REINSURANCE AGREEMENT #6834-1
(AUTOMATIC YRT BULK)
(hereinafter referred to as "Agreement")
between
FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
(WORCESTER, MASSACHUSETTS)
(hereinafter referred to as the "Company")
and
LIFE REASSURANCE CORPORATION OF AMERICA
(NOW KNOWN AS SWISS RE LIFE & HEALTH AMERICA INC.)
(STAMFORD, CONNECTICUT)
(hereinafter referred to as the "Reinsurer")
EFFECTIVE: July 1, 2000
TABLE OF CONTENTS
PREAMBLE 4
ARTICLE I- METHOD OF REINSURANCE AND INSURANCE 4
1. Effective Date 4
2. Methods 4
3. Amounts 4
4. Minimum
Amounts 5
ARTICLE II - AUTOMATICE REINSURANCE 5
1. Insurance 5
2. Coverages 6
3. Jumbo Risk 6
4. Regular Limits of Retention 6
ARTICLE III - FACULTATIVE REINSURANCE 7
ARTICLE IV - PROCEDURES FOR REPORTING 7
1. General Information 7
2. Self-Administered Reporting 8
ARTICLE V - PREMIUMS 10
1. Life Insurance 10
2. Premium Taxes 10
3. Payments 10
4. Nonpayment of Reinsurance Premiums 11
5. Interest on Delinquent Payments 11
6. Misstatements 11
ARTICLE VI - CLAIMS 11
1. Notice 11
2. Contested Claims 12
3. Expenses 12
4. Extra Contractual Obligations 12
5. Misstatements 13
6. Payment 13
7. Assistance and Advice 13
ARTICLE VII - REDUCTIONS, REINSURANCE & CHANGES 13
1. Reductions and Terminations 13
2. Reinstatements 14
3. Nonforfeiture Benefits 15
4. Contractual Conversions and Exchanges 15
5. Non Contractual Exchanges 15
6. Program of Internal Replacement 15
(ii)
ARTICLE VIII - DACTAX 16
ARTICLE IX - RECAPTURE 16
1. Standards for Recapture 16
2. Methods of Recapture 17
ARTICLE XI - INSOLVENCY 17
ARTICLE XII - ARBITRATION 18
ARTICLE XII - GENERAL PROVISIONS 19
1. Reinsurer's Right of Notice of Unusual Practices 19
2. Policy Forms and Rates 19
3. Reinsurance Conditions 20
4. Errors and Omissions 20
5. Offset 20
6. Inspection 20
7. Entire Agreement 20
8. Amendment 21
9. Counterparts 21
10. No Assignment 21
11. Binding Effect 21
12. Notices 21
ARTICLE XIII - DURATION OF AGREEMENT 22
ARTICLE XIV - EXECUTION 23
SCHEDULE A - Retention Limits, Reinsurance Specifications, Plans Covered
SCHEDULE B - Reporting Forms
SCHEDULE C - Premium Rates
SCHEDULE C-1 - Joint Equal Age Calculation
SCHEDULE D - Basis Points and Percentages
(iii)
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PREAMBLE
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This
Reinsurance Agreement ("Agreement") is entered into by and between
FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY, a Massachusetts insurance
corporation (the "Company") and Life Reassurance Corporation of America, now
known as SWISS RE LIFE & HEALTH INC., a Connecticut insurance corporation (the
"Reinsurer"). The Company and the Reinsurer mutually agree to reinsure on the
terms and conditions set forth in this Agreement. This Agreement is solely
between the Company and the Reinsurer, and performance of the obligations of
each party under this Agreement will be rendered solely to the other party. In
no instance will anyone other than the Company or the Reinsurer have any rights
under this Agreement.
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ARTICLE 1 - METHOD OF REINSURANCE AND INSURANCE
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1. EFFECTIVE DATE
The reinsurance under this Agreement is effective as of July 1, 2000.
2. METHOD
Reinsurance of life insurance risks ("Life Insurance") under this Agreement
is on the yearly renewable term ("YRT") plan for the amount at risk under the
policy Reinsured. The Company will cede and the Reinsurer will accept
reinsurance under the policies or plans set forth in Schedule A, written by the
Company on citizens of the United States, Canada, Guam, the Virgin Islands, or
Puerto Rico at the time of application. The policies set forth in Schedule A,
that are reinsured under this Agreement are hereinafter referred to collectively
as "Reinsured Policies" and individually as a "Reinsured Policy." Said policies
will have been underwritten in accordance with the Company's individual ordinary
life underwriting rules and practices.
3. AMOUNTS
The Reinsurer will reinsure a quota share percentage of each Reinsured
Policy. The percentage associated with the Reinsured Policies is set forth in
Schedule A and is hereinafter referred to as "the Reinsurer's Share."
For the purpose of this Agreement, the reinsured amount at risk (R) is
calculated as follows:
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(1) For Option A:
R = (D - A) * X, where
D = Death benefit
A = The accumulation Fund Value or Cash Value, whichever is applicable
under base plan X = The Reinsurer's Percentage
(2) For Option B:
R = D * X, where
D = Death benefit
X = The Reinsurer's Percentage
4. MINIMUM AMOUNTS
Amounts of initial reinsurance less than $3,500 will not be ceded under
this Agreement.
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ARTICLE II - AUTOMATIC REINSURANCE
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1. INSURANCE
The Company will cede and the Reinsurer will accept automatically
reinsurance in amounts not exceeding the binding limits per life in Schedule A
of this Agreement. If the Company has more than one agreement with the
Reinsurer, the total amount per life automatically ceded to the Reinsurer under
all agreements combined will not exceed the automatic binding limit available to
the Company under the agreement with the highest binding authority. The
Reinsurer will accept automatic reinsurance when (a) the Company already has for
its own account its maximum limit of retention on the risk and for this reason
alone is not retaining any portion of the insurance applied for on a current
application, and (b) in the Company's opinion there has been no adverse change
in the insurability of the risk since the Company's last acceptance for its own
retention. A risk as defined in the following categories is not eligible for
reinsurance under this paragraph:
(a) A jumbo risk as defined in paragraph 3 below.
(b) A risk which has been sent to the Reinsurer or any other reinsurer for
facultative underwriting consideration.
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(c) Life Insurance resulting from a group conversion, where full evidence
of insurability has not been secured.
(d) Any risk which is not fully underwritten or any risk where the Company
has not followed its usual underwriting practices.
The liability of the Reinsurer on any automatic reinsurance under this
Agreement begins and ends at the same time as that of the Company, provided that
such an automatic application shall not have been submitted to the Reinsurer or
to any other reinsurer for facultative underwriting consideration.
2. COVERAGES
Life Insurance is exclusively the coverage or risk reinsured automatically
under this Agreement. The Reinsurer will not participate in a unilateral
enhancement of policy provisions unless agreed to in writing prior to the
granting of the enhancement. Life Insurance included both basic policies and
term riders providing life insurance protection.
3. JUMBO RISK
A jumbo risk is one where the papers of the Company, including all papers
that are part of the current application, indicate that the person to be insured
has or will have insurance in force with all companies greater than:
LIFE
----
All Ages $35,000,000
4. REGULAR LIMITS OF RETENTION
The Company may modify its regular limits of retention, detailed in
Schedule A, by giving thirty days' written notice to the Reinsurer. The amount
of reinsurance to be ceded and accepted automatically after the new limits take
effect will be determined by mutual written agreement by the Reinsurer and the
Company.
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ARTICLE III- FACULATIVE REINSURANCE
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The Company may choose to submit for consideration by the Reinsurer, a
request for any amount of reinsurance of the coverages in Article II that the
Company may require. Reinsurance may be requested for any amount without regard
for the limits of retention detailed in Schedule A, but the Company will notify
the Reinsurer promptly of any changes in its limits of retention.
When the Company requests facultative reinsurance, the application will be
made by submitting to the Reinsurer a mutual agreeable form. The Company will
send to the Reinsurer any and all information the company has about the risk,
including without limitation, copies of the application, medical examiner's
report, attending physicians' statements, inspection report, and other reports
and other papers bearing on the insurability of the risk. Promptly upon receipt
of the application, the Reinsurer will analyze the risk and notify the Company
of the Reinsurer's decision and the Reinsurer's classification of the risk. If
the Company elect to accept the Reinsurer's unconditional offer of acceptance
for reinsurance of the risk, the Company will notify the Reinsurer with 120 days
of the Reinsurer's offer.
The liability of the Reinsurer on any facultative reinsurance under this
Agreement begins and ends at the same time as that of the Company, provided
that:
(a) the Reinsurer has given the Company an unconditional offer of
acceptance after the application for reinsurance, AND
(b) the Company has notified the Reinsurer of its acceptance of such offer
within 120 days of said offer.
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ARTICLE IV - PROCEDURES FOR REPORTING
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1. GENERAL INFORMATION
The Reinsurer will accept, on a self administered basis, reinsurance in
amounts per life up to the amounts set forth in Schedule A.
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2. SELF-ADMINISTERED REPORTING
The Company will remit a check for the balance indicated in the monthly
statements to the Reinsurer along with the reporting form set forth in Schedule
B or a mutually agreed upon form submitted by the Company. If a balance is due
the Company, it will be remitted by the Reinsurer promptly. Within ten (10) days
following the close of each calendar month, the Company will forward to the
Reinsurer on computer tape or other acceptable form, reports in substantial
conformity with the following:
A. MONTHLY NEW BUSINESS REPORT
(1) policy number (11) account value
(2) full name of insured (12) automatic/facultative indicator
(3) date of birth (13) state of residence
(4) sex (14) table rating
(5) issue age (15) flat extra (amount number of years)
(6) policy date (16) death benefit option (UL products)
(7) underwriting (17) amount at risk classification
(8) plan of insurance (18) transaction code
(9) amount issued (19) currency of other than U. S.
(10) amount reinsured (20) qualification pension (yes/no)
B. MONTHLY CONVERSION REPORT
The Company will finish the Reinsurer with a separate listing of
reinsurance policiesthat are conversions or replacements to the
plan(s) as stated in Schedule A. The listing should provide the
following information:
(1) 1 through 20 in 2.A above (4) attained age
(2) original policy date (5) duration
(3) original policy number (6) effective date if other than policy
date
C. MONTHLY PREMIUM REPORT
The Company will furnish the Reinsurer a listing of all reinsurance
policies issued or renewing during the past month accompanied by the
reinsurance premiums for such policies. The listing should be
segregated into first year issues and renewals and should provide the
following information:
(1) 1 through 20 in 2.A above
(2) current amount at risk
(3) current account value
The net reinsurance premium due for each reinsured
policy with the
(4) premium for life and each supplemental benefit separated.
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D. MONTHLY CHANGE REPORT
The Company will report the details of all policy terminations and
changes on the reinsured policies. In addition to the data indicated
in 2.A, above, the report should provide information about the nature,
the effective date, and the financial result of the change with
respect to reinsurance.
E. MONTHLY POLICY EXHIBIT REPORT
The Company will provide a summary of new issues, terminations,
recaptures, changes, death claims and reinstatements during the month
and the inforce reinsurance at the end of the month.
F. QUARTERLY INFORCE AND RESERVE LISTING
Within ten (10) days after the close of each calendar quarter, the
Company will furnish the Reinsurer with a listing of reinsurance in
force by policy, by year of issue and include statutory reserves for
the same. The listing must show sufficient detail such that reserve
calculations can be independently verified by the Reinsurer's auditors
and examiners. The listing should be segregated into first year issues
and renewals and should provide the following information:
(1) 1 through 20 in 2.A above
For the fourth quarter, Federal Income Tax reserves must also be
furnished. They may be included in the fourth quarter statutory report
or they may be submitted separately, but in the same format as the
statutory report.
G. ELECTRONIC DATA TRANSMISSION
If the Company reports its reinsurance transactions via electronic
media, the Company will consult with the Reinsurer to determine the
appropriate reporting format. Should the Company subsequently desire
to make changes in the data format or the code structure, the Company
will communicate such changes to the Reinsurer prior to the use of
such changes in reports to the Reinsurer.
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ARTICLE V - PREMIUMS
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1. LIFE INSURANCE
Reinsurance premiums payable shall be the greater of:
(a) The basis point charges set forth in Schedule D applied to the current
Account Value for the Reinsured Policy times the Reinsurer's Share,
and
(b) One-twelfth the premiums per $1,000 for Life Insurance shown in
Schedule C, multiplied by the factors set forth in Schedule D, applied
to the amount of life reinsurance as outlined in Article I. For
Survivorship Policies: The Frasierization method shown in Schedule C-1
shall be employed to determine the rates for Survivorship policies.
The Reinsurer anticipates that these premiums will be continued
indefinitely for all business ceded under this Agreement. For the purpose of
satisfying requirements for deficiency reserves imposed by various state
insurance departments, the Reinsurer will guaranty for renewal the greater of
the premiums provided in this Agreement or premiums based on the 1980 CSO Table
at 2.5% interest.
When the Company charges a flat extra premium, whether alone or in addition
to a premium based on a multiple table, the Company will pay this premium and
apply the factors detailed in Schedule D, on the reinsurance amount in addition
to the standard or multiple table premium for the rating and plan of
reinsurance.
2. PREMIUM TAXES
The Reinsurer will not reimburse the Company for state premium taxes on
reinsurance premiums received from the Company.
3. PAYMENTS
Premiums are payable monthly in advance. If reinsurance is reduced,
terminated, increased or reinstated, monthly in advance, pro-rata adjustment
will be made by the Reinsurer and the Company on all premium items except policy
fees.
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4. NONPAYMENT OF REINSURANCE PREMIUMS
The payment of reinsurance premiums is a condition precedent to the
liability of the reinsurer under this Agreement. If the Company does not pay
premiums to the Reinsurer as provided in this Agreement and such amounts are
more than 120 days in arrears, the Reinsurer will have the right to terminate
the reinsurance under this Agreement.
5. INTEREST ON DELINQUENT PAYMENTS
If the Company is more than 90 days in arrears in remitting premiums to the
Reinsurer, such premiums will be considered delinquent and interest will be
added to the amount to be remitted. Interest will be calculated from (i) the
time the premiums are due the Reinsurer to (ii) the date the Company pays the
premium to the Reinsurer. The rate of interest charged on delinquent payments
will be equal to the rate listed in the Federal Reserve Statistical Release, as
promulgated by the Board of Governors of the Federal Reserve System, for the
monthly average of Corporate bonds, Xxxxx'x seasoned Aaa (the "Interest Rate")
6. MISSTATEMENTS
If the insured's age or sex was misstated and the amount of insurance on
the Company's policies is adjusted, the Company and the Reinsurer will share the
adjustment in proportion to the amount of liability of each at the time of issue
of the policies. Premiums will be recalculated for the correct age or sex and
amounts according to the proportion as above and adjusted without interest. If
the insured is still alive, the methods above will be used for past years and
the amount of reinsurance and premium will be adjusted for the future to the
amount that would have been correct at issue.
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ARTICLE VI - CLAIMS
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1. NOTICE
The Company will notify the Reinsurer promptly after receipt of any
information on a claim where reinsurance is involved. The Company will furnish
to the Reinsurer as soon as possible the completed reinsurance claim form and
copies of all claim papers and proofs. However, if the amount reinsured with the
Reinsurer is more than the amount retained by the Company and the claim is
contestable, all papers in connection with such claim, including all
underwriting and investigation papers must be submitted to the Reinsurer for its
recommendation before admission of any liability on the part of the Company.
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2. CONTESTED CLAIMS
Whenever the Company has formed a preliminary opinion that a claim might be
denied or contested, and prior to any final action by the Company indicating to
the claimant that the claim is being denied or contested, the Company will give
the Reinsurer the opportunity to review the complete claim file. The Reinsurer
will review this file promptly and, at its option, (a) pay the Reinsurer's full
share as if the claim was not contested, in full discharge of the Reinsurer's
obligation to the Company for that claim, or (b) after consultation with the
Company join in the contest, or ratify the denial, in which case the Reinsurer
will communicate to the Company in writing the Reinsurer's decision to
participate in the contest, or ratify the denial, with respect to that claim.
3. EXPENSES
The Reinsurer will share in the claim expense of any contest or compromise
of a claim in the same proportion that the amount at risk reinsured under this
Agreement bears to the total risk of the Company on all policies being contested
by the Company, and the Reinsurer will share in the total amount of any
reduction in liability in the same proportion. Claim expense will include
without limitation the cost of investigation, legal fees, court costs, and
interest charges.
4. EXTRA CONTRACTUAL OBLIGATIONS
Extra Contractual Obligations are obligations outside of the contractual
obligations and include but not limited to punitive damages, bad faith damages,
compensatory damages or statutory penalties which may arise from the willful
and/or negligent acts or omissions by the Company.
The Reinsurer is not liable for Extra Contractual Obligations unless it
concurred in writing and in advance with the actions of the Company which
ultimately led to the imposition of the Extra Contractual Obligations. In such
situations, the Company and the Reinsurer will share in Extra Contractual
Obligations, in equitable proportions, but all factors being equal, the division
of any such assessments would be in proportion to the total risk accepted by
each party for the plan of insurance involved.
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5. MISSTATEMENTS
In the event of an increase or reduction in the amount of the Company's
insurance on any policy reinsured hereunder because of an overstatement or
understatement of age or misstatement of sex, established after the death of the
insured, the Company and the Reinsurer will share in such increase or reduction
in proportion to their respective amounts at risk under that policy.
6. PAYMENT
For Life Insurance the Reinsurer will pay its share in a lump sum to the
Company, without regard to the form of claim settlement of the Company.
7. ASSISTANCE AND ADVICE
At the request of the Company, the Reinsurer will advise the Company on any
claim concerning business reinsured under this Agreement and, when such a claim
appears to be of doubtful validity, the Reinsurer will assist the Company in its
determination of liability and in the best procedure to follow with respect to
the claim.
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ARTICLE VII - REDUCTIONS, REINSTATEMENTS & CHANGES
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1. REDUCTIONS AND TERMINATIONS
If the amount of insurance on a reinsured life under this Agreement is
reduced, reinsurance on that life shall be reduced proportionately. If the
reduction is greater than the amount of reinsurance, the reinsurance shall be
terminated. The effective date and time of the reduction in reinsurance shall be
the same as those of the reduction in the amount of insurance.
Unless specified otherwise in this Agreement, if the amount of insurance of
a policy issued by the Company is reduced, then the amount of reinsurance on
that life will be reduced effective the same date by the full amount of the
reduction under the original policy. If the amount of insurance terminated
equals or exceeds the amount of reinsurance, the full amount of reinsurance is
terminated. If the reinsurance is a quota share of the policy issued by the
Company, the reduction would be proportional.
The reduction will first apply to any reinsurance on the policy being
reduced and then in a chronological order according to policy date ("first in,
first out") to any reinsurance on the other policies in force on the life.
However, the Company will not be required to assume a risk for an amount in
excess of its regular retention for the age at issue and the mortality rating of
the policy under which reinsurance is being terminated.
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If the reinsurance for a policy has been placed with more than one
reinsurer, the reduction will be applied to all reinsurers pro rata to the
amounts originally reinsured with each reinsurer.
It is agreed, however, that in no case shall the Company be required to
assume a risk for an amount in excess of the retention limit specified in the
attached Schedule A. If the cancellation of reinsurance in accordance with the
above rules would have this result, the amount of reinsurance to be cancelled
will be adjusted so the specified retention limit is not exceeded.
2. REINSTATEMENTS
(a) AUTOMATIC REINSURANCE
A policy of the Company, ceded to the Reinsurer on an automatic basis,
that was reduced, terminated, or lapsed, if reinstated by the Company
under its regular rules, will be reinstated automatically to the amount
that would be in force had the policy not been reduced, terminated, or
lapsed.
(b) FACULTATIVE REINSURANCE
A Reinsured Policy ceded to the Reinsurer that was reduced, terminated,
or lapsed, on a facultative basis, (i) will require approval by the
Reinsurer prior to reinstatement if the Company has retained less than
50% of the risk, or (ii) will be reinstated automatically by the
Reinsurer if the Company has retained more than 50% of the risk and
reinstates the Reinsured Policy under its regular rules. Upon
reinstatement, reinsurance for the policy will be for the amount that
would be in force had the policy not been reduced, terminated, or
lapsed.
In connection with all reinstatements the Company will pay the Reinsurer
all reinsurance premiums and interest in like manner as the Company has received
under its policy.
3. NONFORFEITURE BENEFITS
The Reinsurer will not participate in nonforfeiture benefits.
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4. CONTRACTUAL CONVERSIONS AND EXCHANGES
In the event of a contractual conversion or exchange (i.e. conversion or
exchange that requires no evidence of insurability) the Reinsurer will reinsure
the risk resulting from such conversion or exchange at the rates shown in
Schedule C on point-in-scale basis (using the original issue age and duration
from the original issue) and the allowances of Schedule D on a point-in-scale
basis. The reinsured amount at risk on the policy or policies being covered may
not exceed the current reinsured amount at risk on the policy or policies being
converted or exchanged. If the conversion or exchange results in an increase of
risk, the amount of increase will be subject to evidence of insurability.
5. NON CONTRACTUAL EXCHANGES
Non contractual exchanges are subject to evidence of insurability. Premiums
for the risk resulting from the exchange will be reflected in Schedule C.
6. PROGRAM OF INTERNAL REPLACEMENT
Should the Company, its affiliates, successors, or assigns, initiate a
program of internal replacement, as defined below, that would include any of the
risks reinsured hereunder, the Company will immediately notify the reinsurer.
For each risk reinsured hereunder that has been replaced under a program of
internal replacement, the reinsurer shall have the option, at its sole
discretion, of either treating the risks reinsured as recaptured, or continuing
reinsurance on the new policy under this Agreement. The term "program of
internal replacement" shall mean any program offered to a class of policy owners
in which a policy or any portion of a policy is exchanged for another policy,
not reinsured under this Agreement, which is written by the Company, its
affiliates, successors, or assigns.
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ARTICLE VIII - DAC TAX
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The Reinsurer and the Company hereby agree to the following pursuant to
Section 1.848-2(g)(8) of the Income Tax Regulation under Section 848 of the
Internal Revenue Code of 1986, as amended.
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(a) The term "party" will refer to either the Reinsurer or the Company as
appropriate.
(b) The terms used in this Article are defined by reference to Regulation
1.848-2. The term "net consideration" will refer to either net
consideration as defined in Regulation Section 1.848-2(f) or gross
amount of premiums and other consideration as defined in Regulation
Section 1.848-3(b) as appropriate.
(c) Each party shall attach a schedule to its federal income tax return
which identifies the relevant
reinsurance agreements for which the
joint election under the Regulation has been made.
(d) The party with net positive consideration, as defined in the Regulation
promulgated under Code Section 848, for such agreement for each
taxable year, shall capitalized specified policy acquisition expenses
with respect to such agreement without regard to the general
deductions limitation of Section 848(c)(1).
(e) Each party agrees to exchange information pertaining to the amount of
net consideration under such agreement each year to ensure consistency.
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ARTICLE IX - RECAPTURE
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1. STANDARDS FOR RECAPTURE
If the Company increases its maximum retention from the maximum limit of
retention set forth in Schedule A, the Company may elect to recapture that
portion of each Reinsured Policy equal to the difference between the Company's
new limit of retention and the Company's old limit of retention, subject to the
provisions of this Article IX. If the Company elects this type of recapture, the
Company may only recapture Reinsured Policies that meet both of the following
requirements: (a) Reinsured Policies that have been in force for ten (10) years
and (b) Reinsured Policies for which the Company maintained its maximum limit or
retention at the time the Reinsured Policy was issued.
However, if the Reinsurer has given the Company ninety day written notice
of a premium rate increase, the Company may elect to recapture all Reinsurance
Policies affected by such increase before such increase takes effect regardless
of the above requirements.
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2. METHOD OF RECAPTURE
If the Company elects to recapture, the Company will notify the Reinsurer
in writing within ninety days from the effective date of the increase in its
limit of retention. If the Company elects to recapture one Reinsured Policy
under this provision, the Company must recapture every Reinsured Policy that
meets the requirements set forth in Article IX, Section 1, above.
Recapture for each Reinsured Policy will occur on the later to occur of (a)
the next anniversary of the Reinsured Policy or (b) the tenth anniversary of the
Reinsured Policy. The amount of reinsurance on the Reinsured Policy will be
reduced so that the total amount of risk retained by the Company will be equal
to the Company's maximum limit of retention.
If two or more Reinsurers have reinsurance on the same Reinsured Policy,
the Reinsurer's portion of the reduction will be in proportion to the
Reinsurer's share of the total reinsurance on the Reinsured Policy.
However, if the Reinsurer has given the Company ninety day written notice
of a premium rate increase, the Company may elect to recapture all Reinsurance
Policies affected by such increase before such increase takes effect regardless
of the above requirements.
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ARTICLE X - INSOLVENCY
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All reinsurance under this Agreement will be paid on demand by the
Reinsurer directly to the Company, its liquidator, receiver, or statutory
successor, on the basis of the liability of the Company under the policy or
policies reinsured without diminution because of the insolvency of the Company.
In the event of the insolvency of the Company, the liquidator, receiver, or
statutory successor of the Company will give written notice to the Reinsurer of
a pending claim against the Reinsurer or the Company on any policy reinsured
within a reasonable time after the claim is filed in the conservation,
liquidation, or insolvency proceedings. While the claim is pending, the
Reinsurer may investigate and interpose, at its own expense, in the proceedings
where the claim is to be adjudicated, any defenses which it may deem available
to the Company or its liquidator, receiver, or statutory successor. The expense
incurred by the Reinsurer will be charged, subject to court approval, against
the Company as an expense of the conservation, liquidation, or insolvency to the
extent of a proportionate share of the benefit that accrues to the Company as a
result of the defenses by the Reinsurer. Where two or more reinsurers are
involved and a majority in interest elect to defend a claim, the expense will be
apportioned in accordance with the terms of this Agreement as if the expense had
been incurred by the Company.
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ARTICLE XI - ARBITRATION
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The Reinsurer and the Company intend that any dispute between them under or
with respect to this Agreement be resolved without resort to any litigation.
Accordingly, the Reinsurer and the Company agree that they will negotiate such
dispute; PROVIDED, HOWEVER, that if any such dispute cannot be so resolved by
them within sixty calendar days (or such longer period as the parties may agree)
after commencing such negotiation, the Reinsurer and the Company agree that they
will submit such dispute to arbitration in the manner specified in, and such
arbitration proceeding will be conducted in accordance with, the rules of the
American Arbitration Association.
The arbitration hearing will be before a panel of three arbitrators, each
of whom must be a present or former officer of a life insurance company. The
Reinsurer and the Company will each appoint one arbitrator by written
notification to the other party within thirty calendar days after the date of
the mailing of the notification initiating the arbitration. These two
arbitrators will then select the third arbitrator within sixty calendar days
after the date of the mailing of the notification initiating arbitration.
If either the Reinsurer or the Company fails to appoint an arbitrator, or
should the two arbitrators be unable to agree upon the choice of a third
arbitrator, the president of the American Arbitration Association or of its
successor organization or (if necessary) the president of any similar
organization designated by lot of the Reinsurer and the Company within thirty
calendar days after the request will appoint the necessary arbitrator.
The vote or approval of a majority of the arbitrators will decide any
question considered by the arbitrators; PROVIDED, HOWEVER, that if no two
arbitrators reach the same decision, then the average of the two closest
mathematical determinations will constitute the decision of all three
arbitrators. The place of arbitration will be Stamford, Connecticut. Each
decision (including without limitation each award) of the arbitrators will be
final and binding on all parties and will be nonappealable, and (at the request
of either the Reinsurer or the Company) any award of the arbitrators may be
confirmed by a judgment entered by any court of competent jurisdiction. No such
award or judgment will bear interest. Each party will be responsible for paying
(a) all fees and expenses charged by its respective counsel, accountants,
actuaries, and other representatives in conjunction with such arbitration and
(b) one-half of the fees and expenses charged by each arbitrator.
18
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ARTICLE XII - GENERAL PROVISIONS
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1. REINSURER'S RIGHT OF NOTICE OF UNUSUAL PRACTICES
In providing reinsurance facilities to the Company under this Agreement,
the Reinsurer has granted the Company considerable authority with respect to
automatic binding power, reinstatements, claim settlements, and the general
administration of the reinsurance account. To facilitate transactions, the
Reinsurer has required the minimum amount of information and documentation
possible, reflecting its utmost faith and confidence in the Company. The
Reinsurer assumes that, except as otherwise notified by the Company, the
underwriting, claims and other insurance practices employed by the Company with
respect to reinsurance ceded under this Agreement are generally consistent with
the customary and usual practices of the insurance industry as a whole. If the
Company changes or modifies its practices or engages in exceptional or
uncustomary practices, the Company agrees to make those practices known to the
Reinsurer before assigning any liability to the Reinsurer with respect to any
reinsurance issued under such practices.
2. POLICY FORMS AND RATES
Upon request, the Company will furnish the Reinsurer with a copy of its
application forms, policy and rider forms, premium and non-forfeiture value
manuals, reserve table, actuarial memoranda, and any other forms or tables
needed for proper handling of reinsurance under this Agreement. The Reinsurer
must agree in writing before incurring additional liability resulting from any
changes to policies, policy riders or amendments reinsured under this Agreement.
3. REINSURANCE CONDITIONS
The reinsurance is subject to the same limitations and conditions as the
insurance under the policy or policies written by the Company on which the
reinsurance is based.
4. ERRORS AND OMISSIONS
If either the Company or the Reinsurer unintentionally fails to perform an
obligation that affects this Agreement and such failure results in an error on
the part of the Company or the Reinsurer, the error will be corrected by
restoring both the Company and the Reinsurer to the positions they would have
occupied had no such error occurred. For business reported but not covered under
the provisions of this Agreement, the Reinsurer shall be obligated only for the
return of premium paid, plus interest as provided below.
19
Any amounts due under this Section 4 will bear interest at a rate agreed
upon by the Company and the Reinsurer or at a rate equal to the Interest Rate as
described in Article V.5.
5. OFFSET
Any amount which either the Company or the Reinsurer is contractually
obligated to pay to the party may be paid out of any amount which is due and
unpaid under this Agreement. The application of this provision will not be
deemed to constitute diminution in the event of insolvency.
6. INSPECTION
Upon reasonable notice, the Reinsurer may inspect any and all books,
records, documents or similar information relating to or affecting reinsurance
under this Agreement at the home office of the Company during normal business
hours.
7. ENTIRE AGREEMENT
This Agreement and the Schedules attached hereto supersede all prior
discussions and written and oral agreements between the parties with respect to
the subject matter of this Agreement. This Agreement and the Schedules attached
hereto contain the sole and entire agreement between the parties hereto with
respect to the subject matter hereof.
8. AMENDMENT
This Agreement may be modified or amended only with a written instrument
properly signed on behalf of the Company and the Reinsurer.
9. COUNTERPARTS
This Agreement may be executed simultaneously in any number of
counterparts, each of which will be deemed an original, but all of which will
constitute one and the same instrument.
20
10. NO ASSIGNMENT
Except as otherwise provided herein, neither party hereto may assign this
Agreement or any right hereunder or part hereof without the prior written
consent of the other party hereto.
11. BINDING EFFECT
This Agreement is binding upon and will inure to the benefit of the parties
and their respective successors and permitted assignees.
12. NOTICES
Any notice, request, instruction, or other document to be given hereunder
by any party hereto to the other party hereto will be in writing and (a)
delivered personally, (b) sent by facsimile, (c) delivered by overnight express,
or (d) sent by registered or certified mail, postage prepaid, as follows:
If to the Company to:
First Allmerica Financial Life Insurance Company
000 Xxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attention: Reinsurance Manager
Facsimile: 508/853-6332
If to the Reinsurance, to:
Swiss Re Life & Health America Inc.
000 Xxxx Xxxxxx
Xxxxxx, Xxx Xxxx 00000
Attention: Vice President, Administration
Facsimile: 914/828-5986
or at such other address for a party as will be specified by like notice. Each
notice or other communication required or permitted under this Agreement that is
addressed as provided in this Article XII will, if delivered personally or by
overnight express, be deemed given upon delivery; will, if delivered by
facsimile or similar facsimile transmission, be deemed delivered when
electronically confirmed; and will, if delivered by mail in the manner described
above, be deemed given on the third business day after the day it is deposited
in a regular depository of the United States Mail.
21
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ARTICLE XIII - DURATION OF AGREEMENT
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This Agreement will be effective on and after the effective date stated in
Article I. It is unlimited in duration but may be amended by mutual consent of
the Company and the Reinsurer. This Agreement may be terminated as to new
reinsurance by either party giving 90 days' written notice to the other.
Termination as to new reinsurance does not affect existing reinsurance. Existing
reinsurance will remain in force until termination of the Company's policy or
policies on which the reinsurance is based in accordance with the terms of this
Agreement. Notwithstanding the foregoing, the Reinsurance may terminate this
Agreement as to new and existing reinsurance in the event the Company does not
pay premiums to the Reinsurer, as provided in Article V.
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ARTICLE XIV - EXECUTION
--------------------------------------------------------------------------------
IN WITNESS WHEREOF, the Reinsurer and the Company have executed this
Agreement on the dates set forth below.
FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
Date: 11-26-02 By: /S/
------------------------------ ----------------------------
Place: WORCESTER, MA Title: VICE PRESIDENT
----------------------------- ----------------------------
Witness: XXXX XXXX
---------------------------
22
LIFE REASSURANCE CORPORATION OF AMERICA
(NOW KNOWN AS SWISS RE LIFE & HEALTH AMERICA INC.)
Date: 12/02/02 By: /S/
------------------------------ -----------------------------
Place: ARMONK, NY Title VICE PRESIDENT
----------------------------- -----------------------------
Witness /S/
----------------------------
---------------------------------------------------
SCHEDULE A
RETENTION LIMITS
REINSURANCE SPECIFICATIONS
PLANS COVERED
---------------------------------------------------
AGREEMENT NUMBER 6834-1
RETENTION LIMITS
The Company shall retain 20% of the mortality risk on each reinsured
policy not to exceed the maximum retention limits set forth below:
STANDARD - TABLE H TABLE J - TABLE P
AGE & FLAT EXTRAS OF $20 OR LESS & FLAT EXTRAS OVER $20
--- ---------------------------- ----------------------
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
81-89 $ 500,000 (up to Table F) $ 0
AVIATION (Includes policies with an Aviation Exclusion
Clause. Exception is pilots of regularly scheduled
passenger, charter and cargo airlines) Maximum
retention is $500,000.
SPECIAL In cases which are borderline for ratings, the
Company may choose not to hold a full retention.
For survivorship contracts, the Company's retention schedule is the same as for
single life. The retention for a survivorship case is based on the age/rating of
the healthier insured. If both are equally healthy, the retention is based on
the older insured.
SCHEDULE A, PAGE 2
AUTOMATIC BINDING LIMITS
The Reinsurer's Share shall be 30% of each reinsured risk not to exceed its
share of the following automatic reinsurance limit:
$10,000,000
PLANS COVERED
The preceding schedules refer to insured lives whose surnames begin with
the letters A through Z under the following plan:
Single Premium Variable Universal Life (Simplified Issue and Fully
Underwritten)
Joint & Last Survivor Single Premium Variable Universal (Simplified Issue
and Fully Underwritten)
-----------------------------------------------------
SCHEDULE B
REPORTING FORM
-----------------------------------------------------
-----------------------------------------------------
SCHEDULE C
PREMIUM RATES
-----------------------------------------------------
MORTALITY TABLE
OMITTED 6 PAGES
-----------------------------------------------------
SCHEDULE - C-1
JOINT EQUAL AGE CALCULATION
-----------------------------------------------------
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 qx,n for each insured for durations 1 to n.
qx,n = Qx,n divided by 1000
STEP 2
Calculate px,n for each insured for durations (n-1) and n.
px,n = (1-qx,1) x (1-qx,2) x x (1-qx,n).
STEP 3
Calculate py,y,n for durations (n-1) and n
px,y,n, = px,n + py,n ((px,n) x (py,n))
STEP 4
Calculate qx,y,n, for duration n. Let px,y,0 = 1.
qx,y,n = 1 - PX,Y,N
------
px,y,n-1
STEP 5
Qx,y,n, = 1000 x qx,y,n.
.15 per thousand minimum rate in any year after the first year.
-----------------------------------------------------
SCHEDULE D
BASIS POINT
PERCENTAGES
-----------------------------------------------------
AGREEMENT NUMBER 6834-1
SINGLE LIFE
The premium structure requires the payment of the greater of two calculations as
more fully described in Article V:
(a) A calculation based on Basis Points and
(b) A calculation based on a premium per $1,000 (75-80 Select & Ultimate Table)
multiplied by a percentage factor.
The values applicable to these calculations are shown below:
IN BASIC POINTS (MONTHLY VALUES)
UNDERWRITING CLASSIFICATION SIMPLIFIED ISSUE FULLY UNDERWRITTEN
Non Smoker 4.0000 2.7500
Smoker 5.4167 4.1667
IN PERCENTAGE FACTORS
UNDERWRITING CLASSIFICATION SIMPLIFIED ISSUE FULLY UNDERWRITTEN
Non Smoker 27.5% 23.5%
Smoker 62.5% 47.5%
NOTE: On cessions in excess of $10,000,000, the Reinsurer reserves the right to
adjust the calculation values.
SECOND-TO-DIE
--------------------- ------------------ ------------------- ------------------ ------------------- ------------------
YRT rate Min Prem Min Prem Max Prem Max Prem
(x%) Yrs 1 - 10 Yrs 11 + Yrs 1 - 10 Yrs 11+
--------------------- ------------------ ------------------- ------------------ ------------------- ------------------
NT/NT (SI) 72% 20 20 25 25
--------------------- ------------------ ------------------- ------------------ ------------------- ------------------
NY/NT (FU) 60% 10 10 15 15
--------------------- ------------------ ------------------- ------------------ ------------------- ------------------
Tob/Tob 144% 40 40 45 45
(SI)
--------------------- ------------------ ------------------- ------------------ ------------------- ------------------
Tob/Tob 120% 30 30 35 35
(FU)
--------------------- ------------------ ------------------- ------------------ ------------------- ------------------
NT/Tob (SI) 72%/144% 30 30 35 35
--------------------- ------------------ ------------------- ------------------ ------------------- ------------------
NT/Tob (FU) 60%/120% 20 20 25 25
--------------------- ------------------ ------------------- ------------------ ------------------- ------------------
The gross YRT rate shall be calculated by applying the indicated percentages to
the 1975-80 S&U (ALB) rate for the appropriate age and sex of the insured and
then frasierizing.
