EX-99.B7. (i)
REINSURANCE AGREEMENT
BETWEEN
METLIFE INVESTORS USA INSURANCE COMPANY
AND
METROPOLITAN LIFE INSURANCE COMPANY
TABLE OF CONTENTS
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PREAMBLE 3
ARTICLE I. REINSURANCE DEFINITION 4
ARTICLE II. REINSURANCE PREMIUMS 5
ARTICLE III. ALLOWANCE 6
ARTICLE IV. MODIFIED COINSURANCE RESERVE ADJUSTMENT 7
ARTICLE V. INDEMNIFICATION FOR BENEFIT PAYMENTS 8
ARTICLE VI. ACCOUNTING AND SETTLEMENTS 10
ARTICLE VII. DURATION, RECAPTURE AND TERMINATION 13
ARTICLE VIII. TERMINAL ACCOUNTING AND SETTLEMENT 15
ARTICLE IX. THE CEDENT REPRESENTATIONS AND WARRANTIES 17
ARTICLE X. REINSURER REPRESENTATIONS AND WARRANTIES 18
ARTICLE XI. ARBITRATION 19
ARTICLE XII. INSOLVENCY 21
ARTICLE XIII. GENERAL PROVISIONS 22
SCHEDULE A POLICIES AND RISKS REINSURED 27
SCHEDULE B EXISTING REINSURANCE 29
SCHEDULE C RESERVES 30
SCHEDULE D MODIFIED COINSURANCE RESERVE INVESTMENT CREDIT 31
SCHEDULE E ASSET PORTFOLIO 32
SCHEDULE F ALLOWANCES 33
SCHEDULE G MONTHLY REPORT FORMAT 34
PREAMBLE
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THIS REINSURANCE AGREEMENT (the "Agreement") is made and entered into as of
April 1, 2001, by and between MetLIfe Investors USA Insurance Company], a life
insurance corporation domiciled in Delaware, (the "Cedent") and Metropolitan
Life Insurance Company (the "Reinsurer").
THE BACKGROUND OF THIS AGREEMENT is that the Cedent wishes to cede ninety
percent (90%) of the liabilities associated with Policies written under Variable
Annuity products on a modified coinsurance basis and the Reinsurer, having
reviewed materials provided by the Cedent relating to such block, wishes to
accept the proposed cession on that basis.
NOW, THEREFORE, in consideration of the mutual promises and undertakings set
forth herein, the parties agree as follows:
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ARTICLE I. REINSURANCE DEFINITION
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1. POLICIES AND RISKS REINSURED. In accordance with the terms and
conditions hereof, the Cedent hereby cedes and the Reinsurer hereby
accepts as indemnity reinsurance on a modified coinsurance basis, the
quota share of the Cedent's liabilities under the policies (the
"Policies") listed in Schedule A, net of Existing Reinsurance as
described in Schedule B.
2. CONDITIONS. This reinsurance is subject to the same limitations and
conditions specified in the Policies, except as otherwise provided in
this Agreement.
3. POLICY CHANGES. The Cedent must provide written notification to the
Reinsurer of any program to change the original terms or conditions of
the Policies which would result in an increase in liabilities of more
than two percent (2%) of all Policies not later than fifteen (15) days
after the change takes effect. The Reinsurer shall provide written
notification to the Cedent of the Reinsurer's acceptance or rejection
of the change within fifteen (15) days after receipt of notice of the
change. If the Reinsurer accepts any such change then it shall (a)
assume that portion of any increase in the Cedent's liability,
resulting from the change, that corresponds to the reinsured portion of
the Policies, and (b) receive credit for that portion of any decrease
in the Cedent's liability, resulting from the change, that corresponds
to the reinsured portion of the Policies. If the Reinsurer rejects any
such change then its liabilities shall be determined as though no such
change had occurred.
4. REINSTATEMENTS. If a Policy is reinstated while this Agreement is in
force, the reinsurance for such Policy shall be reinstated
automatically and the Cedent shall pay the Reinsurer its quota share of
all amounts received in connection with the reinstatement of the
Policy.
5. NO EXTRACONTRACTUAL DAMAGES. The Reinsurer assumes no liability under
this Agreement for any damages, fines, penalties, costs or expenses, or
portion thereof, levied on or assessed against the Cedent by any court
or regulatory body on the basis of negligence, oppression, malice,
fraud, fault, wrongdoing or bad faith by the Cedent in connection with
any claim or for any other act or omission, unless the Reinsurer shall
have received prior notice of and shall have concurred prior to the
actions taken or not taken by the Cedent that led to the levies or
assessments, in which case, the Reinsurer shall pay its share of such
levy or assessment.
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ARTICLE II. REINSURANCE PREMIUMS
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1. REINSURANCE PREMIUM. Each Accounting Period, the Cedent shall pay to
the Reinsurer a "Reinsurance Premium" in an amount equal to the
Reinsurer's quota share of the gross Policy premiums and deposits
collected during the Accounting Period by the Cedent, net of any
premiums paid under any Existing Reinsurance as defined in Schedule B.
The Reinsurance Premiums paid to the Reinsurer by the Cedent shall be
remitted to the Reinsurer at the end of the Accounting Period during
which the gross premiums were collected by the Cedent.
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ARTICLE III. ALLOWANCE
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1. ALLOWANCE. The Reinsurer shall pay the Cedent "Allowances" for each
Accounting Period calculated as (a) plus (b) plus (c) plus (d) as
defined below:
(a) CEDING ALLOWANCE as described in Schedule F;
(b) COMMISSION ALLOWANCE as described in Schedule F;
(c) PREMIUM TAX ALLOWANCE as described in Schedule F; and
(d) MAINTENANCE EXPENSE ALLOWANCE as described in Schedule F.
2. EXPENSES. The allowance for any expenses incurred in connection with
the Policies is included in the Allowance described in Paragraph 1.
This Allowance is sufficient to cover anticipated allocable renewal
expenses incurred by the Cedent on the Policies reinsured. The
Reinsurer shall not indemnify the Cedent for any other expenses
incurred in connection with the Policies.
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ARTICLE IV. MODIFIED COINSURANCE RESERVE ADJUSTMENT
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1. MODIFIED COINSURANCE RESERVE ADJUSTMENT. The "Modified Coinsurance
Reserve Adjustment" shall be computed each Accounting Period equal to
(a) minus (b) minus (c), where:
(a) equals the Modified Coinsurance Reserve, as defined in
Schedule C Paragraph 3, at the end of the current Accounting
Period on the Policies;
(b) equals the Modified Coinsurance Reserve, as defined in
Schedule C Paragraph 3, at the beginning of the current
Accounting Period, on the Policies; and
(c) equals the Modified Coinsurance Reserve Investment Credit, as
described in Schedule D.
2. For any Accounting Period in which the amount computed in Paragraph 2
above is positive, the Reinsurer shall pay the Cedent such amount. For
any Accounting Period in which the amount computed in Paragraph 2 above
is negative, the Cedent shall pay the Reinsurer the absolute value of
such amount.
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ARTICLE V. INDEMNIFICATION FOR BENEFIT PAYMENTS
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1. INDEMNIFICATION FOR BENEFIT PAYMENTS. The Reinsurer shall pay the
Cedent an "Indemnification for Benefit Payments" equal to the
Reinsurer's quota share of the Benefit Payments defined in Paragraph 2.
2. BENEFIT PAYMENTS. "Benefit Payments", as referred to in this Agreement,
means the sum of the following items:
(a) death benefits and other claims arising from covered riders
incurred by the Cedent in accordance with Policy terms, net of
any claim reimbursements accrued by the Cedent under Existing
Reinsurance;
(b) disability benefits incurred by the Cedent in accordance with
Policy terms, net of reimbursements for the disability
benefits accrued by the Cedent under Existing Reinsurance;
(c) annuity Reserves, as defined in Schedule C, incurred by the
Cedent in accordance with Policy terms upon annuitization; and
(d) surrender benefits and other fund withdrawals incurred by the
Cedent in accordance with Policy terms, net of any surrender
value reimbursements accrued by the Cedent under Existing
Reinsurance.
3. The Reinsurer shall accept and recognize interest credited to Policies
by the Cedent in accordance with Policy terms, net of any
reimbursements for such credits accrued by the Cedent under Existing
Reinsurance.
4. LIABILITY AND PAYMENT. The Reinsurer shall accept the decision of the
Cedent with respect to the determination and payment of Policy Benefit
Payments. The Reinsurer shall pay the Indemnification for Benefit
Payments in a lump sum to the Cedent without regard to the form of
settlement by the Cedent.
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ARTICLE VI. EXPERIENCE REFUND
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1. GENERAL. For the period set forth in Paragraph 2, the Reinsurer shall
pay an Experience Refund to the Ceding Company equal to ninety-five
percent (95%) of the Trial Experience Refund detailed in Paragraph 3
below at the end of each Accounting Period with respect to the
reinsurance hereunder, if such Trial Experience Refund is positive for
that Accounting Period. If the Trial Experience Refund is negative for
the current Accounting Period, then the Experience Refund is set equal
to zero.
2. PERIOD. The Reinsurer shall pay an Experience Refund at the end of each
Accounting Period.
3. TRIAL EXPERIENCE REFUND. With respect to each Accounting Period, the
"Trial Experience Refund" for any Reinsurer shall be equal to (a) minus
(b) minus (c), where:
(a) equals the sum of:
(i) the Reinsurance Premium determined in accordance with
Article II; and
(ii) any Modified Coinsurance Reserve Adjustment payable
to the Reinsurer determined in accordance with
Article IV;
(b) equals the sum of:
(i) the Indemnification for Benefit Payments, determined
in accordance with Article V;
(ii) the Allowance determined in accordance with Article
III; and
(iii) any Modified Coinsurance Reserve Adjustment payable
to the Ceding Company determined in accordance with
Article IV; and
(c) equals the Recapture Charge defined in Article IX, Paragraph 5
as of the end of the prior Accounting Period plus interest as
described in Article IX, Paragraph 5(b)(i).
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ARTICLE VII. ACCOUNTING AND SETTLEMENTS
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1. ACCOUNTING PERIOD. Each "Accounting Period" under this Agreement shall
be monthly, except that: (a) the initial Accounting Period runs from
the date of this Agreement through the last day of the calendar month
during which the date of this Agreement falls, and (b) the final
Accounting Period runs from the end of the preceding Accounting Period
until the Terminal Accounting Date of this Agreement, as described in
Article IX, Paragraph 2.
2. MONTHLY ACCOUNTING REPORTS. The Cedent shall submit monthly accounting
reports in the form of Schedule G to the Reinsurer for each Accounting
Period not later than thirty (30) days after the end of each Accounting
Period. Such reports shall include information on the amount of the
Reinsurance Premium, the Allowance, Benefit Payments, Modified
Coinsurance Reserve, Modified Coinsurance Reserve Investment Credit,
and the book value of the Asset Portfolio.
3. MONTHLY SETTLEMENTS.
(a) At the end of each Accounting Period, the Cedent shall pay the
Reinsurer the sum of:
(i) Reinsurance Premium determined in accordance with
Article II; and
(ii) any Modified Coinsurance Reserve Adjustment payable
to the Reinsurer determined in accordance with
Article IV.
(b) Simultaneously, the Reinsurer shall pay the Cedent the sum of:
(i) Indemnification for Benefit Payments, determined in
accordance with Article V;
(ii) the Allowance determined in accordance with Article
III;
(iii) any Modified Coinsurance Reserve Adjustment payable
to the Cedent determined in accordance with Article
IV; and
(iv) any Experience Refund determined in accordance with
Article VI.
4. AMOUNTS DUE MONTHLY. Except as otherwise specifically provided in this
Agreement, all amounts due to either the Cedent or the Reinsurer under
this Agreement shall be determined on a net basis at the end of each
Accounting Period. Net amounts due the Reinsurer shall be payable
within sixty (60) days after the end of each Accounting Period. Net
amounts due the Cedent shall be payable thirty (30) days after the
receipt of the monthly accounting report with respect to such
Accounting Period.
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5. ESTIMATIONS. If the amounts required in Paragraph 3 above cannot be
determined by the dates described in Paragraph 4 above, on an exact
basis, such amounts shall be estimated in accordance with reasonable
actuarial methods that shall approximate the actual amounts.
Adjustments to payments based upon such estimates shall then be made to
reflect actual amounts when such amounts become available.
6. DELAYED PAYMENTS. For purposes of Paragraph 4 above, if there is a
delayed settlement of a payment due, interest shall be payable for the
number of days from the due date through the date paid, at an
annualized rate of 7.0%.
7. OFFSET OF PAYMENTS. All monies due either the Cedent or the Reinsurer
under this Agreement shall be offset against each other, dollar for
dollar, regardless of any insolvency of either party.
8. TAX ELECTION. With respect to reinsurance ceded under the Agreement,
the parties shall make a joint election, in accordance with Treas. Reg.
1.848-2(g)(8) (the "Regulation"), issued December 28, 1992, under
Section 848 of the Code, and:
The party with the net positive consideration under this Agreement
shall capitalize specified policy acquisition expenses, with respect to
this Agreement, without regard to the general deductions limitations of
Section 848(c)(1) of the Code;
The election shall take effect as of the date of this Agreement and
shall remain in effect for all subsequent years that this Agreement
remains in effect; and
Each party shall attach a schedule to its federal income tax return for
its first taxable year ending after the election becomes effective that
identifies the agreements (including this Agreement) for which joint
elections have been made under the Regulation.
Pursuant to this joint election:
each party shall exchange information pertaining to the amount of net
consideration under this Agreement to assure consistency or as may
otherwise be required by the Internal Revenue Service;
The Cedent shall submit its calculation of the "net consideration" as
defined under Treas. Reg. 1.848-2(f) to the Reinsurer not later than
May 1st for each and every tax year for which this Agreement is in
effect; and
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The Reinsurer may challenge such calculation within ten (10) working
days of receipt of the Ceding Company's calculation.
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ARTICLE VIII. DURATION, RECAPTURE AND TERMINATION
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1. DURATION. Except as otherwise provided herein, this Agreement is
unlimited in duration.
2. AUTOMATIC ACCEPTANCE OF REINSURANCE. The Reinsurer shall cover every
Policy issued by the Ceding Company on or after the Effective Date
under plans of insurance described in Schedule A. The Reinsurer can, at
its sole option, discontinue reinsurance of newly issued Policies
subject to ninety (90) days prior written notice to the Cedent. The
Cedent can, at its sole option, discontinue reinsurance of newly issued
Policies subject to thirty (30) days prior written notice to the
Reinsurer.
3. REINSURER'S LIABILITY. The liability of the Reinsurer with respect to
any Policy reinsured hereunder shall begin simultaneously with that of
the Cedent, but not earlier than the Effective Date of this Agreement.
The Reinsurer's liability with respect to any Policy reinsured
hereunder shall terminate on the earliest of (i) the date such Policy
is recaptured; (ii) the date the Cedent's liability on such Policy is
terminated; or (iii) the date this Agreement is terminated. In no event
shall this Paragraph be construed as providing a unilateral right of
the Reinsurer to terminate this Agreement.
4. RECAPTURE. Reinsurance ceded to the Reinsurer hereunder may be
recaptured at the Cedent's option at any time following the first
anniversary of the Reinsurance Agreement. The Cedent shall provide
thirty (30) days advance notice prior to the effective date of
recapture. Such recapture shall be subject to the payment of a Terminal
Accounting and Settlement as described in Article IX.
5. INTERNAL REPLACEMENTS. Should the Cedent, its affiliates, successors or
assigns, initiate a "Program of Internal Replacement" that includes any
of the Policies reinsured hereunder, the Cedent shall immediately
notify the Reinsurer. All solicited replacement policies shall be
treated as recaptured rather than surrendered. The Reinsurer may elect
at its sole option to treat either all policies reinsured hereunder as
recaptured or all policies of the issue year(s) in which policies were
internally replaced as recaptured. Such recapture shall be subject to
the payment of a Terminal Accounting and Settlement by the Cedent to
the Reinsurer as described in Article IX. For purposes of this
Agreement, the term "Program of Internal Replacement" means any effort
by the Cedent, its affiliates, successors or assigns generally to
solicit replacements of Policies by which a Policy or any portion of
the cash value of a Policy is exchanged for another policy or contract
that is not reinsured under this Agreement; provided, however, that
providing unsolicited replacements at the request of a Policy owner
shall not be considered a Program of Internal Replacement.
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6. TERMINATION FOR NONPAYMENT OF AMOUNTS DUE. If the Cedent fails to pay
the Reinsurance Premiums or any other amounts due to the Reinsurer
pursuant to this Agreement within ninety (90) days after the end of any
Accounting Period, the Reinsurer may terminate this Agreement, subject
to thirty (30) days prior written notice to the Cedent. If the
Reinsurer fails to pay the Benefit Payments or any other amounts due to
the Cedent pursuant to this Agreement, within sixty (60) days after the
receipt of the Monthly Accounting Report, the Cedent may terminate this
Agreement, subject to thirty (30) days prior written notice to the
Reinsurer. Such termination shall be subject to the payment of a
Terminal Accounting and Settlement as described in Article IX Paragraph
3.
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ARTICLE IX. TERMINAL ACCOUNTING AND SETTLEMENT
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1. TERMINAL ACCOUNTING. A Terminal Accounting and Settlement shall take
place if: (1) any reinsurance under this Agreement is recaptured in
accordance with Article XIII Paragraph 5; (2) any portion or percentage
of all reinsurance under this Agreement is recaptured in accordance
with Article VIII, Paragraph 4; (3) the Policies are subject to a
Program of Internal Replacement as described in Article VIII, Paragraph
5; or (4) this Agreement is terminated.
2. TERMINAL ACCOUNTING DATE. A "Terminal Accounting Date" shall be the
earliest of: (1) the effective date of recapture pursuant to any notice
of recapture given under this Agreement; (2) the effective date of
termination pursuant to any notice of termination given under this
Agreement; or (3) such other date mutually agreed in writing.
3. SETTLEMENT. The Terminal Accounting and Settlement payment to the
Reinsurer shall consist of:
(a) the monthly settlement as provided in Article VII, Paragraph
3, computed as of the Terminal Accounting Date; and
(b) payment by the Cedent to the Reinsurer of a Recapture Charge
as described in Paragraph 5 below.
If only a portion or a percentage of all of Policies is recaptured,
then the Terminal Accounting and Settlement payment described above
shall be made only with respect to the portion or percentage of such
Policies recaptured.
4. SUPPLEMENTARY ACCOUNTING AND SETTLEMENT. In the event that, subsequent
to the Terminal Accounting and Settlement as provided above, a change
is made with respect to any amounts due, a supplementary accounting
shall take place pursuant to Paragraph 3 above. Any amount owed to the
Cedent or to any Reinsurer by reason of such supplementary accounting
shall be paid within fifteen (15) days following the completion
thereof.
5. RECAPTURE CHARGE. The Recapture Charge shall be calculated recursively
according to the following formula:
(a) The Recapture Charge on the Effective Date of this Agreement
shall be zero;
(b) The Recapture Charge at the end of any Accounting Period shall
equal the greater between zero and the Recapture Charge at the
end of the prior Accounting Period plus (i) minus (ii) plus
(iii), where:
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(i) equals interest on the Recapture Charge at the end of
the Prior Accounting period for the number of days
between the end of the prior Accounting Period and
the end of the current Accounting Period calculated
at an annualized rate equal to 7.00%;
(ii) equals amounts payable by the Cedent to the Reinsurer
according to Article VII, Paragraph 3(a); and
(iii) equals amounts payable by the Reinsurer to the Cedent
according to Article VII, Paragraphs 3(b)(i), (ii)
and (iii).
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ARTICLE X. THE CEDENT REPRESENTATIONS AND WARRANTIES
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The Cedent represents and warrants, to the best of its knowledge, the following:
1. CORPORATE STATUS. The Cedent is duly licensed, qualified or admitted to
do business and is in good standing in all jurisdictions in which it is
required to be so qualified, licensed or admitted to do business by the
laws thereof.
2. AUTHORITY. The Cedent has the full corporate power and authority to
carry out and perform its undertakings and obligations under this
Agreement. This Agreement has been duly and validly signed and
delivered by the Cedent. The Cedent shall at all times maintain in
force all such legal and regulatory authorizations as may be reasonably
necessary or appropriate for the performance of its obligations under
this Agreement.
3. OTHER REINSURANCE.
The Cedent may, from time to time, enter into other reinsurance
agreements affecting the Policies reinsured. The Cedent must provide
written notification to the Reinsurer of any such change. The Reinsurer
shall provide written notification to the Cedent of the Reinsurer's
acceptance or rejection of the change within fifteen (15) days after
receipt of notice of the change. If the Reinsurer rejects any such
change, the Policies shall be considered recaptured and subject to the
payment of a Terminal Accounting and Settlement as described in Article
VIII.
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ARTICLE XI. REINSURER REPRESENTATIONS AND WARRANTIES
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The Reinsurer represents and warrants, to the best of its knowledge, the
following:
1. CORPORATE STATUS. The Reinsurer is duly licensed, qualified or admitted
to do business and is in good standing in all jurisdictions in which it
is required to be so qualified, licensed or admitted to do business by
the laws thereof.
2. AUTHORITY. The Reinsurer has the full corporate power and authority to
carry out and perform its undertakings and obligations under this
Agreement. This Agreement has been duly and validly signed and
delivered by the Reinsurer. The Reinsurer shall at all times maintain
in force all such legal and regulatory authorizations as may be
reasonably necessary or appropriate for the performance of its
obligations under this Agreement.
3. LICENSE STATUS. The Reinsurer is an authorized insurer or accredited
reinsurer in [state of domicile of the Cedent]. The Reinsurer shall
notify the Cedent within five (5) days after the date of any change in
its status.
4. ADDRESS. The Address of the Reinsurer is Metropolitan Life Insurance
Company, Xxx Xxxxxxx Xxxxxx, Xxx Xxxx XX 00000, XXX.
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ARTICLE XII. ARBITRATION
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1. All disputes and differences between the Cedent and the Reinsurer shall
be decided by arbitration, regardless of the insolvency of either
party, unless the liquidator is specifically exempted from an
arbitration proceeding by applicable law.
2. Either party may initiate arbitration by providing written notification
to the other party that sets forth (a) a brief statement of the
issue(s); (b) the failure of the parties to reach agreement; and (c)
the date of the demand for arbitration.
3. The arbitration panel shall consist of three arbitrators who must be
impartial and each of whom must, at that time, either be accredited as
an arbitrator by XXXXX-US or be an active or former officer of a life
insurance or reinsurance company other than the parties or their
affiliates.
4. Each party shall select an arbitrator within thirty (30) days from the
date of the demand. If either party shall refuse or fail to appoint an
arbitrator within the time allowed, the party that has appointed an
arbitrator may notify the other party that, if it has not appointed its
arbitrator within the following ten (10) days, the arbitrator shall
appoint an arbitrator on its behalf. Within thirty (30) days of the
appointment of the second arbitrator the two (2) arbitrators shall
select the third arbitrator, who must also be, at that time, accredited
by XXXXX-US as an umpire. If the two arbitrators fail to agree on the
selection of the third arbitrator within the time allowed, the Umpire
Selection Procedures of XXXXX-US, as in force at that time, shall be
used to select the third arbitrator.
5. The arbitrators shall interpret this Agreement as an honorable
engagement rather than merely as a legal obligation and shall consider
equitable principles as well as industry custom and practice regarding
the applicable insurance and reinsurance business. The arbitrators are
released from judicial formalities and shall not be bound by strict
rules of procedure and evidence.
6. The arbitrators shall determine all arbitration schedules and
procedural rules and may, in their discretion, use applicable XXXXX-US
forms and procedures. Organizational and other meetings shall be held
in New York, NY, USA, unless the arbitrators shall otherwise provide.
The arbitrators shall decide all matters by majority vote.
7. The decisions of the arbitrators shall be final and binding on both
parties. The arbitrators may, in their discretion, award costs and
expenses, as they deem appropriate, including but not limited to legal
fees and interest. Judgment may be entered upon the final decisions of
the arbitrators in any court of competent jurisdiction. The arbitrators
may not award any exemplary or punitive damages.
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8. Unless the arbitrators shall provide otherwise, each party shall be
responsible for (a) all fees and expenses charged by its respective
counsel, accountants, actuaries and other representatives in connection
with the arbitration and (b) one-half of the expenses of the
arbitration, including the fees of the arbitrators.
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ARTICLE XIII. INSOLVENCY
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1. INSOLVENCY. In the event of the insolvency of the Cedent, the
reinsurance provided hereunder shall be payable by the Reinsurer
directly to the Cedent or to its liquidator without diminution by
reason of the inability of the Cedent to pay any or a portion of any
claims.
2. NOTICE TO REINSUREr. In any such event, the liquidator shall give the
Reinsurer written notice of the pendency of each claim against the
Cedent on a Policy within a reasonable time after each such claim is
filed in the insolvency, liquidation or rehabilitation proceeding.
3. CLAIM DEFENSES. During the pendency of any such claim, the Reinsurer
may, at its own expense, investigate such claim and interpose in the
proceeding in which such claim is to be adjudicated any defense or
defenses that the Reinsurer may reasonably deem available to the Cedent
or its liquidator. The expenses incurred in connection therewith by the
Reinsurer shall be chargeable, subject to court approval, against the
Cedent as part of the expenses of such insolvency, liquidation or
rehabilitation to the extent of any benefit that accrues to the Cedent
solely as a result of the defense or defenses undertaken by the
Reinsurer.
4. NO ENLARGEMENT OF OBLIGATIONS. The provisions of this Article shall
neither change the relationship or status of the parties or enlarge the
obligations established under this agreement between the Cedent and the
Reinsurer, except as specifically provided, nor create any additional
obligations or establish any further rights against either the Cedent
or the Reinsurer in favor of any other persons not parties to this
Agreement.
5. RECAPTURE RIGHT. The Cedent may, in its discretion recapture all
reinsurance ceded with respect to the Reinsurer at any time during
which the Reinsurer may be in insolvency proceedings pending in the
courts of the State of New York, USA, subject to the payment of a
Terminal Accounting and Settlement, and any Supplemental Settlements
that may be necessary or appropriate, as described in Article IX,
Paragraphs (3) and (4).
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ARTICLE XIV. GENERAL PROVISIONS
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1. POLICY ADMINISTRATION. The Cedent shall administer the Policies and
shall perform all accounting for such Policies. Claim settlements made
by the Cedent in good faith, including compromises, shall be
unconditionally binding on the Reinsurer.
2. AUDIT. Upon reasonable advance notice, the Reinsurer may, at a
reasonable location or locations to be designated by the Cedent, audit
any and all books, records, statements, correspondence, reports and
other documentation that relate to the Policies. The Cedent shall
provide a reasonable workspace during normal business hours for such
audit and shall cooperate with and disclose and produce any and all
documentation reasonably requested by the auditors. The Reinsurer shall
keep all information disclosed or produced for audit, including all
audit reports and analyses, confidential as provided herein.
3. "Annual Statement" means the Annual Statement prepared in accordance
with the rules of the National Association of Insurance Commissioners
and filed with the [state of domicile of the Cedent] Insurance
Department. If the Annual Statement blank is changed or modified, such
that any item described herein does not appear on the pages, exhibits,
columns and lines referred to herein, or if it should be eliminated or
combined with other amounts or if the basis set out in the Annual
Statement blank for calculation of any item herein should be modified
so that the calculation is not consistent with the calculation of the
such item described herein, then such item shall be determined in
accordance with a method proposed by the Ceding Company with the
consent of the Reinsurer, which consent shall not be unreasonably
withheld.
4. ERRORS AND OMISSIONS. Any inadvertent errors or omissions on the part
of one party occurring in connection with this Agreement or any
transaction hereunder shall not relieve the other party from any
liability to the first party that would have otherwise attached had
such error or omission not occurred, provided that such error or
omission is rectified as soon as practicable after discovery.
5. INDEMNIFICATION AND LIMITATION OF LIABILITY. The Cedent and the
Reinsurer shall indemnify and hold the other, its affiliates,
directors, officers, employees and all other persons and entities
acting on behalf of or under the control of any of them harmless from
and against any and all claims, including reasonable legal expenses,
that result from any negligent, dishonest, malicious, fraudulent or
criminal act or omission or arising out of or related to any incorrect
representation, warranty or obligation of this Agreement or any failure
or breach of this Agreement by the indemnifying party, its directors,
22
officers, employees, other representatives or any other person or
entity acting on behalf of or under the control of any of them. In no
event shall any party to this Agreement be liable to any other party
for punitive, indirect or consequential damages arising under this
Agreement for any cause whatsoever, whether or not such party has been
advised or could have foreseen the possibility of such damages.
6. AMENDMENT AND NON WAIVER. This Agreement may be amended only by written
agreement of the parties. Any change or modification to this Agreement
shall be null and void unless made by amendment to this Agreement and
signed by both parties. No waiver by either party of any default by the
other party shall be construed to be a waiver by such party of any
other or subsequent default in performance of the same or any other
promise, term or condition of this Agreement. No prior transactions or
dealings between the parties shall be deemed to establish any custom or
usage waiving or modifying any provision hereof. The failure of either
party to enforce any part of this Agreement shall not constitute a
waiver by such party of its right to do so, nor shall it be deemed to
be an act of ratification or consent.
7. SEVERABILITY. In the event that any provision or term of this Agreement
shall be held by any court to be invalid, illegal or unenforceable, all
of the other terms and provisions shall remain in full force and effect
to the extent that their continuance is practicable and consistent with
the original intent of the parties. In addition, if provisions are held
invalid, illegal or unenforceable, the parties shall attempt in good
faith to renegotiate the Agreement to carry out its original intent.
8. SURVIVAL. All of the provisions of this Agreement, to the extent
necessary to carry out the purposes of this Agreement or to ascertain
and enforce the parties' rights hereunder, shall survive the
termination of this Agreement.
9. CHOICE OF LAW, FORUM AND CONSENT TO SERVICE. This Agreement is subject
to and is to be interpreted in accordance with the laws of the State of
[state of domicile of the Cedent] without regard to the [state] choice
of law rules. While the parties contemplate that all disputes shall be
decided through arbitration as provided herein, in the event of any
legal proceedings, the parties shall submit to the exclusive
jurisdiction of courts of the State of [] and the United States of
America and shall abide by the final decision of such courts. The
Reinsurer hereby designates the Superintendent of Insurance of the
State of [] as its true and lawful attorney upon whom may be served any
lawful process in any action, suit or proceeding instituted by or on
behalf of the Cedent arising out of the Agreement. Process accepted by
the Superintendent on behalf of the Reinsurer shall be forwarded to the
Reinsurer at the address specified in this Agreement.
23
10. SETTLEMENTS. All reinsurance settlements shall be effected through
offsetting balances, electronic funds transfers or as the parties may
otherwise agree in order to carry out the purposes of this agreement.
11. NOTICES.
(a) Written notices to the Cedent under this Agreement shall be
effective when delivered to the Cedent at the following
address:
Xxxxx Xxxxx, Vice President
MetLife Investors USA Insurance Company
00 Xxxxxxxxx Xxxxx
Xxxxxxx Xxxxx, XX 00000
or such other address as the Cedent may designate in writing
as to its own address; provided, however, that any notice of
change of address shall be effective only upon receipt.
(b) Written notices to the Reinsurer under this Agreement shall be
effective when delivered to the Reinsurer at the following
address:
Xxxxxx X. Xxxxxxxx, Second Vice President and Actuary
Metropolitan Life Insurance Company
000 Xxxxxxxx Xxxxxx
Xxxxxx, XX 00000
or such other address as the Reinsurer may designate in
writing as to its own address, provided, however, that any
notice of change of address shall be effective only upon
receipt.
12. CONFIDENTIALITY. All records and information obtained from or on behalf
of the Cedent, including legally protected consumer privacy
information, are confidential and shall not be disclosed by the
Reinsurer; provided, however, that this obligation of confidentiality
shall not apply (a) if and to the extent that disclosure by the
Reinsurer is required by applicable law or any court, government agency
or regulatory authority or by subpoena or discovery request in pending
litigation; (b) if the information is or becomes available from public
information (other than as a result of prior unauthorized disclosure by
the Reinsurer); (c) if the information is or was received from a third
party not known by the Reinsurer to be under a confidentiality
obligation with regard to such information; or (d) if the information
was in the possession of the Reinsurer (having been received on a
non-confidential basis) other than by reason of the reinsurance
provided pursuant to this Agreement. In the event that the Reinsurer
becomes legally compelled to disclose any secret or confidential
information, the Reinsurer shall give prompt written notice of that
fact to the Cedent so that the Cedent may seek an appropriate remedy to
prevent such disclosure.
24
13. AGENTS, INTERMEDIARIES AND REPRESENTATIVES. All negotiations relative
to this Agreement and the transactions contemplated hereby, including
all communications and payments, have been and shall be carried out by
the Cedent and the Reinsurer and designated agents thereof directly and
without the intervention of any person in such manner as to give rise
to any valid claim by any other person against the Cedent for a
finder's fee, brokerage, commission or similar payment. Any
communication or payment delivered by the Cedent to a designated agent,
intermediary or representative of the Reinsurer shall be deemed
delivered to the Reinsurer and no delivery of a communication or
payment by the Reinsurer to its agent, intermediary or representative
shall be deemed delivered to the Cedent until actual receipt by the
Cedent.
14. INDEPENDENT CONTRACTOR. The parties shall be deemed to be independent
contractors, each with full control over its respective business
affairs and operations. The Agreement shall not be construed as a
partnership or joint venture and neither party hereto shall be liable
for any obligations incurred by the other party except as expressly
provided herein.
15. SCHEDULES AND CAPTIONS. Schedules attached hereto are made a part of
this Agreement. Captions are provided for reference only and are not
made a part of this agreement.
16. RULES OF CONSTRUCTION. Each party acknowledges that, in the negotiation
and drafting of this Agreement, it has been represented by and has
relied upon the advice of counsel of its choice; that its counsel has
had a substantial role in the drafting and negotiation of this
Agreement; and, therefore, that the rule of construction that any
ambiguities are to be resolved against the drafting party shall not be
applied in the interpretation of this Agreement.
17. COUNTERPARTS. This Agreement may be signed simultaneously in any number
of counterparts, each of which shall be deemed an original, and all of
which shall constitute one and the same instrument as to the respective
signatories.
18. ENTIRE AGREEMENT. This Agreement, including the Schedules attached
hereto, supersede all prior discussions and agreements between the
Cedent and the Reinsurer and constitute their sole and entire agreement
with respect to the Policies and there are no understandings between
the parties other than as expressed in the Agreement.
25
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed as of
the date first above written.
METLIFE INVESTORS USA INSURANCE COMPANY
By: _____________________________
Title: ____________________________
METROPOLITAN LIFE INSURANCE COMPANY:
By: _____________________________
Title: _____________________________
26
SCHEDULE A POLICIES AND RISKS REINSURED
--------------------------------------------------------------------------------
1. POLICIES AND RISKS REINSURED. The Policies and risks reinsured under
this Agreement are the Cedent's net liability on the policies of all
plans of variable annuities listed in Paragraph 2 below, including
associated riders, that are in force as of the date of this Agreement
or included in future endorsements. "Net liability" means the Cedent's
net retained liability on all Policies. Certain policy exchanges for
substantially similar policies undertaken by the Cedent for the sole
purpose of administrative simplicity shall be considered endorsements
rather than replacements and the resulting policies shall continue to
be covered by this Agreement.
2. TYPES OF POLICIES. The following plans of variable annuities are
included:
(a) Class A (Front End Load, A-Share, Xxxxxx Xxxxx Only);
(b) Class VA (7-Yr Back-Loaded):
(i) Option A;
(ii) Option B; and
(iii) Option C;
(c) Class B (7-Yr Back-Loaded; Xxxxxx Xxxxx);
(d) Class AA (7-Yr Back Loaded; XX Xxxxxxx):
(i) Option A; and
(ii) Option B;
(e) Series VA (7-Yrd Back-Loaded; Financial Planners):
(i) Option A;
(ii) Option B; and
(iii) Option C;
(f) Class XC (Bonus; Wirehouses):
(i) Option A; and
(ii) Option B;
27
(g) Series XC (Bonus, Financial Planners):
(i) Option A; and
(ii) Option B;
(h) Class C/Series C (Level Load, C-Share); and
(i) Class L/Series L (3-Yr Back-Loaded, L-Share):
(i) Option A; and
(ii) Option B.
3. QUOTA SHARE. The quota share ceded under this Agreement is ninety
percent (90%) of the liabilities of the Policies and risks reinsured
under this Agreement.
28
SCHEDULE B EXISTING REINSURANCE
--------------------------------------------------------------------------------
Coinsurance agreement with Exeter Reassurance Company, Ltd. on GMDB, EPB and
GMIB riders.
29
SCHEDULE C RESERVES
--------------------------------------------------------------------------------
1. STATUTORY RESERVE. The term "Statutory Reserve", as used in this
Agreement with respect to the Policies, means (a) - (ii) where:
(a) is the sum of the following items that pertain to reinsurance
liabilities hereunder:
(i) Aggregate reserve as shown on the Annual Statement;
and
(ii) Premiums paid in advance as shown on the Annual
Statement.
(b) is the net deferred and uncollected premiums as shown on the
Annual Statement.
2. ACCOUNT VALUE. The "Account Value" is the sum of the policyholders'
interests in the Cedent's separate accounts, as defined in the
Policies, before reductions for surrender charges.
3. MODIFIED COINSURANCE RESERVE. The "Modified Coinsurance Reserve" equals
the Reinsurer's quota share of the greater between the Statutory
Reserve and the Account Value.
4. ANNUITY RESERVE. The "Annuity Reserve" associated with a Policy equals
the surrender value.
30
SCHEDULE D MODIFIED COINSURANCE RESERVE INVESTMENT CREDIT
--------------------------------------------------------------------------------
1. MODIFIED COINSURANCE RESERVE INVESTMENT EARNED RATE. The Modified
Coinsurance Reserve Investment Rate for any Accounting Period shall be
equal to (a) / [(b)-.5x(a)], where:
(a) equals the net investment income after investment income
withholding taxes, if any, and realized and unrealized capital
gains and losses calculated by the Cedent during the current
Accounting Period with respect to the Asset Portfolio,
described in Schedule E; and
(b) equals the average of the statutory values of the assets in
the Asset Portfolio as of the beginning and the end of the
Accounting Period. For purposes of this section, the statutory
value of the assets in the Asset Portfolio includes accrued
investment income.
2. MODIFIED COINSURANCE RESERVE INVESTMENT CREDIT. The Modified
Coinsurance Reserve Investment Credit for any Accounting Period shall
be equal to the Modified Coinsurance Reserve Investment Rate determined
according to Paragraph 1 times the Modified Coinsurance Reserve as of
the beginning of the accounting period.
3. Item 1(a) of the Modified Coinsurance Reserve Investment Earned Rate
formula, described above, shall not be adjusted for income taxes or
changes in any provision for income taxes.
31
SCHEDULE E ASSET PORTFOLIO
--------------------------------------------------------------------------------
1. ASSET PORTFOLIO. The Asset Portfolio is composed of the assets in the
Cedent's general account and separate accounts supporting the policies
described in Schedule A.
2. The Cedent shall retain, control and own all assets held in the Asset
Portfolio. Throughout the duration of this Agreement, the Asset
Portfolio shall continue to be managed in accordance with the laws and
regulations of the Cedent's domiciliary jurisdiction and the guidelines
promulgated by the Cedent's Board of Directors.
32
SCHEDULE F
--------------------------------------------------------------------------------
33
SCHEDULE G MONTHLY REPORT FORMAT
------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------
Annual
Statement Reinsurer's
SAMPLE MONTHLY STATEMENT OF ACTIVITY Reference 100% Quota Share
------------------------------------------------------------------------------------------------------------
Quota Share 0.00%
------------------------------------------------------------------------------------------------------------
1. Reinsurance premiums
------------------------------------------------------------------------------------------------------------
a. Direct Premium
------------------------------------------------------------------------------------------------------------
b. Premiums due under Other Reinsurance
------------------------------------------------------------------------------------------------------------
c. Total reinsurance premium = a - b
------------------------------------------------------------------------------------------------------------
2. Benefit payments
------------------------------------------------------------------------------------------------------------
a. Death benefits and rider claims
------------------------------------------------------------------------------------------------------------
b. Maturity values
------------------------------------------------------------------------------------------------------------
c. Disability Benefits
------------------------------------------------------------------------------------------------------------
d. Surrender values
------------------------------------------------------------------------------------------------------------
e. Annuity values
------------------------------------------------------------------------------------------------------------
f. Cash surrender values transferred
------------------------------------------------------------------------------------------------------------
g. Interest on policy and contract funds
------------------------------------------------------------------------------------------------------------
h. Total benefit payments = a + b + c + d + e + f + g
------------------------------------------------------------------------------------------------------------
3. Allowances
------------------------------------------------------------------------------------------------------------
a. Ceding Allowance
------------------------------------------------------------------------------------------------------------
b. Commission Allowance
------------------------------------------------------------------------------------------------------------
c. Premium Tax Allowance
------------------------------------------------------------------------------------------------------------
d. Maintenance Expense Allowance
------------------------------------------------------------------------------------------------------------
e. Total commissions and allowances = a + b + c + d
------------------------------------------------------------------------------------------------------------
4. Modco adjustment
------------------------------------------------------------------------------------------------------------
a. Modco reserve at the end of the current accounting period
------------------------------------------------------------------------------------------------------------
b. Modco reserve at the end of the prior accounting period
------------------------------------------------------------------------------------------------------------
c. Modco investment credit = (line 4 from Modco Investment Credit
worksheet) x 4b above
------------------------------------------------------------------------------------------------------------
d. Modco adjustment = a - b - c
------------------------------------------------------------------------------------------------------------
5. Experience Refund = .95 x (1c - 2h - 3e - 4d - 6a x (1 + 6b)), not less than
zero
------------------------------------------------------------------------------------------------------------
6. Recapture Charge
------------------------------------------------------------------------------------------------------------
a. Recapture Charge end of prior accounting period
------------------------------------------------------------------------------------------------------------
b. Applicable interest rate
------------------------------------------------------------------------------------------------------------
c. Recapture Charge end of current accounting period = a x (1 + b) - 1c
+ 2h + 3e + 4d, not less than zero
------------------------------------------------------------------------------------------------------------
7. Monthly cash settlement = 1c - 2h - 3e - 4d - 5
------------------------------------------------------------------------------------------------------------
8. Statutory Reserve and Liability net of deferred and uncollected premiums end
of current accounting period
------------------------------------------------------------------------------------------------------------
a. Reserve for life policies and contracts
------------------------------------------------------------------------------------------------------------
b. Premiums paid in advance
------------------------------------------------------------------------------------------------------------
c. Deferred and uncollected premium
------------------------------------------------------------------------------------------------------------
d. Statutory Reserve EOP = a + b - c
------------------------------------------------------------------------------------------------------------
9. Statutory Reserve and Liability net of deferred and uncollected premiums end
of prior accounting period
------------------------------------------------------------------------------------------------------------
a. Reserve for life policies and contracts
------------------------------------------------------------------------------------------------------------
b. Premiums paid in advance
------------------------------------------------------------------------------------------------------------
c. Deferred and uncollected premium
------------------------------------------------------------------------------------------------------------
d. Statutory Reserve BOP = a + b - c
------------------------------------------------------------------------------------------------------------
34
----------------------------------------------------------------------------------------------------------------
SAMPLE MONTHLY CALCULATION OF MODCO INVESTMENT CREDIT Annual Total
Statement
Reference
----------------------------------------------------------------------------------------------------------------
1. Assets end of accounting period
----------------------------------------------------------------------------------------------------------------
a. Subtotal invested assets
----------------------------------------------------------------------------------------------------------------
b. Investment income due and accrued
----------------------------------------------------------------------------------------------------------------
c. Assets end of period = a + b
----------------------------------------------------------------------------------------------------------------
2. Assets end of prior accounting period
----------------------------------------------------------------------------------------------------------------
a. Subtotal invested assets
----------------------------------------------------------------------------------------------------------------
b. Investment income due and accrued
----------------------------------------------------------------------------------------------------------------
c. Assets end of prior accounting period = a + b
----------------------------------------------------------------------------------------------------------------
3. Investment income
----------------------------------------------------------------------------------------------------------------
a. Net investment income
----------------------------------------------------------------------------------------------------------------
b. Realized capital gains before tax
----------------------------------------------------------------------------------------------------------------
c. Unrealized capital gains
----------------------------------------------------------------------------------------------------------------
d. Investment income = a + b + c
----------------------------------------------------------------------------------------------------------------
4. Modco investment earned rate = 3d / (.5 x (1c + 2c - 3d)) 0.00%
----------------------------------------------------------------------------------------------------------------
35
-----------------------------------------------------------------------------------------------------------------
SAMPLE MONTHLY REPORT - INVESTED ASSETS END OF ACCOUNTING PERIOD Annual Total
Statement
Reference
-----------------------------------------------------------------------------------------------------------------
Bonds
-----------------------------------------------------------------------------------------------------------------
Preferred stock
-----------------------------------------------------------------------------------------------------------------
Common stock
-----------------------------------------------------------------------------------------------------------------
Mortgage loans - First liens
-----------------------------------------------------------------------------------------------------------------
Mortgage loans - Other than first liens
-----------------------------------------------------------------------------------------------------------------
Properties occupied by the company
-----------------------------------------------------------------------------------------------------------------
Properties acquired in satisfaction of debt
-----------------------------------------------------------------------------------------------------------------
Investment real estate
-----------------------------------------------------------------------------------------------------------------
Policy loans
-----------------------------------------------------------------------------------------------------------------
Premium notes
-----------------------------------------------------------------------------------------------------------------
Cash and short term investments
-----------------------------------------------------------------------------------------------------------------
Other invested assets
-----------------------------------------------------------------------------------------------------------------
Receivable for securities
-----------------------------------------------------------------------------------------------------------------
Aggregate write-in
-----------------------------------------------------------------------------------------------------------------
TOTAL INVESTED ASSETS
-----------------------------------------------------------------------------------------------------------------
SAMPLE MONTHLY REPORT - INVESTED ASSETS END OF PRIOR ACCOUNTING PERIOD Annual Total
Statement
Reference
-----------------------------------------------------------------------------------------------------------------
Bonds
-----------------------------------------------------------------------------------------------------------------
Preferred stock
-----------------------------------------------------------------------------------------------------------------
Common stock
-----------------------------------------------------------------------------------------------------------------
Mortgage loans - First liens
-----------------------------------------------------------------------------------------------------------------
Mortgage loans - Other than first liens
-----------------------------------------------------------------------------------------------------------------
Properties occupied by the company
-----------------------------------------------------------------------------------------------------------------
Properties acquired in satisfaction of debt
-----------------------------------------------------------------------------------------------------------------
Investment real estate
-----------------------------------------------------------------------------------------------------------------
Policy loans
-----------------------------------------------------------------------------------------------------------------
Premium notes
-----------------------------------------------------------------------------------------------------------------
Cash and short term investments
-----------------------------------------------------------------------------------------------------------------
Other invested assets
-----------------------------------------------------------------------------------------------------------------
Receivable for securities
-----------------------------------------------------------------------------------------------------------------
Aggregate write-in
-----------------------------------------------------------------------------------------------------------------
TOTAL INVESTED ASSETS
-----------------------------------------------------------------------------------------------------------------
36
