Exhibit (g)(2)
FACULTATIVE
REINSURANCE AGREEMENT
BETWEEN
FARMERS NEW WORLD LIFE INSURANCE COMPANY
Mercer Island, Washington
hereinafter referred to as the CEDING COMPANY
and
Company B
FACULTATIVE TREATY
TABLE OF CONTENTS
ARTICLE DESCRIPTION PAGE
------- ----------- -----
I BASIS OF REINSURANCE................................................................... 1
II LIABILITY.............................................................................. 2
III ADMINISTRATIVE REPORTING............................................................... 2
IV PLANS OF REINSURANCE................................................................... 6
V REINSURANCE PREMIUMS................................................................... 6
VI PREMIUM ACCOUNTING..................................................................... 7
VII OVERSIGHTS............................................................................. 9
VIII REDUCTIONS, TERMINATIONS AND CHANGES................................................... 9
IX INCREASE IN RETENTION AND RECAPTURES................................................... 11
X REINSTATEMENTS, EXCHANGES, ETC......................................................... 12
XI EXPENSES OF ORIGINAL POLICY............................................................ 13
XII CLAIMS................................................................................. 13
XIII TAX CREDITS............................................................................ 16
XIV DAC TAX................................................................................ 16
XV INSPECTION OF RECORDS.................................................................. 17
XVI INSOLVENCY............................................................................. 17
XVII ARBITRATION............................................................................ 18
XVIII CONFIDENTIALITY........................................................................ 19
XIX PARTIES TO AGREEMENT................................................................... 19
XX ENTIRE CONTRACT........................................................................ 19
XXI TERMINATION............................................................................ 20
SCHEDULE DESCRIPTION
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A SPECIFICATIONS
B BENEFITS AND NAR CALCULATIONS
C ADDITIONAL INFORMATION AND EXCEPTIONS
EXHIBIT DESCRIPTION
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I RETENTION LIMITS
IA UNDERWRITING GUIDELINES (OPTIONAL)
II REINSURANCE PREMIUMS
IIA POLICY FEES, FLAT EXTRAS, SUBSTANDARD PREMIUMS
IIB PERCENTAGES OF PREMIUM (YRT)
III COMMISSIONS AND ALLOWANCES (COINSURANCE)
REINSURANCE AGREEMENT
REINSURANCE UNDER THIS AGREEMENT MUST BE INDIVIDUAL INSURANCE. THE CEDING
COMPANY MAY REINSURE THE LIFE INSURANCE AND WAIVER OF PREMIUM FOR THE PLAN(S) AS
STATED IN SCHEDULE A. THE BENEFITS COVERED AND THE NET AMOUNT AT RISK
CALCULATION SHALL BE DESCRIBED IN SCHEDULE B.
ARTICLE I
BASIS OF REINSURANCE
1. REQUIREMENTS FOR FACULTATIVE REINSURANCE
A. An application for facultative reinsurance may include life
insurance with or without either disability waiver of premium,
or accidental death, or both. Supplemental benefits without
life are excluded from this agreement. Covered supplemental
benefits are reflected in Schedule A.
B. Copies of all underwriting papers relating to the insurability
of the individual risk must be sent to COMPANY B for
facultative reinsurance. After COMPANY B has examined the
underwriting papers, COMPANY B will promptly notify the CEDING
COMPANY of the underwriting offer subject to additional
requirements, the final underwriting offer or declination. Any
final underwriting offer on the individual risk will
automatically terminate upon the earliest of:
1) The date COMPANY B receives notice of a
withdrawal/cancellation by the CEDING COMPANY,
2) 120 days after the date on which the offer was made,
or
3) The date specified in COMPANY B's approval to extend
the offer.
C. The minimum amount of insurance to be ceded shall be as stated
in Schedule A.
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ARTICLE II
LIABILITY
1. COMPANY B's liability for facultative reinsurance on individual risks
shall not begin unless and until the CEDING COMPANY has accepted
COMPANY B's final and unconditional written offer on the application
for facultative reinsurance.
2. COMPANY B's liability for reinsurance on individual risks shall
terminate when the CEDING COMPANY's liability terminates.
3. As long as the original policy remains in full force, all paid-up
additions, COLA's, GIR's, and accumulated dividends shall be the
liability of the CEDING COMPANY unless specifically included in
Schedule A of this agreement.
4. In no event shall reinsurance under this Agreement be in force unless
the insurance issued directly by the CEDING COMPANY is in force and is
issued and delivered in a jurisdiction in which the CEDING COMPANY is
properly licensed.
5. The payment of reinsurance premiums in accordance with this Agreement
shall be a condition precedent to the liability of COMPANY B under
reinsurance covered by this Agreement.
ARTICLE III
ADMINISTRATIVE REPORTING
1. SELF-ADMINISTERED BUSINESS
Promptly after liability for insurance has begun on an individual risk,
the CEDING COMPANY shall have the responsibility of maintaining
adequate records for the administration of the reinsurance amount and
shall furnish COMPANY B with monthly reports, in substantial conformity
with the following:
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A. MONTHLY NEW BUSINESS REPORT
For new business, the CEDING COMPANY must identify the
reinsurance agreement and provide information adequate for
COMPANY B to establish reserves, check retention limits, and
verify premium calculation.
1) policy number
2) full name of insured
3) date of birth
4) sex
5) issue age
6) policy date
7) underwriting classification
8) plan of insurance/code
9) amount issued
10) amount ceded
11) automatic/facultative indicator
12) state of residence
13) table rating
14) flat extra (amount + number of years)
15) death benefit option (UL products)
16) current net amount at risk
17) transaction code
18) riders (if applicable)
B. MONTHLY CONVERSION REPORT
The CEDING COMPANY shall furnish COMPANY B with a separate
listing of reinsurance policies that are conversions or
replacements from policies previously reinsured with COMPANY B
to the plan(s) as stated in Schedule A. The listing should
provide the following information:
1) 1 through 18 in 1.A above
2) original policy date
3) original policy number
4) attained age
5) duration
6) effective date if other than policy date
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C. MONTHLY PREMIUM REPORT
At the end of each month the CEDING COMPANY shall send to
COMPANY B a listing of all reinsurance policies issued or
renewing during the past month accompanied by the reinsurance
premiums for such policies. The listing should be segregated
into first year issues and renewals and should provide the
following information:
1) 1 through 18 in 1.A above
2) On Yearly Renewable Term treaties the net reinsurance
premium due for each reinsured policy with the
premium for life and each supplemental benefit
separated.
3) On Coinsurance treaties the gross reinsurance
premium, commissions, net reinsurance premium and
other amounts (e.g. dividends, cash surrender values)
with premium separated for life and each supplemental
benefit.
All monthly lists shall be submitted to COMPANY B no later
than the 20th day of the following month.
D. MONTHLY CHANGE REPORT
The CEDING COMPANY shall report the details of all policy
terminations and changes on the reinsured policies. In
addition to the data indicated in 1.A above, the report should
provide information about the nature, the effective date, and
the financial result of the change with respect to
reinsurance. For changes, the CEDING COMPANY shall identify
the reinsurance agreement and provide information adequate for
COMPANY B to establish reserves, check retention limits, and
verify premium calculation.
E. MONTHLY POLICY EXHIBIT REPORT
The CEDING COMPANY shall provide a summary of new issues,
terminations, recaptures, changes, death claims and
reinstatements during the month and the inforce reinsurance at
the end of the month.
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F. QUARTERLY REPORTING
1) Within ten (10) days following the end of the
quarter, the CEDING COMPANY shall provide COMPANY B
with Premiums Due and Unpaid and Commissions Due and
Unpaid. This report may be in summary form reporting
totals by line of business with separate totals for
first year and renewals.
2) Within ten (10) days following the end of the
quarter, the CEDING COMPANY shall provide COMPANY B
with totals for, the reserve liability including
statutory reserves by valuation basis segregated by
Yearly Renewable Term and Coinsurance.
G. ANNUAL INFORCE LISTING
Within ten (10) days after the close of the year, the CEDING
COMPANY shall furnish COMPANY B a listing of reinsurance in
force by policy, by year of issue, segregated by Yearly
Renewable Term and Coinsurance and include statutory reserves
for the same.
H. CLAIMS
Claims shall be reported as incurred on an individual basis.
I. CHANGE IN REPORTING FORMAT
If the CEDING COMPANY chooses to report its reinsurance
transaction via electronic media, the CEDING COMPANY shall
consult with COMPANY B to determine the appropriate reporting
format. Once determined, the CEDING COMPANY shall communicate
any change in the data format or code structure to COMPANY B
prior to the use of such changes in the reports to COMPANY B.
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2. INDIVIDUAL CESSION BUSINESS
Promptly after liability for reinsurance has begun on the individual
risk the CEDING COMPANY shall send COMPANY B a "Reinsurance
Application/Cession". Based on the information on the "Reinsurance
Application/Cession", COMPANY B will prepare and send the CEDING
COMPANY a "Reinsurance Cession Card". When reinsurance is amended or
changed, the CEDING COMPANY shall send COMPANY B a "Notification of
Change in Policy Reinsured".
ARTICLE IV
PLANS OF REINSURANCE
1. Life reinsurance shall be ceded on the basis stated in Schedule A.
2. Copies of all life insurance policies, riders, rate manuals, benefit
forms, commuted value tables and cash value tables shall be provided by
the CEDING COMPANY to COMPANY B, and COMPANY B shall be promptly
notified of any changes therein.
ARTICLE V
REINSURANCE PREMIUMS
1. Life Reinsurance Premiums are payable annually in advance unless
specified differently on Exhibit II.
A. Life Reinsurance Premiums Paid on a Coinsurance Basis (if
applicable).
The CEDING COMPANY shall pay the current annual premiums as
shown in Exhibit II based on the amount of life insurance
reinsured, less the allowance stated in Exhibit M. In
addition, the CEDING COMPANY shall pay any substandard table
extra and flat extra premiums as outlined in Exhibit IIA, but
shall exclude the policy fee. In the event the current premium
is changed, COMPANY B shall be notified by the CEDING COMPANY
immediately.
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B. Life Reinsurance Premiums on a Yearly Renewable Term Basis (if
applicable)
The life reinsurance premium on the net amount at risk shall
be based on rates shown in Exhibit II.
The reinsurance premiums are not guaranteed. For those
premiums less than the current minimum valuation net premiums,
only the latter premiums shall be guaranteed. Should COMPANY B
increase the reinsurance premiums to the current minimum
valuation net premium, then the CEDING COMPANY shall have the
right to immediately recapture any business affected by that
change.
ARTICLE VI
PREMIUM ACCOUNTING
1. PAYMENT OF REINSURANCE PREMIUM
A. The reinsurance premiums shall be paid to COMPANY B using the
rates shown in Exhibit II and IIA, and applying the allowances
(Exhibit III) or, percentages of premium (Exhibit IIB), when
applicable.
B. On issues ceded by individual cessions COMPANY B shall send
the CEDING COMPANY each month two copies of a statement
listing first year and renewal reinsurance premiums less
refunds and allowances which are due during the current month.
C. On self-administered business the CEDING COMPANY shall provide
the statement to COMPANY B using the format described in
Article III, Self-Administered Business.
D. If a net reinsurance premium balance is payable to COMPANY B
the CEDING COMPANY shall pay this balance within forty-five
(45) days after the close of that month. If the full balance
is not received within the forty-five (45) day period, the
reinsurance premiums for reinsurance risks listed on the
statement, for which payment was not received, shall be
delinquent and the liability of COMPANY B shall cease as of
the date reinsurance premiums were due.
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E. If a net reinsurance premium balance is payable to the CEDING
COMPANY, COMPANY B shall pay this net balance within
forty-five (45) days after the monthly statement was sent to
the CEDING COMPANY. If the monthly statement has not been
returned within forty-five (45) days, COMPANY B shall assume
the CEDING COMPANY has verified and is in agreement with the
net balance and shall make payment to the CEDING COMPANY.
2. INTEREST ON DELINQUENT PAYMENTS
If the CEDING COMPANY is more than 90 days in arrears in remitting
premiums to COMPANY B, such premiums will be considered delinquent and
interest will be added to the amount to be remitted. Interest will be
calculated from (i) the time the premiums are due COMPANY B to (ii) the
date the CEDING COMPANY pays the premium to COMPANY B. The rate of
interest charged will be equal to the rate listed in the Federal
Reserve Statistical Release, as promulgated by the Board of Governors
of the Federal Reserve System, for the monthly average of Corporate
bonds, Xxxxx'x seasoned Aaa (the "Interest Rate").
3. CURRENCY
The reinsurance premiums and benefits payable under this Agreement
shall be payable in the lawful money of the United States.
ARTICLE VII
OVERSIGHTS
If there is an unintentional oversight or clerical error in the administration
of this Agreement by either the CEDING COMPANY or COMPANY B, it can be corrected
provided the correction takes place promptly after the time the oversight or
clerical error is first discovered. In that event, the CEDING COMPANY and
COMPANY B will be restored to the position they would have occupied had such
oversight or clerical error not occurred.
ARTICLE VIII
REDUCTIONS, TERMINATIONS AND CHANGES
1. A. If in accordance with policy provisions the original policy is
converted to permanent life insurance, the life risk under the
converted policy which exceeds the amount of risk
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originally retained by the CEDING COMPANY shall continue to be
reinsured with COMPANY B.
B. If there is a replacement where full underwriting evidence is
not required according to the CEDING COMPANY regular
underwriting rules, the life risk which exceeds the amount of
risk originally retained by the CEDING COMPANY shall continue
to be reinsured with COMPANY B.
C. If there is a replacement where full underwriting evidence is
required by the CEDING COMPANY, reinsurance may be ceded to
COMPANY B subject to a written agreement between COMPANY B and
the CEDING COMPANY.
2. If the amount of insurance under a policy or rider reinsured under this
Agreement increases and
A. The increase is subject to new underwriting evidence, the
provisions of Article I shall apply to the increase in
reinsurance.
B. The increase is not subject to new underwriting evidence,
COMPANY B shall accept automatically the increase in
reinsurance but not to exceed the automatic binding limit as
stated in Schedule A.
3. If the amount of insurance under a policy or rider reinsured under this
Agreement is increased or reduced, any increase or reduction in
reinsurance for the risk involved shall be effective on the effective
date of the increase or reduction in the amount of insurance.
4. If any portion of the prior insurance retained by the CEDING COMPANY on
an individual life reduces or terminates, any reinsurance under this
Agreement based on the same life shall also be reduced or terminated.
The CEDING COMPANY shall reduce its reinsurance by applying the
retention limits which were in effect at the time the policy was
issued. The "reinsurance adjustment due to lapse or reduction of
previous insurance" shall be effective on the same date as the lapse or
reduction of prior insurance. The reinsurance to be terminated or
reduced shall be determined in chronological order by the date the risk
was first reinsured. Two or more policies issued the same date shall be
considered one policy.
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5. If the insurance for a risk is shared by more than one reinsurer,
COMPANY B's percentage of the increased or reduced reinsurance shall be
the same as COMPANY B's percentage of initial reinsurance of the
individual risk.
6. If a risk reinsured under this Agreement is terminated, the reinsurance
for that risk shall be terminated as of the effective date of the
termination.
7. For facultative reinsurance, if the CEDING COMPANY reduces the
mortality rating, the reduction shall be subject to the facultative
provisions of this Agreement as stated in Article I.
8. COMPANY B shall refund all unearned reinsurance premiums not including
policy fees, less applicable allowances, arising from reductions,
terminations and changes as described in this Article.
ARTICLE IX
INCREASE IN RETENTION AND RECAPTURES
1. If the CEDING COMPANY changes its retention limits, as listed in
Exhibit I, prompt written notice of the change shall be provided to
COMPANY B.
2. The CEDING COMPANY shall have the option of recapturing the reinsurance
under this Agreement in the event the CEDING COMPANY increases its
retention limit and the policies have been in force the required length
of time as stated in Schedule A. The CEDING COMPANY may exercise its
option to recapture by giving written notice to COMPANY B within ninety
(90) days after the effective date of the increase in retention. If the
recapture option is not exercised within ninety days (90) days after
the effective date of the increase in retention the CEDING COMPANY may
choose to recapture at a later date. In that case, the date of the
written notification to COMPANY B shall determine the effective date
the recapture program shall begin.
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3. If the CEDING COMPANY exercises its option to recapture, then:
A. The CEDING COMPANY shall reduce the reinsurance on all
individual risks on which it retained its maximum retention
for the age and mortality rating that was in effect at the
time the reinsurance was ceded.
B. The CEDING COMPANY shall increase its total amount of retained
insurance on the individual risk up to its new retention limit
by reducing the amount of reinsurance. If an individual risk
is shared by more than one reinsurer, COMPANY B's percentage
of the reduced reinsurance shall be the same as COMPANY B's
initial percentage of reinsurance on the individual risk.
C. The reduction of reinsurance shall become effective on the
later of the following dates:
1) The policy anniversary date immediately following the
date the recapture program is to begin as determined
by paragraph 2. of this Article;
2) The number of years stated in Schedule A starting
with the "policy date."
D. In the event the CEDING COMPANY overlooks any reduction in the
amount of a reinsurance policy because of an increase in the
CEDING COMPANY's retention, the acceptance by COMPANY B of
reinsurance premiums under these circumstances shall not
constitute a liability on the part of COMPANY B for such
reinsurance. COMPANY B shall be liable only for a refund of
premiums.
E. Once a recapture is initiated by the CEDING COMPANY, the
recapture will continue year after year until all eligible
policies are recaptured. Should a claim occur before an
eligible policy has been processed, COMPANY B shall deduct
from the claim payment the amount the CEDING COMPANY should
have recaptured.
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4. No recapture shall be permitted for reinsurance on an individual risk
if (a) the CEDING COMPANY retained less than its maximum retention for
the age and mortality rating in effect at the time the reinsurance was
ceded to COMPANY B, or if (b) the CEDING COMPANY did not retain any of
the individual risk.
ARTICLE X
REINSTATEMENTS EXCHANGES EXTENDED TERM REDUCED PAID UP
If a policy reinsured under this Agreement lapses for nonpayment of premium or
is continued on the Reduced Paidup or Extended Term Insurance basis, and is
reinstated in accordance with the terms of the policy and the CEDING COMPANY'S
rules, the reinsurance on such policy shall automatically be reinstated by
COMPANY B upon notification of such reinstatement. The CEDING COMPANY shall pay
COMPANY B all back reinsurance premiums.
Exchanges, term conversions or other changes in the insurance reinsured with
COMPANY B, where not fully underwritten as a new issue, will continue to be
reinsured with COMPANY B. When these changes are fully underwritten, the policy
will be handled the same as issuance of a new policy.
Exchanges will be reinsured only if the original policy was reinsured with
COMPANY B; the amount of reinsurance will not exceed the amount of reinsurance
on the original policy immediately prior to the exchange. If the business is
subsequently exchanged to any plan reinsured by COMPANY B, then such business
will be reinsured at the rates shown in the treaty covering the new plan. Rates
and allowances applicable to the new plan will be determined at point-in-scale
based on the original policy that is being exchanged. If the business is
subsequently exchanged to a plan that is not reinsured with COMPANY B under a
specific treaty, then such business shall be reinsured at an agreed upon YRT
rate.
Changes as a result of extended term or reduced paid-up insurance will be
handled the same as life reductions.
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ARTICLE XI
EXPENSE OF ORIGINAL POLICY
The CEDING COMPANY shall bear the expense of all medical examinations,
inspection fees, and other charges in connection with the issuance of the
insurance.
ARTICLE XII
CLAIMS
1. The CEDING COMPANY shall give COMPANY B written notice within twenty
(20) days of submission to the CEDING COMPANY of any claim on a policy
reinsured under this Agreement, and written notice within ten (10) days
of the service of process upon the CEDING COMPANY in connection with
any litigation involving such claim. Copies of the proofs obtained by
the CEDING COMPANY together with a statement showing the amount due or
paid on such claim by the CEDING COMPANY shall be furnished to COMPANY
B at the time payment is requested.
2. COMPANY B shall accept the decision of the CEDING COMPANY in payment of
the CEDING COMPANY's contractual liability for the claim and shall pay
its portion to the CEDING COMPANY upon receipt of proof that the CEDING
COMPANY has paid the claimant. It is agreed that if a lesser amount at
risk is retained by the CEDING COMP ANY than the amount ceded to
COMPANY B, the CEDING COMPANY shall consult with COMPANY B concerning
its investigation and/or payment of the claim. However, such
consultation shall not impair the CEDING COMPANY's freedom to determine
its course of action on the claim, and the final decision shall be that
of the CEDING COMPANY. In reaching its decision, the CEDING COMPANY
shall act with good faith and in accord with its standard practices
applicable to all claims, whether reinsured or not.
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3. The CEDING COMPANY shall notify COMPANY B within ten (10) days from the
date of the CEDING COMPANY's decision to contest, compromise, or
litigate a claim involving reinsurance. Unless COMPANY B declines to be
a party to such action, COMPANY B shall pay its share of the settlement
payment, up to the maximum reinsurance that would have been payable by
COMPANY B under the specific policy had there been no controversy, plus
its share of specific "Claim Expenses" therein involved, except as
specified below. If COMPANY B declines to be a party to the contest,
compromise, or litigation COMPANY B shall discharge all of its
liability to the CEDING COMPANY by paying the full amount reinsured
under this Agreement to the CEDING COMPANY. "Claim expenses" shall be
deemed to mean only the reasonable legal and investigative expenses
connected with the litigation or settlement of contractual liability
claims. "Claim expenses" shall not include expenses incurred in
connection with a dispute or contest arising out of conflicting claims
of entitlement to policy proceeds which the CEDING COMPANY admits are
payable or any routine claim administrative expenses, including, but
limited to, compensation of officers and employees of the CEDING
COMPANY.
4. In the event the amount of insurance provided by a policy or policies
reinsured hereunder is increased or reduced because of a misstatement
of age or sex established after the death of the insured, COMPANY B
shall share in the increase or reduction in the proportion that the net
liability of COMPANY B bore to the sum of the retained net liability of
the CEDING COMPANY and the net liability of other reinsurers
immediately prior to such increase or reduction. The reinsurance with
COMPANY B shall be written from commencement on the basis of the
adjusted amounts using premiums and reserves at the correct ages and
sex. The adjustment for the difference in premiums shall be made
without interest.
5. It is understood and agreed that the payment of a death claim by
COMPANY B shall be made in one sum regardless of the mode of settlement
under the policy of the CEDING COMPANY.
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6. In no event shall COMPANY B have any liability for any extracontractual
damages, including, but not limited to, punitive, exemplary,
compensatory and consequential damages which are assessed against the
CEDING COMPANY, whether by judgment, settlement or otherwise, as a
result of acts, omissions or course of conduct of the CEDING COMPANY or
its agents. It is recognized that special circumstances may arise which
indicate that to the extent permitted by law, COMPANY B should
participate in certain assessed damages. These circumstances are not
subject to prior identification or definition. However, the CEDING
COMPANY and COMPANY B agree the circumstances do not include any
circumstance where COMPANY B did not give the CEDING COMPANY written
directions in advance, designated as such, instructing the CEDING
COMPANY to engage in the act, omission or course of conduct which
ultimately results in the assessment of such damages. Consultations
with the CEDING COMPANY pursuant to paragraph 2 of this Article shall
not be considered "written directions" as used herein. The extent of
such participation in such damages by COMPANY B will be determined
based upon a good faith assessment of culpability, but shall not exceed
the ratio of COMPANY B's net liability for policy benefits under this
Agreement to the net liability of the CEDING COMPANY and any other
reinsurers.
7. If a claim is approved for disability waiver of premium insurance
reinsured under this Agreement, the CEDING COMPANY shall continue to
pay reinsurance premiums to COMPANY B. COMPANY B shall reimburse the
CEDING COMPANY COMPANY B's share of the annual liability.
ARTICLE XIII
TAX CREDITS
In jurisdictions which impose premium taxes on the CEDING COMPANY without
deduction for reinsurance, COMPANY B shall reimburse the CEDING COMPANY for
taxes paid on the amount of the reinsurance premiums on the basis shown in
Schedule A, unless COMPANY B itself is required to pay a direct tax on such
reinsurance premiums.
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ARTICLE XIV
DEFERRED ACQUISITION COSTS TAX
The CEDING COMPANY and COMPANY B elect under Regulation 1.848-2(g) (8) to
compute "specified policy acquisition expense", as defined in section 848(c) of
the Internal Revenue Code, in the following manner:
The party with net positive consideration as determined under Reg. 1.848-2(f)
and Reg. 1.848-3 shall compute specified policy acquisition expenses without
regard to the general deductions limitation of section 848(c)(1) for each
taxable year.
The parties will exchange information pertaining to the aggregate amount of net
consideration as determined under Regs. 1.848-2(f) and 1.848-3, for all
reinsurance agreements in force between them, to insure consistency for the
purposes of computing specified policy acquisition expenses. COMPANY B shall
provide the CEDING COMPANY with the amount of such net consideration for each
taxable year no later than May 1 following the end of such year. The CEDING
COMPANY shall advise COMPANY B if it disagrees with the amounts provided, and
the parties agree to amicably resolve any difference. The amounts provided by
COMPANY B shall be presumed correct if it does not receive a response from the
CEDING COMPANY by May 31.
COMPANY B represents and warrants that it is subject to U.S. taxation under
Subchapter L of the Internal Revenue Code.
ARTICLE XV
INSPECTION OF RECORDS
COMPANY B shall have the right, at any reasonable time, to inspect at the office
of the CEDING COMPANY, all books and documents which relate to reinsurance under
this Agreement.
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ARTICLE XVI
INSOLVENCY
1. In the event of insolvency of the CEDING COMPANY, all reinsurance shall
be payable by COMPANY B directly to the CEDING COMPANY or its
liquidator, receiver, or statutory successor, on the basis of the
liability of the CEDING COMPANY under the policy or policies reinsured,
without diminution because of the insolvency of the CEDING COMPANY.
2. It is agreed that the liquidator, receiver, or statutory successor of
the insolvent CEDING COMPANY shall give written notice to COMPANY B of
the pending of a claim against the insolvent CEDING COMPANY on any
policy reinsured within a reasonable time after such claim is filed in
the insolvency proceedings. During the pendency of any such claim
COMPANY B may investigate such claim and interpose, in the proceeding
where such claim is to be adjudicated, any defense or defenses which
COMPANY B may deem available to the CEDING COMPANY or its liquidator,
receiver, or statutory successor. The expense thus incurred by COMPANY
B shall be chargeable, subject to court approval, against the insolvent
CEDING COMPANY as part of the expense of liquidation to the extent of a
proportionate share of the benefit which may accrue to the CEDING
COMPANY solely as a result of the defense undertaken by COMPANY B.
3. Where two or more reinsurers are participating in the same claim and a
majority in interest elect to interpose a defense to such claim, the
expense shall be apportioned in accordance with the terms of the
Agreement as though such expenses had been incurred by the CEDING
COMPANY.
4. Any debts or credits, matured or unmatured, liquidated or unliquidated,
in favor of or against either the CEDING COMPANY or COMPANY B with
respect to this agreement or with respect to any other claim of one
party against the other are deemed mutual debts or credits, as the case
may be, and shall be set off, and only the balance shall be allowed or
paid.
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ARTICLE XVII
ARBITRATION
1. It is the intention of the CEDING COMPANY and COMPANY B that the
customs and practices of the insurance and reinsurance industry shall
be given full effect in the operation and interpretation of this
Agreement. The parties agree to act in all things with the highest good
faith. However, if COMPANY B and the CEDING COMPANY cannot mutually
resolve a dispute or claim which arises out of or relates to this
agreement, the dispute or claim shall be settled through arbitration.
2. The arbitrators shall be impartial regarding the dispute, and shall
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.
3. There shall be three arbitrators who must be officers of life insurance
companies other than the parties to this agreement or their
subsidiaries. Each of the parties to this agreement shall appoint one
of the arbitrators and these two arbitrators shall select the third. If
a party to this agreement fails to appoint an arbitrator within thirty
(30) days after the other party to this agreement has given notice of
the arbitrator appointment, the American Arbitration Association shall
appoint an arbitrator for the party to this Agreement that has failed
to do so. Should the two arbitrators be unable to agree on the choice
of the third, then the appointment of this arbitrator is left to the
American Arbitration Association.
4. Except for the appointment of arbitrators in accordance with the
provisions of Section 3 of this Article, arbitration shall be conducted
in accordance with the Commercial Arbitration Rules of the American
Arbitration Association which are in effect on the date of delivery of
demand for arbitration. Arbitration shall be conducted in City, State.
5. Each party to this agreement shall pay part of the arbitration expenses
which are apportioned to it by the arbitrators.
6. The award agreed by the arbitrators shall be final, and judgment may be
entered upon it in any court having jurisdiction.
Page 19
ARTICLE XVIII
CONFIDENTIALITY
The CEDING COMPANY and COMPANY B (collectively the "Parties") are "financial
institutions" as that term is used in Title V of the Xxxxx-Xxxxx-Xxxxxx Act
("GLB"). The Parties may, from time to time, come into possession of "non-public
personal information" as defined in GLB ("Information"). The Information may be
transmitted by one party to the other in accordance with the transmitting
party's then current privacy policy and practices, in order to allow the other
party to perform pursuant to this Agreement. During the continuation of this
Agreement and after its termination, each party shall at all times use
reasonable care to maintain the confidentiality of the Information. The Parties
agree that they will not transfer Information to a third party, except as
provided in this Agreement and as permitted by GLB. Such permitted disclosures
include, but are not limited to, disclosure of Information if required by
applicable federal, state or local legal requirement, order of a court of
competent jurisdiction, properly authorized civil, criminal or regulatory
investigation, or subpoena by federal, state or local authorities. The Parties
acknowledge and agree that they may need to transfer Information to third party
reinsurers ("Retrocessionaires") for the purpose of obtaining reinsurance on
risks subject to this Agreement. On and after July l, 2001, prior to making such
transfer, the transferring party will obtain written agreements from any such
Retrocessionaires that require the Retrocessionaires to use reasonable care to
maintain the confidentiality of the Information and limit further disclosures to
those permitted by GLB.
ARTICLE XIX
PARTIES TO AGREEMENT
This is an Agreement for indemnity reinsurance solely between the CEDING COMPANY
and COMPANY B. The acceptance of reinsurance under this Agreement shall not
create any right or legal relation whatever between COMPANY B and the insured,
owner, or any other party to or under any policy reinsured under this Agreement.
Page 20
ARTICLE XX
ENTIRE CONTRACT
1. This agreement shall constitute the entire agreement between the
parties with respect to business being reinsured hereunder and that
there are no understandings between the parties other than those
expressed in this agreement.
2. Any change or modification to this agreement shall be null and void
unless made by addendum to this agreement signed by both parties.
ARTICLE XXI TERMINATION OF AGREEMENT
1. This Agreement may be terminated at any time by either party giving at
least ninety (90) days written notice of termination. The day the
notice is deposited in the mail addressed to the Home Office, or to an
Officer of either company, shall be the first day of the ninety-day
(90) period.
2. The CEDING COMPANY shall continue to cede reinsurance and COMPANY B
shall continue to accept reinsurance, as provided for by the terms of
this Agreement, until the date of termination.
3. All automatic reinsurance which became effective prior to the
termination of this Agreement and all facultative reinsurance approved
by COMPANY B based upon applications received prior to termination of
this Agreement shall remain in effect until its termination or
expiration, unless the CEDING COMPANY and COMPANY B mutually decide
otherwise.
Page 21
IN WITNESS WHEREOF, this agreement shall be effective with policies dated 12:01
November 1, 2002, and is hereby executed in duplicate between
FARMERS NEW WORLD LIFE INSURANCE COMPANY
Mercer Island, Washington
referred to as the CEDING COMPANY
and
COMPANY B
City, State
and duly signed by both parties' respective officers as follows:
THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY
THE PARTIES.
CEDING COMPANY
/s/ VP & Actuary VP & Actuary
------------ ------------
signature title
/s/AVP & Secretary AVP & Secretary
------------------ ---------------
signature title
3/1/03
------
date
COMPANY B
Senior Vice President/Reinsurance
------------------------------------ ---------------------------------
signature title
Vice President
Reinsurance Actuary
------------------------------------ -------------------
signature title
--------------------------------------
date
COMPANY B REINSURANCE
SCHEDULE A
TREATY SPECIFICATIONS
FARMERS NEW WORLD LIFE Treaty #: 200211-003
--------------------------------------------------------------------------------
TYPE OF BUSINESS:
Life insurance issued by the CEDING COMPANY
TYPE OF REPORTING:
Individual Cession
BASIS OF REINSURANCE:
Facultative / Yearly Renewable Term
PLAN NAMES:
Single Life Plans
AGE BASIS:
Age last birthday
MINIMUM CESSION AMOUNT:
$5,000
RATE CAPACITY:
$10,000,000
RECAPTURE YEARS:
10 years
PREMIUM TAX REIMBURSEMENT:
Premium taxes are not reimbursed.
COMPANY B REINSURANCE
SCHEDULE A
PLAN BENEFITS & RIDER INFORMATION
FARMERS NEW WORLD LIFE Treaty #: 200211-003
-------------------------------------------------------------------------------
LEVEL TERM - LESS THAN OR EQUAL TO 20 YEARS:
The net amount at risk shall be the reinsurance face amount ceded.
LEVEL TERM - GREATER THAN 20 YEARS:
The net amount at risk shall be the reinsurance face amount ceded.
PERMANENT PLANS:
One-ninth of a 10th year cash value method will be used to determine the annual
reserve.
1st Year - Full amount ceded
2nd through 10th Years - Annual decrement is equal to one-ninth of the 10th year
Cash Value.
11th through 20th Years - Annual decrement is equal to one-tenth of the
difference between the 10th year and the 20th year Cash Value.
Subsequent years calculated in a similar manner.
DECREASING TERM PLANS:
The first year net amount at risk will be the reinsurance face amount ceded. The
net amount at risk in subsequent years will be determined by multiplying the
commuted value schedule, provided by the CEDING COMPANY, times the number of
units issued.
UNIVERSAL LIFE: LEVEL DEATH BENEFIT OPTION (OPTION A):
The CEDING COMPANY shall furnish COMPANY B a schedule of projected values with
each policy sent to COMPANY B. The initial net amount at risk is equal to the
face amount reinsured. In subsequent years, COMPANY B shall reinsure the death
benefit minus the cash value, minus retention.
INCREASING LIFE PLANS: INCREASING DEATH BENEFIT OPTION (OPTION B):
The first year net amount at risk will be the reinsurance face amount ceded. The
net amount at risk in subsequent years will be the increased death benefit minus
the cash value (increase is typically equal to the cash value), minus retention,
resulting in a level net amount at risk.
The CEDING COMPANY shall report fluctuations in the net amount at risk after an
accumulated change of $5,000 has been reached. The change to reinsurance would
be effective the date the accumulation change reached $5,000. At claim time, the
current net amount at risk will be paid to the CEDING COMPANY without
adjustments for insignificant amounts.
WAIVER OF PREMIUM:
Reinsured based on the amount ceded
WAIVER OF COST OF INSURANCE:
Reinsured based on the amount reinsured
COMPANY B REINSURANCE
SCHEDULE C
ADDITIONAL DETAILED INFORMATION
FARMERS NEW WORLD LIFE Treaty #: 200211-003
--------------------------------------------------------------------------------
PREMIUMS BASED ON:
The reinsurance premiums are a percentage of the 75-80 Basic Select and Ultimate
Mortality Table, ALB using the Manufacturers Life extension for ages over 70.
PREMIER WHOLE LIFE:
Premier Whole Life will continue to be reinsured under the 1995 treaty.
EXHIBIT I
RETENTION SCHEDULE
FARMERS NEW WORLD LIFE Treaty #: 200211-003
-------------------------------------------------------------------------------
EFFECTIVE WITH POLICIES DATED: MARCH 01, 2000
Flexible UL
Premier UL & VUL Flexible UL All Other Plans
Issue Standard - Table 6 Premier UL & VUL Standard - Table 6 All Other Plans
Ages Flat Ex. 0-$15.00 Over Table 6 Flat Ex. 0-$15.00 Over Table 6
--------- ------------------- ----------------- ------------------ ---------------
0 - 60 $2,000,000 $250,000 $1,500,000 $250,000
61+ $ 250,000 $250,000 $ 250,000 $250,000
Waiver of Premium retention is the same as life.
ADB is not reinsured
COMPANY B REINSURANCE
EXHIBIT II
REINSURANCE PREMIUMS
FARMERS NEW WORLD LIFE Treaty #: 200211-003
--------------------------------------------------------------------------------
YRT rates marked Exhibit II, applying percentages shown in Exhibit IIB.
EXHIBIT II
1975-80 Basic Select and Ultimate Mortality Table
Mortality Rates per 1000 - Male - Age Last Birthday
[TABLE OMITTED]
EXHIBIT II
1975-80 Basic Select and Ultimate Mortality Table
Mortality Rates per 1000 - Female - Age Last Birthday
[TABLE OMITTED]
COMPANY B REINSURANCE
EXHIBIT IIA
MISCELLANEOUS PREMIUMS
FARMERS NEW WORLD LIFE Treaty #: 200211-003
--------------------------------------------------------------------------------
POLICY FEES:
There are no policy fees.
FLAT EXTRA PREMIUMS:
Flat extra will be the flat extra premium charged the insured times the per
thousand amount ceded to COMPANY B, less the allowances shown in Exhibit III.
SUBSTANDARD PREMIUMS:
Substandard premiums are standard premiums increased 25% per Table.
COMPANY B REINSURANCE
EXHIBIT IIB
PERCENTAGES OF PREMIUM
FARMERS NEW WORLD LIFE Treaty #: 200211-003
--------------------------------------------------------------------------------
SINGLE LIFE PLANS
Policy
Years Non Smoker Smoker
----- ---------- ------
1 0% 0%
2+ 60% 121%
COMPANY B REINSURANCE
EXHIBIT III
OTHER ALLOWANCES
FARMERS NEW WORLD LIFE Treaty #: 200211-003
--------------------------------------------------------------------------------
WAIVER OF PREMIUM
1st Year 100%
Renewal 10%
WAIVER OF COST OF INSURANCE
1st Year 100%
Renewal 10%
TEMP FLAT EXTRA
All Years 20%
PERM FLAT EXTRA
1st Year 100%
Renewal 20%
AMENDMENT
to the Risk Premium Reinsurance Agreement (the "Agreement")
effective August 1, 1973, between
FARMERS NEW WORLD LIFE INSURANCE COMPANY of
Mercer Island, Washington,
hereinafter referred to as the
"REINSURED,"
and
COMPANY C
1. The plans reinsured under the Agreement on and after the first day
of March, 2000, shall be those specified in the Appendix I, attached hereto.
2. On and after the first day of March, 2000, the retention limit of
the REINSURED shall be that shown in the revised Schedule A, attached hereto.
This retention shall apply to reinsurance ceded after the effective date hereof
and to existing reinsurance ceded before the effective date hereof in accordance
with the "INCREASE IN LIMIT OF RETENTION" article of the Agreement of which this
amendment is a part.
3. The premium rates as shown in Schedule D, Part I of the Agreement
shall be extended to include reinsurance of the REINSURED'S Variable Universal
Life (Form Nos. 2000-031 and 2000-131) plan ceded under the Agreement on and
after the first day of March, 2000.
4. The provisions of this amendment shall be subject to all the terms
and conditions of the Agreement which do not conflict with the terms hereof.
IN WITNESS WHEREOF the parties hereto have caused this amendment to be
executed in duplicate on the dates shown below.
FARMERS NEW WORLD LIFE INSURANCE COMPANY
Signed at Mercer Island, WA
By /s/VP & Actuary By /s/Vice President
---------------------------------------- --------------------------------
Title VP & Actuary Title Vice President
Date: 1 June 2000 Date 1 June 2000
COMPANY C
Signed at City, State
By /s/Second Vice President By /s/Assistant Secretary
---------------------------------------- --------------------------------
Second Vice President Assistant Secretary
Date 5/4/00 Date 5/3/2000
APPENDIX I
Insurance Subject to Reinsurance under this Agreement
The REINSURED'S excess as indicated below of its issues of the following plans
bearing application dates in the range shown below to insureds having surnames
beginning with the letters of the alphabet shown below.
A. Automatic Reinsurance
One hundred percent (100%) of the reinsurance the REINSURED cedes
automatically of the insurance specified below shall be ceded under
this Agreement.
Dates Letters
Plan Excess from through from through
---- ------ ---- ------- ---- -------
All plans issued by the
REINSURED Second 08-01-73 03-31-85 A Z
Second 04-01-85 03-31-88 L Z
Universal Life Plan
(Form 1986-038) Second 04-01-88 04-30-91 L Z
Second 05-01-91 04-30-97 A Z
Entire 05-01-97 - A Z
All other plans issued by
the REINSURED Second 04-01-88 04-30-91 L Z
Second 05-01-91 04-30-92 A Z
Automatic Increase Benefit (AIB) Second 04-01-91 04-30-91 L Z
Automatic Insured Rider (AIR) Second 04-01-91 04-30-91 L Z
Automatic Increase Benefit* (AIB) Second 05-01-91 04-30-97 A Z
Entire 05-01-97 - A Z
Additional Insured Rider* (AIR) Second 05-01-91 04-30-97 A Z
Entire 05-01-97 - A Z
*AIB and AIR Riders may be ceded under this Agreement only when they are added
to a Universal Life policy.
APPENDIX I (CONTINUED)
Dates Letters
Plan Excess from through from through
---- ------ ---- ------- ---- -------
Ten Year Renewable and
Convertible Term Second 05-01-92 04-30-97 A Z
Entire 05-01-97 - A Z
Ten Year Convertible Term Second 08-01-93 04-30-97 A Z
Entire 05-01-97 - A Z
All other plans issued by
the REINSURED excluding Premier Whole
Life and Yearly Renewable Term
(Form 1995-112 and 1996-240) Second 1-01-95 04-30-97 A Z
Entire 5-01-97 - A Z
Premier Universal Life
(Form No. 1998-037) Entire 7-01-98 - A Z
Variable Universal Life
(Form No. 2000-031) Entire 3-01-00 - A Z
B. Facultative Reinsurance
One hundred percent (100%) of the reinsurance the REINSURED cedes
facultatively of the insurance specified above, including the Premier
Whole Life plan and Yearly Renewable Term plan to insureds having
surnames beginning with the letters A through Z shall be ceded under
this Agreement provided the REINSURED has accepted COMPANY C's offer to
reinsurance.
C. Continuations
Continuations to the insurance specified above shall be ceded under
this Agreement provided the original policy was reinsured with COMPANY
C under this or another agreement. The percentage of reinsurance ceded
to COMPANY C shall equal the percentage of the original policy ceded to
COMPANY C.
SCHEDULE A
(Effective March 1, 2000)
Retention Limits of the REINSURED
Life
Whole Life (1986-038),
Premier Universal Life (Form Nos. 1998-037 and 1998-137)
and Variable Universal Life (Form Nos. 2000-031 and 2000-131)
Standard-Table .6
Flat Extras
Ages $0 - $15.00 Over Table 6
---- ----------- ------------
0-60 $2,000,000* $250,000*
Over 60 250,000 250,000
All Other Plans
Standard-Table 6
Flat Extras
Ages $0 - $15.00 Over Table 6
---- ----------------- ------------
0-60 S 1,500,000* $250,000*
Over 60 250,000 250,000
Payor Benefits
Amount Issued
Monthly Income Benefit Rider**
Ages 15-55 $500 Per Month
Waiver of Premium Disability
Ages 15-55 Same as Life
Accidental Death***
Issued at Standard, 1 1/2 and two (2)
Ages times Standard rate for same limit,
1-60 $150,000
* The maximum retention on any one (1) life, not including Accidental
Death Benefits for normal double indemnity coverage, shall not exceed
the Life retention shown above by age and rating.
** Standard issues only.
*** Accidental Death Benefits for a normal double indemnity coverage shall
be retained in addition to the limits for Life shown above.
