Exhibit (g)(1)
AUTOMATIC
REINSURANCE AGREEMENT
(hereinafter, "the Agreement")
between
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
of Newark, Delaware
(hereinafter, "Cedent")
And
RGA REINSURANCE COMPANY
of St. Louis, Missouri
(hereinafter, "Reinsurer")
Advanced Market Reinsurance Agreement
EFFECTIVE JUNE 19, 2001
NYLIAC ADVANCED MARKET REINSURANCE AGREEMENT
ARTICLES TABLE OF CONTENTS PAGE
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I Reinsurance Coverage 4
II Requirements for Automatic Reinsurance 4
III Requirements for Facultative Reinsurance 5
IV Liability 6
V Reinsurance Ceded to NYLARC 6
VI Notification of Reinsurance 7
VII Types of Reinsurance 7
VIII Reinsurance Premiums 7
IX Reinsurance Accounting 8
X Oversights 10
XI Reductions, Terminations and Changes 10
XII Increase In Retention 11
XIII Reinstatement 12
XIV Expenses 13
XV Claims 13
XVI Premium Tax Reimbursement 15
XVII DAC Tax Requirements 15
XVIII Inspection Of Records 17
XIX Insolvency 17
XX Arbitration 18
XXI Parties To Agreement 19
XXII Entire Agreement 19
XXIII Duration Of Agreement 19
XXIV Choice of Law and Forum 20
XXV Compliance with Privacy Laws 20
XXVI Reinsurance Credit 20
SCHEDULES
A Policies
B Reinsurance Premium Rates
C Cedent's Retention Limits
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EXHIBITS
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1 DAC Tax Calculation
2 Reinsurance Questionnaire
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ALL SCHEDULES AND EXHIBITS ATTACHED HERETO WILL BE CONSIDERED
PART OF THIS AGREEMENT.
ARTICLE I
REINSURANCE COVERAGE
1. Reinsurance under this Agreement shall be individual life insurance of the
type of business stated in Schedule A. Cedent shall automatically reinsure
and Reinsurer shall automatically accept the life insurance for the plans
and riders as stated in Schedule A that meet the requirements of Article II
below. Reinsurer's liability for the risks ceded hereunder shall be based
on the quota share specified in Schedule A unless a greater amount is
reinsured pursuant to Article III. (Individual life insurance reinsured
pursuant to Article I and II or Article III hereinafter referred to as a
"Covered Policy(ies)".) Reinsurer shall hold policy year reserves based on
1/2Cx where the commutation functions are based on the 1980 CSO Table
(Smoker or Non-Smoker) without select factors, and using the Frasierized
method based on exact issue ages and risk classification for each of the
two insureds for joint life policies.
2. The effective date of this Agreement shall be June 19, 2001.
ARTICLE II
REQUIREMENTS FOR AUTOMATIC REINSURANCE
Cedent shall not cede, and Reinsurer shall not accept, any individual life
insurance for reinsurance under this Agreement unless it meets the following
requirements:
1. The individual risk must be a resident of the United States or Canada.
2. The individual risk must be underwritten by Cedent in accordance with
Cedent's usual underwriting practices and guidelines, or arise out of a
conversion from a prior term policy issued by Cedent. Conversions need not
have been previously reinsured with the Reinsurer to be reinsured under
this agreement. The individual must be classified as select preferred,
preferred, non-smoker, select standard, standard or substandard, in
accordance with those guidelines.
3. The age of the individual risk at issue must be no greater than the maximum
issue age shown on Schedule A.
4. The amount of insurance issued and applied for in all insurance companies
on each life must not exceed the jumbo limits shown on Schedule A.
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5. The amount of insurance issued and applied for with Cedent on each life
must not exceed the automatic binding limits shown on Schedule A.
6. The initial amount of life insurance on each Covered Policy must not be
less than the minimum amount at issue as shown on Schedule A.
7. The issuance of the insurance must constitute the doing of business in a
jurisdiction in which Cedent is properly licensed.
8. On each Covered Policy, Cedent must retain at least the percentage amount
of each risk as shown in Schedule A (hereinafter referred to as the
"Automatic Retained Percentage"), notwithstanding any portion of a Covered
Policy that is reinsured under an agreement with New York Life Agents
Reinsurance Company ("NYLARC") or MLIFE Insurance Company ("MLIFE").
ARTICLE III
REQUIREMENTS FOR FACULTATIVE REINSURANCE
1. If the requirements for automatic reinsurance on an individual life are not
met, or are met but Cedent prefers to apply for facultative reinsurance,
then Cedent may apply to Reinsurer for facultative reinsurance. In order to
apply for facultative reinsurance, Cedent must submit to Reinsurer complete
copies of the original application, medical examiner's reports, inspection
reports, attending physicians' statements plus any other papers or
information that may have a bearing on the insurability of the risk.
2. After Reinsurer has examined the underwriting information submitted in
accordance with Paragraph 1 above, Reinsurer shall promptly notify Cedent
in writing of either a final underwriting offer for facultative reinsurance
or an underwriting offer for facultative reinsurance subject to additional
requirements. Either underwriting offer of facultative reinsurance on an
individual life will automatically terminate on the first of the following
dates:
(a) The date Reinsurer receives notice from Cedent that Cedent has
withdrawn Cedent's application for facultative reinsurance;
(b) A date that is one hundred twenty (120) days after the date Reinsurer
made the offer; or
(c) The date specified in Reinsurer's offer.
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3. If an underwriting offer made by Reinsurer in accordance with Paragraph 2
is accepted by Cedent in writing prior to the date the offer terminates,
that individual life is reinsured under the terms of this Agreement.
ARTICLE IV
LIABILITY
1. Reinsurer's liability for automatic reinsurance on each Covered Policy will
begin simultaneously with Cedent's liability.
2. Reinsurer's liability for facultative reinsurance on each Covered Policy
will begin simultaneously with Cedent's liability once Reinsurer has
accepted the application for facultative reinsurance in writing and Cedent
has accepted Reinsurer's offer.
3. Reinsurer's liability for reinsurance on each Covered Policy will terminate
when Cedent's liability terminates.
4. The initial and subsequent Reinsurance Premiums (as defined herein) must be
received by Reinsurer on a timely basis as provided in Article IX for
Reinsurer to maintain Reinsurer's liability for each individual risk.
5. Reinsurer agrees to accept policies backdated to December 19, 2000 for
reinsurance coverage under this Agreement. However, it is agreed that
Reinsurer shall not be liable for any mortality risk on such policies until
June 19, 2001. When the policy is reinsured, Cedent will pay an annual
premium from the policy date. Reinsurer shall be liable for proceeds paid
under Cedent's conditional receipt or temporary insurance agreement for
risks reinsured automatically pursuant to the terms of this Agreement.
Reinsurer shall not be liable for proceeds paid under Cedent's conditional
receipt or temporary insurance agreement for risks submitted on a
facultative basis, where Cedent's liability for payment under the
conditional receipt or temporary insurance is established before Reinsurer
has accepted the application for facultative reinsurance in writing and
Cedent has accepted Reinsurer's offer.
ARTICLE V
REINSURANCE CEDED TO NYLARC OR MLIFE
In determining the amount of a Covered Policy to be reinsured under this
Agreement, where the Covered Policy is reinsured under an agreement between
either NYLARC or MLIFE and Cedent, the net amount of any reinsurance eligible to
be assumed by NYLARC or MLIFE and not retroceded back to New York Life Insurance
and Annuity Corporation ("NYLIAC") will first be deducted and then the terms of
Article I through III
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and Schedule A will be applied to the remainder to determine the amount of
reinsurance.
The amount of reinsurance assumed by NYLARC or MLIFE and not retroceded back to
NYLIAC will be 25% of the net amount at risk of each eligible Covered Policy up
to a maximum amount of $250,000 per life. Generally, if 25% of the net amount at
risk of a Covered Policy issued on an individual life is greater than $250,000,
the difference between such amounts will be retroceded to NYLIAC and will be
reinsured under this Agreement. This Article will not apply to any Covered
Policy until the reinsurance agreement between NYLARC or MLIFE and Cedent
becomes effective with respect to that Covered Policy. The following policies or
riders are not eligible for reinsurance with NYLARC (these limitations are not
applicable to MLIFE):
A. Policies or riders which are initially Substandard or rated (i.e.
prior to shaving program)
B. Policies or riders issued to insureds under age 15 or over age 65.
ARTICLE VI
NOTIFICATION OF REINSURANCE
Within thirty-one (31) days after the end of each calendar quarter, Cedent will
send Reinsurer an in force listing of all Covered Policies reinsured under this
Agreement.
ARTICLE VII
TYPES OF REINSURANCE
1. Automatic reinsurance under this Agreement shall be on a yearly renewable
term basis, based on the net amount at risk. The net amount at risk shall
be the death benefit under the Covered Policy less the total cash value.
2. If requested, Cedent shall furnish Reinsurer with a copy of each policy
form, form of rider and rate book that applies to the life insurance
reinsured.
ARTICLE VIII
REINSURANCE PREMIUMS
1. The premium for each Covered Policy reinsured pursuant to this Agreement
will be: (a) the quota share shown on Schedule A; multiplied by (b) the
reinsurance premium rate calculated in accordance with Schedule B applied
to the net amount at risk (hereinafter, the "Reinsurance Premium").
2. For technical reasons relating to the uncertain status of deficiency
reserve requirements, the reinsurance premium rates shown in Schedule B
cannot be
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guaranteed for more than one year. However, Reinsurer anticipates
continuing to accept premiums on the basis of the reinsurance premium rates
as described in Schedule B for reinsurance ceded. If Reinsurer deems it
necessary to increase reinsurance premium rates, such increased rates shall
not be higher than the valuation net premiums for yearly renewable term
insurance calculated using the minimum statutory mortality rates and
maximum statutory interest rate for each year of issue.
3. Reinsurer shall notify Cedent of its intention to change the reinsurance
premium rates by giving ninety (90) days written notice. Reinsurer and
Cedent will have this ninety (90) day period to negotiate a change in the
rates. Any rate change that is agreed to will take effect at the end of
this period. Should no agreement be reached by the end of this period,
Cedent shall have the right to terminate this Agreement and recapture all
or part of the reinsurance ceded under this Agreement by providing ninety
(90) days written notice of termination. During the ninety (90) day
termination notice period, premiums shall be calculated based on the
current premium rate. With respect to any notice given under this
Paragraph, the day the notice is deposited in the mail addressed to the
home office or to an officer of the party receiving such notice will be the
first day of the ninety (90) day period.
ARTICLE IX
REINSURANCE ACCOUNTING
1. PAYMENT OF REINSURANCE PREMIUMS
A. Cedent shall prepare and submit to Reinsurer a monthly statement,
either electronically or by regular U.S. postal service, which will
provide the pertinent policy premium details in a mutually agreed upon
report format, within thirty (30) days following the last day of the
same calendar month. The net monthly premiums due will be (i) the
balance of the monthly Reinsurance Premiums due on reinsurance in
force at the end of the immediately preceding calendar month plus (ii)
Reinsurance Premiums due on new business reinsured during the current
month, minus (iii) the refunds of Reinsurance Premiums due Cedent on
deaths, lapses and changes, plus or minus (iv) Reinsurance Premiums
adjustments due to a misstatement of age or sex, without interest.
B. If the monthly statement shows a net Reinsurance Premium balance is
payable to Reinsurer, Cedent shall remit this amount due Reinsurer
within thirty (30) days. If the amount is not paid within the
prescribed period, the premiums for all of the reinsurance risks
listed on the statement will be delinquent.
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C. If the monthly statement shows a net Reinsurance Premium balance is
payable to Cedent, Reinsurer shall remit Reinsurer's payment to Cedent
within thirty (30) days after receiving Cedent's statement.
2. TERMINATION BECAUSE OF NON-PAYMENT OF PREMIUMS
When Reinsurance Premiums are delinquent, Reinsurer shall have the right to
terminate the reinsurance risks on the statement by giving Cedent thirty
(30) days' written notice. As of the close of this thirty (30) day period
all of Reinsurer's liability will terminate for:
A. The risks described in the preceding sentence, and
B. The risks where the Reinsurance Premiums became delinquent during the
thirty (30) day period.
Regardless of these terminations, Cedent will continue to be liable to
Reinsurer for all unpaid Reinsurance Premiums earned by Reinsurer. Cedent
agrees that Cedent will not force termination under this provision solely
to avoid the recapture requirements or to transfer the block of business
reinsured to another reinsurer.
3. REINSTATEMENT OF A DELINQUENT STATEMENT.
Cedent may reinstate the terminated risks within sixty (60) days after the
effective date of termination by paying the unpaid Reinsurance Premiums for
the risks in force prior to the termination. However, Reinsurer will not be
liable for any claim incurred between the date of termination and
reinstatement. The effective date of reinstatement will be the day that
Reinsurer receives the required back Reinsurance Premiums.
4. CURRENCY.
The Reinsurance Premiums and claims payable under this Agreement will be
payable in the lawful money of the United States.
5. OFFSET
Any debts or credits incurred on and after June 19, 2001 in favor of or
against either Cedent or Reinsurer with respect to this Agreement 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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6. BALANCES IN DEFAULT
Reinsurer reserves the right to charge interest at the Prime Rate plus 2%
as stated in the Wall Street Journal on the first business day in January
prior to the due date of the premium when renewal premiums are not paid
within sixty (60) days of the due date or premiums for new business are not
paid within one hundred twenty (120) days of the date the policy is issued.
ARTICLE X
OVERSIGHTS
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 error or omission is rectified as soon as possible
after discovery, and provided that the party making such error or omission or
responsible for such delay shall be responsible for any additional liability
which attaches as a result.
ARTICLE XI
REDUCTIONS, TERMINATIONS AND CHANGES
1. If there is a contractual or non-contractual replacement or change in the
insurance reinsured under this Agreement where full medical underwriting
evidence according to Cedent's regular underwriting rules is not required,
the insurance will continue to be reinsured with Reinsurer.
2. If the insurance reinsured under this Agreement increases and
A. The increase is subject to new underwriting evidence, the provisions
of Article I and II or Article III shall apply to the increase in
reinsurance.
B. The increase is not subject to new underwriting evidence, Reinsurer
will accept automatically the increase in reinsurance but not to
exceed Reinsurer's automatic binding limit.
3. If the insurance reinsured under this Agreement is increased or reduced,
the reinsurance for each policy involved will be proportionately increased
or reduced on the effective date of increase or reduction.
4. If any portion of the total insurance retained by Cedent on an individual
life reduces or terminates, any reinsurance under this Agreement based on
the same life will also be reduced or terminated. Cedent will reduce
Cedent's reinsurance by applying the retention limits that were in effect
at the time the policy was
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issued. Cedent will not be required to retain an amount in excess of
Cedent's regular retention limit for the age, mortality rating and risk
classification at the time of issue for any policy on which reinsurance is
being reduced.
Cedent must first reduce the reinsurance of the insurance that has the same
mortality rating as the terminated insurance. If further reduction is
required, the reinsurance to be terminated or reduced will be determined by
chronological order in which the reinsurance was first reinsured.
5. If the insurance for a risk is shared by more than one reinsurer,
Reinsurer's percentage of the increased or reduced reinsurance will be the
same as Reinsurer's percentage of the initial reinsurance of each policy.
6. If insurance reinsured under this Agreement is terminated, the reinsurance
for the policy involved will be terminated on the effective date of
termination.
7. On facultative reinsurance, if Cedent wishes to reduce the mortality
rating, this reduction will be subject to the facultative provisions of
this Agreement.
8. Reinsurer will refund to Cedent all unearned reinsurance premiums, arising
from reductions, terminations and changes as described in this Article.
ARTICLE XII
INCREASE IN RETENTION
1. If Cedent should increase Cedent's Retention Limits shown in Schedule C,
Cedent shall give Reinsurer prompt written notice of this increase.
1. Cedent will have the option to recapture a portion of the reinsurance under
this Agreement when Cedent's Retention Limits increase.
A. Automatic Cessions: The recapture will be effected through a
proportional increase in Cedent's Automatic Retained Percentage,
defined in Article II Section 8. The increase in the Automatic
Retained Percentage will be proportionate to the increase in
Cedent's Retention Limit for the corresponding issue ages.
B. Facultative Cessions: The recapture will be effected through a
proportional increase in Cedent's Facultative Retained
Percentage, defined as the percentage of the total net amount at
risk on the policy that the ceding company retains at policy
issue. The increase in the Facultative Retained Percentage will
be proportionate to the increase in Cedent's Retention Limit for
the corresponding issue ages.
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Cedent may exercise Cedent's option to recapture by giving Reinsurer ninety
(90) days prior written notice of such recapture.
3. If Cedent exercises this option to recapture, then
A. Cedent must reduce the reinsurance on each individual life on which
Cedent retained its Automatic Retained Percentage or Facultative
Retained Percentage that was in effect on this treaty at the time of
the increase in retention limit.
B. If an individual life is shared by more than one reinsurer,
Reinsurer's percentage of the reduced reinsurance will be the same as
Reinsurer's percentage of the initial reinsurance on the individual
life.
4. The reduction of reinsurance will become effective on the later of the
following dates:
A. The policy anniversary date immediately following the effective date
of Cedent's increase in Retention Limits.
B. The number of years stated in Schedule A starting with the original
policy date shown on Cedent's listing.
ARTICLE XIII
REINSTATEMENT
If a Covered Policy lapses for nonpayment of premium and is reinstated under
Cedent's terms and rules, the reinsurance will be reinstated by Reinsurer.
Cedent must pay Reinsurer all back Reinsurance Premiums in the same manner as
Cedent received insurance premiums under Cedent's policy. If Reinsurer is
requested to reinstate a policy that was originally ceded to Reinsurer on a
facultative basis, then Cedent must submit the policy and associated papers
concerning the individual's insurability to Reinsurer to be underwritten and
approved for the reinsurance to be reinstated if:
1. the policy lapsed for six months or longer, or
2. Cedent seeks additional underwriting information, or
3. Cedent reinsures 100% of the policy.
If the above conditions are not present, Cedent may automatically reinstate a
policy that was originally ceded to Reinsurer on a facultative basis.
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ARTICLE XIV
EXPENSES
Cedent shall pay the expense of all medical examinations, inspection fees and
other underwriting expenses in connection with the issuance of the insurance.
ARTICLE XV
CLAIMS
1. Reinsurer shall pay Reinsurer's quota share of any claim under a Covered
Policy within a reasonable time after Cedent submits the claim to
Reinsurer. Reinsurer shall make payment to Cedent in a single sum
regardless of Cedent's mode of settlement.
2. All reinsurance claim settlements made in accordance with Paragraph 1 above
will be subject to the terms and conditions of the Covered Policy under
which Cedent is liable.
3. When Cedent is advised of a claim for insurance benefits reinsured under
this Agreement, Cedent must promptly notify Reinsurer.
4. If a claim is made under a Covered Policy reinsured under this Agreement,
Reinsurer will abide by the issue as it is settled by Cedent. The maximum
benefit payable to Cedent under each Covered Policy is the amount
specifically reinsured with Reinsurer. When Cedent requests payment of the
reinsurance proceeds, Cedent must deliver a copy of the proof of death,
proof of payment and the claimant's statement to Reinsurer.
5. A. Cedent must promptly notify Reinsurer of Cedent's intent to contest
insurance reinsured under this Agreement or to assert defenses to a
claim for such insurance. Reinsurer shall participate in the contest
or assertion of defenses unless Reinsurer notifies Cedent promptly
that Reinsurer declines to participate. If Cedent's contest of such
insurance results in the reduction of Cedent's liability, Reinsurer
will share in this reduction. Reinsurer's percentage of the reduction
will be Reinsurer's net amount of risk on the individual life as it
relates to Cedent's total net amount at risk on the date of the death
of the insured.
B. If Reinsurer should decline to participate in the contest or assertion
of defenses, Reinsurer will then release all of Reinsurer's liability
(i) by paying Cedent the full amount of reinsurance as if there had
been no contest, compromise or litigation of a claim, and Reinsurer's
proportionate share of covered expenses incurred to the date, from the
date Reinsurer notifies
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Cedent that Reinsurer declined to be a party, and (ii) by not sharing
in any subsequent reduction in liability.
6. If the amount of insurance provided by a Covered Policy reinsured under
this Agreement is increased or reduced because of a misstatement of age or
sex established after the death of the insured, Reinsurer will share with
Cedent in this increase or reduction. Reinsurer's share of this increase or
reduction will be the percentage that Reinsurer's net liability relates to
Cedent's total net liability, immediately prior to this increase or
reduction.
7. Cedent shall pay the routine expenses incurred in connection with settling
claims. These expenses may include compensation of agents and employees and
the cost of routine investigations.
8. Reinsurer shall share with Cedent all expenses that are not routine.
Expenses that are not routine are those directly incurred in connection
with the contest or the possibility of a contest of insurance or the
assertion of defenses. These expenses will be shared in proportion to the
net sum at risk for both parties. However, if Reinsurer has released
Reinsurer's liability under Paragraph 5 of this Article, Reinsurer will not
share in any expenses incurred after Reinsurer's date of release.
9. Notwithstanding anything contained in this Article to the contrary,
Reinsurer will pay Reinsurer's proportionate share of a judgment which
includes extra-contractual damages awarded against Cedent in a lawsuit
arising out of a contested claim unless Reinsurer has declined to
participate in the contest pursuant to Paragraphs 5A and 5B of this
article.
The extent of Reinsurer's liability for extra-contractual damages, however,
exclude those damages assessed against Cedent as a result of acts,
omissions or a course of conduct committed by Cedent and/or Cedent's
agents, other than those that arise out of the investigation processing and
settlement of claims in connection with insurance reinsured under this
Agreement.
10. If either a misrepresentation or misstatement on an application or a death
of an insured by suicide results in Cedent returning the policy premiums to
the policy owner rather than paying the policy benefits, Reinsurer will
refund all of the Reinsurance Premiums Reinsurer received on that policy to
Cedent. This refund given by Reinsurer will be in lieu of all other
reinsurance benefits payable on that policy under this Agreement.
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ARTICLE XVI
PREMIUM TAX REIMBURSEMENT
Reinsurer shall not reimburse Cedent for any premium taxes Cedent may be
required to pay with respect to reinsurance hereunder.
ARTICLE XVII
DAC TAX REQUIREMENTS
1. In accordance with Treasury Regulations Section 1.848-2(g)(8), Cedent and
Reinsurer hereby elect to determine specified policy acquisition expenses
with respect to this Agreement without regard to the general deductions
limitation of Section 848(c)(1) of the Internal Revenue Code (the "IRC").
This election shall be effective for the calendar year in which this
Agreement commenced and for all subsequent taxable years for which this
Agreement remains in effect.
2. All uncapitalized terms used herein shall have the meanings set forth in
the regulations under section 848 of the IRC.
3. Any party with the net positive consideration under this Agreement for each
taxable year shall capitalize specified policy acquisition expenses with
respect to this Agreement without regard to the general deductions
limitation of Section 848(c)(1) of the IRC.
4. Both parties agree to exchange information pertaining to the amount of net
consideration under this Agreement each year to ensure consistency.
5. Cedent shall submit a schedule in the format specified in Exhibit 1 to
Reinsurer by March 1 of each year of Cedent's calculations of the net
consideration under this Agreement for the preceding calendar year. This
schedule of calculations shall be accompanied by a statement signed by an
officer of Cedent stating that Cedent will report such net consideration in
its Federal income tax return for the preceding calendar year.
6. Reinsurer may contest such calculation by providing an alternative
calculation to Cedent in writing within thirty (30) days of Reinsurer's
receipt of Cedent's calculation. If Reinsurer does not notify Cedent within
such time that it contests the calculation, Reinsurer shall report the net
consideration as determined by Cedent in Reinsurer's tax return for the
previous calendar year.
7. If Reinsurer contests Cedent's calculation of the net consideration, the
parties will act in good faith to reach an agreement as to the correct
amount within thirty (30) days of the date Reinsurer submits its
alternative calculation. If the parties reach
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an agreement on an amount of net consideration, each party will report the
agreed upon amount in its Federal income tax return for the previous
calendar year. If during such period, Cedent and Reinsurer are unable to
reach agreement, they shall promptly thereafter cause independent
accountants of nationally recognized standing, satisfactory to Cedent and
Reinsurer (who shall not have any material relationship with Cedent or
Reinsurer) promptly to review (which review shall commence no later than
five (5) days after the selection of such independent accountants), this
Agreement and the calculations of Cedent and Reinsurer for the purpose of
calculating the net consideration under this Agreement. In making such
calculation, such independent accountants shall consider only those items
or amounts in Cedent's calculation as to which Reinsurer has disagreed.
Such independent accountants shall deliver to Cedent and Reinsurer, as
promptly as practicable (but no later than sixty (60) days after the
commencement of their review), a report setting forth such calculation,
which calculation shall result in a net consideration between the amount
thereof shown in Cedent's calculation delivered pursuant to Paragraph 5 and
the amount thereof in Reinsurer's calculation delivered pursuant to
Paragraph 6. Such report shall be final and binding upon Cedent and
Reinsurer. The fees, costs and expenses of such independent accountants
shall be borne (i) by Cedent if the difference between the net
consideration as calculated by the independent accountants and Cedent's
calculation delivered pursuant to Paragraph 5 is greater than the
difference between the net consideration as calculated by the independent
accountants and Reinsurer's calculation delivered pursuant to Paragraph 6,
(ii) by Reinsurer if the first such difference is less than the second such
difference; and (iii) otherwise equally by Cedent and Reinsurer.
8. Both parties agree to attach a schedule to their respective federal income
tax returns for the first taxable year ending after the date on which this
election becomes effective which identifies this Agreement as a reinsurance
agreement for which an election has been made under Treasury Regulations
Section 1.848-2(g)(8).
9. Reinsurer represents and warrants that it is subject to United States
taxation under Subchapter L of the IRC.
10. Reinsurer shall complete a Reinsurance Questionnaire in the format
specified in Exhibit 2 and submit it to Cedent by May 1st of each calendar
year.
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ARTICLE XVIII
INSPECTION OF RECORDS
Reinsurer shall have the right, at any reasonable time, to inspect Cedent's
books and documents that relate to Cedent's reinsurance under this Agreement.
ARTICLE XIX
INSOLVENCY
1. If Cedent becomes insolvent, all of the reinsurance due Cedent will be paid
in full directly to Cedent or Cedent's liquidator (receiver or statutory
successor) on the basis of Cedent's liability under the policy or policies
reinsured, without diminution because of Cedent's insolvency.
2. If Cedent becomes insolvent, the liquidator, receiver or statutory
successor will give Reinsurer written notice of a pending claim against
Cedent for insurance reinsured under this Agreement within a reasonable
time after the claim is filed in the insolvency proceeding. During the
insolvency proceedings where the claim is to be settled, Reinsurer may
investigate this pending claim and interpose in Cedent's or Cedent's
liquidator's, receiver's or statutory successor's name, but at Reinsurer's
own expense, any defense or defenses which Reinsurer may believe available
to Cedent or Cedent's liquidator, receiver or statutory successor.
3. The expenses incurred by Reinsurer will be chargeable, subject to court
approval, against Cedent as part of the expense of liquidation, to the
extent of the proportionate share of the benefit that may accrue to Cedent
solely as a result of the defense undertaken by Reinsurer. Where two or
more reinsurers are involved in the same claim and a majority in interest
elects to interpose a defense or defenses to this claim, the expense will
be apportioned in accordance with the terms of this Agreement as though
such expense had been incurred by Cedent.
4. In the event of Reinsurer's insolvency, as determined by the department of
insurance responsible for such determination, all reinsurance ceded under
this Agreement may be recaptured immediately by Cedent without penalty
effective as of the day prior to the earlier of Reinsurer's becoming
insolvent or the date of such determination by the said department of
insurance.
5. Where two or more reinsurers are members of a pool of reinsurers
established hereby, the insolvency of one reinsurer shall not be deemed to
abrogate this Agreement with respect to the other reinsurers.
-17-
ARTICLE XX
ARBITRATION
1. If the parties cannot mutually resolve a dispute or claim arising out of or
in connection with this Agreement, including the formation or validity
thereof, and whether arising during or after the period of this Agreement,
the dispute or claim shall be settled by arbitration. The arbitrators shall
have the authority to interpret this Agreement and in doing so shall
consider the customs and practices of the life insurance and life
reinsurance industries. The arbitrators shall have the authority to
interpret this Agreement as an honorable engagement, and without regard to
the law of any particular jurisdiction. To initiate arbitration, either
party shall notify the other party by facsimile or by overnight delivery of
its desire to arbitrate, stating the nature of the dispute and the remedy
sought (the "Notice of Arbitration"). The party to which the notice is sent
shall respond to the notification in writing within ten (10) business days
of receipt.
2. Arbitration shall be conducted by three arbitrators who shall be current or
past officers of life insurance companies other than the contracting
companies or their affiliates. Each party shall appoint one arbitrator, and
serve written notice of the appointment upon the other party, within thirty
(30) business days after the date of delivery of the Notice of Arbitration.
The two arbitrators so appointed shall select the third arbitrator within
thirty (30) business days after the date of appointment of the second
arbitrator to be appointed.
3. In the event either party fails to choose an arbitrator within thirty (30)
business days, as provided in Paragraph 2, the party which has given
written notice may choose two arbitrators who shall in turn choose a third
arbitrator before entering arbitration.
4. If the two arbitrators appointed in accordance with Paragraph 2 or
Paragraph 3 are unable to agree upon the selection of a third arbitrator
within thirty (30) business days after the appointment of the second
arbitrator to be appointed, each arbitrator shall nominate three candidates
within ten (10) business days thereafter, two of whom the other shall
decline and the decision shall be made by drawing lots.
5. Arbitration shall be conducted in accordance with the Commercial
Arbitration Rules of the American Arbitration Association in effect on the
date of delivery of Notice of Arbitration.
6. 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.
-18-
The two parties will share equally in the cost of the third arbitrator. The
arbitration hearing will be held in New York City.
7. The award agreed to by the arbitrators will be final and binding, and
judgment may be entered upon it in any court having jurisdiction. The
arbitrators shall not award punitive damages.
ARTICLE XXI
PARTIES TO AGREEMENT
This is an Agreement solely between Cedent and Reinsurer. There will be no legal
relationship between Reinsurer and any person having an interest of any kind in
any Covered Policy.
ARTICLE XXII
ENTIRE AGREEMENT
1. This Agreement shall constitute the entire agreement between the parties
with respect to the subject matter of this Agreement and there are no
understandings between the parties other than as expressed in this
Agreement.
2. Any change or modification to this Agreement shall be null and void unless
made by amendment to this Agreement and signed by both parties.
ARTICLE XXIII
DURATION OF AGREEMENT
1. This Agreement may be terminated as to new business, with respect to the
percentage participation in the risks reinsured hereunder by Reinsurer, as
set forth in Schedule A, at any time by either party giving 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 party will be
the first day of the ninety (90) day period. During the ninety (90) day
period, new Covered Policies shall be reinsured under this Agreement
pursuant to Articles I and II or Article III. Reinsurer's acceptance will
be subject to the terms of this Agreement and Cedent's payment of
Reinsurance Premiums.
2. This Agreement may be terminated immediately as to new business by either
party if the other party materially breaches this Agreement. The Cedent may
also immediately recapture reinsurance and unearned reinsurance premiums
under this Agreement if either (a) the Reinsurer's Authorized Control Level
(ACL) risk-based capital ratio, as defined for Annual Statement years 1999
and following by NAIC at its December 1992 meeting, falls below two hundred
percent (200%) at the end of any quarterly accounting period or (b) the
Reinsurer shall be required
-19-
by their State Insurance Department to file a plan of action responding to
the negative trend in such ratio, in accordance with applicable insurance
regulations ("Negative Trend Plan").
The Reinsurer agrees to report its ACL risk-based capital ratio to the
Cedent annually. The Reinsurer agrees to notify the Cedent in the event
that the Reinsurer's ACL risk-based capital ratio should fall below two
hundred percent (200%) or it should be required to file a Negative Trend
Plan.
3. After termination, Reinsurer will be liable for all automatic reinsurance
which becomes effective prior to termination of this Agreement, and also
for all facultative reinsurance approved by Reinsurer based upon
applications Reinsurer received prior to termination of this Agreement.
4. If Cedent and Reinsurer are unable to reach an agreement regarding a change
in the reinsurance premium rates pursuant to Paragraph 3 of Article VIII,
Cedent may terminate this Agreement and recapture all or part of the
reinsurance ceded under this Agreement in accordance with Paragraph 3 of
Article VIII.
ARTICLE XXIV
CHOICE OF LAW AND FORUM
New York law shall govern the terms and conditions of the Agreement.
ARTICLE XXV
COMPLIANCE WITH PRIVACY LAWS
Except as required by law, the Reinsurer will not disclose Information to third
parties without the consent of the Cedent; however, the Cedent acknowledges that
the Reinsurer may, in the normal course of its business, share Information with
other insurance and reinsurance companies ("Retrocessionaires") to the extent
necessary to retrocede risk to the Retrocessionaires, so long as the
Retrocessionaires have agreed to maintain the confidentiality of the Information
on terms substantially similar to this Agreement.
ARTICLE XXVI
REINSURANCE CREDIT
It is the intention of Reinsurer and Cedent that Cedent qualify for reinsurance
credit for reinsurance ceded under this Agreement. Reinsurer, at its sole cost
and expense, shall do all that is necessary to comply with all applicable
insurance laws and regulations to enable Cedent to take credit for the
reinsurance ceded under this Agreement.
-20-
IN WITNESS WHEREOF the said
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
and the
RGA REINSURANCE COMPANY
have by their respective officers executed and delivered these presents in
duplicate on the date shown below.
NEW YORK LIFE INSURANCE NEW YORK LIFE INSURANCE
AND ANNUITY CORPORATION AND ANNUITY CORPORATION
Signed at Signed at
--------------------------- ------------------------------
By By
---------------------------------- -------------------------------------
Its authorized representative Its authorized representative
Title Title
------------------------------- ----------------------------------
Date Date
-------------------------------- -----------------------------------
RGA REINSURANCE COMPANY RGA REINSURANCE COMPANY
Signed at Signed at
--------------------------- ------------------------------
By By
---------------------------------- -------------------------------------
Its authorized representative Its authorized representative
Title Title
------------------------------- ----------------------------------
Date Date
-------------------------------- -----------------------------------
-21-
SCHEDULE A
POLICIES
1. DESCRIPTION OF LAYERS:
The reinsurance coverage is divided into three layers as follows:
Layer 1 is ceded on a quota share basis. It applies to the first $_____of
Net Amount at Risk.
Layer 2 is entirely retained by the cedent. It starts at the end of layer 1
and continues until Cedent has filled its entire retention limit on the
risk. Where layer 2 ends will vary depending on the amount of prior
coverage retained on the risk. Layer 2 could be zero (if Cedent has filled
its retention in Layer 1). Cedent retention limits are shown in Schedule C.
Layer 3 starts at the end of layer 2. Cedent retains none of layer 3. The
maximum size of Layer 3 (of which Reinsurer will receive a percentage) is
shown in the tables below. Note: for ages 86-90, layer three does not
exist.
1a. CEDED PERCENTAGES OF EACH LAYER ON A GIVEN RISK - SINGLE LIFE:
Age Layer 1 Layer 2 Layer 3 Percent/Max Total Size
----- ------- ------- ------------------------------
0-65 _____% _____% _____% / $_____
66-75 _____% _____% _____% / $_____
76-85 _____% _____% _____% / $_____
86-90 _____% _____% N/A (ARROW) Single Life ages 86-90 are
for UL only
CEDED PERCENTAGES OF EACH LAYER ON A GIVEN RISK - JOINT LIFE:
Age Layer 1 Layer 2 Layer 3
----- ------- ------- ---------------
0-65 _____% _____% _____% / $_____
66-75 _____% _____% _____% / $_____
76-85 _____% _____% _____% / $_____
86-90 _____% _____% N/A
1b. RETAINED PERCENTAGES OF EACH LAYER ON A GIVEN RISK - SINGLE LIFE:
Age Layer 1 Layer 2 Layer 3
----- ------- ------- ---------
0-65 _____% _____% _____%
66-75 _____% _____% _____%
76-85 _____% _____% _____%
86-90 _____% _____% N/A
RETAINED PERCENTAGES OF EACH LAYER ON A GIVEN RISK - JOINT LIFE:
Age Layer 1 Layer 2 Layer 3
----- ------- ------- --------
0-65 _____% _____% _____%
66-75 _____% _____% _____%
76-85 _____% _____% _____%
86-90 _____% _____% N/A
-22-
2. Type of Business: Individual and joint life Universal Life and
Variable Universal Life policies, and
attached Supplementary Term Rider (STR),
Scheduled Term Increasing Rider (STIR), and
Living Benefits Rider (LBR)
3. Plans of Insurance: AD 101 Pinnacle UL, VUL, SUL, SVUL (plus STR,
STIR and LBR riders attached to the base
policy)
4. Maximum Issue Age: 85 for VUL, 90 for UL, 90 for joint life
5. Jumbo Limit: $_____
6. Automatic Binding Limit - $_____ per life for issue ages to age 65;
Single Life: $_____ per life for issue ages 66 to 75;
$_____ per life for issue ages 76 to 85;
$_____ for ages 86 to 90.
Automatic Binding Limit - $_____ for issue ages to age 65;
Joint Life*: $_____ for issue ages 66 to 75;
$_____ for issue ages 76 to 85;
$_____ for issue ages 86 and over.
(Based on younger insured.)
*Based on younger insured.
7. Minimum Amount at Issue: $_____ for single life cases,
$_____ for joint life cases
8. Recapture Period: 10 Years (Single Life)
20 Years (Joint Life)
-23-
SCHEDULE B
REINSURANCE PREMIUM RATES
1A. REINSURANCE PREMIUMS FOR SINGLE LIFE CASES
The reinsurance premium rate per $1,000 of face amount ceded shall be found
in the tables attached hereto. Reinsurance premiums shall be calculated as
follows:
Reinsurance Premiums = Rate per $1,000 x Face Amount Ceded/1,000.
Slightly substandard insureds who qualify will be considered standard as
noted in section 2a below. More seriously substandard insureds, and
non-qualifying Table 2, 3 and 4 insureds, will use standard rates adjusted
as noted in section 3a below. Flat extra premiums will be applied to this
reinsurance premium as also shown in section 3a below.
Term conversion policies will use point-in-scale rates with a _____% first
year discount. Term conversions will be limited to policies which are
within 5 years of issue.
1B. REINSURANCE PREMIUMS FOR JOINT LIFE CASES
Reinsurance premiums will be calculated using the following methodology.
First, mortality rates for each insured shall be retrieved from the SOA
75/80 Select and Ultimate mortality tables based on each insured's age, sex
and duration. Next, the appropriate multiplicative risk class factor from
the following table will be applied to this rate.
Duration
-------------
1 2+
----- -----
Select Preferred (Non-Smoker) _____% _____%
Preferred (Non-Smoker _____% _____%
Standard Non-Smoker _____% _____%
Select Standard (Smoker) _____% _____%
Standard Smoker _____% _____%
(Slightly substandard insureds will be considered Standard as noted in
section 2b below. More seriously substandard insureds, and non-qualifying
Table 2, 3 and 4 insureds, will use standard rates adjusted as noted in
section 3b below.) These individual rates will then be Frasierized to come
up with a single mortality rate for the policy. This rate shall be the
charge per $1,000 of face amount ceded. Total reinsurance premiums shall be
calculated as follows:
-24-
Reinsurance Premium = Rate per $1,000 x Face Amount Ceded/1,000.
Term conversion policies will use % of new issue rates with a % first year
discount. Term conversions will be limited to policies which are within 5
years of issue.
The net rates in all years will be a minimum of $_____/$1,000.
Flat extra premiums will be applied to this reinsurance premium as shown in
section 3b below.
2A. SINGLE LIFE SHAVING PROGRAM ADJUSTMENT
The following lives will be reduced to Standard Non-smoker:
Table 2, 3 and 4 Non-smokers Standard Non-smokers with a medical flat extra
up to $_____ Standard Non-smokers with a non-medical flat extra up to
$_____
The following lives will be reduced to Standard Smoker:
Table 2, 3 and 4 Smokers Standard Smokers with a medical flat extra up to
$_____ Standard Smokers with a non-medical flat extra up to $_____
Binding and Jumbo Limits
Issue Ages Limit
---------- -----
Binding 0-65 $____
66-80 $____
Jumbo 0-80 $____
Additional Limitations for inclusion in Shaving Pool arrangement Maximum
issue age is 80. No cases that present an alcohol, drug or criminal risk.
-25-
2B. JOINT LIFE SHAVING PROGRAM ADJUSTMENT
The following lives will be reduced to Standard Non-smoker:
Table 2, 3 and 4 Non-smokers Standard Non-smokers with a medical flat extra
up to $_____ Standard Non-smokers with a non-medical flat extra up to
$_____
The following lives will be reduced to Standard Smoker:
Table 2, 3 and 4 Smokers Standard Smokers with a medical flat extra up to $
Standard Smokers with a non-medical flat extra up to $_____
Binding and Jumbo Limits
Issue Ages Joint
---------- -----
Binding 0-65 $____
66-75 $____
76-80 $____
Jumbo 0-80 $____
Additional Limitations for inclusion in Shaving Pool arrangement
Maximum issue age is 80. No cases that present an alcohol, drug or criminal
risk.
-26-
3A. SUBSTANDARD TABLE 5-13 (AND NON-QUALIFYING TABLE 2-4) AND FLAT EXTRA
ADJUSTMENTS FOR SINGLE LIFE POLICIES
For individual insureds in tables 5 through 13, and individual insureds in
tables 2-4 who do not qualify for the Shaving Pool adjustment, the premium
rate will be:
The premium rate for a standard insured (non-smoker or smoker as
appropriate), multiplied by the appropriate factor from the following
tables based on the substandard insured's table rating.
Automatic Cessions (NYL Table)
------------------------------
Non-Smoker Smoker
Table Factor Factor
----- ---------- ------
2
3
4
5
6
7
8
9
10
11
12
13
Facultative Cessions
--------------------
Table Factor
----- ------
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
The total premium remitted to the reinsurer will include the flat extra
premium minus a % allowance.
3B. SUBSTANDARD TABLE 5-13 (AND NON-QUALIFYING TABLE 2-4) AND FLAT EXTRA
ADJUSTMENTS FOR JOINT LIFE POLICIES
For individual insureds in tables 5 through 13, and individual insureds in
tables 2-4 who do not qualify for the Shaving Pool adjustment, the
mortality rate will be:
The mortality rate for a standard insured (non-smoker or smoker as
appropriate),
-27-
multiplied by the appropriate factor from the following tables based on the
substandard insured's table rating.
Automatic Cessions (NYL Table)
------------------------------
Non-Smoker Smoker
Table Factor Factor
----- ---------- ------
2
3
4
5
6
7
8
9
10
11
12
13
Facultative Cessions
---------------------------
Non-Smoker Smoker
Table Factor Factor
---------- ---------- ------
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
Uninsurable
Constant Extra Deaths Limitation: At the later of attained age 65 or
duration 20, but not to exceed attained age 100, take a difference between
standard and substandard rates and apply it as an additive factor for all
the later durations (i.e. constant extra deaths at this point.)
Overall Limitation: All individual mortality rates shall be limited to.
The total premium remitted to the reinsurer will include the flat extra
premium minus the allowances shown in the table below:
Term of flat extra Year 1 Years 2+
------------------ ------ --------
0-5 years _____% _____%
6+ years _____% _____%
4. RENEWAL OF INSURANCE
The renewal of insurance shall be considered as a continuation of the
original insurance for the purpose of calculating future reinsurance
premiums.
-28-
SCHEDULE C
CEDENT'S RETENTION LIMITS
Additional Amount at the
Discretion of the Chief
Ages Amount Underwriter
----- ------ ------------------------
Single Life 0-65 $___ N/A
66-75 $___ $___
76+ $ 5 $___
Additional Amount at the
Discretion of the Chief
Ages Amount Underwriter
----- ------ ------------------------
Joint Life * 0-65 $___ N/A
66-75 $___ $___
76+ $___ $___
* based on the younger insured.
-29-
EXHIBIT 1
DAC TAX CALCULATION
CEDING COMPANY: NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
ASSUMING COMPANY: ___________________________
DATE: _______________
DAC TAX - DEDUCTIONS FROM GROSS PREMIUM
DAC TAX CALCULATION AMOUNT
GROSS PREMIUM
LESS:
DEDUCTIONS FROM GROSS PREMIUMS
Commissions
Death Claims
Claim Interest
Premium Taxes
Claim Investigation Expense
Claim Legal Expense
Waiver Claims
Surrenders
Experience Refunds
Admin Fee
Fee Income
Miscellaneous Interest
Dividends
Termination Dividends
Productions Bonus
Reserve Adjustments
Other (specify)
TOTAL DEDUCTIONS
NET CONSIDERATIONS
Please sign below confirming agreement with net considerations or provide an
alternate calculation within 30 days
------------------------------------
Signature
------------------------------------
Type or Print Name
------------------------------------
Title
------------------------------------
Date
-30-
EXHIBIT 2
REINSURANCE QUESTIONNAIRE
FOR FEDERAL INCOME TAX DETERMINATIONS
The purpose of this questionnaire is to secure sufficient information to allow
New York Life Insurance and Annuity Corporation ("NYLIAC") to account properly
under the federal income tax rules for the reinsurance transactions you have
with NYLIAC. Please provide NYL with the following information:
1. Are you either
(a) a company that is subject to U.S. taxation directly under the
provisions of subchapter L of chapter 1 of the Internal Revenue Code
(i.e., an insurance company liable for filing Form 1120L or Form
1120-PC), or
(b) a company that is subject indirectly to U.S. taxation under the
provisions of subpart F of subchapter N of chapter 1 of the Internal
Revenue Code (i.e., a "controlled foreign corporation" with the
meaning of Internal Revenue Code Section 957)?
Answer: _____ Yes _______ No
2. If your answer to 1. is no, have you entered into a closing agreement with
the Internal Revenue Service to be subject to U.S. taxation with respect to
reinsurance income pursuant to Treasury Regulation Section
1.848-2(h)(2)(ii)(B)?
Answer: _____ Yes _______ No
(If your answer is yes, please provide a copy of the closing
agreement.)
Company Name:
---------------------
Signed by:
---------------------
Title:
---------------------
Date:
---------------------
