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AUTOMATIC AND FACULTATIVE
YEARLY RENEWABLE TERM REINSURANCE
AGREEMENT
EFFECTIVE April 30, 2000
PRUCO LIFE INSURANCE COMPANY
(hereinafter referred to as "PRUCO")
000 Xxxxxxxxxx Xxxxxx
Xxxxxx, Xxx Xxxxxx 00000-0000
And
AUSA Life Insurance Company, Inc.
(hereinafter referred to as "AUSA")
0 Xxxxxxxxxxxxxx Xxxx
Xxxxxxxx, XX 00000
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Table of Contents
1. PARTIES TO THE AGREEMENT..................................................3
2. EFFECTIVE DATE OF THE AGREEMENT...........................................3
3. SCOPE OF THE AGREEMENT....................................................3
4. DURATION OF THE AGREEMENT.................................................3
5. BASIS OF REINSURANCE......................................................3
6. AUTOMATIC REINSURANCE TERMS...............................................4
a. CONVENTIONAL UNDERWRITING............................................4
b. RESIDENCE............................................................4
c. OCCUPATION...........................................................4
d. AUTOMATIC PORTION REINSURED..........................................4
e. RETENTION............................................................4
f. AUTOMATIC ACCEPTANCE LIMIT...........................................4
g. JUMBO LIMIT..........................................................4
h. MINIMUM CESSION......................................................4
i. FACULTATIVE QUOTES...................................................4
7. AUTOMATIC REINSURANCE NOTICE PROCEDURE....................................4
8. FACULTATIVE OBLIGATORY REINSURANCE........................................4
9. FACULTATIVE REINSURANCE...................................................5
10. COMMENCEMENT OF REINSURANCE COVERAGE......................................5
a. AUTOMATIC REINSURANCE................................................5
b. FACULTATIVE OBLIGATORY REINSURANCE...................................5
c. FACULTATIVE REINSURANCE..............................................6
d. PRE-ISSUE COVERAGE...................................................6
11. REINSURANCE PREMIUM RATES.................................................6
a. LIFE REINSURANCE.....................................................6
b. RATES NOT GUARANTEED.................................................6
12. PAYMENT OF REINSURANCE PREMIUMS...........................................6
a. PREMIUM DUE..........................................................6
b. FAILURE TO PAY PREMIUMS..............................................6
c. PREMIUM ADJUSTMENT...................................................7
13. PREMIUM TAX REIMBURSEMENT.................................................7
14. DAC TAX AGREEMENT.........................................................7
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15. REPORTS...................................................................8
16. RESERVES FOR REINSURANCE..................................................8
17. CLAIMS....................................................................8
a. NOTICE...............................................................8
b. AMOUNT AND PAYMENT OF BENEFITS.......................................8
c. CLAIM SETTLEMENTS....................................................8
d. CLAIM EXPENSES.......................................................8
e. EXTRACONTRACTUAL DAMAGES.............................................8
18. MISREPRESENTATION, SUICIDE, AND MISSTATEMENT..............................9
19. POLICY CHANGES............................................................9
a. NOTICE...............................................................9
b. INCREASES............................................................9
c. REDUCTION OR TERMINATION.............................................10
d. PLAN CHANGES.........................................................10
e. DEATH BENEFIT OPTION CHANGES.........................................10
f. REDUCED PAID-UP INSURANCE............................................10
20. RECAPTURE.................................................................10
21. REINSTATEMENTS............................................................11
a. AUTOMATIC REINSTATEMENT..............................................11
b. FACULTATIVE REINSTATEMENT............................................11
c. PREMIUM ADJUSTMENT...................................................11
22. ERRORS AND OMISSIONS.................................................11
23. INSOLVENCY................................................................11
24. ARBITRATION...............................................................12
a. GENERAL..............................................................12
b. NOTICE...............................................................12
c. PROCEDURE............................................................12
d. COSTS................................................................12
25. GOOD FAITH; FINANCIAL SOLVENCY............................................13
26. MEDICAL INFORMATION BUREAU................................................13
27. GOVERNING LAW.............................................................13
28. ASSIGNMENT................................................................14
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AUTOMATIC AND FACULTATIVE YEARLY RENEWABLE TERM
REINSURANCE AGREEMENT
1. PARTIES TO THE AGREEMENT
This Agreement is solely between AUSA and PRUCO, a life insurance company
domiciled in the State of Arizona. There is no third party beneficiary to
this Agreement. Reinsurance under this Agreement will not create any right
or legal relationship between AUSA and any other person, for example, any
insured, policyowner, agent, beneficiary, or assignee. PRUCO agrees that
it will not make AUSA a party to any litigation between any such third
party and PRUCO. PRUCO will not use or disclose AUSA's name with regard to
PRUCO's agreements or transactions with these third parties unless AUSA
gives prior written approval for the use or disclosure of its name or
unless PRUCO is compelled by law to do so.
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 the
later of (1) when this Agreement terminates and (2) when the underlying
policies are no longer in force. This Agreement shall not be bifurcated,
partially assigned, or partially assumed.
2. EFFECTIVE DATE OF THE AGREEMENT
This Agreement will be effective as of 12:01 A.M., April 30, 2000, and
will cover policies effective on and after that date.
3. SCOPE OF THE AGREEMENT
The text of this Agreement and all Exhibits, Schedules and Amendments are
considered to be the entire agreement between the parties. There are no
other understandings or agreements between the parties regarding the
policies reinsured other than as expressed in this Agreement. The parties
may make changes or additions to this Agreement, but they will not be
considered to be in effect unless they are made by means of a written
amendment that has been signed and dated by both parties.
4. DURATION OF THE AGREEMENT
The duration of this Agreement will be unlimited. However, either party
may terminate the Agreement for new business at any time by giving the
other a 90-day prior written notice. AUSA will continue to accept new
reinsurance during the 90-day period.
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.
Existing reinsurance will not be affected by the termination of this
Agreement with respect to new reinsurance. Existing reinsurance will
remain in force until the termination or expiry of the underlying policies
on which the reinsurance is based as long as PRUCO continues to pay
reinsurance premiums as described in Section 12. However, existing
reinsurance may be terminated in accordance with the recapture provision
described in Section 20.
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5. BASIS OF REINSURANCE
Reinsurance under this Agreement will be on the Yearly Renewable Term
basis for the net amount at risk on the portion of each policy that is
reinsured as described in Schedule A.
6. AUTOMATIC REINSURANCE TERMS
AUSA agrees to automatically accept contractual risks on the life
insurance plans shown in Schedule A, subject to the following
requirements:
a. CONVENTIONAL UNDERWRITING. Automatic reinsurance applies only to
insurance applications underwritten by PRUCO according to PRUCO's
conventional underwriting and issue practices. Upon request, PRUCO
shall provide AUSA with a copy of its current underwriting and issue
practices and guidelines.
In the event of significant changes in underwriting practices in the
industry, it may be appropriate for PRUCO or AUSA to request of the
other party changes in the underwriting requirements. The party
requesting the change must provide a 120-day advance written notice
to the other party before the effective date of such change.
Recognition of reinsurance premium rates related to these changes
must be determined within the 120-day period. If the underwriting
change or rate change is unacceptable to either party, this
Agreement may be unilaterally terminated for acceptance of new
business with a 90-day written termination notice to the other
party.
b. RESIDENCE. To be eligible for automatic reinsurance, each insured
must either be a resident of the United States or Canada at the time
of issue or be a resident of another country that meets PRUCO's
special underwriting requirements pertaining to foreign residence.
c. OCCUPATION. To be eligible for automatic reinsurance, the insured
must not be employed in an occupation as shown in the Occupation
Exclusion List in Schedule A.
d. AUTOMATIC PORTION REINSURED. For any policy reinsured under
automatic reinsurance, the portion reinsured is shown in Schedule A.
e. RETENTION. PRUCO will retain, and not otherwise reinsure, an amount
of insurance on each life equal to its retention shown in Schedule
A.
f. AUTOMATIC ACCEPTANCE LIMIT. For any policy to be reinsured under
automatic reinsurance, the face amount shall not exceed the
Automatic Acceptance Limit as shown in Schedule A.
g. JUMBO LIMIT. For any policy to be reinsured under automatic
reinsurance, the total amount of insurance in force and applied for
in all companies shall not exceed the Jumbo Limit as shown in
Schedule A.
h. MINIMUM CESSION. The minimum amount of reinsurance per cession that
AUSA will accept is shown in Schedule A.
i. FACULTATIVE QUOTES. The risk shall not have been submitted on a
facultative basis to AUSA or any other reinsurer.
7. AUTOMATIC REINSURANCE NOTICE PROCEDURE
After the policy has been paid for and delivered, PRUCO will submit all
relevant individual policy information, as defined in Schedule C, in its
next statement to AUSA.
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8. FACULTATIVE OBLIGATORY REINSURANCE
When a policy does not qualify for automatic reinsurance because (1) the
Automatic Acceptance Limit is exceeded, (2) the Jumbo Limit is exceeded or
(3) the applicant is employed in an occupation included in the Occupation
Exclusion List in Schedule A, PRUCO may make a request to reserve capacity
through facultative obligatory reinsurance by contacting AUSA by
facsimile. The request will include the name of the insured, date of
birth, ceding company, amount applied for and amount inforce. If PRUCO
reserves capacity and the policy is issued, PRUCO must submit a form
substantially similar to the "Notification of Reinsurance" form shown in
Schedule F.
9. FACULTATIVE REINSURANCE
PRUCO may apply for facultative reinsurance with AUSA 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. To obtain a facultative
reinsurance quote, PRUCO must submit the following:
a. A form substantially similar to the "Application for Reinsurance"
form shown in Schedule E.
b. Copies of the original insurance application, medical examiner's
reports, financial information, and all other papers and information
obtained by PRUCO regarding the insurability of the risk.
After receipt of PRUCO's application, AUSA will promptly examine the
material and notify PRUCO either of the terms and conditions of AUSA's
offer for facultative reinsurance or that no offer will be made. AUSA's
offer expires 120 days after the offer is made unless the written offer
specifically states otherwise. If PRUCO accepts AUSA's offer, then PRUCO
will make a dated notation of its acceptance in its underwriting file and
mail as soon as possible a formal reinsurance cession to AUSA using a form
substantially similar to the Notification of Reinsurance form shown in
Schedule F. If PRUCO does not accept AUSA's offer, then PRUCO will notify
AUSA in writing as soon as possible.
10. COMMENCEMENT OF REINSURANCE COVERAGE
Commencement of AUSA's reinsurance coverage on any policy or pre-issue
risk under this Agreement is described below:
a. AUTOMATIC REINSURANCE. AUSA's reinsurance coverage for any policy
that is ceded automatically under this Agreement will begin and end
simultaneously with PRUCO's contractual liability for the policy
reinsured.
In addition, AUSA will be liable for benefits paid under PRUCO's
conditional receipt or temporary insurance agreement if all of the
conditions for automatic reinsurance coverage under Section 6 of
this Agreement are met. AUSA's liability under PRUCO's conditional
receipt or temporary insurance agreement is limited to the lesser of
(1) AUSA's reinsured portion of the face amount of the policy and
(2) $200,000.
b. FACULTATIVE OBLIGATORY REINSURANCE. AUSA's reinsurance coverage for
any policy that is ceded under the terms of facultative obligatory
reinsurance in this Agreement will begin when (1) PRUCO accepts
AUSA's offer by making a dated notation of its acceptance in its
underwriting file and mailing the "Notification of Reinsurance" form
to AUSA and (2) the policy has been issued.
In addition, AUSA will be liable for benefits paid under PRUCO's
conditional receipt or temporary insurance agreement if the
conditions for automatic reinsurance stated in Section 6a, b, e, h,
and i of this Agreement are met. AUSA's liability under PRUCO's
conditional
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receipt or temporary insurance agreement will be limited to the
portion of $1,000,000 that is derived as the amount of capacity
reserved by PRUCO from AUSA divided by the total amount of capacity
reserved by PRUCO from all reinsurers.
c. FACULTATIVE REINSURANCE. AUSA's reinsurance coverage for any policy
that is ceded facultatively under this Agreement shall begin when
(1) PRUCO accepts AUSA's offer by making a dated notation of its
acceptance in its underwriting file and mailing the "Notification of
Reinsurance" form to AUSA and (2) the policy has been issued.
In addition, AUSA will be liable for benefits paid under PRUCO's
conditional receipt or temporary insurance agreement. AUSA's
liability under PRUCO's conditional receipt or temporary insurance
agreement will be limited to the portion of $1,000,000 that is
derived as the amount of capacity reserved by PRUCO from AUSA
divided by the total amount of capacity reserved by PRUCO from all
reinsurers.
d. PRE-ISSUE COVERAGE. The pre-issue coverage for benefits paid under
PRUCO's conditional receipt or temporary insurance agreement will be
effective once all initial medical exams and tests have been
completed. The pre-issue liability applies only once on any given
life at one time no matter how many conditional receipts or
temporary insurance agreements are in effect. After a policy has
been issued, no reinsurance benefits are payable under this
pre-issue coverage provision.
11. REINSURANCE PREMIUM RATES
a. LIFE REINSURANCE. The reinsurance premiums per $1000 are shown in
Schedule B. Reinsurance premiums for renewals are calculated using
(1) the issue ages, (2) the duration since issuance and (3) the
current underwriting classification.
b. RATES NOT GUARANTEED. The reinsurance premium rates are not
guaranteed. AUSA reserves the right to change the rates at any time.
If AUSA changes the rates, it will give PRUCO a 90-day prior written
notice of the change. Any change applies only to reinsurance
premiums due after the expiration of the notice period.
AUSA further agrees that PRUCO's right of recapture under Section 20
of this Agreement will be triggered if Prudential deems a rate
change unacceptable.
12. PAYMENT OF REINSURANCE PREMIUMS
a. PREMIUM DUE. For each policy reinsured under this Agreement,
reinsurance premiums are payable annually in advance. These premiums
are due on the issue date and each subsequent policy anniversary.
Within 30 days after the close of each reporting period, PRUCO will
send AUSA a statement of account for that period along with payment
of the full balance due. On any payment date, monies payable between
AUSA and PRUCO under this Agreement may be netted to determine the
payment due. This offset will apply regardless of the insolvency of
either party as described in Section 23. If the statement of account
shows a balance due PRUCO, AUSA will remit that amount to PRUCO
within 30 days of receipt of the statement of account. All financial
transactions under this Agreement will be in United States dollars.
If the reinsurance premium amounts cannot be determined on an exact
basis by the dates described below, such payments will be paid in
accordance with a mutually agreed upon formula which will
approximate the actual payments. Adjustments will then be made to
reflect actual amounts when such information is available.
b. FAILURE TO PAY PREMIUMS. If reinsurance premiums are 90 days past
due, for reasons other than those due to error or omission as
defined below in Section 22, the premiums will be considered in
default and AUSA may terminate the reinsurance by
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providing a 30-day prior written notice, provided payment is not
received within that 30-day period. AUSA will have no further
liability as of the termination date. PRUCO will be liable for the
prorated reinsurance premiums to the termination date. PRUCO agrees
that it will not force termination under the provisions of this
paragraph solely to avoid the recapture requirements or to transfer
the block of business reinsured to another reinsurer.
At the end of this 30-day period, AUSA's liability will
automatically terminate for all reinsurance on which balances remain
due and unpaid, including reinsurance on which balances became due
and unpaid during and after the 30-day notice period.
PRUCO may reinstate reinsurance terminated for non-payment of
balances due at any time within 60 days following the date of
termination. However, AUSA will have no liability for claims
incurred between the termination date and the reinstatement date.
c. PREMIUM ADJUSTMENT. If PRUCO overpays a reinsurance premium and AUSA
accepts the overpayment, AUSA's acceptance will not constitute or
create a reinsurance liability or increase in any existing
reinsurance liability. Instead, AUSA will be liable to PRUCO for a
credit in the amount of the overpayment. If a reinsured policy
terminates, AUSA will refund the excess reinsurance premium. This
refund will be on a prorated basis without interest from the date of
termination of the policy to the date to which a reinsurance premium
has been paid.
13. PREMIUM TAX REIMBURSEMENT
See Schedule B.
14. DAC TAX AGREEMENT
PRUCO and AUSA, herein collectively called the "Parties", or singularly
the "Party", 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 Internal Revenue Code Section 848, will capitalize specified
policy acquisition expenses with respect to this Agreement without
regard to the general deductions limitation of Section 848 (c) (1);
b. PRUCO and AUSA agree to exchange information pertaining to the net
consideration under this Agreement each year to insure consistency
or as otherwise required by the Internal Revenue Service;
c. PRUCO will submit to AUSA by May 1 of each year its calculation of
the net consideration for the preceding calendar year.
d. AUSA may contest such calculation by providing an alternative
calculation to PRUCO in writing within 30 days of AUSA 's receipt of
PRUCO's calculation. If AUSA does not so notify PRUCO, AUSA will
report the net consideration as determined by PRUCO in AUSA's tax
return for the previous calendar year;
e. If AUSA contests PRUCO'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 AUSA submits its
alternative calculation. If PRUCO and AUSA do not reach agreement on
the net amount of consideration within such 30-day period, then the
net amount of consideration for such year shall be determined by an
independent accounting firm acceptable to both PRUCO and AUSA within
20 days after the expiration of such 30-day period.
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f. PRUCO and AUSA agree that this election shall first be effective for
the 2000 calendar tax year and will be effective for all subsequent
taxable years for which this Agreement remains in effect.
AUSA and PRUCO 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.
15. REPORTS
The reporting period is shown in Schedule A. For each reporting period,
PRUCO will submit reports to AUSA with information that is substantially
similar to the information displayed in Schedule C.
In addition, the reports will include a billing and accounting summary and
a policy exhibit summary similar to the reports shown in Schedule D.
Within 15 business days after the end of each calendar year, PRUCO will
submit a reserve credit summary similar to that shown in Schedule D. PRUCO
will also submit this reserve credit summary within 10 business days after
the end of each other calendar quarter.
16. RESERVES FOR REINSURANCE
See Schedule A.
17. CLAIMS
a. NOTICE. PRUCO will notify AUSA as soon as reasonably possible after
PRUCO receives a claim for a policy reinsured under this Agreement.
After PRUCO has received all proper claim proofs and paid the claim,
PRUCO will send AUSA an itemized statement of the benefits paid by
PRUCO and all relevant information with respect to the claim
including the claim proofs. However, claim proofs will not be
required by AUSA if AUSA's net amount at risk is less than or equal
to $50,000 and PRUCO has paid the claim in full. In such cases,
PRUCO will provide AUSA with the cause of death.
b. AMOUNT AND PAYMENT OF BENEFITS. As soon as AUSA receives proper
claim notice and any required proof of the claim, AUSA will promptly
pay the reinsurance benefits due PRUCO. PRUCO's contractual
liability for claims is binding on AUSA. The maximum benefit payable
to PRUCO under each reinsured policy is the amount specifically
reinsured with AUSA.
c. CLAIM SETTLEMENTS. PRUCO will use its standard claim practice and
guidelines in the adjudication of all claims on policies reinsured
under this Agreement. Until such time as PRUCO has systems
capability to administer the right of AUSA to opt out of contested
claims, claim settlements made by PRUCO, including compromises,
shall be unconditionally binding on AUSA. AUSA will share in any
reduced amount in proportion to its share of the liability.
d. CLAIM EXPENSES. AUSA will pay its share of reasonable investigation
and legal expenses connected with the litigation or settlement of
policy claims. AUSA will also pay its share of any interest paid by
PRUCO on any claim payment. However, claim expenses do not include
routine claim and administration expenses, including PRUCO'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 PRUCO admits are payable are not
a claim expense under this Agreement.
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e. EXTRACONTRACTUAL DAMAGES. In no event will AUSA participate in
punitive or compensatory damages which are awarded against PRUCO as
a result of an act, omission or course of conduct committed by PRUCO
in connection with the insurance under this Agreement. AUSA will,
however, pay its share of statutory penalties awarded against PRUCO
in connection with the insurance reinsured under this Agreement. The
parties recognize that circumstances may arise in which equity would
require AUSA, to the extent permitted by law, to share
proportionately in certain assessed damages. Such circumstances are
difficult to define in advance, but generally would be those
situations in which AUSA was an active party and in writing either
directed, consented to, or ratified the act, omission, or course of
conduct of PRUCO which ultimately results in the assessment of
punitive and/or compensatory damages. In such situations, PRUCO and
AUSA would share such damages assessed in equitable proportions.
Routine expenses incurred in the normal settlement of uncontested
claims and the salary of an officer or employee of PRUCO are
excluded from this provision. For purposes of the provision, the
following definitions will apply:
"Punitive Damages" are those damages awarded as a penalty, the
amounts of which are not governed or fixed by statute;
"Statutory Penalties" are those amounts that are awarded as a
penalty, but are fixed in amount by statute;
"Compensatory Damages" are those amounts awarded to compensate for
actual damages sustained, and are not awarded as a penalty, nor
fixed in amount by statute.
18. MISREPRESENTATION, SUICIDE, AND MISSTATEMENT
If either a misrepresentation on an application or a death of an insured
by suicide results in the return of policy premiums by PRUCO under the
policy rather than payment of policy benefits, AUSA will refund all of the
reinsurance premiums paid for that policy to PRUCO. If there is an
adjustment for a misrepresentation or misstatement of age or sex, a
corresponding adjustment to the reinsurance benefit will be made.
19. POLICY CHANGES
a. NOTICE. If a reinsured policy is changed as described below, a
corresponding change will be made in the reinsurance for that
policy. PRUCO will notify AUSA of the change in PRUCO's next report
as stated in Section 15.
b. INCREASES. If a request for an increase in the amount of insurance
is made for a reinsured policy and the insured meets PRUCO's
underwriting requirements and PRUCO approves the increase under the
policy, then the amount of reinsurance under this Agreement will be
adjusted as of the effective date of the increase.
If a request for an increase is made for a reinsured policy and the
insured meets PRUCO's underwriting requirements and a new policy is
issued for the higher amount, then reinsurance under the old policy
will cease as of the effective date of the change, and reinsurance
under the new policy will commence as of the policy date of the new
policy.
If a request for an increase in a reinsured policy is granted
without the insured meeting PRUCO's underwriting requirements, then
reinsurance on the increase will not be allowed.
If a request for an increase does not meet all of the terms of
automatic reinsurance, then PRUCO may apply for facultative
obligatory reinsurance or facultative reinsurance as stated in
Section 8 and Section 9, respectively. When this happens, it is the
intent of PRUCO to
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reinsure the entire policy, i.e. the amount before the increase and
the amount of increase. If the facultative increase is allowed, the
automatic reinsurance on the amount before the increase will be
discontinued.
If a reinsured policy is increased as a result of a conversion from
term insurance and the increase is granted without the insured
meeting PRUCO's underwriting requirements, then reinsurance will
cease as of the effective date of the change.
c. REDUCTION OR TERMINATION. If the amount of insurance on a reinsured
policy is reduced, the reinsurance will be reduced proportionately
as of the effective date of the reduction.
If a reinsured policy is terminated, the reinsurance will cease on
the date of such termination.
d. PLAN CHANGES. If a reinsured policy is changed to another plan of
insurance that is not currently reinsured under this Agreement as
defined in Schedule A, then PRUCO will recapture in full the
coverage reinsured under this Agreement, and the reinsurance will
cease with respect to the policy as of the effective date of the
change.
If a policy that is not reinsured under this Agreement is changed to
a plan that is reinsured under this Agreement as defined in Schedule
A and the insured has met PRUCO's underwriting requirements for the
plan change, then reinsurance will commence as of the policy date of
the new plan.
e. DEATH BENEFIT OPTION CHANGES. If the death benefit option under a
reinsured policy is changed and the face amount of insurance is
either increased or decreased, the net amount at risk reinsured
under this Agreement after the change will be the same as before the
change.
f. REDUCED PAID-UP INSURANCE. If any policy reinsured under this
Agreement is changed to Reduced Paid-Up Insurance, the net amount at
risk reinsured will be adjusted as appropriate and reinsurance will
be continued in accordance with the provisions of the underlying
policy. Reinsurance payments for the adjusted policy will be
calculated using (1) the issue age of the original policy, (2) the
duration since issuance of the original policy and (3) the
underwriting classification immediately prior to the change to
Reduced Paid-Up Insurance.
20. RECAPTURE
At any time during the term of the Agreement, PRUCO may elect to recapture
in full the coverage reinsured under this Agreement following the
occurrence of either of the following events: (1) a "Risk Trigger Event"
as defined in Schedule A of this Agreement; or (2) a Plan Change as
described in Section 19 d. above: or (3) the Reinsurance Premium rates are
increased.
In addition, after the twentieth policy anniversary, PRUCO may elect to
recapture all or an appropriate portion of the coverage reinsured under
this Agreement to reflect increases in the maximum retention limits for
PRUCO and all of its affiliates, collectively, subsequent to the date of
policy issue. These maximum retention limits as of the effective date of
this Agreement are equal to the amounts shown in the Risk Retention Limits
table shown in Schedule A. The portion of the coverage that may be
recaptured would be directly related to the increase in the limits. To
illustrate, if the maximum retention limits are increased by 100%, then
the portion that may be recaptured from all reinsurers of the policies
reinsured under this Agreement would be equal to 100% of the portion of
each reinsured policy that is retained by PRUCO. Furthermore, the portion
that may be recaptured from AUSA would be determined as AUSA's prorata
share of the total portion reinsured with all reinsurers.
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If PRUCO elects to recapture the risks ceded to AUSA under this Agreement
as stated above, it will do so by giving written notice to AUSA. Upon the
delivery of such notice, all of the risks previously ceded under each of
the policies subject to this Agreement shall be recaptured, effective as
of the date specified in PRUCO's notice. If PRUCO does not specify in the
written notice the date that such recapture is to be effective, then the
recapture shall be effective immediately upon AUSA's receipt of the
notice.
If a policy is recaptured, AUSA will pay PRUCO the unearned reinsurance
premium as of the date of recapture. AUSA shall not be liable, under this
Agreement, for any claims incurred after the date of recapture.
21. REINSTATEMENTS
a. AUTOMATIC REINSTATEMENT. If PRUCO reinstates a policy that was
originally ceded to AUSA as either automatic reinsurance or
facultative obligatory reinsurance using conventional underwriting
practices, AUSA's reinsurance for the policy shall be reinstated.
b. FACULTATIVE REINSTATEMENT. If PRUCO has been requested to reinstate
a policy that was originally ceded to AUSA as facultative
reinsurance and the reinstatement is processed under PRUCO's Long
Form Reinstatement Process, then PRUCO will re-submit the
appropriate evidence for the case to AUSA for underwriting approval
before the reinsurance can be reinstated.
c. PREMIUM ADJUSTMENT. Reinsurance premiums for the interval during
which the policy was lapsed will be paid to AUSA on a YRT basis by
XXXXX.
00. ERRORS AND OMISSIONS
If either AUSA or PRUCO fails to comply with any of the terms of this
Agreement and it is shown that the failure was unintentional or the result
of a misunderstanding or an administrative oversight on the part of either
party, this Agreement will remain in effect. If the failure to comply
changes the operation or effect of this Agreement, both parties will be
put back to the positions they would have occupied if the failure to
comply had not occurred. This section will not apply to any facultative
submission until PRUCO has mailed the Notification of Reinsurance form to
AUSA.
23. INSOLVENCY
For the purpose of this Agreement, PRUCO or AUSA shall be deemed
"insolvent" if it does one or more of the following:
a. A court-appointed receiver, trustee, custodian, conservator,
liquidator, government official or similar officer takes possession
of the property or assets of either PRUCO or AUSA; or
b. Either PRUCO or AUSA is placed in receivership, rehabilitation,
liquidation, conservation, bankruptcy or similar status pursuant to
the laws of any state or of the United States; or
c. Either PRUCO or AUSA becomes subject to an order to rehabilitate or
an order to liquidate as defined by the insurance code of the
jurisdiction of the domicile of PRUCO or AUSA, as the case may be.
In the event that PRUCO is deemed insolvent, all reinsurance claims
payable hereunder shall be payable by AUSA on the basis of PRUCO's
liability under the policies reinsured without diminution because of the
insolvency of PRUCO. Such claims shall be payable by AUSA directly to
PRUCO, its liquidator or statutory successor. It is understood, however,
that in the event of such insolvency, the liquidator or receiver or
statutory successor of PRUCO shall give written notice to AUSA of the
pendency of a claim against AUSA on a risk reinsured hereunder within a
11
reasonable time after such claim is filed in the insolvency proceeding.
Such notice shall indicate the policy reinsured and whether the claim
could involve a possible liability on the part of AUSA. Failure to give
such notice shall not excuse the obligation of AUSA unless it is
substantially prejudiced thereby. During the pendency of such claim, AUSA
may investigate such claim and interpose, at its own expense, in the
proceeding where such claim is to be adjudicated, any defense or defenses
it may deem available to PRUCO, its liquidator, receiver or statutory
successor. It is further understood that the expense thus incurred by AUSA
shall be chargeable, subject to court approval, against PRUCO as part of
the expense of liquidation to the extent of a proportionate share of the
benefit which may accrue to PRUCO solely as a result of the defense
undertaken by AUSA.
In the event AUSA is deemed insolvent, AUSA will be bound by any legal
directions imposed by its liquidator, conservator, or statutory successor.
However, and if not in conflict with such legal directions, PRUCO shall
have the right to cancel this Agreement with respect to occurrences taking
place on or after the date AUSA first evidences insolvency. Such right to
cancel shall be exercised by providing AUSA (or its liquidator,
conservator, receiver or statutory successor) with a written notice of
PRUCO's intent to recapture ceded business. If PRUCO exercises such right
to cancel and recapture ceded business, such election shall be in lieu of
any premature recapture fee. Upon such election, PRUCO shall be under no
obligation to AUSA , its liquidator, receiver or statutory successor;
however, AUSA , its liquidator, receiver or statutory successor shall be
liable for all claims incurred prior to the date of recapture.
24. ARBITRATION
a. GENERAL. All disputes and differences under this Agreement that
cannot be amicably agreed upon by the parties shall be decided by
arbitration. 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 industry. The
arbitrators will consider this Agreement as 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. The arbitration shall take place within the United States.
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
disinterested arbitrators. The arbitrators will be current or former
executive officers or employees of life insurance or reinsurance
companies; however, these companies will not be either party or any
of their reinsurers or affiliates. 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 date of the mailing of the notification initiating the
arbitration, then select the third arbitrator.
Should either party fail to appoint an arbitrator or should the two
initial arbitrators be unable to agree on the choice of a third
arbitrator, each arbitrator will nominate three candidates, two of
whom the other will decline, and the decision will be made by
drawing lots on the final selection. Once chosen, the three
arbitrators will have the authority to decide all substantive and
procedural issues by a majority vote. 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.
12
d. COSTS. 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
equal cost of the third arbitrator.
25. GOOD FAITH; FINANCIAL SOLVENCY
Each party agrees that all matters with respect to this Agreement require
its utmost good faith. Each party or its representatives has the right at
any reasonable time to inspect the other's records relating to this
Agreement.
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. AUSA has entered into this Agreement in
reliance upon PRUCO's representations and warranties. Each party affirms
that it has and will continue to disclose all matters material to this
Agreement and each cession. Examples of such matters are a material change
in underwriting or issue practices or philosophy, or a change in each
party's ownership or control.
AUSA represents and warrants to PRUCO that AUSA is a licensed or
accredited reinsurer under the applicable laws and regulations of Arizona
and that AUSA satisfies each of the current, applicable legal and
regulatory requirements in Arizona necessary to fully entitle PRUCO to
take the maximum permissible credit for the risks ceded under this
Agreement on each of its statutory financial statements. AUSA acknowledges
that PRUCO is entering into this Agreement in reliance upon this and other
representations and warranties of AUSA, and AUSA agrees that, except as
provided in the immediately following paragraph, PRUCO's right of
recapture under Section 20 of this Agreement will be triggered if, at any
point in the future during the term of this Agreement, this representation
and warranty is no longer true and correct.
If at any point in the future during the term of this Agreement, AUSA's
representation and warranty in the immediately preceding paragraph is no
longer true and correct, PRUCO's right of recapture in Section 20 of this
Agreement will be triggered unless AUSA elects to, and does, provide, on a
timely basis, additional security in the form of a trust structure, letter
of credit, or other security acceptable to PRUCO. To avoid PRUCO's right
of recapture being triggered, any such additional security must in form
and substance satisfy all of the then current, applicable legal and
regulatory requirements in Arizona so as to fully entitle PRUCO to take
the maximum permissible credit for the risks ceded under this Agreement on
each of its statutory financial statements. To be considered furnished "on
a timely basis," the additional security must be in place and in effect
prior to the date legally required to enable PRUCO to avoid any period of
time during which credit may not lawfully continue to be taken on each of
PRUCO's statutory financial statements. If AUSA elects to furnish
additional security in the form of one or more letters of credit, to avoid
PRUCO's right of recapture under Section 20 of this Agreement, any such
letter of credit mush meet the additional requirements set forth in
Section 11 of Schedule A attached hereto.
26. MEDICAL INFORMATION BUREAU
AUSA is required to strictly adhere to the Medical Information Bureau
Rules, and PRUCO agrees to abide by these Rules, as amended from time to
time. PRUCO will not submit a preliminary notice, application for
reinsurance, or reinsurance cession to AUSA unless PRUCO has a signed,
currently required Medical Information Bureau authorization.
27. GOVERNING LAW
This Agreement shall be governed by the laws of the State of Arizona
without giving effect to the principles of conflicts of laws thereof.
13
28. ASSIGNMENT
This Agreement is not assignable by either party except by the express
written consent of the other.
14
In witness of the above, PRUCO and AUSA have by their respective officers
executed and delivered this Agreement in duplicate on the dates indicated below,
with an effective date of April 30, 2000.
PRUCO LIFE INSURANCE COMPANY AUSA Life Insurance Company, Inc.
By: By:
------------------------------ ------------------------------
Title: Title:
------------------------------ ------------------------------
Date: Date:
------------------------------ ------------------------------
By: By:
------------------------------ ------------------------------
Title: Title:
------------------------------ ------------------------------
Date: Date:
------------------------------ ------------------------------
15
SCHEDULE A
REINSURANCE COVERAGE
--------------------------------------------------------------------------------
1. PLANS REINSURED:
This Agreement covers the following plans:
o PruLife Universal (UL) - Policies issued by PRUCO (Form Number
UL-2000 and all state variations)
o PruLife Custom Premier (VUL II) - Policies issued by PRUCO (Form
Number VUL-2000 and all state variations)
o Target Term Rider (TTR) issued by PRUCO (currently available on VUL
II policies)
Excluded from reinsurance under this Agreement are the Waiver of Premium
and Accidental Death Benefits included in the above reinsured policies.
Also excluded from reinsurance under this Agreement are riders that
provide additional life insurance on the lives of any dependent children
of the policyholder. Included under this Agreement is the Living Needs
Benefit rider.
2. AUTOMATIC PORTION REINSURED:
US/Canadian Residents
AUSA will automatically reinsure an amount equal to 20% of the net amount
at risk related to the face amount of insurance.
The net amount of risk is determined as of the issue date and each
subsequent policy anniversary and is defined as the death benefit minus
the contract fund.
Non US/Canadian Residents
AUSA will automatically reinsure an amount equal to 10% of the net amount
at risk related to the face amount of insurance.
3. AUTOMATIC RETENTION LIMIT:
PRUCO will retain at least 10% of each policy. For U.S. and Canadian
residents, PRUCO may cede up to 70% of each policy on a first-dollar quota
share basis to other reinsurers. For residents of other countries, PRUCO
may cede up to 60% of each policy on a first-dollar quota share basis to
other reinsurers.
4. AUTOMATIC ACCEPTANCE LIMIT:
For any policy to be reinsured under automatic reinsurance, the face
amount will not exceed the amounts in the following tables:
16
US/Canadian Residents - No Foreign Travel
===================================================================
Issue Age of Insured Pref. Best - Class D Class E - H
-------------------------------------------------------------------
Ages: 18 - 65 $ 50,000,000 $ 35,000,000
-------------------------------------------------------------------
66 - 70 $ 40,000,000 $ 25,000,000
-------------------------------------------------------------------
71 - 75 $ 35,000,000 $ 15,000,000
-------------------------------------------------------------------
76 - 77 $ 15,000,000 $ 10,000,000
-------------------------------------------------------------------
78 - 80 $ 10,000,000 $ 5,000,000
-------------------------------------------------------------------
81 - 85 $ 5,000,000 None
-------------------------------------------------------------------
86 - 90 $ 1,500,000 None
===================================================================
US/Canadian Residents - Foreign Travel
======================================================================
Pref. Best - Class C Class D - E Greater than
Class E
----------------------------------------------------------------------
Ages: 18 - 70 $ 10,000,000 $ 7,500,000 None
----------------------------------------------------------------------
71 - 75 $ 7,500,000 $ 5,000,000 None
----------------------------------------------------------------------
00 - 00 Xxxx Xxxx Xxxx
======================================================================
Non US/Canadian Residents
======================================================================
Pref. Best - Class C Class D - E Greater than
Class E
----------------------------------------------------------------------
Ages: 18 - 70 $ 20,000,000 $ 15,000,000 None
----------------------------------------------------------------------
71 - 75 $ 15,000,000 $ 10,000,000 None
----------------------------------------------------------------------
00 - 00 Xxxx Xxxx Xxxx
======================================================================
5. JUMBO LIMIT:
For any policy to be reinsured under automatic reinsurance, the total
amount of insurance in force and applied for in all companies will not
exceed the following amounts:
US/Canadian Residents- No Foreign Travel
$50,000,000 for all ages and rating classes.
US/Canadian Residents - Foreign Travel
$35,000,000 for issue ages through age 75 and rating classes through class
E. $0 for issue ages over 75 or rating classes higher than E.
Non US/Canadian Residents
$35,000,000 for issue ages through age 75 and rating classes through class
E. $0 for issue ages over 75 or rating classes higher than E.
6. OCCUPATION EXCLUSION LIST FOR AUTOMATIC REINSURANCE
o Entertainers
o High Profile Athletes
17
7. REPORTING PERIOD:
The reporting period will be monthly.
8. MINIMUM CESSION:
The minimum amount per cession that can be reinsured with AUSA is $10,000.
9. RESERVES FOR REINSURANCE:
The reinsurance reserve is the one-year term reserve on the portion of
each policy reinsured. This reserve will be calculated using 1980 CSO
ultimate mortality and 4 1/2 % interest.
10. RISK TRIGGER EVENT:
A "Risk Trigger Event" means that any of the following has occurred:
(1) AUSA does not have statutory surplus of at least $300 million;
(2) AUSA's representation and warranty contained in Section 25 of this
Agreement (dealing with licensure/accreditation status and related
matters) is no longer true and correct, except that if AUSA elects
to, and does, provide additional security in accordance with the
requirements of the last paragraph of Section 25 of this Agreement,
no Risk Trigger Event will be deemed to have occurred; or
(3) AUSA no longer has in effect a Qualified Rating (as defined below)
from at least one of the Major Rating Agencies shown in the chart
below, which is at least as high as the minimum levels shown:
==============================================================
Major Rating Agency Minimum Applicable Rating:
==============================================================
Fitch IBCA, Duff & Xxxxxx A rating of "A-" or higher.
--------------------------------------------------------------
Xxxxx Investor Services, Inc. A rating of "A3" or higher.
--------------------------------------------------------------
Standard & Poors Corporation A rating of "A-" or higher.
==============================================================
"Qualified Rating" shall mean the issuance of an insurance company
long-term, financial strength rating from one or more of the Major Rating
Agencies that remains in effect, that has not been suspended or withdrawn,
and that was issued as a result of the full interactive ratings review
process (including interviews with senior management) by the Major Rating
Agency in question. (Use of the modifiers "Q" or "Pi" by S&P or any
similar indication that a rating is a "qualified" or "limited" rating by
any other of the Major Rating Agencies means that the rating does not
constitute a "Qualified Rating" for purposes of this Agreement.)
11. LETTER OF CREDIT PROVISIONS:
a. Under the circumstances described in the last paragraph of Section
25 of this Agreement or under the circumstances described in the
last paragraph of Section 10 of this Schedule A, AUSA may apply for,
provide to PRUCO, and maintain during the entire term of this
Agreement, one or more letters of credit with respect to all the
amounts recoverable from AUSA under this Agreement (collectively,
the "Letters of Credit") so as to avoid triggering PRUCO's right of
recapture under Section 20. If AUSA elects to do so, each of the
Letters of Credit must individually satisfy the requirements of
subsections b., c. and d. below and all of the Letters of Credit
collectively must satisfy the requirements of subsections e. and f.
below. In addition, each Letter of Credit individually and all of
the Letters of Credit collectively must
18
satisfy any other applicable legal or regulatory requirement of
Arizona that must be complied with in order to ensure that PRUCO is
entitled to take the maximum credit for the risks ceded under this
Agreement on its statutory financial statements.
b. Each of the Letters of Credit must: (I) be an original and signed by
an authorized official of the issuing bank or an authorized official
of the confirming bank (in the case of a confirmation meeting the
requirements of this Section); (II) contain an issuance date and
contain an expiry date that is no earlier than one calendar year
from the issuance date; (III) be issued or confirmed by a "Qualified
Bank" (as defined in subsection 30c. below); (IV) be issued on
behalf of AUSA as the "Applicant" and include such indication in a
boxed area that states it is "For Internal Identification Purposes
Only" (or similar words to that effect) and that does not affect the
terms of the Letter of Credit or the bank's obligations thereunder;
(V) be issued to PRUCO as "Beneficiary" and expressly indicate in
the body of the Letter of Credit that the definition of the
"Beneficiary" under the Letter of Credit includes any successor by
operation of law of PRUCO, including, without limitation, any
liquidator, rehabilitator, receiver, or conservator for PRUCO; (VI)
be issued, presentable and payable at an office of the issuing or
confirming bank within the United States; (VII) be "clean and
unconditional" (meaning that the Letter of Credit makes no reference
to any other agreement, document or entity and provides that the
Beneficiary need only draw a sight draft under the Letter of Credit
or confirmation and present it to promptly obtain funds and that no
other document need be presented); (VIII) contain a statement that
it is not subject to any agreement, condition or qualification
outside the Letter of Credit itself; (IX) contain a statement to the
effect that the obligation of the issuing bank under the Letter of
Credit is an individual obligation of such bank and is in no way
contingent upon reimbursement with respect thereto; (X) be
irrevocable and contain an "evergreen clause" (meaning that the
letter of credit or confirmation cannot be revoked prior to its
expiry date and that it will automatically renew prior to the
occurrence of the expiry date unless written notice sent by U.S.
registered mail has been delivered to PRUCO as Beneficiary at the
notice address stipulated in subsection d. of this Section 30 not
less than 30 days prior to the expiry date); (XI) state that it is
subject to and governed by the laws of the State of Arizona and the
1993 Revision of the Uniform Customs and Practice for Documentary
Credits of the International Chamber of Commerce (Publication 500)
and that, in the event of any conflict, the laws of the State of
Arizona will control; and (XII) contain a provision for an extension
of time, of not less than 30 days after resumption of business, to
draw against the Letter of Credit in the event that one or more of
the occurrences described in article 17 of Publication 500 occurs.
c. As used in subsection b. of this Section 11, the term "Qualified
Bank" shall mean a bank or trust company that: (I) is organized and
existing, or in the case of a branch or agency office of a foreign
banking organization is licensed, under the laws of the United
States or any state thereof; (II) is regulated, supervised and
examined by United States Federal or state authorities having
regulatory authority over banks and trust companies; (III) is
determined by the Securities Valuation Office of the National
Association of Insurance Commissioners to meet such standards of
financial condition and standing as are considered necessary and
appropriate to regulate the quality of banks and trust companies
whose letters of credit will be acceptable to insurance regulatory
authorities; (IV) is not a foreign branch office of a bank or trust
company organized and existing in the United States; and (V) is not
a parent, subsidiary or affiliate of PRUCO or AUSA.
d. Each Letter of Credit must indicate that notices of non-renewal will
be sent to the following address, or such other address as may be
indicated in a notice sent by PRUCO to the issuing or confirming
bank:
Chief Actuary
PRUCO Life Insurance Company
000 Xxxxxxxxxx Xxxxxx
Xxxxxx, Xxx Xxxxxx 00000-0000
19
e. All of the Letters of Credit must, in the aggregate, provide for a
maximum amount that can be drawn thereunder of a sum that is at
least as great as PRUCO has indicated will be required under this
Agreement and all other related reinsurance agreements between or
AUSA and PRUCO or any affiliate of PRUCO. Each year around December
1, PRUCO will indicate to AUSA the aggregate coverage amount needed
under all of the Letters of Credit as well as any other information
necessary for AUSA to provide PRUCO the required Letters of Credit
prior to December 31. The cost for all Letters of Credit furnished
and maintained under this Agreement will be borne solely by AUSA.
f. AUSA and PRUCO agree that any or all of the Letters of Credit
provided by AUSA pursuant to the provisions of this Agreement may be
drawn upon in full or in part at any time, notwithstanding any other
provisions in this Agreement, and may be utilized by PRUCO or any
successor by operation of law of PRUCO including, without
limitation, any liquidator, rehabilitator, receiver or conservator
of PRUCO for any of the following purposes:
i. to reimburse PRUCO for AUSA's share of premiums returned to
the owners of policies reinsured under the reinsurance
agreement on account of cancellations of such policies;
ii. to reimburse PRUCO for AUSA's share of benefits or losses paid
by PRUCO under the terms and provisions of the policies
reinsured under this Agreement;
iii. to fund an account with PRUCO in an amount at least equal to
the deduction, for reinsurance ceded, from PRUCO's liabilities
for policies ceded under this Agreement. Such amount shall
include, but not be limited to, amounts for policy reserves,
reserves for claims and losses incurred (including losses
incurred but not reported), loss adjustment expenses, and
unearned premiums; and
iv. to pay any other amounts PRUCO claims are due under this
Agreement:
All of the foregoing will be applied without diminution because of
insolvency on the part of PRUCO or AUSA.
a. AUSA further acknowledges and agrees that PRUCO or any successor by
operation of law of PRUCO including, without limitation, any
liquidator, rehabilitator, receiver or conservator of PRUCO may draw
upon any or all of the Letters of Credit in full or in part in the
event that: (I) a notice of cancellation or non-renewal has been
issued by the issuing or confirming bank under any of the Letters of
Credit and AUSA has not obtained one or more replacement letters of
credit that satisfy all of the applicable requirements of this
Section 11 by that date which is ten days prior to the earliest
expiry date of the Letter of Credit or Letters of Credit as to which
notice of cancellation or non-renewal has been sent; or (II) the
maximum amount that may be drawn under -- any of the Letters of
Credit has been reduced or PRUCO has communicated to AUSA in
accordance with the provisions of subsection e. of this Section 11 a
need to increase the aggregate amount available under all of the
Letters of Credit and AUSA has not obtained one or more replacement
Letters of Credit or one or more additional Letters of Credit so
that all issued and outstanding Letters of Credit that will remain
in effect provide for coverage in an amount sufficient to meet the
requirements of subsection e. of this Section 11.
12. RISK RETENTION LIMITS:
The total amount of insurance in force and applied for on an individual
life for PRUCO and its affiliates will not exceed the risk retention
limits in the following table.
20
===============================================================
Issue Age of Insured Pref. Best - Class D Class E - H
---------------------------------------------------------------
Ages: 18 - 65 $ 10,000,000 $ 10,000,000
---------------------------------------------------------------
66 - 70 $ 10,000,000 $ 10,000,000
---------------------------------------------------------------
71 - 75 $ 10,000,000 $ 10,000,000
---------------------------------------------------------------
76 - 77 $ 10,000,000 $ 5,000,000
---------------------------------------------------------------
78 - 80 $ 5,000,000 $ 2,500,000
---------------------------------------------------------------
81 - 85 $ 2,500,000 $ 1,000,000
---------------------------------------------------------------
86 - 90 $ 1,000,000 None
===============================================================
21
SCHEDULE B
AUTOMATIC AND FACULTATIVE REINSURANCE PREMIUMS
--------------------------------------------------------------------------------
1. STANDARD ANNUAL REINSURANCE PREMIUMS
The standard annual reinsurance premiums per $1,000 of net amount at risk
for (1) all cessions of automatic reinsurance and facultative obligatory
reinsurance and (2) all cessions of facultative reinsurance in the amount
of $5 million or less will be the product of the rates in the table
attached to this Schedule B and the following factors:
==============================================================
Face amounts $100,000 and greater AND issue age 18 and greater
--------------------------------------------------------------
Rating Class Factor
--------------------------------------------------------------
1 .315
--------------------------------------------------------------
2 .384
--------------------------------------------------------------
3 .493
--------------------------------------------------------------
4 .633
--------------------------------------------------------------
5 1.028
--------------------------------------------------------------
6 1.295
==============================================================
==============================================================
Face amount less than $100,000 OR issue age less than 18
--------------------------------------------------------------
Rating Class Factor
--------------------------------------------------------------
1 N/A
--------------------------------------------------------------
2 N/A
--------------------------------------------------------------
3 N/A
--------------------------------------------------------------
4 .705
--------------------------------------------------------------
5 N/A
--------------------------------------------------------------
6 1.473
==============================================================
The standard annual reinsurance premiums per $1,000 for cessions of
facultative obligatory reinsurance and facultative reinsurance in excess
of $5 million will be the product of the rates in the table attached to
this Schedule B and the following factors:
==============================================================
Rating Class Factor
--------------------------------------------------------------
1 .347
--------------------------------------------------------------
2 .422
--------------------------------------------------------------
3 .542
--------------------------------------------------------------
4 .696
--------------------------------------------------------------
5 1.131
--------------------------------------------------------------
6 1.425
==============================================================
22
2. SUBSTANDARD ANNUAL REINSURANCE PREMIUMS
Substandard extra premiums are available on classes 4 and 6 (Non-Smoker
and Smoker). For substandard issues, the substandard extra reinsurance
premium (plus any flat extra) is payable for 20 years. After this period,
the base reinsurance premium (plus any flat extra) is payable until the
end of the premium paying period.
The substandard extra annual reinsurance premiums per $1,000 for
substandard issues will be the product of the base reinsurance premiums
per $1,000 and the factor for the appropriate rating class.
Note that this is the total premium per $1,000, including both the base
and substandard premium.
The factors are as follows:
=========================================================
Rating Class Factor
---------------------------------------------------------
A 1.40
---------------------------------------------------------
B 1.65
---------------------------------------------------------
C 1.90
---------------------------------------------------------
D 2.25
---------------------------------------------------------
E 2.75
---------------------------------------------------------
F 3.25
---------------------------------------------------------
G 3.75
---------------------------------------------------------
H 4.50
=========================================================
3. FLAT EXTRA REINSURANCE PREMIUMS
The flat extra reinsurance premium per $1,000 will be the product of flat
extra premiums charged by PRUCO and the factors in the following table:
=========================================================
Permanent Flat Extra Premiums (i.e., for more than 5
years duration)
---------------------------------------------------------
First year .25
---------------------------------------------------------
Renewal year .90
=========================================================
=========================================================
Temporary Flat Extra Premiums (i.e., for 5 years
duration or less)
---------------------------------------------------------
All years .90
=========================================================
4. AGE BASIS
Age Last Birthday.
5. PREMIUM TAXES
Premium taxes are not reimbursed.
23
