EXHIBIT 10.18
RETROCESSION AGREEMENT
EFFECTIVE: JANUARY 1, 1999
ISSUED TO
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
MINNEAPOLIS, MINNESOTA
(HEREINAFTER REFERRED TO AS THE "REINSURER")
BY
LIFEUSA INSURANCE COMPANY
MINNEAPOLIS, MINNESOTA
(HEREINAFTER REFERRED TO AS THE "RETROCESSIONAIRE")
BY THIS AGREEMENT, the Reinsurer obligates itself to retrocede to the
Retrocessionaire and the Retrocessionaire obligates itself to accept a quota
share part of the Reinsurer's interests and liabilities, as respects Life
Insurance, Annuity and Health Insurance business under the Coinsurance
Agreement, effective January 1, 1999, issued to LifeUSA Insurance Company and
the Coinsurance Agreement effective January 1, 1999 issued to Capitol Bankers
Life Insurance Company (hereinafter referred to as the "Original Contracts").
The quota share part shall be 25% with respect to all business. Copies of the
Original Contracts are attached to and forms part of this Agreement.
ARTICLE I - COMMENCEMENT AND TERMINATION
A. This Agreement shall become effective on January 1, 1999, with
respect to policies reinsured under the Original Contracts on or after that
date, and it shall continue in force thereafter until terminated.
B. This Agreement shall terminate with respect to new business written
under the Original Contracts on the dates that the Original Contracts terminate
with respect to new business. Business covered under the Original Contracts and
retroceded hereunder on or prior to the effective date of termination shall
remain in full force and effect until expiration or cancellation of such
business, whichever first occurs. However, it is understood and agreed that if
the Original Contracts are terminated for any reason, coverage under this
Agreement, as respects the terminated Contract, shall expire automatically at
the same time and in the same manner.
ARTICLE II - CONCURRENCY OF CONDITIONS
This Agreement shall follow in all respects the terms and conditions of
the Original Contracts (including addenda thereto when accepted by the
Retrocessionaire), provided the terms and conditions of the Original Contracts
are not inconsistent with the terms and conditions of this Agreement. The
Reinsurer agrees to transmit all notices and information pertaining to the
subject matter of this Agreement as promptly as possible after receipt thereof
on forms mutually agreed as requested by the Retrocessionaire.
ARTICLE III - PREMIUM AND COMMISSIONS
A. As premium for the reinsurance provided hereunder, the Reinsurer
shall retrocede the Retrocessionaire's pro rata share of the premiums ceded to
the Reinsurer under the Original Contracts.
B. The Retrocessionaire shall allow the Reinsurer retrocession
allowances equal to those granted under the Original Contracts.
C. The premium due the Retrocessionaire (less retrocession allowances
thereon) shall be remitted by the Reinsurer as promptly as possible after the
Reinsurer receives its premiums under the Original Contracts.
ARTICLE IV - CLAIMS AND BENEFITS
A. The Retrocessionaire shall be liable for its pro rata share of all
policy claims and benefits the Reinsurer pays or allows under the Original
Contracts, and the Retrocessionaire shall pay its pro rata share of any such
policy claims and benefits promptly following receipt of reasonable evidence of
the amount paid (or scheduled to be paid) by the Reinsurer as requested by the
Retrocessionaire.
B. The Retrocessionaire shall receive its pro rata share of all
recoveries made by the Reinsurer in respect of policy claims and benefits
subject to this Agreement.
C. The Retrocessionaire will be liable for or shall receive its pro
rata share of DAC Tax, Guaranty Fund Assessments and corresponding offsets and
credits as described under the Original Contracts.
ARTICLE V - ACCESS TO RECORDS
The Retrocessionaire, by its duly appointed representatives, shall have
the right at any reasonable time to examine all papers in the possession of the
Reinsurer referring to business effected hereunder.
ARTICLE VI - UNAUTHORIZED RETROCESSIONAIRES
The Retrocessionaire agrees to fund its share of the Reinsurer's
retroceded statutory reserves by:
1. Escrow or trust accounts for the benefit of the
Reinsurer; and/or
2. Cash advances;
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if, without such funding, a penalty would accrue to the Reinsurer on any
financial statement it is required to file with the insurance regulatory
authorities involved.
ARTICLE VII - INSOLVENCY
A. In the event of the insolvency of the Reinsurer, all reinsurance
shall be payable on the basis of the policies reinsured directly to its
liquidator, receiver, conservator or statutory successor, without diminution
because of the insolvency of the Reinsurer or because such liquidator, receiver,
conservator or statutory successor has failed to pay all or a portion of any
claim.
B. In the event of the insolvency of the Reinsurer, the liquidator,
receiver, conservator or statutory successor shall give the Retrocessionaire
written notice of the pendency of a claim on a policy reinsured within a
reasonable time after such claim is filed in the insolvency proceeding. During
the pendency of a claim, the Retrocessionaire may investigate such claim and
interpose in the name of the Reinsurer, its liqudator, receiver, conservator or
statutory successor, but at its own expense, in the proceeding where such claim
is to be adjudicated, any defense or defenses which the Retrocessionaire may
deem available to the Reinsurer or its liquidator, receiver, conservator or
statutory successor.
C. The expense thus incurred by the Retrocessionaire shall be
chargeable, subject to court approval, against the Reinsurer as part of the
expenses of conservation, liquidation or insolvency to the extent of a
proportionate share of the benefit which may accrue to the Reinsurer solely as a
result of the defense undertaken by the Retrocessionaire. Where two or more
retrocessionaires are involved in the same claim and a majority in interest
elect to interpose a defense or defenses to such claim, the expense shall be
apportioned as though such expense had been incurred by the Reinsurer.
ARTICLE VIII - ARBITRATION
A. It is the intention of the parties that customs and usages of the
business of reinsurance shall be given full effect in the interpretation of this
Agreement. The parties shall act in all things with the highest good faith. A
dispute or difference between the parties with respect to the operation or
interpretation of this Agreement on which an amicable understanding cannot be
reached shall be decided by arbitration. The arbitrators are empowered to decide
all questions or issues and shall be free to reach their decisions from the
standpoint of equity and customary practices of the insurance and reinsurance
industry rather than from that of strict law.
B. There shall be three arbitrators who shall be active or retired
officers of life insurance companies other than the contracting companies or
their affiliates. Each of the contracting companies shall appoint one of the
arbitrators and these two arbitrators shall select the third. In the event that
either contracting company should fail to choose an arbitrator within thirty
days after the other contracting company has given notice of its arbitrator
appointment, that contracting company may choose two arbitrators, who shall in
turn choose a third arbitrator
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before entering arbitration. If the two arbitrators are unable to agree upon the
selection of a third arbitrator within thirty days following their appointment,
each arbitrator shall nominate three candidates within ten days thereafter, two
of whom the other shall decline and the decision shall be made by drawing lots.
C. The arbitrators shall decide by a majority of votes and from their
written decision there can be no appeal. The cost of arbitration, including the
fees of the arbitrators, shall be borne by the losing party unless the
arbitrators decide otherwise.
ARTICLE IX - INTERMEDIARY
Reinsurance Alternatives - Reinsurance Intermediaries, ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, is hereby recognized as the
intermediary with regard to this Agreement.
IN WITNESS WHEREOF, the parties hereto by their respective duly
authorized representatives have executed this Agreement as of the date
undermentioned at:
Minneapolis, Minnesota, this 22nd day of December, 1998.
ALLIANZ LIFE INSURANCE
COMPANY OF NORTH AMERICA
By: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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Its: President of Individual Marketing
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LifeUSA INSURANCE COMPANY
By: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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Its: Senior Vice President
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