REINSURANCE AGREEMENT
NUMBER 10107
dated as of October 1, 2007
between
SECURITY BENEFIT LIFE INSURANCE COMPANY
TOPEKA, KANSAS
and
UNION XXXXXXXX REINSURANCE, LTD.
HAMILTON, BERMUDA
- 1 -
TABLE OF CONTENTS
Page
----
ARTICLE I GENERAL PROVISIONS ......................................... 4
ARTICLE II REINSURANCE PREMIUMS ....................................... 14
ARTICLE III INITIAL SETTLEMENT AND ALLOWANCES .......................... 15
ARTICLE IV BENEFIT PAYMENTS ........................................... 17
ARTICLE V TRUST ACCOUNTS AND LETTER OF CREDIT ........................ 21
ARTICLE VI RESERVES ................................................... 27
ARTICLE VII ACCOUNTING AND SETTLEMENT'S ................................ 28
ARTICLE VIII DURATION AND RECAPTURE ..................................... 31
ARTICLE IX TERMINAL ACCOUNTING AND SETTLEMENT ......................... 34
ARTICLE X REPRESENTATIONS ............................................ 36
ARTICLE XI ARBITRATION ................................................ 37
ARTICLE XII INSOLVENCY ................................................. 39
ARTICLE XIII SPECIAL DISPUTE RESOLUTION PROCEDURES AND INDEMNIFICATION .. 41
ARTICLE XIV EXECUTION AND EFFECTIVE DATE ............................... 42
SCHEDULE A ANNUITIES AND RISKS REINSURED .............................. 43
SCHEDULE B QUARTERLY REPORT OF ACTIVITY AND SETTLEMENTS ............... 44
SCHEDULE B-1 MONTHLY SERIATIM DATA ...................................... 47
SCHEDULE C CEDING COMPANY DATA ........................................ 49
EXHIBIT I RESERVE CREDIT TRUST AGREEMENT ............................. 51
- 2 -
REINSURANCE AGREEMENT
This Reinsurance Agreement (the "Agreement") is made and entered into as of
October 1, 2007 (the "Effective Date") by and between Security Benefit Life
Insurance Company (the "Ceding Company") and Union Xxxxxxxx Reinsurance, Ltd
(the "Reinsurer")
The Ceding Company and the Reinsurer mutually agree to reinsure on the terms and
conditions stated herein. This Agreement is an indemnity reinsurance agreement
solely between the Ceding Company and the Reinsurer, and performance of the
obligations of each party under this Agreement will be rendered solely to the
other party. In no instance will anyone other than the Ceding Company or the
Reinsurer have any rights under this Agreement, and the Ceding Company will be
and remains the only party hereunder that is liable to any insured, policyowner
or beneficiary under any Annuity (as defined in Article I below) reinsured
hereunder.
- 3 -
ARTICLE I
GENERAL PROVISIONS
1. Annuities and Risks Reinsured. The Reinsurer agrees to indemnity the
Ceding Company for, and the Ceding Company agrees to reinsure with the
Reinsurer, according to the terms and conditions hereof, the portion of
the risks under the annuities and riders (the "Annuities") described in
Schedule A attached hereto, including any such annuities that have lapsed
and that otherwise would be eligible for inclusion herein, subject to
reinstatement pursuant to reinstatement terms contained in such annuity
contracts.
The Separate Account Liabilities, equal to the Account Value, will be
reinsured on a modified coinsurance basis and the General Account
Liabilities (the Guaranteed Benefits issued as riders and the base Annuity
death benefit in excess of the Account Value) will be reinsured on a
coinsurance basis in accordance with the terms of this Agreement. For
purposes of this Agreement, "Separate Account Liabilities" means the
insurance liabilities that are reflected in the separate accounts and that
relate to the Annuities specified in Schedule A attached hereto, which are
not Guaranteed Benefits. For purposes of this Agreement, the term "Account
Value" means the contract value determined in accordance with the terms of
the base Annuities. For purposes of this Agreement, "Guaranteed Benefits"
means the Guaranteed Minimum Death Benefits ("GMDB"), Guaranteed Minimum
Income Benefits ("GMIB"), Guaranteed Minimum Accumulation Benefits
("GMAB") and Guaranteed Minimum Withdrawal Benefits ("GMWB") occurring
under the directly issued riders specified in Schedule A attached hereto
and the base Annuity death benefit to the extent it exceeds Account Value
For purposes of this Agreement, "General Account Liabilities" means all
liabilities and obligations arising out of or relating to the Annuities
that are supported by the General Account.
2. Coverages and Exclusions. The parties to this Agreement intend for the
Reinsurer to participate, on a first- dollar basis, in the indicated quota
share of Annuities originated by the Ceding Company. The Reinsurer will
share in all the revenues, claims and costs of the Annuities as set forth
in this Agreement. Coverages and exclusions include:
- 4 -
A Only directly issued variable Annuities described in Schedule
A attached hereto are reinsured under this Agreement
B. Only Annuities sold by the Ceding Company in the United States
to United States residents or persons with a tax
identification number issued by the Internal Revenue Service
are reinsured under this Agreement
C. The Reinsurer will have no liability to the Ceding Company for
reimbursement of and will not reimburse the Ceding Company
for, dividends paid to policyowners from the Ceding Company's
surplus,
3. Plan of Reinsurance. This indemnity reinsurance will be on a modified
coinsurance basis for the Separate Account Liabilities and on a
coinsurance basis for the General Account Liabilities. The Ceding Company
will retain, control and own all assets held in relation to the Separate
Account Liabilities.
4. Expenses. The Reinsurer will bear no part of the expenses incurred in
connection with the Annuities reinsured hereunder, except as otherwise
provided herein.
5. Material Changes. The Ceding Company will provide written notification to
the Reinsurer of any change which materially affects the Annuities
reinsured hereunder, including but not limited to any change in the
available fixed account and subaccount investment options (including
through substitutions), changes in the amount or calculation of any fees
(including 12b-l fees, all fund related service fees, and any contract
fees) or withdrawal charges, changes made to preserve the status of the
contracts as annuities under the Internal Revenue Code of 1986, as
amended, changes made to comply with applicable law, and changes to any
commissions or expense allowances to be paid in connection with the sale
and/or distribution of the Annuities no less than thirty (30) days prior
to the change taking effect "Material" or "Materially" for purposes of
this Agreement means matters that a prudent reinsurer or insurer would
consider reasonably likely to affect in any significant respect the
Reinsurer's liability or profitability under this Agreement. The Reinsurer
will have the opportunity to accept or reject only those material changes
that are directly or indirectly within the Ceding Company's control
("Material Changes"), which shall not include, for example,
- 5 -
changes made to preserve the status of the Annuities as annuities under
the Internal Revenue Code of 1986, as amended, or changes made to comply
with applicable law. The Reinsurer shall provide written notification to
the Ceding Company as to the Reinsurer's acceptance or rejection of any
such Material Change within fifteen (15) days after receipt of notice of
the change. If the Reinsurer accepts any such change, the Reinsurer will
(a) assume the share of any increase in the Ceding Company's liability
resulting from the change, and (b) receive credit for the share of any
decrease in the Ceding Company's liability resulting from the change. If
the Reinsurer rejects any such change, the Reinsurer's liability under
this Agreement will be determined as if no such change had occurred.
Ceding Company agrees to use commercially reasonable efforts to prevent
any reduction in the 12b-l and fund related service fees related to the
Annuities which are in effect on the Effective Date of this Agreement and
shall not directly or indirectly seek to influence the investment manager
or any affiliate thereof, or the directors or trustees, of any of the
underlying funds to reduce the amount of any 12b-l or service fees paid in
connection with the Annuities' investments in such underlying funds
6. Damages. The Reinsurer does not indemnify the Ceding Company for, and will
not be liable for, any damages, losses, or liability resulting from fraud,
oppression, bad faith, regulatory non-compliance, improper sales
practices, unfair trade or other practices, strict liability, or
negligent, reckless or intentional wrongs on the part of the Ceding
Company or its directors, officers, employees and agents. The following
types of damages are examples of damages that would be excluded from this
Agreement for the conduct described above, including but not limited to:
actual damages, damages for emotional distress, punitive or exemplary
damages and attorney fees related to any such damages.
7. Annuity Administration. The Ceding Company will administer the Annuities
reinsured hereunder and will perform all accounting for such Annuities.
The Reinsurer is not liable for increases in administrative costs due to
the Ceding Company's operational errors, including, but not limited to,
costs to make Annuity owners whole, or breakage expense, on the Annuity
investment options
- 6 -
8. Inspection. At any reasonable time and upon reasonable prior notice to the
Ceding Company, the Reinsurer, or its duly appointed representatives, may
inspect the original papers and any and all other books or documents
(whether maintained in electronic or physical form) relating to or
affecting reinsurance under this Agreement. The right of inspection as
specified above will survive until all of the obligations under this
Agreement have terminated or been fully discharged.
9. Assessment. The allowance for state guaranty fund assessments or special
assessments paid in connection with the Annuities is included in the
Commission and Expense Allowances, as described in Article III, Paragraph
2. The Reinsurer will not reimburse the Ceding Company for other
assessments paid by the Ceding Company in connection with the Annuities
10. Election to Determine Specified Annuity Acquisition Expenses. The Ceding
Company and the Reinsurer agree to the election pursuant to Section 1
848-2(g)(8) of the Income Tax Regulations effective December 29, 1992,
under Section 848 of the Internal Revenue Code of 1986, as amended (such
election, the "DAC Tax Election"), whereby:
a) 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)(l) of the Code;
b) The 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. The Ceding Company will submit a schedule to the Reinsurer
by May 1st of each year presenting its calculation of the net
consideration for the preceding taxable year. (The term "net
consideration" means "net consideration" as defined in Regulation
Section 1 848-2(f)). The Reinsurer may contest the calculation by
providing an alternative calculation to the Ceding Company in
writing within thirty (30) days of receipt of the Ceding Company's
schedule. If the Reinsurer does not so notify the Ceding Company
within the required timeframe, the Reinsurer will report the net
consideration as determined by the Ceding Company in the Reinsurer's
tax
- 7 -
return for the previous calendar year. Any differences will be
resolved between the parties so that consistent amounts are repotted
on the respective tax returns for the preceding taxable year;
c) This DAC Tax Election will be effective for the first taxable year
in which this Agreement is effective and for all years for which
this Agreement remains in effect
The Ceding Company and the Reinsurer will each attach a schedule to their
respective federal income tax returns filed for the first taxable year for
which this DAC Tax Election is effective. Such schedule will identify the
Agreement as a reinsurance agreement for which the DAC Tax Election under
Regulation Section 1 848-2(g)(8) has been made.
11. Condition. The reinsurance hereunder is subject to the contractual
limitations and conditions specified in the Annuities, except as otherwise
provided in this Agreement.
12. Misunderstandings and Oversights. Any failure to pay amounts due or to
perform any ether act required by this Agreement which can be shown to be
the result of an oversight or clerical error relating to the
administration of reinsurance by either party will not constitute a breach
of this Agreement. Errors in administration of reinsurance do not include
errors related to the Ceding Company's administration of the reinsured
Annuities or breakage (operational errors). Upon discovery, the error will
be promptly corrected so that both parties are restored to the position
they would have occupied had the oversight or clerical error not occurred.
In the event a payment is corrected, the party receiving the payment may
charge interest calculated according to the terms specified in Article
VII, Paragraph 8 Should it not be possible to restore both parties to
this position, the party responsible for the oversight or clerical error
will be responsible for any resulting liabilities and expenses
If the Ceding Company has failed to cede reinsurance as provided under
this Agreement, the Reinsurer may require the Ceding Company to audit its
records for similar errors and take reasonable actions necessary to
correct errors and avoid similar errors
- 8 -
13. Adjustments. If the Ceding Company's liability under any of the Annuities
reinsured hereunder is changed because of a misstatement of age, sex or
any other material fact, or the reinstatement of one of the Annuities
pursuant to the terms of the Annuity contract, the Reinsurer will (a)
assume that portion of any increase in the Ceding Company's liability,
resulting from the change, which corresponds to the portion of the
Annuities reinsured hereunder, and (b) receive credit for that portion of
any decrease in the Ceding Company's liability, resulting from the change,
which corresponds to the portion of the Annuities reinsured hereunder
14. Remedies and Waiver. All remedies of any party are cumulative Failure of
either the Ceding Company or the Reinsurer to exercise any right,
privilege, power or remedy at law, equity or in existence by virtue of
this Agreement or to otherwise insist upon strict compliance with any of
the terms, provisions and conditions of this Agreement, or the obligations
of the other party, will not constitute a waiver of such right, privilege,
power, remedy, term, provision, condition, or obligation. Moreover, the
failure of either party to enforce any part of this Agreement shall not be
deemed to be an act of ratification or consent. No prior transactions or
dealings between the parties shall be deemed to establish any custom or
usage waiving or modifying any provision of this Agreement
15. Assignment. Neither party may assign any of its rights, duties or
obligations under this Agreement without the prior written consent of the
other party, provided however that the Reinsurer may assign any of its
rights, duties or obligations under this Agreement to an affiliate,
provided that the Reinsurer shall remain liable for performance of its
obligations hereunder. The Reinsurer may reinsure or retrocede all or any
portion of the risks assumed hereunder.
16. Choice of Law. This Agreement will be governed by the laws of the State of
Kansas as of the Effective Date of this Agreement, without giving effect
to the choice of law provisions. Notwithstanding the preceding, this
Paragraph shall not be interpreted to permit the parties to avoid their
obligations to arbitrate their disputes pursuant to Article XI of this
Agreement
- 9 -
17. Amendments. This Agreement may be amended only by written agreement of the
parties. Any change or modification to this Agreement shall be null and
void unless made by amendment to this Agreement and signed by both
parties.
18. Current Practices. The Ceding Company will not materially change, alter or
otherwise compromise its underwriting, annuity contract administration or
other administrative practices in effect on the Effective Date with
respect to the Annuities without prior written consent of the Reinsurer.
In the event, the Reinsurer determines in its reasonable discretion that
the Ceding Company is not providing annuity contract administration for
the Annuities in a manner consistent with the standards and practices set
forth in the immediately preceding sentence, as amended from time to time
with the Reinsurer's prior written consent, the Reinsurer shall have the
right, upon at least sixty (60) days prior written notice, to take over
the annuity contract administration for the Annuities and have such
administration performed by an appropriately licensed third party
administrator. Such a determination may only be made if the change in
administrative practice materially affects the Annuities when viewed as a
whole. The reasonable costs of such annuity contract administration by the
third party administrator shall be deducted from the Commission and
Expense Allowance set forth in Article III, Paragraph 2(ii), and any such
costs that exceed the Commission and Expense Allowance shall be borne by
Reinsurer. The Ceding Company shall provide the Reinsurer within fifteen
(15) days after the end of each quarter during the term of this Agreement
a copy of all customer complaints received during such quarter, related in
any manner to the annuity contract administration of the Annuities. The
Ceding Company agrees that if the Reinsurer takes over the annuity
contract administration for the Annuities as set forth above, it will
cooperate and provide reasonable assistance with having the annuity
contract administration performed by the third party administrator
19. Entire Agreement. The terms expressed herein constitute the entire
agreement between the parties with respect to the Annuities reinsured
hereunder. There are no understandings between the parties with respect to
the Annuities reinsured hereunder other than as expressed in this
Agreement.
- 10 -
20. Confidentiality of Data. The parties acknowledge that as a result of this
Agreement, each party may have access to and receive from the other party
non-public personally identifiable financial and/or health information
("NPI"), as defined in federal and state law, regarding consumers,
customers, former customers and/or their beneficiaries The parties agree
to maintain the confidentiality of such NPI and shall not use, disclose,
furnish or make accessible such NPI to anyone other than authorized
employees and agents of that party as necessary to carry out the party's
obligations under this Agreement or as may be required or permitted by law
Each party further agrees to establish and maintain administrative,
technical and physical safeguards to protect the security, confidentiality
and integrity of the NPI At the request of the party that owns the NPI, or
in the absence of such request, upon termination of this Agreement, the
other party shall promptly return all NPI which has been provided to it,
or dispose of such NPI in a manner agreed upon by the parties, unless the
party is required to maintain such NPI under federal or state laws or
regulations NPI does not include de-identified personal data, i e ,
information that does not identify, or could not reasonably be associated
with, an individual.
The parties will keep confidential and not disclose or make competitive
use of any shared Proprietary Information, as defined in this Paragraph 20
below, unless:
a) The information becomes publicly available other than through
unauthorized disclosure by the party seeking to disclose or use such
information;
b) The information is independently developed by the recipient;
c) The disclosure is required by external auditors or regulators; or
d) The disclosure is required by law
"Proprietary Information" includes, but is not limited to, business
procedures, applications, contract forms and applications, investment and
hedging strategies of the Reinsurer and the Ceding Company, including this
Agreement or its terms, but shall not include the existence of this
Agreement and the identity of the parties. The terms of this Agreement
will not be disclosed to any third parties other than as specified above.
- 11 -
21 Agent Per Service of Process. The Reinsurer agrees to designate the
Commissioner of Insurance for the Ceding Company's state of domicile or a
designated attorney as its true and lawful attorney upon who may be served
any lawful process in any action, suit or proceeding instituted by or on
behalf of the Ceding Company.
22. Submission to Jurisdiction. The Reinsurer hereby: (1) submits to the
jurisdiction of any court of competent jurisdiction in Kansas; (2) agrees
to comply with all requirements necessary to give such court jurisdiction;
and (3) agrees to abide by the final decision of such court or of any
Appellate Court in the event of an appeal. Notwithstanding the preceding,
neither the Reinsurer nor the Ceding Company shall avoid their obligations
to arbitrate their disputes under Article XI of this Agreement.
23 Notice Provision: Any notice, request, report or other communication
required or permitted hereunder shall be in writing and shall be delivered
personally (by courier or otherwise), by electronic mail, by facsimile,
sent by certified or registered mail, postage prepaid and return receipt
requested, or by express mail or other nationally recognized overnight or
same-day delivery service, Any such notice shall be deemed given when so
delivered personally or by such delivery service, facsimile or, if mailed,
three (3) days after the date of deposit in the United States mail, as
follows:
If to the Ceding Company: Xx. Xxxx X. Xxxxxxx
Chairman, President and Chief Executive
Officer
Security Benefit Life Insurance Company
One Security Benefit Place
Topeka, Kansas 66636-0001
kris xxxxxxx@xxxxxxxxxxxxxxx.xxx
If to the Reinsurer: I, Xxxxxx Xxxxxxxx
Union Xxxxxxxx Reinsurance, Ltd.
The Vallis Building
3rd floor
00 Xxx-xx-Xxxxx Xxxx
Xxxxxxxx, XX 00
Xxxxxxx
oliver xxxxxxxx@xxxxxx.xxx
With a copies to: Xxxxx Xxxxxxx
Chairman and CEO
Union Xxxxxxxx Reinsurance, Ltd
000 Xxxxx Xxxxx Xxxxxx - 11th Floor
- 12 -
Xxxxxxxxx, XX 00000-0000
xxxxx.xxxxxxx@xxxxxxxx.xxx
With copies of reports
only to: Xxx Xxxxxx
Xxxxxxxx, Inc
00 Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
xxx.xxxxxx@xxxxxxxx.xxx
24. Counterparts. This Agreement may be executed simultaneously in any number
of counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument.
25. Accounting and Tax Advice. Each party hereto agrees that it has relied on
advice from its own accountants and tax counsel regarding the financial
reporting treatment and the tax characterization of the transactions
described in this Agreement
26 Severability. If any provision of this Agreement is determined to be
invalid, illegal or unenforceable, all of the other terms and provisions
shall remain in full force and effect to the extent that their continuance
is practical and consistent with the original intent of the parties In
addition, if any provisions are held invalid, illegal or unenforceable,
the parties will attempt in good faith to renegotiate this Agreement to
carry out its original intent.
27 Currency. All amounts stated in this Agreement are payable in United
States dollars, unless specified otherwise. Any amounts payable in
currency other than United States dollars shall be paid in United States
dollars at the rate(s) of exchange as agreed by the parties or at the rate
of exchange on the date that payment was made.
- 13 -
ARTICLE II
REINSURANCE PREMIUMS
The Ceding Company will pay the Reinsurer Reinsurance Premiums in accordance
with Schedule B attached hereto in an amount equal to that portion of the gross
premiums collected by the Ceding Company during the Accounting Period which
corresponds to the portion of the Annuities reinsured hereunder For purposes of
this Article, gross premiums shall include any credit enhancements added to the
Account Value under the extra credit and bonus credit riders. The Reinsurance
Premiums paid to the Reinsurer by the Ceding Company will be remitted to the
Reinsurer at the end of the Accounting Period during which the gross premiums
were collected by the Ceding Company
The Reinsurer will receive the quota share percentage of income of any type on
the Annuities Such income, where appropriate, will be deducted from the Separate
Account Liabilities as calculated under this Agreement Income for purposes of
this Article includes, but is not limited to, all charges and fees specified in
the Annuities and the Prospectuses, including mortality and expense risk charges
(M&Es), administrative fees, annual contract fees, contingent deferred sales
charges, optional rider charges, and service fees from the underlying funds,
Service fees from underlying funds shall include, but not be limited to, shares
of any fees, commissions, allowances, expense shares or allocations, paid to the
Ceding Company or its affiliated broker dealer by mutual fund companies and/or
their affiliated distributors or managers in connection with participation
agreements, 12b-l plans and/or service agreements entered into by the Ceding
Company and/or its affiliated broker dealer and such mutual fund companies
and/or distributors or managers or their affiliates
- 14 -
ARTICLE III
INITIAL SETTLEMENT AND ALLOWANCES
1. Initial Settlement The Reinsures: will pay the Ceding Company a Commission
and Expense Allowance, on the Effective Date of this Agreement, equal to
the sum of (i) plus (ii) where:
(i) equals an upfront ceding commission of $34,536,743; and
(ii) equals (a) times [(b) - (c) - (d)] where
(a) equals the quota share percentage of the Annuities reinsured
hereunder;
(b) equals $1,558,778,453, the Account Value determined in
accordance with the terms of the Annuities reinsured hereunder
on the Effective Date of this Agreement; and
(c) equals $1,469,305,279, the Separate Account Reserves with
respect to the Annuities reinsured hereunder on the Effective
Date of this Agreement; and
(d) equals $10,692,870, the general account reserve maintained in
compliance with NAIC Actuarial Guideline XXXIV and the
Variable Annuity Guaranteed Living Benefit reserves in
compliance with NAIC Actuarial Guideline XXXIX on the
Effective Date of this Agreement.
2. Commission and Expense Allowance The Reinsurer will pay the Ceding Company
a Commission and Expense Allowance for each Accounting Period equal to the
sum of (i) plus (ii) where;
(i) equals the sum of (a) times [(b) plus (c)], with respect to each
Annuity policyholder reinsured hereunder, where:
(a) equals the quota share percentage of the Annuities reinsured
hereunder as described in Schedule A attached hereto; and
(b) equals the up-front and trail commissions or similar payments
paid to broker/dealers, registered investment advisers and
other financial institutions during the period; and
(c) equals the amount of premium taxes paid during the period
(ii) equals (a) times 0.5 times [(b) plus ( c)], where:
- 15 -
(a) equals $20 initially, increased at a 2.5% compounded rate on
each anniversary of the Effective Date of this Agreement,
times the quota share percentage of the Annuities reinsured
hereunder as described in Schedule A attached hereto;
(b) equals the number of Annuities, exclusive of riders,
outstanding as of the end of the current Accounting Period and
reinsured hereunder as described in Schedule A attached
hereto; and
(c) equals the number of Annuities, exclusive of riders,
outstanding as of the beginning of the current Accounting
Period and reinsured hereunder as described in Schedule A
attached hereto
Items in (i)(b) and (i)(c) above shall not include any amounts incurred by the
Ceding Company prior to the Effective Date of this Agreement
- 16 -
ARTICLE IV
BENEFIT PAYMENTS
1. Benefit Payments, "Benefit Payments," as referred to in this Agreement,
means the sum of (i) Claims, as described in Xxxxxxxxx 0 xxxxx, (xx) Cash
Surrender Values and Cancellation Proceeds, as described in Xxxxxxxxx 0
xxxxx, (xxx) Partial Withdrawals, as described in Paragraph 4 below, and
(iv) Annuity Payments, as described in Paragraph 8 below. Benefit Payments
under this Agreement are limited to benefits which are based on claims
made on or after or pending on the Effective Date of this Agreement
Pending claims will be limited to those claims for which the Ceding
Company has adequate reserves on the Effective Date of this Agreement
2. Claims The Reinsurer will reimburse the Ceding Company in accordance with
Schedule B for the Reinsurer's quota share percentage of Claims paid by
the Ceding Company during the current Accounting Period in accordance with
the contractual terms of the Annuities reinsured hereunder, which
corresponds to the quota share percentage of the Annuities reinsured
hereunder The term "Claims" with regard to the base Annuity means the
amount payable upon death, including Account Value and any base Annuity
death benefit amount guaranteed in excess of the Account Value With regard
to the riders, the term "Claims" means the amount guaranteed in excess of
the Account Value that is payable in accordance with the terms of the
Annuity contracts.
3. Cash Surrender Values and Cancellation Proceeds The Reinsurer will
reimburse the Ceding Company in accordance with Schedule B for the
Reinsurer's quota share percentage of the Cash Surrender Values and of the
Cancellation Proceeds paid by the Ceding Company during the current
Accounting Period in accordance with the contractual terms of the
Annuities reinsured hereunder which corresponds to the quota share
percentage of the Annuities reinsured hereunder
The term "Cash Surrender Values", as used in this Agreement, is defined as
Account Value minus any applicable charges under the Annuity contract
- 17 -
The term "Cancellation Proceeds", as used in this Agreement, is defined as
the amount paid by the Ceding Company in accordance with the Annuity
contract and federal and state regulatory requirements when a policyowner
cancels his or her Annuity pursuant to the terms of the Annuity and will
be equal to either the Account Value or the gross premiums paid by the
policyowner, as provided in the Annuities.
4. Partial Withdrawals The Reinsurer will reimburse the Ceding Company in
accordance with Schedule B for the Reinsurer's quota share percentage of
the Partial Withdrawals paid by the Ceding Company during the current
Accounting Period in accordance with the contractual terms of the
Annuities reinsured hereunder which corresponds to the quote share
percentage of the Annuities reinsured hereunder
5 Claim Notice The Ceding Company is responsible for the settlement of
Claims in accordance with applicable law and the reinsured Annuity terms.
The Ceding Company will provide the Reinsurer with the claims information
specified in Schedule B attached hereto as part of the quarterly report
for each Accounting Period The reinsurance claim and copies of
notification, claim papers, and proofs will be furnished to the Reinsurer
upon request.
On a periodic basis, the Reinsurer will request that the Ceding Company
respond to a questionnaire regarding regulatory investigations and
litigation pertaining to the Annuities reinsured hereunder. The Ceding
Company shall respond to the questionnaire within thirty (30) days of
receipt
6. Liability and Payment The Reinsurer will accept the decision of the Ceding
Company with respect to payment of Claims owed under the contractual terms
of the Annuities reinsured hereunder and as specified under the terms of
this Agreement. The Reinsurer will pay its proportionate share of Claims
to the Ceding Companyin accordance with Schedule B as follows;
a) The Reinsurer will pay a lump sum to the Ceding Company of its
quota share percentage of death benefit proceeds (including
the base Annuity death benefit in excess of Account Value as
well as death benefit riders described in Schedule A attached
hereto)
- 18 -
b) For Claims under the GMIB Riders, as set forth in Schedule A,
the Ceding Company will pay the Reinsurer cash equal to the
Reinsurer's quota share percentage of the contract owner's
Account Value on the benefit election date, and the Reinsurer
will continue to pay its quota share percentage of the Annuity
payments due thereafter.
c) For Claims under the GMWB Riders, as set forth in Schedule A,
the Reinsurer will pay its quota share percentage of each
payout, the protected payment amount, made by the Ceding
Company once the rider benefits are in effect and the Account
Value of the base Annuity is zero,
d) The Reinsurer will also pay its quota share percentage of any
Account Value credit given by the Ceding Company pursuant to
the terms of the GMAB Riders, as set forth in Schedule A
g) The Reinsurer will also pay its quota share percentage of any
Account Value credit enhancements given by the Ceding Company
pursuant to the terms of extra credit and bonus credit riders,
as set forth in Schedule A
The Reinsurer will pot participate in any ex gratia payments made by the
Ceding Company (i e , payments the Ceding Company is not required to make
under the Annuities reinsured) The Reinsurer's quota share percentage of
any interest payable under the terms of the reinsured Annuities or
applicable law which is based on the benefits paid by the Ceding Company
and covered under this Agreement will be payable by the Reinsurer. The
Reinsurer will pay its quota share percentage of such Claims in a lump sum
to the Ceding Company without regard to the form of settlement by the
Ceding Company
7. Contested Claims The Ceding Company will advise the Reinsurer of its
intention to contest, compromise or litigate any Claims involving
Annuities reinsured hereunder by giving the Reinsurer twenty (20) days
prior written notice of its intention to contest, compromise or litigate
such Claims. The Reinsurer will notify the Ceding Company within ten (10)
days of receipt of such notice if it chooses to participate. The Reinsurer
will pay its share of the expenses of such contests, in addition to its
share of Claims, or it may choose sot to participate, If the Reinsurer
chooses not to participate, the Ceding Company will include the full
amount of the Reinsurer's proportionate share of the Claim in the Ceding
Company's settlement for such Accounting Period and the Reinsurer's
liability will be fully discharged as to such Annuities. Notwithstanding
the
- 19 -
above, the Reinsurer will not be notified and will not participate in
contests or litigation whose purpose is to determine the rightful owner of
the proceeds.
8. Annuity Payments. Except for annuitizations related to the GMIB,
annuitizations will be treated as surrenders the Reinsurer will reimburse
the Ceding Company in accordance with Schedule B for Annuity Payments
equal to the quota share percentage of the Annuities reinsured hereunder,
as described in Schedule A attached hereto, times the Account Values of
such Annuities as of the date of such annuitization. Upon payment of such
amounts, the Reinsurer will have no further liability for such Annuity
Payments
- 20 -
ARTICLE V
TRUST ACCOUNTS AND LETTER OF CREDIT
In order to provide the Ceding Company with credit for reinsurance on its
statutory financial statements for the Annuities reinsured hereunder, the
Reinsurer shall establish a trust account and/or letter of credit pursuant to
the terms set forth below; provided further that such trust account and/or
letter of credit shall be established and funded on December 31, 2007, subject
to approval, if required, of the Reserve Credit Trust Agreement (as defined
below) by the Commissioner of Insurance for the Ceding Company's state of
domicile
1. Reserve Credit Trust Agreement.
A The Ceding Company and the Reinsurer will enter into a trust
agreement, substantially in the form attached hereto as Exhibit I
(the "Reserve Credit Trust Agreement"), as a full or partial
alternative to the letter of credit described in Paragraph 2 below
To the extent a Reserve Credit Trust Agreement is established, the
trust account created thereunder will be referred to as the "Reserve
Credit Trust Account" and the assets held in the trust account
created thereunder will be herein referred to as "Reserve Credit
Trust Assets" The Reinsurer will bear all of the costs associated
with creating and maintaining the Reserve Credit Trust Agreement
B On the Effective Date of this Agreement, the Reinsurer shall deposit
Eligible Assets (as defined below) in the Reserve Credit Trust
Account with a fair market value equal to the "Reserve Credit
Required Balance," as defined below, less the amount of the letter
of credit, if any, maintained pursuant to Paragraph 2 below, and the
trustee shall hold the Reserve Credit Trust Assets in the Reserve
Credit Trust Account for the sole benefit of the Ceding Company
pursuant to the terms of the Reserve Credit Trust Agreement
The assets held in the Reserve Credit Trust Account shall be valued
at their fail market value as of the date on which such assets are
required to be valued in respect of each Accounting Period The fair
market value will be determined by the Trustee in accordance with
the terms and conditions of the Reserve Credit Trust Agreement The
assets that may be held in the Reserve Credit Trust Account (the
- 21 -
"Eligible Assets") shall consist of cash, certificates of deposit
issued by a U S bank and payable in U S dollars, and government
agency mortgage backed securities and investment grade assets of the
type permitted by Kansas statutes or any combination of the above;
provided that there should be no investments in or issued by an
entity controlling, controlled by or under common control with
either the Reinsurer or the Ceding Company of the Reserve Credit
Trust Agreement
The Reserve Credit Required Balance equals the Coinsurance Reserve,
as described in Paragraph 4 below
Prior to depositing assets in the Reserve Credit Trust Account, the
Reinsurer will execute assignments or endorsements in blank, or
transfer legal title to the trustee of all shares, obligations or
any other assets requiring assignments, in order that the Ceding
Company, or the trustee upon the direction of the Ceding Company,
may whenever necessary negotiate these assets without the consent OF
signature from the Reinsurer or any other entity.
C If the aggregate fair market value of the Eligible Assets held in
the Reserve Credit Trust Account, plus the amount of the letter of
credit, if any, maintained pursuant to Paragraph 2 below, plus the
fair market value of any assets in the Separate Accounts, as defined
in Paragraph 1(D)(iv) and Paragraph 2(iv) (the "Separate Accounts"),
is less than the Ceding Company's estimate of the Reserve Credit
Required Balance as of the end of the Accounting Period, the Ceding
Company must notify the Reinsurer no later than fifteen (15)
calendar days prior to the end of the Accounting Period. The
Reinsurer prior to the end of such Accounting Period shall transfer
additional Eligible Assets to the Reserve Credit Irust Account, or
increase the principal amount of the letter of credit, so that the
aggregate fair market value of the Eligible Assets held in the
Reserve Credit Trust Account, plus the principal amount of the
letter of credit, plus the fair market value of any assets in the
Separate Accounts, is not less than the Reserve Credit Required
Balance.
D Notwithstanding any other provisions in this Agreement, the Ceding
Company may withdraw the Reserve Credit Trust Assets held in the
Reserve Credit Trust Account at any time and from time to time and
any such Reserve Credit Trust Assets withdrawn from the Reserve
Credit Trust Account shall be
- 22 -
utilized and applied by the Ceding Company (or any successor by operation
of law of the Ceding Company, including, but not limited to, any
liquidator, rehabilitator, receiver or conservator of the Ceding Company),
without diminution or increase because of insolvency on the part of the
Ceding Company or the Reinsurer, only for the following purposes:
(i) to pay or reimburse the Ceding Company for the Reinsurer's share of
premium, fees and charges returned, but not yet recovered from the
Reinsurer, to the owners of Annuities reinsured under this Agreement
on account of cancellations of such Annuities;
(ii) to pay or reimburse the Ceding Company for the Reinsurer's share of
surrenders and benefits paid by the Ceding Company, but not yet
recovered from the Reinsurer, under the provisions of the Annuities
reinsured wider this Agreement;
(iii) to pay or reimburse the Ceding Company for any other amounts
necessary to secure the credit or reduction from liability for
reinsurance taken by the Ceding Company under this Agreement;
(iv) where the Ceding Company has received notification of termination of
the Reserve Credit Trust Account and where the Reinsurer's entire
obligations under this Agreement remain unliquidated and
undischarged ten (10) days prior to the termination date, to
withdraw amounts equal to the Reinsurer's share of liabilities to
the extent that the liabilities have not been funded by the
Reinsurer and deposit those amounts in a Separate Account, in the
name of the Ceding Company in any qualified U S financial
institution apart from its general assets, in trust for the uses and
purposes specified in (i), (ii) or (iii) above as may remain
executory after withdrawal and for any period after the termination
date; and
(v) To make payment to the Reinsurer of amounts held in the Reserve
Credit Trust Account in excess of the amount necessary to secure the
credit or reduction from liability for reinsurance taken by the
Ceding Company under this Agreement,
In the event that the Ceding Company withdraws assets from the Reserve
Credit Trust Account in an amount in excess of the actual amounts required
for items (i), (ii) and/or (iii) above, or in the case of a draw pursuant
to (iv) above, any amounts that are subsequently determined not to be due,
shall be returned to the Reinsurer no later than thirty (30) days
following the date of such determination. In
- 23 -
addition, in the event that the Ceding Company withdraws assets from
the Reserve Credit Trust Account pursuant to item (iv), the Ceding
Company shall pay Reinsurer interest on the amounts held pursuant to
item (iv) above at a rate equal to the prime rate of interest.
In the event of termination of this Agreement or if the Reserve
Credit Trust Account is no longer required under this Agreement, the
Ceding Company will provide its prompt approval of the termination
of the Reserve Credit Trust Agreement and return of the Reserve
Credit Trust Assets to the Reinsurer.
E If the aggregate fair market value of the Eligible Assets in the
Reserve Credit Trust Account, plus the principal amount of the
letter of credit, plus the fair market value of any assets in the
Separate Accounts, exceeds 102% of the Reserve Credit Required
Balance, calculated based on the most recent Quarterly Accounting
Report, then the Reinsurer shall have the right to seek approval
(which shall not be unreasonably or arbitrarily withheld) from the
Ceding Company to withdraw the excess from the Reserve Credit Trust
Account, or the Separate Accounts or reduce the principal amount of
such letter of credit in an amount equal to the excess.
2 Letter of Credit. Notwithstanding anything to the contrary contained in
Paragraph 1 above, the Reinsurer may elect to arrange for the
establishment of a clean, unconditional and irrevocable letter of credit
for the exclusive benefit of the Ceding Company, which shall comply with
the requirements of Kansas insurance law and regulations. The letter of
credit shall be required only if the Reinsurer fails to establish and
maintain as folly funded the Reserve Credit Trust Agreement under the
terms and conditions of Paragraph 1 above. The Reinsurer will bear all of
the costs associated with the letter of credit. The amount of the letter
of credit will at all times equal or exceed (a) minus (b) minus (c) where:
(a) equals the Coinsurance Reserve, as defined in Paragraph 4;
(b) equals the fair market value of the Reserve Credit Trust
Assets, as described in Paragraph 1 above;
(c) equals the fair market value of the assets in the Separate
Accounts.
- 24 -
The letter of credit will be issued by a bank that is neither the parent,
subsidiary nor affiliate of either the Reinsurer or the Ceding Company and
is (1) organized or licensed under the laws of the United States or any
state thereof, (2) regulated, supervised and examined by US federal or
state authorities, and (3) approved by the NAIC Securities Valuation
Office.
Notwithstanding anything to the contrary in this Agreement, the Reinsurer
and the Ceding Company agree that the letter of credit may be drawn on by
the Ceding Company at any time and will be utilized and applied by the
Ceding Company, including, without limitation, any liquidator,
rehabilitator, receiver or conservator of the Ceding Company, without
diminution or increase because of the insolvency on the part of the Ceding
Company or the Reinsurer, only for the following purposes:
(i) to pay or reimburse the Ceding Company for the Reinsurer's
share of premium, fees and charges returned, but not yet
recovered from the Reinsurer, to the owners of the Annuities
reinsured under this Agreement on account of cancellations of
such Annuities;
(ii) to pay or reimburse the Ceding Company far the Reinsurer's
share of surrenders and benefits paid by the Ceding Company,
but not yet recovered from the Reinsurer under the provisions
of the Annuities reinsured under this Agreement;
(iii) to pay any other amounts necessary to secure the credit or
reduction from liability for reinsurance taken by the Ceding
Company under this Agreement; and
(iv) Where the letter of credit will expire without renewal or be
reduced or replaced by a letter of credit for a reduced amount
and where the Reinsurer's entire obligations under this
Agreement remain unliquidated and undercharged ten (10) days
prior to the termination date, to withdraw amounts equal to
the Reinsurer's share of liabilities to the extent that the
liabilities have not been funded by the Reinsurer and deposit
those amounts in a Separate Account, in the name of the Ceding
Company in any qualified U.S. financial institution apart from
its general assets, in trust for the uses and purposes
specified in (i), (ii) or (iii) above as may remain executory
after withdrawal and for any period after the termination
date.
- 25 -
In the event that the Ceding Company draws on the letter of credit in an
amount in excess of the actual amounts required for items (i), (ii) and/or
(iii) above, or in the case of a draw pursuant to (iv) above, any amounts;
that are subsequently determined not to be due, shall be returned to the
Reinsurer no later than thirty (30) days following the date of such
determination In addition, in the event that the Ceding Company draws on
the letter of credit pursuant to item (iv) above, the Ceding Company shall
pay the Reinsurer interest on the amounts held pursuant to item (iv) above
at a rate equal to the prime rate of interest.
In the event of termination of this Agreement or if the letter of credit
is no longer required under this Agreement, the Ceding Company will
provide its prompt approval of the cancellation of the letter of credit.
3 Order of Draw. In the event the Reinsurer establishes multiple sources of
reserve credit trust(s) pursuant to Paragraph 1 above and/or letter(s) of
credit pursuant to Paragraph 2 above, and the Reinsurer has specified in
writing to the Ceding Company an order of draw from these sources of
reserve credit, the Ceding Company will draw from these sources of reserve
credit in the order specified by Reinsurer for the purposes specified in
items (i), (ii), and (iii) of Paragraph 1 or 2. The order of draw is not
applicable to withdrawals for the purpose specified in item (iv) of
Paragraphs 1 or 2. This forbearance shall be binding upon the Ceding
Company and its successors.
4. Coinsurance Reserve. The term "Coinsurance Reserve," as used in this
Agreement, is equa1 to the Guaranteed Minimum Death Benefit reserves in
compliance with NAIC Actuarial Guideline XXXIV, and the Variable Annuity
Guaranteed Living Benefit reserves in compliance with NAIC Actuarial
Guideline XXXIX, or any successor statutory accounting standards for
valuation of reserves, as applied to the base Annuity death benefit in
excess of the Account Value and Guaranteed Benefits issued as riders that
are reinsured hereunder.
- 26 -
ARTICLE VI
RESERVES
1. General Account. The term "General Account," as used in this Agreement,
means the assets of the Ceding Company other than those allocated to any
separate account of the Ceding Company. The General Account supports the
Guaranteed Benefits and the base Annuity death benefit in excess of the
Account Value under the Annuities
2 Separate Account Reserves. The term "Separate Account Reserves" as used in
this Agreement means the reserve established by the Ceding Company in
respect of Separate Account Liabilities
3 Modified Coinsurance Reserve. The term "Modified Coinsurance Reserve" as
used is this Agreement, will be equal to the Account Value.
4. Reserve Strengthening. Any increase in reserves applicable to the business
ceded under this Agreement that is implemented by the Ceding Company on a
discretionary basis will be paid by the Ceding Company to the Reinsurer at
the end of the Accounting Period during which the reserve strengthening
occurs.
5. Riders Coinsurance. Riders will be reinsured on a coinsurance basis.
Accordingly. the Reinsurer will establish a trust account and/or letter of
credit pursuant to Article V for its quota share portion under this
Agreement so that the Ceding Company may deduct full reserve credit in its
statutory financial statements for such quota share portion
- 27 -
ARTICLE VII
ACCOUNTING AND SETTLEMENTS
1. Quarterly Accounting Period. Each Accounting Period under this Agreement
will be a calendar quarter, except that: (a) the initial Accounting Period
runs from the Effective Date of this Agreement through the last day of the
calendar quarter during which this Agreement is executed by both parties,
and (b) the final Accounting Period runs from the end of the preceding
Accounting Period until the terminal accounting date of this Agreement, as
described in Article IX, Paragraph 2.
2. Accounting Reports.
A. Quarterly Accounting Reports. Quarterly accounting reports in the
form of Schedule B attached hereto will be submitted to the
Reinsurer by the Ceding Company not later than five (5) business
days after the end of each Accounting Period Such reports will
include information on the amount of Reinsurance Premiums, Gross
Premiums, Contract/Administration Fees, Surrender Fees, mortality
and expense risk charges (M&Es), Optional rider charges, Mutual Fund
fee income, Total Reinsurance Premiums, Benefit Payments, Annuity
Benefits, Claims, Annuity Payments, Surrender Benefits associated
with Account Value, Cash Surrender Value and Cancellation Proceeds,
Partial Withdrawals, Other Benefits, Total Benefit Payments,
Commission and Expense Allowances, Commissions, Premium Taxes,
Expense Allowances, Total Commission and Expense Allowance, Net
Amount of Transfers, the Ceding Company's and Reinsurer's Settlement
Amounts together with such Supplemental Information as required in
Schedule B attached hereto
B Monthly Reports The Ceding Company will provide the Reinsurer with
monthly reports (whether in electronic or physical form as mutually
agreed to by the parties) within five (5) business days after the
end of each month during the term hereof accurately showing the
detailed information with respect to the Annuities as set forth in
Schedule B-1. The Ceding Company will provide the Reinsurer with
such additional information as the Reinsurer may reasonably request.
- 28 -
It is understood and agreed that the provisions of this Article are
material to the Reinsurer's ability to accept the risks reinsured and
adequately perform its risk management duties.
3 Quarterly Settlements. Within fifteen (15) calendar days after the end of
each Accounting Period, the Ceding Company will calculate the sum of the
following for the Accounting Period:
(i) Reinsurance Premiums and income of any type on the
Annuities as determined in accordance with Article II,
less
(ii) Benefit Payments, as described in Article IV, less
(iii) the Commission and Expense Allowance determined in
accordance with Article III, Paragraph 2, less
(iv) the net amount of Separate Account transfers, as set
forth in Schedule B
If the quarterly settlement amount is positive, the Ceding
Company shall pay such amount to the Reinsurer. Conversely, if
the quarterly settlement amount is negative, the Reinsurer
shall pay the absolute value of such amount to the Ceding
Company
4 Amounts Due Quarterly Except as otherwise specifically provided in this
Agreement, all amounts due to be paid to either the Ceding Company or the
Reinsurer under this Agreement will be determined on a net basis at the
end of each Accounting Period and will be due and payable within fifteen
(15) calendar days after the end of the Accounting Period. All settlements
of account between the Reinsurer and the Ceding Company will be made in
cash or its equivalent
5 Annual Accounting Reports. The Ceding Company will provide the Reinsurer
with annual accounting reports within thirty (30) calendar days after the
end of the calendar year for which such reports are prepared. These
reports will contain sufficient information about the Annuities reinsured
hereunder to enable the Reinsurer to prepare its annual financial reports
and to verify the information reported in Schedule B attached hereto, and
will include, but not be limited to, Exhibit 5 ("Aggregate Reserve for
Life Insurance") by reserve basis, Page 7 ("Analysis of Increase in
Reserves During the Year"), Page 28 ("Exhibit of Number of Policies"), and
Schedule S ("Reinsurance Activity") of the Annual Statement
- 29 -
6. Estimations. If the amounts set forth in Paragraph 3 above cannot be
determined by the dates described in Paragraph 4 above, on an exact basis,
such payments will be paid in accordance with a mutually agreed upon
formula which will approximate the actual payments. Adjustments will then
be made to reflect actual amounts when they become available Ceding
Company will provide written notice to the Reinsurer as soon as reasonably
practicable if the amounts described in Paragraph 3 above cannot be
determined by the due date of the Quarterly Accounting Report.
7. Delayed Payments. For purposes of Paragraph 4 above, if there is a delayed
settlement of a payment due, there will be an interest penalty, at the
Delayed Payment Rate described in Paragraph 8 below, for the period that
the amount is overdue. For purposes of this Paragraph, a payment will be
considered overdue thirty (30) days after the date such payment is due
8. Delayed Payment Rate. The Delayed Payment Rate, on an annual basis, will
be equal to 75 basis points plus the sum of the one month London Interbank
Offered Rates (LIBOR) as published by The Wall Street Journal at the end
of each calendar month ending during the current Accounting Period,
divided by the number of calendar months ending during the current
Accounting Period
9 Offset of Payments. All monies due either the Ceding Company or the
Reinsurer under this Agreement or any other agreements between the parties
will be offset against each other, dollar for dollar, regardless of any
insolvency of either party. However, in the event of an insolvency of the
Reinsurer, offsets will be allowed in accordance with Bermuda laws as such
law exists as of the Effective Date of this Agreement In the event of
insolvency of the Ceding Company, offsets will be allowed in accordance
with the statutory, common and case laws of the state taking jurisdiction
over the insolvency as such laws exist as of the Effective Date of this
Agreement.
- 30 -
ARTICLE VIII
DURATION AND RECAPTURE
1. Duration Except as otherwise provided herein, this Agreement is unlimited
in duration
2. Reinsurer's Liability The liability of the Reinsurer with respect to say
Annuity reinsured hereunder will begin simultaneously with that of the
Ceding Company, but not prior to the Effective Date of this Agreement. The
Reinsurer's liability with respect to any Annuity reinsured hereunder will
terminate on the earliest of: (i) the date the Ceding Company's liability
on such Annuity is terminated or (ii) the date this Agreement is
terminated. Termination of the Reinsurer's liability is subject to
payments in respect of such liability in accordance with the provisions of
Article IX. In no event should the interpretation of this Paragraph imply
a unilateral right of either party to terminate this Agreement
3 Termination for Nonpayment of Reinsurance Premiums or Other Amounts Due If
the Ceding Company fails to pay the Reinsurance Premiums or any other
amounts due to the Reinsurer pursuant to this Agreement, within
twenty-five (25) days after the end of any Accounting Period, the
Reinsurer may terminate this Agreement, subject to fifteen (15) days prior
written notice to the Ceding Company, unless the Ceding Company shall have
paid all amounts due and payable to the Reinsurer within fifteen (15) days
of receipt of such notice The Reinsurer's right to terminate reinsurance
will not prejudice its right to collect premiums and interest for the
period reinsurance was in force, through and including the fifteen (15)
day notice period
4 Termination for Cause If the Ceding Company fails to provide the Monthly
Reports as required by Article VII, Paragraph 2(B) of this Agreement four
(4) or more times during any calendar year, the Reinsurer may terminate
this Agreement subject to thirty (30) days prior written notice to the
Ceding Company; provided, however, that this provision shall operate only
to the extent that it does not affect, prior to a termination by Reinsurer
hereunder, the Ceding Company's ability to take full credit for
reinsurance on its statutory financial statements, for the Annuities
reinsured hereunder
- 31 -
5. Recapture. The Annuities may be recaptured at any time upon mutual
agreement in writing between the Ceding Company and the Reinsurer and upon
payment of the Recapture Charge In no event may the Ceding Company
recapture anything other than one hundred (100%) percent of the quota
share of the Annuities reinsured hereunder
6. Recapture Charge. In the event this Agreement is terminated in accordance
with Paragraph 3, 4 or 5 above, or Paragraph 7 below, or Article XII,
Paragraph 3, the Ceding Company will pay the Reinsurer a Recapture Charge
equal to (i) minus (ii) where,
(i) equals the Account Value, as of the terminal accounting date
as if such Recapture had not occurred, times the rate for the
applicable year, as set forth below:
-----------------------------------------
Year Rate
-----------------------------------------
2007-2008 9%
-----------------------------------------
2009 -2010 8%
-----------------------------------------
2011-2012 7%
-----------------------------------------
2013-2014 6%
-----------------------------------------
2015 and later 5%
-----------------------------------------
(ii) equals the Rider Benefit Liability, as calculated by the
Reinsurer for GAAP purposes, as of the terminal accounting
date as if such Recapture had not occurred, which could be
positive or negative. The Rider Benefit Liability is a policy
and fund level calculation which accounts for the contractual
features of each specific guarantee. The guarantees are valued
using actuarial assumptions as used by the Reinsurer for GAAP
repotting purposes (which are available to the Ceding Company
upon request) and capital market assumptions as follows:
Correlation
----------------------------------------------------------------------------------------------
Money
Class S&P 500 Xxxxxxx 2000 Nasdaq 100 SBBIG EAFE Market
----------------------------------------------------------------------------------------------
S&P 500 100.0% 77.0% 70.0% 5.0% 84.0% 0.0%
Xxxxxxx 0000 77.0% 100.0% 53.9% 2.6% 64.7% 0.0%
Nasdaq 100 70.0% 53.9% 100.0% 2.6% 58.8% 0.0%
SBBIG 5.0% 2.6% 2.6% 100.0% 3.7% 0.0%
EAFE 84.0% 64.7% 58.8% 3.7% 100.0% 0.0%
Money Market 0.0% 0.0% 0.0% 0.0% 0.0% 100.0%
----------------------------------------------------------------------------------------------
- 32 -
----------------------------------------------------------------------------------------------
Money
Class S&P 500 Xxxxxxx 2000 Nasdaq 100 SBBIG EAFE Market
----------------------------------------------------------------------------------------------
Volatility 18.0% 18.0% 24.0% 4.0% 20.0% 1.0%
----------------------------------------------------------------------------------------------
-----------------------
yield Curve
All Years 5.00%
-----------------------
If the Recapture Charge is positive, the Ceding Company shall pay such
amount to the Reinsurer Conversely, if the Recapture Charge is negative,
the Reinsurer shall pay the absolute value of such amount to the Ceding
Company.
7 Conversions and Internal Replacements Annuities converting to another
annuity or policy pursuant to a contractual right to convert, whether
listed on Schedule A attached hereto or not, shall not be reinsured under
this Agreement Unless expressly approved by the Reinsurer in writing, the
Ceding Company, its affiliates, successors or permitted assigns, shall not
initiate a program of Internal Replacement that would include any of the
reinsured Annuities. For purposes of this Agreement, the term "Internal
Replacement" means any instance in which an Annuity or any portion of the
cash value of an Annuity is exchanged for another policy or annuity, not
covered under this Agreement, which is written by the Ceding Company, its
affiliates, successors or assigns Notwithstanding the foregoing, an
Internal Replacement shall not include a replacement for another policy
written by the Ceding Company or any successor or affiliate if such
replacement is initiated by the owner or a registered representative.
- 33 -
ARTICLE IX
TERMINAL ACCOUNTING AND SETTLEMENT
1. Terminal Accounting. In the event that this Agreement is terminated in
accordance with Article VIII, Paragraph 3 or 4, or all reinsurance under
this Agreement is recaptured in accordance with Article VIII, Paragraph 5,
a Terminal Accounting and Settlement will take place
2. Date. The terminal accounting date will be the earliest of: (1) the
effective date of recapture pursuant to any notice of recapture given
under this Agreement, (2) the effective date of termination pursuant to
any notice of termination gives under this Agreement, or (3) such other
date mutually agreed to in writing.
3. Settlement. The Terminal Accounting and Settlement will consist of:
(a) the quarterly settlement as provided in Article VII, Paragraph 3,
computed as of the terminal accounting date; and,
(b) payment of any Recapture Charge determined in accordance with
Article VIII, Paragraph 6, computed as of the terminal accounting
date; and,
(c) in the event this Agreement is terminated in accordance with Article
XII, Paragraph 3, the Reinsurer will pay the Ceding Company an
amount equal to the sum of ((i) minus (ii)), but never less than
zero, where:
(i) equals the statutory reserve, as calculated by the Ceding
Company in a manner mutually agreeable to the Ceding Company
and the Reinsurer; and,
(ii) equals the amount as determined in Article VIII, Paragraph
6(ii).
If the calculation of the Terminal Accounting and Settlement produces an
amount owing to the Ceding Company, such amount will be paid promptly by
the Reinsurer to the Ceding Company. If the calculation of the Terminal
Accounting and Settlement produces an amount owing to the Reinsurer, such
amount will be paid promptly by the Ceding Company to the Reinsurer.
- 34 -
4 Supplementary Accounting and Settlement In the event that, subsequent to
the Terminal Accounting and Settlement as provided above, a change is made
with respect to any amounts due, a supplementary accounting will take
place pursuant to Paragraph 3 above. Any amount owed to the Ceding Company
or to the Reinsurer by reason of such supplementary accounting will be
paid promptly upon the completion thereof.
- 35 -
ARTICLE X
REPRESENTATIONS
1. Solvency The Ceding Company and the Reinsurer each represent and warrant
to the other that it is solvent in all jurisdictions in which it does
business or is licensed to do business and each agrees to promptly notify
the other party if it becomes insolvent, as defined in Article XII,
Paragraph 1.
2. Representations The Ceding Company acknowledges that, at the Reinsurer's
request, it has provided the Reinsurer with the information described in
Schedules A and C prior to the execution of this Agreement by the
Reinsurer. The Ceding Company represents that all factual information
contained in these Schedules is complete and accurate in all material
respects as of the date the document containing the information was
prepared and provided to the Reinsurer by the Ceding Company. The Ceding
Company represents that in compiling the information described in Schedule
C it has used commercially reasonable and sound actuarial practices. The
Ceding Company further represents that any assumptions made in preparing
the information described above were based upon informed judgment and are
consistent with sound actuarial principles The Ceding Company further
represents that it is not aware of any omissions, errors, changes or
discrepancies that would materially affect the information described
above. The Reinsurer has relied on such data and the foregoing
representations in entering into this Agreement. The Ceding Company's
representations contained in this Paragraph shall be continuing
representations and shall apply to all amendments which may be made to the
information in Schedules A and C and the Reinsurer will rely on such
representations in entering into any such amendments.
3 Tax Status. The Reinsurer represents and warrants that it has made an
election under Section 953(d) of the Internal Revenue Code to be treated
as a United States domestic corporation, which election will not be
changed, and that it is subject to United States taxation under either
Subchapter L of Chapter 1, or Subpart F of Subchapter N of Chapter 1 of
the Code.
- 36 -
ARTICLE XI
ARBITRATION
Arbitration. Except as provided in Paragraph 1 of Article XIII, any and all
disputes arising out or relating to this Agreement, including but not limited to
disputes relating to its formation or validity shall be submitted to binding
arbitration. Any arbitration shall be based upon the Procedures for the
Resolution of U.S. Insurance and Reinsurance Disputes dated April 2004 (the
"Procedures"), as supplemented or limited by the subparagraphs below.
(a) The Panel shall consist of three disinterested arbitrators, one to
be appointed by the Petitioner, one to be appointed by the
Respondent and the third to be appointed by the two party-appointed
arbitrators. The third arbitrator shall serve as the umpire, who
shall be neutral. The arbitrators and umpire shall be persons who
are current or former officers or executives of an insurer or
reinsurer. Within twenty (20) days of the commencement of the
arbitration proceeding, each party shall provide the other party
with the identification of its party-appointed arbitrator, his or
her address (including telephone, fax and e-mail information) and
provide a copy of the arbitrator's curriculum vitae If either party
fails to appoint an arbitrator within that twenty (20) day period,
the non- defaulting party will appoint an arbitrator to act as the
party-appointed arbitrator for the defaulting party. The two
party-appointed arbitrators shall seek to reach agreement on an
umpire as soon as practical but no later than twenty (20) days after
the appointment of the second arbitrator. The party-appointed
arbitrators may consult, in confidence, with the party who appointed
them concerning the appointment of the umpire.
(b) Where the two party-appointed arbitrators have failed to reach
agreement on an umpire within the time specified in subparagraph (a)
above, each party shall propose to the other in writing, within
seven (7) days thereafter, eight umpire candidates each of whom
meets the requirements for umpires set forth above. The umpire will
then be selected in accordance with the Procedures Unless the
Parties agree otherwise, the XXXXX U.S. Umpire Questionnaire Form in
effect at the time of the commencement of the arbitration shall be
used.
(c) The arbitration shall take place in the Ceding Company's state of
domicile, and shall commence no later than forty five (45) days
after the appointment of the umpire
- 37 -
(d) Unless prohibited by law, the federal and state courts of the Ceding
Company's state of domicile shall have exclusive jurisdiction over
any and all court proceedings that either party may initiate to
compel arbitration or to enforce an Arbitration Award. The decision
of the Panel shall be delivered to the parties no later than twenty
(20) days after the close of the arbitration proceedings, and shall
be final and binding. In no event shall the Panel include in the
Arbitration Award any punitive, exemplary or other form of extra
contractual damages.
(e) Unless the Panel orders otherwise, each party shall pay: (1) the
fees and expenses of its own arbitrator; and (2) an equal share of
the fees and expenses of the umpire and of the other expenses of the
arbitration Any counsel fees incurred by a party in the conduct of
arbitration will be paid by the party incurring the fees.
(f) In the event of any conflict between the Procedures and this
Article, this Article, and not the Procedures, will control. This
Article shall survive the expiration or termination of the Agreement
- 38 -
ARTICLE XII
INSOLVENCY
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 or;
(b) Is adjudicated as bankrupt or insolvent or;
(c) Files or consents to the filing of a petition in bankruptcy,
seeks reorganization to avoid bankruptcy or an arrangement
with creditors or takes advantage of any bankruptcy,
dissolution, liquidation, rehabilitation, conservation 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.
In the event a party becomes insolvent, it will promptly notify the
other party.
2. Ceding Company's Insolvency. In the event of the Ceding Company's
insolvency, (i) any payments due the Ceding Company from the Reinsurer
pursuant to the terms of this Agreement will be made directly to the
Ceding Company or its domiciliary liquidator, and (ii) the reinsurance
will be payable by the Reinsurer on the basis of the liability of the
Ceding Company under the Annuities reinsured, as approved by the
liquidation court, without diminution or increase because of the
insolvency of the Ceding Company. The domiciliary liquidator of the Ceding
Company will give the Reinsurer written notice of the pendency of a claim
against the Ceding Company on any Annuity reinsured within a reasonable
time after such claim is filed in the insolvency proceeding. During the
pendency of any such claim, the Reinsurer may investigate such claim and
interpose, at its own expense, in the proceeding where such claim is to be
adjudicated, any defense or defenses which the Reinsurer may deem
available to the Ceding Company or its liquidator. The expense thus
incurred by the Reinsurer will be chargeable, subject to court approval,
against the Ceding Company as a 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
- 39 -
3. Reinsurer's Insolvency. In the event of the Reinsurer's insolvency, the
Ceding Company shall have the right to recapture the Annuities. Upon
giving notice to the Reinsurer, the Ceding Company may recapture any and
all of the business reinsured by the Reinsurer under this Agreement.
Termination of the Reinsurer's liability under this Paragraph is subject
to payments in respect of such liability in accordance with the provisions
of Article VIII of this Agreement.
- 40 -
ARTICLE XIII
SPECIAL DISPUTE RESOLUTION PROCEDURES AND INDEMNIFICATION
1 Disputes over Calculations. This section is intended to address disputes
between the Ceding Company and the Reinsurer solely to the extent they
relate to one or more specific calculations. Any such disputes not
resolved pursuant to this Paragraph 1 shall be resolved pursuant to
Article XI. Rights, duties or obligations resulting from either party's
failure to act other than in accordance with the provisions of this
Agreement shall be subject to Article XI. This section shall survive
termination of this Agreement.
a. If a dispute arises between the Ceding Company and the
Reinsurer in regards to the calculation of any amounts to be
paid or reserved (including Reinsurance Premiums, Benefit
Payments, Quarterly Settlement Payments, Coinsurance Reserve,
and Recapture Charge) which cannot be resolved by the parties
within thirty (30) calendar days, then the Ceding Company and
Reinsurer will each prepare written reports describing the
calculation in dispute.
b. Within ten (10) business days after the close of the thirty
(30) day internal resolution period, these written reports
will be submitted to a mutually acceptable third party
actuary, accountant or investment professional (the "Outside
Expert").
c. Within a thirty (30) calendar day period, the Outside Expert
will determine a dollar amount (or other value, as applicable)
for the disputed calculation which will fall in the range
between the values proposed by the Ceding Company and the
Reinsurer.
d. The fees, costs and expenses of retaining the Outside Expert
will be shared equally between the Ceding Company and the
Reinsurer.
2. Indemnification. Notwithstanding any action that may be taken in
accordance with the terms of this Agreement, if one party substantially
fails to perform an obligation specified in this Agreement, the other
party shall have the right to be indemnified and held harmless by the
other party in respect of all costs, expenses, claims and losses arising
out of such failure to perform. The indemnity shall be such as to put the
other party in the same financial position as it would have been if such
failure had not occurred. If such indemnity is required in conjunction
with a termination of this Agreement such indemnity shall be paid in
addition to the Terminal Accounting and Settlement. This section does not
prejudice any other rights or remedies which may be available to either
party under the terms of this Agreement.
- 41 -
ARTICLE XIV
EXECUTION AND EFFECTIVE DATE
In witness of the above, this Agreement is executed in duplicate on the dates
indicated below with an Effective Date as of October 1, 2007.
ATTEST: SECURITY BENEFIT LIFE INSURANCE COMPANY
By: /s/ [ILLEGIBLE] By: /s/ Xxxxxx X. Xxxxx
--------------- -------------------
Title: Asst. Secretary Title: Senior Vice President & COO
Date: 12/17/07 Date: 12/17/07
ATTEST: UNION XXXXXXXX REINSURANCE, LTD
By: /s/ [ILLEGIBLE] By: /s/ [ILLEGIBLE]
--------------- -------------------
Title: Alternate Director Title: VICE PRESIDENT
Date: 12/17/07 Date: DECEMBER 17, 2007
- 42 -
SCHEDULE A
ANNUITIES AND RISKS REINSURED
Annuities and Risks Reinsured. The amount of reinsurance under this Agreement
will be a quota share, as set forth below, of the Ceding Company's variable
annuities and riders which are issued by the Ceding Company in effect on or
prior to the Effective Date of this Agreement and described below:
--------------------------------------------------------------------------------
Product Form Number Securities Act of 1933 Number
--------------------------------------------------------------------------------
AdvisorDesigns V6029 11-00 File No 333-52114*
V6029 11-00U
--------------------------------------------------------------------------------
* The prospectus is included within registration statement no. 333-52114,
--------------------------------------------------------------------------------
The following riders, and any state variations thereof, are reinsured hereunder;
--------------------------------------------------------------------------------------------------------
Rider Form Number
--------------------------------------------------------------------------------------------------------
Guaranteed Minimum Income Benefit Rider V6065 8-00
--------------------------------------------------------------------------------------------------------
6% Dollar for Dollar Guaranteed Minimum Income Benefit V6094 5-05; V6094R 9-05
--------------------------------------------------------------------------------------------------------
Annual Stepped Up Death Benefit Rider V6063 8-00
--------------------------------------------------------------------------------------------------------
Guaranteed Growth Death Benefit Rider V6063-1 8-00
--------------------------------------------------------------------------------------------------------
Combined Annual Stepped Up Rider and Guaranteed Growth Death V6063-2 8-00
Benefit Rider
--------------------------------------------------------------------------------------------------------
Enhanced Death Benefit Rider V6078 4-01
--------------------------------------------------------------------------------------------------------
Combined Enhanced and Annual Stepped Up Death Benefit Rider V6079 4-01
--------------------------------------------------------------------------------------------------------
Combined Enhanced and Guaranteed Growth Death Benefit Rider V6076 4-01
--------------------------------------------------------------------------------------------------------
Combined Enhanced, Annual Stepped Up, and Guaranteed Growth Death V6077 4-01
Benefit Rider
--------------------------------------------------------------------------------------------------------
Death Benefit - Return of Premium Beyond Issue Age 80 (Florida only) V6082FL 5-01
Rider
--------------------------------------------------------------------------------------------------------
Annual Stepped Up Death Benefit Beyond Age 80 (Forida only) Rider V6081FL 5-01
--------------------------------------------------------------------------------------------------------
6% Dollar for Dollar Guaranteed Minimum Income Benefit and Guaranteed V6095 5-05; V6095R 9-05
Minimum Death Benefit
--------------------------------------------------------------------------------------------------------
Guaranteed Minimum Withdrawal Benefit Rider V6086 10-03
--------------------------------------------------------------------------------------------------------
Total Protection Rider V6087 10-03
--------------------------------------------------------------------------------------------------------
Extra Credit Rider/ Bonus Credit Rider V6067 8-00; V6084 11-0l
--------------------------------------------------------------------------------------------------------
Waiver of Withdrawal Charge Rider V6064 8-00
--------------------------------------------------------------------------------------------------------
Alternate Withdrawal Charge Rider V6069 10-00; V6069 2-05
--------------------------------------------------------------------------------------------------------
The quota share reinsured hereunder will be 85% During the term of this
Agreement, the Ceding Company or an affiliate thereof will retain not less than
15% percent of the liability on the Annuities reinsured hereunder which
liability or any portion thereof shall not be reinsured by the Ceding Company
without the prior written consent of the Reinsurer.
- 43 -
SCHEDULE B
QUARTERLY REPORT OF ACTIVITY AND SETTLEMENTS
FROM CEDING COMPANY TO REINSURER
Accounting Period:_________________
Calendar Year: ____________________
Date Report Completed: ____________
SBL
---------------
A. REINSURANCE PREMIUMS
1) Gross Premiums, including bonus credits and credit enhancements (Article II); $ --
2) Contoct/Adiministration Fees (Article II); --
3) Surrender Fees (CDSC) (Article IV, Paragraph 8); --
4) M&Es (Article II); --
5) Optional rider charges (Artels II); --
6) Mutual Fund Fee Income (12b-l and service fees) (Article II); --
A. TOTAL REINSURANCE PREMIUMS (1+2+3+4++5+6)
B. BENEFIT PAYMENTS (Article IV)
7) Annuity Benefits Associated with Aecount Value: --
a. Claims (Art IV, Paragraph 2)
b. Annuity Payments (Art IV, Paragraph 8)
c. Total Annuity Benefits (a+b)
8) Surrender Benefits Associated with Account Value: --
a. Cash Surrender Value and Cancellation Proceeds (Art, IV, Paragraph 3)
b. Partial Withdrawals (Art. IV, Paragraph 4)
c. Total Surrender Benefits (a+b)
9) Other Benefits: --
GMIB, GMWB, GMAB, death benefit claims in excess of Account Value, bonus credits
and credit enhancements (Article IV, Paragraph 6)
B. TOTAL BENEFIT PAYMENTS (7+8+9)
C. COMMISSION AND EXPENSE ALLOWANCES (Article III)
10) Commissions (Article III, Paragraph 2(i)(b)):
Regular --
Trail --
---------------
Total --
- 44 -
11) Premium Taxes (Article III, Paragraph 2(i)(c)):
Premium and miscellaneous taxes
12) Expense Allowances (Article III, Paragraph 2(ii)):
a. Policy Count - beginning of period
b. Policy Count - end of period -------------
c. Average Policy Cout (a+b / 2) -------------
d. $20 (* adjusted per Article III, Paragraph 2(ii)(a)) -------------
e. Expense Allowance (d x c) --
C. TOTAL COMMISSION AND EXPENSE ALLOWANCE (10+11+12)
D. NET AMOUNT OF TRANSFERS
a. Release of Account Value from Separate Account
Liabilities for Claims
b. Release of Account Value from Separate Account
Liabilities for Annuity Payments
c. Release of Account Value from Separate Account
Liabilities for Cash Surrender Value and
Cancellation Proceeds
d. Release of Account Value from Separate Account
Liabilities for Partial Withdrawals
e. Addition of Separate Account for Gross Premiums
-------------
============
D. TOTAL NET AMOUNT OF TRANSFERS (-a-b-c-d+e)
============
============
SETTLEMENT AMOUNT (A - B - C - D)
(Article VII, Paragraph 3) $ --
============
Supplemental Information
Beginning of Period Account Value -------------
Plus Premiums -------------
Minus Account Value Released on Surrenders =============
Minus Surrender Charges =============
Minus Account Value Released on Partial Withdrawals =============
Minus Account Value Released on death benefits =============
Minus M&Es =============
Minus administrative charges =============
Minus optional rider charges =============
Plus or Minus Investment Performance =============
End of Period Account Value =============
- 45 -
Beginning of Period End of Period
------------------- -------------
Guaranteed Death Benefit Account Value ------------------- -------------
Guaranteed CMIB Account Value ------------------- -------------
Guaranteed GMAB Account Value ------------------- -------------
- 46 -
SCHEDULE B-1
MONTHLY SERIATIM DATA
FROM CEDING COMPANY TO REINSURER
Monthly Seriatim File
-----------------------
Polnum
CFR-LOB
EYPlan
Issue Age (Birthday)
Duration
Sex
Issue Year
Issue Month
Totel_FV
Prem in last 12 months
Gross Premium
Total PWs
ROP
StepUp
Rollup
Total Stat Res by XXXXX, XX00, XX00
Total_CV
Loan
Guar Int
Fixed FV
Var FV
EquityClass
BondClass
BalancedClass
SpecialtyClass
Money MarketClass
SC Rider Charge
GMDB Rider Charge
GMDB_Type
StepUp Yr
RollUp %
Enh DB Ind
GMDB Results Code
GMIB Rider Charge
GMIB_Growth
GMIB
GMWB Rider Charge
GMWB_LIM_PC
GMWB_BEN_PC
GMWB-LIMIT
GMWB-BEN
GMAB Rider Charge
GMAB_LIM_PC
GMAB_BEN_PC
GMAB_LIMIT
GMAB_BEN
VAGLBRES
- 47 -
CredEnh Rider Charge
XCRD_BONS_PC
XCRD Amount
SCHG_CODE
Issue Day
Effective dates for Living Benefits (GMAB, GMWB, GMIB) - if different
from issue date
Date of last GMWB reset
CDSC Rider
DB Rider
GMIB Rider
GMWB Rider
Credit Enhancement Rider(s)
Automatic Bonus Credit Rider
Single/Joint Policy Indicator
Total Fund Value each individual fund allocation
State of Residence
Net Asset Value (NAV) for each fund
Annuity Unit Value (AUV) for each policy foreach fund
- 48 -
SCHEDULE C
CEDING COMPANY DATA
Email from Xxxxx Xxxxxxx of Ceding Company to Xxxxxx Kawassaki of Reinsurer
dated October 18, 2007 titled "FW: VA Block" containing Ceding Company's request
for a bid along with numerous files of the block of business and the following
files: "AdvisorDesignsNY PDF" "AdvisorDesigns pdf" "B 15,012 Designs V6029 pdf"
"72 22 Alt WD Charge Rider - FSB223 (5-04) pdf" "7.2 23 Alt WD Charge Rider
V6069 (10-00).pdf" "7 2 25 ASU & GG DB Rider V6063-2 (8-00).pdf" "7 2 30 ASU DB
Rider FSB218 (10.01).pdf "7.2 31 ASU DB Rider V6063 (8-00).pdf "7.2 35 Credit
Enh Rider - FSB222 (7.02) pdf "7.2.36 Credit Enh Rider V6084 (11-01).pdf" "7
2.41 Disability Rider FSB220 (10-0l).pdf" "7 2 42 Disability Rider V6064
(8.00).pdf" "7.2 48 Dollar for Dollar GMIB & GMDB Rider V6095 (R9-05).pdf"
"Advisor Designs Persistency 2004-2007.xls" "ADVDES_Comm (2).xls" "MExls"
Email from Xxxxx Xxxxxxx of Ceding Company to Xxxxxx Kawassaki of Reinsurer
dated October 18, 2007 titled "FW Wtd_Net_Exp_Ration_AdvancedDesign_20070930
(2) (2).xls" containing net expense ratios and revenue sharing for each fund and
the fallowing file: "Wtd_Net_Exp_Ratio_AdvancedDesign_20070930 (2) (2) xls"
Email from Xxxxx Xxxxxxx of Ceding Company to Xxxxxx Kawassaki of Reinsurer
dated October 18, 2007 titled "FW: RE: AdvisorDesigns Inforce files - 9/30/20Q7"
containing three zip files with inforce information for AdvisorDesigns and
AdvisorDesigns-NY and the following 3 files: AdvisorNY_Var_Funds__0907 wae"
"AD_Detail_0907.wac" "Advisor_Funds_0907 wae"
Email from Xxxxx Xxxxxxx of Ceding Company to Xxxxxx Kawassaki of Reinsurer
dated October 18, 2007 titled "FW; AdvisorDesigns Benchmarks xls" containing the
benchmarks for all of the AdvisorDesigns sub accounts and the following file:
"AdvisorDesigns Benchmarks.xls",
Email from Xxxxx Xxxxxxx of Ceding Company to Xxxxxx Kawassaki of Reinsurer
dated October 18, 2007 titled "FW: Fund Prospectuses" containing the
AdvisorDesigns underlying fund prospectuses and the following files; "ftvip 2007
Prospectus.pdf" "May 1 2007, VT Opportunity.pdf" "VanKampenLITGov.pdf" "AIM VI
CapitalAppreciation,pdf" "AIM VI InternationalGrowth,pdf "AIM VI
MidCapCoreEquitypdf" "DirexionDynamicVPHYBond.pdf" "FederatedFund for USGovSec
pdf". "FederatedHighlncomeBondII.PDF" "FidelityVIPContrafund.pdf"
"FidelityVIPGrowthOpp.pdf" "FidelityVIPIndex500.pdf" idelityVIPInvestmentGradeBd
pdf". "NeubergerBermanAMT Guardian.pdf "NeubergerBermanAMTPartners.pdf"
"OppenheimerMainStSmalCap. pdf" "PIMCOVIILowDuration.pdf" "PIMCOVIIRealReturn
..pdf "PIMCOVITStocksPLUSGrowth&Inc.pdf" "PIMCOVITTotalReturn.pdf"
"RVT-CLSAdviserOneAmerigoBerolinaClermont. pdf "RydexVTFamilyofFunds.pdf"
"SBL_Fund. pdf"
Email from Xxxxx Xxxxxxx of Ceding Company to Xxxxxx Kawassaki of Reinsurer
dated October 18, 2007 titled "FW: InforceData0907 .xls" containing summary
inforce data as of 9/30/07 for the VA block and the following file
"InforceData0907.xls".
Email from Xxxxx Xxxxxxx of Ceding Company to Xxxxxx Kawassaki of Reinsurer
dated October 18, 2007 titled "FW: Projected Cash Flows" containing an analysis
on the block of business based on 3/31 data and on Ceding Company's Prophet
model. The spreadsheet contains a projected income statement and balance sheet
as of 3/31/07 based on Ceding Company's model and the following file:
"ADVDES_bal_inc_033107.xls"
Email from Xxxxx Xxxxxxx of Ceding Company to Xxxxxx Kawassaki of Reinsurer
dated October 18, 2007 titled "FW: VA Block" containing some additional
information about Advisor Designs and the following files: "3 3.02 SBL-
Distribution.pdf "3.7 0l FSBL- SDI Distribution. pdf" "3.7,05 FSBL
AdvisorsDesigns Commission Schedule pdf" "3.7,01 SBL-SDI Marketing Org Agree
Amend.pdf "3 7.02 SBL, Marketing Org Agree.pdf' "3.7 03 AdvisorDssigns Comm.pdf"
"3.7.04 SDI Variable Product Agree.pdf" "7.4 Sales history by year.pdf"
"AdvisorDesigns Death Benefit .xls" "AdvisorDes Wkly Rtns.xls" "ADVDES
Daily_NAV.XLS" "AdvisorbyBDandState0307.xls" "ADVDES_AVrollforward xls"
- 49-
Email from Xxxxx Xxxxxxx of Ceding Company to Xxx Xxxxxxx of Reinsurer dated
October 24, 2007 titled "FW: PV by IRS Section" containing data relating to the
block of business by fund values and the following file: "Queryl.xls"
Email from Xxxxx Xxxxxxx of Ceding Company to Xxxxxx Kawassaki of Reinsurer
dated October 24, 2007 titled "FW: Emailing; AdvisorDesigns Specs" containing
pricing information for the AdvisorDesigns product and the following file:
"AdvisorDesigns Specs.doc"
Email from Xxxxx Xxxxxxx of Ceding Company to Xxxxxx Kawassaki of Reinsurer
dated October 25, 2007 titled "FW: AD Persistency 2004-2007" containing updated
lapse worksheet with pricing assumptions and the following file: "Advisor
Designs Persistency 2004-2007.xls"
Email from Xxx Xxxxx of Ceding Company to Xxxxxx Kawassaki of Reinsurer dated
October 25, 2007 titled "RE: fund ID question" containing fund mapping and the
following file "VarFundCodes.xls"
Email from Xxx Xxxxx of Ceding Company to Xxxxxx Kawassaki of Reinsurer dated
November 15, 2007 titled "FW: SBL in force - due diligence list" containing the
following sixteen (16) rider contracts: "6% Dollar for Dollar GMIB Rider V6094
(5-05).pdf" "ASU DB Rider (Age 80) V6081 FL (5-01).pdf" "Credit Enh Rider V6067
(8-00) [obsolete] pdf" "Credit Enh Rider' V6084 (11-01) pdf" "Enh & ASU DB Rider
V6079 (4-01).pdf" "Enh & GG DB Rider V6076 (4-01).pdf" "Enh DB Rider V6078
(4-01).pdf" "Enh, ASU & GG DB Rider V6077 (4-01).pdf" "GG DB Rider V6063-1
(8-00).pdf" "GMIB Rider, FSB240 (5-04) [NY].pdf" "GMIB Rider V6065 (8-00)pdf"
"GMWB Rider - FSB241 (5-04) [NY].pdf "GMWB Rider V6086 (00-00)xxx "Xxxx lnc
Benefit Rider V6065 (8-00)pdf "ROP DB Rider (Age 80) V6082 FL (5-01).pdf"
"Total Protection Rider V6087 (10-03).pdf"
Email from Xxx Xxxxx of Ceding Company to Xxxxxx Kawassaki of Reinsurer dated
November 15, 2007 titled "RE: Additional Requests" containing Reinsurer's
Settlement Amount in an excel file; "Wachovia Settlement Amounts xls"
Email from Xxx Xxxxx of Ceding Company to Xxxxxx Kawasaki of Reinsurer dated
November 15, 2007 titled "FW: Rider Listing as of 9/30" containing a seriatim
rider list in an excel file named "AD Seriatim Rider List 09302007.xls"
Email from Xxx Xxxxx of Ceding Company to Xxxxxx Kawassaki of Reinsurer dated
November 16, 2007 titled, "ADVD__REV_ITEMS.xls" containing an excel file with
dynamic validation named "ADVD_RBV_ITEMS.xls"
Email from Tiro Gaule of Ceding Company to Xxx Xxxxxxx of Reinsurer dated
November 19, 2007 titled "FW: 0539646.pdf containing the Advisor Designs
contract form in a file named "AdvisorDesign_PP_Sample_114945.pdf"
Email from Xxx Xxxxx of Ceding Company to Xxxxxx Kawassaki of Reinsurer dated
November 27, 3007 titled "FW: Automatic Bonus Credit Rider" containing policy
forms in files named "FSB238 (7-02) Bonus Credit Endorsement pdf" "Credit
Enhancement Rider V6084 (11-01).pdf" "V6094 (5-05) Massachusetts.pdf" "V6095
(5-05) Massachusetts.pdf"
Email from Xxx Xxxxx of Ceding Company to Xxxxxx Kawassaki of Reinsurer dated
November 27, 2007 titled "FW; Question about Ced Company Data" verifying there
are no lawsuits pending that are related to the AdvisorDesigns annuity block.
Email from Xxx Xxxxx of Ceding Company to Xxxxxxx Xxxx of Reinsurer dated
December 14, 2007 titled "FW: Unisex version of Contract is attached Thanks"
containing the AdvisorsDesigns unisex contract in a file named
"AdvisorGeneric_PP.PDF"
Email from Xxx Xxx of Ceding Company to Xxxxxxx Xxxx of Reinsurer dated
December 17, 2007 titled "Rider forms are attached for your reference"
containing policy forms in files named" V6094 (R9-05).pdf" and "V6069
(2-05).pdf"
- 50 -
EXHIBIT I
RESERVE CREDIT TRUST AGREEMENT
- 51 -
EXHIBIT I
RESERVE CREDIT TRUST AGREEMENT
Attached to the Reinsurance Agreement Number 10107, effective October 1, 2007
by and among
UNION XXXXXXXX REINSURANCE, LTD
("Grantor")
SECURITY BENEFIT LIFE INSURANCE COMPANY
("Beneficiary")
And
US BANK NATIONAL ASSOCIATION
("Trustee")
Dated as of October 1, 2007
RESERVE CREDIT TRUST AGREEMENT
THIS AGREEMENT made as of October 1, 2007, by and among Union Xxxxxxxx
Reinsurance. Ltd, an insurance company organized and existing undar the laws of
Bermuda (the "Grantor"), Security Benefit Life Insurance Company, an insurance
company organized and existing under the laws of Kansas (the "Beneficiary") and
US Bank National Association, a banking corporation organized and existing under
the laws of the United States and with its principal place of business in the
State of Wisconsin (the "Trustee"}.
WITNESSETH
WHEREAS the Grantor and the Beneficiary have entered into Reinsurance
Agreement Number 10107 (the "Reinsurance Agreement") under which the Grantor
agreed to provide security for its parformance owed to the Beneficiary; and
WHEREAS the Beneficiary and the Grantor intend that the Beneficiary be
permitted to take full credit on its records for the portion of the reserves
ceded the Grantor under the Reinsurance Agreement; and
WHEREAS the Grantor and the Beneficiary desire to create a trust account,
to hold assets as security for the performance by the Grantor of its obligations
under the Reinsurance Agreement; and
WHEREAS the Trustee is willing to act as the trustee of the trust account
under the terms and conditions specified herein.
NOW THEREFORE, the parties agree as follows:
ARTICLE I.
PROVISIONS RELATING TO THE TRUST ACCOUNT
Section 1.01. The Grantor hereby establishes a trust account (the "Trust
Account") with the Trustee at the Trustee's office at 0000 X
XxxxxXxxxxx, Xxxxx 000, Xxxxxxxxx, XX 00000, upon the terms and
conditions hereinafter set forth. The Trust Account established
hereunder is for the sole benefit of the Beneficiary and the
assets deposited therein shall he subject to withdrawal by the
Beneficiary solely as provided herein. As used herein, the term
"Beneficiary" shall include any success of the Beneficiary by
operation of law, including, without limit, any liquidator,
rehabilitate, receiver or conservator. Except as provided in
Sections 3.01 and 3.03, the Trust Account will remain in effect
for as long as the Grantor has outstanding obligations under
Reinsurance Agreement
Section 1.02. (a) The Trustee and its lawfully appointed successors is and
are authorized and shall have power to receive such funds and
other property as the Grantor from time to time may transfer or
remit to or vest in the Trustee or place in the Trustee's hands
or under the Trustee's control, or as otherwise deposited in
the Trust Account and to hold, invest, reinvest manage and
dispose of the same for the uses and purposes and in the manner
and according to the provisions hereinafter set forth. All such
trusteed assets at all times shall be maintained by Trustee as
a trust account, separate and distinct from all other assets
(b) The assets in the Trust Account (the "Trust Assets") must
be held in a safe place as specified in (c) below or at the
Trustee's office in the United States. The Trust Assets must be
segregated from other assets of the Trustee or the assets of
Trustee's other clients.
2
(c) The Trustee shall have the right to hold property on an
uncertificated basis with the issuer or in book-entry form. The
Trustee shall determine that all Trust Assets are in such form
that the Beneficiary, or the Trustee upon direction by the
Beneficiary, may whenever necessary negotiate any such assets,
without consent or signature from the Grantor or any other
person or entity.
Section 1.03. Assets deposited in the Trust Account and investments and
reinvestment thereof shall consist only of currency of the
United States of America, certificates of deposit issued by a
United States bank and payable in currency of the United States
of America, government agency mortgage basked securities, and
investment grade assets of the types permitted by the Kansas
Insurance Code, or any combination of the above, provided that
such investments are issued by an institution that is not the
parent, subsidiary or affiliate of either the Beneficiary or
the Grantor ("Authorized Investments") Any deposit or
investment direction by the Grantor (as provided for in Section
1.08 below) or substitution (as provided in Section 1.08 below)
shall be given to the Trustee in writing including a
certification that the assets so deposited or to be purchased
pursuant to such investment direction or so substituted are
Authorized Investments. The Trustee shall not be responsible
for determining whether any Trust Assets are or continue to be
Authorized Investment or whether the Trust Assets are
sufficient to secure the Grantor's obligations.
Section 1.04. The Grantor shall, upon execution of this Reserve Credit Trust
Agreement ("Trust Agreement"), and from time to time thereafter
as required, execute assignments, endorsements in blank or
other transfer instruments with respect to all securities or
other property standing in the Grantor's name which are
delivered to the Trustee to form a part of the Trust Account so
that, whenever necessary, the Beneficiary (or the Trustee upon
direction of the Beneficiary) can negotiate, any such asset
without the consent or signature of the Grantor or any other
person or entity Any assets received by the Trustee which are
not in such proper negotiable form or accompanied by the
appropriate transfer documents shall not be accepted by the
Trustee and shall be returned to the Grantor as unacceptable.
Section 1.05. (a) The Trustee is authorized to transfer into the name of
nominees selected by it all registered securities from time to
time held under this Trust Agreement, The Trustee shall be
responsible for the acts of its nominee with respect to such
securities
(b) The Trustee is authorized, without further information, to
exchange securities in temporary from for securities in
definitive form, and to effect an exchange of the shares where
the par value of stock is changed, against payment therefore in
accordance with accepted industry practice Except as provided
in Section 1.08, the Trustee shall allow no substitutions or
withdrawals of Trust Assets, except on written instructions
from the Beneficiary; provided, however, that the Trustee may
without the consent of but with notice to the Beneficiary, upon
call or maturity of any Trust Asset, withdraw such asset
provided that the proceeds of any withdrawal at maturity of
call are paid into the Trust Account The Trustee shall have no
duty to notify the Grantor of any rights, duties, limitations,
conditions or other information set forth in any security
(including mandatory or optional put, call and similar
provisions), but the Trustee shall forward to Grantor any
notices or other documents subsequently received in regard to
any such security. The Trustee shall maintain securities
received in bearer form unless instructed by the Grantor to
exchange such securities for securities in registered form. If
any Trust Assets registered in the name of a nominee of 'the
Trustee are called for partial redemption by the issuer of such
Trust Assets, the Trustee shall be authorized to aliot the
called portion to the respective beneficial holders of such
Trust Assets pursuant to fair and equitable lottery procedures
established by the Trustee from time to time
3
(c) Where redemption options, tenders or other like rights with
respect to securities have fixed expiration dates, the Grantor
understands that in order for the Trustee to act, the Trustee
must receive the Grantor's instructions at its offices,
addressed as the Trustee may from time to time request, by no
later than 9:00 a.m. (Trustee's local time) at least one
business day prior to the last scheduled date to act with
respect thereto (or such earlier date or time as the Trustee
may notify the Grantor) Absent the Trustee's timely receipt of
such instruction, such instruments will expire without
liability to the Trustee unless the Trustee did not, with due
diligence, provide the Grantor with timely and appropriate
information.
Section 1.06. (a) All dividends, interest and other income resulting from the
investment of the Trust Assets shall, at the written direction
of the Grantor be forwarded promptly by the Trustee to the
Grantor or deposited into a separate account in the Grantor's
name; however, that except as provided in subsection (b) below
Trustee shall have no obligation with respect to the collection
of such income.
(b) From time to time, the Trustee may elect, but shall not be
obligated, to credit the Trust Account with the amount of
interest, dividends or principal payments due on Trust Assets
before actually receiving such payments from a payor, central
depository, broker or other agent employed by the Grantor or
the Trustee. Any such crediting shall be at the Grantor's sole
risk, and the Trustee shall be authorized to reverse any such
credit in the event it does not receive good funds from the
payor, central depository, broker or agent The Trustee shall
not be required to enforce collection by legal means or
otherwise or any such payment, but shall use reasonable
diligence to make all such collections as may be effected in
the ordinary course of business,
(c) It is understood that the Trustee is not required to make
advances of cash, securities or any other property on behalf of
the Trust Account, or permit overdrafts in the Trust Account,
in connection with the acquisition or disposition of Trust
Assets.
Section 1.07. The Grantor directs the Trustee not to disclose the Grantor's
name, address and securities positions to issuers of securities
held in the Trust Account, pursuant to SEC rules implementing
The Shareholder Communications Act of 1985
The Grantor's address is as set forth on the signature page
hereof The Grantor and the Beneficiary each certify that their
respective Taxpayer Identification Numbers set forth on the
last page hereof are correct and that the Grantor and the
Beneficiary each are not subject to "backup withholding" under
section 3406 (a) (1) (c) of the Internal Revenue Code or any
successor provision when the appropriate original tax form,
W-8BEN or W-9, is given to the Trustee The Grantor and the
Beneficiary agree to notify the Trustee immediately in writing
of any change in the information sat forth in this paragraph
Section l.08. The Trustee, at the Grantor's written direction, may invest
and accept substitution of any funds in the Trust Account
provided that no investment or substitution shall be made
without the prior approval of the Beneficiary, unless the
Trustee determines that the investments and substitutions are
Authorized investments defined in Section 1.03 hereof and that
any substitutions are at least equal in market value to the
Trust Assets withdrawn
The Trustee shall execute any direction to buy or sell
securities and settle securities transactions itself or through
a duly licensed broker or agent. The Trustee shall not be
responsible for any act or omission, or the solvency, of any
such broker or agent unless the act or omission is the result
of the Trustee's negligence, willful misconduct of lack of good
faith Any loss incurred from any investment directed by the
Grantor shall be borne exclusively by the Trust Account
4
Section 1.09. The Grantor shall have the full, unqualified right to vote and
execute consents and to exercise any and all proprietary rights
not inconsistent with this Trust Agreement with respect to any
securities or other property forming a part of the Trust
Account The Grantor shall be entitled to recognize the Trust
Assets as funds held in trust for the benefit of ceding
companies.
Section 1.10. Withdrawals from the Trust Account may be made by the
Beneficiary at any time and from time to time subject only to
prior written notice from the Beneficiary to the Trustee.
Requests for withdrawals from the Trust Account shall be made
pursuant to a withdrawal form in the form of Exhibit "A"
annexed hereto. No other statement or document need be
presented by the Beneficiary is order to withdraw Trust Assets,
except that the Beneficiary shall be required by the Trustee to
acknowledge receipt of withdrawn Trust Assets Upon receipt of
the Beneficiary's instruction, the Trustee shall immediately
take any and all necessary steps to transfer absolutely and
unequivocally to the Beneficiary all right, title and interest
in the Trust Assets being withdrawn, and to deliver the
physical custody thereof to the Beneficiary; provided, that,
with respect to deposit or other accounts in other banks or
with respect to book-entry securities, the Trustee shall
execute the written directions of the Beneficiary with respect
to the transfer, deposit or other disposition of the withdrawn
Trust Assets, The Trustee shall be protected in relying upon
any written demand of the Beneficiary for such withdrawal and
on any statement made therein.
Section 1.11. (a) The Trustee will provide the Crantor and the Beneficiary
with a Schedule of Assets and Transaction Statements showing
all transactions in the Trust Account upon its inception, and
thereafter at intervals no less frequently than as of the and
of each calendar quarter and in no eveat more frequently than
as of the end of each month Such Schedules and Statements shall
be provided no later than fifteen (15) days after such date
(b) The Trustee shall furnish to the Grantor and the
Beneficiary notice of any deposits to or withdrawals from the
Trust Account within 10 calendar days of the occurrence of such
event.
ARTICLE II
PROVISIONS RELATING TO THE TRUSTEE
Section 2.01. The Trustee shall be a bank or trust company which is a member
of the Federal Reserve System of the United States of America
or a New York State chartered bank and shall not be a parent,
subsidiary or affiliate of the Grantor or the Beneficiary.
Section 2.02. (a) The Trustee shall be entitled to receive as compensation
for its services hereunder, an annual fee, computed and payable
quarterly, at such rate as may be agreed from time to time in
writing between the Grantor and the Trustee. The Grantor shall
be solely responsible for the payment of the fee of the Trustee
and all reasonable expenses of the Trustee, including
reasonable fees of counsel. The Trust Account shall not be
utilized for the payment of such fees and expenses The Trustee
may, however, deduct any unpaid fees and expenses from any
dividends, interest and other income of the Trust Account
received by the Trustee before crediting thereof to the
Grantor.
(b) The Grantor indemnifies the Trustee against and holds it
harmless from any claim, loss, liability, cost or expense
(including reasonable attorneys' fees and expenses), incurred
5
or made without negligence, willful misconduct or lack of good
faith on the Trustee's part, arising out of or in connection
with the Trustee's performance of its obligations under this
Trust Agreement. This indemnity shall survive the termination
of this Agreement or the Trustee's resignation or discharge.
Section 2.03. The Trustee shall be responsible for the safekeeping and
administration of the Trust Account in accordance with
provisions of this Trust Agreement. The duties and obligations
of the Trustee shall be only those specifically set forth in
this Trust Agreement, and the Trustee shall have no duty to
take any other action unless specifically agreed to by the
Trustee in writing Without limiting the generality of the
foregoing the Trustee shall not have any duty; to appear in or
defend any suit with respect thereto unless requested by the
Grantor or the Beneficiary in writing and indemnified to the
Trustee's satisfaction; to advise, manage, supervise or make
recommendations with respect to the purchase, retention or sale
of Trust Assets; with respect to any Trust Assets as to which
default in the payment of principal or interest has occurred,
to give notice of default, make demand for payment or take any
other action, to provide notification of the solvency or
financial condition or legal ability, or to be responsible for
the consequences of insolveney or the legal inability, of any
broker, dealer, bank or other agent employed by the Grantor or
the Trustee with respect to the Trust Assets, except to the
extant that the Trustee was negligent, engaged in misconduct or
acted in bad faith in the selection of any such person or
entity or to be responsible for the accuracy of any securities
information, market values or other similar information
provided by third-party services to which the Trustee
subscribes or which the Trustee engages, which information is
provided to the Grantor or Beneficiary in statements or
otherwise, or upon which the Trustee relies in performing
pursuant to the Trust Agreement, or upon which the Grantor or
Beneficiary relies, or to be responsible for the failure to
redeem any called bond or take any other action if notice of
such call or action was not provided by any services to which
it subscribes, unless the Trustee has been negligent in the
selection on any such service. The Trustee shall be liable only
for its own negligence, willful misconduct or lack of good
faith
Section 2.04. Unless otherwise provided in this Trust Agreement the Trustee
is authorized to comply with and rely upon all written
instructions, directions, notices and other communications
given by persons specified in incumbency certificates furnished
to the Trustee from time to time by Grantor and Beneficiary,
respectively, and by attorneys in fact acting under written
authority furnished to Trustee by Grantor and Beneficiary,
including, without limitation, instructions, directions,
notices and other communications given by letter, facsimile, or
other electronic means of transmission, if the Trustee
reasonably believes such, instruction, directions, notices and
other communications to be genuine and to have been signed or
presented by the proper party or parties. With respect to
facsimile and other similar electronic methods of giving
instructions, directions, notices and communications, Grantor
and Beneficiary acknowledge that there are more secure methods
of sending instructions, directions, notices and communications
but have nevertheless elected to use such methods of
communication In the absence of negligence, the Trustee shall
not incur any liability to any one resulting from actions taken
by the Trustee in reliance in good faith on such instructions,
directions, notice and other communications (i) from any
attorney-in-fact or (ii) from any officer specified in an
incumbency certificate delivered hereunder prior to receipt by
the Trustee of a more current certificate. All notices provided
to the Trustee (unless otherwise provided therein) shall be
deemed to be effective when received by the Trustee.
Section 2.05. Whenever in the administration, of the Trust Account created by
the Trust Agreement the Trustee shall deem it necessary or
desirable that a matter be proved or established prior to
taking, suffering or omitting any action thereunder, such
matter (unless other evidence in respect thereof be herein
specifically prescribed, such as in the case of withdrawal of
assets from the Trust Account by the Beneficiary, which is
specifically prescribed by Section 1.10
6
of this Trust Agreement) may be deemed to be conclusively
proved and established by a statement or certificate signed by
or on behalf of the Grantor and/or the Beneficiary and
delivered to the Trustee and said certificates shall constitute
the full warranty to the Trustee for any action taken, suffered
or omitted by it on the faith thereof; but in its discretion,
the Trustee way in lieu, thereof accept other evidence of the
fact or matter or may require such other or additional evidence
as it may deem reasonable
Section 2.06. (a) Except where otherwise expressly provided in this Trust
Agreement, any statement, certificate, notice, request,
consent, approval, or other instrument to be delivered or
furnished by or on behalf of the Grantor and/or the Beneficiary
shall be sufficiently executed if executed in the name of the
Grantor and/or the Beneficiary by an officer or agent of the
Grantor whose name and specimen signature appears on current
incumbency certificates furnished by the Grantor and the
Beneficiary. The Trustee shall be protected in acting upon any
written statement or other instrument made by such officer or
agent of the Grantor and/or the Beneficiary with respect to the
authority conferred on him.
(b) The Trustee shall be under no obligation to determine
whether or not any instruction given by the Grantor and/or the
Beneficiary are contrary to any provision of law
Section 2.07. The Trustee pay as reasonably necessary consult with counsel
selected by it. The opinion of said counsel shall be full and
complete authority and protection for the Trustee with respect
to any action taken, suffered or omitted by it in good faith
and in accordance with the opinion of said counsel other than
with respect to the withdrawal of assets from the Trust Account
by the Beneficiary or any other action contrary to the
provisions in this Agreement
Section 2.08. The Trustee shall keep full and complete records of the
administration of the Trust Account Any person or persons duly
authorized in writing by the Grantor and/or the Beneficiary may
examine such records at any time during business hours
Section 2.09. (a) The Trustee hereby accepts the trust herein created and
declared upon the terms herein expressed
(b) The Trustee may resign, by written resignation, effective
not less than ninety (90) days after receipt thereof by the
Grantor and the Beneficiary; and the Grantor may remove the
Trustee at any time, without assigning any cause therefore, by
the delivery to the Trustee and the Beneficiary of a written
notice of removal, effective not less than ninety (90) days
after receipt by the Trustee and the Beneficiary of the notice,
provided that no such resignation or removal shall be effective
until a successor Trustee reasonably acceptable to the
Beneficiary has been appointed by the Grantor and has accepted
such appointment and all assets in the Trust Account have been
duly transferred to such successor trustee. In any case of the
appointment of a successor trustee, all of the powers, rights
and duties of the Trustee named herein shall survive and
continue in the successor trustee and every successor Trustee
shall succeed to take and have all the estate power, lights and
duties which belonged to or were held by its predecessor. In
the case of the resignation or removal of the Trustee, the
Trustee shall have the right to a final accounting with respect
to the Trust Account
Section 2.10. (a) All assets in the Trust Account shall be valued at their
current fair market value in United States dollars on a basis
determined by the Trustee in its sole discretion.
(b) Upon the written request of the Grantor or the Beneficiary,
the Trustee shall promptly permit the Grantor or the
Beneficiary, its agent or employees, or independent auditors
designated by the Grantor or the Beneficiary to examine, audit,
excerpt, transcribe and copy, during normal business hours, any
books, documents, papers and records relating
7
to the Trust Account or the assets in the Trust Account
ARTICLE III
MISCELLANEOUS
Section 3.01. This Trust Agreement shall be effective until terminated by
sixty (60) days' advance written notice sent to the Trustee by
the Grantor, Written notice of termination shall be delivered
by the Trustee to the Beneficiary at least thirty (30) but not
more than forty-five (45) days prior to termination. Upon the
date of termination of this Trust Agreement, the Trustee shall:
(i) with the Beneficiary's written consent and at the direction
of the Grantor, transfer, pay over and deliver to the Grantor
all of the assets of the Trust Account in exchange for a
receipt from the Grantor; or (ii) deliver such assets to a
successor Trustee meeting the requirements of Section 2.01
hereof, and the Trustee's liability and obligations under this
Trust Agreement shall thereupon cease
Section 3.02. This Agreement shall be governed by and interpreted under the
substantive laws of the State of Wisconsin without regard to
its conflict of lew provisions.
Section 3.03. This Trust Agreement may be amended at any time by written
agreement signed by the Grantor, the Beneficiary and the
Trustee; provided, however, that from time to time after the
Effective Date the Grantor may propose such amendments to this
Agreement as the Grantor reasonably determines, based on advice
of counsel, are necessary to ensure that assets deposited in
the 'Trust Account are treated as admitted assets of the
Grantor for all purposes under the insurance laws of the
Grantor's domiciliary jurisdiction, or any successor provisions
thereto and any regulations promulgated thereunder Promptly
upon receipt of such proposal the Beneficiary will determine
whether its rights to security under this Trust Agreement or
the Reinsurance Agreement would be prejudiced by adoption of
such proposal. Unless Beneficiary reasonably determines that
its rights are prejudiced, Beneficiary and Trustee shall
consent, to such amendment. In the event that Benficiary
reasonably determines that any such amendment is prejudicial to
its interests, it shall have the right to disapprove by written
notice any such proposed amendment Upon receipt of such notice,
the Grantor shall have the light to terminate the Trust
pursuant to the terms of Section 3.01 hereof only if it has
concurrently established for the benefit of Beneficiary a
letter of credit as permitted under the terms of the
Reinsurance Agreement in an amount that will secure the
Grantor's obligations as they are adjusted from time to time
and will allow the Beneficiary to receive full credit for the
reserves ceded under the Reinsurance Agreement Each amendment
to this Trust Agreement shall be reviewed and approved by the
Commissioner before the amendment becomes effective
Section 3.04. This Trust Agreement is not subject to any conditions or
qualifications outside of this Trust Agreement
Section 3.05. In the event any provision of this Trust Agreement shall be
held invalid or unenforceable for any reason, such invalidity
or unenforceability shall not affect the remaining parts of
this Trust Agreement, Entry of the final order of any court of
competent jurisdiction in the United States will make contested
claims valid and enforceable.
Section 3.06. This Trust Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, and
the counterparts shall constitute but one and the same
instrument, which shall be sufficiently evidenced by any one
counterpart
8
Section 3.07. This Trust Agreement may not be assigned by any party without
the prior written consent of the other parties, and any such
attempted assignment shall be void, This Trust Agreement shall
be binding upon the successors and permitted assigns of the
parties hereto
Section 3.08. All notices or demands shall be deemed effective on the same
day that the notice or demand is sent if such notice of demand
is sent by facsimile transmission or delivered by hand,
otherwise notices or demands shall be deemed effective five (5)
days after such notice or demand has been sent by certified
mail, All notices on demands shall be in writing and shall be
delivered by hand, by certified mail, return receipt requested,
or by facsimile transmission addressed to the parties at the
following addresses:
If to Trustee: Xxxxx Xxxxxxx
Assistant Vice President
US Bank National Association
0000 X XxxxxXxxxxx Xxxxx
Xxxxx 000
Xxxxxxxxx, XX 00000
Facsimile: (000)000-0000
If to Beneficiary: Mr. XXXX A Robbing
Chairman, President and Chief
Executive Officer
Security Benefit Life Insurance Company
One Security Benefit Place
Topeka, Kansas 66636-0001
Facsimile; (000) 000-0000
If to the Grantor: J Xxxxxx Xxxxxxxx
The Vallis Building
3rd floor
00 Xxx-xx-Xxxxx Xxxx
Xxxxxxxx XX 00
XXXXXXX
Xxxxxxxxx: (000) 000-0000
With a copy to: Xxxxx Xxxxxxx
Chairman and CEO
Union Xxxxxxxx Reinsurance, Ltd
000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxxx, XX 00000-0000
Facsimile; (000) 000-0000
Section 3.09. The Commissioner has the power to examine the trust herein
created and the Trust Account. Notwithstanding any other
provision of this Trust Agreement, if the Grantor has been
declared insolvent or placed into receivership, rehabilitation,
liquidation or similar proceedings under the laws of its state
or country of domicile, the Trustee shall comply with an order
of the comissioner with regulatory oversight over the Trust
Account or court of competent jurisdiction directing the
Trustee to transfer to the commissioner with regulatory
oversight or other designated receiver all of the Trust Assets.
The Trust Assets shall be applied in accordance with the
priority statutes and laws of the state in which the Trust
Account is domiciled applicable to the assets of insurance
companies in liquidation If the commissioner with regulatory
oversight determines that the assets of the Trust Account or
any part thereof are not necessary to satisfy claims of the
Beneficiary, the assets or any part
9
of them shall be returned to the Trustee for distribution in
accordance with the Trust Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Trust Agreement as of
the day set forth above
Union Xxxxxxxx Reinsurance, Ltd ("Grantor")
By: /s/ J. XXXXXX XXXXXXXX
--------------------------------
Name: J. XXXXXX XXXXXXXX
Address: The Vallis Building, 0xx Xxxxx
00 Xxx-xx-Xxxxx Xxxx, Xxxxxxxx, XX XX, Xxxxxxx
Taxpayer Identification Number; 00-0000000
Security Benefit Life Insurance Company ("Beneficiary")
By: /s/ XXXXXX X XXXXX By: /s/ J XXXXXXX XXXXX
-------------------------------- --------------------------
Name: XXXXXX X XXXXX Name: J XXXXXXX XXXXX
Address: One Security Benefit Xxxxx
Xxxxxx, Xxxxxx 00000-0000
Taxpayer Identification Number: 00-0000000
US Bank National Association ("Trustee")
By: /s/ [ILLEGIBLE]
--------------------------------
Address: 0000 X, XxxxxXxxxxx Xxxxx
Xxxxx 00x Xxxxxxxxx, XX 00000 12-18-07
10
EXHIBIT A
REQUEST FOR WITHDRAWAL BY BENEFICIARY
FROM TRUST ACCOUNT
Security Benefit Life Insurance Company, as Beneficiary, under the Trust
Agreement dated as of October 1, 2007, between Beneficiary, Union Xxxxxxxx
Reinsurance, Ltd, as Grantor, and US Bank National Association, as Trustee,
requests and authorizes the Trustee to withdraw the amount described below from
Trust Account # __________ and to transfer such amount In accordance with the
directions set forth below:
1 Amount to be Withdrawn and Transferred:
Amount $
-------------------------------
2. Transfer Directions:
Transferee:
----------------------------
Location of Account:
-------------------
Account No:
----------------------------
1
Date:
----------------------------------
Security Benefit Life Insurance Company ("Beneficiary")
---------------------------------------
Name:
Title: Senior Vice President
---------------------------------------
Name:
Title: General Counsel
---------------------------------------
11
AMENDMENT ONE TO
REINSURANCE AGREEMENT NUMBER 10107
This Amendment One ("Amendment One"), effective as of October 1, 2007, to the
Reinsurance Agreement ("Agreement") effective October 1, 2007, is entered into
by and between SECURITY BENEFIT LIFE INSURANCE COMPANY ("Ceding Company") and
UNION XXXXXXXX REINSURANCE, LTD ("Reinsurer").
WHEREAS, pursuant to the Agreement, Ceding Company cedes and Reinsurer
reinsures a quota share of certain variable annuities and riders; and
WHEREAS, the Ceding Company desires to add additional business to the
Agreement and the Reinsurer agrees to such addition and will pay the Ceding
Company an initial settlement allowance for such additional business; and
WHEREAS, the parties desire to amend the Recapture Charge and Schedule X-x
in the Agreement.
NOW, THEREFORE, the Ceding Company and the Reinsurer agree as set forth below,
I The Agreement is amended as follows:
1. Article III, Paragraph 1 is amended by adding the following paragraphs:
Initial Settlement for Additional Annuities The Reinsurer will pay
the Ceding Company a Commission and Expense Allowance as part of the
Quarterly Settlement for the Accounting Period ending on December
31, 2007 equal to the sum of (i) plus (ii) where:
(i) equals an upfront ceding commission of $809,873; and
(ii) equals (a) times [(b) - (c) - (d)] where
(a) equals the quota share percentage of the Annuities
reinsured hereunder;
(b) equals $42,771,609, the Account Value of the Additional
Annuities as of December 31, 2007 determined in
accordance with the terms of the Additional Annuities;
and
(c) equals $39,431,800, the Separate Account Reserves with
respect to the Additional Annuities as of December 31,
2007; and
(d) equals $77,216, the general account reserve maintained
with regard to the Additional Annuities as of December
31, 2007 in compliance with NAIC Actuarial Guideline
XXXIV and the Variable Annuity Guaranteed Living Benefit
reserves in compliance with NAIC Actuarial Guideline
XXXIX
For purposes of this Agreement, "Additional Annuities," shall mean
those Annuities that are issued or applied for during the period
that begins at the close of business on October 1, 2007 and ends at
the close of business on December 31, 2007
1 of 4
UH Treaty 2007 Amend I 11-07
2. Article III, Paragraph 2 is amended by deleting the last sentence thereof
and replacing it with the following: "Items in (i)(b) and (i)(c) above
shall not include any amounts incurred by the Ceding Company prior to the
Effective Date of this Agreement, in the case of the Annuities other than
the Additional Annuities, and shall not include any amounts incurred prior
to December 31, 2007, in the case of the Additional Annuities.
3 Article VIII, Paragraph 6 is replaced in its entirety by the following:
Recapture Charge. In the event this Agreement is terminated in
accordance with Paragraph 3, 4 or 5 above, or Paragraph 7 below, or
Article XII, Paragraph 3, a Recapture Charge shall be payable equal
to (i) minus (ii) as set forth below:
(i) equals the Account Value, as of the terminal accounting
date as if such Recapture had not occurred, times the
rate for the applicable year, as set forth below:
----------------------------------------------
Year Rate
----------------------------------------------
2007-2008 9%
----------------------------------------------
2009-2010 8%
----------------------------------------------
2011-2012 7%
----------------------------------------------
2013-2014 6%
----------------------------------------------
2015 and later 5%
----------------------------------------------
(ii) equals the Rider Benefit Liability, as calculated by the
Reinsurer for GAAP purposes, as of the terminal
accounting date as if such Recapture had not occurred,
which could be positive or negative. The Rider Benefit
Liability is a policy and fund level calculation which
accounts for the contractual features of each specific
guarantee The Reinsurer shall value the guarantees using
actuarial assumptions as used by the Reinsurer for GAAP
reporting purposes and capital market assumptions that
are reasonable and reflect standard industry practice
with regard to calculating the Rider Benefit Liability.
The actuarial and capital market assumptions used by
Reinsurer to calculate Rider Benefit Liability are
available to the Ceding Company upon request
If the Recapture Charge is positive, the Ceding Company shall pay
such amount to the Reinsurer. Conversely, if the Recapture Charge is
negative, the Reinsurer shall pay the absolute value of such amount
to the Ceding Company
2 of 4
UH Treaty 2007 Amend I 11-07
4. Schedule A is replaced in its entirety by the following:
SCHEDULE A
ANNUITIES AND RISKS REINSURED
Annuities and Risks Reinsured The amount of reinsurance under this
Agreement will be a quota share, as set forth below, of the Ceding
Company's variable annuities and riders that are issued by the Ceding
Company, or applied for, on or prior to December 31, 2007 and described
below:
--------------------------------------------------------------------------------
Product Form Number Securities Act of 1933 Number
--------------------------------------------------------------------------------
AdvisorDesigns V6029 11-00 File No. 333-52114*
V6029 11-00U
--------------------------------------------------------------------------------
* The prospectus is included within registration statement no. 333-52114.
--------------------------------------------------------------------------------
The following riders, and any state variations thereof, are reinsured hereunder:
--------------------------------------------------------------------------------
Rider Form Number
--------------------------------------------------------------------------------
Guaranteed Minimum Income Benefit Rider V6065 8-00
--------------------------------------------------------------------------------
6% Dollar for Dollar Guaranteed Minimum V6094 5-05; V6094R 9-05
Income Benefit
--------------------------------------------------------------------------------
Annual Stepped Up Death Benefit Rider V6063 8-00
--------------------------------------------------------------------------------
Guaranteed Growth Death Benefit Rider V6063-1 8-00
--------------------------------------------------------------------------------
Combined Annual Stepped Up Rider and V6063-2 8-00
Guaranteed Growth Death Benefit Rider
--------------------------------------------------------------------------------
Enhanced Death Benefit Rider V6078 4-01
--------------------------------------------------------------------------------
Combined Enhanced and Annual Stepped Up Death V6079 4-01
Benefit Rider
--------------------------------------------------------------------------------
Combined Enhanced and Guaranteed Growth Death V6076 4-01
Benefit Rider
--------------------------------------------------------------------------------
Combined Enhanced, Annual Stepped Up, and V6077 4-01
Guaranteed Growth Death Benefit Rider
--------------------------------------------------------------------------------
Death Benefit - Return of Premium Beyond Issue V6082FL 5-01
Age 80 (Florida only) Rider
--------------------------------------------------------------------------------
Annual Stepped Up Death Benefit Beyond Age 80 V6081FL 5-01
(Florida only) Rider
--------------------------------------------------------------------------------
6% Dollar for Dollar Guaranteed Minimum Income V6095 5-05; V6095R 9-05
Benefit and Guaranteed Minimum Death Benefit
--------------------------------------------------------------------------------
Guaranteed Minimum Withdrawal Benefit Rider V6086 10-03
--------------------------------------------------------------------------------
Total Protection Rider V6087 10-03
--------------------------------------------------------------------------------
Extra Credit Rider / Bonus Credit Rider V6067 8-00; V6084 11-01
--------------------------------------------------------------------------------
Waiver of Withdrawal Charge Rider V6064 8-00
--------------------------------------------------------------------------------
Alternate Withdrawal Charge Rider V6069 10-00; V6069 2-05
--------------------------------------------------------------------------------
The quota share reinsured hereunder will be 85% During the term of this
Agreement, the Ceding Company or an affiliate thereof will retain not less than
15% percent of the liability on the Annuities reinsured hereunder which
liability or any portion thereof shall not be reinsured by the Ceding Company
without the prior written consent of the Reinsurer.
3 of 4
UH Treaty 2007 Amend I 11-07
5. The following information is added to Schedule X-x, Monthly Seriatim Data:
The Ceding Company will monitor deaths, and related claims activity, of
the owners of the Annuities and will provide such information to Reinsurer
6. The following is added to Schedule C, Ceding Company Data:
o Email from Xxxxx Xxxxxxx to Xxx Xxxxxxx dated January 8,
2008 titled "Advisor Designs 4Q New Business with Rider
Detail"
o Email from Xxx Xxxxx to Xxx Xxxxxxx dated January 8 2008
titled "December 2007 Files"
o Email from Xxx Xxxxxxxx to Xxx Xxxxxxx dated January 9,
2008 titled "AdvisorDesigns Reinsurance - Schedule B"
II. Other than as modified by this Amendment, all terms and conditions of the
Agreement remain in full force and effect. This Amendment shall be read together
and construed as one document with the Agreement, but to the extent of any
inconsistency or ambiguity, this Amendment shall govern
In witness of the above, this Amendment One is executed in duplicate on the
dates indicated below
SECURITY BENIFIT LIFE INSURANCE COMPANY
ATTEST: ("Ceding Company")
By: /s/ [ILLEGIBLE] By: /s/ J. XXXXXXX XXXXX
------------------------------- -------------------------------
Title: Asst. Secretary Title: VP & Valuation Actuary
Date: 1/24/08 Date: 1/24/08
UNION XXXXXXXX REINSURANCE, LTD.
ATTEST: ("Reinsurer")
By: /s/ Xxxxxxxx Butter By: /s/ [ILLEGIBLE]
------------------------------- -------------------------------
Title: CAPTIVE ASSISTANT Title: VICE PRESIDENT
Date: 1/24/08 Date: 1/24/08
4 of 4
UH Treaty 2007 Amend I 11-07
