VARIABLE ANNUITY GMDB REINSURANCE AGREEMENT
Between
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
(Hereinafter called the "CEDING COMPANY")
Worcester, Massachusetts
and
ACE TEMPEST LIFE REINSURANCE LTD.
(Hereinafter called the "REINSURER")
Hamilton, Bermuda
TABLE OF CONTENTS
ARTICLE PAGE
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Access to Records X 15
Arbitration XIV 17
Automatic Provisions IV 9
Currency XII 16
Definitions I 3
Effective Date, Term, and Termination III 6
Experience Refund VII 12
Insolvency XIII 16
Litigation IX 14
Miscellaneous XVI 18
Notices XVII 19
Offset XV 18
Parties to the Agreement II 5
Premium Accounting V 10
Reinsurance Claim Settlement VI 11
Reserves VIII 13
Unintentional Errors, Misunderstandings, or Omissions XI 16
SCHEDULES
A Description of Guaranteed Minimum Death Benefits (GMDBs)
B Investment Funds Subject to this Reinsurance Agreement
C-1 Limits and Rules of CEDING COMPANY
C-2 Limits and Rules of the REINSURER
D-1 REINSURANCE PREMIUM RATES by Treaty Year
D-2 REINSURANCE RETENTION RATE
E MORTALITY RATE by Attained Age and Sex of INSURED LIFE
F ANNUAL MORTALITY IMPROVEMENT FACTOR
G REINSURER Quota Share of Risk
H CEDING COMPANY Reporting Format and Data Requirements
I Surplus Position of REINSURER
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AFLIAC and ACE Tempest Life GMDB II 2
ARTICLE I - DEFINITIONS
A. DURATION OF AGREEMENT:
EFFECTIVE DATE means December 1, 2002.
ANNUAL VALUATION DATE means November 30.
BUSINESS DAY means any day that securities are traded on the New York Stock
Exchange.
MONTHLY VALUATION Date means the last BUSINESS DAY of each month.
TERMINATION DATE means the earlier of November 30, 2012 and the last BUSINESS
DAY of the month following the month in which the AGGREGATE GMDB AMOUNT is less
than $4,000,000,000.
ANNUAL VALUATION PERIOD means the period from December 1 until November 30.
B. CONTRACT DEFINITIONS:
VARIABLE ANNUITY CONTRACT means a written annuity contract issued by the CEDING
COMPANY to a contract owner in accordance with which the CEDING COMPANY agrees
to provide specified benefits in accordance with specified terms and conditions.
INSURED LIFE means the oldest owner or annuitant, as specified in the VARIABLE
ANNUITY CONTRACT, upon whose death a claim may be due under this Agreement.
GMDB TYPE means one of the Guaranteed Minimum Death Benefits specified in the
VARIABLE ANNUITY CONTRACT and described in Schedule A.
ACCOUNT VALUE means for each VARIABLE ANNUITY CONTRACT, the sum of the invested
assets in the investment funds shown in Schedule B.
GMDB AMOUNT means the CEDING COMPANY's minimum required payment, pursuant to a
VARIABLE ANNUITY CONTRACT, on the death of the INSURED LIFE.
EXCLUDED CONTRACT means any VARIABLE ANNUITY CONTRACT that has (a) a GMDB
provision that is suspended due to change in owner or annuitant, (b) a GMDB
AMOUNT that is contractually set to the ACCOUNT VALUE, or (c) a spousal
continuation in conjunction with a death of an INSURED LIFE. Any EXCLUDED
CONTRACT shall be treated as such only on and after the date as of which it
satisfies any of the conditions identified as (a), (b), or (c) above.
ACTIVE CONTRACT means a VARIABLE ANNUITY CONTRACT, other than an EXCLUDED
CONTRACT, that remains in effect and has not terminated due to death, lapse,
surrender or some other valid contingency and has not been annuitized.
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AGGREGATE GMDB AMOUNT means the sum of the GMDB AMOUNT for all ACTIVE CONTRACTS
covered under this Agreement, as calculated on each MONTHLY VALUATION DATE.
NET AMOUNT AT RISK means for each ACTIVE CONTRACT, the excess, if any, of the
GMDB AMOUNT over the ACCOUNT VALUE.
C. REINSURED AMOUNT DEFINITIONS:
REINSURED NET AMOUNT AT RISK means the NET AMOUNT AT RISK multiplied by the
REINSURER's quota share of risk in accordance with Schedule G.
D. REINSURANCE PREMIUM DEFINITIONS:
REINSURANCE PREMIUM RATE means the numerical value provided in Schedule D-1.
MORTALITY RATE means a numerical value, provided in Schedule E, based on the
attained age and sex of the INSURED LIFE.
ANNUAL MORTALITY IMPROVEMENT FACTOR means a numerical value, provided in
Schedule F, for each ANNUAL VALUATION PERIOD.
MORTALITY IMPROVEMENT FACTOR means the product of all ANNUAL MORTALITY
IMPROVEMENT FACTORs from the inception of this Agreement at each ANNUAL
VALUATION DATE.
TERMINATION RATE means the percentage of AGGREGATE GMDB AMOUNT, based on the
AGGREGATE GMDB AMOUNT at the beginning of each ANNUAL VALUATION PERIOD, that
terminates for any reason except death or admission into a nursing home that
qualifies for waiver of surrender charges under the terms of the VARIABLE
ANNUITY CONTRACTs during each ANNUAL VALUATION PERIOD.
MONTHLY REINSURANCE PREMIUM means, for each ACTIVE CONTRACT covered by this
Agreement, the sum of the REINSURANCE PREMIUM RATE times the MORTALITY RATE
times the MORTALITY IMPROVEMENT FACTOR at the most recent ANNUAL VALUATION DATE
times the REINSURED NET AMOUNT AT RISK as of the MONTHLY VALUATION DATE.
REINSURANCE PREMIUM DUE DATE means the MONTHLY VALUATION DATE.
REMITTANCE DATE means the last BUSINESS DAY of the calendar month following the
REINSURANCE PREMIUM DUE DATE.
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E. REINSURANCE CLAIM DEFINITIONS:
GMDB CLAIM means the REINSURED NET AMOUNT AT RISK on the date that CEDING
COMPANY receives due proof of death.
MONTHLY GMDB CLAIM means the sum of all GMDB CLAIMs presented for payment by the
CEDING COMPANY to the REINSURER in a month, calculated on each MONTHLY VALUATION
DATE.
ANNUAL GMDB CLAIM means the sum of the most recent twelve MONTHLY GMDB CLAIMs,
as calculated on each ANNUAL VALUATION DATE.
AGGREGATE GMDB CLAIM means the sum of all GMDB CLAIMS calculated on the
TERMINATION DATE.
F. REINSURANCE CLAIM LIMIT DEFINITIONS:
MONTHLY CLAIM LIMIT means the sum of the MORTALITY RATE times the REINSURED NET
AMOUNT AT RISK, for each ACTIVE CONTRACT, as calculated on each MONTHLY
VALUATION DATE.
ANNUAL CLAIM LIMIT means the sum of the most recent twelve MONTHLY CLAIM LIMITs,
as calculated on each ANNUAL VALUATION DATE.
G. REINSURANCE EXPERIENCE REFUND DEFINITIONS:
REINSURANCE RETENTION RATE means the numerical value in Schedule D-2.
MONTHLY REINSURANCE RETENTION means, for each ACTIVE CONTRACT, the sum of the
REINSURANCE RETENTION RATE times the MORTALITY RATE times the REINSURED NET
AMOUNT AT RISK as of the MONTHLY VALUATION DATE.
ARTICLE II - PARTIES TO THE AGREEMENT
This Agreement shall be binding upon and shall inure solely to the benefit of
the CEDING COMPANY and the REINSURER. This Agreement shall not and is not
intended to create any legal relationship or confer any rights and obligations
between the REINSURER and any third party, including without limitation,
annuitants, contract owners, certificate owners, beneficiaries, applicants or
assignees under any ACTIVE CONTRACT.
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ARTICLE III - EFFECTIVE DATE, TERM AND TERMINATION
A. The Agreement covers VARIABLE ANNUITY CONTRACTs issued by the CEDING
COMPANY that:
(i) are among the GMDB TYPES identified in Schedule A;
(ii) have accounts invested in the investment funds listed in Schedule B;
(iii) are issued within the limits and rules described in Schedule C-1;
(iv) are ACTIVE CONTRACTS on the EFFECTIVE DATE;
(v) are in compliance with all of the other terms and provisions of this
Agreement
B. Subject to paragraphs C, D and F below, this Agreement will terminate on
the TERMINATION DATE.
C. The CEDING COMPANY shall have the option of terminating this Agreement with
ninety (90) days written notice to the REINSURER, after the occurrence of
any of the following:
1. The REINSURER's Standard and Poor's Claim Paying Rating is
reduced to a "BBB" or lower. The REINSURER must report any
adverse change in Standard and Poor's Claim Paying Rating to the
CEDING COMPANY within fifteen (15) days of the change. Any notice
of termination given by the CEDING COMPANY enabled by such rating
reduction shall be deemed withdrawn if the REINSURER's Standard
and Poor's Rating is restored to a level higher than "BBB" during
the 90 day notice period;
2. An order appointing a receiver, conservator or trustee for
management of the REINSURER is entered or a proceeding is
commenced for rehabilitation, liquidation, supervision or
conservation of the REINSURER;
3. The REINSURER's U.S. GAAP surplus position is reduced to 70% or
less of the value of its U.S. GAAP surplus position as of
December 31, 2001. The REINSURER must report such a reduction
within fifteen (15) days after it occurs. The REINSURER's surplus
position as of December 31, 2001 is provided in Schedule I. Any
notice of termination given by the CEDING COMPANY enabled by such
surplus reduction shall be deemed withdrawn if the REINSURER's
U.S. GAAP surplus position is restored to a level higher than 70%
of its U.S. GAAP surplus position as of December 31, 2001 during
the 90 day notice period.
D. The REINSURER shall have the option of terminating this Agreement with
ninety (90) days written notice to the CEDING COMPANY after the occurrence
of any of the following:
1. The CEDING COMPANY fails to provide timely submissions of data in
accordance with Schedule H. The REINSURER must provide the CEDING
COMPANY with Notice of Termination. If, during the ninety (90)
days following this notification, the REINSURER receives all data
submissions in arrears, the notice of termination shall
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AFLIAC and ACE Tempest Life GMDB II 6
be deemed withdrawn. If the CEDING COMPANY fails to provide
the submission of data in accordance with Schedule H as of
the close of the last day of this ninety (90) day notice
period, the REINSURER's liability for all risks reinsured
associated with the withheld data under this Agreement
will terminate.
2. The CEDING COMPANY fails to pay premium on or before the
REMITTANCE DATE. In the event that the premiums are not paid by
the REMITTANCE DATE, the REINSURER shall have the right to
terminate this agreement by giving ninety (90) days written
notice of termination to the CEDING COMPANY. If all premiums in
default and interest owed in accordance with Article III,
paragraph E are received by the REINSURER within the ninety (90)
day time period, the Agreement will remain in effect and the
notice of termination shall be deemed withdrawn. If premiums
remain in default as of the close of the last day of this ninety
(90) day notice period, the REINSURER's liability for all risks
reinsured associated with the defaulted premiums under this
Agreement will terminate.
E. Except as otherwise provided herein, upon termination of this Agreement,
REINSURER shall have no reinsurance liability with respect to any VARIABLE
ANNUITY CONTRACT. Not withstanding termination of reinsurance as provided
herein, the CEDING COMPANY shall continue to be liable to the REINSURER for
all unpaid reinsurance premiums earned by the REINSURER under this
Agreement and the REINSURER shall continue to be liable to the CEDING
COMPANY for all unpaid GMDB CLAIMS owed to the CEDING COMPANY under this
Agreement. Such amounts owed by either party are subject to a daily
interest charge from the REMITTANCE DATE until the date paid. The daily
interest rate is equal to 1/365 times the sum of (a) the 3-month LIBOR rate
as of the most recent MONTHLY VALUATION DATE, as published in the Wall
Street Journal, and (b) 1.00%.
F. The CEDING COMPANY may recapture all ACTIVE CONTRACTS under this Agreement
prior to the TERMINATION DATE if (a) the EXPERIENCE REFUND ACCOUNT,
measured on the most recent ANNUAL VALUATION DATE; is a positive value and
(b) the sum of the NET AMOUNT AT RISK for all ACTIVE CONTRACTS is less than
$750 million on the most recent ANNUAL VALUATION DATE; and (c) the most
recent ANNUAL VALUATION DATE is after December 1, 2005. Such recapture is
effective on the third MONTHLY VALUATION DATE following written
notification from the CEDING COMPANY to the REINSURER.
G. At the time that recapture is elected by the CEDING COMPANY under the
conditions described in paragraph F, a Recapture Fee will be payable from
the CEDING COMPANY to the REINSURER. The Recapture Fee will be calculated
as follows: First determine the greater of $500,000 or the MONTHLY
REINSURANCE PREMIUM calculated on the MONTHLY VALUATION DATE immediately
following the date that the REINSURER receives written notification from
the CEDING COMPANY of its irrevocable intent to recapture. This figure will
be divided by 60 and multiplied by the number of months between the MONTHLY
VALUATION DATE immediately following the date that the REINSURER receives
such notification and November 30, 2012. The resulting amount will be the
Recapture Fee which is payable from the CEDING COMPANY to the REINSURER on
the REMITTANCE DATE immediately following the MONTHLY VALUATION DATE
immediately following the date that the REINSURER receives such
notification.
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AFLIAC and ACE Tempest Life GMDB II 7
H. In addition to the right of recapture in paragraph F, the CEDING COMPANY
may recapture this Agreement on June 30, 2003 upon 60 days prior written
notice to the REINSURER. Such notice of recapture, once given, is
irrevocable. In the event of recapture under this paragraph, June 30, 2003
shall be the TERMINATION DATE of this Agreement.
I. If the CEDING COMPANY recaptures this Agreement under paragraph H and if
the EXPERIENCE REFUND ACCOUNT, at the time that the amended final statement
of account is produced by the CEDING COMPANY in accordance with Article VI,
Paragraph F, is a negative value, the CEDING COMPANY shall pay such
negative amount to the REINSURER. Any such payment shall be included in the
final statement of account and amended final statement of account as
described in Article VI, paragraphs E and F.
J. If the CEDING COMPANY recaptures this Agreement under paragraph H and if
the EXPERIENCE REFUND ACCOUNT, at the time that the amended final statement
of account is produced by the CEDING COMPANY in accordance with Article VI,
Paragraph F, is a positive value, no experience refund shall be payable to
the CEDING COMPANY by the REINSURER.
K. If the CEDING COMPANY recaptures this Agreement under paragraph H, no
Recapture Fee as described in paragraph G is payable by the CEDING COMPANY
to the REINSURER.
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ARTICLE IV - AUTOMATIC PROVISIONS
A. Subject to Article III, on the EFFECTIVE DATE of this Agreement, the CEDING
COMPANY shall automatically cede and the REINSURER shall automatically
accept the ACTIVE CONTRACTS that are covered under this Agreement.
B. This Agreement covers only the liability for GMDB CLAIMS paid under
VARIABLE ANNUITY CONTRACT forms or benefit rider forms that were inforce
prior to the EFFECTIVE DATE.
C. This Agreement covers only the liability for GMDB CLAIMS paid under
VARIABLE ANNUITY CONTRACTs invested in Variable and Fixed investment funds
listed on Schedule B. If the CEDING COMPANY intends to cede to the
REINSURER a liability with respect to a new or revised investment fund it
must provide written notice to the REINSURER of such intention together
with a copy of the new or revised investment fund, and a revised Schedule
B. The CEDING COMPANY may add new or revise investment funds without
REINSURER approval. Provided the REINSURER receives notice of the new or
revised fund within thirty (30) days after the new or revised fund's
initial availability, the effective date of reinsurance hereunder shall be
the date of the new or revised fund's initial availability. Otherwise, the
REINSURER may approve any new or revised fund within thirty (30) working
days of the date it receives notification and a copy thereof, and any such
fund shall be deemed disapproved if not so approved.
D. This Agreement covers only the liability for GMDB CLAIMS where the date of
death of the INSURED LIFE is on or after the EFFECTIVE DATE and before or
on the TERMINATION DATE.
E. The REINSURER'S liability for GMDB CLAIMS may be limited in accordance with
Schedule C-2.
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AFLIAC and ACE Tempest Life GMDB II 9
ARTICLE V - PREMIUM ACCOUNTING
A. If reinsurance premiums are not paid by the REMITTANCE DATE, interest in
accordance with Article III, paragraph E will be assessed from the
REMITTANCE DATE.
B. On or before the REMITTANCE DATE, the CEDING COMPANY shall forward to the
REINSURER its statement of account and data requirements as set forth in
Schedule H together with its remittance for the MONTHLY REINSURANCE PREMIUM
as shown therein as well as any premium adjustments from the prior period.
C. If the amounts due cannot be determined by the REMITTANCE DATE, the CEDING
COMPANY shall have ninety (90) days to determine the appropriate premium
and remit with interest in accordance with Article III, paragraph E.
D. If a VARIABLE ANNUITY CONTRACT ceases to be an ACTIVE CONTRACT prior to the
MONTHLY VALUATION DATE, the MONTHLY REINSURANCE PREMIUM is adjusted to
include premium from the prior MONTHLY VALUATION DATE to the date the
VARIABLE ANNUITY CONTRACT ceases to be an ACTIVE CONTRACT.
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AFLIAC and ACE Tempest Life GMDB II 10
ARTICLE VI - REINSURANCE CLAIM SETTLEMENT
A. The REINSURER shall not be responsible for any obligation of the CEDING
COMPANY to any party under any VARIABLE ANNUITY CONTRACTS issued by the
CEDING COMPANY. The CEDING COMPANY is solely responsible for payment of
claims under the VARIABLE ANNUITY CONTRACTS.
B. On or before the REMITTANCE DATE, the CEDING COMPANY shall forward to the
REINSURER its statement of account and data requirements as set forth in
Schedule H, together with its request for reimbursement for GMDB CLAIMS as
shown therein. If requested by the REINSURER, the CEDING COMPANY shall
promptly provide the REINSURER with proof of claim, proof of claim payment
and any other claim documentation identified by the REINSURER, in
accordance with Schedule H.
C. For any calendar year, the REINSURER shall not be responsible for
reimbursement for any ANNUAL GMDB CLAIMS in excess of the ANNUAL CLAIM
LIMIT. If ANNUAL GMDB CLAIMS for any calendar year exceed the ANNUAL CLAIM
LIMIT, the request for reimbursement for GMDB CLAIMS shall be reduced so
that the sum of all such requests for reimbursement in that calendar year
do not exceed the ANNUAL CLAIM LIMIT.
D. If GMDB CLAIMS are not paid by the REMITTANCE DATE, interest calculated in
accordance with Article III, paragraph E will be assessed from the
REMITTANCE DATE and will continue until the GMDB CLAIMS are paid in full.
E. A finalstatement of accounts prepared by the CEDING COMPANY is due
sixty (60) days after the TERMINATION DATE. On or before this date, the
CEDING COMPANY shall forward to the REINSURER its final statement of
account as set forth in Schedule H. Based on the statement of account, any
amounts owed by either party must be paid within thirty (30) days of
receiving the statement of accounts. If amounts owed are not paid within
thirty (30) days of receiving the statement of account, the amounts owed
are subject to an interest charge in accordance with Article III, paragraph
E, assessed beginning thirty (30) days after receiving the statement of
account.
F. The CEDING COMPANY shall have six (6) months after the TERMINATION DATE to
submit to REINSURER an amended final statement of account. Any amounts owed
by either the CEDING COMPANY or the REINSURER based on the amended final
statement of account, including any provision for Experience Refund in
accordance with Article VII, must be paid within thirty (30) days of
receipt of the amended final statement. If the amount owed is not paid
within thirty (30) days of receiving the statement of account, the amount
owed is subject to an interest charge in accordance with Article III,
Paragraph E.
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AFLIAC and ACE Tempest Life GMDB II 11
ARTICLE VII - EXPERIENCE REFUND
A. The EXPERIENCE REFUND ACCOUNT shall be calculated on each MONTHLY VALUATION
DATE as the sum of the EXPERIENCE REFUND ACCOUNT on the previous MONTHLY
VALUATION DATE plus interest on the EXPERIENCE REFUND ACCOUNT on the
previous MONTHLY VALUATION DATE plus MONTHLY REINSURANCE PREMIUM less
MONTHLY GMDB CLAIM less MONTHLY REINSURANCE RETENTION.
B. Interest on the EXPERIENCE REFUND ACCOUNT shall be calculated using a
monthly interest rate equal to 1/12 times the sum of (a) the 3-month LIBOR
rate on the preceding MONTHLY VALUTION DATE as published in the Wall Street
Journal and (b) 0.50%.
C. The EXPERIENCE REFUND ACCOUNT on the EFFECTIVE DATE shall be the quantity
zero, and the EXPERIENCE REFUND ACCOUNT shall continue to be calculated
until the time that the amended final statement of account is produced by
the CEDING COMPANY in accordance with Article VI, Paragraph F.
D. Unless subject to Article III, Paragraph J, if the EXPERIENCE REFUND
ACCOUNT is a positive value as reported in the amended final statement of
account as prepared by the CEDING COMPANY in accordance with Article VI,
paragraph F, an experience refund equal to 85% of the EXPERIENCE REFUND
ACCOUNT is payable to the CEDING COMPANY by the REINSURER. Such experience
refund, if payable, shall be included in the amended final statement of
account, as described in Article VI, paragraph F. If the EXPERIENCE REFUND
ACCOUNT is not a positive value as reported in the amended final statement
of account, no experience refund is payable.
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ARTICLE VIII - RESERVES
A. The reserve held by the REINSURER for reinsurance of the variable annuity
death benefit will be determined in accordance with the current applicable
NAIC Actuarial Guidelines, with reasonable adjustments for the
non-proportional aspects of this Agreement.
B. It is the intention of both the REINSURER and the CEDING COMPANY that the
CEDING COMPANY qualifies for reinsurance credit in the states of
Massachusetts and Delaware for reinsurance ceded hereunder. As a
non-authorized reinsurer in Massachusetts and Delaware, REINSURER will
comply with Massachusetts and Delaware Insurance Law relating to
reinsurance credit for non-authorized reinsurers, as promulgated in
Massachusetts' and Delaware's statutes on the effective date of this
Agreement.
C. Provision for statutory reserves is satisfied by the REINSURER if either:
1. the funds (including any additional amounts legally required) are
in a trust that complies with the CEDING COMPANY's applicable
regulations, subject to withdrawal solely by, and under the
exclusive control of the CEDING COMPANY, held in a qualified
United States financial institution, as defined below, are at
least as great as the statutory reserves as of the ANNUAL
VALUATION DATE;
2. cash or marketable securities are transferred to the CEDING
COMPANY in an amount at least as great as the statutory reserves
as of the ANNUAL VALUATION DATE, with the actual investment
earnings on the proceeds owned by the REINSURER.
3. clean, irrevocable, unconditional letters of credit, in an amount
at least as great as the statutory reserves as of the ANNUAL
VALUATION DATE, issued or confirmed by a qualified United States
financial institution, meeting applicable standards of issuer
acceptability as of the dates of their issuance.
4. a combination of (1), (2) and (3), such that the sum is at least
as great as the statutory reserves.
D. If at the end of any ANNUAL VALUATION PERIOD the statutory reserve is a
positive value less than $500,001, the REINSURER may, at its sole
discretion, make provision for this statutory reserve.
E. A qualified United States financial institution means an institution that
meets either subdivision (1) or (2):
1. Is organized, or in the case of a United States office of a
foreign banking organization, is licensed, under the laws of the
United States or any state in the United States, is regulated,
supervised, and examined by federal or state authorities having
regulatory authority over banks and trust companies, and has been
determined by the commissioner of Michigan to meet such standards
of financial condition and standing as are considered necessary
and appropriate to regulate the quality of
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AFLIAC and ACE Tempest Life GMDB II 13
financial institutions whose letters of credit will be
acceptable to the commissioners of Massachusetts and Delaware.
2. For those institutions that are eligible to act as a fiduciary of
a trust, is organized, or in the case of a United States branch
or agency office of a foreign banking organization, is licensed,
under the laws of the United States or any state in the United
States, has been granted authority to operate with fiduciary
powers, and is regulated, supervised, and examined by federal or
state authorities having regulatory authority over banks and
trust companies.
ARTICLE IX - LITIGATION
In the event of any action brought against the CEDING COMPANY under any VARIABLE
ANNUITY CONTRACT that is subject to the terms and conditions of this Agreement,
the CEDING COMPANY shall provide a copy of such action and written notice of
such action within thirty (30) business days to the REINSURER.
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AFLIAC and ACE Tempest Life GMDB II 14
ARTICLE X - ACCESS TO RECORDS
A. The REINSURER, or its duly authorized representative, shall have access at
any reasonable time during regular business hours, to all records of the
CEDING COMPANY, including the right to photocopy and retain copies of such
documents, which reasonably pertain to this Agreement. Records shall be
maintained in accordance with prudent standards of insurance company record
keeping and must be retained for a period of at least three (3) years after
the final settlement date. Within one hundred and twenty (120) days
following the end of each calendar year, the CEDING COMPANY and the
REINSURER will provide each other with copies of their respective audited
financial statements.
B. The CEDING COMPANY and the REINSURER may come into the possession or
knowledge of Confidential Information of the other in fulfilling
obligations under this Agreement. Each party agrees to hold such
Confidential Information in the strictest confidence and to take all
reasonable steps to ensure that such Confidential Information is not
disclosed in any form by any means by each of them or by any of its
employees to third parties of any kind, other than attorneys, accountants,
reinsurance intermediaries, consultants or retrocessionaires having an
interest in such information, except by advance written authorization by an
officer of the authorizing party; provided, however, that either party will
be deemed to have satisfied its obligations as to the Confidential
Information by protecting its confidentiality in the same manner that such
party protects its own proprietary or Confidential Information of like kind
which shall be at least a reasonable manner. "Confidential Information"
means any information which (1) is not generally available to or known by
the public, or (2) has not been lawfully obtained or developed by either
party independently and not in violation of this Agreement or from any
source other than the other party, provided that such source is not bound
by a duty of confidentiality to such other party, and which consists of:
1. Information or knowledge about each party's products, processes,
services, finances, customers, research, computer programs,
marketing and business plans, claims management practices; and
2. Any medical or other personal, individually identifiable
information about people or business entities with whom the
parties do business, including customers, prospective customers,
vendors, suppliers, individuals covered by insurance plan, and
each party's producers and employees.
3. Records provided pursuant to Paragraph A, above.
C. If either the CEDING COMPANY or the REINSURER discloses Confidential
Information to interested parties such as, but not limited to, attorneys,
accountants, reinsurance intermediaries, consultants or retrocessionaires
having an interest in such information, such interested parties shall also
be bound by this Article's provisions on disclosing Confidential
Information. The CEDING COMPANY or the REINSURER must inform the interested
party of the provisions of this Article and agree to ensure that the
interested parties honor the provisions.
D. This Article expires 3 years after the TERMINATION DATE.
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AFLIAC and ACE Tempest Life GMDB II 15
ARTICLE XI - 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.
ARTICLE XII - CURRENCY
All retentions and limits hereunder, and all monetary data elements as described
in Schedule H, are expressed in United States dollars and all premium and claim
payments shall be made in United States dollars.
ARTICLE XIII - INSOLVENCY
A. In the event of insolvency of the CEDING COMPANY, all reinsurance under
this Agreement will be payable directly by the REINSURER to the CEDING
COMPANY or to its liquidator, receiver, conservator or statutory successor
on the basis of the REINSURER's liability to the CEDING COMPANY without
diminution because of the insolvency of the CEDING COMPANY or because the
liquidator, receiver, conservator or statutory successor of the CEDING
COMPANY has failed to pay all or a portion of any claim.
B. In the event of insolvency of the CEDING COMPANY, the liquidator, receiver,
or statutory successor will, within reasonable time after the claim is
filed in the insolvency proceeding, give written notice to the REINSURER of
all pending claims against the CEDING COMPANY on any contracts 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 that 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 that may accrue to the CEDING COMPANY
solely as a result of the defense undertaken by the REINSURER. Where two or
more REINSURERs are participating in the same claim and a majority in
interest 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.
C. In the event of insolvency of the REINSURER, the CEDING COMPANY may
recapture immediately all ceded benefits upon written notice to the
REINSURER, its liquidator, receiver or statutory successor. The CEDING
COMPANY shall also have a claim on the REINSURER for any reinsurance credit
amounts including reserves, unearned premiums and other amounts due the
CEDING COMPANY on such reinsurance, at the date of recapture.
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AFLIAC and ACE Tempest Life GMDB II 16
ARTICLE XIV - ARBITRATION
A. As a condition precedent to any right of action hereunder, any dispute
between the parties with respect to the interpretation of this Agreement or
any right, obligation or liability of either party, whether such dispute
arises before or after termination of this Agreement, shall be submitted to
arbitration upon the written request of either party. Each party shall
select an arbitrator within thirty (30) days after the written request for
arbitration. If either party refuses or neglects to appoint an arbitrator
within thirty (30) days after the written request for arbitration, the
other party may appoint the second arbitrator. The two arbitrators shall
select an umpire within thirty (30) days after the appointment of the
second arbitrator. If the two arbitrators fail to agree on the selection of
the umpire within thirty (30) days after the appointment of the second
arbitrator, either party may submit a request to the American Arbitration
Association to select an umpire, subject to the requirements for such
arbitrator set forth below.
B. The arbitrators and the umpire all shall be active or retired,
disinterested executive officers of insurance or reinsurance companies. The
umpire shall preside at all hearings and meetings of the panel and shall
announce the decision of the panel. The majority vote of the arbitrators
and the umpire shall be the decision of the panel. The decision shall be in
writing signed by the majority in favor thereof.
C. The arbitration panel shall interpret this Agreement as an agreement
entered into in the highest good faith in keeping with the commercially
recognized customs and practices of the insurance business and shall make
its decision considering said customs and practices. The arbitration panel
is released from judicial formalities and shall not be bound by strict
rules of procedure and evidence. Interpreting this Agreement, should it
become necessary to refer to the laws of any particular jurisdiction, the
arbitration panel shall apply the laws of the state of Ohio without regard
to the conflicts of laws provision thereof.
D. The decision of the arbitration panel shall be final and binding on both
parties. The arbitration panel may, at its discretion, award costs and
expenses as it deems appropriate, including, but not limited to, attorneys'
fees, interest and compensatory damages. Judgment may be entered upon the
final decision of the arbitration panel in any court of competent
jurisdiction.
E. All meetings and hearings before the arbitration panel shall take place in
Worcester, Massachusetts unless some other place is mutually agreed upon by
both parties or ordered by the panel.
F. In the absence of a decision to the contrary by the arbitration panel,
each party shall bear the expense of the arbitrator chosen by or for it and
shall jointly and equally bear with the other party the expense of the
umpire and of the arbitration.
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AFLIAC and ACE Tempest Life GMDB II 17
ARTICLE XV - OFFSET
Either party shall have, and may exercise at any time the right to offset any
balance or amounts whether on account of premiums, or on account of claims or
otherwise, due from one party to the other under the terms of this Agreement.
ARTICLE XVI - MISCELLANEOUS
A. This Agreement will be binding to the parties and their respective
successors and permitted assignees. This Agreement may not be assigned by
either party without the written consent of the other.
B. The REINSURER will pay the CEDING COMPANY a Federal Excise Tax allowance on
each MONTHLY VALUATION DATE equal to the amount of any Federal Excise Tax
paid by the CEDING COMPANY during the prior month, with the prior approval
of the REINSURER, in connection with the annuities reinsured hereunder. The
CEDING COMPANY will be responsible for the timely payment of Federal Excise
Tax and for the filing of all required tax, information returns or filings
with the Internal Revenue Service with respect to this Agreement.
C. This Agreement means the text hereof and all Exhibits, Schedules and
Amendments effected in accordance herewith. The Agreement constitutes the
entire statement of agreement between the parties with regard to the
subject matter hereof. There are no other understandings or agreements
between the parties regarding the contracts reinsured other than as
expressed in this Agreement. Any changes or additions to this Agreement
must be effected by means of a written amendment that has been signed by
both parties.
D. Notwithstanding the termination of this Agreement as provided herein, its
provisions will continue to apply hereunder to the end that all obligations
and liabilities incurred by each party hereunder will be full performed and
discharged.
E. If any provision of this Agreement should be rendered invalid, illegal or
unenforceable, the parties will renegotiate the Agreement in good faith to
cure such invalid, illegal or unenforceable provision. If such negotiations
are unsuccessful to resolve the matter, then (i) such invalid, illegal or
unenforceable provision will be deleted from the Agreement, (ii) to the
maximum extent permitted by law, such invalidity, illegality or
unenforceability will not affect any other provisions of this Agreement and
(iii) this Agreement will be construed to give effect to the remaining
provisions hereof to carry out its original intent.
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AFLIAC and ACE Tempest Life GMDB II 18
ARTICLE XVII - NOTICES
A. All notices required to be given hereunder shall be in writing and shall be
deemed delivered if personally delivered, sent via facsimile with evidence
of successful transmission, sent via reputable overnight carrier, or
dispatched by certified or registered mail, return receipt requested,
postage prepaid, addressed to the parties as follows:
Chief Financial Officer
Allmerica Financial Life Insurance and Annuity Company
000 Xxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Phone: (000) 000-0000 Fax: (000) 000-0000
Chief Financial Officer
ACE Tempest Life Reinsurance Ltd.
Xxx XXX Xxxxxxxx, 00 Xxxxxxxxxx Xxxxxx
Xxxxxxxx, XX 00 Xxxxxxx
Xxxxx: (000) 000-0000 Fax: (000) 000-0000
B. Notice shall be deemed given on the date it is received 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.
In witness whereof, the parties hereto have caused this Agreement to be signed
in duplicate on the dates indicated to be effective as of the date specified
above.
ACE Tempest Life Reinsurance Ltd. Allmerica Financial Life Insurance and Annuity
Company
By _______________________________________ By ______________________________________
Date _______________________________________ Date ______________________________________
By _______________________________________ By ______________________________________
Date _______________________________________ Date ______________________________________
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AFLIAC and ACE Tempest Life GMDB II 19
SCHEDULE A
Description of Guaranteed Minimum Death Benefits (GMDBs)
The Guaranteed Minimum Death Benefits are completely described in the VARIABLE
ANNUITY CONTRACTS, riders, or prospectuses.
I. Dollar for Dollar Reduction for withdrawals:
Maximum of (AV, premium, 7yr ratchet)
Maximum of (AV, premium, 5yr ratchet)
II. Proportionate or Blended Reduction for Withdrawals:
Maximum of (AV, premium)
Maximum of (AV, premium, 5yr ratchet)
Maximum of (AV, 5% premium rollup, 1 yr ratchet)
Maximum of (AV, premium, 1 yr ratchet)
Maximum of (AV, 7% premium rollup)
Maximum of (AV, 7% premium rollup, 1 yr ratchet)
Maximum of (AV, premium, 15% Breakthrough ratchet)
Maximum of (AV, premium, 10% Breakthrough ratchet)
Maximum of (AV, 5% premium rollup, 15% Breakthrough ratchet)
Maximum of (AV, 5% premium rollup, 10% Breakthrough ratchet)
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AFLIAC and ACE Tempest Life GMDB II 20
SCHEDULE B
Investment Funds Subject to this Reinsurance Agreement
All Investment Funds available to VARIABLE ANNUITY CONTRACT owners on the
EFFECTIVE DATE are subject to this Agreement. New Investment Funds, eligible for
reinsurance hereunder since the EFFECTIVE DATE, are listed below:
None
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AFLIAC and ACE Tempest Life GMDB II 21
SCHEDULE C-1
Limits and Rules of the CEDING COMPANY
1) CEDING COMPANY will determine the Guaranteed Minimum Death Benefit for
each contract within fourteen (14) working days of receipt of due proof of death
and all required claim forms.
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AFLIAC and ACE Tempest Life GMDB II 22
SCHEDULE C-2
Limits and Rules of the REINSURER
1) REINSURER's liability cannot be increased as a result of CEDING COMPANY's
actions with respect to contested claims.
2) The REINSURER will not be liable for extra contractual damages (whether they
constitute Compensatory damages, Statutory penalties, Exemplary or Punitive
damages) which are awarded against the CEDING COMPANY.
3) A contract where a spousal continuation occurs will be subject to this
Agreement; however, the REINSURER will not pay more than one GMDB CLAIM per
VARIABLE ANNUITY CONTRACT.
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AFLIAC and ACE Tempest Life GMDB II 23
SCHEDULE D-1
REINSURANCE PREMIUM RATE by Treaty Year
The premium rates for reinsurance, subject to the terms and conditions of this
Agreement, are guaranteed while the reinsurance coverage is in effect.
Treaty Year beginning in REINSURANCE PREMIUM RATE
------------------------ ------------------------
2002 70.0%
2003 72.1%
2004 74.3%
2005 76.4%
2006 80.0%
2007 80.0%
2008 80.0%
2009 80.0%
2010 80.0%
2011 80.0%
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AFLIAC and ACE Tempest Life GMDB II 24
SCHEDULE D-2
REINSURANCE RETENTION RATE
REINSURANCE RETENTION RATE .10
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AFLIAC and ACE Tempest Life GMDB II 25
SCHEDULE E
MORTALITY RATE by INSURED LIFE ATTAINED AGE and SEX
94 MGDB MONTHLY REINSURANCE PREMIUM RATES
(Rates per $1 of NAR, based on oldest owner's age last birthday)
AGE MALE FEMALE AGE MALE FEMALE AGE MALE FEMALE
--- ---- ------ --- ---- ------ --- ---- ------
0 0.00005 0.00004 39 0.00010 0.00007 78 0.00522 0.00330
1 0.00005 0.00004 40 0.00011 0.00007 79 0.00580 0.00368
2 0.00004 0.00003 41 0.00012 0.00008 80 0.00643 0.00410
3 0.00003 0.00002 42 0.00013 0.00008 81 0.00709 0.00458
4 0.00002 0.00002 43 0.00014 0.00009 82 0.00777 0.00512
5 0.00002 0.00002 44 0.00015 0.00009 83 0.00846 0.00570
6 0.00002 0.00002 45 0.00016 0.00010 84 0.00919 0.00633
7 0.00002 0.00001 46 0.00018 0.00011 85 0.00998 0.00704
8 0.00002 0.00001 47 0.00020 0.00011 86 0.01088 0.00783
9 0.00002 0.00001 48 0.00022 0.00012 87 0.01192 0.00874
10 0.00002 0.00001 49 0.00024 0.00013 88 0.01308 0.00975
11 0.00002 0.00001 50 0.00027 0.00015 89 0.01435 0.01085
12 0.00002 0.00002 51 0.00030 0.00016 90 0.01571 0.01203
13 0.00003 0.00002 52 0.00033 0.00018 91 0.01715 0.01329
14 0.00003 0.00002 53 0.00037 0.00020 92 0.01866 0.01462
15 0.00004 0.00002 54 0.00041 0.00022 93 0.02029 0.01602
16 0.00004 0.00002 55 0.00046 0.00024 94 0.02201 0.01750
17 0.00004 0.00003 56 0.00052 0.00027 95 0.02377 0.01906
18 0.00005 0.00003 57 0.00059 0.00031 96 0.02549 0.02069
19 0.00005 0.00003 58 0.00066 0.00036 97 0.02715 0.02241
20 0.00005 0.00003 59 0.00074 0.00041 98 0.02875 0.02421
21 0.00005 0.00003 60 0.00084 0.00047 99 0.03031 0.02610
22 0.00006 0.00003 61 0.00094 0.00054 100 0.03188 0.02805
23 0.00006 0.00003 62 0.00107 0.00062 101 0.03350 0.03003
24 0.00006 0.00003 63 0.00120 0.00070 102 0.03521 0.03209
25 0.00007 0.00003 64 0.00135 0.00080 103 0.03711 0.03429
26 0.00007 0.00003 65 0.00152 0.00090 104 0.03909 0.03659
27 0.00007 0.00003 66 0.00169 0.00101 105 0.04099 0.03880
28 0.00008 0.00003 67 0.00187 0.00111 106 0.04263 0.04075
29 0.00008 0.00003 68 0.00205 0.00121 107 0.04387 0.04232
30 0.00008 0.00004 69 0.00224 0.00130 108 0.04473 0.04358
31 0.00008 0.00004 70 0.00245 0.00141 109 0.04530 0.04458
32 0.00008 0.00004 71 0.00268 0.00155 110 0.04564 0.04530
33 0.00008 0.00004 72 0.00294 0.00172 111 0.04580 0.04571
34 0.00008 0.00005 73 0.00321 0.00191 112 0.04583 0.04583
35 0.00008 0.00005 74 0.00351 0.00212 113 0.04583 0.04583
36 0.00009 0.00005 75 0.00384 0.00236 114 0.04583 0.04583
37 0.00009 0.00006 76 0.00423 0.00264 115 0.08333 0.08333
38 0.00010 0.00006 77 0.00469 0.00296
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AFLIAC and ACE Tempest Life GMDB II 26
SCHEDULE F
ANNUAL MORTALITY IMPROVEMENT FACTOR
TERMINATION RATE ANNUAL MORTALITY IMPROVEMENT FACTOR
5% or greater 1.00
4% - 4.99% 0.99
3% - 3.99% 0.98
2% - 2.99% 0.97
1% - 1.99% 0.96
0% - 0.99% 0.95
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AFLIAC and ACE Tempest Life GMDB II 27
SCHEDULE G
REINSURER Quota Share of Risk
For each VARIABLE ANNUITY CONTRACT, REINSURED NET AMOUNT AT RISK will be based
on the share of risk from the table below.
VARIABLE ANNUITY CONTRACTS Share of Risk
-------------------------- -------------
CB10006745 0.0%
CB10010371 0.0%
CB10014103 0.0%
GN00126341 0.0%
GN00131909 0.0%
PN00451756 0.0%
SB10004198 0.0%
VN00414175 0.0%
All other 17.0%
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AFLIAC and ACE Tempest Life GMDB II 28
SCHEDULE H
Reporting Format and Data Requirements
MONTHLY REPORTING DATA REQUIREMENTS (PREPARED BY CEDING COMPANY)
ACTIVE CONTRACTS ONLY:
INSURED LIFE SSN (available no later than June 1, 2003)
Contract Identifier
Joint Life Indicator
INSURED LIFE Issue Age
INSURED LIFE Sex
Issue Date
Initial Purchase Payment
Total Purchase Payment
Cumulative Withdrawals
Account value by subaccount
GMDB Type
GMDB Amount
NET AMOUNT AT RISK
Qualified Status
Termination Indicator (reported in first monthly report following termination)
QUARTERLY REPORTING REQUIREMENTS (PREPARED BY REINSURER)
GAAP Surplus position
Standard and Poor's Ratings
ADDITIONAL MONTHLY CLAIM REPORTING DATA REQUIREMENTS (PREPARED BY CEDING
COMPANY)
DEATHS ONLY:
This includes Monthly Reporting Data Requirements as of the Date of Notification
(the date that death related paperwork is submitted in full), plus the
following:
Date of Death
Date of Notification
Death Benefit Paid
Death Benefit Proceeds in Excess of Account Value
MONTHLY STATEMENT OF ACCOUNT (PREPARED BY CEDING COMPANY)
(prepared for each GMDB TYPE and in aggregate)
1. Calculated value of ANNUAL CLAIM LIMIT and ANNUAL GMDB CLAIMS
2. Calculated value of MONTHLY REINSURANCE BASE PREMIUMS
3. Calculated value of REINSURED NET AMOUNT AT RISK and MONTHLY
REINSURANCE PREMIUM
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AFLIAC and ACE Tempest Life GMDB II 29
SCHEDULE I
Surplus Position of REINSURER
U.S. GAAP Surplus for the REINSURER as of December 31, 2001: $1,654,810,000 USD
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AFLIAC and ACE Tempest Life GMDB II 30
