Exhibit (g)(27)
LETTER OF INTENT
This Letter of Intent (hereinafter referred to as "Letter of Intent" or "LOI")
shall take effect as of August 30, 2005 and is made by and between [name of
reinsurance company] (hereinafter referred to as "Reinsurer") with offices in
[city and state of reinsurance company] and IDS Life Insurance Company
(hereinafter referred to as "Ceding Company" or "IDSL") with offices in
Minneapolis, Minnesota.
WHEREAS, Reinsurer and Ceding Company desire to enter into a reinsurance
arrangement whereby Reinsurer will reinsure a certain block of life
insurance policies issued and underwritten by Ceding Company;
WHEREAS, until such time as the parties can negotiate and execute a
reinsurance agreement covering the reinsurance transaction, the parties
desire to set forth in writing the general terms the parties have agreed
upon with respect to the reinsurance transaction; and
WHEREAS, those terms are expressed in this Letter of Intent, which the
parties intend to serve as a binding contract until such time that the
reinsurance agreement can be negotiated and executed, and which the
parties intend to serve as the basis for negotiation of the reinsurance
agreement, with the understanding that the parties will use their best
efforts to finalize the reinsurance agreement;
NOW THEREFORE, the parties hereby agree to the terms outlined as follows:
o REINSURANCE EFFECTIVE DATE
August 30, 2005
The Reinsurer will accept backdated policies with issue dates up to six
months prior to the effective date.
o PRODUCT SPECIFICATIONS
See Exhibit A
o REINSURANCE METHOD
90/10 First Dollar Quota Share YRT and 100% Excess of Retention
o REINSURANCE BASIS
Mortality only - YRT
1. Reinsured risk amounts will be calculated on each policy anniversary
2. During a policy year, reinsured risk amounts will be adjusted if
there is an increase or decrease in specified amount
3. Reinsured risk amount is the reinsurer's share of the policy net
amount at risk and is the basis for calculating premiums
4. Policy net amount at risk for death benefit option 1 is death benefit
less policy value (where death benefit is greater of specified amount
or policy value times tax corridor) and for option 2 is death benefit
less policy value (where death benefit is greater of specified amount
plus policy value or policy value times tax corridor)
5. Policy net amount at risk for riders is the specified amount
Cessions may be automatic, capacity facultative, or non-capacity
facultative
o REINSURANCE SHARE
Ceding Company will retain [percentage] quota share up to its maximum
retention limit
Automatic reinsurance divided among pool members
Facultative cessions on a case by case basis
Ceding Company has the right to increase per life retention limits
(retained percentage share and/or per life maximum) for new business at
any time upon 90 days advance written notice.
o PREMIUM TAXES
Not reimbursed
o UNDERWRITING REQUIREMENTS
The Reinsurer will automatically accept its share of mortality risk on the
above-referenced policies and riders provided that:
1. the Ceding Company keeps its retention as described in this LOI, and
2. the Ceding Company applies its normal underwriting guidelines and
manual, age and amount requirements as provided to the Reinsurer,
and
3. the sum of all amounts in force and applied for on the life with the
Ceding Company, excluding amounts being internally replaced, does
not exceed the Automatic Binding Limits set forth in this LOI, and
4. the amount of life insurance in force in all companies, including
any coverage to be replaced plus the amount currently applied for on
that life in all companies, does not exceed the Jumbo Limit stated
in this LOI, and
5. the application is on a life that has not been submitted
facultatively to the Reinsurer or any other reinsurer within the
last two (2) years, including the current application, unless
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IDSL - [redacted]
the reason for any prior facultative submission was solely for
capacity that may now be accommodated within the terms of this LOI.
With respect to Ceding Company's application of underwriting guidelines
and requirements as described in clause 2 above, Reinsurer will take into
consideration whether IDSL's underwriters acted in good faith and in a
manner substantially consistent with IDSL's underwriting guidelines and
manual, age and amount requirements and control procedures.
o INTERNAL REPLACEMENTS
A policy issued as an internal exchange or replacement of another policy
(whether or not the original policy was reinsured under this Agreement),
and underwritten by the Ceding Company in accordance with its underwriting
guidelines, standards and procedures for exchanges and replacements, will
be treated and covered as new business under this Agreement
(notwithstanding that suicide and contestability periods may be applied
from the date of the replaced or exchanged policy for coverage up to the
face amount of the replaced or exchanged policy in accordance with the
Ceding Company's exchange guidelines). Reinsurance of any such policy may
be ceded automatically or facultatively under this Agreement according to
the same terms and conditions as apply to other new business. Reinsurance
premium rates will be based on the issue age, issue date, and underwriting
classification of the new policy.
If a policy reinsured under this Agreement is internally exchanged or
replaced with another policy, reinsurance will continue under this
Agreement or, if applicable, any different agreement between the parties
providing reinsurance coverage for the new policy. In that event,
reinsurance premium rates will be based on issue age and duration of the
original policy and on the underwriting classification of the new policy.
Notwithstanding the foregoing, if there is a reinsurance agreement between
the parties providing reinsurance coverage for the new policy and such
agreement treats the policy as new business, then the issue age, duration,
and underwriting classification shall be based on the new policy.
It is understood and agreed that policies resulting from any wholesale
internal exchange program undertaken by the Ceding Company shall not be
covered by this LOI, unless approved in advance in writing by the
Reinsurer. The foregoing restriction on wholesale internal exchange
programs shall not be construed to prohibit waiver of surrender charges or
other policies or practices set forth in the Ceding Company's Internal
Replacement Exchange Guidelines which the parties acknowledge have been
shared with the Reinsurer, nor prevent any communication to the company's
sales force about such guidelines.
o CONVERSIONS
Contractual term conversions from Ceding Company's term insurance policies
or riders (such as an Other Insured Rider or Children's Insurance Rider)
to a policy reinsured under this Agreement will be covered and treated the
same as any other new business under this Agreement except the issue age
and issue date of the original term policy or rider shall apply for
purposes of determining reinsurance premium rates and Reinsurer's share,
if any, shall be
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as provided in any reinsurance agreement that covered the original term
policy or rider. Notwithstanding the foregoing, contractual term
conversions from term insurance policies or riders less than one year old
at time of conversion and which were not reinsured facultatively will be
reinsured as new business under this Agreement based on issue age, issue
date, and underwriting classification of the new policy. In any event,
contractual conversions for purposes of this paragraph shall not include
any increase in the amount ceded to Reinsurer nor any improvement in
underwriting classification, which instead shall be handled as described
in the following paragraph.
In the event a term insurance policyholder seeks to convert to a policy
reinsured under this Agreement and at the same time increase the face
value or specified amount of the policy, or improve the underwriting
classification, if the exchange is agreed to by the Ceding Company, such
exchange shall be treated as an internal replacement and handled in the
manner set forth in the first paragraph of the foregoing section relating
to internal replacements.
In the event of a contractual conversion of an Other Insured Rider that is
issued in connection with a policy reinsured under this Agreement, such
conversion shall be treated as an internal replacement and handled in the
manner set forth in the second paragraph of the foregoing section relating
to internal replacements.
o TRANSITION
Following introduction of the VUL IV Plus and VUL IV Plus - ES plans in
any given state, a policy issued on existing IDSL life plans may be
returned for a policy on the new plans without requiring additional
underwriting evidence, if the policyowner's request for the new policy is
made within the original policy's free-look period. For purposes of this
paragraph, the free-look period administered by IDSL will be 30 days. The
underwriting class may be improved in this event only if the insured fully
qualifies for the new class based on the underwriting evidence submitted
for the original application. The new policy shall be treated as new
business under this Agreement reinsured automatically or facultatively, as
applicable, subject to the terms herein.
o MAXIMUM MORTALITY FOR AUTOMATIC REINSURANCE
Each individual risk must not exceed Table P or its equivalent on a flat
extra premium basis.
o RESIDENCE & MAXIMUM ISSUE AGE REQUIREMENTS FOR AUTOMATIC REINSURANCE
Ceding Company may automatically cede risk on (i) any insureds who are not
international clients or (ii) any international clients who meet the
criteria listed in the Ceding Company's "Guidelines for Underwriting
International Clients" which has been reviewed and approved by the
Reinsurer.
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IDSL - [redacted]
o CEDING COMPANY'S MAXIMUM RETENTION LIMIT
-------------------------------------
Issue Age Retention
-------------------------------------
[ages] [dollar amount]
-------------------------------------
[ages] [dollar amount]
-------------------------------------
1. The per life retention limit shall apply to all of Ceding Company's
policies other than VUL III; and
2. Any excess over the retention limit will be ceded automatically in
accordance with the terms of this LOI unless the Ceding Company
seeks facultative coverage for the applicable policy.
o POOL BINDING LIMIT
-----------------------------------------------------------
Issue Standard -
Age Table D Table E - H Table I - P
-----------------------------------------------------------
[ages] [dollar amount] [dollar amount] [dollar amount]
-----------------------------------------------------------
[ages] [dollar amount] [dollar amount] [dollar amount]
-----------------------------------------------------------
[ages] [dollar amount] [dollar amount] [dollar amount]
-----------------------------------------------------------
1. The Ceding Company may not cede reinsurance automatically if the sum
of all amounts inforce and applied for on the same life with the
Ceding Company, excluding amounts being replaced, exceed the binding
limits set forth herein.
2. There is no minimum for automatic cessions.
3. Potential AIBR increases are not subject to the binding and jumbo
limits and may be ceded automatically if the base policy is ceded
automatically.
4. If an applicant has existing joint coverage with the Ceding Company,
the full face amount of the joint policy will be applied against the
binding and jumbo limits.
o CONDITIONAL RECEIPT POOL BINDING LIMIT
With respect to conditional receipts in connection with applications taken
by the Ceding Company, the Reinsurer's liability will not exceed its
proportionate share of (a) [dollar amount], or (b) [dollar amount] if the
amount is ordered by a court of competent jurisdiction or the result of a
settlement with the applicant.
o JUMBO LIMIT
-----------------------------
Issue Age Jumbo Limit
-----------------------------
[ages] [dollar amount]
-----------------------------
[ages] [dollar amount]
-----------------------------
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IDSL - [redacted]
Jumbo is defined as inforce and applied for, before replacement.
o CLAIMS REQUIREMENTS
The Ceding Company will promptly notify the Reinsurer after it receives a
claim on a policy reinsured under this LOI. The Ceding Company will review
and settle claims without prior approval from the Reinsurer. The Ceding
Company may consult with the Reinsurer, but ultimate authority to pay or
deny a claim will rest solely with the Ceding Company, and failure to
follow the Reinsurer's recommendation, if any, will not relieve the
Reinsurer of its reinsurance liability.
For (i) contestable claims covered by facultative reinsurance regardless
of amount and (ii) claims (whether contestable or non-contestable) in
excess of [dollar amount] in which the death of the insured occurred in a
country other than the United States (including territories and
possessions) or Canada, the Ceding Company will send the Reinsurer full
underwriting and claims investigation information along with proof of
payment by the Ceding Company. For all other claims, the Ceding Company
will provide the Reinsurer with proper claim proofs, which are a copy of
the proof of payment by the Ceding Company, a copy of the insured's death
certificate and a copy of the claimant's statement.
The Ceding Company's contractual liability for policies covered under this
LOI is binding on the Reinsurer, provided that the claim was paid in good
faith and the company's standard practices were followed in the
adjudication of the claim.
Notwithstanding the foregoing, the Reinsurer retains the right upon
reasonable notice to request and receive all reasonably necessary
documents in connection with any claim. Claims covered under this LOI
shall be paid within 30 calendar days of receipt of proper claim proofs
or, when requested, within 30 calendar days of receipt of all requested
documents in connection with a claim. Reinsurer assures Ceding Company
that such requests for additional documents prior to payment of any claim
will be made only occasionally and not routinely unless warranted by
factors such as suspected fraud or other identifiable concerns.
The Ceding Company will promptly advise the Reinsurer of its intention to
contest, compromise, or litigate any claim involving a reinsured policy.
Unless the Reinsurer does not accept participation in such contest,
compromise, or litigation, the Reinsurer will pay its share of any
settlement or decision up to the maximum that would have been payable
under the specific policy had there been no controversy. If the Reinsurer
does not accept participation in such contest, compromise, or litigation,
the Reinsurer must then fulfill its obligation by paying the Ceding
Company its full share of reinsurance and will not share in any subsequent
reduction in liability arising out of or in connection with the claim.
Reinsurer's liability for claims shall include its proportionate share of
any interest the Ceding Company must pay on death proceeds through the
date of settlement. Reinsurer shall also pay its share of non-routine
claim investigation and legal expenses in connection with the
investigation, settlement, or litigation of claims unless it has already
discharged its liability in the manner mentioned above. If the Reinsurer
discharges its liability, it will pay its share of
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non-routine claim investigation and legal expenses incurred to the date it
notifies the Ceding Company of its intent to discharge liability.
The Reinsurer will not participate in punitive damages or compensatory
damages "extra contractual obligations") that are awarded against the
Ceding Company as a result of an act, omission, or course of conduct
committed solely by the Ceding Company, its agents, or representatives in
connection with claims covered under this LOI.
However, the parties recognize that circumstances may arise in which
equity would require the Reinsurer, to the extent permitted by law, to
share proportionately in extra contractual obligations. Such circumstances
are difficult to define in advance but would generally be those situations
in which the Reinsurer, in writing, recommended, consented to, or ratified
the act or course of conduct of the Ceding Company that ultimately
resulted in the assessment of extra contractual obligations. In those
situations, the Reinsurer shall be responsible for paying its
proportionate share of the extra contractual obligations.
o STATUTORY RESERVES
Reinsurer and Ceding Company intend that the Ceding Company will receive
statutory reserve credit in its state of domicile for the insurance risks
ceded to the Reinsurer. They agree to make all reasonable efforts to
ensure that this is accomplished.
o ADMINISTRATION
Self-Administered
o REPORTING MEDIA
Reporting requirements will be as mutually agreed upon by the parties.
Monthly transaction reports will include:
o New Business
o First Year - Other than New Business
o Renewal Year
o Changes and Terminations
o Accounting Information
Quarterly Periodic Reports will include:
o Statutory Reserve Information
o Policy Exhibit Information
o Inforce
o RECAPTURE
Recapture shall be permitted without fee after [number] policy years at
the option of the Ceding Company which will be exercised by increasing its
per life retention limit and/or by
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IDSL - [redacted]
increasing its retained share for policies ceded under this LOI. Once
elected, recapture must be applied consistently to all policies covered
under this LOI.
o TERMINATION
This agreement will be unlimited in its duration and with respect to
existing business will remain inforce until termination or expiry of the
covered policies or until termination for nonpayment of reinsurance
premiums.
Either the Ceding Company or the Reinsurer may terminate the reinsurance
agreement with respect to new business by giving ninety (90) days' written
notice by certified or registered mail to the other party. Notwithstanding
the foregoing, in the event either company materially breaches its
obligations under the reinsurance agreement, the other party may
immediately terminate the agreement for new business, in addition to all
other available rights and remedies.
o YRT RATE GUARANTEE
The maximum reinsurance premium rates which may be charged by the
Reinsurer shall be the statutory valuation premiums for yearly renewable
term insurance at the maximum interest rates and minimum mortality rates
applicable to the reinsured policies for each year of issue as prescribed
by law.
Reinsurer may raise reinsurance premium rates for existing business only
if, and only to the same proportionate extent, it raises premium rates on
all of Reinsurer's other reinsurance business with all companies, except
for any business on which the Reinsurer is contractually prohibited from
raising rates.
If the Reinsurer increases its premium rates for existing business, the
Ceding Company reserves the right to recapture business affected with no
recapture fee. In any event, Reinsurer may not increase rates for either
new or existing business until it has given 90 days advance written notice
to Ceding Company. Reinsurer's rate increase or Ceding Company's
recapture, as applicable, shall take effect on the anniversary of each
policy covered by this Agreement following the aforementioned 90 day
notice period.
o CONFIDENTIALITY
The parties will protect each other's customer and proprietary information
and will ensure compliance with all applicable state and federal privacy
laws.
o GENERAL PROVISIONS
Reinsurance Agreement. Reinsurer and Ceding Company agree to execute a
reinsurance agreement or amendment which will cover the business specified
above. The reinsurance agreement will include the following provisions:
Arbitration, Insolvency, Entire Agreement and Amendment, Extra-Contractual
Damages, Errors and Omissions, Inspection of Records,
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IDSL - [redacted]
OFAC Compliance, Offset, DAC Tax, Insolvency, Non-Transferability, Dispute
Resolution, Good Faith, and Confidentiality.
Term. This Letter of Intent shall begin as of the effective date set forth
above and shall run continuously until the date on which the reinsurance
agreement has been executed by both parties, or until terminated in
writing by mutual agreement of the parties.
Authorization. Each party shall proceed to obtain all corporate approvals
and authorizations that it deems necessary to allow it to enter into the
reinsurance agreement.
Assignment. This Letter of Intent may not be assigned without the express
written consent of the non-assigning party and shall be binding on both
parties' successors, heirs and permitted assigns.
Choice of Law. This Letter of Intent shall be governed by and construed in
accordance with the laws of the State of Minnesota.
IN WITNESS WHEREOF, Reinsurer and Ceding Company have executed this Letter
of Intent reflecting their mutual agreement to the terms and conditions
specified herein.
IDS LIFE INSURANCE COMPANY [name of reinsurance company]
By: /s/ Xxxxxxx X. Xxxxxxxx By: [signature]
------------------------ (signature)
(signature)
Xxxxxxx X. Xxxxxxxx [name]
(print or type name) (print or type name)
Title: President Title: [title]
Date: 8/30/05 Date: 8/29/05
Location: Minneapolis, MN Location: [city and state of
reinsurance company]
Attest: /s/ Xxxxxxx X. Xxxxxxxx Attest: [signature]
----------------------- (signature)
(signature)
Title: Reinsurance Officer Title: [title]
ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
REINSURER'S POOL SHARE: [PERCENTAGE]
ANTICIPATED DATE OF FIRST REPORTING: OCTOBER 31, 2005
--------------------------------------------------------------------------------
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IDSL - [redacted]
EXHIBIT A
Specifications
o PRODUCT(S) REINSURED
VUL IV Plus; VUL IV Plus - ES
o AUTOMATIC REINSURANCE PREMIUMS
YRT reinsurance rates per $1000 net amount at risk are expressed in the
following table as a percentage of the 2001 VBT ALB as modified by the
Ceding Company to be attached to the treaty:
U/W CLASS YEARS 1 +
--------------------------- ----------------
Super Preferred NS [percentage]
Preferred Nonsmoker [percentage]
Standard Nonsmoker [percentage]
Preferred Smoker [percentage]
Standard Smoker [percentage]
Reinsurance premiums for substandard table ratings are an additional
[percentage] per table of the base plan rates.
Flat extra premiums are reinsured at the Ceding Company's flat extra
premium rates:
TERM OF FLAT EXTRA FIRST YEAR ALLOWANCE RENEWAL YEARS ALLOWANCE
------------------------ ----------------------- ---------------------------
More than 5 Years [percentage] [percentage]
5 Years or Less [percentage] [percentage]
o FACULTATIVE REINSURANCE PREMIUMS
Facultative reinsurance premiums are the same as the automatic reinsurance
premiums specified above.
o RIDER(S) REINSURED
Other Insured Rider (OIR)
Automatic Increasing Benefit Rider (AIBR)
Base Insured Rider (BIR)
Exchange of Insured Rider (EOI)
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IDSL - [redacted]
o RIDER(S) NOT REINSURED
Waiver of Monthly Deduction Rider
Children's Insurance Rider
Accidental Death Benefit Rider
Accelerated Benefit Rider (the Ceding Company will treat any payments
under the Accelerated Benefit Rider as a lien and recover reinsurance upon
death of the insured)
o AGE BASIS
ALB
o PREMIUM PAYMENT MODE
Annually in advance
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VUL IV Plus/ES LOI
IDSL - [redacted]
