Exhibit 10.29
CATASTROPHE REINSURANCE AGREEMENT
EFFECTIVE: JULY 1, 2003
(HEREINAFTER REFERRED TO AS THE "AGREEMENT")
MADE AND ENTERED INTO BY
AMERICAN HERITAGE LIFE INSURANCE COMPANY
(HEREINAFTER REFERRED TO AS THE "COMPANY")
AND
ALLSTATE LIFE INSURANCE COMPANY
(HEREINAFTER REFERRED TO AS THE "REINSURER")
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Table of Contents
ARTICLE II - PARTIES TO THE AGREEMENT......................................3
ARTICLE III - REINSURANCE..................................................3
ARTICLE IV - REINSTATEMENT OF LIABILITY....................................3
ARTICLE V - DEFINITIONS....................................................3
ARTICLE VI - EXLCUSIONS....................................................4
ARTICLE VII - NET RETAINED LINES...........................................4
ARTICLE VIII - ULTIMATE NET LOSS...........................................5
ARTICLE IX - NOTICE OF LOSS................................................5
ARTICLE X - LOSS SETTLEMENTS...............................................5
ARTICLE XI - EFFECTIVE DATE AND DURATION OF AGREEMENT......................6
ARTICLE XII - EXTENDED EXPIRATION..........................................6
ARTICLE XIII - PREMIUM.....................................................6
ARTICLE XIV - CURRENCY.....................................................6
ARTICLE XV - TERRITORY.....................................................6
ARTICLE XVI - OFFSET.......................................................6
ARTICLE XVII - ERRORS AND OMISSIONS........................................7
ARTICLE XVIII - ACCESS TO RECORDS..........................................7
ARTICLE XIX - COMMUTATION..................................................7
ARTICLE XX - INSOLVENCY....................................................7
ARTICLE XXI - DISPUTE RESOLUTION...........................................8
ARTICLE XXII - SEVERABILITY................................................9
ARTICLE XXIII - CONTROLLING LAW............................................9
ARTICLE XXIV - ENTIRE AGREEMENT............................................9
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This Agreement is to indemnify the Company for Catastrophic loss in respect to
the excess liability which may accrue to the Company as a result of any loss or
losses which may occur during the term of this Agreement under all policies,
riders, binders, contracts or certificates of insurance, or other evidences of
liability (hereinafter called "policies") now inforce or which may hereafter
come into force and embraces the Company's entire net retained portfolio of
Individual Ordinary and Group Life and Individual and Group Accidental Death
Benefits.
ARTICLE II - PARTIES TO THE AGREEMENT
This Agreement is solely between the Company and the Reinsurer. When more than
one Company is named as a party to this Agreement, the first Company named shall
be the agent of the other companies as to all matters pertaining to this
Agreement. Performance of the obligations of each party under this Agreement
shall be rendered solely to the other party.
ARTICLE III - REINSURANCE
As respects the subject matter of this Agreement, the Company will retain the
first $500,000 ultimate net loss from each and every catastrophic accident
occurring during the term of this Agreement and the Reinsurer agrees to
indemnify the Company for the amount of ultimate net loss in excess of $500,000
for each and every catastrophic accident up to a maximum reimbursement of
$5,000,000 for each and every catastrophic accident.
There will be no reinsurance coverage under this Agreement for any accident if
the Company's ultimate net loss, net of all other reinsurance is less than
$500,000 or if less than five lives are involved in the accident.
ARTICLE IV - REINSTATEMENT OF LIABILITY
In the event of any portion of the liability hereunder being exhausted by loss,
the amount so exhausted shall be reinstated from the time of the occurrence of
the loss after a payment of the remaining pro-rata share of the reinsurance
premium for the coverage period. This payment is due within sixty (60) days of a
catastrophe claim submission.
ARTICLE V - DEFINITIONS
The term "catastrophic accident" as used herein shall be understood to mean each
and every accident or series of accidents arising out of one event or occurrence
resulting in the death and/or dismemberment of five or more persons insured by
the Company.
The term "death" as used herein shall be understood to mean:
a) In the case of accidental death benefits, any death which qualified
for benefits under the original insuring clause issued to the insured
by the Company.
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b) In the case of life insurance, any death as a result of accidental
drowning, asphyxiation or poisoning or bodily injuries, sustained
solely through external accidental means directly and independently of
all other causes within twelve (12) calendar months from the date of
the accident causing such injury.
The term "dismemberment" as used herein shall be understood to mean any
dismemberment which qualifies for benefits under the original policy issued by
the Company.
The term "Loss Adjustment Expense," as used herein, shall mean expenditures by
the Company, other than for office expenses and for the salaries and expenses of
its employees, made in connection with the disposition of a claim, loss, or
legal proceeding including investigation, negotiation, and legal expenses, court
costs, statutory penalties and accrued interest, other than accrued interest
which is part of a judgment. This term shall not include any amount paid or
liability incurred by the Company as a result of its acts or omissions in the
negotiation, settlement, defense of claims, including any extra-contractual
damages, or as result of any acts or omissions in dealing with its
policyholders.
ARTICLE VI - EXCLUSIONS
This Agreement shall not apply to:
1) Loss directly or indirectly occasioned by, happening through or in
consequence of war, invasion (whether war be declared or undeclared),
hostile action of any country (whether war declared or not), civil
war, rebellion, usurped power, insurrection, explosions of weapons of
war, terrorism, or acts of foreign enemies.
2) Nuclear attack, nuclear accident, radioactive contamination and/or
release of nuclear or atomic energy.
3) All classes of business other than the Company's Individual Ordinary
and Group Life and Individual and Group Accidental Death Benefits
4) Federal Employees Group Life Insurance.
5) Serviceman's Group Life Insurance.
6) Members of Armed Forces on active duty.
7) Group coverage on professional sports teams, except non-playing
personnel not traveling on a regular basis with the team
8) Group coverage on airline personnel or their crews
9) Credit Card, airport ticket or booth accident business.
10) Assumed catastrophe reinsurance or the Company's participation in
reinsurance pools, reinsurance facilities and underwriting syndicates,
regardless of how such arrangements may be named.
ARTICLE VII - NET RETAINED LINES
This Agreement applies only to that portion of any insurance or reinsurance
which the Company retains net for its own account, and in calculating the amount
of any "Ultimate Net Loss" hereunder and also in computing the amount or amounts
in excess of which this Agreement
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attaches only loss or losses in respect of that portion of any insurance or
reinsurance which the Company retains for its own account shall be included. The
amount of the Reinsurer's liability hereunder in respect of any loss or losses
shall not be increased by reason of the inability of the Company to collect from
any other reinsurer, whether specific or general, any amounts which may have
become due from them, whether such inability arises from the insolvency of such
reinsurer or otherwise.
ARTICLE VIII - ULTIMATE NET LOSS
The term, "Ultimate Net Loss", as used herein, shall mean the actual loss
sustained by the Company in the settlement of claims, payment of benefits, or
satisfaction of judgments or awards, in accordance with the underlying contract,
excluding loss adjustment expenses which shall be pro-rated and excluding
extra-contractual damages which are not reinsured under this Agreement. However,
reserves released by death and any recoveries, including recoveries under all
reinsurances, are to be first deducted from such loss to arrive at the amount of
liability, if any, attaching hereunder. Nothing, however, in this clause shall
be construed as meaning that losses are not recoverable hereunder until the Net
Loss of the Company has been ascertained.
All reserves released by death, recoveries, and payments recovered or expected
to be received subsequent to a loss settlement under this Agreement, shall be
applied as if recovered prior to the said settlement, and all necessary
adjustments shall be made by the parties hereto.
For the purposes of computing Ultimate Net Loss hereunder, the Company's maximum
retention on any one life shall be deemed not to exceed the following:
Individual Life: $ 250,000
Accidental Death Benefits: $ 50,000
ARTICLE IX - NOTICE OF LOSS
In the event of loss which may cause a claim under this Agreement, notice is to
be given to the Reinsurer as soon as practicable.
ARTICLE X - LOSS SETTLEMENTS
The Reinsurer agrees to abide by the loss settlements of the Company, such
settlements to be considered as satisfactory proof of loss. All papers in the
possession of the Company connected with the adjustment of said losses shall at
all times, within a period of two years after the adjustment has been effected,
be open to the inspection of a properly authorized representative of the
Reinsurer. In no event shall the Reinsurer be liable for any payment of punitive
or compensatory damages, or any fines or penalties imposed upon the Company by
any state or federal regulatory body or court of law.
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ARTICLE XI - EFFECTIVE DATE AND DURATION OF AGREEMENT
The Effective Date of this Agreement shall be 12:01 A.M. on July 1, 2003, and
this Agreement shall be unlimited as to duration. This Agreement may be
unilaterally terminated midnight, December 31, 2003 or any December 31
thereafter by either party giving the other 90 days prior written notice.
Termination of this Agreement by the Company or Reinsurer unilaterally
terminates the entire Agreement.
ARTICLE XII - EXTENDED EXPIRATION
If this Agreement should terminate while a catastrophic accident is in progress,
it is agreed that this Agreement shall apply as if such catastrophic accident
had occurred entirely within the term hereof.
ARTICLE XIII - PREMIUM
The premium to be paid to the Reinsurer, shall be based on an annual rate of
$4.00 per $1,000,000 of average net amount at risk on the business covered
hereunder for each calendar year. A prorated premium will be paid for calendar
year 2003.
A minimum premium of $55,000, shall be paid to the Reinsurer at the beginning of
each agreement year. Within sixty (60) days after the end of each Agreement
Year, the Company shall furnish a statement of the mean net retained insurance
inforce during each Agreement Year and appropriate adjustment, if any, shall be
made in accordance with the foregoing paragraph subject to the minimum
reinsurance premium of $55,000. A prorated minimum premium will apply to
calendar year 2003.
For the purposes of this Agreement, the term "average net amount at risk" shall
mean the average of the net retained insurance the subject matter hereof inforce
at the beginning and end of each Agreement Year.
ARTICLE XIV - CURRENCY
All retentions and limits hereunder are expressed in United States dollars and
all premium and loss payments shall be made in United States currency.
ARTICLE XV - TERRITORY
This Agreement shall only apply to policies issued to insureds domiciled in the
United States of America, its territories and possessions, Puerto Rico, and the
District of Columbia.
ARTICLE XVI - OFFSET
The Company or the Reinsurer shall have, and may exercise at any time and from
time to time, the right to offset any balance or balances, whether on account of
premiums or on account of losses or otherwise, due from one party to the other
under the terms of this Agreement.
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ARTICLE XVII - ERRORS AND OMISSIONS
Inadvertent delays, errors or omissions made in connection with this Agreement
or any transaction hereunder shall not relieve either party from any liability
which would have attached had such delay, error or omission not occurred,
provided always that such delay, error or omission will be rectified as soon as
possible after discovery.
ARTICLE XVIII - ACCESS TO RECORDS
The Reinsurer, or its duly appointed representatives, shall have the right at
any reasonable time to examine all records in the possession of the Company
referring to business effected hereunder.
ARTICLE XIX - COMMUTATION
The Company shall notify the Reinsurer of all claims hereunder which have not
been finally settled at the end of two (2) years following the end of the
Agreement Year in which they occurred. The Reinsurer may then, or at any time
thereafter, request that its liability with respect to one or more of such
claims be commuted. In such event the Company and the Reinsurer shall appoint a
mutually acceptable Actuary or Appraiser to investigate, determine and
capitalize such claim or claims. Payment by the Reinsurer of its share of the
amount ascertained to be the capitalized value of such claim or claims shall
constitute a complete and final release of the Reinsurer with respect to the
claim or claims so capitalized. Any expenses incurred in connection with the
commutation of claims, as provided herein, shall be paid by the Reinsurer.
ARTICLE XX - INSOLVENCY
In the event of the insolvency of the Company, this reinsurance shall be payable
directly to the Company or to its liquidator, receiver, conservator or statutory
successor immediately upon demand, with reasonable provision for verification,
on the basis of the liability of the Company without diminution because of the
insolvency of the Company or because the liquidator, receiver, conservator or
statutory successor of the 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 Company shall give written notice to the Reinsurer of
the pendency of a claim against the Company indicating the policy or bond
reinsured which claim would involve a possible liability on the part of the
Reinsurer within a reasonable time after such claim is filed in the conservation
or liquidation proceeding or in the receivership, and that during the pendency
of such claim, the Reinsurer may investigate such claim and interpose, at its
own expense, in the proceeding where such claim is to be adjudicated, any
defense or defenses that it may deem available to the Company or its liquidator,
receiver, conservator or statutory successor. The expense thus incurred by the
Reinsurer shall be chargeable, subject to the approval of the Court, against the
Company as part of the expense of conservation or liquidation to the extent of a
pro rata share of
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the benefit which may accrue to the company solely as a result of the defense
undertaken by the Reinsurer.
It is further understood and agreed that, in the event of the insolvency of the
Company, the reinsurance under this Agreement shall be payable directly by the
Reinsurer to the Company or to its liquidator, receiver or statutory successor,
except (a) where this Agreement specifically provides another payee of such
reinsurance in the event of the insolvency of the Company or (b) where the
Reinsurer with the consent of and in accordance with all of the requirements of
the Insurance Department of the Company's state of domicile and the direct
insured or insured has assumed such policy obligations of the Company as direct
obligations of the Reinsurer to the payees under such policies and in
substitution for the obligations of the Company to such payees.
The Reinsurer shall be liable only for the amounts reinsured and shall not be or
become liable for any amounts or reserves to be held by the Company on policies
reinsured under this Agreement.
ARTICLE XXI - DISPUTE RESOLUTION
The Reinsurer and the Company intend that any dispute between them under or with
respect to this Agreement be resolved without resort to any litigation.
Accordingly, the Reinsurer and the Company agree that they will negotiate
diligently and in good faith to agree on a mutually satisfactory resolution of
any such dispute; PROVIDED, HOWEVER, that if any such dispute cannot be so
resolved by them within sixty calendar days (or such longer period as the
parties may agree) after commencing such negotiations, the Reinsurer and the
Company agree that they will submit such dispute to arbitration in the manner
specified herein, and such arbitration proceeding will be conducted in
accordance with, the rules of the American Arbitration Association.
The arbitration hearing will be before a panel of three arbitrators, each of
whom must be a present or former officer of a life insurance or life reinsurance
company. The Reinsurer and the Company will each appoint one arbitrator by
written notification to the other party within thirty calendar days after the
date of the mailing of the notification initiating the arbitration. These two
arbitrators will then select the third arbitrator within sixty calendar days
after the date of the mailing of the notification initiating arbitration.
If either the Reinsurer or the Company fail to appoint an arbitrator, or should
the two arbitrators be unable to agree upon the choice of a third arbitrator,
the president of the American Arbitration Association or of its successor
organizations or (if necessary) the president of any similar organization
designated by lot of the Reinsurer and the Company within thirty calendar days
after the request will appoint the necessary arbitrators.
The vote or approval of a majority of the arbitrators will decide any question
considered by the arbitrators; PROVIDED, HOWEVEr, that if no two arbitrators
reach the same decision, then the average of the two closest mathematical
determinations will constitute the decision of all three arbitrators. The place
of arbitration will be in the state of domicile of the Reinsurer. Each decision
(including without limitation each award) of the arbitrators will be final and
binding on all parties and will be nonappealable and (at the request of either
of the Reinsurers or the
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Company) any award of the arbitrators may be confirmed by a judgment entered by
any court of competent jurisdiction. No such award or judgment will bear
interest. Each party will be responsible for paying (a) all fees and expenses
charged by its respective counsel, accountants, actuaries, and other
representatives in conjunction with such arbitration and (b) one-half of the
fees and expenses charged by each arbitrator.
This Article shall survive the cancellation of this Agreement.
ARTICLE XXII - SEVERABILITY
If any part, term, or provision of this treaty shall be held void, illegal, or
unenforceable, the validity of the remaining portion or portions shall not be
affected thereby.
ARTICLE XXIII - CONTROLLING LAW
This Agreement shall be governed by and construed in accordance with the laws of
the state of domicile of the Company.
ARTICLE XXIV - ENTIRE AGREEMENT
This Agreement constitutes the entire agreement of the parties with respect to
the matters set forth herein and no amendment, alteration or modification of
this Agreement shall be valid unless expressed in a written instrument duly
executed by each of the parties hereto.
ALLSTATE LIFE INSURANCE COMPANY AMERICAN HERITAGE LIFE INSURANCE COMPANY
/s/ Xxxxxx X. Xxxxxx /s/ Xxxxx X. Xxxxx
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Name: Xxxxxx X. Xxxxxx Name: Xxxxx X. Xxxxx
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Title: Senior Vice President and Chief Title: Chairman of the Board
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Financial Officer
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Date: 7/28/03 Date: 7/29/03
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