EX-g.2
9295-00-00
AUTOMATIC AND FACULTATIVE YRT REINSURANCE AGREEMENT
(HEREINAFTER REFERRED TO AS THE "AGREEMENT")
BETWEEN
XXXXXXX NATIONAL LIFE INSURANCE COMPANY
LANSING, MICHIGAN, USA
(HEREINAFTER REFERRED TO AS THE "CEDING COMPANY")
and
RGA REINSURANCE COMPANY
ST. LOUIS, MISSOURI, USA
(HEREINAFTER REFERRED TO AS THE "REINSURER")
THIS AGREEMENT IS EFFECTIVE MARCH 8, 2004
(HEREINAFTER REFERRED TO AS THE "EFFECTIVE DATE")
TABLE OF CONTENTS
ARTICLE TITLE PAGE
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I PARTIES TO THE AGREEMENT 3
II COMMENCEMENT, TERMINATION AND CONTINUANCE OF REINSURANCE 3
III SCOPE 4
IV COVERAGE 5
V LIABILITY 6
VI RETENTION AND RECAPTURE 6
VII REINSURANCE PREMIUMS AND ALLOWANCES 6
VIII RESERVES 7
IX TERMINATIONS AND REDUCTIONS 7
X POLICY ALTERATIONS 7
XI POLICY ADMINISTRATION AND PREMIUM ACCOUNTING 8
XII CLAIMS 9
XIII ARBITRATION 10
XIV INSOLVENCY 11
XV OFFSET 12
XVI RIGHT TO INSPECT 12
XVII UNINTENTIONAL ERRORS, MISUNDERSTANDINGS OR OMISSIONS 12
XVIII CHOICE OF LAW AND FORUM 12
XIX CONFIDENTIALITY AND SECURITY OF INFORMATION 13
XX SEVERABILITY 13
XXI REINSURANCE CREDIT 13
XXII ALTERATIONS TO THE AGREEMENT 14
XXIII EXECUTION OF THE AGREEMENT 15
SCHEDULES
I REINSURANCE SPECIFICATIONS 16
II RETENTION 19
III BUSINESS COVERED 20
IV REINSURANCE PREMIUMS 21
V LIMITS 27
VI SAMPLE STATEMENT SPECIFICATIONS 28
VII SAMPLE POLICY EXHIBIT 29
VIII DEFINITIONS 30
IX TERMINAL ILLNESS BENEFIT RIDER 32
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, policyowner, or beneficiary under the Original Policies
reinsured hereunder.
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.
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 as from the date shown in the attached
Schedule I, and applies 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.
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, 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.
ARTICLE III - SCOPE
1. RETENTION OF THE CEDING COMPANY
The type and amount of the Ceding Company's retention on any one life
is as shown in Schedule II. In determining the amounts at risk in each
case, any additional death benefits on the same life (e.g. additional
term insurance or family income benefits) 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.
2. CURRENCY
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.
3. THE REINSURER'S SHARE
The Reinsurer's share is as shown in Schedule V.
4. BASIS OF REINSURANCE
Plans of insurance listed in Schedule III will be reinsured on the
basis described in Schedule I, using the rates given in the Rate
Schedule as shown in Schedule IV.
5. REINSURANCE ALLOWANCES
The Reinsurer will pay to the Ceding Company the reinsurance allowance,
if any, as shown in Schedule IV. 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.
6. PREMIUM RATE GUARANTEE
Premium rate guarantees, if any, are as shown in Schedule IV.
7. POLICY FEES
Policy fees, if any, are as shown in Schedule IV.
8. TAXES
Taxes, if any, are as shown in Schedule I.
9. 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 IV.
10. 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.
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 has retained its limit of retention as
shown in Schedule II; and
2. PLANS AND RIDERS
The basic plan or supplementary benefit, if any, is shown in
Schedule III; and
3. AUTOMATIC ACCEPTANCE LIMITS
The underwriting class, age, minimum reinsurance amount,
binding amounts and jumbo limits fall within the automatic
limits as shown in Schedule V; 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; and
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.
FACULTATIVE PROVISIONS
The Ceding Company will send copies of the original applications, all
medical reports, inspection reports, attending physician's statement,
and any additional information pertinent to the insurability of the
risk to the Reinsurer.
The Ceding Company will also notify the Reinsurer of any underwriting
information requested or received after the initial request for
reinsurance is made. For policies which contain automatic increase
provisions, the Ceding Company will inform the Reinsurer of the initial
and ultimate risk amounts for which reinsurance is being requested, or
in the case of indexed amounts, the basis of the indexing.
On a timely basis, the Reinsurer will submit a written decision to the
Ceding Company. In no case will the Reinsurer's offer on facultative
submissions be open after one hundred twenty (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 one hundred twenty (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 one hundred twenty (120).
The Reinsurer will not be liable for proceeds paid under the Ceding
Company's Conditional Receipt or temporary insurance agreement for
risks submitted on a facultative basis.
ARTICLE V - LIABILITY
The liability of the Reinsurer for all claims within automatic cover and all
claims arising after facultative acceptance as described in Article IV, will
commence simultaneously with that of the Ceding Company and will cease at the
same time as the liability of the Ceding Company ceases.
ARTICLE VI - RETENTION AND RECAPTURE
If the Ceding Company changes its limit of retention as shown in Schedule II,
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. No recapture will be made unless reinsurance has been 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. No recapture will be made unless the Ceding Company retained its
maximum limit of retention for the plan, age and mortality rating at
the time the policy was issued. No recapture will be allowed in any
class of fully reinsured business or in any classes of risks for which
the Ceding Company established special retention limits less than the
Ceding Company's maximum retention limits for the plan, age, and
mortality rating at the time the policy was issued.
4. If any reinsurance is recaptured, all reinsurance eligible for
recapture, under the provisions of this Article, must be recaptured.
5. If there is reinsurance with other reinsurers on risks eligible for
recapture, the necessary reduction is to be applied to each company in
proportion to the total outstanding reinsurance.
ARTICLE VII - REINSURANCE PREMIUMS AND ALLOWANCES
1. LIFE REINSURANCE
Premiums for life and supplemental benefit reinsurance will be as shown
in Schedule IV.
2. SUBSTANDARD PREMIUMS
Premiums will be increased by any Flat Extra Premium as shown in
Schedule IV, charged the insured on the face amount initially
reinsured. Premiums will be increased by any substandard premium as
shown in Schedule IV, charged the insured on the net amount at risk
reinsured.
3. JOINT POLICY PREMIUMS
In the case of joint policy premiums, if any, the premium rate payable
to the Reinsurer will be as shown in Schedule IV.
4. SUPPLEMENTAL BENEFITS
The Reinsurer will receive a proportionate share of any premiums for
additional benefits as shown in Schedule IV. This share will be based
on the ratio between the amount at risk and the total initial benefits
insured and will remain constant throughout the entire period of
premium payment.
ARTICLE VIII - RESERVES
Reserve requirements of the Ceding Company, if any, are as shown in Schedule I.
ARTICLE IX - TERMINATIONS AND REDUCTIONS
Terminations or reductions will take place in accordance with the following
rules in order of priority:
1. The Ceding Company must keep its initial or recaptured retention on the
policy.
2. Termination or reduction of a wholly reinsured policy will not affect
other reinsurance inforce.
3. A termination or reduction on a wholly retained case will cause an
equal reduction in existing automatic reinsurance with the oldest
policy being reduced first.
4. A termination or reduction will be made first to reinsurance of
partially reinsured policies with the oldest policy being reduced
first.
5. If the policies are 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.
6. When a policy is reinstated, reinsurance will be reinstated as if the
lapse or reduction had not occurred.
ARTICLE X - POLICY ALTERATIONS
1. REINSTATEMENT
Any policy originally reinsured 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 procedures and rules of the Ceding Company. Any
policy originally reinsured with the Reinsurer on a facultative basis
which has been in a lapsed status for more than ninety (90) days must
be submitted with 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.
2. EXCHANGES OR CONVERSIONS
An exchange or conversion is a new policy replacing a policy issued
earlier by the Ceding Company 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, or
3. Without a suicide exclusion period, or contestable period of
equal duration, to those contained in new issues by the Ceding
Company, or
4. Without the payment of the same commissions in the first year,
that the Ceding Company would have paid in the absence of the
Original Policy.
Exchanges or conversions will be reinsured under this Agreement only if
the Original Policy was reinsured with the Reinsurer; the amount of
reinsurance under this Agreement will not exceed the amount of the
reinsurance on the Original Policy with the Reinsurer immediately prior
to the exchange or conversion. Premiums will be as shown in Schedule
IV.
ARTICLE X - POLICY ALTERATIONS (CONTINUED)
Note: An original date policy reissue will not be treated as an exchange or
conversion 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.
Note: Re-entry, e.g. wholesale replacement and similar programs are not
covered under this Article. If Re-entry is applicable to this
Agreement, then it will be covered in Schedule IV.
ARTICLE XI - 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 VI and
Schedule VII.
4. PAYMENT OF BALANCES
The Ceding Company will pay any balance due the Reinsurer, at the same
time as the account is rendered, but in all cases, by the accounting
and premium due frequency as shown in Schedule I. The Reinsurer will
pay any balance due the Ceding Company, at the same time as the account
is confirmed, however, at the latest, within thirty (30) days after
receipt of the statement of account. Should the Reinsurer be unable to
confirm the account in its entirety, the confirmed portion of the
balance will be paid immediately. As soon as the account has been fully
confirmed, the difference will be paid immediately by the debtor. All
balances not paid within thirty (30) days of the due date shown on the
statement will be in default.
5. BALANCES IN DEFAULT
The Reinsurer will have the right to terminate the reinsurance for new
business and all policies having reinsurance premiums in arrears, by
giving ninety (90) days written notice of its intention to the Ceding
Company. If all reinsurance premiums in arrears, including any that
become in arrears during the ninety (90) day notice period, are not
paid before the expiration of the notice period, the Reinsurer will be
relieved of all liability under those policies as of the last date to
which premiums have been paid for each policy. Reinsurance on policies
on which reinsurance premiums subsequently fall due will automatically
terminate as of the last date to which premiums have been paid for each
policy, unless reinsurance premiums on those policies are paid on or
before their due date pursuant to section 4 above.
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.
ARTICLE XI - POLICY ADMINISTRATION AND PREMIUM ACCOUNTING (CONTINUED)
6. FLUCTUATIONS 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 [REDACTED] unless the debtor is not responsible for the delay in
payment.
ARTICLE XII - CLAIMS
Claims covered under this Agreement include only death claims, which are those
due to the death of the insured on a policy reinsured and any additional
benefits which are defined in accordance with the underlying policy and are
reinsured under this Agreement.
1. NOTICE
The Ceding Company will promptly notify the Reinsurer of all claims.
2. PROOFS
In every case of loss, copies of the proofs obtained by the Ceding
Company will be taken by the Reinsurer as sufficient. Copies thereof,
together 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.
3. PAYMENT OF BENEFITS
The Reinsurer will pay its share of all payable claims, however, if the
amount reinsured with the Reinsurer is more than the amount retained by
the Ceding Company and the claim is a contestable claim with a face
amount of [REDACTED] or more under this Agreement, the Ceding Company
must submit all papers in connection with such claim, including all
underwriting and investigation papers, to the Reinsurer for its
recommendation before admission of any liability on the part of the
Ceding Company. The Reinsurer reserves the right to request any
additional documentation it deems necessary, regardless of the dollar
amount.
If the amount of insurance changes because of a misstatement of rate
classification, the Reinsurer's share of reinsurance liability will
change proportionately.
For claims under the Terminal Illness Benefit Rider, the reinsurance
benefit is the Reinsurer's proportionate share of the terminal illness
benefit payable (the death benefit less the Ceding Company's discount
percentage and subject to the Ceding Company's cap on dollar amount or
percentage of the total death benefit payable to the insured).
Immediately following payment of any terminal illness benefit claim,
the net amount at risk reinsured hereunder for the policy will be
reduced proportionately with the reduction in the face amount of the
policy.
4. CONTESTED CLAIMS
The Ceding Company will notify the Reinsurer of its intention to
contest, compromise, or litigate a claim. Unless it declines to be a
party to such action, the Reinsurer will pay its share of any
settlement up to the maximum that would have been payable under the
specific policy had there been no controversy plus its share of claim
investigation fees paid to a third party, except as specified below.
If the Reinsurer declines to be a party to the contest, compromise, or
litigation of a claim, it will pay its full share of the amount
reinsured, as if there had been no contest, compromise, or litigation,
and its proportionate share of covered expenses incurred to the date,
from the date it notifies the Ceding Company it declines to be a party.
ARTICLE XII - CLAIMS (CONTINUED)
5. CLAIMS EXPENSES
In no event will the following categories of expenses or liabilities be
reimbursed:
a. Salaries of employees or other internal expenses of the Ceding
Company or the original issuing companies;
b. Expenses incurred in connection with a dispute or contest
arising out of conflicting or any other claims of entitlement
to policy proceeds or benefits.
6. EXTRA CONTRACTUAL OBLIGATIONS
In no event shall the Reinsurer be liable for any proportion of the
Ceding Company's liability consisting in any part of damages, including
those exemplary or punitive in nature, nor for fines or statutory
penalties awarded against the Ceding Company, policyholder, and/or any
agents thereof as a result of any act, omission, or course of conduct
committed by or for the Ceding Company, the policyholder and/or any
agents thereof or for which the Ceding Company, the policyholder and/or
any agents thereof shall otherwise be responsible, in connection with
the handling of or pertaining to the policies.
The Reinsurer shall likewise not be liable for any legal fees or
expenses attendant to the defense of claims of the kind referred to in
the paragraph above.
As an exception to this exclusion, the Reinsurer shall indemnify the
Ceding Company for its proportionate share of any such Extra
Contractual Obligations and/or associated legal fees or expenses
attendant to the defense thereof to the extent that the Reinsurer
concurred, both in advance and in writing, with the Ceding Company's
act, omission, or course of conduct in connection with the handling of
or pertaining to the policies that resulted in the incurral of such
Extra Contractual Obligations.
Notwithstanding the limited exception set forth in the paragraph above,
this Agreement shall not provide any indemnity with respect to any
Extra Contractual Obligation incurred by the Ceding Company as a result
of any fraudulent and/or criminal act or omission by any officer,
director or employee of the Ceding Company who is acting individually,
or collectively, or in collusion with any individual or corporation, or
any other organization, or party which is involved in the presentation,
or defense, or settlement of any claim covered hereunder.
ARTICLE XIII - 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, 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.
ARTICLE XIII - ARBITRATION (CONTINUED)
3. PROCEDURE
Each of the two parties will appoint one arbitrator, and these two
arbitrators will select the third arbitrator. Upon the selection of the
third arbitrator, the arbitration tribunal will be constituted, and the
third arbitrator will act as chairman of the tribunal.
If either party fails to appoint an arbitrator within sixty (60) days
after the other party has given notice of appointing an arbitrator,
then the arbitration association, as shown in Schedule I, will appoint
an arbitrator for the party that has failed to do so.
The party that has failed to appoint an arbitrator will be responsible
for all expenses levied by the arbitration association, for such
appointment. Should the two arbitrators be unable to agree on the
choice of the third arbitrator, then the appointment of this arbitrator
is left to the arbitration association. Such expense shall be borne
equally by each party to this Agreement.
The tribunal, may in its sole discretion make orders and directions as
it considers to be necessary for the final determination of the matters
in dispute. Such orders and directions may be necessary with regard to
pleadings, discovery, inspection of documents, examination of witnesses
and any other matters relating to the conduct of the arbitration. The
tribunal, will have the widest discretion permissible under the law,
and practice of the place of arbitration, when making such orders or
directions.
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 XIV - INSOLVENCY
In the event of the insolvency of the Ceding Company, this reinsurance shall be
payable directly to the Ceding Company, or to its liquidator, receiver,
conservator or statutory successor on the basis of the liability of the Ceding
Company without diminution because of the insolvency of the Ceding Company or
because the liquidator, receiver, conservator or statutory successor of the
Ceding Company has failed to pay all or a portion of any claim. It is agreed,
however, that the liquidator, receiver, conservator or statutory successor of
the Ceding Company shall give written notice to the reinsurers of the pendency
of a claim against the Ceding Company indicating the policy or bond reinsurance
which claim would involve a possible liability on the part of the reinsurers
within a reasonable time after that claim is filed in the conservation or
liquidation proceeding or in the receivership, and that during the pendency of
that claim the reinsurers may investigate that claim and interpose, at their own
expense, in the proceeding where that claim is to be adjudicated any defense(s)
they may deem available to the Ceding Company or its liquidator, receiver,
conservator or statutory successor. This expense incurred by the reinsurers
shall be chargeable, subject to approval of the court, against the Ceding
Company as part of the expense of conservation or liquidation to the extent of a
pro rata share of the benefit which may accrue to the Ceding Company solely as a
result of the defense undertaken by the reinsurers.
1. Where two or more reinsurers are involved in the same claim and a
majority in interest elect to interpose defense to that claim, the
expense will be apportioned in accordance with the terms of the
Agreement as though that expense had been incurred by the Ceding
Company.
ARTICLE XIV - INSOLVENCY (CONTINUED)
2. This insolvency clause shall not preclude the Reinsurer from asserting
any excuse or defense to payment of this reinsurance other than the
excuses or defenses of the insolvency of the Ceding Company and the
failure of the Ceding Company's liquidator, receiver, conservator or
statutory successor to pay all or a portion of any claim.
ARTICLE XV - OFFSET
All amounts due or otherwise accrued to any of the parties hereto whether by
reason of premiums, losses, expenses, or otherwise, under this Agreement will at
all times be fully subject to the right of offset and only the net balance will
be due and payable. To the extent permitted by applicable law, the right of
offset will not be affected or diminished because of the insolvency of either
party.
ARTICLE XVI - RIGHT TO INSPECT
Upon request the Ceding Company will furnish the Reinsurer with detailed
information concerning the risks reinsured under this Agreement. In particular
the Reinsurer will be entitled to request that:
1. Copies of the whole or part of any documents relating to the risks and
their 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; notification of such visits will normally be given two (2)
weeks in advance and even in urgent cases at least forty-eight (48)
hours in advance; and
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.
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.
ARTICLE XVIII - 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.
ARTICLE XIX - CONFIDENTIALITY AND SECURITY OF INFORMATION
The Reinsurer and the Ceding Company recognize that the business of reinsurance
requires the transmission, use, and storage of "non-public personal information"
(as the term is defined in the Xxxxx-Xxxxx-Xxxxxx Act and applicable regulations
promulgated thereunder) (herein the "Information") about proposed, current, and
former owners, insureds, applicants, and beneficiaries (collectively,
"Customers"), and both parties are committed to conduct business in a manner
that provides the required security for the Information.
In consideration of the promises contained in this Agreement and the business
between the Reinsurer and the Ceding Company, the parties agree as follows:
1. The Reinsurer acknowledges that it has and/or will receive Information
about Customers from the Ceding Company. The Reinsurer agrees that it
may use the Information only for the purposes set forth in the
reinsurance agreements by and between the parties. The Reinsurer and
the Ceding Company agree to transmit Information only through
reasonably secure transmission devices including, when appropriate,
encrypted electronic transmission.
2. The Reinsurer agrees to treat Information as confidential and to
maintain its confidentiality by, among other things, maintaining a
reasonably secure system for handling the Information and exercising no
less than that degree of care the Reinsurer exercises with respect to
its own information of a similar nature that it does not wish to be
disclosed to a third party. In that regard, and without limitation, the
Reinsurer agrees to employ the following practices:
A) The Reinsurer will advise employees who receive Information of
the obligation of confidentiality under this Agreement (the
Ceding Company agrees that communication by the Reinsurer to
its employees of a general policy regarding confidentiality of
customer information, including information about customers of
ceding companies, is sufficient to satisfy this clause.); and
B) Except as required by law, the Reinsurer will not disclose
Information to third parties without the consent of the Ceding
Company; however, the Ceding Company agrees that the Reinsurer
may, in the normal course of its business, share Information
with other insurance and reinsurance companies
("Retrocessionaires") to the extent necessary to retrocede
risk to the Retrocessionaires, so long as the
Retrocessionaires have agreed to maintain the confidentiality
of the Information on terms substantially similar to this
Agreement.
3. In the event the Reinsurer is required by court order or other
legislative, judicial, or administrative process to disclose
Information, the Reinsurer agrees to provide the Ceding Company with
prompt notice of the order or process so the Ceding Company has an
opportunity to obtain a protective order or other relief.
4. The terms of this article shall survive in the event that the Ceding
Company or its successors, and the Reinsurer, or its successors, cease
their business relationship.
ARTICLE XX - SEVERABILITY
If any provision of this Agreement shall be rendered illegal or unenforceable by
the laws, regulations or public policy of any state, such provision shall be
considered void in such state, but this shall not affect the validity or
enforceability of any other provision of this Agreement or the enforceability of
such provision in any other jurisdiction.
ARTICLE XXI - REINSURANCE CREDIT
It is the intention of both the Reinsurer and the Ceding Company that the Ceding
Company qualifies for reinsurance credit in the state of Michigan for
reinsurance ceded hereunder. Without limiting the generality of the immediately
preceding sentence, the Reinsurer shall, in conformity with all applicable laws
and regulations governing the Reinsurer, take any and all commercially
reasonable steps within its control so that the Ceding Company may take full
credit in its Standard Accounting Practices financial statements for the
business ceded under this Agreement.
ARTICLE XXII - ALTERATIONS TO THE AGREEMENT
This 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 as expressed in this Agreement.
Any alterations to the provisions of this Agreement will be made by amendment,
addenda or by correspondence attached to the Agreement embodying such
alterations as may be agreed upon and signed by both parties. These documents
will be regarded as part of this Agreement and will be equally binding.
===============================================================================================================================
ARTICLE XXIII - EXECUTION OF THE AGREEMENT
IN WITNESS OF THE ABOVE,
XXXXXXX NATIONAL LIFE INSURANCE COMPANY
OF
LANSING, MICHIGAN, USA
AND
RGA REINSURANCE COMPANY
OF
ST. LOUIS, MISSOURI, USA
HAVE BY THEIR RESPECTIVE OFFICERS EXECUTED AND DELIVERED THIS AGREEMENT
IN DUPLICATE ON THE DATES INDICATED BELOW:
XXXXXXX NATIONAL LIFE INSURANCE COMPANY
BY: /s/ Xxxx X. Xxxxx BY: /s/ Xxxxxxx X. Xxxxx
-------------------------- ----------------------------
TITLE: SVP & Chief Actuary TITLE: AVP & Associate Gen. Counsel
--------------------------- ----------------------------
DATE: 3/18/05 DATE: 3/18/05
--------------------------- ----------------------------
RGA REINSURANCE COMPANY
BY: /s/ Xxxxxx Xxxx
---------------------------
TITLE: VICE PRESIDENT
DATE: 3-14-05
---------------------------
SCHEDULE I - REINSURANCE SPECIFICATIONS
-------------------------------------------------------------------------------------------------------------------------------
COMMENCEMENT, TERMINATION AND CONTINUANCE OF REINSURANCE, ARTICLE II:
-------------------------------------------------------------------------------------------------------------------------------
1. EFFECTIVE DATE:
This Agreement applies to policies with applications
received by the Ceding Company on and after March 8, 2004.
2. POLICY TERMINATION: REFUNDS:
The Reinsurer will refund any unearned reinsurance premiums.
However, policy fees, if any, will be deemed earned for a
policy year if the policy is reinsured during any portion of
that policy year.
-------------------------------------------------------------------------------------------------------------------------------
SCOPE, ARTICLE III:
-------------------------------------------------------------------------------------------------------------------------------
1. CURRENCY: United States Dollars ("US$")
2. BASIS OF REINSURANCE: Yearly Renewable Term
3. TAXES:
DAC TAX REGULATIONS
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 June 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. If the Ceding Company and the
Reinsurer reach agreement on an amount of net
consideration, each party will report such amount in
their respective tax returns for the previous
calendar year.
SCHEDULE I - REINSURANCE SPECIFICATIONS (CONTINUED)
-------------------------------------------------------------------------------------------------------------------------------
SCOPE, ARTICLE III (CONTINUED):
-------------------------------------------------------------------------------------------------------------------------------
3. TAXES (CONTINUED):
PREMIUM TAX: Premium tax will not be reimbursed.
-------------------------------------------------------------------------------------------------------------------------------
COVERAGE, ARTICLE IV:
-------------------------------------------------------------------------------------------------------------------------------
RESIDENCE: United States, Canada, Puerto Rico, Guam or Mexico
-------------------------------------------------------------------------------------------------------------------------------
RETENTION AND RECAPTURE, ARTICLE VI:
-------------------------------------------------------------------------------------------------------------------------------
MINIMUM RECAPTURE PERIOD: Available after twenty (20) years provided the corporate maximum
dollar amount retention was held at issue. Recapture is not
available due to any change in the financial condition of the
Reinsurer.
-------------------------------------------------------------------------------------------------------------------------------
RESERVES, ARTICLE VIII:
-------------------------------------------------------------------------------------------------------------------------------
The Ceding Company agrees to post on its books any deficiency reserves
on the coverage reinsured under this Agreement.
-------------------------------------------------------------------------------------------------------------------------------
POLICY ADMINISTRATION AND PREMIUM ACCOUNTING, ARTICLE XI:
-------------------------------------------------------------------------------------------------------------------------------
1. ACCOUNTING PERIOD: Monthly
PREMIUM DUE: Annually in advance
2. REINSURANCE ADMINISTRATION: Self administration (Client administers)
3. BALANCES IN DEFAULT:
The Reinsurer reserves the right to charge interest at the
prime rate plus [REDACTED] as stated in the Wall Street
Journal on the 1st business day in January 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.
SCHEDULE I - REINSURANCE SPECIFICATIONS (CONTINUED)
-------------------------------------------------------------------------------------------------------------------------------
ARBITRATION, ARTICLE XIII:
-------------------------------------------------------------------------------------------------------------------------------
1. ARBITRATION ASSOCIATION: American Arbitration Association
2. PLACE OF ARBITRATION: St. Louis, Missouri, USA
-------------------------------------------------------------------------------------------------------------------------------
CHOICE OF LAW AND FORUM, ARTICLE XVIII:
-------------------------------------------------------------------------------------------------------------------------------
1. CHOICE OF LAW AND FORUM: Missouri, USA
SCHEDULE II - RETENTION
DOMESTIC AND CANADIAN BUSINESS
The Ceding Company will retain up to the maximum limits stated below:
ISSUE AGES STANDARD - TABLE 2 TABLE 3 - 8 TABLE 9 - UP
---------- ------------------ ----------- ------------
0 - 65 [REDACTED] [REDACTED] [REDACTED]
66 - 75 [REDACTED] [REDACTED] [REDACTED]
76 - Up [REDACTED] [REDACTED] [REDACTED]
MEXICAN BUSINESS
The Ceding Company will retain up to the maximum limits stated below:
ISSUE AGES STANDARD - TABLE 2 TABLE 3 - 8 TABLE 9 - UP
---------- ------------------ ----------- ------------
0 - 65 [REDACTED] [REDACTED] [REDACTED]
66 - 75 [REDACTED] [REDACTED] [REDACTED]
76 - Up [REDACTED] [REDACTED] [REDACTED]
SCHEDULE III - BUSINESS COVERED
EFFECTIVE MARCH 8, 2004
-------------------------------------------------------------------------------------------------------------------------------
PLAN(S)
-------------------------------------------------------------------------------------------------------------------------------
Perspective Investor Universal Life
-------------------------------------------------------------------------------------------------------------------------------
RIDER(S)
-------------------------------------------------------------------------------------------------------------------------------
Scheduled Term Insurance Rider
Other Insured Rider
Terminal Illness Benefit Rider
SCHEDULE IV - REINSURANCE PREMIUMS
EFFECTIVE MARCH 8, 2004
-------------------------------------------------------------------------------------------------------------------------------
LIFE:
-------------------------------------------------------------------------------------------------------------------------------
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 which is reinsured with
the Reinsurer.
The life reinsurance premium rates contained in this Agreement are
guaranteed for one (1) 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 annually renewable
term insurance calculated using the minimum statutory mortality rates
and maximum statutory interest rate for each year of issue.
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 monthly life premium rate, from the
attached Rate Schedule labeled below, for the age of the insured, at
the beginning of the policy year, by the amount at risk reinsured for
that policy year multiplied by twelve (12) and then, multiplied by the
applicable pay percentage as shown below. The same procedure will apply
for single premium policies and for paid up policies.
RATE SCHEDULE
PLAN(S) UNDERWRITING CLASS YEAR 1 YEARS 2+
------- ------------------ ------ --------
Perspective Investor Universal S-1 Preferred Plus Non-Tobacco [REDACTED] [REDACTED]
Life
Preferred Non-Tobacco [REDACTED] [REDACTED]
Standard Non-Tobacco [REDACTED] [REDACTED]
Preferred Tobacco [REDACTED] [REDACTED]
Standard Tobacco [REDACTED] [REDACTED]
Reinsurance premiums will be on an age nearest birthday basis.
All policy fees will be retained by the Ceding Company.
-------------------------------------------------------------------------------------------------------------------------------
SUBSTANDARD PREMIUMS:
-------------------------------------------------------------------------------------------------------------------------------
SUBSTANDARD TABLE EXTRA
Premiums will be increased by any substandard premium charged the
insured on the net amount at risk reinsured. For substandard table
ratings, premiums will be increased by the following percent per table:
[REDACTED]
SCHEDULE IV - REINSURANCE PREMIUMS (CONTINUED)
-------------------------------------------------------------------------------------------------------------------------------
SUBSTANDARD PREMIUMS (CONTINUED):
-------------------------------------------------------------------------------------------------------------------------------
FLAT EXTRA PREMIUMS
The premium will be increased by any Flat Extra Premium charged the
insured on the face amount initially reinsured. The Reinsurer shall pay
expense allowances to the Ceding Company equal to a percentage, as
shown below, of the reinsurance premium for Flat Extra Premiums.
ALLOWANCE
PERCENTAGE
FIRST YEAR PERMANENT PAYABLE 6 FIRST YEAR TEMPORARY PAYABLE
YEARS OR MORE: 1 - 5 YEARS: RENEWAL:
[REDACTED] [REDACTED] [REDACTED]
-------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL BENEFITS:
-------------------------------------------------------------------------------------------------------------------------------
RIDER(S)
The reinsurance premium to be paid to the Reinsurer for reinsurance of
the following rider(s) will be based on the appropriate monthly rate as
shown below, multiplied by twelve (12), and then multiplied by the
following pay percentages.
PAY PERCENTAGE
RATE SCHEDULE
RIDER(S) UNDERWRITING CLASS YEAR 1 YEARS 2+
-------- ------------------ ------ --------
Scheduled Term Insurance Rider [REDACTED] Preferred Plus Non-Tobacco [REDACTED] [REDACTED]
Preferred Non-Tobacco [REDACTED] [REDACTED]
Standard Non-Tobacco [REDACTED] [REDACTED]
Preferred Tobacco [REDACTED] [REDACTED]
Standard Tobacco [REDACTED] [REDACTED]
Other Insured Rider [REDACTED] Preferred Plus Non-Tobacco [REDACTED] [REDACTED]
Preferred Non-Tobacco [REDACTED] [REDACTED]
Standard Non-Tobacco [REDACTED] [REDACTED]
Preferred Tobacco [REDACTED] [REDACTED]
Standard Tobacco [REDACTED] [REDACTED]
TERMINAL ILLNESS BENEFIT RIDER:
There are no premiums for this benefit. Please see Schedule IX
for further details on this benefit.
SCHEDULE IV - REINSURANCE PREMIUMS (CONTINUED)
-------------------------------------------------------------------------------------------------------------------------------
RE-ENTRY'S:
-------------------------------------------------------------------------------------------------------------------------------
Re-entry's are not covered under this Agreement.
-------------------------------------------------------------------------------------------------------------------------------
CONVERSIONS OR EXCHANGES:
-------------------------------------------------------------------------------------------------------------------------------
Conversions or exchanges are not covered under this Agreement.
-------------------------------------------------------------------------------------------------------------------------------
EXPERIENCE REFUND OR PROFIT COMMISSION:
-------------------------------------------------------------------------------------------------------------------------------
Experience Refund or Profit Commissions are not covered under this
Agreement.
SCHEDULE IV - REINSURANCE PREMIUMS (CONTINUED)
-------------------------------------------------------------------------------------------------------------------------------
RATE SCHEDULE S-1
-------------------------------------------------------------------------------------------------------------------------------
SCHEDULE IV - REINSURANCE PREMIUMS (CONTINUED)
-------------------------------------------------------------------------------------------------------------------------------
RATE SCHEDULE S-2
-------------------------------------------------------------------------------------------------------------------------------
SCHEDULE IV - REINSURANCE PREMIUMS (CONTINUED)
-------------------------------------------------------------------------------------------------------------------------------
RATE SCHEDULE S-3
-------------------------------------------------------------------------------------------------------------------------------
SCHEDULE V - LIMITS
-------------------------------------------------------------------------------------------------------------------------------
REINSURER'S SHARE:
-------------------------------------------------------------------------------------------------------------------------------
The Reinsurer's share will be [REDACTED] of the excess over the Ceding Company's
retention specified in Schedule II.
-------------------------------------------------------------------------------------------------------------------------------
ISSUE AGE LIMITS:
-------------------------------------------------------------------------------------------------------------------------------
0 - 90
-------------------------------------------------------------------------------------------------------------------------------
MINIMUM REINSURANCE AMOUNT:
-------------------------------------------------------------------------------------------------------------------------------
[REDACTED]
-------------------------------------------------------------------------------------------------------------------------------
POOL BINDING LIMITS (EXCLUDING THE CEDING COMPANY'S RETENTION):
-------------------------------------------------------------------------------------------------------------------------------
DOMESTIC AND CANADIAN BUSINESS
MAXIMUM AUTOMATIC POOL BINDING LIMIT:
ISSUE AGES STANDARD - TABLE 2 TABLE 3 - 8 TABLE 9 - UP
---------- ------------------ ----------- ------------
0 - 65 [REDACTED] [REDACTED] [REDACTED]
66 - 75 [REDACTED] [REDACTED] [REDACTED]
76 - Up [REDACTED] [REDACTED] [REDACTED]
MEXICAN BUSINESS
MAXIMUM AUTOMATIC POOL BINDING LIMIT:
ISSUE AGES STANDARD - TABLE 2 TABLE 3 - 8 TABLE 9 - UP
---------- ------------------ ----------- ------------
0 - 65 [REDACTED] [REDACTED] [REDACTED]
66 - 75 [REDACTED] [REDACTED] [REDACTED]
76 - Up [REDACTED] [REDACTED] [REDACTED]
-------------------------------------------------------------------------------------------------------------------------------
JUMBO LIMIT:
-------------------------------------------------------------------------------------------------------------------------------
[REDACTED]
SCHEDULE VI - SAMPLE STATEMENT SPECIFICATIONS
The following information should appear on each statement and inforce listing:
o Name of the insured(s)
o Date of birth of the insured(s)
o The issue age of each insured(s)
o The sex of the insured(s)
o The insured(s) country of residence
o Underwriting classification (i.e. preferred, standard, etc.)
o Smoking class (i.e. smoker, nonsmoker, etc.)
o Indication if business is Facultative or Automatic
o Indication if business is Risk Premium or Coinsurance
o Policy number(s)
o Plan code(s) / kind code(s): cession series
o Original face amount of the policy(s)
o Amount(s) ceded to the Reinsurer
o Amount of premium being paid; separated for supplementary benefits.
o The amount of any reinsurance premium allowances
o Any extra premiums concerned. Example: [REDACTED]
o Effective date and duration of any policy(s) change, reissue, or termination
SCHEDULE VII - SAMPLE POLICY EXHIBIT
POLICY SUMMARY NUMBER OF POLICIES REINSURANCE
CLASSIFICATION AMOUNT
[REDACTED] [REDACTED]
Inforce as of last report
New issues [REDACTED] [REDACTED]
Reinstatements [REDACTED]
Increases [REDACTED]
Decreases - still inforce [REDACTED] [REDACTED]
Rollover - in [REDACTED]
DEDUCT BY: [REDACTED]
----------
Death [REDACTED] [REDACTED]
Surrender [REDACTED] [REDACTED]
Lapse [REDACTED]
Conversion - out [REDACTED]
Decreases - termination [REDACTED]
Inactive - pending [REDACTED]
Not taken [REDACTED]
Inforce as of current report [REDACTED] [REDACTED]
SCHEDULE VIII - 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 that 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 that 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 retrocessionaire.
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) 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 a
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's
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.
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 [REDACTED] 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.
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.
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 company and the
insured(s).
SCHEDULE VIII - DEFINITIONS (CONTINUED)
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.
RATE - The premium rate is the amount of premium charged per exposure unit, e.g.
per [REDACTED].
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 insurances 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 IV 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 Statutory Reserve of a policy.
TERMINATION - The formal ending of a reinsurance agreement by its natural
expiry, cancellation or commutation by both parties. Terminations 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.
SCHEDULE IX - TERMINAL ILLNESS BENEFIT RIDER
The Reinsurer will participate in the terminal illness benefit rider and there
will be no charge for this benefit.
If a policy owner diagnosed to be terminal within twelve (12) months requests a
benefit that is less than [REDACTED] of the policy face amount, the policy will
continue to be reinsured for the full ceded face amount until the insured's
death, at which time a claim for the full ceded face amount will be submitted to
the reinsurers. If the benefit requested is [REDACTED] of the policy face
amount, a claim will be made to the reinsurers for the benefit paid and the
amount recovered from the reinsurers will include a discount similar to the
discount under the rider.
