EXHIBIT 7(B)
Automatic Coinsurance Agreement
Between
Pruco Life Insurance Company of New Jersey
of New Jersey, U.S.A.
(Reinsured referred to as you, your or Reinsured)
and
Pruco Reinsurance Ltd.
of Xxxxxxxx XX00, Xxxxxxx
(referred to as the Reinsurer)
EXECUTION COPY
TABLE OF CONTENTS
ARTICLE I............................................................. 3
Automatic Reinsurance.............................................. 3
ARTICLE II............................................................ 3
Liability.......................................................... 3
ARTICLE III........................................................... 4
Plan and Amount of Insurance....................................... 4
ARTICLE IV............................................................ 4
Reinsurance Premiums............................................... 4
ARTICLE V............................................................. 4
Payments by Reinsurer.............................................. 4
ARTICLE VI............................................................ 4
Reporting and Cash Settlement...................................... 4
ARTICLE VII........................................................... 5
Deposits on the Reserves........................................... 5
ARTICLE VIII.......................................................... 6
Credit for Reinsurance............................................. 6
ARTICLE IX............................................................ 11
General Provisions................................................. 11
ARTICLE X............................................................. 15
DAC Tax Agreement.................................................. 15
ARTICLE XI............................................................ 16
Recapture.......................................................... 16
ARTICLE XII........................................................... 16
Arbitration........................................................ 16
ARTICLE XIII.......................................................... 17
Duration of Agreement.............................................. 17
ARTICLE XIV........................................................... 17
Entire Agreement................................................... 17
ARTICLE XV............................................................ 18
Execution.......................................................... 18
SCHEDULE A............................................................ 19
Business Reinsured................................................. 19
SCHEDULE B............................................................ 20
Monthly Settlement Report.......................................... 20
SCHEDULE C............................................................ 21
Monthly Business Management Report................................. 21
SCHEDULE D............................................................ 22
Annual Report...................................................... 22
The Reinsured and the Reinsurer mutually agree to reinsure on the terms and
conditions set out below.
ARTICLE I
AUTOMATIC REINSURANCE
1. Insurance. The Reinsured will cede and the Reinsurer will accept as
reinsurance the underlying benefit provided by the Spousal Life Time 5
Optional Living Benefit (SLT5) riders written by the Reinsured as shown in
Schedule A or any amendments thereto.
2. Coverages. The underlying SLT5 riders may be attached to any deferred
annuity contract written by the Reinsured as specified in Schedule A.
Reinsurance under this Agreement will be provided for the SLT5 riders while
such riders are in effect on the associated annuity contracts.
ARTICLE II
LIABILITY
1. Liability. The liability of the Reinsurer on any reinsurance under this
Agreement begins upon the effective date of this Agreement as set forth in
Article XV, Execution, and ends after all underlying contracts associated
with the reinsured SLT5 riders have terminated or the business reinsured is
otherwise recaptured or terminated. The liability of the Reinsurer to the
Reinsured under this Agreement will be the remaining SLT5 obligation to any
covered contract holder after the associated contract's account value has
been reduced to zero.
2. The liability of the Reinsurer will be settled and paid to the Reinsured
monthly on the basis of the monthly reports prepared by the Reinsured in the
form of Schedule B. Payment of any amount due to be paid by the Reinsurer or
the Reinsured will be determined on a net basis and will be paid within 5
business days after receipt of the monthly report.
3. This is a contract solely between the Reinsured and the Reinsurer. The
obligations under this contract of the Reinsurer are solely to the Reinsured
and those of the Reinsured solely to the Reinsurer.
Page 3 of 22
ARTICLE III
PLAN AND AMOUNT OF INSURANCE
1. Plan. Reinsurance under this Agreement will be on the coinsurance basis in
accordance with the underlying SLT5 riders issued by the Reinsured and
listed on Schedule A while such riders are in effect on the associated
insurance contracts.
2. Reduction and Terminations. If any SLT5 rider is terminated or any of the
underlying contracts associated with the SLT5 riders reinsured under this
Agreement are terminated by payment of a death benefit, surrender or
annuitization, the reinsurance with respect to that contract will be
terminated subject to any party's right to payment under this Agreement with
respect to such terminated rider.
ARTICLE IV
REINSURANCE PREMIUMS
After the effective date of this Agreement, the Monthly Premium due the
Reinsurer by the Reinsured with respect to each insurance contract reinsured is
specified in Schedule B or any amendments thereto.
ARTICLE V
PAYMENTS BY REINSURER
Benefits. As more fully described on Schedule B, the Reinsurer will pay the
Reinsured the remaining obligation under the SLT5 rider after permitted
withdrawals have reduced the associated contract's account value to zero as
well as a monthly expense allowance.
ARTICLE VI
REPORTING AND CASH SETTLEMENT
1. The Reinsured will provide the Reinsurer with information necessary to
properly account for the business reinsured.
2. Not later than ten (10) business days after the end of each month, the
Reinsured will submit to the Reinsurer a report substantially in accordance
with Schedule B. The Reinsured agrees to provide or make available to the
Reinsurer such documentation as may be necessary to support the items
reported.
Page 4 of 22
3. Not later than ten (10) business days after the end of each month, the
Reinsured will submit to the Reinsurer a report substantially in accordance
with Schedule C.
4. Not later than ten (10) business days after the end of each calendar year,
the Reinsured will submit to the Reinsurer a report substantially in
accordance with Schedule D.
5. The Reinsurer and the Reinsured shall consider any balance due and unpaid,
whether on account of premiums, allowances, losses or claims expenses, to be
mutual debits or credits under this Agreement and will offset, if permitted
under the applicable law. Only the balance will be considered in determining
the liability of the Reinsurer.
6. Cash settlement of balances due between Reinsured and Reinsurer will be made
within five (5) business days of receipt of Schedule B each month.
7. The Reinsurer may contest any calculation contained in a report from the
Reinsured by providing an alternative calculation to the Reinsured in
writing within 30 days of the Reinsurer's receipt of the Reinsured's
calculation. If the Reinsurer does not so notify the Reinsured, the
Reinsured may consider the reports final.
If the Reinsurer contests the Reinsured's calculation, the parties will act
in good faith to reach an agreement as to the correct amount within 30 days
of the date the Reinsurer submits its alternative calculation. If the
Reinsured and the Reinsurer do not reach agreement on the calculation within
such 30-day period, then the calculation shall be determined by an
independent accounting firm or other independent third party acceptable to
both the Reinsured and the Reinsurer within 20 days after the expiration of
such 30-day period.
ARTICLE VII
DEPOSITS ON THE RESERVES
The Reinsurer will hold reserves that are at least as great as those required
by Bermuda laws and regulations.
Page 5 of 22
ARTICLE VIII
CREDIT FOR REINSURANCE
Page 6 of 22
Page 7 of 22
Page 8 of 22
Page 9 of 22
Page 10 of 22
ARTICLE IX
GENERAL PROVISIONS
1. Reinsurance Conditions. The reinsurance is subject to the same limitations
and conditions as the SLT5 riders written by the Reinsured on which the
reinsurance is based.
2. Expenses. In no event will the Reinsurer have any liability for any
extra-contractual damages which are rendered against the Reinsured as a
result of administrative errors, acts, omissions or course of conduct
committed by the Reinsured in connection with the annuity contracts
associated with the SLT5 riders reinsured under this Agreement. In no event
will the Reinsured have any liability for extra-contractual damages against
the Reinsurer as a result of acts, omissions, or course of conduct committed
by the Reinsurer in connection with the reinsurance of the SLT5 riders under
this Agreement.
3. Oversights. If failure to pay any premium due or to perform any other act
required by this Agreement is unintentional and is caused by
misunderstanding or oversight, the Reinsured and the Reinsurer will adjust
the situation to what it would have been had the misunderstanding or
oversight not occurred.
4. Inspection. At any reasonable time, the Reinsurer and the Reinsured may
inspect the original papers and any other books or documents at the Home
Office of the other relating to or affecting reinsurance under this
Agreement.
Page 11 of 22
It is mutually agreed by the Reinsured and the Reinsurer that any
information that is made available for inspection under this section of the
Agreement will be kept confidential and under no circumstances may this
information be disclosed to, or made available for inspection by, any third
party without the prior written consent of the other contracting party.
5. Assignment or transfer. In no event will either the Reinsured or the
Reinsurer assign any of its rights, duties and or obligations under this
Agreement without the prior written approval of the other party. Such
approval will not unreasonably be withheld.
In no event will either the Reinsured or the Reinsurer transfer either the
SLT5 riders reinsured under this Agreement or the reinsurance without the
prior written approval of the other party. Such approval will not
unreasonably be withheld.
No assignment or transfer shall be effective unless such assignment or
transfer is (i) filed with the Reinsured's appropriate domiciliary
regulator(s) at least 30 days prior to the proposed effective date, (ii) not
disapproved, (iii) made in writing, and (iv) signed by the parties hereto.
6. If any provision of this Agreement will be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement will
not be affected thereby. This Agreement will be construed in accordance with
the applicable federal law and the laws of the State of New Jersey.
7. Premium Taxes. The Reinsurer will not be liable for premium taxes.
8. Insolvency. In the event of the declared insolvency of the Reinsured, and
the appointment of a domiciliary liquidator, receiver, conservator or
statutory successor for the Reinsured, this reinsurance will be payable,
with reasonable provision for verification, directly to the Reinsured or its
domiciliary liquidator, receiver, or conservator or statutory successor, on
the basis of the liability of the Reinsured without diminution because of
the insolvency of the Reinsured or because the liquidator, receiver,
conservator or statutory successor of the Reinsured has failed to pay all or
a portion of any claim.
Every liquidator, receiver, conservator or statutory successor of the
Reinsured or guaranty fund or association will give written notice to the
Reinsurer of the pendency of a claim involving the Reinsured indicating
which of the underlying insurance contracts would involve possible liability
on the part of the Reinsurer to the Reinsured or its domiciliary liquidator,
receiver, conservator or statutory successor, within a reasonable amount of
time after the claim is filed in the conservation, liquidation, receivership
or other proceeding. Failure to give such notice shall not excuse the
obligation of the Reinsurer unless it is substantially prejudiced thereby.
During the pendency of any claim, the Reinsurer may investigate the same and
interpose, at its own expense, in the proceeding where that claim is to be
adjudicated, any defense or defenses that it may deem available to the
Reinsured, to its contract owner, or to any liquidator, receiver or
statutory successor of the Reinsured or guaranty fund or
Page 12 of 22
association. The expenses thus incurred by the Reinsurer will be chargeable,
subject to approval of the applicable court, against the Reinsured as part
of the expense of conservation or liquidation to the extent of a pro rata
share of the benefit which may accrue to the Reinsured as a result of the
defense undertaken by the Reinsurer.
This reinsurance will be payable directly to the Reinsured or to its
domiciliary liquidator, receiver, conservator or statutory successor, except
as expressly required otherwise by applicable insurance law.
9. Insolvency of the Reinsurer. In the event of the insolvency, bankruptcy,
receivership, rehabilitation or dissolution of the Reinsurer, the Reinsured
may retain all or any portion of any amount then due or which may become due
to the Reinsurer under this Agreement and use such amounts for the purposes
of paying any and all liabilities of the Reinsurer incurred under this
Agreement. When all such liability hereunder has been discharged, the
Reinsured will pay the Reinsurer, its successor or statutory receiver, the
balance of such amounts withheld as may remain.
10.Confidentiality. The Reinsurer agrees to regard and preserve as confidential
all information and material which is related to the Reinsured's business
and/or customers that may be obtained by the Reinsurer from any source as a
result of this Agreement. The Reinsurer will not, without first obtaining
the Reinsured's prior written consent disclose to any person, firm or
enterprise, or use for its own benefit or for the benefit of any third party
any information designated by the Reinsurer as Confidential Information or
Customer Information except as necessary for retrocession purposes, external
auditors, as required by court order, or as required by law or regulation.
"Confidential Information" includes, but is not limited to any and all
financial data, statistics, programs, research, developments, information
relating to the Reinsured's insurance and financial products, planned or
existing computer systems architecture and software, data, and information
of the Reinsured as well as third party confidential information to which
the Reinsured has access. "Customer Information" includes all information
provided by or at the direction of the Reinsured about a customer of the
Reinsured or any affiliates of the Reinsured, including but not limited to
name, address, telephone number, email address, account or policy
information, and any list or grouping of customers.
Notwithstanding the foregoing, this provision shall not apply with respect
to disclosing of Confidential Information which is or becomes publicly known
through no wrongful act of the Reinsurer; or is received from a third party
without similar restriction and without breach of this Amendment; or is
independently developed by the Reinsurer; or is approved for release by
written authorization of the Reinsured; or is placed in or becomes party of
the public domain pursuant to or by reason of operation of law. The
foregoing exceptions do not apply to the disclosure of Customer Information,
which may not be disclosed without the Reinsured's prior written consent.
These provisions regarding Confidential Information shall survive the
termination of the parties' obligations under this Agreement for a period of
two years, and the provisions regarding Customer Information shall survive
the termination of the parties' obligations under this Agreement
indefinitely.
Page 13 of 22
The Reinsurer certifies that it has implemented and will maintain an
effective information security program to protect the Reinsured's Customer
Information, which program includes administrative, technical, and physical
safeguards:
(a) to ensure the security and confidentiality of Customer Information;
(b) to protect against any anticipated threats or hazards to the security or
integrity of such Customer Information; and
(c) to protect against unauthorized access to or use of Customer Information
which could result in substantial harm or inconvenience to the Reinsured
or its affiliates, or to customers of any of them.
In the event that the Reinsurer is in material breach of any provisions of
these provisions, it shall immediately advise the Reinsured and take steps
to remedy such breach, including but not limited to protecting customers,
the Reinsured, and the Reinsured's affiliates against the consequences of
any disclosure or use of Customer Information in violation of these
provisions.
11.Notices. Notices regarding this Agreement shall be in writing and deemed
delivered if personally delivered, sent via facsimile or other agreed upon
electronic means, or dispatched by certified or registered mail, return
receipt requested, postage prepaid, addressed to the parties as follows:
Chief Actuary - Annuities
Pruco Life Insurance Company of New Jersey
000 Xxxxxxxxxx Xxxxxx
Xxxxxx, Xxx Xxxxxx 00000
Copy to: Prudential Annuities - Actuarial
Fax No: 000-000-0000
Pruco Reinsurance Ltd.
c/x Xxxxx Management Services (Bermuda) Ltd.
Xxxxxxxx Xxxx
00 Xxxxxxxx Xxxxxx
Xxxxxxxx XX00, Xxxxxxx
Copy to: Pruco Reinsurance Ltd - Xxxxxxx Xxxxxx
Fax No: 000-000-0000
Notice shall be deemed given on the date it is deposited in the mail or sent
via facsimile or other electronic means in accordance with the foregoing.
Any party may change the address to which to send notices by notifying the
other party of such change of address in writing in accordance with the
foregoing.
Page 14 of 22
ARTICLE X
DAC TAX AGREEMENT
1. The Reinsured and the Reinsurer, herein collectively called the "Parties",
or singularly the "Party", hereby enter into an election under Treasury
Regulations Section 1.848-2(g) (8) as promulgated under the Internal Revenue
Code, as found in Title 26 of the United States Code, hereinafter referred
to as the Regulations and the IRC. Both parties agree to make the election
contemplated by this Section 14 by timely attaching to their U.S. tax
returns the schedule contemplated by Section 1.848-2(g)(8)(ii) of the
Regulations. Furthermore, the parties agree to the following:
a. For each taxable year under this Agreement, the party with the net
positive consideration, as defined in the Regulations, will capitalize
specified policy acquisition expenses with respect to this Agreement
without regard to the general deductions limitation of Section 848
(c) (1);
b. The Reinsured and the Reinsurer agree to exchange information pertaining
to the net consideration under this Agreement each year to insure
consistency or as otherwise required by the U.S. Internal Revenue
Service;
c. The Reinsured will submit to the Reinsurer by May 1 of each year its
calculation of the net consideration for the preceding calendar year.
d. The Reinsurer may contest such calculation by providing an alternative
calculation to the Reinsured in writing within 30 days of the
Reinsurer's receipt of the Reinsured's calculation. If the Reinsurer
does not so notify the Reinsured, the Reinsurer will report the net
consideration as determined by the Reinsured in the Reinsurer's tax
return for the previous calendar year;
e. If the Reinsurer contests the Reinsured's calculation of the net
consideration, the parties will act in good faith to reach an agreement
as to the correct amount within 30 days of the date the Reinsurer
submits its alternative calculation. If the Reinsured and the Reinsurer
do not reach agreement on the net amount of consideration within such
30-day period, then the net amount of consideration for such year shall
be determined by an independent accounting firm acceptable to both the
Reinsured and the Reinsurer within 20 days after the expiration of such
30-day period.
f. The Reinsured and the Reinsurer agree that this election shall first be
effective for the 2006 calendar tax year and will be effective for all
subsequent taxable years for which this Agreement remains in effect.
The Reinsured represents and warrants that it is subject to U.S. taxation
under either Subchapter L of Chapter 1, or Subpart F of Subchapter N of
Chapter 1 of the IRC of 1986, as amended. The Reinsurer represents and
warrants that it has duly elected to be subject to U.S. taxation under
Section 953(d) of the IRC of 1986, as amended.
Page 15 of 22
ARTICLE XI
RECAPTURE
The business reinsured under this Agreement will not be eligible for recapture,
except through mutual agreement of both parties.
ARTICLE XII
ARBITRATION
1. Any controversy or claim arising out of or relating to this Agreement will
be settled by arbitration.
2. There must be three arbitrators who will be active, prior or retired
officers of life insurance companies other than the contracting companies or
their subsidiaries or affiliates. Each of the contracting companies will
appoint one of the arbitrators and these two arbitrators will select the
third.
In the event either contracting company fails to choose an arbitrator within
thirty (30) days after the other contracting company has given written
notice of its arbitrator appointment, the contracting company which has
given written notice may choose two arbitrators who will in turn choose a
third arbitrator before entering arbitration. If the two arbitrators are
unable to agree upon the selection of a third arbitrator within thirty
(30) days following their appointment, each arbitrator will nominate three
candidates within ten (10) days thereafter, and the final selection will be
made by a court of competent jurisdiction from among the submitted names
(three each) or any other persons the court finds to be a qualified and
impartial arbitrator.
3. With regard to (2) above, arbitration must be conducted in accordance with
the Commercial Arbitration Rules of the American Arbitration Association
that will be in effect on the date of delivery of demand for arbitration.
4. Each contracting company will pay its arbitrator and its arbitration
expenses and the two companies will share equally the third arbitrator's
expenses.
5. The award agreed to by the arbitrators will be final and binding upon the
parties, and judgment may be entered upon it in any court having
jurisdiction.
Page 16 of 22
ARTICLE XIII
DURATION OF AGREEMENT
1. This Agreement may be terminated with respect to new SLT5 riders at any time
by either party giving ninety (90) days' written notice of termination. The
day the notice is deposited in the mail addressed to the Home Office or to
an Officer of either company will be the first day of the ninety (90) day
period. No termination shall be effective unless such termination is
(i) filed with the Reinsured's appropriate domiciliary regulator(s) at least
30 days prior to the proposed effective date, (ii) not disapproved,
(iii) made in writing, and (iv) signed by the parties hereto.
2. During the ninety (90) day period, this Agreement will continue to remain in
force.
3. After termination, the Reinsurer and the Reinsured will remain liable for
all reinsurance that became effective prior to the termination of the
Agreement.
ARTICLE XIV
ENTIRE AGREEMENT
This Agreement including any Schedules and Amendments will constitute the
entire agreement between the parties with respect to the business being
reinsured hereunder. There are no understandings between the parties other than
as expressed in this Agreement. Any change or modification to this Agreement
will be null and void unless made by amendment to this Agreement and signed by
both parties.
No change or modification to the Agreement shall be effective unless such
change or modification is (i) filed with the Reinsured's appropriate
domiciliary regulator(s) at least 30 days prior to the proposed effective date,
(ii) not disapproved, (iii) made in writing, and (iv) signed by the parties
hereto.
Page 17 of 22
ARTICLE XV
EXECUTION
In witness of the above, this Agreement is signed in duplicate on the execution
date(s) and at the places indicated and will be effective as of the 26 day of
May, 2006.
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
At Newark, New Jersey
Executed On: 5/25/2006
Signature: /s/ Xxxxxxx Xxxx
------------------------------
By: Xxxxxxx Xxxx
Title: Vice President
PRUCO REINSURANCE LTD.
At Hamilton, Bermuda
Executed On: 26/th/ May 2006
Signature: /s/ Xxxxxxx Xxxxxx
------------------------------
By: Xxxxxxx Xxxxxx
Title: Senior Vice President
Page 18 of 22
SCHEDULE A
BUSINESS REINSURED
1. Form Name and Type First Available Issue Date Form Numbers
------------------ -------------------------- ---------------
SLT5 Riders May 1, 2006 RID-JLT(03/06)
Sch-JLT(03/06)
2. Claims arising under the SLT5 rider are equal to the remaining SLT5 rider
benefits under the contract after permitted withdrawals have reduced the
contract's account value to zero, paid as due to the extent that the SLT5
benefit is greater than the benefit under the base contract or other riders
attached to the contract.
3. A prototype of the SLT5 Rider Form is attached.
Page 19 of 22
SCHEDULE B
MONTHLY SETTLEMENT REPORT
Page 20 of 22
SCHEDULE C
MONTHLY BUSINESS MANAGEMENT REPORT
A. Informational Reports
1. Reserve Report showing the statutory reserves, Account Values and
Surrender Value.
2. Production report with premiums (split by initial and additional
premiums) and contract counts, including the number of insurance
contracts in force at the beginning and at the end of the month.
Page 21 of 22
SCHEDULE D
ANNUAL REPORT
The annual report will provide the following information:
"Exhibit of Number of Policies, Contracts and Certificates for Annuities":
from the NAIC-prescribed annual statement
Page 22 of 22
