Exhibit 99.27(g)
ARTICLE I
PARTIES TO THE AGREEMENT
Reinsurance required by the Ceding Company will be assumed by the Reinsurer as
described in the terms of this Agreement.
This is an Agreement solely between the Reinsurer and the Ceding Company. In no
instance will anyone other than the Reinsurer or the Ceding Company have any
rights under this Agreement, and the Ceding Company is and will remain solely
liable to any insured, policy owner, or beneficiary under the Original Policies
reinsured hereunder. The Ceding Company agrees that it will not make the
Reinsurer a party to any litigation between any such third party and the Ceding
Company. The Ceding Company will not use the Reinsurer's name with regard to the
Ceding Company's agreements or transactions with these third parties, unless the
Reinsurer gives prior approval for the use of its name.
The current general and special policy conditions, the premium schedules, and
underwriting guidelines of the Ceding Company, applying to the business covered
by this Agreement as set out in the Schedules, will form an integral part of
this Agreement. Additions or alterations to any of these conditions or schedules
will be reported to the Reinsurer without delay. In the case of significant
changes, both parties to the Agreement must agree to the new reinsurance
conditions in writing.
ARTICLE II
COMMENCEMENT, TERMINATION AND CONTINUANCE OF REINSURANCE
1. AGREEMENT COMMENCEMENT
Notwithstanding the date on which this Agreement is signed, this
Agreement will take effect from the date shown in the attached Schedule
I, and will apply to new business taking effect on and after this date.
2. AGREEMENT TERMINATION
This Agreement will be in effect for an indefinite period and may be
terminated as to new reinsurance at any time by either party giving
ninety (90) days' written notice of termination. The day the notice is
mailed to the other party's Home Office, or, if the mail is not used,
the day it is delivered to the other party's Home Office or to an
Officer of the other party will be the first day of the ninety (90) day
period. During the ninety-(90) day period, this Agreement will continue
to operate in accordance with its terms.
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3. POLICY TERMINATION
If the Policy is terminated by death, lapse, surrender or otherwise,
the reinsurance will terminate on the same date. If premiums have been
paid on the reinsurance for a period beyond the termination date,
refunds will follow the terms as shown in Schedule I.
If the Policy continues in force without payment of premium during any
days of grace pending its surrender, whether such continuance be as a
result of a Policy provision or a practice of the Ceding Company, the
reinsurance will also continue without payment of premium and will
terminate on the same date as the Ceding Company's risk terminates.
If the Policy continues in force because of the operation of an
Automatic Premium Loan provision, extended term insurance or other such
provision by which the Ceding Company receives compensation for its
risk, then the reinsurance will also continue and the Ceding Company
will pay the Reinsurer the reinsurance premium for the period to the
date of termination.
4. CONTINUATION OF REINSURANCE
On termination of this Agreement in accordance with the provisions in
Paragraph two of this Article, the reinsurance ceded will remain in
force subject to the terms and conditions of this Agreement until their
natural expiry, unless otherwise agreed by both parties.
ARTICLE III
SCOPE
1. RETENTION OF THE CEDING COMPANY
The type and amount of the Ceding Company's retention on any one life
is shown in Schedule I. In determining the amounts at risk in each
case, any additional death benefits on the same life will be taken into
account, as will the amounts at risk under any other existing policies,
at the time of commencement, of the policy ceded under this Agreement.
The Ceding Company may alter its retention in respect of future new
business at any time. The Ceding Company will promptly notify the
Reinsurer of such alteration and its effective date.
All reinsurance to which the provisions of this Agreement apply will be
effected in the same currencies as that expressed in the Original
Policies and as shown in Schedule I.
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2. THE REINSURER'S SHARE
The Reinsurer's Share is as shown in Schedule I.
3. BASIS OF REINSURANCE
Plans of insurance listed in Schedule I will be reinsured on the basis
described in Schedule I.
4. REINSURANCE ALLOWANCES
The Reinsurer will pay to the Ceding Company the reinsurance allowance,
if any, as shown in Schedule I. If any reinsurance premiums or
installments of reinsurance premiums are returned to the Ceding
Company, any corresponding reinsurance allowance previously credited to
the Ceding Company, will be reimbursed to the Reinsurer.
5. PREMIUM RATE GUARANTEE
Premium Rate Guarantees, if any, are as shown in Schedule I.
6. POLICY FEES
Policy fees, if any, are as shown in Schedule I.
7. TAXES
Taxes, if any, are shown in Schedule I.
8. EXPERIENCE REFUND OR PROFIT COMMISSION
If an experience refund or profit commission is payable under this
Agreement, the conditions and formula are as shown in Schedule I.
9. EXPENSE OF THE ORIGINAL POLICY
The Ceding Company will bear the expense of all medical examinations,
inspection fees and other charges incurred in connection with the
original policy.
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ARTICLE IV
COVERAGE
AUTOMATIC PROVISIONS:
For each risk on which reinsurance is ceded, the Ceding Company's retention at
the time of issue will take into account both currently issued and previously
issued policies.
The Ceding Company must cede and the Reinsurer must automatically accept
reinsurance, if all of the following conditions are met for each life:
1. RETENTION
The Ceding Company will retain a percentage of the risk for the Plans
of Insurance noted in Schedule III up to the Ceding Company's retention
limit as noted in Schedule II. If because of previous retention on
other plans, retaining this percentage of the risk on these plans will
exceed the Ceding Company's retention limit, then the Ceding Company
will retain less. Any excess will be split proportionately among the
pool; and
2. PLANS AND RIDERS
The basic plan or supplementary benefit, if any, is shown in
Schedule I; and
3. AUTOMATIC ACCEPTANCE LIMITS
The underwriting class, age, minimum reinsurance amount, binding
amounts and jumbo limits fall within the automatic binding limits as
shown in Schedule I; and
4. UNDERWRITING
The risk is underwritten according to the Ceding Company's Standard
Guidelines; and the Ceding Company has never made facultative
application for reinsurance on the same life to the Reinsurer or any
other Reinsurer; Automatic reinsurance applies only to insurance
applications underwritten by the Ceding Company with conventional
underwriting and issue practices that are consistently applied.
Conventional underwriting and issue practices are those customarily
used and generally accepted by life insurance companies. Some examples
of non-customary underwriting practices that are not accepted for
automatic reinsurance under this Agreement are guaranteed issue, any
form of simplified underwriting, short form applications, any form of
non-customary non-medical underwriting limits, or internal or external
policy exchanges that do not require conventional underwriting. An
example of an unacceptable issue practice is the issuance of a policy
that has contestability or suicide clauses with time limitations that
are shorter than the maximum allowed by state law; and
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5. RESIDENCE
The risk is a resident of the Countries as shown in Schedule I.
If, for a given application, the Ceding Company cannot comply with the automatic
reinsurance conditions described above, or if the Ceding Company submits the
application to other Reinsurers for their facultative assessment, the Ceding
Company can submit this application to the Reinsurer on a facultative basis.
The Reinsurer will be liable for proceeds paid under the Ceding Company's
temporary insurance agreement for risks submitted on an automatic basis as noted
in Schedule I.
FACULTATIVE PROVISIONS:
The Ceding Company will send copies of the original applications, all medical
reports, inspection reports, attending physician's statement, and any additional
information pertinent to the insurability of the risk to the Reinsurer.
The Ceding Company will also notify the Reinsurer of any underwriting
information requested or received after the initial request for reinsurance is
made. For policies, which contain automatic increase provisions, the Ceding
Company will inform the Reinsurer of the initial and ultimate risk amounts for
which reinsurance is being requested, or in the case of indexed amounts, the
basis of the indexing.
On a timely basis, the Reinsurer will submit a written decision to the Ceding
Company. In no case will the Reinsurer's offer on facultative submissions be
open after 120 days have elapsed from the date of the Reinsurer's offer to
participate in the risk. Acceptance of the offer and delivery of the policy
according to the rules of the Ceding Company must occur within 120 days of the
final reinsurance offer. Unless the Reinsurer explicitly states in writing that
the final offer is extended, the offer will be automatically withdrawn at the
end of day 120.
The Reinsurer will be liable under the Ceding Company's temporary insurance
agreement for risks submitted on a facultative basis as noted in Schedule I.
ARTICLE V
ASSIGNMENT OR TRANSFER
Neither this Agreement nor any new or inforce reinsurance under this Agreement,
may be sold or assigned in whole or in part by either the Ceding Company or the
Reinsurer without the prior written approval of the other party. The Ceding
Company and the Reinsurer reserve the right at their option, to terminate their
liability for inforce reinsurance, if written approval is not obtained.
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ARTICLE VI
LIABILITY
The liability of the Reinsurer for all claims within automatic coverage and all
claims arising after facultative acceptance as described in Article IV, will
commence simultaneously with that of the Ceding Company and will cease at the
same time as the liability of the Ceding Company ceases.
ARTICLE VII
RETENTION AND RECAPTURE
If the Ceding Company changes its limit of retention as shown in Schedule I,
written notice of the change will promptly be given to the Reinsurer. At the
option of the Ceding Company, a corresponding reduction may be made in the
reinsurance in force under this Agreement, on all lives, on which the Ceding
Company has maintained its maximum limit of retention, provided that all
eligible business is reduced on the same basis. The Ceding Company may apply the
new limits of retention to existing reinsurance and reduce and recapture
reinsurance inforce in accordance with the following rules:
1. The policy has been reinsured under this Agreement and in force for the
minimum period shown in Schedule I.
2. Recapture will become effective on the policy anniversary date
following written notification of the Ceding Company's intent to
recapture.
3. The Ceding Company retained its maximum limit of retention for the
plan, age and mortality rating at the time the policy was issued under
this Agreement and in accordance with Schedule I.
4. All reinsurance eligible for recapture, under the provisions of this
Article, must be recaptured.
5. If there is reinsurance with other reinsurers on risks eligible for
recapture, the necessary reduction is to be applied to each company in
proportion to the total outstanding reinsurance.
Special recapture on facultative business may be allowed under mutually agreed
upon terms and conditions.
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ARTICLE VIII
REINSURANCE PREMIUMS AND ALLOWANCES
1. LIFE REINSURANCE
Premiums for Life and Supplemental Benefit reinsurance will be as shown
in Schedule I.
2. SUBSTANDARD PREMIUMS
Premiums will be increased by any (flat) extra premium as shown in
Schedule I, charged the insured on the face amount reinsured.
Additional substandard table extra's increased on a per table basis are
based upon the current net amount at risk.
3. SUPPLEMENTAL BENEFITS
The Reinsurer will receive a proportionate share of any premiums for
additional benefits as shown in Schedule I, as well as for any extra
premiums the Ceding Company may collect for the coverage of special
risks (traveling, climate, occupation, etc.).
ARTICLE IX
RESERVES
Reserve requirements of the Ceding Company, if any, are as shown in Schedule I.
ARTICLE X
TERMINATIONS AND REDUCTIONS
1. If insurance reinsured under this Agreement is terminated, the reinsurance
for the individual risk involved will be terminated on the effective date
of termination.
2. The Ceding Company will reduce the reinsurance by applying the retention
limits which were in effect at the time the policy was issued. The
"reinsurance adjustment due to lapse or reduction of previous insurance"
will be effective on the same date as the lapse or reduction of prior
insurance.
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3. The reinsurance to be terminated or reduced will be determined in
chronological order beginning with the earliest reinsured policy date. Two
or more policies issued on the same date will be considered one policy.
4. If a facultative policy reinsured under this Agreement is reduced, the
reinsurance for the individual risk involved will be reduced
proportionately on the effective date of reduction.
5. If the reinsurance amount is reinsured with multiple reinsurers, the
reinsurance will be reduced by the ratio of the amount of reinsurance in
each company to the total outstanding reinsurance on the risk involved.
ARTICLE XI
POLICY ALTERATIONS
1. INCREASES
Non-contractual Increases: If the amount of insurance is increased as a
result of a non-contractual change, the increase will be considered new
reinsurance under this Agreement and will be underwritten by the Ceding
Company in accordance with its customary standards and procedures. If
reinsurance is on a first dollar quota share basis, the Ceding Company and
the Reinsurer will share the increased amount proportionately. Once the
Ceding Company's maximum retention has been reached, the remaining amount
will be reinsured on an excess basis. The Reinsurer's approval is required
if the original policy was reinsured on a facultative basis or if the new
amount will cause the reinsured amount on the life to exceed either the
Automatic Binding Limits or the Jumbo Limit shown in Schedule VI.
Contractual Increases: For policies reinsured on an automatic basis,
reinsurance on net amount at risk increases resulting from contractual
policy provisions will be accepted up to the Automatic Binding Limits shown
in Schedule VI. For policies reinsured on a facultative basis, reinsurance
will follow the parameters outlined in the Reinsurer's facultative offer.
Reinsurance premiums for contractual increases will be on a point in scale
basis from the original issue age of the policy.
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2. REINSTATEMENT
Any policy originally reinsured on an automatic basis in accordance with
the terms and conditions of this Agreement by the Ceding Company may be
automatically reinstated with the Reinsurer as long as the policy is
reinstated in accordance with the terms and rules of the Ceding Company.
Any reinstatement originally reinsured with the Reinsurer on a facultative
basis that requires underwriting will be submitted with the underwriting
requirements and approved by the Reinsurer before it is reinstated, except
when the policy is reinstated via quick reinstatement practices. The Ceding
Company will pay the Reinsurer its share of amounts collected or charged
for the reinstatement of such policies.
3. EXTENDED TERM AND REDUCED PAID-UP ADDITIONS
Extended Term: If the original policy lapses and extended term insurance is
elected under the terms of the policy, reinsurance will continue on the
same basis as under the original policy until the expiry of the extended
term.
Reduced Paid-Up: If the original policy lapses and reduced paid-up
insurance is elected under the terms of the policy, the amount reinsured
will be reduced. If the amount of reduction exceeds the risk amount
reinsured, the reinsurance on the policy will be terminated. If reinsurance
is on a first-dollar quota share basis, the amount reinsured and the amount
retained will be reduced proportionately. The reinsurance premiums will be
calculated in the same manner as reinsurance premiums were calculated on
the original policy.
4. EXCHANGES, ROLLOVERS OR CONVERSIONS
An exchange, rollover or conversion is a new policy that replaces a policy
which was issued earlier by the Ceding Company and reinsured by the
Reinsurer under this Agreement or a change in an existing policy that is
issued or made either:
1. Under the terms of the original policy; or,
2. Without the same new underwriting information the Ceding Company
would obtain in the absence of the original policy;
3. Without a suicide exclusion period, or contestable period of equal
duration, to those contained in new issues by the Ceding Company; or
4. Without the payment of the same allowances in the first year, that
the Ceding Company would have paid in the absence of the original
policy.
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Conversions and Rollovers: The Reinsurer will continue to reinsure
policies resulting from the contractual conversion of any policy
reinsured under this Agreement, in an amount not to exceed the original
amount reinsured.
If the plan to which the original policy is converting is reinsured by
the Reinsurer, either under this Agreement or under a different
Agreement, reinsurance premium rates for the resulting converted policy
will be those contained in the Agreement that covers the plan to which
the original policy is converting. However, if the new plan is not
reinsured by the Reinsurer, reinsurance premiums for a policy resulting
from a contractual conversion will use the rates shown in Schedule V.
Reinsurance Premiums and any allowances for conversions will be on a
point in scale basis from the original issue age of the policy.
If the conversion results in an increase in the risk amount, the
increase will be underwritten by the Ceding Company in accordance with
its customary standards and procedures. The Reinsurer will accept such
increases, subject to the new business provisions of the Agreement the
increase falls under. Reinsurance premiums and any allowances for
increased risk amounts will be first year premiums at the agreed upon
premium rate.
An original date policy reissue will not be treated as a continuation
of the original policy. It will be treated as a new policy and the
original policy will be treated as Not Taken. All premiums previously
paid to the Reinsurer for the original policy will be refunded to the
Ceding Company. All premiums will be due on the new policy from the
original issue date of the old policy.
5. UNDERWRITING CLASSIFICATION
The Ceding Company may reduce the mortality rating, change the tobacco
usage or preferred classification on automatic reinsurance. The Ceding
Company will notify the Reinsurer of this change. For facultative business,
the Ceding Company will be subject to and reinsured under the facultative
provisions in Article IV, except for tobacco usage changes. The Reinsurer
will accept the Ceding Company's tobacco usage reconsideration practices
and decisions.
6. UNDERWRITTEN POLICY WITHDRAWAL
Underwritten policy withdrawals reinsured on an automatic or facultative
basis will be underwritten by the Ceding Company. This type of policy
change will not exceed the original face amount reinsured. The increase in
net amount at risk will not receive first year select YRT reinsurance
premium rates. Rates will remain point in scale.
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ARTICLE XII
POLICY ADMINISTRATION AND PREMIUM ACCOUNTING
1. ACCOUNTING PERIOD AND PREMIUM DUE
The Ceding Company will submit accounts to the Reinsurer, for reporting
new business, alterations, terminations, renewals, claims, and premium
due, as shown in Schedule I.
2. ACCOUNTING ITEMS
The accounts will contain a list of premiums due for the current
accounting period, explain the reason for each premium payment, show
premium subtotals adequate to use for premium accounting, including
first year and renewal year premiums and allowances. The account
information should provide the ability to evaluate retention limits,
premium calculations and to establish reserves.
3. REINSURANCE ADMINISTRATION REQUIREMENTS
Reinsurance Administration Requirements are as shown in Schedule I.
4. PAYMENT OF BALANCES
The Ceding Company will pay any balance due the Reinsurer, at the same
time as the account is rendered, but in all cases, by the Accounting
and Premium Due frequency as shown in Schedule I. The Reinsurer will
pay any balance due the Ceding Company, at the same time as the account
is confirmed, however, at the latest, within thirty (30) days after
receipt of the statement of account. Should the Reinsurer be unable to
confirm the account in its entirety, the confirmed portion of the
balance will be paid immediately. As soon as the account has been fully
confirmed the difference will be paid immediately by the debtor. All
balances not paid within thirty (30) days of the due date shown on the
statement will be in default.
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5. BALANCES IN DEFAULT
The Reinsurer will have the right to terminate this Agreement, when
balances are in default, by giving ninety (90) days' written notice of
termination to the Ceding Company. As of the close of the last day of
this ninety- (90) day notice period, the Reinsurer's liability for all
risks reinsured under the default statements will terminate. The first
day of this ninety (90) day notice of termination, resulting from
default as described in paragraph four of this Article, will be the day
the notice is received in the mail by the Ceding Company, or if the
mail is not used, the day it is delivered to the Ceding Company. If all
balances in default are received within the ninety- (90) day time
period, the Agreement will remain in effect. The interest payable on
balances in default is stipulated as shown in Schedule I.
The Ceding Company will not force termination under the provisions of
this section to avoid the recapture requirements or to transfer the
block of business to another Reinsurer.
6. OFFSET
Any amounts due, by either of the parties to this Agreement, whether
they arise out of this Agreement, or out of any other reinsurance
relationship between the parties, may be offset against the claims of
the other party. This right will continue to exist after the
termination of this Agreement, or of any business relationship between
the parties. This right to offset is not diminished by the insolvency
of either party.
7. FLUCTUATION IN EXCHANGE RATES
If the premium due periods allowed for the payment of balances are
exceeded by either party, the debtor will bear the currency risk, in
the event of any subsequent alteration in the exchange rate, by more
than five percent, unless the debtor is not responsible for the delay
in payment.
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ARTICLE XIII
CLAIMS
1. LEAD REINSURER
The Ceding Company retains the right to select a Lead Reinsurer for the
administration of claims incurred under this Agreement. The selected
Lead Reinsurer will act on behalf of all Reinsurers included in the
Ceding Company's First Dollar Quota Share Agreement. As a general
practice, the Ceding Company will only communicate with the Lead
Reinsurer. The Lead Reinsurer may seek the advice of the other pool
members at its discretion. The Lead Reinsurer is noted in Schedule I.
2. NOTICE
The Reinsurer will receive a monthly claim notification report by the
20th of each month. This notification will provide the Reinsurer with
all new and pending claims. The notification will include the Name,
Policy Number, Issue Date, Date of Birth, Date of Death (if known),
Cause of Death (if known), Net Amount At Risk and an Auto/Fac
indicator.
3. PROOFS
In every case of loss, copies of the proofs obtained by the Ceding
Company will be taken by the Reinsurer as sufficient. Copies of the
death certificate along with proof of the amount paid on such claim by
the Ceding Company will be furnished to the Reinsurer when requesting
its share of the claim.
4. CLAIM ADMINISTRATION AND PAYMENT OF BENEFITS
NON-CONTESTABLE CLAIMS
The Ceding Company will examine and approve all claims that are not
contestable. By the 20th of each month, the Ceding Company will send
the Reinsurer a notification of all paid reinsured claims. The Ceding
Company will net the claim amount due the Ceding Company off of the
monthly billing statements due the Reinsurer.
CONTESTABLE CLAIMS
The Ceding Company will provide information to the Reinsurers as
follows:
For automatic contestable claim amounts of $750,000 and less in face
amount, the Ceding Company will provide proofs to all Reinsurers.
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For automatic contestable claim amounts greater than $750,000 and less
than $7,500,000 in face amount, in order to streamline the amount of
information sent to all Reinsurers, the Ceding Company will provide to
the Lead Reinsurer only, all underwriting and investigation papers in
connection with that claim, along with the Ceding Company's decision
regarding the claim. The Lead Reinsurer will then review the papers and
promptly respond to the Ceding Company with its comments. For policies
where the Ceding Company decides to pay the claim, it will then send
proofs to all Reinsurers. For policies where the Ceding Company decides
not to pay the claim, the procedures stated below under Section 5,
Contested Claims, of this Article, will be followed. If the Reinsurers
disagree with the Ceding Company's decision, they will dispute the
decision with the Ceding Company, directly.
For automatic contestable claim amounts equal to or greater than
$7,500,000 in face amount, the Ceding Company will provide all papers
in connection with that claim, including all underwriting and
investigation papers to all Reinsurers.
For facultative contestable claim amounts with face amounts of $750,000
or less, where the Ceding Company retained none of the risk or where
the face amount is greater than $750,000, the Ceding Company will
provide all papers in connection with that claim, including all
underwriting and investigation papers to the Reinsurer on the
Facultative Risk. For facultative contestable claim amounts with face
amounts of $750,000 or less, where the Ceding Company retained a
portion of the risk, if the Ceding Company's decision is to pay the
claim, it will then send proofs to the Reinsurer on the Facultative
Risk.
If the amount of insurance changes because of a misstatement of rate,
sex or age classification, the Reinsurer's share of liability will
change proportionately. Reinsurance premiums will be adjusted from the
inception of the policy and any differences will be settled without
interest.
5. CONTESTED CLAIMS
If the Ceding Company decides that a claim is not payable, it will
notify each Reinsurer of its intention to deny, compromise or litigate
a claim. If the Reinsurer declines to participate in the contest,
compromise or litigation, the Reinsurer will discharge all of its
liability by paying its proportionate share of reinsurance due to the
Ceding Company.
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6. CLAIM EXPENSES
The Reinsurer will pay its share of reasonable investigation and legal
expenses connected with the litigation or settlement of contractual
liability claims, unless the Reinsurer has discharged its liability, in
which case the Reinsurer will not participate in any expenses after the
date of discharge. However, claim expenses do not include routine claim
and administration expenses, including the Ceding Company's home office
expenses. Also, expenses incurred in connection with a dispute or
contest arising out of conflicting claims of entitlement to policy
proceeds of benefits that the Ceding Company admits are payable are not
a claim expense under this Agreement.
See Schedule VII.
7. EXTRA CONTRACTUAL OBLIGATIONS
The Reinsurer will not participate in and will not be liable to pay the
Ceding Company or others for any amounts in excess of the Reinsurer's
share of the net amount at risk on the mortality risk reinsured
hereunder, including extracontractual damages or liabilities and
related expenses and fees. Extracontractual damages are any damages
awarded against the Ceding Company, including, for example, those
resulting from negligence, reckless or intentional conduct, fraud,
oppression, or bad faith committed by the Ceding Company in connection
with the mortality risk insurance reinsured under this Agreement.
However, if the Reinsurer was an active party in the act, omission or
course of conduct which ultimately resulted in the assessment of the
damages, the extent of the Reinsurers participation is dependent upon a
good faith assessment of the relative culpability in each case; but all
factors being equal, the division of any such assessment would
gererally be in the same proportion of the net liability accepted by
each party for the plan of insurance involved.
As a matter of example and not limitation, the following
extracontractual damages will not include:
1. Actual and consequential damages;
2. Damages for emotional distress or oppression;
3. Punitive exemplary or compensatory damages;
4. Statutory damages, fines or penalties;
5. Amounts in excess of the reinsured hereunder that the Ceding
Company pays to settle a dispute or claim;
6. Third-party attorney fees, cost and expenses.
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8. ACCELERATED BENEFIT AGREEMENT
The Reinsurer will not participate on any accelerated or advance
payments made under an accelerated death benefit agreement. The
Reinsurer will be notified at time of death and will pay its share of
the reinsured net amount at risk as outlined above.
ARTICLE XIV
ARBITRATION
1. GENERAL
The parties agree to act in all things with the highest good faith.
However, if the parties cannot mutually resolve a dispute or claim,
which arises out of, or in connection with this Agreement, including
formation and validity, and whether arising during, or after the period
of this Agreement, the dispute or claim will be referred to an
arbitration tribunal (a group of three arbitrators), and settled
through arbitration.
The arbitrators will be individuals, other than from the contracting
companies and/or affiliates of the Ceding Company or the Reinsurer,
including those who have retired, with more than ten (10) years
insurance or reinsurance experience within the industry.
The arbitrators will base their decision on the terms and conditions of
this Agreement plus, as necessary, on the customs and practices of the
insurance and reinsurance industry rather than solely on a strict
interpretation of the applicable law; there will be no appeal from
their decision, and any court having jurisdiction of the subject
matter, and the parties, may reduce that decision to judgment.
2. NOTICE
To initiate arbitration, either party will notify the other party by
Certified Mail of its desire to arbitrate, stating the nature of the
dispute and the remedy sought. The party, to which the notice is sent,
will respond to the notification in writing, within ten (10) days of
its receipt.
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3. PROCEDURE
Each of the two parties will appoint one arbitrator. Notice of the
appointment of these arbitrators will be given by each party to the
other party within thirty (30) days of the date of mailing of the
notification initiating the arbitration. These two arbitrators will, as
soon as possible, but no longer than 45 days after the day of the
mailing of the notification initiating the arbitration, then select the
third arbitrator. In the event that either party should fail to choose
an arbitrator within thirty (30) days after the other party has given
notice of its arbitrator appointment, the party which has already
appointed an arbitrator may choose an additional arbitrator, and the
two shall, in turn, choose a third arbitrator. If the two arbitrators
are unable to agree upon the selection of a third arbitrator within
thirty (30) days following their appointment, each arbitrator shall
nominate three candidates within ten (10) days thereafter, two of whom
the other shall decline and the decision shall be made by drawing lots.
4. ARBITRATION COSTS
All costs of the arbitration will be determined by the tribunal, which
may take into account the law and practice of the place of arbitration,
and in what manner arbitration costs will be paid, and by whom.
5. PLACE OF ARBITRATION
The place of arbitration is as shown in Schedule I.
6. ARBITRATION SETTLEMENT
The award of the tribunal, will be in writing, and binding upon the
consenting parties.
ARTICLE XV
INSOLVENCY
In the event of the insolvency of the Ceding Company, all death claims, which
are payable only upon actual death will be payable directly to the liquidator,
receiver, or statutory successor of the Ceding Company without diminution
because of the insolvency, for those claims allowed against the Ceding Company
by any court of competent jurisdiction or by the liquidator, rehabilitator,
receiver, or statutory successor having authority to allow such claims.
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In the event of insolvency of the Ceding Company, the liquidator, receiver, or
statutory successor will immediately give written notice to the Reinsurer of all
pending claims against the Ceding Company on any policies reinsured. While a
claim is pending, the Reinsurer may investigate and interpose, at its own
expense, in the proceedings where the claim is adjudicated, any defense or
defenses which it may deem available to the Ceding Company or its liquidator,
receiver, or statutory successor.
The expense incurred by the Reinsurer will be chargeable, subject to court
approval against the Ceding Company as part of the expense of liquidation to the
extent of a proportionate share of the benefit which may accrue to the Ceding
Company solely as a result of the defense undertaken by the Reinsurer. Where two
or more Reinsurers are participating in the same claim and a majority in
interest elect to interpose a defense or defenses to any such claim, the expense
will be apportioned in accordance with the terms of the reinsurance agreement as
though such expense had been incurred by the Ceding Company.
If a final order of liquidation or rehabilitation of the Reinsurer, with a
finding of insolvency, has been entered by a court of competent jurisdiction in
the Reinsurer's state of domicile, amounts due the Reinsurer will be paid
directly to the liquidator, receiver or statutory successor without diminution
because of the Reinsurer's insolvency.
ARTICLE XVI
RIGHT TO INSPECT
Upon request the Ceding Company will furnish the Reinsurer with detailed
information concerning the risks reinsured under this Agreement. In particular
the Reinsurer will be entitled to request that:
1. Copies of the whole or part of any documents relating to the risks and
its reinsurance be made available to the Reinsurer at its own expense;
2. During the Ceding Company's normal office hours these documents will be
made available to a representative of the Reinsurer who will be named
in advance; reasonable notification of such visits will be given. The
first member of the pool to request an audit will have the option to
audit the Ceding Company records. Upon request, all audits will be
shared with other pool members.
3. The Reinsurer will have this right of inspection as long as one of the
two parties to this Agreement is claiming from the other.
18
ARTICLE XVII
UNINTENTIONAL ERRORS, MISUNDERSTANDINGS OR OMISSIONS
It is expressly understood and agreed that if failure to comply with any terms
of this Agreement is hereby shown to be the result of an unintentional error,
misunderstanding or omission, on the part of either the Ceding Company or the
Reinsurer, both the Ceding Company and the Reinsurer, will be restored to the
position they would have occupied, had no such error, misunderstanding or
omission occurred, subject always to the correction of the error,
misunderstanding or omission.
This provision applies only to oversights, misunderstandings or clerical errors
relating to the administration of reinsurance covered by this Agreement. This
provision does not apply to the administration of the insurance provided by the
Ceding Company to its insured or any other errors or omissions committed by the
Ceding Company with regard to the policy reinsured hereunder.
ARTICLE XVIII
CHOICE OF LAW, FORUM, AND LANGUAGE
1. CHOICE OF LAW AND FORUM
This Agreement, will in all respects be governed by, and construed in
accordance with the law and exclusive jurisdiction of the Courts, as
shown in Schedule I.
2. LANGUAGE
The Parties hereto acknowledge and agree that, even though they may
execute this Agreement in both an English version and in another
language, as shown in Schedule I, the version as shown in Schedule I
will control for all legal purposes in the event of any inconsistency
between or disagreement between the two versions.
19
ARTICLE XIX
CONFIDENTIALITY
Except for the purposes of carrying out this Agreement and as required by law,
the Reinsurer shall not disclose or use any non-public personally identifiable
customer or claimant information provided by the Ceding Company to the
Reinsurer, as such Customer or Claimant information is defined by the
Xxxxx-Xxxxx-Xxxxxx Act and related regulations. Such Customer or Claimant
information shall be shared only with those entities with which the Reinsurer
may, from time to time, contract in accordance with the fulfillment of the terms
of this Agreement, including but not limited to the Reinsurer's
retrocessionaires and the Reinsurer's affiliates.
ARTICLE XX
ALTERATIONS TO THE AGREEMENT
The reinsurance Agreement constitutes the entire Agreement between the parties,
with respect to the business being reinsured hereunder, and there are no
understandings between the parties other than expressed in this Agreement. Any
alterations to the provisions of this Agreement will be made by Amendment or
Addenda and must be signed by both parties. These documents will be regarded as
part of this Agreement and will be equally binding.
20
ARTICLE XXI
EXECUTION OF THE AGREEMENT
IN WITNESS WHEREOF, WE HAVE CAUSED THIS AGREEMENT TO BE EXECUTED IN DUPLICATE AT
THE DATES AND PLACES SHOWN BELOW, BY OUR RESPECTIVE OFFICERS AUTHORIZED TO DO
SO.
MINNESOTA LIFE INSURANCE COMPANY
Date:
------------------------------------
Place: St. Xxxx, MN
------------------------------------
By: Attest:
------------------------------------ ---------------------------------------
Title: Actuary, Life Products Title: Reinsurance Specialist
------------------------------------ ---------------------------------------
NAIC #: 00000 Xxxxxxx Xx. #: 00-0000000
------------------------------------ ---------------------------------------
INSURANCE COMPANY NAME
Date:
------------------------------------
Place:
------------------------------------
By: Attest:
------------------------------------ ----------------------------------------
Title: Title:
------------------------------------ ----------------------------------------
NAIC #: Federal Id. #:
------------------------------------ ----------------------------------------
SCHEDULE I
21
REINSURANCE SPECIFICATIONS
COMMENCEMENT AND TERMINATION OF REINSURANCE, ARTICLE II
1. EFFECTIVE DATE:
This Agreement applies to policies issued on or after April 1, 2002
2. POLICY TERMINATION:
Unearned premiums will be refunded on lapses, terminations and deaths
SCOPE, ARTICLE III
1. RETENTION OF THE CEDING COMPANY:
See Schedule II
2. CURRENCY:
United States Currency
3. THE REINSURER'S SHARE:
17.5% of each risk, on a First Dollar Quota Share Basis, up to the
Ceding Company's retention limit and 25% of the excess over the Ceding
Company's retention limit.
4. PLANS OF REINSURANCE:
See Schedule III
5. REINSURANCE PREMIUMS/ALLOWANCES:
See Schedule V, Reinsurance Premiums
6. PREMIUM RATE GUARANTEE:
See Schedule V, Reinsurance Premiums
7. POLICY FEES:
See Schedule V, Reinsurance Premiums
22
8 TAXES:
A. DAC TAX CALCULATION
The Ceding Company and the Reinsurer hereby agree to the following pursuant to
Section 1.848-2(g)(8) of the Income Tax Regulations issued December 29, 1992,
under Section 848 of the Internal Revenue Code of 1986, as amended.
1. The term "party" will refer to either the Ceding Company or the
Reinsurer as appropriate.
2. The terms used in this Article are defined by reference to Treasury
Regulation Section 1.848-2 in effect as of December 29, 1992. The term
"net consideration" will refer to net consideration as defined in
Treasury Regulation Section 1.848-2(f).
3. 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 IRS Section 848(c)(1).
4. The Ceding Company and the Reinsurer agree to exchange information
pertaining to the amount of net consideration under this Agreement each
year to ensure consistency. The Ceding Company and the Reinsurer also
agree to exchange information, which may be otherwise required by the
IRS.
5. The Ceding Company will submit a schedule to the Reinsurer by May 1 of
each year of its calculation of the net consideration for the preceding
calendar year. This schedule of calculations will be accompanied by a
statement signed by an officer of the Ceding Company stating that the
Ceding Company will report such net consideration in its tax return for
the preceding calendar year.
6. The Reinsurer may contest such calculation by providing an alternative
calculation to the Ceding Company. If the Reinsurer does not so notify
the Ceding Company, the Reinsurer will report the net consideration as
determined by the Ceding Company in the Reinsurer's tax return for the
previous calendar year.
7. If the Reinsurer contests the Ceding Company's calculation of the net
consideration, the parties will act in good faith to reach an agreement
as to the correct amount. When the Ceding Company and the Reinsurer
reach an agreement on an amount of net consideration, each party will
report such amount in their respective tax returns for the previous
year.
23
B. PREMIUM TAX:
Premium tax will be reimbursed on an exact basis and calculated
annually by the Ceding Company.
C. EXCISE TAX:
None Applicable
9. EXPERIENCE REFUND OR PROFIT COMMISSION:
See Schedule V, Reinsurance Premiums
10. NET AMOUNT AT RISK CALCULATION:
See Schedule V, Reinsurance Premiums
COVERAGE, ARTICLE IV
1. RETENTION:
See Schedule II, Retention
2. PLAN (S) AND RIDER (S):
See Schedule III, Business Covered.
3. AUTOMATIC ACCEPTANCE LIMTS:
See Schedule VI, Limits.
4. UNDERWRITING CLASS:
See Schedule V, Reinsurance Premiums.
5. RESIDENCE:
United States, Canada
6. TEMPORARY INSURANCE AGREEMENT
See Schedule IV, Temporary Insurance Agreement
24
RETENTION AND RECAPTURE, ARTICLE VII
Minimum Recapture Period: Ten (10) years
For policies ceded on a quota share basis, the amount eligible for
recapture in years 10 - 14 will be based on the percentage increase in
the retention limit applied to the original retained amount. For
example, based on our current retention of $750,000, an increase in
Minnesota Life's retention to $1,500,000 would allow Minnesota Life to
retain an additional 10% of what was originally reinsured up to the new
retention limit. Further, the Ceding Company may at its option
recapture all business ceded on a quota share basis up to its maximum
limits of retention for business inforce for fifteen years or longer.
REINSURANCE PREMIUMS AND ALLOWANCES, ARTICLE VIII
1. LIFE REINSURANCE:
See Schedule V, Reinsurance Premiums.
2. SUBSTANDARD PREMIUMS:
See Schedule V, Reinsurance Premiums.
3. JOINT POLICY PREMIUMS:
See Schedule V, Reinsurance Premiums.
4. SUPPLEMENTARY BENEFITS:
See Schedule V, Reinsurance Premiums.
RESERVES, ARTICLE IX
The Ceding Company will calculate reserves based on 1/2 the gross
premium paid to the Reinsurer.
The Reinsurer will hold reinsurance reserves in accordance with all
applicable laws and regulations that the Reinsurer deems controlling.
POLICY ALTERATIONS, ARTICLE XI
1. EXCHANGES, ROLLOVERS OR CONVERSIONS:
See Schedule V, Reinsurance Premiums.
2. RE-ENTRYS:
See Schedule V, Reinsurance Premiums.
25
POLICY ADMINISTRATION AND PREMIUM ACCOUNTING, ARTICLE XII
1. ACCOUNTING PERIOD AND PREMIUM DUE:
Policies will be billed annually in advance after the policy's
anniversary has processed.
2. ACCOUNTING ITEMS:
See Schedule VIII, Sample Billing Statement.
See Schedule IX, Sample Policy Exhibit.
3. REINSURANCE ADMINISTRATION:
Self Administration
4. BALANCES IN DEFAULT:
The Reinsurer reserves the right to charge interest at the Prime Rate
plus 2% as stated in the Wall Street Journal on January 1, prior to the
due date of the premium when:
a. Renewal premiums are not paid within sixty (60) days of the due
date.
b. Premiums for new business are not paid within one hundred twenty
(120) days of the date the policy is issued.
5. REINSTATEMENT OF DEFAULT REINSURANCE PREMIUMS:
The Ceding Company may reinstate the terminated risks within sixty (60)
days after the effective date of termination by paying the unpaid
reinsurance premiums for the risks in force prior to the termination.
The effective date of reinstatement will be the date the required back
premiums are received.
CLAIMS, ARTICLE XIII
The lead Reinsurer for this Agreement is RGA REINSURANCE COMPANY of
St. Louis, Missouri.
ARBITRATION, ARTICLE XIV
PLACE OF ARBITRATION:
The home office of the third arbitrator.
26
CHOICE OF LAW, FORUM AND LANGUAGE, ARTICLE XVIII
1. CHOICE OF LAW AND FORUM:
Minnesota law
2. LANGUAGE:
English
27
SCHEDULE II
RETENTION
The Ceding Company will retain thirty percent (30%) of each policy subject to
the qualifications and retention limits given in the table below.
SINGLE/JOINT ISSUE AGE RATING RETENTION
--------------------------- ----------------------------- --------------- -------------
SINGLE LIFE ISSUE AGE 0 - 70 STD - TABLE 16 750,000
SINGLE LIFE ISSUE AGES 71 - 85 STD - TABLE 4 250,000
SINGLE LIFE ISSUE AGES > THAN 85 ALL RATINGS FACULTATIVE
SINGLE LIFE PRO. ATHLETE STD - TABLE 16 375,000
ASL/BCR ISSUE AGE 0 - 70 STD - TABLE 16 1,500,000
ASL/BCR ISSUE AGES 71 - 85 STD - TABLE 4 500,000
JOINT LIFE (USE OLDEST AGE) AGES 20 -70 STD - TABLE 16 1,500,000
JOINT LIFE (USE OLDEST AGE) AGES 71 - 85 STD - TABLE 4 500,000
JOINT LIFE (USE OLDEST AGE) OLDEST ISSUE AGE > 85 ALL RATINGS FACULTATIVE
JOINT LIFE (USE OLDEST AGE) AGES 20 - 70 + UNINSURABLE STD - TABLE 16 750,000
JOINT LIFE (USE OLDEST AGE) AGES 71 - 85 + UNINSURABLE STD - TABLE 4 250,000
JOINT LIFE (USE OLDEST AGE) ISSUE AGE > THAN 85 ALL RATINGS FACULTATIVE
28
SCHEDULE III
BUSINESS COVERED
The following plans and riders will be covered under this agreement.
SINGLE
OR AUTO SHORT
JOINT PRODUCT NAME OR FAC NAME EFF. DATE TERMINATION DATE
------ ------------ ------ ------- --------- ----------------
SINGLE PLANS: ADJUSTABLE LIFE III A/F ADJ. 3 4-1-2002
VARIABLE ADJUSTABLE LIFE A/F VAL 4-1-2002
VARIABLE ADJUSTABLE LIFE - HORIZON A/F VAL-H 4-1-2002
SINGLE R: ADJUSTABLE SURVIVORSHIP LIFE RIDER A/F ASL 4-1-2002
INFLATION AGREEMENT A/F IA 4-1-2002
ONE YEAR TERM RIDER A/F OYT 4-1-2002
OTHER INSURED RIDER A/F OIR 4-1-2002
BUSINESS CONTINUATION RIDER A/F BCR 4-1-2002
EXCHANGE OF INSURED AGREEMENT A/F EIA 4-1-2002
SHORT TERM AGREEMENT A/F STA 0-0-0000
XXXXX XXXX: VARIABLE ADJUSTABLE LIFE- SECOND TO DIE A/F VAL-SD 4-1-2002
JOINT R: SINGLE LIFE TERM INSURANCE AGREEMENT A/F SLA 4-1-2002
ESTATE PRESERVATION AGREEMENT A/F EPA 4-1-2002
POLICY EXCHANGE OPTION A/F PEO 4-1-2002
SHORT TERM AGREEMENT A/F STA 4-1-2002
We do not reinsure Waiver of Premium or the Accidental Death Benefits. Minnesota
Life retains that risk.
29
SCHEDULE IV
TEMPORARY INSURANCE AGREEMENT
The Reinsurer has reviewed the Ceding Company's Temporary Insurance Agreement
and has given its acceptance of the terms and procedures contained in the form.
The Ceding Company agrees to submit to the Reinsurer any changes to the
Temporary Insurance Agreement. The Reinsurer's Temporary Insurance Agreement
liability will be limited to the Ceding Company's liability, which is stated as
$250,000 per application.
The Reinsurer is liable for losses under the terms of a Temporary Insurance
Agreement when the following qualifications are met for automatic and
facultative reinsurance.
1. AUTOMATIC REINSURANCE
A) The risk would have qualified for automatic coverage under the
Agreement as specified in Article IV; and
B) the Ceding Company has kept its full retention for the age and
table rating of the insured; and
C) the amount ceded to the Reinsurer does not exceed the Automatic
Binding Limit as specified in Schedule VI; or
D) a court of competent jurisdiction finds that the Ceding Company is
liable under the Temporary Insurance Agreement despite the Ceding
Company's denial of liability and all of (A), (B) and (C) above
have occurred.
2. FACULTATIVE REINSURANCE
The Reinsurer is liable under the terms of the Temporary Insurance
Agreement for a risk which has been submitted to the Reinsurer on a
facultative basis only when:
A) The Reinsurer has given the Ceding Company its final underwriting offer
pursuant to Article IV - Coverage and;
B) the risk would have been placed with the Reinsurer according to the
Ceding Company's usual and standard placement procedures; or
C) A court of competent jurisdiction finds that the Ceding Company is
liable under the Temporary Insurance Agreement despite the Ceding
Company's denial of liability and both (A) and (B) above have occurred.
The Reinsurer will be liable for either a proportionate share of the risk or a
set amount of the risk, according to the terms of its acceptance and the Ceding
Company's standard placement procedures.
30
SCHEDULE V
REINSURANCE PREMIUMS
1. REINSURANCE PREMIUMS:
Business covered, as shown in Schedule III will be reinsured on the yearly
renewable term basis with the Reinsurer participating only in mortality risks
(not cash values, loans, dividends or other features specific to permanent
policies). The mortality risk shall be the net amount at risk on that portion of
the policy that is reinsured with the Reinsurer. Premiums will be paid on an
annual basis.
Reinsurance premiums will be determined according to the amount reinsured with
the Reinsurer per insured life as follows. The life reinsurance premium will be
calculated in the case of life risks, by multiplying the appropriate life
premium rate, from the attached rate tables, for the age of the insured, at the
beginning of the policy year, by the net amount at risk reinsured for that
policy year, reduced by the applicable allowance as shown below. The same
procedure will apply to single premium policies and for paid up policies. The
following table describes the rate table that should be used for each product.
An additional 25% of the standard rates will be charged per table of substandard
rating. Waiver of Premium and Accidental Death Benefits will not be reinsured
under this Agreement.
THE FIRST YEAR ALLOWANCE IS 100%. RENEWAL YEAR ALLOWANCES ARE 0%.
RATE TABLE LABELED PRODUCT BILLING MODE
------------------ ------- ------------
IN2002 - AUTOMATIC ADJUSTABLE LIFE III MONTHLY
FAC02 - FACULTATIVE
IN2002 - AUTOMATIC VARIABLE ADJUSTABLE LIFE MONTHLY
FAC02 - FACULTATIVE
IN2002 - AUTOMATIC VARIABLE ADJUSTABLE LIFE - HORIZON MONTHLY
FAC02 - FACULTATIVE
ASL RATES ADJUSTABLE SURVIVORSHIP LIFE RIDER MONTHLY
BCR RATES BUSINESS CONTINUATION RIDER MONTHLY
IN2002 - AUTOMATIC INFLATION AGREEMENT MONTHLY
FAC02 - FACULTATIVE
IN2002 - AUTOMATIC ONE YEAR TERM RIDER MONTHLY
FAC02 - FACULTATIVE (RIDER PREMIUM RATES WILL EQUAL THE BASE RATES)
IN2002 - AUTOMATIC OTHER INSURED RIDER MONTHLY
FAC02 - FACULTATIVE (RIDER PREMIUM RATES WILL EQUAL THE BASE RATES)
IN2002 - AUTOMATIC SHORT TERM AGREEMENT MONTHLY
FAC02 - FACULTATIVE (RIDER PREMIUM RATES WILL EQUAL THE BASE RATES)
NO FEE EXCHANGE OF INSURED AGREEMENT MONTHLY
IN2002 - AUTOMATIC VARIABLE ADJUSTABLE LIFE- SECOND TO DIE MONTHLY
FAC02 - FACULTATIVE FRASIERIZED
NO FEE POLICY EXCHANGE OPTION MONTHLY
IN2002 - AUTOMATIC SINGLE LIFE TERM INSURANCE AGREEMENT- FIRST TO DIE MONTHLY
FAC02 - FACULTATIVE
EPA OPTION ESTATE PRESERVATION AGREEMENT MONTHLY
IN2002 - AUTOMATIC SHORT TERM AGREEMENT FOR VAL-SD MONTHLY
FAC02 - FACULTATIVE FRASIERIZED
31
2. POLICY FEES:
No policy fees will be paid under this Agreement.
3. FLAT EXTRA PREMIUMS:
The flat extra premium will be the annual flat premium which the Ceding Company
charges the policy owner on that amount of insurance reinsured less the
following allowances on all products:
DURATION OF FLAT EXTRA FIRST YEAR YEARS 2 +
---------------------- ---------- ---------
5 Years or less 10% 10%
More than 5 Years 85% 10%
4. BUSINESS CONTINUATION AGREEMENT:
The BCR rider rates are attached and labeled BCR. A 10% discount will be applied
in all years. Upon exercise of the BCR rider, the premium rates paid the
Reinsurer for the increased amount will be based upon the attained age, first
duration rate charged on the base policy. The increase in the base coverage will
be reinsured in the same proportion as the BCR rider itself was originally
reinsured.
5. ADJUSTABLE SURVIVORSHIP LIFE RIDER:
The ASL rider rates are attached and labeled ASL. A 10% discount will be applied
in all years. Upon exercise of the ASL rider, the premium rates paid the
Reinsurer for the increased amount will be based upon the attained age, first
duration rate charged on the base policy. The increase in the base coverage will
be reinsured in the same proportion as the ASL rider itself was originally
reinsured.
6. JOINT LIFE PLANS:
The reinsurance rates for joint second to die or survivorship base plans will be
equal to the maximum of Frasierized mortality rates and .12 cents per $1000.
This reinsurance rate is multiplied by the net amount at risk reinsured.
Single life flat extras will be converted to an equivalent joint second to die
flat extra. When one life is uninsurable (rating exceeds table 16), the Ceding
Company will use the attached single life rates labeled "IN2002 and FAC02" based
on the reinsurance type, actual issue age of the insurable life and adjusted for
any applicable table rating or flat extra.
32
7. CALCULATION OF "FRASIERIZED" SECOND TO DIE MORTALITY RATES:
The following steps convert the single life mortality rates, which are attached
and labeled as "IN2002 and FAC02", into "Frasierized" second-to-die mortality
rates:
1. q[x]+t-1 and q[y]+t-1
are the single life mortality rates for lives x and y, in policy
year t, obtained by taking the rates shown in Exhibit 2,
attached to this Schedule B, and dividing by 1000. (For
substandard lives, add an extra 25% per table plus any flat
extra.)
2. p[x]+t-1 = 1 - q[x]+t-1 p[y]+t-1 = 1 - q[y]+t-1
3. t-1p[x] = p[x].p[x]+1.p[x]+2''''p[x]+t-2
t-1p[y] = p[y].p[y]+1.p[y]+2''''p[y]+t-2
4. q[x]+t-1:[y]+t-1= t-1p[x] t-1 p[y] q[x]+t-1 q[y]+t-1 + t-1p[x] (1 - t-1p[y]) q[x]+t-1 + (1 - t-1p[x]) t-1p[y] q[y]+t-1
----------------------------------------------------------------------------------------------------
t-1p[x] t-1p[y] + t-1p[x] (1 - t-1p[y]) + (1 - t-1p[x]) t-1p[y]
The "Frasierized" second-to-die mortality rate per $1,000 in
policy year t = 1000q[x]+t-1:[y]+t-1
8. INFLATION AGREEMENT:
The reinsurance rates for the Inflation Agreement will be the reinsurance rate
tables as labeled above. Rates paid will be based on point in scale rates as of
the original underwriting date. All IA increases will be split proportionately
among the Reinsurer(s) until Minnesota Life's retention is full. Inflation
Agreement is only available on Variable Adjustable Life - Horizon.
9. SINGLE LIFE TERM RIDER:
The reinsurance rates for the Single Life Term Rider will be the current single
life rates labeled "IN2002 and FAC02" based on the reinsurance type, actual
issue age and rating. An additional 25% of the standard rates will be charged
per table of substandard rating as well as any applicable flat extra premium.
33
10. EXCHANGE OF INSUREDS AGREEMENT/POLICY EXCHANGE OPTION:
This agreement provides for the exchange of one life for another on a policy
owned by the same corporation. When exercised the new insured is fully
underwritten. For policies requiring automatic reinsurance, rates will be based
on the newly underwritten insured's issue age, issue date and first duration.
Reinsurance originally ceded on a facultative basis may not continue to be
reinsured based on the underwriting classification of the newly underwritten
insured.
11. PREMIUM RATE GUARANTEE:
The Life Reinsurance premium rates contained in this Agreement are guaranteed
for one year, and the Reinsurer anticipates continuing to accept premiums on the
basis of these rates indefinitely. If the Reinsurer deems it necessary to
increase rates, such increased rates cannot be higher than the valuation net
premiums for annual renewable term insurance calculated using the minimum
statutory mortality rates and maximum statutory interest rate for each year of
issue.
If an increase in reinsurance rates occurs on a guaranteed product that is
reinsured on non-guaranteed terms, the Ceding Company has the right to recapture
the reinsurance as of the effective date of the increase in reinsurance rates.
If an increase in reinsurance rates occurs on a non-guaranteed product that is
reinsured on non-guaranteed terms, the Ceding Company should investigate the
possibility of increasing its direct premiums to restore the product to previous
profitability. If the Ceding Company determines that it cannot reasonably
implement such a premium increase then it has the right to recapture the
reinsurance as of the effective date of the increase in reinsurance rates.
12. EXPERIENCE REFUND:
There will be no experience refund calculated for business reinsured under this
Agreement.
13. NET AMOUNT AT RISK CALCULATION:
The full policy cash value will be applied to the reinsured amount. The Ceding
Company will retain a level retention. When multiple layers are reinsured, the
cash value will be applied to the oldest layer first. The Ceding Company will
use a First In, First Out (FIFO) methodology. If multiple companies exist on a
layer, the cash value will be split proportionately among the Reinsurers.
34
SCHEDULE VI
AUTOMATIC ACCEPTANCE LIMITS
1. AGE LIMITS:
Issue Ages 0 - 85
2. MINIMUM REINSURANCE AMOUNT:
Automatic Initial Reinsurance Amount - $0
Facultative Initial Reinsurance Amount* - $100,000
*(Original Shopping Limit for Facultative policies is
$100,000, however facultative policies could ultimately be
issued at an amount less than $100,000)
Subsequent Reinsurance Amount - $0
3. POOL BINDING LIMITS:
ISSUE AGE STD - TABLE 4 TABLE 5 - TABLE 8 TABLE 9 - TABLE 16
--------- ------------- ----------------- ------------------
0 - 14 10,000,000 10,000,000 10,000,000
15 - 80 20,000,000 20,000,000 20,000,000
81 - 85 2,500,000 FACULTATIVE FACULTATIVE
>85 FACULTATIVE FACULTATIVE FACULTATIVE
15 - 70 Pro. Athlete 7,500,000 7,500,000 7,500,000
ASL/BCR RIDERS
ISSUE AGE STD - TABLE 4 TABLE 5 - TABLE 8 TABLE 9 - TABLE 16
--------- ------------- ----------------- ------------------
19 - 80 10,000,000 10,000,000 10,000,000
81 - 85 2,500,000 FACULTATIVE FACULTATIVE
JOINT LIFE
ISSUE AGE STD - TABLE 4 TABLE 5 - TABLE 8 TABLE 9 - TABLE 16
--------- ------------- ----------------- ------------------
19-70 30,000,000 30,000,000 FACULTATIVE
71-80 20,000,000 20,000,000 FACULTATIVE
81-85 3,750,000 FACULTATIVE FACULTATIVE
20-80+UNINSURABLE 20,000,000 20,000,000 20,000,000
81-85+UNINSURABLE 2,500,000 FACULTATIVE FACULTATIVE
OTHER SITUATIONS FACULTATIVE FACULTATIVE FACULTATIVE
4. JUMBO LIMIT:
$50,000,000
35
SCHEDULE VII
CLAIM ADMINISTRATION
PAYMENT OF BENEFITS
The Ceding Company will examine and approve all claims that are not
contestable. By the 20th of each month, the Ceding Company will send
The Reinsurer a notification of all paid reinsured claims. The Ceding
Company will net the claim amount due the Ceding Company off the
monthly billing statements due the Reinsurer.
For contestable claim amounts of $750,000 and less, the Ceding Company
will examine and approve the claim settlement. The Reinsurers will
abide the issue as settled by the Ceding Company.
For contestable claim amounts greater than $750,000 and less than
$7,500,000 in face amount, the Ceding Company will submit all papers in
connection with that claim, including all underwriting and
investigation papers to the Lead Reinsurer. The Lead Reinsurer will
make its recommendation within five working days on behalf of the other
pool members and reply back to the Ceding Company.
For contestable claim amounts equal to or greater than $7,500,000 in
face amount, the Ceding Company will submit all papers in connection
with that claim, including all underwriting and investigation papers to
each Pool Reinsurer. The Reinsurer will make its recommendation within
five working days and reply back to the Ceding Company.
For contestable claim amounts reinsured on a facultative basis with
face amounts of $750,000 or less where the Ceding Company retained no
risk or where the face amount is greater than $750,000, the Ceding
Company will submit all papers in connection with that claim, including
all underwriting and investigation papers to the Reinsurer. The
Reinsurer will make its recommendation within five working days and
reply back to the Ceding Company. If the Ceding Company retained any
risk on facultative policies with face amounts equal to or less than
$750,000, the Reinsurer will abide the issue as settled by the Ceding
Company.
36
If the amount of insurance changes because of a misstatement of rate or
age classification, the Reinsurer's share of reinsurance liability will
change proportionately.
The Reinsurer will not participate on any accelerated or advance
payments made under an accelerated death benefit agreement. The
Reinsurer will be notified at time of death and will pay its share of
the reinsured net amount at risk as outlined above.
The Reinsurer will be notified of the death of a designated life on a
policy which reinsured the Business Continuation Rider (BCR). Copies of
the proofs obtained by the Ceding Company will be taken by the
Reinsurer as sufficient.
SCHEDULE VIII
YEARLY RENEWABLE TERM RATES
37
SCHEDULE IX
REINSURANCE BILLING ADMINISTRATION
SAMPLE STATEMENT SPECIFICATIONS
The following information should appear on each Statement and Inforce listing:
o Name of the Insured(s)
o Date of Birth of the Insured(s)
o The Issue Age of each Insured(s)
o The Sex of the Insured(s)
o The Insured(s) State of Residence
o Underwriting Classification (i.e. Preferred, Standard, Rating,
etc.)
o Smoking Class (i.e. Smoker, Non Smoker, Tobacco, Non Tobacco etc.)
o Indication if Business is Facultative or Automatic
o Policy Number(s)
o Face Amount of the Policy(s)
o Amount(s) Ceded to the Reinsurer
o Amount of Premium being Paid; separated for Supplementary Benefits
38
o The Amount of any Reinsurance Premium Allowances
o Any Extra Premiums concerned. Example: $5 / 1000 / 5 YRS
o Effective Date and Duration of any Policy(s) Change, Reissue, or
Termination
SCHEDULE X
SAMPLE POLICY EXHIBIT
Inforce as of Last Report Policy Count NAR
------------------------- ------------ ---
Add In:
New Issues
Reinstatements
Increases
Decreases - Still Inforce
Rollover - In
Deduct By:
Death
Surrender
Lapse
Conversion - Out Decreases - Terminations
Inactive - Pending
Not Taken
Inforce as of Current Report
39
SCHEDULE XI
DEFINITIONS
ASSUME - To accept or take over a risk, the converse of cede.
AUTOMATIC REINSURANCE - A reinsurance agreement under which the Reinsurer is
obligated to accept or assume risks that meet certain specific criteria based on
the Ceding Company's underwriting.
BINDING LIMIT - The amount of risk over the Ceding Company's retention, which
can be ceded automatically if all automatic conditions are met.
CASH VALUE - The amount of money, which the policy owner will receive as a
refund if the policy owner cancels the coverage and returns the policy to the
company.
CEDE - To transfer an insurance risk from the company originally issuing the
policy to another insurance company known as the Reinsurer.
CEDING COMPANY - A ceding insurer is an insurer, which underwrites and issues an
original, principal policy to an insured and contractually transfers (cedes) a
portion of the risk to the Reinsurer. A ceding Reinsurer is a Reinsurer which
transfers (cedes) a portion of the underlying reinsurance to a
retrocessionnaire.
COINSURANCE - Indemnity life reinsurance under which the reserves as well as the
risk are transferred to the Reinsurer; the Ceding Company retains its liability
to the contractual relationship with the insured. Under the Coinsurance method,
the Ceding Company will pay the Reinsurer a proportionate part of the premiums
it receives. In return, the Reinsurer agrees to pay the Ceding Company a
proportionate part of the claim and participate in all other policy benefits
explicitly stated in this Agreement.
CONDITIONAL RECEIPT - A provision included in some life insurance policies
providing coverage from the date of the application to the date at which the
policy is either issued or declined.
40
EXCESS REINSURANCE - A form of reinsurance under which recoveries are available
when a given loss exceeds the Ceding Company's retention (excess of loss
reinsurance) as defined in this Agreement.
EXPERIENCE REFUND OR PROFIT COMMISSION - A provision found in some reinsurance
agreements which provides for profit sharing. Parties agree to a formula for
calculating profit, an allowance for the Reinsurer's expenses, and the Ceding
Company's share of such profit after expenses.
EXTRA CONTRACTUAL OBLIGATIONS (ECO) - A generic term that, when used in an
reinsurance agreement, refers to damages awarded by a court against an insurer
which are outside the provisions of the insurance policy, due to the insurer bad
faith, fraud or gross negligence in the handling of a claim.
FACULTATIVE - Reinsurance under which the Ceding Company has the option
(faculty) of submitting and the Reinsurer has the option of accepting or
declining individual risks. This Agreement merely reflects how individual
facultative reinsurance will be handled.
"FACULTATIVE OTHER" pertains to policies submitted to the Reinsurer for medical
or other types of impairments or avocations. "FACULTATIVE DUE TO AMOUNT"
pertains to policies submitted to the Reinsurer based solely on the amount of
insurance that the insured has applied for and what this insured already has
inforce.
FIRST DOLLAR QUOTA SHARE - An Agreement which provides that a fixed percentage
of each risk issued will be reinsured.
FLAT EXTRA PREMIUM - A method for rating substandard risks used when the extra
risk is considered to be constant. The underwriter assesses a specific extra
premium for each $1,000 of insurance. Flat extra ratings usually apply to
applicants in hazardous occupations or avocations, aviation, or with certain
physical impairments of a temporary nature.
INDEXING - The adjustment of the Ceding Company's retention and the reinsurance
limit by a measure of inflation such as the Consumer Price Index.
INDIVIDUAL CESSION ADMINISTRATION - A reinsurance arrangement where the
Reinsurer sets up individual records for each cession and calculates the
reinsurance premium, inforce, and reserve information for its financial reports.
JUMBO LIMIT - The limit placed on an amount of coverage that may be inforce, or
applied for in all companies, on an individual life for automatic reinsurance
purposes. If such insurance exceeds the limit, the Ceding Company must submit
the risk to the Reinsurer for facultative review.
41
LEAD REINSURER - A Reinsurer chosen to speak on behalf of all Reinsurers in a
pool.
MINIMUM REINSURANCE AMOUNT - The smallest cession that the Reinsurer will accept
automatically. The minimum size is set to avoid the expenses associated with
small cessions.
ORIGINAL POLICY(S) - Insurance contracts between the original Ceding Company and
the Insured(s).
POLICY RESERVE - A liability account that identifies the amount of assets that,
together with the future premiums to be received from inforce policies, is
expected to be sufficient to pay future claims on those inforce policies. Also
called a legal reserve or a statutory reserve.
POOL - A method of allocating reinsurance among several Reinsurers. Using this
method, each Reinsurer receives a specified percentage of each risk ceded into
the pool. A reinsurance pool is a multi-Reinsurer agreement under which each
Reinsurer in the group or pool assumes a specified portion of each risk ceded to
the pool.
PREMIUM - (Written/Unearned/Earned) - Written premium is premium registered on
the books of an insurer or Reinsurer at the time a policy is issued and paid.
Premium for a future exposure period is said to be unearned premium. For an
individual policy, written premium minus unearned premium equals earned premium.
Earned premium is income for the accounting period while unearned premium will
be income in a future accounting period.
PUNITIVE DAMAGES - A term that, when used in reinsurance agreements, refers to
damages awarded by a court against an insured or against an insurer in addition
to compensatory damages. Punitive damages are intended to punish the insured or
the insurer for willful and careless misconduct and to serve as a deterrent.
When the award is against an insurer, it is usually related to the conduct of
the insurer in the handling of a claim.
QUOTA SHARE - A form of reinsurance in which premiums and losses are shared
proportionately between the Ceding Company and the Reinsurer, in which the same
percentage applies to all policies reinsured.
RATE - The premium rate is the amount of premium charged per exposure unit,
e.g. per $1,000.
RECAPTURE - The process by which the Ceding Company recovers the liabilities
transferred to the Reinsurer.
REINSURER - A company which contractually assumes all or part of the Ceding
Company's risk.
RETENTION - The dollar amount or percentage of each loss retained by the Ceding
Company under this reinsurance agreement. The Ceding Company's retention is not
reinsured in any way.
RISK - Insurance on an individual life.
42
RISK PREMIUM REINSURANCE - Another name for Yearly Renewable Term (YRT)
reinsurance. A form of reinsurance under which the risks, but not the permanent
plan reserves, are transferred to the Reinsurer for a premium that varies each
year with the amount at risk and the ages of the insureds. Under the YRT method,
the Ceding Company will transfer to the Reinsurer the mortality risk on either a
net amount at risk basis or on an approximation of the net amount at risk basis.
SELF ADMINISTRATION - A reinsurance arrangement where the Ceding Company
provides the Reinsurer with periodic reports for reinsurance ceded giving
premium, inforce, reserve, and any other information required by the Reinsurer
for its financial reports. Self-Administration is also known as Bulk or
Bordereaux.
STANDARD GUIDELINES - The underwriting guidelines intended to be applied to all
applications for insurance's of the type(s) reinsured under this agreement.
SUBSTANDARD RISKS - Those insureds that, under the terms of the Ceding Company's
standard guidelines, do not meet the criteria for issuance at standard premium
rates.
SUBSTANDARD TABLE EXTRA - Substandard table extra ratings usually apply to
physically impaired lives. The rates will be increased by a factor as shown in
Schedule I for each table of additional mortality.
SUM AT RISK OR NET AMOUNT AT RISK - The excess of the death benefit of a policy
over the policy reserve.
TERMINATION - The formal ending of a reinsurance agreement by its natural
expiry, cancellation or commutation by both parties. Termination's can be either
on a cutoff or runoff basis. Under cutoff provisions, the parties' obligations
are fixed as of the agreed cutoff date. Otherwise, obligations incurred while
the agreement was inforce are run off to their natural extinction.
YEARLY RENEWABLE TERM - Another name for Risk Premium Reinsurance.
43
REQUIRED CHANGES/REV. 4/3/2003
CHANGE APPLIES TO
CHANGE APPLIES TO ACHIEVER/CLASSIC, ESTIMATE
REQUESTED CHANGE WEB, CD OR BOTH ADVISOR, BOTH TYPE OF CHANGE TO COMPLETE
---------------- ----------------- ----------------- -------------- -----------
1 Modify the following fund names: Both Editing 650
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*Advantus Macro-Cap Value changed to
Advantus Core Equity Achiever/Classic only
-------------------------------------------------------------------------------------------------------------------------------
*Advantus Global Bond changed to Advantus
International Bond Achiever/Classic only
-------------------------------------------------------------------------------------------------------------------------------
*Xxxxxx VT International Growth changed to Achiever/Classic and
Xxxxxx VT International Equity Advisor only
------------------------------------------------------------------------------------------------------------------------------------
2 Modify the following Advisor/Sub-Advisor Both 400
-------------------------------------------------------------------------------------------------------------------------------
Advantus Capital Appreciation
*Credit Suisse changed to Voyageur Achiever/Classic only
-------------------------------------------------------------------------------------------------------------------------------
Advantus Macro-Cap Value
*delete X.X. Xxxxxx as sub-advisor Achiever/Classic only
------------------------------------------------------------------------------------------------------------------------------------
3 Other fund name or fund objective changes
communicated via the 5/1/03 fund company
prospectuses. Estimated availability of
information 4/25/03. Both Both Editing 325
------------------------------------------------------------------------------------------------------------------------------------
4 Add date of first use to output (01-2003) It should Achiever/Classic
look exactly like the CD front cover, tracking output and Advisor
number then DOFU: 01-2003 under tracking number. Both output Editing 200
------------------------------------------------------------------------------------------------------------------------------------
5 Modify any Ibbotson required percentage changes editing and
for Focused MAPS (will know extent of changes possible
in late April) Both Both programming 650
------------------------------------------------------------------------------------------------------------------------------------
6 Modify any Ibbotson required percentage changes editing
for Portfolio Builder (will know extent of changes possible
in late April) Both Both programming 675
------------------------------------------------------------------------------------------------------------------------------------
CHANGE APPLIES TO
CHANGE APPLIES TO ACHIEVER/CLASSIC, ESTIMATE
REQUESTED CHANGE WEB, CD OR BOTH ADVISOR, BOTH TYPE OF CHANGE TO COMPLETE
---------------- ----------------- ----------------- -------------- -----------
7 Update the Advisor fact sheet (non-state specific We will get a new
PDF as of 5/1/03 with text on the PDF: For more PDF. The only thing
information on current state approvals and you will need to do
variations please contact your wholesaler at is replace the PDF
000-000-0000. within the program. Editing (replace
Both Advisor Only PDF 150
------------------------------------------------------------------------------------------------------------------------------------
8 Add text on the Investment Objectives and Both (2 screens for
Investment Options screens "as of 5/1/03." Achiever/Classic 2
Both screens for Advisor) Editing 275
------------------------------------------------------------------------------------------------------------------------------------
9 Speed up initial welcome screen or remove
screens if needed. We have received complaints
that this takes too long to load Both Both Programming 300
------------------------------------------------------------------------------------------------------------------------------------
10 Remove shading on the Financial Professional
screen and add an asterisk "*" for required
fields. (match the web program) Both Both Editing 150
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11 Remove the funds not selected from the Portfolio
Builder output. Essentially if a fund allocation All output (4 for
is 0% do not show the fund of % on the Portfolio Achiever/Classic and
Builder output. Both 4 for Advisor) Programming 2850
------------------------------------------------------------------------------------------------------------------------------------
12 In Portfolio Builder section add a "start here"
arrow or brainstorm on a method of getting people
started on this screen (confusion by testers). We
should match the web version. For reference,
please review page 1 of 2 on web 6. CD Rom only Both Editing 175
------------------------------------------------------------------------------------------------------------------------------------
13 In Portfolio Builder change category name from
Investment Options to Asset Category (Match the
web version) CD Rom only Both Editing 375
------------------------------------------------------------------------------------------------------------------------------------
14 Add a link to the state approval tables. It would
state For state approval information for this CD Graphic
product, please click here. Web only Both change 650
------------------------------------------------------------------------------------------------------------------------------------
15 Add revision date to the cover of CD CD Rom only Both CD Graphic
change 700
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CHANGE APPLIES TO
CHANGE APPLIES TO ACHIEVER/CLASSIC, ESTIMATE
REQUESTED CHANGE WEB, CD OR BOTH ADVISOR, BOTH TYPE OF CHANGE TO COMPLETE
---------------- ----------------- ----------------- -------------- -----------
MINOR TYPO CHANGES
------------------------------------------------------------------------------------------------------------------------------------
16 On the Investment Objectives page we need to
remove the astrick that appears at the end of the
following funds: FTVIP Franklin Large Cap Growth
Securities Fund -- Class 2, Franklin Small
Cap Fund -- Class 2, FTVIP Mutual Shares
Securities Fund -- Class 2, FTVIP Xxxxxxxxx
Developing Markets Securities Fund -- Class 2 Both Both Editing 275
------------------------------------------------------------------------------------------------------------------------------------
17 On the Investment Options page for Advisor only,
we need to add LIT after all Xxx Xxxxxx funds.
All three should start with Xxx Xxxxxx LIT CD Rom only Advisor Only Editing 125
------------------------------------------------------------------------------------------------------------------------------------
18 In Investment Objectives we need to remove the
last sentence in the AIM V.I. Premier Equity Fund.
The sentence refers to the name change in May 1,
2002. Both Both Editing 125
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19 In Investment Objectives we need to add FTVIP
in front of Franklin Small Cap fund. Both Both Editing 125
------------------------------------------------------------------------------------------------------------------------------------
20 In Investment Objectives within Janus
International Growth fund remove the -- in
circumstances. Both Both Editing 75
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21 In Investment Objectives, Xxxxxxxxxxx Capital
Appreciation remove the -- in companies, also
correct the word manager, currently says
manger. Both Both Editing 125
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22 In portfolio builder, Xxxxxx VT Growth and
Income should be listed as Xxxxxx VT Growth
& Income, this is the legal name of the fund.
This needs to be correct on the CD we will
request the change to the CD in the spread sheet. CD Rom only Both Editing 75
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CHANGE APPLIES TO
CHANGE APPLIES TO ACHIEVER/CLASSIC, ESTIMATE
REQUESTED CHANGE WEB, CD OR BOTH ADVISOR, BOTH TYPE OF CHANGE TO COMPLETE
---------------- ----------------- ----------------- -------------- -----------
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TOTAL FOR REQUIRED $9,450.00
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GRAND TOTAL FOR EVERYTHING IN THIS SPREADSHEET. 5000 CD's X $1.25 $6,250 $12,750.00
each CD set up $200 $6,250.00
$100 X2 $200.00
19,200
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