Lincoln
Financial Group
Lincoln Re
YEARLY RENEWABLE TERM
REINSURANCE AGREEMENT
Effective as of March 1, 2000,
between
THE UNION CENTRAL LIFE INSURANCE COMPANY
of
Cincinnati, Ohio,
referred to in this Agreement as "Union Central," and
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
of
Fort Xxxxx, Indiana,
referred to in this Agreement as "Lincoln."
Inspected By /s/E/G
Date 9/18/2000
Doc 000800sl.agm
CCN/Agmt. No. 198/28
TABLE OF CONTENTS
Reinsurance Coverage 1
Automatic Reinsurance 1
Facultative Reinsurance 2
Continuations 4
Terms of Reinsurance 4
Payments by Union Central 5
Payments by Lincoln 6
Reinsurance Administration 6
Settlement of Claims 6
Reinstatements and Restorations 8
Reductions in Insurance 9
Increases in Policy Net Amount at Risk 9
Changes in Retention 9
Assignment of Reinsurance 11
Material Changes 11
Errors 11
Audits of Records and Procedures 12
Arbitration 12
Insolvency of Union Central 13
Offset 13
Parties to the Agreement 14
Commencement and Termination 14
Entire Agreement 14
Deferred Acquisition Cost Tax Election 15
Definitions 15
Execution 18
LIFE BENEFITS SCHEDULE 20
ADMINISTRATION SCHEDULE 22
PREMIUM SCHEDULE 26
ARBITRATION SCHEDULE 28
WAIVER OF PREMIUM BENEFIT ADDENDUM 30
INCREASING POLICY ADDENDUM 33
GUARANTEED INSURABILITY RIDER ADDENDUM 34
Reinsurance A. Union Central agrees to cede, and Lincoln
Coverage agrees to accept, reinsurance of the
Policies specified in the Life Benefits
Schedule. (The term "Policies" and certain
other terms used in this Agreement are
defined in the "Definitions" article.)
B. The death benefits provided by the Policies
are reinsured. Supplemental benefits are
reinsured if and as specified in applicable
Addenda.
C. Union Central agrees to either
(1) cede reinsurance of a Policy to Lincoln
as Automatic Reinsurance;
(2) submit the Policy to Lincoln for
consideration as Facultative
Reinsurance; or
(3) cede reinsurance of a Policy as a
Continuation.
Automatic A. Union Central agrees to cede the Reinsurance
Reinsurance Amount of a Policy as Automatic Reinsurance
if the following conditions are met:
(1) It retains its Retention on the insured
life when the Policy is issued;
(2) It underwrites and issues the Policy in
accordance with its normal individual
life insurance underwriting rules and
practices previously disclosed to
Lincoln;
(3) The sum of (a) and (b) does not exceed
the sum of its Retention and the
Automatic Limit, where
(a) equals the amount of individual
life insurance issued by Union
Central then in force on the
insured life, or in the case of
individual life insurance with
increasing death benefits, the
Ultimate Amount of such
Policies; and
(b) equals the amount of life
insurance currently being applied
for from Union Central, or in the
case of individual life insurance
with increasing death benefits, the
Ultimate Amount;
Page 1
(4) The sum of (a) and (b) does not exceed
the Participation Limit, where
(a) equals the amount of individual life
insurance then in force on the
insured life in all companies, or
in the case of individual life
insurance with increasing death
benefits, the Ultimate Amount of
such Policies; and
(b) equals the amount currently applied
for on the insured life from all
companies, or in the case of
individual life insurance with
increasing death benefits, the
Ultimate Amounts;
(5) It has not submitted a facultative
application to Lincoln or any other
insurance or reinsurance company for
reinsurance of the current application;
and
(6) The Policy is not a Continuation.
B. Policies issued pursuant to any special
underwriting program adopted by Union
Central may be ceded as Automatic
Reinsurance only with Lincoln's consent
to reinsure such Policies.
C. A Policy shall not be ceded as Automatic
Reinsurance if the Reinsurance Amount of
the Policy is less than the minimum cession
amount specified in the Administration
Schedule.
Facultative A. Union Central may submit Policies not
Reinsurance satisfying the conditions for Automatic
Reinsurance, and Policies which it does
not wish to cede as Automatic Reinsurance,
for consideration by Lincoln as Facultative
Reinsurance. Union Central may also submit
for consideration as Facultative
Reinsurance any individual life insurance
issued on a Policy form that is not
specified in the Life Benefits Schedule
provided reinsurance terms and conditions
are established and agreed upon by means
of the Facultative Reinsurance application
process.
Page 2
B. An application for Facultative Reinsurance
shall be made in the manner set forth in
the Administration Schedule. Copies of
all information which Union Central has
pertaining to the insurability of the
proposed insured, including written
summaries of any such information which
cannot be copied, shall accompany the
application.
C. Upon receipt of an application, Lincoln
agrees to promptly examine the underwriting
information and communicate
(1) an offer to reinsure the Policy as
applied for;
(2) an offer to reinsure the Policy other
than as applied for;
(3) an offer to reinsure the Policy subject
to the satisfaction of additional
underwriting requirements;
(4) a request for additional underwriting
information; or
(5) its unwillingness to make an offer to
reinsure the Policy.
D. To accept an offer to reinsure made by
Lincoln, Union Central agrees to
(1) satisfy any conditions stated in the
offer to reinsure; and
(2) follow the procedure for placing
reinsurance into effect as specified
in the Administration Schedule.
E. Union Central agrees to inform Lincoln
immediately of any additional information
pertaining to the insurability of a
proposed insured which is brought to
Union Central's attention before the
completion of the procedures for accepting
Lincoln's offer to reinsure. Upon its
receipt of such information, Lincoln may
withdraw or modify its earlier offer to
reinsure.
F. The terms of an offer to reinsure shall
supercede the terms of this Agreement to
the extent of any conflicts between the
parties. Otherwise, reinsurance of a
Policy ceded as Facultative Reinsurance
shall be in accordance with the terms of
this Agreement.
Page 3
Continuations A. If Union Central issues a Continuation of a
Policy within its normal continuation rules
and practices, it agrees to reinsure the
Continuation with Lincoln. Reinsurance shall
continue
(1) under the reinsurance agreement between
Union Central and Lincoln which provides
reinsurance of the Policy form of the
Continuation; or
(2) under this Agreement if there is no such
agreement.
B. A Policy which is a Continuation of a Policy
that was not previously reinsured with
Lincoln may only be reinsured under this
Agreement with the written consent of
Lincoln and the original reinsurer.
C. If the original Policy was ceded to Lincoln
as Facultative Reinsurance and Union Central
approves an increase in the face amount of
the Continuation based upon receipt of any
new information pertaining to the
insurability of the proposed insured,
Union Central agrees to submit the
Continuation to Lincoln for consideration
as Facultative Reinsurance. In such case,
Lincoln shall only be bound to reinsure
the Continuation in accordance with its
offer to reinsure the Continuation.
D. Reinsurance at issue of the Continuation
shall not exceed the Reinsured Net Amount
at Risk of the original Policy immediately
prior to the issuance of the Continuation.
E. Premiums payable for reinsurance of a
Continuation shall be calculated using the
rate schedule applicable to the Policy form
of the Continuation as specified in the
Premium Schedule. If there is no rate
schedule applicable to the Policy form of
the Continuation, reinsurance premiums shall
be payable using the rate schedule
applicable to the original Policy.
F. If the Continuation results in a change in
the life status of the insured risk from a
single-insured plan to a joint- or
multiple-insured plan, Lincoln must consent
to the Continuation.
Terms of A. The plan of reinsurance shall be yearly
Reinsurance renewable term reinsurance of the Reinsured
Net Amount at Risk of a Policy.
Page 4
B. Reinsurance of a Policy shall commence on
the Policy date, except
(1) in the case of Facultative Reinsurance,
reinsurance shall commence on the Policy
date only if Lincoln's offer to reinsure
is the best offer of reinsurance
received by Union Central as determined
by Union Central's published reinsurance
placement rules in effect as of such
date; and
(2) if a premium receipt is issued by Union
Central in connection with an
application for the Policy, reinsurance
shall commence prior to the Policy date
only if and as specified in a Premium
Receipt Addendum.
C. Union Central agrees not to use Lincoln's
name in connection with the sale of the
Policies.
D. In no event shall reinsurance under this
Agreement be in force with respect to a
Policy unless the issuance and delivery of
the Policy is in compliance with the laws
of all applicable jurisdictions and Union
Central's corporate charter.
E. Union Central agrees to maintain reinsurance
of a Policy in force in accordance with the
terms of this Agreement for as long as its
Policy remains in force.
Payments by A. Union Central agrees to pay Lincoln premiums
Union Central for reinsurance of a Policy equal to the
appropriate rate specified in the Premium
Schedule times the Reinsured Net Amount at
Risk of the Policy.
B. The Premium Schedule specifies other
monetary amounts which Union Central agrees
to take into account when calculating the
amount due Lincoln.
C. Reinsurance premiums shall be due and
payable as specified in the Administration
Schedule.
D. The payment of reinsurance premiums shall be
a condition precedent to the liability of
Lincoln under this Agreement. If reinsurance
premiums are not paid when due, Lincoln may
give Union Central thirty (30) days' written
notice of its intent to terminate
reinsurance because of Union Central's
failure to pay reinsurance premiums.
Reinsurance of all Policies having
reinsurance premiums in arrears shall
terminate as of the date to which
reinsurance premiums had
Page 5
previously been paid unless all premiums in
arrears are paid before the end of the
thirty (30) day notice period. If
reinsurance on any Policy terminates
because of Union Central's failure to pay
reinsurance premiums, reinsurance of
Policies with premiums subsequently
becoming due shall automatically terminate
as of the date on which new reinsurance
premiums become due.
E. So that Lincoln need not maintain deficiency
reserves in connection with reinsurance
premiums payable pursuant to this Agreement,
the premium rates specified in the Premium
Schedule shall only be guaranteed for one
(1) Policy year. Nevertheless, Lincoln shall
anticipate continuing to accept
reinsurance on the basis of such rates
for all Policies originally ceded
pursuant to such rates.
Payments by A. Lincoln agrees to pay Union Central the
Lincoln Reinsured Net Amount at Risk of any claim
paid by Union Central pursuant to a Policy
in accordance with the "Settlement of
Claims" article.
X. Xxxxxxx agrees to pay the Claims Ratio of
any expenses incurred in connection with
Policy claims except as set forth in the
"Settlement of Claims" article.
C. The Premium Schedule specifies other
monetary amounts that Lincoln agrees to pay
Union Central pursuant to this Agreement.
Reinsurance The methods for placing reinsurance into
Administration effect, for paying reinsurance premiums, and
for notifying Lincoln of Policy lapses,
reinstatements, reductions, Continuations,
increases in the Reinsured Net Amount at Risk;
and of other changes affecting reinsurance
shall be specified in the Administration
Schedule.
Settlement A. Union Central agrees to give Lincoln prompt
of Claims written notice of its receipt of any claim
on a Policy and to keep Lincoln informed of
any legal proceedings or settlement
negotiations in connection with a claim.
Copies of written materials relating to such
claim, legal proceedings or negotiation
shall be furnished to Lincoln upon request.
Page 6
B. Union Central agrees to act in accord with
its standard practices applicable to all
claims in enforcing the terms and
conditions of the Policies and with respect
to the administration, negotiation, payment,
denial or settlement of any claim or legal
proceeding.
X. Xxxxxxx agrees to accept the good faith
decision of Union Central in payment or
settlement of any claim for which Lincoln
has received the required notice. Lincoln
agrees to pay Union Central the Reinsured
Net Amount at Risk on which reinsurance
premiums have been computed upon receiving
proper evidence that Union Central has paid
a Policy claim. Payment of the Reinsured Net
Amount at Risk on account of death shall be
made in one (1) lump sum.
X. Xxxxxxx'x liability shall include
indemnification of the Claims Ratio of any
expenses incurred by Union Central in
defending or investigating a Policy claim
with the exception of
(1) salaries of employees or other internal
expenses of Union Central;
(2) routine investigative or administrative
expenses;
(3) expenses incurred in connection with a
dispute arising out of conflicting
claims of entitlement to proceeds of a
Policy that Union Central admits are
payable;
(4) any gratuitous payments made by Union
Central; and
(5) any punitive damages awarded against
Union Central, and expenses incurred in
connection with such damages, that are
based on the acts or omissions of Union
Central or its agents.
X. Xxxxxxx agrees to hold Union Central
harmless from certain expenses and
liabilities that result from Lincoln's own
acts or omissions as provided in this
article. For this purpose, Lincoln agrees
to indemnify Union Central for Lincoln's
equitable share of those punitive and
exemplary damages awarded against Union
Central, and expenses incurred in
connection with a claim for such damages, if
(1) Lincoln actively participated in the
acts or omissions, including the
decision to deny a claim for Policy
benefits; and
Page 7
(2) those acts or omissions serve as a
material basis for the punitive or
exemplary damages. Lincoln's equitable
share shall be determined by an
assessment of Lincoln's participation
in the particular case.
F. If Union Central should contest or
compromise any claim and the amount of
Union Central's liability is thereby
reduced, Lincoln's liability shall be
reduced by the Claims Ratio of the
reduction.
G. If Union Central should recover monies from
any third party in connection with or
arising out of any Policy, Union Central
agrees to pay Lincoln the Claims Ratio of
the recovery.
H. If the amount of insurance provided by a
Policy is increased or reduced because of
a misstatement of age or sex, Lincoln's
liability shall be increased or reduced
by the Claims Ratio of the amount of the
increase or reduction.
I. If Union Central pays interest on a claim,
Lincoln agrees to pay the interest on the
Reinsured Net Amount at Risk computed at
the same rate and for the same period as
that paid by Union Central, but in no
event later than the date the claim is
finally adjudicated by Union Central.
J. If Union Central is required to pay
penalties and interest imposed automatically
by statute, Lincoln shall indemnify Union
Central for the Claims Ratio of such
penalties and interest.
Reinstatements A. If Union Central reinstates a lapsed Policy
and in accordance with the terms of the Policy
Restorations and Union Central's underwriting rules and
practices, Lincoln agrees to reinstate
reinsurance of the Policy automatically
unless Lincoln's offer to reinsure the
Policy specifies that reinsurance of the
Policy may only be reinstated as Facultative
Reinsurance.
B. If Union Central reinstates or restores a
Policy pursuant to any state law or
regulations that require such reinstatements
or restorations of the Policy following a
"free look" period of a proposed replacement
policy that is rejected by the insured,
Lincoln agrees to restore reinsurance of
the Policy under its original terms and
conditions as set forth herein. Union
Central shall follow its reinstatement
procedures and rules to the extent that
such procedures and rules do not conflict
with the applicable state law or regulations
requiring reinstatement or restoration. All
of the foregoing
Page 8
shall apply to Automatic Reinsurance or
Facultative Reinsurance, as applicable. If
Union Central collects premiums in arrears
from the policyholder of a reinstated or
restored Policy, it agrees to pay Lincoln
all corresponding reinsurance premiums in
arrears in connection with the
reinstatement, plus Lincoln's Proportionate
Share of any interest received by Union
Central in connection with the reinstatement
or restoration.
Reductions If individual life insurance on a life
in Insurance reinsured under this Agreement terminates,
the Reinsurance Amount shall be reduced as
specified in the Administration Schedule.
Increases in A. If the Policy Net Amount at Risk on a
Policy Net Policy increases and the increase is
Amount at Risk subject to Union Central's underwriting
approval, the Reinsured Net Amount at
Risk of the Policy shall only increase
if the conditions of either the
"Automatic Reinsurance" or "Facultative
Reinsurance" articles are satisfied.
B. If the Policy Net Amount at Risk on a
Policy increases causing the Reinsured
Net Amount at Risk to exceed the
Reinsurance Amount, and the increase
is not subject to Union Central's
underwriting approval, Lincoln agrees
to accept a portion of such increases
only if and as specified in an
Increasing Policy Addendum.
Changes in A. If Union Central increases its Retention
Retention on new Policies, it agrees to notify Lincoln
in writing within sixty (60) days of such
increase. The notice shall specify the new
Retention and the effective date thereof.
B. Whenever Union Central increases its
Retention on new Policies, it also agrees
to indicate in its notice whether it wishes
to
(1) continue its previous Retention on in
force Policies; or
(2) increase its Retention on in force
Policies and recapture reinsurance. If
Union Central elects (2), Union
Central's new Retention on an in force
Policy shall be calculated using the
insured's age, mortality class, Policy
form and country of residence at issue
of the Policy.
Page 9
C. If Union Central elects to increase its
Retention on in force Policies pursuant
to paragraph B, its new Retention for such
Policies shall become effective on the
later of
(1) the reinsurance renewal date of the
Policy first following the effective
date of its new Retention for new
Policies; and
(2) the Policy anniversary date specified
in the Administration Schedule. If
Union Central fails to initiate
recapture of reinsurance within one
hundred and eighty (180) days of when
the first of its Policies becomes
eligible for recapture, its election
to recapture reinsurance, as of the
date of the Retention change, shall
be considered waived. This does not
preclude Union Central from increasing
its Retention on existing reinsurance
at a later date.
D. If an in force Policy is subject to a
waiver of premium claim on the date the
Policy qualifies for a new Retention, the
new Retention shall nonetheless become
effective on such date for purposes of
life reinsurance.
E. Union Central may only elect to increase
its Retention on in force Policies if
(1) it maintained a Retention greater than
zero dollars ($0) at the time the
Policy was issued and retained its
Retention at such time;
(2) it increases its Retention on all
eligible in force Policies; and
(3) it retains the insurance recaptured
from Lincoln at its own risk without
benefit of any proportional or
nonproportional reinsurance other
than catastrophe accident reinsurance.
F. Notwithstanding the preceding,
(1) the recapture of the Reinsurance
Amount shall be limited to Lincoln's
portion of all reinsurance ceded by
Union Central on the Policy; and
(2) if Union Central gives notice of its
intent to increase its Retention on in
force Policies within five (5) years
following a merger with another
insurance company or the date it
accepts the Policies by means of an
assignment, the new Retention
applicable to such Policies shall be
limited to one hundred fifty percent
(150%) of the original reinsured's
pre-merger or preassignment Retention.
Page 10
G. For purposes of this article, Continuations
shall be considered issued on the issue
date of the original Policy.
Assignment of A. If Union Central sells, assumption
Reinsurance reinsures or otherwise transfers the
Policies to another insurer, it agrees to
require that the other insurer assume all
rights and obligations of Union Central
under this Agreement.
X. Xxxxxxx may object to any such transfer
that would result in a material adverse
economic impact to Lincoln. If Lincoln so
objects, Union Central and Lincoln agree
to mutually calculate a termination charge
that shall be paid by Union Central to
Lincoln upon the transfer, and this
Agreement shall be terminated with
respect to all Policies transferred by
Union Central.
Material A. Union Central agrees to notify Lincoln
Changes in writing of any anticipated Material
Change in any terms or conditions of the
Policies, in Union Central's underwriting
rules and practices applicable to the
Policies or in Union Central's claims
practices and procedures. In the event
of a Material Change to the Policies, to
Union Central's underwriting rules and
practices or to its claims practices and
procedures, Lincoln may at its option
(1) continue to reinsure the Policies under
current terms;
(2) reinsure Policies under modified terms
to reflect the Material Change; or
(3) consider future Policies as issued in
a Policy form that is not reinsured
under this Agreement.
Errors A. Any Error by either Union Central or
Lincoln in the administration of
reinsurance under this Agreement shall
be corrected by restoring both Union
Central and Lincoln to the positions
they would have occupied had no Error
occurred. Any monetary adjustments made
between Union Central and Lincoln to
correct an Error shall be without interest.
Page 11
B. When a party claims that an Error should
be corrected pursuant to paragraph A, that
party agrees to investigate whether other
instances of the Error have also occurred
and agrees to report its findings to the
other party.
Audits of A. Lincoln or Union Central may audit, at any
Records and reasonable time and at its own expense,
Procedures all records and procedures relating to
reinsurance under this Agreement. The party
being audited agrees to cooperate in the
audit, including providing any information
requested by the other in advance of the
audit.
B. Upon request, Union Central agrees to
furnish Lincoln with copies of any
underwriting information in Union
Central's files pertaining to a Policy.
Arbitration A. If Union Central and Lincoln cannot mutually
resolve a dispute that arises out of or
relates to this Agreement, the dispute
shall be decided through arbitration as
specified in the Arbitration Schedule. The
arbitrators shall base their decision on
the terms and conditions of this Agreement
plus, as necessary, on the customs and
practices of the insurance and reinsurance
industry rather than solely on a strict
interpretation of applicable law. There
shall be no appeal from their decision,
except that either party may petition a
court having jurisdiction over the parties
and the subject matter to reduce the
arbitrators' decision to judgement.
B. The parties intend this article to be
enforceable in accordance with the
Federal Arbitration Act (9 U.S.C.
Sections 1 et seq), including any amendments
to that Act which are subsequently
adopted. If either party refuses to
submit to arbitration as required by
paragraph A, the other party may
request a United States Federal District
Court to compel arbitration in accordance
with the Federal Arbitration Act. Both
parties consent to the jurisdiction of
such court to enforce this article and
to confirm and enforce the performance
of any award of the arbitrators.
Page 12
Insolvency of A. In the event of the insolvency of Union
Union Central Central and the appointment of a
conservator, liquidator or statutory
successor of Union Central, reinsurance
shall be payable to such conservator,
liquidator or statutory successor on the
basis of claims allowed against Union
Central by any court of competent
jurisdiction or by the conservator,
liquidator or statutory successor of
Union Central without diminution because
of the insolvency of Union Central or
because such conservator, liquidator or
statutory successor has failed to pay all
or a portion of any claims.
B. In the event of the insolvency of Union
Central, the conservator, liquidator or
other statutory successor of Union Central
agrees to give Lincoln written notice of
the pendency of a claim on a Policy within
a reasonable time after such claim is
filed in the insolvency proceeding. During
the pendency of any such claim, Lincoln
may investigate the claim and interpose
in the proceeding where such claim is to
be adjudicated in the name of Union Central
(its conservator, liquidator or statutory
successor), but at its own expense, any
defense or defenses which Lincoln may deem
available to Union Central or its
conservator, liquidator or statutory
successor. A percentage (calculated as one
(1) minus the Claims Ratio) of the expense
thus incurred by Lincoln shall be charged,
subject to court approval, against Union
Central as part of the expense of
liquidation.
Offset Any debts or credits, matured or unmatured,
liquidated or unliquidated, regardless of
when they arose or were incurred, in favor
of or against either Union Central or Lincoln
with respect to this Agreement or any other
reinsurance agreement between the parties,
shall be offset and only the balance allowed
or paid. If either Union Central or Lincoln
is then under formal insolvency proceedings,
this right of offset shall be subject to the
laws of the state exercising primary
jurisdiction over such proceedings.
Page 13
Parties to This is an Agreement for indemnity reinsurance
the Agreement solely between Union Central and Lincoln. The
acceptance of reinsurance under this Agreement
shall not create any right or legal relation
whatever between Lincoln and an insured,
policyholder, beneficiary or any other party
to or under any Policy.
Commencement A. This Agreement shall be effective as of
and the date set forth on the cover page, except
Termination that Union Central may issue a Policy dated
as much as six (6) months prior to the
Effective Date in order to save age of the
applicant.
B. Either Union Central or Lincoln may
terminate this Agreement for new reinsurance
by giving ninety (90) days' written notice
to the other party. In such case, Union
Central agrees to continue to cede, and
Lincoln agrees to continue to accept,
reinsurance in accordance with this
Agreement of Policies issued prior to the
expiration of the ninety (90) day period.
All reinsurance that has been placed in
effect prior to such date shall remain in
effect in accordance with the teens of this
Agreement, until the earlier of
(1) the termination or expiration of the
Policy; and
(2) the termination of this Agreement
pursuant to paragraphs C or D below.
Reinsurance of a Policy shall terminate
as of the reinsurance premium renewal
date on which the Reinsured Net Amount
at Risk for such Policy is less than
the automatic termination amount
specified in the Administration
Schedule, provided the reinsurance has
been in force for the period specified
in the Administration Schedule. Lincoln
may terminate all reinsurance under
this Agreement in accordance with
paragraph D of the "Payments by Union
Central" article if Union Central fails
to pay reinsurance premiums when due.
Entire A. This Agreement represents the entire
Agreement agreement between Union Central and Lincoln
and supercedes any prior oral or written
agreements between the parties regarding
its subject matter.
Page 14
B. No modification of this Agreement shall be
effective unless set forth in a written
amendment executed by both parties.
C. A waiver of a right created by this
Agreement shall constitute a waiver only
with respect to the particular circumstance
for which it is given and not a waiver in
any future circumstance.
Deferred A. Lincoln and Union Central each acknowledge
Acquisition that it is subject to taxation under
Cost Tax Subchapter "L" of the Internal Revenue
Election Code of 1986 (the "Code").
B. With respect to this Agreement, Lincoln
and Union Central agree to the following
pursuant to Section 1.848-2(g)(8) of the
Income Tax Regulations issued December
1992, whereby:
(1) Each party agrees to attach a schedule
to its federal income tax return which
identifies this Agreement for which the
joint election under the Regulation has
been made;
(2) The party with net positive
consideration, as defined in the
Regulation promulgated under Code
Section 848, for this Agreement for each
taxable year, agrees to capitalize
specified Policy acquisition expenses
with respect to this Agreement without
regard to the general deductions
limitation of Section 848(c)(1);
(3) Each party agrees to exchange
information pertaining to the amount
of net consideration under this
Agreement each year to ensure
consistency; and
(4) This election shall be effective for
the year that this Agreement was
entered into and for all subsequent
years that this Agreement remains in
effect.
Definitions A. Automatic Limit - the amount specified in
the Life Benefits Schedule used to
calculate the maximum Reinsurance Amount
that may be ceded as Automatic Reinsurance.
B. Automatic Reinsurance - reinsurance
satisfying certain conditions relating
to the reinsurance as specified in the
Agreement that is ceded to Lincoln without
obtaining a specific offer to reinsure from
Lincoln.
Page 15
C. Capacity Facultative Reinsurance -
Facultative Reinsurance for which Union
Central made facultative application to no
reinsurer other than Lincoln other than the
automatic reinsurers of the Policy forms
set forth in the Life Benefits Schedule and
on which Union Central retained its full
Retention on the Policy.
D. Claims Ratio - the Reinsured Net Amount at
Risk on which reinsurance premiums have been
computed divided by the Policy Net Amount at
Risk calculated as of the date of the last
premium payment.
E. Continuation - a new Policy replacing a
Policy or a change in an existing Policy
issued or made either
(1) in compliance with the terms of the
Policy; or
(2) without
(a) the same new underwriting
information Union Central would
obtain in the absence of the Policy;
(b) a suicide exclusion or contestable
period as long as those contained
in other new issues of Policies; or
(c) the payment of the same commissions
in the first year that Union Central
would have paid in the absence of
the original Policy.
F. Effective Date - the date specified on the
cover page on which this Agreement becomes
binding on Union Central and Lincoln.
G. Error - any isolated deviation from the
terms of this Agreement resulting from the
act or omission of an employee of either
Union Central or Lincoln whose principal
function relates to the administration of
reinsurance, whether such deviation results
from inadvertence or a mistake in judgment.
"Error" shall not include any failure to
comply with the terms of an offer of
Facultative Reinsurance or any negligent
or deliberate deviation from the terms of
this Agreement.
H. Facultative Reinsurance - reinsurance that
is ceded to Lincoln only after Union Central
has obtained and accepted a specific offer
to reinsure made by Lincoln. Such
reinsurance may be ceded to Lincoln only
upon the terms specified by Lincoln in its
offer to reinsure and the terms of this
Agreement that do not conflict with the
specific offer to reinsure.
Page 16
I. Lincoln's Proportionate Share - the
Reinsurance Amount divided by the death
benefit of a Policy as of the date of issue
or as of the date of a subsequent change to
the Policy that affects the Reinsurance
Amount.
J. Material Change - a change that a prudent
insurance or reinsurance executive would
consider as likely to impact upon a party's
financial experience under this Agreement.
K. Non-Capacity Facultative Reinsurance -
Facultative Reinsurance for which Union
Central made application to reinsurers
other than Lincoln other than the automatic
reinsurers of the Policy forms set forth in
the Life Benefits Schedule or on which
Union Central retained less than its full
Retention on the Policy.
L. Participation Limit - the amount specified
in the Life Benefits Schedule used as a
condition for ceding Automatic Reinsurance.
M. Policy - an individual life insurance
contract issued by Union Central on any of
the Policy forms specified in the Life
Benefits Schedule. A "Policy" shall include
any attached riders and endorsements
specified in the Life Benefits Schedule or
any Addendum to this Agreement.
N. Policy Net Amount at Risk - on the
reinsurance premium renewal date, the death
benefit of a Policy less either the
terminal reserve or, in the case of
interest sensitive Policies, the
accumulation account or cash value on
the Policy, such difference taken to the
nearest dollar. The terminal reserve or
cash value shall be disregarded if a
Policy is on either a level term plan of
twenty years or less or on a decreasing
term plan. The basis for determining the
Policy Net Amount at Risk may be modified
with the consent of both Union Central
and Lincoln without the need for a formal
amendment of this Agreement.
O. Reinsurance Amount - the Policy death
benefit at issue less any accumulative
value, if applicable, less the Retention
on the Policy times the percentage of
Automatic Reinsurance ceded to Lincoln
as specified in the Life Benefits Schedule.
For Facultative Reinsurance, the
"Reinsurance Amount" is that amount of the
Policy death benefit at issue for which
Union Central accepts Lincoln's offer to
reinsure.
Page 17
P. Reinsured Net Amount at Risk - the
percentage of Automatic Reinsurance ceded
to Lincoln as specified in the Life
Benefits Schedule or the percentage ceded
as modified pursuant to the Facultative
Reinsurance process times the remainder of
(1) the Policy Net Amount at Risk; less
(2) the Retention on the Policy.
Q. Retention - the amount specified in the Life
Benefits Schedule that is held by Union
Central at its own risk on a life without
the benefit of proportional reinsurance.
In calculating the Retention, the sum
retained by Union Central on the life and
in force as of the date of issue of the
Policy shall be taken into account.
R. Ultimate Amount - the projected maximum
Policy Net Amount at Risk that a Policy
could achieve based on reasonable
assumptions made about the operation of
certain characteristics of the Policy form.
Execution Union Central and Lincoln, by their respective
officers, executed this Agreement in duplicate
on the dates shown below. As of the Effective
Date, this Agreement consists of
o this Yearly Renewable Term Reinsurance
Agreement numbered 28;
o a Life Benefits Schedule;
o an Administration Schedule;
o a Premium Schedule;
o an Arbitration Schedule;
o a Waiver of Premium Benefit Addendum;
o an Increasing Policy Addendum; and
o a Guaranteed Insurability Rider Addendum.
Page 00
XXX XXXXX XXXXXXX LIFE INSURANCE COMPANY
Signed at Cincinnati, Ohio
By /s/Xxx X. Xxxxxxxx
Title Vice President & Actuary
Date April 6, 2001
By /s/Xxx X. XxXxxxxx
Title 2nd vice President
Date April 6, 2001
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
Signed at Fort Xxxxx, Indiana
By /s/Xxx Xxxxx
Second Vice President
Date 9/18/00
By /s/Xxxxx Xxxxx
Assistant Secretary
Date September 18, 2000
