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AUTOMATIC AND FACULTATIVE
YEARLY RENEWABLE TERM REINSURANCE AGREEMENT
EFFECTIVE April 30, 2000
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
(hereinafter referred to as "PRUCO OF NJ")
000 Xxxxxxxxxx Xxxxxx
Xxxxxx, Xxx Xxxxxx 00000-0000
And
ANNUITY & LIFE REASSURANCE, LTD
(hereinafter referred to as "ANNUITY & LIFE RE")
Xxxxxxxxxx Xxxxx
0 Xxxxxxxx Xxxxxx
Xxxxxxxx, XX 11
Bermuda
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Table of Contents
1. PARTIES TO THE AGREEMENT.................................................. 3
2. EFFECTIVE DATE OF THE AGREEMENT........................................... 3
3. SCOPE OF THE AGREEMENT.................................................... 3
4. DURATION OF THE AGREEMENT................................................. 3
5. BASIS OF REINSURANCE...................................................... 4
6. AUTOMATIC REINSURANCE TERMS............................................... 4
a. CONVENTIONAL UNDERWRITING........................................... 4
b. RESIDENCE........................................................... 4
c. OCCUPATION.......................................................... 4
d. AUTOMATIC PORTION REINSURED......................................... 4
e. RETENTION........................................................... 4
f. AUTOMATIC ACCEPTANCE LIMIT.......................................... 4
g. JUMBO LIMIT......................................................... 4
h. MINIMUM CESSION..................................................... 4
i. FACULTATIVE QUOTES.................................................. 4
7. AUTOMATIC REINSURANCE NOTICE PROCEDURE................................... 5
8. FACULTATIVE OBLIGATORY REINSURANCE....................................... 5
9. FACULTATIVE REINSURANCE.................................................. 5
10. COMMENCEMENT OF REINSURANCE COVERAGE..................................... 5
a. AUTOMATIC REINSURANCE............................................... 5
b. FACULTATIVE OBLIGATORY REINSURANCE.................................. 6
c. FACULTATIVE REINSURANCE............................................. 6
d. PRE-ISSUE COVERAGE.................................................. 6
11. REINSURANCE PREMIUM RATES................................................ 6
a. LIFE REINSURANCE.................................................... 6
b. RATES NOT GUARANTEED................................................ 6
12. PAYMENT OF REINSURANCE PREMIUMS.......................................... 6
a. PREMIUM DUE......................................................... 6
b. FAILURE TO PAY PREMIUMS............................................. 7
c. PREMIUM ADJUSTMENT.................................................. 7
13. PREMIUM TAX REIMBURSEMENT................................................ 7
14. DAC TAX AGREEMENT........................................................ 7
15. REPORTS.................................................................. 8
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16. RESERVES FOR REINSURANCE................................................. 8
17. CLAIMS................................................................... 8
a. NOTICE.............................................................. 8
b. AMOUNT AND PAYMENT OF BENEFITS...................................... 9
c. CLAIM SETTLEMENTS................................................... 9
d. CLAIM EXPENSES...................................................... 9
e. EXTRACONTRACTUAL DAMAGES............................................ 9
18. MISREPRESENTATION, SUICIDE, AND MISSTATEMENT............................. 9
19. POLICY CHANGES........................................................... 10
a. NOTICE.............................................................. 10
b. INCREASES........................................................... 10
c. REDUCTION OR TERMINATION............................................ 10
d. PLAN CHANGES........................................................ 10
e. DEATH BENEFIT OPTION CHANGES........................................ 10
f. REDUCED PAID-UP INSURANCE........................................... 10
20. RECAPTURE................................................................ 11
21. REINSTATEMENTS........................................................... 11
a. AUTOMATIC REINSTATEMENT............................................. 11
b. FACULTATIVE REINSTATEMENT........................................... 11
c. PREMIUM ADJUSTMENT.................................................. 11
22. ERRORS AND OMISSIONS..................................................... 12
23. INSOLVENCY............................................................... 12
24. ARBITRATION.............................................................. 13
a. GENERAL............................................................. 13
b. NOTICE.............................................................. 13
c. PROCEDURE........................................................... 13
d. COSTS............................................................... 13
25. GOOD FAITH; FINANCIAL SOLVENCY........................................... 13
26. MEDICAL INFORMATION BUREAU............................................... 14
27. GOVERNING LAW............................................................ 14
28. ASSIGNMENT............................................................... 14
29. PROVISION FOR BERMUDA DOMICILED ANNUITY & LIFE RE........................ 14
30. LETTER OF CREDIT PROVISIONS.............................................. 15
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AUTOMATIC AND FACULTATIVE YEARLY RENEWABLE TERM
REINSURANCE AGREEMENT
1. PARTIES TO THE AGREEMENT
This Agreement is solely between ANNUITY & LIFE RE and PRUCO OF NJ, a life
insurance company domiciled in the State of New Jersey. There is no third
party beneficiary to this Agreement. Reinsurance under this Agreement will
not create any right or legal relationship between ANNUITY & LIFE RE and
any other person, for example, any insured, policyowner, agent,
beneficiary, or assignee. PRUCO OF NJ agrees that it will not make ANNUITY
& LIFE RE a party to any litigation between any such third party and PRUCO
OF NJ. PRUCO OF NJ will not use or disclose ANNUITY & LIFE RE's name with
regard to PRUCO OF NJ's agreements or transactions with these third
parties unless ANNUITY & LIFE RE gives prior written approval for the use
or disclosure of its name or unless PRUCO OF NJ is compelled by law to do
so.
The terms of this Agreement are binding upon the parties, their
representatives, successors, and assigns. The parties to this Agreement
are bound by ongoing and continuing obligations and liabilities until the
later of (1) when this Agreement terminates and (2) when the underlying
policies are no longer in force. This Agreement shall not be bifurcated,
partially assigned, or partially assumed.
2. EFFECTIVE DATE OF THE AGREEMENT
This Agreement will be effective as of 12:01 A.M., April 30, 2000, and
will cover policies effective on and after that date.
3. SCOPE OF THE AGREEMENT
The text of this Agreement and all Exhibits, Schedules and Amendments are
considered to be the entire agreement between the parties. There are no
other understandings or agreements between the parties regarding the
policies reinsured other than as expressed in this Agreement. The parties
may make changes or additions to this Agreement, but they will not be
considered to be in effect unless they are made by means of a written
amendment that has been signed and dated by both parties.
4. DURATION OF THE AGREEMENT
The duration of this Agreement will be unlimited. However, either party
may terminate the Agreement for new business at any time by giving the
other a 90-day prior written notice. ANNUITY & LIFE RE will continue to
accept new reinsurance during the 90-day period.
In addition, this Agreement may be terminated immediately for the
acceptance of new reinsurance by either party if one of the parties
materially breaches this Agreement or becomes insolvent.
Existing reinsurance will not be affected by the termination of this
Agreement with respect to new reinsurance. Existing reinsurance will
remain in force until the termination or expiry of the
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underlying policies on which the reinsurance is based as long as PRUCO OF
NJ continues to pay reinsurance premiums as described in Section 12.
However, existing reinsurance may be terminated in accordance with the
recapture provision described in Section 20.
5. BASIS OF REINSURANCE
Reinsurance under this Agreement will be on the Yearly Renewable Term
basis for the net amount at risk on the portion of each policy that is
reinsured as described in Schedule A.
6. AUTOMATIC REINSURANCE TERMS
ANNUITY & LIFE RE agrees to automatically accept contractual risks on the
life insurance plans shown in Schedule A, subject to the following
requirements:
a. CONVENTIONAL UNDERWRITING. Automatic reinsurance applies only to
insurance applications underwritten by PRUCO OF NJ according to
PRUCO OF NJ's conventional underwriting and issue practices. Upon
request, PRUCO OF NJ shall provide ANNUITY & LIFE RE with a copy of
its current underwriting and issue practices and guidelines.
In the event of significant changes in underwriting practices in the
industry, it may be appropriate for PRUCO OF NJ or ANNUITY & LIFE RE
to request of the other party changes in the underwriting
requirements. The party requesting the change must provide a 120-day
advance written notice to the other party before the effective date
of such change. Recognition of reinsurance premium rates related to
these changes must be determined within the 120-day period. If the
underwriting change or rate change is unacceptable to either party,
this Agreement may be unilaterally terminated for acceptance of new
business with a 90-day written termination notice to the other
party.
b. RESIDENCE. To be eligible for automatic reinsurance, each insured
must either be a resident of the United States or Canada at the time
of issue or be a resident of another country that meets PRUCO OF
NJ's special underwriting requirements pertaining to foreign
residence.
c. OCCUPATION. To be eligible for automatic reinsurance, the insured
must not be employed in an occupation as shown in the Occupation
Exclusion List in Schedule A.
d. AUTOMATIC PORTION REINSURED. For any policy reinsured under
automatic reinsurance, the portion reinsured is shown in Schedule A.
e. RETENTION. PRUCO OF NJ will retain, and not otherwise reinsure, an
amount of insurance on each life equal to its retention shown in
Schedule A.
f. AUTOMATIC ACCEPTANCE LIMIT. For any policy to be reinsured under
automatic reinsurance, the face amount shall not exceed the
Automatic Acceptance Limit as shown in Schedule A.
g. JUMBO LIMIT. For any policy to be reinsured under automatic
reinsurance, the total amount of insurance in force and applied for
in all companies shall not exceed the Jumbo Limit as shown in
Schedule A.
h. MINIMUM CESSION. The minimum amount of reinsurance per cession that
ANNUITY & LIFE RE will accept is shown in Schedule A.
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i. FACULTATIVE QUOTES. The risk shall not have been submitted on a
facultative basis to ANNUITY & LIFE RE or any other reinsurer.
7. AUTOMATIC REINSURANCE NOTICE PROCEDURE
After the policy has been paid for and delivered, PRUCO OF NJ will submit
all relevant individual policy information, as defined in Schedule C, in
its next statement to ANNUITY & LIFE RE.
8. FACULTATIVE OBLIGATORY REINSURANCE
When a policy does not qualify for automatic reinsurance because (1) the
Automatic Acceptance Limit is exceeded, (2) the Jumbo Limit is exceeded or
(3) the applicant is employed in an occupation included in the Occupation
Exclusion List in Schedule A, PRUCO OF NJ may make a request to reserve
capacity through facultative obligatory reinsurance by contacting ANNUITY
& LIFE RE by telephone. If PRUCO OF NJ reserves capacity and the policy is
issued, PRUCO OF NJ must submit a form substantially similar to the
"Notification of Reinsurance" form shown in Schedule F.
9. FACULTATIVE REINSURANCE
PRUCO OF NJ may apply for facultative reinsurance with ANNUITY & LIFE RE
on a risk if the automatic reinsurance terms are not met or if the terms
are met and it prefers to apply for facultative reinsurance. To obtain a
facultative reinsurance quote, PRUCO OF NJ must submit the following:
a. A form substantially similar to the "Application for Reinsurance"
form shown in Schedule E.
b. Copies of the original insurance application, medical examiner's
reports, financial information, and all other papers and information
obtained by PRUCO OF NJ regarding the insurability of the risk.
After receipt of PRUCO OF NJ's application, ANNUITY & LIFE RE will
promptly examine the material and notify PRUCO OF NJ either of the terms
and conditions of ANNUITY & LIFE RE's offer for facultative reinsurance or
that no offer will be made. ANNUITY & LIFE RE's offer expires 120 days
after the offer is made unless the written offer specifically states
otherwise. If PRUCO OF NJ accepts ANNUITY & LIFE RE's offer, then PRUCO OF
NJ will make a dated notation of its acceptance in its underwriting file
and mail as soon as possible a formal reinsurance cession to ANNUITY &
LIFE RE using a form substantially similar to the Notification of
Reinsurance form shown in Schedule F. If PRUCO OF NJ does not accept
ANNUITY & LIFE RE's offer, then PRUCO OF NJ will notify ANNUITY & LIFE RE
in writing as soon as possible.
10. COMMENCEMENT OF REINSURANCE COVERAGE
Commencement of ANNUITY & LIFE RE's reinsurance coverage on any policy or
pre-issue risk under this Agreement is described below:
a. AUTOMATIC REINSURANCE. ANNUITY & LIFE RE's reinsurance coverage for
any policy that is ceded automatically under this Agreement will
begin and end simultaneously with PRUCO OF NJ's contractual
liability for the policy reinsured.
In addition, ANNUITY & LIFE RE will be liable for benefits paid
under PRUCO OF NJ's conditional receipt or temporary insurance
agreement if all of the conditions for automatic
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reinsurance coverage under Section 6 of this Agreement are met.
ANNUITY & LIFE RE's liability under PRUCO OF NJ's conditional
receipt or temporary insurance agreement is limited to the lesser of
(1) ANNUITY & LIFE RE's reinsured portion of the face amount of the
policy and (2) $200,000.
b. FACULTATIVE OBLIGATORY REINSURANCE. ANNUITY & LIFE RE's reinsurance
coverage for any policy that is ceded under the terms of facultative
obligatory reinsurance in this Agreement will begin when (1) PRUCO
OF NJ accepts ANNUITY & LIFE RE's offer by making a dated notation
of its acceptance in its underwriting file and mailing the
"Notification of Reinsurance" form to ANNUITY & LIFE RE and (2) the
policy has been issued.
In addition, ANNUITY & LIFE RE will be liable for benefits paid
under PRUCO OF NJ's conditional receipt or temporary insurance
agreement if the conditions for automatic reinsurance stated in
Section 6a, b, e, h, and i of this Agreement are met. ANNUITY & LIFE
RE's liability under PRUCO OF NJ's conditional receipt or temporary
insurance agreement will be limited to the portion of $1,000,000
that is derived as the amount of capacity reserved by PRUCO OF NJ
from ANNUITY & LIFE RE divided by the total amount of capacity
reserved by PRUCO OF NJ from all reinsurers.
c. FACULTATIVE REINSURANCE. ANNUITY & LIFE RE's reinsurance coverage
for any policy that is ceded facultatively under this Agreement
shall begin when (1) PRUCO OF NJ accepts ANNUITY & LIFE RE's offer
by making a dated notation of its acceptance in its underwriting
file and mailing the "Notification of Reinsurance" form to ANNUITY &
LIFE RE and (2) the policy has been issued.
In addition, ANNUITY & LIFE RE will be liable for benefits paid
under PRUCO OF NJ's conditional receipt or temporary insurance
agreement. ANNUITY & LIFE RE's liability under PRUCO OF NJ's
conditional receipt or temporary insurance agreement will be limited
to the portion of $1,000,000 that is derived as the amount of
capacity reserved by PRUCO OF NJ from ANNUITY & LIFE RE divided by
the total amount of capacity reserved by PRUCO OF NJ from all
reinsurers.
d. PRE-ISSUE COVERAGE. The pre-issue coverage for benefits paid under
PRUCO OF NJ's conditional receipt or temporary insurance agreement
will be effective once all initial medical exams and tests have been
completed. The pre-issue liability applies only once on any given
life at one time no matter how many conditional receipts or
temporary insurance agreements are in effect. After a policy has
been issued, no reinsurance benefits are payable under this
pre-issue coverage provision.
11. REINSURANCE PREMIUM RATES
a. LIFE REINSURANCE. The reinsurance premiums per $1000 are shown in
Schedule B. Reinsurance premiums for renewals are calculated using
(1) the issue ages, (2) the duration since issuance and (3) the
current underwriting classification.
b. RATES NOT GUARANTEED. The reinsurance premium rates are not
guaranteed. ANNUITY & LIFE RE reserves the right to change the rates
at any time. If ANNUITY & LIFE RE changes the rates, it will give
PRUCO OF NJ a 90-day prior written notice of the change. Any change
applies only to reinsurance premiums due after the expiration of the
notice period.
ANNUITY & LIFE RE further agrees that PRUCO OF NJ's right of
recapture under Section 20 of this Agreement will be triggered if
Prudential deems a rate change unacceptable.
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12. PAYMENT OF REINSURANCE PREMIUMS
a. PREMIUM DUE. For each policy reinsured under this Agreement,
reinsurance premiums are payable annually in advance. These premiums
are due on the issue date and each subsequent policy anniversary.
Within 30 days after the close of each reporting period, PRUCO OF NJ
will send ANNUITY & LIFE RE a statement of account for that period
along with payment of the full balance due. On any payment date,
monies payable between ANNUITY & LIFE RE and PRUCO OF NJ under this
Agreement may be netted to determine the payment due. This offset
will apply regardless of the insolvency of either party as described
in Section 23. If the statement of account shows a balance due PRUCO
OF NJ, ANNUITY & LIFE RE will remit that amount to PRUCO OF NJ
within 30 days of receipt of the statement of account. All financial
transactions under this Agreement will be in United States dollars.
If the reinsurance premium amounts cannot be determined on an exact
basis by the dates described below, such payments will be paid in
accordance with a mutually agreed upon formula which will
approximate the actual payments. Adjustments will then be made to
reflect actual amounts when such information is available.
b. FAILURE TO PAY PREMIUMS. If reinsurance premiums are 90 days past
due, for reasons other than those due to error or omission as
defined below in Section 22, the premiums will be considered in
default and ANNUITY & LIFE RE may terminate the reinsurance by
providing a 30-day prior written notice, provided payment is not
received within that 30-day period. ANNUITY & LIFE RE will have no
further liability as of the termination date. PRUCO OF NJ will be
liable for the prorated reinsurance premiums to the termination
date. PRUCO OF NJ agrees that it will not force termination under
the provisions of this paragraph solely to avoid the recapture
requirements or to transfer the block of business reinsured to
another reinsurer.
At the end of this 30-day period, ANNUITY & LIFE RE's liability will
automatically terminate for all reinsurance on which balances remain
due and unpaid, including reinsurance on which balances became due
and unpaid during and after the 30-day notice period.
PRUCO OF NJ may reinstate reinsurance terminated for non-payment of
balances due at any time within 60 days following the date of
termination. However, ANNUITY & LIFE RE will have no liability for
claims incurred between the termination date and the reinstatement
date.
c. PREMIUM ADJUSTMENT. If PRUCO OF NJ overpays a reinsurance premium
and ANNUITY & LIFE RE accepts the overpayment, ANNUITY & LIFE RE's
acceptance will not constitute or create a reinsurance liability or
increase in any existing reinsurance liability. Instead, ANNUITY &
LIFE RE will be liable to PRUCO OF NJ for a credit in the amount of
the overpayment. If a reinsured policy terminates, ANNUITY & LIFE RE
will refund the excess reinsurance premium. This refund will be on a
prorated basis without interest from the date of termination of the
policy to the date to which a reinsurance premium has been paid.
13. PREMIUM TAX REIMBURSEMENT
See Schedule B.
14. DAC TAX AGREEMENT
PRUCO OF NJ and ANNUITY & LIFE RE, herein collectively called the
"Parties", or singularly the "Party", hereby enter into an election under
Treasury Regulations Section 1.848-2(g) (8) whereby:
a. For each taxable year under this Agreement, the party with the net
positive consideration, as defined in the regulations promulgated
under Internal Revenue Code Section 848, will
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capitalize specified policy acquisition expenses with respect to
this Agreement without regard to the general deductions limitation
of Section 848 (c) (1);
b. PRUCO OF NJ and ANNUITY & LIFE RE agree to exchange information
pertaining to the net consideration under this Agreement each year
to insure consistency or as otherwise required by the Internal
Revenue Service;
c. PRUCO OF NJ will submit to ANNUITY & LIFE RE by May 1 of each year
its calculation of the net consideration for the preceding calendar
year.
d. ANNUITY & LIFE RE may contest such calculation by providing an
alternative calculation to PRUCO OF NJ in writing within 30 days of
ANNUITY & LIFE RE 's receipt of PRUCO OF NJ's calculation. If
ANNUITY & LIFE RE does not so notify PRUCO OF NJ, ANNUITY & LIFE RE
will report the net consideration as determined by PRUCO OF NJ in
ANNUITY & LIFE RE's tax return for the previous calendar year;
e. If ANNUITY & LIFE RE contests PRUCO OF NJ's calculation of the net
consideration, the parties will act in good faith to reach an
agreement as to the correct amount within 30 days of the date
ANNUITY & LIFE RE submits its alternative calculation. If PRUCO OF
NJ and ANNUITY & LIFE RE do not reach agreement on the net amount of
consideration within such 30-day period, then the net amount of
consideration for such year shall be determined by an independent
accounting firm acceptable to both PRUCO OF NJ and ANNUITY & LIFE RE
within 20 days after the expiration of such 30-day period.
f. PRUCO OF NJ and ANNUITY & LIFE RE agree that this election shall
first be effective for the 2000 calendar tax year and will be
effective for all subsequent taxable years for which this Agreement
remains in effect.
ANNUITY & LIFE RE and PRUCO OF NJ represent and warrant that they are
subject to U.S. taxation under either Subchapter L of Chapter 1, or
Subpart F of Subchapter N of Chapter 1 of the Internal Revenue Code of
1986, as amended.
15. REPORTS
The reporting period is shown in Schedule A. For each reporting period,
PRUCO OF NJ will submit reports to ANNUITY & LIFE RE with information that
is substantially similar to the information displayed in Schedule C.
In addition, the reports will include a billing and accounting summary and
a policy exhibit summary similar to the reports shown in Schedule D.
Within 15 business days after the end of each calendar year, PRUCO OF NJ
will submit a reserve credit summary similar to that shown in Schedule D.
PRUCO OF NJ will also submit this reserve credit summary within 10
business days after the end of each other calendar quarter.
16. RESERVES FOR REINSURANCE
See Schedule A.
17. CLAIMS
a. NOTICE. PRUCO OF NJ will notify ANNUITY & LIFE RE as soon as
reasonably possible after PRUCO OF NJ receives a claim for a policy
reinsured under this Agreement. After PRUCO OF NJ has received all
proper claim proofs and paid the claim, PRUCO OF NJ will send
ANNUITY & LIFE RE an itemized statement of the benefits paid by
PRUCO OF NJ and all relevant information with respect to the claim
including the claim proofs. However,
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claim proofs will not be required by ANNUITY & LIFE RE if ANNUITY &
LIFE RE's net amount at risk is less than or equal to $500,000 and
PRUCO OF NJ has paid the claim in full. In such cases, PRUCO OF NJ
will provide ANNUITY & LIFE RE with the cause of death.
b. AMOUNT AND PAYMENT OF BENEFITS. As soon as ANNUITY & LIFE RE
receives proper claim notice and any required proof of the claim,
ANNUITY & LIFE RE will promptly pay the reinsurance benefits due
PRUCO OF NJ. PRUCO OF NJ's contractual liability for claims is
binding on ANNUITY & LIFE RE. The maximum benefit payable to PRUCO
OF NJ under each reinsured policy is the amount specifically
reinsured with ANNUITY & LIFE RE.
c. CLAIM SETTLEMENTS. PRUCO OF NJ will use its standard claim practice
and guidelines in the adjudication of all claims on policies
reinsured under this Agreement. Until such time as PRUCO OF NJ has
systems capability to administer the right of ANNUITY & LIFE RE to
opt out of contested claims, claim settlements made by PRUCO OF NJ,
including compromises, shall be unconditionally binding on ANNUITY &
LIFE RE. ANNUITY & LIFE RE will share in any reduced amount in
proportion to its share of the liability.
d. CLAIM EXPENSES. ANNUITY & LIFE RE will pay its share of reasonable
investigation and legal expenses connected with the litigation or
settlement of policy claims. ANNUITY & LIFE RE will also pay its
share of any interest paid by PRUCO OF NJ on any claim payment.
However, claim expenses do not include routine claim and
administration expenses, including PRUCO OF NJ's home office
expenses. Also, expenses incurred in connection with a dispute or
contest arising out of conflicting claims of entitlement to policy
proceeds or benefits that PRUCO OF NJ admits are payable are not a
claim expense under this Agreement.
e. EXTRACONTRACTUAL DAMAGES. In no event will ANNUITY & LIFE RE
participate in punitive or compensatory damages which are awarded
against PRUCO OF NJ as a result of an act, omission or course of
conduct committed by PRUCO OF NJ in connection with the insurance
under this Agreement. ANNUITY & LIFE RE will, however, pay its share
of statutory penalties awarded against PRUCO OF NJ in connection
with the insurance reinsured under this Agreement. The parties
recognize that circumstances may arise in which equity would require
ANNUITY & LIFE RE, to the extent permitted by law, to share
proportionately in certain assessed damages. Such circumstances are
difficult to define in advance, but generally would be those
situations in which ANNUITY & LIFE RE was an active party and in
writing either directed, consented to, or ratified the act,
omission, or course of conduct of PRUCO OF NJ which ultimately
results in the assessment of punitive and/or compensatory damages.
In such situations, PRUCO OF NJ and ANNUITY & LIFE RE would share
such damages assessed in equitable proportions.
Routine expenses incurred in the normal settlement of uncontested
claims and the salary of an officer or employee of PRUCO OF NJ are
excluded from this provision. For purposes of the provision, the
following definitions will apply:
"Punitive Damages" are those damages awarded as a penalty, the
amounts of which are not governed or fixed by statute;
"Statutory Penalties" are those amounts that are awarded as a
penalty, but are fixed in amount by statute;
"Compensatory Damages" are those amounts awarded to compensate for
actual damages sustained, and are not awarded as a penalty, nor
fixed in amount by statute.
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18. MISREPRESENTATION, SUICIDE, AND MISSTATEMENT
If either a misrepresentation on an application or a death of an insured
by suicide results in the return of policy premiums by PRUCO OF NJ under
the policy rather than payment of policy benefits, ANNUITY & LIFE RE will
refund all of the reinsurance premiums paid for that policy to PRUCO OF
NJ. If there is an adjustment for a misrepresentation or misstatement of
age or sex, a corresponding adjustment to the reinsurance benefit will be
made.
19. POLICY CHANGES
a. NOTICE. If a reinsured policy is changed as described below, a
corresponding change will be made in the reinsurance for that
policy. PRUCO OF NJ will notify ANNUITY & LIFE RE of the change in
PRUCO OF NJ's next report as stated in Section 15.
b. INCREASES. If a request for an increase in the amount of insurance
is made for a reinsured policy and the insured meets PRUCO OF NJ's
underwriting requirements and PRUCO OF NJ approves the increase
under the policy, then the amount of reinsurance under this
Agreement will be adjusted as of the effective date of the increase.
If a request for an increase is made for a reinsured policy and the
insured meets PRUCO OF NJ's underwriting requirements and a new
policy is issued for the higher amount, then reinsurance under the
old policy will cease as of the effective date of the change, and
reinsurance under the new policy will commence as of the policy date
of the new policy.
If a request for an increase in a reinsured policy is granted
without the insured meeting PRUCO OF NJ's underwriting requirements,
then reinsurance on the increase will not be allowed.
If a request for an increase does not meet all of the terms of
automatic reinsurance, then PRUCO OF NJ may apply for facultative
obligatory reinsurance or facultative reinsurance as stated in
Section 8 and Section 9, respectively. When this happens, it is the
intent of PRUCO OF NJ to reinsure the entire policy, i.e. the amount
before the increase and the amount of increase. If the facultative
increase is allowed, the automatic reinsurance on the amount before
the increase will be discontinued.
If a reinsured policy is increased as a result of a conversion from
term insurance and the increase is granted without the insured
meeting PRUCO OF NJ's underwriting requirements, then reinsurance
will cease as of the effective date of the change.
c. REDUCTION OR TERMINATION. If the amount of insurance on a reinsured
policy is reduced, the reinsurance will be reduced proportionately
as of the effective date of the reduction.
If a reinsured policy is terminated, the reinsurance will cease on
the date of such termination.
d. PLAN CHANGES. If a reinsured policy is changed to another plan of
insurance that is not currently reinsured under this Agreement as
defined in Schedule A, then PRUCO OF NJ will recapture in full the
coverage reinsured under this Agreement, and the reinsurance will
cease with respect to the policy as of the effective date of the
change.
If a policy that is not reinsured under this Agreement is changed to
a plan that is reinsured under this Agreement as defined in Schedule
A and the insured has met PRUCO OF NJ's underwriting requirements
for the plan change, then reinsurance will commence as of the policy
date of the new plan.
e. DEATH BENEFIT OPTION CHANGES. If the death benefit option under a
reinsured policy is changed and the face amount of insurance is
either increased or decreased, the net amount at risk reinsured
under this Agreement after the change will be the same as before the
change.
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f. REDUCED PAID-UP INSURANCE. If any policy reinsured under this
Agreement is changed to Reduced Paid-Up Insurance, the net amount at
risk reinsured will be adjusted as appropriate and reinsurance will
be continued in accordance with the provisions of the underlying
policy. Reinsurance payments for the adjusted policy will be
calculated using (1) the issue age of the original policy, (2) the
duration since issuance of the original policy and (3) the
underwriting classification immediately prior to the change to
Reduced Paid-Up Insurance.
20. RECAPTURE
At any time during the term of the Agreement, PRUCO OF NJ may elect to
recapture in full the coverage reinsured under this Agreement following
the occurrence of either of the following events: (1) a "Risk Trigger
Event" as defined in Schedule A of this Agreement; or (2) a Plan Change as
described in Section 19 d. above: or (3) the Reinsurance Premium rates are
increased.
In addition, after the twentieth policy anniversary, PRUCO OF NJ may elect
to recapture all or an appropriate portion of the coverage reinsured under
this Agreement to reflect increases in the maximum retention limits for
PRUCO OF NJ and all of its affiliates, collectively, subsequent to the
date of policy issue. These maximum retention limits as of the effective
date of this Agreement are equal to the amounts shown in the Risk
Retention Limits table shown in Schedule A. The portion of the coverage
that may be recaptured would be directly related to the increase in the
limits. To illustrate, if the maximum retention limits are increased by
100%, then the portion that may be recaptured from all reinsurers of the
policies reinsured under this Agreement would be equal to 100% of the
portion of each reinsured policy that is retained by PRUCO OF NJ.
Furthermore, the portion that may be recaptured from ANNUITY & LIFE RE
would be determined as ANNUITY & LIFE RE's prorata share of the total
portion reinsured with all reinsurers.
If PRUCO OF NJ elects to recapture the risks ceded to ANNUITY & LIFE RE
under this Agreement as stated above, it will do so by giving written
notice to ANNUITY & LIFE RE. Upon the delivery of such notice, all of the
risks previously ceded under each of the policies subject to this
Agreement shall be recaptured, effective as of the date specified in PRUCO
OF NJ's notice. If PRUCO OF NJ does not specify in the written notice the
date that such recapture is to be effective, then the recapture shall be
effective immediately upon ANNUITY & LIFE RE's receipt of the notice.
If a policy is recaptured, ANNUITY & LIFE RE will pay PRUCO OF NJ the
unearned reinsurance premium as of the date of recapture. ANNUITY & LIFE
RE shall not be liable, under this Agreement, for any claims incurred
after the date of recapture.
21. REINSTATEMENTS
a. AUTOMATIC REINSTATEMENT. If PRUCO OF NJ reinstates a policy that was
originally ceded to ANNUITY & LIFE RE as either automatic
reinsurance or facultative obligatory reinsurance using conventional
underwriting practices, ANNUITY & LIFE RE's reinsurance for the
policy shall be reinstated.
b. FACULTATIVE REINSTATEMENT. If PRUCO OF NJ has been requested to
reinstate a policy that was originally ceded to ANNUITY & LIFE RE as
facultative reinsurance and the reinstatement is processed under
PRUCO OF NJ's Long Form Reinstatement Process, then PRUCO OF NJ will
re-submit the appropriate evidence for the case to ANNUITY & LIFE RE
for underwriting approval before the reinsurance can be reinstated.
11
c. PREMIUM ADJUSTMENT. Reinsurance premiums for the interval during
which the policy was lapsed will be paid to ANNUITY & LIFE RE on a
YRT basis by PRUCO OF NJ.
22. ERRORS AND OMISSIONS
If either ANNUITY & LIFE RE or PRUCO OF NJ fails to comply with any of the
terms of this Agreement and it is shown that the failure was unintentional
or the result of a misunderstanding or an administrative oversight on the
part of either party, this Agreement will remain in effect. If the failure
to comply changes the operation or effect of this Agreement, both parties
will be put back to the positions they would have occupied if the failure
to comply had not occurred. This section will not apply to any facultative
submission until PRUCO OF NJ has mailed the Notification of Reinsurance
form to ANNUITY & LIFE RE .
23. INSOLVENCY
For the purpose of this Agreement, PRUCO OF NJ or ANNUITY & LIFE RE shall
be deemed "insolvent" if it does one or more of the following:
a. A court-appointed receiver, trustee, custodian, conservator,
liquidator, government official or similar officer takes possession
of the property or assets of either PRUCO OF NJ or ANNUITY & LIFE
RE; or
b. Either PRUCO OF NJ or ANNUITY & LIFE RE is placed in receivership,
rehabilitation, liquidation, conservation, bankruptcy or similar
status pursuant to the laws of any state or of the United States; or
c. Either PRUCO OF NJ or ANNUITY & LIFE RE becomes subject to an order
to rehabilitate or an order to liquidate as defined by the insurance
code of the jurisdiction of the domicile of PRUCO OF NJ or ANNUITY &
LIFE RE, as the case may be.
In the event that PRUCO OF NJ is deemed insolvent, all reinsurance claims
payable hereunder shall be payable by ANNUITY & LIFE RE on the basis of
PRUCO OF NJ's liability under the policies reinsured without diminution
because of the insolvency of PRUCO OF NJ. Such claims shall be payable by
ANNUITY & LIFE RE directly to PRUCO OF NJ, its liquidator or statutory
successor. It is understood, however, that in the event of such
insolvency, the liquidator or receiver or statutory successor of PRUCO OF
NJ shall give written notice to ANNUITY & LIFE RE of the pendency of a
claim against ANNUITY & LIFE RE on a risk reinsured hereunder within a
reasonable time after such claim is filed in the insolvency proceeding.
Such notice shall indicate the policy reinsured and whether the claim
could involve a possible liability on the part of ANNUITY & LIFE RE.
Failure to give such notice shall not excuse the obligation of ANNUITY &
LIFE RE unless it is substantially prejudiced thereby. During the pendency
of such claim, ANNUITY & LIFE RE may investigate such claim and interpose,
at its own expense, in the proceeding where such claim is to be
adjudicated, any defense or defenses it may deem available to PRUCO OF NJ,
its liquidator, receiver or statutory successor. It is further understood
that the expense thus incurred by ANNUITY & LIFE RE shall be chargeable,
subject to court approval, against PRUCO OF NJ as part of the expense of
liquidation to the extent of a proportionate share of the benefit which
may accrue to PRUCO OF NJ solely as a result of the defense undertaken by
ANNUITY & LIFE RE .
In the event ANNUITY & LIFE RE is deemed insolvent, ANNUITY & LIFE RE will
be bound by any legal directions imposed by its liquidator, conservator,
or statutory successor. However, and if not in conflict with such legal
directions, PRUCO OF NJ shall have the right to cancel this Agreement with
respect to occurrences taking place on or after the date ANNUITY & LIFE RE
first evidences insolvency. Such right to cancel shall be exercised by
providing ANNUITY &
12
LIFE RE (or its liquidator, conservator, receiver or statutory successor)
with a written notice of PRUCO OF NJ's intent to recapture ceded business.
If PRUCO OF NJ exercises such right to cancel and recapture ceded
business, such election shall be in lieu of any premature recapture fee.
Upon such election, PRUCO OF NJ shall be under no obligation to ANNUITY &
LIFE RE , its liquidator, receiver or statutory successor; however,
ANNUITY & LIFE RE , its liquidator, receiver or statutory successor shall
be liable for all claims incurred prior to the date of recapture.
24. ARBITRATION
a. GENERAL. All disputes and differences under this Agreement that
cannot be amicably agreed upon by the parties shall be decided by
arbitration. The arbitrators will have the authority to interpret
this Agreement and, in doing so, will consider the customs and
practices of the life insurance and life reinsurance industry. The
arbitrators will consider this Agreement as an honorable engagement
rather than merely a legal obligation, and they are relieved of all
judicial formalities and may abstain from following the strict rules
of law. The arbitration shall take place within the United States.
b. NOTICE. To initiate arbitration, one of the parties will notify the
other, in writing, of its desire to arbitrate. The notice will state
the nature of the dispute and the desired remedies. The party to
which the notice is sent will respond to the notification in writing
within 10 days of receipt of the notice. At that time, the
responding party will state any additional dispute it may have
regarding the subject of arbitration.
c. PROCEDURE. Arbitration will be heard before a panel of three
disinterested arbitrators. The arbitrators will be current or former
executive officers or employees of life insurance or reinsurance
companies; however, these companies will not be either party or any
of their reinsurers or affiliates. Each party will appoint one
arbitrator. Notice of the appointment of these arbitrators will be
given by each party to the other party within 30 days of the date of
mailing of the notification initiating the arbitration. These two
arbitrators will, as soon as possible, but no longer than 45 days
after the date of the mailing of the notification initiating the
arbitration, then select the third arbitrator.
Should either party fail to appoint an arbitrator or should the two
initial arbitrators be unable to agree on the choice of a third
arbitrator, each arbitrator will nominate three candidates, two of
whom the other will decline, and the decision will be made by
drawing lots on the final selection. Once chosen, the three
arbitrators will have the authority to decide all substantive and
procedural issues by a majority vote. The arbitration hearing will
be held on the date fixed by the arbitrators at a location agreed
upon by the parties. The arbitrators will issue a written decision
from which there will be no appeal. Either party may reduce this
decision to a judgment before any court that has jurisdiction of the
subject of the arbitration.
d. COSTS. Each party will pay the fees of its own attorneys, the
arbitrator appointed by that party, and all other expenses connected
with the presentation of its own case. The two parties will share
equal cost of the third arbitrator.
25. GOOD FAITH; FINANCIAL SOLVENCY
Each party agrees that all matters with respect to this Agreement require
its utmost good faith. Each party or its representatives has the right at
any reasonable time to inspect the other's records relating to this
Agreement.
Each party represents and warrants to the other party that it is solvent
on a statutory basis in all states in which it does business or is
licensed. Each party agrees to promptly notify the other if it is
subsequently financially impaired. ANNUITY & LIFE RE has entered into this
Agreement in reliance upon PRUCO OF NJ's representations and warranties.
Each party affirms that it has and
13
will continue to disclose all matters material to this Agreement and each
cession. Examples of such matters are a material change in underwriting or
issue practices or philosophy, or a change in each party's ownership or
control.
PRUCO OF NJ acknowledges that ANNUITY & LIFE RE is neither a licensed nor
an accredited reinsurer under the applicable laws and regulations of New
Jersey. However, to enable PRUCO OF NJ to take the maximum credit for the
risks ceded under this Agreement on its statutory financial statements,
ANNUITY & LIFE RE has agreed to furnish and maintain during the life of
this Agreement one or more letters of credit in accordance with the
applicable provisions of Sections 29 and 30 below. ANNUITY & LIFE RE
acknowledges that PRUCO OF NJ is entering into this Agreement in reliance
upon ANNUITY & LIFE RE's obligations with respect to furnishing and
maintaining the letter(s) of credit as described in Sections 29 and 30
below. ANNUITY & LIFE RE further agrees that PRUCO OF NJ's right of
recapture under Section 20 of this Agreement will be triggered if, at any
point in the future, ANNUITY & LIFE RE fails to satisfy any of its
obligations with respect to furnishing and maintaining, during the life of
this Agreement, the letters of credit in strict accordance with the
applicable provisions of Sections 29 and 30 below.
26. MEDICAL INFORMATION BUREAU
ANNUITY & LIFE RE is required to strictly adhere to the Medical
Information Bureau Rules, and PRUCO OF NJ agrees to abide by these Rules,
as amended from time to time. PRUCO OF NJ will not submit a preliminary
notice, application for reinsurance, or reinsurance cession to ANNUITY &
LIFE RE unless PRUCO OF NJ has a signed, currently required Medical
Information Bureau authorization.
27. GOVERNING LAW
This Agreement shall be governed by the laws of the State of New Jersey
without giving effect to the principles of conflicts of laws thereof.
28. ASSIGNMENT
This Agreement is not assignable by either party except by the express
written consent of the other.
29. PROVISION FOR BERMUDA DOMICILED ANNUITY & LIFE RE
a. All applicable Federal Excise Taxes assessed to, and paid by, PRUCO
OF NJ relative to ANNUITY & LIFE RE's portion of the reinsurance
risks under this Agreement will be reimbursed by ANNUITY & LIFE RE
to PRUCO OF NJ.
b. The impact of the timing of the DAC Tax payments made by PRUCO OF NJ
as a result of ANNUITY & LIFE RE being a BERMUDA domiciled reinsurer
and not a U.S. domiciled reinsurer will be paid by ANNUITY & LIFE
RE.
c. ANNUITY & LIFE RE shall apply for, provide to PRUCO OF NJ, and
maintain during the entire term of this Agreement, one or more
letters of credit with respect to all the amounts recoverable from
ANNUITY & LIFE RE under this Agreement (collectively, the "Letters
of Credit"). The Letters of Credit must satisfy each of the
requirements set forth in Section 30 below.
d. ANNUITY & LIFE RE agrees to the following:
i. Submit to the jurisdiction of an alternative dispute
resolution panel or court of competent jurisdiction within the
United States;
14
ii. Comply with all requirements necessary to give such court or
panel jurisdiction;
iii. Designate an agent upon whom service of process may be
effected; and
iv. Abide by the final decision of such court or panel.
30. LETTER OF CREDIT PROVISIONS
a. ANNUITY & LIFE RE is obtaining, providing to PRUCO OF NJ, and
maintaining during the entire term of this Agreement, the Letters of
Credit in order to enable PRUCO OF NJ to take the maximum credit for
the risks ceded under this Agreement on its statutory financial
statements. As such, each of the Letters of Credit must individually
satisfy the requirements of Subsections 30 b., 30 c. and 30 d. below
and all of the Letters of Credit collectively must satisfy the
requirements of Subsections 30 e. and 30 f. below. In addition, each
Letter of Credit individually and all of the Letters of Credit
collectively must satisfy any other applicable legal or regulatory
requirements of New Jersey that must be complied with in order to
ensure that PRUCO OF NJ is entitled to take the maximum credit for
the risks ceded under this Agreement on its statutory financial
statements, given that ANNUITY & LIFE RE is neither a licensed nor
an accredited reinsurer under the applicable laws and regulations of
New Jersey.
b. Each of the Letters of Credit must: (I) be an original and signed by
an authorized official of the issuing bank or an authorized official
of the confirming bank (in the case of a confirmation meeting the
requirements of this Section); (II) contain an issuance date and
contain an expiry date that is no earlier than one calendar year
from the issuance date; (III) be issued or confirmed by a "Qualified
Bank" (as defined in subsection 30c. below); (IV) be issued on
behalf of ANNUITY & LIFE RE as the "Applicant" and include such
indication in a boxed area that states it is "For Internal
Identification Purposes Only" (or similar words to that effect) and
that does not affect the terms of the Letter of Credit or the bank's
obligations thereunder; (V) be issued to PRUCO OF NJ as
"Beneficiary" and expressly indicate in the body of the Letter of
Credit that the definition of the "Beneficiary" under the Letter of
Credit includes any successor by operation of law of PRUCO OF NJ,
including, without limitation, any liquidator, rehabilitator,
receiver, or conservator for PRUCO OF NJ; (VI) be issued,
presentable and payable at an office of the issuing or confirming
bank within the United States; (VII) be "clean and unconditional"
(meaning that the Letter of Credit makes no reference to any other
agreement, document or entity and provides that the Beneficiary need
only draw a sight draft under the Letter of Credit or confirmation
and present it to promptly obtain funds and that no other document
need be presented); (VIII) contain a statement that it is not
subject to any agreement, condition or qualification outside the
Letter of Credit itself; (IX) contain a statement to the effect that
the obligation of the issuing bank under the Letter of Credit is an
individual obligation of such bank and is in no way contingent upon
reimbursement with respect thereto; (X) be irrevocable and contain
an "evergreen clause" (meaning that the letter of credit or
confirmation cannot be revoked prior to its expiry date and that it
will automatically renew prior to the occurrence of the expiry date
unless written notice sent by U.S. registered mail has been
delivered to PRUCO OF NJ as Beneficiary at the notice address
stipulated in subsection d. of this Section 30 not less than 30 days
prior to the expiry date); (XI) state that it is subject to and
governed by the laws of the State of New Jersey and the 1993
Revision of the Uniform Customs and Practice for Documentary Credits
of the International Chamber of Commerce (Publication 500) and that,
in the event of any conflict, the laws of the State of New Jersey
will control; and (XII) contain a provision for an extension of
time, of not less than 30 days after resumption of business, to draw
against the Letter of Credit in the event that one or more of the
occurrences described in article 17 of Publication 500 occurs.
15
c. As used in Subsection 30 b. above, the term "Qualified Bank" shall
mean a bank or trust company that: (I) is organized and existing, or
in the case of a branch or agency office of a foreign banking
organization is licensed, under the laws of the United States or any
state thereof; (II) is regulated, supervised and examined by United
States Federal or state authorities having regulatory authority over
banks and trust companies; (III) is determined by the Securities
Valuation Office of the National Association of Insurance
Commissioners to meet such standards of financial condition and
standing as are considered necessary and appropriate to regulate the
quality of banks and trust companies whose letters of credit will be
acceptable to insurance regulatory authorities; (IV) is not a
foreign branch office of a bank or trust company organized and
existing in the United States; and (V) is not a parent, subsidiary
or affiliate of PRUCO OF NJ or ANNUITY & LIFE RE.
d. Each Letter of Credit must indicate that notices of non-renewal will
be sent to the following address, or such other address as may be
indicated in a notice sent by PRUCO OF NJ to the issuing or
confirming bank:
Chief Actuary
PRUCO OF NJ Life Insurance Company
000 Xxxxxxxxxx Xxxxxx
Xxxxxx, Xxx Xxxxxx 00000-0000
e. All of the Letters of Credit must, in the aggregate, provide for a
maximum amount that can be drawn thereunder of a sum that is at
least as great as PRUCO OF NJ has indicated will be required under
this Agreement and all other related reinsurance agreements between
ANNUITY & LIFE RE and PRUCO OF NJ or any affiliate of PRUCO OF NJ.
Approximately one month before the end of each calendar quarter,
PRUCO OF NJ will indicate to ANNUITY & LIFE RE the aggregate
coverage amount needed under all of the Letters of Credit as well as
any other information necessary for ANNUITY & LIFE RE to provide
PRUCO OF NJ the required Letters of Credit prior to end of each
calendar quarter. The cost for all Letters of Credit furnished and
maintained under this Agreement will be borne solely by ANNUITY &
LIFE RE.
f. ANNUITY & LIFE RE and PRUCO OF NJ agree that any or all of the
Letters of Credit provided by ANNUITY & LIFE RE pursuant to the
provisions of this Agreement may be drawn upon in full or in part at
any time, notwithstanding any other provisions in this Agreement,
and may be utilized by PRUCO OF NJ or any successor by operation of
law of PRUCO OF NJ including, without limitation, any liquidator,
rehabilitator, receiver or conservator of PRUCO OF NJ for any of the
following purposes:
i. to reimburse PRUCO OF NJ for ANNUITY & LIFE RE's share of
premiums returned to the owners of policies reinsured under
the reinsurance agreement on account of cancellations of such
policies;
ii. to reimburse PRUCO OF NJ for ANNUITY & LIFE RE's share of
benefits or losses paid by PRUCO OF NJ under the terms and
provisions of the policies reinsured under this Agreement;
iii. to fund an account with PRUCO OF NJ in an amount at least
equal to the deduction, for reinsurance ceded, from PRUCO OF
NJ's liabilities for policies ceded under this Agreement. Such
amount shall include, but not be limited to, amounts for
policy reserves, reserves for claims and losses incurred
(including losses incurred but not reported), loss adjustment
expenses, and unearned premiums; and
iv. to pay any other amounts PRUCO OF NJ claims are due under this
Agreement:
16
All of the foregoing will be applied without diminution
because of insolvency on the part of PRUCO OF NJ or ANNUITY &
LIFE RE.
g. ANNUITY & LIFE RE further acknowledges and agrees that PRUCO OF NJ
or any successor by operation of law of PRUCO OF NJ including,
without limitation, any liquidator, rehabilitator, receiver or
conservator of PRUCO OF NJ may draw upon any or all of the Letters
of Credit in full or in part in the event that: (I) a notice of
cancellation or non-renewal has been issued by the issuing or
confirming bank under any of the Letters of Credit and ANNUITY &
LIFE RE has not obtained one or more replacement letters of credit
that satisfy all of the applicable requirements of this Section 30
by that date which is ten days prior to the earliest expiry date of
the Letter of Credit or Letters of Credit as to which notice of
cancellation or non-renewal has been sent; or (II) the maximum
amount that may be drawn -- under any of the Letters of Credit has
been reduced other than in accordance with PRUCO OF NJ's direction
or PRUCO OF NJ has communicated to ANNUITY & LIFE RE in accordance
with the provisions of Subsection 30 e. above a need to increase the
aggregate amount available under all of the Letters of Credit and
ANNUITY & LIFE RE has not obtained one or more replacement Letters
of Credit or one or more additional Letters of Credit so that all
issued and outstanding Letters of Credit that will remain in effect
provide for coverage in an amount sufficient to meet the
requirements of Subsection 30 e. above.
17
In witness of the above, PRUCO OF NJ and ANNUITY & LIFE RE have by their
respective officers executed and delivered this Agreement in duplicate on the
dates indicated below, with an effective date of April 30, 2000.
PRUCO LIFE INSURANCE COMPANY OF ANNUITY & LIFE REASSURANCE, LTD
NEW JERSEY
By: By:
------------------------------ ------------------------------
Title: Title:
------------------------------ ------------------------------
Date: Date:
------------------------------ ------------------------------
By: By:
------------------------------ ------------------------------
Title: Title:
------------------------------ ------------------------------
Date: Date:
------------------------------ ------------------------------
18
SCHEDULE A
REINSURANCE COVERAGE
--------------------------------------------------------------------------------
1. PLANS REINSURED:
This Agreement covers the following plans:
o PruLife Universal (UL) - Policies issued by PRUCO OF NJ (Form Number
UL-2000 and all state variations)
o PruLife Custom Premier (VUL II) - Policies issued by PRUCO OF NJ
(Form Number VUL-2000 and all state variations)
o Target Term Rider (TTR) issued by PRUCO OF NJ (currently available
on VUL II policies)
Excluded from reinsurance under this Agreement are the Waiver of Premium
and Accidental Death Benefits included in the above reinsured policies.
Also excluded from reinsurance under this Agreement are riders that
provide additional life insurance on the lives of any dependent children
of the policyholder. Included under this Agreement is the Living Needs
Benefit rider.
2. AUTOMATIC PORTION REINSURED:
US/Canadian Residents
ANNUITY & LIFE RE will automatically reinsure an amount equal to 20% of
the net amount at risk related to the face amount of insurance.
The net amount of risk is determined as of the issue date and each
subsequent policy anniversary and is defined as the death benefit minus
the contract fund.
Non US/Canadian Residents
ANNUITY & LIFE RE will automatically reinsure an amount equal to 20% of
the net amount at risk related to the face amount of insurance.
3. AUTOMATIC RETENTION LIMIT:
PRUCO OF NJ will retain at least 10% of each policy. PRUCO OF NJ may cede
up to 70% of each policy on a first-dollar quota share basis to other
reinsurers.
4. AUTOMATIC ACCEPTANCE LIMIT:
For any policy to be reinsured under automatic reinsurance, the face
amount will not exceed the amounts in the following tables:
US/Canadian Residents - No Foreign Travel
================================================================
Issue Age of Insured Pref. Best - Class D Class E - H
----------------------------------------------------------------
Ages: 18 - 65 $ 50,000,000 $ 35,000,000
----------------------------------------------------------------
66 - 70 $ 40,000,000 $ 25,000,000
----------------------------------------------------------------
71 - 75 $ 35,000,000 $ 15,000,000
----------------------------------------------------------------
76 - 77 $ 15,000,000 $ 10,000,000
----------------------------------------------------------------
78 - 80 $ 10,000,000 $ 5,000,000
----------------------------------------------------------------
81 - 85 $ 5,000,000 None
----------------------------------------------------------------
86 - 90 $ 1,500,000 None
================================================================
19
US/Canadian Residents - Foreign Travel
======================================================================
Pref. Best - Class C Class D - E Greater than
Class E
----------------------------------------------------------------------
Ages: 18 - 70 $ 10,000,000 $ 7,500,000 None
----------------------------------------------------------------------
71 - 75 $ 7,500,000 $ 5,000,000 None
----------------------------------------------------------------------
00 - 00 Xxxx Xxxx Xxxx
======================================================================
Non US/Canadian Residents
======================================================================
Pref. Best - Class C Class D - E Greater than
Class E
Ages: 18 - 70 $ 20,000,000 $ 15,000,000 None
71 - 75 $ 15,000,000 $ 10,000,000 None
00 - 00 Xxxx Xxxx Xxxx
======================================================================
5. JUMBO LIMIT:
For any policy to be reinsured under automatic reinsurance, the total
amount of insurance in force and applied for in all companies will not
exceed the following amounts:
US/Canadian Residents- No Foreign Travel
$50,000,000 for all ages and rating classes.
US/Canadian Residents - Foreign Travel
$35,000,000 for issue ages through age 75 and rating classes through
class E. $0 for issue ages over 75 or rating classes higher than E.
Non US/Canadian Residents
$35,000,000 for issue ages through age 75 and rating classes through
class E. $0 for issue ages over 75 or rating classes higher than E.
6. OCCUPATION EXCLUSION LIST FOR AUTOMATIC REINSURANCE
o Entertainers
o High Profile Athletes
7. REPORTING PERIOD:
The reporting period will be monthly.
8. MINIMUM CESSION:
The minimum amount per cession that can be reinsured with ANNUITY & LIFE
RE is $10,000.
9. RESERVES FOR REINSURANCE:
The reinsurance reserve is the one-year term reserve on the portion of
each policy reinsured. This reserve will be calculated using 1980 CSO
ultimate mortality and 4 1/2 % interest.
20
10. RISK TRIGGER EVENT:
A "Risk Trigger Event" means that any of the following has occurred:
(1) ANNUITY & LIFE RE does not have statutory surplus of at least $300
million;
(2) ANNUITY & LIFE RE has failed to satisfy any of its obligations with
respect to furnishing and maintaining, during the life of this
Agreement, the Letters of Credit in strict accordance with the
applicable provisions of Sections 29 and 30 of this Agreement; or
(3) ANNUITY & LIFE RE no longer has in effect a Qualified Rating (as
defined below) from at least one of the Major Rating Agencies shown
in the chart below, which is at least as high as the minimum levels
shown:
=================================================================
Major Rating Agency Minimum Applicable Rating:
=================================================================
Fitch IBCA, Duff & Xxxxxx A rating of "BBB+" or higher.
-----------------------------------------------------------------
Xxxxx Investor Services, Inc. A rating of "Baa1" or higher.
-----------------------------------------------------------------
Standard & Poors Corporation A rating of "BBB+" or higher.
=================================================================
"Qualified Rating" shall mean the issuance of an insurance company
long-term, financial strength rating from one or more of the Major Rating
Agencies that remains in effect, that has not been suspended or withdrawn,
and that was issued as a result of the full interactive ratings review
process (including interviews with senior management) by the Major Rating
Agency in question. (Use of the modifiers "Q" or "Pi" by S&P or any
similar indication that a rating is a "qualified" or "limited" rating by
any other of the Major Rating Agencies means that the rating does not
constitute a "Qualified Rating" for purposes of this Agreement.)
11. RISK RETENTION LIMITS:
The total amount of insurance in force and applied for on an individual
life for PRUCO OF NJ and its affiliates will not exceed the risk retention
limits in the following table.
================================================================
Issue Age of Insured Pref. Best - Class D Class E - H
----------------------------------------------------------------
Ages: 18 - 65 $ 10,000,000 $ 10,000,000
----------------------------------------------------------------
66 - 70 $ 10,000,000 $ 10,000,000
----------------------------------------------------------------
71 - 75 $ 10,000,000 $ 10,000,000
----------------------------------------------------------------
76 - 77 $ 10,000,000 $ 5,000,000
----------------------------------------------------------------
78 - 80 $ 5,000,000 $ 2,500,000
----------------------------------------------------------------
81 - 85 $ 2,500,000 $ 1,000,000
----------------------------------------------------------------
86 - 90 $ 1,000,000 None
================================================================
21
SCHEDULE B
AUTOMATIC AND FACULTATIVE REINSURANCE PREMIUMS
1. STANDARD ANNUAL REINSURANCE PREMIUMS
The standard annual reinsurance premiums per $1,000 of net amount at risk
for (1) all cessions of automatic reinsurance and facultative obligatory
reinsurance and (2) all cessions of facultative reinsurance in the amount
of $2 million or less will be the product of the rates in the table
attached to this Schedule B and the following factors:
==============================================================
Face amounts $100,000 and greater AND issue age 18 and greater
--------------------------------------------------------------
Rating Class Factor
--------------------------------------------------------------
1 .315
--------------------------------------------------------------
2 .384
--------------------------------------------------------------
3 .493
--------------------------------------------------------------
4 .633
--------------------------------------------------------------
5 1.028
--------------------------------------------------------------
6 1.295
==============================================================
==============================================================
Face amount less than $100,000 OR issue age less than 18
--------------------------------------------------------------
Rating Class Factor
--------------------------------------------------------------
1 N/A
--------------------------------------------------------------
2 N/A
--------------------------------------------------------------
3 N/A
--------------------------------------------------------------
4 .705
--------------------------------------------------------------
5 N/A
--------------------------------------------------------------
6 1.473
==============================================================
The standard annual reinsurance premiums per $1,000 for cessions of
facultative obligatory reinsurance and facultative reinsurance in excess
of $2 million will be the product of the rates in the table attached to
this Schedule B and the following factors:
==============================================================
Rating Class Factor
--------------------------------------------------------------
1 .350
--------------------------------------------------------------
2 .420
--------------------------------------------------------------
3 .540
--------------------------------------------------------------
4 .700
--------------------------------------------------------------
5 1.130
--------------------------------------------------------------
6 1.420
==============================================================
22
2. SUBSTANDARD ANNUAL REINSURANCE PREMIUMS
Substandard extra premiums are available on classes 4 and 6 (Non-Smoker
and Smoker). For substandard issues, the substandard extra reinsurance
premium (plus any flat extra) is payable for 20 years. After this period,
the base reinsurance premium (plus any flat extra) is payable until the
end of the premium paying period.
The substandard extra annual reinsurance premiums per $1,000 for
substandard issues will be the product of the base reinsurance premiums
per $1,000 and the factor for the appropriate rating class.
Note that this is the total premium per $1,000, including both the base
and substandard premium.
The factors are as follows:
==============================================================
Rating Class Factor
--------------------------------------------------------------
A 1.40
--------------------------------------------------------------
B 1.65
--------------------------------------------------------------
C 1.90
--------------------------------------------------------------
D 2.25
--------------------------------------------------------------
E 2.75
--------------------------------------------------------------
F 3.25
--------------------------------------------------------------
G 3.75
--------------------------------------------------------------
H 4.50
==============================================================
3. FLAT EXTRA REINSURANCE PREMIUMS
The flat extra reinsurance premium per $1,000 will be the product of flat
extra premiums charged by PRUCO OF NJ and the factors in the following
table:
==============================================================
Permanent Flat Extra Premiums (i.e., for more than 5
years duration)
--------------------------------------------------------------
First year .25
--------------------------------------------------------------
Renewal year .90
==============================================================
==============================================================
Temporary Flat Extra Premiums (i.e., for 5 years
duration or less)
--------------------------------------------------------------
All years .90
==============================================================
4. AGE BASIS
Age Last Birthday.
5. PREMIUM TAXES
Premium taxes are not reimbursed.
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