Exhibit (g)(vi)
2516-00-00
AUTOMATIC AND FACULTATIVE YEARLY RENEWABLE TERM AGREEMENT
between
SECURITY EQUITY LIFE INSURANCE COMPANY
(hereinafter called the CEDING COMPANY)
ARMONK, NEW YORK
and
RGA REINSURANCE COMPANY
(hereinafter called RGA RE)
St. Louis, Missouri
THIS AGREEMENT IS EFFECTIVE AUGUST 1, 1996
Sec-Eqty.2516-00-00
25125160.000
May 27, 1997
TABLE OF CONTENTS
ARTICLE PAGE
------- ----
I AUTOMATIC COVERAGE 1
II FACULTATIVE PROVISIONS 2
III YEARLY RENEWABLE TERM PREMIUMS 3
IV SELF ADMINISTRATION 4
V DAC TAX REGULATIONS 6
VI ERRORS AND OMISSIONS 7
VII EXPENSE OF ORIGINAL POLICY 8
VIII CHANGES IN RETENTION AND RECAPTURE PRIVILEGES 9
IX TERMINATIONS AND REDUCTIONS 10
X REINSTATEMENT, EXCHANGES, EXTENDED TERM AND
REDUCED PAID-UP INSURANCE, CONVERSIONS 11
XI LIABILITY 13
XII CLAIMS 14
XIII ARBITRATION 15
XVI INSOLVENCY 16
XV RIGHT TO INSPECT 17
XVI DURATION OF AGREEMENT 18
XVII BACKDATING POLICIES 19
XVIII INCREASING NET AMOUNT AT RISK POLICIES AND RIDERS 20
XIX EXECUTION OF AGREEMENT 21
Sec-Eqty.2516-00-00
25125160.000
May 27, 1997
EXHIBIT
A RETENTION SCHEDULE
B POLICY PLANS REINSURED
C PREMIUMS
D LIMITS
E STATEMENT SPECIFICATIONS
F SAMPLE POLICY EXHIBIT
G GUARANTEED ISSUE GUIDELINES
H GUARANTEED ISSUE FACULTATIVE SUBMISSION FORM
Sec-Eqty.2516-00-00
25125160.000
May 27, 1997
Reinsurance required by the CEDING COMPANY will be assumed by RGA RE as
described in the terms of this Agreement
This reinsurance agreement constitutes the entire agreement between the parties
with respect to the business being reinsured hereunder and there are no
understandings between the parties other than as expressed in this agreement.
Any change or modification to this agreement is null and void unless made by
written amendment to this agreement and signed by both parties.
Sec-Eqty.2516-00-00
25125160.000
May 27, 1997
ARTICLE I
AUTOMATIC COVERAGE
A. Reinsurance hereunder will be ceded automatically by the CEDING COMPANY
as shown in Exhibit D.
B. The CEDING COMPANY will cede and RGA RE will automatically accept
reinsurance if all of the following conditions are met for each life:
1. The CEDING COMPANY has retained its limit of retention as
shown in Exhibit A.
2. The amount does not exceed the automatic binding limits shown
in Exhibit D.
3. The amount per issue does not exceed the Issue Limit shown in
Exhibit D.
4. If the polices are issued on a guaranteed or simplified issue
basis they must meet the parameters listed in Exhibit G.
5. The CEDING COMPANY has not made facultative application for
reinsurance of the current amount on the same life to RGA RE
or any other reinsurer.
6. The plan is listed in Exhibit B.
7. The risk is a resident of the United States, Canada, Puerto
Rico or Guam.
Sec-Eqty.2516-00-00
25125160.000
May 27, 1997
1
ARTICLE II
FACULTATIVE PROVISIONS
A. The CEDING COMPANY will submit any group or case facultatively which is
not covered under the Automatic provisions of Article I.
B. The CEDING COMPANY will send copies of all information pertinent to the
insurability of the risk.
C. The CEDING COMPANY will also notify RGA RE of any additional
information requested or received after the initial request for
reinsurance is made. For policies which contain automatic increase
provisions, the CEDING COMPANY will inform RGA RE of the initial and
ultimate risk amounts for which reinsurance is being requested.
D. RGA RE will complete a GI Facultative Submission Form (Exhibit H) for
Guarantee Issue and Simplified Issue and return it to the CEDING
COMPANY to indicate its acceptance or rejection of participation.
E. On a timely basis, RGA RE will submit a written decision. In no case
will RGA RE'S offer on facultative submissions be open after 120 days
have elapsed from the date of RGA RE'S offer to participate in the
risk. Acceptance of the offer and delivery of the policy according to
the rules of the CEDING COMPANY must occur within 120 days of the final
reinsurance offer. Unless RGA RE explicitly states in writing that the
final offer is extended, the offer will be automatically withdrawn at
the end of day 120.
E. RGA RE will not be liable for proceeds paid under the CEDING COMPANY'S
conditional receipt or temporary insurance agreement for risks on a
facultative basis.
Sec-Eqty.2516-00-00
25125160.000
May 27, 1997
2
ARTICLE III
YEARLY RENEWABLE TERM PREMIUMS
A. Plans of insurance listed in Exhibit B will be reinsured on the yearly
renewable term basis with RGA RE participating only in mortality risks
(not cash values, loans, dividends or other features specific to
permanent policies). The mortality risk shall be the net amount at risk
on that portion of the policy which is reinsured with RGA RE.
B. Premiums for Life Reinsurance and reinsurance of Supplemental Benefits
will be based on the rates, pay percentages and allowances described in
Exhibit C.
C. Premiums will be increased by any flat extra premium charged the
insured on the face amount initially reinsured.
D. There will be no premium tax reimbursement.
E. The Life Reinsurance rates contained in this Agreement are guaranteed
for one year, and RGA RE anticipates continuing to accept premiums on
the basis of these rates indefinitely. If RGA RE deems it necessary to
increase rates, such increased rates cannot be higher than the
valuation net premiums for annually renewable term insurance calculated
using the minimum statutory mortality rates and maximum statutory
interest rate for each year of issue.
F. The death benefit of the policy to which this endorsement is attached
will, if necessary, be adjusted to meet the cash value accumulation
test as defined in Section 7702 (b) of the Internal Revenue Code or any
applicable successor. If the application of the cash value accumulation
test causes the net amount at risk (as defined in the contract) to
exceed 150% of the face amount, as of the date of the application of
the cash value accumulation test, we will distribute cash value to you.
The amount of the distribution will be the amount such that the net
amount at risk after the distribution and application of the cash value
accumulation test will equal 150% of the face amount on that date.
Sec-Eqty.2516-00-00
25125160.000
May 27, 1997
3
ARTICLE IV
SELF ADMINISTRATION
A. The CEDING COMPANY will administer the records for the reinsurance
ceded to RGA RE under this agreement. The CEDING COMPANY will furnish
quarterly statements to RGA RE which contain the following information:
1. A list of all premiums due for the current quarter,
identifying each policy and explaining the reasons for each
premium payment.
2. Premium subtotals adequate for RGA RE to use for its premium
accounting including first year, renewal year, automatic and
facultative totals.
3. New business, terminations and changes for the current quarter
will be identified on the billing report. For new business and
changes, the CEDING COMPANY must identify the reinsurance
agreement and provide information adequate for RGA RE to
establish reserves, check retention limits and check premium
calculations.
4. Totals for inforce, new business, changes and each type of
termination, as of the end of the quarter. "Totals" refer to
the number of policies reinsured and the net amount at risk
reinsured. See sample Policy Exhibit in Exhibit F.
In addition, the CEDING COMPANY must provide RGA RE with an inforce
listing of reinsured business at least once a year. This inforce
listing must contain information adequate for RGA RE to audit its
inforce records. (See Exhibit E.)
B. If the CEDING COMPANY chooses to report its reinsurance transactions
via electronic media, the CEDING COMPANY shall consult with RGA RE to
determine the appropriate reporting format. Should the CEDING COMPANY
subsequently desire to make changes in the data format or the code
structure, the CEDING COMPANY shall communicate such changes to RGA RE
prior to the use of such changes in reports to RGA RE.
C. The quarterly statements shall be furnished to RGA RE within sixty days
following the close of each quarter and will be accompanied by payment
of any net amount due RGA RE. All premiums not paid within sixty (60)
days of the due date, defined as each policy's 12-month anniversary,
will be in default.
D. Premiums are payable annually in advance.
E. RGA RE reserves the right to charge interest at the Prime Rate plus 2%
as stated in the Wall Street Journal on January 1 prior to the due date
of the premium when:
1. Renewal premiums are not paid within sixty (60) days of the
due date.
2. Premiums for new business are not paid within one hundred
twenty (120) days of the date the policy is issued.
Sec-Eqty.2516-00-00
25125160.000
May 27, 1997
4
ARTICLE IV
SELF ADMINISTRATION (Continued)
F. RGA RE will have the right to terminate this Agreement for those
policies where premiums are in default by giving ninety (90) days
written notice of termination to the CEDING COMPANY. As of the close of
the last day of this ninety (90) day notice period, RGA RE'S liability
for all risks for which premiums are in default which are reinsured
under this agreement will terminate. The first day of the ninety (90)
day notice of the termination period, resulting from default as
described in Section C of this Article, will be the day the notice is
received in the mail by the CEDING COMPANY or if the mail is not used,
the day it is delivered to the CEDING COMPANY. If all premiums in
default are received within the ninety (90) day time period, the
Agreement will remain in effect.
G. Payments between the CEDING COMPANY and RGA RE may be paid net of any
amount due and unpaid under all reinsurance agreements between both
parties.
Sec-Eqty.2516-00-00
25125160.000
May 27, 1997
5
ARTICLE V
DAC TAX REGULATIONS
The CEDING COMPANY and RGA RE hereby agree to the following pursuant to Section
1.848-2(g)(8) of the Income Tax Regulations issued December 29, 1992, under
Section 848 of the Internal Revenue Code of 1986, as amended.
1. The term "party" will refer to either the CEDING COMPANY or RGA RE as
appropriate.
2. The terms used in this Article are defined by reference to Treasury
Regulation Section 1.848-2 in effect as of December 29, 1992. The term
"net consideration" will refer to net consideration as defined in
Treasury Regulation Section 1.848-2(f).
3. 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 IRS Section 848(c)(1).
4. The CEDING COMPANY and RGA RE agree to exchange information pertaining
to the amount of net consideration under this Agreement each year to
ensure consistency. The CEDING COMPANY and RGA RE also agree to
exchange information which may be otherwise required by the IRS.
5. The CEDING COMPANY will submit a schedule to RGA RE by June 1 of each
year of its calculation of the net consideration for the preceding
calendar year. This schedule of calculations will be accompanied by a
statement signed by an officer of the CEDING COMPANY stating that the
CEDING COMPANY will report such net consideration in its tax return for
the preceding calendar year.
6. RGA RE may contest such calculation by providing an alternative
calculation to the CEDING COMPANY in writing. If RGA RE does not so
notify the CEDING COMPANY, RGA RE will report the net consideration as
determined by the CEDING COMPANY in RGA RE'S tax return for the
previous calendar year.
7. If RGA RE contests the CEDING COMPANY'S calculation of the net
consideration, the parties will act in good faith to reach an agreement
as to the correct amount. If the CEDING COMPANY and RGA RE reach
agreement on an amount of net consideration, each party shall report
such amount in their respective tax returns for the previous calendar
year. If the CEDING COMPANY and RGA RE fail to reach agreement on an
amount of net consideration, each party may choose to report their own
determination of net consideration on their respective tax returns.
Sec-Eqty.2516-00-00
25125160.000
May 27, 1997
6
ARTICLE VI
ERRORS AND OMISSIONS
It is expressly understood and agreed that if failure to comply with any terms
of this Agreement is hereby shown to be unintentional or the result of
misunderstanding, error or oversight on the part of either the CEDING COMPANY or
RGA RE, both the CEDING COMPANY and RGA RE shall be restored to the position
they would have occupied had no such misunderstanding, error or oversight
occurred, subject always to the correction of the misunderstanding, error or
oversight.
It is expressly understood and agreed this Article shall apply to both automatic
cessions under the provisions of Article I and the facultative cessions under
the provisions of Article II.
Sec-Eqty.2516-00-00
25125160.000
May 27, 1997
7
ARTICLE VII
EXPENSE OF ORIGINAL POLICY
The CEDING COMPANY will bear the expense of all medical examinations, inspection
fees and other charges incurred in connection with the original policy.
Sec-Eqty.2516-00-00
25125160.000
May 27, 1997
8
ARTICLE VIII
CHANGES IN RETENTION AND RECAPTURE PRIVILEGES
A. If, at any time, the CEDING COMPANY changes its existing retention
limits, as shown in Exhibit A, written notice of the change will
promptly be given to RGA RE.
B. The CEDING COMPANY may apply the new limits of retention to existing
reinsurance and reduce and recapture reinsurance in force in accordance
with the following rules:
1. The CEDING COMPANY will notify RGA RE of its intent to
recapture at least thirty (30) days prior to any recaptures.
2. No recapture will be made unless reinsurance under this
agreement has been in force ten (10) years.
3. Recapture will become effective on the policy anniversary date
following notification of the company's intent to recapture.
4. No recapture will be made unless the CEDING COMPANY retained
its maximum limit of retention for the plan, age and mortality
rating at the time the policy was issued. No recapture will be
allowed in any class of fully reinsured business or in any
classes of risks for which the CEDING COMPANY established
special retention limits less than the CEDING COMPANY'S
maximum retention limits for the plan, age and mortality
rating at the time the policy was issued.
5. If any reinsurance is recaptured, all reinsurance eligible for
recapture under the provisions of this Article must be
recaptured.
6. If there is reinsurance in other companies on risks eligible
for recapture, the necessary reduction is to be applied to
each company in proportion to the total outstanding
reinsurance.
Sec-Eqty.2516-00-00
25125160.000
May 27, 1997
9
ARTICLE IX
TERMINATIONS & REDUCTIONS
Terminations or reductions will take place in accordance with the following
rules, in order of priority:
1. The CEDING COMPANY must maintain its initial or recaptured
retention on the policy.
2. Termination or reduction of a wholly reinsured policy will not
affect other reinsurance in force.
3. A termination or reduction on a wholly or partially retained
case will cause an equal reduction in existing automatic
reinsurance with the oldest policy being reduced first,
provided the remaining active policies were underwritten after
the underwriting of the terminated policy.
4. If the policies are reinsured with multiple reinsurers, having
the same policy dates, the reinsurance will be reduced by the
ratio of the amount of reinsurance in each company to the
total outstanding reinsurance on the risk involved.
Sec-Eqty.2516-00-00
25125160.000
May 27, 1997
10
ARTICLE X
REINSTATEMENT, EXCHANGES, EXTENDED TERM
AND REDUCED PAID-UP INSURANCE, CONVERSIONS
A. REINSTATEMENT
Any policy originally reinsured in accordance with the terms and
conditions of this Agreement by the CEDING COMPANY may be automatically
reinstated with RGA RE as long as the policy is reinstated in
accordance with the terms and rules of the CEDING COMPANY. Any policy
originally reinsured with RGA RE on a facultative basis which has been
in a lapsed status (effective on the lapse effective date) for more
than ninety (90) days must be submitted with underwriting requirements
and approved by RGA RE before it is reinstated. The CEDING COMPANY will
pay RGA RE YRT premiums based on the effective date of the
reinstatement of such policies.
B. EXCHANGES
Exchanges will be reinsured under this Agreement if the original policy
was reinsured with RGA RE; the amount of reinsurance under this
Agreement will not exceed the amount of the reinsurance on the original
policy with RGA RE immediately prior to the exchange. Premiums will be
determined as follows:
1. If any business covered under this Agreement is subsequently
exchanged to any other plan reinsured by RGA RE, then such
business shall be reinsured at the rates as shown in the
Agreement covering the new plan. Rates and allowances or pay
percentages applicable to the new plan will be determined at
point in scale based on the original policy that is being
exchanged.
2. If any business covered under this Agreement is subsequently
exchanged to a plan that is not reinsured with RGA RE under a
specific document, then such business shall be reinsured with
RGA RE at the rates shown in Rate Table C-1. Rates will be
determined at point in scale based on the original policy that
is being exchanged.
Exchanges will be reinsured under this Agreement where the original
policy was reinsured with another Reinsurer not participating in the
new plan of coverage in this treaty. In the event of reentry in
accordance with the CEDING COMPANY'S rules, the new policy will be
treated as new business and the YRT rates and pay percentages listed in
this treaty will recommence at the first year.
Sec-Eqty.2516-00-00
25125160.000
May 27, 1997
11
ARTICLE X
REINSTATEMENT, EXCHANGES, EXTENDED TERM
AND REDUCED PAID-UP INSURANCE, CONVERSIONS (Continued)
C. EXTENDED TERM AND REDUCED PAID-UP INSURANCE
Changes as a result of extended term or reduced paid-up insurance will
be handled like reductions.
D. CONVERSIONS
Conversions will be reinsured under this Agreement only if the original
policy was reinsured with RGA RE; the amount of reinsurance under this
Agreement will not exceed the amount of the reinsurance on the original
policy with RGA RE immediately prior to the conversion. Premiums will
be determined as follows:
1. If any business covered under this Agreement is subsequently
converted to any other plan reinsured by RGA RE, then such
business shall be reinsured at the rates as shown in the
Agreement covering the new plan. Rates and allowances or pay
percentages applicable to the new plan will be determined at
point in scale based on the original policy that is being
converted.
2. If any business covered under this Agreement is subsequently
converted to a plan that is not reinsured with RGA RE under a
specific document, then such business shall be reinsured with
RGA RE at the rates shown in Rate Table C-1. Rates will be
determined at point in scale based on the original policy that
is being converted.
NOTE: An original date policy Reissue will not be treated as a continuation
of the original policy. It will be treated as a new policy and the
original policy will be treated as Not Taken. All premiums previously
paid to RGA RE for the original policy will be refunded to the CEDING
COMPANY. All premiums will be due on the new policy from the original
issue date of the old policy.
Sec-Eqty.2516-00-00
25125160.000
May 27, 19970
12
ARTICLE XI
LIABILITY
A. This is an Agreement solely between RGA RE and the CEDING COMPANY. In
no instance will anyone other than RGA RE or the CEDING COMPANY have
any rights under this agreement, and the CEDING COMPANY will be and
remain solely liable to any insured, policyowner, or beneficiary under
any policy reinsured hereunder.
B. The liability for all automatic reinsurance accepted by RGA RE under
this Agreement will commence simultaneously with that of the CEDING
COMPANY.
C. RGA RE will not be liable for proceeds paid under the CEDING COMPANY'S
conditional receipt or temporary insurance agreement unless conditions
for automatic coverage under Article I of this Agreement are met.
D. Liability for all reinsurance submitted facultatively to RGA RE will
commence when all of the following conditions have been met:
1. RGA RE'S offer has been accepted and the CEDING COMPANY has
properly documented its records to reflect this acceptance,
and
2. The policy has been delivered and paid for in accordance with
the CEDING COMPANY'S procedures, and
3. No more than one-hundred twenty (120) days have elapsed from
the date of RGA RE'S final offer to the policy delivery date,
unless RGA RE explicitly states in writing that the final
offer is extended for some further period of time, or if a
misunderstanding, error or oversight occurs as indicated in
Article VI.
E. The liability of RGA RE for all reinsurance under this Agreement will
cease simultaneously with the liability of the CEDING COMPANY and will
not exceed the CEDING COMPANY'S contractual liability under the terms
of its policies.
Sec-Eqty.2516-00-00
25125160.000
May 27, 1997
13
ARTICLE XII
CLAIMS
A. Prompt notice of a claim must be given to RGA RE. In every case of
loss, copies of the proofs obtained by the CEDING COMPANY will be taken
by RGA RE as sufficient. Copies thereof, together with proof of the
amount paid on such claim by the CEDING COMPANY will be furnished to
RGA RE when requesting its share of the claim. RGA RE shall pay its
share of all payable claims, however, if the amount reinsured with RGA
RE is more than the amount retained by the CEDING COMPANY, and the
claim is contestable, all papers in connection with such claim,
including all underwriting and investigation papers, must be submitted
to RGA RE for its recommendation in a timely manner.
B. The CEDING COMPANY will notify RGA RE of its intention to contest or
deny, settle, compromise, or litigate a claim. Unless it declines to be
a party to such action, RGA RE will pay its share of any settlement,
including interest, up to the maximum that would have been payable
under the specific policy had there been no controversy plus its share
of specific expenses, including legal fees, except as specified below.
If RGA RE declines to be a party to the contest, compromise, or
litigation of a claim, it will pay its full share of the amount
reinsured, including interest, as if there had been no contest,
compromise, or litigation, and its proportionate share of covered
expenses, including legal fees, incurred to the date it notifies the
CEDING COMPANY it declines to be a party.
In no event will the following categories of expenses or liabilities be
reimbursed:
1. Routine in-house investigative or administrative expenses,
except for outside investigation expenses related to
contestable claims;
2. Salaries of employees or other internal expenses of the CEDING
COMPANY or the original issuing company.
3. Extra contractual damages, including punitive and exemplary
damages;
4. Expenses incurred in connection with a dispute or contest
arising out of conflicting or any other claims of entitlement
to policy proceeds or benefits.
C. If the amount of insurance changes because of a misstatement of rate
classification, RGA RE'S share of reinsurance liability will change
proportionately.
Sec-Eqty.2516-00-00
25125160.000
May 27, 1997
14
ARTICLE XIII
ARBITRATION
A. It is the intention of RGA RE and the CEDING COMPANY that the customs
and practices of the insurance and reinsurance industry will be given
full effect in the operation and interpretation of this Agreement. The
parties agree to act in all things with the highest good faith. If RGA
RE or the CEDING COMPANY cannot mutually resolve a dispute which arises
out of or relates to this Agreement, however, the dispute will be
decided through arbitration. The arbitrators will base their decision
on the terms and conditions of this Agreement plus, as necessary, on
the customs and practices of the insurance and reinsurance industry
rather than solely on a strict interpretation of the applicable law;
there will be no appeal from their decision, and any court having
jurisdiction of the subject matter and the parties may reduce that
decision to judgment.
B. To initiate arbitration, either the CEDING COMPANY or RGA RE will
notify the other party by Certified Mail of its desire to arbitrate,
stating the nature of its dispute and the remedy sought. The party to
which the notice is sent will respond to the notification in writing
within ten (10) days of its receipt.
C. There will be arbitrators who will be current or former officers of
life insurance companies other than the contracting companies or their
affiliates. Each of the contracting companies will appoint one of the
arbitrators and these two arbitrators will select the third. If either
party refuses or neglects to appoint an arbitrator within sixty days,
the other party may appoint the second arbitrator. If the two
arbitrators do not agree on a third arbitrator within sixty days of
their appointment, each of the arbitrators will nominate three
individuals. Each arbitrator will then decline two of the nominations
presented by the other arbitrator. The third arbitrator will then be
chosen from the remaining two nominations by drawing lots.
D. It is agreed that each of the three arbitrators should be impartial
regarding the dispute and should resolve the dispute on the basis
described in Section A of this Article. Therefore, at no time will
either the CEDING COMPANY or RGA RE contact or otherwise communicate
with any person who is to be or has been designated as a candidate to
serve as an arbitrator concerning the dispute, except upon the basis of
jointly drafted communications provided by both the CEDING COMPANY and
RGA RE to inform the arbitrators of the nature and facts of the
dispute. Likewise, any written or oral arguments provided to the
arbitrators concerning the dispute will be coordinated with the other
party and will be provided simultaneously to the other party or will
take place in the presence of the other party. Further, at no time will
any arbitrator be informed that the arbitrator has been named or chosen
by one party or the other.
E. The arbitration hearing will be held in New York State on the date
fixed by the arbitrators. In no event will this date be later than six
(6) months after the appointment of the third arbitrator. As soon as
possible, the arbitrators will establish prearbitration procedures as
warranted by the facts and issues of the particular case. At least ten
(10) days prior to the arbitration hearing, each party will provide the
other party and the arbitrators with a detailed statement of the facts
and arguments it will present at the arbitration hearing. The
arbitrators may consider any relevant evidence; they will give the
evidence such weight as they deem it entitled to after consideration of
any objections raised concerning it. The party initiating the
arbitration will have the burden of proving its case by a preponderance
of the evidence. Each party may examine any witnesses who testify at
the arbitration hearing.
F. The cost of arbitration will be borne by the losing party unless the
arbitrators decide otherwise.
Sec-Eqty.2516-00-00
25125160.000
May 27, 1997
15
ARTICLE XIV
INSOLVENCY
A. In the event of the insolvency of the CEDING COMPANY, all reinsurance
made, ceded, renewed, or otherwise becoming effective under this
Agreement shall be payable by RGA RE directly to the CEDING COMPANY or
to its liquidator, receiver, or statutory successor on the basis of the
liability of the CEDING COMPANY under the contract or contracts
reinsured without diminution because of the insolvency of the CEDING
COMPANY.
B. In the event of insolvency of the CEDING COMPANY, the liquidator,
receiver or statutory successor will immediately give written notice to
RGA RE of all pending claims against the CEDING COMPANY on any policies
reinsured. While a claim is pending, RGA RE may investigate and
interpose, at its own expense, in the proceedings where the claim is
adjudicated, any defense or defenses which it may deem available to the
CEDING COMPANY or its liquidator, receiver or statutory successor. The
expense incurred by RGA RE will be chargeable, subject to court
approval, against the CEDING COMPANY as part of the expense of
liquidation to the extent of a proportionate share of the benefit which
may accrue to the CEDING COMPANY solely as a result of the defense
undertaken by RGA RE. Where two or more reinsurers are participating in
the same claim and a majority in interest elect to interpose a defense
or defenses to any such claim, the expense will be apportioned in
accordance with the terms of the reinsurance agreement as though such
expense had been incurred by the CEDING COMPANY.
C. Any debts or credits, matured or unmatured, liquidated or unliquidated,
in favor of or against either RGA RE or the CEDING COMPANY with respect
to this Agreement are deemed mutual debts or credits, as the case may
be, and will be offset, and only the balance will be allowed or paid.
D. In the event of the insolvency of RGA RE and the appointment of
receives therefor, the liability of RGA RE shall not terminate but
shall continue with respect to the reinsurance ceded to RGA RE by the
CEDING COMPANY prior to the date of such insolvency or appointment, and
the CEDING COMPANY shall have a security interest in any and all sums
held by or under deposit in the name of RGA RE.
Sec-Eqty.2516-00-00
25125160.000
May 27, 1997
16
ARTICLE XV
RIGHT TO INSPECT
RGA RE may at all reasonable times inspect the CEDING COMPANY'S original papers,
records, books, files, etc., relating to the business reinsured under this
Agreement.
Sec-Eqty.2516-00-00
25125160.000
May 27, 1997
17
ARTICLE XVI
DURATION OF AGREEMENT
A. This Agreement may be terminated as to new reinsurance at any time by
either party giving ninety (90) days written notice of termination. The
day the notice is mailed to the other party's Home Office, or, if the
mail is not used, the day it is delivered to the other party's Home
Office or to an Officer of the other party will be the first day of the
ninety (90) day period.
B. During the ninety (90) day period, this Agreement will continue to
operate in accordance with its terms.
C. RGA RE and the CEDING COMPANY will remain liable after termination, in
accordance with the terms and conditions of this Agreement, with
respect to all reinsurance effective prior to termination of this
Agreement.
Sec-Eqty.2516-00-00
25125160.000
May 27, 1997
18
ARTICLE XVII
BACKDATING POLICIES
The policies that are eligible for reinsurance under this Agreement may be
backdated to save age no more than six months prior to the effective date of
this Agreement.
Sec-Eqty.2516-00-00
25125160.000
May 27, 1997
19
ARTICLE XVIII
INCREASING NET AMOUNT AT RISK POLICIES AND RIDERS
A. Whenever the insured has the option to increase life coverage at future
date(s) without additional underwriting, and these increasing risks
will be automatically reinsured under this Agreement, the following
provisions will apply:
1. A 20-year projection of future increases will be provided at
issue of base policy.
2. The ultimate amount plus current inforce in all companies must
not exceed the jumbo limit as shown in Exhibit D.
3. The ultimate amount to be reinsured must not exceed the
binding limits as shown in Exhibit D.
4. The projection of total future retention divided by total
future net amount at risk will establish the proportion of
risk to reinsure in all years.
5. If the insured should lose the option to automatically
increase coverage and the policy will no longer increase as
originally projected, the CEDING COMPANY can switch to
reinsuring on an excess versus proportionate basis and keep
their retention in effect at that time.
B. For policies of this type which will be reinsured facultatively, the
CEDING COMPANY has the responsibility for clearly identifying the
current and ultimate net amounts at risk in order for RGA RE'S
underwriters to underwrite both net amounts at risk. The ultimate net
amount at risk reinsured must never exceed the amount of RGA RE'S
offer.
Sec-Eqty.2516-00-00
25125160.000
May 27, 1997
20
ARTICLE XIX
EXECUTION OF AGREEMENT
In Witness of the above,
SECURITY EQUITY LIFE INSURANCE COMPANY
of
Armonk, New York
and
RGA REINSURANCE COMPANY
of
St. Louis, Missouri,
Have by their respective officers executed and delivered this Agreement in
duplicate on the dates indicated below, with an effective date of August 1,
1996.
SECURITY EQUITY LIFE INSURANCE COMPANY
By: /s/ Xxxxxx X. Xxxxx By: /s/ X. Xxxxxxx
--------------------------- ------------------------------
Title: 2nd Vice President Title: VP & CFO
Date: 7/8/97
RGA REINSURANCE COMPANY
By: /s/ Xxxxxxx X. Xxxxxx
---------------------------
Title: Vice President
Date: 5/27/97
Sec-Eqty.2516-00-00
25125160.000
May 27, 1997
21
EXHIBIT A
RETENTION SCHEDULE
The CEDING COMPANY'S Retention is $125,000 per life.
The CEDING COMPANY will over-retain up to $25,000 to avoid the necessity of
reinsuring modest amounts of insurance.
Sec-Eqty.2516-00-00
25125160.000
May 27, 1997
EXHIBIT B
POLICY PLANS REINSURED
Effective August 1, 1996
GROUP FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE CONTRACT
(Form 60000) (LCL1 Gr)
GROUP LIFE INSURANCE CONTRACT, FLEXIBLE PREMIUM VARIABLE LIFE
(Form 60007) (LCLI NY)
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE CONTRACT
(Form 60002) (LCLI Ind)
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE CONTRACT
(Form 60006) (LCL2 Ind)
SUPPLEMENTAL TERM INSURANCE RIDER
(Form 6080200)
JOINT & LAST SURVIVOR SUPPLEMENTAL TERM INSURANCE RIDER
(Form 6080300)
JOINT & LAST SURVIVOR RIDER
(Form 6080100)
Sec-Eqty.2516-00-00
25125160.000
May 27, 1997
EXHIBIT C
PREMIUMS
Single Life Plans
The consideration payable to RGA RE for this coverage shall be based on
the applicable rate from the attached Rate Table C-1, multiplied by the
applicable pay percentage shown below:
Policy Years
-----------------------
1-10 11+
FULL UNDERWRITING
Nonsmoker 85% 100%
Smoker 90% 100%
SIMPLIFIED UNDERWRITING
Nonsmoker 98% 115%
Smoker 104% 115%
GUARANTEED ISSUE
Nonsmoker 145% 145%
Smoker 145% 145%
The reinsurance premium rates for policies issued on a Guaranteed Issue
basis will revert to the Fully Underwritten attained age rate at the
end of the 20th policy year or age 65, whichever is later.
Joint Life Plans
The consideration payable to RGA RE for this coverage shall be based on
the applicable rates from the attached Rate Table C-1, Frasierized as
shown in Exhibit C-1a.
All policy fees will be retained by the CEDING COMPANY.
For substandard table ratings, premiums will be increased by 25 % per
table.
The premium will be increased by any flat extra premium charged the
insured on the face amount initially reinsured, less total allowances
in the amount of 100% of any first year permanent (payable 6 years or
more) extra or 20% of any first year temporary flat extra premium, and
20% of any renewal flat extra premium.
Sec-Eqty.2516-00-00
25125160.000
May 27, 1997
SECURITY EQUITY LIFE INSURANCE
MORTALITY RATES
VARIABLE UNIVERSAL LIFE
MALE NON-SMOKER
ISSUE AGE 20-85
SECURITY EQUITY LIFE INSURANCE
MORTALITY RATES
VARIABLE UNIVERSAL LIFE
MALE SMOKER
ISSUE AGE 20-85
SECURITY EQUITY LIFE INSURANCE
MORTALITY RATES
VARIABLE UNIVERSAL LIFE
FEMALE NON-SMOKER
ISSUE AGE 20- 85
SECURITY EQUITY LIFE INSURANCE
MORTALITY RATES
VARIABLE UNIVERSAL LIFE
FEMALE SMOKER
ISSUE AGE 20- 85
EXHIBIT C-la
JOINT LAST SURVIVOR PREMIUMS
1. The premiums for this business shall be calculated using the Xxxxxxx
method and the single life rates included in Rate Table C-1. The single
life rates shall be adjusted for substandard mortality by adding 25 %
per underwriting table and any flat extra charges to the appropriate
single life rate. The substandard single life rates shall not exceed
$950 per thousand.
2. The single life rates calculated as described in Section 1 above shall
be converted to joint last survivor rates using the methodology
described in Section 3 below.
3. Method for Calculating Joint Last Survivor Premiums
Definition of Terms:
(a) Qx,n = single life rate per thousand in duration n for an
insured whose policy was issued at issue age x
(b) Qx,y,n = joint last survivor rate per thousand in duration n
for two insureds whose policies were issued at issue ages x
and y
Step 1
Calculate the probability of death for each insured for durations 1 to n.
qx,n = Qx,n divided by 1000.
Step 2
Calculate the probability of survival from issue to durations (n-1) and n.
px,n = (1-qx,1) x (1-qx,2) x...x (1-qx,n).
Step 3
Calculate the probability of at least one insured surviving to durations (n-1)
and n.
px,y,n = px,n + py,n - ((px,n) x (py,n))
Step 4
Calculate the probability of the last insured dying in duration n
qx,y,n = ((px,y,n-1) - (px,y,n)) / (px,y,n-1)
Sec-Eqty.2516-00-00
25125160.000
May 27, 1997
EXHIBIT C-1a (Continued)
Step 5
Convert the probability of the last death to a rate per thousand and adjust the
rate to reflect the risk of heartbreak factor mortality and joint accidental
death.
Qx,y,n = qx,y,n x 1000 + 0.10
Step 6
Apply the minimum rate test.
Reinsurance premium = maximum of Qx,y,n and 0.15
Sec-Eqty.2516-00-00
25125160.000
May 27, 1997
EXHIBIT D
LIMITS
FOR INSURANCE COVERAGE ISSUED UNDER THE CEDING COMPANY'S GUARANTEED ISSUE
PROGRAM AND SIMPLIFIED ISSUE PROGRAM
PARTICIPATION PERCENTAGES
RGA RE'S Percentage of Participation:
40%
PARTICIPATION PERCENTAGES FOR AUTOMATIC INCREASES
Until CEDING COMPANY has retained its stated retention
CEDING COMPANY'S Percentage of Participation:
0%
RGA RE'S Percentage of Participation:
40%
AUTOMATIC BINDING LIMITS
The CEDING COMPANY agrees not to automatically bind RGA RE when the
amount to be ceded to RGA RE exceeds the following limits:
Initial: $ 950,000
With Increases: $ 1,350,000
AUTOMATIC ISSUE LIMITS
The amount issued on any case ceded automatically shall not exceed
the following limits:
Business issued by CEDING COMPANY: $ 2,500,000
With Increases: $ 3,500,000
Sec-Eqty.2516-00-00
25125160.000
May 27, 1997
EXHIBIT D
LIMITS (Continued)
FOR FULLY UNDERWRITTEN AUTOMATIC AND FACULTATIVE ISSUES
RGA RE'S PARTICIPATION PERCENTAGE
RGA RE will reinsure 40% of the excess over the CEDING
COMPANY'S retention up to the limits stated below.
AUTOMATIC BINDING LIMIT
The CEDING COMPANY agrees not to automatically bind RGA RE when the
amount to be ceded through the Pool exceeds the following limits:
Standard
AGE Tables A - G Tables H - P
--- ------------ ------------
0 - 60 $ 3,950,000 $ 2,950,000
61 - 80 $ 2,950,000 $ 950,000
AUTOMATIC ISSUE LIMIT
The amount issue (amount applied for plus amounts already in force with
the CEDING COMPANY) on any case ceded automatically shall not exceed
the following limits:
Standard
AGE Tables A - G Tables H - P
--- ------------ ------------
0 - 60 $ 10,000,000 $ 5,000,000
61 - 80 $ 5,000,000 $ 2,500,000
JUMBO LIMIT
A Jumbo risk is one where the amount of insurance already in force and
applied for on the risk in all companies exceeds the following limit:
$25,000,000
Sec-Eqty.2516-00-00
25125160.000
May 27, 1997
EXHIBIT E
STATEMENT SPECIFICATIONS
The following information should appear on each Self-Administered statement and
In-Force listing sent to RGA RE.
- Name of the insured(s)
- Date of birth of the insured(s)
- The issue age of each insured(s)
- The sex of the insured(s)
- The insured's state/country of residence
- Underwriting Classification
- Smoking Class
- Indication if business is Facultative or Automatic
- Indication if business is YRT or Coinsurance
- Policy number(s)
- Plan Code (Kind Code)
- Face Amount of the policy(s)
- Amount(s) ceded to RGA RE
- Amount of premium being paid; separated for Life, WP, ADB, etc.
- The amount of any reinsurance premium allowances
- Extra premiums concerned - Example: $5 / 1000 / 5 YRS
- Effective date and duration of any policy(s) change, reissue, or
termination
Sec-Eqty.2516-00-00
25125160.000
May 27, 1997
EXHIBIT F
SAMPLE POLICY EXHIBIT
POLICY SUMMARY NUMBER OF REINSURANCE
CLASSIFICATION POLICIES AMOUNT
-------------- -------- ------
Inforce as of Last Report 878 $410,220,973.00
New Issues 2 $ 516,666.00
Reinstatements 3 $ 483,334.00
Increases $ 500,000.00
Decreases - Still Inforce $ 133,332.00
Rollover - In 0 $ 0.00
Deduct By:
Death 0 $ 0.00
Surrender 1 $ 250,000.00
Lapse 4 $ 1,000,001.00
Conversion - Out 0 $ 0.00
Decreases - Cancellation 3 $ 299,999.00
Inactive - Pending 0 $ 0.00
Not Taken 0 $ 0.00
INFORCE AS OF CURRENT REPORT 875 $410,037,641.00
Sec-Eqty.2516-00-00
25125160.000
May 27, 1997
EXHIBIT G
GUARANTEED ISSUE GUIDELINES
In order to be considered for Guaranteed Issue, the following guidelines apply:
1. Minimum of 25 lives.
2. Insured must be actively at work for a minimum of 500 hours
semi-annually, and have not been hospitalized or absent from work for
medical reasons for five or more consecutive days in the past 3 months
at the time of issue.
3. Coverage must be formula driven. That is, based on a compensation or
retirement benefit. For aggregate funding the face amount is often a
function of the 7 pay limits where all insureds have the same face
amount or the same premium.
4. 100% participation based on a clearly defined class of employees. This
true of executive carve out plans but not necessarily true for
aggregately funded benefit liability plans where the company will often
not include the smokers in the group of insureds.
5. Owner of the policy must either be a United States citizen or a
corporation domiciled in the United States. The insured must be a
citizen of the United States. The beneficiary must be an entity in the
United States or a citizen of the United States.
6. The initial guaranteed issue limit will be determined based upon the
facts of the case. The automatic limit will generally be the number of
insureds times $15,000, up to a maximum of $2,500,000.
7. Annual increase limit of 20% that includes compensation-related and
promotional increases.
8. Maximum issue age is 65.
9. The cumulative increases in death benefit must not exceed the smaller
of the initial face amount or $1,000,000.
Sec-Eqty.2516-00-00
25125160.000
May 27, 1997
AUTOMATIC AND FACULTATIVE YEARLY RENEWABLE AGREEMENT
#9382807
