EXHIBIT 26(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 in writing.
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. For
Joint Second to Die products submitted on a facultative other basis, the Ceding
Company will send the application and other underwriting information for the
substandard life or lives. The Ceding Company will provide the name, date of
birth, rating (standard or preferred), and smoking status of the unimpaired life
on the reinsurance cover sheet. If the Joint Second to Die policy is facultative
due to amount, then the Ceding Company will send the application and other
underwriting information for both lives.
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.
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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.
ARTICLE VI
LIABILITY
The liability of the Reinsurer for all claims within automatic coverage and all
claims arising after unconditional 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.
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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.
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.
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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.
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.
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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.
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. 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
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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.
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 undisputed 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 undisputed 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.
5. BALANCES IN DEFAULT
The Reinsurer will have the right to terminate this Agreement, when
undisputed 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.
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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 undisputed amounts due, by either of the parties to this Agreement 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.
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. 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
When the Ceding Company is informed of a claim, each Reinsurer will
immediately receive a claim notification. This notification will provide
the Reinsurer with the following: The Name, Policy Number, Issue Date, Date
of Birth, Date of Death (if known), Cause of Death (if known), Face Amount,
Net Amount At Risk and an Auto/Fac indicator.
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3. PROOFS AND PAYMENT OF BENEFITS
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
Non-contestable Claims
The Ceding Company will examine and approve all claims that are not
contestable. 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 $500,000 and less in face
amount, the Ceding Company will examine and approve the claim settlement.
The Reinsurers will abide the issue as settled by the Ceding Company.
For automatic contestable claim amounts greater than $500,000 and less than
$5,000,000 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 7, 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 $5,000,000
in face amount, the Ceding Company will provide all papers in connection
with that claim, including all underwriting and investigation papers to all
Reinsurers. The Reinsurer will then review the papers and promptly respond
to the Ceding Company.
For facultative contestable claim amounts with face amounts of $500,000 or
less, where the Ceding Company retained none of the risk or where the face
amount is greater than $500,000, the Ceding Company will provide all papers
in connection with that claim, including all underwriting and investigation
papers to the Facultative Reinsurer, along with the Ceding Company's
decision regarding the claim. The Reinsurer will then review the papers and
promptly respond to the Ceding Company. For facultative contestable claim
amounts with face amounts of $500,000 or less, where the Ceding Company
retained a portion of the risk, if the Ceding Company's
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decision is to pay the claim, the Reinsurer will abide the issue as settled
by the Ceding Company.
Foreign Claims
The Ceding Company will provide information to the Reinsurers as follows:
For all automatic foreign claim amounts of $500,000 and less in face
amount, the Ceding Company will examine and approve the claim settlement.
The Reinsurers will abide the issue as settled by the Ceding Company.
For all automatic foreign claim amounts greater than $500,000 and less than
$5,000,000 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 all automatic foreign claim amounts equal to or greater than $5,000,000
in face amount, the Ceding Company will provide all papers in connection
with that claim, including all underwriting and investigation papers to all
Reinsurers. The Reinsurer will then review the papers and promptly respond
to the Ceding Company.
For all facultative foreign claim amounts with face amounts of $500,000 or
less, where the Reinsurer held more then half of the reinsured risk or
where the face amount is greater than $500,000, the Ceding Company will
provide all papers in connection with that claim, including all
underwriting and investigation papers to the Facultative Reinsurer, along
with the Ceding Company's decision regarding the claim. The Reinsurer will
then review the papers and promptly respond to the Ceding Company. For all
facultative foreign claim amounts with face amounts of $500,000 or less,
where the Ceding Company retained more than half of the reinsured risk, the
Reinsurer will abide the issue as settled by the Ceding Company.
5. MISSTATEMENT OF AGE OR SEX
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.
6. BUSINESS CONTINUATION RIDER BENEFITS
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.
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7. 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.
8. CLAIM EXPENSES
With prior written agreement, 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.
9. 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.
For purposes of this Agreement, the term "extracontractual damages" will
include, by way of example and not limitation:
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.
However, for claim denials and rescissions which the Reinsurer has opted
into, the Reinsurer will reimburse the Ceding Company for the Ceding
Company's extracontractual damages that result from the Reinsurer's actions
that directly and proximately cause such extracontractual damages. Any such
reimbursement will be
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in the proportion to the Reinsurer's direct and proximate participation in
the actions that lead to the extracontractual damages.
10. 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.
16
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 that the Ceding Company is deemed insolvent, all reinsurance
death claims payable hereunder will be payable by the Reinsurer directly to
the Ceding Company, its liquidator, receiver or statutory successor,
without diminution because of the insolvency of the Ceding Company. It is
understood, however, that in the event of such insolvency, the liquidator,
receiver or statutory successor of the Ceding Company will give written
notice to the Reinsurer of the pendency of a death claim against the Ceding
Company on a risk reinsured hereunder within a reasonable time after such
death claim is filed in the insolvency proceeding. Such notice will
indicate the policy reinsured and whether the death claim could involve a
possible liability on the part of the Reinsurer.
17
During the pendency of such claim, the Reinsurer may investigate such death
claim and interpose, at its own expense, in the proceeding where such death
claim is to be adjudicated, any defense or defenses it may deem available
to the Ceding Company, its liquidator, receiver or statutory successor. It
is further understood that the expense thus 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 death claim and a majority in interest
(determined with respect to shares of net amount at risk) elects to
interpose a defense or defenses to any such death claim, the expense will
be apportioned among the reinsurers in the same proportion that the
reinsurer's net liability bears to the sum of the net liability of all
reinsurers on the insured's date of death.
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 data or records 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; sixty (60) days 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.
ARTICLE XIX
GOOD FAITH
This Agreement is entered into in reliance on the utmost good faith of the
parties including, for example, their warranties, representations and
disclosures. It requires the continuing utmost good faith of the parties, their
representatives, successors, and assigns. This includes a duty of full and fair
disclosure of all information respecting the formation and continuation of this
contract and the business reinsured hereunder. Each party represents and
warrants to the other party that it is solvent on a statutory basis in all
states in
19
which it does business or is licensed. Each party agrees to promptly notify the
other if it is subsequently financially impaired.
ARTICLE XX
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 XXI
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.
ARTICLE XXII
COMPLIANCE WITH LAWS
Each of the rights and obligations of the parties, as provided for in this
Agreement, is subject to such rights or obligations being in compliance with all
applicable laws, and nothing herein shall be construed so as to require either
party to engage in conduct or take any action that would violate such laws. For
purposes of this Article, the term "laws" shall include without limitation the
following, as such terms may be used by a particular governing entity to which a
party hereto is subject: statutes; codes; regulations; resolutions; directives;
acts; orders; judicial and administrative decisions, orders, and opinions; or
other such similar types of rules that have binding legal force.
20
ARTICLE XXIII
SEVERABILITY
If any provision of this Agreement is determined to be invalid or unenforceable,
such determination will not impair or affect the validity or enforceability of
the remaining provisions of this Agreement.
21
ARTICLE XXIV
EXECUTION OF THE AGREEMENT
This Agreement is effective as of the date shown in Schedule I and applies to
all eligible policies with issue dates on or after such date and to eligible
policies applied for on or after such date that were backdated for up to six (6)
months to save age.
This Agreement is to be executed in duplicate at the dates and places shown
below by 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
--------------------------------------- ---------------------------------------
REINSURER NAME
Date:
---------------------------------------
Place: Stamford, CT
---------------------------------------
By: Attest:
--------------------------------------- ---------------------------------------
Title: Title:
--------------------------------------- ---------------------------------------
NAIC #: Federal Id. #:
--------------------------------------- ---------------------------------------
22
SCHEDULE I
REINSURANCE SPECIFICATIONS
COMMENCEMENT AND TERMINATION OF REINSURANCE, ARTICLE II
1. EFFECTIVE DATE:
May 14, 2005.
This agreement applies to all eligible policies with issue dates on or
after such date and to eligible policies applied for on or after such date
that were backdated for up to six (6) months to save age.
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:
This is a FDQS Agreement. The Reinsurers share will be 25% of each risk on
a First Dollar Quota Share Basis for Val-Survivor reinsured on a 50%/50%
FDQS basis. Once the Ceding Company's retention limit is full, the
Reinsurers share will be 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
23
6. PREMIUM RATE GUARANTEE:
See Schedule V, Reinsurance Premiums
7. POLICY FEES:
See Schedule V, Reinsurance Premiums
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.
24
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
25
RETENTION AND RECAPTURE, ARTICLE VII
Minimum Recapture Period: ?? years
For policies ceded on a quota share basis, the amount eligible for
recapture 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 the Ceding Company's retention to
$1,500,000 would allow the Ceding Company to retain an additional 10% of
what was originally reinsured up to the new retention limit.
REINSURANCE PREMIUMS AND ALLOWANCES, ARTICLE VIII
1. LIFE REINSURANCE:
See Schedule V, Reinsurance Premiums.
2. SUBSTANDARD PREMIUMS:
See Schedule V, Reinsurance Premiums.
3. 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.
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.
26
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 city of the Ceding Company.
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 fifty percent (50%) of each policy subject to the
qualifications and retention limits given in the table below. If because of
previous retention on other plans, retaining 10% of the risk on these plans will
exceed the Ceding Company's Maximum Limits of Retention, then the Ceding Company
will retain less than 10%.
JOINT ISSUE AGE RATING RETENTION
--------------------------- -------------------------- -------------- ---------
Joint Life (Use oldest age) Ages 20 -80 STD - TABLE 16 1,500,000
Joint Life (Use oldest age) Ages 81 - 85 STD - TABLE 4 500,000
Joint Life (Use oldest age) Ages 20 - 80 + Uninsurable STD - TABLE 16 750,000
Joint Life (Use oldest age) Ages 81 - 85 + Uninsurable STD - TABLE 4 250,000
28
SCHEDULE III
BUSINESS COVERED
The following plans and riders will be covered under this agreement.
AUTO/FAC SHORT EFF. TERMNATION
JOINT PRODUCT NAME FDQS % NAME DATE DATE
------------- ----------------------------------- -------- ------- --------- ----------
Joint Plan: Variable Adjustable Life- Survivor A/F XXXX 5-14-2005
50%/50%
Joint Riders: Estate Preservation Agreement A/F EPA 5-14-2005
50%/50%
We do not reinsure Waiver of Premium, 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.
Automatic -The first year allowance is 100%. Renewal year allowances are 0%.
Facultative - The first year allowance is 100%. Renewal Year allowances are 0%.
BILLING
RATE TABLE LABELED PRODUCT MODE
-------------------------- ----------------------------- -------
Rate Table ? - Automatic Adjustable Life III Monthly
Rate Table ? - Facultative
EPA Rates Estate Preservation Agreement Monthly
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%
31
4. 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 (RateTable2005Auto) or
(RateTable2005Fac), based on the reinsurance type, actual issue age of the
insurable life, sex, rating, underwriting class and adjusted for any applicable
table rating or flat extra and multiplied by the applicable factor.
5. CALCULATION OF "FRASIERIZED" SECOND TO DIE MORTALITY RATES:
The following steps convert the single life mortality rates, which are attached
and labeled (RateTable?) multiplied by the appropriate factor, 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 Schedule VII 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
6. ESTATE PRESERVATION AGREEMENT (VAL-SD):
The reinsurance rates for the Estate Preservation Agreement prior to election
are attached and labeled "EPA Option Premiums". The Ceding Company will receive
an allowance of 15% in all years prior to election.
Upon election, the Ceding Company will pay the Reinsurer the single life rates
labeled (RateTable2005Auto) or (RateTable2005Fac), using the attained age at
election as the issue age, on the reinsured risk amount.
32
7. SHORT TERM AGREEMENT:
The reinsurance rates paid to the Reinsurer for the Short Term Agreement are the
first duration rates that will be paid for the actual base coverage being issued
without any reinsurance allowance applied. The Ceding Company will pay a
proportionate annual premium based on the number of short term agreement months.
Once the short term agreement has expired, the rates charged will be the
appropriate first duration rate less the first year allowance.
8. 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 shall 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.
9. EXPERIENCE REFUND:
There will be no experience refund calculated for business reinsured under this
Agreement.
10. 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.
33
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:
JOINT LIFE (Using oldest actual age)
--------------------------------------------------------------------------
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
34
SCHEDULE VII
AUTOMATIC FDQS YEARLY RENEWABLE TERM REINSURANCE RATES
35
SCHEDULE VIII
FACULTATIVE YEARLY RENEWABLE TERM REINSURANCE RATES
The attached rate table labeled (rate table name) will be used for facultatively
reinsured products.
The following factors will be added to the attached GENREFAC04 rate table.
Product Additional Factor
------------------ -----------------
Permanent Products 100% in all years
FACULTATIVE ALLOWANCES
There is a 100% allowance in the first year and 0% allowance in all renewal
years for policies reinsured on a facultative basis.
36
SCHEDULE IX
REINSURANCE BILLING ADMINISTRATION
SAMPLE STATEMENT SPECIFICATIONS
The following information should appear on each Statement and Inforce listing:
. Name of the Insured(s)
. Date of Birth of the Insured(s)
. The Issue Age of each Insured(s)
. The Sex of the Insured(s)
. The Insured(s) State of Residence
. Underwriting Classification (i.e. Preferred, Standard,
Rating, etc.)
. Smoking Class (i.e. Smoker, Non Smoker, Tobacco, Non Tobacco
etc.)
. Indication if Business is Facultative or Automatic
. Policy Number(s)
. Face Amount of the Policy(s)
. Amount(s) Ceded to the Reinsurer
. Amount of Premium being Paid; separated for Supplementary
Benefits .
. The Amount of any Reinsurance Premium Allowances
. Any Extra Premiums concerned. Example: $5 / 1000 / 5 YRS
. Effective Date and Duration of any Policy(s) Change,
Reissue, or Termination
37
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
38
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.
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.
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"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.
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.
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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.
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.
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