accounting statement. Unless mutually agreed
otherwise in writing, policies that are not reinsured with the
Reinsurer and that exchange or replace to a plan covered under
this Agreement will not be reinsured hereunder, except as
provided 16.b.ii below
b. TERM CONVERSIONS
For purposes of this Agreement, a term conversion is a
contractual right of the insured to replace a term policy or
rider with a permanent plan without evidence of insurability.
i. The Reinsurer will continue to reinsure policies resulting
from a term conversion of any policy reinsured
under this Agreement, in an amount not to exceed the
original amount reinsured hereunder. If the policy or
rider converts to a plan reinsured with the Reinsurer
under either this Agreement or another Agreement, the
reinsurance rates for the converted policy will be
the reinsurance rates contained in the Agreement that
covers the plan to which the original policy is
converting. If the policy or rider converts to a plan
not reinsured with the Reinsurer, the reinsurance
will continue under this Agreement on a yearly
renewable term basis using the YRT conversion rates
set forth in Section 3 of Schedule B.
ii. The Reinsurer will provide reinsurance coverage under
this Agreement for policies resulting from a term
conversion of a policy not previously reinsured by
the Reinsurer if the converted policy exceeds the
Ceding Company's Maximum Dollar Retention Limits,
shown in section 3 of Schedule A. The reinsurance
rates for the converted policy will be reinsurance
rates contained in this Agreement, plus an additional
5%.
Reinsurance rates for term conversions will be point in scale
(based on the original issue age, duration, and original
underwriting class since issuance of the original policy). The
recapture period applicable to the original policy shall
govern the converted policy and duration shall be measured
from the effective date of the original policy. Reinsurer will
not reimburse Ceding Company for any conversion credits Ceding
Company supplies to the insured.
If the term conversion results in an increase in risk amount,
the increase will be underwritten by the Ceding Company as new
business and will be eligible for reinsurance coverage under
this Agreement as new business.
When a conversion is fully underwritten, the resulting policy
will be administered the same as the issuance of a new policy.
-10-
c. EXCHANGES AND REPLACEMENTS.
For purposes of this Agreement, an exchange or replacement is
a new policy replacing an existing policy of the same type,
where the new policy lacks at least one of the following
characteristics: new business underwriting, full first year
commissions, new suicide period, or new contestable period.
New policies resulting from exchanges or replacements in the
insurance reinsured hereunder will continue to be ceded to the
Reinsurer under this Agreement, in an amount not to exceed the
original amount reinsured hereunder.
Reinsurance rates for exchanges or replacements will be those
in effect at issuance of the original policy and will be point
in scale (based on the original issue age, duration, and
original underwriting class since issuance of the original
policy). The recapture period applicable to the original
policy shall govern the new policy and duration shall be
measured from the effective date of the original policy.
If an exchange or replacement results in an increase in risk
amount, the increase will be underwritten by the Ceding
Company as new business and will be eligible for reinsurance
coverage under this Agreement as new business.
When an exchange or replacement is fully underwritten with new
suicide and contestable periods and full first year
commissions, the resulting policy will be administered the
same as the issuance of a new policy.
12. POLICYHOLDER REINSTATEMENTS.
a. AUTOMATIC REINSTATEMENT.
If the Ceding Company reinstates a policy that was originally
ceded to the Reinsurer as automatic reinsurance using
conventional underwriting practices, the Reinsurer's
reinsurance for that policy will be reinstated.
b. FACULTATIVE REINSTATEMENT.
If the Ceding Company has been requested to reinstate a policy
that was originally ceded to the Reinsurer as facultative
reinsurance, the Ceding Company will resubmit the case to the
Reinsurer for underwriting approval before the reinsurance can
be reinstated.
c. PREMIUM ADJUSTMENT.
The reinsurance premiums for the interval during which the
policy was lapsed will be paid to the Reinsurer on the same
basis as the Ceding Company charged its policyholder for the
reinstatement.
d. REINSTATEMENT FOLLOWING REINSURANCE OF NON-FORFEITURE BENEFITS.
If the Ceding Company has been requested to reinstate a policy
that was reinsured while on extended term or reduced paid-up
then the reinsurance for the extended term or reduced paid up
option will terminate and the original policy will be
reinstated using either the automatic or facultative
reinstatement procedures set forth above, in accordance with
the reinsurance method used for the original policy. If the
reinstatement results in an increase in the Reinsured Net
Amount at Risk greater than that attained at the time of the
non-forfeiture activity, the terms of Article 15b [Increases]
will govern the increase.
-11-
13. INCREASE IN MAXIMUM DOLLAR RETENTION LIMITS AND RECAPTURE.
a. NEW BUSINESS.
If the Ceding Company increases its Maximum Dollar Retention
Limits listed in Section 3 of Schedule A, then it may, at its
option and with 90 days' written notice to the Reinsurer,
increase its Maximum Dollar Retention Limits shown in Section
3 of Schedule A for policies issued after the effective date
of the Maximum Dollar Retention Limit increase.
A change to the Ceding Company's Maximum Dollar Retention
Limits will not affect the reinsured policies in force except
as specifically provided in paragraph 18.b, below.
Furthermore, unless agreed between the parties, an increase in
Ceding Company's Maximum Dollar Retention Limits will not
effect an increase in the total risk amount that it may
automatically cede to the Reinsurer.
b. RECAPTURE.
If the Ceding Company increases its Maximum Dollar Retention
Limits listed in Section 3 of Schedule A, then it may, with 90
days' written notice to the Reinsurer, reduce or recapture the
reinsurance in force subject to the following requirements:
i. An in-force cession is not eligible for recapture
until it has been reinsured for the minimum number of
years shown in Section 7 of Schedule A. The effective
date of the reduction in reinsurance will be the
later of the first policy anniversary following the
expiration of the 90-day notice period to recapture
and the policy anniversary date when the required
minimum number of years is attained.
ii. On all policies eligible for recapture, reinsurance
will be reduced by the amount necessary to increase
the total insurance retained up to the new Maximum
Dollar Retention Limits.
iii. If more than one policy per life is eligible for
recapture, then any recapture must be effected
beginning with the policy with the earliest issue
date and continuing in chronological order according
to the remaining policies' issue dates.
iv. The Ceding Company may not rescind its election to
recapture for policies becoming eligible at future
anniversaries.
v. Recapture of reinsurance will not be allowed on any
policy for which the Ceding Company did not keep its
Maximum Dollar Retention Limit at issue. The Ceding
Company's Maximum Dollar Retention Limits are stated
in Section 3 of Schedule A.
vi. If any policy eligible for recapture is also eligible
for recapture from other reinsurers, the reduction in
the Reinsurer's reinsurance on that policy will be in
proportion to the total amount of reinsurance on the
life with all reinsurers.
vii. Recapture will not be made on a basis that may result
in any anti-selection against the Reinsurer. The
Reinsurer maintains the discretion to determine when
anti-selection has occurred.
-12-
14. ERROR AND OMISSION.
Any unintentional or accidental failure of the Ceding Company or the
Reinsurer to comply with the terms of this Agreement which can be shown
to be the result of an oversight, misunderstanding or clerical error,
will not be deemed a breach of this Agreement. Upon discovery, the
error will be corrected so that both parties are restored to the
position they would have occupied had the oversight, misunderstanding
or clerical error not occurred. Should it not be possible to restore
both parties to such a position, the Ceding Company and the Reinsurer
shall negotiate in good faith to equitably apportion any resulting
liabilities and expenses.
This provision applies only to oversights, misunderstandings or
clerical errors relating to the administration of reinsurance covered
by this Agreement. This provision does not apply to the administration
of the insurance provided by the Ceding Company to its insured or any
other errors or omissions committed by the Ceding Company with regard
to the policy reinsured hereunder.
15. INSOLVENCY.
In the event that the Ceding Company is deemed insolvent, all
reinsurance death claims payable hereunder will be payable by the
Reinsurer directly to the Ceding Company, its liquidator, receiver or
statutory successor, without diminution because of the insolvency of
the Ceding Company. It is understood, however, that in the event of
such insolvency, the liquidator, receiver or statutory successor of the
Ceding Company will give written notice to the Reinsurer of the
pendency of a death claim against the Ceding Company on a risk
reinsured hereunder within a reasonable time after such death claim is
filed in the insolvency proceeding. Such notice will indicate the
policy reinsured and whether the death claim could involve a possible
liability on the part of the Reinsurer. During the pendency of such
claim, the Reinsurer may investigate such death claim and interpose, at
its own expense, in the proceeding where such death claim is to be
adjudicated, any defense or defenses it may deem available to the
Ceding Company, its liquidator, receiver or statutory successor. It is
further understood that the expense thus incurred by the Reinsurer will
be chargeable, subject to court approval, against the Ceding Company as
part of the expense of liquidation to the extent of a proportionate
share of the benefit that may accrue to the Ceding Company solely as a
result of the defense undertaken by the Reinsurer. Where two or more
reinsurers are participating in the same death claim and a majority in
interest (determined with respect to shares of net amount at risk)
elects to interpose a defense or defenses to any such death claim, the
expense will be apportioned among the reinsurers in the same proportion
that the reinsurer's net liability bears to the sum of the net
liability of all reinsurers on the insured's date of death.
16. ARBITRATION.
a. GENERAL.
Notwithstanding any other provision, all disputes and other
matters in question between the parties, arising out of, or
relating to this Agreement, shall be submitted exclusively to
arbitration upon the written request of either party; except a
party shall not be prevented from filing and prosecuting a
suit in a court of competent jurisdiction solely for the
purpose of obtaining equitable relief, including for example,
but not limited to, injunction or enforcement of subpoenas.
The disputes and matters subject to arbitration include, but
are not limited to disputes upon or after termination of this
Agreement, and issues respecting the existence, scope, and
validity of this Agreement. The arbitrators are to seek
efficiencies in time and expense. The arbitrators are not
bound to comply strictly with the rules of evidence. The
arbitration panel also has, for example, the authority to
issue subpoenas to third parties compelling prehearing
depositions, and for document production. The arbitrators will
have the authority to interpret this Agreement and, in doing
so, will consider the customs and practices of the life
insurance and life reinsurance industries. The arbitrators
will consider this Agreement an honorable engagement rather
than merely a legal obligation, and they are relieved of all
judicial formalities and may abstain from following the strict
rules of law.
-13-
b. NOTICE.
To initiate arbitration, one of the parties will notify the
other, in writing, of its desire to arbitrate. The notice will
state the nature of the dispute and the desired remedies. The
party to which the notice is sent will respond to the
notification in writing within 10 days of receipt of the
notice. At that time, the responding party will state any
additional dispute it may have regarding the subject of
arbitration.
c. PROCEDURE.
Arbitration will be heard before a panel of three arbitrators.
The arbitrators will be current or former executive officers
of life insurance or life reinsurance companies other than
either party or an affiliate of either party. Each party will
appoint one arbitrator. Notice of the appointment of these
arbitrators will be given by each party to the other party
within 30 days of the date of mailing of the notification
initiating the arbitration. These two arbitrators will, as
soon as possible, but no longer than 45 days after the day of
the mailing of the notification initiating the arbitration,
then select the third arbitrator. In the event that either
party should fail to choose an arbitrator within 30 days after
the other party has given notice of its arbitrator
appointment, the party which has already appointed an
arbitrator may choose an additional arbitrator, and the two
shall, in turn, choose a third arbitrator before entering
arbitration. If the two arbitrators are unable to agree upon
the selection of a third arbitrator within 30 days following
their appointment, each arbitrator shall nominate three
candidates within 10 days thereafter, two of whom the other
shall decline and the decision shall be made by drawing lots.
Once chosen, the three arbitrators will have the authority to
decide all substantive and procedural issues by a majority
vote. The arbitrators shall operate in a fair but cost
efficient manner. For example, the arbitrators are not bound
by technical rules of evidence and may limit the use of
depositions and discovery. The arbitration hearing will be
held on the date fixed by the arbitrators at a location agreed
upon by the parties. The arbitrators will issue a written
decision from which there will be no appeal. Either party may
reduce this decision to a judgment before any court that has
jurisdiction of the subject of the arbitration.
Each party will pay the fees of its own attorneys, the
arbitrator appointed by that party, and all other expenses
connected with the presentation of its own case. The two
parties will share equally in the cost of the third
arbitrator.
The arbitration panel may, in its discretion, award attorneys'
fees, costs, expert witness fees, expenses and interest, all
as it deems appropriate to the prevailing party.
17. OFFSET.
All amounts due or otherwise accrued to any of the parties hereto or
any of their parents, affiliates, or subsidiaries, whether by reason of
premiums, losses, expenses, or otherwise, under this agreement or any
other contract heretofore or hereafter entered into, will at all times
be fully subject to the right of offset and only the net balance will
be due and payable. The right of offset will not be affected or
diminished because of the insolvency of either party.
-14-
18. GOOD FAITH; FINANCIAL SOLVENCY.
This Agreement is entered into in reliance on the utmost good faith of
the parties including, for example, their warranties, representations
and disclosures. It requires the continuing utmost good faith of the
parties, their representatives, successors, and assigns. This includes
a duty of full and fair disclosure of all information respecting the
formation and continuation of this contract and the business reinsured
hereunder. Each party represents and warrants to the other party that
it is solvent on a statutory basis in all states in which it does
business or is licensed. Each party agrees to promptly notify the other
if it is subsequently financially impaired.
In addition, the Ceding Company affirms that it has disclosed and will
continue to disclose to the Reinsurer all matters material to this
Agreement, such as its underwriting and policy issues (rules,
philosophies, practices, and management personnel), its financial
condition, studies and reports on the business reinsured, and any
change in its ownership or control. The Reinsurer or its
representatives have the right at any reasonable time to inspect the
Ceding Company's records relating to this Agreement.
19. TREATMENT OF CONFIDENTIAL INFORMATION.
Except for the purposes of carrying out this Agreement and as required
by law, the Reinsurer shall not disclose or use any non-public
personally identifiable customer or claimant information
("Customer/Claimant Information") provided by the Ceding Company to the
Reinsurer, as such Customer/Claimant Information is defined by the
Xxxxx-Xxxxx-Xxxxxx Act and related regulations. Such Customer/Claimant
Information shall be shared only with those entities with which the
Reinsurer may, from time to time, contract in accordance with the
fulfillment of the terms of this Agreement, including but not limited
to the Reinsurer's retrocessionaires and the Reinsurer's affiliates.
20. TERM OF THIS AGREEMENT AND TERMINATION.
The Ceding Company will maintain and continue the reinsurance provided
in this Agreement as long as the policy to which it relates is in force
or has not been fully recaptured. This Agreement may be terminated,
without cause, for the acceptance of new reinsurance after 90 days'
written notice of termination by either party to the other. The
Reinsurer will continue to accept reinsurance during this
90-day period. The Reinsurer's acceptance will be subject to both the
terms of this Agreement and the Ceding Company's payment of applicable
reinsurance premiums. In addition, this Agreement may be terminated
immediately for the acceptance of new reinsurance by either party if
one of the parties materially breaches this Agreement, or becomes
insolvent or financially impaired.
21. MEDICAL INFORMATION BUREAU.
The Reinsurer is required to strictly adhere to the Medical Information
Bureau Rules, and the Ceding Company agrees to abide by these Rules, as
amended from time to time. The Ceding Company will not submit a
preliminary notice, application for reinsurance, or reinsurance cession
to the Reinsurer unless the Ceding Company has an authentic, signed
preliminary or regular application for insurance in its home office and
the current required Medical Information Bureau authorization.
-15-
22. SEVERABILITY
In the event that any court, arbitrator, or administrative agency
determines any provision or term of this Agreement to be invalid,
illegal or unenforceable, all of the other terms and provisions of this
Agreement shall remain in full force and effect to the extent that
their continuance is practicable and consistent with the original
intent of the parties. However, in the event this Article is exercised
and the Agreement no longer reflects the original intent of the
parties, the parties agree to attempt to renegotiate this Agreement in
good faith to carry out its original intent.
23. SURVIVAL.
All provisions of this Agreement shall survive its termination to the
extent necessary to carry out the purposes of this Agreement or to
ascertain and enforce the parties' rights or obligations hereunder
existing at the time of termination.
24. NON-WAIVER.
No waiver by either party of any violation or default by the 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. No prior transactions or dealings
between the parties shall be deemed to establish any custom or usage
waiving or modifying any provision hereof. The failure of either 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.
-16-
SCHEDULE A
COVERAGE AND LIMITS
1. PLANS REINSURED:
The policy plans and supplemental benefits eligible for automatic and
facultative reinsurance coverage are:
====================================================================
Plans
--------------------------------------------------------------------
--------------------------------------------------------------------
Single Life UL/VUL
--------------------------------------------------------------------
--------------------------------------------------------------------
Survivorship UL/VUL
--------------------------------------------------------------------
--------------------------------------------------------------------
Traditional Single Life Plans
--------------------------------------------------------------------
--------------------------------------------------------------------
Traditional Survivorship Plans
--------------------------------------------------------------------
--------------------------------------------------------------------
Accelerated Benefits Rider
--------------------------------------------------------------------
--------------------------------------------------------------------
Beneficiary Insurance Option Rider
--------------------------------------------------------------------
--------------------------------------------------------------------
Policy Continuation Rider (for First-to-Die Policies)
--------------------------------------------------------------------
--------------------------------------------------------------------
Flexible Term Rider
--------------------------------------------------------------------
--------------------------------------------------------------------
Adds Rider and Dividend Additions
--------------------------------------------------------------------
--------------------------------------------------------------------
Additional Protection Benefit Rider
--------------------------------------------------------------------
--------------------------------------------------------------------
Policy Split Option Rider
--------------------------------------------------------------------
--------------------------------------------------------------------
Estate Preservation Rider
--------------------------------------------------------------------
--------------------------------------------------------------------
Individual Term Riders
--------------------------------------------------------------------
--------------------------------------------------------------------
Continuing Coverage Rider
--------------------------------------------------------------------
--------------------------------------------------------------------
Enhanced Death Benefit Rider
--------------------------------------------------------------------
--------------------------------------------------------------------
Automatic Increase Rider
--------------------------------------------------------------------
--------------------------------------------------------------------
Accelerated Care Rider - See Addendum A
====================================================================
2. REINSURANCE AMOUNT:
a. AUTOMATIC REINSURANCE:
Subject to the Reinsurer's share of the Reinsurers' Automatic
Acceptance Limits in Section 4 of Schedule A, the Reinsurer will
automatically reinsure 25% of the excess Net Amount at Risk, as defined
in Section 8 of this Schedule A, above the Ceding Company's Maximum
Dollar Retention Limits, which are defined in Section 3 of this
Schedule A.
b. FACULTATIVE REINSURANCE:
The Ceding Company's amount and the Reinsurer's amount of the Net
Amount at Risk shall be determined on a case-by-case basis for
facultative cessions.
-17-
SCHEDULE A, CONTINUED
3. CEDING COMPANY'S MAXIMUM DOLLAR RETENTION LIMITS:
a. With the exception of second-to-die policies, the Ceding
Company will retain $1,000,000 on any one life. For
second-to-die policies, the Ceding Company will retain an
equal amount on each life such that the maximum retention on
either life is $1,000,000.
b. On all plans other than universal life, the Ceding Company
will retain, in addition to its retention stated in Section
3.a above, a share proportinal to its retention stated in
Section 3.a above of the additional insurance provided in the
following situations:
i. Purchased by dividends.
ii. Issued under the terms of a Cost of Living (COL) or other
increasing term insurance rider.
iii. Issued under the terms of its annual premium additions rider
(APAR).
The net amount at risk on an Estate Preservation Rider issued
on a second-to-die policy will be included with the net amount
at risk under the base plan and other riders in determining
National Life's $1,000,000 retention. At expiration of the
Estate Preservation Rider, National Life will retain the same
proportional share of the total net amount at risk as before
expiration.
4. REINSURERS' AUTOMATIC ACCEPTANCE LIMITS:
On each life, the amount automatically reinsured under all agreements
with all reinsurers, including the Ceding Company's Maximum Dollar
Retention must not exceed $15,000,000. The total mortality rating on
the insurable life shall not be higher than 500% for permanent plans,
and 300% for term plans and term riders, or the equivalent on a flat
extra premium basis.
If one life is uninsurable, the sum of any amount of insurance already
in-force on the insurable life and the amount applied for on the
current application on the insurable life with all Reinsurer's shall
not exceed $15,000,000.
The amount automatically reinsured by the Reinsurer for the Beneficiary
Insurance Option Rider must not exceed $2,000,000.
5. AUTOMATIC IN FORCE AND APPLIED FOR LIMIT:
a. LIFE INSURANCE IN FORCE AND APPLIED FOR LIMIT:
$25,000,000
1. PREMIUM DUE:
Reinsurance premiums are due annually in advance. These premiums are
due on the issue date and each subsequent policy anniversary.
Reinsurance premiums are due within the first 15 days following the
calendar quarter of the issue date and each subsequent policy
anniversary.
-18-
SCHEDULE A, CONTINUED
2. RECAPTURE PERIOD:
Recapture is only allowed in accordance with Article 18.b of this
Agreement. The minimum number of years for a cession to be reinsured
before it is eligible for recapture pursuant to Article 18.b. is 10
years for single life plans, and 20 years for survivorship plans.
3. NET AMOUNT AT RISK:
UNIVERSAL LIFE PLANS:
For universal life policies the amount of reinsurance for any policy
year is to be determined at the beginning of such year as the excess,
if any, of the amount at risk over the retained risk. Once determined
for a particular policy year, the amount of reinsurance shall be
altered only if there is a policy change effected during the year.
The Net Amount at Risk for purposes of this Agreement is the death
benefit amount less the accumulated value of the policy. The retained
risk for a policy is determined at the original issue date of the
policy as agreed in the reinsurance cession.
The net amount at risk on the policies and riders eligible for
reinsurance under this Agreement, is defined below:
OPTION A BASE POLICY: The net amount at risk is the death
benefit minus the accumulation value, where the death benefit
is the greater of the Face Amount or the minimum amount
required under Section 7702 of the IRC.
OPTION B BASE POLICY: The net amount at risk is the death
benefit minus the accumulation value, where the death benefit
is the greater of the Face Amount plus accumulation value or
the minimum amount required under Section 7702 of the IRC.
ALL PLANS OTHER THAN UNIVERSAL LIFE:
The portion of the policy reinsured (p) will be determined at issue as
the reinsured face amount divided by the total face amount. The Net
Amount at Risk reinsured will be determined at issue for its first ten
years as follows:
1. Calculate the Net Amount at Risk reinsured for the first
policy years as (p) x [(a) + (b) - (c)] where:
(a) = The first year death benefit of the policy;
(b) = The first year death benefit of any insurance
provided by the adds rider;
(c) = The total projected cash value at the end of the
first year, excluding any dividend payable only at
the completion of the first year.
-19-
SCHEDULE A, CONTINUED
2. Calculate the projected Net Amount at Risk reinsured for
the tenth policy year as (p) x [(a) + (b) + (c) - (d)]
where:
(a) = The tenth-year benefit from the base policy;
(b) = The projected tenth-year death benefit from any
insurance purchased by dividends (based on the
continuation of CEDING COMPANY's current dividend
scale);
(c) = The projected tenth-year death benefit from any
life insurance rider (term, cost of living, or adds
rider);
(d) = The total projected tenth-year cash value,
excluding any dividend payable only at the completion
of the tenth year.
3. The Net Amount at Risk reinsured for the intervening years
will be calculated using straight-line interpolation between
the first year and the tenth-year net amount at risk reinsured
values.
The Net Amount at Risk reinsured will be recalculated at the
end of each ten-year period (or at the time of any policy
change) and projected for another ten-year period using the
then-current dividend scale. Again straight-line interpolation
will be used to calculate the Net Amount at Risk reinsured for
the intervening years.
TERM INSURANCE RIDERS:
The Net Amount at Risk is the Rider Face Amount.
For purposes of this Agreement, the following will apply:
The Face Amount is the amount the Ceding Company uses to determine the
death benefit and proceeds payable under the policy. The Initial Base
Face Amount will be shown in the Policy Data of the policy.
4. ADDITIONAL UNDERWRITING REQUIREMENTS:
The following requirements apply to business reinsured under this
Agreement. These requirements are in addition to the conventional
underwriting and issue practices described in Article 3.a. of this
Agreement.
BLOOD PROFILE LIMITS:
Where permitted by law, a blood profile including an AIDS test is
required for ages 18+. The AIDS test is to be an HIV or, when the HIV
is not permitted, a T-Cell ratio.
-20-
EXHIBIT A.I
UNDERWRITING GUIDELINES
-21-
SCHEDULE B
REINSURANCE PREMIUMS - YEARLY/MONTHLY RENEWABLE TERM BASIS
1. AUTOMATIC REINSURANCE PREMIUMS - LIFE:
a. SINGLE LIFE PLANS WITH ELITE PREFERRED CLASS AVAILABLE:
Standard annual reinsurance premiums per $1000 reinsured are
the following percentages of the 1990 - 95 Basic Select and
Ultimate Table attached to this Schedule B as Exhibit B.I:
=============================================== =======================
Elite Preferred Nonsmoker
----------------------------------------------- -----------------------
----------------------------------------------- -----------------------
Preferred Nonsmoker
----------------------------------------------- -----------------------
----------------------------------------------- -----------------------
Standard Nonsmoker
----------------------------------------------- -----------------------
----------------------------------------------- -----------------------
Preferred Smoker
----------------------------------------------- -----------------------
----------------------------------------------- -----------------------
Standard Smoker
=============================================== =======================
a. SURVIVORSHIP UL/VUL:
Standard annual reinsurance premiums per $1000 reinsured are
the following percentages of the 1990 - 95 Basic Select and
Ultimate Table attached to this Schedule B as Exhibit B.I.,
applied to each individual life. Single life rates are then
Frasierized, as determined in Exhibit B.II.
=============================================== =======================
Preferred Nonsmoker
----------------------------------------------- -----------------------
----------------------------------------------- -----------------------
Standard Nonsmoker
----------------------------------------------- -----------------------
----------------------------------------------- -----------------------
Preferred Smoker
----------------------------------------------- -----------------------
----------------------------------------------- -----------------------
Standard Smoker
=============================================== =======================
There shall be a minimum annual reinsurance premium of $.12
per $1000 per year.
b. TRADITIONAL SURVIVORSHIP (JEA):
Standard annual reinsurance premiums per $1000 reinsured are %
of the Last Survivor Premium Rates attached to this Schedule B
as Exhibit B.III.
c. SINGLE LIFE PLANS WITH NO ELITE PREFERRED CLASS AVAILABLE:
Standard annual reinsurance premiums per $1000 reinsured are
the following percentages of the 1990 - 95 Basic Select and
Ultimate Table attached to this Schedule B as Exhibit B.I:
=============================================== =======================
Preferred Nonsmoker
----------------------------------------------- -----------------------
----------------------------------------------- -----------------------
Standard Nonsmoker
----------------------------------------------- -----------------------
----------------------------------------------- -----------------------
Smoker
=============================================== =======================
-22-
SCHEDULE B, CONTINUED
d. FIRST TO DIE POLICIES:
The annual premiums per $1000 reinsured shall be .95 times the
following percentages times the sum of the 1990 - 95 Basic
Select and Ultimate Table, attached to this Schedule B as
Exhibit B.I, for the first life and the second life:
=============================================== =======================
Preferred Nonsmoker
----------------------------------------------- -----------------------
----------------------------------------------- -----------------------
Standard Nonsmoker
----------------------------------------------- -----------------------
----------------------------------------------- -----------------------
Smoker
=============================================== =======================
e. BENEFICIARY INSURANCE OPTION RIDER:
Standard annual premiums per $1000 reinsured shall be the
following percentages of the Beneficiary Insurance Option
Rates attached to this Schedule B as Exhibit B.IV:
=============================== =======================================
YEAR PERCENTAGE
------------------------------- ---------------------------------------
------------------------------- ---------------------------------------
1
------------------------------- ---------------------------------------
------------------------------- ---------------------------------------
2+
=============================== =======================================
After the option under the Beneficiary Insurance Rider has
been exercised, premiums will be calculated as specified under
Single Life Policies, above, and will be based on the original
issue age, duration since issuance of the original policy and
the original underwriting classification.
f. POLICY CONTINUATION RIDER:
The annual standard premiums per $1000 reinsured shall be 100%
of the Survivor Purchase Option/Designated Second Life Rider
rates attached to this Schedule B as Exhibit B.V. After the
option is elected the reinsurance premiums will be based on
the surviving insured's original issue age and underwriting
classification. If the second insured dies within 90 days of
the death of the first insured, an additional death benefit is
payable.
g. FLEXIBLE TERM RIDER (For Single Life, First-to-Die and Second-to-Die
Policies)
Reinsurance premiums shall be the same as for the base plan.
h. ADDS RIDER AND DIVIDEND ADDITIONS (For Single Life, First-to-Die and
Second-to-Die policies)
Reinsurance premiums shall be the same as for the base plan.
i. POLICY SPLIT OPTION RIDER: Reinsurance premiums for this
option shall be % of the reinsurance premiums for the base
policy.
j. EXERCISE OF THE POLICY SPLIT OPTION RIDER: After a split, the
reinsurance premiums per $1,000 reinsured shall be the CEDING
COMPANY'S RPR Rates based on attained ages at the time of the
split.
The policy shall be split on a 50/50 basis and each life must
be rated Table 6 or better.
k. INDIVIDUAL TERM RIDERS: Reinsurance premiums, per $1000
reinsured under the Individual Term Riders, shall be the
Single Life Rates as stated in Section 1.a of this Schedule B.
-23-
l. CONTINUING COVERAGE RIDER:
Reinsurance premiums for this rider shall be 85% of the rider
premiums attached to this Schedule B as Exhibit X.XX.
m. OTHER RIDERS:
i. JOINT LIFE:
Standard annual reinsurance premiums, per $1000 reinsured
for the riders listed below, shall be the same rates as
for the base plan.
|X| Additional Protection Benefit Rider
|X| Estate Preservation Rider
|X| Enhanced Death Benefit Rider*
|X| Automatic Increase Rider*
*Reinsurance rates for these riders shall be based on the
original issue age, duration since issuance of the rider and
the original underwriting classification.
ii. Single Life:
Standard annual reinsurance premiums, per $1000 reinsured
for the riders listed below, shall be the same rates as
for the base plan.
|X| Additional Protection Benefit Rider
|X| Automatic Increase Rider*
*Reinsurance rates for these riders shall be based on the
original issue age, duration since issuance of the rider and
the original underwriting classification.
-24-
SCHEDULE B, CONTINUED
n. Flat Extra reinsurance premiums are the following percentages of such
premiums charged the insured:
=======================================================================
Permanent flat extra premiums (for more than 5 years duration)
-----------------------------------------------------------------------
---------------------------------- ------------------------------------
First Year
---------------------------------- ------------------------------------
---------------------------------- ------------------------------------
Renewal Years
================================== ====================================
=======================================================================
Temporary flat extra premiums (for 5 years or less duration)
-----------------------------------------------------------------------
---------------------------------- ------------------------------------
All Years
================================== ====================================
Flat Extra premiums shall be added to each single life rate
before Frasierization.
2. AGE BASIS:
Age Nearest Birthday
3. CONVERSION RATES
Annual reinsurance premiums for conversions to plans not reinsured with
the Reinsurer, as specified in Article 16.b, shall be the Ceding
Company's then current rates for permanent insurance. Reinsurance rates
shall be based on the original issue age, duration since issuance of
the original policy and the original underwriting classification.
4. FACULTATIVE RATE LIMIT:
The automatic reinsurance rates in this Agreement can be used for
facultative reinsurance up to the limits shown below.
a. The total amount of insurance in force and applied for, per life, with
all companies, does not exceed $50,000,000.
-25-
SCHEDULE B, CONTINUED
b. The total amount reinsured with the Reinsurer, per life, does not exceed the
following:
========================== ======================== ======================== =========================
Issue Ages Std - Table 4 Tables 5 - 8 Tables 9 - 16
-------------------------- ------------------------ ------------------------ -------------------------
-------------------------- ------------------------ ------------------------ -------------------------
0-75 $20,000,000 $15,000,000 $10,000,000
-------------------------- ------------------------ ------------------------ -------------------------
-------------------------- ------------------------ ------------------------ -------------------------
76-80 $15,000,000 $10,000,000 $5,000,000
-------------------------- ------------------------ ------------------------ -------------------------
-------------------------- ------------------------ ------------------------ -------------------------
81-85 $5,000,000 $0 $0
========================== ======================== ======================== =========================
For joint First-to-Die policies, the maximum amount in the
table above is determined by the life that produces the
smallest amount.
For joint Second-to-Die policies, the maximum amount in the
table above is determined by the life that produces the
largest amount.
For policies where one life is uninsurable, if the healthier life is
rated above Table 8, the Reinsurer can offer only $1,500,000, if
available.
If either limit is exceeded, then rates shall be 110% times the
automatic reinsurance rates in this Agreement.
-26-
EXHIBIT B.I
1990-95 Basic Select and Ultimate Table with
Manulife's High Issue Age Extension
(See Attached)
-27-
EXHIBIT B.II
CALCULATION OF "FRASIERIZED" SECOND TO DIE MORTALITY RATES
The following steps convert the single life mortality rates, attached
as EXHIBIT B.1.I, into "Frasierized" second to die mortality rates.
1. q[x] + t - 1 are the single life mortality rates for lives x and y,
in policy year t,
q[y] + t - 1 obtained by taking the rates shown in Exhibit B.1.I.,
attached to this Schedule B.1, and dividing by 1000.
(For substandard lives, add an extra 25% per table plus
any flat extra.)
2. p[x] + t - 1 = 1 - q[x] + t - 1
p[y] + t - 1 = 1 - q[y] + t - 1
3. t-1p[x] = p[x].p[x] + 1.p[x] + 2....p[x]+t-2
t-1p[y] = p[y].p[y] + 1.p[y] + 2....p[y]+t-2
4. q[x]+t-1:[y]+t-1 = T-1P[X] T-1P[Y] Q[X]+T-1 Q[Y]+T-1 + T-1P[X]
(1 - T-1P[Y]) Q[X]+T-1 + (1 - T-1P[X]) T-1P[Y] Q[Y] +T-1 t-1p[x]
--------------------------------------------------------------------
t-1p[y] + t-1p[x] (1 - t-1p[y]) + (1 - t-1p[x]) t-1p[y]
The Frazierized second to die mortality rate per $1,000 in policy year
t = 1000q[x]+t-1:[y]+t-1.
-28-
EXHIBIT B.III
Last Survivor Premium Rates
(See Attached)
-29-
EXHIBIT B.IV
Beneficiary Insurance Option Rates
(See Attached)
-30-
EXHIBIT B.V
Survivor Purchase Option/Designated Second Life Rider
(See Attached)
-31-
EXHIBIT X.XX
Continuing Coverage Rider Premiums
(See Attached)
-32-
SCHEDULE C
REPORTING INFORMATION
INFORMATION ON RISKS REINSURED
1. Type of Transaction
2. Effective Date of Transaction
3. Automatic/Facultative Indicator
4. Policy Number
5. Full Name of Insured
6. Date of Birth
7. Sex
8. Smoker/Nonsmoker
9. Policy Plan Code
10. Insured's State of Residence
11. Issue Age
12. Issue Date
13. Duration from Original Policy Date
14. Face Amount Issued
15. Reinsured Amount (Initial Amount)
16. Reinsured Amount (Current Amount at Risk)
17. Change in Amount at Risk Since Last Report
18. Death Benefit Option (For Universal Life Type Plans)
19. ADB Amount (If Applicable)
20. Substandard Rating
21. Flat Extra Amount Per Thousand
22. Duration of Flat Extra
23. XX Xxxxx (Yes or No)
24. Previous Policies (Yes or No)
25. Premiums
-33-
SCHEDULE C, CONTINUED
SAMPLE
POLICY EXHIBIT SUMMARY
(LIFE REINSURANCE ONLY)
CEDING COMPANY:
------------------------------ -- ----------- -- ------------ -- -------------------------
REINSURER:
------------------------------ -- ----------- -- ------------ -- -------------------------
ACCOUNT NO:
------------------------------ -- ----------- -- ------------ -- -------------------------
PREPARED BY: Phone: ( )
------------------------------ ------------ -------------------------
DATE PREPARED:
------------------------------ -- ----------- -- ------------ -- -------------------------
TYPE OF REINSURANCE:
Yearly Renewable Term
------------------------------------------
Coinsurance
------------------------------------------
Modified Coinsurance
------------------------------------------
Other
------------------------------------------
VALUATION DATE:
------------------
NUMBER OF AMOUNT OF
POLICIES REINSURANCE
A. In Force Beginning
of Period / /
------ ------ ------- ----------------- ---------------------------
B. New Paid Reinsurance Ceded
---------------- --------------------------
C. Reinstatements
---------------- --------------------------
D. Revivals
---------------- --------------------------
E. Increases (Net)
---------------- --------------------------
F. Conversion In
---------------- --------------------------
G. Transfers In
---------------- --------------------------
H. Total Increases (B - G)
---------------- --------------------------
I. Deaths
---------------- --------------------------
J. Maturities
---------------- --------------------------
K. Cancellations
---------------- --------------------------
L. Expiries
--------------- --------------------------
M. Surrenders
---------------- --------------------------
N. Lapses
---------------- --------------------------
O. Recaptures
---------------- --------------------------
P. Other Decreases (Net)
---------------- --------------------------
Q. Reductions
---------------- --------------------------
R. Conversions Out
--------------- --------------------------
S. Transfers Out
---------------- --------------------------
T. Total Decreases (I - S)
---------------- --------------------------
U. Current In Force / /
----- ------ ------ ---------------- --------------------------
(A + H - T)
-34-
SCHEDULE C, CONTINUED
SAMPLE
RESERVE CREDIT SUMMARY
CEDING COMPANY:
------------------------------ -- ----------- -- ------------ -- -------------------------
REINSURER:
------------------------------ -- ----------- -- ------------ -- -------------------------
ACCOUNT NO:
------------------------------ -- ----------- -- ------------ -- -------------------------
PREPARED BY: Phone: (
------------------------------ ------------ -------------------------
DATE PREPARED:
------------------------------ -- ----------- -- ------------ -- -------------------------
TYPE OF REINSURANCE:
Yearly Renewable Term
------------------------------------------
Coinsurance
------------------------------------------
Modified Coinsurance
------------------------------------------
Other
------------------------------------------
VALUATION DATE:
------------------
TYPE OF RESERVES:
Statutory
------------------------------------------
GAAP
------------------------------------------
Tax
------------------------------------------
ISSUE
VALUATION BASIS YEAR IN FORCE IN FORCE RESERVE
Mortality Interest Valuation Range Count AMOUNT CREDIT
A. Life Insurance
--------------- ------------- -------------- ------------- ------------- ------------- -----------
--------------- ------------- -------------- ------------- ------------- ------------- -----------
B. Accidental
Death Benefit
--------------- ------------- -------------- ------------- ------------- ------------- -----------
C. Disability
Active Lives
--------------- ------------- -------------- ------------- ------------- ------------- -----------
D. Disability
Disabled Lives
--------------- ------------- -------------- ------------- -----------
------------- -------------
E. Other
Please Explain
------------- -------------
--------------- ------------- -------------- ------------- -----------
grand total:
-------------
-35-
SCHEDULE C, CONTINUED
SAMPLE
ACCOUNTING SUMMARY
CEDING COMPANY:
------------------------------ -- ----------- -- ------------ -- -------------------------
REINSURER:
------------------------------ -- ----------- -- ------------ -- -------------------------
ACCOUNT NO:
------------------------------ -- ----------- -- ------------ -- -------------------------
PREPARED BY: Phone: ( )
------------------------------ ------------ -------------------------
DATE PREPARED:
------------------------------ -- ----------- -- ------------ -- -------------------------
TYPE OF REINSURANCE:
Yearly Renewable Term
------------------------------------------
Coinsurance
------------------------------------------
Modified Coinsurance
------------------------------------------
Other
------------------------------------------
VALUATION DATE:
----------------------------
LIFE WP AD TOTAL
Premiums
First Year
------------ ----------- ----------- ------------
Renewal
------------ ----------- ----------- ------------
Allowances
First Year
------------ ----------- ----------- ------------
Renewal
------------ ----------- ----------- ------------
Adjustments
First Year
------------ ----------- ----------- ------------
Renewal
------------ ----------- ----------- ------------
Net Due REINSURER
First Year
------------ ----------- ----------- ------------
Renewal
------------ ----------- ----------- ------------
TOTAL DUE
----------------- ----------- ------------ ------------
(The above information should be a summary of the detailed
information provided to the Reinsurer.)
-36-
SCHEDULE D
FACULTATIVE FORMS
(See attached sample forms.)
Application for Reinsurance
Notification of Reinsurance
-37-
AMENDMENT NO. 1
EFFECTIVE JUNE 1, 2002
to the
Automatic and Facultative
Yearly Renewable Term Reinsurance Agreement
Effective January 1, 2002
between
NATIONAL LIFE INSURANCE COMPANY
("Ceding Company")
And
("Reinsurer")
R E C I T A L S
WHEREAS, Reinsurer currently reinsures Ceding Company's plans or policies under
the Agreement; and
WHEREAS, Ceding Company wishes to cede and Reinsurer wishes to reinsure Ceding
Company's Accelerated Care Rider ("ACR") on Universal Life and Variable
Universal Life plans or policies ceded to Reinsurer under the Agreement.
A M E N D M E N T
The parties hereby agree to amend or modify the Agreement by adding the Ceding
Company's Accelerated Care Rider, as follows:
1. An Accelerated Care Rider may be added to the Universal Life or Variable
Universal Life products covered under this Agreement.
The reinsurance benefit is the Reinsurer's proportionate share of the
accelerated death benefit payable under this Agreement. The Accelerated
Care Rider payable under this Agreement is the Reinsurer's proportionate
share of the net amount at risk as shown in Article 7 of the Agreement,
reduced by the Ceding Company's discount percentage and subject to Ceding
Company's cap on the total death benefit payable to the insured. The cap
is either a dollar amount or a percentage of the total Accelerated Care
Rider. There are no reinsurance premiums for this benefit.
2. Except for those additional terms, conditions and modifications contained
in this Amendment 1, all other terms and conditions of the Agreement,
including amendments thereto, shall remain unchanged.
In witness of the foregoing, Ceding Company and Reinsurer have, by their
respective officers, hereby executed this Amendment 1 in duplicate on the dates
indicated below, with an effective date of June 1, 2002.
-38-
NATIONAL LIFE OF VERMONT
INSURANCE COMPANY
By: ______________________________ By: ________________________________
Title:______________________________ Title:________________________________
Date:_______________________________ Date:_________________________________
By: ______________________________ By: ________________________________
Title:______________________________ Title:________________________________
Date:_______________________________ Date:_________________________________
-39-
