REINSURANCE
AGREEMENT
Between
WESTERN UNITED LIFE ASSURANCE COMPANY
and
OLD STANDARD LIFE INSURANCE COMPANY
TABLE OF CONTENTS
Page
A. REINSURANCE COVERAGE 1
B. EFFECTIVE DATE OF AGREEMENT AND OF REINSURANCE 2
C. AMOUNT DUE FROM REINSURED 2
D. AMOUNT DUE FROM REINSURER 2
E. MONTHLY REPORTS AND PAYMENT SCHEDULE 2
F. ANNUAL REPORTS 3
G. TAX TREATMENT 3
H. UNUSUAL EXPENSES AND ADJUSTMENTS 3
I. POLICY ADMINISTRATION 4
J. POLICY CHANGES 4
K. ASSIGNMENT OF REINSURANCE 5
L. ERRORS 5
M. REDUCTIONS AND CANCELLATIONS 5
N. AUDIT OF RECORDS AND PROCEDURES 5
O. ARBITRATION 6
P. CHOICE OF LAW AND FORUM 6
Q. INSOLVENCY 6
R. PARTIES TO AGREEMENT 7
S. SUSPENSION AND REACTIVATION 7
T. DURATION AND TERMINATION 8
U. MISCELLANEOUS 8
V. EXECUTION 9
SCHEDULES
SCHEDULE I 10
SCHEDULE II 11
SCHEDULE III 13
SCHEDULE IV 14
SCHEDULE V 15
SCHEDULE VI 17
R E I N S U R A N C E A G R E E M E N T
between
WESTERN UNITED LIFE ASSURANCE COMPANY
of
Spokane, Washington.,
hereinafter referred to as the "REINSURED," and
OLD STANDARD LIFE INSURANCE COMPANY
of
Boise, Idaho,
hereinafter referred to as the "REINSURER."
A. REINSURANCE COVERAGE
1. The annuity policies issued by the REINSURED listed on Schedule I ( the
"Policies") shall be reinsured with the REINSURER in accordance with the
terms of this Agreement.
2. The reinsurance shall cover all benefits provided by the Policies in the
amount of the Reinsurance Share set forth in Schedule I.
3. The liability of the REINSURER shall begin:
a. for Policies written by REINSURED from and including April 1, 1998 up to
but not including the Effective Date of this Agreement (Closed Block
Policies) as of the date each such Policy was issued; and
b. for Policies issued on or after the Effective Date of this Agreement
(Open Block Policies), concurrently with that of the REINSURED.
4. Reinsurance with respect to any Policy shall not be in force and
binding unless the Policy issued directly by the REINSURED is in force and
unless the issuance and delivery of such Policy constituted the doing of
business in a state of the United States of America, the District of
Columbia, or a country in which the REINSURED was properly licensed.
5. The reinsurance under this Agreement with respect to any Policy shall be
maintained in force without reduction so long as the liability of the
REINSURED under such reinsured Policy remains in force, without reduction,
unless reinsurance is terminated or reduced as provided herein pursuant to
Sections T and M respectively.
B. EFFECTIVE DATE OF AGREEMENT AND OF REINSURANCE
1. The Effective Date of this Agreement shall be __________
2. Closed Block Policies shall be reinsured in bulk on the Effective Date of
this Agreement,
3. Open Block Policies shall be reinsured automatically upon the issuance of
any such Policy by the REINSURED.
C. AMOUNTS DUE FROM REINSURED
The REINSURED shall pay the REINSURER the Reinsurance Share, as set forth in
Schedule I, of the Premiums received by the REINSURED, plus interest,
calculated as set forth in Schedule IV.
D. AMOUNTS DUE FROM REINSURER
1. Benefits
The REINSURER shall pay the REINSURED:
a. the Reinsurance Share of the gross amount of all death or annuity
benefits paid by the REINSURED (i.e., without deduction for reserves) with
respect to the Policies reinsured hereunder; and
b. the Reinsurance Share of the cash surrender value net of surrender
charges paid by the REINSURED with respect to the Policies reinsured
hereunder, and
2. Commissions
The REINSURER shall pay the REINSURED the Reinsurance Share of Commissions
paid by the REINSURED with respect to Policies reinsured hereunder.
3. Administrative Allowances
The REINSURER shall pay the REINSURED the Administrative Allowances as
defined in Schedule I as follows:
a. The Policy Issuance Allowances shall be a one time charge payable in
full concurrent with payment of the reinsurance Premiums by the REINSURED.
b. The Policy Servicing Allowances shall be payable monthly by REINSURER.
E. MONTHLY REPORTS AND PAYMENT SCHEDULE
1. Except as otherwise specifically provided herein, all amounts due to be
paid by either the REINSURER or the REINSURED shall be determined and paid
on a net basis calculated as of the last day of the calendar month to which
such amount is attributable, plus interest calculated and accrued pursuant
to Schedule IV.
2. The REINSURED shall submit a monthly report substantially in accordance
with Schedule II (the "Monthly Report") not later than the fifteenth day of
each calendar month, regarding reinsurance occurring during the preceding
calendar month.
3. Any amounts indicated in the Monthly Report as due from the REINSURED
to the REINSURER shall accompany such report. Any amounts indicated in the
Monthly Report as due from the REINSURER to the REINSURED shall be paid by
the REINSURER within fifteen (15) days after REINSURER'S receipt of the
Monthly Report plus interest accrued up to the date of such payment.
4. Interest shall be calculated and accrue as specified in Schedule IV.
F. ANNUAL REPORTS
1. Not later than thirty (30) days after the end of each calendar year, the
REINSURED shall submit to the REINSURER an Annual Report substantially in
accordance with Schedule III.
2. Each year the REINSURED shall provide the REINSURER with a copy of its
annual financial reports prepared in accordance with GAAP, if applicable,
and its annual statutory statement, as soon as they are available.
G. TAX TREATMENT
The parties elect to have this Agreement treated in accordance with Section
1.848-2(g)(8) of the Income Tax Regulations issued under Section 848 of the
Internal Revenue Code of 1986. Specific details of this election are set forth
in Schedule VI.
H. UNUSUAL EXPENSES AND ADJUSTMENTS
1. Any unusual expenses, as hereinafter defined, incurred by the REINSURED in
defending or investigating a claim for liability on a Policy or rescinding
a Policy reinsured hereunder shall be participated in by the REINSURER in
the same proportion as its Reinsurance Share.
2. Unusual expenses shall include, but not be limited to, penalties, attorneys
fees, and interest imposed automatically by statute against the REINSURED
and arising solely out of a judgment rendered against the REINSURED in a
suit for Policy benefits reinsured hereunder.
3. The following categories of expenses or liabilities shall not be "unusual
expenses":
a. routine investigative or administrative expenses;
b. expenses incurred in connection with a dispute or contest arising out of
conflicting claims of entitlement to Policy proceeds or benefits which the
REINSURED admits are payable;
c. expenses, fees, settlements, or judgments arising out of or in
connection with claims against the REINSURED for punitive or exemplary
damages; and
d. expenses, fees, settlements, or judgments arising out of or in
connection with claims made against the REINSURED and based on alleged or
actual bad faith, failure to exercise good faith, or tortious conduct.
I. POLICY ADMINISTRATION
1. The Policies reinsured pursuant to the terms of this Agreement shall be
administered by the REINSURED in accordance with the terms of each Policy
and in compliance with applicable statutes, regulations and rules.
2. Administrative expenses incurred in connection with administration of the
Policies reinsured hereunder shall be paid by REINSURED and reimbursable by
REINSURER pursuant to Section H hereinabove and Schedule I.
J. POLICY CHANGES
1. All Policies shall be underwritten in accordance with the REINSURED'S
underwriting rules applicable to such Policies as of the Effective Date of
this Agreement.
2. If the REINSURED intends to make a change in the terms or conditions or
underwriting rules of a Policy reinsured hereunder including, but not
limited to a change in the method used to calculate the statutory reserve
on the Policy and such change is likely to affect the risk reinsured
hereunder in respect of such Policy, the REINSURED shall notify the
REINSURER of such proposed change.
3. For purposes of this Agreement, any change made to a Policy reinsured
hereunder which has not been approved by the REINSURER shall be deemed to
be the issuance of a new policy form by the REINSURED. The REINSURER shall
inform the REINSURED whether the REINSURER will include such new policy
form under this Agreement or will terminate or modify the reinsurance
hereunder in respect of such policy.
4. Unless otherwise agreed by the REINSURER and the REINSURED, the interest
rates credited on the Policies reinsured hereunder shall be determined
according to interest rates credited by the REINSURED.
K. ASSIGNMENT OF REINSURANCE
If the REINSURED proposes to sell, assumption reinsure or otherwise transfer
the Policies or risks that are reinsured under this Agreement to any third
party, it shall require that the third party agree in writing to an assignment
of all rights and obligations of the REINSURED under this Agreement. The
REINSURER may object to any assignment that would result in a material adverse
economic impact to the REINSURER. If the REINSURER objects to an assignment on
this basis, the REINSURED and the REINSURER shall mutually agree on a
termination charge which shall be paid by the REINSURED to the REINSURER.
L. ERRORS
If either party identifies an error in the Monthly Reports or any other
inadvertent clerical error, then such error shall be corrected by restoring
both the REINSURED and the REINSURER to the positions they would have occupied
had no such error occurred. If the error relates to a Monthly report or other
report, the REINSURED shall promptly provide a revised report to REINSURER.
M. REDUCTIONS AND CANCELLATIONS
1. If a portion of a Policy is terminated, the REINSURER shall return to the
REINSURED any reinsurance Premiums on that Policy in the amount that the
Reinsurance Share bears to the amount of the reduction.
2. If a Policy is cancelled in accordance with a thirty day cancellation
provision, the REINSURED shall refund the entire Policy Issuance Allowance
to the REINSURER, and the REINSURER shall refund the entire Reinsurance
Share of the Premiums to REINSURED each as they relate to the cancelled
Policy
3. Payments made pursuant to a reduction or cancellation shall include
interest and be paid pursuant to Section E.
N. AUDIT OF RECORDS AND PROCEDURES
1. The REINSURER and the REINSURED each shall have the right to audit, at the
office of the other, all records and procedures relating to reinsurance
under this Agreement.
2. Upon reasonable notice to the REINSURED, the REINSURER may require
additional monthly or annual reports from the REINSURED in order to obtain
the data REINSURER reasonably needs to properly administer this Agreement
or to prepare its financial statements.
O. ARBITRATION
If the REINSURED and the REINSURER cannot mutually resolve a dispute regarding
the interpretation or operation of this Agreement, the dispute shall be
decided through arbitration as set forth in the Schedule V. The arbitrators
shall base their decision on the terms and conditions of this Agreement.
However, if the terms and conditions of this Agreement do not explicitly
dispose of an issue in dispute between the parties, the arbitrators may base
their decision on the customs and practices of the insurance and reinsurance
industry rather than solely on an interpretation of applicable law. The
arbitrators' decision shall take into account the right to offset mutual debts
and credits as provided in this Agreement. There shall be no appeal from the
arbitrators' decision. Any court having jurisdiction over the subject matter
and over the parties may reduce the arbitrators' decision to judgment.
The parties intend this section to be enforceable in accordance with the
Federal Arbitration Act (9 U.S.C., Section 1) including any amendments to that
Act which are subsequently adopted. In the event that either party refuses to
submit to arbitration as required by paragraph 1, the other party may request
a United States Federal District Court to compel arbitration in accordance
with the Federal Arbitration Act. Both parties consent to the jurisdiction of
such court to enforce this section and to confirm and enforce the performance
of any award of the arbitrators.
P. CHOICE OF LAW AND FORUM
Idaho law shall govern the terms and conditions of the Agreement. In the case
of an arbitration, the arbitration hearing shall take place in Boise, Idaho,
Q. INSOLVENCY
1. In the event of the insolvency of the REINSURED, all reinsurance shall be
payable directly to the liquidator, receiver, or statutory successor of
said REINSURED, without diminution because of the insolvency of the
REINSURED.
2. In the event of the insolvency of the REINSURED, the liquidator, receivor,
or statutory successor shall give the REINSURER written notice of the
pendency of a claim on a Policy reinsured within a reasonable time after
such claim is filed in the insolvency proceeding. During the pendency of
any such claim, the REINSURER may investigate such claim and interpose, in
the name of the REINSURED (its liquidator, receiver, or statutory
successor), but at its own expense, in the proceeding where such claim is
to be adjudicated, any defense or defenses which the REINSURER may deem
available to the REINSURED or its liquidator, receiver, or statutory
successor.
3. The expense thus incurred by the REINSURER shall be chargeable, subject to
court approval, against the REINSURED as part of the expense of liquidation
to the extent of a proportionate share of the benefit which may accrue to
the REINSURED solely as a result of the defense undertaken by the
REINSURER. Where two or more reinsurers are participating in the same claim
and a majority in interest elect to interpose a defense or defenses to any
such claim, the expense shall be apportioned in accordance with the terms
of the reinsurance agreement as though such expense had been incurred by
the REINSURED.
4. Any debts or credits, matured or unmatured, liquidated or unliquidated,
regardless of when they arose or were incurred, in favor of or against
either the REINSURED or the REINSURER 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.
R. PARTIES TO AGREEMENT
This is an agreement for indemnity reinsurance solely between the REINSURED
and the REINSURER. The acceptance of reinsurance hereunder shall not create
any right or legal relation whatever between the REINSURER and the insured or
the beneficiary under any Policy reinsured hereunder, and the REINSURED shall
be and remain solely liable to such insured or beneficiary under any such
Policy.
S. SUSPENSION AND REACTIVATION
1. This Agreement may be suspended at any time and from time to time
with respect to all or any of the Policy forms upon five (5) days written
notice from either party with respect to reinsurance not yet placed in
force. The REINSURER shall continue to accept reinsurance during the five
(5) day notice period, and shall remain liable on all Policies placed in
effect under this Agreement until the effective date of the suspension of
this Agreement.
2. This Agreement may be by reactivated at any time, and from time to
time, with respect to all or any of the Policy forms upon five (5) day
written notice from either party. The REINSURER shall accept reinsurance
at the end of the five (5) day notice period and be liable on all Policies
placed in effect under this Agreement until the Agreement is further
suspended or terminated.
T. DURATION AND TERMINATION
1. Except as otherwise provided herein, this Agreement shall be unlimited in
duration.
2. This Agreement may be terminated at any time by either the REINSURER or the
REINSURED upon thirty (30) days' written notice with respect to reinsurance
not yet placed in force. The REINSURER shall continue to accept reinsurance
during the thirty (30) day notice period, and shall remain liable on all
reinsurance placed in effect under this Agreement until the termination or
expiration of the Policy reinsured.
3. Upon ninety (90) days' written notice to the the other party, REINSURER and
REINSURED shall have the right to terminate reinsurance under this
Agreement with respect to those Policies which have attained the tenth or
any subsequent anniversary of having been reinsured hereunder. Any such
termination shall apply to all Policies which attain the same or any
subsequent anniversary within the twelve (12) month period following the
effective date of such notice of termination. Termination with respect to
each affected Policy shall be effective as of the anniversary of such
Policy having been reinsured hereunder. The REINSURER shall pay to the
REINSURED a surrender benefit equal to the surrender value of each Policy
for which reinsurance is terminated.
4. The termination of this Agreement or of the reinsurance in effect under
this Agreement shall not extend to or affect any of the rights or
obligations of the REINSURED and the REINSURER applicable to any period
prior to the effective date of such termination. In the event that,
subsequent to the termination of this Agreement, an adjustment is made
necessary with respect to any accounting hereunder, a supplementary
accounting shall take place. Any amount owed to either party by reason of
such supplementary accounting shall be paid promptly upon the completion
thereof.
U. MISCELLANEOUS
1. This Agreement represents the entire agreement between the REINSURED and
REINSURER and supersedes, with respect to its subject matter, any prior
oral or written agreements between the parties.
2. No modification of any provision of this Agreement shall be effective
unless set forth in a written amendment to this Agreement which is executed
by both parties.
3. A waiver shall constitute a waiver only with respect to the particular
circumstance for which it is given and not a waiver of any future
circumstance.
V. EXECUTION
IN WITNESS WHEREOF
WESTERN UNITED LIFE ASSURANCE COMPANY
of
Spokane, Washington.,
and
OLD STANDARD LIFE INSURANCE COMPANY
of
Boise, Idaho,
have by their respective officers executed this Agreement in duplicate on the
dates shown below.
WESTERN UNITED LIFE ASSURANCE COMPANY
By By
Title: Title:
Date Date
OLD STANDARD LIFE INSURANCE COMPANY
By By
Title: Title:
Date Date
SCHEDULE I
POLICIES SUBJECT TO REINSURANCE, AMOUNT OF REINSURANCE & ALLOWANCES
Reinsurance Share Administrative Allowances
Trade Name Premiums Policy Commissions Policy Policy
Reserves Issuance Servicing
Claims &
Benefits
Opti-Max I 75% 75% 75% 1.50% 0.0333%
TD-Max I 75% 75% 75% 1.50% 0.0333%
TD-Max III 75% 75% 75% 1.50% 0.0333%
TD Max V 75% 75% 75% 1.50% 0.0333%
Navigator II 75% 75% 75% 1.50% 0.0333%
Unimax III 75% 75% 75% 1.50% 0.0333%
Spectrum 75% 75% 75% 1.50% 0.0333%
Prism 75% 75% 75% 1.50% 0.0333%
Value-Max VII 75% 75% 75% 1.50% 0.0333%
Value-Max X 75% 75% 75% 1.50%. 0.0333%
Opti-Max III 75% 75% 75% 1.50% 0.0333%
Opti-Max V 75% 75% 75% 1.50% 0.0333%
Opti-Max VII 75% 75% 75% 1.50% 0.0333%
Opti-Max X 75% 75% 75% 1.50% 0.0333%
TD Max V-V 75% 75% 75% 1.50% 0.0333%
Basis for Gross Policy Commissions Reinsurance Reinsurance
charge Premiums Reserves, Incurred Quota Share Quota Share
Policy Claims of Gross of
& Benefits Premiums Acct Value
SCHEDULE II
Annuity Reinsurance Monthly Report to
OLD STANDARD LIFE INSURANCE COMPANY
Amounts Due OLD STANDARD LIFE INSURANCE COMPANY
Premiums received during the month by REINSURED multiplied by
the Reinsurance Share applicable to each Policy $
Sum of amounts due to OLD STANDARD LIFE INSURANCE COMPANY $
Amounts Due WESTERN UNITED LIFE ASSURANCE COMPANY
Commission Allowance (Attach detailed worksheet of calculations) $
Policy Issue Allowances (Attach detailed worksheet of
calculations) $
Monthly Administrative Servicing Allowances (Attach
detailed worksheet of calculations) $
Surrender values paid during the month multiplied by
the Reinsurance Share percentage $
Policy Reductions paid during the month multiplied by the
Reinsurance Share $__________
Death benefits paid during the month multiplied by the
Reinsurance Share percentage $
Policy Cancellations (Attach detailed worksheet of calculations)1 $
Sum of amounts due to WESTERN UNITED LIFE ASSURANCE COMPANY $
Net of amount due (sum of amounts due OLD STANDARD LIFE INSURANCE
Company minus sum of amounts due to WESTERN UNITED LIFE
ASSURANCE) $
Interest on the above amount calculated pursuant to Schedule IV $__________
Net amount due plus interest $
Note: If the net amount due is negative, then that amount is due from OLD
STANDARD LIFE INSURANCE COMPANY to WESTERN UNITED LIFE ASSURANCE COMPANY.
Additional Items:
A monthly listing of statutory and GAAP reserves, account values, and interest
credited.
SCHEDULE III
ANNUAL REPORT
The annual report shall provide the following information:
(a) Exhibit 8 from the NAIC-prescribed annual statement
(b) a breakdown of the reserves by withdrawal characteristic of the
annuity contract
(c) "Analysis of Increase in Reserves" from the NAIC-prescribed annual
statement
(d) "Exhibit of Annuities" from the NAIC-prescribed annual statement
(e) an actuarial certification of the reported statutory reserves
(f) tax reserves and required interest.
SCHEDULE IV
INTEREST RATE
The rate of interest shall be equal to the effective annual yield of the 90
day Treasury xxxx determined at the close of business on the last business day
of the month for the amount owed is being determined.
INTEREST ACCRUAL CALCULATION
Interest shall be calculated on the monthly ending amount due and accrued from
the preceding 15th day of such month.
SCHEDULE V
ARBITRATION SCHEDULE
To initiate arbitration, either the REINSURED or the REINSURER shall notify
the other party in writing of its desire to arbitrate, relating the nature of
its dispute and the remedy sought. The party to which the notice is sent shall
respond to the notification in writing within ten (10) days of its receipt.
The arbitration hearing shall be before a panel of three arbitrators, each of
whom must be a present or former officer of a life insurance company. An
arbitrator may not be a present or former officer, attorney, or consultant of
the REINSURED or the REINSURER or either's affiliates.
The REINSURED and the REINSURER shall each name five (5) candidates to serve
as an arbitrator. The REINSURED and the REINSURER shall each choose one
candidate from the other party's list, and these two candidates shall serve as
the first two arbitrators. If one or more candidates so chosen shall decline
to serve as an arbitrator, the party which named such candidate shall add an
additional candidate to its list, and the other party shall again choose one
candidate from the list. This process shall continue until two arbitrators
have been chosen and have accepted. The REINSURED and the REINSURER shall each
present their initial lists of five (5) candidates by written notification to
the other party within twenty-five (25) days of the date of the mailing of the
notification initiating the arbitration. Any subsequent additions to the list
which are required shall be presented within ten (10) days of the date the
naming party receives notice that a candidate that has been chosen declines to
serve.
The two arbitrators shall then select the third arbitrator from the eight (8)
candidates remaining on the lists of the REINSURED and the REINSURER within
fourteen (14) days of the acceptance of their positions as arbitrators. If the
two arbitrators cannot agree on the choice of a third, then this choice shall
be referred back to the REINSURED and the REINSURER. The REINSURED and the
REINSURER shall take turns striking the name of one of the remaining
candidates from the initial eight (8) candidates until only one candidate
remains. If the candidate so chosen shall decline to serve as the third
arbitrator, the candidate whose name was stricken last shall be nominated as
the third arbitrator. This process shall continue until a candidate has been
chosen and has accepted. This candidate shall serve as the third arbitrator.
The first turn at striking the name of a candidate shall belong to the party
that is responding to the other party's initiation of the arbitration. Once
chosen, the arbitrators are empowered to decide all substantive and procedural
issues by a majority of votes.
It is agreed that each of the three arbitrators should be impartial regarding
the dispute and should resolve the dispute on the basis described in the
Agreement and this ARBITRATION Schedule. Therefore, at no time will either the
REINSURED or the REINSURER contact or otherwise communicate with any person
who is to be or has been designated as a candidate to serve as an arbitrator
concerning the dispute, except upon the basis of jointly drafted
communications provided by both the REINSURED and the REINSURER to inform
those candidates actually chosen as arbitrators of the nature and facts of the
dispute. Likewise, any written or oral arguments provided to the arbitrators
concerning the dispute shall be coordinated with the other party and shall be
provided simultaneously to the other party or shall take place in the presence
of the other party. Further, at no time shall any arbitrator be informed that
the arbitrator has been named or chosen by one party or the other.
The arbitration hearing shall be held on the date fixed by the arbitrators. In
no event shall this date be later than six (6) months after the appointment of
the third arbitrator. As soon as possible, the arbitrators shall establish
prearbitration procedures as warranted by the facts and issues of the
particular case. At least ten (10) days prior to the arbitration hearing, each
party shall provide the other party and the arbitrators with a detailed
statement of the facts and arguments it will present at the arbitration
hearing. The arbitrators may consider any relevant evidence; they shall give
the evidence such weight as they deem it entitled to after consideration of
any objections raised concerning it. The party initiating the arbitration
shall have the burden of proving its case by a preponderance of the evidence.
Each party may examine any witnesses who testify at the arbitration hearing.
Within twenty (20) days after the end of the arbitration hearing, the
arbitrators shall issue a written decision that sets forth their findings and
any award to be paid as a result of the arbitration, except that the
arbitrators may not award punitive or exemplary damages. In their decision,
the arbitrators shall also apportion the costs of arbitration, which shall
include, but not be limited to, their own fees and expenses.
SCHEDULE VI
SECTION 1.848-2(g)(8) ELECTION
The REINSURED and the REINSURER agree to the following pursuant to Section
1.848-2(g)(8) of the Income Tax Regulations issued under Section 848 of the
Internal Revenue Code of 1986 (hereinafter "Section 1.848-2(g)(8).")
1. As used below, the term "party" will refer to the REINSURED or the
REINSURER as appropriate.
2. As used below, the phrases "net positive consideration",
"capitalize specified Policy acquisition expenses", "general
deductions limitation", and "net consideration" shall have the
meaning used in Section 1.848-2(g)(8).
3. The party with net positive consideration for this Agreement for
any taxable year beginning with the taxable year prescribed in
paragraph 5 below will capitalize specified Policy acquisition
expenses with respect to this Agreement without regard to the
general deductions limitation.
4. The parties agree to exchange information pertaining to the amount
of net consideration under this Agreement to ensure consistency.
This will be accomplished as follows:
(a) The REINSURED shall submit to the REINSURER by the
fifteenth day of March in each year its calculation of
the net consideration for the preceding calendar year.
Such calculation will be accompanied by a statement
signed by an officer of the REINSURED stating that the
REINSURED will report such net consideration in its
tax return for the preceding calendar year.
(b) The REINSURER may contest such calculation by
providing an alternative calculation to the REINSURED
in writing within thirty (30) days of the REINSURER'S
receipt of the REINSURED'S calculation. If the
REINSURER does not so notify the REINSURED, the
REINSURER will report the net consideration as
determined by the REINSURED in the REINSURER'S tax
return for the previous calendar year.
(c) If the REINSURER contests the REINSURED'S calculation
of the net consideration, the parties will act in good
faith to reach an agreement as to the current amount
within thirty (30) days of the date the REINSURER
submits its alternative calculation. If the REINSURED
and the REINSURER reach agreement on an amount of net
consideration, each party shall report such amount in
their respective tax returns for the preceding
calendar year.
5. This election shall be effective for 1998 and all subsequent taxable
years for which the Reinsurance Agreement remains in effect.
