YEARLY RENEWABLE TERM REINSURANCE AGREEMENT
Effective: March 1, 1996
between
FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
Worcester, Massachusetts
and
NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY
Minneapolis, Minnesota
XXXX X. XXXXXXX ASSOCIATES, INC.
0000 Xxxxxx Xxxxxx Xxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
YEARLY RENEWABLE TERM REINSURANCE AGREEMENT
Effective: March 1, 1996
between
FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
Worcester, Massachusetts
and
NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY
Minneapolis, Minnesota
INDEX
ARTICLE PAGE
------- ----
Access to Records 11 11
Arbitration 15 12
Automatic Reinsurance 3 2
Basis of Reinsurance 3 2
Claims 5 5
Currency 13 11
DAC Tax Regulation 7 9
Definitions 2 1
Delays 12 11
Effective Date 16 13
Errors 12 11
Extra Contractual Obligations 9 10
Facultative Reinsurance 3 3
General Provisions 3 3
Integration 19 14
Insolvency 14 12
Intermediary 18 14
Liability of Northwestern National 4 4
Notices 17 13
Offset 10 11
Omissions 12 11
Payments in Excess of Policy Limits 9 10
Parties to the Agreement 1 1
Premium Accounting 6 7
Recapture 8 10
Reinsurance Premiums 6 7
Retention 8 10
Term and Termination 16 13
SCHEDULES
A Policy and Rider Forms Subject to this Agreement
B Retention of First Allmerica Financial
B Automatic Reinsurance in Northwestern National
C Schedule of Premium Rates and Supplemental Benefits
YEARLY RENEWAL TERM REINSURANCE AGREEMENT
between
FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
Worcester, Massachusetts
(hereinafter called "First Allmerica Financial")
and
NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY
Minneapolis, Minnesota
(hereinafter called "Northwestern National")
ARTICLE I
PARTIES TO THE AGREEMENT
This Agreement is solely between First Allmerica Financial and Northwestern
National. It shall not create any right, interest or relationship to or with
anyone other than First Allmerica Financial or Northwestern National, including
without limitation, any insured individual, beneficiary, policy owner,
applicant, or assignee under any Policy issued by First Allmerica Financial.
ARTICLE 2
DEFINITIONS
"Agreement" Agreement shall include this document and all schedules,
exhibits and amendments identified in the Table of
Contents and/or attached hereto.
"Claim" Claims shall mean loss or losses sustained by any Insured
Individual for which coverage is sought under any Policy
reinsured pursuant to this Agreement.
"Effective Date" Effective Date is the date First Allmerica Financial and
Northwestern National enter into this Agreement as
outlined in ARTICLE 16.
"Insured Individual" A person eligible for benefits under the Policy forms
reinsured pursuant to this Agreement and included on
SCHEDULE A.
-1-
"Jumbo Risk" For the purpose of this Agreement, a jumbo risk is one
with respect to which commonly accepted underwriting
evidence of insurability indicates that the proposed
insured's total life insurance in force and applied for
from all insurers exceeds the amounts outlined on
SCHEDULE B.
"Policy" The Policy underwritten and issued and/or amended by
First Allmerica Financial to an Insured Individual and
Rider issued by First Allmerica Financial shall be
identified on SCHEDULE A.
ARTICLE 3
BASIS OF REINSURANCE
This reinsurance shall be on the yearly renewable term basis.
AUTOMATIC REINSURANCE
On and after the Effective Date of this Agreement, First Allmerica Financial
shall cede and Northwestern National shall accept life reinsurance of First
Allmerica Financial's liability subject to the following:
1. the Policy forms underwritten and issued by First Allmerica Financial
shall be identified on SCHEDULE A; and
2. the Policy forms assumed and retroceded by First Allmerica Financial
that were underwritten and issued by Allmerica Financial Life
Insurance and Annuity Company, a subsidiary of First Allmerica
Financial, shall be identified on SCHEDULE A; and
3. the Policy forms identified on SCHEDULE A shall be based on First
Allmerica Financial's underwriting rules and practices that were
reviewed with and approved by Connecticut General Life Insurance
Company (hereinafter called "Lead Reinsurer") as of the Effective Date
of this Agreement; and
4. First Allmerica Financial's issue and Retention Limit and Northwestern
National's Maximum Liability for each Insured Individual shall be as
set forth on SCHEDULE B and First Allmerica Financial must retain its
maximum retention limit for the policy; and
5. the total amount of insurance, including base policy and any term
riders on the life of an Insured Individual in force or being applied
for in all insurance companies shall not exceed the Jumbo Risk Limits
set forth on SCHEDULE B; and
6. such reinsurance is not being submitted to any reinsurer on a
facultative basis; and
7. the terms, conditions and restrictions contained in this Agreement.
-2-
FACULTATIVE REINSURANCE
For any Policy that exceeds the limits set forth on SCHEDULE B or for any Policy
that will be issued that is not based on the underwriting guidelines, limits and
rules provided for in the Automatic Reinsurance section of this Article, First
Allmerica Financial shall submit such reinsurance coverage proposal to the Lead
Reinsurer for consideration. The information to be submitted to the Lead
Reinsurer shall be on such form acceptable to the Lead Reinsurer and shall
include any and all underwriting information required by the Lead Reinsurer.
No reinsurance coverage for the Policy described in the immediately preceding
paragraph shall be provided by Northwestern National unless and until a written
offer is provided to First Allmerica Financial by the Lead Reinsurer setting
forth the terms and conditions upon which the Lead Reinsurer and Northwestern
National will provide coverage and First Allmerica Financial provides written
acceptance of those terms and conditions. Written acceptance by First Allmerica
Financial must take place within one hundred twenty (120) days or within the
time period set forth in the Lead Reinsurer's written offer, if different. Any
change to the terms of the Lead Reinsurer's written offer that are requested by
First Allmerica Financial shall require the acceptance in writing of the Lead
Reinsurer. Northwestern National's twenty percent (20%) share of the agreed
reinsurance coverage shall then take effect as of the date of the Lead
Reinsurer's written offer unless the parties agree otherwise in writing
GENERAL PROVISIONS
The Policy forms identified on SCHEDULE A were reviewed and approved by the Lead
Reinsurer prior to the Effective Date of this Agreement. First Allmerica shall
provide written notice to Northwestern National of its intention to issue new or
revised Policy forms if it intends such forms to be covered under this
Agreement. Northwestern National shall be entitled to thirty (30) calendar days
following receipt of such notice in which to review such new or revised forms
provided; however, that Northwestern National shall be deemed to have approved
any changes in policy forms that are mandated by a State Insurance Department.
If Northwestern National fails to provide written notice within the thirty (30)
calendar day review period of its decision to deny approval, Northwestern
National shall be deemed to have provided approval on the basis that First
Allmerica Financial requested.
First Allmerica shall provide written notice to Northwestern National of any
revisions in the underwriting rules and practices of First Allmerica Financial.
Northwestern National shall be entitled to thirty (30) calendar days following
receipt of such notice in which to review such revised rules and/or practices.
If Northwestern National fails to provide written notice within the thirty (30)
calendar review period that the revised rules and/or practices are not
acceptable, the revised rules and/or practices shall be deemed to be acceptable
to Northwestern National.
First Allmerica Financial shall notify Northwestern National in writing within
ninety (90) calendar days of any change in any Policy reinsured under this
Agreement which affects the underwriting classification of the Policy and/or
exceeds the limits provided on SCHEDULE B. Northwestern National shall be
entitled to thirty (30) calendar days following receipt of such notice in which
to review the change in underwriting
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classification of the Policy and/or limits of the Policy. If Northwestern
National fails to provide written notice within the thirty (30) calendar day
review period that it will not accept the change in the Policy which affects the
underwriting classification and/or the limits which exceed the limits set forth
on SCHEDULE B, the change(s) shall be deemed to be acceptable to Northwestern
National.
Northwestern National shall not participate in loans on any Policy reinsured
under this Agreement.
ARTICLE 4
LIABILITY OF NORTHWESTERN NATIONAL
Northwestern National's liability shall follow that of First Allmerica Financial
in every case, and be subject in all respects to the general stipulations,
terms, clauses, conditions, waivers and modifications of the Policy forms issued
by First Allmerica Financial and identified on SCHEDULE A.
Northwestern National's liability to First Allmerica Financial for the amount of
reinsurance due and payable shall be based on the net amount at risk at the time
of the Insured Individual's death.
The reinsurance net amount at risk is defined to be the reinsurance face amount
less an appropriate percentage of the policy's total account value (certificate
value) at the end of the prior policy year. The appropriate percentage is sixty
percent (60%) of the Lead Reinsurer and twenty percent (20%) for Northwestern
National.
1 The reinsurance net amount at risk for the first policy year equals
the reinsurance face amount.
2. The reinsurance face amount equals sixty percent (60%) of the policy's
face amount for the Lead Reinsurer and twenty percent (20%) for
Northwestern National.
3. If the policy has Option Two (2) for the death benefit the reinsurance
face amount remains level for all policy years.
4. Changes in the account value between anniversaries will not impact the
reinsurance net amount at risk for the policy year. The reinsurance
net amount at risk will be calculated on each anniversary and remain
constant during the policy year unless a specific reduction in
coverage occurs. If such a reduction occurs, a premium refund will
result and a new reinsurance net amount at risk will be calculated
using the account value on the prior policy anniversary. Increases in
coverage will be treated as new business starting from the effective
date of the increase.
5. Should the Minimum Death Benefit apply when an insured dies, an
appropriate adjustment will be made in the reinsurance death benefit.
4
6. As this is a first dollar quota share reinsurance agreement, there
will be no minimum reinsurance issue amounts, nor will there be a
minimum reinsurance net amount at risk at renewal.
Northwestern National shall have no liability under supplementary benefit riders
for Disability Waiver of Premium, Accidental Death Benefits, Other Insured
Rider, or Dependent coverages attached to policies reinsured under this
Agreement.
A Claim is deemed to be paid on the date when First Allmerica Financial's
payment, check or draft is issued, or when amounts to satisfy the payment are
made available by First Allmerica Financial to the payee.
In the event that the amount of the Claim is increased or decreased due to
misstatement of age or sex of Insured Individual discovered after such Claim,
Northwestern National's liability for the increase or decrease shall be
determined in accordance with its share of liability under the Policy set forth
in Paragraph 2 and 3 of ARTICLE 4.
Northwestern National shall not be responsible for reinsurance on any Claim or
excess payment which is the result of negligence or criminal act or omissions of
an employee, agent, broker officer or director of First Allmerica Financial.
This Agreement does not apply to and specifically excludes the salaries,
administrative, office expenses and any other expenses incurred by First
Allmerica Financial while issuing Policy forms identified on SCHEDULE A.
This Agreement shall apply only to Policy forms identified on SCHEDULE A that
cover Insured Individuals that are domiciled in the United States of America,
the District of Columbia and the province of Canada in which First Allmerica is
properly licensed and authorized to do business unless the Policy form issued by
First Allmerica Financial specifically provides coverage outside the aforesaid
territorial limits, subject to written notice or approval by Northwestern
National.
In no event shall Northwestern National have any reinsurance liability unless
the Policy form identified on SCHEDULE A, underwritten and issued by First
Allmerica Financial is in force and the issuance of such Policy form constitutes
the doing of business in a state of the United States of America and/or province
of Canada in which First Allmerica Financial is properly licensed and authorized
to do business.
ARTICLE 5
CLAIMS
First Allmerica Financial is solely responsible for payment of Claims under the
Policy forms identified on SCHEDULE A.
5
Northwestern National reserves the right to require First Allmerica to provide
documentation relating to any Claim payment made by First Allmerica Financial
prior to the payment of any reinsurance. If Northwestern National requires
documentation, it shall make payment of any reinsurance which it determines to
be due and payable to First Allmerica Financial within thirty (30) calendar days
after receiving the required documentation and will pay one lump sum to First
Allmerica Financial, regardless of the method of settlement under the original
policy.
First Allmerica Financial shall provide written notice to Northwestern National
of any Claim which may impact the reinsurance coverage under this Agreement
within thirty (30) calendar days of receipt of notification of claim. First
Allmerica Financial shall also provide prompt notice to Northwestern National of
all subsequent significant developments relating to such Claim. Inadvertent
oversight or omission in the provision of such notice shall not relieve
Northwestern National of liability provided First Allmerica informs Northwestern
National of such oversight or omission promptly upon its discovery.
Northwestern National shall have the right to associate with First Allmerica
Financial in the control of the Claim, including investigation, contest, denial
or litigation of such Claim, and upon exercising such right, First Allmerica
Financial and Northwestern National shall cooperate in every respect in regard
to the response to such Claim. In addition, where Northwestern National bears
the majority of the risk, Northwestern National may elect to assume full control
of the Claim. If Northwestern National elects to assume full control of the
Claim, First Allmerica Financial may pay its share of the applicable limits of
the Policy at that time and be relieved of any further obligation in respect of
the Claim. If First Allmerica Financial does not make this payment then it will
be bound to pay its share of any payment under the Policy, together with its
share of the expenses as described in Paragraph 5 of ARTICLE 5 and any interest
charges that may be incurred in connection with the Claim.
First Allmerica Financial shall notify Northwestern National of its intention to
contest or deny a Claim which may involve the reinsurance coverage under this
Agreement before any notice of contest or denial is provided to the claimant.
Northwestern National shall then have thirty (30) calendar days within which to
advise First Allmerica Financial whether it agrees that the claim should be
contested or denied. If Northwestern National does not agree that the claim
should be contested or denied, then it shall pay to First Allmerica Financial
the full amount of the reinsurance on the risk reinsured, as set forth in
ARTICLE 4, and Northwestern National shall have no further obligation in respect
to such claim. If Northwestern National agrees that the claim should be
contested or denied, then Northwestern National shall pay its share of the
following in accordance with its share of liability under the Policy set forth
in Paragraph 2 and 3 of ARTICLE 4:
1. Expenses incurred by First Allmerica Financial in investigating,
contesting, litigating or otherwise resisting the Claim, excluding
salaries and expenses of employees, officers and agents of First
Allmerica Financial and ordinary overhead expenses of First Allmerica
Financial, and costs of third party administrators acting on behalf of
First Allmerica Financial; and
2. Interest which is paid by First Allmerica Financial in respect of the
Claim. If the denial of a Claim results in an award verdict or
judgment against
6
First Allmerica Financial, where Northwestern National has agreed with
the claim denial, and First Allmerica Financial intends to appeal the
verdict or judgment, written notice of the intention to appeal shall
be provided to Northwestern National. Northwestern National shall be
entitled at that time to pay its share of judgment, together with any
expenses and interest as set forth above, and to have no further
obligation in connection with such Claim. If Northwestern National
does not pay its share of the judgment and any expenses and interest
due at that time, Northwestern National shall pay its share of the
expenses associated with the appeal of the judgment or verdict,
together with its share of any additional interest charges that may
accrue during the appeal.
ARTICLE 6
REINSURANCE PREMIUMS AND PREMIUM ACCOUNTING
Prior to the last day of each month First Allmerica Financial shall submit to
Northwestern National a statement for the reinsurance premiums due Northwestern
National. Such premiums shall be based on the rate schedule set forth on
SCHEDULE C and shall include the following:
1. Premiums due on Policies issued since the last billing statement.
2. Premiums due on renewing Policies with renewal dates from the prior
month.
3. Premium adjustments as further described in this ARTICLE.
First Allmerica Financial shall remit amounts due Northwestern National with the
monthly statement.
First Allmerica Financial agrees to provide information to Northwestern National
concerning each Insured Individual that was issued a Policy subject to this
Agreement and under which Northwestern National has agreed to accept
reinsurance. Such information shall be provided not later than ninety (90)
calendar days following the date on which the policy is issued by First
Allmerica Financial and may be on any form acceptable to Northwestern National;
provided, however that the following information shall be provided on each
Insured Individual:
Policy Number
Insured Name (Last, First, Middle Initial)
Date of Birth
Policy Date
Amount of Reinsurance
Amount of the current Policy
Retention Amount
Plan Code or Plan of Insurance
Submission Basis (Automatic or Facultative)
Termination Date
7
Sex
Net Amount at Risk
Mortality Assessment
Flat Extra Rating
Smoker Code (Smoker or Non-Smoker)
Original Policy Date
If a discrepancy exists between records maintained by First Allmerica Financial
and Northwestern National, it shall be resolved within ninety (90) calendar days
following written notice delivered by the party discovering such discrepancy to
the other party. If the discrepancy is not resolved, Northwestern National shall
not be liable for any increase liability attributable to the discrepancy.
First Allmerica Financial shall notify Northwestern National in writing within
ninety (90) calendar days of any adjustment resulting from a change in a Policy
form including termination, reduction or increase in benefits. Any adjustment
shall be made during the next accounting statement.
Northwestern National shall refund to First Allmerica Financial the unearned
portion of the reinsurance premium, with the exception of the annual fee, which
will not be subject to a pro rata refund, for the period from the date of death,
or change or termination of the policy to the paid premium date.
First Allmerica Financial shall pay insurance premiums on any reinstated Policy
on the same basis that it collected premiums from the Insured Individual.
Whenever reinsurance hereunder is reinstated, First Allmerica Financial will pay
Northwestern National the proportionate part of the reinsurance premium, based
on the premiums payable for the year of reinstatement, for the period from the
date of reinstatement to the policy anniversary date next following. Thereafter,
reinsurance premiums will be payable in accordance with this Article.
The monthly payment of reinsurance premiums by First Allmerica Financial shall
be a condition precedent to any liability by Northwestern National under the
terms and conditions of the Agreement. If the monthly reinsurance premium
payment is not paid by First Allmerica Financial pursuant to this ARTICLE,
Northwestern National shall have the right to terminate reinsurance under this
Agreement. If Northwestern National elects to exercise its right of termination,
Northwestern National shall provide written notice to First Allmerica Financial
not less than thirty (30) calendar days prior to termination. If all monthly
reinsurance premiums in arrears, including any which may fall due within the
thirty (30) calendar day period, are not received by Northwestern National prior
to the expiration date of such period, Northwestern National shall be relieved
of all liability incurred after the termination date. The reinsurance so
terminated may be reinstated by Northwestern National at any time within sixty
(60) calendar days following such termination if First Allmerica Financial makes
payment of all reinsurance premiums due and payable up to the date of
reinstatement, it shall have no liability incurred between the date of
termination and the reinstatement date.
8
Northwestern National's right to terminate reinsurance pursuant to this ARTICLE
shall be without prejudice to its right to collect monthly reinsurance premiums
for the period that reinsurance was in force prior to the expiration of the
thirty (30) calendar day notice. Pursuant to ARTICLE 10 of this Agreement,
Northwestern National may set off against amounts due First Allmerica Financial
the amount of monthly reinsurance premiums in arrears, up to and including the
termination date.
First Allmerica Financial shall not force termination under the provisions of
Paragraph 9 above to transfer the reinsured block of business to another
reinsurer.
Premiums for reinsurance under this Agreement shall be computed based on the
rates contained on SCHEDULE C. The renewal rates which are guaranteed for the
life reinsurance are the greater of (a) the rates contained in SCHEDULE C, and
(b) the premium calculated based on the 1980 CSO Table with the maximum
valuation interest rate permitted for the underlying contract under the National
Association of Insurance Commissioners' Standard Valuation Law.
ARTICLE 7
DAC TAX REGULATION
Northwestern National and First Allmerica Financial hereby make an election
pursuant to Treasury Regulation Section 1.848-2(g)(8). This election shall be
effective for the taxable year ending December 31, 1996 and for all subsequent
taxable years for which the Agreement remains in effect, and it is applicable
only with respect to risks reinsured under this Agreement that are assumed under
a "specified insurance contract" as defined in Treasury Regulation Section
1.848-1(b).
The terms used in this ARTICLE are defined by reference to Regulation Section
1.848-2 promulgated on December 28, 1992.
The Party with net positive consideration for the Agreement for each taxable
year will capitalize specified policy acquisition expenses with respect to the
Agreement without regard to the general deductions limitation of Section
848(c)(1) of the Internal Revenue Code of 1986, as amended.
The parties agree to exchange information pertaining to the amount of net
consideration under the Agreement each year to ensure consistency. To achieve
this First Allmerica Financial shall provide Northwestern National with a
schedule of its calculation of the net considerations for all reinsurance
agreements in force between them for a taxable year by no later than May 1 of
the succeeding year. Northwestern National shall advise First Allmerica
Financial if it disagrees with the amounts provided by First Allmerica Financial
no later than May 31, otherwise the amounts will be presumed correct and shall
be reported by both parties in their respective tax returns for such tax year.
If Northwestern National contests First Allmerica Financial's calculation of the
net consideration, the Parties agree to act in good faith to resolve any
differences within thirty (30) days of the date Northwestern National submits
its alternative calculation and report the amounts agreed upon in their
respective tax returns for such year.
9
The Parties shall attach to their respective federal income tax returns a
schedule specifying that the joint election herein has been made for this
Agreement.
Northwestern National represents and warrants that it is subject to United
States taxation under either Subchapter L or Subpart F or Part III of Subchapter
N of the Internal Revenue Code of 1986, as amended.
ARTICLE 8
RETENTION AND RECAPTURE
First Allmerica Financial shall have the right to increase or decrease the
Retention Limit under this Agreement by providing thirty (30) days written
notice to Northwestern National. Such increase or decrease shall be applicable
only to new Policies issued on and after the effective date of such increase or
decrease.
First Allmerica Financial shall have no right to recapture existing reinsurance
in the event of its increase in Retention Limit.
Whenever a policy upon which reinsurance is based is reduced or terminated, the
reinsurance will be reduced proportionately as of the date of such reduction or
termination. If reinsurance has been affected more than one company, the
reduction in the reinsurance provided by Northwestern National will be that
proportion of the total amount of the reduction which the reinsurance provided
by Northwestern National is of the total amount reinsured. Reinsurance will be
terminated on a last in, first out basis and facultative amounts should be
reduced first.
Reinsurance under this agreement will not be affected by reductions or
terminations in other insurance or reinsurance.
ARTICLE 9
EXTRA CONTRACTUAL OBLIGATIONS AND PAYMENTS IN EXCESS OF POLICY LIMITS
In no event will Northwestern National have liability for any payment by First
Allmerica Financial in excess of the limits of the Policy, or any damages, fees,
or expenses, or portion thereof, which have been assessed against First
Allmerica Financial by any court on the basis of negligence, oppression, malice,
fraud, fault, wrongdoing, or bad faith by First Allmerica Financial in
connection with any Claim, nor any act or omissions not consistent with the
generally accepted practices and standards of the life insurance industry
applicable at the time of such act or omission, unless Northwestern National
shall have received notice of and concurred with the actions taken or not taken
by First Allmerica Financial which led to the payment or assessments, in which
case Northwestern National shall pay its share of the such payment or
assessment. Said notice and concurrence will be deemed to exist where, pursuant
to Article 5, First
10
Allmerica Financial notified Northwestern national of its intention to contest
or deny the claim and Northwestern National agreed with First Allmerica
Financial that the claim should be contested or denied. Northwestern National's
"share" of any expenses, damages and fees, as described in this ARTICLE, will be
the proportional amount of these items determined by the ratio of reinsurance
held by Northwestern National to the total limit of liability of the Policy.
ARTICLE 10
OFFSET
First Allmerica Financial and Northwestern National shall have, and may exercise
at any time, the right to offset any balance or balances, whether on account of
premiums or on account of losses or otherwise, due from one party to the other
under the terms of this Agreement.
ARTICLE 11
ACCESS TO RECORDS
Northwestern National, or its duly authorized representative, shall have
reasonable access to all books and records of First Allmerica Financial relating
to the terms and conditions of this Agreement and the business that is the
subject matter of this Agreement.
ARTICLE 12
DELAYS, ERRORS OR OMISSIONS
No accidental delays, errors or omissions on the part of First Allmerica
Financial shall relieve Northwestern National of liability provided such delays,
errors or omissions are rectified as soon as possible after discovery. However,
Northwestern National shall not be liable with respect to any reinsurance which
may have been inadvertently included in the premium computation but which ought
not to have been included by reason of the terms and conditions of this
Agreement. Such inadvertent premium payments shall be returned.
ARTICLE 13
CURRENCY
All retentions and limits hereunder are expressed in United States dollars and
all premium and loss payments shall be made in United States currency. For the
purposes of this Agreement, amounts paid or received by Northwestern National in
any other currency shall be converted into United States dollars at the rates of
exchange on the date such transactions are entered on the books of Northwestern
National.
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ARTICLE 14
INSOLVENCY
In the event of insolvency of First Allmerica Financial, the reinsurance under
this Agreement shall be payable directly by Northwestern National to First
Allmerica Financial or to its liquidator, receiver, conservator or statutory
successor on the basis of Northwestern National's liability to First Allmerica
Financial without diminution because of the insolvency of First Allmerica
Financial or because the liquidator, receiver, conservator or a statutory
successor of First Allmerica Financial has failed to pay all or a portion of any
Claim. It is agreed, however, that the liquidator, receiver, conservator or
statutory successor of First Allmerica Financial shall give written notice to
Northwestern National of the pendency of a Claim against First Allmerica
Financial within a reasonable time after such Claim is filed in the
receivership, conservation, insolvency or liquidation proceeding and that during
the pendency of such Claim, Northwestern National may investigate such Claim and
interpose, at its own expense, in the proceeding where such Claim is to be
adjudicated, and defense or defenses that it may deem available to First
Allmerica Financial or its liquidator, receiver, conservator, or statutory
successor. The expense thus incurred by Northwestern National shall be
chargeable, subject to the approval of the Court, against First Allmerica
Financial.
Where two or more reinsurers are involved in the same Claim and a majority in
interest elect to impose defense to such Claim, the expense shall be apportioned
in accordance with the terms of this Agreement as though such expense had been
incurred by First Allmerica.
ARTICLE 15
ARBITRATION
Should a disagreement arise between the two companies regarding the rights or
liabilities of either company under any transaction under this agreement, the
issue will be referred to arbitrators, one to be chosen by each company from
among officers of other life insurance companies, who are familiar with
reinsurance transactions, and a third to be chosen by the said two arbitrators
before entering into arbitration. An arbitrator may not be a present or former
officer, attorney, or consultant of First America Financial or Northwestern
National of either's affiliates. If the arbitrators appointed by the two parties
cannot agree on a third person, then either party may apply to the court,
pursuant to Section 52-411 of the General Statutes of the State of Connecticut,
for appointment of a third arbitrator. The arbitrators will regard this document
as an honorable agreement and not merely as a legal obligation as they will
consider practical business and equity principles. The arbitrators' decision
will be final and binding upon both companies.
The place of meeting of the arbitrators will be decided by a majority vote of
the members thereof. All expenses and fees of the arbitrators will be borne
equally by First Allmerica Financial and Northwestern National (unless the
arbitrators decide otherwise).
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ARTICLE 16
EFFECTIVE DATE; TERM AND TERMINATION
The Effective Date of this Agreement is March 1, 1996 and shall be unlimited in
duration except as noted below and in ARTICLE 6 above.
This Agreement may be terminated for new business either party with ninety (90)
calendar days written notice to the other party.
Northwestern National shall have the option of terminating this Agreement for
new business at any time, upon delivery of written notice to First Allmerica
Financial at least (30) calendar days prior to such termination, upon the
happening of any of the following events:
1. First Allmerica's rating by A.M. Best is reduced from the rating which
existed at the time this Agreement became effective to a Best's Rating
of B or less;
2. First Allmerica Financial is placed upon a "watch list" by its
domiciliary state's insurance regulators;
3. The regulatory authorities of any state in which First Allmerica
Financial is authorized to do business revokes First Allmerica
Financial's right to continue conducting business in that state for
financial reasons;
4. An order appointing a receiver, conservator or trustee for management
of First Allmerica Financial is entered or a proceeding is commenced
for rehabilitation, liquidation, supervision or conservation of First
Allmerica Financial;
5. First Allmerica is merged, purchased or in any manner has new
ownership.
Following termination of this Agreement, the obligations and liabilities of both
First Allmerica Financial and Northwestern National under this Agreement shall
remain in full force and effect for each Policy issued by First Allmerica prior
to the termination date until the termination or cancellation of such Policy,
whichever occurs first.
The parties may mutually agree to terminate this Agreement for new business at
any time and cancel the reinsurance hereunder to be effective on a mutually
agreed upon date for a mutually agreed upon recapture charge.
ARTICLE 17
NOTICES
All notices required to be given hereunder shall be in writing and shall be
deemed delivered if personally delivered, sent via facsimile, or dispatched by
certified or registered mail, return receipt requested, postage prepaid, or by
such other means that
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provide documentation of the date of delivery, addressed to the parties
identified below or to such other persons as identified from time to time by
notice by either party:
Xx. Xxxxxx X. Xxxxx, Xx., FSA
Assistant Vice President and Actuary
First Allmerica Financial Life Insurance Company
000 Xxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Phone No. (000) 000-0000 Fax No. (000) 000-0000
Xx. Xxxx X. Xxxxxxxxx, FLMI
Assistant Vice President, Broker Reinsurance
Northwestern National Life Insurance Company
00 Xxxxxxxxxx Xxxxxx Xxxxx
Xxxxxxxxxxx, XX 00000
Phone No. (000) 000-0000 Fax No.: (000) 000-0000
Notice shall be deemed given on the date of delivery as documented by a record
of delivery in accordance with the modes of delivery set forth above.
ARTICLE 18
INTERMEDIARY
Xxxx X. Xxxxxxx Associates, Inc. is hereby recognized as the intermediary
negotiating this Agreement. All communications (including but not limited to
notices, statements, premiums, return premiums, commissions, taxes, claims,
claim adjustment expenses, salvage and claim settlements) relating hereto shall
be transmitted to First Allmerica Financial and Northwestern National through
Xxxx X. Xxxxxxx Associates, Inc., 0000 Xxxxxx Xxxxxx Xxxxx, Xxxxxxxxxxx,
Xxxxxxxxx 00000. Payments by First Allmerica Financial to Xxxx X. Xxxxxxx
Associates, Inc., shall be deemed to constitute payment to the Northwestern
National. Payments by the Northwestern National to Xxxx X. Xxxxxxx Associates,
Inc. shall be deemed only to constitute payment to the First Allmerica Financial
to the extent that such payments are actually received by the First Allmerica
Financial.
ARTICLE 19
INTEGRATION
This Agreement constitutes the entire contract between the parties. Any
amendment or modification hereto shall be in writing, endorsed upon or attached
hereto and signed by both First Allmerica Financial and Northwestern National.
14
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed
in duplicate to be effective as of the date specified in ARTICLE 16.
FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
By /s/ Xxxxxx X. Xxxxx, Xx.
------------------------------------
Date: March 20, 1997
----------------------------------
NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY
A.K.A. RELIASTAR LIFE INSURANCE COMPANY
By /s/
------------------------------------
Assistant Vice President
Date March 7, 1997
----------------------------------
15
SCHEDULE A
Northwestern National Life Insurance Company
Policy forms subject to Reinsurance under this Agreement
POLICY NAME POLICY FORM NUMBER
----------- ------------------
Group Flexible Premium Variable Life 1029P-94 (Employer)
1029C-94 (Employee)
Individual Flexible Premium Variable Life 1023-93
Note: Same policy form numbers apply for both First Allmerica Financial Life
Insurance Company and Allmerica Financial Life Insurance and Annuity Company.
RIDER NAME RIDER FORM NUMBER
---------- -----------------
None
SCHEDULE B
JUMBO RISK LIMITS
INSURANCE AGE TOTAL LINE
------------- ----------
0 - 80 $ 10,000,000
FIRST ALLMERICA FINANCIAL RETENTION SCHEDULE
LIFE INSURANCE
STANDARD RISKS,
SPECIAL CLASSES SPECIAL CLASSES
A THROUGH H AND J, L, & P, AND
ISSUE FLAT EXTRAS OF FLAT EXTRAS OF
AGES $20.00 OR LESS $20.01 OR OVER
----- -------------- --------------
-0- $ 500,000 $ 250,000
1 - 60 2,000,000 1,000,000
61 - 70 1,000,000 500,000
71 - 80 500,000 250,000
Notes: (1) The above maximum limits are also the maximums on any one life for
all plans and riders combined.
(2) There is no minimum size reinsurance case.
(3) Any Other Insured Rider or Children's Insurance Rider attached to
any of the policy forms on Schedule A will not be reinsured under
this reinsurance agreement.
(4) Disability Waiver of Premium and Accidental Death Benefits are
Fully Retained by First Allmerica Financial.
Any situation involving Aviation will use a $500,000 retention.
MAXIMUM LIMITS OF RETENTION OF FIRST ALLMERICA FINANCIAL
1. Twenty Percent (20%) of Policy Forms shown on SCHEDULE A for Guaranteed
Issue only. For Retention purposes, this business is treated separately.
2. Twenty percent (20%) of Policy Forms shown on SCHEDULE A for any life
fully underwritten above the Guaranteed Issue Limit that does not
involve facultative underwriting. For Retention purposes, this business
is treated separately. Cases of 10 -24 lives will be considered to have
a Guaranteed Issue limit of zero (0).
1
3. For Policy Forms shown on Schedule A, any life involving facultative
underwriting for amounts above the Guaranteed Issue Limit will be
retained for twenty percent (20%) of the total facultative amount, but
not to exceed, on a per life basis, First Allmerica Financial's normal
retention schedule, which is shown above, Cases of 10 - 24 lives will be
considered to have a Guaranteed Issue limit of zero (0).
MAXIMUM LIMITS OF REINSURANCE IN NORTHWESTERN NATIONAL
1. Northwestern National will assume twenty percent (20%) of the lives
covered in 1 and 2 above and twenty-five percent (25%) of any
facultative amount ceded by First Allmerica Financial from 3 above.
Northwestern National will only assume up to $2,000,000 of risk any one
person. Therefore, the percentage assumed by Northwestern National may
be less than twenty-five percent (25%) where they have reached their
full retention.
2. Each group will have the Guaranteed Issue Limit determined at the time
the employer involved accepts First Allmerica Financial's proposal. The
following are the general guidelines:
a. Where the coverage is being replaced:
NUMBER OF GUARANTEED ISSUE
PARTICIPANTS IF ACTIVELY AT WORK
------------ -------------------
25 - 49 $ 500,000
50 - 99 1,000,000
100 - 149 1,500,000
150 + 2,000,000
(1) Maximum issue of five (5) times salary
(2) Formula determined amount subject to a $50,000 minimum
b. Where the coverage is not being replaced:
NUMBER OF GUARANTEED ISSUE
PARTICIPANTS IF ACTIVELY AT WORK
------------ -------------------
25 - 49 $ 300,000
50 - 99 $ 500,000
100 - 149 $ 1,000,000
150 - 249 $ 1,500,000
250 + $ 2,000,000
(1) Maximum issue of five (5) times salary
(2) Formula determined amount subject to a $50,000 minimum
2
c. Where the coverage is optional (supplemental) to the employee:
GUARANTEED ISSUE
ELIGIBLE IF ACTIVELY AT WORK
LIVES AND DREAD DISEASE QUESTIONS
-------- ---------------------------
25 - 99 $ 150,000
100 - 249 250,000
250 - 499 500,000
500 + 1,000,000
(1) Maximum issue of five (5) times salary
(2) Formula determined amount subject to a $50,000 minimum
(3) Dread Disease questions are as follows:
(a) Has the proposed insured ever had any of the following
conditions?
Heart Disease
Kidney Disorder
Cancer
Diabetes
(b) In the past ten (10) years, has a member of the medical
profession diagnosed or treated the proposed insured for
immune system disorder, including acquired immune deficiency
syndrome (AIDS) or AIDS-related complex (ARC)?
3. Additional general guidelines are as follows:
a. The Guaranteed Issue limits noted above may be slightly increased,
if necessary, for a few selected individuals. Northwestern National
will be notified of this during First Allmerica Financial's
proposal stage.
b. In determining the number of eligible lives for optional plans, any
member of the group earning $30,000 or more will be used. For
example, in a group of three hundred (300) lives of which two
hundred (200) earn less than $30,000 and one hundred (100) earn
$30,000 or more, First Allmerica Financial would look to the
100-249 category for the maximum Guaranteed Issue amount, not to
exceed five (5) times salary.
c. When a tiered case is proposed, First Allmerica Financial will look
to the entire group to determine maximum guaranteed issue amounts.
For example, an employer wants to provide fifty (50) senior
partners with $1,000,000 of coverage and seventy-five (75) junior
partners will $500,000 of coverage. First Allmerica Financial will
look at the 125-participant category in determining the maximum
guaranteed issue amount.
d. If a multiple of salary plan is being replaced on an at work basis,
First Allmerica Financial will offer additional multiples of salary
(not to exceed
3
the lesser of the dollar cap for the given category or five (5)
times salary) on a dread disease basis.
For example, if a three (3) times salary plan is being replaced and
there is no supplemental coverage currently in place, First
Allmerica Financial will offer another two (2) times salary on a
dread disease basis.
e. Coverage will be replaced on an at work basis in carve-out
situations (2a above) if the employee is age 70 or under. In
situations when there are a few employees over age 70, First
Allmerica Financial has the right to offer coverage on an at work
basis if the coverage is $1,500,000 or less. Northwestern National
will be notified of this during First Allmerica Financial's
proposal stage.
f. A nonqualified 401(k) type plan that is offered to all eligible
employees who want to defer a portion of their income will make up
a distinct group. This group will be categorized as full
participation where coverage is not being replaced.
g. For nonqualified plans, other than group term carve-outs, such as
SERPs, non-qualified 401(k) type plans, or Split Dollar Plans, the
five (5) times salary cap should not necessarily apply. For
example, when the product is used to fund lost benefits, etc.,
there are factors that determine the death benefit other than a
multiple of salary. For example, an employer wants the minimum
death benefit to fund for a cash value equal to X at age 60. The
minimum death benefit may be more than five (5) times the Insured's
salary. The five (5) times salary cap should apply only to group
term carve-out and optional plans.
h. Increases up to ten percent (10%) per year on a cumulative basis
are available on an actively at work basis. Annual increases of
greater than ten percent (10%) and less than twenty percent (20%)
will be considered based upon actively at work and dread disease.
Any annual increase of twenty percent (20%) or more in one (1) year
will require full evidence of insurability. (Maximum cap not to
exceed $500,000 of applicable category).
i. Only fully underwritten amounts over $1,000,000 need to be
submitted facultatively.
j. Cases of ten (10) to twenty-four (24) lives will be fully
underwritten and are considered to have a Guaranteed Issue limit of
zero (0).
4
SCHEDULE C
YEARLY RENEWABLE TERM RATE PROGRAM
Special First Allmerica Financial Rate Program, Non-Experience Rated Basis
LIFE REINSURANCE: Premium rates are shown on pages 2, 3 and 4 of this schedule.
The total life reinsurance premium on standard cessions and on those substandard
cessions with a percentage rating consists of seventy-five percent (75%) of the
appropriate rate per $1,000 applied to the amount at risk up to attained age 54,
and eighty percent (80%) for attained ages 55 and over. Substandard premiums are
direct multiples of the standard life premium. On substandard cessions involving
flat extra premiums payable for more than five years, the reinsurance flat extra
premium is 20% of the reinsured portion of the gross flat extra premium charged
on the original policy in the first year and 75% in renewal years. When the flat
extra premium is payable for five years or less, the reinsurance flat extra
premium is 75% in all years. Reinsurance premiums on substandard risks will
revert to the standard risk basis on the policy anniversary which the insured
attains age 65 or on the 20th policy anniversary, whichever is later.
PREMIUM TAX REIMBURSEMENT: Northwestern National shall reimburse First Allmerica
Financial for Northwestern National's share of premium taxes paid by First
Allmerica Financial to those states and provinces which do not allow reinsurance
premiums paid by First Allmerica Financial to Northwestern National to be
deducted from First Allmerica Financial's taxable premiums. By mutual consent of
the two companies, such tax reimbursements may be taken as a uniform percentage
of paid reinsurance premiums.
SCHEDULE C
Annual Mortality Charges per $1,000
AGE N/S SMOKER
------------------------------------------
0 2.380000 2.380000
1 0.640000 0.640000
2 0.590000 0.590000
3 0.580000 0.580000
4 0.560000 0.560000
5 0.540000 0.540000
6 0.510000 0.510000
7 0.480000 0.480000
8 0.460000 0.460000
9 0.450000 0.450000
10 0.440000 0.440000
11 0.460000 0.460000
12 0.510000 0.510000
13 0.580000 0.580000
14 0.670000 0.670000
15 0.770000 0.770000
16 0.850000 0.850000
17 0.930000 0.930000
18 0.850000 1.200000
19 0.880000 1.250000
20 0.900000 1.270000
21 0.900000 1.260000
22 0.880000 1.280000
23 0.870000 1.260000
24 0.850000 1.240000
25 0.840000 1.200000
26 0.820000 1.170000
27 0.810000 1.170000
28 0.800000 1.160000
29 0.810000 1.170000
30 0.810000 1.200000
31 0.830000 1.250000
32 0.850000 1.280000
33 0.870000 1.350000
34 0.920000 1.420000
35 0.950000 1.510000
36 1.000000 1.610000
37 1.0600000 1.750000
38 1.1400000 1.890000
39 1.2200000 2.070000
40 1.3100000 2.260000
41 1.4100000 2.490000
42 1.5100000 2.720000
43 1.6300000 2.980000
44 1.7500000 3.250000
45 1.9000000 3.560000
2
Annual Mortality Charges per $1,000
AGE N/S SMOKER
------------------------------------------
46 2.040000 3.850000
47 2.200000 4.150000
48 2.380000 4.470000
49 2.570000 4.830000
50 2.770000 5.800000
51 3.010000 5.800000
52 3.270000 6.080000
53 3.540000 6.210000
54 3.840000 7.240000
55 4.180000 9.050000
56 4.690000 9.050000
57 5.250000 9.300000
58 5.800000 9.830000
59 6.420000 10.850000
60 7.120000 14.100000
61 7.730000 14.120000
62 8.420000 14.300000
63 9.200000 14.940000
64 10.070000 18.030000
65 11.020000 19.990000
66 12.280000 21.760000
67 13.660000 23.590000
68 15.120000 25.460000
69 16.720000 27.420000
70 18.520000 29.590000
71 20.140000 31.680000
72 21.990000 34.070000
73 24.110000 36.750000
74 26.450000 39.660000
75 28.910000 42.840000
76 32.050000 47.570000
77 35.370000 52.530000
78 38.830000 57.660000
79 42.520000 63.080000
80 46.590000 69.010000
81 51.230000 75.620000
82 56.510000 83.090000
83 62.520000 91.510000
84 69.150000 100.770000
85 76.280000 110.520000
86 83.640000 122.200000
87 91.280000 134.230000
88 99.070000 147.740000
89 107.130000 161.760000
90 115.540000 176.710000
3
Annual Mortality Charges per $1,000
AGE N/S SMOKER
------------------------------------------
91 124.460000 192.740000
92 134.200000 208.120000
93 145.240000 226.690000
94 159.430000 251.370000
4
AMENDMENT NO. 1
to the Yearly Renewal Term Reinsurance Agreement
Effective: March 1, 1996
between
FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
and
NORTHWESTERN NATIONAL LIE INSURANCE COMPANY
It is agreed by the two companies that reinsurance of the case known as "Toys R
Us" will be reinsured under this Agreement and will be subject to the provisions
hereof with the following exceptions and modifications:
1. Although the case is not eligible for $1,000,000 of Guaranteed Issue,
$2,000,000 of Guaranteed Issue will be issued.
2. First Allmerica Financial will retain twenty percent (20%) of the first
$1,000,000 of Guaranteed Issue, Connecticut General will reinsure sixty
percent (60%), and the remaining twenty percent (20%) will be reinsured by
Northwestern National.
3. First Allmerica Financial will retain twenty percent (20%) of the excess
between $1,000,000 and $2,000,000 of Guaranteed Issue, and Northwestern
National will reinsure eighty percent (80%) of the excess between
$1,000,000 and $2,000,000 of Guaranteed Issue.
4. Any amounts above the $2,000,000 Guaranteed Issue will be fully
underwritten by First Allmerica Financial and those amounts which qualify
for automatic Reinsurance will be reinsured in accordance with Maximum
Limits of Reinsurance in Northwestern National as defined on Schedule B of
this Agreement.
5. Any amounts above the $2,000,000 Guaranteed Issue which do not qualify for
Automatic Reinsurance will be facultatively underwritten by Connecticut
General and, once approved by Connecticut General, twenty percent (20%)
will be retained by First Allmerica Financial, sixty percent (60%) will be
reinsured in Connecticut General and the remaining twenty percent (20%)
will be reinsured by Northwestern National. The maximum that can be
reinsured by Northwestern National, including Guaranteed Issue, is
$2,500,000. Where this maximum is reached, Connecticut General will also
reinsure the excess of this maximum.
1
Such Facultative Reinsurance amounts will be limited by First Allmerica
Financial retaining up to its normal retention limit as shown in Schedule B of
this Agreement. Examples for facultative cases are as follows:
A. No prior insurance with First Allmerica Financial. The application is for
$4,000,000 and let's assume the Guaranteed Issue amount is $1,000,000. The
amount submitted facultatively is $3,000,000. The amount submitted
facultatively will be split twenty percent/sixty percent/ twenty percent
(20%/60%/20%) which means $600,000 retained by First Allmerica Financial
and ceded to Northwestern National and $1,800,000 to Connecticut General.
B. $1,500,000 of prior insurance with First Allmerica Financial. Under the
same scenario as A. above, First Allmerica Financial would only retain
$300,000 of the $3,000,000 as the $1,500,000 plus First Allmerica
Financial's $200,000 share of the twenty percent (20%) of the Guaranteed
Issue amount of $1,000,000 only leave $300,000 to reach its $2,00,000
normal retention. This means Connecticut General will take seventy-five
(75%) of the $2,700,000 of the $3,000,000 amount above the Guaranteed Issue
amount and Northwestern National will take twenty-five percent (25%) of the
$2,700,000.
C. No prior insurance with First Allmerica Financial. The application is for
$16,000,000 and let's assume the Guaranteed Issue amount is $1,000,000. The
amount submitted facultatively is $14,000,000. The amount submitted
facultatively is split as follows:
(1) $1,600,000 as First Allmerica is retaining $200,000 of the first
$1,000,000 and $200,000 of the second $1,000,000 and Northwestern
National is taking $800,000 of the second $1,000,000 in addition to
$200,000 of the first $1,000,000.
(2) $1,500,000 Northwestern National to reach its maximum of $2,500,000.
(3) $10,900,000 to Connecticut General.
This amendment will be effective for policies issued with policy dates of April
1, 1996 or later.
2
It is further agreed, effective August 1, 1996, that all references in the
Agreement to "Northwestern National Life Insurance Company, Minneapolis,
Minnesota" shall be amended to read "ReliaStar Life Insurance Company,
Minneapolis, Minnesota."
In witness whereof, this amendment is signed in duplicate on the dates indicated
at the home office of each company.
FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
By: /s/ Xxxxxx X. Xxxxx, Xx.
--------------------------------------
Date: May 6, 1997
---------------------------------------
RELIASTAR LIFE INSURANCE COMPANY
By: /s/
--------------------------------------
Assistant Vice President
Date: March 7, 1997
--------------------------------------
3
AMENDMENT NO. 2
to the
Yearly Renewable Term Reinsurance Agreement
Effective: March 1, 1996
between
FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
and
RELIASTAR LIFE INSURANCE COMPANY
It is agreed by the two companies, effective December 30, 1996, that reinsurance
of the case known as "Alabama Power," also known as "Southern Company," will be
reinsured under this Agreement and will be subject to the provisions hereof with
the following exceptions and modifications:
1. First Allmerica Financial will retain twenty percent (20%) of the first
$1,000,000 of Guaranteed Issue, Connecticut General will reinsurer sixty
percent (60%), and the remaining twenty percent (20%) will be reinsured by
ReliaStar.
2. Special pricing using blended rates shown in Schedule C, attached hereto
and made a part of this Agreement, shall be applicable to this Employer.
It is further agreed that Schedule B attached to and forming part of this
Agreement shall be deleted and replaced by the revised Schedule B (effective May
1, 1997) attached hereto and made part of this Agreement, as respects policies
issued with policy dates of May 1, 1997 or later.
All other terms and conditions of the Agreement will remain in full force and
effect.
In witness whereof, this Amendment is signed in duplicate on the dates indicated
at the home office of each company.
FIRST ALLMERICA FINANCIAL LIFE
INSURANCE COMPANY
By: /s/ Xxxxxx X. Xxxxx, Xx.
-----------------------------
Date July 7, 1997
---------------------------
RELIASTAR LIFE INSURANCE COMPANY
By: /s/
-----------------------------
Assistant Vice President
Date: July 29, 1997
---------------------------
(Revised May 1, 1997)
SCHEDULE B
JUMBO RISK LIMITS
INSURANCE AGE TOTAL LINE
------------- ----------
0 - 80 $ 10,000,000
FIRST ALLMERICA FINANCIAL RETENTION SCHEDULE
LIFE INSURANCE
STANDARD RISKS,
SPECIAL CLASSES SPECIAL CLASSES
A THROUGH H AND J, L, & P, AND
ISSUE FLAT EXTRAS OF FLAT EXTRAS OF
AGES $20.00 OR LESS $20.01 OR OVER
----- --------------- ---------------
-0- $ 500,000 $ 250,000
1 - 60 2,000,000 1,000,000
61 - 70 1,000,000 500,000
71 - 80 500,000 250,000
Notes: (1) The above maximum limits are also the maximums on any one life for
all plans and riders combined.
(2) There is no minimum size reinsurance case.
(3) Any Other Insured Rider or Children's Insurance Rider attached to
any of the policy forms on Schedule A will not be reinsured under
this reinsurance agreement.
(4) Disability Waiver of Premium and Accidental Death Benefits are
Fully Retained by First Allmerica Financial.
Any situation involving Aviation will use a $500,000 retention.
MAXIMUM LIMITS OF RETENTION OF FIRST ALLMERICA FINANCIAL
1. Twenty Percent (20%) of Policy Forms shown on SCHEDULE A for Guaranteed
Issue only. For Retention purposes, this business is treated separately.
2. Twenty percent (20%) of Policy Forms shown on SCHEDULE A for any life
fully underwritten above the Guaranteed Issue Limit that does not
involve facultative underwriting. For Retention purposes, this business
is treated separately. Cases of 5 -24 lives will be considered to have a
Guaranteed Issue limit of zero (0).
1
3. For Policy Forms shown on Schedule A, any life involving facultative
underwriting for amounts above the Guaranteed Issue Limit will be
retained for twenty percent (20%) of the total facultative amount, but
not to exceed, on a per life basis, First Allmerica Financial's normal
retention schedule, which is shown above. Cases of 5 -24 lives will be
considered to have a Guaranteed Issue limit of zero (0).
MAXIMUM LIMITS OF REINSURANCE IN NORTHWESTERN NATIONAL
1. Northwestern National will assume twenty percent (20%) of the lives
covered in 1 and 2 above and twenty-five percent (25) of any facultative
amount ceded by First Allmerica Financial from 3 above. Northwestern
National will only assume up to $2,000,000 of risk any one person.
Therefore, the percentage assumed by Northwestern National may be less
than twenty-five percent (25%) where they have reached their full
retention.
2. Each group will have the Guaranteed Issue Limit determined at the time
the employer involved accepts First Allmerica Financial's proposal. The
following are the general guidelines:
a. Where the coverage is being replaced:
NUMBER OF GUARANTEED ISSUE
PARTICIPANTS IF ACTIVELY AT WORK
------------ -------------------
25 - 49 $ 500,000
50 - 99 1,000,000
100 - 149 1,500,000
150 + 2,000,000
(1) Maximum issue of five (5) times salary
(2) Formula determined amount subject to a $50,000 minimum
b. Where the coverage is not being replaced:
NUMBER OF GUARANTEED ISSUE
PARTICIPANTS IF ACTIVELY AT WORK
------------ --------------------
25 - 49 300,000
50 - 99 500,000
100 - 149 1,000,000
150 - 249 1,500,000
250 + 2,000,000
(1) Maximum issue of five (5) times salary
(2) Formula determined amount subject to a $50,000 minimum
2
c. Where the coverage is optional (supplemental) to the employee:
GUARANTEED ISSUE
ELIGIBLE IF ACTIVELY AT WORK
LIVES AND DREAD DISEASE QUESTIONS
-------- ---------------------------
25 - 99 $ 150,000
100 - 249 $ 250,000
250 - 499 $ 500,000
500 + $ 1,000,000
(1) Maximum issue of five (5) times salary
(2) Formula determined amount subject to a $50,000 minimum
(3) Dread Disease questions are as follows:
(a) Has the proposed insured ever had any of the following
conditions?
Heart Disease
Kidney Disorder
Cancer
Diabetes
(b) In the past ten (10) years, has a member of the medical
profession diagnosed or treated the proposed insured for
immune system disorder, including acquired immune deficiency
syndrome (AIDS) or AIDS-related complex (ARC)?
3. Additional general guidelines are as follows:
a. The Guaranteed Issue limits noted above may be slightly increased,
if necessary, for a few selected individuals. Northwestern National
will be notified of this during First Allmerica Financial's
proposal stage.
b. In determining the number of eligible lives for optional plans, any
member of the group earning $30,000 or more will be used. For
example, in a group of three hundred (300) lives of which two
hundred (200) earn less than $30,000 and one hundred (100) earn
$30,000 or more, First Allmerica Financial would look to the
100-249 category for the maximum Guaranteed Issue amount, not to
exceed five (5) times salary.
c. When a tiered case is proposed, First Allmerica Financial will look
to the entire group to determine maximum guaranteed issue amounts.
For example, an employer wants to provide fifty (50) senior
partners with $1,000,000 of coverage and seventy-five (75) junior
partners will $500,000 of coverage. First Allmerica Financial will
look at the 125-participant category in determining the maximum
guaranteed issue amount.
3
REINSURANCE COFIRMATION
FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
Worcester, Massachusetts
YEARLY RENEWABLE TERM REINSURANCE CONTRACT
Originally Effective: March 1, 1996
Terms Effective: March 1, 2002
BUSINESS REINSURED
New and renewal Group and Individual Flexible Premium Variable Life Insurance
written by the Company.
COMMENCEMENT AND TERMINATION
A. Continuous from March 1, 1996 as respects claims incurred on policies
issued or renewed on or after that date. Either party may elect to
terminate Contract with respect to new business, at any time with 90 days
prior notice via certified mail.
B. In addition, the Reinsurer may terminate this agreement, with respect to
new business, at any time with 30 days written notice by certified mail
subject to the occurrence of any of the following:
1. The Company's rating by A.M. Best is reduced below "B+";
2. The Company is place upon the "watch list" by the insurance regulatory
authority in its' state of domicile;
3. The regulatory authorities of any state in which the Company is
authorized to do business revokes the Company's right to continue
conducting business in that state for financial reasons;
4. An order appointing a receiver, conservator or trustee for management
of the Company is entered or a proceeding is commenced for
rehabilitation, liquidation, supervision or conservation of the
Company;
5. The Company is merged, purchased or in any manner has new ownership.
C. Upon termination, reinsurance shall remain in full force and effect for
policies issued prior to the date of termination until the termination or
cancellation of such policy whichever occurs first.
D. In addition to the termination option in paragraph B above and not
withstanding paragraph C above, the parties may mutually agree to cancel
the reinsurance in force on a mutually agreed upon date for a mutually
agreed upon recapture charge.
1
AUTOMATIC REINSURANCE
A. 100% quota share cession of the net amount at risk, including allocable
claim adjustment expense, extra contractual obligations and payments in
excess of the policy limits (per the attached wording).
B. "Net amount at risk" shall be defined as the reinsurance face amount less
an appropriate percentage of the policy's total account value (certificate
value) at the end of the prior policy year. In addition, it is agreed:
1. The net amount at risk for the first policy year equals the
reinsurance face amount.
2. If the policy has Option Two (2) for the death benefit the reinsurance
face amount remains level for all policy years.
3. Changes in the account value between anniversaries will not impact the
reinsurance net amount at risk for the policy year. The reinsurance
net amount at risk will be calculated on each anniversary and remain
constant during the policy year unless a specific reduction in
coverage occurs. If such a reduction occurs, a premium refund will
result and a new reinsurance net amount at risk will be calculated
using the account value on the prior policy anniversary. Increases in
coverage will be treated as new business starting from the effective
date of the increase.
4. Should the Minimum Death Benefit apply when an insured dies, an
appropriate adjustment will be made in the reinsurance death benefit.
5. There will be no minimum reinsurance issue amounts or minimum
reinsurance net amount at risk at renewal.
C. The policy forms underwritten and issued by the Company shall be only those
noted in Schedule A attached hereto. The Company shall provide written
notice of its' intention to issue a new or revised policy form, if it
intends for it to be covered under this Agreement. The Reinsurer shall have
30 calendar days from receipt of notice of a new or revised form to deny
approval of such form to the Company. Failure to notify the Company of
disapproval of a new or revised form within 30 days shall be deemed to
provide approval of such form.
D. The Company's issue and Retention Limit, as well as the Reinsuer's Maximum
Liability for each insured individual shall be as set forth in Schedule B
attached hereto, and the Company must retain its' maximum retention limit
for the policy.
E. The total amount of insurance, including base policy and any term riders on
the life of an insured individual in force or being applied for in all
insurance companies shall not exceed the Jumbo Risk Limits set forth in
Schedule B.
2
F. Any and all business issued under this agreement subsequent to June 1, 1999
shall make use of and follow the Underwriting Guidelines contained in
Schedule E (attached).
G. Notwithstanding the above, the maximum reinsurance net amount at risk ceded
to ReliaStar Life (20% share of this contract) shall not exceed $2,000,000
on any one life.
FACULTATIVE REINSURANCE
For any policy that exceeds the limits set forth in Schedule B or for any policy
that will be issued outside the scope of the provisions of "Automatic
Reinsurance" above, the Company shall submit a coverage proposal to the
Reinsurer for consideration on a facultative basis. No coverage on a facultative
basis will be provided unless and until a written offer (from the Company) and a
written acceptance (from the Reinsurer) are received.
CLAIMS
Individual claim reporting. The Company shall provide written notice of any
claim that may impact the reinsurance coverage within 30 days of receipt of the
notification of the claim. The Reinsurer shall then pay its' share of such claim
within 30 days after receipt of the Company's proof of loss.
PREMIUM REPORTS AND REMITTANCES
A. Within 30 days following the end of each month, the Company shall report
and remit reinsurance premiums based on the rate schedule set forth in the
attached Schedules C and D (for all business issued subsequent to June 1,
1999).
B. In addition, the Company shall provide the Reinsurer with information on
each policy issued, within 90 days of the issuance of such policies. This
information may be in any form acceptable to the Reinsurer, provided it
includes the following information on each insured individual:
1. Policy Number
2. Insured Name
3. Date of Birth
4. Policy Date
5. Amount of Reinsurance
6. Amount of the current policy
7. Retention amount
8. Plan Code or Plan of Insurance
9. Submission basis (Automatic or Facultative)
10. Termination Date
11. Sex
12. Net amount at risk
13. Mortality assessment
14. Flat Extra Rating
15. Smoker Code
16. Original policy date
3
C. Annually, the Company shall provide such information as may be required by
the Reinsurer for Annual Statement purposes.
RETENTION AND RECAPTURE
A. The Company shall have the right to increase or decrease the Retention
Limit under this Contract by providing 30 days prior written notice. Such
increase shall only apply to new policies issued on or after the effective
date of such increase or decrease.
B. The Company shall have no right to recapture existing reinsurance in the
event of its increase in Retention Limit.
OTHER PROVISIONS
ACCESS TO RECORDS INSOLVENCY
OFFSET DELAYS, ERRORS OR OMMISSIONS
DAC TAX CURRENCY
ARBITRATION ECO/XPL (Counsel & Concur basis)
NOTICES INTERMEDIARY (Xxxx X. Xxxxxxx Associates, Inc.)
REINSURER
ReliaStar Life Insurance Company, Minneapolis, MN 20.0%
NAIC: 00000
XXXX: 00-0000000
Accepted by: /s/ Xxx X. Xxxxxx Date: 3/27/02
------------------------------- ----------------------
Vice President
------------------------------
4
SCHEDULE A
ReliaStar Life Insurance Company
Policy forms subject to Reinsurance under this Agreement
POLICY NAME POLICY FORM NUMBER
----------- ------------------
Group Flexible Premium Variable Life 1029P-94 (Employer)
1029C-94 (Employee)
Individual Flexible Premium Variable Life 1023-93
NOTE: Same policy form numbers apply for both First Allmerica Financial Life
Insurance Company and Allmerica Financial Life Insurance and Annuity
Company.
RIDER NAME RIDER FORM NUMBER
---------- -----------------
None
5
(Revised May 1, 1997)
SCHEDULE B
JUMBO RISK LIMITS
INSURANCE AGE TOTAL LINE
------------- ----------
0 - 80 $ 10,000,000
FIRST ALLMERICA FINANCIAL RETENTION SCHEDULE
LIFE INSURANCE
STANDARD RISKS,
SPECIAL CLASSES SPECIAL CLASSES
A THROUGH H AND J, L, & P, AND
ISSUE FLAT EXTRAS OF FLAT EXTRAS OF
AGES $20.00 OR LESS $20.01 OR OVER
----- --------------- ---------------
-0- $ 500,000 $ 250,000
1 - 60 2,000,000 1,000,000
61 - 70 1,000,000 500,000
71 - 80 500,000 250,000
Notes: (1) The above maximum limits are also the maximums on any one life for
all plans and riders combined.
(2) There is no minimum size reinsurance case.
(3) Any Other Insured Rider or Children's Insurance Rider attached to
any of the policy forms on Schedule A will not be reinsured under
this reinsurance agreement.
(4) Disability Waiver of Premium and Accidental Death Benefits are
Fully Retained by First Allmerica Financial.
Any situation involving Aviation will use a $500,000 retention.
MAXIMUM LIMITS OF RETENTION OF FIRST ALLMERICA FINANCIAL
1. Twenty Percent (20%) of Policy Forms shown on SCHEDULE A for Guaranteed
Issue only. For Retention purposes, this business is treated separately.
2. Twenty percent (20%) of Policy Forms shown on SCHEDULE A for any life
fully underwritten above the Guaranteed Issue Limit that does not
involve facultative underwriting. For Retention purposes, this business
is treated separately. Cases of 5-24 lives will be considered to have a
Guaranteed Issue limit of zero (0).
1
3. For Policy Forms shown on Schedule A, any life involving facultative
underwriting for amounts above the Guaranteed Issue Limit will be
retained for twenty percent (20%) of the total facultative amount, but
not to exceed, on a per life basis, First Allmerica Financial's normal
retention schedule, which is shown above. Cases of 5 - 24 lives will be
considered to have a Guaranteed Issue limit of zero (0).
MAXIMUM LIMITS OF REINSURANCE IN RELIASTAR LIFE INSURANCE COMPANY
1. ReliaStar will assume twenty percent (20%) of the lives covered in 1 and
2 above and twenty-five percent (25%) of any facultative amount ceded by
First Allmerica Financial from 3 above. ReliaStar will only assume up to
$2,000,000 of risk any one person. Therefore, the percentage assumed by
ReliaStar may be less than twenty-five percent (25%) where they have
reached their full retention.
2. Each group will have the Guaranteed Issue Limit determined at the time
the employer involved accepts First Allmerica Financial's proposal. The
following are the general guidelines:
a. Where the coverage is being replaced:
NUMBER OF GUARANTEED ISSUE
PARTICIPANTS IF ACTIVELY AT WORK
------------ -------------------
25 - 49 $ 500,000
50 - 99 1,000,000
100 - 149 1,500,000
150 + 2,000,000
(1) Maximum issue of five (5) times salary
(2) Formula determined amount subject to a $50,000 minimum
b. Where the coverage is not being replaced:
NUMBER OF GUARANTEED ISSUE
PARTICIPANTS IF ACTIVELY AT WORK
------------ -------------------
25 - 49 $ 300,000
50 - 99 500,000
100 - 149 1,000,000
150 - 249 1,500,000
250 + 2,000,000
(1) Maximum issue of five (5) times salary
(2) Formula determined amount subject to a $50,000 minimum
2
c. Where the coverage is optional (supplemental) to the employee:
GUARANTEED ISSUE
ELIGIBLE IF ACTIVELY AT WORK
LIVES AND DREAD DISEASE QUESTIONS
-------- ---------------------------
25 - 99 $ 150,000
100 - 249 250,000
250 - 499 500,000
500 + 1,000,000
(1) Maximum issue of five (5) times salary
(2) Formula determined amount subject to a $50,000 minimum
(3) Dread Disease questions are as follows:
(a) Has the proposed insured ever had any of the following
conditions?
Heart Disease
Kidney Disorder
Cancer
Diabetes
(b) In the past ten (10) years, has a member of the medical
profession diagnosed or treated the proposed insured for
immune system disorder, including acquired immune deficiency
syndrome (AIDS) or AIDS-related complex (ARC)?
3. Additional general guidelines are as follows:
a. The Guaranteed Issue limits noted above may be slightly increased,
if necessary, for a few selected individuals. ReliaStar will be
notified of this during First Allmerica Financial's proposal stage.
b. In determining the number of eligible lives for optional plans, any
member of the group earning $30,000 or more will be used. For
example, in a group of three hundred (300) lives of which two
hundred (200) earn less than $30,000 and one hundred (100) earn
$30,000 or more, First Allmerica Financial would look to the
100-249 category for the maximum Guaranteed Issue amount, not to
exceed five (5) times salary.
c. When a tiered case is proposed, First Allmerica Financial will look
to the entire group to determine maximum guaranteed issue amounts.
For example, an employer wants to provide fifty (50) senior
partners with $1,000,000 of coverage and seventy-five (75) junior
partners will $500,000 of coverage. First Allmerica Financial will
look at the 125-participant category in determining the maximum
guaranteed issue amount.
3
d. If a multiple of salary plan is being replaced on an at work basis,
First Allmerica Financial will offer additional multiples of salary
(not to exceed the lesser of the dollar cap for the given category
or five (5) times salary) on a dread disease basis. For example, if
a three (3) times salary plan is being replaced and there is no
supplemental coverage currently in place, First Allmerica Financial
will offer another two (2) times salary on a dread disease basis.
e. Coverage will be replaced on an at work basis in carve-out
situations (2a above) if the employee is age 70 or under. In
situations when there are a few employees over age 70, First
Allmerica Financial has the right to offer coverage on an at work
basis if the coverage is $1,500,000 or less. ReliaStar will be
notified of this during First Allmerica Financial's proposal stage.
f. A nonqualified 401(k) type plan that is offered to all eligible
employees who want to defer a portion of their income will make up
a distinct group. This group will be categorized as full
participation where coverage is not being replaced.
g. For nonqualified plans, other than group term carve-outs, such as
SERPs, non-qualified 401(k) type plans, or Split Dollar Plans, the
five (5) times salary cap should not necessarily apply. For
example, when the product is used to fund lost benefits, etc.,
there are factors that determine the death benefit other than a
multiple of salary. For example, an employer wants to minimum death
benefit to fund for a cash value equal to X at age 60. The minimum
death benefit may be more than five (5) times the insured's salary.
The five (5) times salary cap should apply only to group term
carve-out and optional plans.
h. Increases up to ten percent (10%) per year on a cumulative basis
are available on an actively at work basis. Annual increases of
greater than ten percent (10%) and less than twenty percent (20%)
will be considered based upon actively at work and dread disease.
Any annual increase of twenty percent (20%) or more in one (1) year
will require full evidence of insurability. (Maximum cap not to
exceed $500,000 of applicable category).
i. Only fully underwritten amounts over $1,000,000 need to be
submitted facultatively.
j. Cases of five (5) to twenty-four (24) lives will be fully
underwritten and are considered to have a Guaranteed Issue limit of
zero (0).
4
SCHEDULE C
YEARLY RENEWABLE TERM REISURANCE AGREEMENT
Effective: March 1, 1996
issued to
FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
Annual Mortality Charges Per $1,000
AGE N/S SMOKER BLENDED AGE N/S SMOKER BLENDED
--- --- ------ ------- --- --- ------ -------
0 2.38 2.38 2.38 48 2.38 4.47 2.80
1 0.64 0.64 0.64 49 2.57 4.83 3.02
2 0.59 0.59 0.59 50 2.77 5.80 3.38
3 0.58 0.58 0.58 51 3.01 5.80 3.57
4 0.56 0.56 0.56 52 3.27 6.08 3.83
5 0.54 0.54 0.54 53 3.54 6.21 4.07
6 0.51 0.51 0.51 54 3.84 7.24 4.52
7 0.48 0.48 0.48 55 4.18 9.05 5.15
8 0.46 0.46 0.46 56 4.69 9.05 5.56
9 0.45 0.45 0.45 57 5.25 9.30 6.06
10 0.44 0.44 0.44 58 5.80 9.83 6.61
11 0.46 0.46 0.46 59 6.42 10.85 7.31
12 0.51 0.51 0.51 60 7.12 14.10 8.52
13 0.58 0.58 0.58 61 7.73 14.12 9.01
14 0.67 0.67 0.67 62 8.42 14.30 9.60
15 0.77 0.77 0.77 63 9.20 14.94 10.35
16 0.85 0.85 0.85 64 10.07 18.03 11.66
17 0.93 0.93 0.93 65 11.02 19.99 12.81
18 0.85 1.20 0.92 66 12.28 21.76 14.18
19 0.88 1.25 0.95 67 13.66 23.59 15.65
20 0.90 1.27 0.97 68 15.12 25.46 17.19
21 0.90 1.26 0.97 69 16.72 27.42 18.86
22 0.88 1.28 0.96 70 18.52 29.59 20.73
23 0.87 1.26 0.95 71 20.14 31.68 22.45
24 0.85 1.24 0.93 72 21.99 34.07 24.41
25 0.84 1.20 0.91 73 24.11 36.75 26.64
26 0.82 1.76 0.89 74 26.45 39.66 29.09
27 0.81 1.17 0.88 75 28.91 42.84 31.70
28 0.80 1.16 0.87 76 32.05 47.57 35.15
29 0.81 1.17 0.88 77 35.37 52.53 38.80
30 0.81 1.20 0.89 78 38.83 57.66 42.60
31 0.83 1.25 0.91 79 42.52 63.08 46.63
32 0.85 1.28 0.94 80 46.59 69.01 51.07
33 0.87 1.35 0.97 81 51.23 75.62 56.11
34 0.92 1.42 1.02 82 56.51 83.09 61.83
35 0.95 1.51 1.06 83 62.52 91.51 68.32
36 1.00 1.61 1.12 84 69.15 100.77 75.47
37 1.06 1.75 1.20 85 76.28 110.52 83.13
38 1.14 1.89 1.29 86 83.64 122.20 91.35
39 1.22 2.07 1.39 87 91.28 134.23 99.87
40 1.31 2.26 1.50 88 99.07 147.74 108.80
41 1.41 2.49 1.63 89 107.13 161.76 118.06
42 1.51 2.72 1.75 90 115.54 176.71 127.77
43 1.63 2.98 1.90 91 124.46 192.74 138.12
44 1.75 3.25 2.05 92 134.20 208.12 148.98
45 1.90 3.56 2.23 93 145.24 226.69 161.53
46 2.04 3.85 2.40 94 159.43 251.37 177.82
47 2.20 4.15 2.59
SCHEDULE E
Underwriting Guidelines
EFFECTIVE: JUNE 1, 1999
1. Aggregate Funded Cases and Corporate-Owned/Sponsored Plans including
Deferral and SERP Plans (No individual beneficial interest)
- $25,000 per life
# OF INSUREDS AT ISSUE FACE AMOUNT
------------------------ ------------------------------------------
10 - 25 Based on individual case consideration
26 - 50 $ 650,000 - $1,250,000
51 - 100 $ 1,275,000 - $2,500,000
100 + $ 2,525,000 - $3,500,000
2. Split Dollar and Carve-Out Plans (must be formula driven)
$ 20,000 Per life to 100 lives
$ 25,000 Per life at 100+
# OF INSUREDS AT ISSUE FACE AMOUNT
------------------------ ------------------------------------------
10 - 25 Based on individual case consideration
26 - 50 $ 520,000 - $1,000,000
51 - 100 $ 1,020,000 - $2,000,000
100 + $ 2,525,000 - $3,500,000
Guidelines generally apply to insureds under age 70 who are actively at work
performing their normal duties on a full-time basis. All proposed insureds must
be part of a defined class of executives.
- Increases up to 10% annually on a cumulative basis if "actively at
work."
AGES MAXIMUM INCREASE COVERAGE
------------------------- ------------------------------------------
Up to Age 69 $ 1,500,000
