AUTOMATIC/FACULTATIVE YRT REINSURANCE AGREEMENT (hereinafter referred to as the “Agreement”) Between FARMERS NEW WORLD LIFE INSURANCE COMPANY Mercer Island, Washington (hereinafter referred to as the “Ceding Company”) and REINSURANCE COMPANY A...
EXHIBIT (g)(1)
00000-00-00
AUTOMATIC/FACULTATIVE YRT
REINSURANCE AGREEMENT
(hereinafter referred to as the “Agreement”)
REINSURANCE AGREEMENT
(hereinafter referred to as the “Agreement”)
Between
FARMERS NEW WORLD LIFE INSURANCE COMPANY
Mercer Island, Washington
(hereinafter referred to as the “Ceding Company”)
Mercer Island, Washington
(hereinafter referred to as the “Ceding Company”)
and
REINSURANCE COMPANY A [REDACTED]
[ , ] [REDACTED]
(hereinafter referred to as the “Reinsurer”)
[ , ] [REDACTED]
(hereinafter referred to as the “Reinsurer”)
EFFECTIVE: [ ] [REDACTED]
TABLE OF CONTENTS
ARTICLE 1 — PREAMBLE |
5 | |||
1.1 PARTIES TO THIS AGREEMENT |
5 | |||
1.2 COMPLIANCE |
5 | |||
1.3 CONSTRUCTION |
5 | |||
1.4 ENTIRE AGREEMENT |
5 | |||
1.5 SEVERABILITY |
5 | |||
1.6 WAIVER |
5 | |||
ARTICLE 2 — AUTOMATIC REINSURANCE |
6 | |||
2.1 GENERAL CONDITIONS |
6 | |||
2.2 RETAINED AMOUNTS |
6 | |||
2.3 EXPENSE OF ORIGINAL POLICY |
6 | |||
ARTICLE 3 — FACULTATIVE REINSURANCE |
7 | |||
ARTICLE 4 — COMMENCEMENT OF LIABILITY |
8 | |||
4.1 AUTOMATIC REINSURANCE |
8 | |||
4.2 FACULTATIVE REINSURANCE |
8 | |||
4.3 CONDITIONAL RECEIPT OR TEMPORARY INSURANCE AGREEMENT |
8 | |||
ARTICLE 5 — PREMIUM ACCOUNTING |
9 | |||
5.1 PREMIUMS |
9 | |||
5.2 PAYMENT OF PREMIUM |
9 | |||
5.3 DELAYED PAYMENT |
9 | |||
5.4 FAILURE TO PAY PREMIUMS |
9 | |||
5.5 PREMIUM RATE GUARANTEE |
10 | |||
ARTICLE 6 — POLICY REDUCTIONS, TERMINATIONS AND CHANGES |
11 | |||
6.1 REDUCTIONS AND TERMINATIONS |
11 | |||
6.2 INCREASES |
11 | |||
6.3 RISK CLASSIFICATION CHANGES |
12 | |||
6.4 REINSTATEMENT |
12 | |||
6.5 NONFORFEITURE BENEFITS |
12 | |||
ARTICLE 7 — EXCHANGES AND REPLACEMENTS |
13 | |||
7.1 NOTIFICATION AND PLACEMENT |
13 | |||
7.2 PREMIUMS |
13 | |||
7.3 INCREASES IN AMOUNT |
13 | |||
7.4 FACULTATIVE CONSIDERATIONS |
13 | |||
7.5 ACCELERATED BENEFITS |
13 | |||
ARTICLE 8 — POLICY RESCISSION |
14 | |||
ARTICLE 9 — CLAIMS |
15 | |||
9.1 COVERAGE |
15 | |||
9.2 NOTICE |
15 | |||
9.3 PROOFS |
15 | |||
9.4 AMOUNT AND PAYMENT OF REINSURANCE BENEFITS |
15 | |||
9.5 DISPUTED CLAIMS |
15 | |||
9.6 CLAIM EXPENSES |
16 | |||
9.7 MISREPRESENTATION OR SUICIDE |
16 | |||
9.8 MISSTATEMENT OF AGE OR GENDER |
16 |
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9.9 EXTRA-CONTRACTUAL DAMAGES |
16 | |||
ARTICLE 10 — RETENTION LIMIT CHANGES |
17 | |||
ARTICLE 11 — RECAPTURE |
18 | |||
11.1 RECAPTURE ELIGIBILITY REQUIREMENTS |
18 | |||
11.2 INCREASES IN FIRST DOLLAR QUOTA SHARE RETENTION |
19 | |||
ARTICLE 12 — SPECIAL TERMINATION |
20 | |||
ARTICLE 13 — GENERAL PROVISIONS |
22 | |||
13.1 CURRENCY |
22 | |||
13.2 PREMIUM TAX |
22 | |||
13.3 INSPECTION OF RECORDS |
22 | |||
13.4 FORMS, MANUAL, ISSUE RULES AND CLAIMS PRACTICES |
22 | |||
13.5 ANTI-MONEY LAUNDERING |
22 | |||
13.6 INTEREST RATE FOR BALANCES IN DEFAULT |
22 | |||
ARTICLE 14 — DAC TAX |
23 | |||
ARTICLE 15 — OFFSET |
24 | |||
ARTICLE 16 — INSOLVENCY |
25 | |||
16.1 INSOLVENCY OF A PARTY TO THIS AGREEMENT |
25 | |||
16.2 INSOLVENCY OF THE CEDING COMPANY |
25 | |||
ARTICLE 17 — ERRORS AND OMISSIONS |
26 | |||
ARTICLE 18 — ARBITRATION |
27 | |||
18.1 GENERAL |
27 | |||
18.2 NOTICE |
27 | |||
18.3 PROCEDURE |
27 | |||
18.4 ARBITRATION COSTS |
27 | |||
18.5 SITE OF ARBITRATION |
28 | |||
18.6 ARBITRATION SETTLEMENT |
28 | |||
ARTICLE 19 — DURATION OF AGREEMENT |
29 | |||
ARTICLE 20 — REPRESENTATIONS AND WARRANTIES |
30 | |||
ARTICLE 21
— CONFIDENTIALITY |
31 | |||
ARTICLE 22
— ASSIGNMENT AND TRANSFER |
32 | |||
ARTICLE 23
— NOTICES |
33 | |||
ARTICLE 24 — DEFINITIONS |
34 | |||
ARTICLE 25 — EXECUTION |
37 | |||
EXHIBIT A — RETENTION SCHEDULE OF THE CEDING COMPANY |
38 | |||
A LIFE INSURANCE |
38 | |||
EXHIBIT B — BUSINESS COVERED |
39 |
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EXHIBIT C — BINDING LIMITS |
40 | |||
C.1 REINSURER’S SHARE |
40 | |||
C.2 AUTOMATIC BINDING LIMITS |
00 | |||
X.0 XXXXX XXXXXX |
00 | |||
X.0 AGE LIMITS |
40 | |||
EXHIBIT D — REINSURANCE PREMIUMS |
41 | |||
D.2 AGE BASIS |
41 | |||
D.3 POLICY FEES |
41 | |||
D.5 FLAT EXTRAS |
41 | |||
D.6 RIDERS AND BENEFITS |
41 | |||
EXHIBIT D — RATE SCHEDULE 1 |
42 | |||
EXHIBIT E — SELF-ADMINISTERED REPORTING |
43 | |||
E.1 REPORTING REQUIREMENTS |
43 | |||
E.2 BUSINESS REPORTED ELECTRONICALLY |
43 | |||
E.3 STATEMENT SPECIFICATIONS |
44 | |||
E.4 POLICY EXHIBIT |
45 | |||
E.5 ACCOUNTING SUMMARY |
46 | |||
EXHIBIT F — APPLICATION FOR FACULTATIVE REINSURANCE |
47 | |||
EXHIBIT G — ALLOCATION RULES FOR PLACEMENT OF FACULTATIVE CASES |
48 | |||
EXHIBIT H — ACCELERATED BENEFIT RIDER |
49 |
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ARTICLE 1 — PREAMBLE
1.1 PARTIES TO THIS AGREEMENT
This is a YRT Agreement for indemnity reinsurance (the “Agreement”) solely between Farmers New World Life Insurance Company of Mercer Island, Washington and REINSURANCE COMPANY A [REDACTED] of ___, ___[REDACTED]. The Ceding Company and the Reinsurer are collectively referred to as the “parties”.
This is a YRT Agreement for indemnity reinsurance (the “Agreement”) solely between Farmers New World Life Insurance Company of Mercer Island, Washington and REINSURANCE COMPANY A [REDACTED] of ___, ___[REDACTED]. The Ceding Company and the Reinsurer are collectively referred to as the “parties”.
The acceptance of risks under this Agreement will create no right or legal relationship between the
Reinsurer and the insured, owner or beneficiary of any insurance policy or other contract of the
Ceding Company.
The Agreement will be binding upon the Ceding Company and the Reinsurer and their respective
successors and assigns.
There will be a separate broker agreement between ___, ___[REDACTED] and
REINSURANCE COMPANY A [REDACTED].
1.2 COMPLIANCE
This Agreement applies only to the issuance of insurance by the Ceding Company in a jurisdiction in
which it is properly licensed.
The Ceding Company and the Reinsurer represent that, to the best of their knowledge, they are in
compliance with all state and federal laws and regulations applicable to the business reinsured
under this Agreement. In the event that either party is found to be in non-compliance with any
such law or regulation, the Agreement will remain in effect and the parties will seek to remedy the
non-compliance and will indemnify each other for any direct loss suffered as a result of the
non-compliance.
1.3 CONSTRUCTION
This Agreement will be construed in accordance with the laws of the state of Washington.
1.4 ENTIRE AGREEMENT
This Agreement constitutes the entire agreement between the parties with respect to the business
reinsured hereunder. There are no understandings between the parties other than as expressed in
this Agreement. Any change or modification to this Agreement will be null and void unless made by
amendment to this Agreement and signed by all parties, except as otherwise provided herein.
1.5 SEVERABILITY
If any provision of this Agreement is determined to be invalid or unenforceable, such determination
will not impair or affect the validity or the enforceability of the remaining provisions of this
Agreement.
1.6 WAIVER
Either party may choose not to enforce nor insist upon the strict adherence to any provision or
right under this Agreement. If either party so elects, it will not be considered to be a permanent
waiver of such provision nor in any way affect the validity of this Agreement. The applicable
party will still have the right to insist upon the strict adherence to that provision or any other
provision of this Agreement in the future. Any waiver of provisions by a party under this
Agreement must be in writing and signed by a duly authorized representative of the party.
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ARTICLE 2 — AUTOMATIC REINSURANCE
2.1 GENERAL CONDITIONS
On and after the Effective Date of this Agreement, the Ceding Company will Automatically cede to
the Reinsurer a portion of the life insurance policies, supplementary benefits, and riders listed
in Exhibit B.
The Reinsurer will Automatically accept its share of the above-referenced policies up to the limits
shown in Exhibit C, provided that:
a. | the Ceding Company keeps its Quota Share Retention, as specified in Exhibit A; | ||
b. | the Ceding Company applies the underwriting guidelines, practices, and procedures for risk selection identified by the Ceding Company in the request for proposal submission material submitted by Xxx Xxxxxxxxx and subsequent correspondence on any Material Changes consented to in writing by the Reinsurer; | ||
c. | the risk is a legal permanent resident of the United States or its territories, or is a person that resides in the United States or its territories on a permanent basis, for at least the preceding 12 months, and intends to continue residing in the United States or its territories on a permanent basis, but are not citizens and do not yet have their alien registration receipt card; | ||
d. | the total of the Ultimate Amount of reinsurance required including contractual increases, and the amount already reinsured on that life under this Agreement and all other agreements between the Reinsurer and the Ceding Company, does not exceed the Automatic Binding Limits set out in Exhibit C; | ||
e. | the amount of life insurance in force in all companies, including any coverage to be replaced, plus the amount currently applied for on that life in all companies, does not exceed the Jumbo Limits stated in Exhibit C; and | ||
f. | the application is on a life that has not been submitted Facultatively to the Reinsurer or any other Reinsurer within the last three (3) years, unless the reason for any prior Facultative submission was solely for capacity that may now be accommodated within the terms of this Agreement. |
2.2 RETAINED AMOUNTS
The Ceding Company may not reinsure, on any basis, the amount it has retained on the business
covered under this Agreement without prior notification to and agreement of the Reinsurer.
2.3 EXPENSE OF ORIGINAL POLICY
The Ceding Company will bear the expense of all medical examinations, inspection fees and other
charges incurred in connection with the Original Policy.
6
ARTICLE 3 — FACULTATIVE REINSURANCE
The Ceding Company may submit any application on a plan or rider identified in Exhibit B to the
Reinsurer for its consideration on a Facultative basis.
The Ceding Company will apply for reinsurance on a Facultative basis by sending to the Reinsurer an
application for Facultative reinsurance, providing the information outlined in Exhibit F.
Accompanying this application will be copies of all underwriting evidence that is available for
risk assessment including, but not limited to, copies of the application for insurance, medical
examiners’ reports, attending physicians’ statements, inspection reports, Ultimate Amount applied
for in all companies, Ultimate Amount to be placed in all companies and Ultimate Amount to be in
force in all companies, and any other information bearing on the insurability of the risk. The
Ceding Company also will notify the Reinsurer of any outstanding underwriting requirements at the
time of the Facultative submission. Any subsequent information received by the Ceding Company that
is pertinent to the risk assessment will be promptly transmitted to the Reinsurer.
After consideration of the application for Facultative reinsurance and related information, the
Reinsurer will promptly inform the Ceding Company of its underwriting decision. The Reinsurer’s
offer will expire at the end of one hundred twenty (120) days, unless otherwise specified by the
Reinsurer.
If the underwriting decision is acceptable, the Ceding Company will notify the Reinsurer in writing
of its acceptance of the offer. If any risk is to be submitted to more than one Reinsurer for
consideration, the current allocation rules for placement of Facultative cases as outlined in
Exhibit H will apply.
The relevant terms and conditions of this Agreement will apply to those Facultative offers made by
the Reinsurer and accepted by the Ceding Company.
7
ARTICLE 4 — COMMENCEMENT OF LIABILITY
4.1 AUTOMATIC REINSURANCE
For Automatic reinsurance, the Reinsurer’s liability will commence at the same time as the Ceding
Company’s liability.
4.2 FACULTATIVE REINSURANCE
For Facultative reinsurance, the Reinsurer’s liability will commence at the same time as the Ceding
Company’s liability, provided that the Reinsurer has made a binding Facultative offer and that
offer was accepted, during the lifetime of the insured, in accordance with the terms of this
Agreement.
4.3 CONDITIONAL RECEIPT OR TEMPORARY INSURANCE AGREEMENT
Reinsurance coverage under a Conditional Receipt or Temporary Insurance Agreement is limited to the
Reinsurer’s share of amounts within the Conditional Receipt or Temporary Insurance Agreement
specified in Exhibit C. The Reinsurer will accept liability provided that:
a. | the Reinsurer has reviewed and approved the Conditional Receipt form or Temporary Insurance Agreement; and | ||
b. | the risk is eligible for Automatic reinsurance under this Agreement; or the Reinsurer has made a Facultative offer and the Ceding Company would have accepted that offer based on the allocation rules for placement of Facultative cases in Exhibit H; and | ||
c. | the Ceding Company, including its agents/representatives has followed its normal cash-with-application procedures for such coverage. |
8
ARTICLE 5 — PREMIUM ACCOUNTING
5.1 PREMIUMS
Reinsurance premium rates paid by the Ceding Company for life insurance and other benefits
reinsured under this Agreement are shown in Exhibit D. The rates will be applied to the Reinsured
Net Amount at Risk.
5.2 PAYMENT OF PREMIUM
Reinsurance premiums are payable annually and in advance. The Ceding Company will calculate the
amount of reinsurance premium due and, within thirty (30) days after the end of the month, will
send the Reinsurer a statement that contains the information shown in Exhibit E, showing
reinsurance premiums due for that period. The Ceding Company will remit amounts due the Reinsurer
at the same time as the statement.
5.3 DELAYED PAYMENT
If premium balances remain unpaid for more than sixty (60) days after they are due pursuant to
Article 5.2 above, the Reinsurer reserves the right to charge interest from the end of the
reporting period. Interest will be calculated using the index specified in Article 12.6.
5.4 FAILURE TO PAY PREMIUMS
The payment of reinsurance premiums is a condition precedent to the liability of the Reinsurer for
reinsurance covered by this Agreement. In the event that reinsurance premiums are not paid within
sixty (60) days after they are due pursuant to Article 5.2 above, the Reinsurer will have the right
to terminate the reinsurance for all policies having reinsurance premiums in arrears. If the
Reinsurer elects to exercise its right of termination, it will give the Ceding Company ninety (90)
days written notice of its intention. Such notice will be sent by certified mail.
If all reinsurance premiums in arrears, including any that become in arrears during the ninety (90)
day notice period, are not paid before the expiration of the notice period, the Reinsurer will be
relieved of all liability under those policies as of the last date to which premiums have been paid
for each policy. Reinsurance on policies on which reinsurance premiums subsequently fall due will
automatically terminate as of the last date to which premiums have been paid for each policy,
unless reinsurance premiums on those policies are paid on or before their due date pursuant to
Article 5.2 above.
Terminated reinsurance may be reinstated, subject to approval by the Reinsurer, within thirty (30)
days of the date of termination, and upon payment of all reinsurance premiums in arrears including
any interest accrued thereon. The Reinsurer will have no liability for any claims incurred between
the date of termination and the date of the reinstatement of the reinsurance. The right to
terminate reinsurance will not prejudice the Reinsurer’s right to collect premiums for the period
during which reinsurance was in force prior to the expiration of the ninety (90) day notice.
The Ceding Company may not force termination under the provisions of this Article to avoid the
provisions regarding recapture in Article 11, nor to transfer the reinsured policies to another
Reinsurer.
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5.5 PREMIUM RATE GUARANTEE
Although the Reinsurer anticipates that the premium rates in Exhibit D will apply indefinitely, it
guarantees only that the premium rates applicable to the business reinsured under this Agreement
will not exceed the greater of: (1) the reinsurance premium rates specified in Exhibit D, or (2)
the YRT net premiums at the applicable statutory minimum valuation mortality table and statutory
maximum interest rate for the reinsured business. The Reinsurer does not anticipate holding any
deficiency reserves on the business reinsured under this Agreement.
The Reinsurer may raise YRT reinsurance premium rates for existing business only if it raises
premium rates on all of the Reinsurer’s other YRT reinsurance business with all companies, except
for any business on which the Reinsurer is contractually prohibited from raising rates.
If the Reinsurer increases its premium rates for existing business, the Ceding Company reserves the
right to recapture business affected, in whole or in part, with no recapture fee. In any event,
the Reinsurer may not increase rates for either new or existing business until it has given one
hundred eighty (180) days advance written notice to the Ceding Company. The Reinsurer’s rate
increase or the Ceding Company’s recapture, as applicable, shall take effect on the anniversary of
each policy covered by this Agreement following the aforementioned one hundred eighty (180) day
notice period.
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ARTICLE 6 — POLICY REDUCTIONS, TERMINATIONS AND CHANGES
Whenever a change is made in the status, plan, amount or other feature of a policy reinsured under
this Agreement, the Reinsurer will, upon receipt of notification of the change, consider adjusted
reinsurance coverage in accordance with the provisions of this Article. The Ceding Company will
notify the Reinsurer of any change within ninety (90) days after its effective date.
6.1 REDUCTIONS AND TERMINATIONS
In the event of reduction, lapse, or termination of a policy or policies on a life that is
reinsured under this Agreement, the Ceding Company will reduce or terminate reinsurance on that
life. If a reduction, the Reinsurance Death Benefit on the life with all reinsurers will be
reduced, effective on the same date, by the amount required such that the Ceding Company maintains
its retention as defined in Exhibit A. If the policies are reinsured with multiple reinsurers, the
reinsurance will be reduced by the ratio of the amount of reinsurance in each company to the total
outstanding reinsurance on the risk involved.
The reinsurance reduction will apply first to the policy or policies being reduced and then, on a
chronological basis, to other reinsured policies on the life, beginning with the oldest policy. If
there is a lapse, termination or reduction on a policy reinsured under this Agreement where Full
Retention is held on a life, the Ceding Company will reduce the reinsurance on that life by a
corresponding amount, with the reinsurance on the oldest policy being reduced first. If the amount
of reduction exceeds the amount reinsured, the reinsurance on the policy or policies will be
terminated.
In the event of the reduction, lapse, death claim or termination of a policy or policies reinsured
under this Agreement, the Reinsurer will refund any unearned reinsurance premiums. The reinsured
portion of any policy fee will be deemed earned for the entire policy year if the policy was
reinsured during any portion of that policy year.
6.2 INCREASES
a. | Noncontractual Increases | ||
If the Initial Death Benefit is increased as a result of a noncontractual change, the increase will be underwritten by the Ceding Company in accordance with the underwriting guidelines, practices, and procedures for risk selection identified by the Ceding Company in the questionnaire titled “Underwriting Guidelines, Practices and Procedures” and any Material Changes consented to in writing by the Reinsurer. | |||
Such increases will be considered new reinsurance under this Agreement. The Reinsurer’s approval is required if the Original Policy was reinsured on a Facultative basis or if the new amount will cause the Reinsured Net Amount at Risk on the life to exceed either the Automatic Binding Limits or the Jumbo Limits shown in Exhibit C. | |||
The Ceding Company and the Reinsurer will share the increased amount proportionately. If the reinsurance is Automatic, the amount of reinsurance must not exceed the Automatic Binding Limits or Jumbo Limits shown in Exhibit C. If the increase is Facultative, the Ultimate Amount of reinsurance must not exceed the amount included in the Facultative offer. |
11
Premiums for the additional reinsurance will be based on the issue age, mortality rating, underwriting class and duration since the time of underwriting of the increase. | |||
b. | Contractual Increases | ||
Reinsurance of increases in amount resulting from contractual policy provisions will be based on the issue age, mortality rating, underwriting class and duration from issue of the Original Policy. | |||
The Ceding Company and the Reinsurer will share the increased amount proportionately. If the reinsurance is Automatic, the amount of reinsurance must not exceed the Automatic Binding or Jumbo Limits shown in Exhibit C. If the reinsurance is Facultative, the amount of reinsurance must not exceed the Ultimate Amount included in the Facultative offer. | |||
Any change in the Policy Net Amount at Risk due to changes in the policy’s cash value or account value will be shared proportionately between the Ceding Company and all reinsurers. |
6.3 RISK CLASSIFICATION CHANGES
If the policyholder requests a substandard table rating reduction or removal of a flat extra, such
change will be underwritten in accordance with the underwriting guidelines, practices, and
procedures for risk selection identified by the Ceding Company in the questionnaire titled
“Underwriting Guidelines, Practices and Procedures” and any Material Changes consented to in
writing by the Reinsurer. Risk classification changes on Facultative policies will be subject to
the Reinsurer’s approval.
6.4 REINSTATEMENT
Any policy originally reinsured in accordance with the terms and conditions of this Agreement by
the Ceding Company may be automatically reinstated with the Reinsurer as long as the policy is
reinstated in accordance with the established procedures and rules of the Ceding Company previously
disclosed to the Reinsurer. Any policy originally reinsured with the Reinsurer on a Facultative
basis which has been in a lapsed status for more than ninety (90) days must be submitted with
underwriting requirements and approved by the Reinsurer before it is reinstated. The Ceding
Company will pay the Reinsurer its share of amounts collected or charged for the reinstatement of
such policies.
6.5 NONFORFEITURE BENEFITS
a. | Extended Term | ||
If the Original Policy lapses and extended term insurance is elected under the terms of the policy, reinsurance will continue on the same basis as under the Original Policy until the expiry of the extended term period. | |||
b. | Reduced Paid-Up | ||
If the Original Policy lapses and reduced paid-up insurance is elected under the terms of the policy, the amount reinsured and the amount retained will be reduced proportionately in accordance with the procedures described in Article 6.1. |
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ARTICLE 7 — EXCHANGES AND REPLACEMENTS
7.1 NOTIFICATION AND PLACEMENT
If a policy reinsured with the Reinsurer is exchanged to or replaced by a plan reinsured under this
Agreement, the Ceding Company will notify the Reinsurer within ninety (90) days after the effective
date of the exchange or replacement. A policy resulting from an internal exchange or replacement
will be underwritten by the Ceding Company in accordance with its underwriting guidelines,
practices and procedures for exchanges and replacements. Exchanges or replacements of policies
previously reinsured with the Reinsurer will continue to be reinsured with the Reinsurer, except as
noted in Article 7.4, in an amount not to exceed the original Reinsured Net Amount at Risk, unless
such exchanges or replacements are issued as New Business.
Unless mutually agreed otherwise, policies that are not reinsured with the Reinsurer and that are
exchanged to or replaced by a plan covered under this Agreement will not be reinsured hereunder
unless such exchange or replacement is New Business.
7.2 PREMIUMS
If the New Plan is reinsured by the Reinsurer, either under this Agreement or under a different
agreement, reinsurance premium rates for the resulting New Policy will be those contained in the
agreement that covers the New Plan. If the agreement including the new rates requires policy fees,
then they will also apply to the New Policy. However, if the Reinsurer does not reinsure the New
Plan, reinsurance premiums will be the rates shown in Exhibit D. Reinsurance premiums for the New
Policy will be based on the original issue age, underwriting class and duration since the issuance
of the Original Policy
7.3 INCREASES IN AMOUNT
If the New Policy is issued with an increase in the Initial Death Benefit, then the provisions of
Article 6.2.a will apply to the increased amount.
7.4 FACULTATIVE CONSIDERATIONS
The Reinsurer’s approval to exchange or replace the Original Policy will be required if the
Original Policy was reinsured on a Facultative basis, and the new policy is fully underwritten by
the Ceding Company.
7.5 ACCELERATED BENEFITS
Any residual Reinsured Net Amount at Risk post-acceleration may not be converted, exchanged or
replaced.
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ARTICLE 8 — POLICY RESCISSION
If it is determined that a policy reinsured under this Agreement should be rescinded due to
misrepresentation by the policyholder or the insured, the Reinsurer will pay its share of
reasonable investigation and legal expenses connected with the rescission action.
The Reinsurer will not reimburse the Ceding Company for routine expenses, including but not limited
to the Ceding Company’s home office expenses, compensation of salaried officers and employees, and
any legal expenses other than third party expenses incurred by the Ceding Company.
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ARTICLE 9 — CLAIMS
9.1 COVERAGE
Claims covered under this Agreement are for the plans and any additional benefits specified in
Exhibit B.
9.2 NOTICE
The Ceding Company will promptly notify the Reinsurer after it receives a claim on a policy
reinsured under this Agreement.
9.3 PROOFS
The Ceding Company will promptly provide the Reinsurer with proper claim proofs, which are a copy
of the proof of payment by the Ceding Company, a copy of the insured’s death certificate and a copy
of the claimant’s statement. The Reinsurer may request, and the Ceding Company will send, all
documents in connection with any claim reinsured under this Agreement.
9.4 AMOUNT AND PAYMENT OF REINSURANCE BENEFITS
As soon as the Reinsurer receives proper claim notice and proper claim proofs, the Reinsurer will
promptly pay its Proportionate Share of all payable claims eligible for coverage under this
Agreement.
The maximum Reinsured Net Amount at Risk payable to the Ceding Company under this Agreement is the
risk amount specifically reinsured with the Reinsurer. The Reinsurer will also pay its
Proportionate Share of the interest on the death proceeds through the date of settlement that the
Ceding Company is required to pay, either by law or under the terms of the policy.
Life benefit payments will be made in a single sum, regardless of the Ceding Company’s settlement
options.
The Reinsurer will pay its portion of accelerated benefits paid by the Ceding Company following the
guidelines stated in Exhibit H.
9.5 DISPUTED CLAIMS
The Ceding Company will promptly notify the Reinsurer of any contest, compromise or litigation as a
result of a denial of a claim involving a policy reinsured under this Agreement or as a result of
rescission of a policy reinsured under this Agreement. Unless it declines to be a party to such
action, the Reinsurer will pay its Proportionate Share of any settlement up to the maximum that
would have been payable under the specific policy had there been no controversy plus its
Proportionate Share of claim investigation fees paid to a third party, except as specified below.
If the Reinsurer declines to be a party to said contest, compromise or litigation, it will pay its
full share of the amount reinsured, as if there had been no contest, compromise or litigation. The
Reinsurer will also pay its Proportionate Share of covered expenses incurred to the date it
notifies the Ceding Company it declines to be a party.
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9.6 CLAIM EXPENSES
The Reinsurer will pay its Proportionate Share of reasonable claim investigation and legal expenses
connected with the litigation or settlement of claims payable under this Agreement unless the
Reinsurer has discharged its liability pursuant to Article 9.5 above. If the Reinsurer has so
discharged its liability, the Reinsurer will not participate in any expenses incurred thereafter.
The Reinsurer will not reimburse the Ceding Company for routine claim and administration expenses,
including but not limited to the Ceding Company’s home office expenses, compensation of salaried
officers and employees, and any legal expenses other than third party expenses incurred by the
Ceding Company. Claim investigation expenses do not include expenses incurred by the Ceding
Company as a result of a dispute or contest arising out of conflicting claims of entitlement to
policy proceeds or benefits.
9.7 MISREPRESENTATION OR SUICIDE
If the Ceding Company returns premium to the policyowner or beneficiary as a result of fraud or
misrepresentation within the policy contestable period or suicide of the insured, the Reinsurer
will refund net reinsurance premiums received on that policy without interest to the Ceding Company
in lieu of any other form of reinsurance benefit payable under this Agreement.
9.8 MISSTATEMENT OF AGE OR GENDER
In the event of a change in the amount of the Ceding Company’s liability on a policy due to a
misstatement of age or gender, the Reinsurer’s liability on its Proportionate Share will change
within the terms of this Agreement. The Reinsured Net Amount at Risk will be adjusted from the
inception of the Original Policy, and any difference will be settled without interest.
9.9 EXTRA-CONTRACTUAL DAMAGES
In no event shall the Reinsurer be liable for any Extra-Contractual Obligations awarded against the
Ceding Company as a result of any act, omission or course of conduct committed solely by the Ceding
Company, its agents or representatives in connection with claims under this Agreement, nor for any
legal fees or expenses incurred in the defense of such claims.
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ARTICLE 10 — RETENTION LIMIT CHANGES
If the Ceding Company changes its retention limits as shown in Exhibit A, it will provide the
Reinsurer with prompt written notice of the intended changes.
A change to the Ceding Company’s retention limits will not affect policies reinsured under this
Agreement except as specifically provided elsewhere in this Agreement. Furthermore, unless agreed
between the parties, an increase in the Ceding Company’s retention limit will not increase the
Automatic Binding Limits.
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ARTICLE 11 — RECAPTURE
11.1 RECAPTURE ELIGIBILITY REQUIREMENTS
Whenever the Ceding Company increases its Maximum Retention Per Life as set forth in Exhibit A the
Ceding Company will notify the Reinsurer of its intent to recapture to the new retention limits.
If the Ceding Company has maintained its Maximum Retention Per Life for the plan and the insured’s
issue age, sex, and mortality classification, it may apply its increased retention limits to reduce
the amount of reinsurance in force as follows:
a. | the Ceding Company must give the Reinsurer ninety (90) days written notice prior to its intended date of the commencement of recapture; and | ||
b. | the reduction of reinsurance on affected policies will become effective on the policy anniversary date immediately following the notice of election to recapture; however, no reduction will be made until a policy has been in force for at least twenty (20) years, for policies where the corporate maximum dollar retention was held at issue, up to the then current increased retention; and | ||
c. | if any policy reinsured on the life is recaptured, all policies reinsured on the life that are eligible for recapture under the provisions of this Article must be recaptured up to the Ceding Company’s new Maximum Retention Per Life in a consistent manner, and the Ceding Company must increase its total amount of insurance on each reinsured life. The Ceding Company may not revoke its election to recapture for policies becoming eligible at future anniversaries; and | ||
d. | no recapture will be made unless the Ceding Company retained its corporate maximum dollar limit of retention for the plan, age and mortality rating at the time the policy was issued. No recapture will be allowed in any class of fully reinsured business nor in any classes of risks for which the Ceding Company established special retention limits less than the Ceding Company’s Maximum Retention Per Life for the plan, age, and mortality rating at the time the policy was issued. |
If portions of a policy reinsured under this Agreement have been reinsured with more than one
Reinsurer, the Ceding Company must allocate the reduction in reinsurance so that the amount
reinsured by each Reinsurer after the reduction is proportionately the same as if the new Maximum
Retention Per Life had been in effect at the time of issue.
The amount of reinsurance eligible for recapture is based on the Reinsured Net Amount at Risk as of
the date of recapture. For a policy issued as a result of exchange, conversion or re-entry, the
recapture terms of the reinsurance agreement covering the Original Policy will apply, and the
duration for the purpose of recapture will be measured from the effective date of the reinsurance
on the Original Policy.
If there is any residual Reinsured Net Amount at Risk post-accelerated benefit claim, the policy
will not be recaptured.
After the effective date of recapture, the Reinsurer will not be liable for any benefits on
reinsured policies or portions of such reinsured policies eligible for recapture that the Ceding
Company has overlooked.
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11.2 INCREASES IN FIRST DOLLAR QUOTA SHARE RETENTION
Whenever the Ceding Company increases its first dollar Quota Share Retention for New Business as
set forth in Exhibit A, recapture will not be allowed under this Agreement unless by written
consent of the Reinsurer.
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ARTICLE 12 — SPECIAL TERMINATION
Special Termination
If the Reinsurer experiences any of the following events and any such event remains unremedied,
then the Ceding Company will have the right to terminate this Agreement for new business.
a) | RBC Falls Below 225%; As of the end of any calendar year, the party’s total adjusted capital is less than 225% of the Reinsurer’s authorized control level risk-based capital, as set forth in the five year historical data table of the Reinsurer’s statutory annual statement as filed with its domiciliary regulatory authority. To effectuate termination, notice must be provided in accordance with this provision at least ninety (90) days prior to the requested termination date; | ||
b) | Insolvency; A party’s domiciliary regulatory authority appoints a conservator, liquidator, or statutory successor; or | ||
c) | Loss of License and Failure to Provide Security; The Reinsurer becomes unlicensed in a particle state where the Ceding Company is licensed and doing business under the treaty 00000-00-00 and the Reinsurer fails to provide security necessary for the Ceding Company to take statutory reserve credit for business written in such state. |
Ceding Company’s Limited Right of Recapture in Event of Special Termination
If the Reinsurer experiences any of the events described in this provision and any such event
remains unremedied, then the Ceding Company will have a right to terminate this Agreement for new
business and have the option to recapture the entire Reinsurer’s quota share of policy liabilities
and excess of retention liabilities on all reinsured policies.
In the event of recapture pursuant to this section,
a) | The Ceding Company must give the Reinsurer notice of its election to recapture by certified or registered mail, return receipt requested, at least ninety (90) days prior to its intended date of recapture; | ||
b) | The recapture will become effective on the last day of the ninety (90) day notice period; and | ||
c) | The Reinsurer’s entire quota share of policy liabilities and excess of retention liabilities on all policies reinsured under this Agreement must be recaptured. | ||
d) | The Ceding Company will pay the Reinsurer, or the Reinsurer shall remit to the Ceding Company, as the case may be, a recapture fee based upon the following: |
i. | The fee shall reflect all the present and future obligations and will approximate the economic results of the Agreement and will place the parties in the positions they would have been in, adjusted for the time value of money, had the business run to expiry. | ||
ii. | Specifically, an independent actuarial firm, agreed upon by both parties, will calculate the recapture fee, which will be based on a calculation of the present value of expected future cash flows from premiums, claims commissions and allowances revalued on the same basis as originally priced, using current best estimate assumptions adjusted for: |
1. | Historic experience of the underlying business. | ||
2. | Discount rates consistent with current market conditions. | ||
3. | Credible and relevant historical experiences on similar business based on the Reinsurer’s experience with other companies, credible industry studies and general population studies (to the extent that any or all of which were utilized in original pricing); |
20
4. | Current market perceptions of mortality improvements and later durations lapse rates; and | ||
5. | Current costs of letters of credit or other capital related costs. |
iii. | In no event will the Reinsurer make a net payment to the Ceding Company greater than the Reinsurer’s GAAP liability net of any deferred acquisition costs less any adjustment for market value changes, as appropriate. | ||
iv. | The cost of the independent actuarial firm be shared equally by the Ceding Company an the Reinsurer. |
The Reinsurer’s entire quota share of policy liabilities and excess of retention liabilities on all
policies reinsured under this Agreement must be recaptured.
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ARTICLE 13 — GENERAL PROVISIONS
13.1 CURRENCY
All payments and reporting by all parties under this Agreement will be made in United States
dollars.
13.2 PREMIUM TAX
The Reinsurer will not reimburse the Ceding Company for premium taxes.
13.3 INSPECTION OF RECORDS
The Reinsurer and the Ceding Company, or their duly authorized representatives, will have the right
to inspect original papers, records and all documents relating to the business reinsured under this
Agreement. These documents will be made available during normal office hours to a representative
of either company who will be named in advance; notification of such visits will normally be given
two (2) weeks in advance and even in urgent cases at least forty-eight (48) hours in advance.
13.4 FORMS, MANUAL, ISSUE RULES AND CLAIMS PRACTICES
The Ceding Company affirms that it has supplied the Reinsurer with the underwriting guidelines,
issue rules and policy forms in use as of the Effective Date of this Agreement for the policies
reinsured hereunder. Further, the Ceding Company affirms that it follows claims handling practices
and procedures which are standard and customary to the life insurance industry.
The Ceding Company will promptly notify the Reinsurer of any proposed Material Changes in its
underwriting guidelines, issue rules, policy forms and claims practices and procedures. This
Agreement will not extend to policies issued pursuant to a Material Change unless the Reinsurer has
consented in writing to accept policies subject to the Material Change.
It is the Ceding Company’s responsibility to ensure that its practice and applicable forms are in
compliance with current Medical Information Bureau (MIB) guidelines.
13.5 ANTI-MONEY LAUNDERING
The Ceding Company has established and will maintain policies and procedures to comply with
applicable laws and regulations relating to anti-money laundering and anti-terrorism financing
activities including, without limitation, the U.S.A. Patriot Act, the lists promulgated or
maintained by the United States Department of Treasury naming specially designated nationals or
blocked persons, and any other laws, regulations, executive orders or similar actions that impose
sanctions or prohibit or restrict transactions or relations with designated persons, entities,
organizations or governments.
13.6 INTEREST RATE FOR BALANCES IN DEFAULT
The Reinsurer reserves the right to charge interest at the prime rate plus two percent (2%) as
stated in the Wall Street Journal on the 1st business day in January prior to the due
date of the premium when:
a. | renewal premiums are not paid within sixty (60) days of the due date; or | ||
b. | premiums for New Business are not paid within one hundred twenty (120) days of the date the policy is issued. |
22
ARTICLE 14 — DAC TAX
The Ceding Company and the Reinsurer hereby agree to the following, pursuant to Section
1.848-2(g)(8) of the Income Tax Regulation issued December 1992, under Section 848 of the Internal
Revenue Code of 1986:
a. | the term “party” refers to either the Ceding Company or the Reinsurer, as appropriate; | ||
b. | the terms used in this Article are defined by reference to Regulation Section 1.848-2, effective December 29, 1992; | ||
c. | the party with the net positive consideration for this Agreement for each taxable year will capitalize specified policy acquisition expenses with respect to this Agreement without regard to the general deductions limitation of Section 848(c)(1); | ||
d. | all parties agree to exchange information pertaining to the amount of net consideration under this Agreement each year to ensure consistency, or as otherwise required by the Internal Revenue Service; | ||
e. | the Reinsurer will submit a schedule to the Ceding Company by April 1 of each year of its calculation of the net consideration for the preceding calendar year. This schedule of calculations will be accompanied by a statement stating that the Reinsurer will report such net consideration in its tax return for the preceding calendar year; | ||
f. | the Ceding Company may contest such calculation by providing an alternative calculation to the Reinsurer by May 1 of the year following the end of the taxable year. If the Ceding Company does not notify the Reinsurer by May 1, the new considerations reported in the respective tax returns will be the value as defined in Item (e) above; | ||
g. | if the Ceding Company submits its alternative calculation, the parties will act in good faith to reach an agreement on the correct amount within thirty (30) days of the date the Ceding Company submits its alternative calculation. If the Ceding Company and the Reinsurer reach agreement on an amount of the net consideration, each party shall report such amount in their respective tax returns for the previous calendar year; and | ||
h. | the Ceding Company and the Reinsurer represent and warrant that they are subject to United States taxation under either Subchapter L or Subpart F of Part III of Subchapter N of the Internal Revenue Code of 1986, as amended. |
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ARTICLE 15 — OFFSET
Any debts or credits, in favor of or against either the Reinsurer or the Ceding Company with
respect to this Agreement or any other reinsurance agreement between the parties, are deemed mutual
debts or credits and may be offset, and only the balance will be allowed or paid provided the party
that seeks to avail itself of this right of offset is not in breach of any provision of this
Agreement.
The right of offset will not be affected or diminished because of the insolvency of either party.
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ARTICLE 16 — INSOLVENCY
16.1 INSOLVENCY OF A PARTY TO THIS AGREEMENT
A party to this Agreement will be deemed insolvent when it:
a. | applies for or consents to the appointment of a receiver, rehabilitator, conservator, liquidator or statutory successor of its properties or assets; | ||
b. | is adjudicated as bankrupt or insolvent; | ||
c. | files or consents to the filing of a petition in bankruptcy, seeks reorganization to avoid insolvency or makes formal application for any bankruptcy, dissolution, liquidation or similar law or statute; or | ||
d. | becomes the subject of an order to rehabilitate or an order to liquidate as defined by the insurance code of the jurisdiction of the party’s domicile. |
16.2 INSOLVENCY OF THE CEDING COMPANY
In the event of the insolvency of the Ceding Company, all reinsurance payments due under this
Agreement will be payable directly to the liquidator, rehabilitator, receiver, or statutory
successor of the Ceding Company, without diminution because of the insolvency, for those claims
allowed against the Ceding Company by any court of competent jurisdiction or by the liquidator,
rehabilitator, receiver or statutory successor having authority to allow such claims.
In the event of insolvency of the Ceding Company, the liquidator, rehabilitator, receiver or
statutory successor will give written notice to the Reinsurer of all pending claims against the
Ceding Company on any policies reinsured within a reasonable time after such claim is filed in the
insolvency proceeding. While a claim is pending, the Reinsurer may investigate and interpose, at
its own expense, in the proceeding where the claim is adjudicated, any defense or defenses that it
may deem available to the Ceding Company or its liquidator, rehabilitator, receiver or statutory
successor.
The expense incurred by the Reinsurer will be chargeable, subject to court approval, against the
Ceding Company as part of the expense of liquidation to the extent of a Proportionate Share of the
benefit that may accrue to the Ceding Company solely as a result of the defense undertaken by the
Reinsurer. Where two or more Reinsurers are participating in the same claim and a majority in
interest elects to interpose a defense or defenses to any such claim, the expense will be
apportioned in accordance with the terms of this Agreement as though such expense had been incurred
by the Ceding Company.
The Reinsurer will be liable only for the amounts reinsured and will not be or become liable for
any amounts or reserves to be held by the Ceding Company on policies reinsured under this
Agreement.
This insolvency clause shall not preclude the Reinsurer from asserting any excuse or defense to
payment of this reinsurance other than the excuses or defenses of the insolvency of the Ceding
Company and the failure of the Ceding Company’s liquidator, receiver, conservator or statutory
successor to pay all or a portion of any claim.
25
ARTICLE 17 — ERRORS AND OMISSIONS
If either the Ceding Company or Reinsurer shall fail to perform an obligation under this Agreement
and such failure shall be the result of an Error on the part of the Ceding Company or Reinsurer,
such Error shall be corrected by restoring the Ceding Company and Reinsurer to the positions they
would have occupied had no such Error occurred. If it is not possible to restore each party to the
position it would have occupied but for the Error, the parties will endeavor in good faith to
promptly resolve the situation in a manner that is fair and reasonable, and most closely
approximates the intent of the parties as evidenced by the Agreement.
This provision shall apply only to clerical Errors relating to the administration of reinsurance
covered by this Agreement and not to the administration of the insurance provided by the Ceding
Company to its insured.
The Ceding Company and Reinsurer mutually agree that all Errors will be identified and corrected in
an equitable manner at the earliest possible date.
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ARTICLE 18 — ARBITRATION
18.1 GENERAL
The parties agree to act in all things with the utmost good faith. However, if the parties cannot
mutually resolve a dispute or claim, which arises out of, or in connection with this Agreement,
including formation and validity, and whether arising during, or after the period of this
Agreement, the dispute or claim will be referred to an arbitration tribunal (a group of three
arbitrators), and settled through arbitration.
The arbitrators must have more than ten (10) years experience in the insurance or reinsurance
industry and may not be current or former directors, officers or employees of the parties to this
Agreement or their respective affiliates or subsidiaries.
The arbitrators will 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 the applicable law. There will be no appeal from their
decision, and any court having jurisdiction of the subject matter, and the parties, may reduce the
decision to judgment.
18.2 NOTICE
To initiate arbitration, either party will notify the other party by certified mail of its desire
to arbitrate, stating the nature of the dispute and the remedy sought. The party, to which the
notice is sent, will respond to the notification in writing, within ten (10) days of its receipt.
18.3 PROCEDURE
Each of the two parties will appoint one arbitrator, and these two arbitrators will select the
third arbitrator. Upon the selection of the third arbitrator, the arbitration tribunal will be
constituted, and the third arbitrator will act as chairman of the tribunal.
If either party fails to appoint an arbitrator within sixty (60) days after the other party has
given notice of appointing an arbitrator, then the American Arbitration Association will appoint an
arbitrator for the party that has failed to do so. The party that has failed to appoint an
arbitrator will be responsible for all expenses levied by the American Arbitration Association for
such appointment.
Should the two arbitrators be unable to agree on the choice of the third arbitrator, then the
American Arbitration Association will appoint the third arbitrator. All expenses levied by the
American Arbitration Association for such appointment shall be borne equally by each party to this
Agreement.
The tribunal may in its sole discretion make orders and directions as it considers to be necessary
for the final determination of the matters in dispute. Such orders and directions may be necessary
with regard to pleadings, discovery, inspection of documents, examination of witnesses and any
other matters relating to the conduct of the arbitration. The tribunal will have the widest
discretion permissible under the law, and practice of the place of arbitration, when making such
orders or directions.
18.4 ARBITRATION COSTS
All costs of the arbitration will be determined by the tribunal, which may take into account the
law and practice of the place of arbitration, and in what manner arbitration costs will be paid,
and by whom.
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18.5 SITE OF ARBITRATION
The site of arbitration will be Mercer Island, Washington USA.
18.6 ARBITRATION SETTLEMENT
The award of the tribunal will be in writing and binding upon the parties.
28
ARTICLE 19 — DURATION OF AGREEMENT
This Agreement is indefinite as to its duration. The Ceding Company or the Reinsurer may terminate
this Agreement with respect to reinsurance of newly issued policies by giving one hundred eighty
(180) days written notice of termination to the other party, sent by certified mail. The first day
of the notice period is deemed to be the date the document is postmarked.
During the notification period, the Ceding Company will continue to cede and the Reinsurer will
continue to accept policies covered under the terms of this Agreement. Reinsurance coverage on all
policies reinsured under this Agreement will remain in force until the termination or expiry of the
policies or until the contractual termination of reinsurance under the terms of this Agreement,
whichever occurs first.
29
ARTICLE 20 — REPRESENTATIONS AND WARRANTIES
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 will promptly notify the other if
it is subsequently financially impaired.
The parties agree that this Agreement is entered into with the understanding that the principles of
good faith traditional to reinsurance shall be adhered to in the formation and performance of this
Agreement and shall govern the parties’ rights and obligations. This Agreement is entered into in
reliance of the utmost good faith of the parties including, for example, their warranties,
representations and disclosures.
The Ceding Company affirms that it has and will continue to disclose all matters material to this
Agreement. Examples of such matters are a material change in underwriting, claims or issue
practices or philosophy, or a change in the Ceding Company’s ownership or control.
30
ARTICLE
21 — CONFIDENTIALITY
The Company and the Reinsurer agree that they (i) shall receive and keep all Customer Information
and Proprietary Information (“Information”) in confidence, (ii) shall not make use of Information,
directly or indirectly, or disclose or furnish information to any person or entity that is not
party to this agreement, for any purpose not contemplated by this Agreement, (iii) shall not use
Information for competitive reasons or in any manner that is detrimental to the other party, except
as contemplated by this Agreement, and (iv) will limit disclosure of Information to persons or
entities who have a need to know the Information or as required by law.
The Company and the Reinsurer agree that they shall provide security for Customer Information and
Proprietary Information in a manner reasonably sufficient to preserve the confidential and
proprietary nature of the information. The parties agree that the security provided for Customer
Information and Proprietary Information shall be consistent with the level of security provided by
the parties to their own confidential, proprietary and sensitive information.
This Article does not prevent the Reinsurer from obtaining retrocession coverage on policies
eligible fro coverage under this Agreement.
31
ARTICLE
22 —ASSIGNMENT AND TRANSFER
This Agreement may be sold, assigned or transferred by either Party provided written notice is
provided to the other Party within thirty (30) days of the transaction. The provisions of this
Section are not intended to preclude the Reinsurer from retroceding the reinsurance on an indemnity
basis.
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ARTICLE
23 —NOTICES
Official notices and communications under this Agreement shall be in writing and shall be deemed to
be duly given within one day if sent by national overnight courier, facsimile or other suitable
electronic means, or five days if sent by certified or registered mail, return receipt requested,
as follows:
If to the Reinsurer:
|
If to the Ceding Company: | |
REINSURANCE COMPANY A [REDACTED]
|
Farmers New World Life Insurance Company | |
___________________________[REDACTED]
|
0000 00xx Xxx. X.X. | |
___________________________[REDACTED]
|
Xxxxxx Xxxxxx, Xxxxxxxxxx 00000 | |
___________________________[REDACTED]
|
Attn: Legal Department |
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ARTICLE 24 — DEFINITIONS
Automatic — A reinsurance agreement under which the Reinsurer is obligated to accept or assume
risks that meet certain specific criteria based on the Ceding Company’s underwriting.
Automatic Binding Limit — The amount specified in Exhibit C used to calculate the maximum
Reinsurance Death Benefit that may be ceded as Automatic reinsurance.
Conditional Receipt — A provision included in some life insurance policies providing coverage from
the date of the application to the date at which the policy is either issued or declined.
Effective Date of this Agreement — The date on which this Agreement becomes binding on the Ceding
Company and the Reinsurer. Policies with an application date on or after this date are eligible
for reinsurance coverage under this Agreement.
Error — A clerical mistake or oversight made inadvertently and excludes acts of judgment and all
other forms of intentional decision.
Extra Contractual Obligations — Damages awarded by a court against an insurer that go beyond the
coverage provided by the policy, typically for bad faith in dealing with the insured or
beneficiary.
Facultative — Reinsurance under which the Ceding Company has the option (faculty) of submitting and
the Reinsurer has the option of accepting or declining individual risks.
Full Retention — The initial face amount held by the Ceding Company shall be equal to the amount on
their standard published retention schedule considering issue age, rating and place of residence.
The amount to be retained considers all in force policies as of the date of issue on that life.
Initial Death Benefit — The face amount of the Original Policy on the date of issue.
Insured — For purposes of this Agreement, an Insured is a person covered or seeking coverage under
one of the plans or riders listed in Exhibit B.
Jumbo Limit — The maximum amount of coverage available on an individual life for Automatic
reinsurance purposes. This amount includes all coverage in force, any coverage to be replaced and
amounts currently applied for in all companies. If such insurance exceeds the limit, the Ceding
Company must submit the risk to the Reinsurer for Facultative review.
Material Change — A change that is likely to impact the Reinsurer’s financial experience under this
Agreement or would cause the Reinsurer to alter or revise a risk classification or underwriting
recommendation or claims decision, reconsider or adjust reinsurance pricing, or take similar
actions.
Maximum Retention Per Life — The maximum amount of risk that the Ceding Company may hold on an
individual insured according to their published retention schedule.
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New Business — Policies on which the Ceding Company (1) has obtained the same new underwriting
information it would obtain in absence of the Original Policy, (2) pays the same commissions in the
first year that it would have paid in absence of the Original Policy and (3) the suicide and
contestable period provisions are as long as those contained in other new policies issued by the
Ceding Company.
New Plan — The plan to which the Original Policy is converted, exchanged or replaced.
New Policy — The policy issued resulting from a conversion, exchange or replacement of the Original
Policy.
Original Policy — An insurance contract issued by the Ceding Company on an insured that is
reinsured under this Agreement.
Policy Death Benefit — The death benefit payable on a policy reinsured under this Agreement.
Policy Net Amount at Risk — On the reinsurance premium renewal date, the Policy Death Benefit 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
(20) 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 the Ceding Company and Reinsurer without the need for a
formal amendment of the Agreement.
Professional Athlete — An individual who is a team member in any of the four major U.S.
professional sports — National Football League (NFL), National Basketball Association (NBA), Major
League Baseball (MLB) or National Hockey League (NHL).
Proportionate Share — The percentage derived by dividing the Reinsured Net Amount at Risk by the
Policy Net Amount at Risk.
Quota Share Retention — Specified percentage retention on every policy up to the Full Retention on
a life.
Reinsurance Death Benefit — The Initial Death Benefit less the Retention on the policy times the
percentage of Automatic reinsurance ceded to the Reinsurer as specified in Exhibit C. For
Facultative reinsurance, the Reinsurance Death Benefit is that amount of the Initial Death Benefit
for which the Ceding Company accepts the Reinsurer’s offer to reinsure.
Reinsured Net Amount at Risk — The percentage of Automatic Reinsurance ceded to the Reinsurer as
specified in Exhibit C 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.
Retention — The amounts specified in Exhibit A that is held by the Ceding Company at their own risk
on a life without the benefit of proportional reinsurance. In calculating the Retention, the sum
retained by the Ceding Company on the life and in force as of the date of issue of the policy shall
be taken into account.
35
Temporary Insurance Agreement — Legal agreement between an insurer and a proposed insured that
provides a guaranteed amount of temporary life insurance coverage for a specific period of time,
usually the underwriting period.
Ultimate Amount — The projected maximum Policy Death Benefit that a policy could achieve based on
reasonable assumptions made about the operation of certain characteristics of the policy form.
Yearly Renewable Term (YRT) — A form of life reinsurance under which the risks, but not the
permanent plan reserves, are transferred to the Reinsurer for a premium that varies each year with
the Reinsured Net Amount at Risk and the duration from issue.
36
ARTICLE 25 — EXECUTION
This Agreement is effective as of the month, day and year stated on the cover page of this
Agreement, and applies to all eligible policies with application dates on or after such date. This
Agreement has been made in duplicate and is hereby executed by all parties.
FARMERS NEW WORLD | REINSURANCE COMPANY A [REDACTED] | |||||||||
LIFE INSURANCE COMPANY | ||||||||||
By:
|
By: | |||||||||
(Signature) | (Signature) | |||||||||
Title:
|
Title: | Vice President | ||||||||
Date:
|
Date: | |||||||||
Location:
|
Location: | , | ||||||||
[REDACTED] |
37
EXHIBIT A — RETENTION SCHEDULE OF THE CEDING COMPANY
A LIFE INSURANCE [REDACTED]
38
EXHIBIT B — BUSINESS COVERED
The business reinsured under this Agreement is defined as follows:
Policies issued on the business identified below may qualify for reinsurance if the issue date for
the policy is on or after the Effective Date of this Agreement.
September 1, 2008
Included Plans:
Farmers Essential Variable Universal Life
Benefits & Riders:
Accelerated Death Benefit Rider
39
EXHIBIT C — BINDING LIMITS
C.1 REINSURER’S SHARE [REDACTED]
C.2 AUTOMATIC BINDING LIMITS [REDACTED]
C.3 JUMBO LIMITS [REDACTED]
C.5 AGE LIMITS [REDACTED]
40
EXHIBIT D — REINSURANCE PREMIUMS
D.1 BASE PLAN PARAMETERS [REDACTED]
D.2 AGE BASIS
Age Last Birthday
D.3 POLICY FEES
The Reinsurer will not participate in any policy fees.
The Reinsurer will not participate in any policy fees.
D.4 SUBSTANDARD RATINGS [REDACTED]
D.5 FLAT EXTRAS [REDACTED]
D.6 RIDERS AND BENEFITS
Accelerated Benefit Rider
There are no additional premiums payable for the Accelerated Benefit Rider
(See Exhibit H). No other supplemental benefits are covered under this Agreement.
41
EXHIBIT D — RATE SCHEDULE 1
[REDACTED]
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EXHIBIT E — SELF-ADMINISTERED REPORTING
The Ceding Company will self-administer all reinsurance reporting. The Ceding Company will send
the Reinsurer the reports listed below monthly.
The Ceding Company will send Standard TAI reports.
E.1 REPORTING REQUIREMENTS
a. | New Business — This report will include new issues only, the first time the policy is reported to the Reinsurer. Automatic and Facultative business will be identified separately. | ||
b. | First Year, Other than New Business — This report will include policies previously reported on the New Business detail and still in their first duration, or policies involved in first year premium adjustments. | ||
c. | Renewal Year — This report will include all policies with renewal dates within the accounting period. | ||
d. | Changes and Terminations — This report will include all policies affected by a change during the current reporting period. Type of change or termination activity must be clearly identified for each policy. The Ceding Company will identify the following transactions either by separate listing or unique transaction codes: Terminations, Reinstatements, Changes, Conversions, and Replacements. For Conversions and Replacements, the Ceding Company will report the Original Policy date, as well as the current policy date. | ||
e. | In force — A detailed report listing the data shown in section F.3 (b) of this Exhibit for each policy in force. | ||
f. | Policy Exhibit — Transactions will be summarized for activity during the current period and on a year-to-date basis, reporting the number of policies and Reinsured Net Amount at Risk. An example is shown in section F.4 of this Exhibit. | ||
g. | Accounting Information — Premiums and allowances will be summarized for Life coverage, Benefits and Riders by the following categories: Automatic and Facultative, First Year and Renewals. An example is shown in section F.5 of this Exhibit. |
E.2 BUSINESS REPORTED ELECTRONICALLY
If reporting will be done electronically, the Ceding Company will send the Reinsurer a copy of their current file layout(s) that specifies the columns in the order they appear in the file along with the data type (alpha, numeric) and the exact length of each field. Also a data dictionary will be provided that states a brief definition of each field contained in the file(s), as well as a listing of valid values for fields where applicable and an explanatory key to interpret plan codes, treaty pointers, underwriting and smoking class codes. Future changes will be promptly communicated to the Reinsurer in writing. |
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E.3 STATEMENT SPECIFICATIONS
a. | The following information should appear on the transaction statements for each benefit to be reinsured and for each insured, including all insureds on a joint policy: |
Ceding Company identifier
Policy number
Policy issue date
Reinsurance effective date
Policy application date, if used to determine treaty eligibility
Transaction type code (New Business, Renewal, Conversion, Termination, etc.)
Business Source/Issue type code (New Business, Continuation, Re-entry, etc.)
Effective date of any policy change, reissue or termination
Name of each insured
Date of birth of each insured
Issue age of each insured
Gender of each insured
Mortality rating of each insured
Underwriting classification of each insured
Smoking class of each insured
Automatic or Facultative indicator
YRT indicator
Plan code
Treaty pointer
Original face amount of the policy
Amount ceded to the Reinsurer
Amount of premium being paid, separated for supplementary benefits
Amount of reinsurance premium allowances, if any
Policy fee, if any
Flat extra premium and number of years payable
Joint policy indicator
Policy number
Policy issue date
Reinsurance effective date
Policy application date, if used to determine treaty eligibility
Transaction type code (New Business, Renewal, Conversion, Termination, etc.)
Business Source/Issue type code (New Business, Continuation, Re-entry, etc.)
Effective date of any policy change, reissue or termination
Name of each insured
Date of birth of each insured
Issue age of each insured
Gender of each insured
Mortality rating of each insured
Underwriting classification of each insured
Smoking class of each insured
Automatic or Facultative indicator
YRT indicator
Plan code
Treaty pointer
Original face amount of the policy
Amount ceded to the Reinsurer
Amount of premium being paid, separated for supplementary benefits
Amount of reinsurance premium allowances, if any
Policy fee, if any
Flat extra premium and number of years payable
Joint policy indicator
b. | The Ceding Company will send the Reinsurer an In force report. The following information should appear on the In force file for each benefit to be reinsured and for each insured, including all insureds on a joint policy: |
Ceding Company identifier
Policy number
Policy issue date
Reinsurance effective date
Policy application date, if used to determine treaty eligibility
Business Source/Issue type code (New Business, Continuation, Re-entry, etc.)
Name of each insured
Date of birth of each insured
Issue age of each insured
Gender of each insured
Underwriting classification of each insured
Smoking class of each insured
Mortality rating of each insured
Automatic or Facultative indicator
YRT indicator
Original face amount of the policy
Amount ceded to the Reinsurer
Joint policy indicator
Policy number
Policy issue date
Reinsurance effective date
Policy application date, if used to determine treaty eligibility
Business Source/Issue type code (New Business, Continuation, Re-entry, etc.)
Name of each insured
Date of birth of each insured
Issue age of each insured
Gender of each insured
Underwriting classification of each insured
Smoking class of each insured
Mortality rating of each insured
Automatic or Facultative indicator
YRT indicator
Original face amount of the policy
Amount ceded to the Reinsurer
Joint policy indicator
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E.4 POLICY EXHIBIT
The Ceding Company will send the Reinsurer summary policy exhibit information similar to the following example: |
Number of | Reinsurance | |||||||
Policy Summary Classification | Policies | Amount | ||||||
In force as of last report |
1,000 | $ | 800,000,000 | |||||
New Issues |
10 | 1,000,000 | ||||||
Reinstatements |
1 | 100,000 | ||||||
Increases |
3 | 500,000 | ||||||
Deduct by: |
||||||||
Death |
1 | 300,000 | ||||||
Lapse |
6 | 500,000 | ||||||
Decreases |
2 | 100,000 | ||||||
In force as of current report |
1,005 | 800,700,000 |
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E.5 ACCOUNTING SUMMARY
The Reinsurer requires the Ceding Company to send summary accounting information similar to the following example with each statement: |
Premiums | Allowance | Net Premium | Totals | Total Due | ||||||||||||||||||||
First Year Total
|
Base | $ | 2,300.00 | 0.00 | $ | 2,300.00 | Cash Value | 0.00 | ||||||||||||||||
ADB | 100.00 | 0.00 | 100.00 | Benefits/Claims | 0.00 | |||||||||||||||||||
Waiver | 100.00 | 0.00 | 100.00 | Policy Fee | 0.00 | |||||||||||||||||||
Other | 0.00 | 0.00 | 0.00 | Dividend | 0.00 | |||||||||||||||||||
Prem Tax | 0.00 | |||||||||||||||||||||||
Total | $ | 2,500.00 | 0.00 | $ | 2,500.00 | Net Premium | $ | 2,500.00 | $ | 2,500.00 | ||||||||||||||
Renewal Total
|
Base | $ | 25,000.00 | 0.00 | $ | 25,000.00 | Cash Value | 0.00 | ||||||||||||||||
ADB | 1,000.00 | 0.00 | 1,000.00 | Benefits/Claims | 0.00 | |||||||||||||||||||
Waiver | 1,500.00 | 0.00 | 1,500.00 | Policy Fee | 0.00 | |||||||||||||||||||
Other | 0.00 | 0.00 | 0.00 | Dividend | 0.00 | |||||||||||||||||||
Prem Tax | 0.00 | |||||||||||||||||||||||
Total | $ | 27,500.00 | 0.00 | $ | 27,500.00 | Net Premium | $ | 27,500.00 | $ | 27,500.00 | ||||||||||||||
First Year & Renewal
|
Base | $ | 27,300.00 | 0.00 | $ | 27,300.00 | Cash Value | 0.00 | ||||||||||||||||
ADB | 1,100.00 | 0.00 | 1,100.00 | Benefits/Claims | 0.00 | |||||||||||||||||||
Waiver | 1,600.00 | 0.00 | 1,600.00 | Policy Fee | 0.00 | |||||||||||||||||||
Other | 0.00 | 0.00 | 0.00 | Dividend | 0.00 | |||||||||||||||||||
Prem Tax | 0.00 | |||||||||||||||||||||||
Total | $ | 30,000.00 | 0.00 | $ | 30,000.00 | Net Premium | $ | 30,000.00 | $ | 30,000.00 |
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EXHIBIT F — APPLICATION FOR FACULTATIVE REINSURANCE
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EXHIBIT G — ALLOCATION RULES FOR PLACEMENT OF FACULTATIVE CASES
The Ceding Company will place the case with the Reinsurer having the first in best offer.
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EXHIBIT H — ACCELERATED BENEFIT RIDER
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