CUNA Mutual Group Zone Income Annuity Contract COINSURANCE AGREEMENT
Exhibit 10(i)(a)
CUNA Mutual
Group Zone Income Annuity Contract
COINSURANCE AGREEMENT
This Coinsurance Agreement (this “Agreement”), effective as of _________, 2019, is by and between CMFG Life Insurance Company, a stock insurance corporation organized under the laws of the State of Iowa (hereinafter referred to as the “Reinsurer”), and MEMBERS Life Insurance Company, a stock insurance corporation organized under the laws of the State of Iowa (hereinafter referred to as the “Company”).
The Company and the Reinsurer mutually agree to enter into a reinsurance transaction under the terms and conditions stated herein. This Agreement is an indemnity reinsurance agreement solely between the Company and the Reinsurer, and the performance of the obligations of each party under this Agreement shall be rendered solely to the other party. In no instance, except as set forth in the insolvency provisions of this Agreement, shall anyone other than the Company or the Reinsurer have any rights under this Agreement, and the Reinsurer shall have no obligation or liability to any insured, owner, beneficiary or other third party under the policies reinsured hereunder.
ARTICLE I
Definitions
As used in this Agreement, the following terms shall have the following meanings (definitions are applicable to both the singular and the plural forms of each term defined in this Article):
1.1 | “Business Day” means any day that is not a Saturday, Sunday or other day on which national banking institutions are required or permitted by law or executive order to be closed. | |
1.2 | “Company’s Separate Account” shall mean the insulated, non-unitized separate
account (or accounts) established and maintained by the Company pertaining to the
reinsured policies. |
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1.3 | “Effective
Date” shall have the meaning set forth in Section 2.1. |
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1.4 | “Expense
Allowance” shall have the meaning set forth in Section 4.3. |
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1.5 | “Insurance
Taxes and Charges” means all premium taxes and other insurance taxes (not
including any federal, state or local tax measured by income) and guaranty fund
assessments payable by the Company on account of the Reinsured Policies. |
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1.6 | “Policy
Benefits” shall mean all annuity payouts, partial surrenders, full surrenders,
death claims (if applicable), and all other contractual benefits or liabilities
of any kind payable under the Reinsured Policies, including, without limitation,
any extracontractual liabilities related thereto. |
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1.7 | “Premiums” means the gross consideration payable on account of the Reinsured Policies. |
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1.8 | “Monthly
Accounting Period” means a monthly accounting prepared in accordance with
Iowa SAP and prepared by the Company in accordance with the provisions of Article
VI hereof from the Effective Date through _______ 31, 2019 and each calendar month thereafter. |
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1.9 | “Quota
Share Percentage” shall have the meaning set forth in Section 2.1. |
1.10 | “Reinsured
Policies” shall mean all (i) policies and annuity contracts classified
by the Company as the CUNA Mutual Group Zone Income Annuity Contract , including
any amendments, riders or endorsements attached thereto and any reinstatements thereof,
and (ii) all Supplementary Contracts, in each case issued, written or exchanged
by the Company on or following the Effective Date and through the date of termination
of this Agreement. |
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1.11 | “Reinsurer’s Separate Account” means the separate account (or accounts) established
and maintained by the Reinsurer for purposes of holding assets and reserves attributable
to the portion of business reinsured hereunder that is ceded directly from the Company’s Separate Account. |
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1.12 | “Reserves” means, as of any date, all reserves, deposit fund liabilities and any
other liabilities whatsoever for or under the Reinsured Policies calculated consistent
with the reserve requirements, statutory accounting rules, and actuarial principles
applicable to the Company and/or the Reinsurer. |
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1.13 | “Settlement
Amount” means the net amount due and payable to either party with respect
to any Monthly Accounting Period as set forth in Section 6.1. |
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1.14 | “Supplementary
Contracts” means all supplementary contracts, whether with or without life
contingencies, issued by the Company in exchange for a Reinsured Policy. |
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ARTICLE II Coverage |
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2.1 | Coverage.
Upon the terms and subject to the conditions of this Agreement, as of 12:01
a.m., Central Time, on ________, 2019 (the “Effective Date”), the Company
shall cede to the Reinsurer, and the Reinsurer shall assume from the Company, all
liabilities under the Reinsured Policies on a one hundred percent (100%) coinsurance
basis (the “Quota Share Percentage”). The liability of the Reinsurer hereunder
with respect to the Reinsured Policies shall begin simultaneously and automatically
with that of the Company, but not prior to the Effective Date. |
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2.2 | Conditions.
All coinsurance for which the Reinsurer is liable hereunder shall be subject
to the same rates, terms, conditions, waivers, modifications, alterations, cancellations,
limitations and restrictions as are contained in or otherwise apply to the Reinsured
Policies, except as otherwise provided in this Agreement. Whenever a change is made
in the status, plan, amount or other material feature of a Reinsured Policy, the
Reinsurer will provide adjusted reinsurance coverage in accordance with the provisions
of this Agreement. |
ARTICLE III General Provisions |
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3.1 | Inspection.
Either party or its designated representative may, upon reasonable advance notice
and during normal business hours at the offices of the Company or the Reinsurer,
as the case may be, conduct reasonable inspections of the books and records of the
other party reasonably relating to the Reinsured Policies or this Agreement for
such period as this Agreement remains in effect and as long thereafter as the Company
or the Reinsurer, as the case may be, has any outstanding obligation under this
Agreement. |
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3.2 | Setoff
and Recoupment. Subject to the limitation on setoff set forth in Section 6.2,
any debts or credits incurred or arising on or after the Effective Date in favor
of or against either the Company or the Reinsurer with respect to this Agreement
are deemed mutual debts or credits, as the case may be, and shall be set off, and
only the net balance shall be allowed or paid; provided, however, that in the event
of the insolvency of a party hereto, offsets shall only be allowed in accordance
with the provisions of applicable law. |
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3.3 | Compliance
with Applicable Laws. The Company and the Reinsurer shall maintain all licenses,
obtain all regulatory approvals and comply with all applicable laws and regulatory
requirements necessary to perform their respective obligations under this Agreement. |
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ARTICLE IV Payments |
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4.1 | Premiums.
The Company shall pay the Reinsurer the Quota Share Percentage of all Premiums
payable on account of the Reinsured Policies as such Premiums are due and received.
Premiums received by the Company and payable to the Reinsurer shall be reflected
in the Monthly Accounting Reports prepared by the Company and included in the calculation
of the applicable Settlement Amounts pursuant to Section 6.1. All Premiums remitted
from the Company’s Separate Account shall be deposited directly into the Reinsurer’s Separate Account. The Reinsurer shall be permitted to invest premiums deposited
into the Reinsurer’s Separate Account in accordance with the investment guidelines
attached hereto as Exhibit A (the “Investment Guidelines”). The Reinsurer shall
have the authority to manage, substitute and re-invest assets held in the Reinsurer’s Separate Account at its discretion, provided that (a) all assets held in
or transferred to the Reinsurer’s Separate Account shall comply at all times
with the Investment Guidelines, and (b) the aggregate value of assets held in the
Reinsurer’s Separate Account shall at all times be no less than the outstanding
reserves and other liabilities reinsured from the Company’s Separate Account.
All assets held in the Reinsurer’s Separate Account shall be used solely to
satisfy liabilities attributable to the Company’s Separate Account and shall
not be chargeable with liabilities arising out of any other business of the Company
or the Reinsurer. The Reinsurer shall provide the Company with a semi-annual report
(or more frequently if requested by the Company), with a copy provided to the Iowa
Insurance Division, summarizing the investment holdings in the Reinsurer’s
Separate Account with respect to the six-month period at issue. |
4.2 | Policy
Benefits. The Reinsurer shall pay its Quota Share Percentage of all Policy Benefits
paid by the Company during the current Monthly Accounting Period. Policy Benefits
payable to the Company shall be reflected in the Monthly Accounting Reports prepared
by the Company and included in the calculation of the applicable Settlement Amount
pursuant to Section 6.1. Any Policy Benefit payable by the Reinsurer attributable
to the Company’s Separate Account shall be satisfied solely through assets
held in the Reinsurer’s Separate Account. Any Policy Benefit payable by the
Reinsurer hereunder attributable to the Company’s general account shall be
satisfied using assets from the Reinsurer’s general account. |
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4.3 | Expense
Allowance. As reimbursement for expenses and costs incurred by the Company in
the sale and administration of the Reinsured Policies, including but not limited
to (i) commissions, (ii) acquisition expenses, (iii) expenses incurred in the provision
of policyholder and benefit payment services, and (iv) Insurance Taxes and Charges,
the Reinsurer shall pay to the Company a monthly expense allowance in an amount
equal to the Quota Share Percentage of the actual allocated expenses and costs incurred
by the Company with respect to the Reinsured Policies for the monthly period at
issue, which expenses and costs shall be allocated between the Company’s Separate
Account and the Company’s general account in accordance with SSAP 70 (the “Expense Allowance”). The Expense Allowance shall be reflected in the Monthly
Accounting Reports prepared by the Company and included in the calculation of the
applicable Settlement Amount pursuant to Section 6.1. |
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4.4 | Payments. All payments pursuant to this Agreement shall be made in U.S. dollars and immediately available funds. |
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ARTICLE V Administration |
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5.1 | Policy
Administration. The Company shall provide all required, necessary and appropriate
claims, administrative and other services with respect to the Reinsured Policies.
The Company shall use reasonable care in its underwriting, administration and claims
practices with respect to the Reinsured Policies and in administering and performing
its duties under this Agreement and such practices, administration and performance
shall (a) conform with applicable law; (b) not be fraudulent; and (c) be no less
favorable than those used by the Company with respect to other policies of the Company
not reinsured by the Reinsurer. |
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5.2 | Record
Keeping. The Company shall maintain appropriate books and records relating to
the Reinsured Policies in accordance with industry standards of insurance record
keeping. In the event of the termination of this Agreement and upon the request
of the Company, any records in the possession of the Reinsurer related to the Reinsured
Policies shall be duplicated and forwarded to the Company. The Company shall establish
and maintain an adequate system of internal controls and procedures for financial
reporting relating to the Reinsured Policies and shall make such documentation available
for examination and inspection by the Reinsurer upon request. |
ARTICLE VI Accounting and Settlement |
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6.1 | Monthly
Accounting Reports. Within thirty (30) calendar days following the end of each
Monthly Accounting Period, the Company shall provide the Reinsurer with a monthly
report which shall list each of the payment obligations pursuant to Article IV for
such Monthly Accounting Period and such other information regarding the Reinsured
Policies as may be mutually agreed upon by the parties (the “Monthly Accounting
Reports”). Each Monthly Accounting Report shall separately identify payment
obligations attributable to the Company’s Separate Account and payment obligations
attributable to the Company’s general account. In addition to the Monthly Accounting
Reports, the Company shall provide the Reinsurer with any additional information
related to this Agreement or the Reinsured Policies as is reasonably necessary for
the Reinsurer to satisfy any financial reporting or disclosure requirements or to
comply with any applicable laws. Each Monthly Account Report will include separate
calculations of the Settlement Amount for that Monthly Accounting Period related
to the Company’s Separate Account and the Company’s general account with
respect to the Reinsured Policies. The term “Settlement Amount” for any Monthly
Accounting Period shall mean an amount equal to the difference between (i) Premiums
payable pursuant to Section 4.1, less (ii) Policy Benefits payable pursuant to Section
4.2, less (iii) the Expense Allowance payable pursuant to Section 4.3, in each case
calculated for the Company’s Separate Account and the Company’s general
account. |
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6.2 | Settlements. If the Settlement Amount prepared by the Company for the Company’s Separate
Account or the Company’s general account shows a net balance payable to the
Reinsurer, the Company shall remit such balance(s) to the Reinsurer within thirty
(30) Business Days following delivery of the Monthly Accounting Report. If the Settlement
Amount for the Company’s Separate Account or the Company’s general account
shows a net balance payable to the Company, the Reinsurer shall remit such balance(s)
to the Company within thirty (30) Business Days following receipt of the Monthly
Accounting Report. Any Settlement Amount payable by the Reinsurer from the Reinsurer’s Separate Account shall be satisfied solely from assets held in the Reinsurer’s Separate Account. In addition, any balances due hereunder on account of the
Company’s Separate Account shall not be offset against balances attributable
to the Company’s general account. |
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6.3 | Reconciliation. Each party shall have the right to review and dispute individual components
of the transactions reflected in the Monthly Accounting Reports, and to request
adjustments, as appropriate. Any amount due either party in connection with any
adjustment shall be paid within thirty (30) Business Days following the parties’ resolution of such adjustment. |
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ARTICLE VII Term and Termination |
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7.1 | Term. The coinsurance provided under this Agreement shall remain continuously in force
for so long as the Company shall remain liable on the Reinsured Policies or until
terminated by either party by written notice given to the other party at least twelve
(12) months in advance of the termination date, a copy of which shall be provided
to the Iowa Insurance Division. |
7.2 | Runoff
Coverage. If this Agreement is terminated, the coinsurance hereunder shall continue
to apply to benefits and/or claims under all Reinsured Policies (including any lapsed,
surrendered, reinstated, renewed or matured Reinsured Policy) until the Company’s obligations under the Reinsured Policies ceases. The parties hereto expressly
covenant and agree that, in the event of termination of this Agreement, they will
cooperate with each other in the handling of all such run-off insurance business
until the Company’s obligations under the Reinsured Policies ceases. All costs
and expenses associated with the handling of such run-off business shall be borne
solely by the Reinsurer. For the avoidance of doubt, in the event this Agreement
is terminated, the coinsurance hereunder shall not apply to any life insurance policies
or annuity contracts, or binders, contracts, certificates, riders, endorsements,
supplemental benefits, or other agreements related or attaching to such insurance
policies or contracts, that were first issued or assumed by the Company on or after
the effective date of any termination of this Agreement. |
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7.3 | Recapture. The Policies are not eligible for recapture by the Company except upon the mutual agreement of the Company and the Reinsurer. |
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ARTICLE VIII Insolvency |
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8.1 | Insolvency
of Ceding Company. In the event of insolvency and the appointment of a conservator,
liquidator, or statutory successor of the Company, the reinsurance hereunder shall
be payable directly to the conservator, rehabilitator, liquidator, receiver or statutory
successor of the Company on the basis of claims allowed against the Company by any
court of competent jurisdiction or by any conservator, rehabilitator, liquidator,
receiver or statutory successor of the Company having authority to allow such claims,
without diminution because of that insolvency, or because the conservator, rehabilitator,
liquidator, receiver or statutory successor of the Company has failed to pay all
or a portion of any claims. Payments by the Reinsurer, as set forth herein, shall
be made directly to the Company or to its conservator, rehabilitator, liquidator,
receiver or statutory successor, except where this Agreement specifically provides
another payee of such reinsurance in the event of the insolvency of the Company.
The conservator, rehabilitator, liquidator, receiver or statutory successor of the
Company shall give written notice to the Reinsurer of the pendency of a claim against
the Company indicating the policy reinsured, within a reasonable time after such
claim is filed and the Reinsurer may investigate and interpose, at its own expense,
in any proceeding where such claim is to be adjudicated, any defense or defenses
that the Reinsurer may deem available to the Company or to its conservator, rehabilitator,
liquidator, receiver or statutory successor. |
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ARTICLE IX Dispute Resolution |
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9.1 | Dispute
Resolution. If a dispute, controversy, or claim arises out of or relates to
this Agreement, or an alleged breach thereof, and if said dispute cannot be settled
through direct discussions, the parties agree to first endeavor to settle the dispute
in an amicable manner by mediation administered by the American Arbitration Association
(“AAA”) under its Commercial Mediation Rules, before resorting to arbitration.
If the matter has not been resolved pursuant to mediation |
within thirty (30) calendar days of the commencement of such mediation (which period
may be extended by mutual agreement in writing), then any unresolved dispute, controversy,
or claim arising out of or relating to this Agreement, its termination or non-renewal,
or any breach thereof, shall be settled by arbitration in accordance with the Commercial
Arbitration Rules of the AAA, and judgment upon the award rendered by the arbitrator
may be entered in any court having jurisdiction thereof. The arbitration shall be
conducted by a sole arbitrator or, at the election of either party, before a panel
of three arbitrators. Selection of the arbitrator(s) shall be in accordance with
the Commercial Arbitration Rules of the AAA. The arbitrator(s) shall allow each
party to conduct limited relevant discovery. The arbitrator(s) shall have no authority
to award punitive damages or any damages not measured by the prevailing party’s
actual damages, and may not, in any event, make any ruling, finding or award that
does not conform to the terms and conditions of this Agreement and applicable state
and federal laws. All fees and expenses of arbitration shall be borne by the parties
equally. However, each party shall bear the expense of its own counsel, experts,
witnesses, and preparation and presentation of the arbitration matter. Any such
arbitration shall be conducted in Madison, Wisconsin. |
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ARTICLE X DAC Tax |
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10.1 |
Party. The term “party” will refer to either contracting company
as appropriate. |
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10.2 |
Other Terms. The terms “Net Positive Consideration”, “Specified
Policy Acquisition Expenses” and “General Deductions Limitation” used in this Article
are defined by reference to Regulation Section 1.848-2 and Code Section 848. |
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10.3 |
DAC Tax Election. The parties to this Agreement make the election set forth
below pursuant to Section 1.848-2(g) (8) of the Income Tax Regulations issued under
Section 848 of the Internal Revenue Code of 1986, as amended (the “Code”). This
election shall be effective for taxable year 2013 and for all subsequent taxable
years for which this Agreement remains in effect. |
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(a) | The party
with the Net Positive Consideration for this Agreement for each taxable year will
capitalize Specified Policy Acquisition Expenses with respect to this Agreement
without regard to the General Deductions Limitation of Code Section 848(c)(1). |
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(b) | Both parties
agree to exchange information pertaining to the amount of net consideration under
this Agreement each year, or as otherwise required by the Internal Revenue Service,
to ensure consistency. |
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(c) | The Company
will submit a schedule to the Reinsurer by May 1 of each year with its calculation
of the net consideration for the preceding calendar year. This schedule will be
accompanied by a statement signed by an officer of the Company attesting to the
calculation contained in said schedule. The Reinsurer may contest such calculation
by providing an alternative calculation to the Company in writing within thirty
(30) calendar days of the Reinsurer’s receipt of the Company’s calculation. |
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(d) | If the
Reinsurer contests the Company’s calculation, the parties will act in good
faith to reach an agreement as to the correct amount within thirty (30) calendar
days of the date that the Company receives the Reinsurer’s |
alternative
calculation. If the parties reach an agreement on the net consideration calculation,
each party will report the agreed upon amount in its income tax return for the preceding
calendar year. If the parties are unable to reach an agreement on the amount of
net consideration, then the dispute shall be resolved pursuant to Article IX of
this Agreement. If Reinsurer does not contest the Company’s calculation the
parties will utilize the calculation provided by the Company for reporting purposes
in their respective income tax returns for the preceding year. |
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ARTICLE XI Miscellaneous Provisions |
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11.1 | Headings. Headings used herein are not a part of this Agreement or related documents and shall not affect the terms hereof. |
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11.2 |
Notices. All notices and communications hereunder shall be in writing and
shall become effective when received. Any written notice shall be sent by either
certified or registered mail, return receipt requested, overnight delivery service
(providing for delivery receipt), electronic facsimile transmission, or delivered
by hand. All notices or communications under this Agreement shall be addressed as
follows: If to the Company: |
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MEMBERS Life Insurance Company | ||||
0000 Xxxxxxx Xxxxx Xx. | ||||
Xxxxxxx, XX 00000 | ||||
Attention: Treasurer | ||||
If to the Reinsurer: | ||||
CMFG Life Insurance Company | ||||
0000 Xxxxxxx Xxxxx Xx. | ||||
Xxxxxxx, XX 00000 | ||||
Attention: Treasurer | ||||
11.3 |
Successors and Assigns. This Agreement and related documents cannot be assigned
by either party without the prior written consent of the other and the prior approval
of the Iowa Insurance Division. The provisions of this Agreement and related documents
shall be binding upon and inure to the benefit of and be enforceable by the parties
hereto and their respective successors and assigns as permitted herein. |
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11.4 |
Execution in Counterparts. This Agreement may be executed by the parties hereto
in any number of counterparts, and by each of the parties hereto in separate counterparts,
each of which counterparts, when so executed and delivered, shall be deemed to be
an original, but all such counterparts shall together constitute but one and the
same instrument. |
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11.5 |
Entire Agreement. This Agreement constitutes the entire agreement between
the parties hereto with respect to the business being reinsured hereunder and there
are no understandings between the parties other than those expressed in this Agreement.
Any change or modification to this Agreement shall be null and void unless made
by amendment to this Agreement and signed by both parties hereto. |
11.6 | Regulatory
Approval of Amendments. When and if, under applicable laws or regulations, the approval
of any amendment to this Agreement or related documents by one or more federal,
state or local regulatory authorities is required, the amendment shall not take
effect unless and until all such necessary approvals have been received by the Company. |
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11.7 | Governing
Law. This Agreement and related documents shall be governed by and construed in
accordance with the laws of the State of Iowa. |
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11.8 | Severability.
In the event any section or provision of this Agreement or related documents is
found to be void and unenforceable by a court of competent jurisdiction, the remaining
sections and provisions of this Agreement or related documents shall nevertheless
be binding upon the parties with the same force and effect as though the void or
unenforceable part had not been severed or deleted. |
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[Remainder of page left intentionally blank] |
IN WITNESS
WHEREOF, the parties hereto have caused this Agreement to be executed by their duly
authorized representative. |
CMFG Life Insurance Company |
By:_______________________ |
Title:______________________ |
Date:_____________________ |
MEMBERS Life Insurance Company |
By:_______________________ |
Title:______________________ |
Date:_____________________ |
EXHIBIT A | ||||||
Investment Guidelines CMFG Life Insurance Company MEMBERS Life Risk Control Separate Account and MEMBERS Life Declared Rate Separate Account |
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MEMBERS Life Risk Control Separate Account Limits | ||||||
Broad Asset Class | Asset Class | Minimum | Maximum | |||
Near Risk-Free | 4% | 100% | ||||
Cash | 0% | 100% | ||||
Government | 1% | 100% | ||||
Agency MBS* | 3% | 40% | ||||
Corporate | 20% | 80% | ||||
Public – Investment Grade | 20% | 80% | ||||
Private – Investment Grade | 0% | 20% | ||||
High Yield | 0% | 10% | ||||
Other Credit | 0% | 30% | ||||
Municipal | 0% | 5% | ||||
Mortgage Loan | 0% | 25% | ||||
Structured Credit | 3% | 25% | ||||
ABS | 0% | 20% | ||||
CMBS | 0% | 20% | ||||
CLO | 0% | 20% | ||||
RMBS | 0% | 5% | ||||
Equity or Near-Equity | 0% | 5% | ||||
Real Estate | 0% | 0% | ||||
Alternative – Mezzanine | 0% | 5% | ||||
Alternative – Private Equity | 0% | 5% | ||||
Public Equity | 0% | 5% |
*A pass-through security or unleveraged CMO class
Derivatives
Derivatives will primarily be limited to those hedging liability risks. Risks hedged would primarily be the equity market related guarantees of the CUNA Mutual Group Zone Income Annuity Contract but can also include rate and credit oriented exposures generally related to liability reserves. Derivative usage and limits on notional amounts will be set by the Board of Directors of CMFG Life Insurance Company from time to time and must comply with the CMFG Life Insurance Company Derivative Use Plan and Derivative Policy.
Transfer restrictions
Assets may be transferred into and out of the separate accounts as long as asset values exceed liability values after such transfers. Impaired securities, securities in default or assets encumbered by other agreements (modified coinsurance “segregated” assets, collateral for trusts, etc.) may not be transferred into the separate accounts.
Borrowing to Support the Separate Accounts
Assets of the Separate Accounts may be used to collateralize borrowing in order to meet short-term liquidity needs of the Separate Accounts.
Use of Funding Agreements
Assets of the Separate Accounts may be used to collateralize funding agreements with the Federal Home Loan Bank (“FHLB”). Funding agreement proceeds will be invested within the Separate Accounts in assets that are consistent with these investment guidelines and that match funding agreement liabilities. Funding agreement liabilities will be recorded in the Separate Accounts.
Securities Lending
The Separate Accounts may participate in a securities lending program consistent with the terms of the general account securities lending program in which collateral is received for loaned securities, provided investments made with such collateral are invested within the Separate Accounts in assets consistent with these Investment guidelines and that match securities lending program liabilities.